UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
Commission File Number 1-11154
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(Exact name of registrant as specified in its charter)
Incorporated under the laws of the State of Delaware
I.R.S. Employer Identification No. 13-3663331
6000 N Loop 1604 W
San Antonio, Texas 78249-1112
Telephone number: (210) 592-2000
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 ____
<PAGE>
As of April 30, 1998, 90,220,985 shares of Common Stock, $0.01 par value, were
outstanding, and the aggregate market value of such shares as of April 30, 1998
was $2,734,824,000.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
FORM 10-Q
MARCH 31, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 ..................................... 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1998 and 1997.............................. 4
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the Three Months Ended March 31, 1998 and 1997.. 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997.............................. 6
Notes to Consolidated Financial Statements................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 19
Item 4. Submission of Matters to a Vote of Security Holders........... 19
Item 6. Exhibits and Reports on Form 8-K.............................. 20
SIGNATURE............................................................... 21
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
(Unaudited)
----------- ------------
Assets (in millions)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................... $ 103.0 $ 92.0
Accounts and notes receivable, net...................................... 517.0 673.9
Inventories............................................................. 645.3 741.0
Prepaid expenses and other current assets............................... 39.5 53.1
Deferred income taxes................................................... 44.9 50.8
---------- ----------
Total current assets................................................. 1,349.7 1,610.8
---------- ----------
Property, plant and equipment.............................................. 4,672.4 4,654.3
Less accumulated depreciation and amortization............................. (1,151.8) (1,093.3)
---------- ----------
Property, plant and equipment, net...................................... 3,520.6 3,561.0
Other assets, net.......................................................... 431.3 422.9
---------- ----------
Total assets........................................................... $ 5,301.6 $ 5,594.7
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt..................... $ 6.6 6.5
Accounts payable........................................................ 339.5 661.7
Accrued liabilities..................................................... 330.3 331.9
Taxes other than income taxes........................................... 243.9 237.2
Income taxes payable.................................................... 19.5 13.4
---------- ----------
Total current liabilities............................................ 939.8 1,250.7
---------- ----------
Long-term debt, less current portion....................................... 1,890.2 1,866.4
Other long-term liabilities................................................ 391.1 403.5
Deferred income taxes...................................................... 194.2 187.5
Commitments and contingencies
Company obligated preferred stock of subsidiary............................ 200.0 200.0
Stockholders' equity:
5%Cumulative Convertible Preferred Stock, par value $0.01 per share:
25,000,000 shares authorized, no shares and 1,724,400 shares issued and
outstanding as of
March 31, 1998 and December 31, 1997.................................. - 0.0
Common Stock, par value $0.01 per share:
250,000,000 shares authorized, 90,203,000 and
86,663,000 shares issued and outstanding as of
March 31, 1998 and December 31, 1997................................. 0.9 0.9
Additional paid-in capital.............................................. 1,509.3 1,534.9
Treasury stock.......................................................... - (30.1)
Retained earnings....................................................... 250.6 259.1
Accumulated other comprehensive income ................................. (74.5) (78.2)
---------- ----------
Total stockholders' equity............................................ 1,686.3 1,686.6
---------- ----------
Total liabilities and stockholders' equity............................ $ 5,301.6 $ 5,594.7
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
---------
1998 1997
---- ----
(in millions, except share and per share data)
<S> <C> <C>
Sales and other revenues (including excise taxes)...... $ 2,789.6 $ 2,550.2
---------- ----------
Operating costs and expenses:
Cost of products sold............................... 1,621.3 1,649.7
Operating expenses.................................. 287.9 210.2
Selling, general and administrative expenses........ 78.6 72.0
Taxes other than income taxes....................... 678.3 509.2
Depreciation and amortization....................... 65.4 44.2
Total operating costs and expenses............... 2,731.5 2,485.3
---------- ----------
Operating income....................................... 58.1 64.9
Interest income...................................... 2.1 2.4
Interest expense..................................... (36.1) (32.5)
Gain on sale of property, plant and equipment........ 7.0 11.0
Income before income taxes and dividends of
subsidiary........................................... 31.1 45.8
Provision for income taxes........................... 12.1 18.2
Dividends on preferred stock of subsidiary........... 2.6 -
---------- ----------
Net income............................................. $ 16.4 $ 27.6
========== ==========
Net income per share:
Basic............................................... $0.18 $0.35
Diluted............................................. $0.18 $0.35
Weighted average number of shares (in thousands):
Basic............................................... 87,284 74,725
Diluted............................................. 90,882 78,881
Dividends per share:
Common Shares....................................... $0.275 $0.275
5% Cumulative Convertible Preferred Shares.......... $0.625 $0.625
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Three Months Ended March 31, 1998 and 1997
(Unaudited, in millions)
Common Treasury Accumulated
and Additional Stock, Compre- Other Total
Preferred Paid-in ESOP and Retained hensive Comprehensive Stockholders'
Stock Capital Other Earnings Income Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.......... $0.7 $1,137.0 $(32.2) $193.7 $(58.3) $1,240.9
Comprehensive income:
Net income...................... - - - 27.6 $27.6 - 27.6
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment.................. - - - - (3.9) (3.9) (3.9)
------
Comprehensive income....... - - - - $23.7 - -
======
Issuance of Common Stock.......... - 1.1 - - - 1.1
Cash dividends.................... - - - (21.7) - (21.7)
---- --------- ------- -------- ------- ---------
Balance at March 31, 1997.......... $0.7 $1,138.1 $(32.2) $199.6 $(62.2) $1,244.0
==== ========= ======= ======== ======= =========
Balance at January 1, 1998.......... $0.9 $1,534.9 $(30.1) $259.1 $(78.2) $1,686.6
Comprehensive income:
Net income...................... - - - 16.4 $16.4 - 16.4
Other comprehensive income,
net of tax:
Foreign currency translation
adjustment.................. - - - - 3.7 3.7 3.7
------
Comprehensive income..... - - - - $20.1 - -
======
Issuance of Common Stock.......... - 4.5 - - - 4.5
Cash dividends.................... - - - (24.9) - (24.9)
Conversion of Preferred Shares into
Common Shares.................. - (30.1) 30.1 - - -
---- --------- ------- ------- ------ ---------
Balance at March 31, 1998........... $0.9 $1,509.3 $ - $250.6 $(74.5) $1,686.3
==== ========= ======= ======= ======= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
(in millions)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................... $ 16.4 $ 27.6
--------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.............................. 65.4 44.2
Provision for losses on receivables........................ 4.9 4.3
Gain on sale of property, plant and equipment.............. (7.5) (18.8)
Deferred income tax provision.............................. 2.9 14.8
Other, net................................................. (4.2) 5.0
Changes in operating assets and liabilities:
Decrease in accounts and notes receivable................ 154.6 63.4
Decrease in inventories.................................. 97.1 88.2
Decrease (increase) in prepaid expenses and other
current assets......................................... 13.2 (6.6)
(Increase) decrease in other assets...................... (7.7) 21.5
Decrease in accounts payable and other current liabilities (324.6) (193.2)
Decrease in other long-term liabilities.................. (1.5) (44.5)
Net cash provided by operating activities.............. 9.0 5.9
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures......................................... (28.8) (51.6)
Acquisition of marketing operations.......................... - (8.4)
Deferred turnaround costs.................................... (0.1) 0.5
Expenditures for investments................................. - (5.1)
Proceeds from sales of property, plant and equipment......... 27.8 45.6
Net cash used in investing activities...................... (1.1) (19.0)
--------- ---------
Cash Flows from Financing Activities:
Net change in commercial paper and short-term
borrowings.................................................. 25.6 (82.2)
Proceeds from long-term debt................................. - 20.1
Repayment of long-term debt.................................. (2.2) (2.2)
Payment of cash dividends.................................... (24.9) (21.6)
Other, net................................................... 4.5 0.8
--------- ---------
Net cash provided by (used in) financing activities........ 3.0 (85.1)
Effect of exchange rate changes on cash....................... 0.1 (0.3)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents.......... 11.0 (98.5)
Cash and Cash Equivalents at Beginning of Period.............. 92.0 197.9
--------- ---------
Cash and Cash Equivalents at End of Period.................... $ 103.0 $ 99.4
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
ULTRAMAR DIAMOND SHAMROCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
NOTE 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by Ultramar Diamond Shamrock Corporation (the "Company"), in accordance with
generally accepted accounting principles for interim financial reporting and
with Securities and Exchange Commission rules and regulations for Form 10-Q. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. These
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. The results of operations may be affected by seasonal factors, such as the
demand for petroleum products and working capital requirements in the Northeast
System, which vary significantly during the year; or industry factors that may
be specific to a particular period, such as movements in and the general level
of crude oil prices, the demand for and prices of refined products, industry
supply capacity and maintenance turnarounds.
NOTE 2: Accounting Pronouncement
Effective March 31, 1998, the Company adopted the Financial Accounting Standards
Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," which established standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. The Company
added the required comprehensive income components to the statements of
stockholders' equity and certain amounts from prior periods have been
reclassified to conform with the new requirements of SFAS No. 130.
NOTE 3: Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
(in millions)
<S> <C> <C>
Crude oil and other feedstocks............................................ $ 278.0 $ 342.7
Refined and other finished products and convenience store items........... 308.1 340.5
Materials and supplies.................................................... 59.2 57.8
-------- --------
Total inventories.................................................... $ 645.3 $ 741.0
-------- --------
</TABLE>
During the quarter ended March 31, 1998, the Company recorded a $13.6 million
($8.3 million after tax) non-cash reduction in the carrying value of crude oil
inventories to reduce such inventories to market.
<PAGE>
NOTE 4: Computation of Net Income Per Share
Basic net income per share is calculated as net income less preferred stock
dividends divided by the average number of common shares outstanding. Diluted
net income per share assumes issuance of the net incremental shares from stock
options and restricted stock, and conversion of the 5% Cumulative Convertible
Preferred Shares. The following table reconciles the net income amounts and
share numbers used in the computation of net income per share (in millions,
except per share data and number of shares, which are in thousands).
Three Months Ended
March 31,
---------
1998 1997
---- ----
Basic:
Average number of Common Shares outstanding 87,284 74,725
======= =======
Net income $ 16.4 $ 27.6
Dividends on 5% Cumulative Convertible Preferred
Shares 1.1 1.1
------- -------
Net income applicable to Common Shares $ 15.3 $ 26.5
======= =======
Basic income per share $ 0.18 $ 0.35
======= =======
Diluted:
Average number of Common Shares outstanding 87,284 74,725
Net effect of dilutive stock options and
restricted stock based on the treasury stock
method using the average market price for the
periods presented 804 837
Assumed conversion of 5% Cumulative Convertible
Preferred Shares (prior to conversion in March 1998) 2,794 3,319
------- -------
Total 90,882 78,881
======= =======
Net income $ 16.4 $ 27.6
======= =======
Diluted income per share $ 0.18 $ 0.35
======= =======
NOTE 5: Redemption of 5% Cumulative Convertible Preferred Shares
The Company's 5% Cumulative Convertible Preferred Shares (the Preferred Stock)
included a redemption feature effective through June 2000, such that if the
Company's Common Stock traded above $33.77 per share for any 20 days within a 30
day period, the Company could elect to redeem the Preferred Stock by issuance of
Common Stock of the Company. On February 27, 1998, the trading threshold was
reached and on March 18, 1998 the Company redeemed all 1,724,400 outstanding
shares of Preferred Stock. The Preferred Shares were redeemed for Common Stock
at a conversion rate of 1.9246 shares of Common Stock for each share of
Preferred Stock, resulting in a total of 3,318,698 shares of the Company's
Common Stock being issued. The Common Shares were issued from treasury to the
extent available and the balance were newly issued shares.
NOTE 6: Commitments and Contingencies
The Company's operations are subject to environmental laws and regulations
adopted by various governmental authorities. Site restoration and environmental
remediation and clean-up obligations are accrued either when known or when
considered probable and reasonably estimable. Total future environmental costs
cannot be reasonably estimated due to unknown factors such as the magnitude of
possible contamination, the timing and extent of remediation, the determination
of the Company's liability in proportion to other parties and the extent to
which environmental laws and regulations may change in the future. Although
environmental costs may have a significant impact on results of operations for
any single year, the Company believes that such costs will not have a material
adverse effect on the Company's financial position.
There are various legal proceedings and claims pending against the Company that
arise in the ordinary course of business. It is management's opinion, based upon
advice of legal counsel, that these matters, individually or in the aggregate,
will not have a material adverse effect on the Company's financial position or
results of operations.
NOTE 7: Gain on Sale of El Paso Pipeline and Terminal
In March of 1998, the Company recognized a pre-tax gain of $7.0 million ($4.3
million after tax), resulting from the sale of a 25% interest in the McKee to El
Paso pipeline and El Paso terminal to Phillips Petroleum Company.
NOTE 8: Joint Venture with Petro-Canada
In January 1998, the Company entered into a memorandum of understanding with
Petro-Canada to form a refining and marketing joint venture to serve customers
in Canada and the northern United States more efficiently. The venture requires
that the Company contribute all of the assets in its Northeast System as well as
assets located in Michigan. Petro-Canada will contribute all of its refining and
marketing assets in Canada, including three refineries, a lubricant oil
manufacturing facility and approximately 1,800 retail outlets. Control of the
venture will be shared, with major decisions requiring approval of both parties.
Petro-Canada will own 51% and the Company 49% of the voting units of the joint
venture. Profits and losses will be divided between Petro-Canada and the Company
in a ratio of 64% to 36%, respectively. The Company expects to complete the
joint venture in the third quarter of 1998.
NOTE 9: Joint Venture with Koch Industries, Inc.
In the second quarter of 1998, the Company and Koch Hydrocarbon Co., a division
of Koch Industries, Inc. and Koch Pipeline Co., an affiliate of Koch Industries,
Inc. expect to finalize the formation of a 50-50 joint venture related to each
entity's Mont Belvieu petrochemical assets. The joint venture agreement and
operating agreements will require that the Company contribute its majority
interest in the propane/propylene splitters and related distribution pipeline
and terminal and its operating interest in the hydrocarbon storage facilities
and Koch will contribute its majority interest in its Mont Belvieu natural gas
fractionator facility and certain of its pipeline and supply systems.
NOTE 9: Subsequent Events
On May 5, 1998, the Board of Directors declared a quarterly dividend of $0.275
per Common Share payable on June 5, 1998 to holders of record on May 20, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company
Ultramar Diamond Shamrock Corporation (the Company) is a leading independent
refiner and marketer of petroleum products and convenience store merchandise in
the southwest and central regions of the United States (the US System, formerly
referred to as the Southwest), and the northeast United States and eastern
Canada (the Northeast System). The Company owns and operates seven refineries
located in Texas, California, Michigan, Oklahoma, Colorado and Quebec and
markets its products through Company-operated convenience stores and wholesale
outlets. In the US System, the Company also stores and markets natural gas
liquids and polymer-grade propylene at its facilities at Mont Belvieu, Texas
and, in the Northeast System, the Company sells, on a retail basis, home heating
oil.
On September 25, 1997, the Company completed its acquisition of Total Petroleum
(North America) Ltd. (Total). The purchase price included the issuance of shares
of Company Common Stock and the assumption of Total's outstanding debt. The
acquisition has been accounted for using the purchase method and, accordingly,
operating results of Total subsequent to the date of acquisition have been
included in the consolidated statements of operations, including for the three
months ended March 31, 1998. Total wa an independent refiner and marketer,
operating three refineries in Michigan, Oklahoma and Colorado, and marketing its
products in the central region of the United States through company-owned
convenience stores and wholesale outlets.
In the Northeast System, demand for petroleum products varies significantly
during the year. Distillate demand during the first and fourth quarters can
range from 30% to 40% above the average demand during the second and third
quarters. The substantial increase in demand for heating oil during the winter
months results in the Company's Northeast System having significantly higher
accounts receivable and inventory levels during the first and fourth quarters of
each year. The Company's US System is less affected by seasonal fluctuations in
demand than its operations in the Northeast System. The working capital
requirements of the US System, though substantial, show little fluctuation
throughout the year.
The Company's operating results are affected by Company-specific factors,
primarily its refinery utilization rates and refinery maintenance turnarounds;
seasonal factors, such as the demand for petroleum products and working capital
requirements, both of which vary significantly during the year; and industry
factors, such as movements in and the level of crude oil prices, the demand for
and prices of refined products and industry supply capacity. The effect of crude
oil price changes on the Company's operating results is determined, in part, by
the rate at which refined product prices adjust to reflect such changes. As a
result, the Company's earnings have been volatile in the past and may be
volatile in the future.
<PAGE>
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Financial and operating data by geographic area for the three months ended March
31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Financial Data:
Three Months Ended March 31,
------------------------------------------------------------------------------------------
1998 1997
----------------------------------------- ----------------------------------------
U S Northeast Total U S Northeast Total
--- --------- ----- --- --------- -----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues............. $2,132.8 $ 656.8 $2,789.6 $1,732.1 $818.1 $2,550.2
Cost of products sold (2)............ 1,256.0 365.3 1,621.3 1,145.4 504.3 1,649.7
Operating expenses................... 257.0 30.9 287.9 177.4 32.8 210.2
Selling, general and
administrative expenses........... 38.3 40.3 78.6 29.7 42.3 72.0
Taxes other than income taxes........ 499.8 178.5 678.3 319.8 189.4 509.2
Depreciation and amortization........ 56.5 8.9 65.4 36.9 7.3 44.2
--------- --------- --------- --------- ------- ---------
Operating income..................... $ 25.2 $ 32.9 58.1 $ 22.9 $ 42.0 64.9
========= ========= ========= =======
Gain on sale of assets(1)............ 7.0 11.0
Interest income...................... 2.1 2.4
Interest expense..................... (36.1) (32.5)
--------- ---------
Income before income taxes........... 31.1 45.8
Provision for income taxes........... (12.1) (18.2)
Dividend on subsidiary stock......... (2.6) -
--------- ---------
Net income........................... $ 16.4 $ 27.6
========= =========
</TABLE>
(1) In March 1998, the Company recognized a $7.0 million gain on the sale of a
25% interest in its McKee to El Paso pipeline and El Paso terminal to Phillips
Petroleum Company. In March 1997, the Company recognized an $11.0 million gain
on the sale of an office building in San Antonio, Texas.
(2) In March 1998, the Company recorded a $13.6 million non-cash reduction in
the carrying value of crude oil inventories due to the significant drop in crude
oil prices in 1998.
<PAGE>
Operating Data:
Three Months Ended
March 31,
1998 1997
-------- ---------
US System (formerly the Southwest)
Mid-Continent Refineries (1)
Throughput (bpd) 402,300 222,700
Margin (dollars per barrel) (2) $3.33 $4.48
Wilmington Refinery
Throughput (bpd) 124,000 104,900
Margin (dollars per barrel) $4.82 $5.01
Retail Marketing
Fuel volume (bpd) 167,300 104,500
Fuel margin (cents per gallon) (2) 13.9 10.2
Merchandise sales ($1,000/day) 2,927 2,145
Merchandise margin (%) 30.7 30.2
Northeast System
Quebec Refinery
Throughput (bpd) 156,500 148,600
Margin (dollars per barrel) $1.75 $2.47
Retail Marketing
Fuel volume (bpd) 70,100 70,600
Overall margins (cents per gallon) (3) 29.1 29.2
(1) The Mid-Continent Refineries include the McKee and Three Rivers Refineries
and, since their acquisition on September 25, 1997, the Alma, Ardmore and Denver
Refineries.
(2) Effective January 1, 1998, the Company modified its policy for pricing
refined products transferred from its McKee and Three Rivers Refineries to its
Mid-Continent marketing operations to more closely reflect spot market prices
for such refined products. Accordingly, the 1997 amounts have been restated to
reflect the pricing policy change as if it had occurred on January 1, 1997. The
refining margin and retail marketing fuel margin originally reported for the
quarter ended March 31, 1997, were $4.68 and 9.1(cent), respectively.
(3) Retail marketing overall margin reported for the Northeast System represents
a blend of gross margin for Company and dealer operated retail outlets and
convenience stores, heating oil sales and the cardlock operations.
<PAGE>
General
Net income for the quarter ended March 31, 1998 totaled $16.4 million as
compared to $27.6 million for the quarter ended March 31, 1997. The first
quarter of 1998 included a $4.3 million after-tax gain on the sale of a 25%
interest in the McKee to El Paso pipeline and El Paso terminal and an $8.3
million after-tax non-cash charge to reduce crude oil inventories due to the
continuing drop in crude oil prices. In the first quarter of 1997, the Company
recognized a $6.6 million after-tax gain on the sale o an office building.
Excluding these unusual items, net income would have been $20.4 million in 1998
as compared to $21.0 million in 1997. On a per share basis, basic and diluted
income per share for the first quarter of 1998 was $0.18 per share as compared
to $0.35 per share in 1997. This decrease is due in part to the 17% increase in
the weighted average number of shares outstanding, which increase is due to the
additional shares issued for the acquisition of Total.
In the US System, the Company had operating income of $25.2 million for the
first quarter of 1998, as compared to $22.9 million for the first quarter of
1997. The increase in operating profit was primarily due to increased retail
marketing fuel margins and increased retail fuel volumes, offset by a decline in
the Mid-Continent Refineries' margins. In the Northeast System, operating income
was $32.9 million for the first quarter of 1998 as compared to $42.0 million in
the first quarter of 1997. This decrease is a result of a 29% decline in the
refining margin and lower retail marketing fuel volumes experienced in the first
quarter of 1998. These decreases were partially offset by higher throughput at
the Quebec Refinery.
US System
Sales and other revenues in the US System in the first quarter of 1998 totaled
$2.1 billion and were 23.1% higher than for the first quarter of 1997 primarily
due to the increased sales generated from the Total operations acquired in
September 1997. Sales and other revenues for Total for the three months ended
March 31, 1998 were $628.5 million. Sales and other revenues were adversely
impacted by lower sales prices of products in 1998 as compared to 1997 as a
result of the overall market decline in crud and product prices.
The refining margin for the Mid-Continent Refineries of $3.33 per barrel in the
first quarter of 1998 decreased by 25.7% as compared to $4.48 per barrel in the
first quarter of 1997, due to increased crude oil costs associated with the
inventory write down, a 21-day scheduled turnaround at the Three Rivers Refinery
and lower throughput at the Ardmore Refinery in order to de-bottleneck the crude
unit. The refining margin for the Wilmington Refinery decreased by 3.8% to $4.82
per barrel in the first quarte of 1998. Refinery throughput at Wilmington,
however, increased 18.2% during the same quarter. The Wilmington refinery margin
was adversely impacted by the increased throughput of lower margin gas oil
processed at the Refinery during the first quarter of 1998 as compared to 1997.
Retail marketing fuel volume in the US System increased by 60.0% to 167,300
barrels per day, as a result of the addition of approximately 500 Total
convenience stores, which were acquired in September 1997 and the addition of
several new convenience stores in Colorado and Arizona in the last quarter of
1997. Retail fuel margins increased by 36.3% to 13.9 cents per gallon for the
first quarter of 1998, due to strong retail demand in the Mid-Continent region
as a result of a mild winter in the Southwest United States. The California
retail market was adversely impacted by the heavy rains brought about by El
Nino.
Merchandise sales at the Company's convenience stores increased from $2.1
million per day during the first quarter of 1997 to $2.9 million per day during
the first quarter of 1998 due to the increased sales generated from the Total
stores acquired in September 1997. The merchandise margin for the first quarter
of 1998 was up slightly at 30.7% as compared to 30.2% for the first quarter of
1997.
The petrochemicals and natural gas liquids businesses also contributed to
operating income in the first quarter of 1998, however; polymer-grade sales of
propylene declined due to the turmoil in the Asian market and the resulting
significant decline in propylene prices.
Selling, general and administrative expenses of $38.3 million in the first
quarter of 1998 were $8.6 million higher than in the first quarter of 1997,
reflecting primarily higher selling costs incurred to support the increased
sales resulting from the Total operations.
Northeast System
Sales and other revenues in the Northeast System in the first quarter of 1998
totaled $656.8 million and were $161.3 million, or 19.7%, lower than in the
corresponding quarter of 1997, as a result of a lower sales in the retail and
wholesale segments following the relatively mild winter in Eastern Canada and
the Northeast United States. The lower sales were also directly affected by the
reduced 1998 selling price of refined products in comparison to 1997 as a result
of the lower crude oil prices.
Refining margins decreased by 29.1% to $1.75 per barrel in the first quarter of
1998 as compared to $2.47 per barrel in the first quarter of 1997, due to higher
crude oil costs associated with the inventory write down recorded in 1998.
Throughput at the Quebec Refinery averaged 156,500 barrels per day or 5.3%
higher than in the first quarter of 1997. Overall retail margins remained
constant at 29.1 cents per gallon in 1998 as compared to 29.2 cents per gallon
in 1997, reflecting stable market conditions Retail marketing volumes decreased
less than 1.0% as compared with the first quarter of 1997, to 70,100 barrels per
day, as a result of increased motorist and cardlock demand which offset the
decline in home heating oil volumes resulting from the mild winter.
Selling, general and administrative expenses of $40.3 million were $2.0 million
lower than in the first quarter of 1997, principally due to general reductions
in administrative costs and lower selling costs incurred to support the reduced
level of sales.
Corporate
Net interest expense of $34.0 million in the first quarter of 1998 was $3.9
million higher than in the corresponding quarter of 1997 due to higher average
borrowings in 1998 as compared to 1997 resulting from the debt incurred to
acquire Total in September 1997.
The consolidated income tax provisions for the first quarter of 1998 and 1997
were based upon the Company's estimated effective income tax rates for the years
ending December 31, 1998 and 1997 of 39.0% and 39.7%, respectively. The
consolidated effective income tax rates exceed the U.S. Federal statutory income
tax rate primarily due to state income taxes and the effects of foreign
operations. The organization of the petrochemical joint venture to be formed
with Koch Industries, Inc. is progressing well and is expected to begin
operating as a stand alone entity in the second quarter of 1998. The proposed
joint venture with Petro-Canada is also progressing as scheduled, with closing
expected during the third quarter of 1998. Approval of the Petro-Canada Joint
Venture is still pending from the Competition Bureau of Canada, which is
required prior to the formation and operation of the joint
venture.
<PAGE>
Outlook
The Company's earnings depend largely on refining and retail marketing margins.
The petroleum refining and marketing industry has been and continues to be
volatile and highly competitive. The cost of crude oil purchased by the Company
as well as the price of refined products sold by the Company have fluctuated
widely in the past. As a result of the historic volatility of refining and
marketing margins and the fact that they are affected by numerous diverse
factors, it is impossible to predict future margin levels.
Crude oil prices have remained low thoughout the first quarter of 1998 and are
expected to remain low in the short-term unless the major oil-producing
countries reduce production from current levels. The Company was unable to take
full advantage of the lower crude oil prices during the first quarter of 1998
since there is a significant lag effect between when crude oil is purchased and
when the crude oil is refined and products are sold. The strong economy, early
spring and accelerating demand over 1997 levels for refined products along with
generally improved refining margins since March 31, should provide the Company
an opportunity to improve profits in the second quarter of 1998.
West Coast refining margins, rebounding from the first quarter of 1998, are
stronger than most of the other regions of the country as the second quarter
begins, and the Company expects West Coast retail margins, hampered by heavy
rains, to recover in the second quarter of 1998. Mid-Continent refining margins
have also rebounded, early in the second quarter of 1998, due to the lower crude
oil prices combined with strong product demand resulting from the early arrival
of the summer driving season. Merchandise margins are expected to remain
constant relative to the averages obtained during 1997.
In eastern Canada, refining margins have also increased early in the second
quarter of 1998. A higher than usual demand for gasoline offset declining home
heating oil demand, attributable to a relatively warm winter. See "Certain
Forward Looking Statements."
Capital Expenditures
The refining and marketing of petroleum products is a capital intensive
business. Significant capital requirements include expenditures to upgrade or
enhance refinery operations to meet environmental regulations and maintain the
Company's competitive position, as well as to acquire, build and maintain
broad-based retail networks. The capital requirements of the Company's
operations consist primarily of (i) reliability, environmental and regulatory
expenditures, such as those required to maintain equipment reliability and
safety and to address environmental regulations (including reformulated fuel
specifications, stationary source emission standards and underground storage
tank regulations); and (ii) growth opportunity expenditures, such as those
planned to expand and upgrade its retail marketing business, to increase the
capacity of certain refinery processing units and pipelines and to construct
additional petrochemical processing units.
During the quarter ended March 31, 1998, capital expenditures totaled $28.8
million, of which $15.2 million related to growth opportunity expenditures, and
$13.6 million related to reliability, environmental and regulatory expenditures.
Growth opportunity spending included $7.2 million for the expansion of the
existing two polymer-grade propylene splitters and the construction of a third
splitter to be completed in the third quarter of 1998.
Other growth opportunity spending, during the first three months of 1998
included $1.2 million for the McKee to El Paso pipeline expansion to increase
the capacity of the pipeline to 60,000 barrels per day. Upon completion of the
expansion, this cost will be shared with Phillips Petroleum Company, a partner
whose interest in the pipeline will increase from 25% to 33% as a result. At the
Three Rivers Refinery the fluid catalytic cracker unit's reactor and regenerator
were replaced with new state-of-the-a designs, and new exchangers, pumps and
towers were installed in the gas-concentration and Meroex treating units. This
revamp work cost approximately $2.1 million and has increased throughput
capacity of the Three Rivers Refinery by more than 10%.
In conjunction with the Company's program to upgrade and integrate the Total
retail stores, retail marketing operations spent $2.4 million during the first
quarter of 1998 to reimage and rebrand retail stores in Colorado and Texas.
The Company is continually investigating strategic acquisitions and other
business opportunities, some of which may be material, that will complement its
current business activities.
The Company expects to fund its capital expenditures over the next several years
from cash provided by operations and, to the extent necessary, from the proceeds
of borrowings under its bank credit facilities and its commercial paper and
medium-term note programs discussed below. In addition, depending upon its
future needs and the cost and availability of various financing alternatives,
the Company may, from time to time, seek additional debt or equity financing in
the public or private markets.
Liquidity and Capital Resources
As of March 31, 1998, the Company had cash and cash equivalents of $103.0
million. The Company currently has two committed, unsecured bank facilities
which provide a maximum of $700.0 million U.S. and $200.0 million Cdn. of
available credit, and a $700.0 million commercial paper program supported by the
committed, unsecured U.S. bank facility.
As of March 31, 1998, the Company had approximately $538.8 million remaining
borrowing capacity under its committed bank facilities and commercial paper
program. In addition to its committed bank facilities, on March 31, 1998, the
Company had approximately $520.8 million of borrowing capacity under
uncommitted, unsecured short-term lines of credit with various financial
institutions.
In addition to its bank credit facilities, the Company has $1.0 billion
available under universal shelf registrations previously filed with the
Securities and Exchange Commission. The net proceeds from any debt or equity
offering under the universal shelf registrations would add to the Company's
working capital and would be available for general corporate purposes.
The Company also has $76.7 million available pursuant to committed lease
facilities aggregating $355.0 million, under which the lessors will construct or
acquire and lease to the Company primarily retail stores.
The bank facilities and other debt agreements require that the Company maintain
certain financial ratios and other restrictive covenants. The Company is in
compliance with such covenants and believes that such covenants will not have a
significant impact on the Company's liquidity or its ability to pay dividends.
The Company believes its current sources of funds will be sufficient to satisfy
its capital expenditure, working capital, debt service and dividend requirements
for at least the next twelve months.
In March 1998, the Company exercised its right to redeem the 1,724,400
outstanding shares of its 5% Cumulative Convertible Preferred Stock into Common
Stock at a conversion rate of 1.9246 shares of Common Stock for each share of
Preferred Stock. The redemption resulted in 3,318,698 shares of Common Stock
being issued, a portion of which came from treasury shares and the balance of
shares were newly issued. As a result of the redemption, the cash dividend
requirements for the Company will be lower by $0.
million on an annualized basis.
On May 5, 1998, the Board of Directors declared a quarterly dividend of $0.275
per Common Share payable on June 5, 1998, to holders of record on May 20, 1998.
Cash Flows for the Three Months Ended March 31, 1998
During the first quarter ended March 31, 1998, the Company's cash position
increased $11.0 million to $103.0 million. Net cash provided by operating
activities was $9.0 million due to increased depreciation and amortization and
management's efforts to reduce accounts and notes receivable and inventory
levels, which were offset by reductions in accounts payable and other current
liabilities.
Net cash used in investing activities during the quarter ended March 31, 1998,
totaled $1.1 million, including $28.8 million of cash outflows for capital
expenditures and cash inflows of $27.8 million related to proceeds from the sale
of the McKee to El Paso pipeline and El Paso terminal to Phillips Petroleum
Company.
Net cash provided by financing activities during the quarter ended March 31,
1998, totaled $3.0 million, primarily due to increased short-term borrowings of
$25.6 million offset by the cash dividends declared and paid totaling $24.9
million on its outstanding Common Stock ($0.275 per share) and 5% Cumulative
Convertible Preferred Stock ($0.625 per share) prior to redemption in March
1998.
Exchange Rates
The value of the Canadian dollar relative to the U.S. dollar has weakened
substantially since the acquisition of the Canadian operations in 1992, and
reached an historic low against the U.S dollar in the first quarter of 1998. As
the Company's Canadian operations are in a net asset position, the weaker
Canadian dollar has reduced, in U.S. dollars, the Company's net equity at March
31, 1998, by $74.5 million. Although the Company expects the exchange rate to
fluctuate during 1998, it cannot reasonably predict its future movement.
With the exception of its crude oil costs, which are U.S. dollar denominated,
fluctuations in the Canadian dollar exchange rate will affect the U.S. dollar
amount of revenues and related costs and expenses reported by the Canadian
operation. The potential impact on refining margin of fluctuating exchange rates
together with U.S. dollar denominated crude oil costs is mitigated by the
Company's pricing policies in the Northeast System, which generally pass on any
change in the cost of crude oil. Marketing margins, on the other hand, have been
adversely affected by exchange rate fluctuations as competitive pressures have,
from time to time, limited the Company's ability to promptly pass on the
increased costs to the ultimate consumer. The Company has considered various
strategies to manage currency risk, and it hedges the Canadian currency risk
when such hedging is considered economically appropriate.
<PAGE>
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," in February 1998. SFAS No. 132 revises
employers' disclosures about pension and other postretirement benefit plans. The
statement standardizes the disclosure requirements for pension plans and
postretirement benefit plans to the extent practicable, requires additional
information on changes in the benefit obligations and fair value of plan assets
and eliminates certain disclosures in existing standards. SFAS No. 132 is
effective for financial statements for periods beginning after December 15,
1997. The Company plans to adopt SFAS No. 132 in its December 31, 1998
consolidated financial statements. Upon adoption, certain previously reported
amounts in the notes to the consolidated financial statements will be required
to be restated.
In March 1998, the American Institute of Certified Public Accountants issued a
Statement of Position (SOP) No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 establishes new
standards for capitalizing and amortizing certain costs incurred related to the
development of software for internal use. The SOP requires capitalization of all
external direct costs of material and services, payroll costs for employees
directly associated with internal use software projects, and interest costs
incurred during development. SOP 98-1 is effective for financial statements for
periods beginning after December 15, 1998; however early adoption is permitted.
The Company is currently reviewing its computer software development efforts in
light of the requirements of SOP 98-1 and plans to adopt the SOP in 1998, on a
prospective basis.
Certain Forward Looking Statements
This quarterly report on Form 10-Q contains certain "forward-looking" statements
as such term is defined in the U. S. Private Securities Litigation Reform Act of
1995 and information relating to the Company and its subsidiaries that are based
on the beliefs of management as well as assumptions made by and information
currently available to management. When used in this report, the words
"anticipate," "believe," "estimate," "expect," and "intend" and words or phrases
of similar import, as they relate to the Company or its subsidiaries or
management, identify forward-looking statements. Such statements reflect the
current views of management with respect to future events and are subject to
certain risks, uncertainties and assumptions relating to the operations and
results of operations, including as a result of competitive factors and pricing
pressures, shifts in market demand and general economic conditions and other
factors.
Should one or more of these risks or uncertainties materialize, or should any
underlying assumptions prove incorrect, actual results or outcomes may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The U.S. Environmental Protection Agency ("EPA") has notified the Company that
it intends to seek fines and penalties in connection with (1) a data quality
dispute involving data from the Company's Denver, Colorado refinery stemming
from data analysis prepared by a subcontractor, and (2) potential Clean Air Act
violations identified by the EPA at the Company's Denver Refinery. The EPA has
offered to settle all related issues for $1.8 million. The Company continues to
negotiate with the EPA.
In the Matter of Total Petroleum, Inc. (Combined Notice of Violation No.
EPA-5-97-MI-33 and Finding of Violation No. EPA-5-97-MI-34 filed August 5,
1997). The Company has received correspondence from the EPA indicating that the
EPA is interested in addressing the Company's environmental management practices
at its petroleum refineries on a corporate-wide basis. The Company intends to
cooperate fully with such review.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Stockholders was held on May 5, 1998, in
Scottsdale, Arizona. At the meeting, the Company's stockholders elected four
directors to serve three-year terms expiring in 2001, and ratified the
appointment of Arthur Andersen LLP to serve as independent accountants for the
Company and its subsidiaries for 1998.
The following sets for the number of votes cast for, against or withheld, and
number of abstentions as to each matter:
Election of Directors
Name Total Votes For Total Votes Withheld
E. Bradford 74,409,828 999,281
Roger R. Hemminghaus 74,408,644 1,000,465
Russel H. Herman 74,407,968 1,001,141
C. Barry Schaefer 74,417,338 991,771
Ratification of Arthur Andersen LLP as Independent Accountants
For Against Abstain
75,301,234 42,387 65,488
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
27.1 Amended Financial Data Schedule - First Quarter 1997
27.2 Amended Financial Data Schedule - Second Quarter 1997
27.3 Amended Financial Data Schedule - Third Quarter 1997
27.4 Amended Financial Data Schedule - Year Ended 12/31/96
27.5 Amended Financial Data Schedule - First Quarter 1996
27.6 Amended Financial Data Schedule - Second Quarter 1996
27.7 Amended Financial Data Schedule - Third Quarter 1996
27.8 Amended Financial Data Schedule - Year Ended 12/31/95
27.9 Amended Financial Data Schedule - First Quarter 1995
27.10 Amended Financial Data Schedule - Second Quarter 1995
27.11 Amended Financial Data Schedule - Third Quarter 1995
27.12 Amended Financial Data Schedule - Year Ended 12/31/94
27.13 Amended Financial Data Schedule - Year Ended 12/31/97
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 3, 1998 (File No. 11154) relating to the
redemption of the 1,724,400 outstanding shares of the 5% Cumulative Convertible
Preferred Stock of the Company on March 18, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(Registrant)
By: /s/ H. PETE SMITH
H. PETE SMITH
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
May 13, 1998
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 103,000
<SECURITIES> 0
<RECEIVABLES> 532,700
<ALLOWANCES> (15,700)
<INVENTORY> 645,300
<CURRENT-ASSETS> 1,349,700
<PP&E> 4,672,400
<DEPRECIATION> (1,151,800)
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<CURRENT-LIABILITIES> 939,800
<BONDS> 1,890,200
200,000
0
<COMMON> 900
<OTHER-SE> 1,685,400
<TOTAL-LIABILITY-AND-EQUITY> 5,301,600
<SALES> 2,789,600
<TOTAL-REVENUES> 2,789,600
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<TOTAL-COSTS> 1,621,300
<OTHER-EXPENSES> 1,105,300
<LOSS-PROVISION> 4,900
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<INCOME-TAX> 12,100
<INCOME-CONTINUING> 16,400
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AMENDED
Ultramar Diamond Shamrock Corporation
First Quarter 1997
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 99,400
<SECURITIES> 0
<RECEIVABLES> 450,000
<ALLOWANCES> (15,100)
<INVENTORY> 543,400
<CURRENT-ASSETS> 1,149,000
<PP&E> 3,674,000
<DEPRECIATION> (976,700)
<TOTAL-ASSETS> 4,128,300
<CURRENT-LIABILITIES> 919,500
<BONDS> 1,579,800
0
17
<COMMON> 700
<OTHER-SE> 1,243,283
<TOTAL-LIABILITY-AND-EQUITY> 4,128,300
<SALES> 2,550,200
<TOTAL-REVENUES> 2,550,200
<CGS> 1,649,700
<TOTAL-COSTS> 1,649,700
<OTHER-EXPENSES> 831,300
<LOSS-PROVISION> 4,300
<INTEREST-EXPENSE> 32,500
<INCOME-PRETAX> 45,800
<INCOME-TAX> 18,200
<INCOME-CONTINUING> 27,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,600
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED Ultramar Diamond Shamrock Corporation
Second Quarter 1997
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 93,000
<SECURITIES> 0
<RECEIVABLES> 461,500
<ALLOWANCES> (15,500)
<INVENTORY> 562,700
<CURRENT-ASSETS> 1,172,500
<PP&E> 3,730,200
<DEPRECIATION> (1,011,200)
<TOTAL-ASSETS> 4,195,800
<CURRENT-LIABILITIES> 778,300
<BONDS> 1,527,600
200,000
17
<COMMON> 700
<OTHER-SE> 1,273,783
<TOTAL-LIABILITY-AND-EQUITY> 4,195,800
<SALES> 4,964,600
<TOTAL-REVENUES> 4,964,600
<CGS> 3,135,500
<TOTAL-COSTS> 3,135,500
<OTHER-EXPENSES> 1,655,900
<LOSS-PROVISION> 7,700
<INTEREST-EXPENSE> 62,100
<INCOME-PRETAX> 122,300
<INCOME-TAX> 48,400
<INCOME-CONTINUING> 73,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,900
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.94
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Third Quarter 1997
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 112,800
<SECURITIES> 0
<RECEIVABLES> 724,100
<ALLOWANCES> (18,000)
<INVENTORY> 690,200
<CURRENT-ASSETS> 1,623,400
<PP&E> 4,605,400
<DEPRECIATION> (1,048,800)
<TOTAL-ASSETS> 5,616,700
<CURRENT-LIABILITIES> 1,231,700
<BONDS> 1,920,600
200,000
17
<COMMON> 877
<OTHER-SE> 1,702,306
<TOTAL-LIABILITY-AND-EQUITY> 5,616,700
<SALES> 7,577,800
<TOTAL-REVENUES> 7,577,800
<CGS> 4,752,700
<TOTAL-COSTS> 4,752,700
<OTHER-EXPENSES> 2,521,500
<LOSS-PROVISION> 12,200
<INTEREST-EXPENSE> 92,400
<INCOME-PRETAX> 220,200
<INCOME-TAX> 87,000
<INCOME-CONTINUING> 130,500
<DISCONTINUED> 0
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<EPS-DILUTED> 1.65
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AMENDED
Ultramar Diamond Shamrock Corporation
Year Ended 12/31/96
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 197,900
<SECURITIES> 0
<RECEIVABLES> 518,500
<ALLOWANCES> (15,400)
<INVENTORY> 633,300
<CURRENT-ASSETS> 1,399,300
<PP&E> 3,685,200
<DEPRECIATION> (954,400)
<TOTAL-ASSETS> 4,420,000
<CURRENT-LIABILITIES> 1,096,200
<BONDS> 1,646,300
0
17
<COMMON> 700
<OTHER-SE> 1,240,183
<TOTAL-LIABILITY-AND-EQUITY> 4,420,000
<SALES> 10,208,400
<TOTAL-REVENUES> 10,208,400
<CGS> 6,550,000
<TOTAL-COSTS> 6,550,000
<OTHER-EXPENSES> 3,574,900
<LOSS-PROVISION> 13,600
<INTEREST-EXPENSE> 128,500
<INCOME-PRETAX> (40,200)
<INCOME-TAX> (4,300)
<INCOME-CONTINUING> (35,900)
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<CHANGES> 0
<NET-INCOME> (35,900)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
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<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
First Quarter 1996
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 176,000
<SECURITIES> 0
<RECEIVABLES> 465,500
<ALLOWANCES> (11,900)
<INVENTORY> 598,800
<CURRENT-ASSETS> 1,284,300
<PP&E> 3,506,900
<DEPRECIATION> (855,300)
<TOTAL-ASSETS> 4,237,400
<CURRENT-LIABILITIES> 815,500
<BONDS> 1,668,500
0
17
<COMMON> 700
<OTHER-SE> 1,340,283
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<SALES> 2,369,600
<TOTAL-REVENUES> 2,369,600
<CGS> 1,487,400
<TOTAL-COSTS> 1,487,400
<OTHER-EXPENSES> 817,200
<LOSS-PROVISION> 3,400
<INTEREST-EXPENSE> 28,400
<INCOME-PRETAX> 36,800
<INCOME-TAX> 14,800
<INCOME-CONTINUING> 22,000
<DISCONTINUED> 0
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<CHANGES> 0
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<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
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RESTATED
Ultramar Diamond Shamrock Corporation
Second Quarter 1996
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 328,400
<SECURITIES> 0
<RECEIVABLES> 450,900
<ALLOWANCES> (12,300)
<INVENTORY> 553,800
<CURRENT-ASSETS> 1,379,500
<PP&E> 3,572,700
<DEPRECIATION> (893,200)
<TOTAL-ASSETS> 4,358,700
<CURRENT-LIABILITIES> 873,800
<BONDS> 1,679,500
0
17
<COMMON> 700
<OTHER-SE> 1,374,883
<TOTAL-LIABILITY-AND-EQUITY> 4,358,700
<SALES> 4,935,400
<TOTAL-REVENUES> 4,935,400
<CGS> 3,154,300
<TOTAL-COSTS> 3,154,300
<OTHER-EXPENSES> 1,605,100
<LOSS-PROVISION> 6,800
<INTEREST-EXPENSE> 61,200
<INCOME-PRETAX> 116,100
<INCOME-TAX> 47,000
<INCOME-CONTINUING> 69,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,100
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Third Quarter 1996
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 240,400
<SECURITIES> 0
<RECEIVABLES> 450,700
<ALLOWANCES> (13,200)
<INVENTORY> 587,200
<CURRENT-ASSETS> 1,307,100
<PP&E> 3,627,500
<DEPRECIATION> (925,000)
<TOTAL-ASSETS> 4,323,800
<CURRENT-LIABILITIES> 822,500
<BONDS> 1,683,700
0
17
<COMMON> 700
<OTHER-SE> 1,374,883
<TOTAL-LIABILITY-AND-EQUITY> 4,323,800
<SALES> 7,488,200
<TOTAL-REVENUES> 7,488,200
<CGS> 4,695,300
<TOTAL-COSTS> 4,695,300
<OTHER-EXPENSES> 2,562,900
<LOSS-PROVISION> 10,500
<INTEREST-EXPENSE> 94,600
<INCOME-PRETAX> 137,800
<INCOME-TAX> 54,800
<INCOME-CONTINUING> 83,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,000
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Year Ended 12/31/95
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 175,500
<SECURITIES> 0
<RECEIVABLES> 407,900
<ALLOWANCES> (13,700)
<INVENTORY> 664,300
<CURRENT-ASSETS> 1,306,600
<PP&E> 3,425,000
<DEPRECIATION> (822,500)
<TOTAL-ASSETS> 4,216,700
<CURRENT-LIABILITIES> 920,900
<BONDS> 1,557,800
0
17
<COMMON> 700
<OTHER-SE> 1,327,283
<TOTAL-LIABILITY-AND-EQUITY> 4,216,700
<SALES> 8,083,500
<TOTAL-REVENUES> 8,083,500
<CGS> 4,863,100
<TOTAL-COSTS> 4,863,100
<OTHER-EXPENSES> 2,979,800
<LOSS-PROVISION> 13,800
<INTEREST-EXPENSE> 93,100
<INCOME-PRETAX> 147,100
<INCOME-TAX> 52,100
<INCOME-CONTINUING> 95,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 22,000
<NET-INCOME> 117,000
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
First Quarter 1995
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 96,800
<SECURITIES> 0
<RECEIVABLES> 370,300
<ALLOWANCES> (11,600)
<INVENTORY> 516,600
<CURRENT-ASSETS> 1,054,200
<PP&E> 2,890,700
<DEPRECIATION> (729,900)
<TOTAL-ASSETS> 3,347,100
<CURRENT-LIABILITIES> 618,600
<BONDS> 1,166,000
0
17
<COMMON> 700
<OTHER-SE> 1,116,783
<TOTAL-LIABILITY-AND-EQUITY> 3,347,100
<SALES> 1,852,900
<TOTAL-REVENUES> 1,852,900
<CGS> 1,239,500
<TOTAL-COSTS> 1,239,500
<OTHER-EXPENSES> 577,500
<LOSS-PROVISION> 2,200
<INTEREST-EXPENSE> 22,800
<INCOME-PRETAX> 13,300
<INCOME-TAX> 5,100
<INCOME-CONTINUING> 8,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 22,000
<NET-INCOME> 30,200
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Second Quarter 1995
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 73,600
<SECURITIES> 0
<RECEIVABLES> 406,100
<ALLOWANCES> (11,600)
<INVENTORY> 541,800
<CURRENT-ASSETS> 1,104,300
<PP&E> 3,000,800
<DEPRECIATION> (762,400)
<TOTAL-ASSETS> 3,483,000
<CURRENT-LIABILITIES> 688,200
<BONDS> 1,182,700
0
17
<COMMON> 700
<OTHER-SE> 1,169,783
<TOTAL-LIABILITY-AND-EQUITY> 3,483,000
<SALES> 3,943,900
<TOTAL-REVENUES> 3,943,900
<CGS> 2,620,700
<TOTAL-COSTS> 2,620,700
<OTHER-EXPENSES> 1,216,000
<LOSS-PROVISION> 2,800
<INTEREST-EXPENSE> 46,100
<INCOME-PRETAX> 63,700
<INCOME-TAX> 24,100
<INCOME-CONTINUING> 39,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 22,000
<NET-INCOME> 61,600
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.85
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Third Quarter 1995
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 103,500
<SECURITIES> 0
<RECEIVABLES> 363,000
<ALLOWANCES> (12,400)
<INVENTORY> 537,600
<CURRENT-ASSETS> 1,087,200
<PP&E> 3,121,200
<DEPRECIATION> (793,500)
<TOTAL-ASSETS> 3,558,400
<CURRENT-LIABILITIES> 658,500
<BONDS> 1,260,900
0
17
<COMMON> 700
<OTHER-SE> 1,194,783
<TOTAL-LIABILITY-AND-EQUITY> 3,558,400
<SALES> 6,013,100
<TOTAL-REVENUES> 6,013,100
<CGS> 3,618,900
<TOTAL-COSTS> 3,618,900
<OTHER-EXPENSES> 2,224,900
<LOSS-PROVISION> 3,600
<INTEREST-EXPENSE> 68,600
<INCOME-PRETAX> 104,800
<INCOME-TAX> 39,000
<INCOME-CONTINUING> 65,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 22,000
<NET-INCOME> 87,800
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED
Ultramar Diamond Shamrock Corporation
Year Ended 12/31/94
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 82,500
<SECURITIES> 0
<RECEIVABLES> 412,300
<ALLOWANCES> (11,300)
<INVENTORY> 591,000
<CURRENT-ASSETS> 1,158,700
<PP&E> 2,796,900
<DEPRECIATION> (699,900)
<TOTAL-ASSETS> 3,384,400
<CURRENT-LIABILITIES> 797,400
<BONDS> 1,042,500
0
17
<COMMON> 700
<OTHER-SE> 1,121,583
<TOTAL-LIABILITY-AND-EQUITY> 3,384,400
<SALES> 7,418,300
<TOTAL-REVENUES> 7,418,300
<CGS> 4,270,300
<TOTAL-COSTS> 4,270,300
<OTHER-EXPENSES> 2,842,200
<LOSS-PROVISION> 6,600
<INTEREST-EXPENSE> 87,100
<INCOME-PRETAX> 220,700
<INCOME-TAX> 83,900
<INCOME-CONTINUING> 136,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,800
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.90
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AMENDED
Ultramar Diamond Shamrock Corporation
Year ended 12/31/97
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 92,000
<SECURITIES> 0
<RECEIVABLES> 690,100
<ALLOWANCES> (16,200)
<INVENTORY> 741,000
<CURRENT-ASSETS> 1,610,800
<PP&E> 4,654,300
<DEPRECIATION> (1,093,300)
<TOTAL-ASSETS> 5,594,700
<CURRENT-LIABILITIES> 1,250,700
<BONDS> 1,866,400
200,000
17
<COMMON> 877
<OTHER-SE> 1,685,706
<TOTAL-LIABILITY-AND-EQUITY> 5,594,700
<SALES> 10,882,400
<TOTAL-REVENUES> 10,882,400
<CGS> 6,817,500
<TOTAL-COSTS> 6,817,500
<OTHER-EXPENSES> 3,665,600
<LOSS-PROVISION> 14,900
<INTEREST-EXPENSE> 131,700
<INCOME-PRETAX> 275,200
<INCOME-TAX> 110,200
<INCOME-CONTINUING> 159,600
<DISCONTINUED> 0
<EXTRAORDINARY> (4,800)
<CHANGES> 0
<NET-INCOME> 154,800
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.88
</TABLE>
