Item 1. Business
(a) The Registrant, CBI Industries, Inc. and its subsidiaries (CBI), classifies its operations in three major business segments: Industrial Gases, Contracting Services and Investments. CBI was incorporated in Delaware in 1979, as a holding company. The Industrial Gases segment of CBI is comprised of Liquid Carbonic Industries Corporation, and its subsidiaries, which was founded in 1888 and acquired by CBI in 1984. CBI's Contracting Services segment is comprised of a number of separate companies, including the original Chicago Bridge & Iron Company, which was founded in 1889. The Investments segment of CBI includes CBI Investments, Inc. and its subsidiaries including Statia Terminals.
(b) Financial information by business segment appears under Financial Summary in CBI's 1994 Annual Report to Shareholders and is incorporated herein by reference.
(c) The percentage of revenues contributed by each business segment over the past three years was: 1994 1993 1992 ---- ---- ---- Industrial Gases 48% 49% 45% Contracting Services 44 44 47 Investments 8 7 8 ---- ---- ---- 100% 100% 100% ==== ==== ==== A description of the business done by each of CBI's industry segments follows. Items that are not considered material to an understanding of the business taken as a whole have been omitted.
CBI holds patents and licenses for certain items incorporated into its products. However, none are so essential that their loss would materially affect the businesses of CBI.
For information regarding working capital practices, refer to Financial Review - Financial Condition - Liquidity and Capital Resources in CBI's 1994 Annual Report to Shareholders, which is incorporated herein by reference.
CBI has incurred expenses during the year for the purpose of complying with environmental regulations, but their impact on the financial statements has not been material.
Industrial Gases
Liquid Carbonic Industries Corporation (Liquid Carbonic) is the parent company of the Industrial Gases segment companies. CBI believes Liquid Carbonic is the world's largest supplier of carbon dioxide in its various forms. Liquid Carbonic also produces, processes and markets a wide variety of other industrial/medical and specialty gases, including oxygen, nitrogen, argon, hydrogen, acetylene, carbon monoxide, nitrous oxide and liquefied natural gas. The segment also assembles and sells industrial gas-related equipment. Liquid Carbonic conducts its business through various separate companies and/or units, each of which either generally provides different products or services or conducts business in a different geographical area than the other companies or units. The business of Liquid Carbonic is generally broken down into companies and units which engage in domestic production and sales of industrial gases and cylinder gas products; domestic carbon monoxide, hydrogen gas and methanol production and pipeline sales; Canadian carbon dioxide processing and industrial gas production and sales; and international business outside of the United States and Canada, which involves primarily the processing and sale of carbon dioxide and other gases and chemicals in 23 other countries. The major Liquid Carbonic companies and business units are the following:
The Liquid Carbonic U.S. Industrial Gases unit which is engaged in the domestic production and sale of bulk carbon dioxide, bulk industrial and medical gases, specialty cylinder gases and other gas products. Carbon dioxide is used in the refrigeration, freezing, processing and preservation of food, beverage carbonation, chemical production, water treatment and the enhancement of oil and gas production. Liquid Carbonic U.S. Industrial Gases operates carbon dioxide plants and receives by-product carbon dioxide from other plants operated by suppliers. It also owns and operates plants to produce dry ice. Liquid Carbonic U.S. Industrial Gases also sells oxygen, nitrogen and argon (atmospheric gases) to industrial customers for refrigeration, as a pressure medium and for other applications; and to medical customers for resuscitative and therapeutic purposes. Air separation plants are operated for the production of these atmospheric gases. Industrial gases are sold mainly to small and medium sized "merchant" accounts near supply sources, and medical gases are sold primarily to group purchasing organizations and individual medical centers. Liquid Carbonic U.S. Industrial Gases is also engaged in the domestic production and sale of specialty and other cylinder gases. It sells highly purified gases, acetylene, oxygen, nitrogen, argon and nitrous oxide. The highly purified gases are produced and distributed from regional gas laboratories and sold to universities, research centers, clinics and industry.
The Liquid Carbonic Process Plants unit produces and sells gaseous and liquid carbon monoxide, gaseous hydrogen and methanol. These products are mainly sold by pipeline to customers located in Louisiana, Ohio and West Virginia.
Liquid Carbonic Corporation is the parent company for the Liquid Carbonic companies which operate outside the United States. The principal subsidiaries are in Argentina, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica (acquired October 1994), Mexico, Paraguay, Peru, Poland, Spain, Thailand and Venezuela. Liquid Carbonic Corporation also owns a non-majority interest in a number of affiliated companies located in Barbados, Guyana, Haiti, Jamaica, Japan, Korea, Trinidad, Turkey and Uruguay. Most of these companies process and sell carbon dioxide and produce industrial and medical gases, chemicals (including precipitated calcium carbonate, a chemical ingredient used in the manufacture of a variety of consumer and industrial products) and other products. These companies operate by-product and combustion plants for the processing of carbon dioxide, dry ice plants and air separation plants.
Liquid Carbonic's strength in the carbon dioxide market is in part due to its ability over the years to secure adequate supplies of product from diverse sources. Most carbon dioxide sold by Liquid Carbonic is purchased from by- product sources. By-product carbon dioxide is obtained from various sources, including chemical plants, refineries and industrial processes, or from carbon dioxide wells, and is processed in Liquid Carbonic's own plants to produce commercial carbon dioxide. Liquid Carbonic also purchases commercial carbon dioxide from by-product sources having their own carbon dioxide plants. Liquid Carbonic has supply contracts which require the purchase of specified minimum quantities of carbon dioxide. Generally, these contracts do not obligate the supplier to continue to produce carbon dioxide or to supply specified minimum quantities; however, these provisions have historically had no material adverse effect on Liquid Carbonic's source of supply.
This segment is not dependent upon any single customer or group of customers, and the loss of any single customer would not have a material adverse effect on the business.
Liquid Carbonic's principal competitors in North America are the Airco subsidiary of the BOC Group, Air Products and Chemicals, Inc., the Cardox subsidiary of L'Air Liquide, and Praxair, Inc. It also faces competition from a number of regional and local competitors.
As of December 31, 1994, Liquid Carbonic employed 86 people engaged full- time in the research and development of new products and services or the improvement of existing products and services. This is comparable to 98 people employed at December 31, 1993 and 106 at December 31, 1992. This segment incurred expenses of approximately $10,987,000 in 1994, $10,616,000 in 1993 and $8,765,000 in 1992 for its research and development activities. This segment also performs certain research and development activities for customers.
Approximately 7,100 people were employed by this segment at the end of 1994.
Contracting Services
Chicago Bridge & Iron Company (Chicago Bridge) is the parent company of the Contracting Services segment companies. Chicago Bridge is organized as a worldwide construction group that provides, through separate subsidiaries, a broad range of services, including design, engineering, fabrication, project management, general contracting and specialty construction services, including non-destructive inspection and post-weld heat treatment.
The traditional products constructed by the Chicago Bridge companies have been a wide variety of fabricated metal plate structures including, but not limited to, elevated water tanks, penstocks and tunnel liners for hydroelectric dams, low temperature and cryogenic vessels and systems, and flat-bottom tanks, pressure vessels, and other vessels and structures utilized in the chemical, petroleum refining and petrochemical industries. In recent years, Chicago Bridge companies have broadened their capabilities so as to be in a better position to provide additional products and services to address a more diverse base of customers. Other products and services include the construction of experimental test facilities, environmental chambers, advanced energy systems and structures, power plant maintenance and repair, turnkey water and wastewater treatment facilities, non-destructive testing, post-weld heat treating and refractory bake-outs, and vessels, tanks and other structures for corrosion-resistant applications. Chicago Bridge conducts these activities through various separate companies, the major of which are the following:
CBI Na-Con, Inc. provides domestic construction-related services which include, but are not limited to, the construction of commercial and municipal water and wastewater treatment plants, defense-related facilities, industrial expansion projects, refinery turnarounds and turnkey storage terminals. CBI Na-Con, Inc. has district offices located in Norcross, Georgia; Houston, Texas; Fontana, California; and Plainfield, Illinois. It also has metal plate fabrication capabilities at its Houston and Fontana facilities.
CBI Services, Inc. provides fabricated metal plate products and other specialized domestic construction services for the power generation industries, the government and other industrial customers. The product lines of CBI Services, Inc. include, but are not limited to, petroleum, petrochemical and chemical storage tanks; pressure, cryogenic and low temperature vessels; and miscellaneous metal plate structures. CBI Services has district offices located in New Castle, Delaware; Concord, California; and Kankakee, Illinois. It also has metal plate fabrication capabilities at its Kankakee facility.
Chicago Bridge & Iron Company, incorporated in Illinois, is the original company which was formed in 1889 and is the parent company for Contracting Services companies which operate outside the United States. Regional offices of international subsidiaries are located in London (England), Singapore, Fort Erie (Canada), and Houston, Texas. Other subsidiary offices and facilities are located in Caracas (Venezuela), Dammam (Saudi Arabia), Dubai (U.A.E.), Blacktown (Australia), Johannesburg (South Africa), Kuala Lumpur (Malaysia), Manila (Philippines), Jakarta (Indonesia), Bangkok (Thailand) and Tokyo (Japan).
Other Chicago Bridge companies include: CBI Walker, Inc., which designs and supplies equipment used to treat municipal and industrial water and wastewater; Chicago Bridge and Iron Technical Services Company, which provides engineering and research services for the Chicago Bridge subsidiaries and for outside parties; MQS Inspection, Inc., which provides non-destructive examination and testing services; Cooperheat, Inc. which provides post-weld heat treating and refractory bake-outs as field services and sells associated equipment; and Ershigs, Inc., which is an engineering, manufacturing and construction company which specializes in fiberglass reinforced plastic and dual-laminate vessels, tanks and other structures for corrosion-resistant applications.
The principal raw materials used by the Contracting Services segment are metal plate and structural steel. These materials are available from various domestic and international mills. Chicago Bridge does not anticipate having difficulty in obtaining adequate amounts of raw materials.
This segment is not dependent upon any single customer or group of customers and the loss of any single customer would not have any material adverse effect on the business.
This segment had a backlog of work to be completed on contracts of $287,500,000 at December 31, 1994 and $424,900,000 at December 31, 1993. Approximately 87% of the backlog as of December 31, 1994 is expected to be completed in 1995.
Adequate industry statistics relating to this segment of the business in which CBI competes are not available. Several large companies offer metal plate products that compete with some, but not all, of those of Chicago Bridge. Local and regional companies offer strong competition in one or more geographical areas, but not in other areas where Chicago Bridge operates. Therefore, it is impossible to state Chicago Bridge's position in the industry. Quality, reputation, delivery and price are the principal methods of competition within the industry. Competition is based primarily on performance and the ability to provide the design, engineering, fabrication, project management and construction required to complete projects in a timely and cost-efficient manner. Chicago Bridge believes its position is among the top in the field.
As of December 31, 1994, this segment employed 37 people engaged full-time in the research and development of new products and services or the improvement of existing products and services. This is comparable to 45 people employed at December 31, 1993 and 40 at December 31, 1992. This segment incurred expenses of approximately $2,844,000 in 1994, $3,078,000 in 1993 and $2,961,000 in 1992 for its research and development activities. This segment also performs certain research and development activities for customers.
Approximately 7,100 people were employed by this segment at the end of 1994.
Investments
CBI Investments, Inc. is the parent company of the Investments segment companies. The Investments segment includes Statia Terminals (Statia), which is the sole operating company within the Investments segment. Statia provides transshipment, storage, bunkering and blending services for hydrocarbon products at the island of St. Eustatius in the Caribbean and in Nova Scotia, Canada and operates a special products terminal in Brownsville, Texas. In addition, CBI Investments, Inc. has interests in real estate and several other companies.
Statia primarily provides services and therefore does not depend heavily on raw materials.
Approximately 240 people were employed by Statia at the end of 1994.
The investment in Petroterminal de Panama, S.A. was reduced to zero in the current year due the to receipt of dividends and losses incurred. In December 1994, CBI sold its equity interest in Tankstore, Pte. Ltd.
(d) Financial information by geographic area of operation is shown in Notes to Financial Statements - Note 12 - Operations by Business Segment and Geographic Area in CBI's 1994 Annual Report to Shareholders and is incorporated herein by reference.
Item 2.

Item 2. Properties
Industrial Gases
Liquid Carbonic owns or leases the facilities used in its business. Liquid Carbonic believes these facilities are adequately utilized and sufficient to meet its customer needs. The following list summarizes the principal properties:
Type of Facility by Number of Facilities Geographic Area Owned or Leased ___________________ ____________________ United States By-product CO2 23 owned Air separation 4 owned, 3 leased Carbon monoxide/hydrogen/methanol 1 owned Carbon monoxide/hydrogen 2 owned Liquefied natural gas 1 owned Research center 1 leased
International By-product CO2 55 owned, 1 leased Combustion 33 owned Air separation 22 owned Research centers 2 owned
In addition to the above, Liquid Carbonic also owns facilities in Brazil, Mexico, and Argentina used in the production of precipitated calcium carbonate, and has interests in a number of distributor operations in Canada. Liquid Carbonic also owns or leases cylinder distribution centers, a number of sales offices and other facilities throughout the world.
Contracting Services
Chicago Bridge owns or leases the properties used to conduct its business. The capacities of these facilities depend upon the mix of products being manufactured. As the product mix is constantly changing, the extent of utilization of these facilities cannot be accurately stated. Chicago Bridge believes that these facilities are adequate to meet its requirements. The following list summarizes the principal owned properties:
Type of Square Location Facility Footage ________ __________ _______ United States Fontana, California fabrication plant, warehouse and office 36,000 Houston, Texas fabrication plant, warehouse and office 253,000 Kankakee, Illinois fabrication plant, warehouse and office 396,000 Norcross, Georgia warehouse and office 36,000 Plainfield, Illinois engineering and research center 176,000 warehouse and office 12,000
International Blacktown, New South Wales, fabrication plant, Australia warehouse and office 134,000 Fort Erie, Ontario, Canada fabrication plant, warehouse and office 208,000
In addition to the above, Chicago Bridge has interests in other fabrication facilities in Saudi Arabia, Thailand, Indonesia, Venezuela, South Africa and Australia. Chicago Bridge also owns or leases a number of field construction offices, warehouses and equipment maintenance centers strategically located throughout the world.
Investments
The total storage capacity for Statia is, in millions of barrels, as follows:
Caribbean (Island of St. Eustatius, Netherlands Antilles) terminal 6.3 United States (Brownsville, Texas) terminal 1.6 Canada (Cape Breton Island, Nova Scotia) terminal 7.4
Effective as of the end of January 1995, Statia Terminals assumed operational responsibility, under a lease agreement, of an additional 5 million barrels of new storage capacity, along with a related single-point mooring system, at St. Eustatius.
CBI currently owns approximately 2,300 acres of undeveloped real estate in Virginia, Texas and Utah.
CBI also owns its corporate headquarters located in Oak Brook, Illinois. The buildings have approximately 196,000 square feet of space.
Item 3.

Item 3. Legal Proceedings
MARATHON/TEXAS CITY LITIGATION. On October 30, 1987, CBI Na-Con, Inc. ("CBI Na-Con") was working in the Marathon Petroleum Company refinery in Texas City, Texas. While a lift was being made by a crane supplied and operated by others, the crane became unstable, causing the operator to drop the load on a hydrofluoric acid tank which released part of its contents into the atmosphere. The community surrounding the refinery was evacuated after the incident and a substantial number of persons evacuated sought medical attention. CBI Na-Con has reached settlements with all but about 6 of the 4,300 (approximate) third-party plaintiffs who brought suit as a result of the incident.
After CBI's insurers declined to indemnify CBI for this incident based on their interpretation of certain pollution exclusions contained in CBI's insurance policies, CBI filed suit in Harris County, Texas against its insurers seeking a court ruling that the policies covered the incident. The Trial Court, on the insurers' preliminary motion, sustained the insurers' position that coverage did not exist. The Texas Court of Appeals reversed the Trial Court and found that CBI should be allowed to proceed with its lawsuit and related discovery against the insurers. The insurers immediately appealed the Court of Appeals decision in CBI's favor to the Texas Supreme Court, which accepted the case for review. On March 2, 1995 the Texas Supreme Court reversed the Court of Appeals and affirmed the judgment of the Trial Court that coverage did not exist. CBI will file a motion asking the Supreme Court to reconsider its decision. CBI's management presently believes that its reserves are adequate to cover remaining potential liabilities resulting from the occurrence at Texas City.
ANTITRUST MATTERS. Liquid Carbonic Industries Corporation ("Liquid Carbonic") has been or is currently involved in civil litigation and governmental proceedings relating to antitrust matters. In this regard, since April 1992, several lawsuits have been filed against Liquid Carbonic and various competitors. These cases have been consolidated in the United States District Court for the Middle District of Florida, Orlando Division. The lawsuits allege generally that, beginning not later than 1968 and continuing through October 1992, defendants conspired to allocate customers, fix prices and rig bids for carbon dioxide in the United States in violation of the antitrust laws. On April 19, 1993, the court certified a class in the consolidated cases consisting of direct purchasers of carbon dioxide from defendants in the continental United States for the period from January 1, 1968, to and including October 26, 1992.
Plaintiffs seek from defendants unspecified treble damages, civil penalties, injunctive relief, costs and attorneys' fees. In addition, suits have been brought against Liquid Carbonic and others under the antitrust laws of the States of Alabama and California based upon the foregoing allegations. The company believes that the allegations made against Liquid Carbonic in all of these lawsuits are without merit and Liquid Carbonic intends to defend itself vigorously. Liquid Carbonic and its subsidiaries also, from time to time, furnish documents and witnesses in connection with governmental investigations of alleged violations of the antitrust laws.
In 1994, several claims were filed against Liquid Carbonic, Inc., a wholly owned Canadian subsidiary of Liquid Carbonic, and various competitors generally alleging that for the period 1954 to 1990 the defendants conspired to fix prices for bulk and cylinder gas oxygen in Canada in violation of the Canadian competition laws. The complainants consist mainly of hospitals located in the Provinces of British Columbia and Ontario. The company believes that the damages sought by the plaintiffs are wholly without merit and the company intends to vigorously defend against these claims.
While the outcome of any particular lawsuit or governmental investigation cannot be predicted with certainty, the company believes that these antitrust matters will not have a materially adverse effect on its operations or financial condition.
Item 3. Legal Proceedings (Continued)
ENVIRONMENTAL LITIGATION. Chicago Bridge & Iron Company ("Chicago Bridge") was a minority shareholder from 1934 to 1954 in a company which owned or operated at various times several wood treating facilities at sites in the United States, some of which are currently under investigation, monitoring or remediation under various environmental laws. Chicago Bridge is involved in litigation concerning environmental liabilities, which are currently undeterminable, in connection with certain of those sites. Chicago Bridge denies any liability for each site and believes that the successors to the wood treating business are responsible for cost of remediation of the sites. Chicago Bridge has reached settlements for environmental clean-up at most of the sites. The company believes that any remaining potential liability will not have a materially adverse effect on its operations or financial condition.
CORPORATE LITIGATION. A purported class action on behalf of all holders of CBI common stock is pending in the Chancery Court of Delaware against the company and certain of its Directors. This lawsuit, WILLIAM STEINER V. CBI INDUSTRIES, et al, was commenced on December 22, 1994. It alleges that the defendants breached their fiduciary duty to shareholders by rejecting proposals by Airgas, Inc. for the company to either merge with Airgas or to sell Liquid Carbonic to Airgas, and by amending the Amendment and Restatement of Rights Agreement dated as of August 8, 1989, between the company and First Chicago Trust Company of New York, as Rights Agent, as amended (the "Rights Agreement"). Plaintiff seeks to (a) enjoin the Directors to carry out their fiduciary duties; (b) declare the Rights Agreement null and void; (c) enjoin the company and its Directors from erecting unlawful barriers to the acquisition of the company; and (d) recover from defendants unspecified monetary damages sustained by shareholders of CBI as a result of the alleged acts of the Board of Directors. The company intends to vigorously defend against this action.
OTHER LITIGATION. In addition to the above lawsuits, CBI is a defendant in a number of other lawsuits arising from the conduct of its business. While it is impossible at this time to determine with certainty the ultimate outcome of these other lawsuits, CBI's management believes that adequate provisions have been made for probable losses with respect thereto as best as can be determined at this time and that the ultimate outcome, after provisions therefor, will not have a material adverse effect on the financial position of CBI. The adequacy of reserves applicable to the potential costs of being engaged in litigation and potential liabilities resulting from litigation are reviewed as developments in the litigation warrant.
CBI also is jointly and severally liable for some liabilities of partnerships and joint ventures and has also given certain guarantees in connection with the performance of contracts and repayment of obligations by its subsidiaries and other ventures in which CBI has a financial interest. CBI's management believes that the aggregate liability, if any, for these matters will not be material to its financial position.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter ended December 31, 1994.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
CBI's common stock is listed on the New York Stock Exchange (symbol CBI). The approximate number of holders of record of common stock at February 15, 1995 was 8,000. Information appearing under Quarterly Financial Data - Quarterly Operating Results, and Common Stock Prices and Dividends in CBI's 1994 Annual Report to Shareholders is incorporated herein by reference.
Item 6.

Item 6. Selected Financial Data
The summary of selected financial data appearing under Financial Summary in CBI's 1994 Annual Report to Shareholders is incorporated herein by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Information appearing under Financial Review in CBI's 1994 Annual Report to Shareholders is incorporated herein by reference.
Item 8.

Item 8. Financial Statements and Supplementary Data
The financial statements consisting of Statements of Income, Balance Sheets, Statements of Cash Flows, Statements of Common Capital Stock, Notes to Financial Statements and Report of Independent Public Accountants in CBI's 1994 Annual Report to Shareholders is incorporated herein by reference.
The supplemental financial information appearing under Quarterly Financial Data - Quarterly Operating Results, and Common Stock Prices and Dividends in CBI's 1994 Annual Report to Shareholders is incorporated herein by reference.
Additional financial information and schedules can be found in Part IV of this report.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
CBI has neither changed its independent accountants nor had any disagreements on accounting and financial disclosure with its independent accountants during the two most recent fiscal years.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
(a) Information appearing under Election of Directors in CBI's 1995 Proxy Statement is incorporated herein by reference.
(b) The executive officers of CBI as of March 23, 1995 are as follows:
Served as Executive Officer Name Age Title of CBI Since
____ ___ _____ _________________ John E. Jones 60 Chairman of the Board, President and Chief Executive Officer 1980 Lewis E. Akin 57 Executive Vice President 1986 Robert J. Daniels 61 Executive Vice President 1988 George L. Schueppert 56 Executive Vice President-Finance and Chief Financial Officer 1987 Charles O. Ziemer 55 Senior Vice President and General Counsel 1984 Buel T. Adams 62 Vice President and Treasurer 1983 Stephen M. Duffy 45 Vice President-Human Resources 1993 Alan J. Schneider 49 Vice President and Controller 1991
(d) There are no family relationships between any executive officers and directors. Executive officers are usually elected at the meeting of the Board of Directors immediately preceding the Annual Meeting of Shareholders and serve until successors are elected.
(e) With the exception of Stephen M. Duffy, all of the above named officers have been employed by CBI in an executive or management capacity for more than five years. Stephen M. Duffy was formerly a Vice President with Sunbeam Appliance Company.
Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 appears under Section 16(a) Reporting Delinquencies in CBI's 1995 Proxy Statement and is incorporated herein by reference.
Item 11.

Item 11. Executive Compensation
Information appearing under Executive Compensation in CBI's 1995 Proxy Statement is incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Information appearing under Common Stock Ownership By Certain Persons and Management in CBI's 1995 Proxy Statement is incorporated herein by reference.
Item 13.

Item 13. Certain Relationships and Related Transactions
Not applicable.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following financial statements and Report of Independent Public Accountants previously incorporated by reference under Item 8 of Part II of this report are herein incorporated by reference.
Financial Statements: Statements of Income - For the years ended December 31, 1994, 1993 and 1992 Balance Sheets - For the years ended December 31, 1994, 1993 and 1992 Statements of Cash Flows - For the years ended December 31, 1994, 1993 and 1992 Statements of Common Capital Stock - For the years ended December 31, 1994, 1993 and 1992 Notes to Financial Statements Report of Independent Public Accountants
2. Financial Statement Schedules
These schedules have been omitted because the schedules are either not applicable or the required information is shown in the financial statements or notes thereto incorporated by reference under Item 8 of Part II of this report.
Quarterly financial data for the years ended December 31, 1994 and 1993 is shown in the supplemental financial information incorporated by reference under Item 8 of Part II of this report.
CBI's interest in 50 percent or less owned affiliates, when considered in the aggregate, does not constitute a significant subsidiary, therefore summarized financial information has been omitted.
3. Exhibits
The Exhibit Index on page 13 and Exhibits being filed are submitted as a separate section of this report.
(b) Reports on Form 8-K
A Form 8-K was filed under Item 5, Other Events and Item 7, Financial Statements and Exhibits. The date of that report was December 21, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CBI INDUSTRIES, INC.
Date: March 23, 1995
By: /s/ George L. Schueppert ___________________________ George L. Schueppert Executive Vice President-Finance, Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 23, 1995.
Signature Title
/s/ John E. Jones Chairman of the Board, President, _______________________________ Chief Executive Officer (Principal Executive Officer) and Director John E. Jones
/s/ Lewis E. Akin Executive Vice President and Director _______________________________ Lewis E. Akin
/s/ Robert J. Daniels Executive Vice President and Director _______________________________ Robert J. Daniels
/s/ George L. Schueppert Executive Vice President-Finance, _______________________________ Chief Financial Officer (Principal Financial Officer) and Director George L. Schueppert
/s/ Wiley N. Caldwell Director and Chairman of the Audit Committee _______________________________ Wiley N. Caldwell
/s/ E.H. Clark, Jr. Director and Member of the Audit Committee _______________________________ E.H. Clark, Jr.
/s/ John F. Riordan Director and Member of the Audit Committee _______________________________ John F. Riordan
/s/ Robert G. Wallace Director and Member of the Audit Committee _______________________________ Robert G. Wallace
/s/ Alan J. Schneider Vice President and Controller _______________________________ Alan J. Schneider (Principal Accounting Officer)
1994 FORM 10-K ANNUAL REPORT EXHIBIT INDEX Item 14 (a) 3 Exhibit
(3) Articles of Incorporation and By-Laws.
Articles of Incorporation. Restated Certificate of Incorporation can be found in CBI's Form 10-Q dated August 15, 1994 and is incorporated herein by reference.
By-Laws. By-laws as amended can be found in CBI's Form 10-Q dated May 13, 1994 and are incorporated herein by reference.
(4) Instruments Defining the Rights of Security Holders, Including Indentures.
1. Indenture between CBI and Chemical Bank, as Trustee, dated March 1, 1994 can be found in CBI's Form 10-Q dated May 13, 1994 and is incorporated herein by reference.
2. 6 1/4% Notes due June 30, 2000. The indenture between CBI and Bank of America Illinois (formerly known as Continental Bank, National Association), as Trustee, dated June 1, 1993 filed as Exhibit 4(a) can be found in CBI's Form S-3 Registration Statement Number 33-64052 dated June 22, 1993 and is incorporated herein by reference.
3. 6 5/8% Notes due March 15, 2003. The indenture between CBI and Bank- America National Trust Company, as Trustee, dated March 1, 1993 filed as Exhibit 4(a) can be found in CBI's Form S-3 Registration Statement Number 33-58940 dated February 26, 1993 and is incorporated herein by reference.
4. Series A Preferred Stock Purchase Rights Agreement as amended can be found in CBI's Form 8-K dated December 21, 1994 and is incorporated herein by reference.
5. Description of Convertible Voting Preferred Stock, Series C can be found in CBI's Form 8-K dated April 19, 1988 and is incorporated herein by reference.
6. $300,000,000 Credit Agreement dated as of December 4, 1992 among CBI Industries, Inc., the banks listed therein and Ibis Investments, Inc. as Bid Advance Agent. (a) Amendment No. 1 dated January 11, 1993. (b) Amendment No. 2 dated as of June 1, 1993. (c) Successor Agreements dated January 1, 1995. (d) Letter extending the termination date of the Credit Agreement to December 31, 1997.
7. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, various instruments defining the rights of holders of long-term debt of CBI are not being filed because the total of securities authorized under each such instrument does not exceed 10% of the total assets of CBI. CBI hereby agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.
(10) Material Contracts.
Executive Contracts and Compensation Plans. 1. Directors' Deferred Fee Plan, as amended, can be found in CBI's Form 10-K dated March 30, 1993 and is incorporated herein by reference.
2. Agreement between John E. Jones and CBI can be found in CBI's Form 10-K dated March 29, 1983 and is incorporated herein by reference.
1994 FORM 10-K ANNUAL REPORT EXHIBIT INDEX (Continued)
(10) Material Contracts (continued) 3. A summary of the Termination Agreements can be found in CBI's Form 8-K dated October 10, 1986 and is incorporated herein by reference.
4. Agreement between George L. Schueppert and CBI can be found in CBI's Form 10-K dated March 29, 1989 and is incorporated herein by reference.
5. CBI Industries Stock Option Plan, as amended, can be found in CBI's Form S-8 dated October 10, 1990 and is incorporated herein by reference.
6. CBI Executive Life Insurance Plan can be found in CBI's Form 10-K dated March 30, 1993 and is incorporated herein by reference.
7. CBI Officers' Bonus Plan.
8. CBI 1994 Restricted Stock Award Plan.
(11) Computation of Per Share Earnings.
(13) Portions of the 1994 Annual Report to Shareholders expressly incorporated by reference into this report.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.


ITEM 1. BUSINESS
Overview As used herein, the terms (Wainoco) and (Company) refer to Wainoco Oil Corporation and its subsidiaries. Wainoco was originally incorporated in Canada in 1949 and changed its jurisdiction of incorporation to Wyoming in 1976. The Company's Canadian assets are held by Wainoco Oil Corporation, a Wyoming corporation, its United States oil and gas assets are held through its subsidiary, Wainoco Oil & Gas Company, a Delaware corporation, and its refining assets are held through its subsidiary, Frontier Holdings Inc. (Frontier), a Delaware corporation. The Company directs its activities from its corporate office in Houston, Texas and its division offices in Calgary, Alberta, Canada and Denver, Colorado. Wainoco explored for and produced oil and gas in western Canada, selected areas of the midcontinent, the Los Angeles Basin and the Gulf Coast (onshore and offshore) during 1994. In the fourth quarter of 1994, Wainoco announced that it intended to cease all exploration activities in the United States and sell its United States oil and gas assets. Wainoco is in the process of selling all of its United States oil and gas properties, except for its Conroe field reserves and other minor properties. Wainoco is also engaged in the business of crude oil refining and wholesale marketing of refined petroleum products, including various grades of gasoline, diesel fuel, asphalt, natural gas liquids and petroleum coke. In addition, the Company purchases the crude oil to be refined and markets the refined petroleum products produced by the Refinery.
Oil and Gas Exploration and Production Operations The oil and gas activities of the Company consist of geological and geophysical evaluation of prospective oil and gas properties, the acquisition of oil and gas leases or other interests in exploratory prospects, the drilling of test wells, the acquisition of interests in developed or partially developed properties and the development and operation of properties for the production of oil and gas. At December 31, 1994, approximately 85% of the Company's proved reserves, on a British Thermal Unit (BTU) equivalent basis, was natural gas. During 1994, oil represented 34% and gas represented 66% of oil and gas revenues. The Company's oil and gas exploration and production activities are conducted directly by the Company or through joint drilling and operating arrangements. Wainoco acts as the operator of the majority of its production and prospects. Canada Activities in Canada are conducted through Wainoco Oil Corporation with emphasis on exploration, development and production in the western Canadian provinces of British Columbia and Alberta. At December 31, 1994, approximately 77% of estimated proved gas reserves, approximately 28% of estimated proved oil reserves and approximately 26% of identifiable assets of the Company were located in western Canada. For the year ended December 31, 1994, Canadian operations contributed approximately 58% of the Company's oil and gas revenue. During 1994, the exchange rate of the Canadian dollar averaged approximately U.S. $.7322. The accounts of the Canadian division have been translated in accordance with generally accepted accounting principles as described in Note 1 of the Financial Statements in the 1994 Annual Report to Shareholders which is incorporated herein by reference. United States Activities in the United States are conducted through Wainoco Oil & Gas Company with the production of properties in selected areas of the midcontinent, the Los Angeles Basin and the Gulf Coast (onshore and shallow offshore regions). See "Business - Overview" for a discussion of the sale of United States properties.
Refining Operations Wainoco's refining activities are conducted through Frontier (the Refinery), which was acquired in October 1991. The Refinery is located on approximately 120 acres in Cheyenne, Wyoming, which property is owned by the Company. The Refinery has a permitted crude capacity of 41,000 bpd with an effective operating capacity of 38,000 bpd, which represents approximately 7% of the rated crude distillation capacity in the Rocky Mountain region. The Refinery can also process in excess of 4,000 bpd of purchased natural gasoline, butanes and other petroleum liquids. One of Frontier's competitive advantages relative to most other Rocky Mountain refineries is that it includes substantially all of the major refinery units that comprise a complex refinery, including a coker. Therefore, the Refinery has the capability of producing a higher yield of lighter, more valuable petroleum products such as gasoline and diesel fuel from heavier, less costly feedstocks such as heavy sour crude oil. The Refinery's units have the capacity to process a high percentage (up to 90%) of lower cost, more abundant sour crude oil. The plant's downstream unit configuration affords the Refinery gasoline octane capability equal to or higher than that of most of its competitors. Frontier also owns a 25,000 bpd undivided interest in a crude oil pipeline from Guernsey, Wyoming to Cheyenne. This pipeline was constructed to help serve the Refinery's long-term strategic crude oil needs. The Refinery's gasoline and distillates sales each accounted for more than 10% of consolidated revenues. As a percent of consolidated revenue, gasoline sales were 49%, 50% and 53% and distillates sales were 31%, 29% and 28% in 1994, 1993 and 1992, respectively.
Industry Segments The Company's industry segment information for the three years ended December 31, 1994, is set forth in Note 7 of the Financial Statements in the 1994 Annual Report to Shareholders which is incorporated herein by reference. The Company's discussion of the restructuring of its United States oil and gas operations is set forth in Note 9 of the Financial Statements in the 1994 Annual Report to Shareholders which is incorporated herein by reference.
Operating Hazards and Risks The Company's oil and gas exploration and production operations are subject to all of the risks normally incident to the exploration for and production of oil and gas including blow-outs, cratering, pollution and fires, each of which could result in damage to or destruction of oil and gas wells or production facilities or damage to persons and property. As is common in the oil and gas industry, the Company is not fully insured against all of these risks, either because insurance is not available or because the Company has elected not to insure due to high premium costs. The occurrence of a significant event that is not fully insured against could have a material adverse effect on the Company and its financial position and results of operation. The Company's refinery operations are subject to significant interruption if the refinery were to experience a major accident or fire or if it were damaged by severe weather or other natural disaster. Should the crude oil pipeline become inoperative, crude oil would be supplied to the Refinery by an alternative pipeline and from additional tank trucks. A substantial portion, but not all, of such loss would be covered by business interruption, property or other insurance carried by Frontier. Frontier's safety measures substantially mitigate but do not eliminate the risk of damage to the Refinery or the environment and personal injury should a major adverse event occur. The occurrence of a significant event that is not fully insured against could have a material adverse effect on the Company and its financial position and results of operation.
Competition Oil and gas operations The Company encounters strong competition from other independent operators and from major oil companies in acquiring properties suitable for exploration, in contracting for drilling equipment, in securing trained personnel and in marketing oil and gas production. Many of these competitors have financial resources and staffs substantially larger than those available to the Company. The availability of a ready market for oil and gas discovered by the Company depends on numerous factors beyond its control including the extent of production and imports and exports of oil and gas, the demand for its products, the proximity and capacity of natural gas pipelines and the effect of state, provincial or federal regulations. Competition in the acquisition of oil and gas prospects and properties has been intense and remains so for prime prospects. The Company's ability to discover reserves depends on its ability to select and acquire suitable prospects for future exploration. Although the Company generates the major portion of its oil and gas prospects internally, it depends to some extent upon prospects offered to it by independent consultants and other persons or entities in the petroleum industry.
Refining operations Frontier's business is highly competitive and price is the principal basis of competition. The most important competitive product marketing area in the Rocky Mountain region is the Denver market, principally because it is the major population center in the Rockies. There are at least 17 refineries in the Rocky Mountain region (including those owned by several major integrated oil companies). In addition, two refineries are located in Denver and three product pipelines from outside the Rockies terminate in the area. Frontier also serves western Nebraska and eastern Wyoming. Many of the refineries in the Rocky Mountain region are owned by companies that have significantly greater financial resources and/or refining capacity than Frontier. Certain of these competitors, as integrated oil companies, also have the advantage of owning or controlling crude oil reserves or other sources of crude oil supply, crude oil and product pipelines and service stations and other product marketing outlets. Principal Competitors. Based on proximity to the Denver and Cheyenne areas, Frontier's principal competitors in the wholesale segment are Sinclair Oil Company (Sinclair) with a 54,000 bpd refinery near Rawlins, Wyoming and a 22,000 bpd refinery in Casper, Wyoming, Total Petroleum (North America) Ltd. (Total) with a 32,000 bpd refinery in Denver, Colorado and Conoco, Inc. (Conoco) with a 50,000 bpd refinery in Denver, Colorado. Frontier sells its products exclusively at wholesale, principally to independent retailers, jobbers and major oil companies, while Sinclair, Total and Conoco service both the retail and wholesale markets. Frontier is favorably positioned to purchase its crude oil and feedstock requirements. Because many other refiners in the Rocky Mountain region have significantly lower sour crude capacity, Frontier is able to purchase a significant amount of its sour crude oil and all of its sweet crude oil from the region. Regional production of crude oil still exceeds regional refining capacity. Frontier also purchases Canadian sour crude oil, which is available via pipeline into Guernsey, Wyoming. Frontier and its principal competitors all service the Denver market. Because their refineries are located in Denver, Total's and Conoco's product transportation costs in servicing that area are lower than those of Frontier. Conversely, Frontier has lower crude transportation costs due to its proximity to Guernsey, Wyoming, the major crude oil pipeline hub in the Rocky Mountain region, and further due to its ownership interest in the crude oil pipeline. Capital Improvement Program. Since its acquisition by Wainoco, Frontier has completed a significant capital improvement program for the refinery. The most significant projects included: (i) the construction of new sulfur recovery and amine treating units which increased sour crude processing capacity, (ii) the expansion of the capacity of the delayed coker unit from 8,200 bpd to 10,000 bpd, (iii) the upgrading and expansion of the distillate hydrotreater and construction of a hydrogen plant for adequate hydrogen supply and (iv) several projects, including 1994 projects, which improve the reliability and safety of various refinery units. The capital improvement program enables the Refinery to produce low sulfur diesel as required by the Clean Air Act Amendments of 1990, increases the amount of sour crude processed and improves the operating reliability of the Refinery. The improvements also increased the Refinery's diesel capacity. In addition, Frontier has incurred capital expenditures as a result of studies required under the Occupational Safety and Health Act (OSHA). Strategic Position. Because the Refinery includes substantially all of the major refinery units that comprise a complex refinery, Wainoco believes that it potentially has three significant advantages over its principal competitors and most other refineries in the region. First, the Refinery has the capacity to process a high percentage (up to 90%) of sour crude oil, while most refineries in the Rocky Mountain region can process only sweet crude or smaller percentages of sour crude. Refineries that have the ability to process sour crude can benefit from the lower cost of sour relative to sweet crude oil, which is often referred to as the "sweet/sour spread." During 1994, Frontier's cost for sour crude oil has ranged from approximately $3.26 to $4.20 per barrel lower than its cost for sweet crude. Second, Frontier owns a 10,000 bpd coker, which, among other things, enables the Refinery to upgrade resid and other heavy feedstocks into lighter, more valuable petroleum products. Coker capacity was expanded to 10,000 bpd at the end of 1992 to accommodate a 10-year agreement to process heavy feedstocks for Conoco. There are presently only four other cokers in the region. Third, because of Frontier's combination of downstream process units, the Company believes that the Refinery has octane capability equal to or greater than most of its competitors. This capability enabled Frontier to be the first to introduce 91 octane premium unleaded gasoline to the Rocky Mountain region. (Due to different altitudes, gasoline used in the Rocky Mountain region generally has an octane rating two points lower than corresponding grades of gasoline elsewhere in the United States.) In addition, as a result of stringent environmental protection laws and the high cost of the requisite plant modifications, Wainoco believes that, in general, refiners in the Rocky Mountain region will face barriers to substantially expanding refinery capacities or sour crude processing capability. Based in part on the foregoing factors, the Company believes that Frontier is capable of competing effectively in its market. In particular, Frontier has sold and expects to continue to sell refined products at competitive prices. Markets. Frontier sells to a broad base of independent retailers, jobbers and major oil companies in the region. Its largest customer, CITGO Petroleum Products, comprises approximately 17% of Frontier's 1994 sales. Prices are determined by local marketing conditions and at the "terminal rack" such that the customer typically supplies his own truck transportation. Effect of Crude Oil and Refined Product Prices. Frontier's income and cash flow are derived from the margin between its costs to obtain and refine crude oil and the price for which it can sell products produced in its refining process. The price at which Frontier can sell gasoline and its other refined products will be strongly influenced by the price of crude oil. Although an increase or decrease in the price of crude oil generally results in a corresponding increase or decrease in the price of gasoline and refined products, changes in the prices of refined products generally lag behind changes in the price for crude oil, both upward and downward. Frontier maintains inventories of crude oil, intermediate products and refined products, the value of each of which is subject to rapid fluctuations in market prices. Inventories are recorded at the lower of cost on a first in, first out (FIFO) basis or market. A rapid and significant movement in the market prices for crude oil or refined products could have an adverse short-term impact on earnings and cash flow. Crude oil prices, in general, are affected by a number of factors, including domestic and international demand, domestic and foreign energy legislation, production guidelines established by the Organization of Petroleum Exporting Countries (OPEC), relative supplies of other fuels, such as natural gas, and changing international economic and political conditions. Frontier can process a high percentage of sour crude oil, enabling it to benefit from the lower cost of sour crude relative to sweet crude. Because income and cash flow from refining operations are dependent in part on this cost differential, any narrowing of the sweet/sour crude spread would likely cause a reduction in operating margin and a decrease in earnings and cash flow of the Refinery. A narrowing of the sweet/sour crude spread could result from, among other things, a decrease in the supply of sour crude or an increase in sour crude refining capacity of the Refinery's competitors. General Wainoco competes with other oil and gas concerns and other investment opportunities, whether or not related to the petroleum industry, in raising capital. The Company's ability to compete successfully in the capital markets is largely dependent on the success of its oil and gas exploration activities, refining activities and the economic environment in which it operates.
Gas Markets The Company continues to sell the majority of its natural gas production under long-term gas contracts managed by companies (aggregators) who purchase large volumes of natural gas from many producers and resell this gas throughout North America. The price paid for this gas is a "net-back" price per unit of gas established by subtracting transportation, processing, storage and administrative costs from the total revenue generated from all the monthly sales of gas. Since 1993, North America appears to have established a better balance of demand and supply of natural gas. During earlier periods of lower load factors, the Company negotiated the right to market such excess volumes not taken by the primary purchaser, to other markets. Such excess volumes are sold in the spot market. To diversify gas sales and optimize production, Wainoco also sells a portion of its gas production under short-term contracts. Generally, one-year renewable contracts have been used for this purpose with gas prices that are normally negotiated annually as a fixed price per unit of sales or an indexed price compared to the New York Mercantile Exchange (NYMEX) futures price. Firm transportation and gas processing capacity from major pipeline companies have been obtained in Canada to ensure continued ability to produce pursuant to these contracts. The tariffs associated with this firm pipeline capacity must be paid regardless of the Company's natural gas productive capacity. The Company has not committed for pipeline capacity in excess of our existing deliverability dedicated to short- term gas contracts. Any productive capacity above our firm pipeline capacity must be marketed on an interruptible basis. The Company's commitment for firm pipeline capacity is approximately $3.5 million in 1995, $1.2 million in 1996, $.9 million in 1997 and $.6 million a year from 1998 through 2001. The 1995 commitment represents approximately 55% of gross productive capacity, which thereafter will range from 17% to 28% through 2001.
Government Regulations Oil & Gas Operations Environmental Laws and Regulations. The Company's oil and gas exploration and production activities are subject to laws and regulations relating to environmental quality and pollution control. The Company believes that such legislation and regulations have had no material adverse effect on its present method of operation. In the future, changes in Canadian or United States federal, state, provincial and local government environmental controls could require the Company to make significant expenditures. The magnitude of such expenditures cannot be predicted. Environmental legislation in Alberta has undergone a major revision to update and consolidate the various acts now applicable to the industry into the Environmental Protection and Enhancement Act (EPEA) effective September 1, 1993. The EPEA brings a wider range of activities within the scope of environmental regulation. Environmental standards and penalties are generally stricter under the EPEA than under the environmental regulatory regime it replaces. Wainoco's Canadian oil and gas production is subject to the payment to provincial governments, among others, of a specified percentage of production revenue as a royalty. Royalties paid to the Province of Alberta are subject to a rebate called the Alberta Royalty Tax Credit (ARTC). Prior to 1995, the ARTC was based on a price- sensitive formula using the average West Texas Intermediate (WTI) quarterly oil price. The maximum annual ARTC limit was $1.4 million in each of 1994 and 1993 and $1.5 million in 1992. The Company recognized ARTC's of $1.1 million, $621,000 and $590,000 in 1994, 1993 and 1992, respectively. The Alberta government has made changes and continues to consider further changes in its royalty structure (including royalty exemption periods). During 1994, the Province of Alberta announced various changes regarding determination of the ARTC effective January 1, 1995. Gas prices will now be included in determination of the ARTC rate. Also the maximum qualifying royalty amount and the maximum royalty rebate percentages are to be reduced. These changes will result in a decrease of approximately 10% in the ARTC to be received by Wainoco. The North American Free Trade Agreement (NAFTA) implemented in 1994 is between the Governments of Canada, the United States and Mexico. NAFTA carrys forward most of the material energy terms contained in the Free Trade Agreement (FTA). The FTA implemented in 1989 between Canada and the United States was intended to foster a more open North American marketplace with a minimum of direct government interference. Under FTA both countries are prohibited from imposing minimum export or import price requirements or maintaining any discriminatory export taxes, duties or charges. FTA also provides for the elimination of the United States tariffs and the elimination of customs user fees which were previously imposed. NAFTA provides for the reduction of Mexican restrictive trade practices in the energy sector and prohibits discriminatory border restrictions and export taxes. NAFTA also provides for clearer disciplines on regulators to avoid discriminatory actions and to minimize disruption of contractual arrangements, which is important for Canadian natural gas exports. Refinery Operations The Company's refinery operations are subject to laws and regulations relating to environmental quality and pollution control. Potentially to be among these requirements are regulations recently proposed by the Environmental Protection Agency under the authority of Title 3 of the Clean Air Act Amendments of 1990 (the "Act") which, if promulgated, may require the Company to expend approximately $4 million over the next four years to improve the Refinery's control of emissions of certain petroleum materials designated as hazardous by the Act. Because other refineries will be required to make similar expenditures, the Company does not expect such expenditures to materially adversely impact its competitive position. Frontier is party to formal agreements with both state and federal agencies requiring the investigation and possible eventual remediation of certain areas of the Refinery's property which may have been impacted by past operational activities. The Company has been addressing, over the past nine years, tasks required under a consent decree (Consent Decree) entered by the Wyoming State District Court on November 28, 1984 and involving the State of Wyoming, Department of Environmental Quality and the predecessor owners of the Refinery. This action primarily addressed the threat of groundwater and surface water contamination at the Refinery. As a result of these investigative efforts, substantial capital expenditures and remediation of conditions found to exist have already taken place or are in progress. The continuing requirement for groundwater remediation activities is the only significant task remaining in connection with the Consent Decree. Additionally, Frontier entered into a consent order with the federal Environmental Protection Agency on September 24, 1990 pursuant to the Resource Conservation and Recovery Act. The order requires the technical investigation of the Refinery to determine if certain areas of the Refinery have been adversely impacted by past operational activities. Based upon the results of the investigation, additional remedial action could be required. In the wake of new state legislation, the Company and the Wyoming Department of Environmental Quality have recently been negotiating the terms of an administrative consent decree that would generally parallel the above-referenced federal order and, upon finalization, replace the Consent Decree. Completion of this effort will result in the elimination of certain equivocal state Consent Decree requirements, the unification of state and federal regulatory expectations regarding site investigation and remediation and, consequently, a streamlining of the Company's current environmental obligations. It is further anticipated that, upon eventual state administration of the federal corrective actions program, the federal Administrative Order on Consent may be rescinded. The Company has been and will be responsible for costs related to compliance with or remediations resulting from environmental regulations. There are currently no identified environmental remediation projects of which the costs can be reasonably estimated. However, the continuation of the present investigative process, other more extensive investigations over time or changes in regulatory requirements could result in future liabilities.
Seasonality At the Refinery, due to seasonal increases in tourist related volume and road construction work, a higher demand exists in the Rocky Mountain region for gasoline and asphalt products during the summer months than during the winter months. Diesel demand is relatively constant throughout the year because two major east-west truck routes, and at least two railroads, extend into or through Frontier's principal marketing area. However, reduced road construction during the winter months does somewhat reduce demand for diesel. The Refinery normally schedules its maintenance turnaround work during the spring of each year. During the spring of 1995, the Refinery has scheduled no significant turnaround work on its major operating units.
Employees At December 31, 1994, the Company had 400 full-time employees, down from 417 a year earlier. The Company's 86 full-time employees in oil and gas operations include 6 geologists, 1 geophysicist, 3 land men in exploration and development and 8 petroleum engineers in drilling and production. In conjunction with the sale of United States oil and gas properties, the Company currently expects to further reduce its United States oil and gas staff by 17 full-time employees during 1995. The Company employs 303 full-time people in the refining operations, 40 at the Denver office and 263 at the Refinery. The Refinery employees include 83 administrative and technical personnel and 180 union members. The union members are represented by seven bargaining units, the largest being the Oil, Chemical and Atomic Workers International Union. Six AFL-CIO affiliated unions represent the Refinery's craft workers. The Company considers relations with all of its employees to be good. The current three-year contracts expire in May 1996.
ITEM 2.

ITEM 2. PROPERTIES As used in this Form 10-K, bbl means one barrel, bpd means one barrel per day, bopd means one barrel of oil per day, mbbls means one thousand barrels, mmbbls means one million barrels, mmbblse means one million barrels equivalent, mcf means one thousand cubic feet, mmcf means one million cubic feet, bcf means one billion cubic feet, and bcfe means one billion cubic feet equivalent. Equivalent gas is based on British Thermal Units at a ratio of six mcf of gas to one bbl of oil.
Refining Operations
Oil and Gas Operations Wainoco is in the process of selling all of its United States oil and gas properties, except for its Conroe field reserves and other minor properties. At December 31, 1994, the sales of United States properties have not been reflected in the following oil and gas information. See principal oil and gas properties for a summary of the Conroe field, the major property to remain after completion of the property sales. See "Business - Overview" for a discussion of the sale of United States properties. Production The following table summarizes the Company's net oil and gas production, average daily production, weighted average sales prices and average production (lifting) cost per dollar of oil and gas sales for the periods indicated. Average daily production is computed by dividing net production by the number of days per year. Average sales prices are presented in United States dollars before deduction of production taxes. Production costs are expressed in United States dollars including lifting costs and production taxes. Average production cost is computed by dividing production costs by gross oil and gas sales.
Oil and gas drilling activities The following table shows the number of completed wells in which the Company has participated, the net interest to the Company in those wells and the results thereof for the periods indicated (excluding those wells drilled under farm out arrangements). As of December 31, 1994, the Company had no wells in progress.
Principal oil and gas properties The following presentation is a summary description of the Company's most significant oil and gas properties. During 1994, the Company's production was not curtailed other than for mechanical problems relating to pipeline and compressor repairs and maintenance. In the Monias area (British Columbia) the Company has an average working interest of 41.6%. Two pipelines collect gas from the area, allowing the Company flexibility in seeking gas purchasers. In 1994, Wainoco sold 86% under long-term contract to CanWest Gas Supply Inc. (CanWest), Northwest Pacific Energy Marketing Inc. and B.C. Gas Inc. and 14% to Canadian industrial gas users or exported to the United States under short-term contracts. In the Maple Glen-Leo area (Alberta) the Company has an average working interest of 45%. During 1994, 98% of gas sales were made under long-term contracts with Pan-Alberta Gas Ltd. (Pan-Alta) and Western Gas Marketing Limited (WGML) and Altresco Pittsfield, a cogeneration market, while 2% was sold into the Alberta industrial gas market. In the Oak field (British Columbia) the Company has an average working interest of 44.4%. During 1994, all production was sold to CanWest under long-term contracts. In the Wardlow area (Alberta) the Company has an average working interest of 85.6% and 27 additional undeveloped well locations on proved acreage. Wainoco holds overriding royalty interests in 17,280 gross proved acres and 2,560 gross unproved acres. All 1994 production was sold under long-term contracts to Pan-Alta and WGML. In the North Cache field (British Columbia) the Company has an average working interest of 68.5%. During 1994, 98% of production was sold under long-term contracts to CanWest and 2% was sold to Canadian industrial gas users or to export markets in the United States under short-term contracts. In the Septimus area (British Columbia) the Company has an average working interest of 59.1%. Annual production was sold to Canadian industrial gas users or export markets in the United States under short-term contracts. In the Conroe field (Texas) the Company has a unit working interest of 18%. Oil production was sold to Exxon Company U.S.A. and Texaco Trading and Transportation and plant products and gas production were sold to Union Pacific Resources. The following table presents data for the year and as of December 31, 1994.
(1) Gross wells: 1 unit with 160 wells.
Productive wells The following table shows the Company's gross and net interests in productive oil and gas wells at December 31, 1994.
(1) One or more completions in the same bore hole are counted as one well. The data in the table includes 43 gross (34.6 net) gas wells and one gross (1 net) oil well with multiple completions. (2) Includes producing units which contain numerous wells. Each unit is counted as one gross well and the unit working interest is included in the net wells.
Acreage The table below summarizes the Company's interest in productive and undeveloped acreage as of December 31, 1994.
Reserves Incorporated herein by reference is the Supplemental Financial Information contained in the 1994 Annual Report to Shareholders which presents the estimated net quantities of the Company's proved oil and gas reserves and the standardized measure of discounted future net cash flows attributable to such reserves. Pursuant to regulations of the United States Department of Energy, Wainoco is required to file an annual report of proved reserves with the Federal Energy Regulatory Commission (FERC). The reserve information included in the Supplemental Financial Information is not inconsistent with the reserve information which will be furnished to the FERC. Wainoco has not filed oil or gas reserve information with any other federal agency within the past year, other than information similar to that included herein.
Other Properties The Company leases approximately 27,000 square feet of office space in Houston for its corporate and U.S. oil and gas exploration and production headquarters under a six-year lease expiring in 1998. In Canada, the Company leases approximately 17,000 square feet in Calgary for its Canadian oil and gas exploration and production office under a lease expiring in 2000. Frontier leases approximately 23,000 square feet in Denver, Colorado for its refining operations headquarters under a lease expiring in 1995.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS There are no legal proceedings which in the opinion of management would have a material adverse impact on the Company. See Item 1. Business - Government Regulations regarding certain ongoing proceedings regarding environmental matters.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information in the 1994 Annual Report to Shareholders under the heading "Common Stock" is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA The information in the 1994 Annual Report to Shareholders under the heading "Five Year Financial Data" is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information in the 1994 Annual Report to Shareholders under the heading "Financial Review" is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and the data contained in the 1994 Annual Report to Shareholders are incorporated herein by reference. See index to financial statements and supplemental data appearing under Item 14(a)1.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III
The information called for by Part III of this Form is incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of its last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
*Reference to pages in the 1994 Annual Report to Shareholders (as published), which portions thereof are incorporated herein by reference.
(a)2. Financial Statements Schedules Report of Independent Public Accountants Schedule I - Condensed Financial Information of Registrant Other Schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto.
(a)3. List of Exhibits * 3.1 - Articles of Domestication of the Company, as amended (filed as Exhibit 2.3 to Registration Statement No. 2-62518 and Exhibit 2.2 to Registration Statement No. 2-69149). * 3.2 - Fourth restated By-Laws of the Company as amended through February 20, 1992 (filed as Exhibit 3.2 to Form 10-K dated December 31, 1992). * 4.1 - Indenture dated as of October 1, 1978, between the Company and First City National Bank of Houston, as Trustee relating to the Company's 10 % Subordinated Debentures due 1998 (filed as Exhibit 2.5 to Registration Statement No. 2-59649). * 4.2 - Agreement of Resignation, Appointment and Acceptance by and among the Company, First City National Bank of Houston (Resigning Trustee) and Texas Commerce Bank National Association, Houston, (Successor Trustee) relating to the Company's 10 3/4 % Subordinated Debentures due 1998 (filed as Exhibit 4.2 to Form 10-K dated December 31, 1985). * 4.3 - First Supplemental Indenture dated as of January 20, 1987 between the Company and Texas Commerce Bank National Association, supplementing and amending the Indenture dated as of October 1, 1978, relating to the Company's 10 3/4% Subordinated Debentures due 1998 (filed as Exhibit 4.3 to Form 10-K dated December 31, 1986). * 4.6 - Indenture dated as of June 1, 1989 between the Company and Texas Commerce Trust Company of New York as Trustee relating to the Company's 7 3/4% Convertible Subordinated Debentures due 2014 (filed as Exhibit 4.6 to Form 10-K dated December 31, 1989). * 4.7 - Indenture dated as of August 1, 1992 between the Company and Bank One, N.A., as Trustee relating to the Company's 12% Senior Notes due 2002 (filed as Exhibit 4.7 to Form 10-K dated December 31, 1992). * 10.1 - Amended and Restated Credit Agreement dated June 29, 1994 with certain banks and Morgan Bank of Canada (filed as Exhibit 10.01 to Form 10-Q dated June 30, 1994). * 10.2 - Amended and Restated Credit and Guaranty Agreement dated May 31, 1994 with certain banks and Morgan Guaranty Trust Company of New York (filed as Exhibit 10.02 to Form 10-Q dated June 30, 1994). * 10.3 - Revolving Credit and Letter of Credit Agreement dated August 10, 1992 among Frontier Oil and Refining Company, certain banks and Union Bank (filed as Exhibit 10.8 to Form 10-K dated December 31, 1992). * 10.4 - First Amendment dated October 8, 1992 to Loan Agreement among Frontier Oil and Refining Company, certain banks and Union Bank (filed as Exhibit 10.9 to Form 10-K dated December 31, 1992). * 10.5 - Waiver and Amendment dated March 17, 1993 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.19 to Form 10-K dated December 31, 1993). * 10.6 - Second Amendment dated April 30, 1993 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.20 to Form 10-K dated December 31, 1993). * 10.7 - Waiver letter dated August 31, 1993 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.21 to Form 10-K dated December 31, 1993). * 10.8 - Waiver letter dated October 15, 1993 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.22 to Form 10-K dated December 31, 1993). * 10.9 - Third Amendment dated December 31, 1993 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.23 to Form 10-K dated December 31, 1993). *10.10 - Fourth Amendment dated July 6, 1994 to Loan Agreement dated August 10, 1992 with certain banks and Union Bank (filed as Exhibit 10.03 to Form 10-Q dated June 30, 1994). *10.11 - Credit Agreement dated September 10, 1993 among Wainoco Oil & Gas Company and Cullen Center Bank and Trust (filed as Exhibit 10.24 to Form 10-K dated December 31, 1993). *10.12 - Interest Rate Swap Agreement dated August 5, 1991 between the Company and Morgan Guaranty Trust Company of New York (filed as Exhibit 10.10 to Form 10-K dated December 31, 1992). *10.13 - Waiver and Amendment Agreement dated May 1, 1992 between the Company and Morgan Guaranty Trust Company of New York (filed as Exhibit 10.11 to Form 10-K dated December 31, 1992). *10.14 - Amendment Agreement dated December 31, 1992 to Interest Rate Swap Agreement dated August 5, 1991 between the Company and Morgan Guaranty Trust Company of New York (filed as Exhibit 10.12 to Form 10- K dated December 31, 1992). *10.15 - The 1968 Incentive Stock Option Plan as amended and restated (filed as Exhibit 10.1 to Form 10-K dated December 31, 1987). *10.16 - The 1977 Stock Option Plan as amended and restated (filed as Exhibit 10.2 to Form 10-K dated December 31, 1989). *10.17 - Employment Agreement dated May 26, 1992 between the Company and Clark Johnson (filed as Exhibit 10.16 to Form 10-K dated December 31, 1992). *10.18 - Engagement Contract between the Company and John B. Ashmun (filed as Exhibit 10.1 to Form 10-Q dated March 31, 1994). 10.19 - Wainoco Deferred Compensation Plan dated October 29, 1993. 10.20 - Wainoco Deferred Compensation Plan for Directors dated May 1, 1994. 13.1 - Portions of the Company's 1994 Annual Report covering pages 12 through 16 and 18 through 36. * 21.1 - Subsidiaries of the Registrant (filed as Exhibit 22.1 to Form 10-K dated December 31, 1992). 23 - Consent of Arthur Andersen LLP. 27 - Financial Data Schedule.
*Asterisk indicates exhibits incorporated by reference as shown.
(b) Reports on Form 8-K No reports on Form 8-K have been filed by the Company during the fourth quarter of 1994.
(c) Exhibits The Company's 1994 Annual Report is available upon request. Shareholders of the Company may obtain a copy of any other exhibits to this Form 10-K at a charge of $.25 per page. Requests should be directed to: Mrs. Michal King Corporate Communications Wainoco Oil Corporation 1200 Smith Street, Suite 2100 Houston, Texas 77002-4367
(d) Schedules Report of Independent Public Accountants on Financial Statement Schedules:
To Wainoco Oil Corporation: We have audited in accordance with generally accepted auditing standards, the financial statements included in Wainoco Oil Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 21, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas February 21, 1995
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an integral part of these financial statements.
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an integral part of these financial statements.
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Wainoco Oil Corporation and Subsidiaries" are an integral part of these financial statements.
Wainoco Oil Corporation Notes to Condensed Financial Information of Registrant December 31, 1994 Schedule I - ----------------------------------------------------------------------
(1) General
The accompanying condensed financial statements of Wainoco Oil Corporation (Registrant) should be read in conjunction with the consolidated financial statements of the Registrant and its subsidiaries included in the Registrant's 1994 Annual Report to Shareholders.
(2) Oil and gas properties
All of the Registrant's oil and gas properties are located in Canada. Information relating to the Registrant's oil and gas operations is disclosed in the "Notes to the Financial Statements of Wainoco Oil Corporation and Subsidiaries."
(3) Long-term debt
The components (in thousands) of long-term debt are as follows:
(4) Five-year maturities of long-term debt
The estimated five-year maturities of long-term debt are $2.5 million in 1996 and 1997 and $5.0 million in 1998.
(5) Restructuring of operations
Wainoco's subsidiary, Wainoco Oil & Gas Company, intends to cease oil and gas exploration activities in the United States and sell all of its United States oil and gas properties, except for its Conroe field and some minor properties. Information relating to the restructuring and sale are disclosed in the "Notes to Financial Statements of Wainoco Oil Corporation and Subsidiaries."
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the date indicated.
WAINOCO OIL CORPORATION
By: /s/ James R. Gibbs James R. Gibbs President (chief executive officer)
Date: February 21, 1995 - ----------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Wainoco Oil Corporation and in the capacities and on the date indicated.
/s/ James R. Gibbs /s/ Paul B. Loyd, Jr. - ------------------------------ -------------------------- James R. Gibbs Paul B. Loyd, Jr. President and Director Director (chief executive officer)
/s/ Julie H. Edwards - ------------------------------ -------------------------- Julie H. Edwards James S. Palmer Senior Vice President - Finance Director and Chief Financial Officer (principal financial officer)
/s/ George E. Aldrich /s/ Derek A. Price - ------------------------------ -------------------------- George E. Aldrich Derek A. Price Vice President - Controller Director (principal accounting officer)
/s/ Douglas Y. Bech /s/ Carl W. Schafer - ------------------------------ -------------------------- Douglas Y. Bech Carl W. Schafer Director Director
Date: February 21, 1995