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United States of America
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1999
Commission file number 1-14380
CITGO PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1173881
(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, 1999)
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The Registrant is filing this Amendment No. 1 to Quarterly Report on Form 10-Q
for the period ended September 30, 1999, in order to revise the Financial
Statements and the Management's Discussion and Analysis of Financial Condition
and Results of Operations sections of that Report. This revision is primarily
the result of the correction of errors which occurred as the Registrant
implemented information systems enhancements. The net effect of the corrections
is a $6.9 million increase in net income compared to what was previously
reported. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, the
Registrant is including the complete text of Form 10-Q as so revised.
<PAGE> 3
CITGO PETROLEUM CORPORATION
AMENDMENT NO. 1 TO THE QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS..........................................................................1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1999 (Restated) and December 31, 1998.............2
Condensed Consolidated Statements of Income - Three-Month and Nine-Month
Periods Ended September 30, 1999 (Restated) and 1998....................................................3
Condensed Consolidated Statement of Shareholder's Equity - Nine-Month Period
Ended September 30, 1999 (Restated) ....................................................................4
Condensed Consolidated Statements of Cash Flows - Nine-Month Periods Ended
September 30, 1999 (Restated) and 1998..................................................................5
Notes to the Condensed Consolidated Financial Statements................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................................18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................................20
Item 6. Exhibits and Reports on Form 8-K.......................................................................21
SIGNATURES...........................................................................................................22
</TABLE>
<PAGE> 4
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 1933, as
amended, and Section 21E 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 Year
2000 matters, 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,
1999
(As Restated -
See Note 8) DECEMBER 31,
(UNAUDITED) 1998
----------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,394 $ 30,338
Accounts receivable - net 895,830 540,501
Due from affiliates 36,445 33,780
Inventories 1,064,152 719,625
Deferred income taxes 4,801 65,234
Prepaid expenses and other 10,285 18,317
---------- ----------
Total current assets 2,038,907 1,407,795
PROPERTY, PLANT AND EQUIPMENT - net 2,870,738 2,860,427
RESTRICTED CASH 2,977 9,436
INVESTMENTS IN AFFILIATES 714,327 781,481
OTHER ASSETS 208,990 195,113
---------- ----------
$5,835,939 $5,254,252
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Short-term bank loans $ 92,000 $ 37,000
Accounts payable 502,345 384,532
Payables to affiliates 341,946 141,607
Taxes other than income 179,591 219,642
Other 209,698 209,327
Current portion of long-term debt 47,078 47,078
Current portion of capital lease obligation 15,484 14,660
---------- ----------
Total current liabilities 1,388,142 1,053,846
LONG-TERM DEBT 1,417,935 1,259,270
CAPITAL LEASE OBLIGATION 93,972 101,926
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 211,206 200,281
OTHER NONCURRENT LIABILITIES 200,257 219,466
DEFERRED INCOME TAXES 519,376 543,464
MINORITY INTEREST 29,911 29,559
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock - $1.00 par value, 1,000 shares authorized, issued and outstanding 1 1
Additional capital 1,312,616 1,312,616
Retained earnings 662,523 533,823
---------- ----------
Total shareholder's equity 1,975,140 1,846,440
---------- ----------
$5,835,939 $5,254,252
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
2
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CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- ----------------------------
1999 1999
(As Restated - (As Restated -
See Note 8) 1998 See Note 8) 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 3,621,391 $ 2,671,800 $ 8,964,069 $ 8,266,979
Sales to affiliates 50,156 46,508 117,182 128,912
----------- ----------- ----------- -----------
3,671,547 2,718,308 9,081,251 8,395,891
Equity in earnings (losses) of affiliates 12,150 24,347 8,931 61,957
Other income (expense) - net (2,407) (2,982) (6,321) (3,156)
----------- ----------- ----------- -----------
3,681,290 2,739,673 9,083,861 8,454,692
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses (including
purchases of $1,780,233, $1,096,498,
$4,058,824 and $3,329,432 from affiliates) 3,554,336 2,540,806 8,640,531 7,869,555
Selling, general and administrative expenses 50,375 59,421 160,879 173,701
Interest expense, excluding capital lease 21,816 22,383 62,361 64,691
Capital lease interest charge 3,078 3,469 9,636 10,766
Minority interest (42) 404 352 764
----------- ----------- ----------- -----------
3,629,563 2,626,483 8,873,759 8,119,477
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 51,727 113,190 210,102 335,215
INCOME TAXES 19,139 41,880 66,402 124,030
----------- ----------- ----------- -----------
NET INCOME $ 32,588 $ 71,310 $ 143,700 $ 211,185
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 1 $ 1 $ 1,312,616 $ 533,823 $1,846,440
Net Income (As Restated - See Note 8) -- -- -- 143,700 143,700
Dividends paid -- -- -- (15,000) (15,000)
-------- -------- ----------- ----------- ---------
BALANCE, SEPTEMBER 30, 1999
(As Restated - See Note 8) 1 $ 1 $ 1,312,616 $ 662,523 $1,975,140
======== ======== =========== =========== ==========
</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,
1999
(As Restated -
See Note 8) 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ (21,720) $ 726,931
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (167,801) (144,367)
Proceeds from sales of property, plant and equipment 7,514 3,364
Decrease (increase) in restricted cash 6,459 (2,516)
Loans to LYONDELL-CITGO Refining LP (19,700) (19,800)
Proceeds from sale of investments 4,980 7,160
Investments in and advances to other affiliates (4,212) (5,030)
----------- -----------
Net cash used in investing activities (172,760) (161,189)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term bank loans 55,000 (3,000)
Net proceeds from (repayments of) revolving bank loans 164,000 (135,000)
Payments on term bank loans -- (58,823)
Proceeds from issuance of tax-exempt bonds 25,000 47,200
(Payments on) proceeds from taxable bonds (25,000) 100,000
Dividends paid (15,000) (250,000)
Payments of capital lease obligations (7,130) (6,390)
Repayments of other debt (5,334) (5,334)
----------- -----------
Net cash provided by (used in) financing activities 191,536 (311,347)
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,944) 254,395
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 30,338 24,363
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,394 $ 278,758
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest, net of amounts capitalized $ 60,946 $ 61,622
=========== ===========
Income taxes, net of refund of $30,052 in 1999 $ (27,672) $ 46,788
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
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CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
1. BASIS OF PRESENTATION
The financial information for CITGO Petroleum Corporation ("CITGO" or "the
Company") subsequent to December 31, 1998 and with respect to the interim
three-month and nine-month periods ended September 30, 1999 and 1998 is
unaudited. In the opinion of management, such interim information contains all
adjustments, consisting only of normal recurring adjustments with the exception
of the tax matter described in Footnote 6, 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, 1999 are not necessarily indicative of
the results to be expected for the full year. Reference is made to CITGO's
Annual Report for the fiscal year ended December 31, 1998 on Form 10-K, dated
March 17, 1999, for additional information.
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,
1999 1998
(UNAUDITED)
-------------- --------------
(000's omitted)
<S> <C> <C>
Refined products $ 831,081 $ 539,675
Crude oil 173,607 123,927
Materials and supplies 59,464 56,023
-------------- --------------
$ 1,064,152 $ 719,625
============== ==============
</TABLE>
Inventories at December 31, 1998 were carried at estimated net market value
which was $159 million lower than historical cost. At September 30, 1999
estimated net market values exceeded historical cost, and accordingly, no
write-down was necessary.
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3. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
------------- -----------
(000's omitted)
<S> <C> <C>
Revolving bank loan $ 329,000 $ 165,000
7.875% Senior Notes $200 million face amount, due 2006 199,799 199,776
Private Placement Senior Notes, due 1999 to 2006
with interest rates from 9.03% to 9.30% 176,623 176,623
Master Shelf Agreement Senior Notes, due 2002 to
2009 with interest rates from 7.17% to 8.94% 260,000 260,000
Tax Exempt Bonds, due 2004 to 2029 with variable interest rates 300,520 275,520
Taxable Bonds, due 2026 to 2028 with variable interest rates 183,000 208,000
Cit-Con bank credit agreement 16,071 21,429
----------- -----------
1,465,013 1,306,348
Current portion of long-term debt (47,078) (47,078)
----------- -----------
$ 1,417,935 $ 1,259,270
=========== ===========
</TABLE>
On April 15, 1999, CITGO issued $25 million of tax exempt revenue bonds due
2029. The proceeds were used to redeem $25 million of the taxable Gulf Coast
environmental facilities revenue bonds due 2028.
4. INVESTMENT IN LYONDELL-CITGO REFINING LP
LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
refinery in Houston, Texas. LYONDELL-CITGO was formed in 1993 by subsidiaries of
CITGO and Lyondell Chemical Company. The heavy crude oil processed by the
Houston refinery is supplied by a subsidiary of PDVSA under a long-term crude
oil supply contract that expires in 2017. CITGO purchases substantially all of
the refined products produced at the Houston refinery under a long-term
contract.
In April 1998, the crude oil supplier exercised its contractual rights and
reduced deliveries of crude oil to LYONDELL-CITGO. LYONDELL-CITGO has been
required to obtain alternative sources of crude oil supply in replacement which
has resulted in lower operating margins.
At September 30, 1999, CITGO had a 41.25% participation interest in
LYONDELL-CITGO. CITGO has a one-time option to increase, for an additional
investment, its participation interest to 50 percent. This option may be
exercised after January 1, 2000 but not later than September 30, 2000.
CITGO has notes receivable from LYONDELL-CITGO which total $56 million and $36.3
million at September 30, 1999 and December 31, 1998, respectively. The notes
bear interest at market rates and are
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due July 1, 2003. These notes are included in other assets in the accompanying
consolidated balance sheets.
CITGO accounts for its investment in LYONDELL-CITGO using the equity method of
accounting and records its share of the net earnings of LYONDELL-CITGO based on
allocations of income agreed to by the owners. Information on CITGO's investment
in LYONDELL-CITGO follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(Unaudited)
(000's omitted)
<S> <C> <C>
Carrying value of investment $ 536,910 $ 597,373
Notes receivable 56,009 36,309
Participation interest 41 % 41 %
Equity in net (loss) income $ (7,639) $ 58,827
Cash distributions received 52,823 91,763
Summary of financial position:
Current assets $ 227,896 $ 197,000
Non current assets 1,410,599 1,440,000
Current liabilities 261,638 203,000
Non current liabilities 826,771 785,000
Member's equity 550,086 649,000
Summary of operating results:
Revenue $ 1,694,386 $ 2,055,000
Gross profit 75,649 291,000
Net (loss) income (2,445) 169,000
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
LITIGATION AND INJURY CLAIMS - Various lawsuits and claims arising in the
ordinary course of business are pending against the Company. The Company records
accruals for potential losses when, in management's opinion, such losses are
probable and reasonably estimable. If known lawsuits and claims were to be
determined in a manner adverse to the Company, and in amounts greater than the
Company's accruals, then such determinations could have a material adverse
effect on the Company's results of operations in a given reporting period.
However, in management's opinion the ultimate resolution of these lawsuits and
claims will not exceed, by a material amount, the amount of the accruals and the
insurance coverage available to the Company. This opinion is based upon
management's and counsel's current assessment of these lawsuits and claims. The
most significant lawsuits and claims are discussed below.
In May 1997, an explosion and fire occurred at CITGO's Corpus Christi refinery.
No serious personal injuries were reported. CITGO received approximately 7,500
individual claims for personal injury and property damage related to the above
noted incident. Approximately 1,300 of these claims have been resolved for
amounts which individually and collectively were not material. There are
presently seventeen lawsuits filed on behalf of approximately 9,000 individuals
arising out of this incident pending against CITGO in federal and state courts
in Corpus Christi alleging property damages, personal injury and punitive
damages. A trial of one of the federal court lawsuits in October 1998 involving
ten bellwether plaintiffs, out of approximately 400 plaintiffs, resulted in a
verdict for CITGO. The remaining plaintiffs in this case have agreed to settle
for an immaterial amount.
A class action lawsuit is pending in Corpus Christi, Texas state court against
CITGO and other operators and owners of nearby industrial facilities which
claims damages for reduced value of residential
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properties located in the vicinity of the industrial facilities as a result of
air, soil and groundwater contamination. Trial is scheduled for January 2000.
CITGO has contracted to purchase approximately 267 properties that were included
in the lawsuit and are in a neighborhood adjacent to CITGO's Corpus Christi
refinery and settle the property damage claims relating to these properties.
CITGO has offers open to purchase the remaining eight properties in the
neighborhood. Related to this purchase, $15.7 million was expensed in 1997. Two
related personal injury and wrongful death lawsuits were filed against the same
defendants in 1996, one of which is scheduled for trial in 2000. A trial date
for the other case has not been set.
Litigation is pending in federal court in Lake Charles, Louisiana, against CITGO
by a number of current and former Lake Charles refinery employees and applicants
asserting claims of racial discrimination in connection with CITGO's employment
practices. Trials in this case began in October 1999.
CITGO is among defendants to lawsuits in California and North Carolina alleging
contamination of water supplies by methyl tertiary butyl ether ("MTBE"), a
component of gasoline. The action in California was filed in November 1998 by
the South Tahoe Public Utility District and CITGO was added as a defendant in
February 1999. The North Carolina case, filed in January 1999, is a putative
class action on behalf of owners of water wells and other drinking water
supplies in the state. Both actions allege that MTBE poses public health risks.
Both actions seek damages as well as remediation of the alleged contamination.
These matters are in early stages of discovery. CITGO has denied all of the
allegations and is pursuing its defenses.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION - CITGO is subject to various federal,
state and local environmental laws and regulations which may require CITGO to
take action to correct or improve the effects on the environment of prior
disposal or release of petroleum substances by CITGO 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.
CITGO's accounting policy establishes environmental reserves as probable site
restoration and remediation obligations become reasonably capable of estimation,
or when the payment of fines or other penalties proposed by regulatory
authorities is considered probable and reasonably estimable. Based on currently
available information, including the continuing participation of former owners
in remediation actions and indemnification agreements with third parties, CITGO
management believes that its accruals are sufficient to address such
obligations.
In July 1997, the Texas Natural Resources Conservation Commission ("TNRCC")
issued a Preliminary Report and Petition alleging that CITGO violated TNRCC
rules relating to operation of a hazardous waste management unit without a
permit and recommended a penalty of $699,200. The TNRCC later expanded the
alleged violations to include alleged unauthorized emissions to the atmosphere
and alleged unauthorized discharges to waters of the state. CITGO has settled
all of these matters by entering into an Agreed Order with the TNRCC, which
required the payment of a penalty of $325,000, implementation of an approved
Supplemental Environmental Project at a cost of $325,000 and compliance with
terms and conditions of the order.
The TNRCC conducted an environmental compliance review at the Corpus Christi
refinery in the first and second quarters of 1998. In January 1999, the TNRCC
issued the Company a Notice of Violation (NOV) arising from this review and in
October 1999 proposed fines of approximately $1.6 million related to the NOV.
Most of the alleged violations refer to record keeping and reporting issues,
failure to keep proper records, failure to meet required emission levels, and
failure to properly monitor emissions. The Company intends to vigorously contest
the proposed fines and allegations.
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<PAGE> 13
In June 1999, CITGO and numerous other industrial companies received notice from
the U.S. Environmental Protection Agency, ("EPA") that the EPA believes these
companies have contributed to contamination in the Calcasieu Estuary, in the
proximity of Lake Charles, Calcasieu Parish, Louisiana and are Potentially
Responsible Parties ("PRPs") under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). The EPA made a demand for payment of
its past investigation costs from CITGO and other PRPs and advised it intends to
conduct a Remedial Investigation/Feasibility Study ("RI/FS") under its CERCLA
authority. CITGO and other PRP's may be potentially responsible for the costs of
the RI/FS. CITGO disagrees with the EPA's allegations and intends to contest
this matter. CITGO does not believe its potential exposure in this matter is
material.
In October 1999, the EPA issued an NOV to CITGO for violations of federal
regulations regarding reformulated gasoline found during a May 1998 inspection
at CITGO's Braintree, Massachusetts terminal and recommended a penalty of
$218,500. The Company intends to vigorously contest the proposed fines and
allegations.
Conditions which require additional expenditures may exist with respect to
various Company sites including, but not limited to, CITGO's operating refinery
complexes, closed refineries, service station sites and crude oil and petroleum
product storage terminals. The amount of such future expenditures, if any, is
indeterminable.
DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - CITGO enters into petroleum
futures contracts, options and other over-the-counter commodity derivatives,
primarily to reduce its inventory exposure to market risk. Such contracts are
generally 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. In the nine-month period ended
September 30, 1999, there was no non-hedging activity.
CITGO has only limited involvement with other derivative financial instruments
and does not currently use them for trading purposes. CITGO has entered into
various interest rate swap 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, 1999, 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 loss of $2.0 million. In
connection with the determination of fair 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.
6. INCOME TAXES
The effective tax rate for the current year is unusually low due to a favorable
resolution in the second quarter of 1999 of a significant tax issue in the last
IRS audit. During the years under audit, deferred taxes were recorded for
certain environmental expenses deducted in the tax returns in the event the
deductions were denied on audit. The deductions were allowed on audit and,
accordingly, the deferred tax liability of approximately $11 million was
reversed with a corresponding benefit to tax expense.
7. RELATED PARTY TRANSACTIONS
As of September 30, 1999, PDVSA Petroleo y Gas, S. A. ("PDVSA P&G") deliveries
of crude oil to CITGO were less than contractual base volumes due to PDVSA P&G
declaration of force majeure pursuant to four long-term crude oil supply
contracts related to CITGO's refineries. As a result the Company has been
required to obtain
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<PAGE> 14
alternative sources of crude oil. As a result, CITGO estimates that margins in
the three months and nine months ended September 30, 1999 were reduced by $11
million and $28 million, respectively, from what would have otherwise been the
case. It is not possible to forecast the future financial impacts of these
reductions in crude oil deliveries on CITGO's margins because the correlation
between crude oil and refined product prices is not constant over time.
Additionally, because of among other things, changes in crude oil economics, the
duration of force majeure cannot be forecasted.
Additionally, during the third quarter of 1999, PDVSA P&G did not deliver
naphtha pursuant to one of the contracts and will make contractually specified
payments in lieu thereof. The financial impact to the three-month and nine-month
periods ended September 30, 1999 was immaterial.
In April 1999, the Company declared and paid a $15 million dividend.
8. RESTATEMENT
Subsequent to the issuance of the Company's condensed consolidated
financial statements for the quarterly period ended September 30, 1999, the
Company's management discovered certain errors which occurred as the Company
implemented information systems enhancements. As a result, the condensed
consolidated financial statements for the three and nine-month periods ended
September 30, 1999 have been restated to correct these errors. A summary of the
significant effects of the restatement is as follows (dollars in thousands):
AS
PREVIOUSLY AS
REPORTED RESTATED
---------- ----------
AT SEPTEMBER 30, 1999:
Inventory $1,064,552 $1,064,152
Total assets 5,836,339 5,835,939
Accounts payable 513,745 502,345
Other current liabilities 207,278 209,698
Deferred income taxes 517,726 519,376
Total liabilities 3,868,129 3,860,799
Retained earnings 655,593 662,523
FOR THE THREE-MONTHS ENDED
SEPTEMBER 30, 1999:
Cost of sales and operating
expenses $3,565,336 $3,554,336
Income before income taxes 40,727 51,727
Income taxes 15,069 19,139
Net income 25,658 32,588
FOR THE NINE-MONTHS ENDED
SEPTEMBER 30, 1999:
Cost of sales and operating
expenses $8,651,531 $8,640,531
Income before income taxes 199,102 210,102
Income taxes 62,332 66,402
Net income 136,770 143,700
11
<PAGE> 15
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 unaudited condensed
consolidated financial statements of CITGO included elsewhere herein. Reference
is made to CITGO's Annual Report for the fiscal year ended December 31, 1998 on
Form 10-K, dated March 17, 1999, for additional information and a description of
factors which may cause substantial fluctuations in the earnings and cash flows
of CITGO.
In the quarter ended September 30, 1999, CITGO generated net income of
$33 million on revenue of $3.7 billion compared to net income of $71 million on
revenue of $2.7 billion for the same period last year. In the nine-month period
ended September 30, 1999, CITGO generated net income of $144 million on revenue
of $9.1 billion compared to net income of $211 million on revenue of $8.5
billion for the same period last year. Gross margin for the first nine months of
1999 benefited from the sale of inventories that were written down by $159
million at December 31, 1998, to reflect market prices at that time. At
September 30, 1999, estimated net market value of inventories exceeded
historical cost and, accordingly, no write down of inventories was required.
(See "Gross margin").
RESULTS OF OPERATIONS
The following table summarizes the sources of CITGO's sales revenues
and sales volumes for the three-month and nine-month periods ended September 30,
1999 and 1998:
CITGO SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
----------------- ----------------- ---------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ----- ----- ------ ------
($ in millions) (MM gallons)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline $2,172 $1,566 $5,306 $4,882 3,231 3,378 9,718 9,898
Jet fuel 297 186 726 600 520 463 1,591 1,347
Diesel/#2 fuel 637 449 1,649 1,473 1,136 1,142 3,738 3,512
Asphalt 124 113 243 223 271 286 568 566
Petrochemicals and industrial products 217 239 649 711 448 774 1,494 1,851
Lubricants and waxes 129 111 370 336 77 57 220 172
------ ------ ------ ------ ----- ----- ------ ------
Total refined product sales $3,576 $2,664 $8,943 $8,225 5,683 6,100 17,329 17,346
Other sales 96 54 138 171
------ ------ ------ ------ ----- ----- ------ ------
Total sales $3,672 $2,718 $9,081 $8,396 5,683 6,100 17,329 17,346
====== ====== ====== ====== ===== ===== ====== ======
</TABLE>
12
<PAGE> 16
The following table summarizes CITGO's cost of sales and operating
expenses for the three-month and nine-month periods ended September 30, 1999 and
1998:
CITGO COST OF SALES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
($ in millions)
<S> <C> <C> <C> <C>
Crude oil $ 796 $ 502 $ 1,919 $ 1,496
Refined products 2,208 1,519 5,356 4,708
Intermediate feedstocks 311 209 616 671
Refining and manufacturing costs 204 192 600 580
Other operating costs, expenses and inventory changes (1) 35 119 150 415
-------- -------- -------- --------
Total cost of sales and operating expenses $ 3,554 $ 2,541 $ 8,641 $ 7,870
======== ======== ======== ========
</TABLE>
(1) The nine months ended September 30, 1999, includes the impact of the
inventory write-down of $159 million recorded at December 31, 1998. See
"Gross Margin".
Sales revenues and volumes. Sales increased $954 million, or
approximately 35%, in the three-month period ended September 30, 1999 as
compared to the same period in 1998. This was due to an increase in average
sales price of 45% offset by a decrease in sales volume of 7%. Sales increased
$685 million, or approximately 8%, in the nine-month period ended September 30,
1999 as compared to the same period in 1998. This was due to an increase in
average sales price of 8%. (See CITGO Sales Revenues and Volumes table above.)
Equity in earnings of affiliates. Equity in earnings of affiliates
decreased by $12 million for the three-month period and decreased by $53 million
for the nine-month period as compared to the same period in 1998. The decrease
was primarily due to the change in the earnings of LYONDELL-CITGO, CITGO's share
of which decreased $57 million, from $49 million in the first nine months of
1998 to $(8) million in the first nine months of 1999. This decrease was due
primarily to a reduction of contract crude supply, lower margins on crude
purchased in the spot market and costs and lower operating rates related to
operating unit outages.
Other income (expense). Other income (expense) was $(2) million for the
three-month period ended September 30, 1999 as compared to $(3) million for the
same period in 1998 and $(6) million for the nine-month period ended September
30, 1999 as compared to $(3) million for the same period in 1998. The difference
was primarily due to a $3 million gain on the sale of Petro-Chemical Transport
in the first nine months of 1998. In September 1999, CITGO's interest in the
Texas New Mexico Pipeline was sold for a loss of $(2) million.
Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $1,013 million or 40%, in the quarter ended September 30,
1999 and increased $771 million or 10% in the nine-month period ended September
30, 1999 as compared to the same period in 1998. The average cost of
hydrocarbons increased by 50% in the three-month period ended September 30, 1999
as compared to the same period in 1998. In the nine-month period ended
September 30, 1999, the average cost of hydrocarbons increased by 12% as
compared to the same period in 1998. As a result of the invocation of the force
majeure clause in its crude oil supply contracts, CITGO estimates that the
cost of crude oil, purchased in the three months and nine months ended
September 30, 1999, increased by $11
13
<PAGE> 17
million and $28 million, respectively, from what would have otherwise been the
case. (See CITGO Cost of Sales and Operating Expenses table above.)
CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 62% and 60% of total cost of sales and operating
expenses for the third quarters of 1999 and 1998, respectively, and 62% and 60%
for the first nine months of 1999 and 1998, 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 wholesale 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.
Gross margin. The gross margin for the three-month period ended
September 30, 1999 was $117 million, or 3.2%, compared to $178 million, or 6.5%,
for the same period in 1998. The gross margin for the nine-month period ended
September 30, 1999 was $441 million, or 4.9%, compared to $526 million, or 6.3%,
for the same period in 1998. In the three-month period ended September 30, 1999,
the revenue per gallon component increased approximately 45% while the cost per
gallon component increased approximately 50%. As a result, the gross margin
decreased approximately one cent on a per gallon basis in the three-month period
ended September 30, 1999 compared to the same period in 1998. In the nine-month
period ended September 30, 1999, the revenue per gallon component increased
approximately 8% and the cost per gallon component increased approximately 10%.
As a result, the gross margin decreased approximately six-tenths of one cent on
a per gallon basis in the nine-month period ended September 30, 1999 compared to
the same period in 1998. See also "Notes to the Condensed Consolidated Financial
Statements", Note 7.
Income taxes. Income taxes reported were based on an effective tax rate
of 32% for the nine-month period ended September 30, 1999, as compared to 37%
for the comparable period in 1998. The effective tax rate for the current year
is unusually low due to a favorable resolution in the second quarter of 1999 of
a significant tax issue in the last IRS audit. During the years under audit,
deferred taxes were recorded for certain environmental expenses deducted in the
tax returns in the event the deductions were denied on audit. The deductions
were allowed on audit and, accordingly, the deferred tax liability of
approximately $11 million was reversed with a corresponding benefit to tax
expense.
LIQUIDITY AND CAPITAL RESOURCES
For the nine-month period ended September 30, 1999, the Company's
consolidated net cash used in operating activities totaled approximately $22
million. Operating cash flows were derived from net income of $144 million and
depreciation and amortization of $175 million reduced by changes in other assets
and liabilities of $341 million. The more significant changes in other items
included an increase in notes and accounts receivable (including amounts due
from affiliates) of $369 million and an increase in inventories of $186 million
offset by an increase in current liabilities of $278 million.
Net cash used in investing activities totaled $173 million for the
nine-month period ended September 30, 1999 consisting primarily of capital
expenditures of $168 million (compared to $144 million for the same period in
1998) and loans to LYONDELL-CITGO of $20 million.
Net cash provided by financing activities totaled $192 million for the
nine-month period ended September 30, 1999 consisting primarily of $164 million
from revolving bank loans and $55 million from short-term borrowings offset by a
$15 million dividend to parent.
As of September 30, 1999, capital resources available to the Company
include cash generated by operations, available borrowing capacity under CITGO's
committed bank facilities of $221 million and $93 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
14
<PAGE> 18
for $600 million of debt securities may be offered and sold from time to time.
CITGO management believes that the Company 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, including the issuance of debt securities. The Company's ability
to obtain such financing will depend on numerous factors, including market
conditions and the perceived creditworthiness of the Company at that time.
The Company is in compliance with its obligations under its debt
financing arrangements at September 30, 1999.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives, at fair value,
as either assets or liabilities in the statement of financial position with an
offset either to shareholder's equity and comprehensive income or income
depending upon the classification of the derivative. The company has not
determined the impact on its financial statements that may result from adoption
of SFAS No. 133, which is required no later than January 1, 2001.
YEAR 2000 READINESS
General. The inability of computers, software and other equipment using
microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 issue. As the Year 2000
approaches, such systems may be unable to accurately process certain date-based
information.
To mitigate any adverse impact this may cause, CITGO has established a
company wide Year 2000 Project ("Project") to address the issue of computer
programs and embedded computer chips which may be unable to correctly function
with the Year 2000. The Project is proceeding on schedule. In addition, CITGO is
updating major elements of its information systems by implementing programs
purchased from SAP. The first phase of SAP implementation, which included the
financial reporting and materials management modules, was brought into
production on January 1, 1998. Additional SAP modules including plant
maintenance work order and cost tracking were implemented throughout 1998. The
light oils product scheduling, inventory and billing module and the human
resources module were brought into production on June 1 and July 1, 1999,
respectively. The total cost of the SAP implementation is estimated to be
approximately $125 million, which includes software, hardware, reengineering and
change management. Management has determined that SAP is an appropriate solution
to the Year 2000 issue related to the systems for which SAP is implemented. Such
systems comprise approximately 80 percent of CITGO's total information systems.
The implementation of SAP is 95 percent complete, and is on schedule and on
budget as revised through September 30, 1999. Remaining business software
systems are expected to be made Year 2000 ready through the Year 2000 Project or
they will be replaced.
The Project. CITGO's Year 2000 Project Team is divided into two groups.
One group is working with Information Systems ("I.S.") and Information
Technology ("I.T.") related matters, while the other is analyzing non-I.S. /
I.T. business and asset integrity matters. A risk-based approach toward Year
2000 readiness was applied to non-SAP systems and processes, with most
fix-or-replace decisions made by year-end 1998. The strategy for achieving Year
2000 business and asset integrity is focused on equipment, software and
relationships that are critical to the Company's primary business operation,
15
<PAGE> 19
including refinery operations, terminal operations, crude oil purchase and
shipment operations, and refined product distribution operations. The Company
engaged third party consultants to review and validate the methodology and
organization of the Project. The Project strategy involves a number of phases:
Inventory and Assessment of Critical Equipment, Software and Relationships;
Contingency Planning; Remediation; Testing; and Readiness.
CITGO requires that all new contracts with vendors, suppliers, or
business partners include a clause covering Year 2000 readiness. CITGO also
seeks evidence of Year 2000 readiness from service providers prior to procuring
new services.
While the CITGO Project is systematically assessing the Year 2000
readiness of third party suppliers and customers, there can be no guarantee that
third parties of business importance to the Company will successfully and timely
reprogram, replace, or test all of their own computer hardware, software and
process control systems. CITGO has therefore chosen to continue assessment and
reevaluation of third party relationships beyond the deadline for completion of
other aspects of Inventory and Assessment phases of the Project. Review of third
party Year 2000 readiness will continue through 1999.
CITGO has established a Year 2000 Contingency Planning Team. The
strategy for Contingency Planning included a review and analysis of existing
contingency plans for CITGO refineries, terminals, pipelines and other
operations, in light of potential Year 2000 issues discovered in the Inventory
and Assessment phases of the Project. The Contingency Planning phase has also
evaluated and implemented changes to the existing contingency plans. Contingency
plans based on this process were completed for mission critical items and
external providers as of June 30, 1999. Remediation continues and includes
technical analysis, testing and, if necessary, retrofitting or replacement of
systems and equipment determined to be incapable of reliable operations in the
Year 2000. As of August 1, 1999, the Remediation phase was substantially
complete. The final phase of the Project, Readiness, is being completed.
The following is CITGO's definition of Year 2000 Readiness:
o Correctly and accurately handle date information before, during and
after midnight, December 31, 1999.
o Function correctly and accurately, and without disruption, before,
during and after January 1, 2000.
o Respond to two-digit year date input in a way that resolves ambiguity
as to the century in a disclosed, defined and predetermined manner.
o Process all date data to reflect the year 2000 as a leap year.
o Correctly and accurately recognize and process any date with a year
specified as "99" and "00".
Costs. The estimated total cost of the Project is not expected to
exceed $18 million, down from an original estimate of $35 million. The reduction
is due to less than expected need for remediation of embedded systems and
refinements in expense estimates. This estimate does not include CITGO's
potential share of Year 2000 costs that may be incurred by partnership and joint
ventures in which CITGO participates but is not the managing partner or
operator. The total amount expended through September 30, 1999 was approximately
$12 million. Approximately 46% of these expenditures were for internal costs to
conduct the various phases of the project. Approximately 23% were primarily for
consultants in the specialized areas of Project Management, Contingency
Planning, Information Technology, Database Administration and Operations
Analysis, as well as fees paid to third parties for Quality Assessment analysis
of Project organization and methodology. The remaining 31% were for actual
remediation of critical items, systems, and external providers, as well as
contingency planning and testing.
16
<PAGE> 20
The costs of the Project are being funded with cash from operations. No
existing or planned I.T. projects have been deferred or delayed due to Year 2000
readiness initiatives. The cost of implementing SAP replacement systems is not
included in these estimates.
The majority of remaining costs for completing the Project is
anticipated to be directed toward the replacement and repair of systems and
equipment found to be incapable of reliable operation in the Year 2000.
Risks. The failure to correct a material Year 2000 problem could result
in an interruption, or failure of, certain normal business activities or
operations. Because the Company is dependent, to a very substantial degree, upon
the proper functioning of its computer systems and its interaction with third
parties, including vendors and customers and their computer systems, a failure
of any of these systems to be Year 2000 compliant could have a material adverse
effect on the Company. Failure of this kind could, for example, cause disruption
in the supply of crude oil, cause disruption in refinery operations, cause
disruption in the distribution of refined products, lead to incomplete or
inaccurate accounting, recording, or processing of purchases of supplies or
sales of refined products, or result in generation of erroneous results. If not
remedied, potential risks include business interruption, financial loss,
regulatory actions, reputational harm, and legal liability. Such failures could
adversely affect CITGO's results of operations, liquidity and financial
condition. Unlike other business interruption scenarios, Year 2000 implications
could include multiple, simultaneous events which could result in unpredictable
outcomes.
Due to the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third party
suppliers and customers, CITGO management is unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact on
the Company's operations, liquidity or financial position. The Project has
significantly reduced the Company's level of uncertainty about the Year 2000
impact. CITGO management believes that, with the implementation of new SAP
business systems and completion of the Project as scheduled, the possibility of
significant interruptions of normal operations should be minimized. See also
"Factors Affecting Forward Looking Statements".
17
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at
September 30, 1999, CITGO was exposed to the risk of broad market price declines
with respect to a substantial portion of its crude oil and refined product
inventories. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.
Commodity Instruments. CITGO balances its crude oil and petroleum
product supply / demand and manages a portion of its price risk by entering into
petroleum futures contracts, options and other over-the-counter commodity
derivatives. Generally, CITGO's risk management strategies qualify as hedges.
However, certain strategies do not qualify as hedges. CITGO may take commodity
positions based on its views or expectations of specific commodity prices or
price differentials between commodity types.
NON TRADING COMMODITY DERIVATIVES
OPEN POSITIONS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MATURITY NUMBER OF CONTRACT MARKET
COMMODITY DERIVATIVE DATE CONTRACTS VALUE (2) VALUE
--------- ---------- -------- --------- --------- ------
($ in millions)
-----------------
<S> <C> <C> <C> <C> <C>
No Lead Gasoline (1) Futures Purchased 1999 225 $ 6.6 $ 6.5
Futures Sold 1999 75 $ 2.2 $ 2.2
Heating Oil (1) Futures Purchased 1999 192 $ 4.9 $ 5.0
Futures Purchased 2000 51 $ 1.2 $ 1.3
Futures Purchased 2001 6 $ 0.1 $ 0.1
Futures Sold 2000 325 $ 9.0 $ 8.6
Swaps 1999 20 $ 0.4 $ 0.5
Swaps 2000 34 $ 0.7 $ 0.8
Natural Gas (3) Futures Purchased 1999 33 $ 0.8 $ 0.9
</TABLE>
(1) 1,000 barrels per contract
(2) Weighted average price
(3) 10,000 mmbtu per contract
Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At September 30,
1999, CITGO's primary exposures were to U.S. dollar LIBOR and U.S. Treasury
rates.
18
<PAGE> 22
For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.
NON TRADING INTEREST RATE DERIVATIVES
OPEN POSITIONS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NOTIONAL
FIXED PRINCIPAL
VARIABLE RATE INDEX EXPIRATION DATE RATE PAID AMOUNT
- ------------------- --------------- --------- ------
($ in millions)
<S> <C> <C> <C>
One-month LIBOR May 2000 6.28% $ 25
J.J. Kenny May 2000 4.72% 25
J.J. Kenny February 2005 5.30% 12
J.J. Kenny February 2005 5.27% 15
J.J. Kenny February 2005 5.49% 15
----
$ 92
====
</TABLE>
The fair value of the interest rate swap agreements in place at
September 30, 1999, 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 loss of $2.0 million.
For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.
DEBT OBLIGATIONS
AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
EXPECTED
EXPECTED FIXED AVERAGE FIXED VARIABLE AVERAGE VARIABLE
MATURITIES RATE DEBT INTEREST RATE RATE DEBT INTEREST RATE
---------- --------- ------------- --------- ----------------
($ in millions) ($ in millions)
<S> <C> <C> <C> <C>
1999 $ 40 9.11% $ 94 5.83%
2000 40 9.11% 7 6.32%
2001 40 9.11% 7 6.69%
2002 36 8.78% -- 6.82%
2003 61 8.79% 329 6.89%
Thereafter 422 8.02% 481 6.90%
------- ---- ------- ----
Total $ 639 8.34% $ 918 6.78%
======= ==== ======= ====
Fair Value $ 655 $ 918
======= =======
</TABLE>
19
<PAGE> 23
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The required information is incorporated by reference into Part II of
this Report from Note 5 of the Notes to the Condensed Consolidated Financial
Statements included in Part I of this Report.
20
<PAGE> 24
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:
None.
21
<PAGE> 25
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: January 21, 2000 /s/ R. M. Bright
------------------------------------
R. M. Bright
Controller (Chief Accounting Officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 27,394
<SECURITIES> 0
<RECEIVABLES> 949,777
<ALLOWANCES> (17,502)
<INVENTORY> 1,064,152
<CURRENT-ASSETS> 2,038,907
<PP&E> 3,892,449
<DEPRECIATION> (1,021,711)
<TOTAL-ASSETS> 5,835,939
<CURRENT-LIABILITIES> 1,388,142
<BONDS> 1,417,935
0
0
<COMMON> 1
<OTHER-SE> 1,975,139
<TOTAL-LIABILITY-AND-EQUITY> 5,835,939
<SALES> 9,081,251
<TOTAL-REVENUES> 9,083,861
<CGS> 8,640,531
<TOTAL-COSTS> 8,790,599
<OTHER-EXPENSES> 352
<LOSS-PROVISION> 10,811
<INTEREST-EXPENSE> 71,997
<INCOME-PRETAX> 210,102
<INCOME-TAX> 66,402
<INCOME-CONTINUING> 143,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,700
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
