SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1995 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 (Zip Code)
Executive Offices)
Registrant's Telephone Number, Including Area Code: (210) 641-6800
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Which
Registered
Common Stock, $.01 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 14, 1996 was approximately $908,280,319
Shares of Common Stock outstanding at March 14, 1996 -- 29,181,697
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to shareholders for the fiscal
year ended December 31, 1995, filed as Exhibits 13.1 and 13.2 hereto, are
incorporated by reference into Parts I and II hereof. Portions of the
registrant's definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders, to be filed with the Commission pursuant to Regulation 14A
no later than 120 days after the end of the fiscal year covered by this report,
are incorporated by reference into Part III hereof.
PART I
Item 1. Business.
Diamond Shamrock, Inc. (the "Company") is the leading
independent refiner and marketer of petroleum products in the
southwestern United States and the largest retail marketer of
gasoline in the state of Texas. The Company operates two
crude oil refineries located in Texas and is engaged in the
wholesale and retail marketing of refined petroleum products
in a nine state area. The Company sells gasoline and
merchandise through Company-operated retail outlets
concentrated in Texas, Colorado, New Mexico, Louisiana, and
Arizona, and distributes gasoline through independently owned
Diamond Shamrock branded outlets in Texas and nearby states.
The Company also stores and markets natural gas liquids,
manufactures and markets anhydrous ammonia and polymer-grade
propylene, and operates certain other related businesses.
The Company was incorporated in Delaware in February,
1987, and became a publicly owned corporation effective April
30, 1987.
A description of the general development and conduct of
the business of the Company is set forth below. Consolidated
financial information for the Company for the year ended
December 31, 1995 and for certain prior years, including
Management's Discussion and Analysis of Financial Condition
and Results of Operations, Consolidated Financial Statements,
and Selected Financial Data, is included in this report as
Exhibits 13.1 and 13.2, and all such information is
incorporated into this report by reference. Information
concerning outside sales and operating revenues and operating
profit for the Company and each of its business segments for
the three years ended December 31, 1995, together with
information concerning the identifiable assets of the various
business segments as of December 31, 1993, 1994, and 1995, is
set forth in Note 5 contained in Exhibit 13.2, which is
incorporated herein by reference.
Refining
The Company owns and operates two modern refineries
strategically located near its key markets. The McKee
Refinery, located near Amarillo, Texas, and the Three Rivers
Refinery, located near San Antonio, Texas, have an aggregate
refining capacity of approximately 215,000 barrels of crude
oil per day (140,000 barrels at the McKee Refinery and 75,000
barrels at the Three Rivers Refinery). The Company operated
its refineries at levels which averaged in excess of 95% of
capacity in 1995. Approximately 91% of the refinery outputs
are high-value products, including gasoline, diesel, jet
fuels, and liquefied petroleum gases. The refineries also
produce sulfur, sulfuric acid, ammonium thiosulfate, refinery
grade propylene, fuel oil, asphalt, and carbon black oil.
The completion of certain debottlenecking projects at the
McKee Refinery during 1993, 1994, and 1995 increased its crude
oil throughput capacity to approximately 140,000 barrels per
day. Other projects at the refinery in recent years permit it
to meet various federally mandated fuel specifications.
Preparations were completed at the McKee Refinery during 1994
for the production of reformulated gasoline ("RFG") for the
Dallas/Fort Worth market, and production of RFG commenced in
November 1994. RFG production was made more cost-effective in
mid-1995 when a new tertiary amyl methyl ether ("TAME") unit
was completed at the refinery. In addition to RFG
production, the McKee Refinery supplies oxygenated fuel during
the winter months to the El Paso, Denver, and Albuquerque
markets. Most of the oxygenated fuel manufactured at McKee,
other than RFG, contains oxygenates obtained from other
manufacturers. The McKee plant also manufactures low-sulfur
diesel meeting governmental specifications for on-road use,
with the aid of a desulfurization unit which was completed in
1993.
In 1995, the Company commenced work at the Three Rivers
Refinery on several expansion projects which will, when
completed, allow the refinery to be more flexible in selecting
its crude oil feedstock, upgrade its product slate, and expand
its throughput capacity to approximately 85,000 barrels of
crude oil per day. The projects include a demetalized oil
hydrotreater, a hydrogen plant, a sulphur recovery plant, and
expansion of the crude unit. The hydrogen plant was completed
in October 1995. The sulphur recovery plant and expansion of
the crude unit were completed in February 1996. The final
phase of the expansion, completion of the demetalized oil
hydrotreater, is scheduled for the third quarter of 1996.
The Three Rivers Refinery began processing natural gas
liquids (NGL) from local gas processing plants in early 1995.
A 50 mile pipeline and modifications to existing equipment
were completed in March 1996 to enable the Three Rivers plant
to produce and transport a purity ethane product to a
commercial ethylene plant for processing.
The Company has also commenced engineering work on a
benzene/toluene/xylene ("BTX") extraction and fractionation
unit at the Three Rivers Refinery, which will allow the
company to recover these valuable petrochemical feedstocks
from the refinery s gasoline pool. Completion of the BTX unit
is scheduled for the first half of 1997.
The Three Rivers Refinery continued throughout 1995 to
enjoy the benefits of a substantial plant expansion which was
completed in 1993. That expansion included construction of
a hydrocracker and modification of a continuous regeneration
reformer and crude distillation unit. Completion of these
projects enabled the refinery to increase gasoline production
capacity by approximately 50% and production capacity for
other distillates, including diesel, by approximately 25%. It
also enabled the refinery to meet federal diesel
desulphurization requirements.
The Company owns a natural gas processing facility
located at the McKee Refinery. Upon termination of a gas
processing agreement as of January 1993, the operation of the
facility was phased out. This facility has a throughput
capacity of more than 172 million cubic feet of natural gas
per day. The Company has no present plans to resume operation
of the gas processing plant.
Supply and Distribution
The flexibility to supply the Company's refineries from
a variety of sources is an essential part of being
competitive. The Company's network of crude oil pipelines
gives the Company the ability to acquire crude oil from
producing leases, major domestic oil trading centers, and Gulf
Coast ports, and to transport crude oil to the Company's
refineries at a competitive cost.
The McKee Refinery has access to crude oil from the Texas
Panhandle, Oklahoma, southwestern Kansas, and eastern Colorado
through approximately 1,200 miles of crude oil pipeline owned
or leased (in whole or in part) by the Company. This refinery
is also connected by common carrier pipelines to the major
crude oil centers of Cushing, Oklahoma and Midland, Texas.
The McKee Refinery also has access at Wichita Falls,
Texas through a 70,000 barrel per day pipeline to major
pipelines which transport crude oil from the Texas Gulf Coast
and major West Texas oil fields into the Mid-Continent region.
The Three Rivers Refinery has access to crude oil from
foreign sources delivered to the Texas Gulf Coast at Corpus
Christi, Texas, as well as crude oil from domestic sources. To
enhance its access to foreign crude oil, in 1995 the Company
completed a new crude oil terminal located at the Port of
Corpus Christi, which has a total storage capacity of 1.2
million barrels. The addition of a fourth 400,000 barrel tank
to the terminal in the first half of 1996 will permit the
Company to be more flexible in taking delivery of and in
blending crude oil feedstock for the Three Rivers Refinery,
thereby enabling it to take better advantage of the increased
refining complexity provided by the improvements that have
been recently completed or which are currently underway at the
Three Rivers Refinery. The addition of the new tank should
also reduce the Company's demurrage expense (the charge
assessed by a ship for the time it is delayed in port to
unload cargo) by allowing the Company to accept delivery of
larger crude oil cargos at the terminal, thereby decreasing
the number of such deliveries, and reduce transportation
expense by eliminating the need to terminal a portion of the
Company's crude oil receipts through facilities located near
Corpus Christi which are owned by other parties. The Corpus
Christi crude oil terminal is connected to the Three Rivers
Refinery by a 70 mile pipeline which has the capacity to
deliver 120,000 barrels of crude oil per day to the refinery.
The Three Rivers Refinery also has access to West Texas
Intermediate crude oil through common carrier pipelines and to
crude oil production in South Texas.
The Company acquires a major portion of its crude oil
requirements through the purchase of futures contracts on the
New York Mercantile Exchange. The Company also uses the
futures market to manage the price risk inherent in purchasing
the crude oil in advance of the delivery date, and in
maintaining the inventories contained within its refinery and
pipeline systems.
While the Company has no crude oil reserves and its
operations could be adversely affected by fluctuations in the
availability of crude oil and other supplies, the Company
believes that current domestic and foreign sources of crude
oil will be sufficient to meet the Company's requirements for
the foreseeable future.
The Company's refined products are distributed primarily
through the Company's approximately 2,959 miles of refined
products pipelines and its 16 terminals. The Company's
refined products terminal near Dallas, the Southlake Terminal,
also receives products from the Explorer Pipeline, a major
common carrier of refined products from the Houston area.
Over the last several years the Company has added
significantly to its product distribution system. This has
been accomplished in part by the construction of new product
pipelines to connect the Company's refineries to expanding
markets and in part by adding to or purchasing additional
capacity in existing product pipelines.
In November 1995, the Company commenced operation of a
newly constructed 409-mile, 10-inch pipeline from the McKee
Refinery to El Paso, Texas, along with a new terminal in El
Paso from which the Company will distribute product delivered
via the pipeline. The new pipeline has an initial capacity to
deliver 27,000 barrels per day of refined products, including
gasoline, diesel, jet fuels, and propane, and the new terminal
provides total associated storage capacity for approximately
500,000 barrels of product. It gives the Company the
capability of delivering refined products from the McKee
Refinery directly to the El Paso market, in which the Company
has established a significant market presence, and also to
deliver refined products to markets in Arizona through a
common carrier pipeline originating in El Paso.
Available capacity in the Amarillo-Tucumcari-Albuquerque
products pipeline, which carries products from the McKee
refinery, has been expanded both by purchase of one-half of
the interest of a pipeline partner, and by construction
projects that expanded the capacity of that line by an
additional 2,000 barrels per day, giving the line a total
product delivery capacity from the McKee Refinery of 12,600
barrels per day. In 1994, the Company completed construction
of a products pipeline from the McKee Refinery to the Colorado
Springs, Colorado area. The project included a 10-inch
pipeline to Colorado Springs, Colorado with an initial
capacity of 32,000 barrels per day, covering approximately
258 miles, which connects to a new terminal facility with a
total product storage capacity of 320,000 barrels. Subject to
obtaining regulatory approvals, the Company plans to construct
an extension of that pipeline to Denver.
In 1994, the Company connected its product pipeline
running from the McKee Refinery to the Southlake Terminal to
those of another gasoline refiner and marketer at Wichita
Falls, Texas and at Southlake, Texas. The connections enable
the Company to deliver an additional 2,500 barrels of gasoline
per day from the McKee Refinery to Wichita Falls as part of a
product exchange arrangement, and to deliver an additional
9,000 to 18,000 barrels of gasoline per day from the McKee
Refinery to the Southlake Terminal for sale at a specified
margin above the spot market price.
The Company expanded the Three Rivers Refinery product
distribution system in 1992 by constructing a refined products
terminal near Laredo, Texas. The project required
construction of a 100-mile refined products pipeline
connecting the terminal to the Three Rivers Refinery. The
terminal enables the Company to deliver approximately 15,000
barrels per day of refined products to southwest Texas and
adjacent market areas in Mexico.
The Company has historically entered into product
exchange and purchase agreements with unaffiliated companies.
Exchange agreements provide for the delivery to unaffiliated
companies of refined products at the Company's terminals in
exchange for delivery of a similar amount of refined products
to the Company by such unaffiliated companies at agreed
locations. Purchase agreements involve the purchase by the
Company of refined products from unaffiliated companies with
delivery occurring at agreed locations. Such arrangements
enable the Company to broaden its geographical distribution
capabilities and supply markets not connected to its refined
products pipeline system. Most of the Company's exchanges and
purchase arrangements are long-standing arrangements, but
generally can be terminated on 30 to 90 days notice. Products
are currently received on exchange or by purchase through 39
terminals and distribution points throughout the Company's
principal marketing areas.
Marketing
In December 1995, the Company successfully concluded a
public tender offer for the outstanding common stock and
warrants to purchase common stock of National Convenience
Stores Incorporated ("NCS"), and NCS subsequently became a
wholly owned subsidiary of the Company through merger. At the
end of 1995, NCS operated 661 specialty convenience stores,
over 90% of which sold gasoline, in four cities in the state
of Texas under the name Stop N Go. The Company is currently
engaged in the integration of the NCS stores with the rest of
the Company's retail operations. The Company currently plans
to sell Diamond Shamrock branded gasoline through the Stop N
Go outlets, but to otherwise retain and use the Stop N Go
brand in connection with those outlets.
The Company has a strong brand identification in much of
its nine-state marketing area. The volume of gasoline the
Company sells through its network of 1,506 Company-operated
retail outlets is equal to approximately 68% of the gasoline
the Company produces at its refineries. The volume of
gasoline the Company sells to independent branded and
unbranded jobbers, commercial, and end user accounts, and
other marketers exceeds the remainder of the Company's
gasoline production. To the extent the Company's requirements
exceed the production at its refineries, the balance is made
up through purchases of gasoline.
Total motor fuel outlets at the dates indicated below
were as follows:
<TABLE>
December 31,
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Company Owned and Operated 715 496 504
Company Leased and Operated 791 314 272
TOTAL COMPANY OPERATED 1,506 810 776
Jobber Operated 1,203 1,206 1,194
TOTAL MOTOR FUEL OUTLETS 2,709 2,016 1,970
</TABLE>
As of December 31, 1995, Company-operated retail outlets
were located in Texas (1,291), Colorado (128), New Mexico
(49), Louisiana (37), and Arizona ( 1 ). Most of the
Company's stores are modern, attractive, high-volume gasoline
outlets. In addition, these outlets sell a wide variety of
products such as groceries, health and beauty aids, fast
foods, and beverages.
The Company plans to open 16 new retail outlets during
1996, most of which will be located in Arizona.
The Company opened 30 new retail outlets in 1995. In
1995, the Company also purchased, in addition to 661 NCS
retail outlets, 21 retail outlets in New Mexico.
In 1994, the Company opened 17 new outlets, and purchased
an additional 26. In 1993, the Company opened nine new
outlets, and purchased an additional 19.
The Company has an ongoing program to modernize and
upgrade the retail outlets it operates. These efforts are
designed to improve appearances and create a uniform look
easily recognizable by customers. Exterior improvements
generally include the installation of new price signs,
lighting, and canopies over the gasoline pumping areas. The
program also includes the installation of computer-controlled
pumping equipment and the renovation of interiors.
The Company is continuing its program of closing and
selling retail outlets which have marginal profitability or
which are situated outside its principal marketing areas.
During 1995, the Company closed five such outlets. In
addition, the Company sold all 11 of the outlets it operated
in Amarillo, Texas to a retailer who agreed to become one of
Diamond Shamrock's branded jobbers, and who agreed to retain
the Diamond Shamrock brand on the outlets purchased as well as
place it on another 36 of the jobber's outlets selling
gasoline under other brands in that market.
As of December 31, 1995, 136 independent jobbers supplied
1,203 "Diamond Shamrock" branded retail outlets located in
eight states. The Company enjoys long-term relationships with
many of its jobbers. Representatives from 20 jobbers make up
a Jobber Council that meets on a regular basis with the
Company's management to communicate concerns, and to learn
about opportunities and developments in the Company's
marketing program.
During the past three years, the Company has made a
number of significant improvements to its jobber assistance
programs in an on-going effort to improve the quality of the
"Diamond Shamrock" brand image. Such programs provide
assistance or incentives to jobbers to upgrade existing
outlets or construct new outlets and to make environmental
improvements.
In July 1993, the Company formed a joint venture for the
purpose of franchising the Company's "Corner Store" branded
convenience stores in Mexico. The stores are operated in
conjunction with Mexican national oil company gasoline outlets
under the name "Corner Store", and are patterned after the
Company's retail outlets in the United States. Three new
stores were opened under the franchise arrangement during
1995, and two unprofitable locations were closed during the
year. A total of ten locations were operating under the
franchise arrangement at the end of 1995. The Company
anticipates that an additional three to five locations will be
opened under the arrangement during 1996.
The Company's competitive position is supported by its
own proprietary credit card program, which had approximately
600,000 active accounts at the end of 1995. The Company
currently utilizes electronic point-of-sales credit card
processing ("P.O.S.") at all of its Company and jobber
operated stores. P.O.S. reduces transaction time at the sales
counter and lowers the Company's credit card program costs by
reducing float, reducing charges paid by the Company to accept
other company's credit cards for purchases, eliminating
postage and insurance costs, and reducing bad debts. In
February 1994, the Company began installing pump island-mounted credit
card readers at high volume company operated retail locations, as part
of its "Pay the Pump" program. These units enable the customer to pay for
a gasoline purchase without leaving the gasoline pump. At the end of
1995, the Company had installed the units at over 160 of its
stores.
In June 1994, the Company completed installation of a
computer based, intelligent retail information system ("IRIS")
at Company-operated stores. IRIS incorporates an enhanced
P.O.S. system and will automate inventory control, pricing,
and sales tracking. IRIS interfaces with the Company's new
pump island-mounted credit card readers and the new continuous
underground storage tank monitoring system now being installed
by the Company. The Company is currently working to integrate
the newly acquired NCS stores into its electronic data
processing system, and expects that project to be complete by
the end of 1996.
The "Corner Store" concept for the retail outlets that
began in 1987 is intended to provide the customer with a
message of convenience and friendly customer service. The
Company also uses "Corner Store" to identify its newly
expanded merchandise line. Customers now find a greater
variety of merchandise and consistency of appearance from
outlet to outlet.
The Company actively uses radio, television, newspaper,
and billboard advertising to promote the Company and its
products. These promotional efforts are facilitated by the
concentration of a substantial portion of the Company's
outlets in the Texas metropolitan areas of Austin, Corpus
Christi, Dallas, El Paso, Fort Worth, Houston, and San
Antonio, and in Denver and Colorado Springs, Colorado. The
Company considers the "Diamond Shamrock" and the "Stop N Go"
brand names and logos to be of significant importance to its
business.
In addition to gasoline, the Company also markets an
average of 52,484 barrels per day of diesel fuel to branded
and non-branded customers, railroads, and large fleet
accounts. Asphalt produced at the McKee Refinery is sold
primarily to the roofing industry and for road construction.
The Company also sells an average of 18,705 barrels per day of
high quality jet fuel to commercial airlines and the United
States military.
Allied Businesses
In addition to its core refining and marketing
businesses, the Company is engaged in several related
businesses. The more significant of these businesses and new
ventures are described below.
The Company owns and operates large underground natural
gas liquids and petrochemical storage and distribution
facilities located on the Mont Belvieu salt dome, northeast of
Houston. The facility has total permitted storage capacity of
approximately 77 million barrels, and consists of 30 wells.
The facilities are used for storing and distributing ethane,
ethane/propane mix, ethylene, propane, natural gasoline,
butane, and isobutane, as well as refinery, chemical, and
polymer-grade propylene. The Mont Belvieu facilities receive
products from the McKee Refinery through the Skelly-Belvieu
pipeline (which the Company operates and in which it owns a
50% interest), as well as from local fractionators and through
major pipelines coming from the Mid-Continent region, West
Texas, and New Mexico. In 1995, an average of approximately
618,000 barrels per day of natural gas liquids and
petrochemicals moved through the facilities and were
distributed via an extensive network of pipeline connections
to various refineries and petrochemical complexes on the Texas
and Louisiana Gulf Coasts, earning various storage and
distribution fees for the Company.
The Company operates a propane/propylene splitter plant
located at the Company's Mont Belvieu hydrocarbon storage
facility. A subsidiary of American PetroFina, Inc. ("Fina")
has a one-third interest in the plant. The Company and Fina
each pay their proportionate share of the costs and receive in
kind their proportionate share of the products produced at the
plant.
The splitter is capable of producing 720 million pounds of
polymer-grade propylene per year. Polymer-grade propylene is
a feedstock used in the manufacture of plastics. The plant
utilizes refinery-grade propylene produced by both the
Company's refineries and other refiners for feedstock. The
Company's storage facilities at Mont Belvieu are used to store
both feedstock for the plant and polymer-grade propylene after
it is produced. The product is distributed by pipeline to
purchasers in the Houston ship channel area and to export
facilities. In 1995, the Company's share of production from
the splitter totaled over 500 million pounds of polymer-grade
propylene, and the Company was successful in marketing product
in excess of that amount. The Company and Fina have commenced
work on a project, scheduled to be completed in the third
quarter of 1996, which will add a second splitter and double
the productive capacity of the plant. The two companies will
maintain their existing ownership arrangement for the expanded
facilities, under which Diamond Shamrock is entitled to two
thirds of production.
A petrochemical export terminal located on the Houston
Ship Channel in which the Company has a joint venture interest
was completed and commenced operation in August 1992. The
terminal is connected by pipeline to the Company's
propane/propylene splitter plant and petrochemical storage
facilities at Mont Belvieu. The terminal provides the Company
with access to international petrochemical markets.
The Company has operated an ammonia production facility
located at the McKee Refinery since 1991. During 1995, the
plant produced approximately 431 tons per day of anhydrous
ammonia which is marketed by the Company as a fertilizer.
In September 1991, the Company and Sol Petroleo, S.A.
("Sol"), an Argentine company headquartered in Buenos Aires,
jointly acquired the oil and gas exploration and production
interests of Occidental Petroleum in the Republic of Bolivia.
In 1994, the Company purchased all of Sol's interest in the
Bolivian operations. The Bolivian operations are now owned
jointly by a wholly-owned subsidiary of the Company and
Phoebus Energy, Ltd., a Bermuda corporation in which the
Company owns a 50% interest. The operation includes a 100%
interest in the Chaco Block in southeastern Bolivia, which
has net daily sales of approximately 12 million cubic feet of
gas, a 100% interest in the Nupuco Block, which is also in
southern Bolivia, and a 50% interest in the Madre de Dios
Block in northern Bolivia. This operation is managed by a
staff located in Santa Cruz de la Sierra, Bolivia.
In August 1995, the Company announced that the joint
venture of which it is part owner had made a significant
natural gas discovery in the Nupuco Block. It is estimated
that the first completed well will be capable of producing up
to 20 million cubic feet per day of natural gas and 400
barrels per day of light condensate from five commercial
zones. The Company is entitled to 75% of the net revenue of
the joint venture, which it jointly operates with another
partner.
The Company is the indirect owner of approximately 34% of
the outstanding shares of Sol, whose shares are publicly
traded on the Argentine stock exchange. Sol currently markets
gasoline under the Sol brand through 48 retail gasoline
outlets and convenience stores in Argentina, eight of which
are operated by the company and 40 of which are operated by
jobbers.
The Company operates a wholly owned subsidiary, North
American InTeleCom, Inc. ("NAI"), which is engaged in the
telecommunications industry. NAI operates telephone systems
for use by inmates in correctional facilities, provides pay
telephone services, manages the pay telephone accounts of
several regional retailers, and provides prepaid calling card
services. At the end of 1995, NAI operated inmate telephone
systems in 60 correctional facilities serving some 40,000
inmates and owned or managed approximately 8,350 pay
telephones.
Competitive Considerations
The Company's two refineries and refined products
pipelines and terminals network are strategically located to
service its markets in the states in which the Diamond
Shamrock brand is strongly represented. The Company
consistently sells more refined products than its refineries
produce, purchasing its additional requirements in the spot
market. This strategy has enabled the Company to operate its
refineries at high rates while allowing for incremental
refinery capacity expansions to be quickly utilized upon
completion.
Quality products and a strong brand identification have
positioned the Company as the largest marketer of motor fuels
in the state of Texas, with a market share of approximately
15%. The Company also has a branded gasoline market share of
approximately 11% in the state of Colorado, approximately 13%
in the state of New Mexico, and a significant branded gasoline
market presence in Louisiana.
The retail markets have historically been highly
competitive. Competitors include a number of well capitalized
and fully-integrated major oil companies and both large and
small independent operators. Industry studies indicate that
over the last several years, the retail markets have been
characterized by several significant trends including (i)
increased store rationalization by retailers to fewer
geographic regions and (ii) increased consumer emphasis on
convenience.
During the past several years, the retail marketing
industry has experienced increasing concentration of market
outlets selling under the same brand in selected and fewer
geographic regions as major oil companies have divested non-
strategic locations and have focused efforts on targeted
areas, many of which are near strategic supply sources.
Additionally, smaller operators have closed marginal and
unprofitable locations as a result of increasing environmental
regulations requiring replacement of underground storage
tanks. Industry studies indicate that consumer buying
behavior continues to reflect the effect of increasing demands
on consumer time. Convenience and the time required to make
a purchase are increasingly important considerations in buying
decisions. The Company believes these two trends may result
in opportunities to increase market share in the Company's
core markets.
The Company's earnings and cash flow from operations are
primarily dependent upon processing crude oil and selling
quantities of refined products at refining and retail
marketing margins sufficient to cover fixed and variable
expenses. Crude oil and refined products are commodities.
Crude oil costs and refined product prices depend on numerous
factors beyond the Company's control, including the supply of
and demand for crude oil, gasoline and other refined products
which in turn depend on, among other factors, changes in
domestic and foreign economies, political affairs and
production levels, the availability of imports, the marketing
of competitive fuels, and the extent of government regulation.
The prices received by the Company for its refined products
are affected by regional factors, such as product pipeline
capacity, local market conditions, and the level of operations
of competing refineries. A large, rapid increase in crude oil
prices would adversely affect the Company's operating margins
if the increased cost of raw materials could not be passed on
to the Company's customers. In recent years, crude oil costs
and prices of refined products have fluctuated substantially.
The industry also tends to be seasonal in that refining
margins often increase in the second quarter and decrease at
the end of the third quarter of the year, reflecting increased
demand for gasoline and other refined products during the
summer driving season.
Regulatory Matters
Federal, state, and local laws and regulations
establishing various health and environmental quality
standards affect nearly all of the operations of the Company.
Included among such statutes are the Clean Air Act of 1955, as
amended ("CAA"), including substantial amendments adopted in
1990 (the "1990 Clean Air Act Amendments"), the Clean Water
Act of 1977, as amended ("CWA"), the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), and the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"). Also
significantly affecting the Company are the rules and
regulations issued pursuant to the Occupational Safety and
Health Act of 1970 ("OSHA").
The CAA requires the Company to meet certain air emission
standards and certain specifications for the products the
Company produces. The CWA requires the Company to obtain and
comply with the terms of water discharge permits. The RCRA
empowers the United States Environmental Protection Agency
("EPA") to regulate the treatment and disposal of industrial
and hazardous wastes and to regulate the use and operation of
underground storage tanks. CERCLA requires notification to
the National Response Center of releases of hazardous
materials and provides a program to remediate hazardous
releases at uncontrolled or abandoned hazardous waste sites.
The Superfund Amendments and Reauthorization Act of 1986
("SARA") is an extension of the CERCLA cleanup program. Title
III of SARA, the Emergency Planning and Community Right to
Know Act of 1986, relates to planning for hazardous material
emergencies and provides for a community's right to know about
the hazards of chemicals used or manufactured at industrial
facilities. OSHA requires the Company to furnish to each of
its employees a place of employment and working conditions
which are free from recognized hazards that are causing or are
likely to cause death or serious physical harm. OSHA rules
and regulations provide for a worker's right to know about the
hazards of chemicals used or produced at the Company's
facilities; for the management of hazards associated with the
processes using highly hazardous chemicals; and for the safe
clean-up of hazardous waste and response to uncontrolled
releases of hazardous substances.
Regulations issued by the EPA in 1988 with respect to
underground storage tanks require the Company, over a period
up to ten years, to install, where not already in place, spill
prevention manholes, tank overfill protection devices, leak
detection devices, and corrosion protection on all underground
tanks and piping at retail gasoline outlets. The regulations
also require periodic tightness testing of underground tanks
and piping. Commencing in 1998, operators will be required
under these regulations to install continuous monitoring
systems for underground tanks.
The Company seeks reimbursement from state underground
storage tank insurance funds, when available, for expenses
incurred in replacing older underground storage tanks and in
cleaning up related hydrocarbon contamination. In 1995, the
Company received over $2.6 million from such state insurance
funds in Texas and Louisiana for claims filed in previous
years. Continued receipt of such reimbursements remains
problematic, insofar as aggregate claims made on such
insurance funds in the states in which the Company operates
continue to exceed amounts available in those insurance funds
to pay such claims, and receipt of such reimbursements
therefore continues to lag behind the time of application by
substantial periods.
State and local regulations in parts of Texas, New
Mexico, Colorado, and Arizona require that only motor fuels
containing specified levels of oxygen may be marketed in
winter months. Such fuels are intended to reduce the amount
of carbon monoxide in automobile emissions. Beginning in
November 1992, the 1990 Clean Air Act Amendments required that
only oxygenated gasoline having a minimum oxygen content of
2.7% be marketed in these areas during the winter months. The
level of oxygen in motor fuels is normally raised by the
addition of methyl tertiary butyl ether ("MTBE"), ethanol, or
tertiary amyl methyl ether ("TAME"). The Company produces
TAME and MTBE at its McKee Refinery in sufficient amounts to
meet its requirements for production of reformulated gasoline
("RFG"), all of which is sold into the Dallas, Texas market.
The rest of the Company's oxygenate requirements are currently
being met by the purchase of oxygenates from other
manufacturers. If other areas currently not identified as
severe carbon monoxide or ozone nonattainment areas elect to
require the use of oxygenated gasoline or RFG, the Company may
be required to purchase additional blending components. To
the extent that the Company is unable to pass along such costs
by raising motor fuel prices, the Company's profitability will
be adversely affected.
The EPA has issued a series of regulations since 1989
under authority of the CAA requiring a reduction for the
summer months in the volatility of gasoline as measured by its
Reid Vapor Pressure ("RVP"), which measures the amount of
light hydrocarbons contained in gasoline, such as normal
butane, an octane booster. Such regulations require
reductions in RVP for gasolines produced at the McKee Refinery
for distribution in the Denver, Dallas-Fort Worth, and El
Paso markets.
The 1990 Clean Air Act Amendments impact the Company in
the following areas: (i) starting in 1995, RFG was mandated
for use in the nine worst ozone polluting cities, including
Houston, Texas; Dallas, Texas has opted into the program;
(ii) "Stage II" hose and nozzle controls on gas pumps to
capture fuel vapors in nonattainment areas, including
Beaumont, Dallas, El Paso, Fort Worth, and Houston, Texas; and
(iii) more stringent refinery and petrochemical permitting
requirements.
In addition, EPA regulations required that after October
1, 1993 the sulfur contained in on-highway diesel fuel
produced in the United States be reduced. Construction of a
desulfurization unit at the McKee Refinery and a hydrocracker
unit at the Three Rivers Refinery enabled the Company to
produce diesel fuel in compliance with such regulations.
It is expected that rules and regulations implementing
the 1990 Clean Air Act Amendments and other 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 or regulations will be enacted in the future or
how existing or future laws 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. Much of the capital spent by the
Company for environmental compliance is integrally related to
projects that increase refinery capacity or improve product
mix, and the Company does not specifically identify capital
expenditures related to such projects on the basis of
environmental as opposed to economic purpose. However, with
respect to capital expenditures budgeted primarily to produce
federally-mandated fuels to comply with regulations related to
air and water toxic emission levels, for remediation and
compliance costs related to underground storage tanks, and to
meet Stage II Vapor Recovery requirements, it is estimated
that approximately $11.4 million was spent in 1995, $11.6
million was spent in 1994, and $21.4 million was spent in
1993. For 1996 the Company has budgeted approximately $14.1
million in environmental capital expenditures, primarily for
the retail segment and the refining and wholesale segment.
The Company has in effect policies, practices, and
procedures in the areas of pollution control, product safety,
occupational health, the production, handling, storage, use,
and transportation of refined petroleum products, and the
storage, use, and disposal of hazardous materials to prevent
an unreasonable risk of material environmental or other
damage, and the material financial liability which could
result from such events. However, some risk of environmental
or other damage is inherent in the businesses of the Company,
as it is with other companies engaged in similar businesses.
Employees
The Company employs approximately 11,800 people, about
1,100 of which are part-time employees. Approximately 330
hourly paid workers at the McKee Refinery are affiliated with
the Oil, Chemical, and Atomic Workers International Union,
AFL-CIO, with which the Company has a contract extending to
April 1996. The Company considers its relationship with its
employees to be good and has not experienced any organized
work stoppage in over 30 years.
Certain Transactions
In connection with the divestiture of its ownership of
the Company in 1987 (the "Spin-Off"), Maxus Energy Corporation
("Maxus") and the Company entered into an agreement which,
among other things, provides that as between the Company and
Maxus, the Company will be responsible for liabilities and
other obligations relating principally to the Company's
business and Maxus will be responsible for all other
liabilities relating principally to Maxus' continuing and
former businesses, subject to certain cost-sharing
arrangements described below.
The agreement provides for the sharing by Maxus and the
Company of certain liabilities relating to businesses
discontinued or disposed of by Maxus prior to April 30, 1987.
In substance, the cost of such liabilities will be borne one-third
by the Company and two-thirds by Maxus until the
Company's aggregate reimbursement share equals $85.0 million,
and thereafter solely by Maxus. The Company has reflected the
entire undiscounted amount of its liability under the
Distribution Agreement in its financial statements (See Note
3 to the Consolidated Financial Statements contained in
Exhibit 13.1 to this report). Although some expenditures are
still subject to audit, the Company has reimbursed Maxus for
a total of $74.9 million as of December 31, 1995, including
$11.4 million paid during 1995.
Pursuant to the agreement, the Company will also
reimburse Maxus for one-third of all payments made by Maxus
after April 30, 1987 for providing certain medical and life
insurance benefits with respect to persons who retired on or
before the effective date of the Spin-Off. The actuarial cost
of these expected payments under the Distribution Agreement
has been recognized by the Company.
Item 2. Properties.
The principal plants and properties used by the Company
in its Refining and Wholesale segment are the McKee Refinery,
the Three Rivers Refinery, the Company's crude oil and refined
products pipelines, and its crude oil and products terminals.
For a description of the foregoing, see "Refining", and
"Supply and Distribution" in Item 1 above. The refineries
are owned by the Company in fee, as were the Company's 1,268
miles of crude oil pipelines and 2,959 miles of refined
products pipelines at the end of 1995. Forty-one miles of the
Company's crude oil pipelines and 1,246 miles of its refined
products pipelines were owned jointly with one or more other
companies. The Company's interests in such pipelines were
between 33% and 54%. The Company's 16 products terminals were
owned in fee at the end of 1995. Fifteen of the terminals
were 100% owned by the Company and one terminal was owned 60%
by the Company. The Company leases the property on which its
Corpus Christi crude oil terminal is situated, under a lease
which has a 20 year primary term followed by six consecutive
five year renewal options.
The principal properties used in the Company's Retail
segment at the end of 1995 were 1,506 Company-operated retail
outlets, 715 of which are owned in fee and 791 of which are
leased. Of the leased outlets, 202 were leased to the Company
pursuant to a lease facility entered into in 1992. This lease
facility was expanded by $25 million in April 1993, and by an
additional $25 million in April 1994. The facility has an
initial five year term which expires in 1999. After the
initial five year term the Company may purchase the properties
or renew the lease with the lessor's consent for an additional
five year term or arrange for a sale of the outlets. For a
description of the Company-operated retail outlets, see
"Marketing" in Item 1 above.
The principal plants and properties used in the Company's
Allied Businesses segment are the hydrocarbon storage facility
at Mont Belvieu, which the Company owns, and the jointly-owned
propane/propylene splitter at Mont Belvieu. See "Allied
Businesses" in Item 1 above.
Item 3. Legal Proceedings.
Routine Matters.
The Company is a party to a number of lawsuits which are
ordinary routine litigation incidental to the Company's
businesses, the outcomes of which are not expected to have a
material adverse effect on the Company's operations or
financial position. In addition, the Company is engaged in a
number of hydrocarbon remediation projects, mostly relating to
retail gasoline outlets. While such cleanup projects are
typically conducted under the supervision of a governmental
authority, they do not involve proceedings seeking material
monetary damages from the Company and are not expected to be
material to the Company's operations or financial position.
Three Rivers Refinery.
In October and November, 1994, the Texas Natural Resource
Conservation Commission ("TNRCC") conducted an inspection of
the Company's Three Rivers Refinery. As a result of that
inspection, the Company received a Notice of Violation from
the TNRCC dated December 16, 1994. In 1995, the Company and
the TNRCC negotiated an agreement pertaining to the notice of
violation containing certain enforcement orders as well as a
fine of $74,160 with $22,248 deferred. The Company expects
the agreed order to be effective by the end of the first
quarter of 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The principal United States market on which the Common
Stock of the Company is traded is the New York Stock Exchange.
The high and low sales prices for the Common Stock of the
Company for each full quarterly period during 1994 and 1995 as
reported on the New York Stock Exchange Composite Tape,
together with the amount of cash dividends paid per share of
the Common Stock by calendar quarter, are contained in Exhibit
13.2 to this report, which information is incorporated herein
by reference.
The approximate number of record holders of the Common
Stock at March 14, 1996 was 12,899.
Item 6. Selected Financial Data.
The information required by this item appears in Exhibit
13.2 to this report, which information is incorporated herein
by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The information required by this item appears in Exhibit
13.1 to this report, which information is incorporated herein
by reference.
Item 8. Financial Statements and Supplementary Data.
The information required by this item appears in Exhibit
13.2 to this report, which information is incorporated herein
by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Inapplicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item with respect to the
identity and business experience of the directors of the
Company appears under the heading "Election of Directors" in
the Company's definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation
14A (the "Proxy Statement"), which information is incorporated
herein by reference.
The following information concerning the executive
officers of the Company is as of March 1, 1996.
Roger R. Hemminghaus, 59, is Chairman of the Board, President,
and Chief Executive Officer of the Company, and has served as
the Chief Executive Officer of the Company since April 1987.
Robert C. Becker, 54, has served as Vice President and
Treasurer of the Company since April 1987.
W. Paul Eisman, 40, is Vice President and Group Executive-
Manufacturing of the Company. During the five years prior to
his promotion to that position in 1995, he served in various
positions with the Company, including Director-Crude Oil
Supply, Assistant to the Chairman, and Plant Manager of the
McKee Refinery.
Timothy J. Fretthold, 46, is Senior Vice President/Group
Executive and General Counsel of the Company. He served as a
Group Vice President, and General Counsel of the Company from
April 1987 to June 1989, and as Senior Vice President/Group
Executive and General Counsel since that date.
Gary E. Johnson, 60, has served as Vice President and
Controller of the Company since April 1987.
William R. Klesse, 49, is Executive Vice President of the
Company. He served as Group Vice President - Development and
New Ventures of the Company from May 1988 to June 1989 and as
Senior Vice President/Group Executive from that date until
February 1995 when he became Executive Vice President. Mr.
Klesse served as Group Vice President - Planning and Public
Affairs of the Company from April 1987 through May 1988.
J. Robert Mehall, 53, is Executive Vice President of the
Company. He served as Group Vice President - Supply of the
Company from April 1987 to June 1989 and as Senior Vice
President/Group Executive from that date until February 1995
when he became Executive Vice President.
A. W. O'Donnell, 63, is President/Marketing and Senior Vice
President. He served as Group Vice President - Marketing of
the Company from April 1987 to June 1989 and as Senior Vice
President/Group Executive from that date until February 1995
when he became President/Marketing.
Officers are elected annually by the Board of Directors
and may be removed at any time by the Board. There are no
family relationships among the executive officers listed or
the directors of the Company, and there are no arrangements or
understandings pursuant to which any of the officers or
directors were elected as such.
Information concerning compliance by the directors and
executive officers of the Company with Section 16(a) of the
Securities Exchange Act of 1934 appears under the heading
"Compliance with Section 16(a) of the Securities Exchange Act
of 1934" in the Company's definitive Proxy Statement for the
1996 Annual Meeting of Stockholders to be filed with the
Commission pursuant to Regulation 14A, which information is
incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this item appears under the
heading "Compensation of Executive Officers" in the Proxy
Statement, which information is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this item appears under the
heading "Beneficial Ownership of Securities" in the Proxy
Statement, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
The information required by this item with respect to
directors appears under the heading "The Board of Directors
and Its Committees - Certain Business Relationships" in the
Proxy Statement, which information is incorporated herein by
reference.
The information required by this item with respect to
executive officers appears under the heading "Employee Stock
Purchase Loan Program" in the Proxy Statement, which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements
The following financial statements are attached
hereto as Exhibit 13.2, and are incorporated herein
by reference:
Consolidated Statement of Operations for the
three years ended December 31, 1995
Consolidated Balance Sheet - December 31, 1995
and 1994
Consolidated Statement of Cash Flows for the
three years ended December 31, 1995
Notes to Consolidated Financial Statements
Supplementary Financial Information
The Report of Independent Accountants relating to
such financial statements is attached hereto as
Exhibit 13.3, and is incorporated herein by
reference.
Condensed parent company financial information has
been omitted, since the amount of restricted net
assets of consolidated subsidiaries does not exceed
25% of total consolidated net assets. Also,
footnote disclosure regarding restrictions on the
ability of both consolidated and unconsolidated
subsidiaries to transfer funds to the parent company
has been omitted since the amount of such
restrictions does not exceed 25% of total
consolidated net assets.
(2) Financial Statement Schedules.
The following report of independent accountants
and financial statement schedules are also a
part of this report:
Report of Independent Accountants on
Financial Statement Schedules
Schedule V - Consolidated Properties and
Equipment
Schedule VI - Consolidated Accumulated
Depreciation
All other schedules have been omitted because they
are not applicable or the required information is
shown in the Financial Statements or the Notes to
Consolidated Financial Statements.
(3) Exhibits.
Exhibit Filing
No. Reference Description of Document
3.1 * Certificate of Incorporation of the
Company (Exhibit 3.1 to the Company's Form
10 Registration Statement No. 1-9409 (the
"Form 10")).
3.2 * Form of Certificates of Designations of
Series A Junior Participating Preferred
Stock (Exhibit 3 to the Company's Form 8-A
Registration Statement dated March 6,
1990, filed under Commission File No. 1-9409
(the "Form 8-A for Preferred Stock Purchase Rights")).
3.3 * Form of Certificate of Designations
establishing 5% Cumulative Convertible
Preferred Stock (filed as Exhibit 4.7 to
the Company's Form S-3 Registration
Statement dated August 6, 1993, under
Commission File No. 33-67166, and
incorporated herein by reference).
3.4 * By-Laws of the Company (Exhibit 3.2 to the
Form 10).
4.1 * Certificate of Incorporation of the
Company (Exhibit 3.1 to the Form 10).
4.2 * By-Laws of the Company (Exhibit 3.2 to the
Form 10).
4.3 * Form of Common Stock Certificate (Exhibit
4.3 to the Form 10).
4.4 * Form of Indenture between the Company and
The First National Bank of Chicago
(Exhibit 4.1 to the Company's Form S-1
Registration Statement No. 33-32024 (the
"Form S-1 for Medium-Term Notes")).
4.5 * Form of Right Certificate (Exhibit 1 to
the Form 8-A for Preferred Stock Purchase
Rights).
4.6 * Rights Agreement between the Company and
Ameritrust Company National Association
(Exhibit 2 to the Form 8-A for Preferred
Stock Purchase Rights).
4.7 * Form of 9-3/8% Note Due March 1, 2001
(Exhibit 4.1 to Form 8-K dated February
20, 1991, filed with the Commission on
February 22, 1991).
4.8 * Forms of Medium-Term Notes, Series A
(Exhibit 4.2 to the Company's Form S-3
Registration Statement No. 33-588744).
4.9 * Form of 8% Debenture due April 1, 2023
(Exhibit 4.1 to Form 8-K dated March 22,
1993, filed with the Commission on March
25, 1993).
4.10 * 401(k) Retirement Savings Plan creating
certain "participation interests" (Exhibit
4.1 to Form S-8 Registration Statement
dated October 6, 1993, filed under
Commission File No. 33-50573).
4.11 * Form of Certificate of Designations
establishing 5% Cumulative Convertible
Preferred Stock (filed as Exhibit 4.7 to
the Company's Form S-3 Registration
Statement dated August 6, 1993, under
Commission File No. 33-67166, and
incorporated herein by reference).
4.12 * Form of 5% Cumulative Convertible
Preferred Stock Certificate (Exhibit 4.12
to the Company's Form 10-K for the fiscal
year ended December 31, 1993 (the "1993
10-K").
4.13 * Form of Medium Term Notes, Series B
(Exhibit 99.1 to the Company's Report on
Form 10-Q for the quarter ended June 30,
1995).
10.1 * Distribution Agreement between the Company
and Maxus (Exhibit 10.1 to the Form 10).
10.2 * Tax-Sharing Agreement between the Company
and Maxus (Exhibit 10.2 to the Form 10).
10.3 * Credit Agreement I, dated as of April 14,
1987, as amended and restated through
April 15, 1993, between the Company and
certain banks (Exhibit 10.1 to the
Company's report on Form 10-Q for the
quarter ended June 30, 1993.)
10.4 * Credit Agreement II, dated as of April 14,
1987, as amended and restated through
April 15, 1993, between the Company and
certain banks (Exhibit 10.2 to the
Company's report on Form 10-Q for the
quarter ended June 30, 1993).
10.5 * Senior Subordinated Note Purchase
Agreement, dated as of April 17, 1987,
between the Company and certain purchasers
(the "Senior Subordinated Note Agreement")
(Exhibit 10.22 to the Form 10).
10.6 * Amendment No. 1 to the Senior Subordinated
Note Agreement, dated as of March 31, 1988
(Exhibit 19.5 to the Company's report on
Form 10-Q for the quarter ended March 31,
1988).
10.7 * Amendment No. 2 to the Senior Subordinated
Note Agreement, dated as of July 12, 1989,
between the Company and certain
purchasers. (Exhibit 19.2 to the
Company's report on Form 10-Q for the
quarter ended June 30, 1989 (the "June 30,
1989 10-Q")).
10.8 * Amendment No. 3 to the Senior Subordinated
Note Agreement, dated as of December 6,
1993, between the Company and certain
purchasers (Exhibit 10.8 to the 1993 10-K).
10.9 # 9% Senior Note Purchase Agreement, dated
as of June 4, 1987, between the Company
and Prudential Insurance Company of
America (the "9% Senior Note Agreement").
10.10 # Amendment No. 1 to the 9% Senior Note
Agreement, dated as of July 12, 1989.
10.11 # Amendment No. 2 to the 9% Senior Note
Agreement, dated as of December 6, 1993.
10.12 # 8.35% Senior Note Purchase Agreement,
dated as of December 1, 1988, between the
Company and Prudential Insurance Company
of America (the "8.35% Senior Note
Agreement").
10.13 # Amendment No. 1 to the 8.35% Senior Note
Agreement, dated as of July 12, 1989.
10.14 # Amendment No. 2 to the 8.35% Senior Note
Agreement, dated as of December 6, 1993.
10.15 # 8.77% Senior Note Agreement, dated as of
April 20, 1989, between the Company and
Prudential Insurance Company of America
(the "8.77% Senior Note Agreement").
10.16 # Amendment No. 1 to the 8.77% Senior Note
Agreement, dated as of July 12, 1989.
10.17 # Amendment No. 2 to the 8.77% Senior Note
Agreement, dated as of December 6, 1993.
10.18 * X Form of Indemnification Agreement between
the Company and its directors and
executive officers (Exhibit 19.6 to the
Company's report on Form 10-Q for the
quarter ended June 30, 1987 (the "June 30,
1987 10-Q")).
10.19 * X Amended form of Employment Agreement
between the Company and certain of its
executive officers (Exhibit 19.2 to the
Company's report on Form 10-Q for the
quarter ended March 31, 1989).
10.20 * X Deferred Compensation Plan for executives
and directors of the Company, amended and
restated as of January 1, 1989 (Exhibit
10.13 to the Company's report on Form 10-K
for the year ended December 31, 1988 (the "1988
Form 10-K")).
10.21 * X Supplemental Executive Retirement Plan of
the Company (the "SERP") (Exhibit 10.16 to
the Form 10).
10.22 * X First Amendment to the SERP (Exhibit 10.17
to the Form S-1 for Preferred Stock).
10.23 * X Second Amendment to the SERP (Exhibit
10.21 to the 1989 Form 10-K).
10.24 * X Performance Incentive Plan of the Company
(Exhibit 10.19 to the Form 10).
10.25 * X Excess Benefits Plan of the Company
(Exhibit 19.5 to the June 30, 1987 Form
10-Q).
10.26 * X 1987 Long-Term Incentive Plan of the
Company (Annex A-1 to the Company's Form
S-8 Registration Statement No. 33-15268).
10.27 * X Amended Form of Non-Incentive Stock Option
Agreement with Stock Appreciation Rights
between the Company and certain officers
(Exhibit 19.5 to the June 30, 1989 Form
10-Q).
10.28 * X Amended Form of Restricted Stock Agreement
between the Company and certain officers
(Exhibit 19.6 to the June 30, 1989 Form
10-Q).
10.29 * X Form of Disability Benefit Agreement
between the Company and certain of its
executive officers (Exhibit 10.21 to the
Form S-1 for Preferred Stock).
10.30 * X Form of Split Dollar Insurance Agreement
between the Company and certain of its
executive officers (Exhibit 10.20 to the
1988 Form 10-K).
10.31 * X Form of Supplemental Death Benefit
Agreement between the Company and certain
of its executive officers (Exhibit 19.9 to
the June 30, 1987 Form 10-Q).
10.32 * X Form of Employee Stock Purchase Loan
Agreement between the Company and certain
of its executive officers and employees
(Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1987).
10.33 * X Amendment dated March 5, 1990 to the
Employee Stock Purchase Loan Agreement
(Exhibit 10.31 to the 1989 Form 10-K).
10.34 * X Retirement Plan for Non-Employee Directors
of the Company dated as of May 2, 1989
(Exhibit 19.7 to the June 30, 1989 Form
10-Q).
10.35 * X Diamond Shamrock, Inc. Long-Term Incentive
Plan (Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-34306 filed on
April 13, 1990).
10.36 * X Form of Executive Officer's Restricted
Stock Agreement between the Company and
certain officers pursuant to the Diamond
Shamrock, Inc. Long-Term Incentive Plan.
(Exhibit 19.3 to the Company's report on
Form 10-Q for the quarter ended June 30,
1990 (the "June 30, 1990 Form 10-Q")).
10.37 * X Form of Non-Incentive Stock Option
Agreement with Stock Appreciation Rights
between the Company and certain officers
pursuant to the Diamond Shamrock, Inc.
Long-Term Incentive Plan. (Exhibit 19.4
to the June 30, 1990 Form 10-Q).
10.38 * X Form of Executive Officer's Performance
Restricted Stock Agreement between the
Company and certain officers pursuant to
the Diamond Shamrock, Inc. Long-Term
Incentive Plan. (Exhibit 19.5 to the June
30, 1990 Form 10-Q).
10.39 * X Form of Non-Incentive Stock Option
Agreement between the Company and certain
officers pursuant to the Diamond Shamrock,
Inc. Long-Term Incentive Plan (Exhibit
19.2 to the Company's report on Form 10-Q
for the quarter ended September 30, 1991
(the "September 30, 1991 Form 10-Q").
10.40 * X Form of Non-Incentive Stock Option
Agreement With Reload between the Company
and certain officers pursuant to the
Diamond Shamrock, Inc. Long-Term Incentive
Plan (Exhibit 19.3 to the Company's report
on Form 10-Q for the quarter ended
September 30, 1991 (the "September 30,
1991 Form 10-Q").
10.41 * X Form of Amendment to the Non-Incentive
Stock Option Agreement with Stock
Appreciation Rights and the Non-Incentive
Stock Option Agreement with Reload, each
between the Company and certain officers
pursuant to the Diamond Shamrock, Inc.
Long-Term Incentive Plans (Exhibit 19.1
to the Company's report on Form 10-Q for
the quarter ended March 31, 1992 (the
"March 31, 1992 Form 10-Q").
10.42 * X Form of Amendment to the Non-Incentive
Stock Option Agreement between the Company
and certain officers pursuant to the
Diamond Shamrock, Inc. Long-Term Incentive
Plan (Exhibit 19.2 to the March 31, 1992
Form 10-Q).
10.43 * X Diamond Shamrock, Inc. Long-Term Incentive
Plan, amended and restated as of May 5,
1992 (Exhibit 19.1 to the Company's
report on Form 10-Q for the quarter ended
June 30, 1992 (the "June 30, 1992 Form 10-Q").
10.44 * X Form of Employee Stock Purchase Loan
Agreement between the Company and certain
of its executive officers and employees,
amended and restated as of May 26, 1992
(Exhibit 19.2 to the June 30, 1992 Form
10-Q).
10.45 * Ground Lease Agreement between Brazos
River Leasing, L.P. and DSRMC, dated as of
April 23, 1993 (Exhibit 19.3 to the June
30, 1992 Form 10-Q).
10.46 * First Amendment to Ground Lease Agreement
between Brazos River Leasing, L.P. and
Diamond Shamrock Refining and Marketing
Company, dated as of August 1, 1992
(Exhibit 10.2 to the Company's report on
Form 10-Q for the quarter ended, September
30, 1993)
10.47 * Facilities Lease Agreement between Brazos
River Leasing L.P. and DSRMC, dated as of
April 23, 1992 (Exhibit 19.4 to the June
30, 1992 Form 10-Q).
10.48 * First Amendment to Facilities Lease
Agreement between Brazos River Leasing,
L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of August 1,
1992. (Exhibit 10.3 to the Company's
report on Form 10-Q for the quarter ended
September 30, 1993 (the "September 30,
1993 10-Q").
10.49 * Schedule Relating to Certain Lease
Agreements (Exhibit 10.4 to the September
30, 1993 10-Q).
10.50 * X Form of Excess Benefits Plan between the
Company and certain officers, amended and
restated as of December 1, 1992 (Exhibit
10.49 to the Company's report on Form 10-K
for the year ended December 31, 1992 (the
"1992 10-K")).
10.51 * X Form of Disability Benefit Agreement
between the Company and certain officers,
amended and restated as of January 1, 1993
(Exhibit 10.50 to the 1992 10-K).
10.52 * X Form of Deferred Compensation Plan between
the Company and certain directors,
officers and other employees of the
Company, amended and restated as of
January 1, 1993 (Exhibit 10.51 to the 1992
10-K).
10.53 * Second Amendment to Agreement for Ground
Lease between Brazos River Leasing L.P.
and Diamond Shamrock Refining and
Marketing Company, dated as of April 23,
1994 (Exhibit 10.1 to the Company's report
on Form 10-Q for the quarter ended June
30, 1994 (the "June 30, 1994 10-Q")).
10.54 * Second Amendment to Ground Lease Agreement
between Brazos River Leasing L.P. and
Diamond Shamrock Refining and Marketing
Company, dated as of April 23, 1994.
(Exhibit 10.2 to the June 30, 1994 10-Q)
10.55 * Second Amendment to Agreement for
Facilities Lease between Brazos River
Leasing L.P. and Diamond Shamrock Refining
and Marketing Company, dated as of April
23, 1994. (Exhibit 10.3 to the June 30,
1994 10-Q).
10.56 * Second Amendment to Facilities Lease
Agreement between Brazos River Leasing
L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of April 23,
1994 (Exhibit 10.4 to the June 30, 1994
10-Q).
10.57 * First Amendment to Agreement for Ground
Lease between Brazos River Leasing L.P.
and Diamond Shamrock Refining and
Marketing Company, dated as of June 1,
1994 (Exhibit 10.1 to the Company's report
on Form 10-Q for the quarter ended
September 30, 1994 (the "September 30,
1994 10-Q")).
10.58 * First Amendment to Ground Lease Agreement
between Brazos River Leasing L.P. and
Diamond Shamrock Refining and Marketing
Company, dated as of June 1, 1994.
(Exhibit 10.2 to the September 30, 1994
10-Q).
10.59 * First Amendment to Agreement for
Facilities Lease between Brazos River
Leasing L.P. and Diamond Shamrock Refining
and Marketing Company, dated as of June 1,
1994 (Exhibit 10.3 to the September 30,
1994 10-Q).
10.60 * First Amendment to Facilities Lease
Agreement between Brazos River Leasing
L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of June 1,
1994 (Exhibit 10.4 to the September 30,
1994 10-Q").
10.61 * Third Amendment to Agreement for Ground
Lease between Brazos River Leasing L.P.
and Diamond Shamrock Refining and
Marketing Company, dated as of September
16, 1994 (Exhibit 10.5 to the September
30, 1994 10-Q).
10.62 * Third Amendment to Ground Lease Agreement
between Brazos River Leasing L.P. and
Diamond Shamrock Refining and Marketing
Company, dated as of September 16, 1994.
(Exhibit 10.6 to the September 30, 1994
10-Q).
10.63 * Third Amendment to Agreement for
Facilities Lease between Brazos River
Leasing L.P. and Diamond Shamrock Refining
and Marketing Company, dated as of
September 16, 1994. (Exhibit 10.7 to the
September 30, 1994 10-Q).
10.64 * Third Amendment to Facilities Lease
Agreement between Brazos River Leasing
L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of September
16, 1994. (Exhibit 10.8 to the
September 30, 1994 10-Q).
10.65 . First Amendment dated as of March 31, 1995
to Credit Agreement I dated as of April
14, 1987, as amended and restated through
April 15, 1993.
10.66 . Second Amendment dated as of December 5,
1995 to Credit Agreement I dated as of
April 14, 1987, as amended and restated
through April 15, 1993, as further amended
by the First Amendment thereto dated as of
March 31, 1995.
10.67 . First Amendment dated as of March 31, 1995
to Credit Agreement II dated as of April
14, 1987, as amended and restated through
April 15, 1993.
10.68 . Second Amendment dated as of December 5,
1995 to Credit Agreement II dated as of
April 14, 1987, as amended and restated
through April 15, 1993, as further amended
by the First Amendment thereto dated as of
March 31, 1995.
10.69 * Agreement and Plan of Merger, dated
November 8, 1995 by and among Diamond
Shamrock, Inc., Shamrock Acquisition
Corp., and National Convenience Stores
Incorporated. (Exhibit (c)(1) to the
Company's Schedule 14D-1 Tender Offer
Statement, filed with the Securities and
Exchange Commission on November 14, 1995).
10.70 * Credit Agreement dated December 11, 1995
among the Company, Bank of America
National Trust and Savings Association, as
Agent, Chemical Bank, Royal Bank of
Canada, and Societe Generale, as Co-Agents,
and the banks named therein (Exhibit 4.1 to
the Company's report on Form 8-K dated December
14, 1995).
10.71 *X Diamond Shamrock, Inc. Long-Term Incentive
Plan, amended and restated as of May 2,
1995 (Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-59025).
10.72 *X Diamond Shamrock, Inc. Nonqualified 401(k)
Plan (Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-64645).
13.1 . Management's Discussion and Analysis of
Financial Condition and Results of
Operation from the Company's Annual Report
to Shareholders for the year ended
December 31, 1995.
13.2 . Consolidated Financial Statements and
Selected Financial Data from the Company's
Annual Report to Shareholders for the year
ended December 31, 1995.
13.3 . Report of Independent Accountants from the
Company's Annual Report to Shareholders
for the year ended December 31, 1995.
21.1 . Significant Subsidiaries of the Company.
23.1 . Consent of Price Waterhouse LLP.
24.1 . Power of Attorney of the Company
24.2 . Powers of Attorney of directors and
officers of the Company.
27.1 . Financial Data Schedule
____________________________
* Each document marked with an asterisk is incorporated herein by reference
to the designated document previously filed with the Securities Exchange
Commission.
# The Company hereby agrees pursuant to Item 601(b)(4)(III)(A) of Regulation
S-K to furnish a copy of this agreement to the Securities and Exchange
Commisson upon request.
. Indicates a document filed with this report.
X Indicates the document which constitutes an executive contract or
compensation plan or arrangement.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed by the
Company during the fourth quarter of 1995:
Current Report on Form 8-K dated December 14, 1995,
filed on December 28, 1995, and amended by Form 8-K/
A filed February 14, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIAMOND SHAMROCK, INC.
By: /s/ TODD WALKER
Todd Walker
Attorney-in-Fact
March 21, 1996
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following
persons on behalf of the registrant, and in the capacities,
and on the dates indicated.
Signature Title
/s/ R. R. HEMMINGHAUS*
R. R. Hemminghaus Chairman of the Board and
President
(Principal Executive
Officer)
/s/ ROBERT C. BECKER*
Robert C. Becker Vice President and Treasurer
(Principal Financial
Officer)
/s/ GARY E. JOHNSON*
Gary E. Johnson Vice President and
Controller
Principal Accounting
Officer)
/s/ B. CHARLES AMES*
B. Charles Ames Director
/s/ E. GLENN BIGGS*
E. Glenn Biggs Director
/s/ WILLIAM E. BRADFORD* Director
William E. Bradford
/s/ LAURO F. CAVAZOS*
Lauro F. Cavazos Director
/s/ W. H. CLARK*
W. H. Clark Director
/s/ WILLIAM L. FISHER*
William L. Fisher Director
/s/ BOB MARBUT*
Bob Marbut Director
/s/ KATHERINE D. ORTEGA*
Katherine D. Ortega Director
* The undersigned, by signing his name hereto, does hereby
sign this report on Form 10-K pursuant to the Powers of
Attorney executed on behalf of the above-named officers
and directors of the registrant, and contemporaneously
filed herewith with the Securities and Exchange
Commission
/s/ TODD WALKER
Todd Walker
Attorney-in-Fact
March 21, 1996
W4004.TW
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Diamond Shamrock, Inc.
Our audits of the consolidated financial statements referred
to in our report dated February 23, 1996, which includes an
explanatory paragraph with respect to the Company's change in
its method of accounting for its long-term shared cost
liability, which is included as Exhibit 13.3 to this Annual
Report on Form 10-K also included an audit of the Financial
Statement Schedules listed in Item 14(a)(2) hereof. In our
opinion, these Financial Statement Schedules present fairly,
in all material respects, the information set forth therein
when read in conjunction with the related consolidated
financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
February 23, 1996
<PAGE>
SCHEDULE V
DIAMOND SHAMROCK, INC.
CONSOLIDATED PROPERTIES AND EQUIPMENT
Three Years Ended December 31, 1995
(dollars in millions)
<TABLE>
<CAPTION> Refining & Retail Allied
Wholesale Marketing Businesses Other Total
<S> <C> <C> <C> <C> <C>
Balance January 1, 1993 $ 838.9 $ 306.7 $ 212.6 $ 33.6 $1,391.8
Additions, at cost 100.1 26.5 4.4 0.8 131.8
Disposals and transfers 10.1 (6.7) (34.5)(1) (0.5) (31.6)
Balance December 31, 1993 949.1 326.5 182.5 33.9 1,492.0
Additions, at cost 89.3 49.3 22.3 1.2 162.1
Disposals and transfers (14.0) (6.3) 2.0 (0.4) (18.7)
Balance December 31, 1994 1,024.4 369.5 206.8 34.7 1,635.4
Additions, at cost 193.0 202.3 21.2 1.5 418.0
Disposals and transfers 21.1 (9.3) (24.6) 0.7 (12.1)
Balance December 31, 1995 $1,238.5 $ 562.5 $ 203.4 $ 36.9 $2,041.3
</TABLE>
(1) During 1993, the Company exchanged an undivided interest in certain
properties and equipment for an equity ownership interest in a limited
liability company. This transaction increased investments by $19.2
million, decreased properties and equipment by $22.0 million and decreased
accumulated depreciation by $2.8 million in the Allied Businesses segment.
<PAGE>
SCHEDULE VI
DIAMOND SHAMROCK, INC.
CONSOLIDATED ACCUMULATED DEPRECIATION
Three Years Ended December 31, 1995
(dollars in millions)
<TABLE>
<CAPTION> Refining & Retail Allied
Wholesale Marketing Businesses Other Total
<S> <C> <C> <C> <C> <C>
Balance January 1, 1993 $ 331.1 $ 85.3 $ 66.3 $ 11.5 $494.2
Additions charged against
income 35.1 14.6 11.7 2.9 64.3
Disposals and transfers 0.7 (3.3) (3.5)* (1.5) (7.6)
Balance December 31, 1993 366.9 96.6 74.5 12.9 550.9
Additions charged against
income 38.3 16.3 13.1 3.2 70.9
Disposals and transfers (8.4) (4.2) 0.3 (0.2) (12.5)
Balance December 31, 1994 396.8 108.7 87.9 15.9 609.3
Additions charged against
income 43.5 20.5 11.4 2.3 77.7
Disposals and transfers 19.8 (3.7) (18.9) 0.0 (2.8)
Balance December 31, 1995 $ 460.1 $ 125.5 $ 80.4 $ 18.2 $ 684.2
</TABLE>
* See footnote (1) to the preceding Schedule V "Consolidated Properties And
Equipment."
The provisions for depreciation were computed principally in accordance
with the following methods and range of rates:
<TABLE>
<CAPTION> Method Rate
<S> <C> <C>
Buildings and land improvements Straight line 3% to 5%
Machinery and equipment Straight line 5% to 20%
Furniture and fixtures Straight line 10% to 20%
Automotive equipment Straight line 14% to 33%
Leasehold improvements Straight line Lease terms
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
3.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to
the Company's Form 10 Registration Statement No. 1-9409
(the "Form 10")).
3.2 * Form of Certificates of Designations of Series A Junior
Participating Preferred Stock (Exhibit 3 to the Company's
Form 8-A Registration Statement dated March 6, 1990, filed
under Commission File No. 1-9409 (the "Form 8-A for
Preferred Stock Purchase Rights")).
3.3 * Form of Certificate of Designations establishing 5%
Cumulative Convertible Preferred Stock (filed as Exhibit
4.7 to the Company's Form S-3 Registration Statement dated
August 6, 1993, under Commission File No. 33-67166, and
incorporated herein by reference).
3.4 * By-Laws of the Company (Exhibit 3.2 to the Form 10).
4.1 * Certificate of Incorporation of the Company (Exhibit 3.1 to
the Form 10).
4.2 * By-Laws of the Company (Exhibit 3.2 to the Form 10).
4.3 * Form of Common Stock Certificate (Exhibit 4.3 to the Form
10).
4.4 * Form of Indenture between the Company and The First
National Bank of Chicago (Exhibit 4.1 to the Company's Form
S-1 Registration Statement No. 33-32024 (the "Form S-1 for
Medium-Term Notes")).
4.5 * Form of Right Certificate (Exhibit 1 to the Form 8-A for
Preferred Stock Purchase Rights).
4.6 * Rights Agreement between the Company and Ameritrust Company
National Association (Exhibit 2 to the Form 8-A for
Preferred Stock Purchase Rights).
4.7 * Form of 9-3/8% Note Due March 1, 2001 (Exhibit 4.1 to Form
8-K dated February 20, 1991, filed with the Commission on
February 22, 1991).
4.8 * Forms of Medium-Term Notes, Series A (Exhibit 4.2 to the
Company's Form S-3 Registration Statement No. 33-58744).
4.9 * Form of 8% Debenture due April 1, 2023 (Exhibit 4.1 to Form
8-K dated March 22, 1993, filed with the Commission on
March 25, 1993).
4.10 * 401(k) Retirement Savings Plan creating certain
"participation interests" (Exhibit 4.1 to Form S-8
Registration Statement dated October 6, 1993, filed under
Commission File No. 33-50573).
4.11 * Form of Certificate of Designations establishing 5%
Cumulative Convertible Preferred Stock (filed as Exhibit
4.7 to the Company's Form S-3 Registration Statement dated
August 6, 1993, under Commission File No. 33-67166, and
incorporated herein by reference).
4.12 * Form of 5% Cumulative Convertible Preferred Stock
Certificate (Exhibit 4.12 to the Company's Form 10-K for
the fiscal year ended December 31, 1993 (the "1993 10-K").
4.13 * Form of Medium Term Notes, Series B (Exhibit 99.1 to the
Company's Report on Form 10-Q for the quarter ended June
30, 1995).
10.1 * Distribution Agreement between the Company and Maxus
(Exhibit 10.1 to the Form 10).
10.2 * Tax-Sharing Agreement between the Company and Maxus
(Exhibit 10.2 to the Form 10).
10.3 * Credit Agreement I, dated as of April 14, 1987, as amended
and restated through April 15, 1993, between the Company
and certain banks (Exhibit 10.1 to the Company's report on
Form 10-Q for the quarter ended June 30, 1993.)
10.4 * Credit Agreement II, dated as of April 14, 1987, as amended
and restated through April 15, 1993, between the Company
and certain banks (Exhibit 10.2 to the Company's report on
Form 10-Q for the quarter ended June 30, 1993).
10.5 * Senior Subordinated Note Purchase Agreement, dated as of
April 17, 1987, between the Company and certain purchasers
(the "Senior Subordinated Note Agreement") (Exhibit 10.22
to the Form 10).
10.6 * Amendment No. 1 to the Senior Subordinated Note Agreement,
dated as of March 31, 1988 (Exhibit 19.5 to the Company's
report on Form 10-Q for the quarter ended March 31, 1988).
10.7 * Amendment No. 2 to the Senior Subordinated Note Agreement,
dated as of July 12, 1989, between the Company and certain
purchasers. (Exhibit 19.2 to the Company's report on Form
10-Q for the quarter ended June 30, 1989 (the "June 30,
1989 10-Q")).
10.8 * Amendment No. 3 to the Senior Subordinated Note Agreement,
dated as of December 6, 1993, between the Company and
certain purchasers (Exhibit 10.8 to the 1993 10-K).
10.18 * X Form of Indemnification Agreement between the Company and
its directors and executive officers (Exhibit 19.6 to the
Company's report on Form 10-Q for the quarter ended
June 30, 1987 (the "June 30, 1987 10-Q")).
10.19 * X Amended form of Employment Agreement between the Company
and certain of its executive officers (Exhibit 19.2 to the
Company's report on Form 10-Q for the quarter ended March
31, 1989).
10.20 * X Deferred Compensation Plan for executives and directors of
the Company, amended and restated as of January 1, 1989
(Exhibit 10.13 to the Company's report on Form 10-K for
the year ended December 31, 1988 (the "1988 Form 10-K")).
10.21 * X Supplemental Executive Retirement Plan of the Company (the
"SERP") (Exhibit 10.16 to the Form 10).
10.22 * X First Amendment to the SERP (Exhibit 10.17 to the Form
S-1 for Preferred Stock).
10.23 * X Second Amendment to the SERP (Exhibit 10.21 to the
1989 Form 10-K).
10.24 * X Performance Incentive Plan of the Company (Exhibit
10.19 to the Form 10).
10.25 * X Excess Benefits Plan of the Company (Exhibit 19.5 to
the June 30, 1987 Form 10-Q).
10.26 * X 1987 Long-Term Incentive Plan of the Company (Annex A-1 to
the Company's Form S-8 Registration Statement No. 33-15268).
10.27 * X Amended Form of Non-Incentive Stock Option Agreement
with Stock Appreciation Rights between the Company and
certain officers
(Exhibit 19.5 to the June 30, 1989 Form 10-Q).
10.28 * X Amended Form of Restricted Stock Agreement between the
Company and certain officers (Exhibit 19.6 to the
June 30, 1989 Form 10-Q).
10.29 * X Form of Disability Benefit Agreement between the
Company and certain of its executive officers (Exhibit
10.21 to the Form S-1 for Preferred Stock).
10.30 * X Form of Split Dollar Insurance Agreement between the
Company and certain of its executive officers (Exhibit
10.20 to the 1988 Form 10-K).
10.31 * X Form of Supplemental Death Benefit Agreement between
the Company and certain of its executive officers
(Exhibit 19.9 to the June 30, 1987 Form 10-Q).
10.32 * X Form of Employee Stock Purchase Loan Agreement between
the Company and certain of its executive officers and
employees (Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1987).
10.33 * X Amendment dated March 5, 1990 to the Employee Stock
Purchase Loan Agreement (Exhibit 10.31 to the 1989
Form 10-K).
10.34 * X Retirement Plan for Non-Employee Directors of the
Company dated as of May 2, 1989 (Exhibit 19.7 to the
June 30, 1989 Form 10-Q).
10.35 * X Diamond Shamrock, Inc. Long-Term Incentive Plan
(Exhibit 4.1 to the Company's Form S-8 Registration
Statement No. 33-34306 filed on April 13, 1990).
10.36 * X Form of Executive Officer's Restricted Stock Agreement
between the Company and certain officers pursuant to
the Diamond Shamrock, Inc. Long-Term Incentive Plan.
(Exhibit 19.3 to the Company's report on Form 10-Q for
the quarter ended June 30, 1990 (the "June 30, 1990
Form 10-Q")).
10.37 * X Form of Non-Incentive Stock Option Agreement with
Stock Appreciation Rights between the Company and
certain officers pursuant to the Diamond Shamrock,
Inc. Long-Term Incentive Plan. (Exhibit 19.4 to the
June 30, 1990 Form 10-Q).
10.38 * X Form of Executive Officer's Performance Restricted
Stock Agreement between the Company and certain
officers pursuant to the Diamond Shamrock, Inc. Long-Term
Incentive Plan. (Exhibit 19.5 to the June 30, 1990 Form
10-Q).
10.39 * X Form of Non-Incentive Stock Option Agreement between
the Company and certain officers pursuant to the
Diamond Shamrock, Inc. Long-Term Incentive Plan
(Exhibit 19.2 to the Company's report on Form 10-Q for
the quarter ended September 30, 1991 (the "September
30, 1991 Form 10-Q").
10.40 * X Form of Non-Incentive Stock Option Agreement With
Reload between the Company and certain officers
pursuant to the Diamond Shamrock, Inc. Long-Term
Incentive Plan (Exhibit 19.3 to the Company's report
on Form 10-Q for the quarter ended September 30, 1991
(the "September 30, 1991 Form 10-Q").
10.41 * X Form of Amendment to the Non-Incentive Stock Option
Agreement with Stock Appreciation Rights and the Non-
Incentive Stock Option Agreement with Reload, each
between the Company and certain officers pursuant to
the Diamond Shamrock, Inc. Long-Term Incentive Plans
(Exhibit 19.1 to the Company's report on Form 10-Q for
the quarter ended March 31, 1992 (the "March 31, 1992
Form 10-Q").
10.42 * X Form of Amendment to the Non-Incentive Stock Option
Agreement between the Company and certain officers
pursuant to the Diamond Shamrock, Inc. Long-Term
Incentive Plan (Exhibit 19.2 to the March 31, 1992
Form 10-Q).
10.43 * X Diamond Shamrock, Inc. Long-Term Incentive Plan,
amended and restated as of May 5, 1992 (Exhibit 19.1
to the Company's report on Form 10-Q for the quarter
ended June 30, 1992 (the "June 30, 1992 Form 10-Q").
10.44 * X Form of Employee Stock Purchase Loan Agreement between
the Company and certain of its executive officers and
employees, amended and restated as of May 26, 1992
(Exhibit 19.2 to the June 30, 1992 Form 10-Q).
10.45 * Ground Lease Agreement between Brazos River Leasing, L.P.
and DSRMC, dated as of April 23, 1993 (Exhibit 19.3 to the
June 30, 1992 Form 10-Q).
10.46 * First Amendment to Ground Lease Agreement between Brazos
River Leasing, L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of August 1, 1992 (Exhibit 10.2
to the Company's report on Form 10-Q for the quarter ended,
September 30, 1993)
10.47 * Facilities Lease Agreement between Brazos River Leasing
L.P. and DSRMC, dated as of April 23, 1992 (Exhibit 19.4 to
the June 30, 1992 Form 10-Q).
10.48 * First Amendment to Facilities Lease Agreement between
Brazos River Leasing, L.P. and Diamond Shamrock Refining
and Marketing Company, dated as of August 1, 1992.
(Exhibit 10.3 to the Company's report on Form 10-Q for the
quarter ended September 30, 1993 (the "September 30, 1993
10-Q").
10.49 * Schedule Relating to Certain Lease Agreements (Exhibit 10.4
to the September 30, 1993 10-Q).
10.50 * X Form of Excess Benefits Plan between the Company and
certain officers, amended and restated as of December
1, 1992 (Exhibit 10.49 to the Company's report on Form
10-K for the year ended December 31, 1992 (the "1992
10-K")).
10.51 * X Form of Disability Benefit Agreement between the Company
and certain officers, amended and restated as of January 1,
1993 (Exhibit 10.50 to the 1992 10-K).
10.52 * X Form of Deferred Compensation Plan between the Company and
certain directors, officers and other employees of the
Company, amended and restated as of January 1, 1993
(Exhibit 10.51 to the 1992 10-K).
10.53 * Second Amendment to Agreement for Ground Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of April 23, 1994 (Exhibit 10.1
to the Company's report on Form 10-Q for the quarter ended
June 30, 1994 (the "June 30, 1994 10-Q")).
10.54 * Second Amendment to Ground Lease Agreement between Brazos
River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of April 23, 1994. (Exhibit
10.2 to the June 30, 1994 10-Q)
10.55 * Second Amendment to Agreement for Facilities Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of April 23, 1994. (Exhibit
10.3 to the June 30, 1994 10-Q).
10.56 * Second Amendment to Facilities Lease Agreement between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of April 23, 1994 (Exhibit 10.4
to the June 30, 1994 10-Q).
10.57 * First Amendment to Agreement for Ground Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of June 1, 1994 (Exhibit 10.1
to the Company's report on Form 10-Q for the quarter ended
September 30, 1994 (the "September 30, 1994 10-Q")).
10.58 * First Amendment to Ground Lease Agreement between Brazos
River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of June 1, 1994. (Exhibit 10.2
to the September 30, 1994 10-Q).
10.59 * First Amendment to Agreement for Facilities Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of June 1, 1994 (Exhibit 10.3
to the September 30, 1994 10-Q).
10.60 * First Amendment to Facilities Lease Agreement between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of June 1, 1994 (Exhibit 10.4
to the September 30, 1994 10-Q").
10.61 * Third Amendment to Agreement for Ground Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of September 16, 1994 (Exhibit
10.5 to the September 30, 1994 10-Q).
10.62 * Third Amendment to Ground Lease Agreement between Brazos
River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of September 16, 1994.
(Exhibit 10.6 to the September 30, 1994 10-Q).
10.63 * Third Amendment to Agreement for Facilities Lease between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of September 16, 1994.
(Exhibit 10.7 to the September 30, 1994 10-Q).
10.64 * Third Amendment to Facilities Lease Agreement between
Brazos River Leasing L.P. and Diamond Shamrock Refining and
Marketing Company, dated as of September 16, 1994. (Exhibit
10.8 to the September 30, 1994 10-Q).
10.65 . First Amendment dated as of March 31, 1995 to Credit
Agreement I dated as of April 14, 1987, as amended and
restated through April 15, 1993.
10.66 . Second Amendment dated as of December 5, 1995 to Credit
Agreement I dated as of April 14, 1987, as amended and
restated through April 15, 1993, as further amended by the
First Amendment thereto dated as of March 31, 1995.
10.67 . First Amendment dated as of March 31, 1995 to Credit
Agreement II dated as of April 14, 1987, as amended and
restated through April 15, 1993.
10.68 . Second Amendment dated as of December 5, 1995 to Credit
Agreement II dated as of April 14, 1987, as amended and
restated through April 15, 1993, as further amended by the
First Amendment thereto dated as of March 31, 1995.
10.69 * Agreement and Plan of Merger, dated November 8, 1995 by and
among Diamond Shamrock, Inc., Shamrock Acquisition Corp.,
and National Convenience Stores Incorporated. (Exhibit
10.1 to the Company's report on Form 10-Q for the quarter
ended September 30, 1995)
10.70 * Credit Agreement dated December 11, 1995 among the Company,
Bank of America National Trust and Savings Association, as
Agent, Chemical Bank, Royal Bank of Canada, and Societe
Generale, as Co-Agents, and the banks named therein
(Exhibit 4.1 to the Company's report on Form 8-K dated
December 14, 1995).
10.71 *X Diamond Shamrock, Inc. Long-Term Incentive Plan, amended
and restated as of May 2, 1995 (Exhibit 4.1 to the
Company's Form S-8 Registration Statement No. 33-59025).
10.72 *X Diamond Shamrock, Inc. Nonqualified 401(k) Plan (Exhibit
4.1 to the Company's Form S-8 Registration Statement No.
33-64645).
13.1 . Management's Discussion and Analysis of Financial Condition
and Results of Operation from the Company's Annual Report
to Shareholders for the year ended December 31, 1995.
13.2 . Consolidated Financial Statements and Selected Financial
Data from the Company's Annual Report to Shareholders for
the year ended December 31, 1995.
13.3 . Report of Independent Accountants from the Company's Annual
Report to Shareholders for the year ended December 31,
1995.
21.1 . Subsidiaries of the Company.
23.1 . Consent of Price Waterhouse LLP.
24.1 . Power of Attorney of the Company
24.2 . Powers of Attorney of directors and officers of the
Company.
27.1 . Financial Data Schedule
_______________________________
* Each document marked with an asterisk is incorporated herein by
reference to the designated document previously filed with the
Securities and Exchange Commission.
# The Company hereby agrees pursuant to Item 601(b)(4)(III)(A) of
Regulation S-K to furnish a copy of this agreement to the Securities
and Exchange Commission upon reqeust.
. Indicates a document filed with this report.
X Indicates the document which constitutes an executive contract
or compensation plan or arrangement.
Exhibit 10.65
EXECUTION COPY
FIRST AMENDMENT dated as of March
31, 1995 (the "Amendment"), to CREDIT
AGREEMENT I dated as of April 14, 1987,
as amended and restated through April
15, 1993 (the "Credit Agreement"),
among DIAMOND SHAMROCK, INC., a
Delaware corporation (the "Borrower"),
DIAMOND SHAMROCK REFINING AND MARKETING
COMPANY, a Delaware corporation
("R&M"), the corporations listed in
Schedule I to the Credit Agreement
(together with R&M, collectively
referred to as the "Guarantors"), the
banks party to the Credit Agreement
(the "Banks") and CHEMICAL BANK, as
agent for the Banks (the "Agent").
A. The Borrower and the Guarantors have requested
that the Banks amend certain provisions of the Credit
Agreement. The Banks are willing to enter into this Amendment,
subject to the terms and conditions set forth herein.
B. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the
Credit Agreement.
Accordingly, in consideration of the mutual
agreements contained in this Amendment and other good and
valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. Amendments to Article I. (a) The
definition of "Fixed Charge Coverage Ratio" in Article I of the
Credit Agreement is hereby deleted.
(b) Clause (ii) of the definition of "Funded Debt"
in Article I of the Credit Agreement is hereby amended to read
in its entirety as follows:
(ii) all Guarantees of obligations of the type
described in clause (i) above (other than (a) Guarantees
by any Subsidiary of obligations of the Borrower or any
other Subsidiary, and (b) Guarantees by the Borrower of
obligations of any Subsidiary); and
(c) Article I of the Credit Agreement is hereby
amended to include the following definition of "Interest
Coverage Ratio":
"Interest Coverage Ratio", with respect to any
period, shall mean the ratio of: (a) the sum of (i)
Consolidated Adjusted Net Income of the Borrower and the
Subsidiaries for such period, (ii) interest expense
deducted in determining such Consolidated Adjusted Net
Income, (iii) depreciation, amortization and taxes
deducted in determining such Consolidated Adjusted Net
Income, and (iv) other noncash items deducted in
determining such Consolidated Adjusted Net Income, to (b)
total interest expense of the Borrower and the
Subsidiaries, on a consolidated basis, for such period.
(d) Article I of the Credit Agreement is hereby
amended to include the following definition of "Level IV
Pricing Period":
"Level IV Pricing Period" shall have the meaning
assigned to such term in Section 2.16(a).
(e) Article I of the Credit Agreement is hereby
amended to include the following definition of "Level V Pricing
Period":
"Level V Pricing Period" shall have the meaning
assigned to such term in Section 2.16(a).
(f) The definition of "Maturity Date" in Article I
of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Maturity Date" shall mean March 31, 2000.
(g) The definition of "Periodic Fixed Charge
Coverage Ratio" in Article I of the Credit Agreement is hereby
deleted.
(h) Article I of the Credit Agreement is hereby
amended to include the following definition of "Periodic
Interest Coverage Ratio":
"Periodic Interest Coverage Ratio" shall mean, as
of any date, the Interest Coverage Ratio for the 12-month
period (treated as one period) ending on the last day of
the month immediately preceding such date.
SECTION 2. Amendments to Section 2.05.
(a) Section 2.05(b) and 2.05(c) of the Credit Agreement are
amended to read in their entirety as follows:
(b) Subject to the provisions of Sections 2.08 and
2.10, Certificate of Deposit Loans shall bear interest at
a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to
the Adjusted CD Rate for the Interest Period in effect for
such Loan plus, for each day such Certificate of Deposit
Loan is outstanding, a rate per annum equal to (i) 0.360%
per annum if such day falls within a Level I Pricing
Period, (ii) 0.500% per annum, if such day falls within a
Level II Pricing Period, (iii) 0.475% per annum, if such
day falls within a Level III Pricing Period, (iv) 0.450%
per annum, if such day falls within a Level IV Pricing
Period, or (v) 0.625% per annum, if such day falls within
a Level V Pricing Period. Interest on each Certificate of
Deposit Loan shall be payable on each applicable Interest
Payment Date. The Adjusted CD Rate shall be determined by
the Agent and such determination shall be conclusive
absent manifest error. The Agent shall promptly advise
the Borrower and each Bank of such determination.
(c) Subject to the provisions of Sections 2.08 and
2.10, Eurodollar Standby Loans shall bear interest at a
rate per annum (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to the LIBO
Rate for the Interest Period in effect for such Loan plus,
for each day such Eurodollar Standby Loan is outstanding,
a rate per annum equal to (i) 0.235% per annum, if such
day falls within a Level I Pricing Period, (ii) 0.375% per
annum, if such day falls within a Level II Pricing Period,
(iii) 0.350% per annum, if such day falls within a Level
III Pricing Period, (iv) 0.325% per annum, if such day
falls within a Level IV Pricing Period, or (v) 0.500% per
annum, if such day falls within a Level V Pricing Period.
Subject to the provisions of Sections 2.08 and 2.10,
Eurodollar Competitive Loans shall bear interest at a rate
per annum (computed on the basis of the actual number of
days elapsed over a year of 360 days) equal to the LIBO
Rate for the Interest Period in effect for such Loan plus
the Margin offered by the Bank making such Loan and
accepted by the Borrower pursuant to Section 2.02A.
Interest on each Eurodollar Borrowing shall be payable on
each applicable Interest Payment Date. The LIBO Rate
shall be determined by the Agent and such determination
shall be conclusive absent manifest error. The Agent
shall promptly advise the Borrower and each Bank of such
determination.
(b) Section 2.05(e) of the Credit Agreement is
hereby deleted.
SECTION 3. Amendments to Section 2.06.
(a) Section 2.06(b) of the Credit Agreement is hereby amended
by deleting the reference to "April 15, 1993" and replacing it
with "March 24, 1995".
(b) Section 2.06(c) of the Credit Agreement is
hereby amended to read in its entirety as follows:
(c) The Borrower agrees to pay to each Bank,
through the Agent, on each March 31, June 30, September 30
and December 31 and on the date on which the Commitment of
such Bank shall be terminated as provided herein, a
facility fee (a "Facility Fee") for each day during the
period from and including the Effective Date to and
including the date on which the Commitment of such Bank is
terminated, at a rate per annum equal to (i) 0.115% per
annum, if such day falls within a Level I Pricing Period,
(ii) 0.125% per annum, if such day falls within a Level II
Pricing Period, (iii) 0.150% per annum, if such day falls
within a Level III Pricing Period, (iv) 0.175% per annum,
if such day falls within a Level IV Pricing Period, or (v)
0.250% per annum, if such day falls within a Level V
Pricing Period, in each case on the average daily amount
of the Commitment of such Bank, whether used or unused,
during the preceding quarter (or shorter period commencing
on the Effective Date or ending with the Maturity Date or
any date on which the Commitment of such Bank shall be
terminated). All Facility Fees shall be computed on the
basis of the actual number of days elapsed in a year of
360 days. The Facility Fee due to each Bank shall
commence to accrue on the Effective Date and shall cease
to accrue on the earlier of the Maturity Date and the
termination of the Commitment of such Bank as provided
herein.
SECTION 4. Amendments to Section 2.16(a) Section
2.16(a) of the Credit Agreement is hereby amended to read in
its entirety as follows:
SECTION 2.16. Pricing Periods. (a) Subject to
paragraph (b) below, "Level I Pricing Period" shall mean
any period during which Index Debt shall be rated A- or
better by S&P and A3 or better by Moody's; "Level II
Pricing Period" shall mean any period during which Index
Debt shall be rated (i) BBB+ or better by S&P and Baa1 by
Moody's or (ii) BBB+ by S&P and Baa1 or better by Moody's;
"Level III Pricing Period" shall mean any period during
which Index Debt shall be rated (i) BBB or better by S&P
and Baa2 by Moody's or (ii) BBB by S&P and Baa2 or better
by Moody's; "Level IV Pricing Period" shall mean any
period during which Index Debt shall be rated (i) BBB- or
better by S&P and Baa3 by Moody's or (ii) BBB- by S&P and
Baa3 or better by Moody's; and "Level V Pricing Period"
shall mean any period that is not a Level I Pricing
Period, a Level II Pricing Period, a Level III Pricing
Period or a Level IV Pricing Period, including any period
during which Index Debt shall be unrated by either S&P or
Moody's. "Pricing Period" shall mean a Level I Pricing
Period, a Level II Pricing Period, a Level III Pricing
Period, a Level IV Pricing Period or a Level V Pricing
Period.
SECTION 5. Amendment to Section 3.16.
Section 3.16 of the Credit Agreement is hereby amended by
deleting all references to "December 31, 1992" and replacing
each such reference with "December 31, 1994".
SECTION 6. Amendment to Section 5.05(f).
Section 5.05(f) of the Credit Agreement is hereby amended by
deleting the reference to "the Maturity Date" and replacing it
with "the second anniverary of such date of preparation".
SECTION 7. Amendment to Section 6.01. Section 6.01 of
the Credit Agreement is hereby amended to read in its entirety
as follows:
SECTION 6.01. Indebtedness. (a) Permit the Total
Funded Debt Ratio at any time to exceed 0.63 to 1.00, (b)
in the case of any Subsidiary now owned or hereafter
acquired, permit any such Subsidiary to create, incur,
suffer to exist or assume any Funded Debt except (i) the
obligations of any acquired Subsidiary present at the time
of acquisition or (ii) Funded Debt if the aggregate amount
of such Funded Debt of all Subsidiaries does not exceed
15% of Consolidated Net Tangible Assets at such time, or
(c) create, incur, suffer to exist or assume any
Indebtedness consisting of Commercial Paper in the
aggregate principal amount at any time in excess of the
sum of the unused Commitments and unused Other Commitments
at such time.
SECTION 8. Amendment to Section 6.02. Clause (n) of
Section 6.02 of the Credit Agreement is hereby amended by
deleting the reference to "80%" and replacing it with "100%".
SECTION 9. Amendments to Section 6.05. (a) Section
6.05 of the Credit Agreement is hereby amended by inserting the
following as a new clause (e) immediately preceding the
existing clause (e):
(e) investments in the ordinary course of business
in corporations, partnerships, joint ventures or other
entities primarily engaged in petroleum-related activities
in Mexico, Central America or South America; provided that
the aggregate amount of all such investments pursuant to
this subsection (e) shall not at any time exceed
$30,000,000.
(b) The existing clause (e) of Section 6.05 of the
Credit Agreement will be redesignated as clause (f) and such
clause (f) is hereby amended as follows:
(i) the reference to clause "(d)" is deleted and
replaced with a reference to clause "(e)"; and
(ii) the reference to "this subsection (e)"
is deleted and replaced with a reference to "this
subsection (f)".
SECTION 10. Amendments to Section 6.06. Section
6.06 of the Credit Agreement is hereby amended by
(a) deleting all references to "December 31, 1992" and
replacing each such reference with "December 31, 1994" and
(b) deleting the reference to "$184,087,000" and replacing
such reference with "$200,000,000".
SECTION 11. Amendments to Section 6.08. Section 6.08
of the Credit Agreement is hereby amended to read in its
entirety as follows:
SECTION 6.08. Consolidated Tangible Net Worth.
Permit Consolidated Tangible Net Worth less paid in
capital and surplus attributable to any Preferred Stock
(other than treasury stock) issued and outstanding on the
Effective Date plus any treasury stock of the Borrower
(such treasury stock consisting solely of up to 1,400,000
shares of common stock) to be less than the sum of (i)
$350,000,000 plus (ii) 50% of Consolidated Net Income (to
the extent such Net Income is positive) for the period
commencing on December 31, 1994 and ending on the last day
of the most recently completed fiscal quarter.
SECTION 12. Amendment to Section 6.10.
Section 6.10 of the Credit Agreement is hereby amended to read
in its entirety as follows:
SECTION 6.10. Interest Coverage Ratio. Permit the
Periodic Interest Coverage Ratio at any time to be less
than 3.00 to 1.00.
SECTION 13. Amendment to Schedule I. Schedule I to
the Credit Agreement is hereby amended and replaced in its
entirety by Schedule I attached hereto.
SECTION 14. Amendment to Schedule II.
Schedule II to the Credit Agreement is hereby amended by
deleting the reference to "$1.00 par value" with respect to the
Shares Authorized of Diamond Shamrock Refining and Marketing
Company and replacing it with "0.01 par value."
SECTION 15. Commitments and Addresses of Banks. The
parties hereby confirm and agree that the current Commitments
of the respective Banks and their respective addresses for
notices under the Credit Agreement are as set forth in Schedule
II attached hereto.
SECTION 16. Representations and Warranties. The
Borrower and each of the Guarantors represent and warrant to
the Agent and to each of the Banks that (provided that the
representations of each Guarantor shall be limited to matters
relating to the Borrower or such Guarantor):
(a) This Amendment, and the Credit Agreement as
amended hereby, have been duly authorized, executed and
delivered by it and constitute its legal, valid and
binding obligations enforceable in accordance with their
respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of
equity).
(b) The representations and warranties set forth in
Article III of the Credit Agreement are true and correct
in all material respects before and after giving effect to
this Amendment with the same effect as if made on the date
hereof, except to the extent such representations and
warranties expressly relate to an earlier date, in which
case they were true and correct in all material respects
on and as of such earlier date.
(c) As of the date hereof, the Borrower and each
Guarantor is in compliance with all the terms and
provisions contained in the Credit Agreement on its part
to be observed as performed, and at the time of and
immediately after giving effect to this Amendment no Event
of Default has occurred and is continuing and no event
which with notice or lapse of time or both would
constitute an Event of Default has occurred and is
continuing.
SECTION 17. Conditions to Effectiveness. The
amendments to the Credit Agreement set forth in this Amendment
shall become effective on March 31, 1995; provided that:
(a) the Agent shall have received counterparts of
this Amendment which, when taken together, bear the
signatures of the Borrower, each of the Guarantors and
each Bank;
(b) the Agent shall have received a favorable
written opinion of the Borrower's counsel, addressed to
the Banks, to the effect set forth in Annex I hereto;
(c) the Borrower shall have paid all accrued Fees
and other amounts owing under the Credit Agreement as of
March 31, 1995, as well as all fees payable pursuant to
the letter agreement dated March 24, 1995, among Chemical
Bank, Chemical Securities Inc. and the Borrower, and no
Loans shall be outstanding as of such date; and
(d) the conditions to the amendment of the Other
Credit Agreement, as set forth in the First Amendment
thereto dated as of the date hereof, shall have been
satisfied.
SECTION 18. Credit Agreement. Except as
specifically amended hereby, the Credit Agreement shall
continue in full force and effect in accordance with the
provisions thereof as in existence on the date hereof. After
the date that this Amendment becomes effective as provided in
Section 11 above, any reference to the Credit Agreement shall
mean the Credit Agreement as amended hereby.
SECTION 19. Applicable Law. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 20. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one contract.
SECTION 21. Expenses. The Borrower agrees to
reimburse the Agent for its out-of-pocket expenses in
connection with the preparation and execution of this
Amendment, including the fees, charges and disbursements of
Cravath, Swaine & Moore, counsel for the Agent.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective
authorized officers as of the day and year first written above.
DIAMOND SHAMROCK, INC.,
DIAMOND SHAMROCK REFINING AND
MARKETING COMPANY,
DIAMOND SHAMROCK STATIONS,
INC.,
DIAMOND SHAMROCK PIPELINE
COMPANY,
DIAMOND SHAMROCK REFINING
COMPANY, L.P.,
SIGMOR CORPORATION,
XRAL STORAGE AND TERMINALING
COMPANY,
THE SHAMROCK PIPE LINE
CORPORATION,
SIGMOR PIPELINE COMPANY,
TOC-DS COMPANY,
D-S SPLITTER, INC.,
D-S PIPE LINE CORPORATION,
and NORTH AMERICAN INTELECOM,
INC.,
By: /s/ R.C. BECKER
R.C. Becker, in each
case, Vice President and
Treasurer
SIGMOR BEVERAGE
By: /S/ CARL W. HIX
Carl W. Hix
Vice President,
Secretary
and Treasurer
BIG DIAMOND, INC.,
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller
Vice President,
Secretary
and Treasurer
BIG DIAMOND NUMBER 1, INC.
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller
Vice President,
Secretary
and Treasurer
CHEMICAL BANK, individually
and as Agent,
By: /s/ RONALD POTTER
Ronald Potter
Managing Director
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION,
By: /s/ BETTY LOU J. ROBERT
Betty Lou J. Robert
Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ HELEN A. CARR
Helen A. Carr
Vice President
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ LAURA B. SHEPARD
Laura B. Shepard
Vice President
ROYAL BANK OF CANADA,
By: /s/ EVERETT M. HARNER
Everett M. Harner
Manager
NATIONAL WESTMINSTER BANK PLC
New York Branch,
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
NATIONAL WESTMINSTER BANK PLC
Nassau Branch,
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
THE FROST NATIONAL BANK OF
SAN ANTONIO,
By: /s/ PHIL DUDLEY
Phil Dudley
Vice President
BANK OF SCOTLAND,
By: /s/ ELIZABETH WILSON
Elizabeth Wilson
Vice President and
Branch Manager
NATIONS BANK OF TEXAS, N.A.,
By: /s/ JAMES R. ALLRED
James R. Allred
Vice President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
By: /s/ DAN M. DANELO
Dan M. Danelo
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION,
By: /s/ ROBERT S. GLENN
Robert S. Glenn
Vice President
INDUSTRIAL BANK OF JAPAN,
LIMITED,
By: /s/ ROBERT W. RAMAGE, JR.
Robert W. Ramage, Jr.
Senior Vice President
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By: /s/ MICHAEL MEISS
Michael Meiss
Vice President
THE FIRST NATIONAL BANK OF
BOSTON,
By: /s/ CYNTHIA A. STABLEFORD
Cynthia A. Stableford
Vice President
THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
By: /s/ SOICHI YOSHIDA
Soichi Yoshida
Vice President
SOCIETE GENERALE,
By: /s/ MARK A. COX
Mark A. Cox
Vice President
<PAGE>
SCHEDULE I
Additional Guarantors
1. Diamond Shamrock Refining and Marketing Company, a
Delaware corporation.
2. The Shamrock Pipe Line Corporation, a Delaware
corporation.
3. Sigmor Corporation, a Delaware corporation
4. Sigmor Pipeline Company, a Texas corporation
5. Sigmor Beverage, Inc., a Texas corporation
6. North American InTeleCom, Inc., a Texas
corporation
7. Diamond Shamrock Stations, Inc., a Delaware
corporation
8. XRAL Storage and Terminaling Company, a Texas
corporation
9. TOC-DS Company, a Delaware corporation
10. D-S Splitter, Inc., a Delaware corporation
11. Big Diamond, Inc., a Texas corporation
12. Big Diamond Number 1, Inc., a Texas corporation
13. Diamond Shamrock Pipeline Company, a Delaware
corporation
14. Diamond Shamrock Refining Company, L.P., a Delaware
limited partnership
<PAGE>
SCHEDULE II
Name and Address
of Bank Commitment
Chemical Bank $23,333,334.00
c/o Texas Commerce Bank
2200 Ross Avenue
Dallas, TX 75201
Attn of: W. Paschall Tosch
Bank of America, National Trust $20,000,000.00
and Savings Association
3 Allen Center
333 Clay Street
Suite 4550
Houston, TX 77002-4103
Attn of: Lee McKinsley
The First National Bank of Chicago $20,000,000.00
1100 Louisiana Street
Suite 3200
Houston, TX 77002
Attn of: Helen Carr
National Westminster Bank PLC $16,666,667.00
Texas Commerce Tower
600 Travis Street
Suite 6070
Houston, TX 77002
Attn of: James Moyes
Royal Bank of Canada $16,666,667.00
600 Wilshire Blvd.
Suite 800
Los Angeles, CA 90017
Attn of: Everett Hamer
NationsBank of Texas, N.A. $16,666,667.00
700 Louisiana Street
8th Floor
Houston, TX 77002
Attn of: James Alfred
Bank One, Texas, National Association $16,666,667.00
105 S. St. Mary's Street
Alamo National Building
2nd Floor
San Antonio, TX 78205
Attn of: Rob Glenn
Industrial Bank of Japan, Limited $10,000,000.00
3 Allen Center
333 Clay Street
Suite 4850
Houston, TX 77002
Attn of: Lynn Williford
Fuji Bank, Limited, $10,000,000.00
Houston Agency
1 Houston Center
1221 McKinney Street
Suite 4100
Houston, TX 77010
Attn of: Jacques Azagury
Bank of Tokyo $10,000,000.00
2 Houston Center
909 Fannin
Suite 1104
Houston, TX, 77010
Attn of: Micheal Weiss
Bank of Scotland $10,000,000.00
2 Allen Center
1200 Smith Street
Suite 1750
Houston, TX 77002-4912
Attn of: Janni Blanter
The Chase Manhattan Bank, $10,000,000.00
National Association
1 Houston Center
1221 McKinney Street
Suite 3003
Houston, TX 77010
Attn of: Peter Lind
The First National Bank of Boston $ 6,666,666.67
100 Federal Street
Mail Stop 01-08-02
Boston, MA 02110
Attn of: Cynthia Stableford
Societe Generale $ 6,666,667.33
1111 Bagby Street
Suite 2020
Houston, TX 77002
Attn of: Mark Cox
<PAGE>
The Frost National Bank $ 3,333,332.00
of San Antionio
100 West Houston Street
San Antonio, TX 78205
Attn of: Phil Dudley
Texas Commerce Bank $ 3,333,332.00
National Association
2200 Ross Avenue
3rd Floor
Dallas, TX 75201
Attn of: W. Paschall Tosch
TOTAL $200,000,000.00
SECOND AMENDMENT dated as of December 5, 1995 (the
"Amendment"), to CREDIT AGREEMENT I dated as of April
14, 1987, as amended and restated through April 15,
1993, as amended by the First Amendment thereto dated
March 31, 1995 (the "Credit Agreement"), among DIAMOND
SHAMROCK, INC., a Delaware corporation (the
"Borrower"), DIAMOND SHAMROCK REFINING AND MARKETING
COMPANY, a Delaware corporation ("R&M"), the entities
listed in Schedule I to the Credit Agreement (together
with R&M, collectively referred to as the
"Guarantors"), the banks party to the Credit Agreement
(the "Banks") and CHEMICAL BANK, as agent for the
Banks (the "Agent").
A. The Borrower and the Guarantors have requested that the
Banks amend certain provisions of the Credit Agreement. The
Banks are willing to enter into this Amendment, subject to the
terms and conditions set forth herein.
B. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual agreements
contained in this Amendment and other good and valuable
consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendments to Article I.
(a) The following definitions are hereby added to
Article I:
"Consolidated Net Worth" shall mean at any date,
with respect to the Borrower and its Subsidiaries on a
consolidated basis, (a) the sum of (i) capital stock taken
at par value, plus (ii) capital surplus, plus (iii)
retained earnings, minus (b) treasury stock.
"NCS" shall mean National Convenience Stores
Incorporated, a Delaware corporation.
"NCS Subsidiaries" shall mean, with respect to
NCS, all corporations, associations, or other business
entities, the accounts of which are consolidated in the
financial statements of NCS in accordance with generally
accepted accounting principles.
"NCS Purchase Date" shall mean the date on which
common stock and warrants to purchase common stock of NCS
tendered pursuant to that certain Offer to Purchase by
Shamrock Acquisition Corp., a Delaware corporation, dated
November 14, 1995, as it may be amended or extended (the
"Offer to Purchase"), are accepted for payment by Shamrock
Acquisition Corp. pursuant to the terms of the Offer to
Purchase.
"NCS Guaranty Date" shall mean the date upon which
NCS and such of the NCS Subsidiaries as have either
$20,000,000 in assets or $20,000,000 in revenue as of the
end of the most recently completed fiscal year become
Guarantors hereunder.
"NCS Mortgages" shall mean those certain mortgage
notes secured by Deed of Trust liens on certain real
property of NCS Subsidiaries, bearing interest at a fixed
rate of 9.5%, increasing to 11% in 2001 and to 12% in 2002,
payable in quarterly installments and maturing on September
30, 2003, and any renewals, extensions, restatements, or
reamortizations thereof.
(b) The definition of "Total Funded Debt Ratio" in
Article I of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Total Funded Debt Ratio" shall mean, at any time,
with respect to the Borrower and the Subsidiaries on a
consolidated basis, the ratio of (a) the sum of (i) Funded
Debt at such time and (ii) Subordinated Indebtedness at
such time to (b) the sum of (i) Funded Debt at such time
and (ii) Subordinated Indebtedness at such time and (iii)
Consolidated Net Worth at such time.
SECTION 2. Amendments to Article III:
The first sentence of Section 3.16 is amended to read
as follows:
Each Subsidiary which, at December 31, 1994, had
total assets exceeding $20,000,000, or which, for the year
ended December 31, 1994 had revenues exceeding $20,000,000,
is a Guarantor, other than D-S Venture Company, L.L.C., a
Delaware limited liability company, over ninety-eight
percent (98%) of the assets of which on that date consisted
of its limited partnership interest in Diamond Shamrock
Refining Company, L.P.
SECTION 3. Amendment to Article V:
The following section is hereby added to Article V:
SECTION 5.10. NCS Guaranties. Cause NCS and such
of the NCS Subsidiaries as had either $20,000,000 in assets
or $20,000,000 in revenues as of the end of the then most
recently completed fiscal year to become Guarantors under
this agreement at such time as such entities can deliver
such guaranties without violating the terms and provisions
of the NCS Mortgages.
SECTION 4. Amendments to Article VI:
(a) Amendments to Section 6.01:
(a) Section 6.01(a) of the Credit Agreement is
amended by deleting the reference to "0.63" and inserting
in lieu thereof "0.65".
(b) The following sections are hereby added to Article
VI:
SECTION 6.12. Additional NCS Indebtedness. Permit
NCS or the NCS Subsidiaries to create, incur, assume, or
otherwise be obligated with respect to Indebtedness for
reimbursement obligations relating to letters of credit or
for money borrowed, as an obligor, guarantor, mortgagor,
lessee under a capital lease, or otherwise, after thirty
days following the NCS Purchase Date and prior to the NCS
Guaranty Date, except for (a) Indebtedness in respect of
the NCS Mortgages, in an aggregate amount not to exceed
$57,000,000, (b) Intercompany Loans, and (c) Indebtedness
for money borrowed not otherwise permitted by clauses (a)
and (b) of this section 6.12 in an amount not exceeding
$500,000 in the aggregate outstanding at any one time.
SECTION 6.13. Certain NCS Agreements. Permit NCS
or the NCS Subsidiaries, after the NCS Purchase Date and
prior to the NCS Guaranty Date, to enter into or to allow
to remain in place any provision in any agreement or
arrangement with any Person to which any such entity is a
party which would restrict the ability of such entity to
declare and pay dividends and distributions with respect to
outstanding shares of its common stock or to repay advances
to Borrower or any other Subsidiary.
SECTION 5. Representations and Warranties. The Borrower
and each of the Guarantors represent and warrant to the Agent
and to each of the Banks that (provided that the representations
of each Guarantor shall be limited to matters relating to the
Borrower or such Guarantor):
(a) This Amendment, and the Credit Agreement as
amended hereby, have been duly authorized, executed, and
delivered by it and constitute its legal, valid, and
binding obligations enforceable in accordance with their
respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of
equity).
(b) The representations and warranties set forth in
Article III of the Credit Agreement are true and correct in
all material respects before and after giving effect to
this Amendment with the same effect as if made on the date
hereof, except to the extent such representations and
warranties expressly relate to an earlier date, in which
case they were true and correct in all material respects on
and as of such earlier date.
(c) As of the date hereof, the Borrower and each
Guarantor is in compliance with all the terms and
provisions contained in the Credit Agreement on its part to
be observed as performed, and at the time of and
immediately after giving effect to this Amendment no Event
of Default has occurred and is continuing and no event
which with notice or lapse of time or both would constitute
an Event of Default has occurred and is continuing.
SECTION 6. Conditions to Effectiveness. The amendments to
the Credit Agreement set forth in this Amendment shall become
effective on December 5, 1995; provided that:
(a) the Agent shall have received counterparts of this
Amendment which, when taken together, bear the signatures
of the Borrower, each of the Guarantors, and the Required
Banks;
(b) the Borrower shall have paid all Fees and other
amounts due under the Credit Agreement as of December 5,
1995; and
(c) the conditions to the amendment of the Other
Credit Agreement, as set forth in the Second Amendment
thereto dated as of the date hereof, shall have been
satisfied.
SECTION 7. Credit Agreement. Except as specifically
amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof as in
existence on the date hereof. After the date that this
Amendment becomes effective as provided in Section 4 above, any
reference to the Credit Agreement shall mean the Credit
Agreement as amended hereby.
SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 9. Counterparts. This Amendment may be executed
in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute
but one contract.
SECTION 10. Expenses. The Borrower agrees to reimburse the
Agent for its out-of-pocket expenses in connection with the
preparation and execution of this Amendment, including the fees,
charges and disbursements of Cravath, Swaine & Moore, counsel
for the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first written above.
DIAMOND SHAMROCK, INC.,
DIAMOND SHAMROCK REFINING AND
MARKETING COMPANY,
DIAMOND SHAMROCK STATIONS, INC.,
DIAMOND SHAMROCK PIPELINE COMPANY,
DIAMOND SHAMROCK REFINING
COMPANY, L.P.
SIGMOR CORPORATION,
XRAL STORAGE AND TERMINALING
COMPANY,
THE SHAMROCK PIPE LINE CORPORATION,
SIGMOR PIPELINE COMPANY,
TOC-DIAMOND SHAMROCK COMPANY,
D-S SPLITTER, INC.
and
NORTH AMERICAN INTELECOM, INC.,
By: /s/ R. C. Becker
R. C. Becker, in each case,
Vice President and Treasurer
SIGMOR BEVERAGE, INC.,
By: /s/ CARL W. HIX
Carl W. Hix,
Vice President, Secretary
and Treasurer
BIG DIAMOND, INC.,
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller,
Vice President, Secretary
and Treasurer
BIG DIAMOND NUMBER 1, INC.,
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller,
Vice President, Secretary
and Treasurer
CHEMICAL BANK, individually and as
Agent
By: /s/ RONALD POTTER
Ronald Potter
Managing Director
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By: /s/ BETTY LOU J. ROBERT
Betty Lou J. Robert
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ HELEN A. CARR
Helen A. Carr
Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ LAURA B. SHEPARD
Laura B. Shepard
Vice President
ROYAL BANK OF CANADA
By: /s/ EVERETT M. HARNER
Everett M. Harner
Manager
NATIONAL WESTMINSTER BANK PLC,
New York Branch
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
NATIONAL WESTMINSTER BANK PLC,
Nassau Branch
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
THE FROST NATIONAL BANK OF SAN
ANTONIO
By: /s/ PHIL DUDLEY
Phil Dudley
Vice President
BANK OF SCOTLAND
By: /s/ ELIZABETH WILSON
Elizabeth Wilson
Vice President and
Branch Manager
NATIONSBANK OF TEXAS, N.A.
By: /s/ JAMES R. ALLRED
James R. Allred
Vice President
TEXAS COMMERCE BANK, NATIONAL
ASSOCIATION
By: /s/ DAN M. DANELO
Dan M. Danelo
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ ROBERT S. GLENN
Robert S. Glenn
Vice President
INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ ROBERT W. RAMAGE, JR.
Robert W. Ramage, Jr.
Senior Vice President
THE BANK OF TOKYO, LTD., DALLAS
AGENCY
By: /s/ MICHAEL MEISS
Michael Meiss
Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ CYNTHIA A. STABLEFORD
Cynthia A. Stableford
Vice President
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ SOICHI YOSHIDA
Soichi Yoshida
Vice President
SOCIETE GENERALE
By: /s/ MARK A. COX
Mark A. Cox
Vice President
<PAGE>
SCHEDULE I
Additional Guarantors
1. Diamond Shamrock Refining and Marketing Company, a Delaware
corporation.
2. The Shamrock Pipe Line Corporation, a Delaware corporation.
3. Sigmor Corporation, a Delaware corporation
4. Sigmor Pipeline Company, a Texas corporation
5. Sigmor Beverage, Inc., a Texas corporation
6. North American InTeleCom, Inc., a Texas corporation
7. Diamond Shamrock Stations, Inc., a Delaware corporation
8. XRAL Storage and Terminaling Company, a Texas corporation
9. TOC-DS Company, a Delaware corporation
10. D-S Splitter, Inc., a Delaware corporation
11. Big Diamond, Inc., a Texas corporation
12. Big Diamond Number 1, Inc., a Texas corporation
13. Diamond Shamrock Pipeline Company, a Delaware corporation
14. Diamond Shamrock Refining Company, L.P., a Delaware limited
partnership
W3057a.TW
Exhibit 10.67
EXECUTION COPY
FIRST AMENDMENT dated as of March 31, 1995 (the
"Amendment"), to CREDIT AGREEMENT II dated as of April
14, 1987, as amended and restated through April 15,
1993 (the "Credit Agreement"), among DIAMOND SHAMROCK,
INC., a Delaware corporation (the "Borrower"), DIAMOND
SHAMROCK REFINING AND MARKETING COMPANY, a Delaware
corporation ("R&M"), the corporations listed in
Schedule I to the Credit Agreement (together with R&M,
collectively referred to as the "Guarantors"), the
banks party to the Credit Agreement (the "Banks") and
CHEMICAL BANK, as agent for the Banks (the "Agent").
A. The Borrower and the Guarantors have requested that
the Banks amend certain provisions of the Credit Agreement. The Banks
are willing to enter into this Amendment, subject to the terms and
conditions set forth herein.
B. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual agreements
contained in this Amendment and other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. Amendments to Article I. (a) The definition of
"Fixed Charge Coverage Ratio" in Article I of the Credit Agreement is
hereby deleted.
(b) Clause (ii) of the definition of "Funded Debt" in
Article I of the Credit Agreement is hereby amended to read in its
entirety as follows:
(ii) all Guarantees of obligations of the type described in
clause (i) above (other than (a) Guarantees by any Subsidiary of
obligations of the Borrower or any other Subsidiary, and (b)
Guarantees by the Borrower of obligations of any Subsidiary);
and
(c) Article I of the Credit Agreement is hereby amended
to include the following definition of "Interest Coverage Ratio":
"Interest Coverace Ratio", with respect to any period,
shall mean the ratio of: (a) the sum of (i) Consolidated
Adjusted Net Income of the Borrower and the Subsidiaries for
such period, (ii) interest expense deducted in determining such
Consolidated Adjusted Net Income, (iii) depreciation,
amortization and taxes deducted in determining such Consolidated
Adjusted Net Income, and (iv) other noncash items deducted in
determining such Consolidated Adjusted Net Income, to (b) total
interest expense of the Borrower and the Subsidiaries, on a
consolidated basis, for such period.
(d) Article I of the Credit Agreement is hereby amended
to include the following definition of "Level IV Pricing Period":
"Level IV Pricing Period" shall have the meaning assigned
to such term in Section 2.16(a).
(e) Article I of the Credit Agreement is hereby amended
to include the following definition of "Level V Pricing Period":
"Level V Pricing Period" shall have the meaning assigned to
such term in Section 2.16(a).
(f) The definition of "Maturity Date" in Article I of the
Credit Agreement is hereby amended to read in its entirety as follows:
"Maturity Date" shall mean March 29, 1996.
(g) The definition of "Periodic Fixed Charge Coverage
Ratio" in Article I of the Credit Agreement is hereby deleted.
(h) Article I of the Credit Agreement is hereby amended
to include the following definition of "Periodic Interest Coverage
Ratio":
"Periodic Interest Coverage Ratio" shall mean, as
of any date, the Interest Coverage Ratio for the 12-month period
(treated as one period) ending on the last day of the month
immediately preceding such date.
SECTION 2. Amendments to Section 2.05.
(a) Section 2.05(b) and 2.05(c) of the Credit Agreement are amended to
read in their entirety as follows:
(b) Subject to the provisions of Sections 2.08 and 2.10,
Certificate of Deposit Loans shall bear interest at a rate per
annum (computed on the basis of the actual number of days
elapsed over a year of 360 days) equal to the Adjusted CD Rate
for the Interest Period in effect for such Loan plus, for each
day such Certificate of Deposit Loan is outstanding, a rate per
annum equal to (i) 0.385% per annum if such day falls within a
Level I Pricing Period, (ii) 0.525% per annum, if such day falls
within a Level II Pricing Period, (iii) 0.500% per annum, if
such day falls within a Level III Pricing Period, (iv) 0.475%
per annum, if such day falls within a Level IV Pricing Period,
or (v) 0.700% per annum, if such day falls within a Level V
Pricing Period. Interest on each Certificate of Deposit Loan
shall be payable on each applicable Interest Payment Date. The
Adjusted CD Rate shall be determined by the Agent and such
determination shall be conclusive absent manifest error. The
Agent shall promptly advise the Borrower and each Bank of such
determination.
(c) Subject to the provisions of Sections 2.08 and 2.10,
Eurodollar Standby Loans shall bear interest at a rate per annum
(computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the LIBO Rate for the Interest
Period in effect for such Loan plus, for each day such
Eurodollar Standby Loan is outstanding, a rate per annum equal
to (i) 0.260% per annum, if such day falls within a Level I
Pricing Period, (ii) 0.400% per annum, if such day falls within
a Level II Pricing Period, (iii) 0.375% per annum, if such day
falls within a Level III Pricing Period, (iv) 0.350% per annum,
if such day falls within a Level IV Pricing Period, or (v)
0.575% per annum, if such day falls within a Level V Pricing
Period. Interest on each Eurodollar Borrowing shall be payable
on each applicable Interest Payment Date. The LIBO Rate shall
be determined by the Agent and such determination shall be
conclusive absent manifest error. The Agent shall promptly
advise the Borrower and each Bank of such determination.
(b) Section 2.05(d) of the Credit Agreement is hereby
deleted.
SECTION 3. Amendments to Section 2.06.
(a) Section 2.06(b) of the Credit Agreement is hereby amended by
deleting the reference to "April 15, 1993" and replacing it with
"March 24, 1995".
(b) Sections 2.06(c) and 2.06(d) of the Credit Agreement
are hereby amended to read in their entirety as follows:
(c) The Borrower agrees to pay to each Bank, through the
Agent, on each March 31, June 30, September 30 and December 31
and on the date on which the Commitment of such Bank shall be
terminated as provided herein, a facility fee (a "Facility Fee")
for each day during the period from and including the Effective
Date to and including the date on which the Commitment of such
Bank is terminated, at a rate per annum equal to (i) 0.090% per
annum, if such day falls within a Level I Pricing Period, (ii)
0.100% per annum, if such day falls within a Level II Pricing
Period, (iii) 0.125% per annum, if such day falls within a Level
III Pricing Period, (iv) 0.150% per annum, if such day falls
within a Level IV Pricing Period, or (v) 0.175% per annum, if
such day falls within a Level V Pricing Period, in each case on
the average daily amount of the Commitment of such Bank, whether
used or unused, during the preceding quarter (or shorter period
commencing on the Effective Date or ending with the Maturity
Date or any date on which the Commitment of such Bank shall be
terminated). All Facility Fees shall be computed on the basis
of the actual number of days elapsed in a year of 360 days. The
Facility Fee due to each Bank shall commence to accrue on the
Effective Date and shall cease to accrue on the earlier of the
Maturity Date and the termination of the Commitment of such Bank
as provided herein.
(d) It is acknowledged that the Facility Fee has been
determined based on the understanding that the Banks will not be
required to maintain capital against their Commitments under
currently applicable laws, regulations and guidelines. In the
event that any Bank shall be advised by any governmental or
regulatory authority, or shall otherwise determine on the basis
of any order, ruling, decree, pronouncement or other formal or
informal governmental or regulatory action or communication,
that such understanding is incorrect, then such Bank may notify
the Borrower, the Agent and the other Banks of such
determination and request that the Facility Fee be increased in
order to compensate therefor (an "Increase Notice") and, upon
notice by the Required Banks to the Agent that such increase is
required, then, without the necessity of any approval by the
Borrower, effective as of the date of the Increase Notice, the
Facility Fee shall be increased by (i) 0.075% per annum for each
day falling witlin a Level V Pricing Period or (ii) 0.025% per
annum for each day not falling within a Level V Pricing Period,
and the Agent shall notify the Borrower and the Banks thereof.
SECTION 4. Amendments to Section 2.16(a) Section 2.16(a) of
the Credit Agreement is hereby amended to read in its entirety as
follows:
SECTION 2.16. Pricing Periods. (a) Subject to paragraph (b)
below, "Level I Pricing Period" shall mean any period during
which Index Debt shall be rated A- or better by S&P and A3 or
better by Moody's; "Level II Pricing Period" shall mean any
period during which Index Debt shall be rated (i) BBB+ or better
by S&P and Baal by Moody's or (ii) BBB+ by S&P and Baal or
better by Moody's; "Level III Pricing Period" shall mean any
period during which Index Debt shall be rated (i) BBB or better
by S&P and Baa2 by Moody's or (ii) BBB by S&P and Baa2 or better
by Moody's; "Level IV Pricing Period" shall mean any period
during which Index Debt shall be rated (i) BBB- or better by S&P
and Baa3 by Moody's or (ii) BBB- by S&P and Baa3 or better by
Moody's; and "Level V Pricing Period" shall mean any period that
is not a Level I Pricing Period, a Level II Pricing Period, a
Level III Pricing Period or a Level IV Pricing Period, including
any period during which Index Debt shall be unrated by either
S&P or Moody's. "Pricing Period" shall mean a Level I Pricing
Period, a Level II Pricing Period, a Level III Pricing Period, a
Level IV Pricing Period or a Level V Pricing Period.
SECTION 5. Amendment to Section 3.16.
Section 3.16 of the Credit Agreement is hereby amended by deleting all
references to "December 31, 1992" and replacing each such reference
with "December 31, 1994".
SECTION 6. Amendment to Section 6.01. Section 6.01 of the
Credit Agreement is hereby amended to read in its entirety as follows:
SECTION 6.01. Indebtedness. (a) Permit the Total Funded
Debt Ratio at any time to exceed 0.63 to 1.00, (b) in the case
of any Subsidiary now owned or hereafter acquired, permit any
such Subsidiary to create, incur, suffer to exist or assume any
Funded Debt except (i) the obligations of any acquired
Subsidiary present at the time of acquisition or (ii) Funded
Debt if the aggregate amount of such Funded Debt of all
Subsidiaries does not exceed 15% of Consolidated Net Tangible
Assets at such time, or (c) create, incur, suffer to exist or
assume any Indebtedness consisting of Commercial Paper in the
aggregate principal amount at any time in excess of the sum of
the unused Commitments and unused Other Commitments at such
time.
SECTION 7. Amendment to Section 6.02. Clause (n) of Section
6.02 of the Credit Agreement is hereby amended by deleting the
reference to "80%" and replacing it with "100%".
SECTION 8. Amendments to Section 6.05. (a) Section 6.05 of
the Credit Agreement is hereby amended by inserting the following as a
new clause (e) immediately preceding the existing clause (e):
(e) investments in the ordinary course of business in
corporations, partnerships, joint ventures or other entities
primarily engaged in petroleum-related activities in Mexico,
Central America or South America; provided that the aggregate
amount of all such investments pursuant to this subsection (e)
shall not at any time exceed $30,000,000; and
(b) the existing clause (e) of Section 6.05 of the Credit
Agreement will be redesignated as clause (f) and such clause (f) is
hereby amended as follows:
(i) the reference to clause "(d)" is deleted and
replaced with a reference to clause "(e)"; and
(ii) the reference to "this subsection (e)" is
deleted and replaced with a reference to "this subsection
(f)".
SECTION 9. Amendments to Section 6.06. Section
6.06 of the Credit Agreement is hereby amended by
(a) deleting all references to "December 31, 1992" and
replacing each such reference with "December 31, 1994" and (b)
deleting the reference to "$184,087,000" and replacing such reference
with "$200,000,000".
SECTION 10. Amendments to Section 6.08. Section 6.08 of the
Credit Agreement is hereby amended to read in its entirety as follows:
SECTION 6.08. Consolidated Tangible Net Worth. Permit
Consolidated Tangible Net Worth less paid in capital and surplus
attributable to any Preferred Stock (other than treasury stock)
issued and outstanding on the Effective Date plus any treasury
stock of the Borrower (such treasury stock consisting solely of
up to 1,400,000 shares of common stock) to be less than the sum
of (i) $350,000,000 plus (ii) 50% of Consolidated Net Income (to
the extent such Net Income is positive) for the period
commencing on December 31, 1994 and ending on the last day of
the most recently completed fiscal quarter.
SECTION 11. Amendment to Section 6.10.
Section 6.10 of the Credit Agreement is hereby amended to read in its
entirety as follows:
SECTION 6.10. Interest Coverage Ratio. Permit the Periodic
Interest Coverage Ratio at any time to be less than 3.00 to
1.00.
SECTION 12. Amendment to Schedule I. Schedule I to the
Credit Agreement is hereby amended and replaced in its entirety by
Schedule I attached hereto.
SECTION 13. Amendment to Schedule II.
Schedule II to the Credit Agreement is hereby amended by deleting the
reference to "$1.00 par value" with respect to the Shares Authorized
of Diamond Shamrock Refining and Marketing Company and replacing it
with 11 0.01 par value."
SECTION 14. Commitments and Addresses of Banks. The
parties hereby confirm and agree that the current Commitments of the
respective Banks and their respective addresses for notices under the
Credit Agreement are as set forth in Schedule II attached hereto.
SECTION 15. Representations and Warranties. The Borrower
and each of the Guarantors represent and warrant to the Agent and to
each of the Banks that (provided that the representations of each
Guarantor shall be limited to matters relating to the Borrower or such
Guarantor):
(a) This Amendment, and the Credit Agreement as amended
hereby, have been duly authorized, executed and delivered by it
and constitute its legal, valid and binding obligations
enforceable in accordance with their respective terms (subject,
as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws
affecting creditors, rights generally and to general principles
of equity).
(b) The representations and warranties set forth in
Article III of the Credit Agreement are true and correct in all
material respects before and after giving effect to this
Amendment with the same effect as if made on the date hereof,
except to the extent such representations and warranties
expressly relate to an earlier date, in which case they were
true and correct in all material respects on and as of such
earlier date.
(c) As of the date hereof, the Borrower and each
Guarantor is in compliance with all the terms and provisions
contained in the Credit Agreement on its part to be observed as
performed, and at the time of and immediately after giving
effect to this Amendment no Event of Default has occurred and is
continuing and no event which with notice or lapse of time or
both would constitute an Event of Default has occurred and is
continuing.
SECTION 16. Conditions to Effectiveness. The
amendments to the Credit Agreement set forth in this Amendment shall
become effective on March 31, 1995; provided that:
(a) the Agent shall have received counterparts of this
Amendment which, when taken together, bear the signatures of the
Borrower, each of the Guarantors and each Bank;
(b) the Agent shall have received a favorable written
opinion of the Borrower's counsel, addressed to the Banks, to
the effect set forth in Annex I hereto;
(c) the Borrower shall have paid all accrued Fees and
other amounts owing under the Credit Agreement as of March 31,
1995, as well as all fees payable pursuant to the letter
agreement dated March 24, 1995, among Chemical Bank, Chemical
Securities Inc. and the Borrower, and no Loans shall be
outstanding as of such date; and
(d) the conditions to the amendment of the Other Credit
Agreement, as set forth in the First Amendment thereto dated as
of the date hereof, shall have been satisfied.
SECTION 17. Credit Agreement. Except as specifically
amended hereby, the Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof as in existence on
the date hereof. After the date that this Amendment becomes effective
as provided in Section 11 above, any reference to the Credit Agreement
shall mean the Credit Agreement as amended hereby.
SECTION 18. Applicable Law. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 19. Counterparts. This Amendment may be executed
in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute but
one contract.
SECTION 20. Expenses. The Borrower agrees to reimburse the
Agent for its out-of-pocket expenses in connection with the
preparation and execution of this Amendment, including the fees,
charges and disbursements of Cravath, Swaine & Moore, counsel for the
Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers
as of the day and year first written above.
DIAMOND SHAMROCK, INC.,
DIAMOND SHAMROCK REFINING AND
MARKETING COMPANY,
DIAMOND SHAMROCK STATIONS,
INC.,
DIAMOND SHAMROCK PIPELINE
COMPANY,
DIAMOND SHAMROCK REFINING
COMPANY, L.P.,
SIGMOR CORPORATION,
XRAL STORAGE AND TERMINALING
COMPANY,
THE SHAMROCK PIPE LINE
CORPORATION,
SIGMOR PIPELINE COMPANY,
TOC-DS COMPANY,
D-S SPLITTER, INC.,
D-S PIPE LINE CORPORATION, and
NORTH AMERICAN INTELECOMJI
INC.,
By: /s/ R.C. BECKER
R.C. Becker, in each case,
Vice President and
Treasurer
CHEMICAL BANK, individually
and as Agent,
By: /s/ RONALD POTTER
Ronald Potter
Managing Director
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION,
By: /s/ BETTY LOU J. ROBERT
Betty Lou J. Robert
Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ HELEN A. CARR
Helen A. Carr
Vice President
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ LAURA B. SHEPARD
Laura B. Shepard
Vice President
ROYAL BANK OF CANADA,
By: /s/ EVERETT M. HARNER
Everett M. Harner
Manager
NATIONAL WESTMINSTER BANK PLC
New York Branch,
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
NATIONAL WESTMINSTER BANK PLC
Nassau Branch,
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
THE FROST NATIONAL BANK OF
SAN ANTONIO,
By: /s/ PHIL DUDLEY
Phil Dudley
Vice President
BANK OF SCOTLAND,
By: /s/ ELIZABETH WILSON
Elizabeth Wilson
Vice President and
Branch Manager
NATIONS BANK OF TEXAS, N.A.,
By: /s/ JAMES R. ALLRED
James R. Allred
Vice President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION,
By: /s/ DAN M. DANELO
Dan M. Danelo
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION,
By: /s/ ROBERT S. GLENN
Robert S. Glenn
Vice President
INDUSTRIAL BANK OF JAPAN,
LIMITED,
By: /s/ ROBERT W. RAMAGE, JR.
Robert W. Ramage, Jr.
Senior Vice President
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By: /s/ MICHAEL MEISS
Michael Meiss
Vice President
THE FIRST NATIONAL BANK OF
BOSTON,
By: /s/ CYNTHIA A. STABLEFORD
Cynthia A. Stableford
Vice President
THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
By: /s/ SOICHI YOSHIDA
Soichi Yoshida
Vice President
SOCIETE GENERALE,
By: /s/ MARK A. COX
Mark A. Cox
Vice President
<PAGE>
SCHEDULE I
Additional Guarantors
1. Diamond Shamrock Refining and Marketing Company, a Delaware
corporation.
2. The Shamrock Pipe Line Corporation, a Delaware corporation.
3. Sigmor Corporation, a Delaware corporation
4. Sigmor Pipeline Company, a Texas corporation
5. Sigmor Beverage, Inc., a Texas corporation
6. North American InTeleCom, Inc., a Texas
corporation
7. Diamond Shamrock Stations, Inc., a Delaware corporation
8. XRAL Storage and Terminaling Company, a Texas corporation
9. TOC-DS Company, a Delaware corporation
10. D-S Splitter, Inc., a Delaware corporation
ii. Big Diamond, Inc., a Texas corporation
12. Big Diamond Number 1, Inc., a Texas corporation
13. Diamond Shamrock Pipeline Company, a Delaware corporation
14. Diamond Shamrock Refining Company, L.P., a Delaware limited
partnership
<PAGE>
SCHEDULE II
Name and Address
of Bank Commitment
Chemical Bank $11,666,666.00
c/o Texas Commerce Bank
2200 Ross Avenue
Dallas, TX 75201
Attn of: W. Paschall Tosch
Bank of America, National Trust $10,000,000.00
and Savings Association
3 Allen Center
333 Clay Street
Suite 4550
Houston, TX 77002-4103
Attn of: Lee McKinsley
The First National Bank of Chicago $10,000,000.00
1100 Louisiana Street
Suite 3200
Houston, TX 77002
Attn of: Helen Carr
National Westminster Bank PLC $ 8,333,333.00
Texas Commerce Tower
600 Travis Street
Suite 6070
Houston, TX 77002
Attn of: James Moyes
Royal Bank of Canada $ 8,333,333.00
600 Wilshire Blvd.
Suite 800
Los Angeles, CA 90017
Attn of: Everett Hamer
NationsBank of Texas, N.A. $ 8,333,333.00
700 Louisiana Street
8th Floor
Houston, TX 77002
Attn of: James Alfred
Bank One, Texas, National Association $ 8,333,333.00
105 St. Mary's Street
Alamo National Building
2nd Floor
San Antonio, TX 78205
Attn of: Rob Glenn
Industrial Bank of Japan, Limited $ 5,000,000.00
Allen Center
333 Clay Street
Suite 4850
Houston, TX 772002
lkttn of: Lynn Williford
Fuji Bank, Limited, $ 5,000,000.00
Houston Agency
1 Houston Center
1221 McKinney Street
Suite 4100
Houston, TX 77010
Attn of: Jacques Azagury
Bank of Tokyo $ 5,000,000.00
2 Houston Center
1309 Fannin
Suite 1104
Houston, TX, 77010
Attn of: Micheal Weiss
Bank of Scotland $ 5,000,000.00
2 Allen Center
1200 Smith Street
Suite 1750
Houston, TX 77002-4912
Attn of: Janni Blanter
The Chase Manhattan Bank, $ 5,000,000.00
National Association
1 Houston Center
1221 McKinney Street
Suite 3003
Houston, TX 77010
Attn of: Peter Lind
The First National Bank of Boston $ 3,333,333.00
100 Federal Street
Mail Stop 01-08-02
Boston, MA 02110
Attn of: Cynthia Stableford
Societe Generale $ 3,333,333.00
1111 Bagby Street
Suite 2020
Houston, TX 77002
Attn of: Mark Cox
The Frost National Bank $ 1,666,668.00
of San Antionio
100 West Houston Street
San Antonio, TX 78205
Attn of: Phil Dudley
Texas Commerce Bank $ 1,666,668.00
National Association
2200 Ross Avenue
3rd Floor
Dallas, TX 75201
Attn of: W. Paschall Tosch
TOTAL $100,000,000.00
W4036.TW
SECOND AMENDMENT dated as of December 5, 1995 (the
"Amendment"), to CREDIT AGREEMENT II dated as of April
14, 1987, as amended and restated through April 15,
1993, as amended by the First Amendment thereto dated
March 31, 1995 (the "Credit Agreement"), among DIAMOND
SHAMROCK, INC., a Delaware corporation (the
"Borrower"), DIAMOND SHAMROCK REFINING AND MARKETING
COMPANY, a Delaware corporation ("R&M"), the entities
listed in Schedule I to the Credit Agreement (together
with R&M, collectively referred to as the
"Guarantors"), the banks party to the Credit Agreement
(the "Banks") and CHEMICAL BANK, as agent for the
Banks (the "Agent").
A. The Borrower and the Guarantors have requested that the
Banks amend certain provisions of the Credit Agreement. The
Banks are willing to enter into this Amendment, subject to the
terms and conditions set forth herein.
B. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual agreements
contained in this Amendment and other good and valuable
consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendments to Article I.
(a) The following definitions are hereby added to
Article I:
"Consolidated Net Worth" shall mean at any date,
with respect to the Borrower and its Subsidiaries on a
consolidated basis, (a) the sum of (i) capital stock taken
at par value, plus (ii) capital surplus, plus (iii)
retained earnings, minus (b) treasury stock.
"NCS" shall mean National Convenience Stores
Incorporated, a Delaware corporation.
"NCS Subsidiaries" shall mean, with respect to
NCS, all corporations, associations, or other business
entities, the accounts of which are consolidated in the
financial statements of NCS in accordance with generally
accepted accounting principles.
"NCS Purchase Date" shall mean the date on which
common stock and warrants to purchase common stock of NCS
tendered pursuant to that certain Offer to Purchase by
Shamrock Acquisition Corp., a Delaware corporation, dated
November 14, 1995, as it may be amended or extended (the
"Offer to Purchase"), are accepted for payment by Shamrock
Acquisition Corp. pursuant to the terms of the Offer to
Purchase.
"NCS Guaranty Date" shall mean the date upon which
NCS and such of the NCS Subsidiaries as have either
$20,000,000 in assets or $20,000,000 in revenue as of the
end of the most recently completed fiscal year become
Guarantors hereunder.
"NCS Mortgages" shall mean those certain mortgage
notes secured by Deed of Trust liens on certain real
property of NCS Subsidiaries, bearing interest at a fixed
rate of 9.5%, increasing to 11% in 2001 and to 12% in 2002,
payable in quarterly installments and maturing on September
30, 2003, and any renewals, extensions, restatements, or
reamortizations thereof.
(b) The definition of "Total Funded Debt Ratio" in
Article I of the Credit Agreement is hereby amended to read
in its entirety as follows:
"Total Funded Debt Ratio" shall mean, at any time,
with respect to the Borrower and the Subsidiaries on a
consolidated basis, the ratio of (a) the sum of (i) Funded
Debt at such time and (ii) Subordinated Indebtedness at
such time to (b) the sum of (i) Funded Debt at such time
and (ii) Subordinated Indebtedness at such time and (iii)
Consolidated Net Worth at such time.
SECTION 2. Amendments to Article III:
The first sentence of Section 3.16 is amended to read
as follows:
Each Subsidiary which, at December 31, 1994, had
total assets exceeding $20,000,000, or which, for the year
ended December 31, 1994 had revenues exceeding $20,000,000,
is a Guarantor, other than D-S Venture Company, L.L.C., a
Delaware limited liability company, over ninety-eight
percent (98%) of the assets of which on that date consisted
of its limited partnership interest in Diamond Shamrock
Refining Company, L.P.
SECTION 3. Amendment to Article V:
The following section is hereby added to Article V:
SECTION 5.10. NCS Guaranties. Cause NCS and such
of the NCS Subsidiaries as had either $20,000,000 in assets
or $20,000,000 in revenues as of the end of the then most
recently completed fiscal year to become Guarantors under
this agreement at such time as such entities can deliver
such guaranties without violating the terms and provisions
of the NCS Mortgages.
SECTION 4. Amendments to Article VI:
(a) Amendments to Section 6.01:
(a) Section 6.01(a) of the Credit Agreement is
amended by deleting the reference to "0.63" and inserting
in lieu thereof "0.65".
(b) The following sections are hereby added to Article
VI:
SECTION 6.12. Additional NCS Indebtedness. Permit
NCS or the NCS Subsidiaries to create, incur, assume, or
otherwise be obligated with respect to Indebtedness for
reimbursement obligations relating to letters of credit or
for money borrowed, as an obligor, guarantor, mortgagor,
lessee under a capital lease, or otherwise, after thirty
days following the NCS Purchase Date and prior to the NCS
Guaranty Date, except for (a) Indebtedness in respect of
the NCS Mortgages, in an aggregate amount not to exceed
$57,000,000, (b) Intercompany Loans, and (c) Indebtedness
for money borrowed not otherwise permitted by clauses (a)
and (b) of this section 6.12 in an amount not exceeding
$500,000 in the aggregate outstanding at any one time.
SECTION 6.13. Certain NCS Agreements. Permit NCS
or the NCS Subsidiaries, after the NCS Purchase Date and
prior to the NCS Guaranty Date, to enter into or to allow
to remain in place any provision in any agreement or
arrangement with any Person to which any such entity is a
party which would restrict the ability of such entity to
declare and pay dividends and distributions with respect to
outstanding shares of its common stock or to repay advances
to Borrower or any other Subsidiary.
SECTION 5. Representations and Warranties. The Borrower
and each of the Guarantors represent and warrant to the Agent
and to each of the Banks that (provided that the representations
of each Guarantor shall be limited to matters relating to the
Borrower or such Guarantor):
(a) This Amendment, and the Credit Agreement as
amended hereby, have been duly authorized, executed, and
delivered by it and constitute its legal, valid, and
binding obligations enforceable in accordance with their
respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of
equity).
(b) The representations and warranties set forth in
Article III of the Credit Agreement are true and correct in
all material respects before and after giving effect to
this Amendment with the same effect as if made on the date
hereof, except to the extent such representations and
warranties expressly relate to an earlier date, in which
case they were true and correct in all material respects on
and as of such earlier date.
(c) As of the date hereof, the Borrower and each
Guarantor is in compliance with all the terms and
provisions contained in the Credit Agreement on its part to
be observed as performed, and at the time of and
immediately after giving effect to this Amendment no Event
of Default has occurred and is continuing and no event
which with notice or lapse of time or both would constitute
an Event of Default has occurred and is continuing.
SECTION 6. Conditions to Effectiveness. The amendments to
the Credit Agreement set forth in this Amendment shall become
effective on December 5, 1995; provided that:
(a) the Agent shall have received counterparts of this
Amendment which, when taken together, bear the signatures
of the Borrower, each of the Guarantors, and the Required
Banks;
(b) the Borrower shall have paid all Fees and other
amounts due under the Credit Agreement as of December 5,
1995; and
(c) the conditions to the amendment of the Other
Credit Agreement, as set forth in the Second Amendment
thereto dated as of the date hereof, shall have been
satisfied.
SECTION 7. Credit Agreement. Except as specifically
amended hereby, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof as in
existence on the date hereof. After the date that this
Amendment becomes effective as provided in Section 4 above, any
reference to the Credit Agreement shall mean the Credit
Agreement as amended hereby.
SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 9. Counterparts. This Amendment may be executed
in two or more counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute
but one contract.
SECTION 10. Expenses. The Borrower agrees to reimburse the
Agent for its out-of-pocket expenses in connection with the
preparation and execution of this Amendment, including the fees,
charges and disbursements of Cravath, Swaine & Moore, counsel
for the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first written above.
DIAMOND SHAMROCK, INC.,
DIAMOND SHAMROCK REFINING AND
MARKETING COMPANY,
DIAMOND SHAMROCK STATIONS, INC.,
DIAMOND SHAMROCK PIPELINE COMPANY,
DIAMOND SHAMROCK REFINING
COMPANY, L.P.
SIGMOR CORPORATION,
XRAL STORAGE AND TERMINALING
COMPANY,
THE SHAMROCK PIPE LINE CORPORATION,
SIGMOR PIPELINE COMPANY,
TOC-DIAMOND SHAMROCK COMPANY,
D-S SPLITTER, INC.
and
NORTH AMERICAN INTELECOM, INC.,
By: /s/ R. C. BECKER
R. C. Becker, in each case,
Vice President and Treasurer
SIGMOR BEVERAGE, INC.,
By: /s/ CARL W. HIX
Carl W. Hix,
Vice President, Secretary
and Treasurer
BIG DIAMOND, INC.,
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller,
Vice President, Secretary
and Treasurer
BIG DIAMOND NUMBER 1, INC.,
By: /s/ DOUGLAS M. MILLER
Douglas M. Miller,
Vice President, Secretary
and Treasurer
CHEMICAL BANK, individually and as
Agent
By: /s/ RONALD POTTER
Ronald Potter
Managing Director
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By: /s/ BETTY LOU J. ROBERT
Betty Lou J. Robert
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ HELEN A. CARR
Helen A. Carr
Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ LAURA B. SHEPARD
Laura B. Shepard
Vice President
ROYAL BANK OF CANADA
By: /s/ EVERETT M. HARNER
Everett M. Harner
Manager
NATIONAL WESTMINSTER BANK PLC,
New York Branch
By: /s/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
NATIONAL WESTMINSTER BANK PLC,
Nassau Branch
By: /S/ STEPHEN R. PARKER
Stephen R. Parker
Vice President
THE FROST NATIONAL BANK OF SAN
ANTONIO
By: /s/ PHIL DUDLEY
Phil Dudley
Vice President
BANK OF SCOTLAND
By: /s/ ELIZABETH WILSON
Elizabeth Wilson
Vice President and
Branch Manager
NATIONSBANK OF TEXAS, N.A.
By: /s/ JAMES R. ALLRED
James R. Allred
Vice President
TEXAS COMMERCE BANK, NATIONAL
ASSOCIATION
By: /s/ DAN M. DANELO
Dan M. Danelo
Senior Vice President
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By: /s/ ROBERT S. GLENN
Robert S. Glenn
Vice President
INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ ROBERT W. RAMAGE, JR.
Robert W. Ramage, Jr.
Senior Vice President
THE BANK OF TOKYO, LTD., DALLAS
AGENCY
By: /s/ MICHAEL MEISS
Michael Meiss
Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ CYNTHIA A. STABLEFORD
Cynthia A. Stableford
Vice President
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ SOICHI YOSHIDA
Soichi Yoshida
Vice President
SOCIETE GENERALE
By: /s/ MARK A. COX
Mark A. Cox
Vice President
<PAGE>
SCHEDULE I
Additional Guarantors
1. Diamond Shamrock Refining and Marketing Company, a Delaware
corporation.
2. The Shamrock Pipe Line Corporation, a Delaware corporation.
3. Sigmor Corporation, a Delaware corporation
4. Sigmor Pipeline Company, a Texas corporation
5. Sigmor Beverage, Inc., a Texas corporation
6. North American InTeleCom, Inc., a Texas corporation
7. Diamond Shamrock Stations, Inc., a Delaware corporation
8. XRAL Storage and Terminaling Company, a Texas corporation
9. TOC-DS Company, a Delaware corporation
10. D-S Splitter, Inc., a Delaware corporation
11. Big Diamond, Inc., a Texas corporation
12. Big Diamond Number 1, Inc., a Texas corporation
13. Diamond Shamrock Pipeline Company, a Delaware corporation
14. Diamond Shamrock Refining Company, L.P., a Delaware limited
partnership
W3059a.TW
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
Consolidated Results 1995 vs 1994
Sales and operating revenues for 1995 were $2,936.8 million compared to
$2,606.3 million in 1994. Sales and operating revenues increased primarily
due to a 5.5% and a 4.8% increase in refined product sales volumes and
prices, respectively, and a 9.9% and a 3.2% increase in retail gasoline sales
volumes and prices, respectively. This increase also reflected the
contribution from a 7.0% increase in the average number of retail outlets
during 1995. Per store retail merchandise sales and retail gasoline sales
volumes increased 5.1% and 2.7%, respectively, during 1995 when compared to
1994. Also contributing to the increase in consolidated sales and operating
revenues was a 20.6% increase in sales in the Company's Allied Businesses
segment, primarily due to the strong demand for polymer grade propylene and
ammonia fertilizer. In addition, the acquisition of National Convenience
Stores Incorporated ("NCS") in mid-December 1995, contributed $35.2 million
in sales and operating revenues.
During 1995, the Company had net income of $47.3 million compared with
$75.8 million in 1994. The Company's 1995 results were negatively impacted
by weak refining margins in the inland markets where the Company sells most
of its products. Refining margins improved somewhat later in the fourth
quarter of 1995 due largely to heating oil price increases driven by cold
weather; however, increases in the cost of gasoline could not be recovered
at the retail level. Partially offsetting weak refining margins were strong
results for polymer grade propylene and ammonia fertilizer due to improved
demand.
A major portion of the Company's inventory is valued at the lower of
last-in, first-out (LIFO) cost or market. At December 31, 1995, inventories
of crude oil and refined products of the Refining and Wholesale segment and
propylene products in the Allied Businesses segment were valued at market
(lower than LIFO cost). Motor fuel products of the Retail segment were
recorded at their LIFO costs. 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 $5.2 million
and $7.3 million in 1995 and 1994, respectively.
Consolidated Results 1994 vs 1993
Sales and operating revenues for 1994 were $2,606.3 million compared to
$2,555.3 million in 1993. Sales and operating revenues increased primarily
due to a 6.4% increase in refined product sales volumes, a 6.4% increase in
retail merchandise sales and an improvement in revenues in the Allied
Businesses segment.
During 1994, the Company had net income of $75.8 million compared with
income before cumulative effect of accounting changes of $32.6 million and
net income of $18.4 million in 1993. The Company's integrated business
approach contributed significantly to the Company's profitability during
1994. The Refining and Wholesale segment was supported by strong refining
margins in the first half of 1994. Then, as refining margins narrowed, the
Company had excellent results from the Retail segment, reflecting improved
retail margins in the second half of 1994. The Allied Businesses segment
provided significant operating profit improvements throughout 1994,
reflecting a general improvement in the petrochemical business and strong
demand for ammonia fertilizer. The estimated after tax change in inventory
values was a positive $7.3 million in 1994 and a negative $16.5 million in
1993.
Segment Results 1995 vs 1994
Sales and operating revenues from the Refining and Wholesale segment
were $1,435.8 million compared to $1,320.8 million in 1994. The increase is
primarily due to a 5.5% and a 4.8% increase in refined product sales volumes
and prices, respectively. Operating profit decreased by 41.6% primarily due
to a 20.5% decrease in refinery margins from the same period a year ago. Last
year, refinery margins in the Company's inland markets, where most of its
products are sold, were strong, relative to the Gulf Coast market, primarily
because supply to the inland markets were constrained by distribution system
problems. While refinery margins in the Company's inland markets remain
higher than those in the Gulf Coast market, they have declined versus last
year while Gulf Coast margins have improved. The 1995 operating profit was
positively impacted by an increase in the value of crude oil and refined
product inventories.
Sales and operating revenues in the Retail segment increased by 15.5%
in 1995, primarily due to a 9.9% and a 3.2% increase in retail gasoline sales
volumes and prices, respectively, and a 9.7% increase in retail merchandise
sales. This increase reflected the contribution from a 7.0% increase in the
average number of retail outlets during 1995. Per store retail merchandise
sales increased 5.1% and per store retail gasoline sales volumes increased
2.7% during 1995 compared to 1994. In addition, the acquisition of NCS in
mid-December 1995, contributed $35.2 million in sales and operating revenues.
Retail segment operating profit decreased by $3.3 million to $55.6 million
in 1995 from $58.9 million in 1994, primarily due to a 6.7% decrease in
retail gasoline margins. Gross profit from lottery sales in 1995 was $9.2
million compared to $8.2 million in 1994.
Allied Businesses sales and operating revenues increased 20.6% to $375.4
million in 1995, primarily due to an increase in revenues in the Company's
propylene business, reflecting increased sales volumes and prices
attributable to continued strong demand for polymer grade propylene. Also
contributing to the increase in revenues was an 8.8% increase in natural gas
liquids sales volumes. Operating profits in the Allied Businesses segment
increased by 84.8% in 1995 to $48.1 million primarily due to a $13.7 million
and a $4.0 million increase in operating profit from the Company's propylene
and ammonia fertilizer businesses, respectively, reflecting a general
improvement in the petrochemical business and demand for ammonia fertilizer.
Segment Results 1994 vs 1993
Sales and operating revenues from the Refining and Wholesale segment
increased $26.0 million from $1,294.8 million in 1993 to $1,320.8 million in
1994, primarily due to a 6.4% increase in refined product sales volumes as
the Company's expansion of its Three Rivers Refinery came on-line. This
increase was partially offset by a 5.1% decrease in refined products sales
prices. Refining and Wholesale operating profit increased by 98.6% to $146.8
million compared to $73.9 million in 1993. This increase in operating profit
was primarily due to a 17.0% increase in refinery margins compared to 1993.
The 1994 operating profit was positively impacted by an increase in the value
of crude oil and refined products inventories. The Company also benefited
from a full year of the projects brought on line in 1993, namely, the Three
Rivers expansion and the diesel desulfurizer at McKee.
Sales and operating revenues in the Retail segment increased 1.7% in
1994, primarily due to a 6.4% increase in retail merchandise sales, a 2.0%
increase in gasoline sales volumes, and a 15.8% increase in lottery sales,
partially offset by a 2.9% decrease in retail gasoline sales prices. Per-store
merchandise sales increased by 5.1%. Retail operating profit decreased
by 6.1% to $58.9 million in 1994 from $62.7 million in 1993, primarily due
to increased operating costs, reflecting the costs associated with the
installation of the Company's computerized retail information inventory
management and customer service system ("IRIS"). IRIS has the capability of
tracking merchandise sales by item and interfacing with computerized controls
for underground storage tank monitoring that allows the Company increased
environmental protection. Also contributing to the decrease in operating
profit was a 0.6% decrease in retail merchandise margins. Gross profit from
lottery sales in 1994 was $8.2 million compared to $7.3 million in 1993.
Allied Businesses sales and operating revenues increased 2.9% to $311.2
million in 1994, primarily due to an increase in revenues from the Company's
ammonia fertilizer and propylene businesses. The propylene increases
reflected strong demand for polymer grade propylene during the last half of
the year. The ammonia fertilizer business benefited from strong demand for
ammonia fertilizer and depressed natural gas prices. These revenue increases
were partially offset by a 9.1% decrease in natural gas liquids sales volumes
and a 6.9% decrease in natural gas liquids sales prices. Allied Businesses
operating profits increased by 73.3% in 1994 to $26.0 million, primarily due
to an $8.2 million and a $6.7 million increase in operating profits from the
Company's propylene and ammonia fertilizer businesses, respectively. Also
contributing to the increase in operating profits was a $3.0 million
improvement from Trans Texas Pipeline, reflecting a full year of higher
operating rates and tariffs. Partially offsetting the increase in operating
profits was a $5.7 million increase in operating expense from international
operations, and a $2.9 million decrease in natural gas processing operating
profit, reflecting the cancellation of the Company's contract to process
natural gas.
Acquisition of National Convenience Stores
In December 1995, the Company completed the acquisition of all the
outstanding common shares of NCS for $27 per share in cash. The total value
of the transaction is approximately $280.0 million, which includes the
purchase of outstanding warrants for the spread between $27 per share and the
exercise price of the warrants, transaction costs, and the assumption of
NCS's debt. The purchase price exceeded the estimated fair value of net
assets acquired by approximately $160.5 million, which is included in the
accompanying consolidated balance sheet as excess of cost over acquired net
assets, net of amortization. This asset is being amortized over its estimated
useful life of 20 years. Financing for the transaction has been arranged
through Bank of America National Trust and Savings Association.
NCS operates 661 "Stop N Go" convenience stores located in Texas cities
where the Company currently operates retail outlets. Nearly 600 of the NCS
outlets sell gasoline. Based on historical results, it is estimated that
total annual revenues for the combined companies will be approximately $3.7
billion. In addition, total merchandise sales are expected to more than
double and the Company's sales of gasoline through branded outlets will
increase approximately 21.0% to an estimated 123,000 barrels per day.
Additionally, the acquisition increases the contribution of the Company's
Retail segment to operating profit which lessens the impact of more volatile
refining margins on profitability.
Outlook
1995 was a difficult year for the refining and marketing industry due
to industry-wide weak refining margins. Refining margins were negatively
impacted by industry overcapacity, high utilization rates, regulatory changes
relating to reformulated gasoline, and an unseasonably warm first quarter.
Retail fuel margins, which usually widen when refining margins narrow, did
not fully offset the downturn in refining.
The outlook for the refining and marketing industry in 1996 is positive
as most analysts agree that profit-ability in 1995 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 which is expected to absorb
the overcapacity that plagued the industry in 1995. Currently, however,
although the industry is experiencing better demand and higher prices for
heating oil driven by the recent cold winter weather, gasoline margins until
recently were depressed.
The Company has established earnings per share improvement goals of
$0.75 per share in 1996 and another $0.75 per share the following year for
a total of $1.50 by 1997. These earnings targets do not reflect the potential
impact of changes in refining and marketing margins, the economy and
inflation on operating expenses, or other factors outside the Company's
control. As such, there necessarily can be no assurance that these goals will
be realized.
Underlying the Company's earnings improvement goals are several
significant items. The primary contributor to improved earnings is the
combined impact of the completion of capital projects currently underway or
recently completed. The most significant of these projects are the El Paso
pipeline and terminal, the Three Rivers expansion, and the second propylene
splitter at Mont Belvieu. Project economics are based on historical product
prices and raw material costs that represent two to five year averages.
Also of significance is the recently completed migration of all Company
information systems from a mainframe system to a client/server system which
will result in significant cost savings over the next several years.
The balance of the anticipated earnings improvement comes from a
combination of administrative expense control measures and the optimization
of operations.
Finally, these profit improvement goals were established prior to our
acquisition of NCS. While management is confident the NCS acquisition will
contribute to the Company's operating profit in 1996, the Company will also
incur one-time consolidation expenses during 1996 which will affect net
income for the year.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Working Capital
For the year ended December 31, 1995, cash provided by operations was
$117.6 million, compared with $176.2 million provided in 1994. Working
capital at December 31, 1995 consisted of current assets of $654.9 million
and current liabilities of $489.5 million, or a current ratio of 1.3. At
December 31, 1994, the current ratio was 1.4, with current assets of $540.4
million and current liabilities of $374.1 million. Cash provided by
operations decreased primarily due to a $28.5 million decrease in net income
and a decrease in deferred taxes provided. An increase in working capital
(excluding the impact of the NCS acquisition) primarily due to an increase
in inventory prices and volumes, negatively impacted cash provided by
operations. This increase was partially offset by an increase in accounts
payable, primarily attributable to an 8.8% increase in crude oil purchase
prices in 1995 compared to 1994.
The increase in cash provided by operations during 1994 over 1993 was
primarily due to a $57.4 million increase in net income and an increase in
deferred taxes provided. Deferred taxes increased primarily because of the
difference between book and tax inventory valuation at the Company's two
refineries and because of the increase in the difference between the book and
tax basis for properties and equipment, offset in part by an increase in the
alternative minimum tax credit carryforward. The Company was in an
alternative minimum tax position for the 1994 taxable year. Increased working
capital negatively impacted cash provided by operations during 1994. The
increase in working capital in 1994 was primarily due to a 56.5% increase in
inventories, attributable to high crude oil inventory at year-end. The
increase in current liabilities was primarily due to a 125.2% increase in
accounts payable. The increase in inventories and accounts payable was
affected by the Company's decision to purchase additional crude oil in
December 1994 in order to overcome potential supply disruptions caused by the
implementation of Oil Pollution Act 1990 ("OPA 90"). Under OPA 90, all
vessels trading in U.S. waters must have had a Certificate Of Financial
Responsibility, approved by the Coast Guard, in place by December 28, 1994.
Vessel owners were slow to comply, setting the stage for a possible shortage
of foreign shipments to the U.S.
The Company acquires a major portion of its crude oil requirements
through the purchase of futures contracts on the New York Mercantile
Exchange. The Company also uses the futures market to manage the price risk
inherent in purchasing the crude oil in advance of the delivery date, and in
maintaining the inventories contained within its refinery and pipeline
systems. The Company defers the impact of changes in the market value of
these contracts until such time as the hedged transaction is completed.
The Company has not entered into any form of interest rate caps or swaps
on any of its fixed or variable rate debt in recent periods.
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. The Company's capital expenditures during
1995 were $556.6 million compared with $162.1 million in 1994, and $131.8
million in 1993.
Included in the Company's 1995 capital expenditures is approximately
$280.0 million for the acquisition of NCS on December 14, 1995. Also included
in the Company's capital expenditures during 1995 is the completion of the
McKee to El Paso refined products pipeline and terminal and the Three Rivers
refinery hydrogen plant. The Company also recently completed drilling a brine
production well at the East Terminal at Mont Belvieu and purchased four
underground storage wells at the facility's West Terminal. In addition a non-
cash investment of $12.0 million for a portion of a crude oil import and
storage terminal acquired under an installment purchase arrangement is
included in the 1995 capital expenditures.
The acquisition of NCS and other capital expenditures, expenditures for
debt service, lease obligations, working capital, and dividend requirements
exceeded cash generated by operations. As a result, in addition to borrowing
under the Bank of America term loan to finance the NCS acquisition, the
Company on February 13, 1995 issued $75.0 million of 8.75% debentures due
June 15, 2015 and on June 8, 1995 issued $25.0 million in non-callable 7.25%
debentures due June 15, 2010. Also from time to time throughout 1995, the
Company accessed the commercial paper and bank money markets.
The Company announced in January 1996, 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 prior to the
acquisition of NCS. The Company's capital expenditures budgets for the next
two years have been reduced so that revised capital expenditure plans are
approximately $160.0 million in 1996 and $140.0 million in 1997. 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, capital spending
reductions, and the sale of some assets. The capital spending cuts include
eliminating retail store construction in most of Texas, while integrating the
NCS stores into the Company's system. The Company currently intends to
continue to construct additional retail stores in Arizona. Many 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 allow heavy oils
to be upgraded to more profitable 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 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.
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.
In addition to the NCS acquisition, the Company continued to increase
its retail marketing business in 1995 with the acquisition of 21 outlets in
New Mexico. In addition, the Company opened 30 outlets and closed 16 marginal
outlets in 1995. The Company opened 17 and nine new outlets, in 1994 and
1993, respectively. Approximately 21 of the newly opened outlets in 1995 were
leased by the Company under a pre-existing long-term lease arrangement (the
"Brazos Lease"). The Brazos Lease has an initial lease term which 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 December 31, 1995, approximately $15.3 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 December 31,
1995 would be approximately $175.0 million.
Environmental Matters
Environmental laws and regulations affect the Company in many areas.
Starting on January 1, 1995, reformulated gasoline was mandated by the 1990
Clean Air Act amendments for the nine worst ozone polluting cities in the
United States. Houston, which is in the Company's market area, is included
among these nine cities. Other cities, including Dallas, which is also in the
Company's market area, have chosen to "opt in" to the program. The Company
currently supplies its Houston market through third party purchases and
exchange agreements and anticipates it will continue such supply arrangements
for its reformulated gasoline requirements in Houston. The Company currently
makes reformulated gasoline for its Dallas market, which historically has
absorbed approximately 25 percent of the McKee refinery's total gasoline
pool.
The 1990 Clean Air Act amendments also affect the Company by requiring
more stringent refinery and petrochemical permitting requirements and Stage
II vapor recovery nozzles on gas pumps in ozone non-attainment areas,
including Beaumont, Dallas, El Paso, Fort Worth and Houston, which are
located within the Company's market area.
Most of the capital spent by the Company for environmental compliance
is integrally related to proj-ects that increase refinery capacity or improve
product mix, and the Company does not specifically identify capital
expenditures related to such economic projects as being environmental.
However, with respect to capital expenditures budgeted primarily to produce
federally-mandated fuels to comply with regulations related to air and water
toxic emission levels and for remediation and compliance costs related to
underground storage tanks, it is estimated that approximately $11.4 million
was spent in 1995, $11.6 million was spent in 1994, and $21.4 million in
1993. For 1996, the Company has budgeted approximately $11.1 million
primarily related to environmental capital expenditures to comply with
underground storage tank regulations at retail sites and waste water
treatment at the refineries.
Federal, state, and local laws and regulations relating to health and
environmental quality affect nearly all of the operations of the Company.
While the Company cannot predict what legislation, rules, or regulations will
be developed or how they will be administered, management believes that
compliance with the more stringent laws or regulations could require
substantial additional expenditures by the Company for installation and
operation of systems and equipment related to health and environmental
quality.
Capital Structure
Financing Activities During 1995
On February 13, 1995, the Company issued $75.0 million in non-callable
8.75% debentures due June 15, 2015.
In March and December 1995, the Company renegotiated its two separate
revolving credit facilities ("Agreement I" and "Agreement II"). Agreement I
has a face value of $200.0 million with a maturity date of March 31, 2000.
Agreement II matures on March 29, 1996, and has a value of $100.0 million.
Interest under Agreement I and Agreement II varies depending on specified
lending options available to the Company. Generally, the variable conditions
relate to the prime rate, certificates of deposit, and London Interbank
Offered Rates, as adjusted upward by specified percentages. As of December
31, 1995, the Company had no borrowings outstanding under Agreement I or
Agreement II.
Agreement I and Agreement II, the Senior Notes (as defined below) and
the B of A Credit Facility (as defined below) all contain various restrictive
covenants relating to the Company and its financial condition, operations,
and properties. Under these covenants, the Company is required to maintain
a minimum current ratio and net worth. These covenants also include
restrictions on the payment of dividends. However, it is not anticipated that
such limitations will affect the Company's present ability to pay dividends.
At December 31, 1995, under the most restrictive of these covenants, $205.7
million was available for the payment of dividends.
Agreement I and Agreement II, the Senior Notes, and the B of A Credit
Facility are unsecured. Certain subsidiaries of the Company have
unconditionally guaranteed the repayment of all indebtedness and the
performance of all obligations incurred by the Company under Agreement I and
Agreement II, the Senior Notes, and the B of A Credit Facility.
In May 1995, the Company registered $150.0 million of unallocated
securities in a Universal Shelf Registration. That registration, which was
declared effective by the Securities and Exchange Commission in June 1995,
allows the Company to issue up to $150.0 million of debt, equities or
warrants, or any combination thereof, to the public on terms to be set at the
time of issuance. The Company will issue the securities so registered from
time to time, based on the Company's capital requirements and market
conditions.
On June 8, 1995, the Company issued $25.0 million in non-callable 7.25%
debentures due June 15, 2010. The proceeds from the issuance of the
debentures were used for general corporate purposes.
On October 17, 1995, $6.2 million (the "Shamrock P/L Note") was assumed
when the Company purchased the lessor's interest in the Southlake Products
Pipeline extending from the McKee Refinery to the Dallas/Fort Worth area. The
Shamrock P/L Note is currently being amortized semi-annually at 9.75% with
a maturity date of January 15, 1999.
During December 1995, the Company entered into a Revolving Credit
Agreement (the "B of A Credit Facility") with a syndication of banks to
finance the acquisition of NCS. The B of A Credit Facility is a revolving
facility under which up to $220.0 million may be advanced and readvanced from
time to time for general corporate purposes. Credit available under the B of
A Credit Facility is reduced by equal amounts on four reduction dates: June
11, 1999; December 11, 1999; June 11, 2000; and, at maturity, on December 11,
2000. Interest under the B of A Credit Facility is structured similar to
Agreement I and Agreement II. As of December 31, 1995, the Company had $220.0
million outstanding under the B of A Credit Facility.
On December 14, 1995, the Company assumed $53.3 million in mortgages
(the "Mortgages") as part of the NCS acquisition. The Mortgages currently
carry an annual interest rate of 9.5% with average maturities of 7 years and
are recorded at their net present value. The mortgages are secured by retail
properties owned by the Company. The Company also assumed other NCS debt of
$34.5 million which was immediately repaid and cancelled.
At December 31, 1995, the Company had outstanding $163.0 million of
borrowings under bank money market facilities provided by major money center
banks at a weighted average rate of 6.05%. The bank money market facilities
are uncommitted lines of credit under which banks extend unsecured short-term
credit to the Company from time to time at market rates.
Financing Activities During 1994
On January 6, 1994, the Company prepaid the $35.0 million balance on its
$65.0 million Term Loan Agreement (the "Term Loan").
Financing Activities Prior To 1994
At December 31, 1995, the Company's long-term debt included the
following amounts incurred prior to 1994:
$100.0 million of 8% Debentures due April 1, 2023.
$120.0 million of 10.75% Senior Notes (the "Senior Notes") payable in
equal annual installments of $30.0 million beginning April 30, 1996.
$5.3 million of 9% Senior Notes payable in semi-annual installments
ending May 15, 1997.
$30.0 million of 8.77% Senior Notes payable in quarterly installments
consisting of interest only until the May, 1997 payment and thereafter of
both interest and principal for the remaining 48 quarterly payments.
$1.2 million of 8.35% Senior Notes payable in semi-annual installments
ending May 15, 1997.
$75.0 million of medium-term notes with an interest rate of 9-3/8% due
March 1, 2001.
$24.0 million of medium-term notes with an average interest rate of
8.45% maturing in the year 2003.
$46.0 million of medium-term notes with an average interest rate of
7.44% maturing in the year 2006.
Accounting Matters
Effective January 1, 1993, the Company changed the accounting method for
recording the liability under an agreement with Maxus (the "Distribution
Agree-ment") (see Note 3 of the Notes to the Consolidated Financial
Statements on page 14 of this Annual Report).
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112 ("FAS 112"), "Employers' Accounting for Post-
employment Benefits, an Amendment of FASB Statements No. 5 and 43" (see Note
3 of the Notes to the Consolidated Financial Statements on page 15 of this
Annual Report).
The Company plans to adopt Statement of Financial Accounting Standards
No. 121 ("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," in 1996. While the Company has not
completed its calculations on the effects of FAS 121, it does not expect
adoption of FAS 121 will have a material impact on its results of operations
or financial position.
The Company plans to adopt Statement of Financial Accounting Standards
No. 123 ("FAS 123), "Accounting for Stock-Based Compensation," in 1996, and
plans to elect to adopt FAS 123 by providing the disclosure information
regarding its stock-based compensation plans as allowed by FAS 123.
Accordingly, adoption of FAS 123 is not expected to have a significant effect
on the Company's results of operations or financial position.
W4034.TW
<TABLE>
<CAPTION>
Consolidated Statement of Operations
(dollars in millions, except per share) 1995 1994 1993
<S> <C> <C> <C>
REVENUES
Sales and operating revenues
(excludes excise taxes) $ 2,936.8 $ 2,606.3 $2,555.3
Other revenues, net 19.9 14.8 10.2
2,956.7 2,621.1 2,565.5
COSTS AND EXPENSES
Cost of products sold and
operating expenses 2,636.8 2,269.5 2,305.5
Depreciation and amortization 77.7 70.9 64.3
Selling and administrative 81.4 71.7 60.9
Taxes other than income taxes 39.7 39.9 36.7
Interest 47.4 43.3 40.6
2,883.0 2,495.3 2,508.0
Income before Tax Provision and
Cumulative Effect of Accounting Changes 73.7 125.8 57.5
Provision for Income Taxes 26.4 50.0 24.9
Income before Cumulative Effect of
Accounting Changes 47.3 75.8 32.6
Cumulative Effect of Accounting Changes
(net of income taxes) - - (14.2)
Net Income 47.3 75.8 18.4
Dividend Requirement on Preferred Stock 4.3 4.3 2.4
Earnings Applicable to Common Shares $ 43.0 $ 71.5 $ 16.0
Primary Earnings (Loss) Per Common Share
Before Cumulative Effect of
Accounting Changes $ 1.48 $ 2.45 $ 1.04
Cumulative Effect of Accounting Changes - - (0.49)
Total $ 1.48 $ 2.45 $ 0.55
Fully Diluted Earnings (Loss) Per Common Share
Before Cumulative Effect of Accounting
Changes $ 1.46 $ 2.34 $ 1.04
Cumulative Effect of Accounting Changes - - (0.49)
Total $ 1.46 $ 2.34 $ 0.55
Cash Dividends Per Share
Common $ 0.56 $ 0.53 $ 0.52
Preferred $ 2.50 $ 2.50 $ 1.28
Weighted Average Common Shares Outstanding
(thousands of shares)
Primary 29,102 29,128 28,871
Fully Diluted 32,375 32,383 28,968
Pro forma amounts assuming the effect of
the 1993 change in accounting principle
is applied retroactively: 1995 1994 1993
<S> <C> <C> <C>
Income before Cumulative Effect of
Accounting Changes $47.3 $75.8 $32.6
Cumulative Effect of Accounting Changes - - -
Net Income $47.3 $75.8 $32.6
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
and related Consolidated Financial Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheet December 31,
(dollars in millions, except per share) 1995 1994
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 48.6 $ 27.4
Receivables, less doubtful receivables 213.0 211.6
Inventories 376.0 291.0
Prepaid expenses and other current assets 17.3 10.4
Total Current Assets 654.9 540.4
Properties and Equipment, less accumulated
depreciation 1,357.1 1,026.1
Excess of Cost over Acquired Net Assets, net
of amortization 160.1 -
Deferred Charges and Other Assets 73.3 54.3
$2,245.4 $1,620.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt payable within one year $ 7.2 $ 3.9
Accounts payable 274.3 199.3
Accrued liabilities 208.0 170.9
Total Current Liabilities 489.5 374.1
Long-term Debt 957.5 509.2
Deferred Income Taxes 58.6 81.5
Other Liabilities and Deferred Credits 115.1 67.0
Stockholders' Equity
Preferred Stock, $.01 par value
Authorized shares - 25,000,000
Issued and outstanding shares - 1,725,000;
1,725,000 in 1994 0.0 0.0
Common Stock, $.01 par value
Authorized shares - 75,000,000
Issued shares - 29,035,853; 29,014,667
in 1994
Outstanding shares - 28,994,715;
28,896,917 in 1994 0.3 0.3
Paid-in Capital 447.8 447.3
ESOP Stock and Stock Held in Treasury (37.4) (45.4)
Retained Earnings 214.0 186.8
Total Stockholders' Equity 624.7 589.0
$2,245.4 $1,620.8
</TABLE>
See Note 17 - Commitments and Contingencies
The Notes to Consolidated Financial Statements are an integral part of this
and related Consolidated Financial Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
(dollars in millions) 1995 1994 1993
<S <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 47.3 $ 75.8 $ 18.4
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 77.7 70.9 64.3
Deferred income taxes 8.9 31.9 (9.9)
Loss on sale of properties and
equipment 1.0 0.9 3.0
Cumulative Effect of Accounting
Changes - - 23.6
Cash flow from futures activity - - (3.0)
Changes in operating assets and
liabilities:*
Decrease (increase) in
accounts receivable 4.0 (62.8) (7.2)
Decrease (increase) in
inventories (49.8) (105.0) 7.2
Decrease (increase) in
prepaid expenses 1.4 (1.8) (2.4)
Increase (decrease) in
accounts payable and
accrued liabilities 28.9 153.3 3.3
Other, net (1.8) 13.0 12.0
NET CASH PROVIDED BY OPERATING ACTIVITIES 117.6 176.2 109.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of futures contracts - - (133.3)
Settlement of futures contracts - - 136.3
Proceeds from sales of facilities 4.6 7.1 2.0
Purchase of properties and equipment (258.4) (162.1) (131.8)
Purchase of NCS, net of cash acquired (163.5) - -
Expenditures for investments (2.7) (3.2) (1.3)
NET CASH USED IN INVESTING ACTIVITIES (420.0) (158.2) (128.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in commercial
paper - - (108.5)
Increases in long-term debt 640.8 214.2 321.8
Repayments of long-term debt (291.6) (190.8) (260.5)
Payments of long-term liability (11.4) (10.2) (11.3)
Funds received from ESOP 5.8 5.1 4.3
Issuance of Common Stock 0.3 0.9 1.7
Purchase of Treasury Stock 0.0 (3.4) (0.6)
Issuance of Preferred Stock - - 84.3
Sale of Common Stock held in treasury 0.3 0.5 0.1
Dividends paid (20.6) (19.7) (17.2)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 323.6 (3.4) 14.1
Net increase (decrease) in cash and cash
equivalents 21.2 14.6 (4.7)
Cash and cash equivalents at beginning
of period 27.4 12.8 17.5
Cash and cash equivalents at end of
period $ 48.6 $ 27.4 $ 12.8
</TABLE>
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.
*Does not include the changes resulting from the NCS acquisition reflected
below.
Excluded from the Consolidated Statement of Cash Flows for the year ended
December 31, 1993, was the effect of certain non-cash activities in which
the Company exchanged an undivided interest in certain properties and
equipment for an equity ownership interest in a limited liability company.
This transaction increased investments by $19.2 million and decreased
properties and equipment by $19.2 million.
The Notes to Consolidated Financial Statements are an integral part of this
and related Consolidated Financial Statements.
Note 1 - ORGANIZATION
Diamond Shamrock, Inc. (the "Company") was organized in February 1987, as a
wholly-owned subsidiary of Maxus Energy Corporation, formerly Diamond Shamrock
Corporation ("Maxus"), to engage in the business of refining and marketing of
petroleum products and related businesses.
Effective April 30, 1987, the shares of the Company's common stock, $0.01 par
value (the "Common Stock") were distributed to the shareholders of Maxus in a
spin-off transaction (the "Spin-off") approved by the Maxus Board of Directors
on February 1, 1987. As a result, the Company became an independent entity
which is primarily engaged in the refining and marketing of petroleum products.
Note 2 SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements have been prepared in conformity with
generally accepted accounting principles. The preparation of financial state-
ments in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates. The most significant accounting principles used are
described below.
Consolidation
The Consolidated Financial Statements include the accounts of the Company and
its subsidiaries. Investments in other companies which are at least 20% owned
are accounted for on the equity method. All significant intercompany accounts
and transactions have been eliminated.
Cash and Cash Equivalents
It is the Company's policy to invest cash in excess of operating requirements
in highly liquid income producing investments. The Company considers such
investments with a maturity of three months or less at the time of purchase to
be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost for inventories of crude oil and refined
products of the Refining and Wholesale segment, motor fuel products of the
Retail segment, and propylene products in the Allied Businesses segment. Costs
of all other inventories are determined on an average cost method.
The Company includes purchased items in inven-tory when the product has been
delivered and/or when title has passed to the Company. Imbalances in product
exchanges are also reflected in the inventory account balance. Products owed to
the Company are included in inventory and products owed to exchange partners are
excluded from inventory.
Financial Instruments
The Company acquires a major portion of its crude oil requirements through the
purchase of futures contracts on the New York Mercantile Exchange. The Company
also uses the futures market to manage the price risk inherent in purchasing
the crude oil in advance of the delivery date, and in maintaining the
inventories contained within its refinery and pipeline systems. The Company
defers the impact of changes in the market value of these contracts until such
time as the hedged transaction is completed.
The Company has not entered into any form of interest rate caps or swaps on
any of its fixed or variable rate debt in recent years.
Properties and Equipment
Properties and equipment are carried at cost. Major additions are capitalized;
expenditures for repairs and maintenance are charged against earnings.
Properties and equipment are depreciated generally on the straight-line basis
over their estimated useful lives.
The Company capitalizes the interest cost associ-ated with major property
additions while in progress, such amounts being amortized over the useful lives
of the related assets.
Income Taxes
Deferred income taxes are provided for the differences in the financial
reporting and tax bases of assets and liabilities, for acquired net operating
loss and tax credits available for carryforward.
Earnings per Share
The computation of primary earnings (loss) per share is based on the weighted
average number of common shares outstanding during the year plus common stock
equivalents consisting of stock options, stock awards subject to restrictions,
and stock appreciation rights. In June 1993, the Company issued 1.725 million
shares of 5% Cumulative Convertible Preferred Stock (the "Preferred Stock") in
a private transaction for an aggregate of $86.3 million, before discounts and
transaction costs. Each share of Preferred Stock is convertible into
approximately 1.8868 shares of Common Stock. Primary earnings (loss) per common
share have been adjusted for dividend requirements on Preferred Stock. The
computation of fully diluted earnings (loss) per share, in addition to the
adjustments for primary earnings (loss) per share for the years ended December
31, 1995 and 1994, assumes conversion of the Preferred Stock during the time
that the shares are outstanding. The computation of fully diluted earnings
(loss) per share for the year ended December 31, 1993, did not assume
conversion of the Preferred Stock because the effect would have been
antidilutive.
Other Postemployment Benefits
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112 ("FAS 112"), "Employers' Accounting for Post-
employment Benefits, an Amendment of FASB Statements No. 5 and 43." FAS 112
addresses the accounting for compensation for future absences and postemploy-
ment benefits provided to former or inactive employees that are not provided as
part of a pension or postretirement plan. The adoption of the new standard had
no material effect on the results of operations and did not require recording
any cumulative effect of adoption of a change of accounting method.
Note 3 CHANGES IN ACCOUNTING PRINCIPLES
At December 31, 1989, the Company recorded a liability for payments to be made
pursuant to the Distri-bution Agreement (the "Distribution Agreement") with
Maxus, the Company's former parent, for certain liabilities relating to
businesses of Maxus discontinued or disposed of prior to the date on which the
Company was spun off to Maxus shareholders. The Company's total liability under
the Distribution Agreement is limited to $85.0 million. At December 31, 1989,
the Company believed that it would be required to make payments under the
Distribution Agreement beginning in 1991 and continuing for approximately ten
or more years. The Company did, in fact, begin to make payments in 1991, and,
based on current levels of payments, it is expected that payments will continue
until 1997.
Inasmuch as the total amount of the liability was known ($85.0 million) and
the Company believed the timing and amount of the payments could be estimated
with reasonable accuracy, the liability at December 31, 1989 was recorded on a
discounted basis, in accordance with the accounting rules in existence at the
time. Annual additions to the liability had been recorded as interest through
December 31, 1992.
During June 1993, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") released the minutes of its May 20, 1993
meeting during which the EITF announced a consensus with regard to certain
issues of "Accounting for Environmental Liabilities" (Issue 93-5). The consensus
effectively changed the criteria for determining when a liability may be
recorded on a discounted method. Consequently, in 1993, the Company changed the
accounting method for recording its liability under the Distribution Agreement
to reflect the entire unpaid amount rather than the discounted amount of the
liability.
The change of method was recorded as if the change had occurred on January 1,
1993 and is reflected in the Consolidated Statement of Operations as the
Cumulative Effect of Accounting Changes for the twelve months ended December 31,
1993. The amount of $14.2 million represented the unrecorded liability of $23.6
million at December 31, 1992, less related tax benefit of $9.4 million.
The following pro forma information is provided to reflect the earnings per
share amounts which would have been reported had the undiscounted accounting
method for recording the liability been adopted in the year the liability was
originally recorded.
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Pro forma Primary Earnings
(Loss) Per Share Before
Cumulative Effect of
Accounting Changes $ 1.48 $ 2.45 $ 1.04
Cumulative Effect of
Accounting Changes - - -
Total $ 1.48 $ 2.45 $ 1.04
Pro forma Fully Diluted Earnings
(Loss) Per Share Before
Cumulative Effect of
Accounting Changes $ 1.46 $ 2.34 $ 1.04
Cumulative Effect of
Accounting Changes - - -
Total $ 1.46 $ 2.34 $ 1.04
</TABLE>
<TABLE>
Earnings per share as currently reported:
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Primary Earnings (Loss)
Per Share Before
Cumulative Effect of
Accounting Changes $ 1.48 $ 2.45 $ 1.04
Cumulative Effect of
Accounting Changes - - (0.49)
Total $ 1.48 $ 2.45 $ 0.55
Fully Diluted Earnings (Loss)
Per Share Before
Cumulative Effect of
Accounting Changes $ 1.46 $ 2.34 $ 1.04
Cumulative Effect of
Accounting Changes - - (0.49)
Total $ 1.46 $ 2.34 $ 0.55
</TABLE>
Effective January 1, 1993, the Company adopted FAS 112, "Employers'
Accounting for Postemployment Benefits, an Amendment of FASB Statements No. 5
and 43." FAS 112 addresses the accounting for compensation for future absences
and for postemployment benefits provided to former or inactive employees that
are not provided as part of a pension or postretirement plan. The adoption of
the new standard had no material effect on the results of operations and did
not require recording any cumulative effect of adoption of a change of
accounting method.
The Company plans to adopt Statement of Financial Accounting Standards No.
121 ("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," in 1996. While the Company has not
completed its calculations on the effects of FAS 121, it does not expect
adoption of FAS 121 will have a material impact on its results of operations or
financial position.
The Company plans to adopt Statement of Financial Accounting Standards No.
123 ("FAS 123"), "Accounting for Stock-Based Compensation," in 1996, and plans
to elect to adopt FAS 123 by providing the disclosure information regarding its
stock-based compensation plans as allowed by FAS 123. Accordingly, adoption of
FAS 123 is not expected to have a significant effect on the Company's results
of operations or financial position.
Note 4 - ACQUISITION
On December 14, 1995, the Company completed the acquisition of National
Convenience Stores Incorporated ("NCS"). NCS operates 661 "Stop N Go"
convenience stores located in Texas, of which 600 sell gasoline. The total
value of the transaction, including transaction costs and the assumption of
NCS's debt, is approximately $280.0 million. The acquisition has been accounted
for under the purchase method and, accordingly, the operating results of NCS
have been included in the consolidated operating results since the date of
the acquisition.
The funds used to acquire NCS were arranged through Bank of America National
Trust and Savings Association. The purchase price exceeded the estimated fair
value of net assets acquired by approximately $160.5 million, which is included
in the accompanying consolidated balance sheet as excess of cost over acquired
net assets, net of amortization. This asset is being amortized over its
estimated useful life of 20 years.
In arriving at the purchase cost of the acquisition and, consequently, the
excess cost over acquired net assets, the company evaluated, among other things,
various analyses of cash flow and profitability projections including, as
applicable, the impact on existing Company businesses. Such analyses necessarily
involve significant management judgment to evaluate the capacity of the acquired
business to perform within projections.
The pro forma statements listed below combining the results of operations of
the Company and NCS are unaudited and reflect purchase price accounting
adjustments assuming the acquisition occurred at the beginning of each year
presented.
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C>
Revenues $ 3,659.8 $ 3,350.7
Income before tax provision 67.8 115.3
Net Income 40.6 $ 66.2
Primary Earnings Per
Common Share $ 1.25 $ 2.13
Fully Diluted Earnings Per
Common Share $ 1.25 $ 2.04
</TABLE>
Note 5 - BUSINESS SEGMENTS
The Company's revenues from continuing operations are principally derived
from three business segments: Refining and Wholesale, Retail, and Allied
Businesses. Refining and Wholesale is engaged in crude oil refining and
wholesale marketing of refined petroleum products. Retail is engaged in selling
refined petroleum products and other merchandise. Allied Businesses is engaged
in transporting, storing, and marketing natural gas liquids; upgrading refinery
grade propylene and selling polymer grade propylene; selling ammonia
fertilizer; selling specialized telephone services; selling environmental
testing and related services; and investing in petroleum related opportunities.
The Company's business segments operate primarily in the Southwest region of
the United States with particular emphasis in Texas, Colorado, Louisiana, New
Mexico, and Oklahoma.
<TABLE>
<CAPTION> Refining
and Allied
Wholesale Retail Businesses Total
<S> <C> <C> <C> <C>
1995
Sales and operating
revenues $1,435.8 $1,125.6 $ 375.4 $ 2,936.8
Costs and expenses 1,350.0 1,070.0 327.3 2,747.3
Operating profit $ 85.8 55.6 $ 48.1 189.5
Interest expense 47.4
Administrative expense 68.4
Income before
tax provision $ 73.7
1994
Sales and operating
revenues $1,320.8 $ 974.3 $ 311.2 $ 2,606.3
Costs and expenses 1,174.0 915.4 285.2 2,374.6
Operating profit $ 146.8 $ 58.9 $ 26.0 $ 231.7
Interest expense 43.3
Administrative expense 62.6
Income before tax
provision $ 125.8
1993
Sales and operating
revenues $ 1,294.8 $ 958.1 $ 302.4 $ 2,555.3
Costs and expenses 1,220.9 895.4 287.4 2,403.7
Operating profit $ 73.9 $ 62.7 $ 15.0 $ 151.6
Interest expense 40.6
Administrative expense 53.5
Income before tax
provision and
cumulative effect of
accounting changes $ 57.5
</TABLE>
Intersegment sales and operating revenues are generally derived from
transactions made at prevailing market rates. Sales of refined petroleum
products from the Refining and Wholesale segment to the Retail segment amounted
to $592.4 million in 1995, $502.7 million in 1994, and $510.1 million in 1993.
Sales of natural gas liquids from the Allied Businesses segment to the Refining
and Wholesale segment amounted to $21.5 million in 1995, $15.8 million in 1994,
and $23.4 million in 1993.
<TABLE>
Identifiable Assets
1995 1994 1993
<S> <C> <C> <C>
Refining and Wholesale $1,227.3 $1,048.2 $ 846.8
Retail 754.3 333.0 281.2
Allied Businesses 188.0 159.0 142.7
Corporate 75.8 80.6 78.5
$2,245.4 $1,620.8 $1,349.2
</TABLE>
Identifiable assets are those assets that are utilized by the respective
business segment. Corporate assets are principally cash, investments, and other
assets that cannot be directly associated with the operations or activities of a
business segment.
Note 6 - TAXES
The Company's provision for income taxes was comprised of the following:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Current
Federal $ 16.2 $ 16.4 $ 21.8
State and local 1.3 1.7 3.5
17.5 18.1 25.3
Deferred
Federal 7.9 29.1 (0.3)
State and local 1.0 2.8 (0.1)
8.9 31.9 (0.4)
$ 26.4 $ 50.0 $24.9
</TABLE>
Federal income taxes paid (net of refunds) during 1995, 1994, and 1993 were:
$20.1 million, $11.0 million, and $21.5 million, respectively.
The principal reasons for the difference between the statutory federal
income tax rate and the Company's provision for income taxes were:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Tax provision at
statutory federal rate
(35%) $ 26.0 $ 45.6 $ 20.1
Effect of tax rate increase on
deferred taxes - - 1.7
State income taxes, net of
federal tax benefit 1.9 3.3 2.2
General business credit (3.7) (0.6) (0.7)
Other, net 2.2 1.7 1.6
$ 26.4 $ 50.0 $ 24.9
</TABLE>
The components of the net deferred tax liability are summarized as follows:
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C>
Deferred tax assets
Inventory valuation reserves $ 6.4 $ 10.5
Postretirement and
pension plan liabilities 12.1 13.0
Long-term shared costs liability 2.8 7.1
Alternative minimum tax credit 19.2 16.0
Nonrecurring expenses in connection
with acquisition 7.3 -
Environmental reserve 6.4 -
Insurance reserve 6.6 -
Operating loss carryforward 10.0 -
General business credit carryforward 13.6 0.9
Allowance for doubtful receivables 2.2 1.9
Miscellaneous other 24.7 12.2
111.3 61.6
Deferred tax liabilities
Properties and equipment (133.1) (119.4)
Inventory valuation reserve (20.0) (21.3)
Section 382 basis adjustment (7.5) -
Miscellaneous other (2.7) (2.4)
(163.3) (143.1)
Deferred tax asset
valuation allowance (5.0) -
Net deferred tax liabilit $ (57.0) $(81.5)
</TABLE>
At December 31, 1995 the net deferred tax liability is reflected as $1.6
million in Current deferred tax assets and $58.6 million in Noncurrent deferred
tax liabilities. At December 31, 1994, the entire amount of the net deferred
tax liability was reflected as Noncurrent deferred tax liabilities.
In accordance with the provisions of SFAS No. 109, a valuation allowance of
$5.0 million at December 31, 1995 is deemed appropriate by management in view
of the expiration dates of the acquired net operating loss carryforwards and
credit carryforwards and the amount of future taxable income necessary to
utilize such losses and credits. The acquired net operating loss carryforwards
and credit carryforwards are subject to the separate return limitation year
(SRLY) rules. These rules limit the use of the acquired NCS operating loss
carryforwards and credit carryforwards to offset the taxable income of NCS. In
addition, the ownership change limitations under section 382 of the Internal
Revenue Code further limit the utilization of the acquired loss carryforwards
and credit carryforwards.
For federal income tax purposes at December 31, 1995, the Company estimated
that it had $13.6 million of unused general business tax credits including an
acquired general business tax credit of $7.4 million which expires in varying
amounts if unused by the years 1998 to 2010. The remaining $6.2 million expires
in 2009 and 2010. The Company also had an estimated $19.2 million of minimum
tax credit available for carryforward with an indefinite expiration. There is
an estimated $28.3 million of SRLY net operating loss carryforward from the NCS
acquisition that expires in varying amounts if unused by the years 2001 to
2005. Some of the estimates may be affected by the federal income tax return of
NCS for the fiscal year ended June 30, 1995 that will be filed during March of
1996.
Taxes other than income taxes were comprised of the following:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Real and personal property $20.2 $18.1 $15.8
Payroll 10.6 11.6 11.2
Superfund 7.3 8.6 7.8
Other 1.6 1.6 1.9
$39.7 $39.9 $36.7
</TABLE>
Note 7 - EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans
The Company maintains a retirement plan known as the Career Average
Retirement Income Plan (the "CARIP"). Under the CARIP, eligible employees
acquire a right upon retirement to an annual amount equal to 2% of the
employee's eligible earnings from February 1, 1987 to May 31, 1989, and 1%
of the employee's eligible earnings from June 1, 1989 forward, plus a
potential supplement under certain circumstances.
The Company also maintains a retirement plan for its collective bargaining
groups (the "Bargaining Unit Plan"). The Bargaining Unit Plan generally provides
benefits that are based on the union member's monthly base pay during the five
years before retirement.
The Company also maintains a retirement plan referred to as the Retirement
Income Plan (the "RIP") to cover certain employees not eligible for coverage
under the CARIP or the Bargaining Unit Plan. Under the RIP, eligible employees
acquire a right upon retirement to a monthly amount equal to $5 for each year
of plan service from January 1, 1989 forward.
The Company also maintains a retirement plan referred to as the Excess
Benefits Plan (the "Excess Benefits Plan"), which provides benefits in place
of reductions of qualified benefits resulting from various statutory
limitations imposed by the Internal Revenue Code and the deferral of
compensation through the Deferred Compensation Plan.
In addition, the Company has adopted a Supplemental Retirement Plan (the
"SRP"). The SRP provides additional benefits for executive officers in excess of
amounts payable under the defined benefit plans of the Company or any
predecessor employer.
The Company also provides a retirement plan for its non-employee Directors
(the "Directors Retirement Plan"). The Directors Retirement Plan provides an
annual retirement benefit for a period of time equal to the shorter of (a)
length of service as a non-employee Director or (b) life of Director.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned
during the period $3.2 $3.4 $2.5
Interest cost on projected
benefit obligation 3.2 2.8 2.2
Actual return on assets (6.6) 0.2 (1.9)
Net amortization and deferral 4.7 (2.0) 0.5
Net periodic pension cost $4.5 $4.4 $3.3
</TABLE>
Significant assumptions used in the actuarial calculations were:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Discount rates 7.25% 8.50% 7.25%
Rates of increase in
compensation level 4.50% 5.00% 4.50%
Expected long-term rate
of return on assets 9.00% 9.00% 9.00%
</TABLE>
The Company's trusteed plans are funded at amounts required by the Employee
Retirement Income Security Act. Effective December 31, 1995, the Company
lowered its discount rate to 7.25% and its rates of increase in compensation
level to 4.50%.
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
Consolidated Balance Sheet:
<TABLE>
<CAPTION> 1995 1994
Plans Plans Plans Plans
Where Where Where Where
Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Benefits Assets Benefits Assets
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $27.5 $7.1 $12.3 $14.6
Accumulated benefit
obligation 28.9 7.2 12.3 15.6
Projected benefit
obligation 37.0 8.2 17.2 18.5
Plan assets at fair
market value 32.4 6.2 13.9 12.3
Projected benefit obligation
in excess of plan assets 4.6 2.0 3.3 6.2
Unrecognized net loss (6.9) (1.7) (2.7) (5.3)
Unrecognized net obligation (0.3) (0.2) (0.3) (0.2)
Unrecognized prior
service cost 0.5 0.2 0.1 0.7
Adjustment to recognize
minimum liability 0.0 0.6 0.0 2.1
Pension liability (Prepaid
pension cost) recognized
in the Consolidated
Balance Sheet (2.1) 0.9 0.4 3.5
</TABLE>
In 1995, the plans where assets exceeded the accumulated benefit obligation
were the Bargaining Unit Plan, the Retirement Income Plan, the Career Average
Retirement Income Plan, and the Excess Benefits Plan. In 1994, the plans where
assets exceeded the accumulated benefit obligation were the Bargaining Unit
Plan and the SRP.
At December 31, 1995, Plan assets were invested in equity securities (58%),
bonds (34%), and other investments (8%). At December 31, 1994, Plan assets were
invested in bonds (58%), equity securities (33%), and other investments (9%).
Retiree Health Care and Life Insurance Benefits
The Company provides certain health care and life insurance benefits to
eligible retirees. Employees who participate in the CARIP are eligible for
retiree health care and life insurance benefits if they satisfy certain age and
service requirements. The Company also shares in the cost of providing similar
benefits to former Maxus employees pursuant to the Distribution Agreement
(see Note 17).
Generally, the health care plans pay a stated percentage of most medical
expenses reduced for any deductibles, payments made by government programs, and
other group coverage. The cost of providing most of these benefits is shared
with retirees. The plans are unfunded.
The following table sets forth the plans' status and the amount recognized
in the Company's Consolidated Balance Sheet as of December 31, 1995 and 1994:
Accumulated postretirement benefit obligation attributable to:
<TABLE>
<CAPTION> Health Life
Care Insurance Total
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Retirees $20.9 $19.0 $3.2 $2.8 $24.1 $21.8
Fully Eligible Active
Plan Participants 2.2 1.6 0.1 0.1 2.3 1.7
Other Active
Plan Participants 5.6 3.3 2.7 3.2 8.3 6.5
Unrecognized net loss (5.0) (1.3) (0.1) (0.4) (5.1) (1.7)
Total Accumulated
Postretirement Benefit
Obligation $23.7 $22.6 $5.9 $5.7 $29.6 $28.3
Net Periodic Postretirement Benefit Cost:
Health Life
Care Insurance Total
1995 1994 1995 1994 1995 1994
Service Cost of
Benefits Earned $0.3 $0.3 $0.1 $0.2 $0.4 $0.5
Interest Cost on
Accumulated
Postretirement Benefit
Obligation 1.9 1.4 0.4 0.4 2.3 1.8
Net Periodic
Postretirement
Benefit Cost $2.2 $1.7 $0.5 $0.6 $2.7 $2.3
</TABLE>
The discount rate used in the actuarial calculation was 7.25% and 8.50% in
1995 and 1994, respectively. The rate of increase in compensation level was
4.50% and 5.00% in 1995 and 1994, respectively.
For measuring the expected postretirement benefit obligation, the health
care cost trend rate ranged from 9.2% to 12.0% in 1995, grading down to an
ultimate rate of 6.0% in the year 2000.
A one percentage point increase in the assumed health care cost trend would
increase the aggregate of the service and interest components of 1995 net
periodic postretirement benefit cost by $0.3 million and the 1995 accumulated
postretirement benefit obligation by $3.4 million.
Long-Term Incentive Plans
In 1987 and 1990, and as amended in 1995, the Company adopted Long-Term
Incentive Plans which are administered by the Compensation Committee of the
Board of Directors to provide officers and key employees with stock options,
stock appreciation rights ("SARs"), performance units, and securities awards.
In May 1995, upon shareholder approval, the shares of Common Stock that may be
issued under the plans were increased from 3,500,000 shares to 4,500,000
shares. The number of common shares issued or transferred as restricted shares
that become non-forfeitable solely contingent upon the participant having a
certain length of service with the Company shall not, in aggregate, exceed
314,000 Common Shares. At December 31, 1995, 1994, and 1993, Common Stock
reserved for future grants under the Long-Term Incentive Plans were 1,601,425
shares, 966,213 shares, and 1,195,868 shares, respectively. In
1994 all SARs were exercised and no SARs have been granted since that time.
Transactions in stock options are summarized as follows:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Outstanding at January 1, 878,419 810,587 746,934
Granted 277,500 248,447 367,461
Exercised (66,651) (172,533) (206,957)
Cancelled upon exercise
of SARs - (6,042) (84,979)
Forfeited (1,876) (2,040) (11,872)
Outstanding at
December 31, 1,087,392 878,419 810,587
Exercisable at December 31, 572,662 293,737 283,285
Range of exercise prices of
options outstanding
at December 31, $ 11.31 $ 11.31 $ 11.31
to 29.75 to 29.75 to 27.38
Range of exercise prices
of options exercised $ 11.31 $ 11.31 $ 11.31
to 23.75 to 25.63 to 22.57
</TABLE>
Grants of restricted, performance restricted stock and performance units for
1995, 1994, and 1993 are summarized as follows:
<TABLE>
<CAPTION> Shares
Date Shares Performance Performance
Granted Restricted Restricted Units
<S> <C> <C> <C>
February 1993 40,568 63,414
December 1993 24,235 -
February 1994 16,450 - 1,639,000
February 1995 44,715 - 1,694,000
July 1995 - - 456,800
</TABLE>
All shares of performance restricted stock granted became non-restricted on
October 1, 1995 when certain financial goals were met.
The restricted stock vests over a four-year period through 1999. Deferred
compensation equivalent to market value at the date of grant is recorded to
additional paid-in capital and is amortized to compensation expense over the
vesting period. The amount amortized in 1995, 1994, and 1993 was $1.6 million,
$2.1 million, and $2.1 million, respectively. Unvested shares are restricted
as to transfer or sale.
Performance Units have a target value of $1.00, but based on the Company's
performance, each unit may have an actual value ranging from $0.00 to $2.00
at the end of the three year performance cycle. The cycles begin on January 1,
and end on December 31. Any distributions will occur during the first quarter
following the three year performance cycle. Performance units granted in 1994
will be paid two thirds in the form of cash and one third in the form of non-
restricted stock. Performance units granted in 1995 will be paid in cash. The
amount accrued in 1995 and 1994 was $1.2 million and $0.5 million, respectively.
Performance Incentive Plan
A Performance Incentive Plan has been adopted by the Company, under which
the Compensation Committee may grant cash awards to eligible employees. For
Plan years 1995, 1994, and 1993, the Company paid $2.4 million, $2.7 million,
and $2.3 million, respectively.
Employee Stock Ownership Plans (ESOPs)
The Company maintains two Employee Stock Ownership Plans. ESOP I was
formed in June 1987, and ESOP II was formed in April 1989 (ESOP I and ESOP II
are collectively referred to as the "ESOPs"). Between 1987 and 1991, the
Company loaned ESOP I $34.5 million which it used to purchase 2,052,207
shares of Common Stock.
Between 1989 and 1991, $31.3 million was loaned by the Company to ESOP II
which it used to purchase 1,466,957 shares of Common Stock.
In 1992 and 1991, the Company contributed 37,400, and 45,000 treasury
shares of Common Stock, respectively, to ESOP I as part of special award
programs and a success sharing program. In accordance with the success sharing
program, the Company accrued $1.5 million, $2.8 million and $1.3 million for
the purchase of 55,523 shares, 107,681 shares and 31,668 shares in 1995, 1994
and 1993, respectively.
All employees of the Company who have attained a minimum length of service
and satisfied other plan requirements are eligible to participate in the ESOPs,
except that ESOP II excludes employees covered by any collective bargaining
agreement with the Company.
The Company will make contributions to ESOP I and ESOP II in sufficient
amounts, when combined with dividends on the Common Stock, to retire the
principal and interest on the loans used to fund the ESOPs (see Note 13).
Common shares will be allocated to participants as the payments of principal
and interest are made on the loan. Contributions to the ESOPs charged to
expense for 1995, 1994, and 1993 were $7.5 million, $7.4 million, and $7.1
million, respectively. Dividend and interest income reduced the amounts charged
to expense in 1995, 1994, and 1993 by $1.5 million, $1.8 million, and $1.8
million, respectively.
The number of allocated shares held by ESOP I and ESOP II at December 31,
1995, were 1,822,383 shares and 360,226 shares, respectively. The number of
suspense shares held by ESOP I and ESOP II at December 31, 1995, were 284,489
shares and 1,056,497 shares, respectively.
Note 8 - RECEIVABLES
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C>
Notes and accounts receivable $220.1 $217.4
Less-Allowance for
doubtful receivables 7.1 5.8
$213.0 $211.6
</TABLE>
The following is a summary of the changes in the allowance for doubtful
receivables:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
January 1, $ 5.8 $ 5.5 $ 4.2
Additions charged against
earnings 9.6 3.2 2.3
Write-offs, net of recoveries (8.3) (2.9) (1.0)
December 31, $ 7.1 $ 5.8 $ 5.5
</TABLE>
Note 9 - INVENTORIES
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C>
Finished products $ 204.1 $ 109.6
Raw materials 137.4 148.3
Supplies 34.5 33.1
$ 376.0 $ 291.0
</TABLE>
The cost of approximately 64% and 74% of total inventories was determined
under the LIFO method at December 31, 1995 and 1994, respectively. At December
31, 1995 and 1994, market was lower than LIFO cost by $16.0 million and $27.1
million, respectively.
The Company acquires a major portion of its crude oil requirements through
the purchase of futures contracts on the New York Mercantile Exchange. The
Company also uses the futures market to manage the price risk inherent in
purchasing the crude oil in advance of the delivery date, and in maintaining
the inventories contained within its refinery and pipeline systems.
Note 10 - PROPERTIES AND EQUIPMENT
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C>
Properties and Equipment
Refining and Wholesale $ 1,238.5 $ 1,024.4
Retail 562.5 369.5
Allied Businesses 203.4 206.8
Corporate 36.9 34.7
2,041.3 1,635.4
Less-Accumulated depreciation 684.2 609.3
$ 1,357.1 $ 1,026.1
</TABLE>
The charge against earnings for maintenance and repairs was $40.1 million in
1995, $41.1 million in 1994, and $29.3 million in 1993.nterest capitalized was
$6.8 million in 1995, $2.3 million in 1994, and $6.1 million in 1993.
<TABLE>
Expenditures for
Properties and Equipment
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Refining and Wholesale $193.0 $ 89.3 $100.1
Retail 362.4 49.3 26.5
Allied Businesses 21.2 22.3 4.4
Corporate 1.5 1.2 0.8
$578.1 $162.1 $131.8
</TABLE>
The amount in the table above in the Retail segment for 1995, includes
expenditures for the acquisition of NCS.
<TABLE>
Depreciation
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Refining and Wholesale $43.3 $38.3 $35.1
Retail 20.4 16.3 14.6
Allied Businesses 11.4 13.1 11.7
Corporate 2.6 3.2 2.9
$77.7 $70.9 $64.3
</TABLE>
<TABLE>
Note 11 - ACCRUED LIABILITIES
<CAPTION> 1995 1994
<S> <C> <C>
Accrued Taxes $ 71.0 $ 65.3
Accrued Insurance 6.8 -
Accrued Royalties 6.6 6.7
Current Portion of Long-term
Shared Costs Liability (see Note 17) 8.0 8.0
Other Liabilities 115.6 90.9
$208.0 $170.9
</TABLE>
<TABLE>
Note 12 - OTHER LIABILITIES AND DEFERRED CREDITS
<CAPTION> 1995 1994
<S> <C> <C>
Post Retirement Benefit $ 28.3 $28.3
Long-term Shared Costs
Liability (see Note 17) 2.1 13.4
Deferred Credits 10.3 11.8
Environmental Reserve 18.9 -
Insurance Reserve 10.8 -
Other Liabilities 44.7 13.5
$115.1 $67.0
</TABLE>
<TABLE>
Note 13 - LONG-TERM DEBT
<CAPTION> 1995 1994
<S> <C> <C>
Commercial Paper $ 0.0 $ 0.0
10.75% Senior Notes 120.0 150.0
9% Senior Notes 5.3 8.4
8.77% Senior Notes 30.0 30.0
8.35% Senior Notes 1.2 1.9
Medium Term Notes 145.0 145.0
Shamrock Pipeline Note 6.2 -
Pollution Control Financings 10.9 10.9
7.25% Debentures 25.0 -
Credit Facility 220.0 -
8% Debentures 100.0 100.0
8.75% Debentures 75.0 -
Bank Money Market Facilities 163.0 66.9
Mortgages 59.3 -
Other Notes 3.8 0.0
964.7 513.1
Less-Due within one year 7.2 3.9
$957.5 $509.2
</TABLE>
The aggregate maturities of the long-term debt obligations at December 31,
1995 for the next five years will be as follows, assuming no prepayments:
1996-$7.2 million; 1997-$37.9 million; 1998-$36.2 million; 1999-$145.4 million;
2000-$120.9 million; and all future periods-$611.1 million.
On February 29, 1996, the Company exercised an early redemption option to
redeem 11.75% $4.4 million in Palo Duro River Authority Revenue Bonds at par
value.
On February 13, 1995, the Company issued $75.0 million in non-callable 8.75%
debentures due June 15, 2015.
In March and December 1995, the Company renegotiated its two separate
revolving credit facilities ("Agreement I" and "Agreement II"). Agreement I has
a face value of $200.0 million with a maturity date of March 31, 2000.
Agreement II matures on March 29, 1996, and has a value of $100.0 million.
Interest under Agreement I and Agreement II varies depending on specified
lending options available to the Company. Generally, the variable conditions
relate to the prime rate, certificates of deposit, and London Interbank Offered
Rates, as adjusted upward by specified percentages. As of December 31, 1995,
the Company had no borrowings outstanding under Agreement I or Agreement II.
Agreement I and Agreement II, the Senior Notes and the B of A Credit
Facility (as defined below) all contain various restrictive covenants relating
to the Company and its financial condition, operations, and properties. Under
these covenants, the Company is required to maintain a minimum current ratio
and net worth. These covenants also include restrictions on the payment of
dividends. However, it is not anticipated that such limitations will affect
the Company's present ability to pay dividends. At December 31, 1995, under the
most restrictive of these covenants, $205.7 million was available for the
payment of dividends.
In May 1995, the Company registered $150.0 million of unallocated
securities in a Universal Shelf Registration. That registration, which was
declared effective by the Securities and Exchange Commission in June 1995,
allows the Company to issue up to $150.0 million of debt, equity, or warrants,
or any combination thereof, to the public on terms to be set at the time of
issuance. The Company will issue the securities so registered from time to
time, based on the Company's capital requirements and market conditions.
On June 8, 1995, the Company issued $25.0 million in non-callable 7.25%
debentures due June 15, 2010. The proceeds from the issuance of the debentures
were used for general corporate purposes.
On October 17, 1995, $6.2 million (the "Shamrock P/L Note") was assumed when
the Company purchased the lessor's interest in the Southlake Products Pipeline
extending from the McKee Refinery to the Dallas/Fort Worth area. The Shamrock
P/L Note is currently being amortized semiannually at 9.75% with a maturity
date of January 15, 1999.
During December 1995, the Company entered into a Revolving Credit Agreement
(the "B of A Credit Facility") with a syndication of banks to finance the
acquisition of NCS. The Credit Facility is a revolving facility under which up
to $220.0 million may be advanced and readvanced from time to time for general
corporate purposes. Credit available under the B of A Credit Facility is
reduced by equal amounts on four reduction dates: June 11, 1999, December 11,
1999, June 11, 2000 and at maturity on December 11, 2000. Interest under the B
of A Credit Facility is structured similar to Agreement I and Agreement II. As
of December 31, 1995, the Company had $220.0 million outstanding under the B of
A Credit Facility.
On December 14, 1995, the Company assumed $53.3 million in mortgages (the
"Mortgages") as part of the NCS acquisition. The Mortages currently carry an
annual interest rate of 9.5% with average maturities of 7 years and are
recorded at their net present value of $59.3 million. The mortgages are secured
by retail properties owned by the Company.
Outstanding bank money market facilities are reflected as long-term debt
because the Company has the intent and ability either to roll over the debt as
it becomes due or to convert such borrowings into long-term debt through
revolving credit borrowings.
At December 31, 1995, the Company had outstanding $163.0 million of
borrowings under bank money market facilities provided by major money center
banks at a weighted average annual rate of 6.05%. The bank money market
facilities are uncommitted lines of credit under which banks extend unsecured
short-term credit to the Company from time to time at market rates.
Agreement I and Agreement II, the Senior Notes, and the B of A Credit
Facility are unsecured. Certain subsidiaries of the Company have
unconditionally guaranteed the repayment of all indebtedness and the
performance of all obligations incurred by the Company under Agreement I and
Agreement II, the Senior Notes, and the B of A Credit Facility.
On January 6, 1994, the Company prepaid the $35.0 million balance on its
$65.0 million Term Loan Agreement (the "Term Loan").
During February 1993, the Company issued $46.0 million in medium-term notes
with an average rate of 7.44% and average maturities of 12 years.
On April 1, 1993, the Company issued $100.0 of 8% Debentures due April 1,
2023.
On February 27, 1991, the Company issued $75.0 million of 9-3/8% Notes due
March 1, 2001 (the "Notes") under its medium-term note program.
In December 1991, the Company issued $24.0 million in various notes with an
average rate of 8.45% and maturities of 12 years.
In connection with the Spin-off, the Company sold $150.0 million of 11%
Subordinated Notes due April 30, 1999, (the "11% Subordinated Notes") to
institutional investors. On July 14, 1989, the original 11% Subordinated Notes
became 10.75% Senior Notes (the "10.75% Senior Notes") after certain contractual
conditions were met. On May 1, 1995, the Company repaid $30.0 million of its
10.75% Senior Notes in a scheduled installment, leaving an outstanding balance
of $120.0 million. Of this balance, $30.0 million is payable within one year.
Since the Company intends to refinance the scheduled repayment by the use of
commercial paper or other credit facilities which would be classified as long-
term, and the Company has the capacity to do so, the current portion of the
long-term debt payable on April 30, 1996 has been classified as long-term debt.
Subsequent to the Spin-off, the Company placed $25.0 million of 9% Senior
Notes due 1987-1997 (the "9% Senior Notes") and $5.0 million of 8.35% Senior
Notes due 1989-1997 (the "8.35% Senior Notes") with an institutional investor
and loaned the proceeds to the ESOP I (see Note 7). In 1989, the Company placed
$30.0 million of 8.77% Senior Notes due 1997-2009 (the "8.77% Senior Notes")
with the same institutional investor and loaned the proceeds to the ESOP II
(see Note 7).
Cash payments of interest for 1995, 1994, and 1993 were $49.6 million, $42.9
million, and $41.3 million, respectively.
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of long-term
debt is estimated to be $1,028.2 million at December 31, 1995, including
amounts payable within one year.
Note 14 - PREFERRED STOCK
In June 1993, the Company issued 1.725 million shares of 5% Cumulative
Convertible Preferred Stock (the "Preferred Stock") in a private placement
for an aggregate of $86.3 million, before discounts and transaction costs. The
issue was priced at $50 per share with a dividend rate of 5 percent. The
Preferred stock became convertible into the Company's Common Stock on September
8, 1993, at an initial conversion price of $26.50 per share. After June 15,
1996, the Preferred Stock is redeemable at the Company's option, subject to
certain conditions, for Common Stock, and after June 15, 2000, it is redeemable
at par for cash, at the Company's option.
<TABLE>
Note 15 - STOCKHOLDERS' EQUITY
<CAPTION> Common Paid-In Retained ESOP Treasury
Stock Capital Earnings Stock Stock
<S> <C> <C> <C> <C> <C>
January 1, 1993 $0.3 $356.8 $131.5 $(51.6) $(1.3)
Net Income 18.4
Cash dividends:
Common ($0.52 per share) (15.0)
Convertible Preferred
($1.28 per share)
(See Note 14) (2.2)
Issuance of Key
Employees' and
Directors' stoc 0.0 1.4 0.9
Payment on ESOP note 4.3
Purchase of treasury
stock (0.6)
Issuance of
Convertible Preferred
stock* 84.3
Adjustment of minimum
liabilities of
pensions (1.8)
Tax benefit of ESOP
dividends 0.4
Tax benefit of stock
options 0.4
Options exercised 0.0 1.9 (0.8) 0.4
December 31, 1993 0.3 444.8 130.5 (47.3) (0.6)
Net Income 75.8
Cash dividends:
Common ($0.53 per
share) (15.4)
Convertible Preferred
($2.50 per share)
(See Note 14) (4.3)
Issuance of Key
Employees' and
Directors' stock 0.0 0.0 (0.1)
Payment on ESOP note 5.1
Purchase of treasury
stock (3.4)
Adjustment of minimum
liabilities of
pensions 0.8
Success sharing 0.0 0.9
Tax benefit of ESOP
dividends 0.3
Tax benefit of stock
options 0.5
Options exercised 0.0 1.1 (0.9) 0.9
December 31, 1994 0.3 447.3 186.8 (42.2) (3.2)
Net Income 47.3
Cash dividends:
Common ($0.56
per share) (16.3)
Convertible
Preferred
($2.50 per
share) (See
Note 14) (4.3)
Issuance of Key
Employees' and
Directors' stock 0.0 0.0 (0.5)
Payment on ESOP note 5.8
Purchase of treasury
stock 0.1
Adjustment of minimum
liabilities of
pensions 1.2
Success sharing (0.3) 2.9
Tax benefit of ESOP
dividends 0.3
Tax benefit of stock
options 0.1
Stock forfeitures 0.0 0.0 (0.7)
Options exercised 0.0 0.4 (0.3) 0.4
Other (0.4)
December 31, 1995 $0.3 $447.8 $214.0 $(36.4) $(1.0)
</TABLE>
*The Preferred Stock that was issued in 1993 has a par value of $17,250 which
is not reflected above since it does not round to the nearest $100,000. At
December 31, 1995 and 1994, the Company held 41,138 shares and 117,794 shares,
respectively, as treasury stock.
Note 16 - LEASE COMMITMENTS
The Company leases certain machinery and equipment, transportation and
marketing facilities, and office space under cancelable and non-cancelable
leases, most of which expire within 20 years unless renewed.
Minimum annual rentals at December 31, 1995 were as follows:
<TABLE>
<CAPTION> Operating
Leases
<S> <C>
1996 $ 49.3
1997 41.2
1998 35.7
1999 23.1
2000 15.8
2001 and thereafter 112.3
$277.4
</TABLE>
Rental expense for operating leases was as follows:
<TABLE>
<CAPTION> 1995 1994 1993
<S> <C> <C> <C>
Total rentals $34.5 $28.3 $21.1
Less-Sublease rental income 0.8 0.7 0.7
Rental expense $33.7 $27.6 $20.4
</TABLE>
The Company has an existing long-term lease arrangement (the "Brazos
Lease") to accommodate its continued retail outlet construction program. The
Brazos Lease has an initial lease term which 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 December 31, 1995, approximately $15.3 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 December 31, 1995 would
be approximately $175.0 million.
Note 17 - COMMITMENTS AND CONTINGENCIES
In connection with the Spin-off, the Company and Maxus entered into a
Distribution Agreement which, among other things, provides for the sharing by
the Company and Maxus of certain liabilities relating to businesses of Maxus
discontinued or disposed of prior to the Spin-off date. The Company's total
liability for such shared costs is limited to $85.0 million. Payments with
respect to the shared costs are made by Maxus and the Company is obligated to
reimburse Maxus for the Company's share promptly after receipt of Maxus'
invoice accompanied by appropriate supporting data. Inasmuch as the Company
has already reimbursed Maxus for more than $37.5 million, the Company's share
of remaining shared costs is one-third of the amounts paid by Maxus. Although
some expenditures are still subject to audit, the Company has reimbursed Maxus
for a total of $75.0 million as of December 31, 1995, including $11.4 million
paid during 1995. See Note 3 for a change in the method of accounting for the
liability.
Pursuant to the Distribution Agreement, the Company will also reimburse
Maxus for one-third of all payments for the cost of certain medical and life
insurance benefits for eligible retired employees made by Maxus after the
Spin-off date with respect to persons who retired on or before the Spin-off
date (see Note 7). The actuarial cost of these expected payments under the
Distribution Agreement is included in the Accumulated Postretirement Benefit
Obligation recorded as of January 1, 1992 (see Note 3).
The Company's commitments for future purchases are for quantities not in
excess of anticipated requirements and at prices which will not result in a
loss. There are no long-term contracts with crude oil suppliers which would
fix the cost of future deliveries. The Company anticipates that it will sustain
no losses in fulfillment of existing sales contracts.
The Company purchases its crude oil and other feedstocks from both domestic
and foreign sources. During 1995, approximately 32% of the total feedstocks
processed in the refineries was foreign crude oil. The Company does not
anticipate any disruption in the availability of crude oil or other feedstocks,
but the price of such commodities is beyond the Company's control, being
affected by many factors including the supply and demand for crude oil, changes
in domestic and foreign economies and political affairs, and the extent of
governmental regulation.
The Company is a party to a number of lawsuits, the outcomes of which are
not expected to have a material effect on the Company's financial position or
results of operations.
Federal, state and local laws and regulations establishing various health
and environmental quality standards affect nearly all of the operations of the
Company. Included among such statutes are the Clean Air Act of 1955, as
amended; the Clean Water Act of 1977, as amended; the Resource Conservation
and Recovery Act of 1976, as amended; and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
Regulations issued by the EPA in 1988 with respect to underground storage
tanks require the Company, over a period up to ten years, to install, where not
already in place, spill prevention manholes, tank overfill protection devices,
leak detection devices, and corrosion protection on all underground tanks and
piping at retail gasoline outlets. The regulations also require periodic
tightness testing of underground tanks and piping. Commencing in 1998,
operators will be required under these regulations to install continuous
monitoring systems for underground tanks.
The Company has in effect policies, practices, and procedures in the areas
of pollution control, product safety, occupational health, the production,
handling, storage, use, and disposal of hazardous materials to prevent an
unreasonable risk of material environmental or other damage, and the material
financial liability which could result from such events. However, some risk of
environmental or other damage is inherent in the business of the Company, as
it is with other companies engaged in similar businesses.
None of the estimated costs or liabilities associated with individual
locations identified as being in need of environmental remediation at December
31, 1995 is material to the results of operations of the Company. The
environmental reserve of $18.9 million listed under Other Liabilities and
Deferred Credits (see Note 12) is the fair value of a reserve established by
NCS prior to its emergence from bankruptcy in March of 1993 for the cleanup of
contaminated soil and groundwater caused by releases from underground gasoline
storage tanks and underground piping systems and claims for third party
damages relating to such releases. The actual costs may be higher or lower
than that accrued due to the difficulty in estimating such costs and due to the
potential changes in the status of regulations and state reimbursement programs.
Supplementary Financial Information (unaudited)
QUARTERLY FINANCIAL DATA
<TABLE>
CAPTION>
(dollars in millions,
except per share) 95 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales $676.7 $789.7 $746.3 $724.1
Gross profit(1) 44.9 83.2 46.1 48.1
Net income 5.4 28.0 5.7 8.2
Primary earnings per common share 0.15 0.93 0.16 0.24
Fully diluted earnings per common
share 0.15 0.87 0.16 0.24
Cash dividends per share
Common $ 0.14 $ 0.14 $ 0.14 $ 0.14
Preferred 0.625 0.625 0.625 0.625
Market price per common share
High 28 7/8 28 1/4 28 1/2 29 1/8
Low 22 1/8 23 3/8 23 7/8 23 5/8
1994 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
Net sales $583.8 $646.5 $700.4 $675.6
Gross profit(1) 52.1 82.3 68.7 62.8
Net income 12.2 27.5 20.6 15.5
Primary earnings per common share 0.38 0.9 0.67 0.49
Fully diluted earnings per common
share 0.38 0.85 0.64 0.48
Cash dividends per share
Common $ 0.13 $ 0.13 $ 0.13 $ 0.14
Preferred 0.625 0.625 0.625 0.625
Market price per common share
High 30 28 1/4 28 1/2 29 1/8
Low 24 1/8 23 3/8 23 7/8 23 5/8
</TABLE>
(1) Gross profit is sales and operating revenues less cost of products sold and
operating expenses and depreciation.
<TABLE>
TABLE>
Selected Historical Financial Information (unaudited)
<CAPTION>
(dollars in millions, except
per share) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATIONS
Sales and operating revenues:
Refining and Wholesale $1,435.8 $1,320.8 $1,294.8 $1,290.4 $1,293.2
Retail 1,125.6 974.3 958.1 970.7 908.1
Allied Businesses 375.4 311.2 302.4 341.5 374.6
Total $2,936.8 $2,606.3 $2,555.3 $2,602.6 $2,575.9
Operating profit:
Refining and Wholesale $ 85.8 $ 146.8 $ 73.9 $ 68.1 $ 86.8
Retail 55.6 58.9 62.7 46.6 26.1
Allied Businesses 48.1 26.0 15.0 22.9 32.5
Total $ 189.5 $ 231.7 $ 151.6 $ 137.6 $ 145.4
Income from continuing
operations $ 47.3 $ 75.8 $ 32.6 $ 26.4 $ 37.1
Net income $ 47.3 $ 75.8 $ 18.4 $ 8.7 $ 37.1
FINANCIAL POSITION
Current assets $ 654.9 $ 540.4 $ 356.2 $ 358.5 $ 409.8
Current liabilities 489.5 374.1 220.4 217.0 252.9
Properties and equipment,
less accumulated
depreciation 1,357.1 1,026.1 941.1 897.6 791.2
Total assets $2,245.4 $1,620.8 $1,349.2 $1,297.5 $1,222.3
CAPITAL STRUCTURE
Long-term debt including
portion due within one
year $ 964.7 $ 513.1 $ 489.7 $ 536.9 $ 446.1
Deferred income taxes 57.0 81.5 48.7 61.4 65.6
Stockholders' equity 624.7 589.0 527.7 435.7 437.6
Total $1,646.4 $1,183.6 $1,066.1 $1,034.0 $ 949.3
OTHER DATA
Capital expenditures $ 556.6 $ 162.1 $ 131.8 $ 170.5 $ 180.1
Depreciation and amortization 77.7 70.9 64.3 56.8 52.3
Book value per share* 19.47 18.45 16.40 16.50 16.76
PER COMMON SHARE
Primary earnings:
Continuing operations $ 1.48 $ 2.45 $ 1.04 $ 0.92 $ 1.39
Net income 1.48 2.45 0.55 0.30 1.39
Fully diluted earnings:
Continuing operations $ 1.46 2.34 $ 1.04 $ 0.92 $ 1.36
Net income 1.46 2.34 0.55 0.30 1.36
CASH DIVIDENDS PER SHARE
Common Stock $ 0.56 $ 0.53 $ 0.52 $ 0.52 $ 0.52
Preferred Stock 2.50 2.50 1.28 __ __
FINANCIAL RATIOS
Current ratio $ 1.3 1.4 1.6 1.7 1.6
Total debt as a percent
of total capital 58.6% 43.4% 45.9% 51.9% 47.0%
* Calculated excluding 1,340,983; 1,669,264; 1,985,102; 2,286,705; and 2,573,904
unallocated ESOP shares at December 31 of the respective years.
</TABLE>
<TABLE>
Five Year Operating Information (unaudited)
<CAPTION> 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATIONS
Crude Oil Refining Capacity
(barrels per day at year-end)
McKee 140,000 135,000 125,000 120,000 110,000
Three Rivers 75,000 70,000 70,000 55,000 55,000
Total 215,000 205,000 195,000 175,000 165,000
Crude Oil Refined (barrels per day)
McKee 130,439 126,235 118,949 112,909 111,765
Three Rivers 74,499 69,428 61,280 51,775 48,238
Total 204,938 195,663 180,229 164,684 160,003
Capacity Utilization 95.3% 95.4% 92.4% 94.1% 97.0%
Total Inputs (barrels per day)
Domestic Crude Oil 135,418 139,099 137,672 145,687 140,244
Foreign Crude Oil 69,520 56,564 42,557 18,997 19,759
Other Feedstocks 14,238 13,888 16,528 16,034 19,003
Total 219,176 209,551 196,757 180,718 179,006
Crude Oil Purchase Cost
(dollars per barrel) 18.58 17.08 18.57 20.64 21.83
Inventory (thousands of barrels at year-end)
Crude Oil 7,210 7,717 2,499 1,796 3,085
Petroleum Products 3,794 3,277 3,736 2,845 3,509
REFINED PRODUCT SPREAD (dollars per barrel)
Product Salesrices 22.31 21.53 22.39 24.04 25.55
Raw Material Costs 18.82 17.13 18.63 20.83 21.76
Refined Product Spread 3.49 4.40 3.76 3.21 3.79
PRODUCTS MANUFACTURED (barrels per day)
Gasoline 124,573 120,377 112,974 104,220 103,271
Diesel Fuel 47,663 44,425 39,952 31,462 34,478
Aviation Fuel 17,946 18,921 17,602 18,900 16,382
Other 30,751 26,478 26,014 24,965 24,900
Total 220,933 210,201 196,542 179,547 179,031
WHOLESALE REFINED PRODUCT SALES (barrels per day)
Gasoline 153,140 142,016 134,954 128,507 122,831
Diesel Fuel 52,484 49,102 43,774 36,487 37,686
Aviation Fuel 18,705 21,206 20,437 21,043 15,944
Other 13,817 13,373 12,872 13,156 12,148
Total 238,146 225,697 212,037 199,193 188,609
WHOLESALE REFINED PRODUCT SALES (dollars per barrel)
Gasoline 24.37 23.06 24.15 26.54 28.09
Diesel Fuel 22.04 21.46 22.99 24.49 25.39
Aviation Fuel 22.50 22.05 23.78 25.07 26.95
Other 14.96 14.32 14.43 13.45 14.24
RETAIL
Number of Retail Outlets (at year-end)
Company Operated 1,506 810 776 761 763
Company Owned 715 496 504 518 529
Company Leased 791 314 272 243 234
RETAIL SALES
Gasoline (barrels per day) 61,766 56,410 55,473 53,931 50,876
Diesel (barrels per day) 2,216 1,795 1,606 1,455 1,164
Merchandise ($000/day) 957.9 872.9 820.7 792.6 710.5
OTHER DATA
Number of Jobber Outlets
(at year-end) 1,203 1,206 1,194 1,163 1,155
Miles of Products Pipelines
(at year-end) 2,959 2,484 2,291 2,290 2,275
Miles of Crude Oil Pipelines
(at year-end) 1,268 1,289 2,110 2,110 1,839
</TABLE>
Exhibit 13.3
Report of Independent Accountants
To the Stockholders and Board of Directors of Diamond Shamrock,
Inc.
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of operations and of cash
flows present fairly, in all material respects, the financial
position of Diamond Shamrock, Inc. and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 3 to the consolidated financial statements,
the Company changed its method of accounting for its long-term
shared cost liability in 1993.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
February 23, 1996
W4031.TW
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
STATE OR JURISDICTION
SUBSIDIARIES OF ORGANIZATION
AUTOTRONIC SYSTEMS, INC. Delaware
BELVEX, INC. Texas
BIG DIAMOND NUMBER 1, INC. Texas
BIG DIAMOND, INC. Texas
CANADIANOXY LTD. Bermuda
COLONNADE ASSURANCE LIMITED Bermuda
COLONNADE VERMONT INSURANCE COMPANY Vermont
CORNER STORE MEXICO, S.A. DE C.V. Mexico
CORPORATE CLAIMS MANAGEMENT, INC. Texas
D-S MONT BELVIEU, INC. Texas
D-S SPLITTER, INC. Delaware
D-S SYSTEMS, INC. Delaware
D-S UNITED, INC. Delaware
D-S VENTURE COMPANY, L.L.C. Delaware
D-S WORLD ENERGY, INC. Delaware
D.S.E. PIPELINE COMPANY Delaware
DIAMOND REFORMING, INC. Delaware
DIAMOND SECURITY SYSTEMS, INC. Delaware
DIAMOND SHAMROCK ARIZONA, INC. Delaware
DIAMOND SHAMROCK BOLIVIANA, LTD. California
DIAMOND SHAMROCK LEASING, INC. Delaware
DIAMOND SHAMROCK PIPELINE COMPANY Delaware
DIAMOND SHAMROCK REFINING COMPANY, L.P. Delaware
DIAMOND SHAMROCK REFINING AND MARKETING Delaware
COMPANY
DIAMOND SHAMROCK STATIONS, INC. Delaware
DIAMOND SHAMROCK OF BOLIVIA, INC. Delaware
EMERALD CORPORATION Delaware
EMERALD MARKETING, INC. Texas
EMERALD PIPE LINE CORPORATION Delaware
INTEGRATED PRODUCT SYSTEMS, INC. Delaware
KEMPCO PETROLEUM COMPANY Texas
NATIONAL CONVENIENCE STORES INCORPORATED Delaware
NATIONAL MONEY ORDERS, INC. Texas
NORTH AMERICAN INTELECOM, INC. Delaware
PETRO/CHEM ENVIRONMENTAL SERVICES, INC. Delaware
PHOEBUS ENERGY LTD. Bermuda
SCHEPPS FOOD STORES, INC. Texas
SERVIN SERVICIOS INTEGRALES, S.A. DE C.V. Mexico
SHAMROCK VENTURES LTD. Bermuda
SHAMROCK VENTURES (BOLIVIANA) LTD. Bermuda
SIGMOR BEVERAGE, INC. Texas
SIGMOR CORPORATION Delaware
SIGMOR NO. 5007, INC. Texas
SIGMOR PIPELINE COMPANY Texas
SKELLY-BELVIEU PIPELINE COMPANY, L.L.C. Delaware
STOP N GO MARKETS OF GEORGIA, INC. Georgia
STOP N GO MARKETS OF TEXAS, INC. Texas
TEXAS SUPER DUPER MARKETS, INC. Texas
TOC-DS COMPANY Delaware
THE SHAMROCK PIPE LINE CORPORATION Delaware
WEST EMERALD PIPE LINE CORPORATION Delaware
XCEL PRODUCTS COMPANY, INC. Texas
XRAL STORAGE AND TERMINALING COMPANY Texas
w3108.TW
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each of
the Prospectuses constituting part of the Registration
Statements of Diamond Shamrock, Inc. 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, of our report dated February 23,
1996, which includes an explanatory paragraph with respect to
the Company's change in its method of accounting for its long-term
shared cost liability, which is attached as Exhibit 13.3 to
this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedules, which is included in Item 14(a)(2) of this
Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
March 21, 1996
W3107.TW
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, on
behalf of Diamond Shamrock, Inc., a Delaware corporation (the
"Corporation"), hereby constitutes and appoints Timothy J.
Fretthold, Jerry D. King, and Todd Walker, attorneys-in-fact and
agents of the corporation, with full power of substitution and
resubstitution, to do any and all acts and things in its name
and on its behalf and to execute any and all instruments in its
name in such capacity which they may deem appropriate or
advisable to enable the Company to comply with the Securities
Exchange Act of 1934, as amended, and any rules and regulations
of the Securities and Exchange Commission, in connection with
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, including without limitation, the power
to sign such report on the Company's behalf and to sign any
amendments thereto, and to file the same, with all exhibits
thereto, and any other documents required in connection
therewith, with the Securities and Exchange Commission, granting
to each and all of said attorneys-in-fact, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection with the filing
of such report as herein described.
DIAMOND SHAMROCK, INC.
/s/ R. R. HEMMINGHAUS
R. R. Hemminghaus
Chairman of the Board, President,
and Chief Executive Officer
Dated: March 14, 1996
w2771a.tw
EXHIBIT 24.2
POWER OF ATTORNEY
The undersigned directors and/or officers of Diamond
Shamrock, Inc., hereby constitute and appoint Timothy J.
Fretthold, Jerry D. King and Todd Walker, or any of them, their
true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, to do any and all acts
and things in their name and behalf in their capacity as a
director and/or officer of Diamond Shamrock, Inc. and to execute
any and all instruments for them and in their name in such
capacity, which said attorneys-in-fact and agents, or any of
them, may deem necessary or advisable to enable Diamond
Shamrock, Inc. to comply with the Securities Exchange Act of
1934, as amended, and any rules, regulations and requirements of
the Securities and Exchange Commission, in connection with the
Annual Report on Form 10-K of Diamond Shamrock, Inc. for the
fiscal year ended December 31, 1995, including without
limitation, power and authority to sign for them, in their name
in the capacity indicated above, such Form 10-K and any and all
amendments thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that the said attorneys-in-fact and agents, or
their substitute or substitutes, or any one of them, shall do or
cause to be done by virtue hereof.
/S/ R. R. HEMMINGHAUS /S/ E. GLENN BIGGS
R. R. Hemminghaus E. Glenn Biggs
Chairman of the Board and Director
Chief Executive Officer
/S/ ROBERT C. BECKER /S/ WILLIAM E. BRADFORD
Robert C. Becker William E. Bradford
Vice President and Treasurer Director
/S/ GARY E. JOHNSON /S/ LAURO F. CAVAZOS
Gary E. Johnson Lauro F. Cavazos
Vice President and Controller Director
/S/ B. CHARLES AMES /S/ W. H. CLARK
B. Charles Ames W. H. Clark
Director Director
/S/ WILLIAM L. FISHER /S/ BOB MARBUT
William L. Fisher Bob Marbut
Director Director
/S/ KATHERINE D. ORTEGA
Katherine D. Ortega
Director
Dated: March 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 48,600
<SECURITIES> 0
<RECEIVABLES> 220,100
<ALLOWANCES> 7,100
<INVENTORY> 376,000
<CURRENT-ASSETS> 654,900
<PP&E> 2,041,300
<DEPRECIATION> 684,200
<TOTAL-ASSETS> 2,245,400
<CURRENT-LIABILITIES> 489,500
<BONDS> 0
0
0
<COMMON> 300
<OTHER-SE> 624,400
<TOTAL-LIABILITY-AND-EQUITY> 2,245,400
<SALES> 2,936,800
<TOTAL-REVENUES> 2,936,800
<CGS> 2,636,800
<TOTAL-COSTS> 2,636,800
<OTHER-EXPENSES> 178,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,400
<INCOME-PRETAX> 73,700
<INCOME-TAX> 26,400
<INCOME-CONTINUING> 47,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,300
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.46
</TABLE>
