UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTINO 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 001-12138
PDV America, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51-0297556
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
750 Lexington Avenue, New York, New York 10022
(Address of principal executive office) (Zip Code)
(212) 753-5340
(Registrant's telephone number, including area code)
N.A.
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $1.00 par value 1,000
- ---------------------------------- ------------------------------
(Class) (Outstanding at July 31, 1999)
<PAGE>
PDV AMERICA, INC.
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1999
Table of Contents
Page
FACTORS AFFECTING FORWARD LOOKING STATEMENTS..................................3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
June 30, 1999 and December 31, 1998.............................4
Condensed Consolidated Statements of Operation --
Three-Month and Six-Month Periods Ended June 30, 1999 and 1998..5
Condensed Consolidated Statement of Shareholder's Equity --
Six-Month Period Ended June 30, 1999............................6
Condensed Consolidated Statements of Cash Flows --
Six-Month Periods Ended June 30, 1999 and 1998..................7
Notes to the Condensed Consolidated Financial Statements........8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations...............14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................24
Item 5. Other Information..............................................25
Item 6. Exhibits and Reports on Form 8-K...............................25
SIGNATURES...................................................................26
2
<PAGE>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the caption "Item 2 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to Year 2000 matters, capital expenditures and investments related to
environmental compliance and strategic planning, purchasing patterns of refined
products and capital resources available to the Companies (as herein defined)
are forward looking statements. In addition, when used in this document, the
words "anticipate," "estimate," "prospect" and similar expressions are used to
identify forward looking statements. Such statements are subject to certain
risks and uncertainties, such as increased inflation, continued access to
capital markets and commercial bank financing on favorable terms, increases in
regulatory burdens, changes in prices or demand for the Companies' products as a
result of competitive actions or economic factors and changes in the cost of
crude oil, feedstocks, blending components or refined products. Such statements
are also subject to the risks of increased costs in related technologies and
such technologies producing anticipated results. Should one or more of these
risks or uncertainties, among others, materialize, actual results may vary
materially from those estimated, anticipated or projected. Although PDV America,
Inc. believes that the expectations reflected by such forward looking statements
are reasonable based on information currently available to the Companies, no
assurances can be given that such expectations will prove to be correct.
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
PDV AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(Unaudited)
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 75,832 $ 34,822
Accounts receivable - net 767,325 592,315
Due from affiliates 61,126 52,666
Inventories 1,094,874 835,128
Prepaid expenses and other 22,063 85,571
---------- ----------
Total current assets 2,021,220 1,600,502
NOTES RECEIVABLES FROM PDVSA AND AFFILIATES 1,010,000 1,010,000
PROPERTY, PLANT AND EQUIPMENT - net 3,418,091 3,420,053
RESTRICTED CASH 9,690 9,436
INVESTMENTS IN AFFILIATES 771,748 807,659
OTHER ASSETS 237,256 227,760
---------- ----------
TOTAL ASSETS $7,468,005 $7,075,410
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY:
CURRENT LIABILITIES
Short-term bank loans $ 134,000 $ 37,000
Accounts payable 670,818 492,090
Due to affiliates 227,209 158,956
Taxes other than income 217,350 219,642
Other current liabilities 199,549 247,966
Income taxes payable 1,880 1,607
Current portion of long-term debt 47,078 47,078
Current portion of capital lease obligation 15,484 14,660
---------- ----------
Total current liabilities 1,513,368 1,218,999
LONG-TERM DEBT 2,071,495 2,071,843
CAPITAL LEASE OBLIGATION 93,972 101,926
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 208,001 200,281
OTHER NONCURRENT LIABILITIES 241,040 230,007
DEFERRED INCOME TAXES 622,595 621,463
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 29,953 29,559
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
Common stock, $1.00 par,
1,000 shares authorized
issued and outstanding 1 1
Additional capital 1,532,435 1,532,435
Retained earnings 1,155,145 1,068,896
---------- ----------
Total shareholder's equity 2,687,581 2,601,332
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $7,468,005 $7,075,410
========== ==========
(See Notes to the Condensed Consolidated Financial Statements.)
4
<PAGE>
PDV AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------------------------
1999 1998 1999 1998
----------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 3,115,067 $2,913,007 $ 5,346,456 $5,610,829
Sales to affiliates 44,981 31,280 72,702 82,404
-----------------------------------------------------
3,160,048 2,944,287 5,419,158 5,693,233
Equity in earnings (losses) of affiliates (12,905) 14,341 (2,480) 41,458
Interest income from affiliates 20,524 15,693 40,869 35,124
Other income (expense) - net (3,599) 976 (13,146) 1,622
-----------------------------------------------------
3,164,068 2,975,297 5,444,401 5,771,437
COST OF SALES AND EXPENSES:
Cost of sales and operating expenses 3,032,147 2,752,531 5,087,950 5,288,720
Selling, general and administrative
expenses 60,212 61,692 118,222 121,974
Interest expense:
Capital leases 3,279 3,648 6,558 7,297
Other 36,993 43,440 74,540 86,814
Minority interest in earnings of
consolidated subsidiary (19) 402 394 360
-----------------------------------------------------
3,132,612 2,861,713 5,287,664 5,505,165
-----------------------------------------------------
INCOME BEFORE INCOME TAXES 31,456 113,584 156,737 266,272
INCOME TAXES 1,505 42,964 48,473 100,314
-----------------------------------------------------
NET INCOME $ 29,951 $ 70,620 $ 108,264 $ 165,958
=====================================================
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
5
<PAGE>
PDV AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Common Stock Additional Retained
Shares Amount Capital Earnings Total
-------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS, DECEMBER 31, 1998 1 $1 $1,532,435 $ 1,068,896 $ 2,601,332
Dividend distribution - - -- (22,015) (22,015)
Net income - - -- 108,264 108,264
-------- -------- ---------- ----------- -----------
RETAINED EARNINGS, JUNE 30, 1999 1 $1 $1,532,435 $ 1,155,145 $ 2,687,581
======== ======== ========== =========== ===========
</TABLE>
(See Notes to Condensed Financial Statements.)
6
<PAGE>
PDV AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Six Months Ended June 30,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $108,465 $263,592
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (118,682) (114,985)
Proceeds from sale of property, plant and equipment 3,894 13,949
(Increase) decrease in restricted cash (254) 5,926
Loans to LYONDELL-CITGO Refining LP (17,000) (7,000)
Investments in and advances to affiliates (2,712) (2,555)
Proceeds from sale of investment -- 7,160
--------- ---------
Net cash used in investing activities (134,754) (97,505)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of revolving bank loans 3,000 (37,561)
Net proceeds from short-term bank loans 97,000 22,000
Proceeds from issuance of tax-exempt bonds 25,000 25,000
Payments on taxable bonds (25,000) --
Payments on term bank loans -- (14,705)
Dividend to parent (22,015) (145,000)
Repayments of other debt (3,556) (3,556)
Payments of capital lease obligations (7,130) (6,390)
--------- ---------
Net cash provided by (used in) financing activities 67,299 (160,212)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 41,010 5,875
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,822 35,268
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 75,832 $ 41,143
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 86,004 $ 91,524
========= =========
Income taxes, net of refunds of $30,000 in 1999 $ (28,080) $ 43,392
========= =========
</TABLE>
(See Notes to the Condensed Consolidated Financial Statements.)
7
<PAGE>
PDV AMERICA, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
- --------------------------------------------------------------------------------
1. Basis of Presentation
The financial information for PDV America, Inc. ("PDV America" or
the "Company") subsequent to December 31, 1998 and with respect to the interim
three-month and six-month periods ended June 30, 1999 and 1998 is unaudited. In
the opinion of management, such interim information contains all adjustments,
consisting only of normal recurring adjustments, with the exception of the tax
matter described in Footnote 5, necessary for a fair presentation of the results
of such periods. The results of operations for the three-month and six-month
periods ended June 30, 1999 are not necessarily indicative of the results to be
expected for the full year. Reference is made to PDV America's Annual Report for
the fiscal year ended December 31, 1998 on Form 10-K, dated March 30, 1999, for
additional information.
The condensed consolidated financial statements include the accounts
of PDV America, its wholly owned subsidiaries, CITGO Petroleum Corporation
("CITGO") and its wholly owned subsidiaries, Cit-Con Oil Corporation, which is
65 percent owned by CITGO, VPHI Midwest, Inc. ("Midwest") and its wholly owned
subsidiary, PDV Midwest Refining, L.L.C. ("PDVMR"), and PDV USA, Inc. ("PDV
USA") (collectively, the "Companies").
2. Inventories
Inventories, primarily at LIFO, consist of the following:
June 30
1999 December 31,
(Unaudited) 1998
--------------- ---------------
(000's omitted)
Refined products $ 779,519 $ 580,666
Crude oil 245,707 186,503
Materials and supplies 69,648 67,959
--------- ---------
$1,094,874 $ 835,128
========== =========
Inventories at December 31, 1998 were carried at estimated net
market value which was $172.0 million lower than historical cost. At June 30,
1999 estimated net market values exceeded historical cost, and accordingly, no
write down was necessary.
8
<PAGE>
3. Long-Term Debt
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(Unaudited) 1998
-------------- ---------------
(000's omitted)
-----------------------------------
<S> <C> <C>
Revolving bank loans $213,000 $210,000
Senior Notes due from 2000 to 2006 with interest rates from
7.75% to 7.875% 947,723 947,499
Private Placement Senior Notes, due from 1999 to 2006 with
interest rates from 9.03% to 9.30% 176,623 176,623
Master Shelf Agreement Senior Notes, due from 2002 to 2009
with interest rates from 7.17% to 8.94% 260,000 260,000
Tax Exempt Bonds, due from 2004 to 2029 with variable interest
rates 300,520 275,520
Taxable Bonds, due from 2008 to 2028 with variable interest
rates 202,850 227,850
Cit-Con bank credit agreement 17,857 21,429
-----------------------------------
2,118,573 2,118,921
Current portion of long-term debt (47,078) (47,078)
-----------------------------------
$2,071,495 $2,071,843
-----------------------------------
</TABLE>
On April 15, 1999, CITGO issued $25 million of tax exempt revenue
bonds due 2029. The proceeds were used to redeem $25 million of the taxable Gulf
Coast environmental facilities revenue bonds due 2028.
9
<PAGE>
4. Commitments and Contingencies
Litigation and Injury Claims - Various lawsuits and claims arising
in the ordinary course of business are pending against the Companies. The
Companies record accruals for potential losses when, in management's opinion,
such losses are probable and reasonably estimable. If known lawsuits and claims
were to be determined in a manner adverse to the Companies, and in amounts
greater than the Companies' accruals, then such determinations could have a
material adverse effect on the Companies' results of operations in a given
reporting period. However, in management's opinion the ultimate resolution of
these lawsuits and claims will not exceed, by a material amount, the amount of
the accruals and the insurance coverage available to the Companies. This opinion
is based upon management's and counsel's current assessment of these lawsuits
and claims. The most significant lawsuits and claims are discussed below.
In May 1997, an explosion and fire occurred at CITGO's Corpus
Christi refinery. No serious personal injuries were reported. CITGO received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively were not material.
There are presently seventeen lawsuits filed on behalf of approximately 9,000
individuals arising out of this incident pending against CITGO in federal and
state courts in Corpus Christi alleging property damages, personal injury and
punitive damages. A trial in one of the federal court lawsuits in October 1998
involving ten bellwether plaintiffs, out of approximately 400 plaintiffs,
resulted in a verdict for CITGO. The remaining plaintiffs in this case have
agreed to settle for an immaterial amount.
A class action lawsuit is pending in Corpus Christi, Texas state
court against CITGO and other operators and owners of nearby industrial
facilities which claims damages for reduced value of residential properties
located in the vicinity of the industrial facilities as a result of air, soil
and groundwater contamination. Trial is scheduled for January 2000. CITGO has
contracted to purchase approximately 267 properties that were included in the
lawsuit and are in a neighborhood adjacent to CITGO's Corpus Christi refinery
and settle the property damage claims relating to these properties. CITGO has
offers open to purchase the remaining eight properties in the neighborhood.
Related to this purchase, $15.7 million was expensed in 1997. Two related
personal injury and wrongful death lawsuits were filed against the same
defendants in 1996, one of which is scheduled for trial in 2000; a trial date
for the other case has not been set.
Litigation is pending in federal court in Lake Charles, Louisiana,
against CITGO by a number of current and former Lake Charles refinery employees
and applicants asserting claims of racial discrimination in connection with
CITGO's employment practices. Trials in this case are set to begin in the fall
of 1999.
CITGO is among defendants to lawsuits in California and North
Carolina alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of gasoline. The action in California was filed in
November 1998 by the South Tahoe Public Utility District and CITGO was added as
a defendant in February 1999. The North Carolina case, filed in January 1999, is
a putative class action on behalf of owners of water wells and other drinking
10
<PAGE>
water supplies in the state. Both actions allege that MTBE poses public health
risks. Both actions seek damages as well as remediation of the alleged
contamination. These matters are in early stages and there has been no discovery
conducted against CITGO. CITGO has denied all of the allegations and is pursuing
its defenses.
Environmental Compliance and Remediation - The Companies are subject
to various federal, state and local environmental laws and regulations which may
require the Companies to take action to correct or improve the effects on the
environment of prior disposal or release of petroleum substances by the
Companies or other parties. Management believes that the Companies are in
compliance with these laws and regulations in all material aspects. Maintaining
compliance with environmental laws and regulations in the future could require
significant capital expenditures and additional operating costs.
The Companies' accounting policy establishes environmental reserves,
as probable site restoration and remediation obligations become reasonably
capable of estimation. Based on currently available information, including the
continuing participation of former owners in remediation actions and
indemnification agreements with third parties, the Companies believe that its
accruals are sufficient to address its environmental clean-up obligations.
In July 1997, the Texas Natural Resources Conservation Commission
("TNRCC") issued a Preliminary Report and Petition alleging that CITGO violated
TNRCC rules relating to the operation of a hazardous waste management unit
without a permit and recommended a penalty of $699,200. The TNRCC later expanded
the alleged violations to include alleged unauthorized emissions to the
atmosphere and alleged unauthorized discharges to waters of the state. CITGO has
settled all of these matters by entering into an Agreed Order with the TNRCC,
which required the payment of a penalty of $325,000, implementation of an
approved Supplemental Environmental Project at a cost of $325,000 and compliance
with terms and conditions of the order.
In June 1999, CITGO Petroleum Corporation and numerous other
industrial companies received notice from the U.S. Environmental Protection
Agency, Region VI ("EPA") that the EPA believes these companies have contributed
to contamination in the Calcasieu Estuary, in the proximity of Lake Charles,
Calcasieu Parish, Louisiana and are Potentially Responsible Parties ("PRPs")
under the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"). The EPA made a demand for payment of its past investigation costs
from CITGO and other PRPs and advised it intends to conduct a Remedial
Investigation/Feasibility Study ("RI/FS") under its CERCLA authority. CITGO and
other PRP's may be potentially responsible for the costs of the RI/FS. CITGO
disagrees with the EPA's allegations and intends to contest this matter. CITGO
does not believe its potential exposure in this matter is material.
On June 28, 1999, PDVMR received a Finding of Violation ("FOV") from
the U.S. EPA (Region V) for alleged violations of the federal benzene New Source
Hazardous Air Pollutants regulations under the Federal Clean Air Act at the
Lemont refinery operated by CITGO. PDVMR is currently in negotiations with the
EPA concerning the FOV and anticipates resolving
11
<PAGE>
this matter by the end of 1999. While PDVMR does not expect this matter to have
a material financial impact on the company, it can reasonably anticipate
proposed penalties to exceed $100,000.
Conditions, which require additional expenditures, may exist with
respect to various Companies' sites including, but not limited to, the
Companies' operating refinery complexes, closed refineries, service station
sites and crude oil and petroleum product storage terminals. The amount of such
future expenditures, if any, is indeterminable.
Derivative Commodity and Financial Instruments - The Companies enter
into petroleum futures contracts, options and other over-the-counter commodity
derivatives, primarily to reduce their inventory exposure to market risk. Such
contracts are generally entered into through major brokerage houses and traded
on national exchanges and can be settled in cash or through delivery of the
commodity. Such contracts generally qualify for hedge accounting and correlate
to market price movements of crude oil and refined products. Resulting gains and
losses on such contracts, therefore, will generally be offset by gains and
losses on the Companies' hedged inventory or future purchases and sales. In the
six-month period ended June 30, 1999, there was no non-hedging activity.
The Companies have only limited involvement with other derivative
financial instruments and do not currently use them for trading purposes. The
Companies have entered into various interest rate swap and cap agreements to
manage their risk related to interest rate changes on their debt. The fair value
of the interest rate swap agreements in place at June 30, 1999, based on the
estimated amount that the Companies would receive or pay to terminate the
agreements as of that date and taking into account current interest rates, was
an unrealized loss of $2.4 million. In connection with the determination of fair
market value, the Companies consider the creditworthiness of the counterparties,
but no adjustment was determined to be necessary as a result.
The impact of these instruments on cost of sales and operating
expenses and pretax earnings was immaterial for all periods presented.
Management considers the market risk to the Companies related to these
instruments to be insignificant during the periods presented.
5. Income Taxes
The effective tax rate for the current year is unusually low due to
a favorable resolution in the second quarter of 1999 of a significant tax issue
in the last IRS audit. During the years under audit, deferred taxes were
recorded for certain environmental expenses deducted in the tax returns in the
event the deductions were denied on audit. The deductions were allowed on audit
and, accordingly, the deferred tax liability of approximately $11 million was
reversed with a corresponding benefit to tax expense.
12
<PAGE>
6. Related Party Transactions
As of February 1, 1999, PDVSA Petroleo y Gas, S. A. reduced
deliveries of crude oil to CITGO by approximately 15 percent under the force
majeure clauses of its two long-term crude oil supply contracts related to
CITGO's fuel refineries. Effective May 1, 1999, the reduction percentage
increased to approximately 20 percent related to those contracts. With respect
to the two long-term crude oil supply contracts related to CITGO's asphalt
refineries, there were no reductions in deliveries during the first quarter of
1999, but during the second quarter of 1999, PDVSA Petroleo y Gas, S. A. reduced
deliveries to CITGO by approximately 40 percent. The Company has been required
to obtain alternative sources of crude oil supply in replacement. As a result,
CITGO estimates that the cost of crude oil purchased in the three months and six
months ended June 30, 1999 increased $13 million and $17 million, respectively,
from what would have otherwise been the case. Due to the complexity of the
factors affecting crude oil and refined product prices, it is not possible to
forecast future financial impacts of these reduced deliveries of crude oil on
CITGO crude oil costs. Additionally, it is not possible to forecast the duration
of the force majeure at this time.
During 1999, PDV America has paid dividends to its parent, PDV
Holding, Inc. as follows: $2,297,000 in March, $5,944,000 in April, $5,759,500
in May and $8,015,000 in June.
On July 2, 1999, PDV America loaned to PDVSA Finance, Ltd., a
wholly-owned subsidiary of Petroleos de Venezuela, S.A., $38,000,000. Interest
shall be payable in arrears quarterly commencing on August 15, 1999 at a rate
per annum equal to 10.395%. Principal shall be payable in eight equal quarterly
installments commencing August 15, 2012.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion of the financial condition and results of
operations of the Companies should be read in conjunction with the unaudited
condensed consolidated financial statements of the Companies included elsewhere
herein. Reference is made to the Companies' Annual Report for the fiscal year
ended December 31, 1998 on Form 10-K, dated March 30, 1999, for additional
information and a description of factors which may cause substantial
fluctuations in the earnings and cash flows of the Companies.
In the second quarter June 30, 1999, the Companies generated net
income of $30.0 million on revenues of $3.2 billion compared to the net income
of $70.6 million on revenues of $3.0 billion for the same period last year. In
the six-month period ended June 30, 1999, the Companies generated net income of
$108.3 million on revenues of $5.4 billion compared to net income of $166.0 on
revenues of $5.8 billion for the same period last year. Gross margin for the
first six months of 1999 benefitted from the sale of inventories that were
written down by $172.0 million at December 31, 1998, to reflect market prices at
that time. At June 30, 1999, estimated net market value of inventories exceeded
historical cost and, accordingly, no write down of inventories was required.
(See "Results of Operations -- Gross margin").
CITGO's revenue accounted for over 99% of PDV America's consolidated
revenues in the first six months of 1999 and 1998. PDVMR's sales of $451.2
million for the six-month period ended June 30, 1999 were primarily to CITGO
and, accordingly, these were eliminated in consolidation.
In June 1999, a group of U.S. independent oil producers filed
petitions under the U.S. anti-dumping and countervailing duty laws against
imports of crude oil from Venezuela, Iraq, Mexico and Saudi Arabia. (See Part
II, Item 5 -- "Other Information.").
Results of Operations
The following table summarizes the sources of PDV America's sales
revenues and sales volumes for the three-month and six-month periods ended June
30, 1999 and 1998:
14
<PAGE>
PDV America Sales Revenues and Volumes
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
-------------- --------------- ---------------- --------------
1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ----
($ in millions) (MM gallons)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline $1,878 $1,736 $3,134 $3,316 3,386 3,361 6,487 6,520
Jet fuel 238 210 429 414 535 456 1,071 884
Diesel/#2 fuel 560 500 1,012 1,024 1,293 1,212 2,602 2,370
Asphalt 93 87 119 110 227 228 297 280
Petrochemicals and industrial
products 236 217 432 472 469 561 1,046 1,077
Lubricants and waxes 122 117 241 225 75 60 143 115
------ ------ ------ ------ ------ ------ ------ ------
Total refined products sales 3,127 2,867 5,367 5,561 5,985 5,878 11,646 11,246
Other sales 33 77 52 132
-------------- -------------- -------------- --------------
Total sales $3,160 $2,944 $5,419 $ 5,693 5,985 5,878 11,646 11,246
============== =============== ============== ==============
</TABLE>
The following table summarizes PDV America's cost of sales and operating
expenses for the three-month and six-month periods ended June 30, 1999 and 1998:
PDV America Cost of Sales and Operating Expenses
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------
1999
1999 1998 (1) 1998
-------------------------------------
($ in millions)
Crude oil $875 $648 $1,479 $1,307
Refined products 1,577 1,525 2,709 2,712
Intermediate feedstocks 205 233 342 497
Refining and manufacturing costs 245 243 493 477
Other operating costs, expenses
and inventory changes(1) 130 104 65 296
------------------- ----------------
Total costs of sales
and operating expenses $3,032 $2,753 $5,088 $5,289
=================== ================
------------
(1) The six months ended June 30, 1999, includes the impact of the
inventory write down of $172 million recorded at December 31, 1998.
See "Gross Margin."
Sales revenues and volumes. Sales increased $216 million, or
approximately 7%, in the three-month period ended June 30, 1999 as compared to
the same period in 1998. This was due to an increase in average sales price of
5% and an increase in sales volume of 2%. Sales decreased $274 million, or
approximately 5%, in the six-month period ended June 30, 1999 as compared to the
same period in 1998. This was due to a decrease in average sales price of 8%
15
<PAGE>
partially offset by an increase in sales volume of 4%. (See PDV America Sales
Revenues and Volumes table above).
Equity in earnings (losses) of affiliates. Equity in earnings
(losses) of affiliates decreased by $27.2 million for the three-month period and
decreased by $43.9 million for the six-month period as compared to the same
period in 1998. The decrease was primarily due to the change in the earnings of
LYONDELL-CITGO Refining LP, ("LYONDELL-CITGO"), CITGO's share of which decreased
$42 million, from $28 million in the first six months of 1998 to $(14) million
in the first six months of 1999. This decrease is due primarily to a reduction
of contract crude supply, lower margins and crude oil purchased in the spot
market and costs and lower operating rates related to operating unit outages.
Other income (expense) - net. Other income (expense) was $(13.1)
million for the six-month period ended June 30, 1999 as compared to $1.6 million
for the same period in 1998. The difference is primarily due to a disposals of
property, plant and equipment which were sold at a loss in 1999, but were sold
at a gain in 1998.
Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $279.6 million or 10%, in the quarter ended June 30, 1999
and decreased $200.8 million or 4% in the six-month period ended June 30, 1999
as compared to the same period in 1998. As a result of the invocation of the
force majeure clause in its crude oil supply contracts, the Companies estimate
that the cost of crude oil purchased in the three months and six months ended
June 30, 1999, increased by $13 million and $17 million, respectively, from what
would have otherwise been the case. (See PDV America Cost of Sales and Operating
Expenses table above.)
The Companies purchase refined products to supplement the production
from their refineries to meet marketing demands and resolve logistical issues.
Refined product purchases represented 52% and 55% of total cost of sales and
operating expenses for the second quarters of 1999 and 1998, and 53% and 51% for
the first six months of 1999 and 1998, respectively. The Companies estimate that
margins on purchased products, on average, are somewhat lower than margins on
produced products due to the fact that the Companies can only receive the
marketing portion of the total wholesale margin received on the produced refined
products. However, purchased products are not segregated from the Companies'
produced products and margins may vary due to market conditions and other
factors beyond the Companies' control.
Gross margin. The gross margin for the three-month period ended June
30, 1999 was $127.9 million, or 4.0%, compared to $191.8 million, or 6.5%, for
the same period in 1998. The gross margin for the six-month period ended June
30, 1999 was $331.2 million, or 6.1%, compared to $404.5 million, or 7.1%, for
the same period in 1998. In the three-month period ended June 30, 1999, the
revenue per gallon component increased approximately 5% while the cost per
gallon component increased approximately 8%. As a result, the gross margin
decreased approximately 1.1 cents on a per gallon basis in the three-month
period ended June 30, 1999 compared to the same period in 1998. In the six-month
period ended June 30, 1999, the revenue per gallon component declined
approximately 8% while the cost per gallon component declined
16
<PAGE>
approximately 7%. As a result, the gross margin decreased approximately
seven-tenths of one cent on a per gallon basis in the six-month period ended
June 30, 1999 compared to the same period in 1998.
Income taxes. Income taxes reported were based on an effective tax
rate of 30.9% for the six-month period ended June 30, 1999, as compared to 37.7%
for the comparable period in 1998. The effective tax rate for the current year
is unusually low due to a favorable resolution in the second quarter of 1999 of
a significant tax issue in the last IRS audit. During the years under audit,
deferred taxes were recorded for certain environmental expenses deducted in the
tax returns in the event the deductions were denied on audit. The deductions
were allowed on audit and, accordingly, the deferred tax liability of
approximately $11 million was reversed with a corresponding benefit to tax
expense.
Liquidity and Capital Resources
For the six-month period ended June 30, 1999, the Companies'
consolidated net cash provided by operating activities totaled approximately
$108.5 million. Operating cash flows were derived from net income of $108.3
million and depreciation and amortization of $132.1 million reduced by changes
in other assets and liabilities of $131.9 million. The more significant changes
in other items included an increase in notes and accounts receivable (including
amounts due from affiliates) of $252.6 million and an increase in inventories of
$249.2 million, offset by an increase in current liabilities of $279.6 million,
an increase in deferred income taxes of $71.2 million and a decrease in
affiliates earnings of $41.3 million.
Net cash used in investing activities totaled $134.8 million for the
six-month period ended June 30, 1999 consisting primarily of capital
expenditures of $118.7 million (compared to $115.0 million for the same period
in 1998) and loans to LYONDELL-CITGO of $17 million.
Net cash provided by financing activities totaled $67.3 million for
the six-month period ended June 30, 1999 consisting primarily of a $97.0 million
from short-term borrowings offset by $22.0 million dividend to parent and net
repayment on capital lease obligations and other obligations of $7.1 million.
As of June 30, 1999, capital resources available to the Companies
include cash generated by operations, available borrowing capacity under CITGO's
committed bank facilities of $450 million and $51 million of uncommitted
short-term borrowing facilities with various banks and $12 million in unused
availability under PDVMR's revolving credit facility with various banks.
Additionally, the remaining $400 million from CITGO's shelf registration with
the Securities and Exchange Commission for $600 million of debt securities may
be offered and sold from time to time. The Companies' management believes that
they have sufficient capital resources to carry out planned capital spending
programs, including regulatory and environmental projects in the near term, and
to meet currently anticipated future obligations as they arise. The Companies
periodically evaluate other sources of capital in the marketplace and anticipate
that long-term capital requirements will be satisfied with current capital
resources and future financing arrangements, including the issuance of debt
securities. The Companies' ability
17
<PAGE>
to obtain such financing will depend on numerous factors, including market
conditions and the perceived creditworthiness of the Companies at that time.
The Companies are in compliance with their obligations under their
debt financing arrangements at June 30, 1999.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives, at fair value,
as either assets or liabilities in the statement of financial position with an
offset either to shareholder's equity and comprehensive income or income
depending upon the classification of the derivative. The company has not
determined the impact on its financial statements that may result from adoption
of SFAS No. 133, which is required no later than January 1, 2001.
Year 2000 Readiness
General. The inability of computers, software and other equipment
using microprocessors to recognize and properly process data fields containing a
two-digit year is commonly referred to as the Year 2000 issue. As the Year 2000
approaches, such systems may be unable to accurately process certain date-based
information.
To mitigate any adverse impact this may cause, the Companies have
established a company-wide Year 2000 Project ("Project") to address the issue of
computer programs and embedded computer chips which may be unable to correctly
function with the Year 2000. The Project is proceeding on schedule. In addition,
CITGO is updating major elements of their information systems by implementing
programs purchased from SAP. The first phase of SAP implementation, which
included the financial reporting and materials management modules, was brought
into production on January 1, 1998. Additional SAP modules including plant
maintenance work order and cost tracking were implemented throughout 1998. The
light oils product scheduling, inventory and billing module and the human
resources module were brought into production on June 1 and July 1, 1999,
respectively. The total cost of the SAP implementation is estimated to be
approximately $125 million, which includes software, hardware, reengineering and
change management. Management has determined that SAP is an appropriate solution
to the Year 2000 issue related to the systems for which SAP is implemented. Such
systems comprise approximately 80% of the Companies' total information systems.
The implementation of SAP is 90% complete, and is on schedule and on budget as
revised through June 30, 1999. Remaining business software systems are expected
to be made Year 2000 ready through the Year 2000 Project or they will be
replaced.
The Project. The Companies' Year 2000 Project Team is divided into
two groups. One group is working with Information Systems ("I.S.") and
Information Technology ("I.T.") related matters, while the other is analyzing
non-I.S. and non-I.T. business and asset integrity
18
<PAGE>
matters. A risk-based approach toward Year 2000 readiness was applied to non-SAP
systems and processes, with most fix-or-replace decisions made by year-end 1998.
The strategy for achieving Year 2000 business and asset integrity is focused on
equipment, software and relationships that are critical to the Companies'
primary business operations, including refinery operations, terminal operations,
crude oil purchase and shipment operations, and refined product distribution
operations. The Companies engaged third party consultants to review and validate
the methodology and organization of the Project. The Project strategy involves a
number of phases: Inventory and Assessment of Critical Equipment, Software and
Relationships; Contingency Planning; Remediation; Testing; and Readiness.
The Inventory and Assessment of Critical Equipment and Software and
Relationship phases of the Project have been completed. The Companies now
require that all new contracts with vendors, suppliers or business partners
include a clause covering Year 2000 readiness. The Companies also seek evidence
of Year 2000 readiness from service providers prior to procuring new services.
While the Project is systematically assessing the Year 2000
readiness of third party suppliers and customers, there can be no guarantee that
third parties of business importance to the Companies will successfully and
timely reprogram, replace or test all of their own computer hardware, software
and process control systems. The Companies have therefore chosen to continue
assessment and reevaluation of third party relationships beyond the deadline for
completion of other aspects of Inventory and Assessment phases of the Project.
Reviews of third party Year 2000 readiness will continue through 1999.
The Companies have also established a Year 2000 Contingency Planning
Team. The strategy for Contingency Planning includes a review and analysis of
existing contingency plans for the Companies' refineries, terminals, pipelines
and other operations, in light of potential Year 2000 issues discovered in the
Inventory and Assessment phases of the Project. The Contingency Planning phase
has also evaluated and implemented changes to the existing contingency plans.
Contingency plans based on this process were completed for mission critical
items and external providers as of June 30, 1999. Remediation continues and
includes technical analysis, testing and, if necessary, retrofitting or
replacement of systems and equipment determined to be incapable of reliable
operations in the Year 2000. As of August 1, 1999, the Remediation phase was
substantially complete. The final phase of the Project, Readiness, is being
conducted concurrently with other Project phases. As systems, equipment,
processes and business relationships are determined and documented as Year 2000
ready, Project resources are being shifted to pursue Readiness in remaining
areas of the enterprise.
The following is the Companies' definition of Year 2000 Readiness:
o Correctly and accurately handle date information before, during and
after midnight, December 31, 1999.
o Function correctly and accurately, and without disruption, before,
during and after January 1, 2000.
19
<PAGE>
o Respond to two-digit year date input in a way that resolves
ambiguity as to the century in a disclosed, defined and
predetermined manner.
o Process all date data to reflect the year 2000 as a leap year.
o Correctly and accurately recognize and process any date with a year
specified as "99" and "00."
Costs. The estimated total cost of the Project is not expected to
exceed $23 million, down from an original estimate of $35 million. The reduction
is due to less than expected need for remediation of embedded systems and
refinements in expense estimates. This estimate does not include the Companies'
potential share of Year 2000 costs that may be incurred by partnerships and
joint ventures in which the Companies participate but are not the managing
partner or operator. The total amount expended through June 30, 1999 was
approximately $12 million. Approximately 48% of these expenditures were for
internal costs to conduct the various phases of the Project. Approximately 28%
were primarily for consultants in the specialized areas of Project Management,
Contingency Planning, Information Technology, Database Administration and
Operations Analysis, as well as fees paid to third parties for Quality
Assessment analysis of Project organization and technology. The remaining 24%
were for actual remediation of critical items, systems, and external providers,
as well as contingency planning and testing.
The costs of the Project are being funded with cash from operations.
No existing or planned I.T. projects have been deferred or delayed due to Year
2000 readiness initiatives. The cost of implementing SAP replacement systems is
not included in these estimates.
The majority of estimated future costs for completing the Project
are anticipated to be directed toward the replacement and repair of systems and
equipment found to be incapable of reliable operation in the Year 2000.
Estimates for replacement and repair costs will be refined over time as the
Remediation phase progresses.
Risks. The failure to correct a material Year 2000 problem could
result in an interruption, or failure of, certain normal business activities or
operations. Because the Companies are dependent, to a very substantial degree,
upon the proper functioning of their computer systems and their interaction with
third parties, including vendors and customers and their computer systems, a
failure of any of these systems to be Year 2000 compliant could have a material
adverse effect on the Companies. Failure of this kind could, for example, cause
disruption in the supply of crude oil, cause disruption in refinery operations,
cause disruption in the distribution of refined products, lead to incomplete or
inaccurate accounting, recording, or processing of purchases of supplies or
sales of refined products, or result in generation of erroneous results. If not
remedied, potential risks include business interruption, financial loss,
regulatory actions, reputational harm, and legal liability. Such failures could
adversely affect the Companies' results of operations, liquidity and financial
condition. Unlike other business interruption scenarios, Year 2000 implications
could include multiple, simultaneous events which could result in unpredictable
outcomes.
20
<PAGE>
Due to the general uncertainty inherent in the Year 2000 problem,
resulting in part from the uncertainty of the Year 2000 readiness of third party
suppliers and customers, the Companies' management is unable to determine at
this time whether the consequences of Year 2000 failures will have a material
impact on the Companies' operations, liquidity or financial position. The
Project is expected to significantly reduce the Companies' level of uncertainty
about the Year 2000 impact. The Companies' management believes that, with the
implementation of new SAP business systems and completion of the Project as
scheduled, the possibility of significant interruptions of normal operations
should be minimized. See also "Factors Affecting Forward Looking Statements."
21
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Introduction. The Companies have exposure to price fluctuations of
crude oil and refined products as well as fluctuations in interest rates. To
manage these exposures, the Companies have defined certain benchmarks consistent
with their preferred risk profile for the environment in which the Companies
operate and finance their assets. The Companies do not attempt to manage the
price risk related to all of their inventories of crude oil and refined
products. As a result, at June 30, 1999, the Companies were exposed to the risk
of broad market price declines with respect to a substantial portion of their
crude oil and refined product inventories. The following disclosures do not
attempt to quantify the price risk associated with such commodity inventories.
Commodity Instruments. The Companies balance their crude oil and
petroleum product supply/demand and manages a portion of its price risk by
entering into petroleum futures contracts, options and other over-the-counter
commodity derivatives. Generally, the Companies' risk management strategies
qualify as hedges. However, certain strategies do not qualify as hedges. The
Companies may take commodity positions based on its views or expectations of
specific commodity prices or price differentials between commodity types.
Non-Trading Commodity Derivatives
Open Positions at June 30, 1999
<TABLE>
<CAPTION>
Maturity Number of Contract Market
Commodity Derivative Date Contracts Value(2) Value
- --------- ---------- -------- --------- -------- ------
($ in millions)
<S> <C> <C> <C> <C> <C>
No Lead Gasoline(1) Futures Purchased 1999 5 $0.1 $0.1
Futures Sold 1999 25 $0.5 $0.6
Heating Oil(1) Futures Purchased 1999 242 $4.7 $5.0
Futures Purchased 2000 12 $0.2 $0.3
Futures Sold 1999 50 $1.0 $1.0
OTC Swaps 1999 14 $0.3 $0.3
OTC Swaps 2000 17 $0.3 $0.4
Natural Gas(3) Futures Purchased 1999 79 $1.6 $2.0
</TABLE>
- ------------------------
(1) 1000 barrels per contract
(2) Weighted average price
(3) 10,000 mmbtu per contract
Debt Related Instruments. The Companies have fixed and floating U.S.
currency denominated debt. The Companies use interest rate swaps to manage its
debt portfolio toward a benchmark of 40 to 60 percent fixed rate debt to total
fixed and floating rate debt. These instruments have the effect of changing the
interest rate with the objective of minimizing the Companies' long-term costs.
At June 30, 1999, the Companies' primary exposures were to U.S.
dollar LIBOR and U.S. Treasury rates.
22
<PAGE>
For interest rate swaps, the table below presents notional amounts
and interest rates by expected (contractual) maturity dates. Notional amounts
are used to calculate the contractual payments to be exchanged under the
contracts.
Non-Trading Interest Rate Derivatives
Open Positions at June 30, 1999
Notional
Expiration Fixed Rate Principal
Variable Rate Index Date Paid Amount
- ------------------- ------ ------ ----------
($ in millions)
One-month LIBOR May 2000 6.28% $ 25
J.J. Kenny May 2000 4.72% 25
J.J. Kenny February 2005 5.30% 12
J.J. Kenny February 2005 5.27% 15
J.J. Kenny February 2005 5.49% 15
------
$ 92
======
The fair value of the interest rate swap agreements in place at
June 30, 1999, based on the estimated amount that the Companies would receive or
pay to terminate the agreements as of that date and taking into account current
interest rates, was an unrealized loss of $2.4 million.
For debt obligations, the table below presents principal cash flows
and related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.
Debt Obligations at June 30, 1999
Expected
Fixed Average Fixed Variable Average Variable
Expected Maturities Rate Debt Interest Rate Rate Debt Interest Rate
- ------------------- --------- -------------- --------- ----------------
($ in millions) ($ in millions)
1999 $ 40 9.11% $ 138 5.49%
2000 290 7.94% 7 6.05%
2001 40 9.11% 7 6.47%
2002 36 8.78% 113 6.60%
2003 559 7.98% 100 6.70%
Thereafter 422 8.02% 500 6.81%
-------- ---- ------ ----
Total $ 1,387 8.07% $ 865 6.55%
======== ==== ====== ====
Fair Value $ 1,328 $ 865
======== ======
23
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Various lawsuits and claims arising in the ordinary course of
business are pending against the Companies. The Companies record accruals for
potential losses when, in management's opinion, such losses are probable and
reasonably estimable. If known lawsuits and claims were to be determined in a
manner adverse to the Companies, and in amounts greater than the Companies'
accruals, then such determinations could have a material adverse effect on the
Companies' results of operations in a given reporting period. However, in
management's opinion the ultimate resolution of these lawsuits and claims will
not exceed, by a material amount, the amount of the accruals and the insurance
coverage available to the Companies. This opinion is based upon management's and
counsel's current assessment of these lawsuits and claims. The most significant
lawsuits and claims are discussed below.
In May 1997, an explosion and fire occurred at CITGO's Corpus
Christi refinery. No serious personal injuries were reported. CITGO received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively were not material.
There are presently seventeen lawsuits filed on behalf of approximately 9,000
individuals arising out of this incident pending against CITGO in federal and
state courts in Corpus Christi alleging property damages, personal injury and
punitive damages. A trial in one of the federal court lawsuits in October 1998
involving ten bellwether plaintiffs, out of approximately 400 plaintiffs,
resulted in a verdict for CITGO. The remaining plaintiffs in this case have
agreed to settle for an immaterial amount.
A class action lawsuit is pending in Corpus Christi, Texas state
court against CITGO and other operators and owners of nearby industrial
facilities which claims damages for reduced value of residential properties
located in the vicinity of the industrial facilities as a result of air, soil
and groundwater contamination. Trial is scheduled for January 2000. CITGO has
contracted to purchase approximately 267 properties that were included in the
lawsuit and are in a neighborhood adjacent to CITGO's Corpus Christi refinery
and settle the property damage claims relating to these properties. CITGO has
offers open to purchase the remaining eight properties in the neighborhood.
Related to this purchase, $15.7 million was expensed in 1997. Two related
personal injury and wrongful death lawsuits were filed against the same
defendants in 1996, one of which is scheduled for trial in 2000; a trial date
for the other case has not been set.
Litigation is pending in federal court in Lake Charles, Louisiana,
against CITGO by a number of current and former Lake Charles refinery employees
and applicants asserting claims of racial discrimination in connection with
CITGO's employment practices. Trials in this case are set to begin in the fall
of 1999.
CITGO is among defendants to lawsuits in California and North
Carolina alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of
24
<PAGE>
gasoline. The action in California was filed in November 1998 by the South Tahoe
Public Utility District and CITGO was added as a defendant in February 1999. The
North Carolina case, filed in January 1999, is a putative class action on behalf
of owners of water wells and other drinking water supplies in the state. Both
actions allege that MTBE poses public health risks. Both actions seek damages as
well as remediation of the alleged contamination. These matters are in early
stages and there has been no discovery conducted against CITGO. CITGO has denied
all of the allegations and is pursuing its defenses.
Item 5. Other Information
On June 29, 1999, a group of U.S. independent oil producers filed
petitions under the U.S. anti-dumping and countervailing duty laws against
imports of crude oil from Venezuela, Iraq, Mexico and Saudi Arabia.
These laws provide for the imposition of additional duties on
imports of merchandise if (1) the U.S. Department of Commerce ("DOC") determines
that the merchandise has been sold to the United States at dumped prices or has
benefitted from countervailable subsidies, and (2) the U.S. International Trade
Commission ("ITC") determines that the imported merchandise has caused or
threatened material injury to the U.S. industry producing like product. The
amount of the additional duties imposed is generally equal to the amount of the
dumping margin and subsidies found on the imports on which the duties are
assessed.
On August 9, 1999, the DOC dismissed the petitions and terminated
the anti- dumping and countervailing duty investigations because the petitioners
did not have required industry support. Consequently, the DOC or the ITC will
take no further action. The petitioners have stated that they may appeal this
decision to the U.S. Court of International Trade.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
None.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PDV AMERICA, INC.
Date: August 13, 1999 /s/ Luis Urdaneta
------------------------------------
Luis Urdaneta
President, Chief Executive and
Financial Officer
Date: August 13, 1999 /s/Jose I. Moreno
------------------------------------
Jose I. Moreno
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from PDV America,
Inc.'s financial statements for the period ending June 30, 1999.
</LEGEND>
<CIK> 0000906422
<NAME> PDV America, Inc.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Apr-01-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 75,832
<SECURITIES> 0
<RECEIVABLES> 848,208
<ALLOWANCES> 19,757
<INVENTORY> 1,094,874
<CURRENT-ASSETS> 2,021,220
<PP&E> 4,442,694
<DEPRECIATION> 1,024,603
<TOTAL-ASSETS> 7,468,005
<CURRENT-LIABILITIES> 1,513,368
<BONDS> 2,071,495
0
0
<COMMON> 1
<OTHER-SE> 2,687,580
<TOTAL-LIABILITY-AND-EQUITY> 7,468,005
<SALES> 5,419,158
<TOTAL-REVENUES> 5,444,401
<CGS> 5,087,950
<TOTAL-COSTS> 5,198,616
<OTHER-EXPENSES> 394
<LOSS-PROVISION> 7,556
<INTEREST-EXPENSE> 81,098
<INCOME-PRETAX> 156,737
<INCOME-TAX> 48,473
<INCOME-CONTINUING> 108,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,264
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
