-----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, E48DTBPHGl97mksj4wtl8wmeLE5G85dWn60mmkpJ5XFxDOivQ2kZYLB6AbMwWaeQ FgphzZI5CgQqVBrD4JvIgA== 0000950134-96-004114.txt : 19960813 0000950134-96-004114.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950134-96-004114 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAPCO INC CENTRAL INDEX KEY: 0000062142 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 730705739 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05254 FILM NUMBER: 96609089 BUSINESS ADDRESS: STREET 1: 1800 S BALTIMORE AVE CITY: TULSA STATE: OK ZIP: 74119 BUSINESS PHONE: 9185811800 MAIL ADDRESS: STREET 1: P O BOX 645 CITY: TULSA STATE: OK ZIP: 74101-0645 FORMER COMPANY: FORMER CONFORMED NAME: MID AMERICA PIPELINE CO DATE OF NAME CHANGE: 19710923 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 ------------------------------------------------ Commission file number 1-5254 ----------------- MAPCO Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 73-0705739 - ------------------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1800 South Baltimore Avenue, Tulsa, Oklahoma 74119 - -------------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) (918) 581-1800 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) No Changes - -------------------------------------------------------------------------------- (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 (or for such shorter period that the registrant was required to file such reports), and has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- On August 6, 1996, 28,786,750 shares of MAPCO Inc. Common Stock, $1 par value, were outstanding. 2 MAPCO Inc. Index PART I. Financial Information: Condensed Consolidated Statements of Income for the three and six months ended June 30, 1996 and 1995 Condensed Consolidated Balance Sheets, June 30, 1996 and December 31, 1995 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 Notes to Condensed Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. Other Information: Legal Proceedings Submission of Matters to a Vote of Security Holders Exhibits and Reports on Form 8-K Signatures 3 PART I FINANCIAL INFORMATION MAPCO INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME Dollars and Shares in Millions except per share amounts (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, ------------------------ ----------------------- 1996 1995 1996 1995 --------- -------- --------- -------- Sales and Operating Revenues (1) $ 782.7 $ 814.8 $ 1,524.2 $1,489.7 --------- -------- --------- -------- Expenses: Outside purchases and operating expenses (1) 705.0 743.2 1,340.2 1,333.9 Selling, general and administrative 15.6 15.3 30.8 30.6 Depreciation and amortization 19.9 18.9 39.8 37.8 Interest and debt expense 14.6 14.4 29.8 28.9 Gain on sale of net assets held for disposal (Note 3) - - (20.8) - Other (income) expense - net (.9) 0.1 (1.0) (0.4) --------- -------- --------- -------- 754.2 791.9 1,418.8 1,430.8 --------- -------- --------- -------- Income from Continuing Operations before Provision for Income Taxes 28.5 22.9 105.4 58.9 --------- -------- --------- -------- Provision for Income Taxes: Current 8.2 4.5 34.7 11.2 Deferred 2.0 4.7 4.1 11.8 --------- -------- --------- -------- 10.2 9.2 38.8 23.0 --------- -------- --------- -------- Income from Continuing Operations before Minority Interest 18.3 13.7 66.6 35.9 Minority Interest in Earnings of Subsidiary (.5) (.6) (1.4) (1.1) --------- -------- --------- -------- Income from Continuing Operations 17.8 13.1 65.2 34.8 --------- -------- --------- -------- Discontinued Operations (Note 2): Income from discontinued Coal operations, net of income taxes 6.7 8.1 14.5 15.4 Loss on disposal of the Coal segment, including operating income of $2.0 million during phase-out period, net of income tax benefit (45.5) - (45.5) - --------- -------- --------- -------- Income (Loss) from Discontinued Operations (38.8) 8.1 (31.0) 15.4 --------- -------- --------- -------- Net Income (Loss) $ (21.0) $ 21.2 $ 34.2 $ 50.2 ========= ======== ========= ======== Earnings (Loss) per Common Share: Income from continuing operations $ .62 $ .44 $ 2.25 $ 1.17 Net income (loss) $ (.73) $ .71 $ 1.18 $ 1.68 Average Common Shares Outstanding 28.8 29.9 28.9 29.9 Cash Dividends per Common Share $ .25 $ .25 $ .50 $ .50
See Notes to Condensed Consolidated Financial Statements. (1) Includes consumer excise taxes of $40.8 million and $43.2 million for the three months ended June 30, 1996 and 1995, respectively, and $77.5 million and $74.4 million for the six months ended June 30, 1996 and 1995, respectively. 4 MAPCO INC. CONDENSED CONSOLIDATED BALANCE SHEETS Dollars in Millions
June 30, 1996 December 31, (Unaudited) 1995 ------------- ------------ Current Assets: Cash and cash equivalents $ 48.8 $ 33.3 Receivables 261.0 222.1 Inventories (Note 5) 156.5 114.0 Prepaid expenses 20.5 18.4 Other current assets 30.8 27.0 Net assets of discontinued operations (Note 2) 231.0 307.5 Net assets held for disposal (Note 3) - 23.4 -------- -------- Total current assets 748.6 745.7 -------- -------- Property, Plant and Equipment, at cost 2,108.4 2,062.1 Less - accumulated depreciation and amortization (778.1) (750.1) -------- -------- 1,330.3 1,312.0 -------- -------- Other Assets 231.8 225.0 -------- -------- $2,310.7 $2,282.7 ======== ======== Current Liabilities: Current maturities of long-term debt $ 39.7 $ 26.9 Accounts payable 304.2 263.9 Accrued taxes 46.8 47.9 Accrued payroll and related expenses 18.9 15.4 Other current liabilities 51.8 52.5 -------- -------- Total current liabilities 461.4 406.6 -------- -------- Long-Term Debt, excluding current maturities (Note 6) 811.1 801.0 -------- -------- Other Liabilities 115.3 116.5 -------- -------- Deferred Income Taxes 262.4 289.3 -------- -------- Minority Interest 28.4 27.0 -------- -------- Contingencies (Note 8) -------- -------- Stockholders' Equity (Note 7): Common stock 62.9 62.9 Capital in excess of par value 203.9 203.0 Retained earnings 1,421.6 1,401.8 -------- -------- 1,688.4 1,667.7 Treasury stock, at cost (997.6) (966.7) Loan to ESOP (58.7) (58.7) -------- -------- 632.1 642.3 -------- -------- $2,310.7 $2,282.7 ======== ========
See Notes to Condensed Consolidated Financial Statements. 5 MAPCO INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in Millions (Unaudited)
Six Months Ended June 30, ----------------------------- 1996 1995 -------- -------- Cash Flows from Operating Activities: Net income $ 34.2 $ 50.2 Reconciliation of net income to net cash provided by operating activities: Discontinued operations 31.0 (15.4) Depreciation and amortization 39.8 37.8 Provision for deferred income taxes 4.1 11.8 Gain on sale of net assets held for disposal (20.8) - Other items not requiring cash (Note 4) 10.3 5.8 -------- -------- Funds provided by operations 98.6 90.2 Changes in operating assets and liabilities (Note 4) (56.9) (20.2) -------- -------- Net cash provided by continuing operations 41.7 70.0 Net cash provided by discontinued operations 30.3 18.8 -------- -------- Net cash provided by operating activities 72.0 88.8 -------- -------- Cash Flows from Investing Activities: Capital expenditures and acquisitions, net of liabilities assumed: Continuing operations (63.1) (63.4) Discontinued operations (17.2) (19.2) Proceeds from sale of net assets held for disposal 43.0 - Proceeds from sales of property, plant and equipment 5.4 1.7 Other (2.2) - -------- -------- Net cash used in investing activities (34.1) (80.9) -------- -------- Cash Flows from Financing Activities: Purchase of common stock (30.9) (4.4) Increase in borrowings 19.6 21.6 Dividends (15.0) (14.9) Issuance of long-term debt 3.8 - Payments on long-term debt (.5) (3.5) Other .6 .3 -------- -------- Net cash used in financing activities (22.4) (.9) -------- -------- Increase in Cash and Cash Equivalents 15.5 7.0 Cash and Cash Equivalents, January 1 33.3 30.6 -------- -------- Cash and Cash Equivalents, June 30 $ 48.8 $ 37.6 ======== ========
See Notes to Condensed Consolidated Financial Statements. 6 MAPCO INC. Notes to Condensed Consolidated Financial Statements Note 1 - In the opinion of Management, the accompanying condensed consolidated financial statements of MAPCO Inc. and its subsidiaries ("MAPCO" or the "Company") contain all adjustments necessary to present fairly the financial position as of June 30, 1996 (unaudited) and December 31, 1995, the results of operations for the three and six months ended June 30, 1996 and 1995 (both unaudited) and the cash flows for the six months ended June 30, 1996 and 1995 (both unaudited). Prior year amounts have been reclassified to present the Coal business as discontinued and to conform to current year presentations. All intercompany accounts and transactions have been eliminated. Note 2 - Discontinued Operations In June 1996, the Company concluded it would sell its Coal business. In July 1996, the Company signed an agreement with the Beacon Group Energy Investment Fund L.P. ("Beacon") to sell substantially all of the net assets of the Coal business. The transaction is expected to be finalized in August 1996. As a result, operations of the Coal business for the current and prior periods have been shown as discontinued in the condensed consolidated statements of income. In connection with the sale, the Company made guarantees, indemnifications and representations for certain specified matters. Management of the Company does not expect these guarantees, indemnifications and representations to have any material impact on future operations. Income from discontinued Coal operations includes income tax expense of $2.5 million and $4.8 million for the three and six months ended June 30, 1996, respectively, and $2.3 million and $4.1 million for the three and six months ended June 30, 1995, respectively. The loss on disposal of the Coal business is net of an income tax benefit of $29.5 million. The Coal segment's sales and operating revenues were $113.0 million and $237.3 million for the three and six months ended June 30, 1996, respectively, and $112.8 million and $215.1 million for the three and six months ended June 30, 1995, respectively. 7 For financial reporting purposes, the assets and liabilities attributable to the sale of the Coal business have been classified in the condensed consolidated balance sheets as Net Assets of Discontinued Operations and consist of the following (in millions):
June 30, December 31, 1996 1995 -------- ------------ Current assets $ 88.4 $ 90.7 Property, plant and equipment, net 171.2 246.6 Other assets 37.8 35.3 ------ ------ Total assets 297.4 372.6 ------ ------ Current liabilities 44.3 44.5 Other liabilities 22.1 20.6 ------ ------ Total liabilities 66.4 65.1 ------ ------ Net assets $231.0 $307.5 ====== ======
Note 3 - Net Assets Held for Disposal In January 1996, the Company signed an agreement to sell its Thermogas Iowa propane and liquid fertilizer assets as well as its remaining liquid fertilizer assets in Arkansas, Illinois, Indiana, Minnesota, Ohio and Wisconsin, to CENEX Inc. ("CENEX"). The sale of assets to CENEX was completed on March 29, 1996. See RESULTS OF OPERATIONS on page 13 for additional information regarding the CENEX transaction. The assets and liabilities attributable to the CENEX transaction have been classified in the condensed consolidated balance sheets as Net Assets Held for Disposal and at December 31, 1995, consist of current assets ($14.4 million), property, plant and equipment, net ($10.0 million), other assets ($.1 million) and current liabilities ($1.1 million). 8 Note 4 - Statements of Cash Flows Other items not requiring (providing) cash reported in cash flows from operating activities consist of (in millions):
Six Months Ended June 30, ---------------------------- 1996 1995 ------ ------ Net periodic pension expense $ 1.8 $ 1.3 Gain on sales of property, plant and equipment (.8) (.2) Minority interest in earnings of subsidiary 1.4 1.1 Litigation and environmental accruals 5.4 (.2) Refinery turnaround accrual 2.1 3.4 Other non-cash income and expense items - net .4 .4 ------ ------ $ 10.3 $ 5.8 ====== ======
Changes in operating assets and liabilities consist of (in millions):
Six Months Ended June 30, ---------------------------- 1996 1995 ------- ------- Decrease (increase) in: Receivables $ (36.0) $ 11.6 Inventories (42.7) (39.0) Prepaid expenses (1.7) 5.6 Other current assets (3.7) .3 Other assets (2.9) (2.3) Increase (decrease) in: Accounts payable 35.9 (.4) Accrued taxes (.6) 8.9 Accrued payroll and related expenses 3.5 3.9 Other current liabilities (5.5) (9.6) Other liabilities (3.2) .8 ------- ------- $ (56.9) $ (20.2) ======= =======
Income taxes paid were $44.7 million and $2.9 million for the six months ended June 30, 1996 and 1995, respectively. Interest paid, net of amounts capitalized, was $31.4 million and $29.9 million for the six months ended June 30, 1996 and 1995, respectively. 9 Note 5 - Inventories Inventories consist of (in millions):
June 30, December 31, 1996 1995 -------- ------------ Raw materials - crude oil $ 39.3 $ 24.1 ------- ------- Finished products: Refined petroleum products 51.4 43.6 Fertilizer and natural gas liquids 42.3 24.2 Retail merchandise 23.5 22.1 ------- ------- 117.2 89.9 ------- ------- Inventories $ 156.5 $ 114.0 ======= =======
The cost to replace the Petroleum segment's crude oil, refined petroleum products and retail merchandise inventories in excess of their last-in, first-out carrying values was approximately $21.8 million at June 30, 1996, and $16.5 million at December 31, 1995. Note 6 - Long-Term Debt Long-term debt consists of (in millions):
June 30, December 31, 1996 1995 -------- ------------ MAPCO Inc. - ---------- Commercial paper and bank money market lines $ 309.3 $ 289.7 8.43% ESOP Notes, payable in mortgage type principal reductions annually through 2003 58.7 58.7 Medium Term Notes, various maturities through 2022 308.8 308.8 --------- --------- 676.8 657.2 --------- --------- Subsidiaries - ------------ Senior Notes: 8.51% Notes, payable 2007 15.0 15.0 8.95% Notes, payable 2012 35.5 35.5 8.20% Notes, payable $2.5 annually 2007 through 2012 15.0 15.0 8.59% Notes, payable 2017 14.5 14.5 8.70% Notes, payable $2.0 annually 2018 through 2022 10.0 10.0 6.67% Notes, payable $15.0 annually 2001 through 2005 75.0 75.0 Other 9.0 5.7 --------- --------- 174.0 170.7 --------- --------- 850.8 827.9 Less - current maturities (39.7) (26.9) --------- --------- Long-term debt $ 811.1 $ 801.0 ========= =========
10 Interest rates on commercial paper and bank money market lines ranged from 5.35% to 6.15% during the first six months of 1996 and from 5.83% to 6.25% during the first six months of 1995. Commercial paper and bank money market lines outstanding at June 30, 1996, and December 31, 1995, were classified as long-term debt. MAPCO has the ability and intent, if necessary, under a bank credit agreement to refinance up to $350 million of commercial paper and bank money market lines with long-term debt having maturities in excess of one year. MAPCO has bank credit agreements which represent a total committed line of credit of $350 million. The first bank credit agreement is for $300 million and reduces in quarterly increments of $25 million commencing June 30, 1998. In December 1995, MAPCO obtained an additional $50 million commitment under a bank credit agreement which matures in December 1996 and is treated as long-term debt. In July 1996, the $50 million bank credit agreement was amended to increase the amount of the commitment to $100 million. The amended bank credit agreement reduces in $50 million increments in October 1996 and in December 1996. Interest on borrowings under the bank credit agreements would be at rates generally less than the prime interest rate. MAPCO must pay a commitment fee to maintain the bank credit agreements. These agreements serve as a back-up for MAPCO's outstanding commercial paper and bank money market lines. As of June 30, 1996, no borrowings were outstanding under the bank credit agreements. As of June 30, 1996, MAPCO had $308.8 million of Medium Term Notes outstanding. These notes mature at various times through 2022 and bear interest at rates ranging from 7.60% to 8.87%. The Company has entered into various interest rate swap agreements with financial institutions which effectively change the Company's interest rate exposure from variable rates to fixed rates on $100 million of debt. The swaps' interest rates are fixed at 5.82% and expire April 1, 2003. The swaps provide protection against actual interest rate exposure and are not speculative in nature. Various loan agreements contain restrictive covenants which, among other things, limit the payment of advances or dividends by two of Natural Gas Liquids' subsidiaries to MAPCO Inc. At June 30, 1996, $190 million of net assets were restricted by such provisions. Note 7 - Employee Benefit Plans MAPCO offers the MAPCO Inc. and Subsidiaries Profit Sharing and Savings Plan which includes an Employee Stock Ownership Plan feature ("ESOP"). With respect to the ESOP, MAPCO recognized compensation expense of $.8 million and $1.6 million for the three and six months ended June 30, 1996, respectively, and $.7 million and $1.4 million for the three and six months ended June 30, 1995, respectively. Interest expense on ESOP related debt was $1.2 million 11 and $2.4 million for the three and six months ended June 30, 1996, respectively, and $1.3 million and $2.6 million for the three and six months ended June 30, 1995, respectively. Dividends on the allocated and unallocated MAPCO common stock held by the ESOP were $.5 million and $1.1 million for the three and six months ended June 30, 1996, respectively, and $.6 million and $1.2 million for the three and six months ended June 30, 1995, respectively, and will be used for ESOP debt service. Note 8 - Contingencies Texas Explosion Litigation On April 7, 1992, a liquefied petroleum gas explosion occurred near an underground salt dome storage facility located near Brenham, Texas and owned by an affiliate of the Company, Seminole Pipeline Company ("Seminole"). The National Transportation Safety Board and the Texas Railroad Commission essentially determined that the probable cause of the explosion was the result of overfilling the storage facility. The Company, as well as Seminole, Mid-America Pipeline Company, MAPCO Natural Gas Liquids Inc. and other non-MAPCO entities have been named as defendants in civil actions filed in state district courts in Texas. During 1993, Seminole received reimbursements from its insurers for settlements which disposed of all of the death claims and substantially all of the serious injury claims resulting from the incident. Generally, the types of remaining claims consist of personal injury, mental anguish and property damage claims, coupled with theories of nuisance and diminished property value. In March 1996, a judgement was rendered in a case tried in the state district court in Houston, Texas against Seminole, Mid-America Pipeline Company and MAPCO (the "defendants"). The judgement totaled approximately $72 million in actual damages, exemplary damages and interest, with only $5.4 million pertaining to actual damages found by the jury. Following the denial of a motion for new trial on April 19, 1996, the defendants announced that they plan to appeal. The plaintiffs in cases which remain to be tried in Harris, Maverick and Washington counties in Texas, seek unspecified amounts for actual and exemplary damages. Management believes that it has defenses of considerable merit and will vigorously litigate all pending disputes and/or seek settlements favorable to the Company, but is not able to predict the ultimate outcome of these matters at this time. The Company has accrued a liability representing an estimate of amounts it may incur in connection with the final resolution of all the remaining claims related to the explosion. The Company has also recorded a receivable which corresponds to the remainder of its insurance coverage to be reimbursed by its insurance carrier. Resolutions unfavorable to the Company could result in material liabilities and charges which have 12 not been reflected in the condensed consolidated financial statements. Seminole Loop/Aquila-LaGrange Line Litigation In May 1993, Seminole completed its Seminole loop project and in January 1994, Seminole completed its Aquila-LaGrange line project. At December 31, 1995, Seminole was the plaintiff in over 70 eminent domain lawsuits in which defendant landowners claim additional compensation for and/or damages to tracts of land traversed by these projects in 12 counties in the state of Texas. Many of the lawsuits claim punitive damages for alleged fraud, illegal entry and other wrongful conduct. On March 29, 1996, the Company settled 21 of the lawsuits for $3 million which has been capitalized as a cost of the project. Claims in this litigation are not covered by the Company's insurance. The Company believes that complete resolution of the Seminole Loop/Aquila-LaGrange line litigation will not have a material adverse effect on the Company's business, results of operations or financial position. General Litigation The Company and its subsidiaries are involved in various other lawsuits, claims and regulatory proceedings incidental to their businesses. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company's business, results of operations or financial position. Note 9 - Subsequent Event In July 1996, the Company signed an agreement with Beacon to sell substantially all of the net assets of the Coal business. The transaction is expected to be finalized in August 1996. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SECOND QUARTER 1996 VS. SECOND QUARTER 1995 Sales and operating revenues were as follows (in millions):
Three Months Ended June 30, ------------------------------------------- 1996 1995 Variance ------ ------ -------- Natural Gas Liquids $195.4 $196.2 $ (.8) Petroleum 592.0 624.4 (32.4) Eliminations (4.7) (5.8) 1.1 ------ ------ ------ $782.7 $814.8 $(32.1) ====== ====== ======
Sales and operating revenues decreased $32.1 million. - - Natural Gas Liquids' sales and operating revenues decreased $.8 million, as a $9.0 million decrease in Thermogas sales was mostly offset by an $8.4 million increase in pipeline revenues. Fertilizer revenues decreased $17.7 million because of the sale of Thermogas' fertilizer operations to CENEX on March 29, 1996. However, propane sales increased $9.0 million reflecting a new five-year agreement to supply propane to the retail plants sold to CENEX, increased volumes due to colder weather and higher retail propane prices. The increase in pipeline revenues was primarily attributable to improved ethane recoveries and increased product shipments from the Rocky Mountain and Four Corners locations to meet Gulf Coast demand. - - Petroleum's sales and operating revenues decreased $32.4 million as increased sales by the Memphis and North Pole Refineries and Retail Marketing were more than offset by reduced Petroleum trading sales. Production and sales volumes at the Memphis Refinery were at record highs in the current quarter, resulting in a $75.6 million increase in sales. Additional cargo shipments of naphtha were the principal reason for a $29.1 million increase in North Pole sales. Increased demand and higher prices for motor fuels combined with aggressive merchandise marketing resulted in a $24.7 million increase in Retail Marketing sales. Sales from Petroleum trading activities decreased $161.8 million because trading activities have been significantly curtailed since the third quarter of 1995. 14 Outside purchases and operating expenses decreased $38.2 million. Details by segment are as follows (in millions):
Three Months Ended June 30, ------------------------------------------------------------------------------------- 1996 1995 Variance ------------------------- ------------------------ ------------------------ Outside Operating Outside Operating Outside Operating Purchases Expenses Purchases Expenses Purchases Expenses --------- --------- --------- --------- --------- -------- Natural Gas Liquids $ 99.0 $ 48.3 $ 106.3 $ 44.5 $ 7.3 $ (3.8) Petroleum 512.3 45.4 549.2 43.2 36.9 (2.2) ------- ------ ------- ------ ------ ------ $ 611.3 $ 93.7 $ 655.5 $ 87.7 $ 44.2 $ (6.0) ======= ====== ======= ====== ====== ======
Natural Gas Liquids' outside purchases decreased $7.3 million primarily due to reduced fertilizer purchases resulting from the divestiture of those operations in the first quarter of 1996. The lower fertilizer purchases were partially offset by increased propane purchases. Higher wholesale prices, additional purchases to meet increased sales volumes and purchases associated with the new CENEX supply agreement were the principal reason for the increase in propane purchases. Operating expenses in the Natural Gas Liquids' segment increased $3.8 million principally due to smart-pigging costs and higher power costs resulting from the increase in product shipments. Thermogas operating expenses decreased only slightly as lower salary, benefit and plant maintenance costs, attributable to the plant divestitures, were mostly offset by increases in contingent liabilities. Petroleum's outside purchases decreased $36.9 million as increased purchases by the Memphis and North Pole Refineries and Retail Marketing were more than offset by lower trading purchases. Outside purchases increased at the Memphis and North Pole Refineries due to increased volumes of crude processed in the current quarter combined with higher crude prices. The increase in Retail Marketing purchases was primarily related to the higher volume of merchandise sales. Trading purchases were significantly decreased because of the curtailment of trading activities since the third quarter of 1995. There was a $1.0 million increase in depreciation and amortization reflecting additional depreciation from the Four Corners Loop pipeline project and capital additions to the Memphis Refinery in 1995. These increases were partially offset by the absence of depreciation on the Thermogas assets sold to CENEX at the end of the first quarter of 1996. The effective income tax rate for the second quarter of 1996 was 35.8% and 40.2% for the second quarter of 1995. The difference between the statutory Federal income tax rate of 35% and the effective income tax rate is primarily due to state taxes. 15 Operating profit for the three months ended June 30, 1996 and 1995 is detailed below (in millions):
1996 1995 Variance ------ ------ -------- Natural Gas Liquids $ 27.3 $ 25.3 $ 2.0 Petroleum 21.5 17.9 3.6 ------ ------ ----- $ 48.8 $ 43.2 $ 5.6 ====== ====== =====
The increase in operating profit of $5.6 million was a combination of increases in Pipeline, the North Pole Refinery and Retail Marketing, partially offset by decreases in Thermogas and the Memphis Refinery. Pipeline profits increased primarily due to additional product movements. The improvement in North Pole's profits reflects an increase in sales of refined products. Retail Marketing's profit increase was principally due to higher gasoline margins and improved merchandise volumes and margins. Thermogas profits compare unfavorably to the 1995 quarter because of significantly reduced fertilizer profits and the absence of the Iowa propane plants. Profits at the Memphis Refinery declined because of lower margins which reflect higher crude costs in the current quarter. YEAR-TO-DATE 1996 VS. YEAR-TO-DATE 1995 Sales and operating revenues were as follows (in millions):
Six Months Ended June 30, ------------------------------------------------ 1996 1995 Variance -------- -------- -------- Natural Gas Liquids $ 493.0 $ 456.2 $ 36.8 Petroleum 1,040.5 1,044.7 (4.2) Eliminations (9.3) (11.2) 1.9 -------- -------- ------ $1,524.2 $1,489.7 $ 34.5 ======== ======== ======
Sales and operating revenues were $34.5 million more in 1996 than for the same period in 1995. - - Natural Gas Liquids' sales and operating revenues increased $36.8 million over 1995. Pipeline sales increased because of improved ethane recoveries and shipments to meet Gulf Coast demand. Thermogas' sales increased because of the impact of colder weather on retail propane sales and the new supply agreement with CENEX, partially offset by lower fertilizer sales due to the divestiture of those operations to CENEX. - - Petroleum's sales and operating revenues decreased $4.2 million as increased sales by the Memphis and North Pole Refineries and Retail Marketing were more than offset by reduced Petroleum trading sales. An increase in production and sales volumes at the Memphis Refinery and additional cargo shipments of naphtha at the North Pole Refinery were the principal reasons for higher sales at those locations. Sales from Retail Marketing were favorably impacted by increased demand and higher prices for motor fuels combined with aggressive merchandise marketing and 16 operating more stores in the current year. Sales from Petroleum trading activities decreased because trading activities have been significantly curtailed since the third quarter of 1995. Outside purchases and operating expenses in the first six months of 1996 were comparable to 1995. Details by segment are as follows (in millions):
Six Months Ended June 30, ----------------------------------------------------------------------------------------- 1996 1995 Variance ------------------------- -------------------------- ------------------------- Outside Operating Outside Operating Outside Operating Purchases Expenses Purchases Expenses Purchases Expenses --------- --------- --------- --------- --------- -------- Natural Gas Liquids $ 264.8 $ 95.5 $ 244.3 $ 91.7 $ (20.5) $ (3.8) Petroleum 890.3 89.6 913.3 84.6 23.0 (5.0) -------- ------- -------- ------- ------- ------ $1,155.1 $ 185.1 $1,157.6 $ 176.3 $ 2.5 $ (8.8) ======== ======= ======== ======= ======= ======
Natural Gas Liquids' outside purchases increased $20.5 million primarily because of additional propane purchases partially offset by reduced purchases of fertilizer. Increased volumes of retail propane sales, higher wholesale prices and purchases associated with the new CENEX supply agreement were the principal reasons for the increase in propane purchases. Fertilizer purchases decreased because of the divestiture of the fertilizer operations in the first quarter of 1996. Operating expenses increased $3.8 million principally due to smart-pigging costs and higher power costs resulting from the increased product shipments. Petroleum's outside purchases decreased $23.0 million for the same reasons as described in the second quarter analysis above. The operating expense increase is primarily attributable to higher Retail Marketing expense due to operating more stores in the current year. Depreciation and amortization expense increased $2.0 million over 1995 due to additional depreciation from the Four Corners Loop pipeline project and capital additions to the Memphis Refinery in 1995. These increases were partially offset by the absence of depreciation on the Thermogas assets sold to CENEX at the end of the first quarter of 1996. The effective income tax rate for the first six months of 1996 was 36.8% compared to 39.0% in 1995. The difference between the statutory Federal income tax rate of 35% and the effective income tax rate is primarily due to state taxes. 17 Operating profit for the six months ended June 30, 1996 and 1995 is detailed below (in millions):
1996 1995 Variance ------- ------ -------- Natural Gas Liquids $ 112.1 $ 80.3 $ 31.8 Petroleum 34.7 18.9 15.8 ------- ------ ------ $ 146.8 $ 99.2 $ 47.6 ======= ====== ======
The gain on sale of assets to CENEX in the first quarter of 1996 accounts for $20.8 million of the $31.8 million increase in Natural Gas Liquids' operating profit. The remaining $11.0 million increase is primarily attributable to increased pipeline profits. Petroleum's operating profit increased $15.8 million because of improved profits at the North Pole Refinery, Memphis Refinery and Retail Marketing. The improvement at the North Pole Refinery and Memphis Refinery reflects an increase in sales of refined products. Retail Marketing's profit increase was principally due to higher gasoline margins and improved merchandise volumes and margins. FINANCIAL CONDITION Cash Generation Cash generation was as follows (in millions):
Six Months Ended June 30, ----------------------------------- 1996 1995 ------- ------- Funds provided by operations $ 98.6 $ 90.2 Changes in operating assets and liabilities (56.9) (20.2) ------- ------- Net cash provided by continuing operations 41.7 70.0 Net cash provided by discontinued operations 30.3 18.8 ------- ------- Net cash provided by operating activities 72.0 88.8 Net cash used in investing activities (34.1) (80.9) Net cash used in financing activities (22.4) (.9) ------- ------- Cash generation $ 15.5 $ 7.0 ======= =======
The increase in funds provided by operations was primarily due to improved operating results from the Pipeline, North Pole Refinery and Retail Marketing operations during the first six months of 1996 as compared to the first six months of 1995. The negative impact of changes in operating assets and liabilities in 1996 was primarily attributable to the seasonal build-up of propane inventories, the timing of crude inventory purchases and the payment of invoices related to the 1995 construction of the Four Corners project. These negative items were partially offset by the receipt of cash from propane sales made at the end of 1995. The change in operating assets and liabilities during the first six months 18 of 1995 was primarily attributable to the build-up of inventory at the Memphis Refinery in anticipation of the July 1995 turnaround. Cash used in investing activities during the first six months of 1996 included $43.0 million of proceeds from Thermogas' sale of its Iowa propane assets and its liquid fertilizer assets to CENEX. These proceeds were more than offset by $63.1 million of capital expenditures for continuing operations, of which $15.2 million was for capital items necessary to maintain existing operations. Capital expenditures in 1996 also included $8.7 million for a saturated gas plant expansion at the Memphis Refinery, $6.5 million for the expansion of the Hobbs Station in west Texas and $5.8 million for the acquisition of a propane company in Colorado. Cash used in investing activities during the first six months of 1995 consisted of $63.4 million of capital expenditures for continuing operations, of which $23.1 million was for capital items necessary to maintain existing operations. Capital expenditures in 1995 also included $11.2 million for the expansion of the Rocky Mountain Pipeline System and $11.0 million for the acquisition of 27 retail gasoline/convenience stores in the Nashville, Tennessee market. Cash used in financing activities for the first six months of 1996 included the repurchase of 554,850 shares of MAPCO common stock for $30.9 million and the payment of $15.0 million of dividends, partially offset by a net increase in short-term debt of $19.6 million. Cash used in financing activities for the first six months of 1995 included dividend payments of $14.9 million, the repurchase of 78,700 shares of MAPCO common stock for $4.4 million and the repayment of $3.5 million of fixed-rate debt, offset by a net increase in short-term debt of $21.6 million. Liquidity and Capital Resources MAPCO's primary sources of liquidity are its cash and cash equivalents, internal cash generation, and external financing. At June 30, 1996, MAPCO had $48.8 million of cash and cash equivalents. MAPCO's external financing sources include its bank credit agreements and its ability to issue public or private debt, including commercial paper. MAPCO's bank credit agreements represent a total committed line of credit of $350 million. The commitment under the first bank credit agreement is for $300 million and reduces in quarterly amounts of $25 million beginning June 30, 1998. In December 1995, MAPCO obtained an additional $50 million commitment under a bank credit agreement which matures in December, 1996. In July 1996, the $50 million bank credit agreement was amended to increase the amount of the commitment to $100 million. The amended bank credit agreement reduces in $50 million increments in October 1996 and in December 1996. Both agreements serve as a back-up for commercial paper and for borrowings against bank money market lines. As of June 30, 1996, no borrowings were outstanding under the bank credit agreements. In 1990, MAPCO filed a shelf registration statement with the Securities and Exchange Commission providing for the issuance of up to $400 million of debt 19 securities. As of June 30, 1996, MAPCO had outstanding $308.8 million of Medium Term Notes under this registration. MAPCO has the authorization to issue up to an additional $47 million of Medium Term Notes. The proceeds from any debt issued under the shelf registration statement have been and will continue to be used for general corporate purposes, including working capital, capital expenditures, reduction of other debt and acquisitions. The Company has entered into various interest rate swap agreements with financial institutions which effectively change the Company's interest rate exposure from variable rates to fixed rates on $100 million of debt. The swaps, which expire April 1, 2003, provide protection against actual interest rate exposure and are not speculative in nature. The Company has minimized any risk of impact on its financial position, liquidity or results of operations from changes in interest rates on the $100 million of variable rate debt that is hedged through the use of the interest rate swap agreements. In July 1996, the Company signed an agreement with Beacon to sell substantially all of the net assets of the Coal business and expects the transaction to be finalized in August 1996. The Company anticipates the majority of the proceeds from the sale will be used for capital expenditures, share repurchases and/or debt reduction. On March 29, 1996, the Company sold its Thermogas Iowa propane and fertilizer assets and its remaining Thermogas liquid fertilizer assets in Arkansas, Illinois, Indiana, Ohio, Minnesota and Wisconsin to CENEX. The transaction resulted in proceeds of $43.0 million which were used primarily for capital expenditures, share repurchases and general corporate purposes. Various loan agreements contain restrictive covenants which, among other things, limit the payment of advances or dividends by two of Natural Gas Liquids' subsidiaries to MAPCO Inc. At June 30, 1996, $190 million of net assets were restricted by such provisions. MAPCO's existing debt and credit agreements contain covenants which limit the amount of additional indebtedness the Company may incur. Management believes that the Company has sufficient capacity to fund its anticipated needs. Capital expenditures for continuing operations in 1996 are expected to be approximately $240 million, of which $175 million will be for acquisitions and expansion projects. MAPCO expects to utilize cash from operations and funding sources, as needed, to meet currently projected capital expenditures, environmental projects, debt service and dividends in 1996 and thereafter. 20 PART II OTHER INFORMATION Item 1. Legal Proceedings During May of 1993, the EPA, Region X conducted a multimedia inspection at MAPCO Alaska Petroleum Inc.'s ("MAPI") North Pole Refinery located near Fairbanks, Alaska. Following the inspection, the EPA issued two (2) Information Requests relating to New Source Performance Standards ("NSPS"). In June of 1995, the U.S. Department of Justice, Environmental and Natural Resources Division also served written notice upon MAPI of civil claims under the NSPS of the Clean Air Act. Although the Department of Justice indicated a willingness to bring suit against MAPI in federal court for recovery of civil penalties and injunctive relief, the Department of Justice offered to defer litigation if MAPI would enter into settlement negotiations with the Department of Justice. After over a year of settlement discussions, MAPI has reached a tentative agreement with the Department of Justice and the EPA, Region X. Under the terms of the proposed Consent Decree, MAPI will pay a penalty of $425,000 and will perform two Supplemental Environmental Projects ("SEP") having a total cost value of $397,000. The Consent Decree is expected to be executed by the parties on or before September 1, 1996. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of the Company was held on Wednesday, May 29, 1996, at the Four Seasons Resort and Club in Irving, Texas. In connection with the election of four nominees for Directors to Class II Directorships, 24,666,529 votes were cast as follows:
NUMBER OF SHARES -------------------------------------------------- NAME FOR WITHHOLD AUTHORITY ---- --- ------------------ James E. Barnes 24,409,572 256,957 ---------- ------- Harry A. Fischer, Jr. 24,427,947 238,582 ---------- ------- Frank T. MacInnis 24,423,229 243,300 ---------- ------- Samuel F. Segnar 24,429,390 237,139 ---------- -------
Stockholders were also requested to consider and act upon a proposal to approve the selection of Deloitte & Touche LLP as independent auditors for the year ended December 31, 1996. Of the 24,666,529 votes cast, the number of shares voting FOR this proposal was 24,551,081, 43,851 votes cast AGAINST the proposal and 71,597 abstentions were tabulated. Of the 24,666,529 votes cast on the proposal to transact other business which may properly come before the meeting or any adjournment thereof, 24,664,460 were voted in favor of the proposal and the remaining 2,069 were abstentions. 21 Item 6. Exhibits and Reports on Form 8-K (a). Exhibits Exhibit 10 - Severance Agreement between MAPCO Inc. and Joseph W. Craft III dated as of January 20, 1995. Exhibit 11 - Statement Regarding Computation of per Share Earnings. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges. Exhibit 27 - Financial Data Schedule. (b). Reports on Form 8-K Current Report on Form 8-K filed on April 24, 1996, announcing the denial of a motion for a new trial and resultant jury verdict against the Company and several subsidiaries in litigation in connection with an explosion of natural gas products. 22 SIGNATURES Pursuant to the requirements 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. MAPCO Inc. Date: August 12, 1996 /s/ PHILIP W. BAXTER ----------------- ---------------------------- Philip W. Baxter Executive Vice President and Chief Financial Officer Date: August 12, 1996 /s/ GORDON E. SCHAECHTERLE ----------------- ---------------------------- Gordon E. Schaechterle Vice President, Controller and Tax 23 INDEX TO EXHIBITS Exhibit 10 Severance Agreement between MAPCO Inc. and Joseph W. Craft III dated as of January 20, 1995. Exhibit 11 Statement Regarding Computation of per Share Earnings. Exhibit 12 Computation of Ratio of Earnings to Fixed Charges. Exhibit 27 Financial Data Schedule. EX-10 2 SEVERANCE AGREEMENT 1 January 20, 1995 Mr. Joseph W. Craft III President MAPCO Coal Inc. 1717 South Boulder Tulsa, OK 74121-0628 Dear Joe: MAPCO Inc. (the "Corporation") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel of the Corporation and its majority-owned subsidiaries (the "Controlled Subsidiaries"), including MAPCO Coal Inc. (the "Subsidiary"). The Corporation has determined that its decision to explore whether to sell the Subsidiary's stock or cause the Subsidiary to sell substantially all of its assets may distract the Subsidiary's management from their assigned duties unless appropriate steps are taken to reinforce and encourage the continued attention and dedication of such management. In addition, it is important to encourage the continued services of key employees and officers, such as yourself, to assist in the successful sale of the Subsidiary. To induce you to remain in the employ of the Subsidiary, the Corporation has directed the Subsidiary to commit to provide you the severance benefits set forth in this letter agreement (the "Agreement") in the event of a "Divestiture" (as defined in Section 2) under the circumstances described below. 1. Term of Agreement. This Agreement shall commence on January 1, 1995, and shall continue in effect through December 31, 1996. 2. Divestiture. Except as otherwise provided herein, no benefits shall be payable hereunder unless prior to the date this Agreement expires by its terms, there shall have been a Divestiture. For purposes of the Agreement, a "Divestiture," or Date of Divestiture shall be deemed to have occurred if and when: (a) any person, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 or Rule 16a-1 under the Exchange Act), directly or indirectly, through a final closing transaction of securities of the Subsidiary representing 2 Joseph W. Craft III January 20, 1995 Page 2 either (A) the majority of the combined voting power of the Subsidiary's then outstanding securities eligible to vote or (B) the majority of the value of the Subsidiary's then outstanding securities, provided that a Divestiture shall not be deemed to have occurred if such person is (1) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any Controlled Subsidiary, including, without limitation, the Subsidiary, (2) any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of the stock of the Corporation or (3) the stockholders of the Corporation; or (b) the Subsidiary completes the sale or other disposition of two-thirds or more of the Subsidiary's assets, whether in a single and final closing transaction or in a series of final closing transactions. (ii) Within 5 business days after it determines that such an event has occurred, the Corporation shall give you written notice of the date as of which a Divestiture has occurred (the "Date of Divestiture "); provided that, at any time that you reasonably believe that a Divestiture has occurred, you may request a written statement from the Corporation as to whether such an event has occurred. (iii) Notwithstanding anything else contained in this Agreement to the contrary, (a) no benefits shall be payable to you hereunder if you participate, other than in your capacity as an officer, director or employee of the Corporation, the Subsidiary or any other Controlled Subsidiary, in any transaction which alone or when combined with any other transaction results in a Divestiture hereunder, provided that, this subparagraph (iii) shall not be construed to preclude you from receiving benefits hereunder solely by reason of your being employed subsequent to the Divestiture by the "person" (or an affiliate of such person) whose acquisition of the stock or a material portion of the assets of the Subsidiary resulted in the occurrence of the Divestiture; and (b) this Agreement shall be rendered void and without effect if, prior to the occurrence of a Divestiture, there occurs a change in control of the Corporation, as defined in the agreement between you and the Corporation, dated as of December 20, 1989, as amended (the "Employment Continuation Agreement"), in which case your right, if 3 Joseph W. Craft III January 20, 1995 Page 3 any, to receive severance benefits shall be governed by the terms of such Employment Continuation Agreement. 3. Divestiture Benefits. (i) General. Except as otherwise provided herein if a Divestiture shall have occurred, your employment shall terminate and you shall be entitled to the benefits provided in Section 4(iii). You shall not be entitled to said benefits if you voluntarily resign prior to a Divestiture. (ii) Disability. If prior to Divestiture, as a result of your "Disability" (as defined under the MAPCO Inc. and Participating Subsidiaries Disability Benefit Plan), you shall have been absent from the full-time performance of your duties with the Subsidiary for six (6) consecutive months, and within thirty (30) days after written notice of termination is given, you shall not have returned to the full-time performance of your duties, for purposes of this Agreement your employment may be terminated for Disability. In the event of such termination, payment or the providing to you of all or a portion of the benefits provided in Section 4(iii) shall be at the discretion of the Subsidiary Board of Directors considering such factors as your contribution up to that time to the success of a subsequent Divestiture. (iii) Cause. You shall not be entitled to the benefits provided in Section 4(iii) if you are terminated by the Subsidiary for "Cause." Termination for "Cause" shall mean termination (a) upon the willful and continued failure by you to substantially perform your duties with the Subsidiary (other than any such failure resulting from your Disability) or any such actual or anticipated failure after the issuance of a Notice of Termination (as defined in Subsection 3(v)) within ten (10) days after a written demand for substantial performance is delivered to you by the Subsidiary Board or Chairman, which demand specifically identifies the manner in which you have not substantially performed your duties, or (b) the willful engaging by you in conduct which is clearly and materially injurious to the Corporation or the Subsidiary, monetarily or otherwise. For purposes of this subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in or not opposed to the best interest of the Subsidiary. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board of the Subsidiary at a meeting of the Board (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this subsection and specifying the particulars thereof in detail. (iv) Death. In the event of your death prior to Divestiture, payment or the providing to you or your representatives of all or a portion of the benefits 4 Joseph W. Craft III January 20, 1995 Page 4 provided in Section 4(iii) shall be at the discretion of the Subsidiary Board of Directors considering such factors as your contribution up to that time to the success of a subsequent Divestiture. (v) Notice of Termination. Any purported termination of your employment by the Subsidiary shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) Date of Termination due to Disability or for Cause. "Date of Termination" shall mean (a) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) -day period), and (b) if your employment is terminated for cause, the date specified in the Notice of Termination which shall not be less than thirty (30) days from the date such Notice of Termination is given. 4. Compensation as a Result of Disability, Death, Divestiture, or Upon Termination for Cause. (i) If prior to Divestiture you fail to perform your full-time duties with the Subsidiary as a result of your Disability, and you are so terminated or you become deceased, your benefits shall be determined under the Subsidiary's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs, in addition to payments owing, if any, pursuant to Section 3(ii) and Section 3(iv). (ii) If your employment shall be terminated by the Subsidiary for Cause, the Subsidiary shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts or benefits to which you are entitled under any employee benefit or incentive compensation plan of the Subsidiary then in effect, and the Subsidiary shall have no further obligations to you under this Agreement. (iii) As a result of Divestiture, you shall be entitled to the following: (a) the Subsidiary shall pay you your full base salary through the Date of Divestiture at the rate then in effect, no later than the fifth day following the Date of Divestiture, plus all other amounts to which you are entitled under 5 Joseph W. Craft III January 20, 1995 Page 5 any employee benefit or incentive compensation plan of the Subsidiary, at the time such payments are due; (b) additionally, the Subsidiary shall pay you as severance pay, at the time specified in Subsection (iv) of this Section 4, a single sum payment equal to the product of the sum of your (1) annual salary as in effect as of the Date of Divestiture and (2) as a minimum, an amount equal to the award payable to you at standard performance (i.e., 45 percent of base salary) under the Annual Incentive Compensation Plan (as in effect on the date hereof) or, at the discretion of the Subsidiary, any higher amount related to bonus to reflect performance in your support, and in the results of, the Divestiture and (3) six percent (6%) of such annual salary, times three (3). (c) your rights under any employee benefit or incentive compensation plan shall be governed by the terms of such plan, provided that, notwithstanding the terms of any applicable plan or any agreement between you and the Corporation to the contrary, any stock options held by you at the Date of Divestiture and granted to you prior to January 1, 1995, shall be fully and immediately exercisable (regardless of whether exercisable immediately prior to the Date of Divestiture) and shall remain exercisable until the third anniversary of the Date of Divestiture or until the end of the option's original term, whichever period is shorter; and (d) For a thirty-six (36) month period after the Date of Divestiture, the Subsidiary shall arrange to provide you with benefits substantially similar to those which you were receiving or entitled to receive under the Subsidiary's life, disability, accident and group health insurance plans or any similar welfare benefit plans (but excluding contributions to the MAPCO Inc. and Subsidiaries Profit Sharing and Savings Plan, accruals and the MAPCO Inc. and Subsidiaries Pension Plan, and contributions or accruals under any other employee pension benefit plan within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") as well as any nonqualified retirement related and deferred compensation plans), in which you were participating immediately prior to the Date of Divestiture at a cost to you which is no greater than the cost that would apply to you if you continued as an employee; provided that, the Subsidiary's obligation to provide any such benefit shall cease upon your becoming eligible to receive any benefit of a similar nature (whether or not substantially comparable to that provided by the Subsidiary) by reason of your obtaining other employment during such thirty-six (36) month period. As a condition to receiving and continuing to receive any of the benefits described in this subparagraph (d), you shall be obligated to advise the Subsidiary, within 10 business days of becoming so eligible. 6 Joseph W. Craft III January 20, 1995 Page 6 (iv) The payments provided for in paragraphs (a) and (b) above shall be made not later than the fifth day following the Date of Divestiture; provided, however, that if the amount of either such payment cannot be finally determined on or before such day, the Subsidiary shall pay to you on such day an estimate, as determined in good faith by the Subsidiary, of the minimum amount of such payment and shall pay the remainder of such payment as soon as the amount thereof can be determined but in no event later than the thirtieth day after the Date of Divestiture. (v) Except as required in Subsection (iii)(d) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Subsidiary, or otherwise. 5. Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die and any amount remains or becomes payable to you hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Subsidiary shall be directed to the attention of the Subsidiary Board with a copy to the Secretary of the Subsidiary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be authorized by the Subsidiary Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of 7 Joseph W. Craft III January 20, 1995 Page 7 this Agreement shall be governed by the laws of the State of Delaware without regard to its conflicts of law principles. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Subsidiary under Section 4 shall survive the expiration of the term of this Agreement. Notwithstanding any other provision of this Agreement to the contrary, the Subsidiary may assign this Agreement to the Corporation at any time, and upon the Corporation's written assumption of the duties and obligations of the Subsidiary hereunder, the Subsidiary shall have no further obligation to you hereunder. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Employment Continuation Agreement. The Employment Continuation Agreement is hereby amended to provide that it shall be rendered void and without effect if, prior to the occurrence of a change in control of the Corporation (as defined in the Employment Continuation Agreement), there occurs a Divestiture in which event your right to receive severance benefits shall be governed by the terms of this Agreement. If a change in control of the Corporation occurs prior to a Divestiture, this Agreement shall be rendered void and without effect and your right to receive severance benefits shall be governed by the terms of the Employment Continuation Agreement. 11. MAPCO Guarantee. In consideration of the amendment to the Employment Continuation Agreement described in Section 10 hereof, the Corporation hereby guarantees payment to you of any amounts payable hereunder by the Subsidiary after you have made written demand for payment to the Subsidiary and such payment is not made within 10 business days after the date of such demand; provided that the Corporation shall have no obligation to make any payment to you hereunder to the extent that the Subsidiary is contesting in good faith your claim to receive payment hereunder. 12. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto. 8 Joseph W. Craft III January 20, 1995 Page 8 If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Subsidiary the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, MAPCO Inc. By/s/ Robert M. Howe ------------------------- Name: Robert M. Howe Title: President MAPCO Coal Inc. By/s/ Robert M. Howe ------------------------- Name: Robert M. Howe Title: Chairman Agreed to as of this 23 day of January, 1995. By /s/ Joe Craft --------------------------- Name: Joe Craft Title: President EX-11 3 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 MAPCO INC. AND CONSOLIDATED SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (Dollars and Shares in Millions except per share amounts)
Three Months Six Months Ended June 30, Ended June 30, --------------------- ---------------------- 1996 1995 1996 1995 ------ ------ ------ ------ PRIMARY EARNINGS PER COMMON SHARE Computation for Consolidated Statements of Income - ------------------------------------------------- Net income (loss) (a) $(21.0) $ 21.2 $ 34.2 $ 50.2 ====== ====== ====== ====== Weighted average common shares outstanding 28.8 29.9 28.9 29.9 Common stock equivalents (stock options) - - - - ------ ------ ------ ------ Weighted average common shares outstanding (a) 28.8 29.9 28.9 29.9 ====== ====== ====== ====== Primary earnings (loss) per common share (a) (c) $ (.73) $ .71 $ 1.18 $ 1.68 ====== ====== ====== ====== Additional Primary Computation - ------------------------------ Net income (loss) (a) $(21.0) $ 21.2 $ 34.2 $ 50.2 ====== ====== ====== ====== Weighted average common shares outstanding (a) 28.8 29.9 28.9 29.9 Dilutive effect of outstanding options (d) .2 .1 .2 .1 ------ ------ ------ ------ Weighted average common shares outstanding, as adjusted 29.0 30.0 29.1 30.0 ====== ====== ====== ====== Primary earnings (loss) per common share, as adjusted (b) $ (.73) $ .71 $ 1.18 $ 1.67 ====== ====== ====== ====== FULLY DILUTED EARNINGS PER COMMON SHARE Additional Fully Diluted Computation - ------------------------------------ Net income (loss) (a) $(21.0) $ 21.2 $ 34.2 $ 50.2 ====== ====== ====== ====== Weighted average common shares outstanding (a) 28.8 29.9 28.9 29.9 Dilutive effect of outstanding options (d) .2 .1 .2 .1 ------ ------ ------ ------ Weighted average common shares outstanding, as adjusted 29.0 30.0 29.1 30.0 ====== ====== ====== ====== Fully diluted earnings (loss) per common share, as adjusted (b) $ (.73) $ .71 $ 1.18 $ 1.67 ====== ====== ====== ======
2 EXHIBIT 11 (a) These figures agree with the related amounts in the condensed consolidated statements of income. (b) This calculation is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083, although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. (c) In 1996 and 1995, stock options are not included in the earnings per share computation included in MAPCO's condensed consolidated statements of income because the dilutive effect is less than 3%. (d) In accordance with footnote 3 to paragraph 9 of APB Opinion No. 30, the impact of outstanding options is included in the additional primary earnings per share and additional fully diluted earnings per share calculations for the three months ended June 30, 1996. EX-12 4 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 MAPCO INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Millions)
Six Months Ended June 30, 1996 1995 1994 1993 1992 1991 ---------------- ------ ------ ------ ------ ------ Earnings as defined: Income before provision for income taxes ............ $105.4 $114.2 $116.6 $202.9 $144.6 $182.6 Fixed charges ....................................... 33.1 66.2 60.1 55.3 60.1 63.9 Capitalized interest included in fixed charges....... (.6) (1.7) - (2.8) (2.0) (1.2) Amortization of capitalized interest ................ 1.3 3.5 3.4 3.5 3.5 3.3 ------ ------ ------ ------ ------ ------ Total ....................................... $139.2 $182.2 $180.1 $258.9 $206.2 $248.6 ====== ====== ====== ====== ====== ====== Fixed charges as defined: Interest and debt expense (includes amortization of debt expense and discount) ..................... $ 30.0 $ 58.7 $ 53.7 $ 46.9 $ 51.7 $ 55.5 Capitalized interest ................................ .6 1.7 - 2.8 2.0 1.2 Portion of rentals representative of the interest factor ............................................ 2.5 5.8 6.4 5.6 6.4 7.2 ------ ------ ------ ------ ------ ------ Total ....................................... $ 33.1 $ 66.2 $ 60.1 $ 55.3 $ 60.1 $ 63.9 ====== ====== ====== ====== ====== ====== Ratio of earnings to fixed charges 4.2 2.8 3.0 4.7 3.4 3.9 ====== ====== ====== ====== ====== ======
EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAPCO INC.'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996, AND MAPCO INC.'S CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JUN-30-1996 48,800 0 261,000 0 156,500 748,600 2,108,400 778,100 2,310,700 461,400 811,100 62,900 0 0 569,200 2,310,700 1,524,200 1,524,200 0 1,340,200 48,800 0 29,800 105,400 38,800 65,200 (31,000) 0 0 34,200 1.18 1.18
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