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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended April 30, 1996 Commission file number 1-8059
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GETTY PETROLEUM CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 11-2232705
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 Jericho Turnpike, Jericho, New York 11753
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(Address of principal executive offices) (Zip Code)
(516) 338 - 6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Registrant has 12,675,572 shares of Common Stock, par value $.10 per share,
outstanding as of April 30, 1996.
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<PAGE>
GETTY PETROLEUM CORP.
INDEX
Part I. FINANCIAL INFORMATION Page Number
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Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 1996 and
January 31, 1996 1
Consolidated Statements of Operations for the three months
ended April 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the three months
ended April 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
<PAGE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
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April 30, January 31,
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Assets: 1996 1996
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(unaudited)
Current assets:
Cash and cash equivalents $25,286 $19,808
Short-term investments 1,034 1,059
Accounts receivable, net 14,955 15,327
Inventories 19,918 21,214
Deferred income taxes 7,315 5,880
Prepaid expenses and other current assets 5,422 3,388
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Total current assets 73,930 66,676
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 182,931 184,559
Other assets 10,535 10,231
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Total assets $267,396 $261,466
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Liabilities and Stockholders' Equity:
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Current liabilities:
Current portion of long-term debt
and capital lease obligations $9,671 $9,154
Accounts payable 30,673 26,856
Accrued expenses 33,613 26,195
Gasoline taxes payable 15,438 13,919
Income taxes payable -- 175
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Total current liabilities 89,395 76,299
Long-term debt 18,178 19,589
Obligations under capital leases 21,309 22,843
Deferred income taxes 17,772 16,977
Other, principally deposits 15,510 15,184
Stockholders' equity:
Preferred stock -- --
Common stock, par value $.10 per share 1,357 1,355
Other stockholders' equity 103,875 109,219
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105,232 110,574
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Total liabilities and stockholders' equity $267,396 $261,466
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See accompanying notes.
1
<PAGE>
GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
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Three months ended April 30,
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1996 1995
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Net sales $204,284 $195,007
Rental income 8,981 8,531
Other income (expense) (6,755) 1,534
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206,510 205,072
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Cost of sales 200,961 188,228
Selling, general and administrative expenses 6,337 6,100
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207,298 194,328
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Earnings (loss) before interest, taxes,
depreciation and amortization (788) 10,744
Interest expense 1,855 2,513
Depreciation and amortization 5,669 5,491
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Earnings (loss) before provision (credit)
for income taxes and cumulative
effect of accounting change (8,312) 2,740
Provision (credit) for income taxes (3,147) 1,084
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Earnings (loss) before cumulative
effect of accounting change (5,165) 1,656
Cumulative effect of accounting change -- (794)
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Net earnings (loss) ($5,165) $862
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Per Share Data:
Earnings (loss) before cumulative
effect of accounting change ($.41) $.13
Cumulative effect of accounting change -- (.06)
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Net earnings (loss) per share ($.41) $.07
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Weighted average shares outstanding 12,668 12,645
======== ========
See accompanying notes.
2
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GETTY PETROLEUM CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
April 30,
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1996 1995
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Cash flows from operating activities:
Net earnings (loss) ($5,165) $862
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Cumulative effect of accounting change -- 794
Depreciation and amortization 5,669 5,491
Deferred income taxes (635) (371)
Gain on dispositions of property, plant
and equipment (204) (602)
Loss on short-term investments 13 --
Changes in assets and liabilities:
Accounts receivable 372 (122)
Inventories 1,296 1,103
Prepaid expenses and other current assets (2,070) 1,102
Other assets (337) (457)
Accounts payable, accrued expenses and
gasoline taxes payable 12,754 7,100
Income taxes payable (175) (157)
Other, principally deposits 326 143
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Net cash provided by operating activities 11,844 14,886
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Cash flows from investing activities:
Capital expenditures (4,290) (4,329)
Proceeds from dispositions of property,
plant and equipment 522 705
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Net cash used in investing activities (3,768) (3,624)
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Cash flows from financing activities:
Repayment of long-term debt (1,121) (1,748)
Payments under capital lease obligations (1,307) (1,244)
Cash dividends (380) --
Treasury stock and stock options, net 210 10
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Net cash used in financing activities (2,598) (2,982)
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Net increase in cash and cash equivalents 5,478 8,280
Cash and cash equivalents at beginning of period 19,808 41,576
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Cash and cash equivalents at end of period $25,286 $49,856
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Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $1,860 $2,547
Income taxes, net 1,099 1,686
See accompanying notes.
3
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GETTY PETROLEUM CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:
The accompanying consolidated financial statements include the accounts
of Getty Petroleum Corp. and its wholly-owned subsidiaries (the "Company").
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
management's best estimates and judgments. While all available information
has been considered, actual amounts could differ from those estimates. The
consolidated financial statements are unaudited but, in the opinion of
management, reflect all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation.
2. Accounting change:
The consolidated statement of operations for the three months ended April
30, 1995 has been restated to retroactively reflect an after-tax charge to
earnings of $794,000 for the cumulative effect of adopting at the end of fiscal
1996, Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
3. 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
period. Common stock equivalents are not included in earnings (loss) per
share computations since their effect is immaterial.
4. Inventories:
Inventories, primarily finished petroleum products, are principally
accounted for under the lower of last-in, first-out ("LIFO") cost or market.
Due to significant increases in product costs during the quarter ended April
30, 1996, the Company recorded a LIFO inventory charge of $3,480,000 in the
quarter ended April 30, 1996 which increased cost of sales and decreased pre-
tax income by such amount. During the prior year's first quarter, there was
no LIFO inventory charge. As of January 31, 1996, the carrying value of the
Company's LIFO inventories approximated the first-in, first-out ("FIFO")
method or replacement cost.
4
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5. Stockholders' equity:
A summary of the changes in stockholders' equity for the three months
ended April 30, 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
Retained Treasury Net Unrealized
Common Paid-in Earnings Stock, Loss on
Stock Capital (Deficit) at cost Equity Securities Total
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1996 $1,355 $119,960 $3,481 $14,090 ($132) $110,574
Net loss (5,165) (5,165)
Cash dividends-
$.03 per share (380) (380)
Net unrealized loss
on equity securities (7) (7)
Purchase of treasury stock 10 (10)
Issuance of treasury stock (2) (25) 23
Stock options exercised 2 195 197
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Balance, April 30, 1996 $1,357 $120,153 ($2,064) $ 14,075 ($139) $105,232
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</TABLE>
6. Subsequent event:
In May 1996, a federal judge in the U.S. District Court for the Eastern
District of New York entered a judgment in the amount of $8.4 million, plus
interest, in favor of Morrison- Knudsen Company, Inc. against the Company's
former construction company subsidiary, Slattery Associates, Inc., which was
sold in 1989.
The case arose out of a joint venture between Slattery Associates and
Morrison-Knudsen which was established to reconstruct in 1986 a portion of an
expressway in Philadelphia. The judgment represents Slattery's share of joint
venture construction costs which the Court held Slattery owed. Slattery had
contended that Morrison-Knudsen had mismanaged the project and had failed to
disclose material facts. Slattery also had contended that certain costs were
improperly charged to the joint venture.
5
<PAGE>
During the quarter ended April 30, 1996, the Company recorded a pre-tax
charge of $7.5 million ($4.7 million after-tax or $.37 per share) in addition
to a previously established reserve of $3.6 million for this matter. The pre-
tax charge is included in other expense in the April 30, 1996 consolidated
statement of operations. The Company's consolidated balance sheet as of April
30, 1996 includes an accrual of $11.1 million relating to this matter.
The Company has filed a post-judgment motion with the trial court
contending that the court applied incorrect rates of interest. After
disposition of the motion, the Company intends to vigorously appeal.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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Net sales for the first fiscal quarter ended April 30, 1996 were $204.3
million as compared with $195.0 million for the same quarter last year. The
increase in net sales was principally due to a 3.8% increase in average
selling prices and a 9.1 million gallon or 5.3% increase in retail gallonage
sold, partially offset by a 6.5 million gallon or 10.2% decrease in wholesale
gallonage sold. Gross profit (excluding rental and other income) was $3.3
million for the quarter ended April 30, 1996 compared to $6.8 million in the
comparable period last year. The decrease in gross profit was principally due
to a LIFO inventory charge of $3.5 million which resulted from significantly
higher product costs during the 1996 quarter.
Rental income for the three months ended April 30, 1996 amounted to $9.0
million as compared with $8.5 million for the quarter ended April 30, 1995.
The increase was due to rent escalations provided under existing lease
agreements, lease renewals and as a result of improvements to the facilities.
Other income (expense) was ($6.8) million for the three months ended
April 30, 1996 as compared with $1.5 million for the quarter ended April 30,
1995. The current quarter included a pre-tax charge of $7.5 million related
to a judgment against Slattery Associates, Inc., a former construction company
subsidiary, which was sold in 1989. Also contributing to the decrease in
other income was $.4 million of lower gains on dispositions of assets, $.2
million of reduced investment income and $.2 million of expenses related to
the previously announced proposed spin-off.
Selling, general and administrative expenses for the quarter ended April
30, 1996 amounted to $6.3 million which was comparable to the $6.1 million for
the quarter ended April 30, 1995.
Interest expense for the three months ended April 30, 1996 amounted to
$1.9 million as compared with $2.5 million for the quarter ended April 30,
1995. The decrease was principally due to reduced capitalized lease
obligations and debt outstanding during the quarter ended April 30, 1996.
Depreciation and amortization was $5.7 million for the quarter ended
April 30, 1996 which was comparable to the $5.5 million for the quarter ended
April 30, 1995.
The quarter ended April 30, 1995 was restated to retroactively reflect a
charge to earnings of $.8 million for the cumulative effect of adopting at the
end of fiscal 1996, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of".
7
<PAGE>
Liquidity and Capital Resources
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As of April 30, 1996, working capital amounted to a deficit of $15.5
million as compared to a deficit of $9.6 million as of January 31, 1996. The
decrease in working capital was primarily due to $4.3 million of capital
expenditures and the reduction of $2.9 million in long- term indebtedness,
partially offset by $1.3 million of working capital generated during the
quarter from operations which included an after-tax charge of $4.7 million
relating to the Morrison-Knudsen judgment.
The Company's principal sources of liquidity are cash flows from
operations, which amounted to $11.8 million during the three months ended
April 30, 1996, and its short-term unsecured lines of credit. As of April 30,
1996, such lines of credit amounted to $60 million, of which $8.4 million was
utilized in connection with outstanding letters of credit. Management
believes that cash requirements for operations and debt service can be met by
cash flows from operations, available cash and short-term investments of $26.3
million as of April 30, 1996 and available credit lines.
Proposed Spin-off
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During the fiscal quarter ended April 30, 1996 the Company announced that
it intends to spin-off its petroleum marketing business. A request for a tax-
free ruling was filed with the Internal Revenue Service and the Company
anticipates that a favorable ruling will be issued. Subject to receipt of the
favorable IRS ruling, it is anticipated that the spin-off will be completed on
or prior to the end of the Company's fiscal year ending January 31, 1997.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Designation of Exhibit
in this Quarterly Report
on Form 10-Q Description of Exhibit
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27 Financial Data Schedule
(b) Reports on Form 8-K:
Registrant filed a Current Report on Form 8-K dated May 2, 1996
reporting under Item 5, Other Events, that a federal judge in the
Eastern District of New York had entered a judgment against a former
Getty subsidiary in the amount of $8.4 million plus interest.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GETTY PETROLEUM CORP.
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(Registrant)
Dated: June 10, 1996 BY: __________________________________
(Signature)
MICHAEL K. HANTMAN
Vice President and
Corporate Controller
(Chief Accounting Officer)
Dated: June 10, 1996 BY: __________________________________
(Signature)
JOHN J. FITTERON
Senior Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)
Dated: June 10, 1996 BY: __________________________________
(Signature)
LEO LIEBOWITZ
President (Chief Executive
Officer)
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF GETTY PETROLEUM CORP. AND SUBSIDIARIES AS
OF APRIL 30, 1996 AND FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 25,286
<SECURITIES> 1,034
<RECEIVABLES> 16,487
<ALLOWANCES> 1,532
<INVENTORY> 19,918
<CURRENT-ASSETS> 73,930
<PP&E> 353,667
<DEPRECIATION> 170,736
<TOTAL-ASSETS> 267,396
<CURRENT-LIABILITIES> 89,395
<BONDS> 39,487
<COMMON> 1,357
0
0
<OTHER-SE> 103,875
<TOTAL-LIABILITY-AND-EQUITY> 267,396
<SALES> 204,284
<TOTAL-REVENUES> 206,510
<CGS> 200,961
<TOTAL-COSTS> 206,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 121
<INTEREST-EXPENSE> 1,855
<INCOME-PRETAX> (8,312)
<INCOME-TAX> (3,147)
<INCOME-CONTINUING> (5,165)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,165)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
