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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period Ended September 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-14380
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CITGO PETROLEUM CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 73-1173881
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(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
ONE WARREN PLACE, 6100 SOUTH YALE AVENUE, TULSA, OKLAHOMA 74136
----------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(918) 495-4000
--------------
(Registrant's telephone number, including area code)
N. A.
- --------------------------------------------------------------------------------
(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 (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $1.00 par value 1,000
----------------------------- -----
(Class) (outstanding at October 31, 1996)
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CITGO PETROLEUM CORPORATION
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS......................................................2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1996 and December 31, 1995........3
Condensed Consolidated Statements of Income - Three-Month Periods Ended
September 30, 1996 and 1995 and Nine-Month Periods Ended September 30,
1996 and 1995..................................................................4
Condensed Consolidated Statements of Cash Flows - Nine-Month Periods Ended
September 30, 1996 and 1995...........................................................5
Notes to the Condensed Consolidated Financial Statements............................. 6 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................................11 - 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K......................................................... 19
SIGNATURES....................................................................................... 20
</TABLE>
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FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 31E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the caption "Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to capital expenditures and investments related to environmental
compliance and strategic planning, purchasing patterns of refined products and
capital resources available to the Company (as defined herein) are forward
looking statements. In addition, when used in this document, the words
"anticipate," "estimate," "prospect" and similar expressions are used to
identify forward looking statements. Such statements are subject to certain
risks and uncertainties, such as increased inflation, continued access to
capital markets and commercial bank financing on favorable terms, increases in
regulatory burdens, changes in prices or demand for the Company's products as a
result of competitive actions or economic factors and changes in the cost of
crude oil, feedstocks, blending components or refined products. Such
statements are also subject to the risks of increased costs in related
technologies and such technologies producing anticipated results. Should one
or more of these risks or uncertainties, among others, materialize, actual
results may vary materially from those estimated, anticipated or projected.
Although CITGO believes that the expectations reflected by such forward looking
statements are reasonable based on information currently available to the
Company, no assurances can be given that such expectations will prove to have
been correct.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,506 $ 19,863
Accounts receivable 926,320 817,990
Due from affiliates 27,568 28,991
Inventories 897,615 785,275
Prepaid expenses and other 65,913 30,199
------------ ------------
Total current assets 1,940,922 1,682,318
PROPERTY, PLANT AND EQUIPMENT - Net 2,704,882 2,491,849
RESTRICTED CASH 12,028 1,258
INVESTMENTS IN AFFILIATES 757,593 650,360
OTHER ASSETS 127,235 97,793
------------ ------------
$ 5,542,660 $ 4,923,578
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term bank loans $ 86,000 $ 25,000
Accounts payable 473,531 438,172
Payables to affiliates 223,789 176,800
Taxes other than income 159,497 173,915
Other 242,017 224,077
Current portion of long-term debt 95,240 95,240
Current portion of capital lease obligation 11,150 10,557
------------ ------------
Total current liabilities 1,291,224 1,143,761
LONG-TERM DEBT 1,466,554 1,159,263
CAPITAL LEASE OBLIGATION 135,776 141,504
POSTRETIREMENT BENEFITS OTHER THAN 179,523 167,905
PENSIONS
OTHER NONCURRENT LIABILITIES 191,356 186,376
DEFERRED INCOME TAXES 427,217 367,644
MINORITY INTEREST 27,071 25,618
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock - $1.00 par value, 1,000 1 1
shares authorized, issued and outstanding
Additional capital 1,235,009 1,222,345
Retained earnings 588,929 509,161
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Total shareholder's equity 1,823,939 1,731,507
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$ 5,542,660 $ 4,923,578
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
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CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
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<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 3,258,006 $ 2,649,238 $ 9,071,078 $ 7,860,553
Sales to affiliates 52,450 58,245 180,569 156,556
----------- ----------- ----------- -----------
3,310,456 2,707,483 9,251,647 8,017,109
Equity in earnings (losses) of affiliates 3,891 8,696 19,227 25,826
Other income (expense) - net (456) (160) (1,540) 2,190
----------- ----------- ----------- -----------
3,313,891 2,716,019 9,269,334 8,045,125
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses 3,186,413 2,596,525 8,936,804 7,683,709
(including purchases of $960,193,
$835,427, $2,842,997 and
$2,462,068 from affiliates)
Selling, general and administrative
expenses 44,562 42,084 120,970 115,048
Interest expense, excluding capital lease 25,306 23,210 70,805 66,720
Capital lease interest charge 4,133 4,413 12,686 13,499
Minority interest (77) 443 1,453 1,259
----------- ----------- ----------- -----------
3,260,337 2,666,675 9,142,718 7,880,235
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 53,554 49,344 126,616 164,890
INCOME TAXES 19,815 18,257 46,848 60,899
----------- ----------- ----------- -----------
INCOME BEFORE EXTRAORDI-
NARY ITEM 33,739 31,087 79,768 103,991
EXTRAORDINARY GAIN, early
extinguishment of debt, net of related
income taxes of $2,160 - - - 3,380
----------- ----------- ----------- -----------
NET INCOME $ 33,739 $ 31,087 $ 79,768 $ 107,371
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 73,055 $ 190,651
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (318,343) (207,839)
Proceeds from sales of property, plant and equipment 3,696 810
(Increase) decrease in restricted cash (10,770) 18,038
Investments in LYONDELL-CITGO Refining Company Ltd. (106,361) (147,768)
Investment in subsidiary and advances to other affiliates - (47,805)
----------- -----------
Net cash used in investing activities (431,778) (384,564)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash infusion from parent - 15,000
Net proceeds from short-term bank loans 61,000 65,000
Net payments on revolving bank loans (10,000) (35,000)
Payments on term bank loan (22,059) -
Proceeds from master shelf agreement - 100,000
Proceeds from issuance of senior notes 199,694 -
Proceeds from issuance of taxable bonds 120,000 -
Proceeds from issuance of tax-exempt bonds 25,000 90,700
Payments on tax-exempt bonds - (40,237)
Payments of capital lease obligations (5,912) (4,780)
(Repayments) borrowings on other debt (5,357) 4,183
----------- -----------
Net cash provided by financing activities 362,366 194,866
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 3,643 953
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,863 16,271
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,506 $ 17,224
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 73,857 $ 67,430
=========== ===========
Income taxes, net of refunds of $3,449 and $3,682
in 1996 and 1995 $ 27,635 $ 44,033
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Noncash capital contribution from parent (PDV America) $ 12,664 $ -
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The financial information for CITGO Petroleum Corporation ("CITGO" or
"the Company") subsequent to December 31, 1995 and with respect to the
interim three and nine-month periods ended September 30, 1996 and 1995 is
unaudited. In the opinion of management, such interim information
contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of such
periods. The results of operations for the three-month and nine-month
periods ended September 30, 1996 and 1995 are not necessarily indicative
of the results to be expected for the full year. Reference is made to
the audited consolidated financial statements and notes thereto for the
fiscal years ended December 31, 1995 and 1994 included in CITGO's General
Form for Registration of Securities on Form 10, as amended, for
additional information.
Effective January 1, 1996, CITGO adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121
establishes the accounting for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to
be held and used and the accounting for long-lived assets and certain
identifiable intangibles to be disposed of. The adoption of SFAS No. 121
did not have a material effect on the consolidated financial position or
results of operations of CITGO.
The condensed consolidated financial statements include the accounts of
CITGO, its wholly owned subsidiaries, and Cit-Con Oil Corporation, which
is 65 percent owned by CITGO (collectively, "the Company").
2. INVENTORIES
Inventories, primarily at LIFO, consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
-------------- ---------------
(000'S OMITTED)
<S> <C> <C>
Refined products $ 700,083 $ 588,696
Crude oil 149,906 149,414
Materials and supplies 47,626 47,165
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$ 897,615 $ 785,275
============= =============
</TABLE>
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3. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
---------------------------------
(000'S OMITTED)
<S> <C> <C>
Revolving bank loan $ 280,000 $ 290,000
Term bank loan 95,588 117,647
7.875% Senior Notes $200 million face amount due 2006 199,707 -
Private Placement:
8.75% Series A Senior Notes due 1998 56,250 56,250
9.03% Series B Senior Notes due 2001 171,429 171,429
9.30% Series C Senior Notes due 2006 125,000 125,000
Master Shelf Agreement:
8.55% Senior Notes due 2002 25,000 25,000
8.68% Senior Notes due 2003 50,000 50,000
7.29% Senior Notes due 2004 20,000 20,000
8.59% Senior Notes due 2006 40,000 40,000
8.94% Senior Notes due 2007 50,000 50,000
7.17% Senior Notes due 2008 25,000 25,000
7.22% Senior Notes due 2009 50,000 50,000
Tax Exempt Bonds:
Pollution control revenue bonds due 2004 15,800 15,800
Port facilities revenue bonds due 2007 11,800 11,800
Louisiana wastewater facility revenue bonds due 2023 3,020 3,020
Louisiana wastewater facility revenue bonds due 2024 20,000 20,000
Louisiana wastewater facility revenue bonds due 2025 40,700 40,700
Gulf Coast solid waste facility revenue bonds due 2025 50,000 50,000
Gulf Coast solid waste facility revenue bonds due 2026 50,000 50,000
Port of Corpus Christi sewage and solid waste disposal
revenue bonds due 2026 25,000 -
Taxable Louisiana wastewater facility revenue
bonds due 2026 120,000 -
Cit-Con bank credit agreement 37,500 42,857
----------- -----------
1,561,794 1,254,503
Less current portion of long-term debt (95,240) (95,240)
----------- -----------
$ 1,466,554 $ 1,159,263
=========== ===========
</TABLE>
In March 1996, CITGO issued $25 million of Port of Corpus Christi Sewage
and Solid Waste Disposal Revenue Bonds due in the year 2026.
In April 1996, CITGO filed a registration statement with the Securities
and Exchange Commission relating to the shelf registration of $600
million of debt securities that may be offered and sold from time to
time. In May 1996, the registration became effective and CITGO sold a
tranche of debt securities with an aggregate offering price of $200
million. The Company used the net proceeds from the sale of the notes
for working capital and the
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repayment of borrowings under the Company's revolving credit facility.
This repayment will not permanently reduce the Company's borrowing
capacity thereunder. The Company may, in the future, borrow additional
amounts under its revolving credit facility to fund capital expenditures,
to fund working capital requirements or for other corporate purposes.
On July 25, 1996, CITGO issued $120 million of taxable environmental
revenue bonds due in the year 2026. The bonds were issued with a
variable rate that was 5.429% on the date of issuance. The proceeds were
used for the repayment of borrowings under the Company's revolving credit
facility. This repayment will not permanently reduce the Company's
borrowing capacity thereunder. The Company may in the future borrow
additional amounts under its revolving credit facility to fund capital
expenditures, to fund working capital requirements or for other corporate
purposes.
4. COMMITMENTS AND CONTINGENCIES
LITIGATION AND INJURY CLAIMS - Various lawsuits and claims in the
ordinary course of business are pending against the Company. Included
among these are: (i) litigation with a contractor who is claiming
additional compensation for sludge removal and treatment at CITGO's Lake
Charles, Louisiana refinery; CITGO is seeking contractual penalties for
nonperformance and breach of contract and also a determination that a
portion of any damages awarded would be recoverable from a former owner;
a trial is scheduled for March 1997 concerning the nonperformance and
breach of contract issues; (ii) litigation against the State of Louisiana
concerning a potential assessment to CITGO and other refiners of a use
tax on petroleum coke which accumulates on catalyst during refining
operations and a change to the calculation of the sales/use tax on fuel
gas generated by refinery operations; a Louisiana Supreme Court decision
on a similar industry case is expected by December 31, 1996; and (iii)
litigation against CITGO by a number of current and former employees and
applicants on behalf of themselves and a class of similarly situated
persons asserting claims under Federal and State laws of racial
discrimination in connection with the employment practices at CITGO's
Lake Charles, Louisiana refining complex; the plaintiffs have appealed
the Court's denial of class certification; the initial trials on this
litigation are scheduled for March 1997. The Company is vigorously
contesting or pursuing, as applicable, such lawsuits and claims and
believes that its positions are sustainable. The Company has recorded
accruals for losses it considers to be probable and reasonably estimable.
However, due to uncertainties involved in litigation, there are cases,
including the significant matters noted above, in which the outcome is
not reasonably predictable, and the losses, if any, are not reasonably
estimable. If such lawsuits and claims were to be determined in a manner
adverse to the Company, and in amounts in excess of the Company's
accruals, it is reasonably possible that such determinations could have a
material adverse effect on the Company's results of operations in a given
year. The term "reasonably possible" is used herein to mean that the
chance of a future transaction or event occurring is more than remote but
less than likely. However, based upon management's current assessments
of these lawsuits and claims and that provided by counsel in such
matters, and the capital resources available to the Company, management
of the Company believes that the ultimate resolution of these lawsuits
and claims would not exceed the aggregate of the amounts accrued in
respect of such lawsuits and claims and the insurance coverages available
to the Company by a material amount and, therefore, should
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not have a material adverse effect on the Company's financial condition,
results of operations or liquidity.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION - The Company is subject to
various Federal, state and local environmental laws and regulations which
may require the Company to take action to correct or improve the effects
on the environment of prior disposal or release of petroleum substances
by the Company or other parties. Management believes the Company is in
compliance with these laws and regulations in all material aspects.
Maintaining compliance with environmental laws and regulations in the
future could require significant capital expenditures and additional
operating costs.
At September 30, 1996, the Company had $58 million of environmental
accruals included in other noncurrent liabilities. Based on currently
available information, including the continuing participation of former
owners in remediation actions, management believes these accruals are
adequate. Conditions which require additional expenditures may exist for
various sites of the Company including, but not limited to, operating
refinery complexes, former refinery sites, service stations and crude oil
and petroleum product storage terminals. The amount of such future
expenditures, if any, is indeterminable.
RECENT DEVELOPMENTS RELATING TO ENVIRONMENTAL COMPLIANCE - Recent
developments relating to environmental compliance and remediation matters
include the following: (i) During late 1993 and 1994, CITGO Asphalt
Refining Company ("CARCO") received two Notices of Violation and two
Compliance Orders from the U.S. Environmental Protection Agency ("EPA")
related to the operations of certain units at CARCO's Paulsboro, New
Jersey asphalt refinery. CARCO disagreed with those allegations, but
entered into a consent decree with the EPA that settles this matter for
$1,230,000 in October 1996. In November 1996, the EPA filed the Consent
Decree with the U.S. District Court, District of New Jersey for public
comments and judicial approval. (ii) On September 30, 1996, CITGO received
a Notice of Violation from the EPA, Washington, D.C., alleging ten
violations of the Clean Air Act in the Chicago-Gary-Lake County,
Illinois-Indiana-Wisconsin area, arising from the sale of gasoline that
failed to meet the applicable minimum or maximum applicable oxygen
content. The EPA has not yet proposed penalties but CITGO anticipates the
proposed penalty could possibly exceed $100,000, but the Company does not
expect that the actual amount of the penalties, if any, will have a
material adverse effect on the Company's financial condition, results of
operations or liquidity.
DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - CITGO enters into
petroleum futures contracts primarily to reduce its inventory exposure to
market risk. CITGO also buys and sells commodity options for delivery and
receipt of crude oil and refined products. Such contracts are entered
into through major brokerage houses and traded on national exchanges and
can be settled in cash or through delivery of the commodity. Such
contracts generally qualify for hedge accounting and correlate to market
price movements of crude oil and refined products. Resulting gains and
losses on such contracts, therefore, will generally be offset by gains and
losses on CITGO's hedged inventory or future purchases and sales.
CITGO has only limited involvement with other derivative financial
instruments and does not use them for trading purposes. They are used to
manage well defined interest rate and commodity price risks arising out
of CITGO's core activities. CITGO has entered into various interest rate
swap and cap agreements to manage its risk related to interest rate
changes on its debt. The fair value of the interest rate swap agreements
in place at September 30, 1996, based on the estimated amount that CITGO
would receive or pay to terminate the agreements as of that date and
taking into account current interest rates, was an unrealized gain of
$0.2 million. In connection with the determination of said fair
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market value, the Company considers the creditworthiness of the
counterparties, but no adjustment was determined to be necessary as a
result.
The impact of these instruments on cost of sales and operating expenses
and pretax earnings was immaterial for all periods presented. Management
considers the market risk to the Company related to these instruments to
be insignificant during the periods presented.
5. RELATED PARTY TRANSACTIONS
CITGO has various long-term crude oil and feedstock supply agreements
with subsidiaries of Petroleos de Venezuela, S.A. ("PDVSA"). Effective
January 1, 1992, the supply agreements with respect to CITGO's Lake
Charles, Corpus Christi and Paulsboro refineries were modified to reduce
the price levels to be paid by CITGO by a fixed amount per barrel of
crude oil purchased from PDVSA. Such reductions were intended to defray
CITGO's costs of certain environmental compliance expenditures. This
modification resulted in a decrease in the cost of crude oil purchased
under these agreements of approximately $70 million per year for the
years 1992 through 1994 as compared to the amount that would otherwise
have been payable thereunder. This modification was to expire at
December 31, 1996; however, in the third quarter of 1995, PDVSA and CITGO
agreed to adjust this modification so that the 1992 fixed amount per
barrel would be reduced and the adjusted modification would not expire
until December 31, 1999. The impact of this adjustment is an increase in
crude oil cost of $11 million for the quarter ended September 30, 1996
and $33 million for the nine months then ended over what would otherwise
have been payable under the original 1992 modification. The Company
anticipates that the effect of the adjustments to the original
modifications will be to reduce the price of crude oil purchased from
PDVSA under these agreements by $25 million per year in 1997 through
1999, in each case without giving effect to any other factors that may
affect the price payable for crude oil under these agreements. Due to
the pricing formula under the supply agreements, the aggregate price
actually paid for crude oil purchased from PDVSA under these agreements
in each of these years will depend primarily upon the then current prices
for refined products and certain actual costs of CITGO. These estimates
are also based on the assumption that CITGO will purchase the base
volumes of crude oil under the agreements.
CITGO and PDV America, Inc. are parties to a tax allocation agreement
which is designed to provide PDV America, Inc. with sufficient cash to
pay its consolidated income tax liabilities. In April 1996, $12.7
million due from CITGO to PDV America, Inc., under this tax allocation
agreement for the tax years 1992 through 1994, was classified and
accounted for as a contribution of capital. In the event that CITGO
should cease to be part of the consolidated federal income tax return,
any amounts included in shareholder's equity under this agreement may be
required to be paid to PDV America, Inc.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion of the financial condition and results of
operations of CITGO should be read in conjunction with the financial
statements, notes and management's discussion contained in CITGO's General Form
for Registration of Securities on Form 10, as amended, and the unaudited
condensed consolidated financial statements of CITGO included elsewhere herein.
Petroleum industry operations and profitability are influenced by a
large number of factors, some of which individual petroleum refining and
marketing companies have little control over. Governmental regulations and
policies, particularly in the areas of taxation, energy and the environment,
have a significant impact on petroleum activities, regulating how companies
conduct their operations and formulate their products, and, in some cases,
limiting their profits directly. Demand for crude oil and refined products is
largely driven by the condition of local and worldwide economies, although
weather patterns and taxation relative to other energy sources also play a
significant part. Due to the seasonality of refined products markets and
refinery maintenance schedules, results of operations for any quarter of a
calendar year are not necessarily indicative of results to be expected for a
full year. CITGO's consolidated operating results are affected by these
industry factors and by Company-specific factors, such as the success of
wholesale marketing programs and refinery operations.
The earnings and cash flows of companies engaged in the refining and
marketing business in the United States are primarily dependent upon producing
and selling quantities of refined products at margins sufficient to cover fixed
and variable costs. The refining and marketing business is characterized by
high fixed costs resulting from the significant capital outlays associated with
refineries, terminals and related facilities. This business is also
characterized by substantial fluctuations in variable costs, particularly costs
of crude oil, feedstocks and blending components, and the prices realized for
refined products. Crude oil and refined products are commodities whose price
levels are determined by market forces beyond the control of CITGO.
In general, prices for refined products are significantly influenced
by the price of crude oil, feedstocks and blending components. Although an
increase or decrease in the price for crude oil, feedstocks and blending
components generally results in a corresponding increase or decrease in prices
for refined products, generally there is a lag in the realization of the
corresponding increase or decrease in prices for refined products. The effect
of changes in crude oil prices on CITGO's consolidated operating results
therefore depends in part on how quickly refined product prices adjust to
reflect these changes. A substantial or prolonged increase in crude oil prices
without a corresponding increase in refined product prices, a substantial or
prolonged decrease in refined product prices without a corresponding decrease
in crude oil prices, or a substantial or prolonged decrease in demand for
refined products could have a significant negative effect on the Company's
earnings and cash flows. CITGO purchases a significant amount of its crude oil
requirements from PDVSA or subsidiaries thereof under long-term supply
agreements (expiring in the years 2006 through 2013). These supply agreements
are designed to reduce the volatility of earnings and cash flows from CITGO's
refining operations by providing a relatively stable level of gross margin on
crude oil supplied by PDVSA. This supply represented approximately two-thirds
of the crude oil processed in refineries operated by CITGO in the nine months
ended September 30, 1996. However, CITGO also purchases significant volumes of
refined products to supplement the production from its refineries to meet
marketing demands and to resolve logistical issues. CITGO's
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earnings and cash flows are also affected by the cyclical nature of
petrochemical prices. Profit margins on sales of petrochemicals were a
significant contributor to CITGO's income during 1995. While still substantial,
petrochemical profit margins have decreased significantly from 1995 levels
during the nine months ended September 30, 1996. Inflation was not a
significant factor in the operations of CITGO during 1995 or during the first
nine months of 1996. As a result of these factors, the earnings and cash flows
of CITGO may experience substantial fluctuations.
RESULTS OF OPERATIONS
The following table summarizes the sources of CITGO's sales revenues
and sales volumes for the three-month and nine-month periods ended September
30, 1996 and 1995:
CITGO SALES
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
---------------- ---------------- -------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ----- ----- ------ ------
($ in millions) (MM gallons)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline $1,959 $1,663 $5,430 $4,977 3,023 2,947 8,434 8,498
Jet fuel 396 285 1,041 838 634 556 1,727 1,656
Diesel/#2 fuel 496 324 1,544 983 817 664 2,632 2,020
Petrochemicals, industrial products
and other products 212 206 601 626 366 459 1,043 1,115
Asphalt 94 90 182 186 209 178 416 382
Lubricants and waxes 111 112 326 300 56 58 166 158
------ ------ ------ ------ ----- ----- ------ ------
Total refined product sales $3,268 $2,680 $9,124 $7,910 5,105 4,862 14,418 13,829
Other sales 42 27 128 107
------ ------ ------ ------ ----- ----- ------ ------
Total sales $3,310 $2,707 $9,252 $8,017 5,105 4,862 14,418 13,829
====== ====== ====== ====== ===== ===== ====== ======
</TABLE>
12
<PAGE> 14
The following table summarizes CITGO's cost of sales and operating
expenses for the three-month and nine-month periods ended September 30, 1996
and 1995:
CITGO COST OF SALES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------- ---------------------
1996 1995 1996 1995
-------- -------- --------- ---------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
Crude oil $ 747 $ 588 $ 2,129 $ 1,840
Refined products 1,829 1,393 5,224 4,284
Intermediate feedstocks 250 253 676 687
Refining and manufacturing costs 201 195 602 559
Other operating costs and expenses
and inventory changes 159 168 306 314
-------- -------- --------- --------
Total cost of sales and operating
expenses $ 3,186 $ 2,597 $ 8,937 $ 7,684
======== ======== ========= ========
</TABLE>
Sales revenues and volumes. Sales increased $603 million, or
approximately 22%, in the three-month period ended September 30, 1996, and by
$1,235 million, or 15%, in the nine-month period ended September 30, 1996 as
compared to the same periods in 1995. Total sales volumes increased by 5% from
4,862 million gallons in the third quarter of 1995 to 5,105 million gallons in
the third quarter of 1996, and increased by 4% from 13,829 million gallons in
the first nine months of 1995 to 14,418 million gallons in the first nine
months of 1996. The increase in volumes, coupled with increases in most
product sales prices resulted in the increase in revenues.
Sales volumes of light fuels (gasoline, diesel/#2 fuel and jet fuel),
excluding bulk sales made for logistical reasons, increased by 10% in the third
quarter of 1996 as compared to the third quarter of 1995, and increased by 11%
in the first nine months of 1996 as compared to the same period in 1995.
Gasoline, jet fuel and diesel/#2 fuel , excluding bulk sales, had sales volume
increases of 8%, 13% and 23%, respectively, in the third quarter of 1996,
compared to the third quarter of 1995. For the nine-month period ended
September 30, 1996 versus the same period in 1995, gasoline, jet fuel and
diesel/#2 fuel, excluding bulk sales, had sales volume increases of 10%, 6% and
23%, respectively. Gasoline sales volumes increased due to successful
marketing efforts, including the net addition of 808 independently owned CITGO
branded retail outlets since September 30, 1995, bringing the total number of
CITGO branded retail outlets to 14,572 at September 30, 1996 (17 of which are
owned by CITGO).
Sales prices of gasoline, excluding bulk sales, have been higher for
the nine-month period ended September 30, 1996 as compared to the same period
in 1995. The average increase for the third quarter of 1996 over the third
quarter of 1995 is 9 cents per gallon, or a 15% increase. Sales prices of jet
fuel and diesel/#2 fuel, excluding bulk sales, increased 11 cents and 12 cents
per
13
<PAGE> 15
gallon, respectively, or 22% and 24%, respectively, in the third quarter of
1996 as compared to the same period in 1995. For the nine-month period ended
September 30, 1996, gasoline prices were approximately 10% higher, jet fuel
prices were approximately 18% higher and diesel/#2 fuel prices were
approximately 22% higher than for the same period in 1995.
To meet demand for its products and to manage logistics, timing
differences and product grade imbalances, CITGO purchases and sells gasoline,
diesel/#2 fuel and jet fuel from and to other refiners and in the spot market.
Such bulk sales increased by $93 million, or 15%, from $619 million in the
three-month period ended September 30, 1995 to $712 million in the same period
in 1996, and decreased by $24 million, or 1%, from $1,913 million in the
nine-month period ended September 30, 1995 to $1,889 million in the same period
in 1996. The increase in revenue for the quarter ended September 30, 1996 is a
result of a 16% increase in bulk sales prices partially offset by a less than
1% decrease in volumes between the quarters. The nine-month period decrease is
due to a 10% decrease in volumes partially offset by a 10% increase in bulk
sales prices between the nine-month periods. Despite the nine-month period
decrease in overall bulk sales revenue, bulk sales revenue of diesel/#2 fuel
increased by $76 million, or 52% for the third quarter ended September 30, 1996
and increased $277 million, or 67% for the nine-month period ended September
30,1996 as compared to the same periods in 1995. The increase in diesel/#2
fuel bulk sales revenue is the result of a 23% increase in volumes combined
with a 24% increase in sales prices between the quarters and a 40% increase in
volumes combined with a 19% increase in bulk sales prices between the
nine-month periods.
Petrochemicals and industrial products sales revenues increased 8% and
decreased 2%, respectively, for the three months ended September 30, 1996 as
compared to the three months ended September 30, 1995, and decreased 14% and
increased 6%, respectively, for the nine months ended September 30, 1996 versus
the nine months ended September 30, 1995. The petrochemicals revenue increase
for the quarter was the result of a 10% increase in volume, offset by a 3%
decrease in unit sales price and the decrease for the nine-month period was the
result of a 17% decrease in unit sales price and a 2% increase in volume, as
compared to the same periods in 1995. The industrial products revenue decrease
was the result of an 11% increase in unit sales price and a 12% decrease in
volumes for the third quarter of 1996 and the increase was the result of an 8%
increase in unit sales price and a 2% volume decrease for the nine-month period
ended September 30, 1996, as compared to the same periods in 1995.
Asphalt sales revenues in the third quarter of 1996 were $4 million
higher and sales volumes were 17% higher as compared to the same period in
1995, and sales revenues were $4 million lower, and sales volumes were 9%
higher in the first nine months of 1996 as compared to the same period in 1995.
Asphalt sales prices decreased 11% in the third quarter of 1996, and 9% in the
first nine months of 1996, as compared to the same periods in 1995.
Equity in earnings (losses) of affiliates. Equity in earnings of
affiliates decreased by $4.8 million overall for the three-month period and
decreased $6.6 million overall for the nine-month period ended September 30,
1996 as compared to the same periods in 1995. For the third quarter period,
the decrease was primarily due to the change in the equity in earnings of two
affiliates. Equity in the earnings of Nelson Industrial Steam Company
("NISCO") increased by $1.1 million, from a loss of $1.2 million in the third
quarter of 1995 to a loss of $0.1 million in the third quarter of 1996. Equity
in the earnings of LYONDELL-CITGO Refining Company Ltd. ("LYONDELL-CITGO")
decreased $5.2 million, from $4.0 million in the third quarter of 1995 to a
loss of $1.2 million in the third quarter of 1996. For the nine-month period,
the decrease was primarily due to a decrease in the equity in the earnings of
LYONDELL-CITGO which decreased $8.0 million, from
14
<PAGE> 16
$11.2 million in the first nine months of 1995 to $3.2 million in the first
nine months of 1996. This decrease is due primarily to a decline in refining
margins on non-Venezuelan crude oil and declines in the profitability of
petrochemicals and lubricants. The decrease was partially offset by an
increase in the equity in earnings of NISCO of $2.0 million, from a loss of
$4.4 million in the first nine months of 1995 to a loss of $2.4 million in the
first nine months of 1996.
As of September 30, 1996, LYONDELL-CITGO was not in compliance with a
financial ratio covenant contained in LYONDELL-CITGO'S $450 million five-year
term credit facility and its $70 million 360 day revolving working capital
credit facility (together the "LCR Credit Facilities"). Effective as of
November 13, 1996, the LCR Credit Facilities were amended for the period third
quarter 1996 through June 30, 1997. As a result of these amendments,
LYONDELL-CITGO is currently in compliance with the financial covenants in the
LCR Credit Facilities.
Other income (expense). Other income (expense) was $(1.5) million for
the nine month period ended September 30, 1996 as compared to $2.2 million for
the same period in 1995. The difference is primarily due to a $2.4 million
gain on the termination of an interest rate swap agreement recognized in the
first nine months of 1995.
Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $589 million or 23%, in the quarter ended September 30,
1996, and increased $1,253 million, or 16%, in the nine-month period ended
September 30, 1996, as compared to the same periods in 1995. Higher crude oil
costs (an increase from $588 million in the third quarter of 1995 to $747
million in the third quarter of 1996) resulted from a 22% increase in crude
prices, and a 4% increase in crude oil volumes purchased. Crude oil costs
increased from $1,840 million in the nine-month period ended September 30, 1995
to $2,129 million in the first nine months of 1996, the result of a 14%
increase in crude prices, and a 1% increase in crude oil volumes purchased.
Refined product purchases increased in 1996 as compared to the comparable
periods in 1995 (up 31%, from $1,393 million to $1,829 million for the third
quarter, and up 22%, from $4,284 million to $5,224 million, for the first nine
months). These increases resulted from increases in refined product purchase
volumes (up 15% for the third quarter and 10% for the first nine months of 1996
as compared to the same periods in 1995), and changes in prices (up 15% for the
third quarter and 10% for the first nine months of 1996 as compared to the same
periods in 1995). Intermediate feedstock purchases decreased to $250 million
from $253 million in the third quarter of 1995, or a decrease of 1%, and
decreased to $676 million for the first nine months of 1996 from $687 million
for the first nine months of 1995, or a decrease of 2%. Intermediate feedstock
volumes purchased decreased 22%, and prices increased 27% between the quarters
ended September 30, 1995 and September 30, 1996. Intermediate feedstock volumes
purchased decreased 13% and prices increased 13% between the nine-month
periods ended September 30, 1995 and September 30, 1996. Refining and
manufacturing costs increased for both periods in 1996 as compared to 1995, 3%
for the third quarter (from $195 million to $201 million) and 8% for the
nine-month period ended September 30 (from $559 million to $602 million). The
increases in refining and manufacturing costs are due primarily to increased
costs of purchased fuel and electricity at CITGO's Lake Charles and Corpus
Christi refineries as well as the additional manufacturing costs related to the
lubricants plant acquired in May 1995. Depreciation and amortization expense
increased by $9 million, from $42 million to $51 million for the quarters ended
September 30, 1995 and 1996, respectively, and by $18 million, from $122
million to $140 million for the nine-month periods ended September 30, 1995 and
1996, respectively, due in both cases to increases in depreciation and
turnaround amortization. Increased capital expenditures are expected to
continue to result in increases in depreciation expense.
15
<PAGE> 17
CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 57% and 54% of total cost of sales and operating
expenses for the third quarters of 1996 and 1995 respectively, and 58% and 56%
for the first nine months of 1996 and 1995, respectively. CITGO estimates that
margins on purchased products, on average, are somewhat lower than margins on
produced products due to the fact that CITGO can only receive the marketing
portion of the total margin received on the produced refined products.
However, purchased products are not segregated from CITGO's produced products
and margins may vary due to market conditions and other factors beyond the
Company's control. As such, it is difficult to measure the effects on
profitability of changes in volumes of purchased products. CITGO anticipates
that its purchased refined product requirements will continue to increase to
meet marketing demands. In the near term, other than normal refinery
turnaround maintenance, CITGO does not anticipate operational actions or market
conditions which might cause a material change in purchased product
requirements. However, there could be events beyond the control of CITGO which
would impact the volume of refined products purchased and profit margins.
Commencing in the third quarter of 1995, certain deductible costs
under certain of CITGO's supply agreements with subsidiaries of PDVSA were and
will be deferred from 1995 and 1996 to the years 1997 through 1999. The
estimated impact of this adjustment is an increase in crude oil cost of $11
million per quarter beginning in the third quarter of 1995 and $45 million for
1996 over what would otherwise have been payable. As a result of this
deferral, crude costs for the first nine months of 1996 increased approximately
$22 million over such costs in the first nine months of 1995. (See Note 5 to
the Unaudited Condensed Consolidated Financial Statements). From 1997 through
1999, crude oil costs are estimated to decrease by approximately $25 million
per year as a result of the deferral and without giving effect to other factors
that may affect the price paid for crude oil under the supply agreements,
effective January 1, 1992, between CITGO and PDVSA.
Gross margin. The gross margin for the three-month period ended
September 30, 1996 was $124 million, or 3.7%, compared to $111 million, or
4.1%, for the same period in 1995. The gross margin for the nine-month period
ended September 30, 1996 was $315 million, or 3.4%, compared to $333 million,
or 4.2%, for the nine-month period ended September 30, 1995. Gross margins in
1996 have been adversely affected by the scheduled modifications to the pricing
provisions in the crude and feedstock supply agreements, the decline in
petrochemical profitability, increased volumes of refined products purchased
as a percentage of sales volume and increased costs of purchased fuel and
electricity at the refineries (in each case, as discussed above).
Selling, general and administrative expenses. Selling, general and
administrative expenses increased in the third quarter of 1996 by 7%, from $42
million in the third quarter of 1995 to $45 million in the third quarter of
1996, and increased 5% from $115 million in the first nine months of 1995 to
$121 million in the same period in 1996. The increase during the third quarter
and the nine months ended September 30, 1996 is primarily due to increased
marketing expenses in 1996 including the effect of the change in focus of the
Company's marketing programs initiated in April 1996.
Interest expense. Interest expense increased by approximately $1
million, or 4% (from $28 million to $29 million), for the third quarter ended
September 30, 1996, and increased year-to-date by approximately $3 million, or
4% (from $80 million to $83 million), as compared to the same periods in 1995.
Income taxes. Income taxes for each period reported were based on an
effective tax rate of 37%.
16
<PAGE> 18
Net income. The net income of $107 million for the nine-month period
ended September 30, 1995 includes an after tax extraordinary gain of $3.4
million on the early extinguishment of certain tax-exempt debt.
LIQUIDITY AND CAPITAL RESOURCES
For the nine-month period ended September 30, 1996, the Company's
consolidated net cash provided by operating activities totaled approximately
$73 million. Net income of $80 million and depreciation and amortization of
$140 million were reduced by net changes in other items of $(147) million. The
more significant changes in other items included an increase in accounts
receivable (including amounts due from affiliates) of $116 million, increases
in inventory of $112 million and increases in prepaid expenses and other assets
of $62 million, which were partially offset by increases in accounts payable
(including amounts due to affiliates) of $79 million, increases in deferred
taxes of $18 million, increases in interest payable of $17 million and an
increase in other liabilities of $13 million. The increase in accounts
receivable is due primarily to an increase in credit card receivables and
crude oil receivables. The increase in credit card receivables is primarily
the result of an increase in the number of active accounts, higher gasoline
prices and increased use of revolving credit. The increase in crude oil
receivables is a result of an increase in crude oil sales volumes and prices.
Refined products inventories have increased from year-end 1995 due to normal
seasonal fluctuations for various products. The Company anticipates that
inventory levels will be five to ten percent higher as compared to December 31,
1995 levels by the end of 1996.
Net cash used in investing activities of $432 million for the
nine-month period ended September 30, 1996 included capital expenditures of
$318 million (compared to $208 million for the same period in 1995), additional
investments in LYONDELL-CITGO of $106 million (compared to $148 million for the
same period in 1995) and an increase in restricted cash of $11 million.
Net cash provided by financing activities of $362 million for the
nine-month period ended September 30, 1996 included proceeds to CITGO of $61
million from short term borrowing facilities, proceeds of $25 million from a
tax-exempt revenue bond issue and proceeds of $120 million from a taxable
revenue bond issue. CITGO also received approximately $200 million from the
public offering of a tranche of debt securities from the $600 million shelf
registration statement filed with the Securities and Exchange Commission in
April 1996. Funds received from these financing activities were partially
offset by net repayments of $43 million on the Company's term loan, revolving
bank loans and other debt.
As of September 30, 1996, capital resources available to the Company
include cash generated by operations, available borrowing capacity under
CITGO's committed bank facilities of $395 million and $94 million of
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. The Company believes that it has sufficient capital
resources to carry out planned capital spending programs, including regulatory
and environmental projects in the near term, and to meet currently anticipated
future obligations as they arise. CITGO periodically evaluates other sources
of capital in the marketplace and anticipates that long-term capital
requirements will be satisfied with current capital resources and future
financing arrangements. The Company believes that it is in material compliance
with its obligations under its debt financing arrangements at September 30,
1996.
17
<PAGE> 19
DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS
CITGO enters into petroleum futures contracts primarily to reduce its
inventory exposure to market risk. CITGO also buys and sells commodity options
for delivery and receipt of crude oil and refined products. Such contracts
are entered into through major brokerage houses and traded on national
exchanges and can be settled in cash or through delivery of the commodity.
Such contracts generally qualify for hedge accounting and correlate to market
price movements of crude oil and refined products. Resulting gains and losses,
therefore, will generally be offset by gains and losses on CITGO's hedged
inventory or future purchases and sales.
CITGO has only limited involvement with other derivative financial
instruments, and does not use them for trading purposes. They are used to
manage well defined interest rate and commodity price risks arising out of
CITGO's core activities. CITGO has entered into various interest rate swap and
cap agreements to manage its risk related to interest rate changes on its debt.
The fair value of the interest rate swap agreements in place at September 30,
1996, based on the estimated amount that CITGO would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates was an unrealized gain of $0.2 million. In connection with the
determination of said fair market value, CITGO considered the creditworthiness
of the counterparties, but no adjustment was determined to be necessary as a
result.
The impact of these instruments on costs of sales and operating
expenses and pretax earnings was immaterial for all periods presented.
Management considers the market risk to the Company related to these
instruments to be insignificant during the periods presented.
NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted SFAS 121. SFAS 121
establishes the accounting for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used and the accounting for long-lived assets and certain identifiable
intangibles to be disposed of. The adoption of SFAS 121 did not have a
material effect on the consolidated financial position or results of operations
of the Company.
18
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of certain recent developments relating to
environmental compliance see Footnote 4 to the Condensed Consolidated
Financial Statements (unaudited) for the Three and Nine-Month Periods
Ended September 30, 1996 included in Part I hereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits
--------
Exhibit No. Description
27 Financial Data Schedule
(filed electronically only).
(b) Reports on Form 8 - K:
----------------------
No reports on Form 8 - K were filed during the quarter
for which this report is filed
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITGO PETROLEUM CORPORATION
Date: November 14, 1996 /s/ R. M. Bright
------------------------
R. M. Bright
Controller (Chief accounting officer)
20
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 23,506
<SECURITIES> 0
<RECEIVABLES> 973,910
<ALLOWANCES> 20,022
<INVENTORY> 897,615
<CURRENT-ASSETS> 1,940,922
<PP&E> 3,274,876
<DEPRECIATION> 569,994
<TOTAL-ASSETS> 5,542,660
<CURRENT-LIABILITIES> 1,291,224
<BONDS> 1,466,554
0
0
<COMMON> 1
<OTHER-SE> 1,823,938
<TOTAL-LIABILITY-AND-EQUITY> 5,542,660
<SALES> 9,251,647
<TOTAL-REVENUES> 9,269,334
<CGS> 8,936,804
<TOTAL-COSTS> 9,057,774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,788
<INTEREST-EXPENSE> 83,491
<INCOME-PRETAX> 126,616
<INCOME-TAX> 46,848
<INCOME-CONTINUING> 79,768
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,768
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
