UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1996
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: 1-9409
DIAMOND SHAMROCK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2456753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9830 Colonnade Boulevard, San Antonio, Texas 78230
(Address of principal executive offices) (Zip
Code)
210-641-6800
(Registrant's telephone number, including area code)
________________________________________________________________________
(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. (X)YES ( )NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
( )YES ( )NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares of Common Stock outstanding at April 30, 1996: 29,258,874
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DIAMOND SHAMROCK, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(dollars in millions, except per share data)
Three Months
Ended
March 31,
1996 1995(a)
REVENUES
Sales and operating revenues $1,171.2 $ 845.6
Other revenues, net 7.1 4.2
1,178.3 849.8
COSTS AND EXPENSES
Cost of products sold 739.1 517.1
Operating expenses 151.4 95.9
Depreciation and amortization 25.9 18.7
Selling and administrative 24.8 18.3
Taxes other than income taxes 206.2 179.3
Interest 18.5 11.4
1,165.9 840.7
Income Before Tax Provision 12.4 9.1
Provision for Income Taxes 5.2 3.7
Net Income 7.2 5.4
Dividend Requirement
on Preferred Stock 1.1 1.1
Earnings Applicable to
Common Shares $ 6.1 $ 4.3
Primary Earnings
Per Share $ 0.21 $ 0.15
Fully Diluted Earnings
Per Share $ 0.21 $ 0.15
Cash Dividends Per Share
Common $ 0.14 $ 0.14
Preferred $ 0.625 $ 0.625
Weighted Average Common Shares
Outstanding (thousands of shares)
Primary 29,104 29,024
Fully Diluted 32,359 32,332
(a) Reclassified to conform to 1996 presentation, to include excise
taxes as a component of sales: 1996-$196.6 million; 1995-$168.0
million. (See Note 2)
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DIAMOND SHAMROCK, INC.
CONSOLIDATED BALANCE SHEET
(dollars in millions, except per share data)
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 47.3 $ 48.6
Receivables, less doubtful receivables
of $5.9; $7.1 in 1995 247.1 213.0
Inventories
Finished products 171.9 204.1
Raw materials 71.0 137.4
Supplies 34.8 34.5
277.7 376.0
Prepaid expenses and other current assets 11.5 17.3
Total Current Assets 583.6 654.9
Properties and Equipment, less accumulated
depreciation of $704.3; $684.2 in 1995 1,377.3 1,357.1
Excess of Cost over Acquired Net Assets,
less accumulated amortization
of $1.9; $0.3 in 1995 158.2 160.1
Deferred Charges and Other Assets 70.6 73.3
$2,189.7 $2,245.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt payable within one year $ 7.5 $ 7.2
Accounts payable 207.8 274.3
Accrued taxes 71.1 71.0
Accrued royalties 10.3 6.6
Current portion of Long-term Liability 7.2 8.0
Other accrued liabilities 90.7 122.4
Total Current Liabilities 394.6 489.5
Long-term Debt 993.7 957.5
Deferred Income Taxes 57.7 58.6
Other Liabilities and Deferred Credits 112.2 115.1
Stockholders' Equity
Preferred Stock, $.01 par value
Authorized shares - 25,000,000
Issued and Outstanding shares - 1,725,000;
1,725,000 in 1995 0.0 0.0
Common Stock, $.01 par value
Authorized shares - 75,000,000
Issued shares - 29,190,373; 29,035,853
in 1995
Outstanding shares - 29,190,373; 28,994,715
in 1995 0.3 0.3
Paid-in Capital 453.2 447.8
ESOP Stock and Stock Held in Treasury (36.4) (37.4)
Retained Earnings 214.4 214.0
Total Stockholders' Equity 631.5 624.7
$2,189.7 $2,245.4
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DIAMOND SHAMROCK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(dollars in millions)
Three Months Ended
March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7.2 $ 5.4
Adjustments to arrive at net cash provided
by operating activities:
Depreciation and amortization 25.9 18.7
Deferred income taxes (0.9) 3.2
Loss on sale of properties and equipment 0.3 0.0
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (34.1) 6.5
Decrease (increase) in inventories 98.3 87.5
Decrease (increase) in prepaid expenses 5.8 3.4
Increase (decrease) in accounts payable (66.2) (82.1)
Increase (decrease) in taxes payable 0.1 (3.4)
Increase (decrease) in accrued liabilities (28.8) (14.7)
Other, net 3.2 1.5
NET CASH PROVIDED BY OPERATING ACTIVITIES 10.8 26.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of properties and equipment 0.1 0.0
Purchase of properties and equipment (40.9) (51.5)
Expenditures for investments (2.1) (0.2)
NET CASH (USED IN) INVESTING ACTIVITIES (42.9) (51.7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increases in long-term debt 78.3 138.9
Repayments of long-term debt (42.1) (116.0)
Payments of long-term liability (2.2) (3.0)
Issuance of Common Stock 2.1 -
Sale of Common Stock held in treasury 0.7 -
Dividends paid (5.1) (5.1)
Other, net (0.9) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 30.8 14.8
Net (decrease) in cash and cash equivalents (1.3) (10.9)
Cash and cash equivalents at beginning of period 48.6 27.4
Cash and cash equivalents at end of period $ 47.3 $ 16.5
In January 1995, the Company acquired a portion of a crude oil import
and storage terminal in a non-cash transaction under an installment
purchase arrangement. The purchase price was $12.0 million.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
DIAMOND SHAMROCK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statements
The consolidated financial statements as of March 31, 1996 and for the
three months ended March 31, 1996 and 1995 are unaudited, but in the
opinion of Diamond Shamrock, Inc. (the "Company"), all adjustments
(consisting only of normal accruals) necessary for a fair presentation
of consolidated results of operations, consolidated financial position,
and consolidated cash flows at the date and for the periods indicated
have been included.
The consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q. Accordingly, certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
1995 Annual Report to Stockholders and incorporated by reference into
the Company's Annual Report on Form 10-K for the year ended December
31, 1995 (the "1995 Form 10-K").
With respect to the unaudited consolidated financial information of
the Company as of March 31, 1996, and for the three months ended March
31, 1996 and 1995, Price Waterhouse LLP has made a review (based on
procedures adopted by the American Institute of Certified Public
Accountants) and not an audit, as set forth in their separate report
appearing herein. Such a report is not a "report" or "part of a
Registration Statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11
of such Act do not apply.
2. Classification of Excise Taxes
Beginning in 1996, the Company includes federal excise taxes and
state motor fuel taxes in Sales and operating revenues and in Costs and
expenses for financial reporting purposes. The results of operations
for the three months ended March 31, 1995 have been reclassified to
conform to the 1996 presentation. The amount of such taxes is $196.6
million and $168.0 in 1996 and 1995, respectively. Neither operating
profits nor net income are affected by including such taxes in both
sales and expenses.
3. Acquisition
On December 14, 1995, the Company completed the acquisition of
National Convenience Stores Incorporated ("NCS") (See footnote 4
of the 1995 Form 10K). The acquisition was accounted for under
the purchase method. Consequently, the operating results of NCS
are included in the first quarter Consolidated Statement of Income
and the Consolidated Statement of Cash Flows for 1996, but not for
1995. The amount of NCS sales included in the 1996 first quarter
Consolidated Statement of Operations is $200.9 million.
4. Inventories
Inventories are valued at the lower of cost or market with cost
determined primarily under the Last-in, First-out (LIFO) method. At
March 31, 1996, inventories of crude oil and refined products of the
Refining and Wholesale segment were valued at market values (lower
than LIFO cost). Motor fuel products of the Retail segment, and
propylene products in the Allied Businesses segment were recorded at
their LIFO costs. Costs of all other inventories are determined on
an average cost method.
5. Long-term Debt
As of March 31, 1996, the Company had $120.0 million of debt
designated as the 10.75% Senior Notes outstanding, $30.0 million of
which was payable within one year. On April 30, 1996, the Company
refinanced the $30.0 million repayment using credit facilities which
are classified as long-term debt. Therefore, the current portion of
the 10.75% Senior Notes outstanding as of March 31, 1996 was classified
as long-term debt.
6. Commitments and Contingencies
In connection with the 1987 Spin-off from Maxus Energy Corporation
("Maxus"), the Company agreed to assume a share of certain
liabilities of Maxus' businesses discontinued or disposed of prior to
the Spin-off date (see Note 17 of the 1995 Form 10-K). The Company's
total liability for such shared costs is limited to $85.0 million. The
Company has reimbursed Maxus for a total of $77.8 million as of
March 31, 1996, including $2.8 million paid during the three months
ended March 31, 1996. See Note 3 of the 1995 Form 10-K for a discussion
of the change in the method of accounting for the liability.
REVIEW BY INDEPENDENT ACCOUNTANTS
With respect to the unaudited consolidated financial information of
the Company as of March 31, 1996 and the three months ended March 31,
1996 and 1995, Price Waterhouse LLP reported that they have applied
limited procedures in accordance with professional standards for a
review of such information. However, their separate report dated
May 10, 1996, appearing below, states that they did not audit and they
do not express an opinion on that unaudited consolidated financial
information. Price Waterhouse LLP has not carried out any significant
or additional audit tests beyond those which would have been necessary
if their report had not been included. Accordingly, the degree of
reliance on their report on such information should be restricted in light
of the limited nature of the review procedures applied. Price Waterhouse
LLP is not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited consolidated
financial information because that report is not a "report" or "part of
a Registration Statement" prepared or certified by Price Waterhouse LLP
within the meaning of Sections 7 and 11 of the Act.
<PAGE>
REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Diamond Shamrock, Inc.
We have reviewed the consolidated interim financial information
included in the Report on Form 10-Q of Diamond Shamrock, Inc. (the
"Company") and its subsidiaries as of March 31, 1996 and for the quarter
then ended. This financial information is the responsibility of the
management of Diamond Shamrock, Inc.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial information for it to
be in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of
December 31, 1995, and the related consolidated statements of
operations and of cash flows for the year then ended (not presented
herein), and in our report dated February 23, 1996 we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated
balance sheet information as of December 31, 1995, is fairly stated
in all material respects in relation to the consolidated balance sheet
from which it has been derived.
/s PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
May 10, 1996
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following are the Company's sales and operating revenues and
operating profit for the three months ended March 31, 1996 and 1995.
Business segment operating profit is sales and operating revenues
less applicable segment operating expense. In determining the
operating profit of the three business segments, neither interest
expense nor administrative expenses are included.
Three Months
Ended
March 31,
1996 1995
Sales and Operating Revenues:
Refining and Wholesale $ 519.3 $ 403.8(1)
Retail 562.2 337.31
Allied Businesses 89.7 104.5
Total Sales and Operating Revenues $ 1,171.2 $ 845.6
Operating Profit:
Refining and Wholesale $ 34.0 $ 8.4
Retail 7.5 15.1
Allied Businesses 10.3 13.1
Total Operating Profit $ 51.8 $ 36.6
(1) Reclassified to conform to 1996 presentation, including excise
taxes as a component of sales.
Consolidated Results First Quarter 1996 vs 1995
Sales and operating revenues of $1,171.2 million for the first
quarter of 1996 were 38.5% higher than in the same period of 1995,
primarily due to the acquisition of National Convenience Stores
Incorporated ("NCS") in mid-December 1995 which contributed $200.9
million in sales and operating revenues. Excluding the impact of
the NCS acquisition, sales and operating revenues increased 14.7%,
primarily due to a 15.7% and an 11.5% increase in refined product
sales volumes and prices, respectively, compared to the same period
a year ago.
During the first quarter of 1996, the Company had net income of $7.2
million compared to net income of $5.4 million in the 1995 first
quarter. The Company's first quarter results were positively
impacted by higher refinery margins. Partially offsetting the
increase in refining margins during the first quarter of 1996 was
a 23.0% decrease in retail fuel margins compared to the first
quarter of 1995, as the retail segment was unable to recoup the
rising cost of wholesale gasoline and diesel fuel resulting from
higher crude prices in the first quarter of 1996.
Inventories are valued at the lower of cost or market with cost
determined primarily under the Last-in, First-out (LIFO) method. At
March 31, 1996, inventories of crude oil and refined products of the
Refining and Wholesale segment were valued at market values (lower
than LIFO cost). Motor fuel products of the Retail segment, and
propylene products in the Allied Businesses segment were recorded
at their LIFO costs. All other inventories are determined on an
average cost method. Estimating the financial impact of changes
in the valuation of refinery inventories due to such inventories
being valued at market is difficult because of the number of variables
that must be considered. For operating purposes, management attempts
to estimate the impact of changes in valuation of refinery inventories
on net income. The estimated after tax change in inventory values was
a positive $1.2 million and $1.8 million in the first quarters of 1996
and 1995, respectively.
Segment Results First Quarter 1996 vs First Quarter 1995
During the first quarter of 1996 the Refining and Wholesale segment
had sales and operating revenues of $519.3 million compared to $403.8
million during the first quarter of 1995. The increase in sales and
operating revenues was primarily due to a 15.7% and an 11.5% increase
in refined product sales volumes and prices, respectively. Operating
profit in the first quarter of 1996 increased $25.6 million from the
first quarter of 1995, primarily due to a 52.0% increase in refinery
margins from the same period a year ago. Refining margins were weak
early in the quarter but improved significantly in March. Volatile
and rising crude oil prices, low industry-wide inventory levels,
primarily as a consequence of an unusually harsh winter, and strong
product demand, have had a significant impact on refining margins during the
first quarter of 1996.
The Retail segment in the first quarter of 1996 reflected a 66.6%
increase in sales and operating revenues, primarily due to the
acquisition of NCS and its 661 retail outlets in mid-December 1995.
Operating profit in the first quarter of 1996 was $7.5 million
compared to $15.1 million in the first quarter of 1995. The decrease
in operating profit was primarily due to a 23.0% and a 1.4% decrease in
retail fuel and merchandise margins, respectively, reflecting pricing
competition. Retail was unable to recoup the rising cost of
wholesale gasoline and diesel fuel resulting from higher crude prices
during the first quarter of 1996.
During the first quarter of 1996, the Allied Businesses segment
reflected a decrease in sales and operating revenues of 14.2%,
primarily due to a decrease in prices in the Company's propylene
business. Operating profits were $10.3 million for the first quarter of 1996
compared to $13.1 million in the first quarter of 1995. Operating
profits decreased primarily due to a $1.5 million and a $1.4 million
decrease in operating profit from the Company's propane/propylene and
Nitromite fertilizer businesses, respectively.
Outlook
The outlook for the refining and marketing industry for the rest of
1996 is positive. Most analysts agree that in 1995, refining industry
profitability hit the bottom of a cycle that is expected to swing
upward this year. Underlying these expectations is the assumed
continued growth in gasoline demand and higher prices for heating oil driven by
the recent harshwinter weather. Gasoline margins, which until
recently were depressed, are beginning to recover as we approach the
driving season.
<PAGE>
Liquidity and Capital Resources
Cash Flow and Working Capital
For the three months ended March 31, 1996, cash provided by
operations was $10.8 million, compared with $26.0 million in the same
period of 1995.
Working capital at March 31, 1996 was up $23.6 million from December
31, 1995, and consisted of current assets of $583.6 million and current
liabilities of $394.6 million, or a current ratio of 1.5. At
December 31, 1995, current assets were $654.9 million and current
liabilities were $489.5 million, or a current ratio of 1.3. The increase in
working capital was primarily due to a 24.2% and a 21.5% decrease in
accounts payable and accrued liabilities, respectively. The decrease in
current liabilities was partially offset by a 26.1% decrease in
inventories. The decrease in accounts payable reflected the payment
in the first quarter of 1996 for the additional crude oil purchased in December
1995 and the return to lower inventory levels. In addition, receivables
increased primarily due to increased refined product sales prices and
an increase in the receivables associated with the open positions of the
Company's futures contracts at March 31, 1996.
Capital Expenditures
In recent years, capital expenditures have represented a variety of
projects designed to expand and maintain up-to-date refinery
facilities, improve terminal and distribution systems, modernize and expand
retail outlets, comply with environmental regulatory requirements, and
pursue new ventures in related businesses.
In January 1996, the Company announced the goal of strengthening the
Company's balance sheet and, within two years, bringing its debt to
total capital and interest coverage ratios back to the levels
experienced prior to the acquisition of NCS. The Company's capital
expenditure budgets for the next two years have been reduced so that
revised capital spending plans are approximately $160.0 million in
1996 and $140.0 million in 1997. In addition to capital spending cuts the
Company's goal is to pay down over $200.0 million of debt in the next
two years through cash flow generated from operations, and the
pruning of assets. The capital spending cuts include eliminating retail
store construction in most of Texas but allow for the integration of the
NCS stores into the Company's system. Thus far the gasoline facilities
at nearly 100 former NCS retail outlets have been branded Diamond
Shamrock. This conversion includes signage on the street and at the pump,
and upgraded security, computerization, and store interiors. The Company
expects to complete branding the NCS gasoline retail outlets at a
rate of about 100 outlets per month. The Company also intends to
continue to construct additional retail stores in Arizona.
Several refinery projects have been deferred from 1996; however,
expansion and upgrading projects begun in 1995 at the Company's Three
Rivers refinery will be completed in 1996. These projects will
increase the capacity of the refinery from 75,000 barrels per day to
85,000 barrels per day and will allow heavy oils to be upgraded to higher
value refined products. The projects are scheduled for completion in
the third quarter of 1996. In addition, expenditures continue at Three
Rivers on the previously announced benzene, toluene, and xylene
("BTX") extraction unit, which will produce high value petrochemical
feedstocks. Once completed in 1997, the BTX project gives the Company
the flexibility to shift certain components out of the gasoline pool into
more attractive petrochemical markets. Finally, the 1996 capital
budget also includes construction of a second 730 million pound per
year propylene splitter at Mont Belvieu with completion scheduled for the
third quarter of 1996.
The Company's capital and investment expenditures during the first
three months of 1996 were $44.7 million. The Company's capital
expenditures were $63.5 million during the first three months of 1995,
including a non-cash investment of $12.0 million for the Corpus Christi
crude oil terminal acquired under an installment purchase arrangement.
Although it is presently the Company's goal to reduce debt in 1996,
if its assumptions regarding operating results or capital requirements
change, the Company can access its bank credit, bank money market,
and commercial paper facilities. In addition, depending upon
developments in the capital markets, the Company can access such
markets to refinance existing debt or to meet its capital and operating
requirements.
The Company opened 4 retail outlets and closed 4 marginal retail
outlets during the quarter ended March 31, 1996. One of the newly
opened outlets was leased by the Company under a pre-existing
long-term lease arrangement (the "Brazos Lease"). The Brazos Lease has
an initial lease term that will expire in April 1999. Rent payable under
the Brazos Lease is based upon the amounts spent to acquire or construct
the outlets and the lessor's cost of funds from time to time. At March
31, 1996, approximately $10.2 million of the $190.0 million commitment
remained available under the Brazos Lease to construct retail
outlets. After the non-cancelable lease term, the Brazos Lease may be
extended by agreement of the parties, or the Company may purchase or arrange
for the sale of the retail outlets. If the Company were unable to extend
the lease or arrange for the sale of the properties to a third party in
1999, the amount necessary to purchase properties under the lease as
of March 31, 1996 would be approximately $179.8 million.
Regulatory Matters
It is expected that rules and regulations implementing the federal,
state, and local laws relating to health and environmental quality
will continue to affect the operations of the Company. The Company
cannot predict what health or environmental legislation, rules or
regulations will be enacted in the future or how existing or future
laws, rules or regulations will be administered or enforced with respect to
products or activities of the Company. However, compliance with more
stringent laws or regulations, as well as more expansive interpretation of
existing laws and their more vigorous enforcement by the regulatory agencies
could have an adverse effect on the operations of the Company and
could require substantial additional expenditures by the Company, such
as for the installation and operation of pollution control systems and
equipment.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15.1 Independent Accountants' Awareness Letter
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company in the first
quarter of 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DIAMOND SHAMROCK, INC.
By: /s/ GARY E. JOHNSON
Gary E. Johnson
Vice President and
Controller Principal
Accounting Officer
May 10, 1996
EXHIBIT 15.1
INDEPENDENT ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Diamond Shamrock, Inc. has included our report
dated May 10, 1996 (issued pursuant to the provisions of
Statement on Auditing Standards No. 71) in the Prospectuses
constituting part of its Registration Statements on Form S-3
(Nos. 33-67166 and 33-59451) filed on August 9, 1993, and May
19, 1995, respectively, and on Form S-8 (Nos. 33-15268, 33-34306,
33-47761, 33-50573, 33-59025 and 33-64645) filed on June 22,
1987, April 13, 1990, May 6, 1992, October 6, 1993, May 2, 1995
and November 30, 1995, respectively. We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
May 10, 1996
w3922.TW
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