-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LvzuDCzyjH1F5L+vmwKBXdyWUaVu6eDv36yA9QCUa9QWrqmKs+RS0e79t8EXi6+F fcK+H9WsMtjNzylsnorS9w== 0000025885-98-000030.txt : 19980518 0000025885-98-000030.hdr.sgml : 19980518 ACCESSION NUMBER: 0000025885-98-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN CENTRAL PETROLEUM CORP /MD/ CENTRAL INDEX KEY: 0000025885 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 520550682 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01059 FILM NUMBER: 98621943 BUSINESS ADDRESS: STREET 1: ONE N CHARLES STREET 2: PO BOX 1168 CITY: BALTIMORE STATE: MD ZIP: 21203 BUSINESS PHONE: 4015397400 MAIL ADDRESS: STREET 2: PO BOX 1168 CITY: BALTIMORE STATE: MD ZIP: 21203 FORMER COMPANY: FORMER CONFORMED NAME: UNITED CENTRAL OIL CORP DATE OF NAME CHANGE: 19680923 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) ONE NORTH CHARLES STREET, BALTIMORE, 21201 MARYLAND (Address of principal executive offices) (Zip Code) 410-539-7400 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) 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 number of shares outstanding at April 30, 1998 of the Registrant's $5 par value Class A and Class B Common Stock was 4,817,394 shares and 5,169,188 shares, respectively.
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS > PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements (Unaudited) Consolidated Condensed Balance Sheets March 31, 1998 and December 31, 1997 3-4 Consolidated Condensed Statements of Operations Three months ended March 31, 1998 and 1997 5 Consolidated Condensed Statements of Cash Flows Three months ended March 31, 1998 and 1997 6 Notes to Unaudited Consolidated Condensed 7-11 Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 11-17 PART - OTHER INFORMATION II Item 1 - Legal Proceedings 17 Item 4 - Submission of Matters to a Vote of Security 17 Holders Item 6 - Exhibits and Reports on Form 8-K 17 Exhibit 20 - Interim Report to Stockholders for the three months ended March 31, 1998 Exhibit 27 (a) - Financial Data Schedule for the three months ended March 31, 1998 Exhibit 27 (b) - Financial Data Schedule for the three months ended March 31, 1997 - revised SIGNATURE 18
PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED CONDENSED BALANCE SHEETS Crown Central Petroleum Corporation and Subsidiaries (Thousands of dollars) March 31 December 31 1998 1997 --------- --------- -- -- ASSETS (Unaudite d) CURRENT ASSETS Cash and cash equivalents $30,340 $36,622 Accounts receivable - net 73,227 102,529 Recoverable income taxes 7,417 3,819 Inventories 138,937 109,279 Other current assets 3,971 2,097 --------- --------- -- -- TOTAL CURRENT ASSETS 253,892 254,346 INVESTMENTS AND DEFERRED CHARGES 43,634 44,448 PROPERTY, PLANT AND EQUIPMENT 644,727 635,063 Less allowance for depreciation 345,802 339,854 --------- --------- -- -- NET PROPERTY, PLANT AND EQUIPMENT 298,925 295,209 --------- --------- -- -- $596,451 $594,003 ========= ========= = = See notes to unaudited consolidated condensed financial statements.
CONSOLIDATED CONDENSED BALANCE SHEETS Crown Central Petroleum Corporation and Subsidiaries (Thousands of dollars) March 31 December 31 1998 1997 --------- --------- -- -- LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudite d) CURRENT LIABILITIES Accounts Payable: Crude oil and refined products $109,051 $104,391 Other 21,757 20,366 Accrued Liabilities 36,574 46,766 Current portion of long-term debt 26,894 1,498 --------- --------- -- -- TOTAL CURRENT LIABILITIES 194,276 173,021 LONG-TERM DEBT 129,188 127,506 DEFERRED INCOME TAXES 38,991 43,854 OTHER DEFERRED LIABILITIES 39,822 42,267 COMMON STOCKHOLDERS' EQUITY Common stock, Class A - par value $5 per share: Authorized shares -- 7,500,000; issued and outstanding shares -- 4,817,394 in 1998 and 24,087 24,087 1997 Common stock, Class B - par value $5 per share: Authorized shares -- 7,500,000; issued and outstanding shares -- 5,166,654 in 1998 and 5,240,774 in 1997 25,833 26,204 Additional paid-in capital 93,009 94,655 Unearned restricted stock (2,712 ) (5,291) Retained earnings 53,957 67,700 --------- --------- -- -- TOTAL COMMON STOCKHOLDERS' EQUITY 194,174 207,355 $596,451 $594,003 ========= ========= = = See notes to unaudited consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS Crown Central Petroleum Corporation and Subsidiaries (Thousands of dollars, except per share amounts) (Unaudited) Three Months Ended March 31 1998 1997 -------- --------- REVENUES Sales and operating revenues $325,960 $394,5 13 OPERATING COSTS AND EXPENSES Costs and operating expenses 314,495 361,058 Selling expenses 20,130 18,454 Administrative expenses 5,125 5,046 Depreciation and 8,164 7,775 amortization Sales of property, plant and (20 ) (556) equipment --------- ------- - -- 347,894 391,777 --------- ------- - -- OPERATING (LOSS) INCOME (21,934 ) 2,736 Interest and other income 3,272 2,188 Interest expense (3,530 )(3,501) --------- ------- - -- (LOSS) INCOME BEFORE INCOME (22,192 ) 1,423 TAXES INCOME TAX (BENEFIT) EXPENSE (8,449 ) 699 --------- ------- - -- NET (LOSS) INCOME $(13,743 )$ 724 ========= ======= = == NET (LOSS) INCOME PER SHARE - BASIC AND DILUTED $ (1.40 )$ .07 ========= ======= = == See notes to unaudited consolidated condensed financial statements.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Crown Central Petroleum Corporation and Subsidiaries (Thousands of dollars) (Unaudited) Three Months Ended March 31 1998 1997 --------- ---------- -- NET CASH FLOWS FROM OPERATING ACTIVITIES Net cash from operations before changes in assets and liabilities $(13,802 ) $ 6,086 Net changes in assets and (8,742) (20,094 ) liabilities --------- ---------- - NET CASH (USED IN) OPERATING (22,544 )(14,008 ) ACTIVITIES --------- ---------- - CASH FLOWS FROM INVESTMENT ACTIVITIES Capital Expenditures (10,021 )(7,145) Proceeds from sales of property, plant and equipment 211 878 Investments in Subsidiaries 300 Capitalization of software costs (1,078) (945) Deferred turnaround maintenance (474) (1,792) Other charges to deferred assets (92) (97) --------- ---------- - NET CASH (USED IN) INVESTMENT (11,454 )(8,801) ACTIVITIES --------- ---------- - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt and credit agreement 27,441 21,000 borrowings (Repayments) of debt and credit agreement (372) (6,341) borrowings Net cash flows from long-term notes receivable 85 456 Issuance of common stock 562 --------- --------- - NET CASH PROVIDED BY FINANCING ACTIVITIES 27,716 15,115 --------- --------- - NET (DECREASE) IN CASH AND CASH $(6,282 )$(7,694 ) EQUIVALENTS ========= ========== = See notes to unaudited consolidated condensed financial statements.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Crown Central Petroleum Corporation and Subsidiaries March 31, 1998 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments considered necessary for a fair and comparable presentation have been included. Operating results for the three months ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. The enclosed financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1997. 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 affiliates 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. 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. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO projections must be based on Management's estimates of expected year-end inventory levels and values. At March 31, 1998, approximately 3.3 million barrels of crude oil and refined products inventory were held in excess of anticipated year-end quantities which are valued at the lower of cost (first-in, first-out) or market. 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 operating 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 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. 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 affect 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 March 31, 1998. 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 Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," 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. OTHER COMPREHENSIVE INCOME - The Company has no material items of other comprehensive income as defined by Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", for the three months ended March 31, 1998. RECLASSIFICATIONS - To conform to the 1998 presentation, the Consolidated Condensed Statement of Operations for the three months ended March 31, 1997 has been restated. Service station rental income and certain other retail marketing recoveries, which had previously been reported as a reduction of Selling and administrative expenses, have been reclassified and are now reported as components of Interest and other income, and Costs and operating expenses, respectively. Additionally, beginning with the three months ended March 31, 1998, the Company began reporting Selling expenses and Administrative expenses as separate amounts in the Consolidated Condensed Statement of Operations. Selling and administrative expenses as originally reported in the Company's Form 10-Q for the three months ended March 31, 1997, have been restated to reflect these changes. These reclassifications had no effect on the net income or net income per share amounts as originally reported. RECENTLY ISSUED PRONOUNCEMENTS - In June 1997, the Financial Accounting Standards Board (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. In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits" (SFAS No. 132), which standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, eliminates certain disclosures required by former guidance and requires additional disclosures not included in the former guidance. This Statement is effective for fiscal years beginning after December 15, 1997. The Company will adopt SFAS No. 132 for the fourth quarter of 1998. STATEMENTS OF CASH FLOWS - Net changes in assets and liabilities presented in the Unaudited Consolidated Condensed Statements of Cash Flows is composed of the following:
Three Months Ended March 31 1998 1997 --------- --------- - - (thousands of dollars) Decrease in accounts receivable $29,303 $9,129 (Increase) in inventories (29,659 ) (58,670 ) (Increase) Decrease in prepaid operating (1,873 ) 7,961 expenses and other current assets Increase in crude oil and refined products 4,660 26,624 payable Increase (decrease) in other accounts 1,391 (3,536) payable (Decrease) in accrued liabilities and other (12,740 ) (4,095) deferred liabilities Decrease in recoverable and deferred income 176 2,493 taxes --------- --------- -- -- $(8,742 ) $ (20,094 ) ========= ========= == ==
NOTE B - INVENTORIES Inventories consist of the following: March 31 December 31 1998 1997 --------- --------- -- -- (thousands of dollars) Crude oil $59,651 $42,164 Refined products 76,955 79,905 --------- --------- -- -- Total inventories at FIFO (approximates current 136,606 122,069 cost) LIFO allowance (10,500 )(25,586 ) --------- --------- -- -- Total crude oil and refined products 126,106 96,483 --------- --------- -- -- Merchandise inventory at FIFO 6,783 6,806 (approximates current cost) LIFO allowance (1,929 ) ( --------- 1,929) -- --------- -- Total merchandise 4,854 4,877 --------- --------- -- -- Materials and supplies inventory at FIFO 7,977 7,919 --------- --------- -- -- TOTAL INVENTORY $138,937 $109,279 ========= ========= == ==
NOTE C - LONG-TERM DEBT AND CREDIT ARRANGEMENTS Long-term debt consists of the following: March 31 December 31 1998 1997 --------- --------- --- --- (thousands of dollars) Unsecured 10.875% Senior Notes $124,786 $124,779 Credit Agreement 25,000 Purchase Money Liens 5,962 3,859 Other obligations 334 366 --------- --------- -- -- 156,082 129,004 Less current portion 26,894 1,498 --------- --------- -- -- LONG-TERM DEBT $129,188 $127,506 ========= ========= == ==
As of March 31, 1998, under the terms of the First Restated Credit Agreement dated as of August 1, 1997, as amended (Credit Agreement), the Company had outstanding cash borrowings in the principal amount of $25 million, which is included in the current portion of long-term debt, and outstanding irrevocable standby letters of credit in the principal amount of $5.4 million. Unused commitments under the terms of the Credit Agreement totaling $79.6 million were available for future cash borrowings and issuance of letters of credit at March 31, 1998. As of March 31, 1998, the Company was in compliance with all covenants and provisions of the Credit Agreement, as amended, and forecasts that, but there can be no assurance that, it will remain in compliance for the remainder of the year. As discussed in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition, subsequent to March 31, 1998, the level of cash borrowings and letters of credit outstanding under the Credit Agreement decreased significantly. The $125 million unsecured 10.875% Senior Notes (Notes), which were issued in January 1995 under an Indenture are used principally to finance the permanent capital requirements of the Company. As of March 31, 1998, the Company was in compliance with the terms of the Indenture. The Indenture includes certain restrictions and limitations customary with senior indebtedness of this type, including, but not limited to the amount of additional indebtedness the Company may incur outside of the Credit Agreement, the payment of dividends and the repurchase of capital stock . As of March 31, 1998, the Indenture substantially restricted the Company from effecting borrowings outside of the Credit Agreement and precluded the payment of dividends. The Company has not paid a dividend on its shares of common stock since the first quarter, 1992. NOTE D - CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES The net deferred gain from futures contracts included in crude oil and refined product hedging strategies was $.8 million at March 31, 1998. Included in these hedging strategies are futures contracts maturing from May 1998 to December 1998. The Company is using these contracts to defer the pricing of approximately 9% of its crude oil commitments, fix the supply cost of crude oil on less than 1% of supply and fix the margin on less than 1% of its refined products, for the aforementioned period. NOTE E - CALCULATION OF NET (LOSS) INCOME PER COMMON SHARE Net (loss) income per common share for the three months ended March 31, 1998 and 1997 is based on the weighted average of common shares outstanding of 9,812,569 and 9,733,480, respectively. The average outstanding and equivalent shares excludes 147,300 and 168,000 shares of Performance Vested Restricted Stock (PVRS) registered to participants in the 1994 Long-Term Incentive Plan (Plan) at March 31, 1998 and 1997, respectively. The PVRS shares are not considered outstanding for earnings per share calculations until the shares are released to the Plan participants. The following table provides a reconciliation of the basic and diluted earnings per share calculations:
THREE MONTHS ENDED MARCH 31 1998 1997 --------- ------------ -- - (dollars in thousands, except per share data) (LOSS) INCOME APPLICABLE TO COMMON SHARES Net (loss) income $ (13,743 ) $ 724 ========= ============ == = Common shares outstanding at January 1, 1998 and 1997, respectively 10,058,168 9,983,180 Restricted shares held by the Company at January 1, 1998 and 1997, respectively (260,700 ) (249,700 ) Weighted average effect of shares of common stock issued for stock option exercises 15,101 --------- ------------ -- - Weighted average number of common shares outstanding, as adjusted at March 31, 1998 and 1997, respectively basic and diluted 9,812,569 9,733,480 ========= ============ == = EARNINGS PER SHARE: Net (loss) income - basic and diluted $ (1.40 ) $ .07 ========= ============ ==
At March 31, 1998, the Company had non-qualified stock options and performance vested restricted awards outstanding representing 357,357 total potential common shares that were not included in the diluted earnings per share calculation since doing so would have been anti-dilutive. NOTE F - LITIGATION AND CONTINGENCIES As discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations, the Company had recorded a liability of approximately $10.7 million as of March 31, 1998 to cover the estimated costs of compliance with environmental regulations which are not anticipated to be of capital nature. Except as noted above, there have been no material changes in the status of litigation and contingencies as discussed in Note I of Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 1997. ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's Sales and operating revenues decreased $68.6 million or 17.4% in the first quarter of 1998 from the comparable period in 1997. The decrease in Sales and operating revenues was primarily attributable to a 25.3% decrease in the average sales price per gallon of petroleum products which was partially offset by a 10.1% increase in petroleum product sales volumes due principally to the expiration of the processing agreement with Statoil North America, Inc. which effectively increased the Company's refined product available for sale. Merchandise sales for the three months ended March 31, 1998 remained consistent with the same 1997 period. Costs and operating expenses decreased $46.6 million or 12.9% in the first quarter of 1998 from the comparable period in 1997. The decrease was due to a 29% decrease in the average cost per barrel consumed of crude oil and feedstocks. These decreases were partially offset by increases in volumes sold as previously discussed. The results of operations were significantly affected by the Company's use of the LIFO method to value inventory, which in a period of falling prices increased the Company's gross margin $1.12 per barrel ($15.1 million) in 1998 and $.72 per barrel ($9.9 million) in 1997. The aforementioned decrease in Sales and operating revenues coupled with the decrease in Costs and operating expenses resulted in an overall decrease in gross margin of $22 million for the first quarter of 1998 compared to the same 1997 period. The decrease in average sales price per gallon of petroleum products reflected similar industry-wide decreases due to excess supply of refined petroleum products, principally distillates, due primarily to the unseasonably warm winter in the Company's marketing areas. Additionally, decreases in the cost of the Company's crude oil and purchased feedstocks reflect industry-wide decreases in prices of these products, however, these decreases were not as significant as the decreases in finished product sales prices. Gasoline gross margin (gasoline gross profit as a percent of gasoline sales) at the Company's retail locations increased from $.116 per gallon to $.131 per gallon, respectively, for the three months ended March 31, 1997 and 1998 due primarily to improved driving conditions which resulted in an increase in retail gasoline prices driven by an increase in demand for gasoline. Retail gasoline margins are also generally favorably impacted in a period of rapidly falling crude oil prices as retail prices generally decline less quickly. Aggregate gasoline gross profit on a same store basis increased by 8.5% for the quarter ended March 31, 1998 compared to the same 1997 period. Merchandise gross margin (merchandise gross profit as a percent of merchandise sales) increased slightly from 30.8% to 31.8% for the first quarter of 1997 and 1998, respectively. This slight increase in gross margin is a result of the Company's merchandise pricing program which has selectively increased targeted merchandise yet still maintains an everyday low pricing policy which is competitive with major retail providers in the applicable market area. This marketing strategy has resulted in average monthly merchandise sales increases, on a same store basis, of approximately 2.2% for the three months ended March 31, 1998 compared to the same 1997 period and has contributed to the $.3 million or 4% increase in merchandise gross profit. Aggregate year to date merchandise gross profit on a same store basis increased by 1.3% in 1998 compared to the same 1997 period. Yields of gasoline increased slightly from 83,200 barrels per day (bpd) (54.1%) for the first quarter 1997 to 83,500 bpd (55.8%) for the first quarter 1998 while distillate production decreased slightly from 49,800 bpd (32.4%) for the first quarter 1997 to 46,500 bpd (31%) for the same period in 1998. Selling expenses increased $1.7 million or 9.1% for the three months ended March 31, 1998 compared to the same period in 1997. The increase is principally due to increases in expenses for technology enhancements at the Company's retail sites and in retail support locations and to increases in labor costs at retail sites. Additionally, marketing promotion related expenses increased slightly in the first quarter of 1998 compared to the first quarter of 1997. Administrative expenses for the three months ended March 31, 1998 were comparable to the same period in 1997. Depreciation and amortization in the first quarter of 1998 increased $.4 million or 5% from the comparable 1997 period. This increase is primarily attributable to increases in the amortization of refinery deferred turnaround expenses related to turnarounds performed in the second and fourth quarters of 1997. Operating costs and expenses for the three months ended March 31, 1998 included $.3 million of expenses for retail units that have been closed compared to $.3 million of expenses for closed retail units for the three months ended March 31, 1997. Additionally, the first quarter of 1997 includes $2.5 million in reductions of accruals related to environmental matters. Interest and other income for the quarter ended March 31, 1998 increased $1 million or 49.5% compared to the same 1997 period due to a $.9 million dividend from the Company's investment in an unconsolidated affiliate. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities (including changes in assets and liabilities) totaled $22.5 million for the three months ended March 31, 1998 compared to cash used in operating activities of $14 million for the three months ended March 31, 1997. The 1998 outflows consist primarily of cash used in operations of $13.8 million before changes in assets and liabilities. Additionally, the 1998 outflows included net cash outflows from changes in assets and liabilities of $8.7 million due primarily to increases in the volume of crude oil and finished product inventories, to decreases in incentive plan accruals and to decreases in accrued interest payable related to the Company's long-term obligations. These working capital outflows were partially offset by decreases in accounts receivable, and increasesin crude oil and refined products payable and in other accounts payable. The 1997 outflows consist primarily of net cash outflows of $20.1 million related primarily to working capital requirements resulting from increases in the volume of crude oil and finished product inventories and decreases in accrued interest payable related to the Company's long-term obligations and decreases in other accounts payable. These working capital outflows were partially offset by increases in crude oil and refined products payables, decreases in accounts receivable and decreases in prepaid operating expenses principally related to prepaid insurance premiums and deferred losses on futures trading activity. Partially offsetting these cash outflows was net cash provided by operations of $6.1 million before changes in assets and liabilities. Net cash outflows from investment activities were $11.5 million for the three months ended March 31, 1998 compared to a net outflow of $8.8 million for the same 1997 period. The 1998 outflows consist primarily of capital expenditures of $10 million (which includes $8.2 million relating to the marketing area, $1.4 relating to corporate projects and $.4 million for refinery operations). Additionally, there were $1.1 million in capitalized software costs and $.5 million of deferred refinery turnaround expenditures. These cash outflows were partially offset by proceeds from the sale of property, plant and equipment of $.2 million. The 1997 amount consists principally of capital expenditures of $7.1 million (which includes $2.6 million for refinery operations and $2.4 million relating to the marketing area). Additionally, there were deferred turnaround expenditures of $1.8 million and $.9 million in capitalized expenditures related to corporate strategic projects. These cash outflows were partially offset by proceeds from the sale of property, plant and equipment of $.9 million and decreases in investments in unconsolidated affiliatesof $.3 million. Net cash provided by financing activities was $27.7 million for the three months ended March 31, 1998 compared to cash provided by financing activities of $15.1 million for the three months ended March 31, 1997. The 1998 cash inflow consists primarily of $27.4 in net proceeds received from debt and credit agreement borrowings due primarily to net cash borrowings from the Company's unsecured revolving Credit Agreement. Additionally, cash inflows include $.6 million received from the issuance of the Company's Class B Common Stock resulting from exercises of non-qualified stock options granted to participants of the Company's Long-Term Incentive Plans. The 1997 cash inflow consists principally of $14.7 million in net proceeds received from debt and credit agreement borrowings due primarily to net cash borrowings from the Company's unsecured revolving Credit Agreement. Additionally, long-term notes receivable decreased $.4 million. Cash and cash equivalents at March 31, 1998 were $2 million higher than at March 31, 1997. This increase resulted primarily from cash provided by operating activities of $32.4 million. Additionally, cash provided by financing activities for the twelve month period ended March 31, 1998 totaled $14.3 million relating primarily to net borrowings from the Company's debt and credit agreement facilities of $12.8 million and net proceeds from the issuance of the Company's Class B Common Stock resulting from exercises of non- qualified stock options granted to participants of the Long-Term Incentive Plan of $1.4 million. Partially offsetting these cash inflows was cash used in investment activities of $44.6 million, which includes capital expenditures of $28.1 million, net of $6.7 million of proceeds received from the sale of property, plant and equipment. Additionally, cash outflows from investment activities included deferred turnaround charges of $12.7 million and $4.1 million in capitalized expenditures related to corporate strategic projects. These cash outflows were partially offset by an increase in cash of $.5 million resulting from decreases in other deferred assets. The ratio of current assets to current liabilities at March 31, 1998 was 1.31:1 compared to 1.25:1 at March 31, 1997 and 1.47:1 at December 31, 1997. If FIFO values had been used for all inventories, assuming an incremental effective income tax rate of 38.5%, the ratio of current assets to current liabilities would have been 1.37:1 at March 31, 1998, 1.46:1 at March 31, 1997 and 1.63:1 at December 31, 1997. 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. The Company believes, but provides no assurance, that cash provided from its operating activities, together with other available sources of liquidity will be sufficient to fund future environmental related expenditures. The Company had recorded a liability of approximately $10.7 million as of March 31, 1998 to cover the estimated costs of compliance with environmental regulations which are not anticipated to be of a capital nature. The liability of $10.7 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 cleanup 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. The Company's principle purchases (crude oil and convenience store merchandise) are transacted primarily under open lines of credit with its major suppliers. The Company maintains two credit facilities to finance its business requirements and supplement internally generated sources of cash. Under the First Restated Credit Agreement effective August 1, 1997, as amended (Credit Agreement), as of April 30, 1998, the Company had outstanding $5 million in cash borrowings and outstanding irrevocable standby letters of credit in the principal amount of $5.4 million for purposes in the ordinary course of business. At March 31, 1998, the Company was in compliance with all covenants and provisions of the Credit Agreement, as amended. Meeting the covenants imposed by the Credit Agreement is dependent, among other things, upon the level of future earnings. The Company reasonably expects to continue to be in compliance with the covenants imposed by the Credit Agreement or a successor agreement for the remainder of the year. 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. As of March 31, 1998, the Indenture substantially restricted the Company from effecting borrowings outside of the Credit Agreement and precluded the Company from paying any dividends. The Company has not paid a dividend on its shares of common stock since the first quarter of 1992. As outlined in the Company's planned capital requirements described below, while the Company is limited by the Indenture from effecting borrowings outside of the Credit Agreement, it does not currently plan to effect any borrowings outside of the Credit Agreement. The Purchase Money Lien effective December 1, 1993 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 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 $15 million. At March 31, 1998, the Company has borrowed $3.9 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 $4.2 million at March 31, 1998. 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 $4 million Lease Line of Credit (Lease Line) to finance point-of- sale computer equipment to be installed at its company operated retail facilities. At March 31, 1998, the Company has drawn $3.9 million of the Lease Line. 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 $50 million. The capital expenditures relate primarily to planned enhancements at the Company's refineries, retail unit improvements, additionally retail units 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 Item 3. Legal Proceedings of the Annual Report on Form 10-K for the fiscal year ended December 31, 1997, 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 of the Annual Report on Form 10-K for the fiscal year ended December 31, 1997, 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 to do so during the negotiation period with the collective bargaining unit. 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 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. 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. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS There has been no material change in the status of legal proceedings as reported in Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. The Company is involved in various matters of litigation, the ultimate determination of which, in the opinion of management, is not expected to have a material adverse effect on the Company. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a)At the Annual Meeting of Stockholders held on April 23, 1998, a shareholder proposal concerning executive compensation was submitted. The complete Shareholder Proposal, the proponents Supporting Statement and the Board of Directors Statement in Opposition are set forth on pages 13 and 14 of the Company's Proxy Statement dated March 26, 1998. The results of the shareholder voting on this proposal was as follows: 200,295 in the affirmative, 3,7377,037 against, 12,250 abstentions and 546,257 broker non-votes. (b) At the Annual Meeting of Stockholders held on April 23, 1998, a shareholder proposal concerning relationships between the Company and certain officers was submitted. The complete Shareholder Proposal, the proponents Supporting Statement and the Board of Directors Statement in Opposition are set forth on pages 14 and 15 of the Company's Proxy Statement dated March 26, 1998. The results of the shareholder voting on this proposal was as follows: 202,004 in the affirmative, 3,736,859 against, 10,731 abstentions and 546,245 broker non- votes. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit: 4 - Amendment, effective as of March 31, 1998, to the First Restated Credit Agreement effective as of August 1, 1997. 10 - Second Amendment, effective as of January 29, 1998, to the Crown Central Petroleum Corporation 1994 Long-Term Incentive Plan. 20 - Interim Report to Stockholders for the three months ended March 31, 1998. 27 (a)- Financial Data Schedule for the three months ended March 31, 1998. 27 (b)- Financial Data Schedule for the three months ended March 31, 1997 - revised. (b) Reports on Form 8-K: There were no reports on Form 8-K filed with the Securities and Exchange Commission during the three months ended March 31, 1998. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q for the quarter ended March 31, 1998 to be signed on its behalf by the undersigned thereunto duly authorized. CROWN CENTRAL PETROLEUM CORPORATION /s/--Jan L. Ries Jan L. Ries Controller Chief Accounting Officer and Duly Authorized Officer Date: May 15, 1998 EX-4 2 EXHIBIT 4 FIRST AMENDMENT TO FIRST RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO FIRST RESTATED CREDIT AGREEMENT (this "Amendment") is made as of the 14th day of May, 1998 and effective as of March 31, 1998, among: Crown Central Petroleum Corporation, a corporation duly organized and validly existing under the laws of the State of Maryland (the "Company"); each Bank signatory hereto; BankBoston, N.A., as Documentation Agent, and NationsBank, N.A. (f/k/a NationsBank of Texas, N.A.), as Administrative Agent and as Letter of Credit Agent. RECITALS 1. The Company and the Bank Parties entered into that certain First Restated Credit Agreement dated as of August 1, 1997 (the "Original Agreement"), for the purpose and consideration therein expressed. 2. The Company and the Bank Parties signatory hereto desire to amend the Original Agreement as expressly set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement and in consideration of the credit which may hereafter be extended by the Banks to the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. -- Definitions and References Section 1.1. TERMS DEFINED IN THE ORIGINAL AGREEMENT. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment. Section 1.2. OTHER DEFINED TERMS. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2. "Amendment" shall mean this First Amendment to First Restated Credit Agreement. "Credit Agreement" shall mean the Original Agreement as amended hereby. ARTICLE II. -- AMENDMENTS TO ORIGINAL AGREEMENT Section 2.1. SHORT-TERM FIFO NET INCOME (LOSS). Section 8.23 of the Original Agreement is hereby amended in its entirety to read as follows: Section 8.23. SHORT-TERM FIFO NET INCOME (LOSS). The Company shall cause FIFO Net Income (Loss) to be greater than ($15,200,000) for each short-term measurement period commencing on or after August 1, 1996 (i.e., either to be positive or, if a loss, not to be a loss of more than $15,200,000), except for the short-term measurement periods commencing on April 1, 1997, May 1, 1997, June 1, 1997 and July 1, 1997, for which the Company shall cause FIFO Net Income (Loss) to be greater than ($18,500,000) for such periods.. As used in this Section 8.23, "short- term measurement period" means any period of twelve consecutive calendar months. ARTICLE III. -- CONDITIONS OF EFFECTIVENESS Section 3.1. EFFECTIVE DATE. This Amendment shall become effective when, and only when, (i) Administrative Agent shall have received, at Administrative Agent's office, a counterpart of this Amendment executed and delivered by the Company, the Administrative Agent, the Letter of Credit Agent and the Majority Banks and (ii) Administrative Agent shall have additionally received such supporting documents as Administrative Agent may reasonably request. Section 3.2. AMENDMENT FEE. In consideration hereof, the Company hereby agrees to pay to the Administrative Agent, for the account of each Bank signatory hereto on or before 12:00 noon EST, Thursday, May 14, 1998, an amendment fee equal to ten Basis Points times such Bank's Commitment; provided, Majority Banks shall have executed and delivered this Amendment on or before such time and date. ARTICLE IV. -- REPRESENTATIONS AND WARRANTIES Section 4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce each Bank to enter into this Amendment, the Company represents and warrants to each Bank that: (a) The representations and warranties contained in Section 7 of the Original Agreement are true and correct and no Default or Event of Default exists at and as of the time of the effectiveness hereof, in each case after giving effect to the amendments herein made. (b) The Company is duly authorized to execute and deliver this Amendment and is and will continue to be duly authorized to borrow monies and to perform its obligations under the Credit Agreement. The Company has duly taken all corporate action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of the Company hereunder. (c) The execution and delivery by the Company of this Amendment, the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of the articles or certificate of incorporation and bylaws of the Company, or of any material agreement, judgment, license, order or permit applicable to or binding upon the Company, or result in the creation of any lien, charge or encumbrance upon any assets or properties of the Company. Except for those which have been obtained, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by the Company of this Amendment or to consummate the transactions contemplated hereby. (d) When duly executed and delivered, each of this Amendment and the Credit Agreement will be a legal and binding obligation of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application. ARTICLE V. -- MISCELLANEOUS Section 5.1. RATIFICATION OF AGREEMENTS. The Original Agreement as hereby amended, together with all of the other Loan Documents, are hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Banks under the Credit Agreement, the Notes, or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement, the Notes or any other Loan Document. Section 5.2. SURVIVAL OF AGREEMENTS. All representations, warranties, covenants and agreements of the Company herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by the Company hereunder or under the Credit Agreement to any Bank shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, the Company under this Amendment and under the Credit Agreement. Section 5.3. LOAN DOCUMENTS. This Amendment is a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto. Section 5.4. GOVERNING LAW. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance. Section 5.5. COUNTERPARTS. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. IN WITNESS WHEREOF, this Amendment is executed as of the date first above written. CROWN CENTRAL PETROLEUM CORPORATION By: /S/ - - - JOHN E. WHEELER, JR. ---------------------------- John E. Wheeler, Jr. Executive Vice President and Chief Financial Officer NATIONSBANK, N.A. (f/k/a NationsBank of Texas, N.A.), as Administrative Agent, Letter of Credit Agent and a Bank By: /S/ - - - PATRICK M. DELANEY -------------------------- Patrick M. Delaney Senior Vice President BANKBOSTON, N.A., as Documentation Agent and a Bank By: /S/ - - - CHRISTOPHER HOLMGREN ------------------------------ Name: Christopher Holmgren Title: Director FIRST NATIONAL BANK OF MARYLAND, as a Bank By: /S/ - - - SUSAN ELLIOTT BENNINGHOFF ----------------------------------- Name: Susan Elliott Benninghoff Title: Vice President FIRST UNION NATIONAL BANK, as a Bank By: /S/ - - - KEVIN MAHON --------------------- Name: Kevin Mahon Title: Vice President DEN NORSKE BANK ASA, as a Bank By: /S/ - - - BYRON L. COOLEY -------------------------- Name: Byron L. Cooley Title:Senior Vice President HIBERNIA NATIONAL BANK, as a Bank By: /S/ - - - COLLEEN MCEVOY ------------------------ Name: Colleen McEvoy Title:Vice President CRESTAR BANK, as a Bank By: /S/ - - - PAUL R. BELIVEAU -------------------------- Name:Paul R. Beliveau Title:Vice President PNC BANK, N.A., as a Bank By: /S/ - - - JOHN R. WAY --------------------- Name: John R. Way Title: Assistant Vice President EX-10 3 EXHIBIT 10 SECOND AMENDMENT TO THE CROWN CENTRAL PETROLEUM CORPORATION 1994 LONG-TERM INCENTIVE PLAN THIS SECOND AMENDMENT TO THE CROWN CENTRAL PETROLEUM CORPORATION 1994 LONG-TERM INCENTIVE PLAN, made on this 29th day of January, 1998 BY CROWN CENTRAL PETROLEUM CORPORATION, a Maryland corporation: WITNESSETH WHEREAS, Crown Central Petroleum Corporation (the "Company") maintains the Crown Central Petroleum Corporation 1994 Long-Term Incentive Plan (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. Section 6(a)(1) of the Plan is amended in its entirety to read as follows: 1) Non-assignability. A. A provision that no Award shall be assignable or transferable other than by will or the laws of descent and distribution, except as provided in B. below. Except for an Award transferred pursuant to a provision meeting the requirements of B. below, a provision that the Award shall be exercisable, during the lifetime of the Participant, only by the Participant or the Participant's guardian or legal representative. B. To the extent determined by the Committee in new or amended Awards, a provision that, subject to applicable securities laws, a Participant may transfer Non-qualified Stock Options that have been or will be granted to the Participant under this Plan to one or more of the Participant's immediate family members, to a trust or trusts for the benefit of any one or more of the Participant's immediate family members, or to a partnership, limited liability company or other entity the only partners, members or interest holders of which are the Participant or are among the Participant's immediate family members. No consideration may be paid for the transfer of any Non-qualified Stock Options. The transferee shall be subject to all conditions applicable to the Non-qualified Stock Option prior to its transfer. The Committee may impose on any Non- qualified Stock Option, and on Stock issued upon exercise of a Non-qualified Stock Option, such limitations and conditions as the Committee deems appropriate, and may amend the agreement granting the Non-qualified Stock Option to set forth such limitations and conditions. II. This Amendment shall be effective as of January 29, 1998 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/--DELORES B. RAWLINGS By /S/--HENRY A. ROSENBERG, JR. - ------------------------ ------------------------------ - -- Delores B. Rawlings Henry A. Rosenberg, Jr. Chairman of the Board EX-20 4 EXHIBIT 20 APRIL 24, 1998 RESULTS FIRST QUARTER 1998 Dear Shareholders: Crown Central Petroleum Corporation announced a loss of $13.7 million ($1.40 per share) on revenues of $326 million for the first quarter of 1998 compared to a profit of $.07 million on revenues of $395 million in the first quarter of 1997. The erosion of gasoline and distillate margins that began in the fourth quarter of 1997 carried over through the first quarter of 1998. Crude oil having finally bottomed out in mid-March having dropped by 40% since November, was the primary cause of the quarterly loss. Operationally, during the first quarter, the fluid catalytic cracking unit at our Pasadena, Texas refinery was down for 12 days for unscheduled maintenance. One of two alkylation units at Pasadena and the one unit at our Tyler, Texas refinery underwent scheduled 10 day maintenance turnarounds. The loss the Company experienced was primarily due to the sharp fall in the price of oil during the first quarter of 1998. Because of the severe backwardization in the oil markets that occurred in 1996, during the first quarter of 1997 the Company decided to price its crude oil more into the future, meaning pricing the crude before it is manufactured into products. The Company continues to maintain its current pricing strategy as it is believed that raw materials should expectedly recover from the extreme lows recorded during the first quarter. At different price levels the Company will consider changing its pricing strategy. Crown's retail marketing operations reported improved results compared to the same period in 1997. Retail merchandise gross profit increased 4.1% on comparable sales. Gasoline margins per gallon improved 12.9% in the first quarter. The volatility of crude, the basic, fundamental component to our industry, makes for challenging times. Both internally and externally, Crown will continue to be disciplined yet flexible in conducting its day to day business. We have experienced this volatility in the past but are encouraged by more positive forecasts for the independent domestic refining industry for the year ahead. I would like to recognize the positive contribution retail marketing continues to make. Sincerely, /S/--HENRY A. ROSENBERG, JR. -------------------------- - --- HENRY A. ROSENBERG, JR. Chairman of the Board, Chief Executive Officer and President
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA Three Months Ended March 31 1998 1997 --------- --------- - -- Sales and operating revenues $325,960 $394,513 Income (loss) before income (22,192) 1 taxes ,423 Net income (loss) (13,743) 7 24 Net income (loss) per share $ (1.4 $. 0) 07 Weighted average shares used in the computation of income (loss) 9,812,569 9 per share ,733,478
CROWN CENTRAL PETROLEUM CORPORATION OPERATING STATISTICS Three Months Ended March 31 1998 1997 --------- --------- -- -- COMBINED REFINERY OPERATIONS - ----------------------------- Production (BPD-M) 150 154 Production (MMbbl) 13.5 13.9 Sales (MMbbl) 15.0 14.3 Gross Margin ($/bbl) 0.30 1.99 Gross Profit ($MM) 4.5 28.4 Operating Cost ($/bbl) (2.30) (2.17) Operating Cost ($MM) (34.4) (30.9) Net Refining (Loss)($MM) (29.9) (2.5) RETAIL - ---------------- Number Stores 343 341 Volume (pmps - Mgal) 121 126 Volume (MMgal) 125 129 Gasoline Gross Margin ($/gal) 0.131 0.116 Gasoline Gross Profit ($MM) 16.3 14.9 Merchandise Sales (pmps - $M) 23.7 23.7 Merchandise Sales ($MM) 24.3 24.2 Merchandise Gross Margin (%) 31.8 30.7 Merchandise Gross Profit ($MM) 7.7 7.4 Retail Gross Profit ($MM) 24.0 22.3 Retail Operating Costs (pmps - $M) (19.4) (18.0) Retail Operating Costs ($MM) (19.9) (18.2) Retail Non-Operating (Expense) (0.1) (0.2) Income ($MM) Retail Net Profit (Loss) ($MM) 4.0 3.9 WHOLESALE/TERMINAL NET (3.6) (1.8) PROFIT(LOSS)($MM) OTHER - ---------------- LIFO Recovery (Provision)($MM) 15.1 9.9 Corporate Overhead ($MM) (5.6) (5.2) Net Interest Expense ($MM) (2.8) (2.9) Other Income ($MM) 0.7 0.0 (Loss) from Extrordinary Item ($MM) Total Net Income (Loss) ($MM) (13.7) 0.7 Depreciation & Amortization ($MM) 8.2 7.8 LIFO (Recovery) Provision ($MM) (15.1) (9.9) (Gain) from Asset Disposals ($MM) (0.0) (0.6) Loss from Extraordinary Item ($MM) Income Tax Expense (Benefit) (8.4) 0.7 EBITDAAL ($MM) (26.2) 1.6 ------------------------------- 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
EX-27.A 5
5 1000 DEC-31-1998 MAR-31-1998 3-MOS
EXHIBIT 27 (a) Crown Central Petroleum Corporation and Subsidiaries Financial Data Schedule (In thousands, except per share amounts) Three Months End ed March 31, 1998 ---------------- -- $ (2 ) 30,342 73,956 (729 ) 138,937 253,892 644,727 345,802 596,451 194,276 129,188 0 0 49,920 144,254 596,451 325,960 325,960 314,495 314,495 33,324 75 3,530 (22,192 ) (8,449 ) (13,743 ) 0 0 0 (13,743 ) (1.40 ) (1.40 )
EX-27.B 6
5 1000 DEC-31-1997 MAR-31-1997 3-MOS
EXHIBIT 27 (b) Crown Central Petroleum Corporation and Subsidiaries Financial Data Schedule - AS REVISED (In thousands, except per share amounts) Three Months En ded March 31, 19 97 -------------- ---- $ (1,878) 30,215 105,019 (701) 124,674 267,473 630,224 331,710 600,073 214,214 126,862 0 0 49,507 138,590 600,073 394,513 394,513 361,058 361,058 31,114 (377) 3,501 1,423 699 724 0 0 0 724 .07 .07
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