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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 March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 33-59144
CLARK USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1495734
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8182 Maryland Avenue 63105-3721
St. Louis, Missouri (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (314) 854-9696
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 (*) No ( )
Number of shares of registrant's common stock, $.01 par value,
outstanding as of May 10, 1996:
Class Shares Outstanding
Common Stock 19,051,818
Class A Common Stock 10,162,509
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1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Clark USA, Inc.:
We have reviewed the accompanying consolidated balance sheet of Clark
USA, Inc. (a Delaware corporation) and subsidiaries as of March 31, 1996, and
the related consolidated statements of earnings and cash flows for the three
month periods ended March 31, 1995 and 1996. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of
the System for the preparation of interim financial information, applying
analytical review procedures to the financial data and making inquiries of
persons responsible for financial and accounting matters. It is substantially
less in scope than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Clark USA, Inc. and subsidiaries
as of December 31, 1995, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 2, 1996, we expressed an
unqualified opinion on those statements.
In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1995 is fairly stated, in all
material respects, in relation to the financial statements from which it
has been derived.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri,
April 30, 1996
2
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
Reference December 31, March 31,
Note 1995 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 103,729 $ 104,628
Short-term investments 2 46,116 41,902
Accounts receivable 179,763 190,632
Inventories 3 290,444 311,348
Prepaid expenses and other 22,228 21,655
Advance crude oil purchase receivable 6 6,565 11,077
---------- ----------
Total current assets 648,845 681,242
PROPERTY, PLANT AND EQUIPMENT 7 550,872 548,356
ADVANCE CRUDE OIL PURCHASE RECEIVABLE 6 99,345 97,817
OTHER ASSETS 4 65,860 65,810
---------- ----------
$ 1,364,922 $ 1,393,225
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 307,528 $ 354,119
Accrued expenses and other 5 46,301 48,632
Accrued taxes other than income 45,242 41,866
--------- ----------
Total current liabilities 399,071 444,617
LONG-TERM DEBT 765,030 768,244
DEFERRED INCOME TAXES 7,677 --
OTHER LONG-TERM LIABILITIES 38,937 39,332
CONTINGENCIES 8 -- --
STOCKHOLDERS' EQUITY:
Common stock
Common, $.01 par value, 19,051,818 issued 190 190
Class A Common, $.01 par value, 10,162,509 issued 90 102
Class B Common 6 --
Class C Common 6 --
Paid-in capital 300,057 299,991
Advance crude oil purchase receivable from stockholders 6 (146,890) (144,635)
Retained earnings (deficit) 2 748 (14,616)
--------- ---------
Total stockholders' equity 154,207 141,032
--------- ----------
$ 1,364,922 $ 1,393,225
========= =========
The accompanying notes are an integral part of these statements.
3
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands)
For the three months ended
Reference March 31,
Note 1995 1996
NET SALES AND OPERATING REVENUES $ 827,801 $ 1,140,238
EXPENSES:
Cost of sales (758,525) (1,024,554)
Operating expenses (72,217) (100,189)
General and administrative expenses (13,650) (14,547)
Depreciation (7,033) (9,053)
Amortization 4 (2,890) (3,613)
-------------- --------------
(854,315) (1,151,956)
-------------- --------------
OPERATING LOSS (26,514) (11,718)
Interest and financing costs, net 2, 4, 5, 6 (12,930) (12,718)
-------------- --------------
LOSS BEFORE INCOME TAXES (39,444) (24,436)
Income tax benefit 14,843 9,196
-------------- --------------
NET LOSS $ (24,601) $ (15,240)
============== ==============
The accompanying notes are an integral part of these statements.
4
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the three months
ended March 31,
1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (24,601) $ (15,240)
Adjustments:
Depreciation 7,033 9,053
Amortization 3,905 6,289
Accretion of Zero Coupon Notes 4,139 4,561
Share of earnings of affiliates, net of dividends (569) 333
Deferred income taxes (14,850) (9,380)
Other 263 (1,418)
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other
(97,631) (11,829)
Inventories (137,417) (20,987)
Accounts payable, accrued expenses, taxes other than
income, and other 202,583 45,363
------------ -----------
Net cash (used in) provided by operating activities (57,145) 6,745
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (5,862) 14
Sales of short-term investments -- 4,000
Expenditures for property, plant and equipment (8,105) (7,403)
Expenditures for turnaround (569) (3,574)
Refinery acquisition expenditures (68,112) --
Proceeds from disposals of property, plant and equipment 15,023 3,621
Advance crude oil purchase receivable -- (2,984)
------------ -----------
Net cash used in investing activities (67,625) (6,326)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments (4) (1,347)
Proceeds from sale of stock 135,500 2,255
Stock issuance costs (2,995) (66)
Deferred financing costs (14,355) (362)
------------ -----------
Net cash provided by financing activities 118,146 480
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,624) 899
CASH AND CASH EQUIVALENTS, beginning of period 126,384 103,729
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 119,760 $ 104,628
============ ===========
The accompanying notes are an integral part of these statements.
5
FORM 10-Q - PART I
ITEM 1 Financial Statements (continued)
Clark USA, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1996
(tabular dollar amounts in thousands of US dollars)
1. Basis of Preparation
The unaudited consolidated balance sheet of Clark USA, Inc. and
Subsidiaries (the "Company"), a Delaware corporation, as of March 31, 1996,
and the related consolidated statements of earnings and cash flows for the
three month periods ended March 31, 1995 and 1996, have been reviewed by
independent accountants. Clark Refining & Marketing, Inc. ("Clark"), a
subsidiary of the Company, makes up the majority of the consolidated financial
information. In the opinion of the management of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the financial statements have been included therein. The
results of this interim period are not necessarily indicative of results for
the entire year.
Certain reclassifications have been made to the operating and general
administrative expenses in the 1995 financial statements to conform to current
year presentation.
The financial statements have been prepared in accordance with the
instructions to Form 10-Q. Accordingly, certain information and disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These unaudited financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1995.
The Company's earnings and cash flow from operations are primarily
dependent upon processing crude oil and selling quantities of refined
petroleum products at margins sufficient to cover operating expenses. Crude
oil and refined petroleum products are commodities, and factors largely out of
the Company's control can cause prices to vary, in a wide range, over a short
period of time. This potential margin volatility can have a material effect
on financial position, current period earnings and cash flow.
2. Short-term Investments
The Company's short-term investments are all considered "Available-for-
Sale" and are carried at fair value with the resulting unrealized gain or loss
(net of applicable taxes) shown as a component of retained earnings.
Short-term investments consisted of the following:
December 31, 1995 March 31, 1996
Amortized Unrealized Aggregate Amortized Unrealized Aggregate
Major Security Type Cost Gain/(Loss) Fair Value Cost Gain/(Loss) Fair Value
U.S. Debt Securities $ 46,116 $ -- $ 46,116 $ 42,102 $ (200) $ 41,902
The net unrealized position at March 31, 1996 included gains of $0.0
million and losses of $0.2 million (December 31, 1995 -- gains of $0.1 million
and losses of $0.1 million).
6
The contractual maturities of the short-term investments at March 31,
1996 were:
Amortized Aggregate
Cost Fair Value
Due in one year or less $ 27,058 $ 27,023
Due after one year through five years 15,044 14,879
------- -------
$ 42,102 $ 41,902
======= ======
Although some of the contractual maturities of these short-term
investments are over one year, management's intent is to use the funds for
current operations and not hold the investments to maturity.
For the three month period ended March 31, 1996, proceeds from the sale
of Available-for-Sale securities was $4.0 million with no realized gains or
losses recorded for the period. For the same period in 1995, their were no
sales of Available-for-Sale securities. Realized gains and losses are
presented in "Interest and financing costs, net" and are computed using the
specific identification method.
The change in the net unrealized holding gains or losses on Available-
for-Sale securities for the three month period ended March 31, 1996, was a
loss of $0.2 million ($0.1 million after taxes). For the same period in 1995,
the change in the net unrealized holding gains or losses was a gain of $0.7
million ($0.5 million after taxes).
3. Inventories
The carrying value of inventories consisted of the following:
December 31, March 31,
1995 1996
Crude oil.......................... $ 90,635 $ 130,291
Refined and blendstocks............ 163,915 143,638
Convenience products............... 20,532 22,767
Warehouse stock and other ......... 15,362 14,652
----------- -----------
$ 290,444 $ 311,348
=========== ===========
The market value of these inventories at March 31, 1996 was approximately
$33.2 million above the carrying value (December 31, 1995 - $5.4 million).
4. Other Assets
Amortization of deferred financing costs for the three month period ended
March 31, 1996, was $2.5 million (1995 - $1.0 million), and is included in
"Interest and financing costs, net".
Amortization of turnaround costs for the three month period ended March
31, 1996, was $3.6 million (1995 - $2.9 million).
7
5. Interest and Financing Costs, Net
Interest and financing costs, net, consisted of the following:
For the three months
ended March 31,
1995 1996
Interest expense................................ $ 14,411 $ 20,056
Financing costs................................. 1,015 2,506
Interest and finance income (see Note 6)........ (1,845) (9,616)
----------- ----------
13,581 12,946
Capitalized interest............................ (651) (228)
----------- ----------
$ 12,930 $ 12,718
=========== ===========
Accrued interest payable at March 31, 1996, of $14.9 million (December
31, 1995 - $8.4 million) is included in "Accrued Expenses and Other".
6. Advance Crude Oil Purchase Receivable
The Company has advance crude oil purchase receivables from Occidental
Petroleum Corporation (Occidental) and Gulf Resources Corporation (Gulf).
These advance crude oil purchase receivables are being accounted for as
financial instruments and are recorded at cost which approximated market at
March 31, 1996. To the extent the advance crude oil purchase receivables were
acquired by the issuance of stock, they were recorded as a reduction to
Stockholders' Equity. The issuance of stock is recognized as the principal
portion of the receivable is amortized. Finance income and the reduction of
principle related to the notes is recognized according to the interest method
of amortization with gross proceeds from the sale of crude oil delivered
allocated between principal recovery (for both the note recorded as an asset
and the note recorded as a reduction to stockholders' equity) and finance
income. This allocation is based on the implicit yield of the transactions,
which yield is a function of the expected future cash flow stream relative to
the value of the advance crude oil purchase receivable assets on the date of
acquisition. The projected cash flow stream is determined by reference to the
applicable forward oil markets. At March 31, 1996, the implicit yield for the
Occidental and Gulf transactions was 9.2% and 17.2%, respectively.
The Company received proceeds totaling $6.4 million, net of hedging
activity, from these transactions for the period ended March 31, 1996.
Proceeds reflected the two scheduled monthly payments on the note receivable.
The Advance Crude Oil Purchase Receivable, recorded as an asset, net of
hedging activity, increased by $3.0 million and the Advance Crude Oil
Purchase Receivable, recorded as a reduction to stockholders' equity, was
reduced by $2.3 million as a result of cash proceeds in the first quarter.
This reduction had the effect of increasing stockholders' equity. For the
three month period ended March 31, 1996, the Company recorded finance income
of $7.1 million which is included in "Interest and Financing Costs, Net".
7. New Accounting Standard Adopted
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of. The standard requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable with future cash flows.
Implementation of this SFAS did not result in an impairment loss.
The Company has expended approximately $25 million on a project to
produce low sulfur diesel fuel
8
at the Hartford refinery ("DHDS Project") which was delayed in 1992. Should
the Company determine in the future to permanently discontinue this project,
the carrying value of the DHDS Project may not be fully recoverable.
8. Contingencies
Clark and the Company are subject to various legal proceedings related to
governmental regulations and other actions arising out of the normal course of
business, including legal proceedings related to environmental matters.
In early April, 1996, Clark learned that its Hartford, Illinois refinery
is the subject of a Clean Air Act enforcement referral by the United States
Environmental Protection Agency to the United States Department of Justice.
The referral pertains to alleged violations of the Clean Air Act and
regulations promulgated thereunder in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit ("FCCU") and alleged
modification of the FCCU. Although a complaint has not yet been filed, the
government requested additional information from Clark pursuant to Section 114
of the Clean Air Act for the stated purpose of completing its pre-enforcement
evaluation. Clark is gathering the requested information and is otherwise
cooperating with the government in its investigation. No estimate can be made
at this time of Clark's potential liability, if any, as a result of this
enforcement referral.
While it is not possible at this time to establish the ultimate amount of
liability with respect to such contingent liabilities, Clark and the Company
are of the opinion that the aggregate amount of any such liabilities, for
which provision has not been made, will not have a material adverse effect on
their financial position, however, an adverse outcome of any one or more of
these matters could have a material effect on quarterly or annual operating
results or cash flows when resolved in a future period.
9
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Clark USA, Inc. (the "Company" or "Clark USA") owns all of the
outstanding capital stock of Clark Refining & Marketing, Inc. ("Clark").
Clark USA also owns all of the outstanding capital stock of Clark Pipe Line
Company. Because Clark is the principal subsidiary of the Company, a
discussion of the Company's results of operations consists principally of a
discussion of Clark's results of operations.
Certain reclassifications were made to 1995 operating expenses and
general and administrative expenses to conform to current period presentation.
In addition, certain reclassifications were made to 1995 refining division
results for the Port Arthur refinery and Blue Island, Hartford and Other
Refining to allocate certain crude oil acquisition and inventory management
results and conform to current period presentation. Such reclassifications
did not change the Company's total results of operations.
Results of Operations
Financial Highlights
The following tables reflect the Company's financial and operating
highlights for the three month periods ended March 31, 1995 and 1996. All
dollars listed are in millions except per barrel, per gallon and other
statistical data.
Financial Results: (a)
For the three months
ended March 31,
1995 1996
Net sales and operating revenues $ 827.8 $ 1,140.2
Cost of sales 758.5 1,024.5
Operating expenses 72.2 100.2
General and administrative expenses 13.7 14.5
Depreciation and amortization 9.9 12.7
Interest and financing costs 14.8 22.3
Interest and financing income 1.9 9.6
---------------------------------------------------------------------------------------------
Loss before income taxes (39.4) (24.4)
Income tax benefit 14.8 9.2
---------------------------------------------------------------------------------------------
Net loss $ (24.6) $ (15.2)
=============================================================================================
Operating Income:
Refining contribution to operating income $ (20.5) $ (4.8)
Retail contribution to operating income 8.2 9.1
Corporate general and administrative 4.3 3.3
Depreciation and amortization 9.9 12.7
---------------------------------------------------------------------------------------------
Operating loss $ (26.5) $ (11.7)
=============================================================================================
(a) This table provides supplementary data and is not intended to
represent an income statement presented in accordance with generally accepted
accounting principles.
The Company's net loss and operating loss for the first quarter of 1996
narrowed over the comparable period in 1995 due to a rebound in refining
margins reflecting more normal winter demand for distillates and continued
strong demand for gasoline. Weather was unseasonably warm in the prior year's
first quarter reducing industry-wide demand for petroleum products. The
majority of the Company's products are commodities that are subject to
seasonal and market volatility. Net sales and operating revenues increased
significantly over the prior year because of the inclusion in 1996 of a full
quarter of incremental sales from production at the Port Arthur refinery,
which was acquired on February 27, 1995.
10
Refining
Refining Division Operating Statistics:
For the three months
ended March 31,
1995 1996
Port Arthur Refinery (acquired February 27, 1995)
Crude oil throughput (m bbls/day) 179.7 199.0
Production (m bbls/day) 186.6 203.7
Gross margin ($/barrel of production) $ 1.83 $ 2.39
Operating expenses ($/barrel of production) $ 2.08 $ 2.09
Net margin (millions) $ (1.5) $ 5.7
Blue Island, Hartford and other refining
Crude oil throughput (m bbls/day) 122.1 125.6
Production (m bbls/day) 125.3 132.3
Gross margin ($/barrel of production) $ 1.55 $ 2.17
Operating expenses ($/barrel of production) $ 2.83 $ 2.61
Net margin (millions) $(14.5) $ (5.4)
Clark Pipe Line net margin $ 0.1 $ 0.5
Divisional G & A expenses (millions) 4.6 5.6
Contribution to operating income (millions) $ (20.5) $ (4.8)
The refining division reduced its quarterly loss by $15.7 million to $4.8
million in the first quarter of 1996 (1995 - loss of $20.5 million). Gulf
Coast and Midwest industry refining margin indicators improved substantially
in the current year's first quarter as compared to the unusually weak period a
year ago. The principal factors that contributed to the poor industry margins
in 1995 were the transition to reformulated gasoline in certain markets and an
unseasonably warm winter, which reduced demand for heating oil. The Company's
actual results in the first quarter of 1996 benefited from the industry margin
improvement and the impact of rising crude oil prices on forward crude oil
purchase commitments, but were tempered by increased refinery fuel gas costs
caused by high winter demand for natural gas, lower chemical and by-product
margins, higher relative foreign crude oil costs and weather-related crude oil
supply delays. Port Arthur refinery results in 1996 reflected a full quarter
of ownership as compared to one month in the first quarter of 1995.
Refining production during the quarter was below capacity as routine
maintenance was successfully completed on the alkylation unit at the Blue
Island refinery and the vacuum unit at the Hartford refinery, while
unscheduled repairs were completed on the coker unit at the Port Arthur
refinery. Refinery production was reduced by an average of approximately
20,000 barrels per day in the first quarter of 1995 due to the poor industry
refining margins and a fire in an operating unit at the Blue Island refinery.
Per barrel operating expenses in the first quarter of 1996 and 1995 were
negatively affected by the reduced production rates and 1996 expenses were
increased by the higher market prices for refinery fuel gas.
During the first four months of 1996, the commodity markets for crude oil
and refined products were characterized by rising crude oil prices, daily
volatility and steep premiums for prompt crude oil deliveries. The Company
believes such conditions have been magnified in early 1996 due to inventory
levels reaching 20 year lows and the perception of possible shortages. The
Company believes refiners have reduced inventories as a result of strong
winter demand, the prospect for lower crude oil and product prices
11
caused by the possible return of Iraqi crude oil to the world markets and
the desire by refiners to reduce their investment in working capital.
Current commodity market conditions have disrupted many normal options and
futures relationships making it difficult for the Company to effectively hedge
short-term price risk. Governmental agencies are investigating increased
retail gasoline prices and considering strategies to reduce future prices.
The Company is unable to predict what effect, if any, the current state of
commodity markets or potential government action may have on the Company's
future results of operation.
Retail
Retail Division Operating Statistics:
For the three months
ended March 31,
1995 1996
Gasoline volume (mm gals.) 250.9 236.5
Gasoline gross margin (c/gal) 9.9c 11.9c
Convenience product sales (millions) $ 51.8 $ 58.5
Convenience product and other income (millions) 14.4 16.3
Operating expenses (millions) $ 26.2 $ 29.8
Divisional G & A expenses (millions) 4.8 5.6
Contribution to operating income (millions) $ 8.2 $ 9.1
Per Month Per Store
Company operated stores (average) 838 826
Gasoline volume (m gals.) 99.8 95.4
Convenience product sales (m) $ 20.6 $ 23.6
Convenience product gross margin (m) $ 5.7 $ 5.8
The retail division contribution to operating income of $9.1 million in
the first quarter of 1996 exceeded year ago levels even though gasoline
margins were squeezed by rapidly rising wholesale gasoline costs that the
Company was not able to fully capture at the pump. Last year's first quarter
gasoline margins per gallon were comparatively low due to significant
promotional activity which increased volume, but lowered per gallon margins.
Retail gasoline margins per gallon typically narrow when wholesale gasoline
costs rise rapidly and widen when they fall rapidly. The improvement in first
quarter results was realized from improved pricing strategies, strong
performance from newly acquired stores and a modest gain on the sale of non-
core stores. Convenience product and other income increased over the previous
year primarily due to the gain on the sale of stores. Operating expenses
increased over the prior year principally due to operating leases and other
costs related to new store properties and increased costs related to the
expansion of Clark's credit card programs.
The Company continued to implement its targeted retail growth strategy in
the first quarter by adding 10 high volume stores in its core Chicago market
which raised its Chicago market share to approximately 10%. Early in the
quarter, the Company completed its withdrawal from the Minnesota market. As
part of its overall growth strategy, the Company expects to continue to
consider retail store growth in both existing and new markets while also
evaluating current markets for possible divestiture.
12
Other Financial Highlights
Corporate general and administrative expenses for the first quarter of
1996 were below the same period in 1995 principally because of the transfer of
certain activities to the retail and refining divisions in the current year.
Depreciation and amortization expenses for the first quarter of 1996 exceeded
the comparable period of 1995 principally because of the newly acquired Port
Arthur refinery.
Increases in both interest expense and finance income in the first
quarter of 1996 over 1995 were principally related to the advance crude oil
production purchases and related financing completed in the fourth quarter of
1995. In addition, interest expense increased due to the amortization of
bondholder consent fees incurred in 1995 and costs related to the expanded
working capital facility.
Liquidity and Capital Resources
Net cash used in operating activities, excluding working capital changes,
for the first quarter of 1996 was $5.8 million, an improvement of $18.9
million from the year-earlier period. The improvement in cash flows resulted
primarily from the improved refining market conditions. Working capital at
March 31, 1996 was $236.6 million, a 1.53 to 1 current ratio, versus $249.8
million at December 31, 1995, a 1.63 to 1 current ratio.
In general, the Company's short-term working capital requirements
fluctuate with the price and payment terms of crude oil. Clark has in place a
$400 million committed revolving line of credit expiring November 30, 1997 for
the issuance of letters of credit primarily to support purchases of crude oil,
other feedstocks and refined products. The amount available under the
borrowing base associated with such facility at March 31, 1996 was $400
million and approximately $249 million of the facility was utilized for
letters of credit. There were no direct borrowings under Clark's line of
credit at March 31, 1996.
Cash flows used in investing activities in the first quarter in 1996,
excluding short-term investment activities for which management's intent is
similar to cash and cash equivalents, decreased to $10.3 million from $61.8
million in the year-earlier period. The higher investing activities in 1995
resulted principally from the Port Arthur refinery acquisition which closed on
February 27, 1995. Capital expenditures for property, plant and equipment
totaled $7.4 million (1995 - $8.1 million) during the first quarter of 1996
with an additional $3.6 million (1995 - $0.6 million) for refinery maintenance
turnaround expenditures. Refinery capital expenditures totaled $3.9 million
in the first quarter of 1996 (1995 - $1.3 million), the majority of which was
for discretionary projects at the Port Arthur and Hartford refineries. Retail
capital expenditures for the first quarter of 1996 totaled $3.4 million (1995
- $6.8 million), the majority of which related to the purchase of equipment
associated with the first quarter acquisition of stores in Chicago.
Cash flows from financing activities declined in the first quarter of
1996 as compared to the prior year. Financing activities in 1995 related to
the financing of the Port Arthur refinery acquisition.
Funds generated from operating activities together with the Company's
existing cash, cash equivalents and short-term investments are expected to be
adequate to fund requirements for working capital and capital expenditure
programs for the next year. Future working capital, discretionary capital
expenditures, environmentally-mandated spending and acquisitions may require
additional debt or equity financing.
13
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
In early April, 1996, Clark learned that its Hartford, Illinois refinery
is the subject of a Clean Air Act enforcement referral by the United States
Environmental Protection Agency to the United States Department of Justice.
The referral pertains to alleged violations of the Clean Air Act and
regulations promulgated thereunder in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit ("FCCU") and alleged
modification of the FCCU. Although a complaint has not yet been filed, the
government requested additional information from Clark pursuant to Section 114
of the Clean Air Act for the stated purpose of completing its pre-enforcement
evaluation. Clark is gathering the requested information and is otherwise
cooperating with the government in its investigation. No estimate can be made
at this time of Clark's potential liability, if any, as a result of this
enforcement referral.
On January 5, 1995, Clark received a Unilateral Administrative Order from
the EPA pursuant to CERCLA alleging that "Clark Oil & Refining Corp." is a PRP
with respect to shipments of hazardous substances to a solid waste disposal
site known as the Ninth Avenue Site, Gary, Indiana. The alleged shipments all
occurred prior to 1987. The Order instructs Clark and the other approximately
ninety PRPs to design and implement certain remedial work at the site. Clark
has informed the EPA that it is not a proper party to this matter, because its
purchase of certain assets of a company previously operating under the "Clark"
name ("Old Clark") was free and clear of all Old Clark liabilities.
Information provided with the Order estimates that the remedial work may cost
approximately $25 million. No estimate of liability can be made with respect
to this proceeding at this time. In addition, on December 28, 1994, Clark was
served with a summons and complaint brought by certain private parties seeking
to recover all past and future response costs with respect to that site on the
basis of shipments of hazardous substances allegedly made prior to 1987.
Clark moved to dismiss this action on the basis that the action is barred by
the free and clear Order pursuant to which Clark purchased certain assets of
Old Clark. The plaintiffs and one co-defendant opposed Clark's motion to
dismiss. On April 19, 1996, the District Court denied Clark's Motion to
Dismiss holding that at this early procedural stage of the case and prior to
gathering facts regarding the plaintiffs opportunity to participate in the
bankruptcy case which issued the free and clear order, the Court would not
dismiss the case. No estimate of any liability with respect to this case can
be made at this time.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
None
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARK USA, INC.
(Registrant)
/s/ Dennis R. Eichholz
-------------------------------
Dennis R. Eichholz
Controller and Treasurer
(Authorized Officer and
Chief Accounting Officer)
May 13, 1996
15
[ARTICLE] 5
[MULTIPLIER] 1000
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] MAR-31-1996
[CASH] 104,628
[SECURITIES] 41,902
[RECEIVABLES] 192,296
[ALLOWANCES] 1,664
[INVENTORY] 311,348
[CURRENT-ASSETS] 681,242
[PP&E] 704,740
[DEPRECIATION] 156,384
[TOTAL-ASSETS] 1,393,225
[CURRENT-LIABILITIES] 444,617
[BONDS] 768,244
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 292
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 1,393,225
[SALES] 1,137,999
[TOTAL-REVENUES] 1,149,854
[CGS] 1,024,554
[TOTAL-COSTS] 1,139,290
[OTHER-EXPENSES] 12,438
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 20,056
[INCOME-PRETAX] (24,436)
[INCOME-TAX] (9,196)
[INCOME-CONTINUING] (15,240)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (15,240)
[EPS-PRIMARY] 0
[EPS-DILUTED] 0