SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JANUARY 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-8059
GETTY PETROLEUM CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2232705
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
125 JERICHO TURNPIKE, JERICHO, NEW YORK 11753
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 516-338-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock, $.10 par value New York Stock Exchange
Subordinated Debentures due 2000 New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
(Title of Class)
Indicate by check mark whether 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
Indicated by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates
(6,768,865 shares) of the Company was $100,686,867 as of April 20, 1994.
The registrant had outstanding 12,637,436 shares of common stock as of
April 20, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
Annual Report to Stockholders for the fiscal year
ended January 31, 1994 (the "Annual Report") (pages 17 through 32). II
Definitive Proxy Statement for the 1994 Annual Meeting of
Stockholders (the "Proxy Statement") which will be filed
by the registrant on or prior to 120 days following the
end of the registrant's fiscal year ended January 31, 1994
pursuant to Regulation 14A. III
PART I
Item 1. Business
GENERAL
Getty Petroleum Corp. (hereinafter, together with its subsidiaries, called
the "Registrant", "Getty" or the "Company") is one of the nation's largest
independent marketers of petroleum products. The Company serves retail and
wholesale customers through a distribution and marketing network of 1,865
Getty and other branded retail outlets (also referred to as service
stations) of which 652 have convenience food stores located in 13
Northeastern and Middle Atlantic states. The Company stores and distributes
petroleum products from 26 distribution terminals and bulk plants. The
Company purchases gasoline, fuel oil and related petroleum products from
Phibro Energy USA, Inc. pursuant to a three-year supply contract expiring
on June 30, 1995, and from other suppliers. These products are delivered by
cargo ship, barge, pipeline and truck to the Company's distribution
terminals and bulk plants located in the Company's marketing region.
Through its truck transportation fleet of 145 vehicles and its distribution
network, the Company markets and distributes such products throughout its
13 state marketing region. Of the 1,865 retail outlets supplied by the
Company at January 31, 1994, over half are owned by the Company in fee or held
under long-term leases. The remaining retail outlets purchase petroleum
products from the Company under contract as licensed Getty dealers or from
licensed Getty distributors who purchase Getty products from the Company.
The Company also sells on a wholesale basis gasoline, fuel oil, diesel fuel
and kerosene from distribution terminals and bulk plants in truckload,
barge and pipeline quantities and sells fuel oil, kerosene and propane to
residential, commercial and governmental customers in Maryland,
Pennsylvania and upstate New York.
The Company and its predecessors have been in the petroleum marketing
business for over 39 years. Mr. Leo Liebowitz, a director, President and
Chief Executive Officer of the Company, and Mr. Milton Safenowitz, a
director and former Executive Vice President of the Company, founded the
business in 1955 with one service station and have pursued a strategy of
expanding the business principally through acquisitions. Prior to 1985, the
Company had expanded into five states under various brand names,
principally Power Test. On February 1, 1985, the Company acquired the
marketing and distribution assets of Getty Oil Company in the Northeastern
and Middle Atlantic states from a subsidiary of Texaco Inc. The Getty
acquisition added service stations, distribution terminals and a heating
oil and middle distillate marketing network in six additional states. Since
1985, the Company's operations have continued to expand, to its current
marketing region in 13 Northeastern and Middle Atlantic states.
During the period from 1985 to 1991, the Company continued to expand by
acquiring numerous small regional distributors, stations and convenience
food stores. In addition to adding locations through fee ownership and
leasing, the Company continued to implement its program of adding non-
petroleum products and revenue enhancing services at retail outlets in its
marketing network, particularly convenience food stores, automotive repairs
and car washes. In 1992, the Company implemented a comprehensive program of
evaluating retail outlets to determine the long-term viability of certain
locations as gasoline stations. This process has resulted in the sale or
lease of 64 properties in fiscal 1994 and is expected to result in the
disposal of additional locations in the future.
OPERATING STRATEGY
The Company's operating strategy is to market motor fuels through service
stations which are operated by independent Getty licensed dealers who lease
or sublease the Company's service stations. Such dealers either buy their
petroleum products from the Company or from licensed Getty distributors who
purchase Getty products from the Company, or sell the Company's petroleum
products and receive a commission. The Company views each of its retail
outlets as a "profit center" and believes that independent operators, with
greater financial incentive than salaried employees, generally operate
retail outlets more successfully. Moreover, the leasing and subleasing of
retail outlets to independent operators has provided the Company with a
stable and increasing source of rental income and has enabled the Company
to reduce its direct operating costs.
The Company directly operated 21 retail outlets at January 31, 1994
utilizing salaried employees. While the Company seeks to lease or sublease
retail outlets to independent operators, it intends to retain a certain
number of such company operated outlets. These outlets permit management to
keep abreast of changes in retail marketing, to assist in providing
practical guidance to independent dealers and to test new products and
concepts.
Certain of the owned and leased outlets have convenience food stores,
automotive repair centers and car washes. Getty receives higher rentals
from such properties as a result of such additional uses of the properties.
DISTRIBUTION
The retail outlets in the Company's marketing network sell gasoline, diesel
fuel and other related petroleum products (such as motor oil and
lubricants) under the Company's proprietary brand name Getty or, to a
limited extent, under other brand names, in the states of Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island, Vermont, Virginia and West Virginia.
As of January 31, 1994, the Company has 1,865 Getty and other branded
retail outlets as follows:
(i) 21 company operated retail outlets which are operated by salaried
employees;
(ii) 449 lessee dealer operated retail outlets (dealers who lease or
sublease retail outlets and purchase their petroleum products from the
Company);
(iii) 469 commission lessee dealer operated retail outlets (dealers who
lease or sublease retail outlets and receive a commission for sale of
Company owned petroleum products);
(iv) 141 retail outlets operated by management contractors (dealers who
operate the Company's retail outlets pursuant to a management contract);
(v) 206 contract dealer retail outlets (dealers who purchase their
petroleum products from the Company but do not lease or sublease retail
outlets from the Company); and
(vi) 48 distributors who purchase their petroleum products from the
Company, which distributors in turn supply the petroleum product
requirements of 579 retail outlets.
As of January 31, 1994, the Company also has 36 non-operating properties
being held for disposition and 105 locations in various stages of change.
Getty distributes its petroleum products from 26 distribution terminals and
bulk plants which are Company controlled either through fee ownership or
long-term leases and utilizes additional terminals pursuant to thruput and
storage agreements with unrelated parties. A substantial portion of the
petroleum products are transported to retail outlets by the Company's truck
transportation fleet, whose drivers are compensated in part on an
incentive-based system.
The Company is a supplier of #2 heating oil (also known as home heating
oil) in the Northeast, supplying fuel oil to dealers who deliver to
residences and commercial accounts. Diesel fuel and kerosene are marketed
both to distributors of such products and directly by the Company to retail
outlets. In addition, the Company sells home heating oil, propane (LPG) and
related services directly to approximately 47,500 retail and commercial
customers.
PRODUCT SUPPLY
Effective July 1, 1992, the Company entered into a three-year supply
contract to purchase gasoline and middle distillates from Phibro Energy
USA, Inc. ("Phibro") at competitive spot related prices. During the year
ended January 31, 1994, the Company purchased approximately 60% of its
petroleum product requirements from Phibro and approximately 40% from other
sources, principally domestic. Substantially all of the Company's supply
contracts are for a term of one year or less except for the contract with
Phibro which expires June 30, 1995. The Company has no crude oil reserves
or refining capacity.
Historically, petroleum prices have been subject to extreme volatility and
there have been periodic shortages followed by periods of oversupply. No
assurance can be given that petroleum prices will not fluctuate greatly or
that petroleum products will continue to be available from multiple sources
or available at all in times of shortage. Further, a large, rapid increase
in petroleum prices could adversely affect the Company's revenues and
profitability if the Company's sales prices could not be increased or
automobile consumption of gasoline were to decline as a result of such
price increases. The Company's management believes, however, that the
structure of the supply contract with Phibro reduces to a certain extent
the impact of product price volatility due to lower inventory requirements,
and, due to the large volume of its purchases, it will continue to have the
ability to acquire petroleum products on competitive terms for the
foreseeable future.
MARKETING
In order to provide efficient service to retail dealers and other
customers, the Company is divided into various marketing regions. The
Company's regional marketing personnel provide significant guidance,
counseling and assistance to the Company's dealers, including advice on
retail operations. The marketing personnel also supervise the company
operated retail outlets.
The Company provides advertising and promotional support to its retail
outlets. Both radio and newspaper media are utilized, and promotional
programs are implemented on an ongoing basis.
The Company accepts Visa, MasterCard, Discover and American Express credit
cards at Getty outlets and plans in the near future to accept debit cards.
In addition, the Company has a proprietary fleet fueling card and a related
tracking program which provides cost control data to its fleet customers.
COMPETITION
The Company believes that, based on the number of locations served, it is
currently one of the largest independent marketers of petroleum products in
the United States. The petroleum products industry is highly competitive,
and the Company competes with a substantial number of integrated oil
companies and other companies who may have greater assets, financial
resources and sales. Accordingly, the Company's earnings may be adversely
affected by the marketing policies of such integrated oil companies, which
may have greater flexibility to withstand price changes than the Company
because of such integration. The Company competes for new dealers and
distributors primarily on the basis of Getty brand acceptance, supply,
price and marketing support. The retail outlets in the Company's marketing
network compete primarily on the basis of Getty brand acceptance, location,
customer service, appearance of the retail outlet and price.
REGULATION
The petroleum products industry is subject to numerous federal, state and
local laws and regulations. Compliance with those laws and regulations has
not had and is not expected to have a material effect on the competitive
position of the Company.
The Company is not a refiner and, therefore, is not subject to the
Petroleum Marketing Practices Act ("PMPA"), a federal law. However,
pursuant to the Company's agreements with its Getty dealers and
distributors, the Company has voluntarily extended to them the protection
of PMPA. Under PMPA, the Company complies with certain notice requirements
and extends nondiscriminatory contracts to its Getty licensed dealers and
distributors, whose franchises can be terminated or not renewed if certain
PMPA-imposed requirements are met. Although a licensed dealer or
distributor is not required to renew his or her franchise, because the
Company has agreed to comply with PMPA the Company is required (unless
there are grounds for non-renewal or termination) to renew the franchises
of most of its licensed dealers and distributors who elect to renew. In
addition, if the Company elects to sell any of its service stations, the
Company shall, in accordance with PMPA, offer the franchisee the right to
purchase any of such service stations operated by such franchisee at the
price and upon terms at which the Company elects to sell.
In addition, the Company's operations are governed by numerous federal,
state and local environmental laws and regulations affecting all aspects of
its operations. Among these laws are (i) requirements to dispense
reformulated gasoline in accordance with the Clean Air Act, (ii)
restrictions imposed on the amount of hydrocarbon vapors which may enter
the air at the Company's terminals and service stations, (iii) OSHA and
other laws regulating terminal employee exposure to benzene and other
hazardous materials, (iv) requirements to report to governmental
authorities discharges of petroleum products into the environment and,
under certain circumstances, to remediate the soil and/or groundwater
contamination pursuant to governmental order and directive, (v)
requirements to remove and replace underground storage tanks which have
exceeded governmental-mandated age limitations and (vi) the requirement to
provide a certificate of financial responsibility with respect to claims
relating to underground storage tank failures.
The Company believes that it is in substantial compliance with federal,
state and local provisions enacted or adopted regulating the discharge of
materials harmful to the environment. Although the Company is unable to
predict what legislation or regulations may be adopted in the future with
respect to environmental protection and waste disposal, existing
legislation and regulations have had no material adverse effect on its
competitive position. See "Item 3. Legal Proceedings".
PERSONNEL
As of January 31, 1994, the Company had 877 employees, of which 105
employees, consisting of truck drivers and service technicians, are
represented by Amalgamated Local Union 355. The Company considers its
relationships with its employees and the union to be satisfactory.
Item 2. Properties
As of January 31, 1994, the Company owned in fee 457 retail outlets and
leased 786 retail outlets, substantially all of which are leased on a long-term
net lease basis. The Company, in turn, has leased or subleased 1,128 of such
properties to others, substantially all of which are operated as Getty
branded service stations.
The Company generally extends three-year lease terms to its dealers, except
for new dealers, who generally receive a one year trial lease. Such leases
provide for fixed and variable rentals at competitive rates. In addition,
most leases provide for an additional rental if the dealer fails to sell
certain minimum quantities of gasoline during a month. The lessee of a
retail outlet is generally responsible for payment of utilities and for all
maintenance and repairs, except for structural and marketing equipment
repairs and capital improvements, which are performed by the Company.
The retail outlets owned in fee or leased by the Company for each of the
five fiscal years ended January 31, 1994 are as follows:
January 31,
-------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Owned 457 465 463 436 453
Leased 772 791 825 796 729
----- ----- ----- ----- -----
Total 1,229 1,256 1,288 1,232 1,182
====== ===== ===== ===== =====
The Company has an upgrading program to enhance the physical appearance of
the Company's retail outlets which it expects to complete in fiscal 1995.
As of January 31, 1994, the Company also owned in fee 13 distribution
terminals and bulk plants and leased 13 distribution terminals and bulk
plants (on a long-term net lease basis) located in New York, New Jersey,
Maine, Rhode Island, Pennsylvania, Connecticut and Maryland. The terminals
and bulk plants owned or leased by the Company have an aggregate storage
capacity of approximately 80 million gallons. The terminals located in East
Providence (Rhode Island), Rensselaer (New York) and South Portland (Maine)
are deep-water terminals, capable of handling large vessels. Some of the
Company's terminals have excess capacity and land that could be developed
or adapted to handle products, such as residual fuel, jet fuel and lube
blending, which the Company does not presently market.
The Company leases 309 service stations and 6 distribution terminals on a
long-term basis from Power Test Realty Company Limited Partnership (the
"Partnership"). The sole limited partner of the Partnership is Power Test
Investors Limited Partnership ("PTILP"), which was created in 1985 pursuant
to a rights offering to all of the Company's then existing stockholders.
The general partner of the Partnership and PTILP is CLS General Partnership
Corp. ("CLS"), which manages the Partnership and PTILP. CLS is wholly owned
by Messrs. Leo Liebowitz, Milton Safenowitz and Milton Cooper, the
principal stockholders of the Company, who as of January 31, 1994,
collectively owned 46% of PTILP. The Company does not have any ownership
interest in the Partnership or CLS, and does not have any ownership
interest or option to purchase the Partnership's property and equipment,
except for properties that the Company has determined have become
uneconomical or unsuitable for the Company's use. In the event the Company
makes such a determination, it must either (i) purchase the property from
the Partnership for a sum equal to the greater of (x) the product of the
annual rent then in effect multiplied by eleven or (y) 110% of the
appraised fair market value of the property considered as encumbered by the
lease or (ii) direct the Partnership to sell such property to a third party
at a price negotiated by the Company, in which case the Company receives
from the Partnership the amount, if any, by which the negotiated price
exceeds the price determined by the above formula or pays any deficiency to
the Partnership. Each of the leases of the service stations and the
distribution terminals with the Partnership has an initial term of 15
years, expiring on January 31, 2000. The Company has the option to extend
these leases for up to five consecutive terms of ten years each. During the
fiscal years ended January 31, 1994, 1993 and 1992, the Company received
from the Partnership $600,000, $576,000 and $552,000, respectively, for
administrative and other services rendered to the Partnership and paid rent
to the Partnership during such fiscal years of $10,981,000, $11,002,000 and
$11,051,000, respectively.
The Company leases approximately 41,000 square feet of office space at 125
Jericho Turnpike, Jericho, New York where it currently maintains its
corporate headquarters. The Company owns a 23,000 square foot building
located at 175 Sunnyside Boulevard, Plainview, New York, where until June
1987 it maintained its corporate headquarters and which it is attempting to
sell. Slattery Group Inc., a majority-owned subsidiary of the Company, owns
certain properties, which it is attempting to sell, consisting principally
of a nine story office building in Easton, Pennsylvania, and vacant land in
Alabama and Ohio.
The Company believes that substantially all of its owned and leased
properties are in good condition.
Item 3. Legal Proceedings
(a) Information in response to this item is incorporated herein by
reference from Note 5 of the Notes to Consolidated Financial Statements set
forth on pages 26 and 27 of the Annual Report.
The State of New York has brought separate actions against the Company for
alleged underground discharges of petroleum products at certain of its
service stations. The actions, which were filed in 1983 and 1986, are
pending in New York State Supreme Court in Albany County. In each case, the
State is seeking reimbursement for clean up costs, interest and penalties
for the alleged discharges. Most of any possible compensatory damages
relating to clean up activities and any reimbursement to the State arising
out of these two cases are covered by liability insurance.
In 1990, the State of New York brought an action in the New York State
Supreme Court in Albany County seeking reimbursement for clean up costs
against the Company and two other petroleum companies arising from an
alleged 1984 spill of gasoline. In addition to clean up costs of $167,000,
the State is seeking penalties of $500,000 and interest. The State has
agreed to dismiss the Company from the lawsuit but a co-defendant has
withheld consent.
In 1991, the State of New York brought an action in the New York State
Supreme Court in Albany County against a subsidiary of the Company seeking
reimbursement in the amount of $189,000 for clean up costs incurred at a
service station. The State is also seeking penalties of $200,000 and
interest.
In 1992, the State of New York asserted a claim for reimbursement of clean
up costs against the Company and another oil company, in the amount of
$121,000, together with statutory penalties of $100,000, pertaining to an
alleged spill at a service station in 1984; no further communications have
been received.
On October 22, 1993, the State of New York asserted a claim against the
Company for $453,868 for cleanup costs incurred at a service station and
for $68,000 for statutory penalties; no further communications have been
received.
A majority-owned subsidiary of the Company has been named as a Potentially
Responsible Party at a Superfund site in Connecticut; the subsidiary is
considered to be a "de minimus" discharger and the maximum payment required
will be approximately $5,000.
In 1992, the U. S. Environmental Protection Agency ("EPA") advised the Company
that it would seek administrative penalties for the Company's failure to
cease discharging into, and to close, service station bay drains at
approximately 270 retail outlets. The EPA is seeking penalties of
approximately $625,000. The Company has had no communications with the EPA
during the past fiscal year concerning this matter.
In 1990, Getty Terminals Corp. ("Getty Terminals"), a subsidiary of the
Company, was convicted of conspiracy and evasion of 1985 federal gasoline
taxes. The Company provided for the costs associated with this matter in
its financial statements for the year ended January 31, 1991 and all taxes,
penalties and interest have been paid. As a result of the conviction, the
Company and one of its subsidiaries, which have not heretofore bid on U.S.
Government contracts, have been precluded from doing so until November 20,
1994. In February 1994, Getty Terminals received notices of proposed license
revocations from the New York State Department of Taxation and Finance
("Department") for Getty Terminals' operating permits for its three New York
State terminals and its motor fuels and diesel distributor licenses. The
notices of proposed revocation are based on Getty Terminals' 1990 federal
conviction for conspiracy to evade 1985 federal gasoline excise taxes and
for non-payment of such taxes. The Department contends that Getty
Terminals' federal tax conviction affects its "duties and obligations"
under Sections 283 and 283-b of the New York Tax Law ("Tax Law"). Getty
paid all New York State taxes which were due and owing and has fully
performed all of its duties and obligations under the Tax Law. Management
of the Company believes that the Department does not have cause to revoke
Getty Terminals' New York State licenses; therefore, management believes
that this matter will have no material adverse effect on the Company's
financial position or future business.
During the past fiscal year, the following three proceedings were settled:
In 1990, the Commissioner of Environmental Protection of Connecticut filed
an action against the Company in the Hartford Superior Court alleging
violations at several service station facilities. The matter has been
settled and a penalty of $219,500 has been paid.
In 1991, the State of New York brought an action in the New York State
Supreme Court in Albany County seeking reimbursement for $15,000 for
cleanup costs. During the past fiscal year the amount sought was increased
to $72,000 for cleanup costs, together with statutory penalties of $500,000
and interest; the case has been settled and $80,000 has been paid to the
State.
On April 2, 1993, the U. S. Environmental Protection Agency filed an
administrative complaint seeking $122,000 in penalties for improper storage
and disposition of PCB's which were deposited at two service stations by
unknown persons. The matter has been settled and a penalty of $95,200 has
been paid.
The Company is subject to various laws relating to protection of the
environment, and to other contingencies, including legal proceedings and
claims which arise in the ordinary course of its business. With respect to
environmental contingencies, the total cost to the Company cannot be
determined with certainty as a result of such factors as the unknown amount
of claims and the timing of clean up efforts at identified sites, which
cost may be partially offset by subsequent recoveries against certain state
underground tank funds. These factors have been assessed based on
management's review of currently known facts and circumstances, and will
continue to be assessed by the Company in estimating the reserves for
environmental matters to be provided in its financial statements. In the
opinion of the Company, the aggregate amount of such environmental and
legal liabilities, if any, for which provision has not been made will not
have a material adverse effect on its financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended January 31, 1994.
EXECUTIVE OFFICERS OF REGISTRANT
The following table lists the executive officers of the Company, their
respective ages, the offices and positions held with the Company as of
April 15, 1994 and the year in which each was elected an officer.
Name Age Position Officer Since
---- --- -------- -------------
Leo Liebowitz 66 President and Chief Executive
Officer 1971
John J. Fitteron 52 Senior Vice President and
Chief Financial Officer 1986
Stephen P. Salzman 57 Senior Vice President and
Corporate Secretary 1971
Alvin A. Smith 56 Senior Vice President 1985
L. Douglas Bauguss 35 Vice President 1991
James R. Craig 42 Vice President 1987
Michael K. Hantman 42 Vice President and
Corporate Controller 1988
Samuel M. Jones 57 Vice President and
General Counsel 1986
Lorenzo Cinque 51 Treasurer 1984
Mr. Liebowitz has been President and Chief Executive Officer and a director
of the Company since 1971. He has also served as the President and a
director of CLS General Partnership Corp. since 1985. He is also a director
of the Regional Banking Advisory Board of Chemical Bank.
Mr. Fitteron joined the Company in 1986 as Senior Vice President and Chief
Financial Officer. He has also served as Vice President - Finance and
Assistant Secretary of CLS General Partnership Corp. since 1986. Prior to
joining Getty, he was a Senior Vice President at Beker Industries Corp., a
chemical and natural resource company.
Mr. Salzman became a Senior Vice President of the Company in 1986 and was
elected Corporate Secretary in 1985. Prior thereto, he served as Vice
President-Finance from 1984 to 1986 and Treasurer of the Company from 1971
to 1984. He has also served as Vice President and Secretary of CLS General
Partnership Corp. since 1985.
Mr. Smith has been a Senior Vice President of the Company since 1985. Prior
thereto, he was employed at Getty Oil Company as Wholesale Manager and
Petroleum Manager.
Mr. Bauguss became a Vice President of the Company in 1991. He joined the
Company in 1989 as Director of Real Estate. Prior to joining Getty, he was
the Mid-Atlantic Real Estate Manager for Mobil Oil Corp.
Mr. Craig became a Vice President of the Company in 1987. He joined the
Company in 1982 as a District Manager and became Manager - Retail Sales in
1984. Prior to joining Getty, he was a Regional Manager of Amerada Hess
Corp.
Mr. Hantman became a Vice President of the Company in 1991. He joined the
Company in 1985 as Corporate Controller. Prior to joining Getty, he was a
Principal at Arthur Young & Company, an international accounting firm.
Mr. Jones joined the Company in 1986 as Vice President and General Counsel.
He has also served as Vice President and Assistant Secretary of CLS General
Partnership Corp. since 1986. Prior to joining Getty, he was a Senior
Attorney with Texaco Inc.
Mr. Cinque has been Treasurer of the Company since 1984. Prior thereto, he
served as Controller of the Company from 1976 to 1984.
Management is not aware of any family relationships among any of the
foregoing executive officers.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information in response to this item is incorporated herein by reference from
material under the heading "Common Stock" on page 32 of the Annual Report.
Item 6. Selected Financial Data
Information in response to this item is incorporated herein by reference from
material under the heading "Selected Financial Data" on page 20 of the
Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information in response to this item is incorporated herein by reference from
material under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 17 through 20 of
the Annual Report.
Item 8. Financial Statements and Supplementary Data
Information in response to this item is incorporated herein by reference from
the financial information set forth on pages 21 through 32 of the
Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors in response to this item is
incorporated herein by reference from material under the heading "Election of
Directors" on pages 2 and 3 of the Proxy Statement.
Information regarding executive officers is included in Part I hereof.
Item 11. Executive Compensation
Information in response to this item is incorporated herein by reference from
material under the headings "Directors' Meetings, Committees and
Compensation" and "Report of the Compensation and Stock Option Committee"
on pages 4 through 9 of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to this item is incorporated herein by reference from
material under the heading "Beneficial Ownership of Common Stock" on pages
3 and 4 of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Information in response to this item is incorporated herein by reference from
material under the headings "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions" on pages 8 and 10 of the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial statements
The financial statements listed in the Index to Financial
Statements and Financial Statement Schedules on page 16 are filed
as part of this annual report.
2. Financial statement schedules
The financial statement schedules listed in the Index to
Financial Statements and Financial Statement Schedules on page 16
are filed as part of this annual report.
3. Exhibits
The exhibits listed in the Exhibit Index on pages 24 through 29 are
filed as part of this annual report.
4. Reports on Form 8-K
None.
GETTY PETROLEUM CORP.
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS
Items 14(a) 1 & 2
Reference
--------------------------
Form 10-K 1994 Annual
(pages) Report (pages)
--------------------------
Data incorporated by reference from attached
1994 Annual Report to Stockholders of Getty
Petroleum Corp.:
Report of Independent Accountants 32
Consolidated Statements of Operations for the
years ended January 31, 1994, 1993 and 1992 21
Consolidated Balance Sheets as of January 31,
1994 and 1993 22
Consolidated Statements of Cash Flows for the
years ended January 31, 1994, 1993 and 1992 23
Notes to Consolidated Financial Statements 24-31
Report of Independent Accountants - Supplemental
Schedules 18
Schedule V - Property, Plant and Equipment for the
years ended January 31, 1994, 1993 and 1992 19
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant and Equipment for
the years ended January 31, 1994, 1993 and 1992 20
Schedule VIII - Valuation and Qualifying Accounts
and Reserves for the years ended January 31,
1994, 1993 and 1992 21
Schedule IX - Short-Term Borrowings for the years
ended January 31, 1994, 1993 and 1992 22
Schedule X - Supplementary Income Statement
Information for the years ended January 31,
1994, 1993 and 1992 23
All other schedules are omitted for the reason that they are either not
required, not applicable, not material or the information is included in
the consolidated financial statements or notes thereto.
The financial statements listed in the above index which are included in
the 1994 Annual Report to Stockholders are hereby incorporated by
reference. With the exception of the pages listed in the above index and
the information incorporated by reference included in Part II, Items 5, 6,
7 and 8, the 1994 Annual Report to Stockholders is not deemed filed as part
of this report.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Getty Petroleum Corp.:
Our report on the consolidated financial statements of Getty Petroleum
Corp. and Subsidiaries has been incorporated by reference in this Form 10-K
from page 32 of the 1994 Annual Report to Stockholders of Getty Petroleum
Corp. and Subsidiaries. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index on page 16 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
New York, New York
March 16, 1994, except as to Note 6,
the date of which is April 12, 1994.
<TABLE>
<CAPTION>
GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
for the years ended January 31, 1994, 1993 and 1992
(in thousands)
Balance at Balance at
beginning Additions Retirements end of
Description of period at cost or sales period
- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1994:
Land $43,505 $ 568 $1,466 $42,607
Buildings 53,453 3,844 1,145 56,152
Machinery and
equipment 114,506 14,379 1,212 127,673
Motor vehicles 6,041 64 129 5,976
Furniture and
fixtures 2,037 21 9 2,049
Leasehold
improvements 28,611 1,539 122 30,028
Assets recorded
under capital
leases 55,349 - 39 55,310
--------- ------- ------ ---------
$303,502 $20,415 $4,122 $319,795
========= ======= ====== =========
1993:
Land $42,613 $1,633 $741 $43,505
Buildings 53,345 3,171 3,063 53,453
Machinery and
equipment 103,679 12,185 1,358 114,506
Motor vehicles 6,604 245 808 6,041
Furniture and
fixtures 2,028 18 9 2,037
Leasehold
improvements 27,396 1,486 271 28,611
Assets recorded
under capital
leases 55,498 - 149 55,349
--------- ------- ------ ----------
$291,163 $18,738 $6,399 $303,502
========= ======= ====== ==========
1992:
Land $42,844 $ 215 $446 $42,613
Buildings 49,613 4,385 653 53,345
Machinery and
equipment 96,754 17,842 10,917 103,679
Motor vehicles 6,422 559 377 6,604
Furniture and
fixtures 2,090 25 87 2,028
Leasehold
improvements 25,427 2,219 250 27,396
Assets recorded
under capital
leases 55,864 - 366 55,498
--------- ------- ------- ----------
$279,014 $25,245 $13,066 $291,163
========= ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION and AMORTIZATION
of PROPERTY, PLANT and EQUIPMENT
for the years ended January 31, 1994, 1993 and 1992
(in thousands)
Additions
Balance at charged to Balance at
beginning costs and Retirements end of
Description of period expenses or sales period
- ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
1994:
Buildings $19,551 $3,164 $506 $22,209
Machinery and
equipment 41,336 10,067 692 50,711
Motor vehicles 4,383 518 96 4,805
Furniture and
fixtures 1,456 158 8 1,606
Leasehold
improvements 11,866 2,209 71 14,004
Assets recorded
under capital
leases 32,617 3,892 24 36,485
--------- ------- ------ ----------
$111,209 $20,008 $1,397 $129,820
========= ======= ====== ==========
1993:
Buildings $17,046 $3,086 $ 581 $19,551
Machinery and
equipment 32,716 9,300 680 41,336
Motor vehicles 4,255 685 557 4,383
Furniture and
fixtures 1,285 180 9 1,456
Leasehold
improvements 10,044 1,982 160 11,866
Assets recorded
under capital
leases 28,695 3,996 74 32,617
--------- ------- ------ ----------
$ 94,041 $19,229 $2,061 $111,209
========= ======= ====== ==========
1992:
Buildings $14,193 $3,051 $198 $17,046
Machinery and
equipment 27,511 9,702 4,497 32,716
Motor vehicles 3,744 748 237 4,255
Furniture and
fixtures 1,120 191 26 1,285
Leasehold
improvements 8,007 2,185 148 10,044
Assets recorded
under capital
leases 24,563 4,318 186 28,695
--------- ------- ------ --------
$ 79,138 $20,195 $5,292 $ 94,041
========= ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE VIII - VALUATION and QUALIFYING ACCOUNTS AND RESERVES
for the years ended January 31, 1994, 1993 and 1992
(in thousands)
Balance at Balance at
beginning end of
of period Additions Deductions period
- ----------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
1994:
Allowance for
doubtful
accounts* $1,610 $566 $642 $1,534
========= ======= ====== =========
1993:
Allowance for
doubtful
accounts* $1,634 $549 $573 $1,610
========= ======= ====== =========
1992:
Allowance for
doubtful
accounts* $1,519 $1,105 $990 $1,634
========= ======= ====== =========
*Relates to accounts receivable.
</TABLE>
<TABLE>
<CAPTION>
GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
for the years ended January 31, 1994, 1993 and 1992
(in thousands, except percentages)
Weighted
Maximum Average average
Weighted amount amount interest
Balance average outstanding outstanding rate
at end interest during during the during the
Category of period rate the period period (1) period (2)
- -------- --------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1994:
Bank lines
of credit (3)
1993:
Bank lines
of credit - - $11,000 $1,164 4.35%
1992:
Bank lines
of credit - - 39,000 9,519 6.44%
<FN>
Notes:
(1) The average amount outstanding during the period was calculated by
multiplying the borrowings by the number of days such borrowings were
outstanding during the period and dividing such amount by the number
of days in the entire period.
(2) The weighted average interest rate for each period was calculated by
dividing the actual interest expense on short-term borrowings by the
average amount outstanding during the period.
(3) There were no short-term borrowings during the year ended January 31,
1994.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the years ended January 31, 1994, 1993 and 1992
(in thousands)
Charged to costs and expenses
1994 1993 1992
------- ------ -------
<S> <C> <C> <C>
Maintenance and repairs $20,117 $22,191 $24,308
======= ======= =======
Taxes, other than payroll and
income taxes $12,296 $11,229 *
======= =======
<FN>
* Amount less than 1 percent of total sales and revenues.
</FN>
</TABLE>
EXHIBIT INDEX
GETTY PETROLEUM CORP.
Annual Report on Form 10-K
for the fiscal year ended January 31, 1994
Exhibit
No. Description Begins on Sequential Page No.
3.1 Certificate of Filed as Exhibit 3.1 to registrant's
Incorporation. Registration Statement on Form S-1
filed on June 23, 1971 (Registration
No. 2-40881) and incorporated herein by
reference.
3.2 Certificate of Amendment of Filed as Exhibit B to
Certificate of registrant's Annual Report on
Incorporation, filed July Form 10-K for the fiscal year
22, 1977. ended January 31, 1978 (File
No. 1-8059) and incorporated
herein by reference.
3.3 Certificate of Amendment of Filed as Exhibit 6.3 to
Certificate ofIncorporation, Registration Statement on
filed September 23, 1980. Form 8-A filed by the Company
on July 19, 1985 (File No. 1-
8059) and incorporated herein
by reference.
3.4 Certificate of Amendment of Filed as Exhibit 6.4 to
Certificate of Incorporation, Registration Statement on
filed June 24, 1985. Form 8-A filed by the Company
on July 19, 1985 (File No. 1-
8059) and incorporated herein
by reference.
3.5 Certificate of Amendment of Filed as Exhibit 6.5 to
Certificate of Incorporation, Registration Statement on
filed, July 11, 1985. Form 8-A filed by the Company
on July 19, 1985 (File No. 1-
8059) and incorporated herein
by reference.
Exhibit
No. Description Begins on Sequential Page No.
3.6 By-Laws. Filed as Exhibit 3.2 to
registrant's Registration
Statement on Form S-1 filed
on June 23, 1971
(Registration No. 2- 40881)
and incorporated herein by
reference.
3.7 Certificate of Amendment Filed as Exhibit A to
of Certificate of registrant's definitive proxy
Incorporation. statement, dated May 8, 1987,
with respect to its Annual
Meeting of Stockholders held
June 18, 1987 and
incorporated herein by
reference.
3.8 Amendment to By-Laws. Filed as Exhibit B to
registrant's definitive proxy
statement, dated May 8, 1987,
with respect to its Annual
Meeting of Stockholders held
June 18, 1987 and
incorporated herein by
reference.
3.9 Amendment to By-Laws. Filed as Exhibit 3.9 to
registrant's Quarterly Report
on Form 10-Q for the quarter
ended April 30, 1988 (File
No. 1-8059) and incorporated
herein by reference.
4.1 Indenture dated as of Filed as Exhibit 4.1 to
August 1, 1985 between registrant's Annual Report on
registrant and BankAmerica Form 10-K for the fiscal year
Trust Company of New York, ended January 31, 1986 (File
as Trustee, relating to the No. 1-8059) and incorporated
14% Subordinated Debentures herein by reference.
due August 1, 2000,
including form of
Debenture.
*4.5 Bond Purchase Agreement
dated as of October 1, 1981
among Nassau County
Industrial Development
Agency, Chemical Bank and
Leemilt's Petroleum, Inc.,
relating to a $1,500,000
industrial development bond
due November 1, 1996.
Exhibit
No. Description Begins on Sequential Page No.
4.7 $35,000,000 reducing Filed as Exhibit 4.7 to
revolving Loan Agreement registrant's Quarterly
between Leemilt's Report on Form 10-Q for the
Petroleum, Inc. and Bank quarter ended October 31, 1987
of New England, N.A. dated (File No. 1-8059) and
as of December 7, 1987 and incorporated herein by reference.
related Guaranty Agreement,
dated as of December 7,
1987, by and between Getty
Petroleum Corp. and Bank of
New England, N.A.
10.2(a) Retirement and Profit Filed as Exhibit 10.2(a) to
Sharing Plan (amended registrant's Annual Report
and restated as of on Form 10-K for the fiscal
September 11, 1986.) year ended January 31, 1987
(File No. 1-8059) and
incorporated herein by
reference.
10.3 Asset Purchase Agreement Filed as Exhibit 2(a) to
between Power Test Corp. registrant's Current Report
(now known as Getty on Form 8-K, filed
Petroleum Corp.) and February 19, 1985 (File No.
Texaco Inc., Getty Oil 1-8059) and incorporated
Company, and Getty herein by reference.
Refining and Marketing
Company, dated December
21, 1984.
10.4 Trademark License Agreement Filed as Exhibit 2(b) to
between Texaco Inc., Getty registrant's Current Report
Oil Company,Texaco on Form 8-K, filed February
Refining and Marketing 19, 1985 (File No. 1-8059)
Inc., and Power Test Corp. and incorporated herein by
(now known as Getty reference.
Petroleum Corp.), dated
February 1, 1985.
Exhibit
No. Description Begins on Sequential Page No.
10.7 Form of Real Property Filed as Exhibit 2(e) to
Leases between Power Test registrant's Current Report
Realty Company Limited on Form 8-K, filed February 19,
Partnership, as Lessor, 1985 (File No. 1-8059) and
and Power Test Corp. incorporated herein by reference.
(now known as Getty
Petroleum Corp.) (either
directly or indirectly
through a wholly-owned
subsidiary), as Lessee,
each dated February 1, 1985.
10.8 Rolling Stock Lease Filed as Exhibit 2(f) to
between Power Test Realty registrant's Current Report
Company Limited Partnership, on Form 8-K, filed February
as Lessor, and Power Test 19, 1985 (File No. 1-8059)
Petro Corp. (a wholly-owned and incorporated herein by
subsidiary of registrant), reference.
as Lessee, dated
February 1, 1985.
10.9 Equipment Lease between Filed as Exhibit 2(g) to
Power Test Realty Company registrant's Current Report
Limited Partnership, as on Form 8-K, filed
Lessor, and Power Test February 19, 1985 (File
Corp. (now known as Getty No. 1-8059) and incorporated
Petroleum Corp.) as Lessee, herein by reference.
dated February 1, 1985.
10.16 Registrant's 1985 Stock Filed as Exhibit A to
Option Plan. registrant's definitive proxy
statement, dated May 31,
1985, with respect to its
Annual Meeting of
Stockholders held June 20,
1985 and incorporated herein
by reference.
10.17 Hazardous Waste and Filed as Exhibit 10.17 to
PMPA Indemnification registrant's Annual Report on
Agreement dated as of Form 10-K for the fiscal year
December 10, 1986 among ended January 31, 1987 (File
Getty Petroleum Corp., No. 1-8059) and incorporated
Power Test Realty Company herein by reference.
Limited Partnership and
Bank of New England, N.A.
Exhibit
No. Description Begins on Sequential Page No.
10.18 Guaranty Agreement dated Filed as Exhibit 10.18 to
as of December 1, 1986 of registrant's Annual Report on
Getty Petroleum Corp. Form 10-K for the fiscal year
regarding distribution ended January 31, 1987 (File
terminal leases between No. 1-8059) and incorporated
Power Test Realty Company herein by reference.
Limited Partnership and
Getty Terminals Corp.
10.19 Form of Indemnification Filed as Exhibit C to
Agreement between Getty registrant's definitive proxy
Petroleum Corp. and statement, dated May 8, 1987,
directors. with respect to its Annual
Meeting of Stockholders held
June 18, 1987 and incorporated
herein by reference.
10.20 Registrant's 1988 Stock Filed as Exhibit A to
Option Plan. registrant's definitive proxy
statement, dated April 29, 1988,
with respect to its Annual
Meeting of Stockholders held
June 16, 1988 and incorporated
herein by reference.
10.21 Milton Safenowitz Filed as Exhibit 10.21 to
Employment Agreement dated registrant's Annual Report on
February 1, 1990. Form 10-K for the fiscal year
ended January 31, 1990 (File
No. 1-8059) and incorporated
herein by reference.
10.22 Supplemental Retirement Filed as Exhibit 10.22 to
Plan for Executives of registrant's Annual Report on
Getty Petroleum Corp. and Form 10-K for the fiscal year
Participating Subsidiaries. ended January 31, 1990 (File
No. 1-8059) and incorporated
herein by reference.
10.23 Form of Agreement dated as 39
of September 9, 1993
between the Company and its
non-director officers and
one key employee regarding
compensation upon change in
Company control.
Exhibit
No. Description Begins on Sequential Page No.
10.24 Amendment to Employment Filed as Exhibit 10.24 to
Agreement dated February 1, registrant's Annual Report on
1990 (see Exhibit 10.21). Form 10-K for the fiscal year
ended January 31, 1991 (File
No. 1-8059) and incorporated
herein by reference.
10.25 Registrant's Amended and Filed as Exhibit 4.10 to
Restated 1991 Stock Option registrant's Registration
Plan. Statement on Form S-8 filed
on June 18, 1993
(Registration No. 33- 64746)
and incorporated herein by
reference.
10.26 Petroleum Products Supply Filed as Exhibit 10.26 to
Agreement dated as of July registrant's Quarterly Report
1, 1992 by and between on Form 10-Q for the quarter
Phibro Energy USA, Inc. and ended July 31, 1992 (File No.
Getty Petroleum Corp., 1-8059) and incorporated
Getty Terminals Corp., and herein by reference.
Aero Oil Company.
13 Annual Report to 42
Stockholders for the fiscal
year ended January 31, 1994.
22 Subsidiaries of the 37
registrant.
24 Consent of Independent 38
Accountants.
*Registrant will furnish upon request.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Getty Petroleum Corp.
(Registrant)
By____________________________ By__________________________
John J. Fitteron, Michael K. Hantman,
Senior Vice President and Vice President and
Chief Financial Officer Corporate Controller
(Principal Financial (Chief Accounting Officer)
Officer) April 28, 1994
April 28, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
By____________________________ By________________________
Leo Liebowitz, President, Milton Cooper,
Chief Executive Officer Director
and Director April 28, 1994
April 28, 1994
By____________________________ By_________________________
Herbert Lotman, Milton Safenowitz,
Director Director
April 28, 1994 April 28, 1994
By____________________________
Warren G. Wintrub,
Director
April 28, 1994
FINANCIAL REVIEW
GETTY PETROLEUM CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the year ended January 31, 1994 were $772.6 million as
compared with $903.7 million in the preceding year. The decrease in net
sales was principally due to the Company's decision to effectively
eliminate its bulk wholesale activities (which had a minimal effect on
earnings) primarily as a result of the July 1992 product supply contract,
resulting in $128.0 million lower sales. Also contributing to the decrease
in sales was a 1.3% decrease in average selling prices, offset by a 5.3%
increase in retail gallonage sold through 6.9% fewer outlets. Gross profit
was $45.7 million in fiscal 1994, an increase of $14.2 million over the
prior year. The increase in gross profit was principally due to improved
gross margins, increased retail gallonage and the inclusion in the prior
year period of approximately $1.2 million of non-recurring or unusual pre-
tax charges related to settlement of demurrage charges and completion of a
product supply contract with a foreign supplier. Fiscal 1993 sales were
$903.7 million as compared with $1.12 billion in the preceding year. The
decrease in net sales was due principally to the Company's decision during
the latter half of fiscal 1993 to substantially reduce bulk wholesale
activities primarily as a result of the 1992 product supply contract, and
the elimination of direct Company operated convenience store sales as a
result of leasing 141 of such stores in December 1991. Gross profit was
$31.5 million in fiscal 1993 compared to $26.4 million in the prior fiscal
year. Gross profit, although improved over the prior year, remained lower
than historical levels principally due to the continuation of
unsatisfactory profit margins during the first nine months of fiscal 1993
resulting from highly competitive market conditions.
Although the Company believes that it has only been modestly affected by
inflation due to its ability to generally pass on wholesale cost increases
at the retail level, there have been wide and rapid fluctuations in product
costs and selling prices. Accordingly, the Company's revenues and resultant
profit margins from the sale of petroleum products may continue to undergo
significant variations.
Rental income of $30.0 million in fiscal 1994 increased 4.4% over fiscal
1993 rental income of $28.8 million. The increase was due to increased
lease rental rates resulting from capital improvements in Company owned and
leased locations and lease renewals. Rental income in fiscal 1993 amounted
to $28.8 million, an increase of 14.9% over the $25.0 million realized in
fiscal 1992. The increase in the 1993 period was principally due to
additional rental income earned as a result of the convenience store
leases.
Other income, net was $3.9 million in fiscal 1994 which represented a
decrease of $.7 million from the prior year. The current year includes $.8
million of gains on dispositions of non-performing assets compared to $2.7
million of gains on dispositions in the prior year. The prior year also
included $1.7 million of non-recurring or unusual pre-tax charges relating
to cancellation of a cargo freight contract and the planned disposition of
two terminals, which charges were incurred principally because of the 1992
product supply contract and severance payments resulting from a work force
reduction in October 1992. Other income, net was $4.6 million in fiscal
1993 as compared to $11.8 million in the prior year, a decrease of $7.2
million principally due to a combination of gains or losses from non-
recurring or unusual items in both years. Fiscal 1993 included $2.7 million
of gains on dispositions of non-performing assets partially offset by the
aforementioned $1.7 million of non-recurring or unusual pre-tax charges
relating to cancellation of a cargo freight contract, the planned
disposition of two terminals and severance payments. Fiscal 1992 included
$3.2 million of income recognized by the Company for its portion of a claim
settlement, $3.7 million of gains on dispositions of non-performing assets
and $1.2 million of miscellaneous income related to the convenience food
store operations.
Selling, general and administrative expenses in fiscal 1994 amounted to
$28.8 million, a decrease of $2.8 million from the prior year. The decrease
was principally due to lower expenses as a result of cost reduction
measures previously instituted by the Company, which included a work force
reduction in October 1992, and reduced advertising expenditures. Selling,
general and administrative expenses in fiscal 1993 amounted to $31.6
million, a decrease of $8.7 million from the prior year. The decrease was
principally due to the elimination of expenses as a result of leasing the
convenience food stores, cost reduction measures instituted by the Company,
which included the work force reduction in October 1992, and reduced
advertising expenditures.
Interest expense in fiscal 1994 amounted to $14.6 million, a decrease of
$2.2 million from the prior year. The decrease was principally due to
reduced debt outstanding during the current fiscal year. Interest expense
in fiscal 1993 amounted to $16.8 million, a decrease of $2.2 million from
fiscal 1992 primarily due to reduced debt outstanding and lower interest
rates.
Depreciation and amortization decreased by $.4 million in fiscal 1994 as
compared to the prior year. There was a decrease in amortization of
deferred charges of $1.1 million, partially offset by an increase in
depreciation of $.7 million as a result of additions to property, plant and
equipment. Depreciation and amortization decreased by $.9 million in fiscal
1993 as compared to the prior year principally as a result of the sale in
December 1991 of certain equipment used in the convenience food stores,
partially offset by a write-off of certain deferred charges in connection
with a $30 million term loan, which was prepaid in July 1992.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", during the first quarter of fiscal
1994 and has reported the cumulative effect of the change in accounting
principle as a credit to earnings of $.9 million in the consolidated
statement of operations.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1994, working capital amounted to $6.2 million as
compared to $3.0 million as of January 31, 1993. The increase in working
capital was primarily due to funds generated during the year from
operations, partially offset by capital expenditures and the reduction in
long-term indebtedness.
The Company's principal sources of liquidity are cash flows from
operations, which amounted to $38.1 million during the year ended January
31, 1994, and its short-term unsecured lines of credit. As of January 31,
1994, lines of credit amounted to $60 million, of which $37.6 million was
utilized in connection with outstanding letters of credit. Management
believes that cash requirements for operations and debt service can be met
by its available cash balances and short-term investments of $50.6 million,
cash flows from operations and its credit lines.
On April 12, 1994, the Company announced that it will call all of the
outstanding 14% subordinated debentures due August 1, 2000. The call price
will be 102.8% and the redemption date will be May 16, 1994. Interest will
be paid to the redemption date. The redemption will be made with existing
funds, a portion of which may be funded by long-term debt.
Capital expenditures during the fiscal year ended January 31, 1994 amounted
to $20.4 million, including $.9 million related to property acquisitions
and $9.2 million for replacement of underground storage tanks and vapor
recovery facilities at gasoline stations and terminals.
ENVIRONMENTAL MATTERS
The Company is subject to various laws relating to protection of the
environment, and to contingencies, including legal proceedings and claims
which arise in the ordinary course of its business. With respect to
environmental contingencies, the total cost to the Company cannot be
determined with certainty as a result of such factors as the unknown amount
of claims and the timing of clean up efforts at identified sites, which
cost may be partially offset by subsequent recoveries against certain state
underground tank funds. These factors have been assessed based on
management's review of currently known facts and circumstances, and will
continue to be assessed by the Company in estimating the reserves for
environmental matters to be provided in its financial statements. In the
opinion of the Company, the aggregate amount of such environmental and
legal liabilities, if any, for which provision has not been made will not
have a material adverse effect on its financial position.
The Company is impacted by numerous environmental laws and regulations, the
most important of which are discussed below.
The Clean Air Act Amendments of 1990 requires that the nine worst ozone
non-attainment areas in the U.S. must use reformulated fuels gasoline
("RFG") year round. These geographic areas plus other areas that elect to
participate in the program include substantially all of the Company's
marketing area. At the same time it issued the final RFG rule, the U.S.
Environmental Protection Agency issued a proposed rule to ensure that at
least 30% of the oxygen required to make RFG come from renewable sources. A
final rule is expected in June 1994. The Company's supply contract with
Phibro Energy USA, Inc. provides for RFG gasoline and, therefore, the
Company should not experience any impact to meet these new regulations. The
Company has blended gasoline with ethanol successfully in many markets for
the past four years and has supply arrangements for ethanol. Many of the
Company's terminals are equipped with blending equipment. Accordingly, the
Company believes it is well positioned to meet the RFG regulations.
The federal underground storage tank ("UST") regulations, enacted in 1988,
provide that all non-complying UST's must be upgraded or replaced by the
end of 1998. The Company estimates that an additional $47 million may be
required to meet the 1998 UST deadline.
Various environmental regulations require the remediation of discharges or
releases of petroleum products from UST's. The Company estimates that for
existing remediation projects and anticipated remediation required in
conjunction with UST replacements it may be required to expend $65 million
in the next five years, reduced by $8 million for expected recoveries
against certain state underground tank funds.
Numerous regulations affect the Company's terminals and, in particular, the
imperviousness of the terminals' ground or surface and federal volatile
organic compound ("VOC") air emission regulations. The Company's terminals
are substantially in compliance with all environmental regulations and the
Company estimates that only $2 million may be required in the next five
years for its terminals, except the Company is unable to estimate the cost
of complying with the VOC emission regulations which have not been
finalized.
Federal and local regulations require the permanent closure of service
station bay drains and the removal of waste oil and fuel oil tanks. The
Company estimates that it may expend $5 million over the next five years to
complete this program.
The foregoing environmental expenditures are comparable in the aggregate to
the amounts spent for environmental matters during the past five fiscal
years. It is anticipated that the aforesaid environmental expenditures will
be provided from operating cash flow.
The Company is a Potentially Responsible Party at one Superfund site in
Connecticut for which its maximum exposure is approximately $5,000.
As of January 31, 1994, the Company had $6.8 million accrued for
environmental matters, principally for service station site remediations
and legal matters. During the years ended January 31, 1994, 1993 and 1992,
the Company expensed $9.7 million, $12.4 million and $13.0 million,
respectively, for environmental matters, which amount in fiscal 1994 was
net of $1.1 million for recoveries against certain state underground tank
funds.
The Company cannot predict what environmental legislation or regulations
will be enacted in the future or how existing or future laws or regulations
will be administered or interpreted with respect to products or activities
to which they have not previously been applied. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement
policies of the regulatory agencies or stricter interpretation of existing
laws which may develop in the future, could have an adverse effect on the
financial position or operations of the Company and could require
substantial additional expenditures for the installation and operation of
pollution control systems and equipment. Moreover, the Company cannot
predict the number or the magnitude of new discharges or releases from its
UST's.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in thousands except per share amounts)
Years ended January 31,
1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net sales $ 772,610 $903,712 $ 1,117,380 $ 1,234,359 $ 1,153,524
Net income (loss) 10,201(a) (3,703) (12,337) (9,540) 22,987
Net income (loss) per share .81(a) (.29) (.98) (.74) 1.75
Cash dividends per share -- .04 .23 .37 .29
Financial Position:
Total assets 292,388 293,736 317,539 337,978 309,950
Working capital 6,191 2,994 37,044 25,802 29,268
Long-term debt 50,403 58,645 91,941 69,785 48,632
Capital lease obligations 34,177 38,188 41,673 44,839 47,677
Stockholders' equity $ 92,152 $ 81,759 $ 85,795 $ 100,855 $ 121,120
<FN>
(a) Includes credit to earnings of $860 or $.07 per share from the cumulative effect of adopting
Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
For the years ended January 31,
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $772,610 $ 903,712 $ 1,117,380
Rental income 30,033 28,758 25,029
Other income, net 3,914 4,616 11,835
-------- --------- ----------
806,557 937,086 1,154,244
Cost of sales 726,918 872,261 1,091,003
Selling, general and administrative
expenses 28,780 31,625 40,284
Interest expense 14,606 16,812 18,969
Depreciation and amortization 21,777 22,129 22,983
-------- -------- -----------
792,081 942,827 1,173,239
Income (loss) before provision (credit)
for income taxes and cumulative
effect of accounting change 14,476 (5,741) (18,995)
Provision (credit) for income taxes 5,135 (2,038) (6,658)
------- ------- ---------
Income (loss) before cumulative effect
of accounting change 9,341 (3,703) (12,337)
Cumulative effect of accounting change 860 -- --
-------- --------- -----------
Net income (loss) $ 10,201 $ (3,703) $ (12,337)
======== ========= ===========
Per Share Data:
Income (loss) before cumulative effect
of accounting change $ .74 $ (.29) $ (.98)
Cumulative effect of accounting change .07 -- --
------- ------- --------
Net income (loss) per share $ .81 $ (.29) $(.98)
Weighted average shares outstanding 12,622 12,606 12,597
======= ======= =======
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31,
Assets: 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,334 $ 38,684
Short-term investments, at cost which
approximates market 8,250 516
Accounts receivable, less allowance for
doubtful accounts of $1,534 in 1994
and $1,610 in 1993 21,242 24,442
Inventories 10,017 9,799
Deferred income taxes 6,700 4,955
Prepaid expenses and other current assets 3,686 12,302
-------- -------
Total current assets 92,229 90,698
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 189,975 192,293
Other assets 10,184 10,745
--------- ---------
Total assets $ 292,388 $ 293,736
========= =========
Liabilities and Stockholders' Equity:
Current liabilities:
Current portion of long-term debt and
capital lease obligations $ 9,877 $ 8,119
Accounts payable 32,320 36,452
Accrued expenses 32,812 33,867
Gasoline taxes payable 8,658 9,266
Income taxes payable 2,371 --
------- -------
Total current liabilities 86,038 87,704
Long-term debt 50,403 58,645
Obligations under capital leases 34,177 38,188
Deferred income taxes 16,359 15,056
Other, principally deposits 13,259 12,384
Commitments and contingencies (Notes 3 and 5)
Stockholders' equity 92,152 81,759
--------- ---------
Total liabilities and stockholders'
equity $ 292,388 $ 293,736
========= =========
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the years ended January 31,
1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 10,201 $ (3,703) $ (12,337)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 21,777 22,129 22,983
Deferred income taxes (442) 3,447 3,744
Gain on dispositions of property, plant
and equipment (788) (1,944) (3,671)
Gain on investments (465) (520) (766)
Changes in assets and liabilities, net of effect
of acquisitions:
Accounts receivable 3,200 5,182 2,162
Inventories (218) 11,922 8,201
Prepaid expenses and other current assets 7,471 2,058 3,501
Other assets (63) 78 (2,618)
Accounts payable, accrued expenses and
gasoline taxes payable (5,795) 18,816 (31,066)
Income taxes payable 2,371 -- --
Other, principally deposits 875 315 115
---------- --------- ---------
Net cash provided by (used in)
operating activities 38,124 57,780 (9,752)
--------- --------- ----------
Cash flows from investing activities:
Sale (purchase) of short-term investments, net (7,269) 533 8,497
Payments for acquisitions (920) (2,465) (6,534)
Capital expenditures (19,495) (16,273) (22,665)
Proceeds from dispositions of property,
plant and equipment 3,513 6,282 11,141
--------- -------- ---------
Net cash used in investing activities (24,171) (11,923) (9,561)
--------- --------- ---------
Cash flows from financing activities:
Long-term borrowings 845 1,769 30,000
Repayment of long-term debt (7,989) (36,870) (6,356)
Payments under capital lease obligations (3,351) (3,005) (2,572)
Treasury stock and stock options, net 192 171 175
Cash dividends -- (504) (2,898)
--------- --------- ---------
Net cash provided by (used in)
financing activities (10,303) (38,439) 18,349
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 3,650 7,418 (964)
Cash and cash equivalents at beginning of year 38,684 31,266 32,230
--------- --------- ----------
Cash and cash equivalents at end of year $ 42,334 $ 38,684 $ 31,266
========= ========= ==========
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest $ 14,141 $ 15,950 $ 20,008
Income taxes, net (4,327) (7,211) (7,566)
See accompanying notes.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Getty Petroleum Corp. and all majority-owned subsidiaries (the
"Company"). The Company is principally engaged in the marketing and
distribution of petroleum products. All significant intercompany accounts
and transactions have been eliminated.
Cash and Cash Equivalents: The Company considers highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories, primarily finished petroleum products, are
principally accounted for under the lower of last-in, first-out ("LIFO")
cost or market. Net product exchange positions with other companies are
reflected in inventory.
The Company may take positions in the futures market as part of its overall
purchasing strategy in order to reduce the risk associated with price
fluctuations. The gains and losses on futures contracts are included as a
part of product costs.
Property, Plant and Equipment: Expenditures for renewals and betterments
are capitalized; maintenance and repairs are charged to operations when
incurred. When fixed assets are sold or retired, the cost and related
accumulated depreciation and amortization are eliminated from the
respective accounts and any gain or loss is credited or charged to income.
Depreciation and Amortization: Depreciation of fixed assets is computed on
the straight-line method based upon the estimated useful lives of the
assets. Assets recorded under capital leases (including land) and leasehold
improvements are amortized on the straight-line method over the shorter of
the term of the lease or the useful life of the related asset.
Environmental Costs: The estimated future costs for known environmental
remediation requirements are accrued when it is probable that a liability
has been incurred and the amount of remediation costs can be reasonably
estimated.
Income Taxes: Deferred income taxes are provided for the effect of items
which are reported for income tax purposes in years different from that in
which they are recorded for financial statement purposes.
Revenue Recognition: Revenue is recognized from sales when product
ownership is transferred to the customer and from rentals as earned.
Earnings (Loss) Per Share: Earnings (loss) per share of common stock is
computed by dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the year. Common stock
equivalents are not included in earnings (loss) per share computations
since their effect is immaterial.
Accounting Change: The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", during the first
quarter of fiscal 1994 and has reported the cumulative effect of the change
in accounting principle as a credit to earnings of $.9 million in the
consolidated statement of operations. In addition to the impact of the
cumulative effect on prior years, the effect on the current year of
adopting SFAS No. 109 was insignificant. Prior years' financial statements
have not been restated to apply the provisions of SFAS No. 109.
2 INVENTORIES
As of January 31, 1994, 1993 and 1992, the carrying value of the Company's
LIFO inventories approximated the first-in, first-out ("FIFO") method or
replacement cost.
3 LEASES
In 1985, Power Test Investors Limited Partnership (the "Partnership"), a
publicly traded real estate limited partnership, purchased from Texaco
certain Getty Oil Company properties and equipment which, in turn, have
been leased on a long-term basis to the Company. For financial statement
purposes, such leases have been recorded as capital leases.
The Partnership is managed by the General Partner, which is CLS General
Partnership Corp. The Directors and shareholders of CLS General Partnership
Corp. are also Directors and the principal shareholders of the Company.
During the years ended January 31, 1994, 1993 and 1992, the Company billed
the Partnership and reflected in other income $600,000, $576,000 and
$552,000, respectively, for administrative and other services rendered to
the Partnership.
Future minimum annual rentals under capital leases as of January 31, 1994,
payable to the Partnership, are as follows:
<TABLE>
<CAPTION>
Years ending January 31, (in thousands)
- -----------------------------------------------------------
<S> <C>
1995 $ 10,757
1996 10,557
1997 10,557
1998 10,557
1999 10,557
Thereafter 10,557
---------
63,542
Less, amount representing interest 25,384
---------
Present value of minimum lease payments
(including $3,981 due within one year) $ 38,158
==========
</TABLE>
In addition, the Company has obligations to other lessors under
noncancelable operating leases which have terms in excess of one year,
principally for gasoline stations. Substantially all of these leases
contain renewal options and escalation clauses. Future minimum annual
rentals under such leases are as follows:
<TABLE>
<CAPTION>
Years ending January 31, (in thousands)
- ------------------------------------------------------------
<S> <C>
1995 $ 13,541
1996 12,753
1997 11,630
1998 9,877
1999 8,160
Thereafter 34,530
---------
$ 90,491
</TABLE>
Rent expense, substantially all of which is included in cost of sales,
amounted to $16,955,000, $17,226,000 and $17,276,000 for the years ended
January 31, 1994, 1993 and 1992, respectively. Such amounts consist of
minimum rentals on noncancelable operating leases referred to above and
short-term rentals of terminal facilities and other equipment.
Rental income from fee owned and leased properties aggregated $30,033,000,
$28,758,000 and $25,029,000 for the years ended January 31, 1994, 1993 and
1992, respectively, which included $20,308,000, $20,421,000 and $17,960,000
of rent received under subleases. The net book value of fee owned
properties leased to lessees was $80,041,000 at January 31, 1994.
Leased gasoline stations, which have been subleased to lessees, have
sublease rentals generally not less than the rentals paid by the Company.
No significant difficulty has been experienced in subleasing station
properties.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Depreciable
1994 1993 Life (Years)
- ---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Land $ 42,607 $ 43,505
Buildings 56,152 53,453 16
Machinery and equipment 127,673 114,506 10 to 16
Motor vehicles 5,976 6,041 3 to 10
Furniture and fixtures 2,049 2,037 10
Leasehold improvements 30,028 28,611 See Note 1
Assets recorded under
capital leases 55,310 55,349 See Note 1
--------- --------
319,795 303,502
Less, accumulated
depreciation and amortization 129,820 111,209
--------- ---------
$ 189,975 $ 192,293
</TABLE>
Property, plant and equipment includes the following assets recorded under
capital leases, principally with the Partnership:
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Land $ 27,571 $ 27,599
Buildings 18,172 18,181
Equipment 8,660 8,662
Motor vehicles 907 907
--------- ---------
55,310 55,349
Less, accumulated amortization 36,485 32,617
--------- ---------
$ 18,825 $ 22,732
</TABLE>
5 COMMITMENTS AND CONTINGENCIES
The Company is subject to various laws relating to protection of the
environment, and to other contingencies, including legal proceedings and
claims which arise in the ordinary course of its business. With respect to
environmental contingencies, the total cost to the Company cannot be
determined with certainty as a result of such factors as the unknown amount
of claims and the timing of clean up efforts at identified sites, which
cost may be partially offset by subsequent recoveries against certain state
underground tank funds. These factors have been assessed based on
management's review of currently known facts and circumstances, and will
continue to be assessed by the Company in estimating the reserves for
environmental matters to be provided in its financial statements. In the
opinion of the Company, the aggregate amount of such environmental and
legal liabilities, if any, for which provision has not been made will not
have a material adverse effect on its financial position.
Getty Terminals Corp. ("Getty Terminals"), a wholly-owned subsidiary of the
Company, has received notices of proposed license revocations from the New
York State Department of Taxation and Finance ("Department") for Getty
Terminals' operating permits for its three New York State terminals and its
motor fuels and diesel distributor licenses. The notices of proposed
revocation are based on Getty Terminals' 1990 federal conviction for
conspiracy to evade 1985 federal gasoline excise taxes and for non-payment
of such taxes. The Department contends that Getty Terminals' federal tax
conviction affects its "duties and obligations" under Sections 283 and 283-
b of the New York Tax Law ("Tax Law"). Getty paid all New York State taxes
which were due and owing and has fully performed all of its duties and
obligations under the Tax Law. Management of the Company believes that the
Department does not have cause to revoke Getty Terminals' New York State
licenses; therefore, management believes that this matter will have no
material adverse effect on the Company's financial position or future
business.
In order to minimize the Company's exposure to credit risk associated with
financial instruments, the Company places its temporary cash investments
with high credit quality financial institutions and, by policy, limits the
amount invested with any one financial institution other than the U.S.
Government. Concentration of credit risk with respect to trade receivables
generally is limited due to the large number of customers comprising the
Company's customer base.
6 DEBT
<TABLE>
<CAPTION>
Long-term debt consists of:
1994 1993
- ---------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Mortgage loan due through January 1, 1998 $ 24,164 $ 26,950
Subordinated debentures due through
August 1, 2000 21,666 24,126
Real estate mortgages, bearing interest at
rates ranging from 4% to 11%, due in varying
amounts through October 1, 2020 10,469 12,367
--------- ---------
56,299 63,443
Less, current portion 5,896 4,798
--------- ---------
Noncurrent portion $ 50,403 $ 58,645
</TABLE>
Aggregate principal payments in subsequent fiscal years relating to long-
term debt are as follows (in thousands): 1995--$5,896; 1996--$7,749; 1997--
$6,286; 1998--$21,630; 1999--$3,920 and $10,818 thereafter.
Borrowings under the mortgage loan are payable monthly over the term of the
agreement with a final payment of $15,346,000 on January 1, 1998. The loan,
which bears interest at prime, is collateralized by first mortgages on
certain service station properties.
The subordinated debentures, which bear interest at 14%, are redeemable in
whole at any time or in part from time to time, at the option of the
Company, at a premium initially equal to the coupon rate declining
uniformly over the ten year period ending August 1, 1995. Annual sinking
fund payments of $2,625,000, which commenced on August 1, 1990, are
calculated to retire 75% of the debentures prior to maturity. As of January
31, 1994, $934,000 of debentures are held in treasury and may be used to
meet future sinking fund payments. The debentures are subordinate in right
of payment to all existing and future Senior Indebtedness (as defined) of
the Company. As of January 31, 1994, Senior Indebtedness amounted to
$34,633,000. On April 12, 1994, the Company announced that it will call all
of the outstanding subordinated debentures at a price of 102.8% with a
redemption date of May 16, 1994.
Certain long-term debt is collateralized by property, plant and equipment
having an aggregate net book value of approximately $54,200,000 at January
31, 1994.
As of January 31, 1994, the Company had unsecured lines of credit
aggregating $60,000,000, of which $37,624,000 was utilized in the form of
outstanding letters of credit.
Notes to Consolidated Financial Statements (continued)
7 INCOME TAXES
The provision (credit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Federal:
Current $ 3,305 $ (6,148) $ (10,687)
Deferred 746 3,372 3,704
State and local:
Current 1,025 663 285
Deferred 59 75 40
Provision (credit) for income taxes $ 5,135 $ (2,038) $ (6,658)
</TABLE>
The tax effects of temporary differences which comprise the deferred tax
assets and liabilities at January 31, 1994 are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Property, plant and equipment $ (9,064)
Accruals (2,468)
Investments 949
Inventories 853
Alternative minimum tax credit carryforwards 531
Other (460)
----------
Net deferred tax liabilities $ (9,659)
</TABLE>
As of January 31, 1994, the Company has state tax operating loss
carryforwards of approximately $2,110,000 expiring through 2008 which are
available to offset future state income taxes.
The following is a reconciliation of the expected statutory federal income
tax provision (credit) and the actual provision (credit) for income taxes:
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Expected provision (credit)
at statutory federal income
tax rate $ 5,067 $ (1,952) $ (6,458)
State and local income taxes,
net of federal benefit 705 487 215
Taxes related to prior years -- (927) --
Utilization of capital
loss carryforward (1,026) -- (873)
Nondeductible expenses -- 293 --
Other 389 61 458
--------- ---------- ----------
Provision (credit) for
income taxes $ 5,135 $ (2,038) $ (6,658)
</TABLE>
As of January 31, 1993, recoverable income taxes amounting to $6,708,000
are included in prepaid expenses and other current assets.
8 STOCKHOLDERS' EQUITY
A summary of the changes in stockholders' equity for the three years ended
January 31, 1994 is as follows:
<TABLE>
<CAPTION>
Retained Treasury Stock,
Capital Stock (a) Paid-in Earnings at cost
Shares Amount Capital (Deficit) Shares Amount Total
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1991 13,529 $ 1,353 $ 119,886 $ (5,491) 944 $ 14,893 $ 100,855
Net loss (12,337) (12,337)
Cash dividends--$.23
per share (2,898) (2,898)
Purchase of treasury stock 1 7 (7)
Issuance of treasury stock (28) (13) (197) 169
Stock options exercised 1 13 13
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1992 13,530 1,353 119,871 (20,726) 932 14,703 85,795
Net loss (3,703) (3,703)
Cash dividends--$.04
per share (504) (504)
Purchase of treasury stock 1 7 (7)
Issuance of treasury stock (63) (16) (241) 178
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1993 13,530 1,353 119,808 (24,933) 917 14,469 81,759
Net income 10,201 10,201
Purchase of treasury stock 2 21 (21)
Issuance of treasury stock (38) (7) (105) 67
Stock options exercised 13 1 145 146
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1994 13,543 $ 1,354 $ 119,915 $ (14,732) (b) 912 $ 14,385 $ 92,152
<FN>
(a) Capital stock consists of preferred stock, par value $1.00 per share; authorized 10,000,000 shares for issuance in series
(none of which is issued) and common stock, par value $.10 per share; authorized 30,000,000 shares.
(b) Net of $103,803,000 transferred from retained earnings to common stock and paid-in capital as a result of accumulated stock
dividends.
</FN>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9 EMPLOYEE BENEFIT PLANS
The Company has a retirement and profit sharing plan with deferred 401(k)
savings plan provisions (the "Retirement Plan") for non-union employees
meeting certain service requirements and a Supplemental Plan for
executives. Under the terms of these plans, the annual discretionary
contributions to the plans are determined by the Board of Directors. Under
the Retirement Plan, employees may make voluntary contributions and the
Company has elected to match an amount equal to 50% of such contributions
but in no event more than 3% of the employee's eligible compensation. Under
the Supplemental Plan, a participating executive may receive an amount
equal to 10% of his compensation, reduced by the amount of any
contributions allocated to such executive under the Retirement Plan. Net
Company contributions under the plans approximated $719,000, $765,000 and
$874,000 for the years ended January 31, 1994, 1993 and 1992, respectively.
The Company has Stock Option Plans which authorize the Company to grant
options to purchase shares of the Company's common stock and to also grant
stock appreciation rights (SARs) under the 1985 Plan. The aggregate number
of shares of the Company's common stock which may be made the subject of
options under the 1985, 1988 and 1991 Plans shall not exceed 281,420 shares
(including SARs), 303,876 shares and 500,000 shares, respectively, subject
to further adjustment for stock dividends and stock splits. Each plan
provides that options are exercisable starting one year from the date of
grant, on a cumulative basis at the annual rate of 25 percent of the total
number of shares covered by the option.
Changes in stock options for the three years ended January 31, 1994 are as
follows:
<TABLE>
<CAPTION>
1985 Plan 1988 Plan 1991 Plan
- ----------------------------------------------------------------------------------------------------------------------------------
Number Option Number Option Number Option
of Price per of Price per of Price per
Shares Share Shares Share Shares Share
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
February 1, 1991 221,021 $ 10.49--14.09 265,161 $ 11.12--18.62
Granted 86,000 $ 12.38
Exercised (941) 10.49--14.09 (137) 17.12
Cancelled (913) 14.09 (2,615) 11.12--18.62
-------- --------- ----------
Outstanding at
January 31, 1992 219,167 10.49--14.09 262,409 11.12--18.62 86,000 12.38
Granted 131,050 10.88
Cancelled (12,008) 10.49--14.09 (5,886) 11.12--18.62 (2,775) 10.88--12.38
-------- --------- ----------
Outstanding at
January 31, 1993 207,159 10.49--14.09 256,523 11.12--18.62 214,275 10.88--12.38
Granted 80,000 12.25--13.13
Exercised (9,833) 10.49 (2,500) 11.12 (1,250) 12.38
Cancelled (8,052) 10.49--14.09 (15,014) 11.12--18.62 (12,325) 10.88--12.38
-------- -------- --------
Outstanding at
January 31, 1994 189,274 $ 10.49--14.09 239,009 $ 11.12--18.62 280,700 $ 10.88--13.13
============================ ============================ ============================
Exercisable at
January 31, 1994 189,274 $ 10.49--14.09 199,797 $ 11.12--18.62 69,960 $ 10.88--12.38
============================ ============================ ============================
Available for grant at
January 31, 1994 78,134 62,230 218,050
====== ====== =======
There were no SARs outstanding at January 31, 1994.
</TABLE>
10 QUARTERLY FINANCIAL DATA
The following summarizes the quarterly results of operations for the years
ended January 31, 1994 and 1993 (unaudited as to quarterly information):
<TABLE>
<CAPTION>
Three months ended Year ended
Fiscal 1994: April 30 July 31 October 31 January 31 January 31
- -------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $ 216,147 $ 204,261 $ 191,102 $ 195,047 $ 806,557
Gross profit 8,562 9,051 9,492 18,587 45,692
Income before provision
for income taxes and
cumulative effect of
accounting change 1,594 1,052 1,599 10,231 14,476
Net income 1,802(a) 625 882 6,892 10,201(a)
Net income per share $ .14(a) $ .05 $ .07 $ .55 $ .81(a)
==========================================================================
<FN>
(a) Includes credit to earnings of $860 or $.07 per share from the cumulative effect of adopting
Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three months ended Year ended
Fiscal 1993: April 30 July 3 1 October 31 January 31 January 31
- -------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $ 246,569 $ 252,825 $ 215,131 $ 222,561 $ 937,086
Gross profit 5,158 4,295 4,758 17,240 31,451
Income (loss) before
provision (credit)
for income taxes (4,217) (5,854) (5,804) 10,134 (5,741)
Net income (loss) (2,811) (3,818) (3,877) 6,803 (3,703)
Net income (loss) per share $ (.22) $ (.30) $ (.31) $ .54 $ (.29)
=========================================================================
</TABLE>
11 ACQUISITION
On May 30, 1991, the Company concluded an agreement to lease on a long-term
basis 53 service stations, supply an additional 73 service stations and
purchase certain inventories and other assets for approximately $5,803,000.
The service stations are located in Massachusetts, Rhode Island and New
Hampshire. The leases have been accounted for as operating leases and the
assets have been accounted for as a purchase with the purchase price being
assigned to the net assets acquired based on the fair value of such assets
and liabilities at the date of acquisition as follows:
- --------------------------------------------------------------------------
(in thousands)
Net current assets $ 2,170
Property, plant and equipment 1,062
Other assets 2,693
Other, principally deposits (122)
-------------
Net assets acquired $ 5,803
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Getty Petroleum Corp.:
We have audited the accompanying consolidated balance sheets of GETTY
PETROLEUM CORP. and SUBSIDIARIES as of January 31, 1994 and 1993, and the
related consolidated statements of operations and cash flows for each of
the three years in the period ended January 31, 1994. 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 Getty
Petroleum Corp. and Subsidiaries as of January 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended January 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in fiscal 1994.
New York, New York
March 16, 1994, except as to Note 6,
the date of which is April 12, 1994
COMMON STOCK
Getty Petroleum's common stock, its only outstanding voting security, is
traded on the New York Stock Exchange (symbol: "GTY"). At April 20, 1994,
there were approximately 3,300 holders of record of Getty Petroleum's
common stock. The price range of common stock and cash dividends paid with
respect to each share of common stock during the past two fiscal years were
as follows:
<TABLE>
<CAPTION>
Cash
Price Range Dividends
Quarter Ending High Low Per Share
- --------------------------------------------------------------------------
<S> <C> <C> <C>
January 31, 1994 $ 17.00 $ 12.25 $ --
October 31, 1993 15.00 12.75 --
July 31, 1993 15.50 10.625 --
April 30, 1993 12.375 10.00 --
January 31, 1993 $ 12.25 $ 9.75 $ --
October 31, 1992 10.75 9.375 --
July 31, 1992 15.25 10.50 .02
April 30, 1992 16.25 12.25 .02
- --------------------------------------------------------------------------
</TABLE>
CORPORATE DATA
BOARD OF DIRECTORS
Milton Cooper
Chairman of the Board
of Kimco Realty Corporation
and former Vice President of the Company.
Leo Liebowitz
President and Chief Executive Officer
of the Company.
Herbert Lotman
Chairman of the Board and Chief
Executive Officer of Keystone Foods
Corporation.
Milton Safenowitz
Former Executive Vice President of the
Company.
Warren G. Wintrub
Retired Partner, Member of the
Executive Committee and Chairman of
the Retirement Committee of
Coopers & Lybrand.
EXECUTIVE OFFICERS
Leo Liebowitz
President and Chief Executive Officer
John J. Fitteron
Senior Vice President and
Chief Financial Officer
Stephen P. Salzman
Senior Vice President and
Corporate Secretary
Alvin A. Smith
Senior Vice President, Operations
L. Douglas Bauguss
Vice President
Lorenzo Cinque
Treasurer
James R. Craig
Vice President
Michael K. Hantman
Vice President and Corporate Controller
Samuel M. Jones
Vice President and General Counsel
SHAREHOLDER INFORMATION
ANNUAL MEETING
All shareholders are cordially invited to attend the Company's annual
meeting on June 16, 1994 at 10:30 a.m. at 1301 Avenue of the Americas, 2nd
Floor, New York, New York. Holders of common stock of record at the close
of business on April 20, 1994, are entitled to vote at the meeting. A
notice of meeting, proxy statement and proxy were mailed to shareholders
with this report.
FORM 10-K AND INVESTOR
RELATIONS INFORMATION
The Company's fiscal 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission may be obtained by shareholders without
charge by writing to:
Corporate Secretary
Getty Petroleum Corp.
125 Jericho Turnpike
Jericho, New York 11753
In addition, Getty shareholders are informed about Company news through the
issuance of press releases and quarterly reports. Investors, brokers,
security analysts and others desiring financial information should contact
the Corporate Secretary at (516) 338-1212.
TRANSFER AGENT
American Stock Transfer and Trust Company
99 Wall Street
New York, New York 10005
ABOUT OUR SHAREHOLDERS
As of April 20, 1994, the Company had 12,637,436 outstanding shares of
Common Stock owned by approximately 3,300 shareholders of record.
CORPORATE HEADQUARTERS
Getty Petroleum Corp.
125 Jericho Turnpike
Jericho, New York 11753
Getty Petroleum Corp.'s Common
Stock is listed on the New York Stock
Exchange under the ticker symbol GTY.
SHAREHOLDER INQUIRIES
Inquiries, comments or suggestions concerning Getty Petroleum Corp. are
welcome and should be directed to:
Investor Relations
125 Jericho Turnpike
Jericho, New York 11753
(516) 338-6000
Telex
175061 GETTY
Telecopier
(516) 338-6062
INDEX TO EXHIBITS
Exhibit Name Exhibit Number
- ------------ --------------
Index to Exhibits (Electronic) 99.1
Subsidiaries of Registrant 22
Consent of Independent Auditors 23
President Letter 10.23
Exhibit 22. Subsidiaries of the Registrant.
STATE OF
SUBSIDIARY INCORPORATION
AERO OIL COMPANY Pennsylvania
BERKSHIRE CONSTRUCTION COMPANY, INC. Pennsylvania
DONNA OIL CORP. New York
GASWAY INC. New York
GETTYMART INC. Delaware
GETTY TERMINALS CORP. New York
KINGSTON OIL SUPPLY CORP. New York
KWIK FARMS, INC. New York
LEEMILT'S FLATBUSH AVENUE, INC. New York
LEEMILT'S PETROLEUM, INC. New York
M. S. S. ECONOMY OIL CORP. New York
MR. FOOD, INC. Delaware
PT PETRO CORP. New York
P. T. STATIONS CORP. New York
POWER TEST OF NEW JERSEY, INC. New Jersey
POWER TEST PETROLEUM DISTRIBUTORS, INC. New York
RECO PETROLEUM, INC. Pennsylvania
SLATTERY GROUP INC.* New Jersey
ENERGY RESOURCE & RECOVERY CORPORATION New York
GT GROUP, INC. New York
HSCO GROUP, INC. New York
UNION ROUTE 22 CORP. New Jersey
*97% owned by Getty Petroleum Corp.
EXHIBIT 10.23
September 9, 1993
Mr.
Getty Petroleum Corp.
125 Jericho Turnpike
Jericho, New York 11753
Dear :
I am pleased to advise you that the Board of Directors of the Company
has approved the following "change of control" or "substantial structural
change" agreement:
1. Subject to the limitations set forth in paragraph 3 below, if, on
or before January 31, 1995, there is a change of control or substantial
structural change of the Company ("Change") and you (i) are not offered
continued employment by any surviving or successor entity (the "surviving
entity") following such Change, in a comparable position at comparable
total compensation ("comparable employment") or (ii) are offered and
accept comparable employment but are subsequently demoted to non-comparable
employment or terminated without Cause (as defined in paragraph 4 below)
within the 36-month period following the Change, the Company will pay to
you in cash, during the 36-month period immediately following such Change
or, in the case of clause (ii) above, for any remaining portion of such 36-
month period (such 36-month or shorter period, as applicable, the "benefit
period"), the annual average of the sum of (a) your base salary; (b) your
benefits under the Incentive Compensation Plan ("ICP") or any other bonus
plan; and (c) the total of the employer contribution (other than salary
deferrals made by you) made to your accounts under the Company's 401(k) and
Supplemental Deferred Compensation Plans, based upon the 36-month period
prior to the date of the Change ("the Guaranteed Salary"). In addition,
under such circumstances the Company will also continue during the benefit
period to provide you with medical, dental, life insurance and disability
coverage at least as favorable as the coverage currently extended to you
("the Guaranteed Benefits").
Mr.
September 9, 1993
Page Two
2. In consideration for your services and assistance in achieving the
Change, upon the event of Change, the following also shall occur:
A. You will be paid by the Company an amount equal to the maximum
Bonus Opportunity (100% of Corporate, Unit and Individual) you would
be entitled to receive under the ICP for the previous fiscal year (for
example, payment in March 1994 would be for the fiscal year ending
January 31, 1994), but not less than the maximum you would have been
entitled to receive under the ICP for the fiscal year ended January
31, 1993; and
B. You will receive the full amount of your share of the Supplemental
Deferred Compensation Plan, which shall include the Company's
contribution for the then current fiscal year; and
C. Prior to the distribution of any E&P dividend ("Dividend") to the
shareholders of the Company, all stock options held by you will become
fully vested. For any stock options which you irrevocably elect to
exercise: (a) You will then have an election either (i) to receive a
payment in cash from the Company equal to the amount of the Dividend
payable with respect to the shares of Company stock ("Shares") for
which you hold and have exercised options, or (ii) to reduce the
exercise price of each such option by the amount of the Dividend
payable with respect to the Shares covered by the option; (b) The
Company will then have an election to cancel any or all such options
in exchange for a cash payment for Shares covered by each option equal
to the value of the option as determined under the Option Agreement;
(c) You may exercise any remaining options pursuant to their terms
and shall have the right, at no cost to you, to sell any Shares
obtained pursuant to such exercise in conjunction with the next public
offering of Shares by the Company; and
D. Also, pursuant to the terms thereof, your account in the 401(k)
Plan, will be distributable to you after termination of employment.
3. If the surviving entity (or one of the surviving entities in the case
of a substantial structural change) continues to compensate you but at a
total salary less than the Guaranteed Salary and/or provide any benefit
which is a part of the Guaranteed Benefits at less than the Guaranteed
Benefit level, the Company shall pay, and/or provide to you, the difference
between the Guaranteed Salary and Guaranteed Benefits and such lower salary
or lesser benefits. If you resign on your own volition from, or are
terminated without Cause by, the successor entity, the
Mr.
September 9, 1993
Page Three
Company will continue to be obligated to pay, and provide, the Guaranteed
Salary and Guaranteed Benefits; provided however, that you shall use your
best efforts to obtain other comparable employment and further provided
that, if you obtain any other employment, the amounts of Guaranteed Salary
and Guaranteed Benefits shall be reduced by the amounts you receive from
the new employer.
4. For purposes of this letter, (a) the term "change of control" means a
transaction pursuant to which (i) all or substantially all of the assets
of the Company are sold to any person, persons or related group of persons
other than an affiliate or affiliates of the Company (a "third party"),
(ii) ownership of 50% or more of the outstanding capital stock (or equity
equivalents) of the Company is acquired by a third party, or (iii) the
Company is merged or consolidated with another entity with the effect that
after such merger or consolidation 50% or more of the voting equity of the
surviving entity is owned by a third party ; (b) the term "substantial
structural change" shall mean (i) a transaction pursuant to which the
Company is substantially structurally changed whereby the business and/or
the assets are divided into two or more separate entities and the present
Company controlling shareholder interests are substantially reduced in the
Company and/or materially non-existent in the new entity or entities, (ii)
declaration of any E&P Dividend, or (iii) election of REIT status with the
IRS; and (c) the term "Cause" shall mean (i) a finding that you have
materially harmed the Company through a material act of dishonesty in the
performance of your duties, or (ii) indictment (whether or not it results
in a conviction) for a felony involving moral turpitude, fraud or
embezzlement.
5. Upon your acceptance of this Agreement, the letter agreement dated May
4, 1993 and all prior agreements and understandings shall terminate and no
longer have any force or effect.
I appreciate your contribution to the Company and hope that we will
together experience a profitable fiscal year.
Very truly yours,
GETTY PETROLEUM CORP.
LEO LIEBOWITZ
President and CEO
Accepted and Agreed to this
______ day of September, 1993.
LL/bs
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Getty Petroleum Corp. on Form S-8 (Registration Nos. 33-22653 and
33-64746) of our report dated March 16, 1994, except as to Note 6, the date
of which is April 12, 1994, on our audits of the consolidated financial
statements and financial statement schedules of Getty Petroleum Corp. and
Subsidiaries as of January 31, 1994 and 1993, and for each of the three years
in the period ended January 31, 1994, which report has been incorporated by
reference in this Annual Report on Form 10-K from the 1994 Annual Report to
Stockholders of Getty Petroleum Corp. and Subsidiaries.
Coopers & Lybrand
New York, New York
March 16, 1994, except as to Note 6,
the date of which is April 12, 1994.
