The following is the Annual Report on Form 10-K of Getty Petroleum
Corp. for the fiscal year ended January 31, 1995.
Please be advised that the box in the second grammatical paragraph
of the cover page is not checked because of two late filings of
Form 4 by a director, due to calendaring errors. This will be
disclosed in the Proxy Statement.
===========================================================================
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, 1995
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
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
----- -----
Indicate 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. [ ]
The aggregate market value of the voting stock held by nonaffiliates
(6,828,351 shares) of the Company was $76,818,948 as of April 17, 1995.
The registrant had outstanding 12,644,904 shares of common stock as of
April 17, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
Annual Report to Stockholders for the fiscal year
ended January 31, 1995 (the "Annual Report")
(pages 13 through 28). II
Definitive Proxy Statement for the 1995 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, 1995
pursuant to Regulation 14A. III
===========================================================================
1
<PAGE>
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 1,751
Getty (registered trademark) and other branded retail outlets (also
referred to as service stations) located in 13 Northeastern and Middle
Atlantic states, of which 625 have convenience food stores. The Company
stores and distributes petroleum products from 23 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 154 vehicles
and its distribution network, the Company markets and distributes such
products throughout its 13 state marketing region. Of the 1,751 retail
outlets supplied by the Company at January 31, 1995, 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 40 years. Mr. Leo Liebowitz, President and Chief
Executive Officer and a director 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
2
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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 net reduction of 92 retail
outlets owned in fee or leased by the Company since January 31, 1992.
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 10 retail outlets at January 31, 1995
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.
3
<PAGE>
As of January 31, 1995, the Company has 1,751 Getty and other branded
retail outlets as follows:
(i) 10 company operated retail outlets which are operated by salaried
employees;
(ii) 352 lessee dealer operated retail outlets (dealers who lease or
sublease retail outlets and purchase their petroleum products from the
Company);
(iii) 532 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) 136 retail outlets operated by management contractors (dealers who
operate the Company's retail outlets pursuant to a management contract);
(v) 147 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) 49 distributors who purchase their petroleum products from the
Company, which distributors in turn supply the petroleum product
requirements of 574 retail outlets.
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.
In addition, as of January 31, 1995, the Company has 132 properties, most
of which are leased for non-petroleum use. The Company also has 27
properties being held for disposition.
Getty distributes its petroleum products from 23 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.
Certain of the Company's properties mentioned above have 145 tenants who do
not sell petroleum products.
The Company sells home heating oil, propane (LPG) and related services
directly to approximately 44,000 retail and commercial customers. In
addition, the Company is a wholesale supplier of #2 heating oil (also known
as home heating oil) in the Northeast, supplying heating oil to dealers who
deliver to residences and commercial accounts. Diesel fuel and kerosene are
4
<PAGE>
marketed both to distributors of such products and directly by the Company
to retail outlets.
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, 1995, the Company purchased approximately 70% of its
petroleum product requirements from Phibro and approximately 30% 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 is presently in
discussions with Phibro regarding renewing the contract as well as with
other companies. The Company believes it will be able to negotiate an
agreement on substantially similar terms; however, no assurance can be made
that this will occur. 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 its principal supply contract reduces to a certain extent the
impact of product price volatility due to lower inventory requirements.
Management believes that the Company 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 has a cobranded Getty MasterCard, accepts Visa, MasterCard,
Discover and American Express credit cards, and has introduced "NYCE" and
"MAC" debit cards at certain Getty outlets. In addition, the Company has a
Getty fleet fueling card and accepts the Wright Express fleet fueling card,
both of which have tracking programs which provide cost control data to
fleet customers.
5
<PAGE>
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. Petroleum marketing 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 companies, which may have greater flexibility to
withstand price changes than the Company. 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 certain of 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 many 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.
6
<PAGE>
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, 1995, the Company had 778 employees, of which 112
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
The properties owned in fee or leased by the Company for each of the five
fiscal years ended January 31, 1995 are as follows:
January 31,
----------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------
Owned 444 457 465 463 436
Leased 752 772 791 825 796
----- ----- ----- ----- -----
Total 1,196 1,229 1,256 1,288 1,232
===== ===== ===== ===== =====
The Company has an upgrading program to enhance the physical appearance of
the Company's retail outlets which it expects to complete in fiscal 1996.
As of January 31, 1995, the Company also owned in fee 11 distribution
terminals and bulk plants and leased 12 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 77 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 305 service stations and 6 distribution
terminals on a long-term basis from
7
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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, 1995, collectively owned
48% 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, 1995, 1994 and 1993, the Company received from the Partnership
$624,000, $600,000 and $576,000, respectively, for administrative and other
services rendered to the Partnership and paid rent to the Partnership
during such fiscal years of $10,925,000, $10,981,000 and $11,002,000,
respectively.
The Company leases approximately 30,500 square feet of office space at 125
Jericho Turnpike, Jericho, New York where it currently maintains its
corporate headquarters.
The Company believes that substantially all of its owned and leased
properties are in good condition.
8
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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 22 and 23 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 $240,000,
the State is seeking penalties of $500,000 and interest. The State has
agreed to dismiss the Company from the lawsuit but one of the two other
petroleum companies who is a party to the action has withheld consent.
In 1991, the State of New York brought an action in the New York State
Supreme Court in Albany County against 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 petroleum 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.
In 1993, the State of New York asserted a claim against the Company for
cleanup costs incurred at a service station and for statutory penalties.
In 1994, an action was filed in New York Supreme Court in Albany County to
recover $504,149 for clean up costs and $250,000 for statutory penalties.
The U. S. Environmental Protection Agency ("EPA") advised the Company in
1992 that it would seek administrative penalties for the Company's failure
to cease discharging into, and to close, service station bay drains at
certain retail outlets. The EPA was seeking penalties of approximately
$625,000. In 1994, the Company complied with a documents request of the
EPA and is awaiting the EPA's present position on the matter.
In 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
9
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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 and that its ultimate liability will be less than
$10,000.
In 1994, a Superfund proceeding involving a site in Connecticut was settled
by the payment of approximately $5,000 to the EPA.
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, 1995.
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, 1995 and the year in which each was elected an officer.
Name Age Position Officer Since
- -------------------------------------------------------------------------------
Leo Liebowitz 67 President and Chief Executive
Officer 1971
John J. Fitteron 53 Senior Vice President, Treasurer
and Chief Financial Officer 1986
Alvin A. Smith 57 Senior Vice President and
Chief Operating Officer 1985
James R. Craig 43 Vice President 1987
Michael K. Hantman 43 Vice President and
Corporate Controller 1988
Samuel M. Jones 58 Vice President, Corporate Secretary
and General Counsel 1986
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 and assumed the additional position of Treasurer in 1994.
Prior to joining Getty, he was a Senior Vice President at Beker Industries
Corp., a chemical and natural resource company.
Mr. Smith has been a Senior Vice President of the Company since 1985 and
became Chief Operating Officer in 1994. Prior thereto, he was employed at
Getty Oil Company as Wholesale Manager and Petroleum Manager.
10
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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
and assumed the additional position of Corporate Secretary in 1994. Prior
to joining Getty, he was a Senior Attorney with Texaco Inc.
Management is not aware of any family relationships among any of the
foregoing executive officers.
11
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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 28 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 16 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 13 through 15 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 17 through 28 of the
Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
12
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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" through, and including the material under the heading,
"Compensation Committee Interlocks and Insider Participation" on pages 4
through 8 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 heading "Certain Transactions" on page 10 of the
Proxy Statement.
13
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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 15
are filed as part of this annual report.
2. Financial statement schedule
The financial statement schedule listed in the Index to
Financial Statements and Financial Statement Schedules on
page 15 is filed as part of this annual report.
3. Exhibits
The exhibits listed in the Exhibit Index on pages 18
through 23 are filed as part of this annual report.
4. Reports on Form 8-K
None.
14
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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 1995 Annual
(pages) Report (pages)
Data incorporated by reference from attached
1995 Annual Report to Stockholders of Getty
Petroleum Corp.:
Report of Independent Accountants 28
Consolidated Statements of Operations for the
years ended January 31, 1995, 1994 and 1993 17
Consolidated Balance Sheets as of January 31,
1995 and 1994 18
Consolidated Statements of Cash Flows for the
years ended January 31, 1995, 1994 and 1993 19
Notes to Consolidated Financial Statements 20 - 27
Report of Independent Accountants -
Supplemental Schedule 16
Schedule II - Valuation and Qualifying Accounts
and Reserves for the years ended
January 31, 1995, 1994 and 1993 17
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 1995 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 1995 Annual Report to Stockholders is not deemed filed as part
of this report.
15
<PAGE>
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 28 of the 1995 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 schedule
listed in the index on page 15 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
New York, New York
March 16, 1995.
16
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GETTY PETROLEUM CORP. and SUBSIDIARIES
SCHEDULE II - VALUATION and QUALIFYING ACCOUNTS AND RESERVES
for the years ended January 31, 1995, 1994 and 1993
(in thousands)
Balance at Balance at
beginning end of
of period Additions Deductions period
1995:
Allowance for
doubtful accounts* $1,534 $385 $410 $1,509
====== ==== ==== ======
1994:
Allowance for
doubtful accounts* $1,610 $566 $642 $1,534
====== ==== ==== ======
1993:
Allowance for
doubtful accounts* $1,634 $549 $573 $1,610
====== ==== ==== ======
*Relates to accounts receivable.
17
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EXHIBIT INDEX
GETTY PETROLEUM CORP.
Annual Report on Form 10-K
for the fiscal year ended January 31, 1995
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
3.1 Certificate of Incorporation. Filed as Exhibit 3.1 to
registrant's 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 Incorporation, registrant's Annual Report on
filed July 22, 1977. Form 10-K for the fiscal year
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 of Incorporation, Registration Statement on Form
filed September 23, 1980. 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 Form
filed June 24, 1985. 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 Form
filed July 11, 1985. 8-A filed by the Company on
July 19, 1985 (File No. 1-
8059) and incorporated herein
by reference.
18
<PAGE>
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
3.6 Certificate of Amendment of Filed as Exhibit A to
Certificate of Incorporation. 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.
3.7 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.
3.8 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 August Filed as Exhibit 4.1 to
1, 1985 between registrant and registrant's Annual Report on
BankAmerica Trust Company of Form 10-K for the fiscal year
New York, as Trustee, relating ended January 31, 1986 (File
to the 14% Subordinated No. 1-8059) and incorporated
Debentures due August 1, 2000, herein by reference.
including form of Debenture.
19
<PAGE>
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
4.7 $35,000,000 reducing revolving Filed as Exhibit 4.7 to
Loan Agreement between registrant's Quarterly Report
Leemilt's Petroleum, Inc. and on Form 10-Q for the quarter
Bank of New England, N.A. ended October 31, 1987 (File
dated as of December 7, 1987 No. 1-8059) and incorporated
and related Guaranty herein by reference.
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 Sharing Filed as Exhibit 10.2(a) to
Plan (amended and restated as registrant's Annual Report on
of September 11, 1986). Form 10-K for the fiscal 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. (now registrant's Current Report on
known as Getty Petroleum Form 8-K, filed February 19,
Corp.) and Texaco Inc., Getty 1985 (File No. 1-8059) and
Oil Company, and Getty incorporated herein by
Refining and Marketing reference.
Company, dated December 21,
1984.
10.4 Trademark License Agreement Filed as Exhibit 2(b) to
between Texaco Inc., Getty Oil registrant's Current Report on
Company, Texaco Refining and Form 8-K, filed February 19,
Marketing Inc., and Power Test 1985 (File No. 1-8059) and
Corp. (now known as Getty incorporated herein by
Petroleum Corp.), dated reference.
February 1, 1985.
20
<PAGE>
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
10.7 Form of Real Property Leases Filed as Exhibit 2(e) to
between Power Test Realty registrant's Current Report on
Company Limited Partnership, Form 8-K, filed February 19,
as Lessor, and Power Test 1985 (File No. 1-8059) and
Corp. (now known as Getty incorporated herein by
Petroleum Corp.) (either reference.
directly or indirectly through
a wholly-owned subsidiary),
as Lessee, each dated February
1, 1985.
10.16 Registrant's 1985 Stock Option Filed as Exhibit A to
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 PMPA Filed as Exhibit 10.17 to
Indemnification Agreement registrant's Annual Report on
dated as of December 10, 1986 Form 10-K for the fiscal year
among Getty Petroleum Corp., ended January 31, 1987 (File
Power Test Realty Company No. 1-8059) and incorporated
Limited Partnership and Bank herein by reference.
of New England, N.A.
10.18 Guaranty Agreement dated as of Filed as Exhibit 10.18 to
December 1, 1986 of Getty registrant's Annual Report on
Petroleum Corp. regarding Form 10-K for the fiscal year
distribution terminal leases ended January 31, 1987 (File
between Power Test Realty No. 1-8059) and incorporated
Company Limited Partnership herein by reference.
and Getty Terminals Corp.
10.19 Form of Indemnification Filed as Exhibit C to
Agreement between Getty registrant's definitive proxy
Petroleum Corp. and directors. statement, dated May 8, 1987,
with respect to its Annual
Meeting of Stockholders held
June 18, 1987 and incorporated
herein by reference.
21
<PAGE>
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
10.20 Registrant's 1988 Stock Option Filed as Exhibit A to
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 Employment Filed as Exhibit 10.21 to
Agreement dated February 1, registrant's Annual Report on
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 Plan Filed as Exhibit 10.22 to
for Executives of Getty registrant's Annual Report on
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 of
December 9, 1994 between the
Company and its non-director
officers and certain key
employees regarding
compensation upon change in 31
Company control.
10.24 Amendment to Milton Safenowitz Filed as Exhibit 10.24 to
Employment Agreement dated registrant's Annual Report on
February 1, 1990 (see Exhibit Form 10-K for the fiscal year
10.21). 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.
22
<PAGE>
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
10.26 Petroleum Products Supply Filed as Exhibit 10.26 to
Agreement dated as of July 1, registrant's Quarterly Report
1992 by and between Phibro on Form 10-Q for the quarter
Energy USA, Inc. and Getty ended July 31, 1992 (File No.
Petroleum Corp., Getty 1-8059) and incorporated
Terminals Corp., and Aero Oil herein by reference.
Company.
13 Annual Report to Stockholders
for the fiscal year ended
January 31, 1995. 38
22 Subsidiaries of the 35
registrant.
24 Consent of Independent 36
Accountants.
27 Financial Data Schedule. 37
23
<PAGE>
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, Vice President and
Treasurer and Chief Financial Corporate Controller
Officer (Principal Financial (Chief Accounting Officer)
Officer) April 28, 1995
April 28, 1995
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, 1995
April 28, 1995
By _________________________________ By _______________________________
Herbert Lotman, Milton Safenowitz,
Director Director
April 28, 1995 April 28, 1995
By _________________________________
Warren G. Wintrub,
Director
April 28, 1995
24
<PAGE>
<PAGE>
EXHIBIT INDEX
GETTY PETROLEUM CORP.
Annual Report on Form 10-K
for the fiscal year ended January 31, 1995
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
3.1 Certificate of Incorporation. Filed as Exhibit 3.1 to
registrant's 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 Incorporation, registrant's Annual Report on
filed July 22, 1977. Form 10-K for the fiscal year
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 of Incorporation, Registration Statement on Form
filed September 23, 1980. 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 Form
filed June 24, 1985. 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 Form
filed July 11, 1985. 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 Certificate of Amendment of Filed as Exhibit A to
Certificate of Incorporation. 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.
3.7 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.
3.8 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 August Filed as Exhibit 4.1 to
1, 1985 between registrant and registrant's Annual Report on
BankAmerica Trust Company of Form 10-K for the fiscal year
New York, as Trustee, relating ended January 31, 1986 (File
to the 14% Subordinated No. 1-8059) and incorporated
Debentures due August 1, 2000, herein by reference.
including form of Debenture.
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
4.7 $35,000,000 reducing revolving Filed as Exhibit 4.7 to
Loan Agreement between registrant's Quarterly Report
Leemilt's Petroleum, Inc. and on Form 10-Q for the quarter
Bank of New England, N.A. ended October 31, 1987 (File
dated as of December 7, 1987 No. 1-8059) and incorporated
and related Guaranty herein by reference.
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 Sharing Filed as Exhibit 10.2(a) to
Plan (amended and restated as registrant's Annual Report on
of September 11, 1986). Form 10-K for the fiscal 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. (now registrant's Current Report on
known as Getty Petroleum Form 8-K, filed February 19,
Corp.) and Texaco Inc., Getty 1985 (File No. 1-8059) and
Oil Company, and Getty incorporated herein by
Refining and Marketing reference.
Company, dated December 21,
1984.
10.4 Trademark License Agreement Filed as Exhibit 2(b) to
between Texaco Inc., Getty Oil registrant's Current Report on
Company, Texaco Refining and Form 8-K, filed February 19,
Marketing Inc., and Power Test 1985 (File No. 1-8059) and
Corp. (now known as Getty incorporated herein by
Petroleum Corp.), dated reference.
February 1, 1985.
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
10.7 Form of Real Property Leases Filed as Exhibit 2(e) to
between Power Test Realty registrant's Current Report on
Company Limited Partnership, Form 8-K, filed February 19,
as Lessor, and Power Test 1985 (File No. 1-8059) and
Corp. (now known as Getty incorporated herein by
Petroleum Corp.) (either reference.
directly or indirectly through
a wholly-owned subsidiary),
as Lessee, each dated February
1, 1985.
10.16 Registrant's 1985 Stock Option Filed as Exhibit A to
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 PMPA Filed as Exhibit 10.17 to
Indemnification Agreement registrant's Annual Report on
dated as of December 10, 1986 Form 10-K for the fiscal year
among Getty Petroleum Corp., ended January 31, 1987 (File
Power Test Realty Company No. 1-8059) and incorporated
Limited Partnership and Bank herein by reference.
of New England, N.A.
10.18 Guaranty Agreement dated as of Filed as Exhibit 10.18 to
December 1, 1986 of Getty registrant's Annual Report on
Petroleum Corp. regarding Form 10-K for the fiscal year
distribution terminal leases ended January 31, 1987 (File
between Power Test Realty No. 1-8059) and incorporated
Company Limited Partnership herein by reference.
and Getty Terminals Corp.
10.19 Form of Indemnification Filed as Exhibit C to
Agreement between Getty registrant's definitive proxy
Petroleum Corp. and directors. statement, dated May 8, 1987,
with respect to its Annual
Meeting of Stockholders held
June 18, 1987 and incorporated
herein by reference.
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
10.20 Registrant's 1988 Stock Option Registrant's 1988 Stock Option
Plan. Plan. Filed as Exhibit A to
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 Employment Filed as Exhibit 10.21 to
Agreement dated February 1, registrant's Annual Report on
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 Plan Filed as Exhibit 10.22 to
for Executives of Getty registrant's Annual Report on
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 of
December 9, 1994 between the
Company and its non-director
officers and certain key
employees regarding
compensation upon change in 31
Company control.
10.24 Amendment to Milton Safenowitz Filed as Exhibit 10.24 to
Employment Agreement dated registrant's Annual Report on
February 1, 1990 (see Exhibit Form 10-K for the fiscal year
10.21). ended January 31, 1991 (File
No. 1-8059) and incorporated
herein by reference.
Exhibit
No. Description Begins on Sequential Page No.
- ------------------------------------------------------------------------------
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 1, registrant's Quarterly Report
1992 by and between Phibro on Form 10-Q for the quarter
Energy USA, Inc. and Getty ended July 31, 1992 (File No.
Petroleum Corp., Getty 1-8059) and incorporated
Terminals Corp., and Aero Oil herein by reference.
Company.
13 Annual Report to Stockholders
for the fiscal year ended
January 31, 1995. 38
22 Subsidiaries of the 35
registrant.
24 Consent of Independent 36
Accountants.
27 Financial Data Schedule. 37
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Getty Petroleum Corp. and Subsidiaries
Results of Operations
Net sales for the year ended January 31, 1995 were $749.4 million as
compared with $772.6 million in the preceding year. The decrease in net
sales was principally due to a .5% decrease in average selling prices and a
12.5% decrease in wholesale gallonage sold, partially offset by a 2.3%
increase in retail gallonage sold through 7.8% fewer outlets. Gross profit
was $36 million in fiscal 1995 compared to $45.7 million in the prior
fiscal year. The decrease in gross profit was principally due to lower
retail gross margins. Fiscal 1994 sales 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 a July 1992 product supply contract, resulting in $128 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.
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 $32.1 million in fiscal 1995 increased 7% over fiscal 1994
rental income of $30 million, which increased 4.4% over the $28.8 million
realized in fiscal 1993. The increase in both periods was due to increased
lease rental rates resulting from capital improvements in Company owned and
leased locations and lease renewals.
Other income, net was $3.6 million in fiscal 1995 as compared to $3.9
million in the preceding year. The current fiscal year included pre-tax
charges of $2.7 million to provide for severance and other costs associated
with restructuring the Company's organization and its operations. The
charges were partially offset by $1 million of income recognized by the
Company in fiscal 1995 from a claim settlement, as well as $.6 million of
additional investment income and $.5 million of additional gains on
dispositions of assets realized during fiscal 1995. The Company expects
that the restructuring will result in annual savings of approximately $3
million. Other income, net was $3.9 million in fiscal 1994 which
represented a decrease of $.7 million from the prior year. Fiscal 1994
included $.8 million of gains on dispositions of non-performing assets
compared to $2.7 million of such gains 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.
Selling, general and administrative expenses in fiscal 1995 amounted to
$27.3 million, a decrease of $1.5 million from the prior year. The decrease
principally occurred in the fourth quarter of the current fiscal year as a
result of a restructuring of the Company's organization and its operations
in October 1994. 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.
13
<PAGE>
Interest expense in fiscal 1995 amounted to $11.4 million, a decrease of
$3.2 million from the prior year. The decrease was principally due to
reduced debt outstanding during the current fiscal year, principally
related to the early redemption in May 1994 of the Company's 14%
subordinated debentures. Interest expense in fiscal 1994 amounted to $14.6
million, a decrease of $2.2 million from fiscal 1993. The decrease was
principally due to reduced debt outstanding during fiscal 1994.
Depreciation and amortization was $21.8 million in fiscal 1995, which was
comparable to the amount in fiscal 1994. An increase in depreciation of
$1.2 million as a result of additions to property, plant and equipment was
offset by a decrease of like amount in amortization of deferred charges.
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.
The Company recorded an extraordinary charge of $.8 million after taxes
resulting from the early retirement of the Company's 14% subordinated
debentures. The extraordinary charge consists of the write-off of deferred
finance costs associated with the debentures and an early redemption
premium paid to holders of the retired debentures.
The Company adopted Statement of Financial Accounting Standards ("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 to
earnings of $.2 million in the fiscal 1995 consolidated statement of
operations. The Company adopted 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 fiscal 1994 consolidated statement of
operations.
Liquidity and Capital Resources
As of January 31, 1995, working capital amounted to a deficit of $10.7
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 $24.4 million in long-term indebtedness including the effect
of redeeming the subordinated debentures in May 1994 and $22.8 million of
capital expenditures, including property acquisitions, partially offset by
funds generated during the year from operations.
The Company's principal sources of liquidity are cash flows from
operations, which amounted to $41.3 million during the year ended January
31, 1995, and its short-term unsecured lines of credit. As of January 31,
1995, lines of credit amounted to $60 million, of which $33.9 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 which amounted to
$42 million at January 31, 1995, cash flows from operations and its credit
lines.
Capital expenditures during the fiscal year ended January 31, 1995 amounted
to $22.8 million, including $1.5 million related to property acquisitions
and $10.4 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 related 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
14
<PAGE>
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
for which provision has not been made will not have a material adverse
effect on its financial position. However, such costs could be material to
results of operations in a future period.
The Company is impacted by numerous environmental laws and regulations, the
most important of which are discussed below.
Effective January 1, 1995, the Clean Air Act Amendments of 1990 required
that the nine worst ozone non-attainment areas in the U.S. must use
reformulated fuels gasoline ("RFG"). These geographic areas plus other
areas that elected to participate in the program include substantially all
of the Company's marketing area. The Company has been able to purchase
sufficient supplies of RFG as well as conventional gasoline under existing
supply contracts and from other sources.
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. Various environmental regulations require the remediation of
discharges or releases of petroleum products from UST's. In addition,
federal and local regulations require the permanent closure of service
station bay drains and the removal of certain waste and fuel oil tanks.
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.
The Company estimates that it may be required to expend $98.8 million over
the next four years in connection with the foregoing environmental matters.
It is anticipated that such environmental expenditures will be provided
from operating cash flow.
As of January 31, 1995 and 1994, the Company had accrued $6.9 million and
$6.8 million, respectively, for environmental matters, principally for
service station site remediations and related legal matters. During the
years ended January 31, 1995, 1994 and 1993, the Company expensed $11.8
million, $9.7 million and $12.4 million, respectively, for environmental
matters, which amounts were net of $.4 million in fiscal 1995 and $1.1
million in fiscal 1994 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.
15
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
(in thousands except per share amounts)
Years ended January 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net sales $749,443 $772,610 $903,712 $1,117,380 $1,234,359
======== ======== ======== ========== ==========
Net earnings (loss) 6,339(a) 10,201(b) (3,703) (12,337) (9,540)
======== ======== ======== ========== ==========
Net earnings (loss)
per share .50(a) .81(b) (.29) (.98) (.74)
======== ======== ======== ========== ==========
Cash dividends
per share -- -- .04 .23 .37
======== ======== ======== ========== ==========
Financial Position:
Total assets 278,957 292,388 293,736 317,539 337,978
======== ======== ======== ========== ==========
Working capital (10,723) 6,191 2,994 37,044 25,802
======== ======== ======== ========== ==========
Long-term debt 30,849 50,403 58,645 91,941 69,785
======== ======== ======== ========== ==========
Capital lease
obligations 29,349 34,177 38,188 41,673 44,839
======== ======== ======== ========== ==========
Stockholders' equity $ 98,480 $ 92,152 $ 81,759 $ 85,795 $ 100,855
======== ======== ======== ========== ==========
<FN>
(a) Includes extraordinary charge to earnings of $775 or $.06 per share in
connection with the early retirement of debt and a credit to earnings
of $183 or $.01 per share from the cumulative effect of adopting
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities".
(b) 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".
</TABLE>
16
<PAGE>
Consolidated Statements of Operations
Getty Petroleum Corp. and Subsidiaries
(in thousands except per share amounts)
For the years ended January 31,
---------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------
Net sales $749,443 $772,610 $903,712
Rental income 32,146 30,033 28,758
Other income, net 3,587 3,914 4,616
-------- -------- --------
785,176 806,557 937,086
-------- -------- --------
Cost of sales 713,408 726,918 872,261
Selling, general and
administrative expenses 27,317 28,780 31,625
-------- -------- --------
740,725 755,698 903,886
-------- -------- --------
Earnings before interest, taxes
and depreciation 44,451 50,859 33,200
Interest expense 11,372 14,606 16,812
Depreciation and amortization 21,750 21,777 22,129
-------- -------- --------
Earnings (loss) before provision
(credit) for income taxes,
extraordinary item and
cumulative effect of accounting
changes 11,329 14,476 (5,741)
Provision (credit) for income taxes 4,398 5,135 (2,038)
-------- -------- --------
Earnings (loss) before
extraordinary item
and cumulative effect of
accounting changes 6,931 9,341 (3,703)
Extraordinary item, net of
income taxes (775) -- --
Cumulative effect of accounting
changes 183 860 --
-------- -------- --------
Net earnings (loss) $ 6,339 $ 10,201 $ (3,703)
======== ======== ========
Per Share Data:
Earnings (loss) before
extraordinary item
and cumulative effect of
accounting changes $ .55 $ .74 $ (.29)
Extraordinary item (.06) -- --
Cumulative effect of
accounting changes .01 .07 --
-------- -------- --------
Net earnings (loss) per share $ .50 $ .81 $ (.29)
======== ======== ========
Weighted average shares outstanding 12,639 12,622 12,606
======== ======== ========
See accompanying notes.
17
<PAGE>
Consolidated Balance Sheets
Getty Petroleum Corp. and Subsidiaries
(in thousands)
January 31,
-------------------------
Assets: 1995 1994
- ------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 41,576 $ 42,334
Short-term investments 415 8,250
Accounts receivable, less allowance for
doubtful accounts of $1,509 in 1995
and $1,534 in 1994 18,338 21,242
Inventories 11,117 10,017
Deferred income taxes 6,004 6,700
Prepaid expenses and other current assets 3,536 3,686
-------- --------
Total current assets 80,986 92,229
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 188,527 189,975
Other assets 9,444 10,184
-------- --------
Total assets $278,957 $292,388
======== ========
- ------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
- ------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt and
capital lease obligations $ 11,118 $ 9,877
Accounts payable 39,326 32,320
Accrued expenses 32,570 32,812
Gasoline taxes payable 8,318 8,658
Income taxes payable 377 2,371
-------- --------
Total current liabilities 91,709 86,038
Long-term debt 30,849 50,403
Obligations under capital leases 29,349 34,177
Deferred income taxes 14,120 16,359
Other, principally deposits 14,450 13,259
Commitments and contingencies (Notes 3 and 5)
Stockholders' equity 98,480 92,152
-------- --------
Total liabilities and stockholders' equity $278,957 $292,388
======== ========
See accompanying notes.
18
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Getty Petroleum Corp. and Subsidiaries
(in thousands)
For the years ended January 31,
---------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 6,339 $ 10,201 $ (3,703)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Extraordinary item, before tax 1,232 -- --
Cumulative effect of accounting changes (183) (860) --
Depreciation and amortization 21,750 21,777 22,129
Deferred income taxes (1,553) 418 3,447
Gain on dispositions of property, plant
and equipment (1,294) (788) (1,944)
Gain on investments -- (465) (520)
Sale (purchase) of trading securities 7,860 (7,269) 533
Changes in assets and liabilities:
Accounts receivable 2,904 3,200 5,182
Inventories (1,100) (218) 11,922
Prepaid expenses and other current assets (107) 7,471 2,058
Other assets (123) (63) 78
Accounts payable, accrued expenses and
gasoline taxes payable 6,424 (5,795) 18,816
Income taxes payable (1,994) 2,371 --
Other, principally deposits 1,191 875 315
-------- -------- --------
Net cash provided by operating activities 41,346 30,855 58,313
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (21,343) (19,495) (16,273)
Property acquisitions (1,466) (920) (2,465)
Proceeds from dispositions of property,
plant and equipment 4,296 3,513 6,282
-------- -------- --------
Net cash used in investing activities (18,513) (16,902) (12,456)
-------- -------- --------
Cash flows from financing activities:
Long-term borrowings 10,550 845 1,769
Repayment of long-term debt (29,406) (7,989) (36,870)
Payments under capital lease obligations (4,285) (3,351) (3,005)
Premium paid on early retirement of debt (607) -- --
Treasury stock and stock options, net 157 192 171
Cash dividends -- -- (504)
-------- -------- --------
Net cash used in financing activities (23,591) (10,303) (38,439)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents (758) 3,650 7,418
Cash and cash equivalents at beginning of year 42,334 38,684 31,266
-------- -------- --------
Cash and cash equivalents at end of year $ 41,576 $ 42,334 $ 38,684
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest $ 11,955 $ 14,141 $ 15,950
Income taxes, net 8,088 (4,327) (7,211)
See accompanying notes.
</TABLE>
19
<PAGE>
Notes to Consolidated Financial Statements
- ---------------------------------------------------------------------------
1 Summary of significant accounting policies
Consolidation: The consolidated financial statements include the accounts
of Getty Petroleum Corp. and its wholly-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 is computed by
dividing net earnings (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 Changes: The Company adopted Statement of Financial Accounting
Standards ("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 to
earnings of $183,000 in the consolidated statement of operations. The
Statement requires that such investments be classified into three
categories, namely, held-to-maturity, trading and available-for-sale
securities. As of January 31, 1995, the Company's short-term investments,
which consist of equity securities, 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.
During the year ended January 31, 1995, the market value of the Company's
short-term investments increased and a net unrealized gain of $15,000 was
reported as a separate component of stockholders' equity (see Note 8).
During the first quarter of fiscal 1994, the Company adopted SFAS No. 109,
"Accounting for Income Taxes" and reported the cumulative effect of the
change in accounting principle as a credit to earnings of $860,000 in the
fiscal 1994 consolidated statement of operations.
20
<PAGE>
- ---------------------------------------------------------------------------
2 Inventories
As of January 31, 1995, 1994 and 1993, 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, 1995, 1994 and 1993, the Company billed
the Partnership and reflected in other income $624,000, $600,000 and
$576,000, respectively, for administrative and other services rendered to
the Partnership.
Future minimum annual rentals under capital leases as of January 31, 1995,
payable to the Partnership, are as follows:
- ---------------------------------------------------------------------------
Years ending January 31, (in thousands)
- ---------------------------------------------------------------------------
1996........................................................... $10,463
1997........................................................... 10,463
1998........................................................... 10,463
1999........................................................... 10,463
2000........................................................... 10,463
- --------------------------------------------------------------------------
52,315
Less, amount representing interest............................. 18,442
- --------------------------------------------------------------------------
Present value of minimum lease payments
(including $4,524 due within one year)....................... $33,873
===========================================================================
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:
- ---------------------------------------------------------------------------
Years ending January 31, (in thousands)
- ---------------------------------------------------------------------------
1996.......................................................... $13,254
1997.......................................................... 12,137
1998.......................................................... 10,713
1999.......................................................... 9,007
2000.......................................................... 7,361
Thereafter.................................................... 29,210
- --------------------------------------------------------------------------
$81,682
==========================================================================
Rent expense, substantially all of which is included in cost of sales,
amounted to $15,838,000, $16,955,000 and $17,226,000 for the years ended
January 31, 1995, 1994 and 1993, 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 $32,146,000,
$30,033,000 and $28,758,000 for the years ended January 31, 1995, 1994 and
1993, respectively, which included $21,800,000, $20,308,000 and $20,421,000
of rent received under subleases. The net book value of fee owned
properties leased to lessees was $77,648,000 at January 31, 1995.
21
<PAGE>
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.
- ---------------------------------------------------------------------------
4 Property, plant and equipment
Property, plant and equipment consists of the following:
- -------------------------------------------------------------------------------
Depreciable
1995 1994 Life (Years)
- -------------------------------------------------------------------------------
(in thousands)
Land................................ $ 42,289 $ 42,607
Buildings........................... 56,198 56,152 16
Machinery and equipment............. 142,439 127,673 10 to 16
Motor vehicles...................... 6,194 5,976 3 to 10
Furniture and fixtures.............. 1,537 2,049 10
Leasehold improvements.............. 32,263 30,028 See Note 1
Assets recorded under capital leases 54,752 55,310 See Note 1
- ------------------------------------------------------------
335,672 319,795
Less, accumulated depreciation
and amortization.................. 147,145 129,820
- ------------------------------------------------------------
$188,527 $189,975
============================================================
Property, plant and equipment includes the following assets recorded under
capital leases with the Partnership:
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
(in thousands)
Land............................................. $27,265 $27,571
Buildings........................................ 18,006 18,172
Equipment........................................ 8,574 8,660
Motor vehicles................................... 907 907
- ------------------------------------------------------------------------------
54,752 55,310
Less, accumulated amortization................... 39,978 36,485
- ------------------------------------------------------------------------------
$14,774 $18,825
==============================================================================
- ------------------------------------------------------------------------------
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. As of
January 31, 1995 and 1994, the Company had accrued $6.9 million and $6.8
million, respectively, for environmental matters, principally for service
station site remediations and related legal matters. During the years ended
January 31, 1995, 1994 and 1993, the Company expensed $11.8 million,
$9.7 million and $12.4 million, respectively, for environmental
matters, which amounts were net of $.4 million in fiscal 1995 and
$1.1 million in fiscal 1994 for recoveries against certain state
underground tank funds. In the opinion of the Company, the
aggregate amount of such environmental and legal liabilities
22
<PAGE>
for which provision has not been made will not have a material adverse
effect on its financial position. However, such costs could be material to
results of operations in a future period.
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 has 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 ultimate resolution of 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
Long-term debt consists of:
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
(in thousands)
Mortgage loan due through January 1, 1998............... $20,145 $24,164
Subordinated debentures due through August 1, 2000...... -- 21,666
Bank term loan due through June 30, 1999................ 8,500 --
Real estate mortgages, bearing interest at a
weighted average interest rate of 7.9%, due
in varying amounts through October 1, 2020............ 6,117 7,632
Other................................................... 2,681 2,837
- ------------------------------------------------------------------------------
37,443 56,299
Less, current portion................................... 6,594 5,896
- ------------------------------------------------------------------------------
Noncurrent portion...................................... $30,849 $50,403
==============================================================================
Aggregate principal payments in subsequent fiscal years relating to long-term
debt are as follows (in thousands): 1996--$6,594; 1997--$5,497; 1998--$18,936;
1999--$3,155; 2000--$1,260 and $2,001 thereafter.
Borrowings under the mortgage loan are payable monthly over the term of the
agreement with a final payment of $13,287,000 on January 1, 1998. The loan,
which bears interest at prime, is collateralized by first mortgages on certain
service station properties.
In May 1994, the Company redeemed all of its outstanding 14% subordinated
debentures due August 1, 2000 at a call price of 102.8%. 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 an early redemption premium
paid to holders of the retired debentures. The redemption of $21,666,000 of
debentures was made with existing funds, $10,000,000 of which was funded in
June 1994 under a five-year term loan agreement with two banks. The remaining
principal balance of $8,500,000 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.
23
<PAGE>
Certain long-term debt is collateralized by property, plant and equipment
having an aggregate net book value of approximately $50,296,000 at January 31,
1995.
As of January 31, 1995, the Company had unsecured lines of credit aggregating
$60,000,000, of which $33,904,000 was utilized in the form of outstanding
letters of credit.
- ------------------------------------------------------------------------------
7 Income taxes
The provision (credit) for income taxes is summarized as follows:
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
(in thousands)
Federal:
Current................................ $1,698 $3,305 $(6,148)
Deferred............................... 1,903 746 3,372
State and local:
Current................................ 836 1,025 663
Deferred............................... (39) 59 75
- ------------------------------------------------------------------------------
Provision (credit) for income taxes $4,398 $5,135 $(2,038)
==============================================================================
The tax effects of temporary differences which comprise the deferred tax assets
and liabilities are as follows:
- -------------------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment..................... $(10,599) $(9,064)
Accruals.......................................... 1,468 (2,468)
Inventories....................................... 588 853
Tax credits....................................... 557 531
Investments....................................... 121 949
Other............................................. (251) (460)
- -------------------------------------------------------------------------------
Net deferred tax liabilities...................... $ (8,116) $(9,659)
===============================================================================
As of January 31, 1995, the Company has state and local tax operating loss
carryforwards of approximately $5,196,000 expiring through 2010 which are
available to offset future state and local income taxes.
The following is a reconciliation of the expected statutory federal income tax
provision (credit) and the actual provision (credit) for income taxes:
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
(in thousands)
Expected provision (credit) at statutory
federal income tax rate................. $3,965 $5,067 $(1,952)
State and local income taxes, net of
federal benefit......................... 518 705 487
Taxes related to prior years -- -- (927)
Utilization of capital loss carryforward -- (1,026) --
Nondeductible expenses.................... -- -- 293
Other..................................... (85) 389 61
- -------------------------------------------------------------------------------
Provision (credit) for income taxes....... $4,398 $5,135 $(2,038)
===============================================================================
24
<PAGE>
8 Stockholders' equity
A summary of the changes in stockholders' equity for the three years ended
January 31, 1995 is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Net
Treasury Stock, Unrealized
Common Stock(a) Retained at cost Gain (Loss)
-------------------- Paid-in Earnings ------------------ on Equity
Shares Amount Capital (Deficit) Shares Amount Securities Total
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 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) 912 14,385 -- 92,152
Net income......................... 6,339 6,339
Cumulative effect of
accounting change................ (183) (183)
Net unrealized gain on
equity securities................ 15 15
Purchase of treasury stock......... 2 23 (23)
Issuance of treasury stock......... (44) (13) (205) 161
Stock options exercised............ 2 19 19
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1995.......... 13,545 $1,354 $119,890 $(8,393)(b) 901 $14,203 $(168) $98,480
==================================================================================================================================
<FN>
(a) Capital stock consists of preferred stock, par value $1.00 per share;
authorized 10,000 shares for issuance in series (none of which is issued)
and common stock, par value $.10 per share; authorized 30,000 shares.
(b) Net of $103,803 transferred from retained earnings to common stock and
paid-in capital as a result of accumulated stock dividends.
</TABLE>
25
<PAGE>
- ------------------------------------------------------------------------------
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
$694,000, $719,000 and $765,000 for the years ended January 31, 1995, 1994 and
1993, 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, 1995 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, 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
Granted.................................. 107,250 10.88
Exercised................................ (1,245) 10.49-14.09 (250) 11.12 (125) 10.88
Cancelled................................ (1,217) 14.09 (926) 17.12-18.62 (1,250) 10.88
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at January 31, 1995.......... 186,812 $10.49-14.09 237,833 $11.12-18.62 386,575 $10.88-13.13
==================================================================================================================================
Exercisable at January 31, 1995.......... 186,812 $10.49-14.09 237,833 $11.12-18.62 139,449 $10.88-13.13
==================================================================================================================================
Available for grant at January 31, 1995.. 79,351 63,156 112,050
==================================================================================================================================
</TABLE>
There were no SARs outstanding at January 31, 1995.
26
<PAGE>
10 Quarterly Financial Data
The following summarizes the quarterly results of operations for the years
ended January 31, 1995 and 1994 (unaudited as to quarterly information):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Three months ended Year ended
-------------------------------------------------------- ------------------
Fiscal 1995: April 30 July 31 October 31 January 31 January 31
- -----------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues...................... $179,460 $189,377 $202,915 $213,424 $785,176
Gross profit.................. 8,053 (147) 12,641 15,488 36,035
Earnings (loss) before income
taxes, extraordinary item
and cumulative effect of
accounting change........... 1,693 (5,389) 4,711 10,314 11,329
Net earnings (loss)........... 1,171(a) (4,166)(b) 3,014 6,320 6,339(a)(b)
Net earnings (loss)
per share................... $ .09(a) $ (.33)(b) $ .24 $ .50 $ .50(a)(b)
===========================================================================================================
</TABLE>
<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
Earnings before
income taxes and
cumulative effect of
accounting change.......... 1,594 1,052 1,599 10,231 14,476
Net earnings................. 1,802(c) 625 882 6,892 10,201(c)
Net earnings per share....... $ .14(c) $ .05 $ .07 $ .55 $ .81(c)
=======================================================================================================
<FN>
(a) Includes credit to earnings of $183 or $.01 per share from the cumulative
effect of adopting Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
(b) Includes extraordinary charge to earnings of $775 or $.06 per share in
connection with the early retirement of the Company's subordinated
debentures.
(c) 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".
</TABLE>
- -------------------------------------------------------------------------------
11 Restructuring
During fiscal 1995, pre-tax charges of $2,668,000 were recorded to provide for
severance and other costs associated with restructuring the Company's
organization and its operations. The restructuring charges included $1,924,000
for severance and related benefits resulting from a 6% reduction in the work
force, and $744,000 for other costs. The charges are included in other income,
net in the consolidated statement of operations. The Company's consolidated
balance sheet as of January 31, 1995 included an accrual of $1,343,000 relating
to the restructuring.
27
<PAGE>
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, 1995 and 1994, and the related
consolidated statements of operations and cash flows for each of the three
years in the period ended January 31, 1995. 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, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each
of the three years in the period ended January 31, 1995, 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 certain investments in debt and equity
securities in fiscal 1995 and its method of accounting for income taxes in
fiscal 1994.
New York, New York
March 16, 1995
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Common Stock
Getty Petroleum's common stock, its only outstanding voting security, is traded
on the New York Stock Exchange (symbol: "GTY"). At April 17, 1995, there were
approximately 3,200 holders of record of Getty Petroleum's common stock. The
price range of common stock during the past two fiscal years was as follows:
Price Range
---------------------
Quarter Ending High Low
- ---------------------------------------------------------------
January 31, 1995 $12.00 $10.625
October 31, 1994 13.25 10.75
July 31, 1994 16.125 11.625
April 30, 1994 16.75 12.375
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
28
<PAGE>
INDEX TO EXHIBITS
Exhibit Name Exhibit Number
- ------------ --------------
Index to Exhibits (Electronic) 99.1
Subsidiaries of Registrant 22
Consent of Independent Accountants 24
Change in Company Control Agreement 10.23
Financial Data Schedule 27
Exhibit 22. Subsidiaries of the Registrant.
STATE OF
SUBSIDIARY INCORPORATION
AERO OIL COMPANY Pennsylvania
DONNA OIL CORP. New York
GASWAY INC. New York
GETTYMART INC. Delaware
GETTY TERMINALS CORP. New York
KINGSTON OIL SUPPLY CORP. New York
LEEMILT'S FLATBUSH AVENUE, INC. New York
LEEMILT'S PETROLEUM, INC. New York
PT PETRO CORP. New York
RECO PETROLEUM, INC. Pennsylvania
SLATTERY GROUP INC. New Jersey
ENERGY RESOURCE & RECOVERY CORPORATION New York
HSCO GROUP, INC. New York
EXHIBIT 10.23
December 9, 1994
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, 1996 (or as such date is automatically extended under
Paragraph 5 below), 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 account 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").
2. In consideration for your services and assistance in achieving
the Change, upon the event of Change, the following shall also 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
(or other bonus plan in which you participate) for the
previous fiscal year (for example, payment in March 1995
would be for the fiscal year ending January 31, 1995), but
not less than the maximum you would have been entitled to
receive under the ICP or bonus plan for the fiscal year
ended January 31, 1994; and
B. 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 of 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
C. 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 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 or leased 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 (x)
substantially reduced in the Company or (y) 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. This Agreement shall be in effect from the date hereof until the
fiscal year ending January 31, 1996 and shall automatically continue in
effect for each fiscal year thereafter unless, prior to a Change having
occurred, you are no longer employed by the Company or one of its
subsidiaries. In the event of a roll-over of this Agreement as aforesaid,
the fiscal years and ending dates set forth in paragraph 2(A) above shall
be adjusted accordingly.
6. Upon your acceptance of this Agreement, the letter agreement
dated September 9, 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 continued success and profitability.
Very truly yours,
GETTY PETROLEUM CORP.
LEO LIEBOWITZ
President and CEO
Accepted and Agreed to this
______ day of December, 1994.
_____________________________
:mam/Corporate
EXHIBIT 24
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, 1995 on our audits of the
consolidated financial statements and financial statement schedule of Getty
Petroleum Corp. and Subsidiaries as of January 31, 1995 and 1994 and for
each of the three years in the period ended January 31, 1995 which report
has been incorporated by reference in this Annual Report on Form 10-K from
the 1995 Annual Report to Stockholders of Getty Petroleum Corp. and
Subsidiaries.
New York, New York
March 16, 1995.
[LEGEND]
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY PETROLEUM CORP. AND SUBSIDIARIES
AS OF JANUARY 31, 1995 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 41,576
<SECURITIES> 415
<RECEIVABLES> 19,847
<ALLOWANCES> 1,509
<INVENTORY> 11,117
<CURRENT-ASSETS> 80,986
<PP&E> 335,672
<DEPRECIATION> 147,145
<TOTAL-ASSETS> 278,957
<CURRENT-LIABILITIES> 91,709
<BONDS> 60,198
<COMMON> 1,354
0
0
<OTHER-SE> 97,126
<TOTAL-LIABILITY-AND-EQUITY> 278,957
<SALES> 749,443
<TOTAL-REVENUES> 785,176
<CGS> 713,408
<TOTAL-COSTS> 735,158
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<INTEREST-EXPENSE> 11,372
<INCOME-PRETAX> 11,329
<INCOME-TAX> 4,398
<INCOME-CONTINUING> 6,931
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