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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2000
Commission File Number 1-11154
A. UDS 401(k) Retirement Savings Plan
B. Ultramar Diamond Shamrock Corporation
6000 North Loop 1604 West
San Antonio, TX 78249-1112
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UDS 401(k) RETIREMENT SAVINGS PLAN
Index to Financial Statements and Supplemental Schedule
December 31, 2000 and 1999
Page
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Report of Independent Public Accountants................................ 3
Financial Statements:
Statements of Net Assets Available for Plan Benefits
as of December 31, 2000 and 1999................................. 4
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 2000 and 1999................... 5
Notes to Financial Statements...................................... 6
Supplemental Schedule:
Schedule I - Schedule of Assets (Held at End of Year)
as of December 31, 2000.......................................... 13
Signature............................................................... 14
Consent of Independent Public Accountants............................... 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefits Committee of
Ultramar Diamond Shamrock Corporation:
We have audited the accompanying statements of net assets available for plan
benefits of the UDS 401(k) Retirement Savings Plan (the Plan) as of December 31,
2000 and 1999, and the related statements of changes in net assets available for
plan benefits for the years then ended. These financial statements and the
schedule referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2000 and 1999, and the changes in net assets available for plan
benefits for each of the years then ended, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2000 included as Schedule I is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department
of Labor Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
San Antonio, Texas
June 20, 2001
UDS 401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31,
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Assets 2000 1999
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Investments, at fair value $ 236,460,520 $ 198,067,614
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Contributions receivable:
Employer 783,829 578,270
Employee 2,193,586 1,889,132
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2,977,415 2,467,402
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Net assets available for plan benefits $ 239,437,935 $ 200,535,016
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See accompanying notes to financial statements.
UDS 401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Years Ended December 31,
2000 1999
---- ----
Additions to net assets:
Investment income:
Interest and dividend income $ 14,137,490 $ 10,480,909
Net appreciation in fair value
of investments 4,207,739 4,768,588
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18,345,229 15,249,497
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Contributions:
Employer 4,724,109 4,038,773
Employee 12,974,092 10,663,142
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17,698,201 14,701,915
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Asset transfers in from other plans 33,733,099 44,553,225
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Total additions 69,776,529 74,504,637
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Deductions from net assets:
Benefits paid to participants 30,873,610 17,534,700
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Net increase in net assets available for
plan benefits 38,902,919 56,969,937
Net assets available for plan benefits:
Beginning of year 200,535,016 143,565,079
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End of year $ 239,437,935 $ 200,535,016
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See accompanying notes to financial statements.
UDS 401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2000 and 1999
NOTE 1: DESCRIPTION OF PLAN
The following description of the UDS 401(k) Retirement Savings Plan (the Plan)
provides only general information. Participants should refer to the Plan
agreement for a more complete description of the Plan's provisions.
General: The Plan is a defined contribution plan covering all eligible employees
of Ultramar Diamond Shamrock Corporation (UDS). Eligible employees include all
non-union employees and certain union employees who have completed one year of
service and who are at least 18 years old. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
UDS is the Sponsor of the Plan. The Employee Benefits Committee (the
Administrator) which consists of at least three members appointed by the Chief
Executive Officer of UDS administers the Plan. The trustee and recordkeeper of
the Plan is Vanguard Fiduciary Trust Company.
Plan Mergers and Acquisition: On August 31, 2000, UDS acquired the Golden Eagle
Refinery from Tosco Corporation. Effective September 1, 2000, the employees at
the Golden Eagle Refinery became eligible to participate in the Plan. In
connection with this acquisition, UDS agreed to accept the transfer of each
Golden Eagle employee's account balance from the Tosco Corporation Capital
Accumulation Plan (the Tosco Plan). Effective October 31, 2000, the Golden Eagle
employee accounts in the Tosco Plan were transferred to the UDS 401(k)
Retirement Savings Plan. These transfers are included in asset transfers in from
other plans in the statement of changes in net assets available for plan
benefits for the year ended December 31, 2000.
On September 29, 2000, UDS acquired Valley Shamrock, Inc. Effective with this
acquisition, employees of Valley Shamrock, Inc. became eligible to participate
in the Plan.
Effective September 30, 1999, the Ultramar Diamond Shamrock Corporation Employee
Stock Ownership Plan I and the Ultramar Diamond Shamrock Employee Stock
Ownership Plan II (collectively known as the ESOP Plans) were merged with the
Plan. Participant account balances from the respective ESOP Plans were
transferred from Key Trust Company, the trustee of the ESOP Plans, to Vanguard
Fiduciary Trust Company's UDS ESOP1 Stock Fund and UDS ESOP2 Stock Fund. These
transfers are included in asset transfers in from other plans in the statement
of changes in net assets available for plan benefits for the year ended December
31, 1999. After the transfers were completed, 25% of the common shares were
immediately eligible for diversification by the ESOP Plans' participants, with
an additional 25% becoming eligible on January 1, 2000, 2001, and 2002.
Contributions to the UDS ESOP1 Stock Fund or the UDS ESOP2 Stock Fund by the
participants are not permitted.
Contributions: Participants can contribute from 1% to 15% of their compensation,
as defined in the Plan. In addition, any employee may make rollover
contributions. For the years ended December 31, 2000 and 1999, rollover
contributions were $1,419,209 and $54,103, respectively, and are included in
employee contributions in the statements of changes in net assets available for
plan benefits. UDS contributes from $0.60 to $1.00 for every $1.00 of the
participant's contribution up to 6% of compensation. These matching
contributions are invested in the same investment fund(s) and in the same
proportion as the participant's current investment options. UDS will also
contribute 2% of compensation for certain participants from the Golden Eagle
Refinery.
UDS may make discretionary company contributions to the Plan for a plan year,
subject to certain limitations. For the years ended December 31, 2000 and 1999,
UDS did not make additional discretionary company contributions to the Plan.
The Internal Revenue Code establishes an annual limitation on the amount of
individual pre-tax salary deferral contributions. This limit for 2000 and 1999
was $10,500 and $10,000, respectively.
Participant Accounts: Each participant's account is valued on a daily basis and
is equal to the participant's and company contributions plus investment income
less benefits paid to the participant and loans.
Vesting: Participants vest immediately in their contributions, rollover
contributions and actual earnings thereon. Participants become 100% vested in
company matching and discretionary contributions and related earnings after five
years of service. Certain participants are subject to accelerated vesting as a
result of special Plan provisions associated with past mergers. However, a
participant will be vested in 100% of his account balance upon his death,
disability, attainment of Normal Retirement Age, as defined in the Plan,
termination or partial termination of the Plan or a change in control, as
defined in the Plan. (See Note 10).
Investment Options: During the years ended December 31, 2000 and 1999,
participants were able to allocate their contributions and transfer existing
account balances, except for certain amounts restricted under the UDS ESOP1
Stock Fund and the UDS ESOP2 Stock Fund, among mutual funds, a collective trust,
other self-directed investments and the Ultramar Diamond Shamrock Corporation
Common Stock Fund.
The collective trust is tax-exempt and invests primarily in investment contracts
issued by insurance companies and commercial banks, and similar types of
fixed-principal investments. The contracts are fully benefit responsive and are
recorded at fair value. The average yield for the years ended December 31, 2000
and 1999 was 6.19% and 5.93%, respectively. The crediting interest rate as of
December 31, 2000 and 1999 was 6.24% and 5.87%, respectively.
Transfers: Plan participants can transfer the balances in any of the investment
options on a daily basis.
Participant Loans: Participants may borrow from their vested account balance a
minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their
vested account balance. The participant may elect a repayment term of up to five
years for general purpose loans or up to 10 years for the purchase of a primary
residence. The loan is secured by a lien on the participant's vested account
balance and bears interest at a reasonable rate as determined by the
Administrator. Principal and interest is repaid through payroll deductions. A
participant can have only one loan outstanding at any time and must wait three
months after paying off a loan before initiating a new loan.
Payment of Benefits: On termination of service, a participant can choose a
lump-sum distribution equal to the vested interest of his or her account or can
defer receipt of such distribution, depending on the terminated participant's
vested account balance. If the vested account balance is less than $5,000, the
distribution can not be deferred. If the vested account balance is more than
$5,000, the participant can consent to the distribution, or can defer to a later
date, but not later than the normal retirement date. If the participant takes no
action, the distribution is made at normal retirement date. Optional forms of
payments are available to certain participants as described in the Plan
agreement.
In the event of hardship, participants can elect to withdraw a portion of their
vested account balance, subject to tax penalties and the cessation of elective
deferral contributions under certain circumstances.
Forfeitures: In the event a participant terminates before becoming 100% vested
in the employer contributions, the nonvested employer contribution amounts held
in the participant's account will be forfeited. If the terminated participant
receives a distribution from the vested portion of his account, the nonvested
amounts remaining in the participant's account are treated as a forfeiture.
Forfeited amounts are used to reduce future employer contributions or defray
Plan administrative costs. During 2000 and 1999, employer contributions were
reduced by $230,659 and $159,893 from forfeited nonvested accounts,
respectively. At December 31, 2000 and 1999, $20,102 and $30,036, respectively,
in unused forfeitures were available for future use under the Plan.
NOTE 2: SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting: The Plan's financial statements are prepared on the accrual
basis of accounting. Benefits paid to participants are recorded when paid.
Use of Estimates: The preparation of financial statements in conformity with
United States' generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition: Investments in mutual funds are
valued at quoted market prices which represent the net asset value of shares
held by the Plan as of the balance sheet date. The Plan's investment in the
collective trust is valued at fair value. Self-directed investments are valued
at quoted market prices as of the balance sheet date. Participant loans are
valued at cost which approximates fair value. UDS common stock is valued at its
quoted market price as of the balance sheet date.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. Capital gain distributions are included in interest and
dividend income.
Net Appreciation in Fair Value of Investments: Net appreciation in fair value of
investments includes net realized gains and losses on the sale of investments
and net unrealized appreciation (depreciation) of investments in accordance with
the rules enacted by the Department of Labor. The computation of realized gains
and losses on the sale of investments is based on the fair value (rather than
historical cost) of Plan assets at the beginning of the year or at the time of
purchase if purchased during the year, compared to the sale price of the
investment. The computation of unrealized appreciation (depreciation) of
investments is based on the difference, if any, between fair value at the
beginning of the year plus current year purchases compared to fair value at the
end of the year.
Derivative Instruments: Effective January 1, 2001, the Plan adopted Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended. This statement established accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that all derivative instruments be recognized as either assets or
liabilities in the statement of net assets available for plan benefits and be
measured at their fair value. The Statement requires that changes in the
derivative instrument's fair value be recognized currently in the statement of
changes in net assets available for plan benefits unless specific hedge
accounting criteria are met. There was no impact in adopting Statement No. 133,
as amended, as the Plan does not hold or trade derivative instruments.
Plan Expenses: UDS pays the administrative expenses of the Plan and provides
certain other services at no cost to the Plan.
Risks and Uncertainties: The Plan's investments, in general, are exposed to
various risks, such as interest rate, credit and overall market volatility risk.
Due to the level of risk associated with certain investment securities, it is
reasonably possible that changes in the value of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and amounts presented in the statements of net
assets available for plan benefits.
NOTE 3: INVESTMENTS
Investments that represent 5% or more of the Plan's net assets are as follows:
December 31,
2000 1999
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Vanguard 500 Index Fund $ 28,700,428 $ 24,842,696
Vanguard PRIMECAP Fund 57,159,426 35,806,727
Vanguard U.S. Growth Fund** 10,362,159 11,227,487
Vanguard Wellington Fund 29,783,466 27,767,821
Vanguard Windsor II Fund** 7,798,735 8,035,535
Vanguard Retirement Savings Trust 27,341,012 30,768,546
UDS ESOP1 Stock Fund * 36,290,707 31,731,479
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* Nonparticipant-directed.
**This investment at December 31, 2000 is less than 5% of the Plan's
net assets but is shown in the schedule for comparative purposes
only.
During 2000 and 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
Years Ended December 31,
2000 1999
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Mutual funds $(10,746,926) $ 9,961,767
Self-directed investments 944 375
Common shares of
Ultramar Diamond Shamrock
Corporation 14,953,721 (5,193,554)
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Net appreciation in fair
value of investments $ 4,207,739 $ 4,768,588
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NOTE 4: NONPARTICIPANT-DIRECTED INVESTMENTS
The net assets and the changes in net assets relating to nonparticipant-directed
investments (comprised of the UDS ESOP1 Stock Fund and UDS ESOP2 Stock Fund) as
of and for the years ended December 31, 2000 and 1999 are shown below.
December 31,
-----------
2000 1999
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Net assets:
Common shares of
Ultramar Diamond Shamrock
Corporation $ 45,170,172 $ 39,541,988
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Years Ended December 31,
-----------------------
2000 1999
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Changes in net assets:
Interest and dividend income $ 1,710,261 $ 480,498
Net appreciation (depreciation) in
fair value of investments 12,456,093 (4,953,413)
Asset transfers in from other plans - 44,553,225
Benefits paid to participants (3,809,393) -
Transfers to participant-directed
investments (4,728,777) (538,322)
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Net increase in net assets 5,628,184 39,541,988
Net assets, beginning of year 39,541,988 -
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Net assets, end of year $ 45,170,172 $ 39,541,988
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NOTE 5: PLAN TERMINATION
Although it has not expressed any intent to do so, UDS has the right under the
Plan to discontinue or reduce its contributions and to terminate the Plan at any
time subject to the provisions of ERISA.
NOTE 6: TAX STATUS
The Internal Revenue Service has determined and informed UDS by a letter dated
September 22, 1995, that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code. Although the Plan has
been amended since receiving the determination letter, UDS believes that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the Internal Revenue Code.
NOTE 7: PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds and a collective trust
managed by an affiliate of the Trustee and shares of common stock of UDS.
Transactions in these investments qualify as party-in-interest transactions.
NOTE 8: RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500 Annual Return/Report of Employee
Benefit Plan:
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Years Ended December 31,
2000 1999
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Benefits paid to participants per the financial statements $ 30,873,610 $ 17,534,700
Add: Amounts allocated to withdrawing participants
at end of year 1,167 221,857
Less: Amounts allocated to withdrawing participants
at beginning of year (221,857) (1,151,538)
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Benefits paid to participants per the Form 5500 $ 30,652,920 $ 16,605,019
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NOTE 9: NONEXEMPT TRANSACTIONS
For the year ended December 31, 2000, there were no nonexempt transactions. For
the year ended December 31, 1999, UDS failed to remit participant contributions
totaling $971,756 to the Plan within the required period as specified by
applicable Department of Labor regulations. These late contributions resulted in
prohibited extensions of credit to UDS and represent nonexempt transactions. The
late contributions plus interest of $5,503 were contributed to the Plan in July
2000. In May 2001, UDS paid interest of $8,838 for late remittance of
contributions for the years ended December 31, 1998 and 1997 as assessed by the
Department of Labor.
NOTE 10: SUBSEQUENT EVENT
On May 7, 2001, UDS announced that it had agreed to be acquired by Valero Energy
Corporation for total consideration of approximately $4.0 billion plus the
assumption of all outstanding debt of approximately $2.0 billion. Under the
terms of the agreement and plan of merger, shareholders of UDS common stock will
receive 1.228 shares of Valero common stock for approximately 50% of the
outstanding shares of UDS common stock, and $55 per share in cash for the
remaining 50%. The merger has been approved by the board of directors of both
companies; however, closing of the transaction is subject to regulatory reviews
and the approval of the shareholders of both companies. The merger is expected
to close in the fourth quarter of 2001.
Valero Energy Corporation owns and operates six refineries in Texas, Louisiana,
New Jersey and California with a combined throughput capacity of more than 1.0
million barrels per day. Valero markets its gasoline, diesel and other refined
products in 34 states through a bulk and rack marketing network and, in
California, through approximately 350 retail locations.
As noted above, the UDS board of directors approved the merger which constitutes
a change in control as defined by the Plan agreement. At closing of the merger,
participants will be 100% vested in their account balances which includes
company matching and discretionary contributions.
Shares of UDS common stock held under the Plan, whether in the Ultramar Diamond
Shamrock Corporation Common Stock Fund, the UDS ESOP1 Stock Fund or the UDS
ESOP2 Stock Fund, will not be subject to the proration of cash and Valero common
stock as described above. These shares will be converted into Valero common
stock based on the exchange ratio.
SCHEDULE I
UDS 401(k) RETIREMENT SAVINGS PLAN
Schedule of Assets (Held at End of Year)
December 31, 2000
Current
Identity of Issue Description of Investment Cost Value
* The Vanguard Group Vanguard 500 Index Fund ** $ 28,700,428
* The Vanguard Group Vanguard Extended Market Index Fund ** 1,267,441
* The Vanguard Group Vanguard Federal Money Market Fund ** 5,907,088
* The Vanguard Group Vanguard International Growth Fund ** 2,229,466
* The Vanguard Group Vanguard International Value Fund ** 990,897
* The Vanguard Group Vanguard Long Term Corporate Fund ** 1,546,359
* The Vanguard Group Vanguard Long Term Treasury Fund ** 440,727
* The Vanguard Group Vanguard PRIMECAP Fund ** 57,159,426
* The Vanguard Group Vanguard Total Bond Market Index Fund ** 2,143,956
* The Vanguard Group Vanguard U.S. Growth Fund ** 10,362,159
* The Vanguard Group Vanguard Wellington Fund ** 29,783,466
* The Vanguard Group Vanguard Windsor II Fund ** 7,798,735
Credit Suisse Warburg Pincus Value Fund ** 150,066
* The Vanguard Group Vanguard Retirement Savings Trust ** 27,341,012
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation ESOP1 Common Stock Fund $ 22,213,528 36,290,707
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation ESOP2 Common Stock Fund 6,209,366 8,879,465
* Ultramar Diamond Ultramar Diamond Shamrock Corporation
Shamrock Corporation Common Stock Fund ** 8,712,974
* UDS 401(k) Retirement Participant loans --
Savings Plan Interest rates range from 7% - 11.5% ** 6,703,578
Self-directed investments:
Salomon Smith Barney Inc. Smith Barney Money Funds ** 7,660
Salomon Smith Barney Inc. Smith Barney Appreciation Fund ** 18,638
Salomon Smith Barney Inc. Government Backed Trust CL T-1 ** 8,770
Salomon Smith Barney Inc. Government Backed Trust CTF ** 7,821
Salomon Smith Barney Inc. Government Trust CTF CL 3-C-REG ** 9,681
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$ 236,460,520
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* Parties-in-interest to the Plan.
** Historical cost information is omitted as it is participant-directed and is
not required to be disclosed.
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized as of June 20, 2001.
UDS 401(k) Retirement Savings Plan
By: /s/ Penelope Viteo
------------------------------------
Penelope Viteo
Member, Employee Benefits Committee and
Vice President, Ultramar Diamond Shamrock Corporation
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated June 20, 2001, included in this Form 11-K, into the Ultramar
Diamond Shamrock Corporation's previously filed Registration Statement File No.
333-47322.
/s/ARTHUR ANDERSEN LLP
San Antonio, Texas
June 20, 2001