SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): July 2, 1998
CROWN ENERGY CORPORATION
Exact name of registrant as specified in its charter
Utah 0-19365 87-0368981
________________________________________________________________
State or other Commission IRS
jurisdiction File No. Employer ID #
of incorporation
215 South State, Suite 550, Salt Lake City, Utah 84111
_______________________________________________________________
Address and zip code of principal executive offices
801-537-5610
____________________________________________________
Registrant's telephone number
Item 7. Financial Statement, Pro Forma Financial Information
and Exhibits
(a) Financial statements of Acquired Business
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Crown Energy Corporation:
We have audited the accompanying combined balance sheets of
Petro Source Asphalt Company (the Company) as of December 31,
1997 and 1996, and the related combined statements of
operations and cash flows for each of the three years in the
period ended December 31, 1997. These combined 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, such combined financial statements referred to
above present fairly, in all material respects, the combined
financial position of Petro Source Asphalt Company as of
December 31, 1997 and 1996, and the combined results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
August 14, 1998
PETRO SOURCE ASPHALT COMPANY
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996 AND JUNE 30, 1998 (UNAUDITED)
June 30, December 31,
ASSETS 1998 1997 1996
(Unaudited)
CURRENT ASSETS:
Accounts receivable (trade,
net of allowance for doubtful
accounts of $24,000 at
December 31, 1997 and 1996
and at June 30, 1998) $3,531,452 $6,635,659 $2,813,269
Inventory 8,915,247 6,248,333 5,890,172
Prepaid expense 12,466 100,939 53,729
___________ __________ __________
Total current assets 12,459,165 12,984,931 8,757,170
PROPERTY, PLANT,
AND EQUIPMENT - Net 1,372,870 1,523,690 885,946
OTHER ASSETS - Net 624,017 590,353 70,842
__________ ___________ __________
TOTAL $14,456,052 $15,098,974 $9,713,958
__________ __________ __________
__________ _________ __________
LIABILITIES AND NET
INVESTMENT (DEFICIT)
CURRENT LIABILITIES:
Accounts payable - trade $2,327,003 $3,950,733 $2,700,740
Notes payable 8,933,142 8,058,914 7,996,718
Accrued liabilities 40,198 24,206 14,974
Obligations under
capital leases 94,036 141,007 5,058
Deferred tax liability 168,454 59,315
Total current 11,394,379 12,343,314 10,776,805
liabilities __________ __________ __________
LONG-TERM NOTES PAYABLE 890,915 741,409
LONG-TERM OBLIGATIONS UNDER
CAPITAL LEASES 258,159 375,665
DEFERRED TAX LIABILITY 311,443 248,913 499,184
COMMITMENTS AND CONTINGENCIES (Note 5)
NET INVESTMENT (DEFICIT) IN PETRO
SOURCE ASPHALT COMPANY
1,601,156 1,389,673 (1,562,031)
_________ __________ ___________
TOTAL $14,456,052 $15,098,974 $9,713,958
__________ ___________ __________
_________ ___________ __________
See notes to combined financial statements.
PETRO SOURCE ASPHALT COMPANY
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
June 30, December 31,
1998 1997 1997 1996 1995
(Unaudited) (Unaudited)
REVENUES - $14,181,943 $15,928,122 $38,793,874 $27,425,673 $19,161,208
Sales
COST OF 13,478,626 15,959,292 37,573,741 27,198,014 20,107,717
SALES __________ __________ __________ __________ __________
GROSS 703,317 (31,170) 1,220,133 227,659 (946,509)
PROFIT (LOSS)
SELLING, 759,407 894,626 1,607,373 1,100,795 955,518
GENERAL AND __________ _________ _________ _________ ________
ADMINISTRATIVE
OPERATING LOSS (56,090) (925,796) (387,240) (873,136) (1,902,027)
INTEREST EXPENSE 428,704 388,685 781,219 503,473 353,665
_______ _________ _______ _________ _______
LOSS BEFORE (484,794) (1,314,481) (1,168,459) (1,376,609) (2,255,692)
INCOME TAXES _________ ___________ ___________ ___________ __________
INCOME TAX BENEFIT:
Current (101,314) (70,566) (141,131) (56,428) (17,711)
Deferred (82,907) (428,937) (302,883) (466,683) (839,452)
_________ _________ _________ __________ __________
Total income (184,221) (499,503) (444,014) (523,111) (857,163)
tax benefit _________ _________ _________ _________ _________
NET LOSS $(300,573) $(814,978) $(724,445) $(853,498) $(1,398,529)
___________ ___________ ___________ __________ ____________
___________ ___________ ___________ __________ ___________
See notes to combined financial statements.
PETRO SOURCE ASPHALT COMPANY
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
June 30, December 31,
1998 1997 1997 1996 1995
(Unaudited) (Unaudited)
CASH FLOWS
FROM
OPERATING
ACTIVITIES:
Net loss $(300,573) $(814,978) $(724,445) $(853,498) $(1,398,529)
Adjustments
to reconcile
net loss to
net cash
used in
operating
activities:
Depreciation 150,820 80,875 241,370 128,889 67,722
Deferred (82,907) (428,937) (302,883) (466,683) (839,452)
income taxes
Changes in
operating
assets and
liabilities:
Accounts 3,104,207 (2,461,342) (3,822,390) 2,606,621 (890,863)
receivable
Inventory (2,666,914) (4,200,266) (358,161) (3,234,540) 185,800
Prepaid 88,473 (7,684) (47,210) (41,888) 7,381
expenses
Other (33,664) 200 (519,512) 26,172 (97,014)
assets
Accounts (1,623,730) 817,293 1,249,993 801,309 721,076
payable
Accrued 15,992 83,809 9,232 (10,429) (4,802)
liabilities ________ ________ ________ _________ _______
Net cash (1,348,296) (6,931,030) (4,274,006) (1,044,047) (2,248,681)
used in ___________ ___________ ___________ __________ ___________
operating
activities
CASH FLOWS FROM INVESTING
ACTIVITIES (23,017) (879,114) (439,931) (213,846)
Additions to ________ __________ ________ _________
property,
plant, and equipment
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase 512,056 5,870,621 4,388,697 (2,793,656) 1,030,051
(decrease)
in net
investment
Principal (164,477) (19,591) (39,182)
paid on
obligations
under
capital leases
Proceeds 1,023,734 1,080,000 803,605 4,277,634 1,432,476
from note _________ _________ _________ __________ _________
payable
Net cash 1,371,313 6,931,030 5,153,120 1,483,978 2,462,527
provided __________ _________ ___________ _________ _________
by financing
activities
CHANGE IN NONE NONE NONE NONE NONE
CASH
AND CASH
EQUIVALENTS
CASH AND NONE NONE NONE NONE NONE
CASH _______ _______ ________ _______ _______
EQUIVALENTS
AT
THE BEGINNING
OF THE PERIOD
CASH AND NONE NONE NONE NONE NONE
CASH _____ ______ ______ _______ ______
EQUIVALENTS _____ _______ ______ _______ _______
AT THE END
OF PERIOD
SUPPLEMENTAL
DISCLOSURE OF
CASH FLOW INFORMATION -
Interest $797,757 $488,192 $ 350,050
paid ________ ________ _________
________ _______ _________
See notes to combined financial statements.
PETRO SOURCE ASPHALT COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
1. ORGANIZATION AND BUSINESS
Basis of Presentation - The accompanying combined financial
statements present, on a historical cost basis, the assets,
liabilities, revenues, and expenses related to Petro Source
Asphalt Company (the Company) to be included in the sale to
Crown Asphalt Distribution LLC (Crown), which is a subsidiary of
Crown Energy Corporation, discussed below. The Company is owned
by Petro Source Corporation (PSC). The Company consists of the
following: certain asphalt production and storage facilities
located in the states of Arizona, Colorado, Nevada, and Utah,
certain asphalt related intellectual property rights, and
certain contract rights to purchase and market asphalt from
unaffiliated refineries located in California and the countries
of Trinidad and Tobago. All significant intercompany accounts
and transactions have been eliminated.
Description of the Company's Business - The Company operates
primarily as a refiner/seller of asphalt and other petroleum
products in the western United States.
Sale of Petro Source Asphalt Company to Crown Asphalt
Distribution LLC - On July 2, 1998, an agreement was signed
between PSC and Crown with respect to the principle terms and
conditions under which Crown acquired the assets of the Company
for $14,297,932.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in Preparing Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Goodwill - Goodwill is stated at cost and is being amortized
using the straight-line method over its estimated life of 15
years.
Revenue Recognition - Revenues are recognized when the related
product is shipped.
Concentration of Credit Risk - Financial instruments which
subject the Company to concentration of credit risk consist
principally of trade receivables. The Company's policy is to
evaluate, prior to shipment, each customer's financial condition
and determine the amount of open line credit to be extended. It
is also the Company's policy to obtain adequate letters of
credit or other acceptable security as collateral for amounts in
excess of the open line.
At December 31, 1997, trade receivables were predominantly from
customers in the states of Arizona, Colorado, Nevada, Utah, and
California. The trade receivables were from manufacturing,
construction, and trading companies. The Company had no
customers accounting for 10% or more of total sales. However,
as of December 31, 1997, approximately $2.8 million of the $6.6
million balance in trade receivables was due from a single
customer.
Inventory - Inventories consist principally of hydrocarbons and
chemical supplies which are valued at the lower of cost (first-
in first-out) or market.
Property, Plant, and Equipment - Property, plant, and equipment
include asphalt storage and other equipment, as well as computer
equipment, furniture, and fixtures. Such items are stated at
cost when purchased. Assets acquired under capital leases are
recorded at the present value of the lease payments.
Depreciation of property, plant, and equipment and amortization
of capital leases are computed using the straight-line method of
accounting over estimated useful lives as follows:
Buildings and improvements 30 years
Equipment 5 years
Vehicles 3-5 years
Computer equipment 3 years
Furniture and fixtures 3 years
Carrying Value of Long-Term Assets - The Company evaluates the
carrying value of long-term assets based upon current and
anticipated undiscounted cash flows, and recognizes an
impairment when such estimated cash flows will be less than the
carrying value of the asset. Measurement of the amount of
impairment, if any, is based upon the difference between
carrying value and fair value.
Income Taxes - The Company uses the asset and liability method
of accounting for income taxes. Deferred income taxes reflect
the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial and tax
reporting purposes. During 1997, 1996, and 1995, the Company's
operations were included in consolidated income tax returns of
PSC. PSC's intercompany tax allocation policy provides for each
subsidiary to calculate their own provision on a "separate
return basis." Amounts due to or receivable from PSC are
settled through intercompany accounts.
Recently Issued Financial Accounting Standards - In June 1997,
the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set
of general purpose financial statements. This statement
requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement
and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in-
capital in the equity section and financial position. SFAS No.
130 is effective for fiscal years beginning after December 15,
1997. The impact of SFAS No. 130 on the Company is not expected
to be material in relation to the combined financial statements,
as there were no comprehensive income items.
In June 1997, the FASB issued SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. SFAS No. 131
established standards for the way that public business
enterprises report information about operating segments in
annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes
standards for related disclosure about products and services,
geographic areas, and major customers. SFAS No. 131 is
effective January 1, 1998. The Company does not expect the
impact of SFAS No. 131 to be material in relation to its
financial statements.
In February 1998, the FASB issued SFAS No. 132, Employer's
Disclosures about Pensions and Other Postretirement Benefits.
SFAS No. 132 does not change the measurement or recognition of
pension and other postretirement benefit plans. It standardizes
the disclosure requirements for those plans, requires additional
information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis,
and eliminates certain disclosures. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1997.
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which supersedes
SFAS No. 80, Accounting for Futures Contracts, SFAS No. 105,
Disclosure of Information About Financial Instruments with Off-
Balance-sheet Risk and Financial Instruments with Concentration
of Credit Risk, and SFAS No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments,
and also amends certain aspects of other SFAS's previously
issued. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those
instruments at fair value. SFAS No. 133 is effective for the
Company's financial statements for the year ending December 31,
2000. The Company does not expect the impact of SFAS No. 133 to
be material in relation to its financial statements.
3. SUPPLEMENTARY BALANCE SHEET INFORMATION
December 31,
1997 1996
Inventory:
Finished goods $5,540,591 $5,285,610
Raw materials 707,742 604,562
___________ ___________
Total $6,248,333 $5,890,172
__________ ___________
__________ ____________
Property, plant,
and equipment:
Land $46,939 $46,939
Buildings and 840,828 455,321
improvements
Computer equipment, 36,693 16,464
furniture, and
fixtures
Tankage and other equipment:
Owned 757,283 726,309
Acquired under 438,394
capital lease ________ __________
2,120,137 1,245,033
Less accumulated (596,447) (359,087)
depreciation and __________ ___________
amortization
Total $1,523,690 $885,946
__________ _________
__________ _________
Other assets:
Goodwill $333,682
Long-term receivable 203,330
Deposits and bonds 53,342 $70,842
________ ________
Total $590,354 $70,842
________ ________
________ ________
4. NOTES PAYABLE
Notes payable consists of the following at December 31, 1997:
Advances under a collateralized bank credit facility,
interest at prime plus .25% (8.75% at December 31,
1997), payable September 1998 $7,849,583
Note payable, secured by equipment, interest
at 8%, payable monthly through October 2001
950,740
_________
Total 8,800,323
Less current portion (8,058,914)
___________
Long-term portion $741,409
_________
__________
Future principal payments required on these obligations are as
follows as of December 31, 1997:
Year ending December 31:
1998 $8,058,914
1999 235,880
2000 265,615
2001 239,914
___________
Total $8,800,323
___________
___________
Bank Credit Facility - As of December 31, 1997, the Company is a
co-borrower with Petro Source Corporation on a bank credit
facility which provides up to $100,000,000 of collateralized
borrowings, subject to borrowing base limitations and which
expires September 30, 1998. At December 31, 1997 and 1996, the
Company had approximately $7,850,000 and $7,997,000,
respectively, in outstanding borrowings under this facility.
Outstanding letters of credit are discussed in Note 5. Interest
is payable monthly. Interest on base rate loans is computed at
the higher of the federal funds rate plus three-fourths percent
per annum or the bank's reference rate plus one-fourth percent
per annum. Interest on offshore rate loans is computed at one
and three-quarters percent per annum plus the bank's inter-bank
offer rate (IBOR) divided by [one minus the eurodollar reserve
percentage]. Principal is due on demand. The Company's portion
of the credit facility is collateralized by a general security
interest in the Company's assets. The agreement contains
certain guidelines which require, among other things, that the
Company maintain certain financial conditions such as minimum
net working capital. While the Company does not guarantee the
obligations of other co-borrowers, the availability of this
credit facility is affected by the activities and financial
condition of the affiliates.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments - The Company's leasing arrangements consist
primarily of premises and equipment leases that are classified
as operating leases. Two leases of assets are classified as
capital leases as of December 31, 1997. Rental expense for all
operating leases for the years ended December 31, 1997 and 1996
was $351,126 and $297,277, respectively.
Future minimum lease payments under such arrangements are as
follows for the years ending December 31:
Operating Capitalized
Leases Leases
1998 $187,978 $569,061
1999 163,877 499,982
2000 139,780 385,445
2001 104,056 371,284
2002 38,440 371,284
Thereafter 713,807
________
Total future minimum lease payments 634,131 $2,910,863
Less amounts representing interest (117,459)
_________
Present value of future minimum lease 516,672
payments
Less current portion (141,007)
_________
Long-term portion $375,665
________
________
Environmental - The Company is subject to environmental issues
which it considers routine for its business activities. In the
opinion of management, the ultimate liability to the Company of
such issues will not have a material adverse impact on its
financial position or results of operations.
Letters of Credit - The Company has outstanding standby letters
of credit totaling $2,624,053 and $604,333 at December 31, 1997
and 1996, respectively. The letters of credit are issued in
connection with the credit facility (see Note 4).
6. RELATED PARTY TRANSACTIONS
During 1997 and 1996, PSC allocated approximately $1,607,373 and
$457,642, respectively, of overhead costs to the Company.
7. INCOME TAXES
The Company has recorded net deferred tax assets and liabilities
at December 31, 1997 and 1996 which consisted of the following
temporary differences and carryforward items:
1997 1996
Long- Long-
Current Term Current Term
Deferred income
tax liabilities:
Differences between
tax basis and
financial reporting
basis of property
and equipment $(248,913) $(499,184)
Other $(168,454) $(59,315)
__________ ___________
Net $(168,454) $(248,913) $(59,315) $(499,184)
__________ __________ ________ __________
__________ __________ _______ __________
The components of income tax benefit for the years ended
December 31, 1997, 1996, and 1995 are summarized as follows:
1997 1996 1995
Current:
Federal $(129,989) $(51,973) $(16,313)
State (11,142) (4,455) (1,398)
_________ ________ _________
(141,131) (56,428) (17,711)
_________ ________ _________
Deferred:
Federal (278,971) (429,840) (773,179)
State (23,912) (36,843) (66,273)
_________ _________ _________
(302,883) (466,683) (839,452)
Total $(444,014) $(523,111) $(857,163)
__________ _________ _________
__________ ________ _________
The provision for income taxes differs from the amounts computed
by applying the U.S. corporate income tax statutory rate of 35%
for the following reasons:
Year Ended December 31,
1997 1996 1995
U.S. corporate income tax
benefit at statutory rate $(408,960) $(481,813) $(789,492)
of 35%
State income taxes, (35,054) (41,298) (67,671)
net of federal tax _________ ________ ________
benefit
Income tax $(444,014) $(523,111) $(857,163)
expense (benefit) __________ __________ __________
__________ __________ __________
8. NET INVESTMENT (DEFICIT)
The net investment (deficit) of the Company is comprised of the
following for each of the three years ended December 31, 1997
(in thousands):
Balance, January 1, 1995 $2,453,601
Net loss (1,398,529)
Increase in net investment 1,030,051
_________
Balance, December 31, 1995 2,085,123
Net loss (853,498)
Decrease in net investment (2,793,656)
____________
Balance, December 31, 1996 (1,562,031)
Net loss (724,445)
Increase in net investment 4,388,697
Other capital transactions (712,548)
___________
Balance, December 31, 1997 1,389,673
Net loss (300,573)
Increase in net investment 512,056
__________
Balance, June 30, 1998 (unaudited) $1,601,156
____________
_____________
(b) Pro Forma financial information
CROWN ENERGY CORPORATION
AND PETRO SOURCE ASPHALT COMPANY
PRO FORMA BALANCE SHEET
6/30/98
(UNAUDITED)
CROWN PETRO
ENERGY SOURCE
CORPORA ASPHALT ELIM.
TION COMPANY(1) ENTRIES TOTAL
CASH $861,376 $0 $730 (5) $862,106
ACCOUNTS 192,954 3,531,452 (2,006,969)(2) 1,717,437
RECEIVABLE
INVENTORY 294,764 8,915,247 (495,000)(3) 8,715,011
OTHER CURRENT 776,454 12,466 (12,466)(2) 776,454
ASSETS
TOTAL 2,125,548 12,459,165 (2,513,705) 12,071,008
CURRENT
ASSETS
PROPERTY & 183,371 1,372,870 630,705 (3) 2,186,946
EQUIPMENT (5)
EQUITY 4,397,438 0 0 4,397,438
INVESTMENT
IN A LIMITED
LIABILITY CO.
OTHER ASSETS 235,035 624,017 (624,017)(2) 235,035
GOODWILL 0 0 4,701,953(3) 4,701,953
________ _________ ____________ __________
TOTAL ASSETS $6,941,392 $14,456,052 $2,194,936 $23,592,380
__________ ____________ __________ ______________
_________ ____________ __________ ______________
ACCOUNTS $42,305 $2,327,003 ($70,423)(2) $2,298,885
PAYABLE
NOTES 0 8,933,142 (1,791,212)(4) 7,141,930
PAYABLES
ACCRUED 0 40,198 0 40,198
LIABILITIES
DIVIDENDS 270,986 0 0 270,986
PAYABLE
OBLIGATIONS 0 94,036 0 94,036
UNDER CAPITAL
LEASES
OTHER 53,259 0 908,059 (5) 961,318
CURRENT _______ ________ ___________ _______
LIABILITIES
TOTAL 366,550 11,394,379 (953,576) 10,807,353
CURRENT
LIABILITIES
LONG TERM 0 890,915 5,109,085 (4) 6,000,000
NOTES PAYABLE (5)
LONG TERM 0 258,159 0 258,159
OBLIGATIONS
UNDER CAPITAL
LEASES
DEFERRED TAX 0 311,443 (311,443) (5) 0
LIIABILITY
MINORITY 0 0 758,546 (3) 758,546
INTEREST
PREFERRED 2,500 0 0 2,500
STOCK
COMMON 253,370 0 0 253,370
STOCK
CAP.IN 10,695,485 0 0 10,695,485
EXCESS OF
PAR VALUE
COMMON STOCK (572,058) 0 0 (572,058)
SUBSCRIPTION
RECEIVABLE
PETRO SOURCE
CORPORATION'S
INVESTMENT
(DEFICIT) IN
THE COMPANY 0 1,601,156 (1,601,156)(5) 0
RETAINED (3,804,455) 0 (806,520)(16) (4,610,975)
EARNINGS _____________ __________ ________________ ___________
TOTAL $6,941,392 $14,456,052 $2,194,936 $23,592,380
LIABILIES _____________ ____________ ____________ _____________
& EQUITY _____________ ____________ ____________ _____________
CROWN ENERGY CORPORATION
AND PETRO SOURCE ASPHALT COMPANY
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED 6/30/1998
(UNAUDITED)
PETRO
CROWN SOURCE
ENERGY ASPHALT ELIM.
CORPORATION COMPANY ENTRIES TOTAL
REVENUE:
OIL AND GAS $0 $0 $0 $0
SALES
ASPHALT 186,929 14,181,943 0 14,368,872
SALES _________ ___________ ______ ___________
TOTAL 186,929 14,181,943 0 14,368,872
REVENUE __________ ___________ ______ ___________
__________ ___________ ______ ___________
EXPENSES:
OIL AND GAS 0 0 0 0
PRODUCTION
COSTS OF SALES 123,140 13,478,626 (150,820)(6) 13,450,946
OPERATING 816 0 0 816
EXPENSES
SELLING, 250,361 759,407 0 1,009,768
GENERAL AND
ADMINISTRATIVE
DEPRECIATION, 9,651 0 68,445(6) 210,373
DEPLETION,
AND
AMORTIZATION
132,277
________ ________ ________ _________
TOTAL 383,968 14,238,033 49,902 14,671,903
EXPENSES _________ __________ _______ ___________
OPERATING (197,039) (56,090) (49,902) (303,031)
(LOSS) ___________ ____________ __________ __________
OTHER INCOME
EXPENSE
INTEREST 78,078 0 0 78,078
AND OTHER
INCOME
INTEREST (6,873) (428,704) 209,676 (7) (225,901)
AND OTHER
EXPENSE
LOSS ON 0 0 0 0
SALE OF
SUBSIDIARY
_________ _________ __________ _________
TOTAL OTHER 71,205 (428,704) 209,676 (7) (147,823)
INCOME (EXPENSE) _________ _________ _________ _________
MINORITY 0 0 (162,510) (9) (162,510)
INTEREST
(LOSS) (125,834) (484,794) 322,284 (288,344)
BEFORE _________ ___________ _________ _________
INCOME
TAXES
CURRENT TAX 0 (101,314) 101,314 (8) 0
EXPENSE (BENEFIT)
DEFERRED TAX 0 (82,907) (29,557) (8) (112,464)
EXPENSE (BENEFIT) ______ __________ ______________ _________
NET (LOSS) ($125,834) ($300,573) $250,527 ($175,880)
__________ ____________ _________ __________
__________ ____________ ________ ___________
CROWN ENERGY CORPORATION
AND PETRO SOURCE ASPHALT COMPANY
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED 6/30/1997
(UNAUDITED)
CROWN PETRO SOURCE
ENERGY ASPHALT ELIM. TOTAL
CORPORATION COMPANY ENTRIES
REVENUE:
OIL AND GAS SALES $77,496 $0 $0 $77,496
ASPHALT SALES 0 15,928,122 0 15,928,122
_________ ____________ _____ ___________
TOTAL REVENUE 77,496 15,928,122 0 16,005,618
_________ ____________ _____ ____________
EXPENSES:
OIL AND GAS 54,653 0 0 54,653
PRODUCTION COSTS
COST OF SALES 0 15,959,292 (80,875)(10) 15,878,417
OPERATING 0 0 0 0
EXPENSES
SELLING, GENERAL AND 163,998 894,626 0 1,058,624
ADMINISTRATIVE
DEPRECIATION, DEPLETION 23,817 0 68,445 (10) 224,539
AND AMORTIZATION
132,277
_______ _________ _________ _________
TOTAL EXPENSES 242,468 16,853,918 119,847 17,216,233
___________ ___________ ________ __________
OPERATING (LOSS) (164,972) (925,796) (119,847) (1,210,615)
___________ ___________ _________ ____________
OTHER INCOME
(EXPENSE):
INTEREST AND 1,486 0 0 1,486
OTHER INCOME
INTEREST AND (754,045) (388,685) 129,347(11) (1,013,383)
OTHER EXPENSE
LOSS ON SALE OF 0 0 0 0
SUBSIDIARY _______ _________ __________ _________
TOTAL OTHER (752,559) (388,685) 129,347 (1,011,897)
INCOME (EXPENSE)
MINORITY INTEREST 0 0 (652,491)(9) (652,491)
(LOSS) BEFORE (917,531) (1,314,481) 661,991 (1,570,021)
INCOME TAXES ___________ ____________ _________ ___________
CURRENT TAX 0 (70,566) 70,566 (12) 0
EXPENSE (BENEFIT)
DEFERRED TAX (373,833) (428,937) 190,462 (12) (612,308)
EXPENSE (BENEFIT) __________ _________ ___________ _________
NET (LOSS) ($543,698) ($814,978) $400,963 ($957,713)
__________ __________ __________ _________
___________ __________ __________ _________
CROWN ENERGY CORPORATION
AND PETRO SOURCE ASPHALT COMPANY
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED 12/31/1997
(UNAUDITED)
CROWN PETRO SOURCE
ENERGY ASPHALT ELIM. TOTAL
CORPORATION COMPANY ENRIES
REVENUE:
OIL AND GAS SALES $86,781 $0 $0 $86,781
ASPHALT SALES 0 38,793,874 0 38,793,874
________ ____________ ____ ___________
TOTAL REVENUE 86,781 38,793,874 0 38,880,874
_______ ___________ ____ ___________
EXPENSES:
OIL AND GAS 54,653 0 0 54,653
PRODUCTION COSTS
COST OF SALES 0 37,573,741 (241,370)(13) 37,332,371
OPERATING 0 0 0 0
EXPENSES
SELLING, GENERAL AND 775,544 1,607,373 0 2,382,917
ADMINISTRATIVE
DEPRECIATION, 39,857 0 136,890 (13) 441,301
DEPLTION AND
AMORTIZATION
264,554
_________ ___________ ___________ ________
TOTAL EXPENSES 870,054 39,181,114 160,074 40,211,242
________ ___________ __________ __________
OPERATING (LOSS) (783,273) (387,240) (160,074) (1,330,587)
_________ __________ __________ __________
OTHER INCOME
(EXPENSE):
INTEREST AND 35,451 0 0 35,451
OTHER INCOME
INTEREST AND (37,280) (781,219) 170,646(14) (647,853)
OTHER EXPENSE
LOSS ON SALE OF (801,461) 0 0 (801,461)
SUBSIDIARY __________ _________ _________ __________
TOTAL OTHER (803,290) (781,219) 170,646 (1,413,863)
INCOME (EXPENSE) __________ __________ __________ ___________
MINORITY INTEREST 0 0 (578,944)(9) (578,944)
(LOSS) BEFORE (1,586,563) (1,168,459) 589,516 (2,165,506)
INCOME TAXES ___________ __________ ________ ___________
CURRENT TAX 0 (141,131) 141,131(15) 0
EXPENSE (BENEFIT)
DEFERRED TAX (434,056) (302,883) (107,608)(15) (844,547)
EXPENSE (BENEFIT) ___________ _____________ _____________ _________
NET (LOSS) ($1,152,507) ($724,445) $555,993 ($1,320,959)
____________ ___________ _________ _____________
___________ ___________ _______ _____________
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
(1) The acquisition of the assets of Petro Source Asphalt
Company was completed as of July 2, 1998. Pro Forma income
statement information is included for the six months ended
June 30, 1998 and June 30, 1997 and for the year ended
December 31, 1997. Pro Forma balance sheet information is
included as of June 30, 1998.
(2) Represents receivables of $2,006,969, other current
assets of $12,466, other assets of $624,017, and accounts
payable of $70,423 retained by Petro Source Asphalt Company.
(3) Represents adjustments to record fixed assets and
inventory acquired from Petro Source Asphalt Company at
their estimated fair market values of $2,208,910 (adjusted
for proforma effects of depreciation) and $8,420,247,
respectively, and to record the resulting goodwill of
$4,701,953 (adjusted for the proforma effects of
amortization). Also to record the minority interest of
$1,500,000 (adjusted for the proforma effects to income).
The minority interest represents the investment of MCNIC
Pipeline and Processing Company, Crown's joint venture
partner, in the joint venture partnership.
(4) To record the notes payable of $6,000,000, long-term,
and $7,141,930, short-term, related to the acquisition of
Petro Source Asphalt Company.
(5) Represents various adjustments to write-off Petro
Source Corporation's investment in the Company, to write-
off related Petro Source notes not assumed by Crown and to
record other purchase price adjustments to property and
equipment, current liabilities and deferred taxes.
(6) To reverse depreciation expense of $150,820 and record
an estimated depreciation expense of $68,445 and an
estimated amortization expense of $132,277 based on the
allocated purchase price.
(7) To reverse interest expense of $428,704 and record an
estimated interest expense of $219,028 based on Crown's
estimated cost of capital.
(8) To reverse current tax benefit of $101,314 and deferred
tax benefit of $82,907 and record an increase in the
estimated deferred tax benefit of $112,464.
(9) To record Crown's join venture partner, MCNIC Pipeline
and Processing Company's minority interest in the net loss
of Petro Source Asphalt Company.
(10) To reverse depreciation expense of $80,875 and record
an estimated depreciation expense of $68,445 and an
estimated amortization expense of $132,277 based on the
allocated purchase price.
(11) To reverse interest expense of $388,685 and record an
estimated interest expense of $259,338 based on Crown's
estimated cost of capital.
(12) To reverse current tax benefit of $70,566 and deferred
tax benefit of $428,937 and record an increase in the
estimated deferred tax benefit of $238,475.
(13) To reverse depreciation expense of $241,370 and record
an estimated depreciation expense of $136,890 and an
estimated amortization expense of $264,554 based on the
allocated purchase price.
(14) To reverse interest expense of $781,219 and record an
estimated interest expense of $610,573 based on Crown's
estimated cost of capital.
(15) To reverse current tax benefit of $141,131 and deferred
tax benefit of $302,883 and record an increase in the
estimated deferred tax benefit of $410,491.
(16) To adjust retained earnings for the effects of the
proforma adjustments on income.
(c) The following exhibit (without schedules and exhibits)
is furnished herewith in accordance with the provisions of Item
601 of Regulation S-K. Registrant agrees to supplementally
furnish the Securities and Exchange Commission with a copy of any
omitted schedule upon request.
Exhibit No. Description
2.1 Purchase and Sale Agreement, dated
July 2, 1998 (1)
(1) Incorporated by reference from the Company's
Report on Form 8-K filed with Commission on or about July
17, 1998, bearing Commission file number 0-19365.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CROWN ENERGY CORPORATION
Richard Rawdin
Vice President
DATED: November 16, 1998
