SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended July 31, 1994 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)
(516) 338-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Registrant has 12,638,573 shares of Common Stock, par value $.10 per share,
outstanding as of July 31, 1994.
<PAGE>
GETTY PETROLEUM CORP.
INDEX
Part I. FINANCIAL INFORMATION Page Number
- -------------------------------- ------------
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 1994 and
January 31, 1994 1
Consolidated Statements of Operations for the three and
six months ended July 31, 1994 and 1993 2
Consolidated Statements of Cash Flows for the six months
ended July 31, 1994 and 1993 3
Notes to Consolidated Financial Statements 4 - 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 8
Part II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<PAGE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
- ----------------------------------------------------------------------
July 31, January 31,
Assets: 1994 1994
- ----------------------------------------------------------------------
(unaudited)
Current assets:
Cash and cash equivalents $ 28,705 $ 42,334
Short-term investments 441 8,250
Accounts receivable, net 18,564 21,242
Inventories 10,637 10,017
Deferred income taxes 5,167 6,700
Prepaid expenses and other current assets 6,379 3,686
-------- ---------
Total current assets 69,893 92,229
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 187,180 189,975
Other assets 10,027 10,184
-------- ---------
Total assets $267,100 $292,388
======== =========
- ---------------------------------------------------------------------
Liabilities and Stockholders' Equity:
- ---------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt and
capital lease obligations $ 11,602 $ 9,877
Accounts payable 32,500 32,320
Accrued expenses 28,384 32,812
Gasoline taxes payable 9,478 8,658
Income taxes payable -- 2,371
-------- --------
Total current liabilities 81,964 86,038
Long-term debt 34,392 50,403
Obligations under capital leases 31,795 34,177
Deferred income taxes 16,219 16,359
Other, principally deposits 13,632 13,259
Stockholders' equity:
Preferred stock -- --
Common stock, par value $.10 per share 1,354 1,354
Other stockholders' equity 87,744 90,798
-------- ---------
89,098 92,152
-------- ---------
Total liabilities and stockholders' equity $267,100 $292,388
======== ========
See accompanying notes.
-1-
<PAGE>
<TABLE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Three months ended July 31, Six months ended July 31,
- ---------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $179,958 $195,637 $350,659 $403,664
Rental and other income 9,419 8,624 18,178 16,744
-------- -------- -------- --------
189,377 204,261 368,837 420,408
-------- -------- -------- --------
Cost of sales 180,105 186,586 342,753 386,051
Selling, general and administrative expenses 6,513 7,464 13,061 13,298
Interest expense 2,799 3,733 6,072 7,483
Depreciation and amortization 5,349 5,426 10,647 10,930
-------- -------- -------- --------
194,766 203,209 372,533 417,762
-------- -------- -------- --------
Income (loss) before provision (credit) for
income taxes, extraordinary item and
cumulative effect of accounting changes (5,389) 1,052 (3,696) 2,646
Provision (credit) for income taxes (1,998) 427 (1,293) 1,079
-------- -------- -------- --------
Income (loss) before extraordinary item
and cumulative effect of accounting changes (3,391) 625 (2,403) 1,567
Extraordinary item, net of income taxes (775) -- (775) --
Cumulative effect of accounting changes -- -- 183 860
-------- -------- -------- --------
Net income (loss) ($4,166) $625 ($2,995) $2,427
======== ======== ======== ========
Per Share Data:
Income (loss) before extraordinary item and
cumulative effect of accounting changes ($0.27) $0.05 ($0.19) $0.12
Extraordinary item (0.06) -- (0.06) --
Cumulative effect of accounting changes -- -- 0.01 0.06
-------- -------- -------- --------
Net income (loss) per share ($0.33) $0.05 ($0.24) $0.19
======== ======== ======== ========
Weighted average shares outstanding 12,639 12,619 12,639 12,616
======== ======== ======== ========
See accompanying notes.
</TABLE>
-2-
<PAGE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
July 31,
1994 1993
-------------------
Cash flows from operating activities:
Net income (loss) ($2,995) $2,427
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary item, before tax 1,232 --
Cumulative effect of accounting changes (183) (860)
Depreciation and amortization 10,647 10,930
Deferred income taxes 1,372 (631)
(Gain) loss on dispositions of property, plant
and equipment 55 (493)
(Gain) on investments -- (130)
Sale of short-term investments, net 7,860 293
Changes in assets and liabilities:
Accounts receivable 2,678 4,978
Inventories (620) (2,662)
Prepaid expenses and other current assets (2,910) 7,935
Other assets (548) 442
Accounts payable, accrued expenses and
gasoline taxes payable (3,428) (12,450)
Income taxes payable (2,371) --
Other, principally deposits 373 400
---------------------
Net cash provided by operating activities 11,162 10,179
---------------------
Cash flows from investing activities:
Property acquisitions (536) (201)
Capital expenditures (8,455) (7,272)
Proceeds from dispositions of property,
plant and equipment 1,380 1,095
---------------------
Net cash used in investing activities (7,611) (6,378)
---------------------
Cash flows from financing activities:
Long-term borrowings 10,000 --
Repayment of long-term debt (24,536) (2,047)
Payments under capital lease obligations (2,132) (1,585)
Premium paid on early retirement of debt (607) --
Treasury stock and stock options, net 95 59
---------------------
Net cash used in financing activities (17,180) (3,573)
---------------------
Net increase (decrease) in cash and cash equivalents (13,629) 228
Cash and cash equivalents at beginning of period 42,334 38,684
---------------------
Cash and cash equivalents at end of period $28,705 $38,912
=====================
Supplemental disclosures of cash flow information-
Cash paid (received) during the period for:
Interest $7,166 $7,397
Income taxes, net 3,787 (4,422)
See accompanying notes.
-3-
<PAGE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the
accounts of Getty Petroleum Corp. and all majority-owned subsidiaries (the
"Company"). The consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation.
2. 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 period. Common stock equivalents are not included
in earnings (loss) per share computations since their effect is immaterial.
3. Inventories:
Inventories, primarily finished petroleum products, are principally
accounted for under the lower of last-in, first-out ("LIFO") cost or
market. As of July 31, 1994 and January 31, 1994, the carrying value of
the Company's LIFO inventories approximated the first-in, first-out
("FIFO") method or replacement cost.
4. Accounting Changes:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", which requires that such investments be
classified into three categories, namely, held-to-maturity, trading and
available-for-sale securities. Currently, the Company's short-term
investments are all considered available-for-sale and are carried at fair
value with unrealized gains or losses excluded from earnings and reported
as a separate component of stockholders' equity.
The Company adopted SFAS No. 115 as of the beginning of fiscal 1995
and has reported the cumulative effect of the change in accounting
principle as a credit of $183,000 in the consolidated statement of
operations. During the quarter and six months ended July 31, 1994, the
market value of the Company's short-term investments increased and a net
unrealized gain of $51,000 and $29,000, respectively, was excluded from
earnings and reported as a separate component of stockholders' equity (see
Note 5).
The Company adopted SFAS No. 109, "Accounting for Income Taxes",
during the quarter ended April 30, 1993 and reported the cumulative effect
of the change in accounting principle as a credit of $860,000 in the
consolidated statement of operations.
-4-
<PAGE>
5. Stockholders' equity:
A summary of the changes in stockholders' equity for the six months
ended July 31, 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
Treasury Net Unrealized
Common Paid-in Accumulated Stock, Gain (Loss) on
Stock Capital Deficit at cost Equity Securities Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31,
1994 $1,354 $119,915 $(14,732) $14,385 $ -- $92,152
Net loss (2,995) (2,995)
Cumulative effect of
accounting change (183) (183)
Net unrealized gain
on equity securities 29 29
Purchase of
treasury stock 15 (15)
Issuance of
treasury stock (18) (109) 91
Stock options
exercised 19 19
-------------------------------------------------------------------------------------------
Balance, July 31, 1994 $1,354 $119,916 $(17,727) $14,291 $(154) $89,098
===========================================================================================
</TABLE>
6. Debt:
On May 16, 1994, the Company redeemed all of its outstanding 14%
subordinated debentures due August 1, 2000 at a call price of 102.8%. The
redemption of $21,666,000 of debentures was made with existing funds,
$10,000,000 of which was funded on June 13, 1994 under a five year term
loan agreement with two banks. The principal is payable in quarterly
installments of $500,000, together with interest payable, at the option of
the Company, at LIBOR plus 1.25% or a base rate, as defined. In the second
quarter of fiscal 1995, the Company recorded an extraordinary charge of
$1,232,000 ($775,000 after taxes) resulting from the redemption. The
extraordinary charge consists of the write-off of deferred finance costs
associated with the debentures and a redemption premium paid to holders of
the retired debentures.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Quarter ended July 31, 1994 Compared
with Quarter Ended July 31, 1993
--------------------------------
Net sales for the quarter ended July 31, 1994 were $180.0 million as
compared with $195.6 million for the same quarter last year. The decrease
in net sales was principally due to a 6.4% decrease in average selling
prices and a decrease in wholesale gallonage sold, partially offset by an
increase in retail gallonage sold. Gross profit (excluding rental and
other income) decreased by $9.2 million in the quarter ended July 31, 1994
as compared to the same quarter last year. The decrease in gross profit
was principally due to lower gross margins. A rise in crude oil prices
during the Company's second fiscal quarter translated into higher costs for
finished petroleum products. Such product costs rose faster than the
Company's reselling prices which resulted in a decrease in profit margins.
Rental and other income for the three months ended July 31, 1994
amounted to $9.4 million as compared with $8.6 million for the quarter
ended July 31, 1993. The increase was primarily due to $.5 million of
additional rental income earned during the current period and $1.0 million
of income recognized by the Company for a claim settlement, partially
offset by a pre-tax charge of $.4 million relating to severance payments.
Selling, general and administrative expenses for the quarter ended
July 31, 1994 amounted to $6.5 million as compared with $7.5 million for
the quarter ended July 31, 1993. The decrease was principally due to lower
employee and legal expenses.
Interest expense for the three months ended July 31, 1994 amounted to
$2.8 million as compared with $3.7 million for the quarter ended July 31,
1993. The decrease was principally due to reduced debt outstanding during
the current fiscal quarter, principally related to the redemption in May
1994 of the Company's 14% subordinated debentures.
Depreciation and amortization decreased by $.1 million in the quarter
ended July 31, 1994 as compared to the same quarter last year. The
reduction was due to a decrease in amortization of deferred charges of $.3
million, partially offset by an increase in depreciation of $.2 million as
a result of additions to property, plant and equipment.
On May 16, 1994, the Company redeemed all of the outstanding 14%
subordinated debentures due August 1, 2000 at a call price of 102.8%. The
redemption of $21.7 million of debentures was made with existing funds,
$10.0 million of which was funded on June 13, 1994 under a five year term
loan agreement. During the quarter ended July 31, 1994, the Company
recorded an extraordinary charge of $1.2 million ($.8 million after taxes)
in connection with the early retirement of debt.
-6-
<PAGE>
Results of Operations - Six Months Ended July 31, 1994 Compared
with Six Months Ended July 31, 1993
-----------------------------------
Net sales for the six months ended July 31, 1994 were $350.7 million
as compared with $403.7 million for the same period last year. The
decrease in net sales was principally due to a 9.2% decrease in average
selling prices and a decrease in wholesale gallonage sold, partially offset
by an increase in retail gallonage sold. Gross profit (excluding rental
and other income) was $7.9 million for the six months ended July 31, 1994
compared to $17.6 million in the comparable period last year. The decrease
in gross profit was principally due to lower gross margins. A rise in
crude oil prices during the current fiscal year translated into higher
costs for finished petroleum products. Such product costs rose faster than
the Company's reselling prices which resulted in a decrease in profit
margins.
Rental and other income for the six months ended July 31, 1994
amounted to $18.2 million as compared with $16.7 million for the six months
ended July 31, 1993. The increase was principally due to $1.1 million of
additional rental income earned during the current six month period and
$1.0 million of income recognized by the Company for a claim settlement,
partially offset by a reduction in gains on dispositions of properties and
a pre-tax charge of $.4 million relating to severance payments.
Selling, general and administrative expenses for the six months ended
July 31, 1994 amounted to $13.1 million as compared with $13.3 million for
the six months ended July 31, 1993. The decrease was principally due to
lower legal expenses.
Interest expense for the six months ended July 31, 1994 amounted to
$6.1 million, a decrease of $1.4 million from the comparable period last
year. The decrease was principally due to reduced debt outstanding during
the current period, principally related to the redemption in May 1994 of
the Company's 14% subordinated debentures.
Depreciation and amortization decreased by $.3 million in the current
six month period as compared to the six months ended July 31, 1993. The
reduction was due to a decrease in amortization of deferred charges of $.8
million, partially offset by an increase in depreciation of $.5 million as
a result of additions to property, plant and equipment.
The Company adopted SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", as of the beginning of fiscal 1995 and has
reported the cumulative effect of the change in accounting principle as a
credit of $.2 million in the consolidated statement of operations. The
Company adopted SFAS No. 109, "Accounting for Income Taxes" during the
quarter ended April 30, 1993 and reported the cumulative effect of the
change in accounting principle as a credit of $.9 million in the
consolidated statement of operations.
-7-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of July 31, 1994, working capital amounted to a deficit of $12.1
million, as compared to positive working capital of $6.2 million as of
January 31, 1994. The decrease in working capital was primarily due to the
reduction of $18.4 million in long-term indebtedness including the effect
of redeeming the subordinated debentures in May 1994 and $8.5 million of
capital expenditures, partially offset by funds generated from operations.
The Company's principal sources of liquidity are cash flows from
operations which amounted to $11.2 million during the six months ended July
31, 1994, and its short-term unsecured lines of credit. As of July 31,
1994, lines of credit amounted to $60 million, of which $33.8 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, cash flows from operations and its credit
lines.
-8-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 7, 1994, a subsidiary of the Company was served
with an Amended Complaint naming the Company's subsidiary as
one of many defendants in the Keystone Superfund case
pending in the U.S. District Court for the Middle District
of Pennsylvania, pertaining to the subsidiary's
miscellaneous office refuse and used furnace air and oil
filters which were disposed of at the Site. The Company
believes that its participation in the cost of cleanup
at the Site will be determined to be insignificant or
de minimis in nature.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
------------------------- ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
for which this report is filed.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GETTY PETROLEUM CORP.
(Registrant)
Dated: September 12, 1994 BY:___________________________
(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Chief Accounting Officer)
Dated: September 12, 1994 BY:___________________________
(Signature)
JOHN J. FITTERON
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: September 12, 1994 BY:___________________________
(Signature)
LEO LIEBOWITZ
President (Chief Executive
Officer)
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JUL-31-1994
<CASH> 28,705
<SECURITIES> 441
<RECEIVABLES> 20,292
<ALLOWANCES> 1,728
<INVENTORY> 10,637
<CURRENT-ASSETS> 69,893
<PP&E> 326,179
<DEPRECIATION> 138,999
<TOTAL-ASSETS> 267,100
<CURRENT-LIABILITIES> 81,964
<BONDS> 66,187
<COMMON> 1,354
0
0
<OTHER-SE> 87,744
<TOTAL-LIABILITY-AND-EQUITY> 267,100
<SALES> 350,659
<TOTAL-REVENUES> 368,837
<CGS> 342,753
<TOTAL-COSTS> 353,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,072
<INCOME-PRETAX> (3,696)
<INCOME-TAX> (1,293)
<INCOME-CONTINUING> (2,403)
<DISCONTINUED> 0
<EXTRAORDINARY> (775)
<CHANGES> 183
<NET-INCOME> (2,995)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
