UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X]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, 1997
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 Number)
incorporation or organization)
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:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Class A Common Stock - $5 Par Value American Stock Exchange
Class B Common Stock - $5 Par Value American Stock Exchange
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___
The aggregate market value of the voting stock held by
nonaffiliates as of December 31, 1997 was $142,173,301.
The number of shares outstanding at January 31, 1998 of the
registrant's $5 par value Class A and Class B Common Stock was
4,817,394 shares and 5,130,040 shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of
Stockholders on April 23, 1998 are incorporated by reference
into Items 10 through 13, Part III.
CROWN CENTRAL PETROLEUM CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I
Item 1Business l
Item 2Properties 3
Item 3Legal Proceedings 8
Item 4Submission of Matters to a Vote of
Security Holders 9
PART II
Item 5Market for the Registrant's Common
Equity and Related Stockholder Matters 10
Item 6Selected Financial Data 11
Item 7Management's Discussion and Analysis
of Financial Condition and Results of Operations 12
Item 8Financial Statements and Supplementary Data 20
Item 9Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure 39
PART III
Item 10 Directors and Executive Officers of the Registrant
40
Item 11 Executive Compensation
41
Item 12 Security Ownership of Certain
Beneficial Owners and Management 41
Item 13 Certain Relationships and Related Transactions
41
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 41
PART I
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" and "Additional Factors that May Affect Future
Results" 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, 1997, 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, 1997, 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 one of the
largest independent refiners and marketers 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 336 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 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 $52 million for environmental compliance,
upgrading, expansion and process improvements at its two
refineries. As a result of these expenditures, the Pasadena
refinery has one of the highest rates of conversion to higher
margin fuels, according to an industry study. The Tyler
refinery enjoys essentially the same product yield
characteristics as the Pasadena refinery.
The Company is the largest independent retail marketer in its
core retail market areas within Maryland, Virginia and North
Carolina. In the Company's primary retail marketing region of
Baltimore, Maryland, the Company is the leading independent
gasoline retailer, with a 1997 market share of approximately
13%. In addition to its leading market position in Baltimore,
the Company has a geographic concentration of retail locations
in high growth areas such as Charlotte and Raleigh, North
Carolina and Atlanta, Georgia. Over the past several years,
the Company has rationalized and refocused its retail
operations, resulting in significant improvements in average
unit performance and positioning these operations for growth
from a profitable base. For the year ended December 31, 1997,
average merchandise sales per unit increased 3.2% on a same
store basis when compared with 1996. The Company has made
substantial investments of approximately $28 million at its
retail locations pursuant to environmental requirements from
1989 to 1997 and believes that over 91% of its retail units
are currently in full or substantial compliance with the 1998
underground storage tank environmental standards. The Company
does not anticipate any problems in meeting the compliance
requirements for the remaining retail units.
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 12 of this report.
At December 31, 1997, the Company employed 2,819 employees.
The total number of employees decreased approximately 2.9%
from year-end 1996.
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,
terminal operations and retail marketing. 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
comply with federal, state and local provisions. A more
detailed discussion of environmental matters is included in
Note A and Note I of Notes to Consolidated Financial
Statements on pages 26 and 35, respectively, of this report,
and in Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 12 through 19 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 efficiency, refinery product mix and product
distribution and transportation costs. Certain of the
Company's larger competitors have refineries which 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 and quality, appearance and cleanliness of stores and
brand identification. Competition from large integrated oil
companies, as well as from convenience stores which 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 $1 million.
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
of 106,709 barrels per day and 52,310 barrels per day,
respectively, during 1997. While both refineries primarily
run sweet (low sulphur content) crude oil, they can process up
to 20% of 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 which 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 the Company can purchase 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."
Over the past several years, the Company has made significant
capital investments to upgrade its refining facilities and
improve operational efficiency. Three new process units were
placed in service at the Pasadena refinery in 1996. These
three units include a compression facility which transports
gas from the fluid catalytic cracking unit (FCCU) to a
petrochemical plant where the ethylene is recovered, a
reformate splitter which increases the refinery's capacity to
manufacture reformulated gasoline, and a vapor destructor
which allows for expanded product loading at the refinery
dock. At the Tyler refinery, the FCCU and sulfur recovery
units were modified, enabling the refinery to increase
production of gasoline and low sulfur diesel.
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 since 1969 and today has a rated crude capacity of
100,000 barrels per day. During the past five years, the
Company has invested approximately $29 million in major
upgrades and maintenance projects.
The Company's refining strategy includes several initiatives
to enhance productivity. For example, the Company has
completed an extensive plant-wide distributed control system
at the Pasadena refinery 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 38,000 barrels per day vacuum
tower. Major downstream units consist of a 52,000 barrels per
day fluid catalytic cracking unit, a 12,000 barrels per day
delayed coking unit, two alkylation units with a combined
capacity of 10,000 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 liquefied petroleum gas recovery unit that removes
approximately 1,000 barrels per day of liquids from the
refinery fuel system and a methyl tertiary butyl ether
("MTBE") process which can produce approximately 1,500 barrels
per day of MTBE for gasoline blending, a reformate splitter,
and a compression facility capable of transporting up to 14
million standard cubic feed per day of process gas to a
neighboring petrochemical plant.
The Clean Air Act mandates that after January 1, 1995 only
reformulated gasoline ("RFG") may be sold in certain ozone non-
attainment areas, including some metropolitan areas where the
Company sells gasoline. Using production from its MTBE unit,
the Pasadena refinery can currently produce 12,000 barrels per
day of winter grade RFG. With additional purchases of MTBE,
ethanol or other oxygenates, all of the Pasadena refinery's
current gasoline production could meet winter grade RFG
standards. In 1996, the Company completed the construction of
a reformate splitter at its Pasadena refinery. This process
unit enables the refinery to make 12,000 barrels per day of
summer grade RFG using its own MTBE, and up to 100% of its
Pasadena refinery gasoline production as summer grade RFG with
the purchase of additional oxygenates. This project enables
the Company to satisfy all of its retail RFG requirements.
In 1997, the Pasadena refinery crude unit was shut down for 24
days for the completion of a planned maintenance turnaround
and accordingly operated at only 84% of rated crude unit
capacity with production yielding approximately 56% gasoline
and 32% distillates. Of the total gasoline production,
approximately 19% was premium octane grades. In addition, the
Pasadena refinery produced and sold by-products including
propylene, propane, slurry oil, petroleum coke and sulphur.
The Company owns and operates storage facilities located on
approximately 130 acres near its Pasadena refinery which,
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 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 55% 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. This refinery, which
was acquired from Texas Eastern Corporation in the fourth
quarter of 1989, had been substantially modernized between
1977 and 1980. The Tyler refinery's location provides access
to nearby high quality East Texas crude oil which 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 for use of the Scurlock system with
Scurlock Permian Pipe Line Corporation. 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 16,000 barrels per day vacuum
tower. The other major process units at the Tyler refinery
include an 18,000 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 16,000 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 1997, the Tyler refinery operated at approximately 95% of
rated crude unit capacity, with production yielding
approximately 55% gasoline and approximately 36% distillates.
Of the total gasoline production, approximately 25% 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 60% 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 truck terminal sales.
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. In 1983 the Company significantly expanded its
retail presence with the acquisition of 642 Fast Fare and
Zippy Mart convenience stores located in the Southeastern
United States. In 1986 the Company purchased an additional 50
gasoline stations, expanding the Company's presence in the
Baltimore/Washington, D.C. region, and in 1991, the Company
acquired 48 additional units in Virginia which doubled its
presence in that state.
Beginning in 1989, the Company conducted a facility by
facility review of its retail units. As a result, the Company
disposed of non-strategic, marginal or unprofitable units as
well as certain units which would have required significant
capital improvements to comply with environmental regulations.
During this period, the Company rebuilt and added individual
units to increase its market share in strategic core markets.
As of December 31, 1997, the Company had 336 retail locations.
Of these 336 units (237 owned and 99 leased), the Company
directly operated 232 and the remainder were operated by
independent dealers. The Company conducts its operations in
Maryland through an independent dealer network as a result of
legislation which 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 the largest independent retail marketer of gasoline
in its core retail market areas within Maryland, Virginia and
North Carolina. In the Company's primary retail marketing area
of Baltimore, Maryland, the Company is the leading independent
gasoline retailer, with a 1997 market share of approximately
13%. In addition to its leading market position in Baltimore,
the Company has a geographic concentration of retail locations
in high growth areas such as Raleigh and Charlotte, North
Carolina and Atlanta, 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, 1997, the Company had 70
convenience stores, 124 mini-marts and 142 gasoline stations.
The Company's convenience stores operate primarily under the
names Fast Fare and Zippy Mart. 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,
snacks, dairy products and baked goods and more recently food
service items.
The Company's mini-marts generally contain up to 800 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 which 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. The Company has conducted customer
surveys which indicate strong consumer preference for units
which are well-lighted and safe. In response to such customer
preferences, the Company has initiated a system-wide lighting
upgrade and safety enhancement program.
While the Company derives approximately 76% 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, and
management continues to evaluate the addition of new ancillary
services such as the marketing of fast food from major branded
chains. At December 31, 1997, the Company has two locations
offering A&W fast food products, two locations offering Lil'
Caesar fast food products and an additional two locations
offering Taco Bell fast food products.
DEALER OPERATIONS
The Company maintains 104 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.
TRANSPORTATION
Most 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
receives between 20,000 and 25,000 barrels per day of crude
through this system. Foreign crudes (principally from the
North Sea, West Africa and South America) account for
approximately 65% 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 and, in addition to
the terminal at the Tyler refinery, operates four product
terminals located along the Texas Eastern Products Pipeline
system. These terminals have a combined storage capacity of
1.9 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 16% 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. The terms of these agreements extend through
March 1999 and December 1999, respectively, and require the
exchange of 6,000 barrels per day and 7,000 barrels per day,
respectively. 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, the
ultimate determination of which, in the opinion of management,
will not have a material adverse effect on the Company. The
Company's legal proceedings are further discussed in Note I of
Notes to Consolidated Financial Statements on page 35 of this
report.
The Company negotiated a settlement with the Environmental
Protection Agency ("EPA") in late 1997 to pay a fine of
$137,500 and to make improvements to the Pasadena refinery's
waste water discharge system to address alleged exceedances of
the Pasadena refinery's Clean Water Act permit. The
wastewater system improvements will be completed by March 31,
1998 and are expected to cost approximately $650,000.
The Company's Tyler, Texas refinery received a Notice of
Violation from the Texas Natural Resource Conservation
Commission ("TNRCC") in October of 1997 regarding alleged
noncompliance with TNRCC's air program. The Company has
addressed the majority of the alleged non-compliances and is
evaluating and negotiating the resolution of one remaining
alleged violation. The Company does not expect the costs of
implementation of applicable measures will exceed $100,000.
In July of 1997, the Pasadena refinery was issued a Notice of
Violation by the TNRCC pertaining to record keeping and notice
requirements and to alleged exceedances of concentration
standards for hydrogen sulfide and air emissions of sulfur
dioxide from the refinery. TNRCC proposed a penalty of
$651,875 in November 1997 and an enforcement order is
currently being negotiated. The Company has already installed
certain backup equipment and, by June 15, 1998, the Company
will complete the upgrading of equipment at the refinery to
improve the removal efficiencies of hydrogen sulfide and
sulfides from certain operating processes at a cost of
approximately $300,000.
The Pasadena and Tyler refineries and many of the Company's
other facilities are involved in a number of other
environmental enforcement actions or are subject to
agreements, orders or permits that require remedial
activities. Environmental expenditures, including these
matters, are discussed in the Liquidity and Capital Resources
section of Management's Discussion and Analysis of Financial
Conditions and Results of Operations on pages 14 through 17 of
this report, and in Note I of Notes to Consolidated Financial
Statements on page 35 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.
On July 21, 1997, Texans United for a Safe Economy Education
Fund, the Sierra Club, the Natural Resources Defense Council,
Inc. and several individuals filed a Clean Air Act citizens'
suit in the United States District Court for the Southern
District of Texas against the Company, alleging violations by
the Company's Pasadena refinery of certain state and federal
environmental air regulations. TEXANS UNITED FOR A SAFE
ECONOMY EDUCATION FUND, ET AL. VS. CROWN CENTRAL PETROLEUM
CORPORATION, H-97-2427 (S.D. Tex.). The alleged violations
pertain to record keeping and notice requirements and to
potential exceedances of concentration standards for hydrogen
sulfide and air emissions of sulfur dioxide from the refinery
that had been previously self reported by the Company to the
applicable government agency. Most of the alleged violations
were redressed in a 1995 TNRCC Agreed Order and most of the
remaining alleged violations are the subject of the
enforcement action by the TNRCC described above. The
plaintiffs seek injunctive relief and civil penalties. The
Company has filed a Motion for Summary Judgment and discovery
is underway.
On June 25, 1997, a purported class action lawsuit was filed
in the state district court of 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.
Seven employees at the Pasadena refinery and one at the Tyler
refinery have filed a purported class action suit in the
United States District Court for the Eastern District of Texas
alleging race and sex discrimination in violation of Title VII
of the Civil Rights Act of 1964, as amended, and in violation
of the Civil Rights Act of 1871, as amended. LORRETTA
BURRELL, ET AL. VS. CROWN CENTRAL PETROLEUM CORPORATION, C.A.
No. 97-CVO-357 (E.D. Tex.). The named plaintiffs seek to
represent several subclasses of salaried and hourly African-
American and female employees of the Company. The matter is
in discovery.
There has been no action taken by the Court with respect to
the plaintiffs' request for class certification in the Burrell
case, and discovery has not been completed in Texans United,
Allman or Burrell. A review of these cases suggests, however,
that the Company has meritorious defenses. The Company
intends to vigorously defend these cases and in the opinion of
management, there is no reasonable basis to believe that the
eventual outcome of any of these cases will have a material
adverse effect on the Company.
In February 1998, the Company and thirteen other companies,
including several major oil companies, were sued on behalf of
the EPA and the 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 costs in excess of $125
million in completing the remediation at the Sikes Site.
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.
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
although not material.
The Company's collective bargaining agreement with the Oil
Chemical & Atomic Workers Union ("OCAW") covering employees at
the Pasadena refinery expired on February 1, 1996. 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 February 5, 1996
the Company implemented a lock out of employees in the
collective bargaining unit at the Pasadena facility. OCAW
subsequently filed a number of unfair labor practice charges
with the National Labor Relations Board ("NLRB") and all of
these charges have been dismissed by the NLRB. The lock out
and negotiations on a new contract continue.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the last three months of the fiscal year covered by this
report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American
Stock Exchange under the ticker symbols CNP A and CNP
B.
COMMON STOCK MARKET PRICES AND CASH DIVIDENDS
1997 1996
---------------- ----------------
---- ---
Sales Price Sales Price
Low High Low
High
------ ------- ------- -------
-
CLASS A COMMON STOCK
First Quarter $ 14 $11 1/8 $19 1/8 $ 14
1/4 3/4
Second Quarter 15 12 1/8 20 7/8 15 1/8
7/16
Third Quarter 22 14 3/4 15 13
1/2 1/2 3/8
Fourth Quarter 21 7/8 17 1/2 14 3/4 12 1/4
Yearly 22 1/2 11 1/8 20 7/8 12 1/4
CLASS B COMMON STOCK
First Quarter $ 13 $ 11 $ 18 $ 14 3/4
3/4 1/2
Second Quarter 15 11 5/8 20 3/8 14 5/8
7/16
Third Quarter 22 14 3/4 15 1/2 13 1/8
1/4
Fourth Quarter 20 16 5/8 14 5/8 11 3/4
3/8
Yearly 22 11 20 3/8 11 3/4
1/4
<FN>
The payment of cash dividends is dependent upon future
earnings, capital requirements, overall financial condition
and restrictions as described in Note C of Notes to
Consolidated Financial Statements on page 28 of this report.
There were no cash dividends declared on common stock in
1997 or 1996.
The number of shareholders of the Company's common stock
based on the number of record holders on December 31, 1997
was:
Class A Common Stock 525
Class B Common Stock 646
TRANSFER AGENT & REGISTRAR
BankBoston
c/o Boston EquiServe
Boston, Massachusetts
</FN>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company set
forth below for the five years ended December 31, 1997 should
be read in conjunction with the Consolidated Financial
Statements.
1997 1996 1995 1994 1993
--------- -------- --------- ------- --------
- -
(Thousands of dollars except per share amounts)
Sales and
operating $1,602,6 $1,635, $1,318, $1,451,
revenues 24 276 $1,451,3 558 183
49
Income (loss)
before
extraordinary
item 19,235 (2,767) (35,406 (4,3
(67,367 ) 00 )
)
Extraordinary
item (3,257)
Net income (loss) 19,235 (2,767) (70,624) (35,406 (4,3
) 00 )
Total assets 594,003 565,233 583,214 704,076 656,1
78
Long-term debt 127,506 127,196 128,506 96,632 65,5
79
Per Share Data:
Income (loss)
before
extraordinary
item 1.97 (.28) (6.95) (3.63 (.44)
)
Net income (loss) 1.97 (.28) (7.28) (3.63 (.44)
)
Per Share Data -
assuming
dilution:
Income (loss)
before
extraordinary
item 1.94 (.28) (6.95) (3.63 (.44)
)
Net income (loss) 1.94 (.28) (7.28) (3.63 (.44)
)
<FN>
The extraordinary loss in 1995, which was recorded in the
first quarter, resulted from the early retirement of the
remaining principal balance of the Company's 10.42%
Senior Notes with the proceeds from the sale of $125
million of Unsecured Senior Notes due February 1, 2005.
The net loss in 1995 was unfavorably impacted by a pre-
tax write-down of certain refinery assets of $80.5
million in the fourth quarter relating to the adoption of
Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of".
The net loss in 1994 was unfavorably impacted by a pre-
tax write-down of $16.8 million in the third quarter
relating to the abandonment of plans to construct a
hydrodesulphurization unit at the Pasadena refinery.
There were no cash dividends declared in 1997, 1996,
1995, 1994 or 1993.
</FN>
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's Sales and operating revenues
decreased 2% in 1997 compared to a 12.7% increase
in 1996. The 1997 decrease in Sales and operating
revenues was primarily due to a 3.6% decrease in
the average unit selling price of petroleum
products. These increases were partially offset
by a 1% increase in petroleum product sales
volumes and a $1.6 million or 1.6% increase in
merchandise sales. The 1996 increase in Sales and
operating revenues was primarily due to a 16.7%
increase in the average unit selling price of
petroleum products and a $3.4 million or 3.5%
increase in merchandise sales. These increases
were partially offset by a 3.8% decrease in
petroleum product sales volumes principally
attributable to the processing contract with
Statoil wherein the Company processed 20,000
barrels per day for Statoil during the last five
months of 1996.
As previously mentioned, merchandise sales
increased $1.6 million or 1.6% to $103.7 million
for the year ended December 31, 1997 compared to
the same period in 1996, while merchandise gross
profit increased $2.4 million or 8.4% for the year
ended December 31, 1997 compared to the same
period in 1996. Merchandise gross margin
(merchandise gross profit as a percent of
merchandise sales) was 30.4% and 28.5% for the
years ended December 31, 1997 and 1996,
respectively. These aggregate increases occurred
despite a slight reduction in the number of
operating units during the period, and are
attributable to the Company's merchandise pricing
program which has selectively increased margins on
targeted merchandise yet still maintains an
everyday low pricing policy which is competitive
with major retail providers in the applicable
market area. As a result of the strategy,
aggregate merchandise gross profit, on a same
store basis, increased 3.5% in 1997 as compared to
1996. Same store average monthly merchandise sales
increased approximately 3% in 1997 as compared to
1996.
Gasoline sales accounted for 55.7% of total 1997
revenues, while distillates and merchandise sales
represented 29% and 6.5%, respectively. This
compares to a dollar mix from sales of 54.3%
gasoline, 31.2% distillates and 6.2% merchandise
in 1996; and 57.8% gasoline, 24.2% distillates and
6.8% merchandise in 1995.
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
millions of dollars
1997 1996 1995
------ -------- -------
Gasoline $892.2 $888.1 $839.4
No. 2 Fuel & Diesel 419.4 436.4 335.7
Costs and operating expenses decreased 4% in 1997
compared to an 11.8% increase in 1996. The 1997
decrease was primarily attributable to the
Company's use of the last-in, first-out (LIFO)
method to value inventory which results in a
better matching of current revenues and costs.
The impact of LIFO was to decrease the Company's
Costs and operating expenses by approximately
$27.3 million in 1997 while increasing Costs and
operating expenses by $.9 million in 1996.
Additionally, there was a decrease in the average
consumed cost per barrel of crude oil and
feedstocks of 6.6%. These decreases were
partially offset by slight increases in petroleum
products sales volumes as mentioned above. The
1996 increase was attributable to an increase in
the average consumed cost per barrel of crude oil
and feedstocks of 20.5%. This increase was
partially offset by slight decreases in petroleum
products sales volumes. The average consumed cost
per barrel includes only those costs directly
associated with the purchase and processing of
crude oil and feedstocks. Accordingly, refinery
operating expenses are not included in the average
consumed cost per barrel of crude oil and
feedstocks.
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
impact of the Company's use of the LIFO method was
to increase the Company's gross margin over what
it would have been had the first-in, first-out
(FIFO) method of inventory valuation been utilized
in 1997 by $.51 per barrel ($27.3 million) while
decreasing the Company's gross margins in 1996 and
1995 by $.02 per barrel ($.9 million) and $.12 per
barrel ($6.7 million), respectively. The 1996
LIFO impact is net of gross margin increases of
$5.9 million resulting from a change in base year
values for a portion of the Company's LIFO
inventories and reductions in LIFO inventories of
$15.2 million, which were carried at lower costs
prevailing in prior years. The 1995 LIFO impact
is net of a $4.9 million gross margin increase
resulting from a reduction in LIFO inventories.
Total yields of finished gasoline were increased
slightly to 89,000 barrels per day (bpd) (56%) in
1997 from 85,500 bpd (56%) in 1996 while
distillate production was increased slightly from
51,700 bpd (33.9%) in 1996 to 52,800 bpd (33.2%)
in 1997. In early 1996, the Company adjusted its
distillate and gasoline production to take
advantage of better distillate margins compared to
gasoline margins. Correspondingly, yields of
distillates were increased to 51,700 (bpd) (33.9%)
in 1996 from 46,200 bpd (29.8%) in 1995, while
gasoline production was decreased from 90,700 bpd
(58.6%) in 1995 to 85,500 bpd (56%) in 1996.
Total refinery production was 159,000 bpd in 1997,
152,600 bpd in 1996 and 154,800 bpd in 1995.
Selling and administrative expenses decreased 7.6%
in 1997 after increasing 16.1% in 1996. The 1997
decrease was primarily due to decreases in store
level operating expenses which include decreases
related to environmental expenses and decreases in
advertising and insurance related accruals.
Additionally, Coronet Security Systems operations,
which were consolidated for a full year in 1996
were only consolidated for the first quarter of
1997 which resulting in a decrease in reported
administrative costs of approximately $1.1
million. Coronet Security System's operations
were contributed to a new corporation in March of
1997. The Company accounts for its investment in
this new corporation under the equity method.
Corporate administrative expenses in 1996 included
approximately $1 million associated with a
management reorganization. Partially offsetting
these decreases were increases of approximately
$.9 million in employee incentive payments ( from
$1 million in 1996 to $1.9 million in 1997) due to
improved Company performance. The 1996 increase
was primarily due to increases in store level
operating expenses principally related to
additional retail outlets acquired in the third
quarter of 1995 which operated for a full year in
1996 and to a same price cash or credit gasoline
marketing strategy that increased credit card
processing fees. Also included in 1996 were
increased labor costs resulting from the
installation of branded fast food operations in
certain retail outlets. Additionally the Company
recorded approximately $1 million in corporate
administrative expenses associated with a
management reorganization, $.8 million associated
with certain long-range strategic initiatives and
$1 million in employee incentive payments due to
improved Company performance. At December 31,
1997, the Company operated 266 retail gasoline
facilities and 70 convenience stores compared to
264 retail gasoline facilities and 79 convenience
stores at December 31, 1996 and 267 retail
gasoline facilities and 81 convenience stores at
December 31, 1995.
Operating costs and expenses in 1997, 1996 and
1995 include $.8 million, $.5 million and $.1
million, respectively, of accrued non-
environmental casualty related costs.
Additionally, 1997 expenses include $1.7 million
relating to the closure or sale of several
marketing terminal locations and certain other
corporate strategic initiatives. Included in
Operating costs and expenses in 1996 and 1995 were
$1.9 million and $3.2 million, respectively,
related to environmental matters. Operating costs
and expenses in 1997 and 1996 have been reduced by
$1.8 million and $4.8 million, respectively,
relating to adjustments in certain liability
reserves. Additionally, 1995 expenses also
include $3.7 million related to retail units that
have been closed.
Depreciation and amortization in 1997 was
comparable to 1996. Depreciation and amortization
decreased 13.3% in 1996. These decreases were
primarily the result of the lower depreciable base
due to the write-down of certain property, plant
and equipment in connection with the
implementation of Statement of Financial
Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121), effective
October 1, 1995. The lower depreciable base
resulted in a reduction of 1996 depreciation and
amortization by approximately $3.9 million
compared to 1995.
The loss from Write-down of property, plant and
equipment of $80.5 million in 1995 is due to the
initial adoption of SFAS 121 effective October 1,
1995. While all of the Company's long-lived
assets are subject to the provisions of SFAS 121,
circumstances indicated the carrying amount of
assets used in the operation of the Tyler refinery
would not be recoverable. As such, a write-down to
estimated fair value was recorded. The estimated
fair value of these assets was determined by an
independent appraisal. There were no indications
of possible impairment relating to the remainder
of the Company's long-lived assets.
Interest and other income in 1997 increased $.6
million after decreasing $3.4 million in 1996.
The 1997 increase is due primarily to an increase
in interest income of $1 million due to an
increase in the average daily cash invested of
$23.2 million which was partially offset by a loss
of $.5 million from the equity in losses in
affiliates. The 1996 decrease is due primarily to
the consolidation in the fourth quarter of 1995 of
the Company's wholly-owned insurance subsidiaries
which reported $2.3 million in equity earnings
(and was recorded as "other income") in 1995. The
1996 income of the Company's wholly-owned
insurance subsidiaries of approximately $.8
million is reported as part of the Company's
consolidated gross margin. Additionally, interest
income decreased $1.2 million due to a decrease in
the average daily cash invested of $25.7 million.
Interest expense in 1997 was comparable to 1996
which was comparable to 1995.
As previously discussed, in January 1995, the
Company retired the remaining outstanding
principal balance of the unsecured 10.42% Senior
Notes (including a prepayment premium of $3.4
million) with the proceeds from the sale of $125
million of Unsecured 10.875% Senior Notes due
February 1, 2005 which resulted in a net
extraordinary loss in the first quarter of 1995 of
$3.3 million (after reduction for the income tax
benefit of $2 million).
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $.6
million higher at year-end 1997 than at year-end
1996. The increase was attributable to cash
provided by operating activities of $40.9 million
and cash inflows from financing activities of $1.7
million. These inflows were partially offset by
$42 million of net cash outflows from investment
activities.
Net cash inflows from operating activities in 1997
is net of $19.3 million in net outflows relating
to other assets and liabilities. These outflows
were primarily the result of increases in crude
oil and finished product inventories due primarily
to the expiration in 1997 of the crude oil
processing contract with Statoil and decreases in
crude oil and refined products payables.
Partially offsetting these cash outflows were cash
inflows relating to decreases in accounts
receivable and decreases in prepaid insurance
premiums. Additional cash inflows relate to
decreases in recoverable and deferred income
taxes, increases in employee incentive plan
accruals due to improved operating results in
1997, increases in excise tax liabilities and
increases in other accounts payable. The timing
of collection of the Company's receivables is
impacted by the specific type of sale and
associated terms. Bulk sales of finished products
are typically sold in 25,000 barrel increments
with three day payment terms. Rack sales at the
Company's product terminals are sold by truckload
(approximately 8,000 gallons) with seven to ten
day payment terms. While the Company's overall
sales are aligned to its refining capability,
receivables can vary between periods depending
upon the specific type of sale and associated
payment terms for sales near the end of a
reporting period.
Net cash inflows from financing activities in 1997
relates primarily to net proceeds of $.9 million
from issuances of the Company's Class B Common
Stock due to exercises of stock options and to net
proceeds of $.4 million from the reduction of long-
term notes receivable.
Net cash outflows from investment activities in
1997 consisted principally of capital expenditures
of $31.9 million (which includes $17.4 million
related to the marketing area, $9.7 million for
refinery operations and $4.8 million related to
corporate strategic projects) and $14.1 million of
refinery deferred turnaround costs. Additionally,
cash outflows from investing activities include
$3.9 million in capitalized costs of software
developed for the Company's own use. The total
outflows from investment activities were partially
offset by proceeds from the sale of property,
plant and equipment of $7.3 million.
The ratio of current assets to current liabilities
was 1.47:1 and 1:29 : 1, respectively, at December
31, 1997 and 1996. If FIFO values had been used
for all inventories, the ratio of current assets
to current liabilities would have been 1.63:1 at
December 31, 1997 and 1.60:1 at December 31, 1996.
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 a significant capital investment
will be required over the next several years 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 $11.1 million as of December 31,
1997 to cover the estimated costs of compliance
with environmental regulations which are not
anticipated to be of a capital nature. The
liability of $11.1 million includes accruals for
issues extending past 1998.
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 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
matters which would be expected to have a material
adverse effect on the Company.
During 1998, the Company estimates environmental
expenditures at the Pasadena and Tyler refineries,
of at least $2.5 million and $1.4 million,
respectively. Of these expenditures, it is
anticipated that $1.5 million for Pasadena and $1
million for Tyler will be of a capital nature,
while $1 million and $.5 million, respectively,
will be related to previously accrued non-capital
remediation efforts. At the Company's marketing
facilities, environmental expenditures relating to
previously accrued non-capital compliance efforts
are planned totaling approximately $1.6 million
during 1998.
As a result of a strong balance sheet and overall
favorable credit relationships, the Company has
been able to maintain open lines of credit with
its major suppliers. Effective August 1, 1997,
the Company entered into the First Restated Credit
Agreement (Restated Credit Agreement) which is
essentially a renewal of the Revolving Credit
Agreement dated as of September 25, 1995, as
amended. Management believes the Restated Credit
Agreement will adequately provide anticipated
working capital requirements as well as support
future growth opportunities. Under the Restated
Credit Agreement, the Company had outstanding as
of December 31, 1997, irrevocable standby letters
of credit in the principal amount of $17.7 million
for purposes in the ordinary course of business
and unused commitments totaling $92.3 million. At
December 31, 1997, the Company was in compliance
with all covenants and provisions of the First
Restated Credit Agreement effective as of August
1, 1997. Meeting the covenants imposed by the
Restated Credit Agreement is dependent, among
other things, upon the level of future earnings.
During the first quarter of 1998, refinery margins
have continued to decline throughout the industry
due to a number of factors. If this decline
continues, revisions to the convenants and
provisions of the Restated Credit Agreement may be
required for the Company to remain in compliance.
Due to the industry-wide nature of the margin
reductions, it is management's opinion but there
can be no assurance that the Company will be able
to obtain the revisions to the convenants and
provisions of the Restated Credit Agreement should
they become necessary.
At the Company's option, the Unsecured 10.875%
Senior Notes (Notes) may be redeemed at 105.438%
of the principal amount at any time after January
31, 2000 and thereafter at an annually declining
premium over par until February 1, 2003 when they
are redeemable at par. The Notes were issued
under an Indenture which includes certain
restrictions and limitations customary with senior
indebtedness of this type including, but not
limited to, the payment of dividends and the
repurchase of capital stock. There are no sinking
fund requirements on the Notes.
The Purchase Money Lien effective December 1, 1993
discussed in Note C of Notes to Consolidated
Financial Statements on page 28 of this report, is
secured by certain service station and terminal
equipment and office furnishings having a cost
basis of $6.5 million. The effective rate for
this Purchase Money Lien is 6.65%. Ninety percent
of the principal is payable in 60 equal monthly
installments which commenced in February 1994 with
a balloon payment of 10% of the principal payable
in January 1999.
Effective August 11, 1997, the Company entered
into a Purchase Money Lien (Money Lien) for the
financing of land, buildings and equipment at
certain service station and convenience store
locations. Each draw-down for land and buildings
under the Money Lien is repayable in 72 monthly
installments based on twelve year amortization
with the remaining principal balance payable after
72 months. Each draw-down for equipment under the
Money Lien is repayable in 60 monthly
installments. The effective rate of each draw-
down is based upon a fixed spread over the then
current six year or five year U.S. Treasury Note
rate for land and buildings, and equipment,
respectively. The Money Lien allows for a maximum
draw-down of $10 million. At December 31, 1997,
the Company has drawn $1.8 million from the Money
Lien. The Money Lien is secured by the service
station and convenience store land, buildings and
equipment having a cost basis of $2.3 million at
December 31, 1997. It is the Company's intention
to draw the remaining balance by the end of fiscal
year 1998.
In addition, the Company has arranged a $6 million
Lease Line of Credit (Lease Line) to finance point-
of-sale computer equipment to be installed at its
company operated retail facilities. At December 31,
1997, the Company has drawn $3.9 million of the
Lease Line and expects to utilize the remaining
balance in 1998.
The Company's management is involved in a continual
process of evaluating growth opportunities in its
core business as well as its capital resource
alternatives. Total capital expenditures and
deferred turnaround costs in 1998 are projected to
approximate $57 million. The capital expenditures
relate primarily to planned enhancements at the
Company's refineries, retail unit improvements and
to company-wide environmental requirements. The
Company believes that cash provided from its
operating activities, together with other available
sources of liquidity, including the First Restated
Credit Agreement or a successor agreement, will be
sufficient over the next several years to make
required payments of principal and interest on its
debt, permit anticipated capital expenditures and
fund the Company's working capital requirements.
The First Restated Credit Agreement expires on
September 30, 1999 but may be extended for a period
of one year upon agreement between the Company and a
majority of the participant banks. Any major
acquisition would likely require a combination of
additional debt and equity.
The Company places its temporary cash investments in
high credit quality financial instruments which are
in accordance with the covenants of the Company's
financing agreements. These securities mature
within ninety days, and, therefore, bear minimal
risk. The Company has not experienced any losses on
its 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 net income in
the summer months than at other times of the year.
Gasoline sales, both at the Crown multi-pumps and
convenience stores, are also somewhat seasonal in
nature and, therefore, related revenues may vary
during the year. The 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 $1 million.
The Company has disclosed in Note I of Notes to
Consolidated Financial Statements on page 35 of this
report, various contingencies which involve
litigation, environmental liabilities and
examinations by the Internal Revenue Service.
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, the Company has concluded, after
consultation with counsel, that there is no
reasonable basis to believe that the ultimate
resolution of any of these contingencies will have a
material adverse effect on the Company.
Additionally, as discussed in Item 3. Legal
Proceedings on page 8 of this report, the Company's
collective bargaining agreement at its Pasadena
refinery expired on February 1, 1996, and on
February 5, 1996, the Company invoked a lock out of
employees in the collective bargaining unit. The
Company has been operating the Pasadena refinery
without interruption since the lock out and intends
to continue full operations until an agreement is
reached with the collective bargaining unit.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's Consolidated Financial Statements
are prepared on the historical cost method of
accounting and, as a result, do not reflect
changes in the dollar's purchasing power. 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 and 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.
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 demand for crude oil and
refined products, which is largely driven by
the condition of local and worldwide economies,
although seasonality and weather patterns 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.
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 significantly
fluctuate 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 lag time 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 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.
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 are used to minimize the
exposure of the Company's refining margins to
crude oil and refined product fluctuations.
The Company also 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 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
discussed below. 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.
The following table estimates the sensitivity
of the Company's income before taxes to price
changes which impact its refining and retail
margins based on a representative production
rate for the Refineries and a representative
amount of total gasoline sold at the Company's
retail units:
EARNINGS SENSITIVITY CHANGE ANNUAL IMPACT
-------------------- ------- -------------
Refining margin $0.10/bbl $ 5.8 million
Retail margin $0.01/gal $ 5.3 million
The Company conducts environmental assessments
and remediation efforts at multiple locations,
including operating facilities and previously
owned or operated facilities. 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
the amount can be reasonably estimated.
Accruals for losses from environmental
remediation obligations generally are
recognized no later than completion of the
remedial 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.
Expenditures for equipment necessary for
environmental issues relating to ongoing
operations are capitalized.
The Company's crude oil, refined products and
convenience store merchandise and gasoline
inventories are valued at the lower of cost
(based on the last-in, first-out or LIFO method
of accounting) or market, with the exception of
crude oil inventory held for resale which is
valued at the lower of cost (based on the first-
in first-out or FIFO method of accounting) or
market. Under the LIFO method, the effects of
price increases and decreases in crude oil and
other feedstocks are charged directly to the
cost of refined products sold in the period
that such price changes occur. In periods of
rising prices, the LIFO method may cause
reported operating income to be lower than
would otherwise result from the use of the FIFO
method. Conversely, in periods of falling
prices the LIFO method may cause reported
operating income to be higher than would
otherwise result from the use of the FIFO
method. In addition, the Company's use of the
LIFO method understates the value of
inventories on the Company's consolidated
balance sheet as compared to the value of
inventories under the FIFO method.
[This space intentionally left blank]
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer
programs being written using two digits rather
than four to determine the applicable year.
Any of the Company's computer programs that
have time-sensitive software may recognize a
date using "00" as the year 1900 rather than
the year 2000. This could result in a system
failure or miscalculations causing disruptions
of operations, including , among other things,
a temporary inability to process transactions,
send invoices, or engage in similar normal
business activities.
In 1993, the Company began a long-term project
which encompassed an in-depth evaluation of all
current business processes and the redesign of
any of these processes where significant
opportunity for improvement was identified. One
of the results of this project was the decision
to purchase and implement a state-of-the-art
fully integrated software package which will
allow for operating and record keeping
efficiencies to more quickly provide the
Company's management with the information it
needs to make operating decisions. This
software is Year 2000 ready. As such, the
costs associated with the Year 2000 Issue are
inseparable from the costs of implementing the
new fully integrated software and no separate
estimate is necessary. Project plans call for
the completion of the implementation and
testing of this software prior to any
anticipated Year 2000 impact.
The Company plans to initiate formal
communications with all of its significant
suppliers and large customers during 1998 to
determine the extent to which the Company's
interface systems are vulnerable to those third
parties' failure to remediate their own Year
2000 Issues. The estimated costs and time
associated with the impact of third party Year
2000 Issues cannot be made until the evaluation
of the extent of the Company's vulnerability to
suppliers and large customers Year 2000 issues
is completed.
Based on management's best estimates, which
were derived utilizing numerous assumptions of
future events, including the continued
availability of certain resources and other
factors, the Company believes it will complete
the implementation of the new fully integrated
software prior to any adverse Year 2000 impact.
However, there can be no guarantee that these
estimates will be achieved and the actual date
of full implementation could differ materially
from the estimated date. Specific factors that
might cause such material differences include,
but are not limited to, the availability of
personnel knowledgeable with this software and
similar uncertainties.
[This space intentionally left blank]
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
December 31
1997 1996
--------- -----------
--
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36,622 $
36,031
Accounts receivable, less
allowance for
doubtful accounts (1997--$738;
1996-- 102,529 113,447
$1,079)
Recoverable income taxes 3,819 4,820
Inventories 109,279 66,004
Other current assets 2,097 13,207
--------- -----------
--
TOTAL CURRENT ASSETS 254,346 233,509
INVESTMENTS AND DEFERRED CHARGES 44,448 33,807
PROPERTY, PLANT AND EQUIPMENT
Land 45,148 44,438
Petroleum refineries 364,081 374,490
Marketing facilities 200,011 195,366
Pipelines and other equipment 25,823 25,944
--------- -----------
--
635,063 640,238
Less allowance for depreciation 339,854 342,321
--------- -----------
--
NET PROPERTY, PLANT AND 295,209 297,917
EQUIPMENT
--------- -----------
--
$594,003 $ 565,233
========= ===========
==
<FN>
See notes to consolidated
financial statements
</FN>
CONSOLIDATED BALANCE SHEETS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
December 31
1997 1996
--------- ----------
-- -
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable:
Crude oil and refined products $104,391 $112,532
Other 20,366 17,130
Accrued liabilities 46,766 49,594
Current portion of long-term debt 1,498 1,379
--------- --------
- --
TOTAL CURRENT LIABILITIES 173,021 180,635
LONG-TERM DEBT 127,506 127,196
DEFERRED INCOME TAXES 43,854 30,535
OTHER DEFERRED LIABILITIES 42,267 39,492
COMMON STOCKHOLDERS' EQUITY
Class A Common Stock--par value $5
per
share:
Authorized--7,500,000 shares;
issued and outstanding shares--
4,817,394 in 1997 and in 1996 24,087 24,087
Class B Common Stock--par value $5
per
share:
Authorized--7,500,000 shares;
issued and outstanding shares--
5,240,774 in 1997 and 5,165,786 in 26,204 25,829
1996
Additional paid-in capital 94,655 91,817
Unearned restricted stock (5,291) (2,951
)
Retained Earnings 67,700 48,593
--------- --------
- --
TOTAL COMMON STOCKHOLDERS' EQUITY 207,355 187,375
--------- --------
- --
$594,003 $565,233
========= ========
= ==
<FN>
See notes to consolidated
financial statements
</FN>
CONSOLIDATED STATEMENTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
Year Ended December 31
1997 1996 1995
--------- --------- ---------
- - -
REVENUES
Sales and operating revenues $1,602, $1,635,2 $1,451,
624 76 349
OPERATING COSTS AND EXPENSES
Costs and operating expenses 1,438, 1,340,596
879 1,498,647
Selling and administrative expenses 88,811 96,098 82,792
Depreciation and amortization 31,623 31,756 36,640
Sales, abandonments and write-down
of
property, plant and equipment:
Write-down of property, plant and
equipment 80,524
Sales and abandonments of property, 402 217 (311)
plant and equipment
--------- --------- ---------
-- - -
1,559,7 1,626,7 1,540,
15 18 241
--------- --------- ---------
- - -
4 8 (
OPERATING INCOME (LOSS) 2,909 ,558 88,892)
2 2 5
Interest and other income ,617 ,001 ,351
( ( (
Interest expense 14,168) 13,982) 14,948)
--------- --------- ---------
- - -
INCOME (LOSS) BEFORE INCOME TAXES AND 3 ( (
EXTRAORDINARY ITEM 1,358 3,423 ) 98,489)
INCOME TAX EXPENSE (BENEFIT) 12,123 (656) (31,122)
--------- --------- ---------
- - -
INCOME (LOSS) BEFORE EXTRAORDINARY 19,235 (2,767) (67,367)
ITEM
EXTRAORDINARY (LOSS) FROM EARLY
EXTINGUISHMENT
OF DEBT (NET OF INCOME TAX BENEFIT (3,257)
OF $2,039)
--------- --------- ---------
- - -
NET INCOME (LOSS) $19,235 $(2,767) $(70,624
)
========= ========= =========
= = =
EARNINGS PER COMMON SHARE:
Income (Loss) Before Extraordinary $ 1.97 $ (.28) $(6.95)
Item
Extraordinary (Loss) from Early
Extinguishment of Debt (.33)
--------- --------- ---------
- - -
Net Income (Loss) $ 1.97 $ (.28) $(7.28)
========= ========= =========
= = =
EARNINGS PER COMMON SHARE - ASSUMING
DILUTION:
Income (Loss) Before Extraordinary $ 1.94 $ (.28) $(6.95)
Item
Extraordinary (Loss) from Early
Extinguishment of Debt (.33)
--------- --------- ---------
- - -
Net Income (Loss) $ 1.94 $ (.28) $(7.28)
========= ========= =========
= = =
<FN>
See notes to consolidated financial statements
</FN>
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 AdditionalUnearned
Common Stock Common Stock Paid-In RestricteRetained
d
Shares Amount Shares Amount Capital Stock Earnings Total
-------------------------- ------- ------------------------- -------
-- - - - -
BALANCE AT
JANUARY 1, 19954,817,392$24,087$4,985,70 $24,929 $ 90,549$ (1,266 $122,162 $260,
6 ) 461
Net (loss) for (70,624 (70,624 )
1995 )
Adjustment to
minimum pension
liability, net
of deferred
income
tax benefit of
$174 (324 (324)
)
Stock registered
to participants
of stock
incentive
plans 149,800 749 1,273 (2,022
)
Market value
adjustments to
Unearned
Restricted 445 (445)
Stock
Other 52 (18) (18)
-------------------------- ------- ------------------------- -------
- - --
BALANCE AT
DECEMBER 31, 4,817,39224,087 5,135,558 25,678 92,249 (3,733 51,214 189,495
1995 )
Net (loss) for (2,767 (2,767 )
1996 )
Adjustment to
minimum
pension
liability, net
of deferred
income taxes
of $79 146 146
Stock registered
to participants
of stock
incentive
plans 45,450 227 466 (693
)
Cancellation of
non-vested stock
registered to
participants
of
stock
incentive (51,050 (255) (591) 846
plans )
Stock option
exercises 35,828 179 337 516
Market value
adjustments to
Unearned
Restricted Stock (629) 629
Other (15) (15)
2
-------------------------- ------- ------------------------- -------
- - --
BALANCE AT
DECEMBER 31, 4,817,39424,087 5,165,786 25,829 91,817 (2,951 48,593 187,375
1996 of $133 )
Net income for 19,235 19,235
1997
Adjustment to
minimum pension
liability,
net of
deferred
income tax
benefit of (128 (128)
$69 )
Stock registered
to participants
of stock
incentive
plans 92,700 464 736 (1,200)
Cancellation of
non-vested stock
registered to
participants
of
stock
incentive (81,700 (409) (571) 980
plans )
Stock option
exercises 63,988 320 557 877
Market value
adjustments to
Unearned
Restricted 2,120 (2,120
Stock )
Other (4) (4)
-------------------------- ------- ------------------------- -------
- -
BALANCE AT
DECEMBER 31, 4,817,394$24,0875,240,774 $26,204 $94,655 $(5,291 $67,700 $207,
1997 OF $133 ) 355
========================== ======= ================ ======== =======
=
<FN>
See notes to consolidated financial statements
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars)
Year Ended December 31
1997 1996 1995
---------- ----------- ---------
-- -- --
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $19,235 $ (2,767 $(70,624
) )
Reconciling items from net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 31,623 31,756 36,640
and equipment 402 217 (311)
Write-down from
implementation of SFAS No. 121
80,524
Equity loss (earnings) in
unconsolidated subsidiaries 500 (2,369)
Deferred income taxes 10,310 (1,406 (25,986)
)
Other deferred items (1,446) 1,837 1,880
Extraordinary loss 3,257
Changes in assets and
liabilities
Accounts receivable 10,918 (7,648 23,185
)
Inventories (43,275) 30,021 (1,092)
Other current assets 11,110 (10,612 (1,331)
)
Crude oil and refined
products payable (8,141) 496 (38,841)
Other accounts payable 3,236 (7,157 (5,701)
)
Accrued liabilities and other
deferred liabilities 2,443 (10,250 ) 15,288
Recoverable and deferred
income taxes 4,010 3,263 (6,245)
Deferred financing costs (4,102)
NET CASH PROVIDED BY ---------- ----------- ---------
OPERATING ACTIVITIES - 27,750 -
40,925 4,172
========== =========== =========
= =
CASH FLOWS FROM INVESTMENT
ACTIVITIES
Capital expenditures (31,924) (24,101 (41,010)
)
Proceeds from sales of
property, plant and
equipment 7,337 2,494 6,359
Investment in subsidiaries 136 6,778
Capitalization of software
costs (3,946) (6,077 (6,908)
)
Deferred turnaround
maintenance and other (13,588) (4,846 ) (2,637)
NET CASH (USED IN) ---------- ----------- ---------
INVESTMENT ACTIVITIES - (32,530 -
(41,985) ) (37,418)
========== =========== =========
= =
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from debt and credit
agreement borrowings 27,776 108,000 142,711
Repayments of debt and credit
agreement borrowings (27,378) (109,522) (122,755
)
Net repayments (issuances)of
long-term notes receivable 376 (228 ) 467
Issuances of common stock 877 516
NET CASH PROVIDED BY (USED ---------- ----------- ---------
IN) FINANCING ACTIVITIES 1,651 (1,234 -
) 20,423
========== =========== =========
=
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 591 (6,014 ) (12,823)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 36,031 42,045 54,868
---------- ----------- ---------
-
CASH AND CASH EQUIVALENTS AT
END OF YEAR $36,622 $ 36,031 $42,045
========== =========== =========
=
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year
for:
Interest (net of amount
capitalized) $13,232 $ 13,007 $19,670
Income taxes 2,746 904 9,490
<FN>
See notes to consolidated financial statements
</FN>
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 one business
segment 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 336
gasoline stations, convenience stores and mini-
marts located in the Mid-Atlantic and
Southeastern United States.
Crude oil and refined products are the
Company's principal raw materials and finished
goods, respectively. The price of crude oil
and refined products are subject to worldwide
market forces of supply and demand. Prices can
be volatile and fluctuations influence the
Company's financial results.
Employment at the Company's Pasadena and Tyler
refineries represent approximately 11% and 8%,
respectively, of the Company's total employment
at December 31, 1997. Additionally,
approximately 67% of the Pasadena refinery
employees and approximately 69% of the Tyler
refinery employees are subject to collective
bargaining agreements. The Company's collective
bargaining agreement with the Oil Chemical &
Atomic Workers Union (OCAW) covering employees
at the Pasadena refinery expired on February 1,
1996. The Pasadena refinery employees subject
to the OCAW agreement were locked out by the
Company on February 5, 1996. Negotiations for
a new agreement are ongoing.
Locot Corporation, a wholly-owned subsidiary of
the Company, is the parent company of La Gloria
Oil and Gas Company (La Gloria) which operates
the Tyler refinery, a pipeline gathering system
in Texas and product terminals located along
the Texas Eastern Products Pipeline system.
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
intercompany accounts and transactions have
been eliminated. The Company's investments in
unconsolidated subsidiaries are accounted for
under the equity method.
USE OF ESTIMATES: The preparation of financial
statements in conformity with generally
accepted accounting principles 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.
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.
PROPERTY, PLANT AND EQUIPMENT: Property, plant
and equipment is carried at cost. Costs
assigned to property, plant and equipment of
acquired businesses are based on estimated fair
value at the date of acquisition. 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, which
generally ranges from 24 to 48 months.
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 income.
Effective October 1, 1995, the Company adopted
Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be
Disposed Of," (SFAS 121). SFAS 121 requires
that long-lived assets and certain identifiable
intangibles, including goodwill, to be held and
used by an entity, be reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount of the
asset(s) may not be recoverable. At the time
of adoption, the decline in operating margins
and continuing operating losses were indicators
of potential impairment at the Company's Tyler
refinery. The estimated undiscounted cash
flows anticipated from operating this refinery
indicated that a write-down to fair market
value was required under SFAS 121. This write-
down from the initial adoption of SFAS 121
resulted in a charge to income before income
taxes of $80.5 million which is included in the
Statement of Operations as Write-downs of
property, plant and equipment. The estimated
fair value of these assets was determined by an
independent appraisal.
SOFTWARE CAPITALIZATION: Costs of developing
and implementing software designed for the
Company's own use are capitalized 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.
INTEREST CAPITALIZATION: Interest costs
incurred during the construction and
preoperating stages of significant construction
or development projects is capitalized and
subsequently amortized by charges to earnings
over the useful lives of the related assets.
AMORTIZATION OF GOODWILL: The excess purchase
price of acquisitions of businesses over the
estimated fair value of assets acquired is
being amortized on a straight-line basis over
20 years.
DERIVATIVE FINANCIAL INSTRUMENTS: Futures,
forwards and exchange traded options are used
to minimize the exposure of the Company's
refining margins to crude oil and refined
product price fluctuations. The Company also
uses the futures market to 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.
Futures, forwards and exchange traded options
entered into with commodities brokers and other
integrated oil and gas companies are utilized
to execute the Company's strategies. 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
represent the difference between the market
price of refined products and the price of the
derivative financial instrument, inclusive of
refining costs. Individual transaction
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 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
refined product profit margins.
CREDIT RISK - The Company is potentially
subjected to concentrations of credit risk with
accounts receivable and futures, forwards and
exchange traded options for crude oil and
finished products. Because the Company has a
large and diverse customer base with no single
customer accounting for a significant
percentage of accounts receivable, there was no
material concentration of credit risk in these
accounts at December 31, 1997. The Company
evaluates the credit worthiness of the
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.
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
proforma disclosures of net income and earnings
per share calculated using the fair value based
method.
RECENTLY ISSUED PRONOUNCEMENTS -In June 1997,
the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive
Income (SFAS No. 130), which applies to all
enterprises that provide a full set of
financial statements that report financial
position, results of operations, and cash
flows. The provisions of SFAS No. 130 are
effective for fiscal years beginning after
December 15, 1997 with earlier application
permitted. Since the Company currently has no
material items of other comprehensive income as
defined by this Statement, the adoption of SFAS
No. 130 in the first quarter of 1998 is not
expected to have an impact on the Company's
financial statements.
Also in June 1997, the FASB issued Statement of
Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and
Related Information (SFAS No. 131), which
applies to all public business enterprises that
are required to file financial statements with
the Securities and Exchange Commission or that
provide financial statements for the purpose of
issuing any class of securities in a public
market. SFAS No. 131 requires that public
business enterprises report certain information
about operating segments in complete annual
sets of financial statements and in condensed
financial statements of interim periods issued
to shareholders. This Statement is effective
for fiscal years beginning after December 15,
1997 with earlier application encouraged. This
Statement need not be applied to interim
financial statements in the initial year of
application. The Company expects to adopt SFAS
No. 131 in the fourth quarter of 1998.
NOTE B--INVENTORIES
Inventories consist of the following:
December 31
1996
1997
----- ------
-- -
(thousands of
dollars)
Crude oil $42,164 $22,150
Refined products 79,905 8
4,516
-------- -------
-
Total inventories at FIFO
(approximates current cost) 122,069 1
06,666
LIFO allowance (25,586 (52,988
) )
-------- -------
-
Total crude oil and refined products 96,483 53,678
-------- -------
-
Merchandise inventory at FIFO
(approximates current cost) 6,806 6,001
LIFO allowance (1,929 (1,861
) )
-------- -------
- --
Total merchandise 4,877 4,140
-------- -------
- --
Materials and supplies inventory at 7,919 8,186
FIFO
-------- -------
- --
Total Inventory $109,279 $66,004
======== =======
= ==
<FN>
As a result of a reduction in LIFO inventories, which were
carried at lower costs prevailing in prior years, the net
loss for 1996 decreased by approximately $9.4 million
($.96 per share).
</FN>
NOTE C--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
December 31
1997 1996
-------- ------
-- ----
(thousands of
dollars)
Unsecured 10.875% Senior Notes $124,779 $124,748
Purchase Money Liens 3,859 3,330
Other obligations 366 497
-------- --------
- 1 128,575
29,004
Less current portion 1,498 1,379
-------- --------
Long-Term Debt $127,506 $127,196
======== ========
<FN>
The aggregate maturities of long-term debt through 2001
are as follows (in thousands):
1998 - $1,498; 1999 - $983; 2000 - $152; 2001 - $127;
2002 - $86.
</FN>
On January 24, 1995, the Company completed the
sale of $125 million of unsecured 10.875%
Senior Notes due February 1, 2005 priced at
99.75% (Notes). Approximately $55 million of
the net proceeds from the sale was used to
retire the Company's outstanding 10.42% Senior
Notes, including a net prepayment premium of
$3.4 million, and $8 million was used to reduce
amounts outstanding under the Company's
unsecured bank lines. The Notes were issued
under an Indenture which includes certain
restrictions and limitations customary with
senior indebtedness of this type including, but
not limited to, the payment of dividends and
the repurchase of capital stock. The
retirement of the Company's outstanding 10.42%
Senior Notes resulted in a net extraordinary
loss in the first quarter of 1995 of $3.3
million.
Effective as of August 1, 1997, the Company
entered into the First Restated Credit
Agreement (Restated Credit Agreement) with
NationsBank of Texas, N.A., as administrative
agent and letter of credit agent, and
BankBoston, N.A. as documentation agent and six
other participant banks. The Restated Credit
Agreement is essentially a renewal of the
Credit Agreement dated as of September 25,
1995, as amended. Under the Restated Credit
Agreement, the banks have committed a maximum
of $110 million to the Company for cash
borrowings and letters of credit. The
Agreement allows for interest on outstanding
borrowings to be computed under one of two
methods based on the Base Rate or the London
Interbank Offered Rate (all as defined). The
Restated Credit Agreement limits indebtedness
(as defined) and cash dividends and requires
the maintenance of various covenants including,
but not limited to, minimum consolidated FIFO
tangible net worth, minimum working capital,
minimum FIFO net income or (loss) and a
cumulative adjusted liquidity capacity test
(all as defined). The Company intends to use
the Restated Credit Agreement for general
corporate and working capital purposes.
As of December 31, 1997, the Company had
outstanding irrevocable standby letters of
credit in the principal amount of $17.7
million. Unused commitments under the terms of
the Credit Agreement totaling $92.3 million
were available for future borrowings and
issuance of letters of credit at December 31,
1997. The Company pays an annual commitment
fee on the unused portion of the credit line.
The Purchase Money Lien effective December 1,
1993 is secured by certain service station
equipment and office furnishings having a cost
basis of $6.5 million. The effective rate for
the Purchase Money Lien is 6.65%. Ninety
percent of the principal is repayable in 60
monthly installments with a balloon payment of
10% of the principal payable in January 1999.
Effective August 11, 1997, the Company entered
into a Purchase Money Lien (Money Lien) for the
financing of land, buildings and equipment at
certain service station and convenience store
locations. Each borrowing for land and
buildings under the Money Lien is repayable in
72 monthly installments based on twelve year
amortization with the remaining principal
balance payable after 72 months. Each
borrowing for equipment under the Money Lien is
repayable in 60 monthly installments. The
effective rate of each borrowing is based upon
a fixed spread over the then current six year
or five year U.S. Treasury Note rate for land
and buildings, and equipment, respectively.
The Money Lien allows for a maximum borrowing
of $10 million. Borrowings at December 31,
1997 under the Money Lien were approximately
$1.8 million and are secured by the service
station and convenience store land, buildings
and equipment having a cost basis of $2.3
million at December 31, 1997. It is the
Company's intention to draw the remaining
balance by the end of fiscal year 1998.
In addition, the Company has arranged a $6
million Lease Line of Credit (Lease Line) to
finance point-of-sale computer equipment to be
installed at its company operated retail
facilities. At December 31, 1997, the Company
has drawn $3.9 million of the Lease Line and
expects to utilize the remaining balance in
1998.
The following interest costs were charged to
pre-tax income:
Year Ended December 31
1997 1996 1995
----- ------ ------
-
(thousands of dollars)
Total interest costs incurred $16,330 $15,822 $15,234
Less: Capitalized interest 2,162 1,840 286
-------- -------- --------
- -
Interest Expense $14,168 $13,982 $14,948
======== ======== ========
= =
NOTE D--CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES
The net deferred loss from futures contracts
included in crude oil and refined product
hedging strategies was $1.2 million and $3.4
million at December 31, 1997 and 1996,
respectively. Included in these hedging
strategies are futures contracts maturing from
February 1998 to April 1998. The Company is
using these contracts to defer the pricing of
approximately 7% of its crude oil commitments,
fix the supply cost of crude oil on
approximately 11% of supply and fix the margin
on approximately 4% of its refined products, for
the aforementioned period.
NOTE E--INCOME TAXES
Significant components of the Company's deferred
tax liabilities and assets are as follows:
1996
1997
--------- ---------
-
(thousands of
dollars)
Depreciation and amortization $(66,958) $(63,661
)
Other (26,260) (26,066
)
--------- --------
- -
Total deferred tax liabilities (93,218) (89,727
)
Deferred tax assets:
Postretirement and pension 9,067 7,427
obligations
Environmental, litigation and other 8
accruals ,240 9,796
Construction and inventory cost not 9
currently deductible ,758 11,765
Benefit of future tax NOL carry 5,630 14,869
forwards
Other 16,669 15,335
--------- ---------
- -
Total deferred tax assets
49,364 59,192
--------- ---------
- -
Net deferred tax liabilities
$(43,854) $(30,535
)
========= =========
= =
No valuation allowance is considered necessary
for the above deferred tax assets. The company
has tax credit carryforwards of $303,000 which
expire in the years 2008 through 2010, an
alternative minimum tax credit carryforward
into 1998 of $1,650,000 and net operating loss
carryforwards of approximately $31,736,000
which expire in the years 2009 through 2011.
Recoverable income taxes include an income tax
receivable for the estimated benefit from the
net operating loss carryforwards that will be
used in 1998.
Significant components of the income tax (benefit) for
the years ended December 31 follows:
1997 1996 1995
------ ------ -----
- - -
(thousands of dollars)
Current:
Federal $1,062 $ 0 $ (5,3
72)
State 750 750 236
-------- -------- --------
- -
Total Current 1,812 750 (5,136)
Deferred:
Federal 10,062 (911 (25,1
) 78)
State 249 (495 (808)
)
-------- -------- --------
- -
Total Deferred 10,311 (1,406 (25,986
) )
-------- -------- --------
- -
INCOME TAX EXPENSE (BENEFIT) $12,123 $ $(31,122
(656 ) )
======== ======== ========
= = =
<FN>
Current state tax provision includes $750,000 of
franchise taxes for each of the years ended December 31,
1997, 1996 and 1995.
</FN>
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:
1997 1996 1995
-------- -------- --------
-- -- --
(thousands of dollars)
Income tax expense(benefit)
calculated
at the statutory federal income
tax rate $10,975 $(1,198 $(34,472)
)
Amortization of goodwill and 1 2
purchase adjustment 45 145 ,726
State taxes (net of federal 650 166 (572)
benefit)
Other 353 231 1,196
-------- -------- --------
- -- --
INCOME TAX EXPENSE (BENEFIT) $12,123 $ (656 $(31,122)
)
======== ======== ========
= == ==
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 260,700, 249,700 and 255,300 shares of
Performance Vested Restricted Stock (PVRS)
shares registered to participants in the 1994
Long-Term Incentive Plan (Plan) at December 31,
1997, 1996 and 1995, respectively. The PVRS
shares are not considered outstanding for
earnings per share calculations until the shares
are released to the Plan participants.
[This space intentionally left blank]
The following table provides a reconciliation of the
basic and diluted earnings per share calculations:
Year Ended December 31
--------------------------------
1997 1996 1995
--------- --------- ---------
(dollars in thousands, except per share
data)
INCOME (LOSS) APPLICABLE TO
COMMON SHARES
Income (loss) before $ 19,235 $(2,767 $ (67,367)
extraordinary item )
Extraordinary (loss) from early
extinguishment of debt (3,257
)
--------- --------- ---------
Net income (loss) $ 19,235 $ (2,767 $(70,624
) )
========= ========= =========
Common shares outstanding at
January 1,
1997, 1996 and 1995, respectively 9,983,180 9,952,950 9,803,098
Restricted shares held by the
Company at January 1, 1997, 1996
and 1995, (249,700 (255,300 (105,500
respectively.................. ) ) )
.......
Weighted average effect of shares
of
common stock issued for stock 18,531 24,043
option
exercises.....................
.......
Weighted average effect of 52
shares of common stock issued in
October
1995 13
---------- --------- ---------
-
Weighted average number of common
shares outstanding, as adjusted
at December 31,
1996 and 1995, respectively 9,752,011 9,721,693 9,697,611
Effect of Dilutive Securities:
Employee stock options 113,060
Restricted stock awards 33,833
--------- --------- ---------
Weighted average number of common
shares outstanding, as adjusted
at
December 31, 1997, 1996 and
1995, respectively - assuming
dilution 9,898,904 9,721,693 9,697,611
========= ========= =========
EARNINGS PER SHARE:
Income (loss) before
extraordinary item $ 1.97 $ (.28) $ (6.95)
Extraordinary (loss) from early
extinguishment of debt (.33
)
--------- --------- ---------
Net income (loss) $ 1.97 $ (.28) $(7.28
)
========= ========= =========
EARNINGS PER SHARE - ASSUMING
DILUTION:
Income (loss) before
extraordinary item $ 1.94 $ (.28) $(6.95
)
Extraordinary (loss) from early
extinguishment of debt (.33
)
-------- --------- ---------
Net income (loss) $ 1.94 $ (.28) $(7.28
)
======== ========= =========
<FN>
At December 31, 1997, the Company had non-qualified stock
options outstanding representing 173,717 potential common
shares whose exercise price exceeded the average market
price for the year ended December 31, 1997. In
accordance with Statement of Financial Accounting
Standards No. 128, Earnings Per Share, these shares were
not assumed to be exercised and therefore were not
included in the diluted earnings per share calculation.
</FN>
NOTE G--LONG-TERM INCENTIVE PLAN
Under the terms of the 1994 Long-term Incentive
Plan (Plan), the Company may distribute to
selected 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.
Performance Vested Restricted Stock (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,
1997, 260,700 shares of PVRS have been
registered in 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 are 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
358,892 and 399,536 at December 31, 1997 and
1996, respectively.
Detail of the Company's stock options are as follows:
Weighted
Common Price Average
Shares Range Price Per
Per Share Share
--------- ---------- -----------
- - --
1994 Long-Term Incentive
Plan
--------------------------
---
Outstanding - January 1, 108,850 $16.13 - $16.84
1995 $16.88
Granted - 1995 396,150 $12.81 - $13.37
--------- $13.75
--
Outstanding - December 31, 505,000 $12.81 - $14.11
1995 --------- $16.88
--
Shares Exercisable at 36,283 $16.13 - $16.84
December ========= $16.88
31, 1995 ==
Granted - 1996 106,500 $13.75 - $17.01
$19.50
Exercised - 1996 (29,072) $12.81 - $14.60
$16.88
Canceled - 1996 (97,872) $12.81 - $14.26
--------- $17.69
--
Outstanding - December 31, 484,556 $12.81 - $14.69
1996 ========= $19.50
==
Shares Exercisable at 156,756 $12.81 - $14.59
December ========= $16.88
31, 1996 ==
Granted - 1997 166,600 $11.69 $11.69
Exercised - 1997 (4,963) $12.81 - $13.24
$16.13
Canceled - 1997 (4,536) $12.81 - $15.37
--------- $17.06
--
Outstanding - December 31, 641,657 $12.81 - $13.92
1997 ========= $19.50
==
Shares Exercisable at
December 310,142 $12.81 - $14.66
31, 1997 ========= $19.50
==
1995 Management Stock Option
Plan
--------------------------
-----
Granted - 1995 461,760 $13.75 - $13.77
--------- $16.06
-
Outstanding - December 31, $13.75 - $13.77
1995 461,760 $16.06
Exercised - 1996 (6,756) $13.75 $13.75
Canceled - 1996 (24,524) $13.75 $13.75
---------
-
Outstanding - December 31, $13.75 - $13.77
1996 430,480 $16.06
=========
=
Shares exercisable at
December 143,493 $13.75 - $13.77
31, 1996 ========= $16.06
=
Exercised - 1997 (59,025) $13.75 $13.75
Canceled - 1997 (32,704) $13.75 $13.75
---------
-
Outstanding - December 31, $13.75 - $13.78
1997 338,751 $16.06
=========
=
Shares exercisable at
December 207,388 $13.75 - $13.78
31, 1997 ========= $16.06
=
Total outstanding - December
31, 980,408 $12.81 - $13.87
1997 ========= $19.50
=
Total exercisable - December
31, 517,530 $12.81 - $14.30
1997 ========= $19.50
=
The weighted average remaining life for options
outstanding at December 31, 1997 was
approximately eight years for the Long Term
Incentive Plan and also approximately eight
years for the 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. The weighted
average fair value at the date of grant for
options granted under the Long Term Incentive
Plan was $2.31, $3.36 and $3.88 for 1997, 1996
and 1995, respectively. The fair value at the
date of grant for options granted under the
Management Stock Option Plan was $4.00 for
1995. There were no grants under the
Management Stock Option Plan in 1997 or 1996.
The fair value of options at date of grant was
estimated using the Black-Scholes model with
the following assumptions:
LONG TERM INCENTIVE PLAN 1997 1996 1995
--------- --------- ----------
-
Expected life (years) 3 3 3
Risk Free Interest Rate 5.67% 6.04% 6.04%
Volatility 27.0% 26.0% 26.0%
Dividend Yield 0.0% 0.0% 0.0%
MANAGEMENT STOCK OPTION PLAN
Expected life (years) - - 3
Risk Free Interest Rate - - 6.04%
Volatility - - 26.0%
Dividend Yield - - 0.0%
The Company granted 92,700, 45,450 and 149,800
of shares of Performance Vested Restricted
Stock Awards during 1997, 1996 and 1995,
respectively. The weighted average fair value
at date of grant for Performance Vested
Restricted Stock Awards granted in 1997, 1996
and 1995 was $11.69, $17.05 and $12.81,
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
Performance Vested Stock Awards was not
significant for 1997 or 1996. There was no
compensation expense recognized in 1995 for
these awards.
Stock-based compensation costs would have
decreased the pretax income by approximately
$1,610,000 ($1,007,000 after tax or $.10 per
basic and diluted share) for the year ended
December 31, 1997 and would have increased the
pretax loss by: $1,320,000 ($805,000 after tax
or $.08 per share) and $1,530,000 ($939,000
after tax or $.10 per share) for the years
ended December 31, 1996 and 1995, respectively,
had the fair values of options and the
Performance Vested Restricted Stock granted
since 1995 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 proforma
effect on net income for 1997, 1996 and 1995 is
not representative of the proforma effect on
net income in future years as it does not
consider the proforma compensation expense
related to grants made prior to 1995.
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 employees' 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.
Net periodic pension costs consisted of the
following components:
Year Ended December 31
1997 1996 1995
------- ------- -------
(thousands of dollars)
Service cost - benefit earned
during the year $4,500 $ 4,737 $4,015
Interest cost on projected 8
benefit obligations 8,787 ,175 7,322
Actual (return) on plan assets (16,705 (13,756 (22,346
) ) )
Total amortization and deferral 6,922 5,202 15,086
------- ------- -------
-
Net periodic pension costs $3,504 $4,358 $4,077
======= ======= =======
=
Assumptions used in the accounting for the defined
benefit plans as of December 31 were:
1997 1996 1995
------- ------- -------
-- -- -
Weighted average discount rates 7.00% 7.50% 7.25%
Rates of increase in compensation 4.00% 4.00% 4.00%
levels
Expected long-term rate of return
on assets 9.75% 9.75% 9.75%
The following table sets forth the funded status of the
plans in which assets exceed accumulated benefits:
December 31
1997 1996
-------- ---------
(thousands of dollars)
Actuarial present value of
benefit obligations:
Vested benefit obligation $105,084 $91,948
-------- ---------
Accumulated benefit obligation $108,350 $94,928
-------- ---------
Projected benefit obligation $126,300 $113,567
Plan assets at fair value 115,402 104,651
-------- ---------
Projected benefit obligation (in
excess of) plan assets (10,898 (8,916)
)
Unrecognized net loss 6,664 7,593
Prior service (benefit) not yet
recognized in net period
pension
cost (1,203 (1,182)
)
Unrecognized net (asset) at
beginning
of year, net of amortization (1,426 (1,693)
)
-------- ---------
Net pension liability $(6,863 $(4,198)
)
======== =========
The following table sets forth the funded status of the
plans in which accumulated benefits exceed assets:
December 31
1997 1996
------- --------
(thousands of dollars)
Actuarial present value of
benefit obligations:
Vested benefit obligation $5,642 $5,258
-------- --------
Accumulated benefit obligation $5,790 $5,400
-------- --------
Projected benefit obligation $6,352 $5,871
Plan assets at fair value 0 0
-------- --------
Projected benefit obligation (in
excess of) plan assets (6,352 (5,871
) )
Unrecognized net loss 1,608 1,320
Prior service cost not yet
recognized
in net periodic pension cost 358 404
Unrecognized net obligation at
beginning of year, net of 917 1,146
amortization
Minimum liability recognized (2,321 (2,399
) )
-------- --------
Net pension liability $ (5,790 $(5,400
) )
======== ========
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
postretirement health care plan is
contributory, with retiree contributions
consisting of copayment of premiums and other
cost sharing features such as deductibles and
coinsurance. Beginning in 1998, the Company
will "cap" 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 the accrued cost of
the Company's postretirement benefit plans
recognized in the Company's Balance Sheet:
December 31
1997 1996
------- -------
-
(thousands of
dollars)
Accumulated postretirement
benefit obligation (APBO):
Retirees $6,383 $6,011
Fully eligible active plan 2,097 1,727
participants
Other active plan participants 4,144 4,564
Unrecognized net (loss) (3,708 (3,730
) )
Unrecognized prior service cost 1,039 1,157
-------- --------
Accrued postretirement benefit $9,955 $9,729
cost
======== ========
<FN>
The weighted average discount rate used in
determining the APBO was 7.00% and 7.50% in 1997 and
1996, respectively.
</FN>
Net periodic postretirement benefit cost include the
following components:
December 31
1997 1996 1995
------ ------ ------
- - -
(thousands of dollars)
Service cost $326 $ 354 $184
Interest cost on accumulated
postretirement benefit obligation 859 856 815
Total amortization and deferral 94 55
(72 )
------ ------ ------
- - -
Net periodic postretirement benefit $1, $1, $927
cost 279 265
====== ====== ======
= = =
The Company's policy is to fund postretirement costs
other than pensions on a pay-as-you-go basis.
A 9% increase in the cost of medical care was assumed
for 1997. As a result of the expense cap in 1998, no
further increase in the cost of medical care will be
assumed in years subsequent to 1997. The medical trend
rate assumption affects the amounts reported. For
example, a 1% increase in the medical trend rate would
increase the APBO by $211,000, and the net periodic
cost by $40,000 for 1997.
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, 1997. 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, in the opinion of
management, there is no reasonable basis to
believe that the eventual outcome of any such
matter or group of related matters will have a
material adverse effect on the Company.
The Company's federal income tax returns for the
fiscal years 1990 through 1995 are currently
under examination by the Internal Revenue
Service. The Company has not received any
Notices of Proposed Adjustments and is not aware
of any such matters which will 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 had recorded a
liability of approximately $11.1 million as of
December 31, 1997 relative to the estimated
costs of a non-capital nature related to
compliance with environmental regulations. This
liability is anticipated 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 recoveries to offset this
liability. Included in Costs and operating
expenses in the Consolidated Statements of
Operations for the years ended December 31,
1996 and 1995 were costs related to
environmental remediation in the amount of $1.6
million and $3.2 million, respectively.
Environmental costs incurred for the year ended
December 31, 1997 were offset against previously
accrued amounts.
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.
It is possible that the ultimate cost, 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 Super fund 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, an
airplane, 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
airplane lease commenced in 1992 and has a term
of seven years. The majority of service station
properties have lease terms of 20 years. The
average lease term for convenience stores is
approximately 13 years. The Corporate
Headquarters office lease commenced in 1993 and
has a ten year term beginning in 1993. Certain
of these leases have renewal provisions.
Future minimum rental payments under
noncancellable operating lease agreements as of
December 31, 1997 are as follows (in thousands):
1998 $ 12,662
1999 12,894
2000 11,509
2001 9,315
2002 8,046
After 2002 24,164
----------
Total Minimum Rental $ 78,590
Payments
==========
Rental expense for the years ended December
31, 1997, 1996 and 1995 was $12,927,000,
$12,935,000 and $12,955,000, respectively.
[This space intentionally left blank]
NOTE K--INVESTMENTS AND DEFERRED CHARGES
Investments and deferred charges consist of the following:
December 31
1997 1996
-------- --------
-
(thousands of
dollars)
Deferred turnarounds $16,874 $ 9,679
System development costs 16,065 12,656
Investments 2,930 1,185
Loan expense 2,168 3,208
Long-term notes receivable 1,715 2,791
Goodwill 1,367 2,541
Intangible pension asset 917 1,147
Other 2,412 600
-------- --------
- -
INVESTMENTS AND DEFERRED CHARGES $44,448 $33,807
======== ========
= =
Accumulated amortization of goodwill was $5,224,000
and $4,809,000 at December 31, 1997 and 1996,
respectively.
NOTE L--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers cash and cash equivalents,
accounts receivable, investments in subsidiaries, 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,
1997 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,
1997 was estimated using a discounted cash flow
analysis, based on the Company's assumed incremental
borrowing rates for similar types of borrowing
arrangements. The fair value of its investments in
subsidiaries is not determinable since these
investments do not have quoted market prices.
The following summarizes the carrying amounts and
related approximate fair values as of December 31, 1997
and 1996, respectively, of the Company's financial
instruments whose carrying amounts do not equal its
fair value:
December 31, 1997 December 31, 1996
Carrying Approxima Carrying Approximate
Amount te Amount Fair Value
------- Fair ------- -----------
Value -- -
-------
(thousands of (thousands of
dollars) dollars)
Assets
Long-Term
Notes Receivable $ 1,715 $ 1,825 $ 2,791 $ 2,667
Liabilities
Long-Term Debt $127,506 $125,867 $127,196 $127,285
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, 1997 and 1996, 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,
1997. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the 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, 1997 and 1996, and the consolidated
results of their operations and their cash flows for
each of the three years in the period ended December
31, 1997, in conformity with generally accepted
accounting principles.
As discussed in Note A of the consolidated financial
statements, in the fourth quarter of 1995, the Company
changed its method of accounting for impairment of long-
lived assets.
/s/---Ernst & Young LLP
Baltimore, Maryland
February 26, 1998
UNAUDITED
QUARTERLY RESULTS OF OPERATIONS
Crown Central Petroleum Corporation and Subsidiaries
(thousands of dollars, except per share amounts)
First Second Third Fourth
Yearly
Quarter Quarter Quarter Quarte
r
1997
Sales and operating
revenues $394,513 $391,4 $412,7 $403,8 $1,602,6
50 98 63 24
Gross profit 32,805 47,4 51,4 32,0 163,7
85 18 37 45
Net income (loss) 724 7,9 11,2 (66 19,2
07 65 1 ) 35
Net income (loss)
per share .07 . 1.16 (.07 1.97
82 )
Net income (loss)
per share -
assuming
dilution .07 1.12 (.07 1.94
.81 )
1996
Sales and operating
revenues $371,091 $431,2 $397,8 $435,0 $1,635,2
08 89 88 76
Gross profit 15,953 35,9 29,8 54,8 136,629
79 21 76
Net (loss) income (13,010) 3,0 (3,6 10,8 (2,767)
12 36 ) 67
Net (loss) income ( . (
per share 1.34 ) 31 (.37) 1.12 .28 )
Net (loss) income
per share -
assuming dilution (1.34) .31 (.37 1.12 (.28)
)
<FN>
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.
Net income (loss) per share for all quarters presented
have been recalculated under the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings Per
Share", (SFAS No. 128) which was adopted in the fourth
quarter of 1997. The adoption of SFAS No. 128 required
restatement of diluted earnings per share for the second
and third quarters of 1997 from those amounts originally
reported but had no effect on earnings per share amounts
originally reported for any other quarters presented.
</FN>
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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Following is a list of Crown Central Petroleum
Corporation's executive officers, their ages and
their positions and offices as of March 1, 1998:
HENRY A. ROSENBERG, JR. (68)
Director since 1955, Chairman of the Board and
Chief Executive Officer since May 1975 and also
President since March 1, 1996.
RANDALL M. TREMBLY (51)
Executive Vice President since April 1996;
Senior Vice President - Refining from July 1995
to March 1996; Vice President - Refining from
December 1991 to June 1995.
JOHN E. WHEELER, JR. (45)
Executive Vice President - Chief Financial
Officer and Treasurer since February 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; Vice
President - Treasurer and Controller from
December 1991 to June 1994.
EDWARD L. ROSENBERG (42)
Executive Vice President - Supply and
Transportation since February 1998; Senior Vice
President - Supply and Transportation from April
1996 to January 1998; Senior Vice President -
Administration - Corporate Development and Long
Range Planning from June 1994 to March 1996;
Senior Vice President - Finance and
Administration from December 1991 to June 1994.
Edward L. Rosenberg is the son of Henry A.
Rosenberg, Jr., and the brother of Frank B.
Rosenberg.
FRANK B. ROSENBERG (39)
Senior Vice President - Marketing since April
1996; Vice President - Marketing from January
1993 to March 1996. Frank B. Rosenberg is the
son of Henry A. Rosenberg, Jr. and the brother
of Edward L. Rosenberg.
THOMAS L. OWSLEY (57)
Vice President - Legal since April 1983.
J. MICHAEL MIMS (48)
Vice President - Human Resources since June 1992
PAUL J. EBNER (40)
Vice President - Shared Services since April
1996; Vice President - Marketing Support
Services from December 1991 to March 1996.
DENNIS W. MARPLE (49)
Vice President - Wholesale Sales and Terminals
since January 1996; General Manager - Wholesale
Sales from February 1995 to December 1995; Vice
President - LaGloria Supply, Trading and
Transportation from October 1989 to January
1995.
JAMES R. EVANS (51)
Vice President - Retail Marketing since June
1996; General Manager of Retail Operations from
February 1995 to May 1996; General Manager of
Direct Operations from November 1993 to January
1995; Division Manager - Retail from October
1990 to October 1993.
WILLIAM A. WOLTERS (51)
Vice President - Supply and Logistics and
Assistant Secretary since February 1998; General
Manager - Raw Material Supply and Assistant
Secretary from September 1985 to January 1998.
DOLORES B. RAWLINGS (60)
Vice President - Secretary since April 1996;
Secretary from November 1990 to March 1996.
JAN L. RIES (49)
Corporate Controller since November 1996;
Marketing Division Controller from January 1992
to October 1996.
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.
The information required in this Item 10
regarding Directors of the Company and all
persons nominated or chosen to become directors
is hereby incorporated by reference to the
definitive Proxy Statement which will be filed
with the Commission pursuant to Regulation 14A
on or about March 27, 1998.
ITEM 11. EXECUTIVE COMPENSATION
The information required in this Item 11
regarding executive compensation is hereby
incorporated by reference to the definitive
Proxy Statement which will be filed with the
Commission pursuant to Regulation 14A on or
about March 27, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The information required in this Item 12
regarding security ownership of certain
beneficial owners and management is hereby
incorporated by reference to the definitive
Proxy Statement which will be filed with the
Commission pursuant to Regulation 14A on or
about March 27, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in this Item 13
regarding certain relationships and related
transactions is hereby incorporated by reference
to the definitive Proxy Statement which will be
filed with the Commission pursuant to Regulation
14A on or about March 27, 1998.
PART IV
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 20
through 37 of this report:
*Consolidated Statements of Operations -- Years ended
December 31, 1997, 1996 and 1995
* Consolidated Balance Sheets -- December 31, 1997
and 1996
* Consolidated Statements of Changes in Common
Stockholders' Equity -- Years ended December 31,
1997, 1996 and 1995
* Consolidated Statements of Cash Flows -- Years
ended December 31, 1997, 1996 and 1995
* Notes to Consolidated Financial Statements --
December 31, 1997
(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 was previously filed with the
Registrants' Proxy Statement dated March 15, 1996 for
the Annual Meeting of Shareholders held on April 25,
1996 as Exhibit A of Appendix A, herein incorporated
by reference.
(b)Bylaws of Crown Central Petroleum Corporation as
amended and restated at February 29, 1996 was
previously filed with the Registrant's Form 10-K for
the year ended December 31, 1995 as Exhibit 3(b),
herein incorporated by reference.
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING
INDENTURES
(a)First Restated Credit Agreement effective as of
August 1, 1997 between the Registrant and various
banks was previously filed with the Registrant's Form
10-Q for the quarter ended June 30, 1997 as Exhibit
4, herein incorporated by reference.
(b)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.
10MATERIAL 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.
(c)Second Amendment effective as of June 29 1995 to
the Crown Central Petroleum Corporation Retirement
Plan.
(d)Third Amendment effective as of December 18, 1997
to the Crown Central Petroleum Corporation Retirement
Plan.
(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) 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.
(h)Amendment effective as of June 26, 1997 to the
Crown Central Employees Savings Plan.
(i)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.
(j)The 1994 Long-Term Incentive Plan was previously
filed as an exhibit to the Registrant's Proxy
Statement dated March 24, 1994, herein incorporated
by reference.
(k)Amendment effective as of September 26, 1996 to
the Crown Central Petroleum Corporation 1994 Long-
Term Incentive Plan was previously filed with the
Registrant's Form 10-Q for the quarter ended
September 30, 1996 as Exhibit 10(d), herein
incorporated by reference.
(l)Annual Performance Incentive Plan for the year
ended December 31, 1998.
(m)Executive Severance Plan effective as of September
26, 1996 was previously filed with the Registrant's
Form 10-Q for the quarter ended September 30, 1996 as
Exhibit 10(a), herein incorporated by reference.
(n)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.
(o)Advisory and Consultancy Agreement dated October
28, 1993 between Jack Africk, Director and Crown
Central Petroleum Corporation was previously filed
with the Registrant's Form 10-Q for the quarter ended
September 30, 1994 as Exhibit 99, 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.
13ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR
QUARTERLY REPORT TO SECURITY HOLDERS
Annual Report Exhibits:
(a) Shareholders' Letter dated February 26, 1998
(b) Operating Results and Key Financial Statistics
(c) Directors and Officers of the Company
(d) Corporate Information
(e) Supplement to the Annual Report - Operating
Statistics
21 SUBSIDIARIES OF THE REGISTRANT
Exhibit 21 is included on page 44 of this report.
23 CONSENT OF INDEPENDENT AUDITORS
Exhibit 23 is included on page 45 of this report.
24 POWER OF ATTORNEY
Exhibit 24 is included on page 46 of this report.
27FINANCIAL DATA SCHEDULE
99 FORM 11-K WILL BE FILED UNDER COVER OF FORM 10-
K/A BY JUNE 30, 1998.
(b)REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for
the three months ended December 31, 1997.
NOTE: Certain exhibits listed on pages 42 and 43 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.
EXHIBIT 21
SUBSIDIARIES
1.Subsidiaries as of December 31, 1997, which are
consolidated in the financial statements of the
Registrant; each subsidiary is 100% owned and doing
business under its own name.
NATION OR STATE
SUBSIDIARY OF INCORPORATION
--------------------------- ----------------
-----
Continental American Delaware
Corporation
Crown Central Holding Maryland
Corporation
Crown Central International United
(U.K.), Limited Kingdom
Crown Central Pipe Line Texas
Company
Crown Gold, Inc. Maryland
The Crown Oil and Gas Company Maryland
Crown-Rancho Pipe Line Texas
Corporation
Crown Stations, Inc. Maryland
Crowncen International N.V. Netherlands
Antilles
Fast Fare, Inc. Delaware
F Z Corporation Maryland
Health Plan Administrators, Maryland
Inc.
La Gloria Oil and Gas Company Delaware
Locot, Inc. Maryland
McMurrey Pipe Line Company Texas
Tiara Insurance Company Vermont
Tiara Properties, Inc. Maryland
T. B. & Company, Inc. Maryland
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 of Crown Central Petroleum
Corporation and Subsidiaries of our report
dated February 26, 1998, with respect to the
consolidated financial statements of Crown
Central Petroleum Corporation and Subsidiaries
included in the Annual Report (Form 10-K) for
the year ended December 31, 1997.
ERNST & YOUNG
LLP
Baltimore, Maryland
March 20, 1998
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, 1997
pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934 and all amendments
thereto.
SIGNATUARE TITLE DATE
- ---------- ----- ----
/S/--Henry A. Rosenberg, Jr. Chairman of the Board,
---------------------------- President and Chief
Henry A. Rosenberg, Jr. Executive Officer 2/26/9
(Principal Executive 8
Officer)
/s/--Jack Africk Director 2/26/9
---------------------------- 8
Jack Africk
/s/--George L. Bunting, Jr. Director 3/9/98
----------------------------
George L. Bunting, Jr.
/s/--Michael F. Dacey Director 2/26/9
---------------------------- 8
Michael F. Dacey
/s/--Thomas M. Gibbons Director 2/26/9
---------------------------- 8
Thomas M. Gibbons
/s/--Patricia A. Goldman Director 2/26/9
---------------------------- 8
Patricia A. Goldman
/s/--William L. Jews Director 3/5/98
- ----------------------------
William L. Jews
/s/--Harold E. Ridley, Jr. Director 2/26/9
---------------------------- 8
Reverend Harold E. Ridley, Jr.,
S .J.
/s/--Sanford V. Schmidt Director 2/26/9
---------------------------- 8
Sandord V. Schmidt
/s/--John E. Wheeler, Jr. Executive Vice 2/26/9
---------------------------- President-Chief 8
John E. Wheeler, Jr. Financial Officer and
Treasurer (Principal
Financial Officer)
/s/--Jan L. Ries Controller 2/26/9
---------------------------- (Chief Accounting 8
Jan L. Ries Officer)
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/---Henry A. Rosenberg, Jr.
--------------------------------
Henry A. Rosenberg, Jr.
Chairman of the Board, President
and Chief Executive Officer
By /s/---Jan L. Ries
--------------------------------
Jan L. Ries
Controller and Chief Accounting
Officer
Date: March 27, 1998
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed
below on March 27, 1998 by the following persons
on behalf of the registrant and in the capacities
indicated:
* *
----------------------------------- ------------------
---------------
Jack Africk, Director William L. Jews, Director
* *
----------------------------------- ------------------
----------------
George L. Bunting, Jr., Director Rev. Harold E.
Ridley, Jr., S.J.,
Director
* *
----------------------------------- ------------------
----------------
Michael F. Dacey, Director Henry A. Rosenberg, Jr.,
Director
Chairman of the Board,
President
and Chief Executive Officer
* *
----------------------------------- ------------------
-----------------
Thomas M. Gibbons, Director Sanford V. Schmidt, Director
*
-----------------------------------
Patricia A. Goldman, Director
*By Power of Attorney (Jan L.
Ries)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.B
<SEQUENCE>2
<TEXT>
Exhibit 10(b)
THIS FIRST AMENDMENT TO THE CROWN CENTRAL PETROLEUM
CORPORATION RETIREMENT PLAN BY CROWN CENTRAL PETROLEUM
CORPORATION, a Maryland Corporation:
WITNESSETH
----------
WHEREAS, Crown Central Petroleum Corporation (the
"Company") maintains the Crown Central Petroleum
Retirement Plan, as amended and restated effective July
1, 1993 (the "Plan"). The Company has the power to
amend the Plan and now wishes to do so.
NOW, THEREFORE, the Plan is amended as follows:
I. Effective January 1, 1994, Section 1.8(b)
is amended by deleting the reference to $200,000
where it appears twice in the second sentence and
by adding a sentence immediately after the first
sentence to read as follows:
For Plan Years beginning on or after January 1,
1994, the amount of a Participant's annual
Compensation that may be taken into account under
the Plan shall not exceed $150,000, or an adjusted
amount determined pursuant to Code sections 401(a)
(17) and 415(d).
II. Effective July 1, 1993, Section 1.8 is
amended by adding a new subsection (c) to read as
follows:
(c) With respect to the Pasadena, Texas
refinery's collective bargaining unit,
Compensation of members of the Workmen's Committee
and the Pension Representative shall include
amounts paid by the Union as reimbursement for
hours lost while attending to authorized union
business. Such amounts shall be included as
Compensation so long as the Union provides the
Plan Administrator with a copy of each
Participant's W-2 Form within a reasonable time
after it is provided to the Participant.
III. Effective July 1, 1993, Section 1.16 is
amended by adding a new subsection (f) to read as
follows:
(f) With respect to the Pasadena, Texas
refinery's collective bargaining unit, members of
the Workmen's Committee and the Pension
Representative shall be credited with one (1) Hour
of Service or each hour lost from work while
attending to authorize union business.
IV. Effective July 1, 1993, Section 5.1 is
amended by adding a new subsection (e) to read as
follows:
(e) Unless otherwise provided under the
Plan, each Section 401(a) (17) Participant's
Accrued Benefit under this Plan will be the
greater of the Accrued Benefit determined for the
Participant under subsections (i) or (ii) below:
(i) The Participant's Accrued
Benefit determined with respect to the benefit
formula applicable for the Plan Year beginning on
or after January 1, 1994, as applied to the
Participant's total Benefit Service taken into
account under the Plan for the purpose of benefit
accruals; or
(ii) The sum of:
(x) the Participant's Accrued
Benefit as of the last day of the last Plan Year
beginning before January 1, 1994, frozen in
accordance with Section 1.401 (a) (4)-13 of the
Treasury Regulations, and
(y) the Participant's Accrued
Benefit determined under the benefit formula
applicable for the Plan Year beginning on or after
January 1, 1994, as applied to the Participant's
years of Benefit Service credited to the
Participant for Plan Years beginning on or after
January 1, 1994, for purposes of benefit accruals.
For purposes of this subsection (e), a
Section 401(a) (17) Participant means a
Participant whose current Accrued Benefit as of a
date on or after the first day of the first Plan
Year beginning on or after January 1, 1994, is
based on Compensation for a Plan Year beginning
prior to the first day of the first Plan Year
beginning on or after January 1, 1994, that
exceeded $150,000.
V. Section 6.2(a) is amended by deleting the
last sentence and adding the following sentence in
its place:
The written explanation of the Qualified Joint
and Survivor Annuity and five-year certain and
life annuity will be provided no more than 90 days
and no less than 30 days before the annuity
starting date (as defined in paragraph (b) (i)
below).
VI. Section 10.1 is amended by replacing the
first sentence with the following sentence:
This Plan shall be irrevocable and binding as
to all contributions made by the Employer to the
Trust, but this Plan may be amended from time to
time by the Company by resolution of its Board of
Directors.
VII. Section 13.3 is amended by replacing the
cross-reference "1.37" with the cross-reference
"1.36."
VIII. A new Section 14.9 is added to read as
follows:
14.9 APPLICATION OF TAX REFORM ACT
PROVISIONS. To the extent necessary to comply
with the provisions of the Tax Reform Act of 1986;
the following provisions of this Plan shall be
effective as of January 1, 1989 as to the Prior
Plans: Section 1.8, Section 1.30, Section IV,
Section V, Section VI, and Section IX.
IX. Except where otherwise stated, this
Amendment shall be effective as of July 1, 1993.
X. In all respects not amended, the Plan is
hereby ratified and confirmed.
* * * * *
IN WITNESS WHEREOF, the Company has caused this
Amendment to be executed by its duly authorized officer
and its corporate seal duly attested as of the day and
year first above written.
ATTEST:
CROWN CENTRAL PETROLEUM
CORPORATION
/s/ - - Dolores B. Rawlings By /s/ - -
Henry A. Rosenberg, Jr.
---------------------------- ------------------------
----------
Secretary Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.C
<SEQUENCE>3
<TEXT>
Exhibit 10(c)
THIS SECOND AMENDMENT TO THE CROWN CENTRAL
PETROLEUM CORPORATION RETIREMENT PLAN, made on this
29th day of June, 1995 BY CROWN CENTRAL PETROLEUM
CORPORATION, a Maryland Corporation:
WITNESSETH
----------
WHEREAS, Crown Central Petroleum Corporation (the
"Company") maintains the Crown Central Petroleum
Retirement Plan, originally effective as of January
1, 1950 and as subsequently amended and restated
(the "Plan"). The Company has the power to amend
the Plan and now wishes to do so.
NOW, THEREFORE, the Plan is amended as follows:
I. Effective August 1,
1995, Section 6.1 (d) (iv) is amended to read
as follows:
(iv) From July 1, 1993 to July 21, 1995, the
interest rate used to determine the present value of
a Participant's Pension or the Actuarial Equivalent
under this Section 6.1(d) shall be determined by
using the "applicable interest rate" (as defined
below), if the Participant's Pension does not exceed
$25,000, and 120% of the "applicable interest rate"
if the retirement benefit exceeds $25,000. From July
1, 1993 to June 30 1994, the "applicable interest
rate" is the lesser of (A) the interest rate that
would be used by the Pension Benefit Guaranty
Corporation for purposes of determining the present
value of a lump sum distribution on Plan terminations
as of the first day of the Plan Year in which the
distribution occurs or (B) such interest rate as of
the date of the distribution. From June 30, 1994 to
July 31, 1995, the "applicable interest rate" is the
interest rate as of the first day of the Plan Year in
which the distribution occurs that would be used by
the Pension Benefit Guaranty Corporation for purposes
of determining the present value of a lump sum
distribution on Plan terminations. The interest rate
for purposes of this Section shall be determined in
accordance with Code section 411(a) (11).
II. Effective August 1, 1995, Section 6.1(d) is
amended by adding a new paragraph (v) to read as
follows:
(v) From August, 1995, the present value of a
Participant's Pension or the Actuarial Equivalent
under this Section 6.1(d) shall be determined by
using the "applicable mortality table" and the
"applicable interest rate" (as defined below). The
"applicable mortality table" means the table
prescribed by the Secretary of the Treasury under
Code section 417 (e) (3) (A) as changed from time to
time. As of August 1, 1995, the "applicable
mortality table" is the 1983 Group Annuity Mortality
Table. The "applicable interest rate" for any Plan
Year is the annual rate of interest on 30-year
Treasury securities as published by the Secretary of
the Treasury for November of the immediately prior
Plan Year. The mortality table and the interest
rate for purposes of this Section shall be
determined in accordance with Code sections 411(a)
(11) and 417 (e) (3). Effective August 1, 1995, the
provisions of this paragraph (v) shall apply to the
determination of the present value of a
Participant's Pension or Actuarial Equivalent for
all Participants and former Participants with an
Accrued Benefit under the Plan.
III. Effective August 1, 1995, Section 6.1 is
amended by adding a new subsection (f) to read as
follows:
(f) This subsection (f) shall be effective
only from August 1, 1995 until November 30, 1995 and
only apply to former Participants ("Window
Participants"):
(i) who terminated employment on or before
July 31, 1995, and
(ii) for whom the present vale of their
Pension or the Actuarial Equivalent of their Pension
determined under subsection (d) (v) is $10,000 or
less.
From August 1, 1995 until November 30, 1995,
any Window Participant may elect to receive an
immediate distribution of his Pension. All
elections must be received by the Administrator by
November 30, 1995 to be effective. In addition to
the forms of benefit otherwise available under this
Section 6.1, a Window Participant may elect to
receive the Actuarial Equivalent present value of
his Pension paid in a single-sum payment. Payment
of Pensions to Window Participants who elect an
immediate distribution shall commence as soon as
possible.
IV. In all respects not amended, the Plan is
hereby ratified and confirmed.
* * * * *
IN WITNESS WHEREOF, the Company has caused this
Amendment to be executed by its duly authorized
officer and its corporate seal duly attested as of
the day and year first above written.
ATTEST: CROWN CENTRAL PETROLEUM
CORPORATION
/s/ - - Dolores B. Rawlings By /s/ - -
Henry A. Rosenberg, Jr.
---------------------------- ------------------------
----------
Secretary Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.D
<SEQUENCE>4
<TEXT>
Exhibit 10(d)
THIS THIRD AMENDMENT TO THE CROWN CENTRAL PETROLEUM
CORPORATION RETIREMENT PLAN, made on this 18th day
of December, 1997 BY CROWN CENTRAL PETROLEUM
CORPORATION, a Maryland Corporation:
WITNESSETH
----------
WHEREAS, Crown Central Petroleum Corporation
(the "Company") maintains the Crown Central
Petroleum Retirement Plan, originally effective as
of January 1, 1950 and as subsequently amended and
restated (the "Plan"). The Company has the power
to amend the Plan and now wishes to do so.
NOW, THEREFORE, the Plan is amended as follows:
I. Effective July 1, 1993, Section 5.8 is
amended by addition of new subsection (h) to read
as follows:
"(h) The annual benefit payable to or
in respect of a Participant which is otherwise
limited by the dollar limitation described in this
Section 5.8(a)(i)(x), shall be increased in
accordance with cost-of-living adjustments of such
limitation as prescribed by the Secretary of the
Treasury or his delegate, including for such
adjustments made after the commencement of the
Participant's Pension."
II. Section 6.1(d)(i) is amended to read in
its entirety as follows:
"(i) Effective January 1, 1998, except as
provided in subsection (d)(ii), if the present
value of a Pension payable under the Plan,
including Pensions payable to Beneficiaries, is
$5,000 or less on the commencement date of the
Participant's or Beneficiary's benefit, the
Actuarial Equivalent present value shall be paid
in a single-sum payment. However, in the case of
distributions to Participants and Spouses, if the
present value of a benefit has ever exceeded
$5,000, the Participant and his Spouse, if any,
must consent in writing to the distribution before
it may be made. Payment shall be made as soon as
practicable following the Participant's last day
of service or as soon as practicable after an
election is made by a Beneficiary."
III. Section 1.8(a) is amended by striking
"and" at the end of paragraph (5) and by
striking the period and inserting the
following in lieu thereof:
", and
(7) individual recognition awards under an
established program, paid in cash or property."
IV. In all respects not amended, the Plan is
hereby ratified and confirmed.
* * * * * *
IN WITNESS WHEREOF, the Company has caused this
Amendment to be executed by its duly authorized
officer and its corporate seal duly attested as of
the day and year first above written.
ATTEST: CROWN CENTRAL PETROLEUM
CORPORATION
/s/ - - Dolores B. Rawlings By /s/ - -
Henry A. Rosenberg, Jr.
---------------------------- ------------------------
----------
Secretary Chairman of the
Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.H
<SEQUENCE>5
<TEXT>
Exhibit 10(h)
THIS THIRD AMENDMENT TO THE CROWN CENTRAL
PETROLEUM
CORPORATION EMPLOYEES SAVINGS PLAN, made on this
26th day of June, 1997 BY CROWN CENTRAL
PETROLEUM CORPORATION, a Maryland Corporation:
WITNESSETH
----------
WHEREAS, Crown Central Petroleum Corporation
(the "Company") maintains the Crown Central
Petroleum Employees Savings Plan, amended and
restated as of January 1, 1987 and as
subsequently amended (the "Plan"). The Company
has the power to amend the Plan and now wishes to
do so.
NOW, THEREFORE, the Plan is amended as follows:
Section 1.22 is amended in its entirety to read
as follows, effective as of January 1, 1987:
1.22 PENSION PLAN means the Crown Central
Petroleum Corporation Pension Trust Agreement
and/or the Crown Central Petroleum Corporation
Retirement Income Plan as such Plans were in effect
through June 30, 1993, and from and after July 1,
1993, means the Crown Central Petroleum Retirement
Plan which resulted from the merger of the Crown
Central Petroleum Corporation Retirement Income
Plan into the Crown Central Petroleum Corporation
Pension Trust Agreement effective as of July 1,
1993.
Section 1.31(b) is amended in its entirety to
read as follows, effective as of January 1, 1987:
(b) FOR VESTING PURPOSES. A Year of Service
means the following:
(i) In the case of an Employee whose employment
commencement date is prior to January 1, 1995, a
twelve (12) consecutive month period, measured from
the Employee's employment commencement date and
each anniversary thereof, during which the Employee
is credited with at least one thousand (1,000)
Hours of Service.
(ii) In the case of an Employee whose employment
commencement date is on or after January 1, 1995, a
Plan Year during which the Employee is credited
with at least one thousand (1,000) Hours of
Service.
Section 2.1 is amended by inserting the phrase
"on any Entry Date thereafter," immediately before
the phrase "provided that if the Employee is a
member".
Section 2.2(a) is amended in its entirety to
read as follows, effective as of January 1, 1987:
(a) If he had not yet met the service
requirement of Section 2.1 prior to such
termination, then:
(i) If his re-employment date is 12 months or
more after such termination, his employment
commencement date for purposes of Section 1.31(a)
shall be the date of his re-employment;
(ii) If his re-employment date is less than 12
months after such termination, his employment
commencement date for purposes of Section 1.31(a)
shall be his employment commencement date before
the termination.
The last paragraph of Section 3.7 is amended in
its entirety to read as follows, effective as of
January 1, 1987:
The Administrator shall determine whether the
Plan satisfies the multiple use limitations after
applying the ADP test under Section 3.3 and the ACP
test under Section 3.5 and making any corrective
distributions required by those Sections. If the
Administrator determines that the Plan has failed
to satisfy the multiple use limitation, the
Administrator shall correct the failure by reducing
the ACP of those Highly Compensated Employees
(beginning with the Highly Compensated Employee
whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly
Compensated Employee's ACP is reduced shall be
treated as Excess Aggregate Contributions. This
Section 3.7 does not apply unless, prior to the
application of the multiple use limitation, the ADP
and the ACP of the Highly Compensated Group each
exceeds 125% of the respective percentages for the
Nonhighly Compensated Group.
Section 7.1(a) is amended by deleting the second
sentence and adding the following in lieu thereof,
effective as of January 1, 1997:
"Upon such a withdrawal, the amount of the
Participant's Employer Matching Contributions
Account attributable to the withdrawn After-Tax
Contributions shall be forfeited."
The first paragraph of Section 10.2 is amended
by adding the following sentence to the end,
effective as of January 1, 1987:
For purposes of the consent requirements under
this article X, if the value of the vested portion
of all of the Participant's accounts, at the time
of any distribution exceeds $3,500, the Plan
Administrator must treat this value as exceeding
$3,500 for purposes of all subsequent
distributions.
The first sentence of the last paragraph of
Section 14.1 is amended in its entirety to read as
follows, effective as of January 1, 1987:
For purposes of this Section 14.1, the
contribution rate for a Participant who is a Key
Employee is the sum of Employer Matching
Contributions plus Participant Pre-Tax
Contributions allocated to the Participant's
Account for the Plan year divided by his
Compensation for the entire Plan Year.
Section 14.5 is amended in its entirety to read
as follows, effective as of January 1, 1987:
14.5 Effective for the first Plan Year for which
the Plan is top heavy and then in all subsequent
Plan Years, a Participant's vested interest in his
Employer Matching Contributions Account shall be
determined in accordance with the following
schedule:
Years of Service Vesting Percentage
---------------- ------------------
Less than 3 0%
3 or more 100%
The above top heavy vesting schedule will apply to
Participants who earn at least one (1) Hour of
Service after such schedule becomes effective. The
adoption of the above top heavy vesting schedule is a
vesting schedule amendment within the meaning of
Section 6.1(b).
Article XIV is amended by adding new section 14.7 to the
end to read as follows, effective as of January 1, 1987:
14.7 The provisions of Section 7.1(a) which require a
forfeiture of Employer Matching Contributions shall not
apply if, during any Limitation Year, this Plan is or has
ever been top heavy.
I.In all respects not amended, the Plan is hereby ratified
and confirmed.
* * * * *
IN WITNESS WHEREOF, the Company has caused this
Amendment to be executed by its duly authorized
officer and its corporate seal duly attested as of
the day and year first above written.
ATTEST: CROWN CENTRAL PETROLEUM
CORPORATION
/s/ - - Dolores B. Rawlings By /s/ - -
Henry A. Rosenberg, Jr.
---------------------------- ------------------------
----------
Secretary Chairman of the Board
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.L
<SEQUENCE>6
<TEXT>
Exhibit 10(l)
(LOGO HERE) PERFORMANCE INCENTIVE PLAN
--------------------------------------------------------------
-----
PLAN DESCRIPTION
The 1998 PERFORMANCE INCENTIVE PLAN is designed to
recognize and reward eligible employees by sharing
in the financial achievements of the Company. The
program forges a stronger link between pay and
Company performance and sharpens the Company's focus
on business goals. It provides an opportunity for
salaried employees to share in the added value they
create by superior group effort. The Plan Year for
measuring financial and operational results is
calendar year 1998.
PARTICIPATION
Employees are eligible to participate in the Plan if
they meet all the following criteria:
1. They are a regular full-
time or part-time salaried employee in an
eligible position for 90 days prior to December
31, 1998.
2. They receive a
"Proficient" or higher performance appraisal
rating.
FULL AWARD
In addition to employees who participate in the
Plan for a full Plan Year, certain employees, who
meet any of the following criteria, will also be
eligible for a full award provided they have no
other deductible time.
1. Employees who receive Accident and Sickness
Benefits for less than 90 days during the Plan
Year.
2. Employees hired, promoted or transferred into
an eligible position before April 1, 1998.
3. Employees called to active military duty
during the Plan Year.
PRORATED AWARDS
The Plan award will be prorated for certain
employees who first meet the basic eligibility
requirements above, including:
1. Employees hired, promoted or transferred into
an eligible position during the second or
third quarter of the Plan Year.
2. Employees whose employment ends due to
retirement or death during the Plan Year.
3. Employees who leave the Company due to long-
term disability prior to December 31, 1998.
4. Employees who receive Accident and Sickness
benefits for more than 90 days or who are on
paid or unpaid leave of absence for any other
reason for more than 90 days during the Plan
Year.
5. Part-time employees. Calculation of
incentive payments to part-time employees is
based upon the standard work schedule and
annualized base salary. Awards are calculated
on scheduled hours.
INELIGIBILITY
The Plan is not available to:
1. Employees whose employment is terminated during
the Plan Year for any reason other than
retirement, death, or disability.
2. Employees on disciplinary probation for any
portion of the Plan Year.
3. Employees whose job performance during the Plan
Year is evaluated as "Needs Improvement" or
"Unsatisfactory."
4. Employees not on active status on the date
incentive payments are made.
5. Employees hired, promoted or transferred into an
eligible position on or after October 1,1998.
PLAN AWARD DESCRIPTION
The 1998 PERFORMANCE INCENTIVE PLAN provides
participants with annual incentive pay based upon
the attainment of specific Corporate and Business
Unit financial performance measures. Performance
measures are determined using EBITDAAL at
Threshold, Target, and Ceiling levels.
EBITDAAL is defined as earnings before interest,
taxes, depreciation, amortization, abandonments,
and LIFO accounting adjustments. Awards are
dependent upon the achieved level of Corporate
and Business Unit performance against these
financial objectives, and each employee's'
individual award opportunity percentage. The
award opportunity percentage that applies is
based on an employee's' permanent position and is
expressed as a percentage of annualized base
salary. No incentive is earned for performance
below Threshold
KEY ELEMENTS
1. There are two levels of participation within
the Plan: Corporate and Business Unit.
Employees in the Pasadena refinery, Tyler
refinery, the Wholesale Sales and Terminals
organization and Supply and Transportation
organization have been assigned to the Refining
Business Unit, and they will have a single
Refining scorecard. Those employees within the
organization directed by the Senior Vice
President, Marketing are in the Marketing
Business Unit, which will have a single
Marketing scorecard. The Corporate support
staffs and Shared Services staffs play a vital
role in the success of both Business Units and
the Corporation as a whole. Accordingly,
employees in these groups will have their
incentive payments based on total Corporate
performance as measured by a single Corporate
scorecard.
2. Awards for participants of the Plan at the
Business Unit level will be determined 730% by
Corporate results and 370% by Business Unit
results as measured by each applicable
scorecard. NO BONUS POOL IS CREATED AT THE
CORPORATE OR BUSINESS UNIT LEVEL UNTIL THE
CORPORATE THRESHOLD EBITDAAL AMOUNT IS MET.
3. Awards are paid in the form of a one-time,
lump sum cash payment. Interpolation will be
used to determine actual awards when
performance on any goal falls between
Threshold, Target, and Ceiling levels.
The 1998 Corporate and Business Unit scorecards
showing Threshold, Target, and Ceiling EBITDAAL
levels are as follows:
Corporate Scorecard
-------------------
Threshold Target Ceiling
$4039 $5048 $652
million million million
Refining Scorecard
------------------
Threshold Target Ceiling
$27 million $330 $42
million million
Marketing Scorecard
-------------------
Threshold Target Ceiling
$13 million $178 $233
million million
CALCULATION OF AWARDS
The individual award opportunity percentage
that applies is based on an employee's
permanent position and is expressed as a
percentage of annualized base salary, exclusive
of overtime or any other premium pay, as of
December 31, 1998. See the attached Annex for
illustrated examples of award calculations.
INCLUSION OF OVERTIME PAY
Award payments will be used in determining
eligible non-exempt employees equivalent
overtime rate of pay for overtime hours worked
during the Plan Year. Such incremental
overtime payment will be paid as soon as
practical after the incentive award payment and
is subject to appropriate tax withholding.
EFFECTS ON BENEFITS
Award payments will be included in the
calculation of pension accruals under the
Pension Plan. Award payments are not eligible
for contribution to the Savings Plans nor will
they be included in the calculation of
insurance benefits or payments under any other
benefit plan.
TAX TREATMENT OF INCENTIVE PAYMENTS
All incentive earnings are considered taxable
income in the year in which they are paid.
Appropriate federal, state, and local taxes
will be withheld at the rates in effect at the
time of payment.
APPROVALS
1. Corporate performance measures, targets, and
award levels for all officers are subject to
approval by the Executive Compensation and
Bonus Committee of the Board of Directors.
2. The Chairman and Chief Executive Officer
approves Business Unit performance measures
and targets.
ADJUSTMENTS
To avoid distortion in the operation of the
Plan and to assure the incentive features of
the Plan, the Company reserves the right to
adjust the level of payment to compensate for
or reflect in any extraordinary changes which
may have occurred during the Plan Year which
significantly alter the basis upon which
performance levels were determined.
ADMINISTRATION, AMENDMENTS, AND TERMINATION
The Company has the full power, in its sole
discretion, to administer and interpret the
Plan and to establish rules for its operation.
The Company may also modify, amend, or
terminate the Plan at any time without prior
notice.
Nothing contained in this Plan or in any other
documents relating to the Plan is intended to
confer any right to continue in the employ of
the Company, or to constitute a contract, or
in any way limit the right of the Company to
change an individual's compensation, or to
terminate the employment of any person with or
without cause.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.A
<SEQUENCE>7
<TEXT>
EXHIBIT 13.a
CROWN CENTRAL PETROLEUM CORPORATION
LETTER TO SHAREHOLDERS
To the Shareholders:
Crown Central Petroleum Corporation's results for
1997 reflect both operating efficiencies and a
stronger operating environment. For the full year,
Crown reported a net profit of $19.2 million ($1.97
per share) on revenues of $1.60 billion versus a
net loss of $2.8 million ($.28 per share) on
revenues of $1.64 billion for the 1996 period.
For the fourth quarter of 1997, Crown announced a
net loss of $.7 million ($.07 per share) on
revenues of $4.4 million, compared to a net profit
of $10.9 million ($1.12 per share) on revenues of
$435 million for the fourth quarter of 1996.
Crown's performance in 1997 reflected the strong
economy and the increasing demand and higher
margins for petroleum products. This year was also
positively influenced by Crown's internal operating
strategies that contributed to a solid performance
and the best operating results since 1990.
Supply and demand for crude oil and refined
products are factors of our business largely beyond
our control. This makes it all the more critical
for Crown to be disciplined yet flexible in
conducting its own day-to-day business. Through
effective management, planning and skillful
operations, we can compensate for some of the
volatility inherent in the refining business.
REFINING
--------
Improved Gulf Coast refining margins, which
averaged $2.74 for the year, were fueled by record
gasoline demand in the United States. This allowed
Crown's refining sector to enjoy its best year
since 1990. The improved margin environment was
especially noticeable in the second and third
quarters. The strength in this market subsided in
the fourth quarter as the delayed 3-2-1 margin
declined by $2.79 per barrel.
The reformate splitter which extracts aromatics for
reformulated gasoline (RFG) was added to the
Pasadena, Texas refinery as a new unit in 1996.
The unit was run opportunistically to increase RFG
production and it improved profits with the
aromatic extract sales. Production of RFG
increased to 1.1 million barrels in 1997, up from
800,000 in 1996.
In addition to the improved margins, the refineries
continued to experience lower fixed operating
costs. The Pasadena and Tyler, Texas refineries
both completed major turnarounds on their crude
distillation and coking units in 1997 at a total
cost of $11 million. The previous turnarounds on
these process units had been in 1992. In 1998, we
are planning two small turnarounds which we do not
expect to cause a disruption of our operations.
Environmental projects continued to receive
attention in 1997. At the Company's Pasadena
refinery, improvements in stormwater handling
facilities were begun, and a backup amine absorber
was installed to improve the treatment of our fuel
gas. In Tyler, the sulfur recovery unit was
modified to increase recovery from fuel gas
streams.
We continue to stress the importance of health and
safety at the refineries. The Pasadena refinery
enjoyed an outstanding year in safety performance,
qualifying for both the National Petroleum Refiners
Association (NPRA) Gold and Meritorous awards. The
reduction in total recordable incidents to three
and an incident rate of 1.95 are both records for
the Pasaena facility. The Tyler refinery safety
performance continues to achieve low recordable and
lost workday totals, although the performance at
Tyler in these categories in 1997 did not match the
outstanding record reported in 1996.
Marketing
---------
CrownCen Marketing finished a strong year in which
improvements were achieved in operating statistics
and plans initiated to spur future results. Same
store merchandise sales showed a 3% increase while
same store net merchandise dollars were up 12%,
this after comparable improvements in 1996. Fuel
gallonage was flat due to less aggressive pricing
strategies. Same store net fuel margins declined
3.7% for Crown as motor fuel retail margins were
lower during 1997 in several of Crown's market
areas.
Total store count dropped from 343 at the end of
1996 to 336 for the year just ended. This was due
to the closing of eleven sites that failed to meet
our criteria for volume and margins. Four new
sites were opened in Maryland and the southeast
during 1997. Seven more sites have been opened so
far in 1998. Within our existing inventory of
sites, eleven major rebuilds were completed in
1997. Major rebuilds represent a capital
investment of at least $100,000 per site.
(PHOTOGRAPH OF HENRY A. ROSENBERG, JR. CHAIRMAN OF
THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER)
(PHOTOGRAPH'S CAPTION: HENRY A. ROSENBERG, JR.
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER)
CrownCen has aggressively pursued its reimaging
program in 1997. It is designed to upgrade
existing units into an integrated, fresh new "look"
with consistent graphics, canopy colors, interior
quality, equipment and merchandise presentation.
In the Tidewater area of Virginia, 28 locations are
in final stages of the reimaging program with
additional units scheduled in the North Carolina
market. In addition, a Company-wide ATM
installation in all locations was commenced in
1997.
Crown's Point-of-Sale and scanning equipment is
nearing rollout to all of our Company operated
stores. Once completed in 1998, Crown retail
locations will be equipped with modern "touch
screen" technology designed to help speed our
customers through checkout, and reduce the time
necessary to train new employees. This will also
deliver in-depth management reporting aimed at
improving results via better inventory and pricing
controls and regional customer reporting data.
BPIP
----
Crown's Business Process Improvement Project (BPIP)
continued in 1997 with successful implementation of
the Company's crude oil, feedstock and products
acquisition/sale activity and Tyler Wholesale
Marketing operations on the new system.
Additionally, significant progress was made toward
the development of new financial and asset
management, human resources and payroll systems.
As a result of reorganizing procurement and
accounts payable functions under the Shared
Services model and the elimination of old computing
technology, the Company began realizing the
financial benefits envisioned from investing in
state-of-the-art client/server technology and
enterprise-wide business software. We further
anticipate that this strategic initiative will
provide key managers with more timely and accurate
information to enhance decision making and help to
lower administrative costs.
Government Affairs
------------------
Over the past year, several government initiatives
have moved forward at both the state and ederal
levels which could place additional challenges on
the petroleum refining and marketing industry.
The Federal Environmental Protection Agency (EPA)
finalized regulations last summer imposing more
stringent national air quality standards for ozone
and particulate matter. EPA guidance to the states
for drafting air quality implementation plans will
be forthcoming in 1998. While the bulk of the
emission reductions needed to comply with the new
standards are expected to come from utility
sources, passenger vehicles and the fuels they run
on are also targeted for changes.
In conjunction with the EPA, many states - both
individually and collectively - are moving forward
with regulations that could mandate changes in fuel
composition. The 37 states represented by the
Ozone Transport Assessment Group (OTAG) forwarded
recommendations to the EPA calling for a review and
possible reduction of the sulfur content in
gasoline and diesel fuel as a means to reduce
vehicle emissions. Further, 45 states are
considering participation in a voluntary National
Low-Emission Vehicle (NLEV) program which may
require motor fuel modifications to avoid problems
with vehicle emission catalysts.
The EPA is also expected to report to Congress in
the Summer of 1998 as to whether new, more
stringent vehicle emission standards are necessary.
Part of that on-going review has been the question
of what should be the sulfur content in motor
fuels.
Individual states have proposed unique fuel
standards to address localized air pollution
problems. Of significance to the Company, Georgia,
Alabama and other states are considering adopting
regulations that would require large areas of each
state to use gasoline ("boutique" fuels) different
from both federal reformulated gasoline and
conventional gasoline.
Despite the uncertainty surrounding future
composition of motor fuels, and the increasing
government pressure to reduce gasoline sulfur
levels, the Company is well positioned to supply
all of its customers. The Company is taking a pro-
active stance by engaging in discussions with
industry and government to ensure future gasoline
and diesel will be environmentally sound and remain
cost-effective.
Lockout Activities
------------------
The lockout of the Oil, Chemical and Atomic Workers
(OCAW) bargaining unit employees at the Pasadena
refinery continues. A 1997 National Labor
Relations Board (NLRB) decision associated with the
lockout continues to support Crown's position that
the Company has acted properly. The unfair labor
practice charges filed by OCAW in November and
December of 1996 were dismissed by the NLRB
Dallas/Fort Worth Regional director in April of
1997. OCAW appealed the Regional Director's
decision to the General Counsel of the NLRB, and on
December 31, 1997 the appeal with respect to all of
the charges was dismissed. No further appeal is
possible under federal labor law.
The Company has also been sued by various
plaintiffs in three separate law suits which claim
environmental violations, personal injury, and
discrimination. It is our considered judgment that
these suits have been instigated and supported by
OCAW as part of their "corporate campaign" to force
a settlement of the labor dispute on their terms.
The Company believes that the claims of these law
suits are without merit, and we will vigorously
defend the cases.
Most recently, in January of this year, Crown filed
two law suits in U.S. District Court for the
Southern District of Texas - Houston Division
against OCAW and some of its members to recover
damages for breach of contract and sabotage.
Crown is serious about the need for cost savings at
the refineries. We have shared our expectations
and statistical evaluations of our expense history
with the union at Pasadena. The union has been
unwilling to accept the proposed contract offer by
the Company which would provide for 162 bargaining
unit jobs with a total compensation and benefit
package. The Company continues to meet with the
union to negotiate and further present our case.
In the past several years, Crown has taken an
increasing role in the leadership of the domestic
refining industry. On October 23, I was pleased to
address the World Fuels Conference and make several
suggestions to strengthen our industry efforts to a
productive response to the challenges we face. One
suggestion for us is to work towards the
establishment of a national institute on the
environment that would provide independent,
objective scientific judgments free from government
and political influence. I related that refiners
needed to build effective coalitions outside our
traditional allies; such as was developed in
establishing the foreign refiners baseline rule to
limit imported product not meeting environmental
standards. I also asked for DOE to assume a more
active role in recognizing our industry by
establishing an office designed to focus on
domestic refining issues.
On January 30, 1998, John E. Wheeler, Jr. was
elected Executive Vice President - Chief Financial
Officer and Treasurer of the Company. Edward L.
Rosenberg was elected Executive Vice President -
Supply and Transportation. William A. Wolters was
elected Vice President - Supply and Logistics.
The past year has been operationally encouraging
and all employees at all levels of the Company are
due proper credit for their respective
contributions.
In addition to the outstanding performance of our
workforce, which is very much appreciated, I would
like to recognize the faithful support of our Board
of Directors and shareholders during a continuing
challenging time in our Company's history.
Sincerely,
Henry A. Rosenberg, Jr.
Chairman of the Board,
Chief Executive Officer and President
March 6, 1998
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.B
<SEQUENCE>8
<TEXT>
EXHIBIT 13.b
Crown Central Petroleum Corporation And Subsidiaries
OPERATING RESULTS
TWELVE MONTHS ENDED DECEMBER 31
-------------------------------------
--------
DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA 1997 1996 1995
- ----------------------------- ----------- ------------ ----------
- --- -- -- --
Sales and operating revenues $1,602,624 $1,635,276 $1,451,349
SFAS 121 Implementation (1) ---- ---- (80,524)
Income (Loss) before income 31,358 (3,423) (98,489)
taxes (2)
Income (Loss) before
extraordinary item 19,235 (2,767) (67,367)
Income (Loss) from
extraordinary ---- ---- (3,257)
item (3)
Net income (loss) 19,235 (2,767) (70,624)
Income (Loss) per share
before 1.97 (.28) (6.95)
extraordinary item
Income (Loss) per share from (
extraordinary item ---- ---- .33 )
Net income (loss) per share 1.97 (.28) (7.28)
Net income (loss) per share
assuming dilution 1.94 (.28) (7.28)
Weighted average shares used
in the computation of
(loss) per
share - Basic 9,752,011 9,721,693
9,697,611
Weighted average shares used
in the computation of
(loss) per
share - assuming diluation
9,898,904 9,721,693 9,697,611
KEY FINANCIAL STATISTICS
--------------------------------------------------
1997 1996 1995
----------- ------------ ----------
-- -- --
Working capital (in millions) $ 81.3 $ 52.9 $ 45.9
Working capital ratio 1.47 : 1 1.29 : 1 1
.22 : 1
Liquid assets as a percentage
of
current liabilities (4) 80.4% 82.8% 72.2%
Long-term debt as a
percentage of total 38.4% 40.7% 40.7%
capitalization (5)
Equity ratio (6) 34.9% 33.2% 32.5%
Return on average 9.3% (1.5%) (31.4%)
shareholders' equity
Gross profit margin 10.2% 8.4% 7.6%
- --------------------------------------------------------------------
- ------------
<FN>
(1) During the fourth quarter of 1995, the Company
implemented Statement of Financial Accounting Standard
No. 121 "Accounting for the Impairment of Long-Lived
Assets and Assets to be disposed Of" which resulted in a
write-down of $80.5 million related to certain refinery
assets.
(2) Includes the impact of implementation of SFAS No.
121.
(3) During the first quarter of 1995, the Company
incurred an extraordinary loss as a result of the early
retirement of its outstanding 10.42% Senior Notes
(Notes). The outstanding Notes were retired on January
24, 1995 from the net proceeds received from the sale of
$125 million of Unsecured 10.875% Senior Notes due
February 1, 2005.
(4) Liquid assets defined as cash, cash equivalents and
trade accounts receivable.
(5) Total capitalization defined as long-term debt and
common stockholders' equity.
(6) Common stockholders' equity divided by total
assets.
</FN>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.C
<SEQUENCE>9
<TEXT>
EXHIBIT 13.c
Crown Central Petroleum Corporation
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
JACK AFRICK # *
Retired Vice Chairman
UST Inc.
GEORGE L. BUNTING, JR. # *
President and CEO
Bunting Management Group
MICHAEL F. DACEY #
President
The Evolution Consulting Group, Inc.
THOMAS M. GIBBONS + # *
Retired Chairman of the Board
The Chesapeake and Potomac
Telephone Companies (part of Bell
Atlantic Corporation)
PATRICIA A. GOLDMAN +
Retirement Senior Vice President
Corporate Communications USAir
WILLIAM L. JEWS +
President and Chief Executive Officer
Blue Cross and Blue Shield
of Maryland
REV. HAROLD E. RIDLEY, JR., S.J.
President
Loyola College in Maryland
HENRY A. ROSENBERG, JR.
Chairman of the Board, President and
Chief Executive Officer of the
Corporation
# Members of Audit Committee
+ Members of Executive
Compensation and Bonus
Committee
* Members of Succession Planning Committee
EXECUTIVE COMMITTEE
JACK AFRICK 1,2,4
President and CEO
North Atlantic Trading, Co.
GEORGE L. BUNTING, JR. 2,4
President and CEO
Bunting Management Group
MICHAEL F. DACEY 2
President
The Evolution Consulting Group, Inc.
THOMAS M. GIBBONS 1,3,4
Retired Chairman of the Board
The Chesapeake and Potomoc Telephone Companies
(part of Bell Atlantic Corporation)
PATRICIA A. GOLDMAN 3
Retired Senior Vice President - Corporate Communications
USAir
WILLIAM L. JEWS 3
Presdent and Chief Executive Officer
CareFirst, Inc.
REV. HAROLD RIDLEY, S.J. 2
President
Loyola College in Maryland
HENRY A. ROSENBERG, JR. 1,4
Chairman of the Board, President and
Chief Executive Officer of the Corporation
SANFORD V. SCHMIDT 2
Senior Vice President and Chief Administrative Officer
American Trading and Production Corporation
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Executive Compensation and Bonus Committee
4 Member of Succession Planning Committee
OFFICERS
HENRY A. ROSENBERG, JR.
Chairman of the Board,
President and Chief Executive Officer
RANDALL M. TREMBLY
Executive Vice President
JOHN E. WHEELER, JR.
Executive Vice President,
Chief Financial Officer and Treasurer
EDWARD L. ROSENBERG
Executive Vice President - Supply and
Transportation
FRANK B. ROSENBERG
Senior Vice President - Marketing
THOMAS L. OWSLEY
Vice President - Legal
J. MICHAEL MIMS
Vice President - Human Resources
PAUL J. EBNER
Vice President - Shared Services
DENNIS W. MARPLE
Vice President - Wholesale Sales
and Terminals
JAMES R. EVANS
Vice President - Retail Marketing
WILLIAM A. WOLTERS
Vice President - Supply and Logistics
and Assistant Secretary
DELORES B. RAWLINGS
Vice President - Secretary
JAN L. RIES
Controller
PETER G. WOLFHAGAN
Assistant Secretary
PHILLIP F. HODGES
Assistant Secretary
ANDREW LAPAYOWKER
Assistant Secretary
DAVID J. SHADE
Assistant Treasurer
KURT S. LARSEN
Assistant Treasurer
FAST FARE, INC.
FRANK B. ROSENBERG
President
LAGLORIA OIL & GAS COMPANY
RANDALL M. TREMBLY
President
TRANSFER AGENT AND REGISTRAR
BANKBOSTON
c/o Equiserve, LP
P. O. Box 8040
Boston, Massachusetts 02266-8040
800-736-3001
Stock listed on American Stock Exchange
symbol: CNPA and CNPB
Internet Access
http://www.prnewswire.com
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.D
<SEQUENCE>10
<TEXT>
EXHIBIT 13.d
CORPORATE INFORMATION
Crown Central Petroleum Corporation is one of the
largest independent refiners and marketers of petroleum
products in the United States. The Company operates two
high-conversion refineries in Texas with a combined
capacity of 152,000 barrels per day. Crown markets its
refined products at 336 retail gasoline stations and
convenience stores in seven Mid-Atlantic and
Southeastern states. Crown's wholesale operations
extend from its Texas refineries into the Southeastern,
Mid-Atlantic and Midwestern regions of the United States
via 13 product terminals along the Colonial, Plantation
and Texas Eastern Products pipelines.
By concentrating on its core business and maintaining a
strong financial position, Crown is able to offer
quality products to its customers and long-term value to
its shareholders.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.E
<SEQUENCE>11
<TEXT>
EXHIBIT 13.e
Crown Central Petroleum Corporation and Subsidiaries
OPERATING STATISTICS
Twelve Months Ended Decembe
r 31
----------------------
----
1997 1996
--------- -----------
-- -
Combined Refinery Operations
Production (BPD - M) 159 153
Production (Mmbbl) 58.0 56.1
Sales (Mmbbl) 59.3 58.4
Gross Margin ($/bbl) 2.69 2.41
Gross Profit ($MM) 159.4 141.0
Operating Cost ($/bbl) (2.25) (2.20 )
Operating Cost ($MM) (133.5) (128.7 )
Refining Operating Profit ($MM) 25.9 12.4
Retail
Number Stores 336 343
Volume (pmps - Mgal) 132 130
Volume (MMgal) 530 535
Gasoline Gross Margin ($/gal) 0.116 0.120
Gasoline Gross Profit ($MM) 61.3 64.3
Merchandise Sales (pmps - $M) 25.7 24.8
Merchandise Sales ($MM) 103.7 102.0
Merchandise Gross Margin (%) 30.4 28.5
Merchandise Gross Profit ($MM) 31.5 29.1
Retail Gross Profit ($MM) 92.8 93.4
Retail Operating Costs (pmps - $M) (18.7) (19.9 )
Retail Operating Costs ($MM) (75.4) (81.9 )
Retail Non-Operating (Expense) Income (0.9) 1.8
($MM)
Retail Operating Profit ($MM) 16.5 13.3
Wholesale/Terminal Operating (Loss) (5.3) 5.4
Profit ($MM)
Other
LIFO Recovery (Provision) ($MM) 27.3 (0.9 )
Corporate Overhead ($MM) (21.3) (21.3 )
Net Interest (Expense) ($MM) (11.5) (12.3 )
Other (Expense) ($MM) (0.3) (0.1 )
Income Tax (Expense) Benefit ($MM) (12.1) 0.7
Total Net Income (Loss) ($MM) 19.2 (2.8 )
Depreciation and Amortization ($MM) 31.6 31.8
Net Interest Expense ($MM) 11.5 12.3
LIFO (Recovery) Provision ($MM) (27.3) 0.9
Loss from Asset Disposals ($MM) 0.4 0.2
Income Tax Expense (Benefit) ($MM) 12.1 (0.7 )
EBITDAAL ($MM) 47.5 41.7
Capital Expenditures ($MM) 31.9 24.1
<FN>
NOTE: To conform to the 1997 presentation, certain
1996 marketing administrative expenses have been
raclassified from Retail Operating Expenses to
Corporate Overhead. This reclassification had no
effect on the net (loss) of EBITDAAL figures as
originally presented.
BPD = Barrels per day
bbl = barrel or barrels as applicable
gal = gallon or gallons as applicable
pmps = per month per store
M = in thousands
MM = in millions
</FN>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>12
<TEXT>
<ARTICLE> 5
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
FINANCIAL DATA SCHEDULE
Crown Central Petroleum Corporation and Subsidi
aries
(Thousands of dollars, except per share amounts)
December 31
1997
--------------
(Unaudited)
<CASH> (1,943)
<SECURITIES> 38,565
<RECEIVABLES> 103,267
<ALLOWANCES> 738
<INVENTORY> 109,279
<CURRENT-ASSETS> 254,346
<PP&E> 635,063
<DEPRECIATION> 339,854
<TOTAL-ASSETS> 594,003
<CURRENT-LIABILITIES> 173,021
<BONDS> 127,506
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 50,291
<OTHER-SE> 157,064
<TOTAL-LIABILITY-AND-EQUITY> 594,003
<SALES> 1,602,624
<TOTAL-REVENUES> 1,602,624
<CGS> 1,438,879
<TOTAL-COSTS> 1,438,879
<OTHER-EXPENSES> 121,102
<LOSS-PROVISION> (266)
<INTEREST-EXPENSE> 14,168
<INCOME-PRETAX> 31,358
<INCOME-TAX> 12,123
<INCOME-CONTINUING> 19,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,235
<EPS-PRIMARY> (1.97)
<EPS-DILUTED> (1.94)