<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 33-88526
GRIFFITH CONSUMERS COMPANY
CARL KING, INC.
FREDERICK TERMINALS, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
DELAWARE 52-1887726
DELAWARE 04-2941998
MARYLAND 52-1863759
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER NO.)
INCORPORATION OR ORGANIZATION)
GRIFFITH CONSUMERS COMPANY CARL KING, INC.
FREDERICK TERMINALS, INC. 109 SOUTH MAIN STREET
2510 SCHUSTER DRIVE CAMDEN, DELAWARE 19934
CHEVERLY, MARYLAND 20781 (302) 697-3251
(301) 322-3111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 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. X YES NO
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATIONS 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 THE FORM 10-K OR ANY AMENDMENT OF THIS
FORM 10-K [ ].
AS OF SEPTEMBER 30, 1996, THE ISSUERS HAD THE FOLLOWING NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING:
GRIFFITH CONSUMERS COMPANY : 1,000 SHARES
CARL KING, INC. : 1,000 SHARES
FREDERICK TERMINALS, INC. : 500 SHARES
AS OF SEPTEMBER 30, 1996, ALL SHARES OUTSTANDING OF GRIFFITH CONSUMERS COMPANY,
CARL KING, INC. AND FREDERICK TERMINALS, INC. WERE HELD BY AFFILIATES.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned, each thereunto duly authorized on the 15th day of
October, 1996.
GRIFFITH CONSUMERS COMPANY
By: /s/ Todd R. Berman
------------------------------
Name: Todd R. Berman
Title: Chairman
CARL KING, INC.
By: /s/ Todd R. Berman
------------------------------
Name: Todd R. Berman
Title: Chairman
FREDERICK TERMINALS, INC.
By: /s/ Todd R. Berman
------------------------------
Name: Todd R. Berman
Title: Chairman
1
<PAGE>
SIGNATURES
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 registrants and
in the capacities and on the dates indicated.
GRIFFITH CONSUMERS COMPANY
NAME TITLE DATE
/s/ Todd R. Berman Chairman of the October 15, 1996
- -------------------- Board of Directors
Todd R. Berman
/s/ Howard B. President and October 15, 1996
Schlosberg Director (Principal
- -------------------- Executive Officer)
Howard B. Schlosberg
/s/ Michael S. Shein Vice President and October 15, 1996
- -------------------- Director
Michael S. Shein
/s/ Raymond R. Vice President, October 15, 1996
McKenzie, Jr. Secretary and
- -------------------- Treasurer (Principal
Raymond R. McKenzie, Financial and
Jr. Accounting Officer)
Director October 15, 1996
- --------------------
Barry J. Lassman
/s/Walter J. Meighan Director October 15, 1996
- --------------------
Walter J. Meighan
/s/Neil H. Director October 15, 1996
McLaurin, III
- --------------------
Neil H. McLaurin, III
2
<PAGE>
CARL KING, INC.
NAME TITLE DATE
/s/ Todd R. Berman Chairman of the October 15, 1996
- -------------------- Board of Directors
Todd R. Berman
/s/ Raymond R. Vice President October 15, 1996
McKenzie, Jr. (Principal Financial
- -------------------- and Accounting Officer)
Raymond R. McKenzie,
Jr.
/s/ Michael S. Shein Vice President and October 15, 1996
- -------------------- Director
Michael S. Shein
FREDERICK TERMINALS, INC.
NAME TITLE DATE
/s/ Todd R. Berman Chairman of the October 15, 1996
- -------------------- Board of Directors
Todd R. Berman
/s/ Howard B. President and October 15, 1996
Schlosberg Director (Principal
- -------------------- Executive Officer)
Howard B. Schlosberg
/s/ Michael S. Shein Vice President and October 15, 1996
- -------------------- Director
Michael S. Shein
/s/ Raymond R. Secretary and October 15, 1996
McKenzie, Jr. Director (Principal
- -------------------- Financial and
Raymond R. McKenzie, Accounting Officer)
Jr.
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Griffith Consumers Company:
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows of Griffith Consumers Company and
subsidiaries ("Predecessor") for the period July 1, 1994 through December 15,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows
of Griffith Consumers Company and subsidiaries for the period July 1, 1994
through December 15, 1994, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen, LLP
ARTHUR ANDERSEN LLP
New York, New York
September 18, 1996
F-1a
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Griffith Consumers Company:
We have audited the accompanying consolidated balance sheets of Griffith
Consumers Company (a Delaware corporation) and subsidiaries ("Successor") as
of June 30, 1996 and 1995, and the related consolidated statements of
operations, changes in shareholder's equity and cash flows for the year ended
June 30, 1996, and for the period December 16, 1994 through June 30, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion of 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 financial position of Griffith Consumers Company
and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for the year ended June 30, 1996, and for the
period December 16, 1994 through June 30, 1995, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
September 18, 1996
F-1b
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
Griffith Consumers Company
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows of Griffith Consumers Company and
subsidiaries for the year ended June 30, 1994. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows
of Griffith Consumers Company and subsidiaries for the year ended June 30,
1994, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
August 22, 1994
F-2
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
ASSETS: 1996 1995
- ----------------------------------------- ------------------ -----------------
<S> <C> <C>
CURRENT ASSETS
CASH $ 1,687,443 $ 803,085
ACCOUNTS AND NOTES RECEIVABLE,
LESS ALLOWANCE FOR BAD DEBTS - NOTE K 11,813,211 8,854,865
PETROLEUM PRODUCTS INVENTORY 1,228,347 1,104,087
REPAIR PARTS AND SUPPLIES INVENTORY 1,662,048 1,654,668
PREPAID EXPENSES AND OTHER 1,320,055 1,686,326
REFUNDABLE INCOME TAXES - - - - - 1,184,380
---------------- ----------------
TOTAL CURRENT ASSETS 17,711,104 15,287,411
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------------------
LAND 5,533,870 5,691,704
BUILDINGS 1,844,358 1,849,746
MACHINERY AND EQUIPMENT 16,152,930 14,427,147
---------------- ----------------
23,531,158 21,968,597
LESS: ALLOWANCE FOR DEPRECIATION 6,019,263 2,079,727
---------------- ----------------
17,511,895 19,888,870
INTANGIBLES - NOTE C
- -----------------------------------------
CUSTOMER AND SERVICE ACCOUNTS 37,063,186 37,243,999
COVENANTS NOT TO COMPETE 2,936,824 2,936,823
GOODWILL 39,000,867 39,375,955
OTHER INTANGIBLES 836,344 836,344
---------------- ----------------
79,837,221 80,393,121
LESS: ALLOWANCE FOR AMORTIZATION 11,304,362 4,951,986
---------------- ----------------
68,532,859 75,441,135
LONG-TERM NOTES RECEIVABLE 1,054,816 793,595
DEFERRED DEBT COSTS & OTHER 3,759,756 3,764,930
---------------- ----------------
TOTAL ASSETS $ 108,570,430 $ 115,175,941
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
LIABILITIES AND SHAREHOLDER'S EQUITY: 1996 1995
- ----------------------------------------- ------------------ -----------------
<S> <C> <C>
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 7,581,065 $ 6,050,846
ACCRUED EXPENSES 3,560,374 2,144,619
DEFERRED REVENUE 2,471,880 3,251,038
INCOME TAXES PAYABLE 73,103 - - - -
OTHER TAXES PAYABLE 198,517 523,701
CURRENT PORTION OF LONG-TERM DEBT-
NOTE F 4,240,893 3,924,660
---------------- ----------------
TOTAL CURRENT LIABILITIES 18,125,832 15,894,864
LONG-TERM DEBT, LESS CURRENT PORTION-
NOTE F 65,350,995 68,614,436
DEFERRED INCOME TAXES 7,993,849 9,840,169
POST-RETIREMENT EMPLOYEE BENEFITS
AND OTHER 1,541,330 1,602,916
---------------- ----------------
TOTAL LIABILITIES 93,012,006 95,952,385
SHAREHOLDER'S EQUITY
- -----------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE,
100 SHARES, AUTHORIZED, ISSUED AND
OUTSTANDING 1 1
ADDITIONAL PAID-IN CAPITAL 20,691,323 20,691,323
RETAINED DEFICIT (5,132,900) (1,467,768)
---------------- ----------------
TOTAL SHAREHOLDER'S EQUITY 15,558,424 19,223,556
TOTAL LIABILITIES AND ---------------- ----------------
SHAREHOLDER'S EQUITY $ 108,570,430 $ 115,175,941
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------------------------ ------------------------------------
JUL 1, 1995 - DEC 16, 1994 - JUL 1, 1994 - JUL 1, 1993 -
JUN 30, 1996 JUN 30, 1995 DEC 15, 1994 JUN 30, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SALES FROM PETROLEUM PRODUCTS $ 178,834,396 $ 94,579,313 $ 65,437,258 159,565,648
SERVICE, EQUIPMENT, AND OTHER SALES 19,182,816 9,535,569 8,939,201 17,372,193
---------------- ---------------- ---------------- ----------------
TOTAL SALES 198,017,212 104,114,882 74,376,459 176,937,841
COST OF SALES 154,157,555 80,504,645 59,739,106 134,222,416
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 43,859,657 23,610,237 14,637,353 42,715,425
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 29,032,933 15,358,839 12,866,611 28,384,963
DEPRECIATION EXPENSE 4,124,316 2,136,576 1,304,698 2,853,034
AMORTIZATION EXPENSE 7,065,138 3,970,889 2,013,836 4,461,784
---------------- ---------------- ---------------- ----------------
OPERATING INCOME (LOSS) 3,637,270 2,143,933 (1,547,792) 7,015,644
INTEREST EXPENSE 9,398,476 5,054,455 1,239,657 2,526,247
OTHER INCOME 668,001 850,722 199,747 564,853
---------------- ---------------- ---------------- ----------------
(LOSS) INCOME BEFORE INCOME TAX (5,093,205) (2,059,800) (2,587,702) 5,054,250
INCOME TAX (BENEFIT) EXPENSE - NOTE H (1,428,073) (592,032) (1,004,455) 1,971,187
---------------- ---------------- ---------------- ----------------
NET (LOSS) INCOME $ (3,665,132) $ (1,467,768) $ (1,583,247) 3,083,063
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID-IN EARNINGS SHAREHOLDER'S
PREDECESSOR SHARES STOCK CAPITAL (DEFICIT) EQUITY
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE JUNE 30, 1993 2,355,000 23,550 2,849,407 1,879,436 4,752,393
NET INCOME - - - 3,083,063 3,083,063
----------- ------------ ------------- ------------ -------------
BALANCE JUNE 30, 1994 2,355,000 23,550 2,849,407 4,962,499 7,835,456
ISSUANCE OF STOCK 5,000 50 24,950 - 25,000
NET LOSS - - - (1,583,247) (1,583,247)
----------- ------------ ------------- ------------ -------------
BALANCE DECEMBER 15, 1994 2,360,000 23,600 2,874,357 3,379,252 6,277,209
STOCK REDEMPTION (2,360,000) (23,600) (2,874,357) (3,379,252) (6,277,209)
----------- ------------ ------------- ------------ -------------
BALANCE DECEMBER 16, 1994 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
SUCCESSOR
CAPITAL CONTRIBUTIONS FROM PARENT 100 1 20,691,323 - 20,691,324
NET LOSS - - - (1,467,768) (1,467,768)
----------- ------------ ------------- ------------ -------------
BALANCE JUNE 30, 1995 100 1 20,691,323 (1,467,768) 19,223,556
NET LOSS - - - (3,665,132) (3,665,132)
----------- ------------ ------------- ------------ -------------
BALANCE JUNE 30, 1996 100 1 20,691,323 (5,132,900) 15,558,424
----------- ------------ ------------- ------------ -------------
----------- ------------ ------------- ------------ -------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------------------------ -------------------------------------
YEAR ENDED DECEMBER 16, 1994 JULY 1, 1994 YEAR ENDED
JUNE 30 THROUGH THROUGH JUNE 30
1996 JUN 30, 1995 DECEMBER 15, 1994 1994
---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (3,665,132) $ (1,467,768) $ (1,583,247) $ 3,083,063
Adjustments to reconcile net (loss)
income to net cash provided by
(used in) operating activities:
Depreciation 4,124,316 2,136,576 1,304,698 2,853,034
Amortization 7,065,138 3,970,889 2,013,836 4,461,784
Provision for bad debts 336,000 96,000 92,000 356,000
Amortization of bond discount 182,108 72,264 - - - - - - - -
Gain on sale of property, plant,
equipment, and intangibles (137,772) (6,498) (24,087) (20,689)
Changes in operating assets and
liabilities,
Net of effects of change in
working capital:
Accounts and notes receivable (3,555,567) 1,439,016 (1,571,994) (2,193,749)
Inventory (131,640) 43,919 (175,887) 232,029
Prepaid expenses and other 366,271 951,694 (1,841,787) (166,538)
Refundable income taxes, net 1,257,483 55,411 (1,234,890) 5,467
Other assets (151,688) (1,990,701) (771,997) (321,047)
Accounts payable 1,530,219 (2,770,914) 1,319,125 639,733
Accrued expenses 1,415,755 254,306 (283,208) (545,849)
Deferred revenue (779,158) (1,615,715) 1,822,452 447,344
Other liabilities (2,233,090) (238,900) 392,473 102,852
---------------- ---------------- --------------- --------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,623,243 929,579 (542,513) 8,933,434
INVESTING ACTIVITIES
Purchases of property, plant, and
equipment (2,376,852) (2,061,981) (1,497,243) (2,888,938)
Purchases of intangible assets - - - - - - - - (750,000) (81,632)
Proceeds from sale of property, plant,
and equipment and intangible assets 767,283 89,431 125,545 242,058
Acquisition of business:
Property, Plant and equipment - - - - - - - - - - - - (1,375,400)
Intangibles - - - - (76,650) (142,000) (912,000)
Inventory - - - - - - - - - - - - (8,500)
Purchase of predecessor's stock per Merger - - - - (54,280,000) - - - - - - - -
Acquisition Costs (3,674,391) - - - - - - - -
---------------- ---------------- --------------- --------------
Net cash used in investing activities (1,609,569) (60,003,591) (2,263,698) (5,024,412)
FINANCING ACTIVITIES
Proceeds from line of credit 800,000 (1,850,000) 1,850,000 530,984
Proceeds from bond debentures issuance - - - - 31,196,612 - - - - - - - -
Bond issue costs - - - - (1,473,000) - - - - - - - -
Proceeds from term loans - - - - 40,275,853 - - - - - - - -
Prepaid interest - - - - (1,170,000) - - - - - - - -
Payments on long-term debt (3,929,316) (27,793,692) (1,760,875) (4,281,916)
Capital Contributions from Parents - - - - 20,691,323
Issuance of capital stock - - - - 1 25,000 - - - -
---------------- ---------------- --------------- --------------
Net cash (used in) provided by
financing activities (3,129,316) 59,877,097 114,125 (3,750,932)
---------------- ---------------- --------------- --------------
Increase (Decrease) in cash 884,358 803,085 (2,692,086) 158,090
Cash at beginning of period 803,085 - - - - 2,692,086 2,533,996
---------------- ---------------- --------------- --------------
Cash at end of period $ 1,687,443 $ 803,085 $ 0 $ 2,692,086
---------------- ---------------- --------------- --------------
---------------- ---------------- --------------- --------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE>
Griffith Consumers Company and Subsidiaries
June 30, 1996
Notes to Consolidated Financial Statements
Note A--Introduction
On December 15, 1994, the transaction contemplated by the merger agreement
("Merger Agreement") dated August 26, 1994 between Griffith Consumers Company
("Griffith", and together with its consolidated subsidiaries "the Company")
and Griffith Holdings, Inc. ("GHI"), a corporation previously unrelated to
the Company, closed, whereby GHI acquired all of Griffith's 2,360,000
outstanding shares of common stock (the "Common Stock") for $23.00 cash per
share. Pursuant to the Merger Agreement, ABC Acquisition Corp. ("ABC"), a
wholly owned subsidiary of GHI, merged with and into Griffith, and each share
of Griffith's common stock was converted into the right to receive $23.00 in
cash (the "Acquisition"). As a result of the Acquisition, the Company became
a wholly owned subsidiary of GHI.
The Acquisition has been accounted for under the purchase method of
accounting as of December 16, 1994. Accordingly, GHI has allocated its total
purchase cost of approximately $54,280,000 to the assets and liabilities of
the Company based upon the fair value of these assets and liabilities. The
fair values assigned on the December 16, 1994 balance sheet were adjusted
when valuation studies were completed. Because of this purchase price
allocation, the accompanying consolidated financial statements of the Company
for the periods July 1, 1995 through June 30, 1996 and December 16, 1994
through June 30, 1995 (the "Successor") are not directly comparable to the
consolidated financial statements of the Company for the period prior to
December 16, 1994 (the "Predecessor").
Note B--Business
The Company is engaged principally in the retail sale of home heating oil, the
retail sale of gasoline through Company-owned gas stations, the sale of gasoline
to independent dealer gas stations and the sale of other petroleum products.
The Company is also engaged in the sale of oil heating and air-conditioning
equipment.
Note C--Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION: The subsidiaries' accounts have been included in
the consolidated financial statements. All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION: Sales are recognized as deliveries are made or services
are performed. Deferred revenue represents collections from customers who are
on a periodic payment plan and who have made payments in excess of deliveries or
services received.
F-8
<PAGE>
ALLOWANCE FOR BAD DEBTS: A provision for bad debts is provided when the
collection of the account is doubtful.
INVENTORIES: Inventories are valued at the lower of average cost or market.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at
cost. Depreciation is recorded using the straight-line method over the
following useful lives:
Buildings 20 years
Dealer equipment and station improvements 5-10 years
Machinery and equipment 3- 5 years
As of December 16, 1994, the remaining useful lives were used to depreciate
property, plant and equipment revalued under purchase accounting.
Maintenance and repairs are expensed as incurred; significant renewals and
betterments are capitalized. Maintenance and repair expense for the year ended
June 30, 1996 and the periods December 16, 1994 through June 30, 1995 and July
1, 1994 through December 15, 1994 and the year ended June 30, 1994 was
$1,159,137, $650,118, $643,655, and $1,591,051, respectively.
INTANGIBLE ASSETS: Customer and service accounts obtained through acquisitions
are amortized over their estimated useful lives of eight years. Other
intangibles are amortized over periods not exceeding ten years. Covenants not
to compete are amortized over the period stated in the agreements. Goodwill was
amortized over a period of fifteen years for the Predecessor and is amortized
over a thirty year period for the Successor. All intangible assets are
amortized using the straight-line method. The Company evaluates the potential
impairment of intangibles and other long-lived assets by comparing the related
discounted cash flow from operations to the net book value of such assets. Any
impairment would be the excess of net book value over discounted future cash
flow from operations. For these purposes, the related cash flow is the earnings
before taxes, depreciation, amortization, and interest attributable to the
intangibles and other long-lived assets whose impairment is being assessed.
BURNER SERVICE CONTRACTS: A contingent liability is provided for labor and
parts given free to customers during the years in which no revenue is received
from the customer.
RECLASSIFICATIONS: Certain amounts in the consolidated balance sheet for the
year ended June 30, 1995 have been reclassified to conform to the June 30, 1996
presentations. Additionally, certain amounts in the consolidated statements of
operations, changes in shareholder's equity and statements of cash flows for the
year ended June 30, 1994, and the periods July 1, 1994 through December
F-9
<PAGE>
15, 1994 and December 16, 1994 through June 30, 1995 have been reclassified to
conform with the June 30, 1996 presentation.
DEBT ISSUANCE COSTS: The costs associated with the issuance of debt are
amortized utilizing the effective interest method over the term of the
underlying debt instrument. The terms of the debt range from six to ten years.
INCOME TAXES: Deferred income taxes are provided for the temporary differences
between the financial statements and the tax basis of assets and liabilities,
except for goodwill recorded in connection with the Acquisition, which is not
deductible for tax purposes. Deferred income taxes relate primarily to
depreciation associated with property, plant, and equipment, allowances for bad
debt and various accruals of salaries and related benefits.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect 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.
F-10
<PAGE>
Note D--Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121). This
statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 requires these assets to be reviewed
for possible impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. This statement will be
effective for fiscal years beginning after December 15, 1995, and the Company
plans to adopt the statement on July 1, 1996. Based upon the facts and
circumstances known today, the Company does not expect the adoption of SFAS No.
121 to have a material impact on its financial statements.
Note E--Acquisitions of Retail Oil Companies and Gasoline Stations
The Company acquired the assets of a retail oil company. The acquisition was
accounted for as a purchase transaction and, therefore, the financial statements
include the results of operations of the acquired company from the acquisition
date. The cost of the acquisition in the previous year was allocated as
follows:
Year Ended Year Ended
June 30, June 30,
1996 1995
------------------------------
Customer and service
accounts $ -0- $ 50,000
Covenants not to compete -0- 24,000
Goodwill -0- 68,000
---------- -----------
$ -0- $ 142,000
---------- -----------
---------- -----------
Number of acquisitions - 1
F-11
<PAGE>
Note F--Debt
In connection with the Acquisition, the Company retired the Predecessor's
operating line of credit and primary bank term loan. Mortgage notes (the
"Mortgage Notes") on several properties located in Delaware, Maryland and
West Virginia were assumed by the Successor.
The Company subsequently negotiated a new term loan and operating line of
credit with the Company's primary bank lender under the Third Amended and
Restated Revolving Credit and Term Loan Agreement dated as of December 15,
1994 (the "Credit Agreement"). Borrowings under the Credit Agreement are
secured by a first lien on substantially all the assets of the Company,
except those properties located in Delaware, Maryland and West Virginia
securing the Mortgage Notes. The primary lender is subordinated to the
mortgage lender on these properties.
The Credit Agreement contains various provisions regarding events of default and
restrictive covenants, including, among others, restrictions on new liens and
indebtedness, restrictions on the sale of assets, restrictions on mergers and
consolidations and a prohibition on the payment of dividends. In addition, at
the end of each quarter and/or fiscal year-end, the Company is required to
maintain a certain cumulative cash flow coverage ratio, minimum tangible net
worth, minimum working capital, specified maximum ratio of funded debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
debt service coverage ratio.
In addition to the Credit Agreement, the Company financed the Acquisition with
$34 million of 14 1/2% Senior Subordinated Notes due December 15, 2004 (the
"Notes"). Interest on the Notes is payable semiannually on June 15 and December
15 of each year. The Notes are subordinated to all existing and future senior
indebtedness of the Company. The Indenture governing the Notes (the "Indenture")
contains certain restrictive covenants and financial covenants similar to the
Credit Agreement.
The Company has entered into three amendments to the Credit Agreement and two
amendments to the Indenture during 1995 and 1996, which, among other things
revised certain definitions and/or certain financial covenants contained
therein. The Company is in compliance with such agreements as amended.
Subsequent to year-end, the Company amended the agreement. See Note N -
Subsequent Events.
F-12
<PAGE>
The outstanding balances, due dates and interest rates of debt at June 30, 1996
and 1995 were as follows:
June 30, June 30,
1996 1995 Rate
------------------------------------------
Term loan due December 31, 2000 $17,200,000 $20,400,000 Prime + 1.5%
or Eurodollar
Rate + 2.75%
Term loan due December 31, 2002 $17,250,000 $17,750,000 Prime + 2%
or Eurodollar
Rate + 3.25%
Mortgage note due May 1, 2001 $324,905 $378,802 7.5% to April
995 Prime +
1.5%
thereafter
Senior Subordinated Notes due
December 15, 2004, net of
unamortized bond discount
of $2,548,419 and $2,730,527 $31,451,581 $31,269,473 14.5%
Line of Credit due December $2,600,000 $1,800,000 Prime + 1.5%
31, 1998 or Eurodollar
Rate + 2.75%
Other long-term debt due 7.0% through
through 2006 $765,402 $940,821 9.5%
----------- -----------
Total debt $69,591,888 $72,539,096
Current portion of
long-term debt ($4,240,893) ($3,924,660)
------------- ------------
Long-term debt, less
current portion $ 65,350,995 $68,614,436
------------ -----------
------------ -----------
The term loan interest is payable either quarterly or based on the maturity of
the Eurodollar Rate Loans. The Senior Subordinated Notes interest is paid semi-
annually. All other interest payments are made monthly.
As noted above, the Company's term loans and line of credit are based on either
the Prime rate or Eurodollar rate. The Company decides whether to use the
Eurodollar or Prime rate based on the current market interest rates during the
year.
F-13
<PAGE>
The prime rate was 8.25% and 9% at June 30, 1996 and 1995, respectively. The
average Eurodollar rate at June 30, 1996 and 1995 was 5.5% and 6.125%,
respectively.
The Company has available lines of credit. The maximum and average amounts
outstanding and the maximum available for the fiscal years are as follows:
Year Ended June 30
1996 1995
------------------------
Maximum Outstanding $10,800,000 $ 4,000,000
Average Outstanding $ 2,849,808 $ 939,726
Maximum Available $12,000,000 $12,000,000
The Company entered into a two year interest rate swap covering the term loan
outstanding at January 17, 1996. The amount of the swap coverage is reduced as
payments of principle on the term loan are made. The interest rate provides a
fixed Eurodollar rate of 5.22% for the term.
The operating line of credit has a commitment fee of 1/2% per annum on the
unused portion. The Company paid $44,281, $15,385, $13,015, and $28,914 for the
year ended June 30, 1996, the periods December 16, 1994 through June 30, 1995,
July 1, 1994 through December 15, 1994 and the year ended June 30, 1994,
respectively.
The Company paid $9,398,476, $5,054,455, $1,239,657 and $2,526,247 in interest
for the year ended June 30, 1996 and during the periods December 16, 1994
through June 30, 1995 and July 1, 1994 through December 15, 1994 and the year
ended June 30, 1994, respectively. Principal payments due during each fiscal
year ended June 30 under all loan agreements are as follows:
1997 $ 4,240,893
1998 4,541,243
1999 4,525,552
2000 5,176,233
2001 6,113,257
Thereafter 44,994,710
----------
$69,591,888
-----------
-----------
Seven letters of credit, totaling $3,578,191, were outstanding at June 30, 1996.
These letters expire on or before July 1, 1997. Management believes none of
these letters of credit will be called in the future.
Note G--Related Party Transactions
In connection with the change of control in December 1994, the Company paid
certain transaction-related fees and expense reimbursements to entities owned by
certain of the current directors and controlling shareholders of the Company.
Such payments totaled $1,172,360. A quarterly management fee is also
F-14
<PAGE>
paid to entities owned by certain of the current directors and controlling
shareholders. The Company paid $300,000 of management fees in 1996.
NOTE H--Income Taxes
The components of income tax expense (benefit) are as follows:
Successor Predecessor
----------- ------------
Year Ended Dec 16, 1994- Jul 1, 1994- Year Ended
June 30,1996 Jun 30, 1995 Dec 15, 1994 June 30,1994
------------------------------------------------------
Federal income taxes
Current $ 159,438 $ 11,469 $ (807,313) $1,632,485
Deferred (1,609,321) (605,188) (78,419) (15,101)
State income taxes 21,810 1,687 (118,723) 353,803
------------ ------------ ------------ ---------
$(1,428,073) $ (592,032) $(1,004,455) $1,971,187
------------ ------------ ------------ ----------
------------ ------------ ------------ ----------
A reconciliation of the difference between income tax (benefit) expense at the
statutory federal rate and the effective rate is as follows:
Successor Predecessor
------------- ------------
Year Ended Dec 16, 1994- Jul 1, 1994- Year Ended
June 30,1996 Jun 30, 1995 Dec 15, 1994 June 30,1994
-------------------------------------------------------
Statutory federal rate
(34%) $(1,731,690) $ (700,332) $ (879,819) $1,718,445
State income taxes, net
of federal benefit (254,660) (102,990) (140,400) 220,429
Goodwill-pre acquisition -0- 12,480 12,963 27,501
Goodwill-post acquisition 500,073 193,419 -0- -0-
Other, net 58,204 5,391 2,801 4,812
----------- ----------- ----------- ----------
Income tax (benefit)
expense $(1,428,073) $ (592,032) $(1,004,455) $1,971,187
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
F-15
<PAGE>
The components of deferred taxes are as follows at June 30, 1996:
Deferred tax liabilities:
Depreciation - PP&E $ 449,299
Step-up in assets,
excluding goodwill 7,931,353
Other 380,351
----------
Total $8,761,003
----------
Deferred tax assets:
Allowance for bad debts 269,677
Accrued vacation 103,738
Alternative Minimum Tax 237,000
Other 156,738
----------
Total 767,153
----------
Net deferred tax liabilities $7,993,850
----------
----------
Deferred income taxes are provided for the temporary differences between the
financial statements and the tax basis of assets and liabilities, except for
goodwill in connection with the acquisition, which is not deductible for tax
purposes. The Company received income tax refunds of $880,366, $199,504, $0,
and $863 in the year ended June 30, 1996, the periods December 16, 1994 through
June 30, 1995 and July 1, 1994 through December 15, 1994 and the year ended June
30, 1994, respectively. The Company made income tax payments of $42,000,
$107,189, $278,300, and $1,764,875 in the year ended June 30, 1996, the periods
December 16, 1994 through June 30, 1995 and July 1, 1994 through December 15,
1994 and the year ended June 30, 1994, respectively.
The Company files a consolidated federal income tax return with GHI as its
parent corporation. GHI is ultimately liable for future federal income tax
liabilities of the Company. The Company's federal tax provision is calculated
on a separate return basis. The Company files separate company state income tax
returns and is ultimately liable for its future state income tax liabilities.
Note I--Environmental Regulations
Management believes that the environmental liability recorded as of June 30,
1996 properly provides for the Company's environmental liability exposure for
future remediation or contamination which existed at June 30, 1996.
Management's assessment of the environmental liability is based on a
comprehensive environmental study by an independent environmental consultant
that was completed during fiscal year 1995. Management is not aware of any
additional significant environmental exposures since the completion of the
fiscal year 1995 study.
The Company maintains a program to routinely detect releases of gasoline or
other regulated substances from underground storage
F-16
<PAGE>
tanks it owns or operates. The Company employs groundwater monitoring wells
and/or sophisticated in-tank monitoring devices at a majority of its Company
operated stations and this information is available on-line at the Company's
headquarters.
Note J--Pension and Other Benefit Plans
As part of an acquisition agreement, the Company agreed to provide post-
retirement health and life benefits to certain retirees and spouses of an entity
acquired in 1987. The net present value of these postretirement benefits was
established as a liability for all periods presented. Under this agreement, the
Company pays 100% of the health insurance premiums for 35 retirees and spouses,
100% of the life insurance premiums for 16 retirees and spouses, and
approximately 35% of the dental premiums for 4 retirees and spouses. There are
35 retirees and spouses at June 30, 1996 and the Company's portion of the
retirees' premiums approximated $37,000, $36,000, and $38,000 during the years
ended June 30, 1996, 1995, and 1994, respectively.
The actuarial present value of the accumulated postretirement benefit obligation
("APBO") was approximately $600,000 as of June 30, 1996. Net postretirement
benefit expense for the year ended June 30, 1996 was $34,000.
Effective January 1, 1988, the Company adopted "The Griffith Consumers Company
401(k) Plan and Trust" (the "Plan"). All full-time employees are eligible to
participate in the Plan after one year of employment. Until December 31, 1992,
each eligible participant could elect to contribute 2% to 15% of compensation,
and the Company contributed an equal amount up to 2% of the participant's total
compensation. Effective January 1, 1993, the Company contribution was increased
to 3%. Total contributions charged to expense for the year ended June 30, 1996
and the periods December 16, 1994 through June 30, 1995 and July 1, 1994 through
December 15, 1994 and the year ended June 30, 1994 were $285,567, $141,000,
$119,000, and $263,000, respectively.
Note K--Allowance for Bad Debts
Activity in the allowance for bad debts is as follows:
Year Ended June 30
1996 1995 1994
---------------------------------------
Beginning Balance $ 463,398 $ 552,073 $ 353,159
Provision for bad debts 336,000 188,000 356,000
Accounts written off,
net of recoveries (107,919) (276,675) (157,086)
---------- ---------- ----------
Ending balance $ 691,479 $ 463,398 $ 552,073
---------- ---------- ----------
---------- ---------- ----------
F-17
<PAGE>
Note L--Commitments and Contingencies
The Company leases office facilities, petroleum product storage facilities,
computer equipment and transportation equipment. The Company's operating leases
range in length from one to six years. Certain leases have options for renewal.
Future minimum payments, by year and in the aggregate, under noncancelable
operating leases with terms of one year or more, consist of the following at
June 30, 1996:
Year Ending Total Operating
June 30, Leases
------------ ---------------
1997 $ 571,614
1998 333,186
1999 207,264
2000 164,755
2001 163,155
Thereafter -0-
----------
Total minimum
lease payments $1,439,974
----------
----------
Rental expense for all operating leases for the year ended June 30, 1996, and
the periods December 16, 1994 through June 30, 1995 and July 1, 1994 through
December 15, 1994 and the year ended June 30, 1994 was $1,147,110, $643,929,
$544,863, and $1,353,500, respectively. The Company derives rental income
primarily from real estate leases to dealers. Rental income for the year ended
June 30, 1996 and the periods December 16, 1994 through June 30, 1995, and July
1, 1994 through December 15, 1994, and the year ended June 30, 1994 was $212,216
$109,580, $88,395, and $147,660, respectively.
The Company purchases petroleum products pursuant to supply contracts or on the
spot market. At June 30, 1996, the Company was a party to 14 supply contracts
which are effective for periods of up to three years. These contracts establish
maximum amounts of petroleum products which a supplier is required to provide
but the Company is not required to purchase a minimum amount. The price
approximates market at time of purchase. Historically, the Company has procured
approximately one-half of its petroleum products under these supply contracts
and the balance on the spot market.
The Company has 81 contracts with terms varying from two to twenty years to
supply nonaffiliated gasoline stations with petroleum products. These contracts
establish minimum amounts of petroleum products which the Company will supply.
The price approximates market at time of purchase.
Company management believes the probability is remote that the outcome of
litigation and other proceedings relating to the Company
F-18
<PAGE>
will have a material adverse impact on the results of the
Company's operations or its financial position.
Note M--Subsidiaries' Condensed Financial Statement Data
Griffith's wholly owned subsidiaries, Carl King, Inc. and Frederick
Terminals, Inc. (collectively, "Subsidiaries") are the full and unconditional
guarantors of the Notes, issued in connection with Company's private placement
thereof on December 15, 1994. This footnote sets forth the combined balance
sheets of the Subsidiaries as of June 30, 1996 and June 30, 1995, the combined
statements of operations and cash flows for the year ended June 30, 1996 and the
periods December 16, 1994 through June 30, 1995 and July 1, 1994 through
December 15, 1994, and changes in shareholder's equity for the period from June
30, 1993 through June 30, 1996.
In accordance with Staff Accounting Bulletin No. 55, the separate financial
statement data reflects all of the expenses that the Company incurred on each
Subsidiary's behalf. Except for certain general and administrative expenses and
income taxes, expenses are separately identifiable and, therefore, charged
directly to the respective Subsidiary. Common general and administrative
expenses are allocated based on management's assessment of the actual costs
associated with the operations; and income tax expense is provided in the
financial data on a separate return basis. Management believes that the methods
used to allocate expenses to each Subsidiary are reasonable.
F-19
<PAGE>
CARL KING, INC. AND FREDERICK TERMINALS, INC.
COMBINED CONDENSED BALANCE SHEETS
-------------- --------------
June 30 June 30
ASSETS: 1996 1995
-------------- --------------
Current assets $ 5,215,700 $ 3,125,955
Net property, plant and equipment 13,500,023 15,910,702
Net intangibles 12,496,263 13,502,376
Other 566,783 752,911
-------------- --------------
$ 31,778,769 $ 33,291,944
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current liabilities $ 5,940,506 $ 5,112,715
Due to Parents 5,335,763 5,417,801
Long-term debt, less current portion 15,143,539 16,022,445
Other liabilities 1,555,511 1,997,564
Shareholder's equity 3,803,450 4,741,419
-------------- --------------
$ 31,778,769 $ 33,291,944
-------------- --------------
-------------- --------------
CARL KING, INC. AND FREDERICK TERMINALS, INC.
COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Successor Successor Predecessor
-------------- --------------- ---------------
Jul 1, 1995 - Dec 16, 1994 - Jul 1, 1994 -
Jun 30, 1996 Jun 30, 1995 Dec 15, 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
Total sales $ 96,811,737 $ 51,618,467 $ 44,704,897
Cost of sales 84,057,750 45,618,659 38,700,054
-------------- -------------- --------------
Gross profit 12,753,987 5,999,808 6,004,843
Selling, general, and administrative
expenses 8,398,315 4,462,622 3,811,513
Depreciation expense 2,800,950 1,458,549 932,048
Amortization expense 875,467 600,131 287,130
-------------- -------------- --------------
Operating income (loss) 679,255 (521,494) 974,152
Interest expenses 2,304,060 1,249,814 393,502
Other income 238,749 397,656 40,505
-------------- -------------- --------------
(Loss) Income before income tax (1,386,056) (1,373,652) 621,155
Income tax (benefit) expense (448,087) (322,461) 245,631
-------------- -------------- --------------
Net (loss) income $ (937,969) $ (1,051,191) $ 375,524
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
F-20
<PAGE>
CARL KING, INC. AND FREDERICK TERMINALS, INC.
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
INVESTMENT RETAINED TOTAL
BY EARNINGS SHAREHOLDER'S
PARENT (DEFICIT) EQUITY
------------------ ------------------ ------------------
PREDECESSOR
<S> <C> <C> <C>
BALANCE JUNE 30, 1993 $5,074,657 $1,185,051 $6,259,708
Additional Investment by parent 717,953 - 717,953
Net income - 846,158 846,158
------------------ ------------------ ------------------
BALANCE JUNE 30, 1994 5,792,610 2,031,209 7,823,819
Net income - 375,524 375,524
------------------ ------------------ ------------------
BALANCE DECEMBER 15, 1994 5,792,610 2,406,733 8,199,343
Stock Redemption - (2,406,733) (2,406,733)
------------------ ------------------ ------------------
BALANCE DECEMBER 16, 1994 5,792,610 - 5,792,610
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
SUCCESSOR
(1,051,191) (1,051,191)
Net loss - - -
------------------ ------------------ ------------------
BALANCE JUNE 30, 1995 5,792,610 (1,051,191) 4,741,419
Net income - (937,969) (937,969)
------------------ ------------------ ------------------
BALANCE JUNE 30, 1996 $5,792,610 ($1,989,160) $3,803,450
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
CARL KING, INC. AND FREDERICK TERMINALS, INC.
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------------------------- ------------------
JUL 1, 1995 - DEC 16, 1994 - JUL 1, 1994 -
JUN 30, 1996 JUN 30, 1995 DEC 15, 1994
----------------- ------------------ ------------------
<S> <C> <C> <C>
Operating activities $1,994,347 $7,324,404 $1,248,408
Investment activities (92,128) (15,145,311) (995,129)
Financing activities (948,985) 7,820,907 (759,118)
------------------ ------------------ ------------------
Increase (decrease) in cash 953,234 - (505,839)
Cash at beginning of year - - 505,839
------------------ ------------------ ------------------
Cash at end of year $953,234 - -
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
F-21
<PAGE>
Note N--Subsequent Events
On July 11, 1996, the Company acquired certain assets used in the operations
of a chain of convenience stores and retail gasoline stations within the
states of Maryland, Delaware and Virginia under the "Shore Stop" trade name
and a dealer petroleum sales business at two facilities located in Virginia
and Maryland from Regent Investments, Inc., Delaware Investments, Inc., and
Mid-Atlantic Investments, Inc., each a Virginia corporation (collectively,
the "Sellers"). The Company intends to continue using the acquired assets as
convenience stores and dealer petroleum sales business, respectively. The
Company paid the Sellers $17,000,000 (plus the purchase price of certain
inventory), subject to certain adjustments, of which $1,500,000 was in the
form of a promissory note secured by first priority mortgages or deeds of
trust on certain stores and assumed $350,000 of debt. The terms and
conditions of the acquisition were determined upon arms length negotiations
between the Company and Sellers and are set forth in the Asset Purchase and
Sale Agreement by and among the Sellers and the Company, dated as of April
23, 1996 (the "Purchase Agreement"). No material relationship exists between
the Company and the Sellers. The acquisition was financed through an
amendment and restatement of the existing Credit Agreement.
F-22
