UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ---------- to ---------
Commission File Number 1-1059
CROWN CENTRAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 52-0550682
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 539-7400
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
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, and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
There were no voting or non-voting common equity securities held by non-
affiliates of the registrant on March 7, 2001; and, therefore, there was
no aggregate market value for such securities on that date.
The number of shares outstanding at March 7, 2001 of the registrant's $5
par value Common Stock was one share, which is owned by Rosemore, Inc.,
a privately held Maryland corporation.
CROWN CENTRAL PETROLEUM CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
Page
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PART I
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Item 1 Business l
Item 2 Properties 3
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security Holders 8
PART II
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Item 5 Market for the Registrant's Common
Equity and Related Stockholder Matters 8
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Item 7a Qualitative and Quantitative Disclosures
About Market Risk 17
Item 8 Financial Statements and Supplementary Data 18
Item 9 Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure 39
PART III
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Item 10 Directors and Executive Officers of the
Registrant 40
Item 11 Executive Compensation 42
Item 12 Security Ownership of Certain
Beneficial Owners and Management 44
Item 13 Certain Relationships and Related Transactions 45
PART IV
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Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 45
PART I
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FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts included in this
Annual Report on Form 10-K, including without limitation those under
"Liquidity and Capital Resources", "Additional Factors that May Affect
Future Results" and under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the Company's
financial position and results of operations, are forward-looking
statements. Such statements are subject to certain risks and
uncertainties, such as changes in prices or demand for the Company's
products as a result of competitive actions or economic factors, changes
in the cost of crude oil, changes in operating costs resulting from new
refining technologies, increased regulatory burdens or inflation, and
the Company's ability to continue to have access to capital markets and
commercial bank financing on favorable terms. Should one or more of
these risks or uncertainties, among others as set forth in this Annual
Report on Form 10-K for the year ended December 31, 2000, materialize,
actual results may vary materially from those estimated, anticipated or
projected. Although the Company believes that the expectations
reflected by such forward-looking statements are reasonable based on
information currently available to the Company, no assurances can be
given that such expectations will prove to have been correct.
Cautionary statements identifying important factors that could cause
actual results to differ materially from the Company's expectations are
set forth in this Annual Report on Form 10-K for the year ended December
31, 2000, including without limitation in conjunction with the forward-
looking statements included in this Annual Report on Form 10-K that are
referred to above. All forward-looking statements included in this
Annual Report on Form 10-K and all subsequent oral forward-looking
statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by these cautionary
statements.
ITEM 1. BUSINESS
GENERAL
Crown Central Petroleum Corporation and subsidiaries (the Company),
which traces its origins to 1917, is a large independent refiner and
marketer of petroleum products in the United States. The Company owns
and operates two high-conversion refineries with a combined capacity of
152,000 barrels per day of crude oil - a 100,000 barrel per day facility
located in Pasadena, Texas, near Houston (the Pasadena refinery) and a
52,000 barrel per day facility located in Tyler, Texas (the Tyler
refinery, and together with the Pasadena refinery, the Refineries). The
Company is also a leading independent marketer of refined petroleum
products and merchandise through a network of 330 gasoline stations and
convenience stores located in the Mid-Atlantic and Southeastern United
States. In support of these businesses, the Company operates 13 product
terminals located on three major product pipelines along the Gulf Coast
and the Eastern Seaboard and in the Central United States.
The Refineries are strategically located and have direct access to crude
oil supplies from major and independent producers and trading companies,
thus enabling the Company to select a crude oil mix to optimize refining
margins and minimize transportation costs. The Pasadena refinery's Gulf
Coast location provides access to tankers, barges and pipelines for the
delivery of foreign and domestic crude oil and other feedstocks. The
Tyler refinery benefits from its location in East Texas due to its
ability to purchase high quality crude oil directly from nearby
suppliers at a favorable cost and from its status as the only supplier
of a full range of refined petroleum products in its local market area.
The Refineries are operated to generate a product mix of over 89% higher
margin fuels, primarily transportation fuels such as gasoline, highway
diesel and jet fuel as well as home heating oil. During the past five
years, the Company has invested over $58 million for environmental
compliance, upgrading, expansion and process improvements at its two
refineries. As a result of these expenditures, the Refineries have a
high rate of conversion to higher margin fuels.
Page 1
The Company is one of the largest independent retail marketers in its
core retail market areas within Maryland, Virginia and North Carolina.
The Company has a geographic concentration of retail locations in high
growth areas such as Baltimore, Maryland and the Washington, D.C.
metropolitan areas, Tidewater and Richmond, Virginia, Charlotte and
Raleigh, North Carolina and Columbus, Georgia.
Sales values of the principal classes of products sold by the Company
during the last three years are included in Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 10 of
this report.
At December 31, 2000, the Company employed 2,636 employees. The total
number of employees decreased approximately 2% from year-end 1999.
REGULATION
Like other companies in the petroleum refining and marketing industries,
the Company's operations are subject to extensive regulation and the
Company has responsibility for the investigation and clean-up of
contamination resulting from past operations. Current compliance
activities relate to air emissions limitations, waste water and storm
water discharges and solid and hazardous waste management activities.
In connection with certain of these compliance activities and for other
reasons, the Company is engaged in various investigations and, where
necessary, remediation of soils and ground water relating to past
spills, discharges and other releases of petroleum, petroleum products
and wastes. The Company's environmental activities are different with
respect to each of its principal business activities: refining and
retail marketing operations. The Company is not currently aware of any
information that would suggest that the costs related to the air, water
or solid waste compliance and clean-up matters discussed herein will
have a material adverse effect on the Company. The Company anticipates
that substantial capital investments will be required in order to
maintain compliance with federal, state and local regulations, including
an approximately $41 million for the EPA's new regulations regarding low
sulfur gasoline. A more detailed discussion of environmental matters is
included in Note A and Note I of the Notes to Consolidated Financial
Statements on pages 24 and 33, respectively, of this report, and in
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 10 through 17 of this report.
COMPETITIVE CONDITIONS
Oil industry refining and marketing is highly competitive. Many of the
Company's principal competitors are integrated multinational oil
companies that are substantially larger and better known than the
Company. Because of their diversity, integration of operations, larger
capitalization and greater resources, these major oil companies may be
better able to withstand volatile market conditions, compete on the
basis of price and more readily obtain crude oil in times of shortages.
The principal competitive factors affecting the Company's refining
operations are crude oil and other feedstock costs, refinery product
margins, refinery efficiency, refinery product mix and product
distribution and transportation costs. Certain of the Company's larger
competitors have refineries that are larger and more complex and, as a
result, could have lower per barrel costs or higher margins per barrel
of throughput. The Company has no crude oil reserves and is not engaged
in exploration. The majority of the Company's total crude oil purchases
are transacted on the spot market. The Company believes that it will be
able to obtain adequate crude oil and other feedstocks at generally
competitive prices for the foreseeable future.
The principal competitive factors affecting the Company's retail
marketing operations are locations of stores, product price, pay-at-the-
pump capability, the quality, appearance and cleanliness of stores and
brand identification. Competition from large integrated oil companies,
as well as from convenience stores that sell motor fuel, is expected to
continue. The principal competitive factors affecting the Company's
wholesale marketing business are product price and quality, reliability
and availability of supply and location of distribution points.
The Company maintains business interruption insurance to protect itself
against losses resulting from shutdowns to refinery operations from
fire, explosions and certain other insured casualties. Business
interruption coverage begins for such losses in excess of $2 million.
Page 2
ITEM 2. PROPERTIES
REFINING OPERATIONS
OVERVIEW
The Company owns and operates two strategically located, high conversion
refineries with a combined capacity of 152,000 barrels of crude oil per
day--a 100,000 barrel per day facility located in Pasadena, Texas, near
Houston, and a 52,000 barrel per day facility located in Tyler, Texas.
Both refineries are operated to generate a product mix of over 89%
higher margin fuels, primarily transportation fuels such as gasoline,
highway diesel and jet fuel, as well as home heating oil. When operating
to maximize the production of light products, the product mix at both of
the Refineries is approximately 55% gasoline, 33% distillates (such as
diesel, home heating oil, jet fuel, and kerosene), 6% petrochemical
feedstocks and 6% slurry oil and petroleum coke.
The Pasadena refinery and Tyler refinery averaged production output of
98,074 barrels per day and 51,051 barrels per day, respectively, during
2000. While both refineries primarily run sweet (low sulphur content)
crude oil, they can process up to 20% of certain sour (high sulphur
content) crude oil in their mix.
The Company's access to extensive pipeline networks provides it with the
ability to acquire crude oil directly from major integrated and
independent domestic producers, foreign producers, or trading companies,
and to transport this crude to the refineries at a competitive cost. The
Pasadena refinery has docking facilities that provide direct access to
tankers and barges for the delivery of crude oil and other feedstocks.
The Company also has agreements with terminal operators for the storage
and handling of the crude oil it receives from large ocean-going vessels
and which the Company transports to the refineries by pipeline. The
Tyler refinery benefits from its location in East Texas since a portion
of the Company's crude oil can be purchased as high quality crude oil at
favorable prices directly from nearby producers. In addition, the Tyler
refinery is the only supplier of a full range of petroleum products in
its local market area. See "Supply, Transportation and Wholesale
Marketing."
PASADENA REFINERY
The Pasadena refinery is located on approximately 174 acres in Pasadena,
Texas and was the first refinery built on the Houston Ship Channel. The
refinery has been substantially modernized and today has a rated crude
capacity of 100,000 barrels per day. During the past five years, the
Company has invested approximately $23 million in capital projects at
Pasadena.
The Pasadena refinery has an extensive plant-wide distributed control
system which is designed to improve product yields, make more efficient
use of personnel and optimize process operations. The distributed
control system uses technology that is fast, accurate and provides
increased information to both operators and supervisors. This equipment
also allows the use of modern advanced control techniques for optimizing
unit operations.
The Pasadena refinery has a crude unit with a 100,000 barrels per day
atmospheric column and a 42,000 barrels per day vacuum tower. Major
downstream units consist of a 56,000 barrels per day fluid catalytic
cracking unit, a 12,000 barrels per day delayed coking unit, two
alkylation units with a combined capacity of 14,000 barrels per day of
alkylate production, and a continuous regeneration reformer with a
capacity of 24,000 barrels per day. Other units include two
depropanizers that can produce 5,500 barrels per day of refinery grade
propylene, a liquified petroleum gas recovery unit that removes
approximately 1,000 barrels per day of liquids from the refinery fuel
system, a reformate splitter, and a compression facility capable of
transporting up to 14 million standard cubic feet per day of process gas
to a neighboring petrochemical plant.
The Clean Air Act mandated that only reformulated gasoline ("RFG") may
be sold in certain ozone non-attainment areas, including some
metropolitan areas where the Company sells gasoline. RFG standards
became more stringent with the implementation of the Complex Model Phase
1 in 1997, and again in 2000 with the Complex Model Phase 2. The
Pasadena refinery can produce up to 30,000 barrels per day of winter
grade Phase 2 RFG with purchases of MTBE, ethanol, or other oxygenates.
The Pasadena refinery directly supplies premium unleaded RFG to nearby
truck rack facilities with the remainder of RFG production being shipped
in the Colonial pipeline. Company retail and wholesale RFG requirements
above production capabilities are met with gasoline grade exchanges and
spot market purchases.
Crude unit operation at the Pasadena refinery was at higher rates in
2000 as compared to the prior year. This was primarily due to the
planned increase in refinery production volumes as a result of improved
industry-wide refining margins. The production increase was partially
offset by major unit outages and mechanical failures during the year.
In addition, the Company purchased substantially more heavy crude at
discounts to light sweet grades. With the heavier crude, the refinery
Page 3
capacity is effectively reduced because of constraints in downstream
units that process the heavier fractions. In 2000, the Pasadena
refinery operated at 98,074 BPD yielding approximately 58% gasoline and
31% distillates. Of the total gasoline production, approximately 22%
was premium octane grades. In addition, the Pasadena refinery produced
and sold other products including propylene, propane, slurry oil,
petroleum coke and sulfur.
The Company owns and operates storage facilities located on
approximately 130 acres near its Pasadena refinery that, together with
tanks on the refinery site, provide the Company with a storage capacity
of approximately 6.2 million barrels (2.8 million barrels for crude oil
and 3.4 million barrels for refined petroleum products and intermediate
stocks).
The Pasadena refinery's refined petroleum products are delivered to both
wholesale and retail customers. Approximately one-half of the gasoline
and distillate production is sold at wholesale into the Gulf Coast spot
market and one-half is shipped by the Company on the Colonial and
Plantation pipelines for sale in East Coast wholesale and retail
markets. The Company's retail gasoline requirements represent
approximately 54% of the Pasadena refinery's total gasoline production
capability.
TYLER REFINERY
The Tyler refinery is located on approximately 100 of the 529 acres
owned by the Company in Tyler, Texas and has a rated crude capacity of
52,000 barrels per day. The Tyler refinery's location provides access
to nearby high quality East Texas crude oil that accounts for
approximately 70% of its crude supply. This crude oil is transported to
the refinery on the McMurrey and Scurlock pipeline systems. The Company
owns the McMurrey system and has a long-term contract with Scurlock
Permian Pipe Line Corporation for use of the Scurlock system. The
Company also has the ability to ship crude oil to the Tyler refinery by
pipeline from the Gulf Coast and does so when market conditions are
favorable. Storage capacity at the Tyler refinery exceeds 2.7 millions
barrels (1.2 million barrels for crude oil and 1.5 million barrels for
refined petroleum products and intermediate stocks), including tankage
along the Company's pipeline system.
The Tyler refinery has a crude unit with a 52,000 barrels per day
atmospheric column and a 15,000 barrels per day vacuum tower. The other
major process units at the Tyler refinery include a 20,000 barrels per
day fluid catalytic cracking unit, a 6,000 barrels per day delayed
coking unit, a 20,000 barrels per day naphtha hydrotreating unit, a
12,000 barrels per day distillate hydrotreating unit, two reforming
units with a combined capacity of 17,000 barrels per day, a 5,000
barrels per day isomerization unit, and an alkylation unit with a
capacity of 4,700 barrels per day.
In 2000, the Tyler refinery operated at approximately 95% of rated crude
unit capacity, with production yielding approximately 53% gasoline and
approximately 37% distillates, which include the production of 5,800 BPD
of aviation fuels. Of the total gasoline production, approximately 10%
was premium octane grades. In addition, the refinery produced and sold
by-products including propylene, propane, slurry oil, petroleum coke and
sulphur. The Tyler refinery is the principal supplier of refined
petroleum products in the East Texas market with approximately 63% of
production distributed at the refinery's truck terminal. The remaining
production is shipped via the Texas Eastern Products Pipeline for sale
either from the Company's terminals or from other terminals along the
pipeline. Deliveries under term exchange agreements account for the
majority of the refinery's truck terminal activity.
RETAIL OPERATIONS
OVERVIEW
The Company traces its retail marketing history to the early 1930's when
it operated a retail network of 30 service stations in the Houston,
Texas area. It began retail operations on the East Coast in 1943. The
Company has been recognized as an innovative industry leader and, in the
early 1960's, pioneered the multi-pump retailing concept which has since
become an industry standard in the marketing of gasoline.
As of December 31, 2000, the Company had 330 retail locations. Of these
330 units (202 owned and 128 leased), the Company directly operated 228
and independent dealers operated the remainders. The Company conducts
its operations in Maryland through an independent dealer network as a
result of legislation that prohibits refiners from operating gasoline
stations in Maryland. The Company believes that the high proportion of
Company-operated units enables it to respond quickly and uniformly to
changing market conditions.
While most of the Company's units are located in or around major
metropolitan areas, its sites are generally not situated on major
interstate highways or inter-city thoroughfares. These off-highway
locations primarily serve local customers and, as a result, the
Company's retail marketing unit volumes are not as highly seasonal or
dependent on seasonal vacation traffic as locations operating on major
traffic arteries. The Company is one of the largest independent retail
marketers of gasoline in its
Page 4
core retail market areas within Maryland, Virginia and North Carolina.
The Company has a geographic concentration of retail locations in high
growth areas such as the metropolitan Baltimore, Maryland and
Washington, D.C. area, Tidewater and Richmond, Virginia, Raleigh and
Charlotte, North Carolina and Columbus, Georgia. The Company's three
highest volume core markets are Baltimore, the suburban areas of
Maryland and Virginia surrounding Washington, D.C., and the greater
Norfolk, Virginia area.
RETAIL UNIT OPERATIONS
The Company conducts its retail marketing operations through three basic
store formats: convenience stores, mini-marts and gasoline stations. At
December 31, 2000, the Company had 77 convenience stores, 150 mini-marts
and 103 gasoline stations.
The Company's convenience stores operate primarily under the name Fast
Fare. These units generally contain 1,500 to 2,800 square feet of
retail space and typically provide gasoline and a variety of convenience
store merchandise such as tobacco products, beer, wine, soft drinks,
coffee, snacks, dairy products and baked goods.
The Company's mini-marts generally contain up to 600 to 1,500 square
feet of retail space and typically sell gasoline and much of the same
merchandise as at the Company's convenience stores. The Company has
installed lighted canopies that extend over the multi-pump fuel islands
at most of its locations. This provides added security and protection
from the elements for customers and employees.
The Company's gasoline stations generally contain up to 100 square feet
of retail space in an island kiosk and typically offer gasoline and a
limited amount of merchandise such as tobacco products, candies, snacks
and soft drinks.
The Company's units are brightly decorated with its trademark signage to
create a consistent appearance and encourage customer recognition and
patronage. The Company believes that consistency of brand image is
important to the successful operation and expansion of its retail
marketing system. In all aspects of its retail marketing operations,
the Company emphasizes quality, value, cleanliness and friendly and
efficient customer service.
While the Company derives approximately 81% of its retail revenue from
the sale of gasoline, it also provides a variety of merchandise and
other services designed to meet the non-fuel needs of its customers.
Sales of these additional products are an important source of revenue,
contribute to increased profitability and serve to increase customer
traffic. The Company believes that its existing retail sites present
significant additional profit opportunities based upon their strategic
locations in high traffic areas. The Company also offers ancillary
services such as compressed air service, car washes, vacuums, and
automated teller machines. Management continues to evaluate the
addition of new ancillary services.
DEALER OPERATIONS
The Company maintains 102 dealer-operated units, all of which are
located in Maryland. Under the Maryland Divorcement Law, refiners are
prohibited from operating gasoline stations. The Maryland units are
operated under a Branded Service Station Lease and Dealer Agreement (the
"Dealer Agreement"), generally with a term of three years. Pursuant to
the Dealer Agreement, a dealer leases the facility from the Company and
purchases and resells Crown-branded motor fuel and related products.
Dealers purchase and resell merchandise from independent third parties.
The Dealer Agreement sets forth certain operating standards; however,
the Company does not control the independent dealer's personnel, pricing
policies or other aspects of the independent dealer's business. The
Company believes that its relationship with its dealers has been very
favorable as evidenced by a low rate of dealer turnover.
The Company realizes little direct benefit from the sale of merchandise
or ancillary services at the dealer operated units, and the revenue from
these sales is not reflected in the Company's Consolidated Financial
Statements. However, to the extent that the availability of merchandise
and ancillary services increases customer traffic and gasoline sales at
its units, the Company benefits from higher gasoline sales volumes.
SUPPLY, TRANSPORTATION AND WHOLESALE MARKETING
SUPPLY
The Company's refineries, terminals and retail outlets are strategically
located in close proximity to a variety of supply and distribution
channels. As a result, the Company has the flexibility to acquire
available domestic and foreign crude oil economically, and also the
ability to cost effectively distribute its products to its own system
and to other domestic wholesale markets. Purchases of crude oil and
feedstocks are determined by quality, price and general market
conditions.
Page 5
TRANSPORTATION
All of the domestic crude oil processed by the Company at its Pasadena
refinery is transported by pipeline. The Company's purchases of foreign
crude oil are transported primarily by tankers under spot charters which
are arranged by either the seller or the Company. The Company is not
currently obligated under any time-charter contracts. The Company has
an approximate 5% interest in the Rancho Pipeline and generally received
approximately 8,000 barrels per day of crude through this system in
2000. Foreign crudes (principally from the North Sea, West Africa and
South America) account for approximately 90% of total Pasadena crude
supply and are delivered by tanker. Most of the crude for the Tyler
refinery is gathered from local East Texas fields and delivered by two
pipeline systems, one of which is owned by the Company. Foreign crude
also can be delivered to the Tyler refinery by pipeline from the Gulf
Coast.
TERMINALS
The Company operates eight product terminals located along the Colonial
and Plantation pipeline systems. In addition to the terminal at the
Tyler refinery, it operates four product terminals located along the
Texas Eastern Products Pipeline system. These terminals have a combined
storage capacity of 1.7 million barrels. The Company's distribution
network is augmented by agreements with other terminal operators also
located along these pipelines. In addition to serving the Company's
retail requirements, these terminals supply products to other
refiner/marketers, jobbers and independent distributors.
WHOLESALE MARKETING
Approximately 15% of the gasoline produced by the Company's Pasadena
refinery is transported by pipeline for sale at wholesale through
Company and other terminals in the Mid-Atlantic and Southeastern United
States. Heating oil is also regularly sold at wholesale through these
same terminals. Gasoline, heating oil, diesel fuel and other refined
products are also sold at wholesale in the Gulf Coast market.
The Company has entered into product exchange agreements for
approximately one-quarter of its Tyler refinery production with two
major oil companies headquartered in the United States. These
agreements provide for the delivery of refined products at the Company's
terminals, in exchange for delivery by these companies of a similar
amount of refined products to the Company. These exchange agreements
provide the Company with the ability to broaden its geographic
distribution, supply markets not connected to the refined products
pipeline systems and reduce transportation costs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various matters of litigation, which, in the
opinion of management, are not expected to have a material adverse
effect on the Company. The Company's legal proceedings are further
discussed in Note I of the Notes to Consolidated Financial Statements on
page 33 of this report.
The Pasadena and Tyler refineries and many of the Company's other
facilities are involved in a number of environmental enforcement actions
or are subject to agreements, orders or permits that require remedial
activities. These matters and other environmental expenditures are
discussed in the Liquidity and Capital Resources section of Management's
Discussion and Analysis of Financial Conditions and Results of
Operations on pages 13 through 17 of this report, and in Note I of the
Notes to Consolidated Financial Statements on page 33 of this report.
These enforcement actions and remedial activities, in the opinion of
management, are not expected to have a material adverse effect on the
Company.
During most of the last five fiscal years, the Company was engaged in a
labor dispute at its Pasadena refinery. Following a number of incidents
apparently intended to disrupt normal operations at the refinery and
also as a result of the unsatisfactory status of the negotiations on the
collective bargaining agreement, on February 5, 1996, the Company
implemented a lock out of employees in the collective bargaining unit at
the refinery. During the lockout, the Paper, Allied-Industrial,
Chemical & Energy Workers Union (PACE), the union to which the
collective bargaining unit belongs, waged an orchestrated corporate
campaign that included a boycott of the Company's retail facilities and
support of various lawsuits against the Company. On January 17, 2001,
the local bargaining unit ratified a new collective bargaining agreement
and the Company ended the lockout. As a result, PACE agreed to cease
all boycott activity, dismiss all regulatory complaints, resolve all
litigation with the Company and end the corporate campaign.
The litigation directly related to the corporate campaign has previously
been reported. The judge denied class certification in LORETTA BURRELL,
ET AL. VS. CROWN CENTRAL PETROLEUM CORPORATION, C.A. No. 97-CVO-357
(E.D. Tex.) and granted the
Page 6
Company's summary judgment motion with respect to the claims of one
plaintiff. Motions for Partial Summary Judgment against all of the
individual claims of all of the seven remaining plaintiffs are pending.
The Company has reached a settlement agreement with the plaintiffs in
TEXANS UNITED FOR A SAFE ECONOMY EDUCATION FUND, ET AL. VS. CROWN
CENTRAL PETROLEUM CORPORATION, H-97-2427 (S.D. Tex.), and the settlement
has been submitted to the court for approval. The parties in KNOX, ET
AL. VS. ROSENBERG, ET AL. C.A. No. 1998-58870 (S.D. Tex.) have an
agreement in principle to settle that case, and a defendants' motion to
dismiss is pending before the court.
On June 25, 1997, a purported class action lawsuit was filed in District
Court for Harris County, Texas by individuals who claim to have suffered
personal injuries and property damage from the operation of the
Company's Pasadena refinery. ALLMAN, ET AL. VS. CROWN CENTRAL PETROLEUM
CORPORATION, ET AL., C.A. No. 97-39455 (District Court of Harris County,
Texas). This suit seeks unspecified compensatory damages and $50
million in punitive damages. The plaintiffs have now dropped all class
action claims. The matter is in discovery.
On January 8, 1999, five named plaintiffs filed a purported class action
lawsuit against the Company and 12 other named defendants in Superior
Court for New Hanover County, North Carolina claiming that the
defendants are liable for damages caused by MTBE contamination of
groundwater, ATLAS ALAN MAYNARD, III, ET AL. V. AMERADA HESS
CORPORATION, ET AL. 99-CV-00068 (Superior Court of New Hanover County,
North Carolina). MTBE is a gasoline additive that is used by the
petroleum industry principally to formulate gasolines that comply with
the federal Clean Air Act Amendments of 1990. The plaintiffs seek to
certify two sub-classes-all owners of drinking water wells in the state
who wish to have their wells tested at the defendants' expense and all
owners of such wells which are contaminated by certain levels of MTBE.
On January 20, 2000, the Court held hearings on the plaintiffs' motion
for class certification and the defendants' motions to dismiss. The
Court has not issued a ruling on those motions and is now reviewing
additional briefs and will hold additional hearings. Court-ordered
nonbinding mediation was unsuccessful.
Approximately 85 current or former employees (or their representatives)
of the Company's La Gloria Oil and Gas Company subsidiary have sued La
Gloria, the Company and over 250 other defendants alleging that they
have suffered injuries resulting from exposure to chemicals at the Tyler
refinery, FAYE B. ANDERSON, ET AL. VS. CROWN CENTRAL PETROLEUM
CORPORATION, ET AL. No. 2000-47892 (District Court of Harris County,
Texas). The plaintiffs have also filed workers' compensation claims.
La Gloria and the Company intend to vigorously defend these actions.
In February 1998, the Company and thirteen other companies, including
several major oil companies, were sued on behalf of the United States
Environmental Protection Agency (EPA) and the Texas Natural Resource
Conservation Commission (TNRCC) under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 (the Superfund Statute)
to recover the costs of removal and remediation at the Sikes Disposal
Pits Site (the Sikes Site) in Harris County, Texas. The Company does
not believe that it sent any waste material to the Sikes Site or that
there is any credible evidence to support the government's claim that it
did so. In fact, the Company has developed considerable evidence to
support its position that it should not have been named as a Potentially
Responsible Party (PRP). The EPA and TNRCC allege that they incurred
response costs and interest in excess of $230 million at the Sikes Site
of which they seek to recover a significant portion. Since the
Superfund statute permits joint and several liability and any PRP is
theoretically at risk for the entire judgment, the Company intends to
vigorously defend this action. Based upon the information currently
available, the Company expects that it will eventually prevail in this
matter. In addition, the Company has been named by the EPA and by
several state environmental agencies as a PRP at various other federal
and state Superfund sites. The Company's exposure in these matters has
either been resolved, is properly reserved or is DE MINIMIS and is not
expected to have a material adverse effect on the Company.
On January 13, 2000, the Company received a Notice of Enforcement from
the TNRCC regarding alleged state and federal air quality violations,
some of which include sulfur exceedances. In a letter dated May 3,
2000, the TNRCC informed the Company that it was proposing to enter an
administrative order against the Company for alleged violations of New
Source Performance Standards for hydrogen sulfide and sulfur dioxide and
for additional alleged violations reflected in three prior notices of
violation or enforcement covering the period April 1, 1998 through
December 31, 1999. The Company believes it has valid legal defenses to
the majority of the alleged violations and is negotiating with the TNRCC
in an effort to settle all charges. In any case, the ultimate outcome
of any enforcement action, in the opinion of management, is not expected
to have a material adverse effect on the Company.
During the first half of 2000, the Company received notices from the
United States Department of Justice (DOJ) that the government was again
considering filing a civil action against the Company for the alleged
sulfur violations already addressed by an August 31, 1998 TNRCC Agreed
Order and for additional alleged violations not covered by that Order.
The Company has negotiated an agreement in principle with DOJ and EPA to
resolve these matters. The proposed settlement will not have a material
adverse effect on the Company.
The foregoing environmental proceedings are not of material importance
to Crown's accounts and are described in compliance with SEC rules
requiring disclosure of such proceedings. Other environmental
enforcement actions previously
Page 7
reported have either been resolved, or the settlement currently proposed
by the relevant agency does not require separate disclosure.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 14, 2000, the Company held its Annual Meeting of
Stockholders. Six directors were elected by the holders of Class A
Common Stock and two directors were elected by the holders of Class B
Common Stock. The result of the Stockholders election of directors was
as follows:
VOTES
VOTES FOR WITHHELD
--------- --------
PROPOSAL I - ELECTION OF DIRECTORS
- ----------------------------------
Nominees for election by the holders
of Class A Stock:
Michael F. Dacey 3,985,696 544,290
Stanley A. Hoffberger 3,956,188 573,798
Barry L. Miller 3,950,489 579,497
Frank B. Rosenberg 3,949,410 580,576
Henry A. Rosenberg, Jr. 3,954,299 575,687
John E. Wheeler, Jr. 3,954,514 575,472
Nominees for election by the holders
of Class B Stock:
Jack Africk 296,186 167,689
The Reverend Harold Ridley, S.J. 296,588 167,287
No other matters were submitted to a vote of stockholders.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Until March 7, 2001, the Company's common stock was listed on the
American Stock Exchange under the ticker symbols CNP A and CNP B. On
March 7, 2001, a subsidiary of Rosemore, Inc., a privately held
company, acquired all of the Company's common stock and the Company
became an indirect wholly-owned subsidiary of Rosemore, and the stock
was no longer traded on the American Stock Exchange following the
close of the market on March 7, 2001. The stock has subsequently been
delisted and it is no longer registered with the Exchange or the
Commission.
COMMON STOCK MARKET PRICES AND CASH DIVIDIENDS
2000 1999
Sales Price Sales Price
High Low High Low
------ ------- ------ -------
CLASS A COMMON STOCK
First Quarter $ 8 9/16 $ 5 5/8 $ 9 $ 7 1/16
Second Quarter 9 1/4 8 1/4 12 1/8 7 1/4
Third Quarter 9 3/4 8 7/8 12 6
Fourth Quarter 10 3/16 7 5/8 8 5/8 4 3/4
Yearly 10 3/16 5 5/8 12 1/8 4 3/4
CLASS B COMMON STOCK
First Quarter $ 8 3/4 $ 5 1/2 $ 9 $ 6 7/8
Second Quarter 9 3/16 8 3/16 11 1/4 7 1/8
Third Quarter 9 9/16 8 9/16 11 6
Fourth Quarter 9 7/8 6 7/8 7 1/4 4 9/16
Yearly 9 7/8 5 1/2 11 1/4 4 9/16
There were no cash dividends declared on common stock in 2000 or 1999.
Page 8
The number of stockholders of the Company's common stock based on the
number of record holders on December 31, 2000 was:
Class A Common Stock 494
Class B Common Stock 873
TRANSFER AGENT & REGISTRAR
EquiServe
Boston, Massachusetts
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company set forth below
for the five years ended December 31, 2000 should be read in conjunction
with the Consolidated Financial Statements.
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Thousands of dollars except per share amounts)
Sales and operating
revenues $1,961,386 $1,270,181 $1,264,317 $1,609,083 $1,641,875
(Loss) income
before extraordinary
item (5,094) (30,026) (29,380) 19,235 (2,767)
Extraordinary item (3,132) - - - -
Net (loss) income (8,226) (30,026) (29,380) 19,235 (2,767)
Total assets 523,561 523,108 518,010 597,394 566,955
Long-term debt 129,367 129,180 129,899 127,506 127,196
PER SHARE DATA - BASIC:
(Loss) income
before extraordinary
item (.51) (3.04) (2.99) 1.97 (.28)
Net (loss) income (.83) (3.04) (2.99) 1.97 (.28)
PER SHARE DATA - DILUTED:
(Loss) income before
extraordinary item (.51) (3.04) (2.99) 1.94 (.28)
Net (loss) income (.83) (3.04) (2.99) 1.94 (.28)
The extraordinary loss recorded in the year 2000 represents legal,
accounting and other related expenses incurred in the Company's efforts
in going private.
To conform to the 1999 and 1998 presentation, Sales and operating
revenues for the years ended December 31, 1997, and 1996, respectively,
have been restated. These restatements had no effect on the Net income
(loss) and the Net income (loss) per share amounts previously reported.
See Note A to the accompanying financial statements.
To conform to the 1999 presentation, Total assets at December 31, 1998,
1997, and 1996, respectively, have been restated. See Note A to the
accompanying financial statements.
The net loss in 1998 included a $7.1 million reserve to reflect the
decline in inventory values of crude oil and petroleum products when
valuing inventories at the lower of cost or market. Due to the increase
in refined products prices, the reserve of $7.1 million recorded as of
December 31, 1998 to reflect valuing inventories at lower of cost or
market was recovered during the first quarter of 1999.
There were no cash dividends declared in 2000, 1999, 1998, 1997, or
1996.
Page 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Consolidated sales and operating revenues increased 54.4% for the year
ended December 31, 2000 compared to an increase of 0.5% for the year
ended December 31, 1999. The 2000 increase was primarily attributable
to a 66.7% increase in the average sales price per gallon of petroleum
products. Partially offsetting this increase was a decrease in retail
merchandise sales due to the sale of fourteen non-strategic properties
in the fourth quarter of 1999. Merchandise sales on a same store basis
for the year 2000 increased a modest .7% compared to the prior year.
(See Retail Results of Operations below for further discussion.) The
1999 increase was primarily attributable to a 21.9% increase in the
average sales price per gallon of petroleum products and an increase in
merchandise sales of $1.2 million or 3.4% offset by a 17.8% decrease in
volumes of refined petroleum products sold primarily due to the
Company's processing agreement with Statoil Marketing and Trading (US)
Inc. (Statoil). (See discussion of Processing Agreement below.) This
processing agreement expired on October 14, 2000.
Gasoline sales accounted for 60.0% of total 2000 revenues while
distillates and merchandise sales represented 29.5% and 5.4%,
respectively. This compares to a dollar mix from sales of 57.7%
gasoline, 26.5% distillates and 9.8% merchandise in 1999 and 56.2%
gasoline, 27.0% distillates and 8.9% merchandise in 1998.
The following table depicts the sales values of the principal classes of
products sold by the Company, which individually contributed more than
ten percent of consolidated Sales and operating revenues during the last
three years:
SALES OF PRINCIPAL PRODUCTS
(IN MILLIONS OF DOLLARS)
2000 1999 1998
-------- ------ ------
Gasoline $1,176.6 $732.6 $711.1
No. 2 Fuel & Diesel 513.6 295.4 315.9
Consolidated costs and operating expenses increased 57.7% compared to an
increase of 0.8% in 1999. The 2000 increase was due primarily to the
increased cost of crude oil. The average cost of Platt's West Texas
Intermediate (WTI) crude oil rose 44.6% during the year, from $24.79 per
barrel in 1999 to $35.84 per barrel in 2000. The increase between 1999
and 1998 was 24.8% from $19.87 per barrel in 1998. Additionally, rising
fuel gas cost expenses during the year increased cost and operating
expenses at the refineries by approximately $10.1 million as compared to
the prior year's expense. The increase in 1999 expense was due
primarily to the increased cost of petroleum products stated above
offset by the 17.8% decrease in refining sales volumes due to the
Statoil processing agreement. The Company utilizes the last-in, first-
out (LIFO) method to value inventory resulting in a better matching of
current revenues and costs. The impact of using LIFO as compared with
using the first-in first-out method to value inventory was to increase
the Company's costs and operating expenses by $14.2 million in 2000 as
compared to an increase of $53.1 million in 1999 while decreasing costs
and operating expenses by $24.8 million in 1998. There was an increase
in the 2000 average consumed cost per barrel of crude oil and feedstock
of 70.3% compared to an increase of 29.5% in 1999. This increase was
primarily due to the increase in crude oil costs discussed above. The
increase in 1999 Costs and operating expenses was partially offset by a
recovery of the lower of cost or market reserve established in 1998 due
to an industry-wide decline in the market prices of crude oil and
refined products of approximately $7.1 million. The $7.1 million lower
of cost or market reserve was recovered in the first quarter of 1999 due
to increases in market values of refined product prices during the
period. The average consumed cost per barrel includes only those costs
directly associated with the purchase and processing of crude oil and
feedstock. Accordingly, refinery operating expenses are not included in
the average consumed cost per barrel of crude oil and feedstock.
Consolidated costs and operating expenses in 2000, 1999, and 1998
include $3.4 million, $10.0 million, and $2.6 million, respectively, of
litigation costs. Additionally, 2000, 1999 and 1998 expenses include
reductions of $3.0 million, $2.1 million and $2.9 million, respectively,
related to favorable resolutions of certain litigation and insurance
claims. Due to the resolution of certain employee benefit issues, the
Company reduced its general benefits accrual by $1.9 million in 2000.
The Company's results of operations were significantly affected by its
use of the LIFO method to value inventory, which in a period of rising
prices, decreased the Company's gross margin by $14.2 million in 2000
and $53.1 million in 1999, whereas the Company's gross margin increased
$24.8 million in 1998 when prices were falling. Increases in the cost
of the Company's crude oil and purchased feedstocks reflect industry-
wide increases in the prices of these products, which prevailed for most
of the year. West Texas Intermediate (WTI) crude oil prices increased
from a low of $12.14 per barrel at the beginning of 1999 to average
$19.31 per barrel for the year 1999 and further increased to average
$30.36 per barrel for the year 2000.
Page 10
On October 15, 1998, the Company executed a Processing Agreement with
Statoil, N.A. whereby the Company processed a monthly average of 35,000
barrels per day of crude oil owned and supplied by Statoil at the
Company's Pasadena, Texas refinery. The Company received a specified
fee per barrel processed and returned to Statoil a specified mix of
finished petroleum products. The fees earned from the processing
agreement represented 17.3% in 2000 and 29.4% in 1999 of the Company's
gross margin. This Processing Agreement expired on October 14, 2000.
The crude oil production capacity previously allotted to the fixed fee
processing agreement will be used to produce and sell product through
the Company's wholesale and retail refined product distribution system
at margins subject to competitive pressure and market fluctuation.
The Company utilizes the last-in, first-out (LIFO) method to value its
inventory. The LIFO method attempts to achieve a better matching of
costs to revenues by including the most recent costs of products in
Costs and operating expenses. The Company's use of the LIFO method
decreased gross margin over what it would have been had the first-in,
first-out (FIFO) method of inventory valuation been utilized by $.26 per
barrel ($14.2 million) in the year 2000. The 1999 impact of the
Company's use of the LIFO method was to decrease the Company's gross
margin by $1.03 per barrel ($53.1 million) while increasing the
Company's gross margin by $.44 per barrel ($24.8 million) in 1998. The
LIFO impact for 1999 and 1998 is net of $14.3 million and $0.5 million
respectively of the decreases in gross margin attributable to lower
inventory levels resulting from the liquidation of LIFO layers, which
were carried at higher costs prevailing in prior years.
Selling expenses decreased 5.0% in 2000 and increased 0.4% in 1999. The
decrease in 2000 is primarily the result of the sale of the Atlanta area
retail properties in the fourth quarter of 1999 that reduced overall
selling expenses and the retail marketing administrative staff
reorganization in mid-year 1999. The 1999 increase is principally due
to increases in labor and maintenance costs at the Company's retail
sites. Additionally, environmental refunds received reduced 1998 selling
expenses, no such refunds were received in 1999.
Administrative expenses decreased 3.9% in 2000 compared to 1999 and
decreased 6.1% in 1999 compared to 1998. The decreases in 2000 expenses
are primarily due to overall reductions in personnel costs offset by
increases in insurance expense and consulting fees. The decrease in
1999 is due primarily to reductions in labor costs as a result of the
completion of the company-wide business process-reengineering project.
Depreciation and amortization increased 4.1% in 2000 compared to 1999
and increased 8.8% in 1999 compared to 1998. The changes in 2000 were
the result of increases in the depreciable base of station/store
equipment and facilities and computer equipment, offset by decreases in
turnaround amortization at the Tyler refinery. The 1999 increases were
primarily attributable to the increases in the depreciable base of the
Company's computer systems because of the company-wide information
systems upgrade completed in 1999.
Sales, abandonments and write-downs of property, plant and equipment
decreased $6.5 million in 2000. This decrease is due primarily to the
sale of certain non-strategic operating retail locations near Atlanta,
Georgia that occurred in 1999.
Earnings Before Interest, Taxes, Depreciation, Amortization,
Abandonments of Property, Plant and Equipment, and LIFO inventory
adjustments (EBITDAAL), which measures the Company's cash flow from
operations on a FIFO inventory basis increased from $52.8 million in
1999 to a positive cash flow of $58.1 million in 2000. The increase
principally reflects improved industry margins available to the Company
during the year. The Company's ability to take advantage of these
margins was offset by the negative impact of market backwardation on the
Company's margin management policies and depressed margins available on
non-transportation products produced. EBITDAAL increased in 1999 from a
deficit EBITDAAL of $24.6 million in 1998 primarily due to the Company's
performance of realizing available industry margins in 1999.
During the year the Company incurred expenses of $3.1 million as a
result of its proposed going private transaction with Rosemore
Acquisition Corporation (RAC). These expenses are shown on the
Statement of Income as an Extraordinary Loss. On December 17, 2000, the
Company entered into a definitive Agreement and Plan of Merger with
Rosemore, Inc. and RAC an indirect wholly owned subsidiary of Rosemore,
Inc. The merger transaction was approved by the Company's stockholders
at a Special Meeting of Stockholders held on March 7, 2001.
REFINING RESULTS OF OPERATIONS
Refining sales and operating revenues increased from $807.6 million in
1999 to $1,338.3 million in 2000. This increase follows a decrease in
Refining sales and operating revenues in the prior year of $25.0 million
to $807.6 million reflected in 1999. The increase in 2000 is due
primarily to the increased market prices for refined petroleum products
existing throughout the year 2000 as compared to 1999. The annual
average sales price per barrel from the Company's refining operation was
$35.33 in 2000 versus $21.23 in 1999. Operating revenues also increased
due to sales volumes increasing 5.6% in 2000; offset
Page 11
by a decline in other refining operating revenues. The decrease in
1999 was due primarily to the decrease in sales volumes resulting from
the Company's crude oil based processing agreement executed in the
fourth quarter of 1998 offset by an increase in average selling price of
refined products per barrel. If the crude oil processed under the
Processing Agreement had been sold at the market price of the refined
products returned to Statoil, refining sales and operating revenues for
2000 and 1999 would have been approximately, $319.3 million and $225.0
million respectively, higher than those currently reported.
The refining gross margin before LIFO increased $11.3 million (6.8%)
from $165.2 million in 1999 to $176.5 million in 2000. The 1999 gross
margin before LIFO increased $79.3 million from $87.1 million in 1998.
The Company's use of the LIFO method to value its inventories had a
significant impact on its refining gross margin. The effect of LIFO, in
a period of rising prices, decreased the Company's refining gross margin
by $13.4 million in 2000 and decreased the Company's refining gross
margin by $52.5 million in 1999. The effect of LIFO in 1998, a period
of falling prices, increased the Company's gross margin by $24.8
million. Additionally, the refining margins in 1999 were positively
impacted by the liquidation of LIFO layers previously discussed.
Total refinery yields of distillates increased to approximately 48,900
barrels per day (bpd) (32.8%) in 2000 from 42,800 bpd (30.2%) in 1999
and from 48,700 bpd (31.4%) in 1998 while total production of finished
gasoline increased to approximately 84,200 bpd (56.5%) from 81,200 bpd
(57.4%) in 1999 and decreased from 87,500 bpd (56.5%) in 1998. Total
refinery production was approximately 149,100 bpd in 2000, 141,500 bpd
in 1999, and 155,000 bpd in 1998. These increases in refinery
production volumes and yields during 2000 are due primarily to the
planned maximization in refinery production volumes as a result of
improved industry-wide refining margins during the current year offset
by unscheduled downtime and the depressed margins of non-transportation
products produced. The decreases in refinery volumes from 1998 to 1999
were due primarily to the planned reduction in refinery production
because of poor industry-wide refining margins. During these periods of
low refining margins, the Company successfully optimized refining gross
margin at reduced run levels. The 1999 Pasadena refining operations were
also impacted significantly by weather related incidents in the second
quarter. High winds damaged the main cooling tower resulting in
substantially reduced throughputs in May 1999 and an electrical storm in
June 1999 damaged the FCC unit, resulting in a two week shut down.
Refining operating expenses increased $11.5 million or 8.8% in 2000 and
decreased $1.8 million or 1.4% in 1999 and $2.2 million or 1.6% in 1998.
Refining operating expenses in 2000 were primarily impacted by
escalations in fuel gas cost, up by $10.1 million in 2000, and increases
in insurance claims and maintenance costs. During 1999 refining
operating expenses were favorably impacted by cost reduction initiatives
at the refineries resulting in a reduction in expenses when compared to
1998 of approximately $9.2 million. These savings were primarily driven
by reductions in refinery operating supplies, professional fees and
maintenance costs. The 1999 refinery operating cost savings were
partially offset by an increase in legal expenses, primarily relating to
various matters associated with the locked-out collective bargaining
unit employees at the Pasadena refinery.
EBITDAAL from refining operations modestly increased to a positive $55.7
million in 2000 from $55.3 million in 1999 and significantly increased
from a deficit EBITDAAL of $24.2 million in 1998. The average annual
30-day delayed industry-wide refining margin increased approximately 46%
from 1999 to 2000, increased approximately 60% from 1998 to 1999 and
decreased 30% from 1997 to 1998. The slight increase in EBITDAAL from
1999 to 2000 principally reflects the impact of the depressed margins of
non-transportation products produced and the steep backwardation in the
crude market that negatively impacted the Company's risk management
program.
RETAIL RESULTS OF OPERATIONS
Retail sales and operating revenues increased 34.6% from $465.3 million
in 1999 to $626.1 million in 2000. Retail sales and operating revenues
also increased $31.0 million to $465.3 million in 1999 from $434.3
million in 1998. The 2000 increase is due primarily to increases in the
retail prices of refined petroleum products, offset by a decrease in
retail gasoline sales volumes of 36.4 million gallons from the prior
year. The decreases in gasoline volumes are due to increased
competition with state of the art facilities, delayed capital
improvements, particularly the Company's decision to delay the
installation of island card readers, a decrease in the number of
operating units from year to year and more aggressive pricing strategies
resulting in significantly increased gasoline margins for 2000. The
increase in 1999 is due primarily to increases in the retail prices of
refined petroleum products, tobacco-related products and alcohol sales
while offset by a decrease in retail gasoline sales volumes due to the
increased competition previously mentioned. On a same store basis,
merchandise sales and margins dollars showed modest increases of .7% and
1.5% respectively in 2000. The merchandise sales increases are
primarily due to the increases in the selling prices of beer and wine
and tobacco-related products. Petroleum product sales on a same store
basis declined 22.2 million gallons while margins increased $6 million
in 2000.
Page 12
The Company's retail gasoline gross margin increased from $.092 per
gallon in 1999 to $.108 per gallon in 2000. The retail gasoline margin
decreased 13.2% in 1999 from $.106 per gallon in 1998. An increase in
2000 overall gasoline margin dollars was achieved despite the decline in
volumes mentioned above. The improved margins are attributable to more
favorable retail market conditions and targeted aggressive pricing
strategies. The decrease in 1999 was primarily the result of retail
price increases lagging behind the rapid run-up of wholesale gasoline
prices during the year. Additionally, retail gasoline sales volumes in
1999 declined 4.6% compared to 1998. This decrease in volume is
principally the result of a less competitive margin focused pricing
strategy coupled with increased competition. The Company's merchandise
gross margin percentage increased slightly from 31.7% in 1999 to 31.9%
in 2000. The merchandise gross margin percentage in 1999 increased from
30.8% in 1998. The increases in merchandise gross margin are a result
of selective merchandise margin increases, primarily beer, wine and
tobacco products.
Retail operating expenses decreased 7.3% in 2000 and increased 4.3% in
1999. The decrease in retail operating expenses is primarily
attributable to a lower number of operating units for most of the year
2000, when compared to the number of locations operating in 1999. The
decreases occurred principally in personnel costs, computer expenses and
depreciation. The increase in retail operating expenses in 1999 was
primarily due to increases in store salaries, wages and benefits and
depreciation and amortization expenses offset by a decrease in
promotional expenses. Additionally, retail operating expenses were
positively impacted in 1998 by non-recurring environmental refunds that
were available that year. At December 31, 2000, the Company operated
220 retail gasoline facilities and 110 convenience stores compared to
249 retail gasoline facilities and 82 convenience stores at December 31,
1999 and 267 retail gasoline facilities and 76 convenience stores at
December 31, 1998.
EBITDAAL from retail operations increased from $16.8 million in 1999 to
$26.1 million in 2000. EBITDAAL in 1999 decreased from $24.0 million in
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased $0.4 million during
2000, as accounts receivable increases attributable to higher product
prices, capital expenditures and deferred turnaround maintenance
spending offset cash flows from operations and the proceeds from
property sales. During 1999, cash and cash equivalents decreased $2.0
million, as cash losses from operations, capital expenditures, deferred
maintenance spending and net repayments of borrowings offset a decrease
in net working capital items and the proceeds from property sales. Cash
and cash equivalents decreased $29.1 million in 1998 due to cash losses
from operations and investment expenditures that were partially offset
by a net decrease in working capital items and additional borrowings.
Net cash flows provided by operating activities were $5.7 million during
2000, as operations provided $31.9 million of cash flow, which offset a
$26.2 million net increase in working capital accounts. The increase in
working capital items was primarily attributable to a price-driven
increase in accounts receivable. The Company generated $27.2 million of
net cash inflows from operating activities during 1999, as a $40.9
million reduction in net working capital items offset a deficit in cash
flow attributable to the $30.0 million net loss recorded in that year.
The 1999 working capital reduction was primarily due to the redeployment
of $12.0 million of restricted cash on hand at the end of 1998 and the
cash flow impact of higher raw material costs and product prices that
resulted in a substantial increase in crude oil and refined products
payables that was partially offset by a smaller increase in accounts
receivable. During 1998, the net cash flow provided by operating
activities was $1.5 million, as the impact of lower unit costs and
product prices on inventories and accounts receivable offset a related
decrease in crude oil and refined products payables, the negative cash
flow attributable to the $29.4 million net loss recorded that year and
both a temporary restriction of cash and the incurrence of financing
costs at the inception of the Company's new credit facility.
Net cash used in investment activities during 2000 totaled $6.3 million
and resulted from $17.2 million in capital expenditures ($6.7 million
for refining operations, $9.1 million for retail operations and $1.4
million for corporate and other strategic projects) and $6.1 million of
deferred refinery turnaround maintenance spending, partially offset by
$15.8 million of proceeds from the sales of property and equipment. The
latter amount includes $13.8 million in net proceeds from a sale-
leaseback of 15 existing retail facilities. Net cash outflows from
investment activities during 1999 were $17.8 million and consisted
principally of capital expenditures of $25.9 million ($11.4 million for
refining operations, $10.1 million for retail operations and $4.4
million related to corporate and other strategic projects) and $5.8
million for deferred refinery turnaround costs and $2.2 million in
capitalized costs of software developed for the Company's own use.
These outflows from investment activities were partially offset by
proceeds from the sale of 14 non-strategic retail properties in Georgia,
the sale of a majority-owned security monitoring company and a reduction
of other long-term assets. During 1998, net cash outflows from
investment activities were $43.3 million and primarily included capital
expenditures of $36.2 million ($12.4 million for refining
Page 13
operations, $21.5 million for retail operations and $2.3 million related
to corporate and other strategic projects), $3.5 million of deferred
refinery turnaround costs and $3.9 million in capitalized costs of
software developed for the Company's own use.
The net cash provided by financing activities during 2000 was $0.2
million and reflected $0.8 million of net proceeds from a purchase money
lien on a new service station and convenience store site offset by
principal payments on other long-term debt. The cash used in financing
activities during 1999 was $11.4 million and consisted of repayments of
both Secured Credit Facility (defined below) borrowings and long-term
debt . During 1998, the cash provided by financing activities was $12.8
million and reflected borrowings under the Secured Credit Facility and
$4.8 million of purchase money liens on new service station and
convenience store sites, partially offset by the repayment of long-term
debt.
At the end of 2000 and 1999, the ratio of current assets to current
liabilities was 1.05 to 1 and .93 to 1, respectively. If FIFO values,
which approximate market value, had been used for all inventories, the
ratios as of the same dates would have been 1.39 to 1 and 1.20 to 1,
respectively.
Like other petroleum refiners and marketers, the Company's operations
are subject to extensive and rapidly changing federal and state
environmental regulations governing air emissions, waste water
discharges, and solid and hazardous waste management activities. The
Company's policy is to accrue environmental and clean-up related costs
of a non-capital nature when it is both probable that a liability has
been incurred and that the amount can be reasonably estimated. While it
is often extremely difficult to reasonably quantify future environmental
related expenditures, the Company anticipates that significant capital
investments will continue to be required over the next year to comply
with existing regulations. The Company believes that cash provided from
its operating activities, together with other available sources of
liquidity will be sufficient to fund these costs. The Company had
recorded a liability of approximately $5.7 million and $7.1 million as
of December 31, 2000 and 1999, respectively, to cover the estimated
costs of compliance with environmental regulations which are not
anticipated to be of a capital nature. The $5.7 million liability
includes accruals for issues extending beyond the year 2001.
Environmental liabilities are subject to considerable uncertainties,
which affect the Company's ability to estimate the ultimate cost of its
remediation efforts. These uncertainties include the exact nature and
extent of the contamination at each site, the extent of required clean-
up efforts, varying costs of alternative remediation strategies, changes
in environmental remediation requirements, the number and financial
strength of other potentially responsible parties at multi-party sites
and the identification of new environmental sites. As a result, charges
to income for environmental liabilities could have a material effect on
results of operations in a particular quarter or year as assessments and
remediation efforts proceed or as new claims arise. However, management
is not aware of any environmental matters that would be reasonably
expected to have a material adverse effect on the Company. See Item 3.
Legal Proceedings on page 6 and Note I of the Notes to Consolidated
Financial Statements on page 33 of this report.
During 2001, the Company estimates environmental expenditures at the
Pasadena and Tyler refineries, of at least $2.0 million and $2.7
million, respectively. Of these amounts, it is anticipated that $1.8
million for Pasadena and $2.4 million for Tyler will be of a capital
nature, while $0.2 million and $0.3 million, respectively, has been
budgeted for non-capital remediation efforts. At the Company's
marketing facilities, environmental expenditures relating to previously
accrued non-capital compliance efforts are planned for 2001 totaling
approximately $1.5 million.
During December 1998, the Company entered into a $125 million Loan and
Security Agreement (Secured Credit Facility) to provide cash borrowings
and letters of credit. The Secured Credit Facility, which has a three-
year term expiring December 9, 2001 and is secured by certain current
assets, provides for the Company's general corporate and working capital
requirements. It includes limitations on additional indebtedness and
cash dividends and requires compliance with financial covenants,
including the maintenance of minimum levels of adjusted working capital
and net worth. Cash borrowings under the Secured Credit Facility are
limited by the Indenture to $50 million and bear interest based on the
prime rate or LIBOR based rates. The Company pays a fee for unused
commitments under the Secured Credit Facility. Up to $75 million of the
Secured Credit Facility is subject to the availability of eligible
collateral, which totaled $110.5 million at December 31, 2000, after the
application of reserves and advance rates. The remaining $50 million of
availability, which is provided by Rosemore, Inc. (Rosemore), a related
party to the Company, is not subject to the limitation of eligible
collateral.
As of December 31, 2000, the Company had no cash borrowings and $53.7
million of outstanding letters of credit issued pursuant to the Secured
Credit Facility, with remaining unused commitments of $71.3 million.
There were $31.7 million of letters of credit outstanding and no cash
borrowings at December 31, 1999.
The Company has utilized additional financial support from Rosemore that
is not committed and is subject to Rosemore's discretion. This support
is in the form of performance guarantees relative to the Company's
purchase of crude oil, feedstocks
Page 14
and other petroleum products and unsecured cash borrowing availability.
As of December 31, 2000, there were no such guarantees or loans
outstanding. The Company pays Rosemore fees at market rates for these
facilities.
At the Company's option, the 10 7/8% Senior Notes due 2005 (Notes) may
be redeemed at 103.625% of the principal amount beginning February 1,
2001, and thereafter at an annually declining premium over the principal
amount until February 1, 2003, when no premium is required. The Notes
were issued under an Indenture, as amended (Indenture), which includes
certain restrictions and limitations effecting the payment of dividends,
repurchase of capital stock and incurrence of additional debt. As of
December 31, 2000, the Indenture allowed additional borrowings outside
of the Secured Credit Facility of $0.9 million. The Notes have no
sinking fund requirements.
The Purchase Money Liens outstanding as of December 31, 2000, represent
loans to finance land, buildings and equipment at seven service station
and convenience store locations. These borrowings are repayable over 60
to 72 months at either fixed or floating interest rates. The Purchase
Money Liens are secured by assets having a net cost basis of $7.7
million and $7.1 million at December 31, 2000 and 1999, respectively,
and are payable monthly through November 2006.
The Company's management is involved in a continual process of
evaluating growth opportunities in its business segments as well as its
capital resource alternatives. Total capital expenditures and deferred
turnaround costs in 2001 are projected to approximate $30.0 million.
The capital expenditures relate primarily to planned improvements at the
Company's refineries, retail unit improvements and to company-wide
environmental requirements. The Company believes, but there can be no
assurance, that cash provided from its operating activities, together
with other available sources of liquidity, including Rosemore and the
Secured Credit Facility, or a successor agreement, will be sufficient in
2001 to make required payments of principal and interest on its debt,
permit anticipated capital expenditures and fund the Company's working
capital requirements. The Secured Credit Facility expires on December
9, 2001, but may be extended for additional one-year periods upon
agreement between the Company and the agent of the Secured Credit
Facility. The Company has requested that the Secured Credit Facility
expiration date be extended to December 31, 2002. In the event that the
Company is not able to renew or replace the current credit facility or
should crude oil prices dramatically increase, management intends to
take the necessary actions for the Company to continue to operate as a
going concern including, but not limited to, the reduction of refinery
throughput and limiting or deferring capital expenditures. Any major
acquisition or other substantial expenditure would likely require a
combination of additional debt and equity.
The Company places its temporary cash investments in high credit quality
financial instruments, which comply with the requirements contained in
the Company's financing agreements. These securities mature within 90
days and, therefore, bear minimal interest rate risk. The Company has
not experienced any losses on these investments.
The Company faces intense competition in all of the business areas in
which it operates. Many of the Company's competitors are substantially
larger and, therefore, the Company's earnings can be affected by the
marketing and pricing policies of its competitors, as well as changes in
raw material costs.
Merchandise sales and operating revenues from the Company's convenience
stores are seasonal in nature, generally producing higher sales and
earnings in the summer months than at other times of the year. Gasoline
sales, both at the Crown multi-pump stations and convenience stores, are
also somewhat seasonal in nature and, therefore, related revenues may
vary during the year. This seasonality does not, however, negatively
impact the Company's overall ability to sell its refined products.
The Company maintains business interruption insurance to protect itself
against losses resulting from shutdowns to refinery operations from
fire, explosions and certain other insured casualties. Business
interruption coverage begins for such losses in excess of $2 million.
The Company has disclosed in Item 3. Legal Proceedings on page 6 and in
Note I of the Notes to Consolidated Financial Statements on page 33 of
this report, various contingencies which involve litigation and
environmental liabilities. Depending on the occurrence, amount and
timing of an unfavorable resolution of these contingencies, the outcome
of which cannot reasonably be determined at this time, it is possible
that the Company's future results of operations and cash flows could be
materially affected in a particular quarter or year. However, after
consultation with counsel, in the opinion of management, the ultimate
resolution of any of these contingencies is not expected to have a
material adverse effect on the Company. Additionally, as discussed in
Item 3. Legal Proceedings on page 6 of this report, on January 17, 2001
the local PACE bargaining unit at the Pasadena refinery ratified a new
collective bargaining agreement and the Company ended the lockout. As a
result, PACE has ceased all boycott activities, dismissed all regulatory
complaints, moved to resolve all litigation with the Company, and ended
the corporate campaign. Bargaining unit employees began returning to
work in February 2001.
Page 15
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's financial statements were prepared using the historical
cost method of accounting and, as a result, do not reflect changes in
the purchasing power of the dollar. In the capital intensive industry
in which the Company operates, the replacement costs for its properties
would generally far exceed their historical costs. As a result,
depreciation would be greater if it were based on current replacement
costs. However, since the replacement facilities would reflect
technological improvements and changes in business strategies, such
facilities would be expected to be more productive and versatile than
existing facilities, thereby increasing profits, mitigating increased
depreciation, and operating costs.
In recent years, crude oil and refined petroleum product prices have
been volatile which has impacted working capital requirements. If the
prices increase in the future, the Company would expect a related
increase in working capital needs and financial performance capability.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's operating results have been, and will continue to be,
affected by a wide variety of factors that could have an adverse effect
on profitability during any particular period, many of which are beyond
the Company's control. Among these are the supply and demand for crude
oil and refined products, which is largely driven by the condition of
local and worldwide economies and politics, although seasonality and
weather patterns can also play a significant part. Governmental
regulations and policies, particularly in the areas of energy and the
environment, also have a significant impact on the Company's activities.
Operating results can be affected by these industry factors, by
competition in the particular geographic markets that the Company serves
and by Company-specific factors, such as the success of particular
marketing programs and refinery operations and the availability of
sufficient working capital.
In addition, the Company's profitability depends largely on the
difference between market prices for refined petroleum products and
crude oil prices. This margin is continually changing and may fluctuate
significantly from time to time. Crude oil and refined products are
commodities whose price levels are determined by market forces beyond
the control of the Company. Additionally, due to the seasonality of
refined products and refinery maintenance schedules, results of
operations for any particular quarter of a fiscal year are not
necessarily indicative of results for the full year. In general, prices
for refined products are significantly influenced by the price of crude
oil. Although an increase or decrease in the price for crude oil
generally results in a corresponding increase or decrease in prices for
refined products, often there is a time lag in the realization of the
corresponding increase or decrease in prices for refined products. The
effect of changes in crude oil prices on operating results therefore
depends in part on how quickly refined product prices adjust to reflect
these changes. A substantial or prolonged increase in crude oil prices
without a corresponding increase in refined product prices, a
substantial or prolonged decrease in refined product prices without a
corresponding decrease in crude oil prices, or a substantial or
prolonged decrease in demand for refined products could have a
significant negative effect on the Company's earnings and cash flows.
The profitability and liquidity of the Company is dependent on refining
and selling quantities of refined products at margins sufficient to
cover operating costs, including any future inflationary pressures. The
refining business is characterized by high fixed costs resulting from
the significant capital outlays associated with refineries, terminals
and related facilities. Furthermore, future regulatory requirements or
competitive pressures could result in additional capital expenditures,
which may or may not produce desired results. Such capital expenditures
may require significant financial resources that may be contingent on
the Company's continued access to capital markets and commercial bank
financing on favorable terms including acceptable financial covenants.
Purchases of crude oil supply are typically made pursuant to relatively
short-term, renewable contracts with numerous foreign and domestic major
and independent oil producers, generally containing market-responsive
pricing provisions. Futures, forwards and exchange-traded options may
be used to minimize the exposure of the Company's refining margins to
crude oil and refined product fluctuations. The Company also
selectively uses the futures market to help manage the price risk
inherent in purchasing crude oil in advance of the delivery date, and in
maintaining the inventories contained within its refinery and pipeline
system. Hedging strategies used to minimize this exposure include
fixing a future margin between crude oil and certain finished products
and also hedging fixed price purchase and sales commitments of crude oil
and refined products. While the Company's hedging activities are
intended to reduce volatility while providing an acceptable profit
margin on a portion of production, the use of such a program can effect
the Company's ability to participate in an improvement in related
product profit margins. Although the Company's net sales and operating
revenues fluctuate significantly with movements in industry crude oil
prices, such prices do not have a direct relationship to net earnings,
which are subject to the impact of the Company's LIFO method of
accounting. The effect of changes in crude oil prices on the Company's
operating results is determined more by the rate at which the prices of
refined products adjust to reflect such changes.
Page 16
The following table presents the current market value of the Company's
outstanding derivative commodity instruments held at December 31, 2000
based on crude oil and refined products market prices at that date and
the estimated impact on future earnings before taxes based on the
sensitivity of those instruments to a 10% increase or decrease in market
prices.
Anticipated Gain (Loss)
-----------------------
Current Value at 10% Increase in 10% Decrease in
December 31, 2000 Market Prices Market Prices
----------------- --------------- ---------------
(in thousands)
Commodity futures $ 338 $ (1,365) $ 1,365
Commodity forwards 4,548 4,395 (4,395)
---------- ---------- ----------
Total $ 4,886 $ 3,030 $ (3,030)
========== ========== ==========
Cash borrowings under the Secured Credit Facility bear interest based on
the prime rate or LIBOR based rates. Changes in these rates could also
impact the level of earnings in future periods.
Rosemore entered into an Agreement and Plan of Merger dated December 17,
2000 (the "Merger Agreement"), with the Company. The Merger Agreement
proposed that Rosemore Acquisition Corporation, a Rosemore subsidiary,
be merged with and into the Company . Under the Merger Agreement, the
stockholders of the Company, other than Rosemore, would receive $10.50
per share in exchange for their Company stock if the Company's
stockholders approved the Merger. The Merger Agreement was submitted to
the Company's stockholders for approval at a special meeting of
stockholders on March 7, 2001. The Merger Agreement received the
requisite two-thirds approval from the Company stockholders and also the
majority of votes cast other than those owned by Rosemore and its
affiliates. The effective date of the Merger was March 7, 2001.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk disclosures relating to outstanding derivative
commodity instruments are discussed above in Item 7 Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
[This space intentionally left blank]
Page 17
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
December 31
2000 1999
---------- -----------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 12,097 $ 12,447
Accounts receivable, less allowance for
doubtful accounts (2000--$418, 1999--$552) 132,571 104,332
Inventories, net of LIFO reserves (2000 -- $70,042
1999 -- $55,813) 69,962 69,195
Other current assets 1,944 1,428
---------- ----------
TOTAL CURRENT ASSETS 216,574 187,402
INVESTMENTS AND DEFERRED CHARGES 17,560 21,666
PROPERTY, PLANT AND EQUIPMENT
Land 43,728 46,650
Petroleum refineries 395,124 389,331
Marketing facilities 207,067 214,418
Furniture and other equipment 33,727 40,024
---------- -----------
679,646 690,423
Less allowance for depreciation 390,219 376,383
---------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 289,427 314,040
---------- -----------
$ 523,561 $ 523,108
========== ===========
[FN]
See notes to consolidated financial statements
</FN>
Page 18
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
December 31
2000 1999
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable:
Crude oil and refined products $121,802 $118,489
Other 31,730 22,307
Accrued liabilities 50,250 60,685
Income tax payable 1,218 413
Current portion of long-term debt 665 631
-------- --------
TOTAL CURRENT LIABILITIES 205,665 202,525
LONG-TERM DEBT 129,367 129,180
DEFERRED INCOME TAXES 5,336 7,384
OTHER DEFERRED LIABILITIES 41,985 34,718
COMMON STOCKHOLDERS' EQUITY
Class A Common Stock--par value $5 per share:
Authorized -15,000,000 shares;
issued and outstanding shares--
4,817,394 in 2000 and in 1999 24,087 24,087
Class B Common Stock--par value $5 per share:
Authorized -15,000,000 shares;
issued and outstanding shares--
5,247,937 in 2000 and 5,253,862 in 1999 26,239 26,269
Additional paid-in capital 92,693 91,154
Unearned restricted stock (2,558) (1,049)
Retained earnings 747 8,973
Accumulated other comprehensive income - (133)
-------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY 141,208 149,301
-------- --------
$523,561 $523,108
======== ========
[FN]
See notes to consolidated financial statements
</FN>
Page 19
CONSOLIDATED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Year Ended December 31
2000 1999 1998
---------- ---------- ----------
REVENUES
Sales and operating revenues $1,961,386 $1,270,181 $1,264,317
OPERATING COSTS AND EXPENSES
Costs and operating expenses 1,812,594 1,164,299 1,155,194
Selling expenses 83,076 87,431 87,121
Administrative expenses 20,242 21,058 22,427
Depreciation and amortization 38,496 36,995 34,017
Sales, abandonments and write-down
of property and equipment (676) (7,181) (408)
---------- ---------- ----------
1,953,732 1,302,602 1,298,351
---------- ---------- ----------
OPERATING (LOSS) INCOME 7,654 (32,421) (34,034)
Interest and other income 3,427 2,735 3,029
Interest expense (16,500) (15,015) (14,740)
---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES
AND EXTRAORDINERY ITEM (5,419) (44,701) (45,745)
INCOME TAX (BENEFIT) (325) (14,675) (16,365)
---------- ---------- ----------
(LOSS) BEFORE EXTRAORDINARY ITEM (5,094) (30,026) (29,380)
EXTRAORDINARY (LOSS) (3,132) - -
---------- ---------- ----------
NET (LOSS) $ (8,226) $ (30,026) $ (29,380)
========== ========== ==========
EARNINGS PER COMMON SHARE-BASIC
AND DILUTED:
(Loss) Before Extraordinary Item $ (0.51) $ (3.04) $ (2.99)
Extraordinary (Loss) (0.32) - -
---------- ---------- ----------
Net (Loss) $ (0.83) $ (3.04) $ (2.99)
========== ========== ==========
[FN]
See notes to consolidated financial statements
</FN>
Page 20
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Class A Class B
Common Common Additional
Total Stock Stock Paid-In
Shares Amount Amount Capital
--------- -------- -------- ---------
BALANCE AT DECEMBER 31, 1997 10,058,168 $ 24,087 $ 26,204 $ 94,655
Comprehensive income:
Net income for 1998
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $117
Comprehensive income
Stock registered to
Participants of stock
Incentive plans 85,415 427 645
Cancellation of non-vested stock
Registered to participants
of stock incentive plans (114,140) (571) (1,649)
Stock option exercises 41,814 209 387
Market value adjustments to
Unearned Restricted Stock (2,530)
Other (17,646) (88) (42)
---------- ------- ------- -------
BALANCE AT DECEMBER 31, 1998 10,053,611 24,087 26,181 91,466
Comprehensive income:
Net (loss) for 1999
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $175
Comprehensive income
Stock registered to
Participants of stock
Incentive plans 40,200 201 111
Stock released to participants
of stock incentive plans 227
Cancellation of non-vested stock
Registered to participants
of stock incentive plans (22,555) (113) (56)
Market value adjustments to
Unearned Restricted Stock (594)
---------- ------- ------- -------
BALANCE AT DECEMBER 31, 1999 10,071,256 $24,087 $26,269 $91,154
========== ======= ======= =======
Comprehensive income:
Net (loss) for 2000
Adjustment to minimum
Pension liability, net
of $73 tax
Comprehensive income
Cancellation of non-vested stock
Registered to participants of
stock incentive plans (5,925) (30) (16)
Market value adjustments to
Unearned Restricted Stock 1,555
---------- ------- ------- -------
BALANCE AT DECEMBER 31, 2000 10,065,331 $24,087 $26,239 $92,693
========== ======= ======= =======
[FN]
See notes to consolidated financial statements
</FN>
Page 21
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY - CONTINUED
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Accumulated
Unearned Other
Restricted Retained Comprehensive
Stock Earnings Income Total
---------- -------- ----------- --------
BALANCE AT DECEMBER 31, 1997 (5,291) $ 68,379 $ (679) $207,355
Comprehensive income:
Net income for 1998 (29,380) (29,380)
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $117 219 219
-------
Comprehensive income (29,161)
-------
Stock registered to
Participants of stock
Incentive plans (1,072)
Cancellation of non-vested stock
Registered to participants
of stock incentive plans 2,220
Stock option exercises 596
Market value adjustments to
Unearned Restricted Stock 2,530
Other 113 (17)
---------- ------- ------- -------
BALANCE AT DECEMBER 31, 1998 (1,500) 38,999 (460) 178,773
Comprehensive income:
Net (loss) for 1999 (30,026) (30,026)
Adjustment to minimum
Pension liability, net of
Deferred income tax
benefit of $175 327 327
-------
Comprehensive income (29,699)
-------
Stock registered to
Participants of stock
Incentive plans (312)
Stock released to participants
of stock incentive plans 227
Cancellation of non-vested stock
Registered to participants
of stock incentive plans 169
Market value adjustments to
Unearned Restricted Stock 594
---------- ------- ------- --------
BALANCE AT DECEMBER 31, 1999 $ (1,049)$ 8,973 $ (133) $149,301
Comprehensive income:
Net (loss) for 2000 (8,226) (8,226)
Adjustment to minimum
Pension liability, net
of $73 tax 133 133
--------
Comprehensive income (8,093)
--------
Cancellation of non-vested stock
Registered to participants of
stock incentive plans 46 -
Market value adjustments to
Unearned Restricted Stock (1,555)
---------- ------- ------- --------
BALANCE AT DECEMBER 31, 2000 $ (2,558)$ 747 $ - $141,208
========== ======= ======= ========
[FN]
See notes to consolidated financial statements
</FN>
Page 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
Year Ended December 31
2000 1999 1998
---------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (8,226) $ (30,026) $ (29,380)
Reconciling items from net (loss) to net
Cash provided by operating activities:
Depreciation and amortization 38,496 36,995 34,017
(Gain) on sales of property
and equipment (676) (7,180) (408)
Gain on sale of equity investment - (1,224) -
Equity loss in unconsolidated subsidiaries - 839 1,042
Deferred income taxes (1,501) (15,425) (16,874)
Other deferred items 3,818 2,315 2,219
Changes in assets and liabilities
Accounts receivable (28,239) (44,105) 42,302
Inventories (768) 10,910 29,175
Other current assets (516) (18) 686
Crude oil and refined products payable 3,313 70,023 (55,925)
Other accounts payable 9,422 (14,443) 9,420
Accrued liabilities and other deferred
liabilities (9,650) 6,657 3,447
Income tax payable 805 413 -
Recoverable and deferred income taxes (546) (522) 170
Restricted cash - 12,000 (12,000)
Deferred financing costs - - (6,430)
-------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,732 27,209 1,461
-------- -------- --------
CASH FLOWS FROM INVESTIING ACTIVITIES
Capital expenditures (17,188) (25,922) (36,161)
Proceeds from sales of property
and equipment 15,754 13,002 786
Proceeds from sale of equity investment - 1,224 -
Investment in affiliates - - 959
Capitalization of software costs - (2,233) (3,898)
Deferred turnaround maintenance (6,107) (5,837) (3,461)
Net proceeds from long-term notes receivable 347 436 461
Other credits (charges) to deferred assets 922 1,523 (2,030)
-------- -------- --------
NET CASH (USED IN) INVESTiing
ACTIVITIES (6,272) (17,807) (43,344)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt and credit agreement
borrowings 930,962 588,181 79,770
Repayments of debt and credit agreement
borrowings (930,772) (599,606) (67,600)
Issuances of common stock - - 597
NET CASH PROVIDED BY (USED IN) FINANCING -------- -------- --------
ACTIVITIES 190 (11,425) 12,767
-------- -------- --------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (350) (2,023) (29,116)
-------- -------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,447 14,470 43,586
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 12,097 $ 12,447 $ 14,470
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) $ 14,961 $ 16,086 $ 21,442
Income taxes 1,575 1,671 1,328
[FN]
See notes to consolidated financial statements
</FN>
Page 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crown Central Petroleum Corporation and Subsidiaries
NOTE A--DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: Crown Central Petroleum Corporation and
subsidiaries (the Company) operates primarily in two business segments
as an independent refiner and marketer of petroleum products, including
petrochemical feedstocks. The Company operates two refineries, one
located near Houston, Texas with a rated capacity of 100,000 barrels per
day of crude oil and another in Tyler, Texas with a rated capacity of
52,000 barrels per day of crude oil. Its principal business is the
wholesale and retail sale of its products through 13 product terminals
located on three major product pipelines along the Gulf Coast and the
Eastern Seaboard and in the Central United States and through a network
of 330 gasoline stations, convenience stores and mini-marts located in
the Mid-Atlantic and Southeastern United States.
Employment at the Company's Pasadena and Tyler refineries represent 11%
and 8%, respectively, of the Company's total employment at December 31,
2000. Additionally, 55% of the Pasadena refinery employees and 72% of
the Tyler refinery employees are subject to collective bargaining
agreements. The Company's collective bargaining agreement with the
Paper, Allied-Industrial, Chemical and Energy Workers International
Union (PACE), formerly the Oil Chemical & Atomic Workers Union, covering
employees at the Pasadena refinery expired on February 1, 1996. The
Pasadena refinery employees subject to the PACE agreement were locked
out by the Company on February 5, 1996. The Company has been operating
the Pasadena refinery without interruption since the lock out. On
January 17, 2001, the local bargaining unit ratified a new collective
bargaining agreement and the Company ended the lockout. As a result,
PACE agreed to cease all boycott activity, dismiss all regulatory
complaints, resolve all litigation with the Company and end the
corporate campaign. The Company began recalling eligible bargaining
unit employees that have not resigned or retired since the lockout
began.
For most of the year 2000, the Company had a contract to process 35,000
barrels per day of crude oil into refined product for one customer at
its Pasadena refinery. The customer retained ownership of the crude oil
and the refined products. The Company received a fixed processing fee
per barrel. This contract expired on October 14, 2000.
Locot Corporation, a wholly-owned subsidiary of the Company, is the
parent company of La Gloria Oil and Gas Company (La Gloria) which owns
and operates the Tyler refinery, product terminals located along the
Texas Eastern Products Pipeline system and through a subsidiary, a
pipeline gathering system in Texas.
FZ Corporation, a wholly owned subsidiary of the Company, is the parent
company of Fast Fare, Inc., which operates two convenience store chains
in six states, retailing both merchandise and gasoline.
The following summarizes the significant accounting policies and
practices followed by the Company:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of Crown Central Petroleum Corporation and all
majority-owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated.
USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash in excess of daily requirements is
invested in marketable securities with maturities of three months or
less. Such investments are deemed to be cash equivalents for purposes
of the Statements of Cash Flows. Cash with restrictions on usage are
not deemed to be cash equivalents for purposes of the Balance Sheets and
the Statements of Cash Flows. Temporary cash overdrafts are included in
accounts payable.
ACCOUNTS RECEIVABLE: The majority of the Company's accounts receivable
relate to sales of petroleum products to third parties operating in the
petroleum industry.
INVENTORIES: The Company's crude oil, refined products, and convenience
store merchandise and gasoline inventories are valued at the lower of
cost (last-in, first-out) or market with the exception of crude oil
inventory held for resale which is valued at the lower of cost (first-
in, first-out) or market. Materials and supplies inventories are valued
at cost. Incomplete exchanges of crude oil and refined products due the
Company or owing to other companies are reflected in the inventory
accounts.
Page 23
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is carried
at cost. Depreciation and amortization of plant and equipment are
primarily provided using the straight-line method over estimated useful
lives. Construction in progress is recorded in property, plant and
equipment.
Expenditures which materially increase values, change capacities or
extend useful lives are capitalized in property, plant and equipment.
Routine maintenance, repairs and replacement costs are charged against
current operations. At intervals of two or more years, the Company
conducts a complete shutdown and inspection of significant units
(turnaround) at its refineries to perform necessary repairs and
replacements. Costs associated with these turnarounds are deferred and
amortized over the period until the next planned turnaround.
Upon sale or retirement, the costs and related accumulated depreciation
or amortization are eliminated from the respective accounts and any
resulting gain or loss is included in operating results.
Depreciation of property, plant and equipment was approximately
$31,152,000, $26,386,000, and $24,288,000 in the years ended December
31, 2000, 1999 and 1998, respectively.
SOFTWARE CAPITALIZATION: Costs of developing and implementing software
designed for the Company's own use are capitalized in Property, Plant
and Equipment as incurred. Amortization is provided using the straight-
line method over the estimated remaining useful lives of the related
software.
ENVIRONMENTAL COSTS: The Company conducts environmental assessments and
remediation efforts at multiple locations, including operating
facilities, and previously owned or operated facilities. Estimated
closure and post-closure costs for active, refinery and finished product
terminal facilities are not recognized until a decision for closure is
made. Estimated closure and post-closure costs for active and operated
retail marketing facilities and costs of environmental matters related
to ongoing refinery, terminal and retail marketing operations are
recognized as follows. Expenditures for equipment necessary for
environmental issues relating to ongoing operations are capitalized.
The Company accrues environmental and clean-up related costs of a non-
capital nature when it is both probable that a liability has been
incurred and that the amount can be reasonably estimated. Accruals for
losses from environmental remediation obligations generally are
recognized no later than completion of the remediation feasibility
study. Estimated costs, which are based upon experience and
assessments, are recorded at undiscounted amounts without considering
the impact of inflation, and are adjusted periodically as additional or
new information is available.
SALES AND OPERATING REVENUES: Resales of crude oil are recorded net of
the related crude oil cost (first-in, first-out) in sales and operating
revenues. Revenues are recognized net of excise and other taxes when
products are sold, delivered and collectibility is reasonably assured.
INTEREST CAPITALIZATION: Interest costs incurred during the construction
and preoperating stages of significant construction or development
projects are capitalized and subsequently amortized by charges to
earnings over the useful lives of the related assets.
AMORTIZATION OF GOODWILL: The excess purchase price over the estimated
fair value of assets of businesses acquired is being amortized on a
straight-line basis over 20 years.
DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses futures, forwards,
and exchange traded options to manage the price risk inherent in
purchasing crude oil in advance of the delivery date, and in maintaining
the value of inventories contained within its refinery and pipeline
system. Hedging strategies used to minimize this exposure include
fixing a future margin between crude oil and certain finished products
and also hedging fixed price purchase and sales commitments of crude oil
and refined products. These instruments generally allow for settlement
at the end of their term in either cash or product.
Net realized gains and losses from these hedging strategies are
recognized in costs and operating expenses when the associated refined
products are sold. Unrealized gains and losses are deferred in other
current assets and liabilities to the extent that the associated refined
products have not been sold. While the Company's hedging activities are
intended to reduce volatility and provide an acceptable profit margin on
a portion of production, the use of such a program can effect the
Company's ability to participate in an improvement in related refined
product profit margins. Also see the comments provided in this Note A
under "Recently Issued Pronouncements."
CREDIT RISK - As of December 31, 2000, 19% of the Company's accounts
receivable was due from one customer. The Company evaluates the credit
worthiness of counterparties to futures, forwards and exchange traded
options and considers non-performance credit risk to be remote. The
amount of exposure with such counterparties is generally limited to
unrealized gains on outstanding contracts.
Page 24
STOCK BASED COMPENSATION - The Company has adopted the disclosure
provisions prescribed by SFAS 123 which permit companies to continue to
value their stock-based compensation using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25 while providing
pro-forma disclosures of net income and earnings per share calculated
using the fair value based method.
RECLASSIFICATIONS - To conform to the 2000 presentation, certain
consolidated financial statement amounts at December 31, 1999 and 1998
have been reclassified.
RECENTLY ISSUED PRONOUNCEMENTS - In June 1998, The FASB issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which requires that
all derivatives be recognized as either assets or liabilities in the
statement of financial position and that those instruments be measured
at fair value. SFAS No. 133 also prescribes the accounting treatment
for changes in the fair value of derivatives which depends on the
intended use of the derivative and the resulting designation.
Designations include hedges of the exposure to changes in the fair value
of a recognized asset or liability, hedges of the exposure to variable
cash flows of a forecasted transaction, hedges of the exposure to
foreign currency translations, and derivatives not designated as hedging
instruments. In June 1999, the FASB deferred the effective date of SFAS
No. 133 for one year until fiscal years beginning after June 15, 2000.
The Company will adopt SFAS No. 133 in the first quarter of the year
2001.
Had the Company adopted SFAS No. 133 as of December 31, 2000, the
adoption would not have had a material effect on the Company's financial
statements.
NOTE B--INVENTORIES
Inventories consist of the following:
December 31
2000 1999
-------- --------
(thousands of dollars)
Crude oil $ 29,593 $ 32,390
Refined products 92,701 75,926
-------- --------
Total inventories at FIFO
(approximates current cost) 122,294 108,316
LIFO allowance (66,652) (53,006)
-------- --------
Total crude oil and refined products 55,642 55,310
-------- --------
Merchandise inventory at FIFO
(approximates current cost) 8,531 7,943
LIFO allowance (3,390) (2,807)
-------- --------
Total merchandise 5,141 5,136
-------- --------
Materials and supplies inventory at FIFO 9,179 8,749
-------- --------
TOTAL INVENTORY $ 69,962 $ 69,195
======== ========
In 1999, the reduction in LIFO inventory quantities decreased net loss
by approximately $9.3 million ($0.94 per share) and the net loss for
1998 was increased by approximately $0.5 million ($0.5 per share).
NOTE C--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consisted of the following:
December 31
2000 1999
-------- --------
(thousands of dollars)
Unsecured 10 7/8% Senior Notes $124,872 $124,841
Purchase Money Liens and other obligations 5,160 4,970
-------- --------
130,032 129,811
Less current portion 665 631
-------- --------
Long-Term Debt $129,367 $129,180
======== ========
The aggregate maturities of long-term debt through 2005 are as follows
(in thousands):
2001 - $665; 2002 - $680; 2003 - $804; 2004 - $2,484; 2005 - $125,089.
Page 25
The 10 7/8% Senior Notes due 2005 (Notes) were issued under an
Indenture, as amended (Indenture), which includes certain restrictions
and limitations effecting the payment of dividends, repurchase of
capital stock and incurrence of additional debt.
The Purchase Money Liens outstanding as of December 31, 2000, represent
loans to finance land, buildings and equipment at seven service station
and convenience store locations. These borrowings are repayable over 60
to 72 months at either fixed or floating interest rates. The Purchase
Money Liens are secured by assets having a net cost basis of $7.7
million and $7.1 million at December 31, 2000 and 1999, respectively,
and are payable monthly through November 2006.
During December 1998, the Company entered into a $125 million Loan and
Security Agreement (Secured Credit Facility) to provide cash borrowings
and letters of credit. The Secured Credit Facility, which has a three-
year term expiring December 9, 2001 and is secured by certain current
assets, provides for the Company's general corporate and working capital
requirements. It includes limitations on additional indebtedness and
cash dividends and requires compliance with financial covenants,
including the maintenance of minimum levels of adjusted working capital
and net worth. Cash borrowings under the Secured Credit Facility are
limited by the Indenture to $50 million and bear interest based on the
prime rate or LIBOR based rates. The Company pays a fee for unused
commitments under the Secured Credit Facility. Up to $75 million of the
Secured Credit Facility is subject to the availability of eligible
collateral, which totaled $110.5 million at December 31, 2000, after the
application of reserves and advance rates. The remaining $50 million of
availability, which is provided by Rosemore, Inc. (Rosemore), a related
party to the Company, is not subject to the limitation of eligible
collateral.
As of December 31, 2000, the Company had no cash borrowings and $53.7
million of outstanding letters of credit issued pursuant to the Secured
Credit Facility, with remaining unused commitments of $71.3 million.
There were $31.7 million of letters of credit outstanding and no cash
borrowings at December 31, 1999.
The Company has utilized additional financial support from Rosemore that
is not committed and is subject to Rosemore's discretion. This support
is in the form of performance guarantees relative to the Company's
purchase of crude oil, feedstocks and other petroleum products and
unsecured cash borrowing availability. As of December 31, 2000, there
were no such guarantees or loans outstanding. The Company pays Rosemore
fees at market rates for these facilities.
The following interest expense amounts are reflected on the Consolidated
Statements of Operations:
Year Ended December 31
2000 1999 1998
------- ------- -------
(thousands of dollars)
Total interest costs incurred $16,640 $17,212 $17,344
Less: Capitalized interest 140 2,197 2,604
------- ------- -------
INTEREST EXPENSE $16,500 $15,015 $14,740
======= ======= =======
NOTE D--CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES
The net deferred gain from futures contracts (excluding forward
contracts) included in crude oil and refined product hedging strategies
was approximately $905,000 at December 31, 2000. Included in these
hedging strategies are futures contracts maturing in January 2001. The
Company is using these contracts to defer the pricing of approximately
14.2% of its crude oil commitments for the aforementioned period.
Page 26
NOTE E--INCOME TAXES
Significant components of the Company's deferred tax liabilities and
assets are as follows:
2000 1999
-------- --------
(thousands of dollars)
Deferred tax liabilities:
Depreciation and amortization $ (61,726) $ (66,357)
Other (34,758) (35,520)
--------- ---------
Total deferred tax liabilities (96,484) (101,877)
Deferred tax assets:
Post-retirement and pension obligations 12,273 11,538
Environmental, litigation and other accruals 7,680 7,440
Construction and inventory costs not
currently deductible 19,471 11,351
Benefit of future tax NOL carry forwards 33,188 45,339
Other 18,536 18,825
--------- ---------
Total deferred tax assets 91,148 94,493
--------- ---------
NET DEFERRED TAX LIABILITIES $ (5,336) $ (7,384)
========= =========
No valuation allowance is considered necessary for the above deferred
tax assets. The Company has tax credit carry-forwards of approximately
$280,000 which expire in the years 2009 through 2020, an alternative
minimum tax credit carry-forward of approximately $1,259,000 and net
operating loss carry-forwards of approximately $83,580,000 which expire
in the years 2009 through 2019.
Significant components of the income tax (benefit) provision for the
years ended December 31 follows:
2000 1999 1998
-------- -------- --------
(thousands of dollars)
Current:
Federal $ 426 $ - $ -
State 750 750 509
------- ------- --------
Total Current 1,176 750 509
Deferred:
Federal (1,309) (14,154) (15,723)
State (192) (1,271) (1,151)
------- ------- --------
Total Deferred (1,501) (15,425) (16,874)
------- ------- --------
Income Tax (Benefit) $ (325) $(14,675) $(16,365)
======= ======== ========
Current state tax provision includes $750,000 of franchise taxes for
each of the years ended December 31, 2000, 1999 and 1998. In addition,
the year ended December 31, 1998 includes a franchise tax refund of
$241,000 from prior periods.
The following is a reconciliation of the statutory federal income tax
rate to the actual effective income tax rate for the years ended
December 31:
2000 1999 1998
-------- -------- --------
(thousands of dollars)
Income tax (benefit)
calculated at the
statutory federal income tax rate $ (2,993) $(15,663) $(16,011)
Amortization of goodwill, purchase
adjustment and Other non-deductible
costs 370 145 145
Merger related costs 1,221 - -
State taxes (net of federal benefit) 650 (451) (252)
Other 427 1,294 (247)
-------- -------- --------
INCOME TAX (BENEFIT) $ (325) $(14,675) $(16,365)
======== ======== ========
Page 27
NOTE F--CAPITAL STOCK AND NET INCOME PER COMMON SHARE
Class A Common stockholders are entitled to one vote per share and have
the right to elect all directors other than those to be elected by other
classes of stock. Class B Common stockholders are entitled to one-tenth
vote per share and have the right to elect two directors. The average
outstanding and equivalent shares excludes 193,900, 199,825 and 214,325
shares of Performance Vested Restricted Stock (PVRS) shares registered
to participants in the 1994 Long-Term Incentive Plan (Plan) at December
31, 2000, 1999 and 1998, respectively. The PVRS shares are not
considered outstanding for earnings per share calculations until the
shares are released to the Plan participants.
The following table provides a reconciliation of the basic and diluted
earnings per share calculations:
2000 1999 1998
----------- ----------- ------------
(thousands of dollars)
(LOSS) APPLICABLE TO COMMON SHARES
- ----------------------------------
(Loss) before extraordinary item $ (5,094) $ (30,026) $ (29,380)
Extraordinary (loss) (3,132) - -
---------- ---------- ----------
Net (loss) $ (8,226) $ (30,026) $ (29,380)
========== ========== ==========
Common shares outstanding at
January 1, 2000, 1999 and
1998, respectively 10,071,256 10,053,611 10,058,168
Restricted shares held by the
Company at January 1, 2000,
1999 and 1998, respectively (199,825) (214,325) (260,700)
Weighted average effect of
shares of common stock issued
for stock option exercises - - 35,237
Weighted average effect of PVRS
shares of common stock released
to Plan participants - 31,945 -
--------- --------- ---------
Weighted average number of common
shares outstanding, as adjusted
at December 31, 2000, 1999 and
1998, respectively - assuming
dilution 9,871,431 9,871,231 9,832,705
========= ========= =========
EARNINGS PER SHARE - BASIC AND DILUTED:
- --------------------------------------
(Loss) before extraordinary item $ (0.51) $ (3.04) $ (2.99)
Extraordinary (loss) (0.32) - -
--------- --------- ---------
Net (loss) $ (0.83) $ (3.04) $ (2.99)
========= ========= =========
The loss from extraordinary item represents legal, accounting and other
expenses related to the Company's efforts in going private.
At December 31, 2000, the Company had non-qualified stock options
outstanding representing 979,907 potential common shares. Due to the
net loss from operations for the years ended December 31, 2000, 1999 and
1998, the effect of dilutive securities under stock options and awards
were excluded from the diluted earnings per share calculations.
On February 1, 2000, the Company adopted a one-year Shareholder Rights
Plan in which rights to purchase its preferred stock were distributed to
holders of its common stock on February 15, 2000 to ensure that any
strategic transaction undertaken by the Company would be one in which
all stockholders receive fair and equal treatment, and to guard against
partial tender offers, open market accumulations and other abusive
tactics that might result in unequal treatment of stockholders. The
plan expired at the close of business on February 14, 2001 without any
further extensions or renewals. Due to the net loss from operations for
the year ended December 31, 2000 and 1999, the issuance of the preferred
stock purchase rights has no impact on the diluted earnings per share
amounts presented in the previous table.
Page 28
NOTE G--LONG-TERM INCENTIVE PLAN
Under the terms of the 1994 Long-term Incentive Plan (Plan), the Company
may distribute to employees restricted shares of the Company's Class B
Common Stock and options to purchase Class B Common Stock. Up to 1.1
million shares of Class B Common Stock may be distributed under the
Plan. The balance sheet caption "Unearned restricted stock" is charged
for the market value of restricted shares at their grant date and
changes in the market value of shares outstanding until the vesting
date, and is shown as a reduction of stockholders' equity. The impact
is further reflected within Class B Common Stock and Additional Paid-in-
Capital.
PVRS awards are subject to minimum years of service requirements from
the date of grant with earlier vesting possible subject to the
attainment of performance goals. Additionally, PVRS awards are subject
to certain other restrictions including the receipt of dividends and
transfers of ownership. As of December 31, 2000, 193,900 shares of PVRS
have been registered in the participants' names and are being held by
the Company subject to the attainment of the related performance goals
or years of service. PVRS awards to employees who have left the Company
are canceled. PVRS awards granted prior to 1996 whose related
performance goals have not been achieved were forfeited.
Under the 1994 Long-Term Incentive Plan, non-qualified stock options are
granted to participants at a price not less than 100% of the fair market
value of the stock on the date of grant. The exercise period is ten
years with the options vesting one-third per year over three years after
a one-year waiting period.
Under the terms of the 1995 Management Stock Option Plan, the Company
may award to participants non-qualified stock options to purchase shares
of the Company's Class B Common Stock at a price equal to 100% of the
fair market value of the stock at the date of grant. Up to 500,000
shares of Class B Common Stock may be distributed under the Plan. The
exercise period is ten years with the options vesting one-third per year
over three years after a one-year waiting period.
Shares of Class B Common Stock available for issuance under options or
awards amounted to 284,638 and 226,173 at December 31, 2000 and 1999,
respectively.
Details of the Company's stock options are as follows:
Weighted
Average
Common Price Range Price
Shares Per Share Per Share
-------- --------------- ---------
1994 Long-Term Incentive Plan
- -----------------------------
Outstanding - January 1, 1998 310,142 $12.81 - $19.50 $14.66
=======
Granted - 1998 165,915 $ 9.38 - $15.00 $14.92
Exercised - 1998 (29,942) $12.81 - $17.69 $14.27
Canceled - 1998 (37,982) $11.69 - $17.69 $13.20
-------
Outstanding - December 31, 1998 739,648 $ 9.38 - $19.50 $14.17
=======
Shares exercisable at
December 31, 1998 509,559 $ 9.38 - $19.50 $14.20
=======
Granted - 1999 68,600 $ 7.75 $ 7.75
Canceled - 1999 (74,610) $ 7.75 - $17.69 $13.68
-------
Outstanding - December 31, 1999 733,638 $ 7.75 - $19.50 $13.62
=======
Shares exercisable at
December 31, 1999 557,713 $ 7.75 - $19.50 $14.20
=======
Canceled - 2000 (23,431) $ 7.75 - $17.06 $11.44
-------
Outstanding - December 31, 2000 710,207 $ 7.75 - $19.50 $13.69
=======
Shares exercisable at
December 31, 2000 644,763 $ 7.75 - $19.50 $13.85
=======
Page 29
Weighted
Average
Common Price Range Price
Shares Per Share Per Share
-------- --------------- ---------
1995 Management Stock Option Plan
- ---------------------------------
Outstanding - January 1, 1997 338,751 $13.75 - $16.06 $13.78
=======
Exercised - 1998 (11,872) $13.75 - $16.06 $14.27
Canceled - 1998 (1,500) $13.75 $13.75
-------
Outstanding-December 31, 1998 325,379 $13.75 - $16.06 $13.76
=======
Shares exercisable at
December 31, 1998 325,379 $13.75 - $16.06 $13.76
=======
Canceled - 1999 (26,645) $13.75 - $16.06 $13.87
-------
Outstanding-December 31, 1999 298,734 $13.75 $13.75
=======
Shares exercisable at
December 31, 1999 298,734 $13.75 $13.75
=======
Canceled - 2000 (29,034) $13.75 $13.75
-------
Outstanding -December 31, 2000 269,700 $13.75 $13.75
=======
Shares exercisable at
December 31, 2000 269,700 $13.75 $13.75
=======
Total outstanding -
December 31, 2000 979,907 $ 7.75 - $19.50 $13.71
=======
Total exercisable -
December 31, 2000 914,463 $ 7.75 - $19.50 $13.82
=======
The weighted average remaining life for options outstanding at December
31, 2000 was approximately six years for the 1994 Long-Term Incentive
Plan and approximately four years for the 1995 Management Stock Option
Plan.
All options were granted at an exercise price equal to the fair market
value of the common stock at the date of grant. There were no options
granted under the 1994 Long-Term Incentive Plan in 2000. The weighted
average fair value at the date of grant for options granted under the
1994 Long-Term Incentive Plan was $2.15 and $3.57 for 1999 and 1998,
respectively. There were no grants under the Management Stock Option
Plan in 2000, 1999, or 1998. The fair value of options at date of grant
was estimated using the Black-Scholes model with the following
assumptions:
1994 LONG-TERM INCENTIVE PLAN 1999 1998
- ----------------------------- ------ ------
Expected life (years) 3 3
Risk Free Interest Rate 5.50% 5.63%
Volatility 36.6% 27.5%
Dividend Yield 0.0% 0.0%
No PVRS awards were granted in 2000. The Company granted 40,200 and
85,415 of shares of PVRS Awards during 1999 and 1998, respectively. The
weighted average fair value at date of grant for PVRS Awards granted in
1999 and 1998 was $7.75 and $14.94, respectively, which in each case
represents the market value of the Company's Class B Common Stock at the
date of grant. The amount of compensation expense recognized for PVRS
Awards was not significant for 2000, 1999, or 1998.
Stock-based compensation costs would have increased the pretax loss by
approximately $513,000 ($320,000 after tax or $.03 per basic and diluted
share) for the year ended December 31, 2000, $728,000 ($455,000 after
tax or $.05 per basic and diluted share) for the year ended December 31,
1999, and $864,000 ($540,000 after tax or $.05 per basic and diluted
share) for the year ended December 31, 1998 had the fair values of
options and the PVRS granted since 1996 been recognized as compensation
expense on a straight line basis over the vesting period of the grant
giving consideration to achievement of performance objectives where
applicable. The pro-forma effect on net income for 1998 is not
representative of the pro-forma effect on net income in future years as
it does not consider the pro-forma compensation expense related to
grants made prior to 1996.
In connection with the Rosemore acquisition of the Company in March
2001, all outstanding PVRS awards were converted into the right to
receive $10.50 per share. All outstanding options became fully vested
and immediately exercisable at the time of the merger. The options
remained outstanding and became options to purchase stock in the
surviving company. Pursuant to the Agreement and Plan of Merger,
Rosemore provided the option holders the opportunity to receive payment
for the cancellation of all of the holder's options.
Page 30
NOTE H--EMPLOYEE BENEFIT OBLIGATIONS
The Company has a defined benefit pension plan covering the majority of
full-time employees. The Company also has several defined benefit plans
covering only certain senior executives. Plan benefits are generally
based on years of service and on the employee's average compensation.
The Company's policy is to fund the pension plans in amounts which
comply with contribution limits imposed by law. Plan assets consist
principally of fixed income securities and stocks.
The following table sets forth the changes in the benefit obligation and
plan assets of the Company's pension plans for the years ended December
31, 2000 and 1999, respectively:
December 31
2000 1999
--------- ---------
(thousands of dollars)
CHANGE IN PENSION PLANS' BENEFIT OBLIGATION
- -------------------------------------------
Pension plans' benefit obligation -
beginning of year $ 131,786 $ 141,701
Service cost 4,528 5,379
Interest cost 10,227 9,711
Benefits paid (6,944) (6,310)
Administrative expenses (831) (865)
Actuarial loss or (gain) 8,547 (17,830)
--------- ---------
Pension plans' benefit
obligation - end of year 147,313 131,786
========= =========
CHANGE IN PENSION PLAN ASSETS
- -----------------------------
Fair value of plan assets - beginning of year 131,160 125,495
Actual return on plan assets 5,834 12,503
Benefits paid (6,608) (5,973)
Administrative expenses (831) (865)
--------- ---------
Fair value of plan assets - end of year 129,555 131,160
--------- ---------
Reconciliation of Funded Status
Funded status (17,758) (626)
Unrecognized actuarial loss or (gain) 1,280 (13,902)
Unrecognized net (asset) at transition (395) (433)
Unrecognized prior service cost (693) (743)
--------- ---------
Net amounts recognized at end of year $ (17,566) $(15,704)
========= ========
Amounts recognized in the Balance Sheets consist of:
Year Ended December 31
2000 1999
--------- ---------
(thousands of dollars)
Accrued pension liability $ (17,566) $ (16,636)
Intangible asset - 726
Accumulated other comprehensive income - 206
--------- ---------
Net amounts recognized at end of year $ (17,566) $ (15,704)
========= =========
Other comprehensive income attributable to
change in additional minimum liability
recognition $ (206) $ (503)
========= =========
Page 31
Net periodic pension costs consist of the following components:
Year Ended December 31
2000 1999 1998
-------- -------- --------
(thousands of dollars)
Service cost - benefit earned
during the year $ 4,528 $ 5,379 $ 4,913
Interest cost on projected
benefit obligations 10,227 9,711 8,882
Expected (return) on plan assets (12,362) (11,824) (10,951)
Amortization of prior service cost (50) (51) (51)
Recognized actuarial loss (107) 58 76
Amortization of transition (asset)
obligation (38) (38) (38)
-------- -------- --------
Net periodic pension cost $ 2,198 $ 3,235 $ 2,831
======== ======== ========
Assumptions used in the accounting for the defined benefit plans as of
December 31 were:
2000 1999 1998
-------- -------- --------
Weighted average discount rates 7.50% 8.00% 6.75%
Rates of increase in compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of return on assets 9.75% 9.75% 9.75%
The Company's defined benefit pension plans which cover only certain
senior executives are unfunded plans. The projected benefit obligation
and accumulated benefit obligation were $5,316,000 and $4,754,000,
respectively, as of December 31, 2000, and $6,019,000 and $5,423,000,
respectively, as of December 31, 1999.
In addition to the defined benefit pension plan, the Company provides
certain health care and life insurance benefits for eligible employees
who retire from active service. The post-retirement health care plan is
contributory, with retiree contributions consisting of co-payment of
premiums and other cost sharing features such as deductibles and
coinsurance. Beginning in 1998, the Company "capped" the amount of
premiums that it will contribute to the medical plans. Should costs
exceed this cap, retiree premiums would increase to cover the additional
cost.
The following table sets forth changes in the accrued cost of the
Company's post-retirement benefit plans recognized in the Company's
Balance Sheets:
Year Ended December 31
2000 1999
--------- ---------
(thousands of dollars)
Accumulated post-retirement benefit
obligation (APBO):
Benefit obligation - beginning of year $ 15,585 $ 16,359
Service cost 366 429
Interest cost 1,283 1,132
Benefits and estimated administrative
expenses paid (1,096) (1,036)
Actuarial loss or (gain) 1,824 (1,299)
--------- ---------
Benefit obligation - end of year $ 17,962 $ 15,585
========= =========
RECONCILIATION OF FUNDED STATUS
Funded status $(17,962) $(15,585)
Unrecognized actuarial loss 6,607 5,084
Unrecognized prior service cost (685) (803)
--------- ---------
Net amount recognized at end of year $(12,040) $(11,304)
========= =========
Amounts recognized in the Balance Sheets
consist of:
Accrued benefit liability $(12,040) $(11,304)
========= =========
The weighted average discount rate used in determining the APBO was
7.50% in 2000 and 8.00% in 1999.
The Company's policy is to fund postretirement costs other than pensions
on a pay-as-you-go basis.
Page 32
Net periodic postretirement benefit costs include the following
components:
Year Ended December 31
2000 1999 1998
-------- -------- --------
(thousands of dollars)
Service cost $ 366 $ 429 $ 390
Interest cost on accumulated
postretirement benefit obligation 1,283 1,132 1,058
Amortization of prior service cost (118) (118) (118)
Recognized actuarial loss 301 392 332
-------- -------- --------
Net periodic postretirement
benefit cost $ 1,832 $ 1,835 $ 1,662
======== ======== ========
As a result of the expense cap implemented in 1998, no further increase
in the cost of medical care has been assumed for years subsequent to
1998. The medical trend rate assumption affects the amounts reported.
For example, a one-percentage-point change in the medical trend rate
would have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
(thousands of dollars)
Effect on total of service and interest
cost components $ 59 $ (47)
Effect on accumulated postretirement
benefit obligation 552 (472)
NOTE I--LITIGATION AND CONTINGENCIES
The Company has been named as a defendant in various matters of
litigation, some of which are for substantial amounts, and involve
alleged personal injury and property damage from prolonged exposure to
petroleum, petroleum related products and substances used at its
refinery or in the petroleum refining process. The Company is a co-
defendant with numerous other defendants in a number of these suits.
The Company is vigorously defending these actions, however, the process
of resolving these matters could take several years. The liability, if
any, associated with these cases was either accrued in accordance with
generally accepted accounting principles or was not determinable at
December 31, 2000. The Company has consulted with counsel with respect
to each such proceeding or large claim which is pending or threatened.
While litigation can contain a high degree of uncertainty and the risk
of an unfavorable outcome, the eventual outcome of any such matter or
group of related matters, in the opinion of management, is not expected
to have a material adverse effect on the Company.
Like other petroleum refiners and marketers, the Company's operations
are subject to extensive and rapidly changing federal and state
environmental regulations governing air emissions, waste water
discharges, and solid and hazardous waste management activities. The
Company's policy is to accrue environmental and clean-up related costs
of a non-capital nature when it is both probable that a liability has
been incurred and that the amount can be reasonably estimated. While it
is often extremely difficult to reasonably quantify future environmental
related expenditures, the Company anticipates that continuing capital
investments will be required over the next several years to comply with
existing regulations. The Company has recorded a liability of $5.7
million as of December 31, 2000 and 1999 relative to the estimated costs
of environmental issues of a non-capital nature. The liability is not
discounted, it is expected to be expended over the next five years and
is included in the balance sheet as a noncurrent liability. No amounts
have been accrued as receivables for potential reimbursement or as
recoveries to offset this liability.
Environmental liabilities are subject to considerable uncertainties
which affect the Company's ability to estimate its ultimate cost of
remediation efforts. These uncertainties include the exact nature and
extent of the contamination at each site, the extent of required clean-
up efforts, varying costs of alternative remediation strategies, changes
in environmental remediation requirements, the number and strength of
other potentially responsible parties at multi-party sites, and the
identification of new environmental sites.
On January 13, 2000, the Company received a Notice of Enforcement from
the TNRCC regarding alleged state and federal air quality violations,
some of which include sulfur exceedances. In a letter dated May 3,
2000, the TNRCC informed the Company that it was proposing to enter an
administrative order against the Company for alleged violations of New
Source Performance Standards for hydrogen sulfide and sulfur dioxide and
for additional alleged violations reflected in three prior notices of
violation or enforcement covering the period April 1, 1998 through
December 31, 1999. The Company believes it has valid legal defenses to
the majority of the alleged violations and is negotiating with the TNRCC
in an effort to settle all charges. In any case, the ultimate outcome
of any enforcement action, in the opinion of management, is not expected
to have a material adverse effect on the Company.
Page 33
During the first half of 2000, the Company received notices from the
United States Department of Justice (DOJ) that the government was again
considering filing a civil action against the Company for the alleged
sulfur violations already addressed by an August 31, 1998 TNRCC Agreed
Order and for additional alleged violations not covered by that Order.
The Company has negotiated an agreement in principle with DOJ and EPA to
resolve these matters. The proposed settlement will not have a material
adverse effect on the Company.
Other environmental enforcement actions previously reported have either
been resolved or the settlement currently proposed by the relevant
agency does not require separate disclosure.
It is possible that the ultimate cost of future environmental
compliance, which cannot be determined at this time, could exceed the
Company's recorded liability. As a result, charges to income for
environmental liabilities could have a material effect on the results of
operations in a particular quarter or year as assessments and
remediation efforts proceed or as new claims arise. In addition, the
Company has been named by the Environmental Protection Agency and by
several state environmental agencies as a potentially responsible party
at various federal and state Superfund sites. Management is not aware
of any environmental matters which would reasonably be expected to have
a material adverse effect on the Company.
NOTE J--NONCANCELLABLE LEASE COMMITMENTS
The Company has noncancellable operating lease commitments for refinery,
computer, office and other equipment, transportation equipment, service
station and convenience store properties, and office space. Lease terms
range from three to ten years for refinery, computer, office and other
equipment and four to eight years for transportation equipment. The
majority of service station properties have lease terms of 20 years.
The average lease term for convenience stores is approximately nine
years. The Corporate Headquarters office lease expires on December 31,
2003. Certain of these leases have renewal provisions.
Future minimum rental payments under noncancellable operating lease
agreements as of December 31, 2000 are as follows
(in thousands):
2001 $ 11,592
2002 10,118
2003 9,480
2004 8,445
2005 8,376
After 2005 30,355
---------
Total Minimum Rental Payments $ 78,366
=========
Rental expense for the years ended December 31, 2000, 1999 and 1998 was
$14,311,000, $13,543,000 and $13,426,000, respectively.
During the third quarter 2000, the Company completed a sale-leaseback
transaction involving 15 of its retail properties and realized net
proceeds of $13.8 million and a deferred gain of $5.4 million; the
deferred gain will be amortized as a reduction of rental expense over
the 20-year term of the lease. The leaseback is accounted for as an
operating lease.
NOTE K--INVESTMENTS AND DEFERRED CHARGES
Investments and deferred charges consist of the following:
December 31
2000 1999
-------- ---------
(thousands of dollars)
Deferred turnarounds $ 9,783 $ 10,738
Debt issuance costs 5,744 7,438
Long-term notes receivable 1,171 1,518
Goodwill 394 552
Investments 15 15
Intangible pension asset - 726
Other 453 679
-------- --------
Investments and Deferred Charges $ 17,560 $ 21,666
======== ========
Accumulated amortization of goodwill was $6,196,626 and $6,039,000 at
December 31, 2000 and 1999, respectively.
Page 34
NOTE L--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers cash and cash equivalents, accounts receivable,
long-term notes receivable, accounts payable and long-term debt to be
its financial instruments. The carrying amount reported in the balance
sheet for cash and cash equivalents, accounts receivable and accounts
payable, represent their fair values. The fair value of the Company's
long-term notes receivable at December 31, 2000 and 1999 was estimated
using a discounted cash flow analysis, based on the assumed interest
rates for similar types of arrangements. The approximate fair value of
the Company's Long-Term Debt at December 31, 2000 and 1999 was
estimated using a discounted cash flow analysis, based on the Company's
assumed incremental borrowing rates for similar types of borrowing
arrangements.
The following summarizes the carrying amounts and related approximate
fair values as of December 31, 2000 and 1999, respectively, of the
Company's financial instruments whose carrying amounts do not equal its
fair value:
December 31, 2000 December 31, 1999
Carrying Approximate Carrying Approximate
Amount Fair Value Amount Fair Value
-------- ---------- -------- -----------
(thousands of dollars)
Assets
Long-Term Notes
Receivable $ 1,171 $ 1,097 $ 1,518 $ 1,365
Liabilities
Long-Term Debt $ 129,367 $ 128,589 $ 129,180 $ 128,002
NOTE M--SEGMENT INFORMATION
The Company has two reportable segments: refinery operations and retail
marketing. The Company's refinery operations segment consists of two
high-conversion petroleum refineries and related wholesale distribution
networks. One refinery is located in Pasadena, Texas and the other
refinery is located in Tyler, Texas. The Pasadena and Tyler refining
operations sell petroleum products directly to other oil companies,
jobbers, and independent marketers. In addition, the Pasadena refining
operation sells directly into the Gulf Coast spot market as well as to
an independent network of dealer-operated retail units that sell Crown-
branded petroleum products and to the Company's own retail segment. The
Company's retail segment sells petroleum products and convenience store
merchandise directly to retail customers.
The Company evaluates performance and allocates resources based on
profit or loss from operations before income taxes, interest income or
expense, and corporate expenses. The accounting policies of the
reportable segments are the same as those described in the summary of
accounting policies described in Note A of the Notes to Consolidated
Financial Statements on page 23 of this Annual Report on Form 10-K.
Certain prior year balances have been reclassified to conform to the
2000 presentation.
Intersegment sales and transfers are recorded at market prices. Income
or loss on intersegment sales is eliminated in consolidation.
Page 35
The Company's reportable segments are business divisions that offer
different operating and gross margin characteristics and different
distribution methods. The reportable segments are each managed
separately due to their distinct operating characteristics.
For the year ended December 31
2000 1999 1998
---------- ---------- ----------
Sales and operating revenues from
external customers:
Refinery operations $1,338,258 $ 807,552 $ 832,571
Retail operations 626,052 465,336 434,349
Other revenues 507 644 732
Other adjustments (3,431) (3,351) (3,335)
---------- ---------- ----------
Total sales and operating revenues $1,961,386 $1,270,181 $1,264,317
========== ========== ==========
Intersegment sales and operating
revenues:
Refinery operations $ 485,606 $ 362,640 $ 466,469
Income (loss) before income taxes
and extraordinary item:
Refinery operations $ 20,426 $ (19,202) $ (20,090)
Retail operations 13,965 11,809 12,820
Other income (loss) 245 684 1,018
Unallocated amounts:
Corporate (expenses) (25,422) (23,432) (27,091)
Net interest (expenses) (14,633) (14,560) (12,402)
---------- ---------- ----------
Total (loss) before income
taxes and extraordinary item $ (5,419) $ (44,701) $ (45,745)
========== ========== ==========
Other adjustments includes items that are reported as a component of
Sales and operating revenues for management reporting purposes but are
reported as a component of operating expenses in accordance with
generally accepted accounting principles.
For the year ended December 31
2000 1999 1998
---------- ---------- ----------
Depreciation and amortization
expense reconciliation:
Refinery operation $ 21,819 $ 22,319 $ 22,303
Retail operation 12,086 10,917 9,419
Other 4,591 3,759 2,295
---------- ---------- ----------
Total depreciation and
amortization expense $ 38,496 $ 36,995 $ 34,017
========== ========== ==========
For the year ended December 31
2000 1999 1998
---------- ---------- ----------
Capital expenditure reconciliation:
Refinery operation $ 6,740 $ 11,446 $ 12,408
Retail operation 9,090 10,128 21,458
Other 1,358 4,348 2,295
---------- ---------- ----------
Total capital expenditures $ 17,188 $ 25,922 $ 36,161
========== ========== ==========
For the year ended December 31
2000 1999 1998
---------- ---------- ----------
Total assets reconciliation:
Refinery operation assets $ 347,310 $ 326,371 $ 302,829
Retail operation assets 134,115 147,263 146,579
Other assets 2,691,382 1,681,376 1,068,875
Elimination of intercompany
receivables (2,462,045) (1,444,701) (806,072)
Elimination of investment in
consolidated subsidiaries (187,201) (187,201) (194,201)
---------- ---------- ----------
Total assets $ 523,561 $ 523,108 $ 518,010
========== ========== ==========
Page 36
Assets dedicated to a particular segment operation are included in that
segment's total assets. Assets that benefit both segments or are
considered corporate assets are not allocated.
Sales and operating revenues by major product:
For the year ended December 31
2000 1999 1998
---------- ---------- ----------
Petroleum products $1,846,862 $1,147,357 $1,147,643
Convenience store merchandise
and services 109,625 118,888 112,441
The Company sells all of its products in the United States.
NOTE N--SUBSEQUENT EVENTS
Rosemore entered into an Agreement and Plan of Merger dated December 17,
2000 (the "Merger Agreement"), with the Company. The Merger Agreement
proposed that Rosemore Acquisition Corporation be merged with and into
the Company . Under the Merger Agreement, the stockholders of the
Company, other than Rosemore, would receive $10.50 per share in exchange
for their Company stock if the Company's stockholders approved the
Merger. The Merger Agreement was submitted to the Company's
stockholders for approval at a special meeting of stockholders on March
7, 2001. The Merger Agreement received the requisite two-thirds
approval from the Company stockholders and also the majority of votes
cast other than those owned by Rosemore and its affiliates. The
effective date of the Merger was March 7, 2001.
[This space intentionally left blank]
Page 37
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Crown Central Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Crown
Central Petroleum Corporation and subsidiaries as of December 31, 2000
and 1999, and the related consolidated statements of operations, changes
in common stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Crown Central Petroleum Corporation and subsidiaries at
December 31, 2000 and 1999, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/---Ernst & Young LLP
Baltimore, Maryland
March 7, 2001
Page 38
UNAUDITED
QUARTERLY RESULTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter Yearly
-------- -------- -------- -------- ----------
2000
- ----
Sales and operating revenues $421,484 $481,049 $478,947 $579,906 $1,961,386
Gross profit 35,376 50,684 33,535 29,197 148,792
(Loss) income before extraordinary item (3,563) 9,213 (2,611) (8,133) (5,094)
Extraordinary loss - - (2,861) (271) (3,132)
Net (loss) income (3,563) 9,213 (5,472) (8,404) (8,226)
(Loss) income before extraordinary
item per share (.36) .93 (.26) (.82) (.51)
Extraordinary loss per share - - (.29) (.03) (.32)
Net (loss) income per share - basis (.36) .93 (.55) (.85) (.83)
Net (loss) income per share - diluted (.36) .92 (.55) (.85) (.83)
1999
- ----
Sales and operating revenues $225,165 $281,413 $359,899 $403,704 1,270,181
Gross profit 20,597 20,965 30,011 34,309 105,882
Net (loss) (11,830) (11,029) (6,018) (1,149) (30,026)
Net (loss) per share - basic and diluted (1.20) (1.12) (0.61) (0.12) (3.04)
The extraordinary loss recorded in the year 2000 represents legal,
accounting and other related expenses incurred in the Company's
efforts in going private. These expenses were previously reported
in the Unaudited Quarterly Results of Operations as a component of
Operating Costs and Expenses and Operating Income and have been
reclassified above and in the Form 10-K as extraordinary.
Gross profit is defined as Sales and operating revenues less
Costs and operating expenses (including applicable property
and other operating taxes).
Per share amounts are based upon the weighted average number of
common shares outstanding at the end of each quarter.
Item 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not filed a Form 8-K within the last twenty-four (24)
months reporting a change of independent auditors or any disagreement
with the independent auditors.
Page 39
PART III
- --------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
NAME AND AGE ON PRINCIPAL OCCUPATION FOR LAST 5 YEARS; DIRECTOR
MARCH 1, 2001 DIRECTORSHIPS IN PUBLIC CORPORATIONS SINCE
- --------------- ---------------------------------------- --------
Jack Africk (72) Retired. Formerly, Vice Chairman,
UST, Inc. Also a director of
Tanger Factory Outlet Centers, Inc. 1991
Michael F. Dacey (56) Private investor. 1991
Stanley A. Hoffberger (71) Private real estate developer. 2000
Barry L. Miller (52) Senior Vice President--Treasurer and Chief
Financial Officer of Rosemore, Inc. since
January 1999; Vice President--Taxation of
American Trading and Production Corporation
from May 1995 to December 1998; Assistant
Treasurer and Director of Taxation of American
Trading and Production Corporation from
February 1987 to April 1995. 2000
The Reverend Harold President, Loyola College in Maryland since
Ridley, S.J. (61) July 1994. 1995
Frank B. Rosenberg (42) Senior Vice President-Marketing of the
Company since April 1996; Vice President-
Marketing of the Company from January 1993
to March 1996. 2000
Henry A. Rosenberg, Jr. (71) Chairman of the Board and Chief Executive
Officer of the Company since May 1975 and
President since March 1996. 1955
John E. Wheeler, Jr. (48) Executive Vice President-Chief Financial
Officer of the Company since April 1998;
Executive Vice President-Chief Financial
Officer and Treasurer of the Company from
February 1998 to April 1998; Senior Vice
President-Finance and Treasurer of the
Company from October 1996 to January 1998;
Senior Vice President-Finance of the Company
from April 1996 to September 1996; Senior Vice
President-Treasurer and Controller of the
Company from June 1994 to March 1996. 2000
Page 40
EXECUTIVE OFFICERS
NAME AND AGE ON POSITIONS, OFFICES AND
MARCH 1, 2001 PRINCIPAL OCCUPATION FOR LAST 5 YEARS
----------------- ---------------------------------------
Henry A. Rosenberg, Jr. (71) Chairman of the Board and Chief
Executive Officer of the Company
since May 1975 and President since
March 1996
Randall M. Trembly (54) Executive Vice President since April
1996; Senior Vice President - Refining
from July 1995 to March 1996.
John E. Wheeler, Jr. (48) Executive Vice President - Chief
Financial Officer since April 1998;
Executive Vice President - Chief
Financial Officer and Treasurer from
February 1998 to April 1998; Senior
Vice President - Finance and Treasurer
from October 1996 to January 1998;
Senior Vice President - Finance from
April 1996 to September 1996; Senior
Vice President - Treasurer and
Controller from June 1994 to March
1996.
Thomas L. Owsley (60) Senior Vice President - Legal since May
1998; Vice President - Legal from April
1983 to May 1998.
J. Michael Mims (52) Senior Vice President - Human Resources
since May 1998; Vice President - Human
Resources from June 1992 to May 1998.
Frank B. Rosenberg (42) Senior Vice President - Marketing since
April 1996; Vice President - Marketing
from January 1993 to March 1996.
William A. Wolters (54) Senior Vice President - Supply and
Transportation since December 1998;
Vice President - Supply and Logistics
and Assistant Secretary from February
1998 to December 1998; General Manager
-Raw Material Supply and Assistant
Secretary from September 1985 to
January 1998.
Paul J. Ebner (43) Vice President - Shared Services since
April 1996; Vice President - Marketing
Support Services from December 1991 to
March 1996.
James R. Evans (54) Vice President - Retail Marketing since
June 1996; General Manager of Retail
Operations from February 1995 to May
1996.
Dennis W. Marple (52) Vice President - Wholesale Sales and
Terminals since January 1996.
Philip A. Millington (47) Vice President - Treasurer since April
1998; Chief Financial Officer U. S.
Corrections Corporation from May 1997
to November 1997; Chief Financial
Officer Builders' Supply and Lumber
Company, Inc., from June 1995 to May
1997.
Dolores B. Rawlings (63) Vice President - Secretary since April
1996; Secretary from November 1990 to
March 1996.
Jan L. Ries (52) Corporate Controller since November
1996; Marketing Division Controller
from January 1992 to October 1996.
Frank B. Rosenberg, a Director and Senior Vice President - Marketing,
is the son of Henry A. Rosenberg, Jr., Chairman of the Board, President
and Chief Executive Officer. Stanley A. Hoffberger, a Director, is
married to Judith R. Hoffberger. Mrs. Hoffberger is Henry A. Rosenberg,
Jr.'s sister and Frank B. Rosenberg's aunt. There are no other family
relationships among the directors and the executive officers, and there
is no arrangement or understanding between any director or officer and
any other person pursuant to which the director was elected or the
officer was selected.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation
of the ability and integrity of any Director or Executive Officer during
the past five years.
Page 41
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by or
paid to the Chief Executive Officer and the other four most highly
compensated executive officers for all services rendered in all
capacities to the Company and its subsidiaries during the last three
fiscal years. The positions shown on the table are those held by the
officers on December 31, 2000:
ANNUAL
-------
NAME AND
PRINCIPAL POSITION YEAR SALARY
- ------------------------- ---- -------
Henry A. Rosenberg, Jr. 2000 $600,000
Chairman of the Board, 1999 600,000
President and Chief 1998 600,000
Executive Officer
Randall M. Trembly 2000 $260,004
Executive Vice President 1999 260,004
1998 255,008
John E. Wheeler, Jr. 2000 $260,004
Executive Vice President- 1999 255,004
Chief Financial Officer 1998 241,671
Thomas L. Owsley 2000 $220,008
Senior Vice President- 1999 220,008
Legal 1998 210,008
Frank B. Rosenberg 2000 $195,000
Senior Vice President- 1999 195,000
Marketing 1998 185,000
ANNUAL COMPENSATION (CONTINUED)
LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------ -------------------------------
OTHER SECURITIES ALL
NAME AND ANNUAL UNDERLYING OTHER
PRINCIPAL POSITION COMPENSATION (a) OPTIONS/SARS (b) COMPENSATION (c)
- ------------------------ ---------------- ---------------- ------------
Henry A. Rosenberg, Jr. $ 22,014 - $ 20,082
Chairman of the Board, 21,093 148,000 23,975
President and Chief 21,659 43,900 19,847
Executive Officer
Randall M. Trembly $ 18,600 - $ 11,638
Executive Vice President 18,600 55,000 12,130
18,600 16,400 12,837
John E. Wheeler, Jr. $ 22,901 - $ 11,963
Executive Vice President- 20,817 55,000 12,407
Chief Financial Officer 21,761 15,500 10,607
Thomas L. Owsley $ 20,902 - $ 12,341
Senior Vice President- 18,798 25,000 11,905
Legal 18,891 7,300 10,641
Frank B. Rosenberg $ 19,811 - $ 10,338
Senior Vice President- 18,537 23,000 10,007
Marketing 19,880 6,500 9,507
[FN]
- --------------
(a) These amounts include automobile allowances, gasoline
allowances, and the tax gross-ups applicable to the gasoline allowances.
Perquisites below the required reporting levels are not included in
this table.
(b) The 1999 grants are Appreciation Units and the 1998 grants are
stock options for the purchase of shares of Class B Common Stock.
(c) These amounts include imputed income related to excess life
insurance, payments for executive medical insurance and the Company's
matching payments under the Savings Plans. In 2000, the imputed income
for Mr. Henry A. Rosenberg, Jr. was $8,544 and for Mr. Owsley, $1,003.
The executive medical payments for each of the officers listed in the
table were $2,538. The Company's matching payments under the Savings
Plans were for Mr. Henry A. Rosenberg, Jr., $9,000; for Mr. Trembly,
$9,100; for Mr. Wheeler, $9,425; for Mr. Owsley, $8,800 and for Mr.
Frank B. Rosenberg, $7,800.
</FN>
[This space intentionally left blank]
Page 42
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(a)
Number of Securities
Underlying Unexercised
Options/SARs at FY-End
----------------------
Exercisable Unexercisable
----------- -------------
Name Options SARs Options SARs
- ----------------------- ------- ---- ------- -------
Henry A. Rosenberg, Jr. 223,426 -- 14,634 148,000
Randall M. Trembly 67,003 -- 5,467 55,000
John E. Wheeler, Jr. 52,813 -- 5,167 55,000
Thomas L. Owsley 41,686 -- 2,434 25,000
Frank B. Rosenberg 39,613 -- 2,167 23,000
[FN]
- -----------------
(a) The Options are for the purchase of Class B Common Stock.
There were no unexercised in-the-money Options or SARs at
fiscal year end.
</FN>
PENSION PLAN TABLE (a)
----------------------
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 40 45
- ------------ -------- -------- -------- -------- -------- -------- --------
$ 150,000 $ 54,000 $ 72,000 $ 94,500 $117,000 $139,500 $162,000 $184,500
200,000 72,000 96,000 126,000 156,000 186,000 216,000 246,000
250,000 90,000 120,000 157,500 195,000 232,500 270,000 307,500
300,000 108,000 144,000 189,000 234,000 279,000 324,000 369,000
400,000 144,000 192,000 252,000 312,000 372,000 432,000 492,000
500,000 180,000 240,000 315,000 390,000 465,000 540,000 615,000
600,000 216,000 288,000 378,000 468,000 558,000 648,000 738,000
[FN]
- ------------------
(a) The table above reflects the retirement benefits (life annuity
with 60 months certain) which would be payable under the
Company's Retirement Plan at various base salary levels and
years of service projected to normal retirement. The table
assumes that the participant has earned the annual remuneration
shown in the table in every year of credited service. The
Retirement Plan is a career average plan with benefits based on
taxable compensation. Limitations imposed by the Internal
Revenue Code or any other statute are not reflected in the table
since the Company's Supplemental Retirement Income Plan for
Senior Executives is designed to provide or restore to
participants the benefits that would have been received under
the Retirement Plan if calculated without regard to such
limitations. All officers at the Vice President level and above
participate in the Supplemental Retirement Income Plan. Mr.
Henry A. Rosenberg, Jr.'s normal retirement date was December 1,
1994. His credited service at that time was 42 years and 4
months. The estimated credited service projected to normal
retirement for the other current executives listed in the
Summary Compensation Table is: Mr. Trembly, 27 years and 10
months; Mr. Wheeler, 41 years and 8 months; Mr. Owsley, 23 years
and 6 months and Mr. Frank B. Rosenberg, 38 years and 7 months.
</FN>
Page 43
COMPENSATION OF DIRECTORS. Each director who is not an employee of the
Company or a subsidiary of the Company is paid $12,000 per year for
serving as a director and a meeting fee of $750, plus travel expenses,
for attendance at each meeting. Each non-employee director who is a
member of any standing committee of the Board of Directors other than
the Executive Committee is paid $3,000 per year for serving on each such
committee. The chairman of any committee other than the Executive
Committee is paid a fee of $1,000 for serving in that capacity.
Directors who are employees receive no separate compensation for serving
on the Board, on any Board committee or as chairman of any committee.
CONSULTING AGREEMENT. From November 1, 1993 until April 28, 2000, Mr.
Africk served as a general business adviser and consultant to the
Company for which he was paid a consultancy fee of $3,000 per month.
His work in this capacity was in addition to his service as a director,
committee chairman and member of various board committees.
CHANGE OF CONTROL ARRANGEMENTS. All current officers at the Vice
President level and above have been designated as participants in the
Executive Severance Plan (the "Severance Plan"); however, Mr. Henry A.
Rosenberg, Jr. voluntarily withdrew from the Severance Plan in 1998.
Under the Severance Plan, as amended, if a participant is terminated
without good reason within two years of a change of control, as defined
in the Severance Plan, the participant receives credit for enhanced age
and service under the Supplemental Retirement Plan for Senior Executives
(the "SRI Plan") and the immediate payment of SRI Plan benefits. In
addition, the participant receives a payment of three times the
executive's annual salary, full payment under the annual Performance
Incentive Plan, an additional contribution equal to a three-year Company
match for participants in the Savings Plans, the continuation of certain
welfare benefits for a three-year period, a payment equal to the excise
tax on the basic severance benefits and certain other miscellaneous
benefits. The Board of Directors adopted the Severance Plan, which it
views as a typical executive benefit, to help insure stability and
continuity of employment of key management personnel at the time of a
proposed or threatened change of control, if any.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Mr. Africk
serves as Chairman and Mr. Miller and Father Ridley are currently
members of the Executive Compensation and Bonus Committee. As
previously noted, Mr. Africk had a consulting agreement with the Company
until April 28, 2000. Mr. Gibbons was Chairman and Ms. Goldman and Mr.
Jews were members of the Committee prior to the Annual Meeting on
December 14, 2000. There are not now and there were no Compensation
Committee Interlocks during 2000.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
OWNERS OF MORE THAN FIVE PERCENT. The following table sets forth
ownership of the Company's stock, and the amount and percentage of the
stock owned by all persons known by the Company to be the beneficial
owners of more than 5% of the shares of any class of the Company's stock
on March 7, 2001:
Name and Address Percent
of Beneficial Owner Title of Class Amount of Class
- -------------------------- -------------- ------ --------
Rosemore Holdings, Inc. (a)
One North Charles Street
Suite 2300
Baltimore, MD 21201 Common Stock 1 Share 100%
(a) Rosemore Holdings, Inc. is a wholly owned subsidiary of
Rosemore, Inc., a Maryland Corporation.
Page 44
PART IV
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ROSEMORE. During 1999, an affiliate of Rosemore, Inc. ("Rosemore")
agreed to provide a $50 million junior participation in the Company's
secured credit facility. This commitment, when added to the portion of
the facility provided by financial institutions, increased the overall
facility size to $125 million. The Company paid Rosemore a total of
$142,000 in commitment and utilization fees related to their junior
participation during 2000.
During 2000, the Company negotiated agreements with Rosemore pursuant to
which Rosemore provided performance guarantees relating to the Company's
purchase of crude oil, feedstocks and other petroleum products and
provided an unsecured cash borrowing availability. These agreements are
provided to the Company on an uncommitted basis and are made available
to the Company in Rosemore's sole discretion. The Company paid
guarantee fees of $360,300 and interest on cash borrowings of $7,500 in
2000. These fees are at market rates substantiated by an opinion of an
outside party. There were no Rosemore guarantees or cash borrowings
outstanding on December 31, 2000.
CONSULTING AGREEMENT. Mr. Africk's prior Consulting Agreement with the
Company is described in Item. 11. Executive Compensation.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) LIST OF FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Crown Central
Petroleum Corporation and Subsidiaries are included in Item 8 on pages
18 through 37 of this report:
(bullet) Consolidated Statements of Operations -- Years ended
December 31, 2000, 1999, and 1998
(bullet) Consolidated Balance Sheets -- December 31, 2000 and
1999
(bullet) Consolidated Statements of Changes in Common
Stockholders' Equity -- Years ended December 31, 2000,
1999 and 1998
(bullet) Consolidated Statements of Cash Flows -- Years ended
December 31, 2000, 1999 and 1998
(bullet) Notes to Consolidated Financial Statements --
December 31, 2000
(a) (2) LIST OF FINANCIAL STATEMENT SCHEDULES
The schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have
been omitted.
(a) (3) and (c) LIST OF EXHIBITS
EXHIBIT
NUMBER
- -------
3 Articles of Incorporation and Bylaws
(a) Amended and Restated Charter of Crown Central Petroleum
Corporation
(b) Bylaws of Crown Central Petroleum Corporation as amended and
restated at March 7, 2001
Page 45
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
(a) Loan and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation was
previously filed with Form 10-K for the year ended December
31, 1998 as exhibit 4(a), herein incorporated by reference.
(b) First Amendment, effective as of March 29, 1999, to the Loan
and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation
previously filed with the Registrant's Form 10-Q for the
quarter ended March 31, 1999 as Exhibit 10(a), herein
incorporated by reference.
(c) Second Amendment, effective as of August 1, 1999, to the Loan
and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation
previously filed with the Registrant's Form 10-Q for the
quarter ended September 30, 1999 as Exhibit 10, herein
incorporated by reference.
(d) Third Amendment, effective as of March 16, 2000, to the Loan
and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation was
previously filed with Form 10-K for the year ended December
31, 1999 as exhibit 4(d), herein incorporated by reference.
(e) Fourth Amendment, effective as of June 27, 2000, to the Loan
and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation was
previously filed with Form 10-Q for the quarter ended June
30, 2000 as exhibit 10(a), herein incorporated by reference.
(f) Fifth Amendment, effective as of September 19, 2000, to the
Loan and Security Agreement effective as of December 10, 1998
between the Registrant and Congress Financial Corporation was
previously filed with Form 10-Q for the quarter ended
September 30, 2000 as exhibit 10, herein incorporated by
reference.
(g) Form of Indenture for the Registrant's 10 7/8% Senior Notes
due 2005 filed on January 17, 1995 as Exhibit 4.1 of
Amendment No. 3 to Registration Statement on Form S-3,
Registration No. 33-56429, herein incorporated by reference.
(h) First Supplemental Indenture, effective as of December 2,
1998, to the Indenture for the Registrant's 10 7/8% Senior
Notes due 2005, was previously filed as Exhibit 4(f) with the
Registrant's Form 10-K for the year ended December 31, 1998,
herein incorporated by reference.
10 MATERIAL CONTRACTS
(a) Crown Central Petroleum Corporation Retirement Plan effective
as of July 1, 1993, was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1993
as Exhibit 10(a), herein incorporated by reference.
(b) First Amendment effective as of January 1, 1994 to the Crown
Central Petroleum Corporation Retirement Plan was previously
filed with the Registrant's Form 10-K for the year ended
December 31, 1997 as Exhibit 10(b), herein incorporated by
reference.
(c) Second Amendment effective as of June 29 1995 to the Crown Central
Petroleum Corporation Retirement Plan was previously filed with
the Registrant's Form 10-K for the year ended December 31, 1997 as
Exhibit 10(c), herein incorporated by reference.
(d) Third Amendment effective as of December 18, 1997 to the Crown
Central Petroleum Corporation Retirement Plan was previously filed
with the Registrant's Form 10-K for the year ended December 31,
1997 as Exhibit 10(d), herein incorporated by reference.
(e) Supplemental Retirement Income Plan for Senior Executives as
Restated effective September 26, 1996 was previously filed with
the Registrant's Form 10-Q for the quarter ended September 30,
1996 as Exhibit 10(b), herein incorporated by reference.
(f) Crown Central Petroleum Employee Savings Plan as amended and
restated effective January 1, 1987 was previously filed with the
Registrant's Form 10-K for the year ended December 31, 1995 as
Exhibit 10(c), herein incorporated by reference.
(g) Amendment effective as of September 26, 1996 to the Crown Central
Petroleum Employees Savings Plan was previously filed with the
Registrant's Form 10-Q for the quarter ended September 30, 1996 as
Exhibit 10(c), herein incorporated by reference.
Page 46
(h) Amendment effective as of June 26, 1997 to the Crown Central
Employees Savings Plan was previously filed with the Registrant's
Form 10-K for the year ended December 31, 1997 as Exhibit 10(h),
herein incorporated by reference.
(i) Fourth Amendment, effective as of June 25, 1998, to the Crown
Central Petroleum Corporation Employees Savings Plan was
previously filed with the Registrant's Form 10-Q for the quarter
ended June 30, 1998 as Exhibit 10, herein incorporated by
reference.
(j) Directors' Deferred Compensation Plan adopted on August 25, 1983
was previously filed with the Registrant's Form 10-Q for the
quarter ended September 30, 1983 as Exhibit 19(b), herein
incorporated by reference.
(k) The 1994 Long-Term Incentive Plan, as amended and restated
effective as of June 29, 2000, was previously filed as Exhibit
10(b) with the Registrant's Form 10-Q for the quarter ended June
30, 2000, herein incorporated by reference.
(l) Amendment, effective as of March 25, 1999 to the Crown Central
Petroleum Corporation 1994 Long-Term Incentive Plan, as amended
and restated, was previously filed as Exhibit 10 (m) with the
Registrant's Form 10-K for the year ended December 31, 1998,
herein incorporated by reference.
(m) Master Lease Agreement between Crown Prince Properties, LLC and
Crown Central Petroleum Corporation dated September 29, 2000
(n) Executive Severance Plan, as amended and restated effective as of
March 7, 2001
(o) The 1995 Management Stock Option Plan filed on April 28, 1995 as
Exhibit 4 of Registration Statement on Form S-8, Registration No.
33-58927, herein incorporated by reference.
(p) Employees Supplementary Savings Plan filed on February 27, 1995 as
Exhibit 4 of Registration Statement on Form S-8, Registration No.
33-57847, herein incorporated by reference.
(q) 1999 Long-term Incentive Plan as amended and restated June 29,
2000 was previously filed as Exhibit 10(c) with the Registrant's
Form 10-Q for the quarter ended June 30, 2000, herein incorporated
by reference.
21 SUBSIDIARIES OF THE REGISTRANT
Exhibit 21 is included on page 49 of this report.
23 CONSENT OF INDEPENDENT AUDITORS
Exhibit 23 is included on page 50 of this report.
24 POWER OF ATTORNEY
Exhibit 24 is included on page 51 of this report.
99 FORM 11-K WILL BE FILED UNDER COVER OF FORM 10-K/A BY
JUNE 29, 2001.
(b) REPORTS ON FORM 8-K
Reports filed on Form 8-K during the period from October 1, 2000
to March 28, 2001 are as follows:
Form 8-K dated October 11, 2000
Item 5. Other Events - Tentative Collective Bargaining
Agreement with PACE.
Item 7. Financial Statements and Exhibits - Exhibit No.
99 Press Release relating to the Tentative Collective
Bargaining Agreement.
Form 8-K dated November 1, 2000
Item 5. Other Events - Extension of deadline to Apex Oil
regarding the merger proposal with Crown.
Item 7. Financial Statements and Exhibits - Exhibit No.
99 Press Release relating to the extension of deadline
to Apex Oil regarding the merger proposal.
Form 8-K dated November 30, 2000
Item 5. Other Events - Crown's discussions with
Rosemore,
Inc. and Apex Oil regarding the Company's strategic
alternatives.
Item 7. Financial Statements and Exhibits - Exhibit No.
99 Press Release relating to discussions with Rosemore,
Inc. and Apex Oil regarding the Company's strategic
alternatives.
Form 8-K dated December 18, 2000
Item 5. Other Events - Definitive Agreement and Plan of
Merger between the Company and Rosemore, Inc.
Item 7. Financial Statements and Exhibits - Exhibit No.
2
Agreement and plan of merger dated as of December 17,
2000. Exhibit No. 4 Second amendment to Shareholder
Rights Plan dated as of December 17, 2000. Exhibit No.
99 Press Release relating to Agreement and Plan of
Merger between the Company and Rosemore, Inc.
Page 47
Form 8-K dated January 3, 2001
Item 5. Other Events - Second Tentative Collective
Bargaining Agreement with PACE.
Item 7. Exhibit No. 99 Press Release relating to the
Second Tentative Collective Bargaining Agreement.
Form 8-K dated January 18, 2001
Item 5. Other Events - Local PACE unit agrees to
Collective Bargaining Agreement and ends five-year
labor dispute.
Item 7. Financial Statements and Exhibits - Exhibit No.
99.1 Agreement to end of the five-year labor dispute,
and Exhibit No. 99.2 Press Release relating to the
announcement by PACE on end of labor dispute with Crown
Central Petroleum Corporation.
Form 8-K dated February 16, 2001
Item 5. Other Events - Expiration of the Shareholders'
Rights Plan.
Item 7. Financial Statements and Exhibits - Exhibit No.
4.1- Shareholder Rights Plan dated as of February 1,
2000 between Crown Central and First Union Bank,
Exhibit No. 4.2- First Amendment to Shareholder Rights
Plan dated as of April 10, 2000 between Crown Central
and First Union Bank and Exhibit No. 4.3- Second
amendment to Shareholder Rights Plan dated as of
December 17, 2000 between Crown Central and First Union
Bank.
Form 8-K dated March 7, 2001
Item 5. Other Events - Approval of the merger between
Rosemore Acquisition Corporation and Crown Central
Petroleum Corporation.
Item 7. Financial Statements and Exhibits - Exhibit No.
99.1 Press Release relating to the approved merger.
Exhibit No. 99.2 Announcement of the Shareholders'
voting results in favor of the merger.
NOTE: Certain exhibits listed on pages 45 through 48 of this report
and filed with the Securities and Exchange Commission, have been
omitted. Copies of such exhibits may be obtained from the Company upon
written request, for a prepaid fee of 25 cents per page.
Page 48
EXHIBIT 21
SUBSIDIARIES
1. SUBSIDIARIES AS OF DECEMBER 31, 2000, WHICH ARE CONSOLIDATED IN THE
FINANCIAL STATEMENTS OF THE REGISTRANT; EACH SUBSIDIARY IS 100%
OWNED EITHER DIRECTLY OR THROUGH A SUBSIDIARY (EXCEPT FOR DIRECTOR
QUALIFYING SHARES) AND IS QUALIFIED TO DO BUSINESS UNDER ITS OWN
NAME.
SUBSIDIARY NATION OR STATE
OF INCORPORATION
Continental American Corporation Delaware
Crown Central Holding Corporation Maryland
Crown Central International (U.K.), Limited United Kingdom
Crown Central Pipe Line Company Texas
Crown Gold, Inc. Maryland
The Crown Oil and Gas Company Maryland
Crown-Rancho Pipe Line Corporation Texas
Crown Stations, Inc. Maryland
Crowncen International N.V. Netherlands Antilles
Fast Fare, Inc. Delaware
F Z Corporation Maryland
Health Plan Administrators, Inc. Maryland
La Gloria Oil and Gas Company Delaware
Locot, Inc. Maryland
McMurrey Pipe Line Company Texas
Mollies Properties, Inc. Maryland
Tiara Insurance Company Vermont
T. B. & Company, Inc. Maryland
Page 49
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-53457) pertaining to the 1994 Long-Term
Incentive Plan and Employees Savings Plan and the Registration Statement
(Form S-8 No. 33-57847) pertaining to the Employees Supplemental Savings
Plan and the Registration Statement (Form S-8 No. 33-58927) pertaining
to the 1995 Management Stock Option Plan of Crown Central Petroleum
Corporation and Subsidiaries of our report dated March 7, 2001, with
respect to the consolidated financial statements of Crown Central
Petroleum Corporation and Subsidiaries included in this Form 10-K for
the year ended December 31, 2000.
/s/--ERNST & YOUNG LLP
Baltimore, Maryland
March 30, 2001
Page 50
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crown Central Petroleum
Corporation hereby severally constitute Henry A. Rosenberg, Jr., John E.
Wheeler, Jr., Frank B. Rosenberg, Jan L. Ries and Thomas L. Owsley, and
each of them singly, our true and lawful attorneys with full power to
them and each of them to sign for us in our names and in the capacities
indicated below this Report on Form 10-K for the fiscal year ended
December 31, 2000 pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934 and all amendments thereto.
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Crown Central Petroleum
Corporation hereby severally constitute Henry A. Rosenberg, Jr., John
E. Wheeler, Jr., Jan L. Ries and Thomas L. Owsley, and each of them
singly, our true and lawful attorneys with full power to them and each
of them to sign for us in our names and in the capacities indicated
below this Report on Form 10-K for the fiscal year ended December 31,
2000 pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 and all amendments thereto.
SIGNATURE TITLE DATE
/s/---Henry A, Rosenberg, Jr. Chairman of the Board, President 3/7/01
- ----------------------------- and Chief Executive Officer
Henry A. Rosenberg, Jr. (Principal Executive Officer)
/s/---Jack Africk Director 3/7/01
- -----------------------------
Jack Africk
/s/---Michael F. Dacey Director 3/7/01
- -----------------------------
Michael F. Dacey
/s/---Stanley A. Hoffberger Director 3/7/01
- -----------------------------
Stanley A. Hoffberger
/s/---Barry L. Miller Director 3/7/01
- -----------------------------
Barry L. Miller
/s/---Reverend Harold E. Ridley, Jr. Director 3/7/01
- ------------------------------------
Reverend Harold E. Ridley, Jr., S.J.
/s/---Frank B. Rosenberg Senior Vice President-Marketing 3/7/01
- ------------------------ and Chief Operating Officer
Frank B. Rosenberg (Principal Operating Officer
and Director)
/s/---John E. Wheeler, Jr. Executive Vice President - 3/7/01
- --------------------------- Chief Financial Officer
John E. Wheeler, Jr. (Principal Financial Officer)
/s/---Jan L. Ries Controller 3/7/01
- ---------------------------- (Chief Accounting Officer)
Jan L. Ries
Page 51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CROWN CENTRAL PETROLEUM CORPORATION
By: /s/---Jan L. Ries
-----------------------------
Jan L. Ries
Controller and Chief Accounting
Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 30, 2001 by the following
persons on behalf of the registrant and in the capacities indicated:
* *
- -------------------------------- ---------------------------------
Jack Africk, Director Rev. Harold E. Ridley, Jr., S.J.,
Director
* *
- -------------------------------- ---------------------------------
Michael F. Dacey, Director Frank B. Rosenberg, Director,
Senior Vice President-Marketing
and Chief Operating Officer
* *
- -------------------------------- ---------------------------------
Stanley A. Hoffberger, Director Henry A. Rosenberg, Jr., Director
Chairman of the Board, President
and Chief Executive Officer
* *
- -------------------------------- ---------------------------------
Barry L. Miller, Director John E. Wheeler, Jr., Director and
Executive Vice President and Chief
Financial Officer
*By Power of Attorney (Jan L. Ries)
Page 52