UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2004
Petrobras International Finance Company - PIFCo
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(Translation of Registrant's Name Into English)
Cayman Islands
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(Jurisdiction of incorporation or organization)
Anderson Square Building, P.O. Box 714
George Town, Grand Cayman
Cayman Islands, B.W.I.
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(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F x Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No x
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_____.)
INCORPORATION BY REFERENCE
THIS REPORT ON FORM 6-K IS INCORPORATED BY REFERENCE INTO THE REGISTRATION
STATEMENT ON FORM F-3, FILE NO. 333-92044, OF PETROLEO BRASILEIRO S.A --
PETROBRAS AND PETROBRAS INTERNATIONAL FINANCE COMPANY.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 2003
Forward Looking Statements
This report on Form 6-K contains "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, that are not based on historical
facts and are not assurances of future results. These forward-looking statements
are subject to certain risks and uncertainties, including, but not limited to,
our ability to obtain financing, changes by Petroleo Brasileiro S.A. - Petrobras
in its use of our services for market purchases of crude oil and oil products
and changes in government regulations.
All forward-looking statements attributed to us or a person acting on our behalf
are expressly qualified in their entirety by this cautionary statement, and you
should not place reliance on any forward-looking statement contained herein.
Basis of Presentation
You should read the following discussion of our financial condition and results
of operations together with the attached audited consolidated financial
statements and the accompanying notes for the year ended December 31, 2003
beginning on page F-2. You should also read our audited consolidated financial
statements for the year ended December 31, 2002 and the accompanying notes,
which are included in our annual report on Form 20-F for the year ended December
31, 2002, but which are not presented in this Form 6-K. The audited consolidated
financial statements for the years ended December 31, 2003 and December 31, 2002
and the accompanying notes have been presented in U.S. dollars and prepared in
accordance with U.S. GAAP. As a subsidiary of Petrobras, we also prepare
financial statements in accordance with accounting practices adopted in Brazil.
Overview
We are a wholly-owned subsidiary of Petrobras. Accordingly, our financial
position and results of operations are significantly affected by decisions of
our parent company. Our ability to meet our outstanding debt obligations depends
on a number of factors, including:
o Petrobras' financial condition and results of operations;
o the extent to which Petrobras continues to use our services for market
purchases of crude oil and oil products;
o Petrobras' willingness to continue to make loans to us and provide us
with other types of financial support;
o our ability to access financing sources, including the international
capital markets and third-party credit facilities; and
o our ability to transfer our financing costs to Petrobras.
We earn income from:
o sales of crude oil and oil products to Petrobras;
o limited sales of crude oil and oil products to third parties; and
o financial income derived from financing of sales to Petrobras and
inter-company loans to Petrobras and investments in marketable
securities and other financial instruments.
Our operating expenses include:
o cost of sales, which is comprised mainly of purchases of crude oil and
oil products; and
o financial expense, mainly from interest on our lines of credit and
capital markets indebtedness, sales of future receivables and
inter-company loans from Petrobras.
Purchases and Sales of Crude Oil and Oil Products
We typically purchase crude oil and oil products in transactions with payment
terms of approximately 30 days. Petrobras typically pays for shipments of crude
oil and oil products that we sell to it over a period of up to 270 days, which
allows Petrobras sufficient time to assemble the necessary documentation under
Brazilian law to commence the payment process for its shipments. During this
period, we typically finance the purchase of crude oil and oil products through
either funds previously provided by Petrobras or third-party trade finance
arrangements. In years prior to 2003, financial income from sales to Petrobras
was calculated according to a formula based on LIBOR, which was designed to
reimburse us for estimated financing expenses we incurred in connection with
these sales. In January 2003, the interest component of this formula was
modified from a formula based on LIBOR to a formula based on a rate which more
fully passes on our average costs of capital to Petrobras. The difference
between the amount we pay for crude oil and oil products and the amount
Petrobras pays for that same crude oil and oil products is deferred and
recognized as part of our financial income on a straight-line basis over the
period in which Petrobras' payments to us come due.
Results of Operations
Results of operations for 2003 compared to 2002.
Net Loss
We had a net loss of U.S.$3.0 million in 2003, as compared to a net loss of
U.S.$65.5 million in 2002.
Sales of Crude Oil and Oil Products and Services
Our sales of crude oil and oil products and services increased 9.2% from
U.S.$6,390.2 million in 2002 to U.S.$6,975.5 million in 2003, primarily due to a
16.5% increase in the average price of Brent crude oil from U.S.$24.76 per
barrel in 2002 to U.S.$28.84 per barrel in 2003, a 9.7% increase in the volume
of sales made by our subsidiary, PFL, in connection with Petrobras' exports
prepayment program, the favorable effects of the Iraq war and the effects,
primarily in the first quarter, of the political and economic crisis in
Venezuela on international prices and supplies of crude oil and oil products.
The increase was partially offset by a reduction in the volume of oil products
we sold to Petrobras as a result of the contraction in the Brazilian economy and
the consequent loss of purchasing power among the population.
Lease income
As a result of the transfer of PNBV to Petrobras, we had no income from leases
in 2003. In 2002, our lease income was U.S.$36.1 million. See Note 1 to our
consolidated financial statements.
Cost of Sales
Cost of sales increased 8.6% from U.S.$6,371.5 million in 2002 to U.S.$6,920.2
million in 2003, primarily due to the 16.5% increase in the average price of
Brent crude oil in 2003, as compared to 2002, and the 9.7% increase in sales
made by our subsidiary PFL in connection with Petrobras' exports prepayment
program. The increase was partially offset by a reduction in the volume of oil
products sold to Petrobras as a result of lower demand for such products in the
Brazilian market.
Lease Expense
As a result of the transfer of PNBV to Petrobras, we had no expense related to
leases in 2003. In 2002, our lease expense was U.S.$24.0 million. See Note 1 to
our consolidated financial statements.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist primarily of shipping
costs and fees for services, including accounting and legal services. These
expenses increased from U.S.$1.2 million in 2002 to U.S.$18.6 million in 2003,
of which U.S.$17.1 million consisted of shipping expenses. In 2003, Petrobras'
management decided to assign to us the responsibility for payment of shipping
expenses previously paid by Petrobras. From this point forward, we expect
shipping costs to figure permanently as part of our selling, general and
administrative expenses.
Gross Profit
Our gross profit reflects profits from our third-party sales of crude oil and
oil products and services (since we record profits from sales of crude oil and
oil products to Petrobras as financial income). Our gross profit increased 24.3%
from U.S.$29.6 million in 2002 to U.S.$36.8 million in 2003 as a result of the
16.5% increase in the average price of Brent crude oil from U.S.$24.76 per
barrel in 2002 to U.S.$28.84 per barrel in 2003 and due to the favorable effects
of the Iraq war and the effects, primarily in the first quarter, of the
political and economic crisis in Venezuela on international prices and supplies
of crude oil and oil products.
Financial Income
Our financial income consists of the financing of sales to Petrobras and
inter-company loans to Petrobras, investments in marketplace securities and
other financial instruments. Our financial income increased from U.S.$219.6
million in 2002 to U.S.$442.9 million in 2003, primarily due to an increase in
loans to related parties and interest received as a result of increases in the
time period previously agreed with Petrobras for receipt of payments related to
sales of crude oil and oil products to Petrobras from up to 120 days in early
2002 to up to 270 days beginning in May 2002 and continuing for the remainder of
2002 and throughout all of 2003, increases in the periods of time for receipt of
payments beyond the time periods previously agreed with Petrobras and a
modification of the interest component of the payment formula by which Petrobras
reimburses us for our financing costs. As previously noted, this formula was
adjusted in order to more fully pass on our average costs of capital to
Petrobras.
Financial Expense
Our financial expense consists of interest paid and accrued on our outstanding
indebtedness and other fees associated with our issuance of debt. Our financial
expense increased 53.3% from U.S.$314.7 million in 2002 to U.S.$482.7 million in
2003, primarily due to the increase in the amount of our long-term indebtedness.
Our long-term indebtedness increased from U.S.$3,248.7 million at December 31,
2002 to U.S.$5,825.3 million at December 31, 2003. The increase in financial
expense was partially offset by the lower average interest rate on PIFCo's
outstanding debt.
Liquidity and Capital Resources
Overview
We finance our oil trading activities principally from commercial banks,
including lines of credit and commercial paper programs, as well as through
inter-company loans from Petrobras and the issuance of notes in the
international capital markets. In our opinion, our strong cash position at hand
and our ability to access international capital markets will continue to allow
us to meet our anticipated cash needs and financial obligations.
As an offshore non-Brazilian company, we are not legally obligated to receive
prior approval from the Brazilian National Treasury to incur debt or register
debt with the Central Bank. As a matter of policy, however, the issuance of any
debt is recommended by any of Petrobras' Chief Financial Officer, Executive
Board or Board of Directors, depending on the aggregate principal amount and the
tenor of the debt to be issued.
Sources of Funds
Our Cash Flow
At December 31, 2003, we had cash and cash equivalents of U.S.$1,262.0 million,
as compared to U.S.$260.6 million at December 31, 2002. This increase in cash
was primarily a result of our issuances of notes in the international capital
markets in 2003. Our operating activities used net cash of U.S.$1,306.6 million
in 2003, as compared to U.S.$2,038.9 million in 2002. Our investing activities
used net cash of U.S.$86.5 million in 2003, as compared to U.S.$1,093.1 million
in 2002. Our financing activities provided net cash of U.S.$2,394.6 million in
2003, as compared to U.S.$3,344.0 million in 2002.
Accounts Receivable
Accounts receivable from related parties increased 4.7% from U.S.$4,837.1
million at December 31, 2002 to U.S.$5,064.5 million at December 31, 2003, as a
result of an increase in the interest component of the payment formula by which
Petrobras reimburses us for our financing costs, increases in the periods of
time for receipt of payments beyond the time periods previously agreed with
Petrobras and the 16.5% increase in the average price of Brent crude oil from
U.S.$24.76 per barrel in 2002 to U.S.$28.84 per barrel in 2003. This increase
was partially offset by the lower volume of oil products we sold to Petrobras in
2003.
Our Short-Term Borrowings
Our short-term borrowings are denominated in U.S. dollars and consist of lines
of credit, commercial paper and loans payable. At December 31, 2003, we had
access to short-term capital through U.S.$274.6 million in guarantees, primarily
in the form of irrevocable letters of credit supporting oil imports, as compared
to U.S.$380.6 million in guarantees at December 31, 2002. At December 31, 2003
we had accessed U.S.$1,015.3 million in lines of credit, including the current
portion of long-term lines of credit, as compared to U.S.$366.1 million accessed
at December 31, 2002. The weighted average annual interest rate on these
short-term borrowings was 3.9% at December 31, 2003, as compared to 3.4% at
December 31, 2002. At December 31, 2003 and 2002, we had fully utilized all
available lines of credit for purchase of imports.
We renewed our commercial paper program in May 2003 in an aggregate principal
amount of U.S.$160 million in order to finance our working capital requirements.
Our commercial paper program is rated A1+ by Standard & Poor's and P-1 by
Moody's and is supported by a letter of credit issued by Barclays Bank and a
standby purchase agreement with Petrobras. At December 31, 2003 and December 31,
2002, we had no commercial paper notes outstanding.
Our loans payable to related parties, which are principally composed of notes
payable to Petrobras, decreased 33.8% from U.S.$3,688.2 million at December 31,
2002 to U.S.$2,442.8 million at December 31, 2003, as a result of our
utilization of the net proceeds from the issuance of U.S.$400 million in Global
Step-up Notes and U.S.$1,500 million in Global Notes to finance the purchase of
crude oil and oil product imports and to repay existing trade-related and
inter-company loans and from the fact that, as a result of the transfer of PNBV
to Petrobras in January 2003, the liabilities of PNBV are not included in our
balance sheet for 2003.
Our Long-Term Borrowings
At December 31, 2003, we had outstanding U.S.$377.6 million in long-term lines
of credit due between 2004 and 2006, as compared to U.S.$460.3 million at
December 31, 2002. We also had outstanding:
o U.S.$1,550 million in three series of long-term Senior Notes due between
2007 and 2011. We have subsequently repurchased U.S.$8.4 million of these
Notes.
o U.S.$338.4 million in 4.75% Senior Exchangeable Notes due 2007, issued on
October 17, 2002, in connection with Petrobras' purchase of Perez Companc
S.A. (currently known as Petrobras Energia Participaciones - PEPSA). In
exchange, we received notes issued by Petrobras International Braspetro BV
(PIB BV), a related party, in the same amount, terms and conditions as the
Senior Exchangeable Notes. In connection with the acquisition of Perez
Companc, we also provided PIB BV with a loan for U.S.$738.9 million, with
an interest rate of 4.79%.
o U.S.$400 million in Global Step-up Notes due April 2008. The notes will
bear interest from March 31, 2003 at a rate of 9.00% per annum until April
1, 2006 and at a rate of 12.375% per annum thereafter, with interest
payable semiannually. We used the proceeds from this issuance principally
to repay trade-related debt and inter-company loans. We have subsequently
repurchased U.S.$19.9 million of these Notes.
o U.S.$1,500 million in Global Notes, of which U.S.$500 million were issued
on July 2, 2003 and are due July 2013. The notes will bear interest at the
rate of 9.125% per annum, payable semiannually. In September 2003, we
issued an additional U.S.$250 million in Global Notes, which form a single
fungible series with our U.S.$500 million Global Notes due July 2013. The
proceeds from these issuances were used principally to repay trade-related
debt and inter-company loans. On December 10, 2003, we issued an additional
U.S.$750 million of Global Notes due December 2018. The notes will bear
interest at the rate of 8.375% per annum, payable semiannually. The
proceeds from the issuance of these notes were used principally for general
corporate purposes, including the financing of the purchase of oil product
imports and the repayment of existing trade-related debt. We have
subsequently repurchased U.S.$18.4 million of the Global Notes.
o U.S.$1,767.3 million ($60.5 million current portion) in connection with
Petrobras' exports prepayment program. On December 21, 2001, the Trust (PF
Export) issued to PFL, our subsidiary, U.S.$750 million of Senior Trust
Certificates in four series and U.S.$150 million of Junior Trust
Certificates. In addition, on May 13, 2003, the Trust issued U.S.$550
million in 6.436% Senior Trust Certificates due 2015, and on May 14, 2003,
the Trust issued U.S.$200 million in 3.748% Senior Trust Certificates due
2013 and an additional U.S.$150 million of Junior Trust Certificates. We
have subsequently repurchased U.S.$7.2 million of the Senior Trust
Certificates.
The following table shows the sources of our current and long-term debt at
December 31, 2003 and December 31, 2002:
CURRENT AND LONG-TERM DEBT
December 31, 2003 December 31, 2002
--------------------------------- ---------------------------------
(in millions of U.S. dollars)
Current Long-term Current Long-term
------------- -------------- ------------- -------------
Financing institutions U.S.$1,015.3 U.S.$377.6 U.S.$366.1 U.S.$460.3
Senior notes 53.6 1,541.6 53.6 1,550.0
Global Step-up Notes 9.0 380.1
Global Notes 4.4 1,488.1
Sale of future receivables 61.8 1,699.7 0.6 900.0
Senior exchangeable notes 3.8 338.4 3.3 338.4
------------- -------------- ------------- -------------
U.S.$1,147.9 U.S.$5,825.3 U.S.$423.6 U.S.$3,248.7
------------- -------------- ------------- -------------
The following table shows the sources of our capital markets debt outstanding at
December 31, 2003:
CAPITAL MARKETS DEBT OUTSTANDING(1)
Notes Principal Amount
(in millions of U.S.
dollars)
- ---------------------------------------------------------------------------------------
9.125% Senior Notes due 2007(2) (6) U.S.$500
4.750% Senior Exchangeable Notes due 2007(3) 338
9.875% Senior Notes due 2008(2) (6) 450
6.750% Senior Trust Certificates due 2010(4) 95
Floating Rate Senior Trust Certificates due 2010(4) 55
9.750% Senior Notes due 2011(2) (6) 600
6.600% Senior Trust Certificates due 2011(4) 300
Floating Rate Senior Trust Certificates due 2013(4) 300
3.748% Senior Trust Certificates due 2013(4) 200
6.436% Senior Trust Certificates due 2015(4) 517
Global Step-up Notes due 2008(5) 400
9.125% Global Notes due 2013(2) (7) 750
8.375% Global Notes due 2018(2) (7) 750
-------------------------
Total U.S.$5,255
-------------------------
- --------------
(1) Does not include Junior Trust Certificates issued by PF Export Trust
in connection with Petrobras' exports prepayment program, because we
are the beneficiary of such Junior Trust Certificates.
(2) Issued by us, with support from Petrobras through a standby purchase
agreement.
(3) Issued by us on October 17, 2002 in connection with Petrobras'
acquisition of Perez Companc S.A.
(4) Issued in connection with Petrobras' exports prepayment program. We
have subsequently repurchased U.S.$7.2 million.
(5) The Global Step-up Notes bear interest from March 31, 2003 at a rate
of 9.00% per year until April 1, 2006 and at a rate of 12.375% per
year thereafter, with interest payable semi-annually, and were issued
by us with support from Petrobras through a standby purchase
agreement. We have subsequently repurchased U.S.$19.9 million.
(6) Of the aggregate U.S.$1550.0 million of Senior Notes, we have
repurchased U.S.$8.4 million.
(7) Of the aggregate U.S.$1500.0 million of Global Notes, we have
repurchased U.S.$18.4 million.
Off Balance Sheet Arrangements
At December 31, 2003, we had no off-balance sheet arrangements that have, or are
reasonably likely to have, a material effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
Uses of Funds
We primarily utilize funds to finance our oil trade activities. The following
table sets forth our contractual obligations as of December 31, 2003, and the
period in which the contractual obligations come due.
Payments due by period
(in millions of U.S. dollars)
Contractual Obligations as
of December 31, 2003: Total less than 1 year 1-3 years 3-5 years more than 5 years
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt 6,049.3 224.0 668.2 1,985.0 3,172.1
Purchase obligations 290.0 197.0 15.0 14.0 64.0
- ------------------------------ ------------------ ------------------ --------------- ------------- -------------------
Total 6,339.3 421.0 683.2 1,999.0 3,236.1
CONSOLIDATED FINANCIAL STATEMENTS
PETROBRAS INTERNATIONAL FINANCE COMPANY
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
Years ended December 31, 2003 and 2002
together with Report of Independent Auditors
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
FINANCIAL STATEMENTS
Years ended December 31, 2003 and 2002
Contents
Report of Independent Auditors..............................................1
Audited Financial Statements
Consolidated Balance Sheet..................................................2
Consolidated Statement of Operations........................................4
Consolidated Statement of Changes in Stockholders' Equity...................5
Consolidated Statement of Cash Flows........................................6
Notes to Consolidated Financial Statements..................................8
REPORT OF INDEPENDENT AUDITORS
To the Executive Board and Stockholder of
PETROBRAS INTERNATIONAL FINANCE COMPANY
We have audited the accompanying consolidated balance sheet of PETROBRAS
INTERNATIONAL FINANCE COMPANY and its subsidiaries as of December 31, 2003, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows, for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of PETROBRAS INTERNATIONAL FINANCE COMPANY as of December 31, 2002
and for the years ended December 31, 2002 and 2001, were audited by other
auditors whose report dated February 13, 2003, expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PETROBRAS
INTERNATIONAL FINANCE COMPANY and its subsidiaries at December 31, 2003, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Ernst & Young Auditores Independentes S.S.
Paulo Jose Machado
Partner
Rio de Janeiro, Brazil
February 13, 2004
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED BALANCE SHEET
As of December 31, 2003 and 2002 (In thousands of US dollars)
December 31, December 31,
Assets 2003 2002
--------------------------------------------
Current assets
Cash and cash equivalents 1,262,039 260,629
Marketable securities 17,960 61,673
Accounts receivable
Related parties 5,064,472 4,837,080
Trade 109,415 57,073
Notes receivable - related parties 1,388,004 1,157,930
Inventories 6,443 4,506
Export prepayments - related parties 72,482 1,189
Restricted deposits for guarantees and others 81,976 7,889
--------------------------------------------
8,002,791 6,387,969
--------------------------------------------
Property and equipment 41 110
--------------------------------------------
Other assets
Marketable securities - 36,299
Advances to suppliers - 19,027
Notes receivable - related parties 338,416 473,632
Assets related to export prepayments 300,000 150,000
Export prepayment - related parties 1,406,850 750,000
Net investment in direct financing leases from related party - 832,319
Restricted deposits for guarantees and prepaid expenses 148,510 47,946
--------------------------------------------
2,193,776 2,309,223
--------------------------------------------
Total assets 10,196,608 8,697,302
============================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED BALANCE SHEET
As of December 31, 2003 and 2002 (In thousands of US dollars)
December 31, December 31,
Liabilities and stockholders' equity 2003 2002
-----------------------------------------
Current liabilities
Trade accounts payable
Related parties 270,950 291,980
Other 349,029 281,133
Notes payable - related parties 2,442,778 3,688,249
Short-term financing 852,390 285,770
Current portion of long term debt 224,002 81,700
Accrued interest 71,494 56,169
Unearned income - related parties 61,866 48,563
Capital lease obligations - 68,948
Others 3,922 415
-----------------------------------------
4,276,431 4,802,927
-----------------------------------------
Long-term liabilities
Capital lease obligations - 601,733
Long-term debt 5,825,336 3,248,716
-----------------------------------------
5,825,336 3,850,449
-----------------------------------------
Stockholders' equity
Shares authorized and issued
Common stock - 2003 and 2002 - 50,000 shares,
par value US$ 1 50 50
Additional paid in capital 173,926 120,000
Accumulated deficit (79,135) (76,124)
-----------------------------------------
94,841 43,926
-----------------------------------------
Total liabilities and stockholders' equity 10,196,608 8,697,302
=========================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF OPERATIONS
Years Ended December 31, 2003, 2002 and 2001
(In thousands of US dollars, except share amounts)
Years ended December 31,
--------------------------------------------------
2003 2002 2001
--------------------------------------------------
Sales of crude oil and oil products and services 6,975,538 6,390,226 6,260,514
Lease income - 36,062 10,682
--------------------------------------------------
6,975,538 6,426,288 6,271,196
Cost of sales 6,920,177 6,371,465 6,253,009
Lease expense - 24,004 10,542
Selling, general and administrative expenses 18,600 1,178 114
--------------------------------------------------
6,938,777 6,396,647 6,263,665
--------------------------------------------------
Gross profit 36,761 29,641 7,531
--------------------------------------------------
Financial income 442,878 219,580 158,804
Financial expense 482,650 314,683 187,101
Gain on materials and equipment - - 435
--------------------------------------------------
Net (loss) for the year (3,011) (65,462) (20,331)
==================================================
Weighted average number of shares outstanding 50,000 50,000 50,000
==================================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 2003, 2002 and 2001
(In thousands of US dollars)
December 31, December 31, December 31,
2003 2002 2001
-----------------------------------------------------
Common stock 50 50 50
-----------------------------------------------------
Additional paid in capital
Balance at January 1 120,000 60,000 -
Capital contribution from PETROBRAS
related to transfer of PNBV 53,926 - -
Conversion of loans to capital - 60,000 60,000
-----------------------------------------------------
Balance at end of year 173,926 120,000 60,000
-----------------------------------------------------
Accumulated deficit
Balance at January 1 (76,124) (10,662) 9,669
Loss for the year (3,011) (65,462) (20,331)
-----------------------------------------------------
Balance at end of year (79,135) (76,124) (10,662)
-----------------------------------------------------
Total stockholders' equity 94,841 43,926 49,388
=====================================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 2003, 2002 and 2001
(In thousands of US dollars)
Years ended December 31,
----------------------------------------------
2003 2002 2001
----------------------------------------------
Cash flows from operating activities
Net loss for the year (3,011) (65,462) (20,331)
Adjustments to reconcile net loss to net cash
Depreciation and amortization 8,346 9,347 8,041
Decrease (increase) in assets
Accounts receivable
Related parties (410,756) (2,069,800) 426,316
Other (62,143) (12,333) (5,132)
Export prepayments - related parties (722,000) - (750,000)
Other assets (228,234) (38,205) (65,602)
Increase (decrease) in liabilities
Trade accounts payable
Related parties (3,439) 3,912 217,226
Other 82,210 50,133 (362,190)
Other liabilities 32,398 83,485 (6,916)
----------------------------------------------
Net cash provided by (used in) operating activities (1,306,629) (2,038,923) (558,588)
----------------------------------------------
Cash flows from investing activities
Cash rendered in connection with transfer of subsidiary
to PETROBRAS (743) - -
Cash acquired in connection with transfer of subsidiary
from BRASOIL 2,988 - -
Marketable securities, net 80,012 (96,385) -
Issuance of notes receivable (1,400,290) (2,247,658) (1,397,655)
Collection of principal on notes receivable 1,231,526 1,422,122 1,210,383
Assets held for sale - - (144,721)
Property and equipment (28) (37) (213)
Advances to suppliers - (7,718) (11,309)
Net investment in direct financing activities from
related party - (163,414) (156,017)
----------------------------------------------
Net cash used in investing activities (86,535) (1,093,090) (499,532)
----------------------------------------------
Cash flows from financing activities
Short-term debt, net issuance and repayments 566,620 (489,657) 245,075
Proceeds from issuance of long-term debt 2,837,675 657,000 2,165,000
Principal payments of long - term debt (268,371) (215,000) (10,000)
Proceeds from short term loans - related parties 9,618,929 6,861,572 3,654,629
Principal payments of short term loans - related parties (10,375,070) (3,469,866) (4,961,129)
Capital contribution 14,791 - -
Dividends paid - - (38,060)
----------------------------------------------
Net cash provided by financing activities 2,394,574 3,344,049 1,055,515
----------------------------------------------
Increase (decrease) in cash and cash equivalents 1,001,410 212,036 (2,605)
Cash and cash equivalents at beginning of year 260,629 48,593 51,198
----------------------------------------------
Cash and cash equivalents at end of year 1,262,039 260,629 48,593
==============================================
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, 2003, 2002 and 2001
(In thousands of US dollars)
Years ended December 31,
----------------------------------------------
2003 2002 2001
----------------------------------------------
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest 337,818 322,286 151,487
Income taxes 109 213 77
Non cash investing and financing activities
Book value of net assets exchanged for inter-company loan 6,361 - -
Capital contribution from PETROBRAS from transfer of PNBV 39,135 - -
Receipt of Junior Trust Certificates in exchange of future
receivables 150,000 - 150,000
Assets acquired through capital lease obligations - 665,000 -
Increase of capital through conversion of loan payable - 60,000 60,000
Receipt of notes receivable in exchange of Senior
Exchangeable issued - 338,416 -
The accompanying notes are an integral part of these financial statements.
PETROBRAS INTERNATIONAL FINANCE COMPANY
AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
1. The Company and its Operations
Petrobras International Finance Company - PIFCo was incorporated in the
Cayman Islands on September 24, 1997 and operates as a wholly-owned
subsidiary of PETROBRAS.
The primary objective of Petrobras International Finance Company and its
subsidiaries (the Company) is to purchase crude oil and oil products from
third parties and sell the products at a premium to PETROBRAS on a
deferred payment basis. Accordingly, intercompany activities and
transactions, and therefore the Company's financial position and results
of operations, are affected by decisions made by PETROBRAS. Additionally,
to a more limited extent, the Company sells oil and oil products to third
parties. PIFCo also engages in international capital market borrowings as
a part of the PETROBRAS strategy.
On January 2, 2003, the Company entered into a series of transactions as
part of a larger corporate restructuring implemented by PETROBRAS. The
restructuring included the transfer of PETROBRAS NETHERLANDS B. V. - PNBV
to PETROBRAS and the transfer of BEAR INSURANCE COMPANY LIMITED - BEAR
from BRASPETRO OIL SERVICES - BRASOIL to PIFCo.
PNBV was transferred to PETROBRAS through an intercompany loan of US$
4,658, with PNBV's existing cash balance being US$ 743. BEAR was
transferred to the Company in exchange for an intercompany payable to
BRASOIL of US$ 1,703, with BEAR's existing cash balance being US$ 2,988.
The restructuring was undertaken in order to group each business'
activities more closely with the corporate goals of the respective
companies in the PETROBRAS group.
The corporate restructurings, which resulted in the transfer of PNBV from
PIFCo and the transfer of BEAR to PIFCo, were accounted for under FAS 144
and FAS 141, respectively. Due to the immaterial impact of BEAR on PIFCo's
consolidated financial statements, the financial statements of December
31, 2002 have not been restated to reflect this transfer among commonly
controlled entities. Additionally, as PNBV's operating result was
immaterial, the PIFCo financial statements as of December 31, 2002 have
similarly not been restated to reflect discontinued operations for
disposal of this component.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
1. The Company and its Operations--Continued
In connection with the transfer of PNBV, the Company recognized US$ 39,135
as a capital contribution from PETROBRAS. This amount is equal to the
unamortized portion of the deferred gain of the platform P-47 (US$ 37,271)
and the deferred gain on other equipment (US$ 1,864) under similar
transaction structures, which upon transfer of PNBV to PETROBRAS was
treated as a capital transaction. This platform was acquired from BRASOIL
in December 2001, for its book value of US$ 142,729. On the same date, the
P-47 was sold to PB-47, an independent trust, for a market value of US$
180,000. PB-47 subsequently entered into a charter agreement with PNBV,
which in turn entered into a subcharter agreement with PETROBRAS.
The following is a brief description of each of the Company's wholly-owned
subsidiaries:
PETROBRAS FINANCE LIMITED
PETROBRAS FINANCE LIMITED - PFL, is based in the Cayman Islands. PFL
purchases bunker and fuel oil from PETROBRAS and sells these products in
the international market in order to generate export receivables to cover
the sale of future receivables obligations and to generate additional cash
flows in connection with the Company's structured finance export
prepayment program.
PETROBRAS EUROPE LIMITED
PETROBRAS EUROPE LIMITED - PEL, based in the United Kingdom, directs
PETROBRAS' European trade and finance activities. These activities consist
of advising on and negotiating the terms and conditions for crude oil and
oil products supplied to PIFCo and PETROBRAS, as well as marketing
Brazilian crude oil and other derivative products exported to the
geographic areas in which the Company operates. PEL plays an advisory role
in connection with these activities and undertakes no commercial or
financial risk.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
1. The Company and its Operations--Continued
BEAR INSURANCE COMPANY LIMITED
BEAR INSURANCE COMPANY LIMITED - BEAR, based in Bermuda, contracts
insurance for subsidiaries of PETROBRAS.
2. Basis of Financial Statement Presentation
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America (US GAAP).
(a) Foreign currency translation
The functional currency of the Company is the US dollar, as the
majority of its transactions are denominated in US dollars. When
there are transactions in foreign currencies, exchange gains and
losses resulting from foreign currency transactions are recognized in
the statement of operations.
(b) Cash and cash equivalents
Cash equivalents consist of highly liquid investments that are
readily convertible into cash and have an original maturity of three
months or less at their date of acquisition.
(c) Revenues, costs, income and expenses
Revenues are recognized in accordance with the volume of crude oil
and oil products sold and of services rendered; crude oil and oil
products revenues are recognized on an accrual basis when title has
transferred. Costs are recognized when incurred. Income and expenses
include financial interest and charges, at official rates or indexes,
relating to current and non-current assets and liabilities and, when
applicable, the effects arising from the adjustment of assets to
market or realizable value.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
2. Basis of Financial Statement Presentation--Continued
(d) Current and other assets
These are stated at their net realizable values.
(e) Marketable securities
The Company accounts for certain investments as held-to-maturity
securities in accordance with SFAS 115 - Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115). The securities
are carried at their amortized cost.
(f) Inventories
Inventories are stated at the lower of cost or market value.
(g) Deferred financing costs
Deferred financing costs associated with various debt issuances are
recorded as prepaid expenses and are being amortized over the terms
of the related debt, based on the amount of outstanding debt, using
the effective interest method. The unamortized balance of deferred
financing costs was US$ 80,513 and US$ 34,497 as of December 31, 2003
and 2002, respectively.
(h) Income taxes
The Company accounts for income taxes using an asset and liability
approach, which requires the recognition of taxes payable or
refundable for the current year and deferred tax liabilities and
assets representing the future tax consequences of events that have
been recognized in the Company's financial statements. The
measurement of current and deferred tax liabilities and assets are
based on the provisions of the tax laws in the countries in which the
Company and its subsidiaries operate (the United Kingdom, Bermuda and
the Cayman Islands in 2003 and United Kingdom, Netherlands and the
Cayman Islands in 2002). Deferred tax assets are reduced by the
amount of any tax benefits when, based on the available evidence,
such benefit may not be realized. The Cayman Islands and Bermuda have
no corporate tax requirements, therefore the Company has no tax
provision for the periods. There were no significant operations in
the United Kingdom or the Netherlands that gave rise to taxable
income in these countries that would have created temporary
differences.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
2. Basis of Financial Statement Presentation--Continued
(i) Investments in direct financing leases and capital lease obligations
As of January 2, 2003, PNBV, the Company's leasing subsidiary, was
transferred to PETROBRAS. Due to this transaction, leasing activities
are no longer included in the Company's results of operations. Prior
period financial statements have not been restated for the effect of
discontinued leasing operations as amounts related to these
transactions were immaterial to PIFCo operations.
Through December 31, 2002, the Company acquired operating platforms
and production equipment under the terms of purchase agreements (see
Note 6), purchase invoices and charter agreements and subsequently
leased this equipment under the terms of existing and future charter
and sub-charter agreements with related parties. These charter and
sub-charter agreements were considered to be Direct Finance Leases in
accordance with the provisions of Statement of Financial Accounting
Standards No. 13 "Accounting for leases" (SFAS 13) and subsequently
issued amendments to and interpretations of SFAS 13.
(i) Investments in direct financing leases and capital lease
obligations--Continued
Income and expense financing leases, consisting of interest income,
was recognized over the lease term. Income and expense from operating
leases was recognized ratably over the terms of the leases.
(j) Current and long-term liabilities
These are stated at known or estimated amounts including, when
applicable, accrued interest.
(k) Unearned income
Unearned income represents the unearned premium charged by the
Company to PETROBRAS and ALBERTO PASQUALINI - REFAP S.A. (REFAP) to
compensate for its financing costs. The premium is billed to
PETROBRAS and REFAP at the same time the related product is sold, and
is deferred and recognized into earnings as a component of financial
income on a straight-line basis over the collection period, which
ranges from 120 to 270 days, in order to match the premium billed
with the Company's financial expense.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
2. Basis of Financial Statement Presentation--Continued
(l) Financial instruments
All of the Company's derivative instruments are recorded on the
balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings. The
ineffective portion of all hedges is recognized in current period
earnings.
PIFCo holds a purchased call option that serves as an economic hedge
on crude oil related to future sales of receivables under the
structured finance export prepayment program, the intent of which is
to assure a minimum floor price of US$14/barrel sufficient to comply
with its financial obligations. This option has no intrinsic value
and immaterial time value at December 31, 2003, and therefore does
not have a material effect on the Company results or balance sheet.
(m) Recently issued accounting pronouncements
In January 2003, FASB issued Interpretation No. 46 - Consolidation of
Variable Interest Entities, which was later revised in December 2003
(FIN 46-R). FIN 46-R provides guidance on when certain entities
should be consolidated or the interests in those entities should be
disclosed by enterprises that do not control them through majority
voting interest. Under FIN 46-R, variable interest entities are
required to be consolidated by an enterprise that has a controlling
financial interest through an obligation to absorb the majority of
expected losses or the right to receive the majority of expected
returns. Entities identified with these characteristics are called
variable interest entities and the interest that enterprises have in
these entities are called variable interests. These interests may
derive from certain guarantees, leases, loans or other arrangements
that result in risks and rewards, which finance the variable interest
entities, despite the voting interest in the entities.
The interpretation requires that if a business enterprise has a
controlling financial interest in a variable entity, the assets,
liabilities and results of the activities of the variable interest
entity must be included in the consolidated financial statements with
those of the business enterprise. This interpretation applies
immediately to variable interest entities created after January 31,
2003. FIN 46-R must be adopted for variable interest entities created
before February 1, 2003, at the end of the first interim or annual
reporting period ended after March 15, 2004. The Company has
concluded that it does not have any entities or transactions that are
subject to the requirements of FIN 46-R.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
3. Cash and Cash Equivalents
2003 2002
------------------------------------
Cash 1,312 1,226
Time deposits and short term investment funds 1,260,727 259,403
------------------------------------
1,262,039 260,629
====================================
At December 31, 2003, PIFCo had amounts invested in an exclusive fund that
held debt securities of PIFCo and PIFCo subsidiaries in the amount of US$
54,004. These amounts were offset against the balance of financing
classified under current and noncurrent liabilities.
Further, this fund held other debt securities in the amount of US$ 221,909
of other PETROBRAS group companies that are affiliates, but not
subsidiaries of the Company, and special purpose companies with which
Petrobras has affiliations.
4. Marketable Securities
Total
-----------------------
Interest
Security Issuer Maturity Currency rate 2003(*) 2002 (*)
---------------------------------------- ---------- ----------- ----------------------------------
MARLIM 04 (1) MARLIM 2004 Dollar 13% 14,700 29,625
PETRO 04 (1) PETROBRAS 2004 Euro 9% 3,260 2,624
PETRO 03 PETROBRAS 2003 Yen 4% 52,622
OTHERS - - - - 13,101
-----------------------
17,960 97,972
Less non-current balances - (36,299)
-----------------------
17,960 61,673
=======================
(*) The balances include interest and principal.
(1) The Company classified these investments as held to maturity.
5. Related Parties
DOWNSTREAM PETROBRAS BRASPETRO
PETROLEO PARTICIPACOES INTERNATIONAL OIL SERVICES -
BRASILEIRO S.A. BRASPETRO B.V. - BRASOIL BRASPETRO
S.A. - and its PIB.B.V. and its and its OIL COMPANY -
PETROBRAS subsidiaries (iii) subsidiaries subsidiaries BOC
----------------------------------------------------------------------------------------
CURRENT ASSETS
Accounts receivable,
principally for sales (i) 4,746,196 147,845 160,518 - -
Net investment in direct finance lease - - - -
Notes receivable 452 - 786,741 341,610 259,201
Marketable securities (Note 5) 3,260 - - - -
Export prepayment 72,482 - - - -
Others - - - - -
Other assets
Notes receivable - - 338,416 - -
Net investment in direct financing lease - - - - -
Export prepayment 1,406,850 - - - -
Marketable securities (Note 5) - - - - -
Others - - - - -
Current liabilities
Trade accounts payable 223,019 4,138 6,865 36,528 -
Notes payable (ii) 2,441,401 - - 1,377 -
Unearned income 59,466 2,400 - - -
Statement of operations
Sales of crude oil and oil products 3,618,804 804,273 1,115,663 - -
Cost of sales (1,669,984) (74,510) (783,394) (323,514) -
Lease income (expense) - - - - -
Selling, general and administrative
expense (17,091) - - - -
Financial income (expense) 202,714 8,787 51,507 9,176 14,387
PETROBRAS COMPANHIA
DISTRIBUIDORA - PETROLIFERA
BR MARLIM Others 2003 2002
---------------------------------------------------------------------------
CURRENT ASSETS
Accounts receivable,
principally for sales (i) 1,906 - 8,007 5,064,472 4,653,462
Net investment in direct finance lease - - - - 183,618
Notes receivable - - - 1,388,004 1,157,930
Marketable securities (Note 5) - - 14,700 17,960 51.906
Export prepayment - - - 72,482 1,189
Others - - - - 970
Other assets
Notes receivable - - - 338,416 473.632
Net investment in direct financing lease - - - - 832,319
Export prepayment - - - 1,406,850 750,000
Marketable securities (Note 5) - - - - 2,370
Others - - - - 3,349
Current liabilities
Trade accounts payable - - 400 270,950 291,980
Notes payable (ii) - - - 2,442,778 3,688,249
Unearned income - - - 61,866 48,563
Statement of operations 2001
-------------
Sales of crude oil and oil products 4,282 - - 5,543,022 5,375,484 5,849,883
Cost of sales - - - (2,851,402) (2,409,034) (1,648,107)
Lease income (expense) - - - - 12,058 140
Selling, general and administrative
expense - - - (17,091) - -
Financial income (expense) - 3,268 - 289,839 140,657 88,040
Commercial operations between PIFCo and its subsidiaries and affiliated
companies are carried out under normal market conditions and at commercial
prices, except for the sales of oil and oil products to PETROBRAS, which have an
extended settlement period consistent with PIFCo's formation as a financing
entity, and include finance charges incurred during the extended payment period.
The transactions were realized to support the financial and operational strategy
of the Company's Parent Company, PETROLEO BRASILEIRO S.A. - PETROBRAS.
(i) Accounts receivable from related parties relate principally to crude oil
sales made by the Company to PETROBRAS, with extended payment terms of up
to 270 days.
(ii) Notes payable to related parties principally include balances to PETROBRAS
for intercompany loans made on a 90 and 180 day basis.
(iii) On January 2 and 5, 2004, PIFCo received US$ 7,902 and US$ 18,400,
respectively, relating to trade accounts receivable from REFAP outstanding
in 2003.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
6. Restricted Deposits for Guarantees
PIFCo has deposits in guarantee, relating to contractual obligations in
financing arrangements. The amount of US$ 69,874 classified in current
assets, relates to a deposit made in connection with the issuance of global
notes in the amount of US$ 500,000 (described in note 7) and is renewed
annually. The amount classified in non-current assets is comprised of
deposits of US$ 29,568 and US$ 38,429 related to issuances of senior notes
in the total amount of US$ 450,000 and US$ 600,000, respectively (described
in note 7). These guarantees will be maintained through maturity of the
related financings.
7. Short-Term Financing and Long-Term Debt
Current Long-term
---------------------- ----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Financial institutions (i) 1,015,346 366,066 377,550 460,300
Senior notes 53,612 53,647 1,541,558 1,550,000
Sale of future
Receivables 61,764 577 1,699,650 900,000
Senior exchangeable
Notes 3,840 3,349 338,416 338,416
Global step-up notes 8,951 - 380,077 -
Global notes 4,373 - 1,488,085 -
---------- ---------- ---------- ----------
1,147,886 423,639 5,825,336 3,248,716
========== ========== ========== ==========
Financing 852,390 285,770 5,825,336 3,248,716
Current portion of long term debt 224,002 81,700 - -
Accrued interest 71,494 56,169 - -
---------- ---------- ---------- ----------
1,147,886 423,639 5,825,336 3,248,716
========== ========== ========== ==========
(i) The Company's borrowings in US dollars are derived mainly from
commercial banks and include trade lines of credit and commercial
paper, which are primarily intended for the purchase of crude oil and
oil products, and with interest rates ranging from 2.57% to 5.21% at
December 31, 2003. The weighted average borrowing rate for short-term
debt at December 31, 2003 and 2002 was 3.85% and 3.44%, respectively.
At December 31, 2003 and 2002, the Company had fully utilized all
available lines of credit for purchase of imports.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
7. Short-Term Financing and Long-Term Debt--Continued
Long term financing - additional information
Payment period
------------------------
Date of issuance Maturity Interest rate Amount Interest Principal
------------------------------------------------------------------------------------
Senior Notes (a)
Senior Notes February, 2001 2007 9.125% 400,000 semiannually bullet
Senior Notes February, 2001 2007 9.125% 100,000 semiannually bullet
Senior Notes May, 2001 2008 9.875% 450,000 semiannually bullet
Senior Notes July, 2001 2011 9.750% 600,000 semiannually bullet
-------------
1,550,000
Senior Notes repurchased (e) (8,442)
-------------
1,541,558
Sale of Future receivables (b)
Junior Notes
Serie 2001-A1 December, 2001 2010 6.75% 19,000 quarterly bullet
Serie 2001-A2 December, 2001 2010 Libor 3 M + 1% 11,000 quarterly bullet
Serie 2001-B December, 2001 2011 6.60% 60,000 quarterly bullet
Serie 2001-C December, 2001 2013 Libor 3 M + 0.85% 60,000 quarterly bullet
Serie 2003-B May, 2003 2013 3.748% 40,000 quarterly bullet
Serie 2003-A May, 2003 2015 6.436% 110,000 quarterly bullet
-------------
300,000(f)
Senior Notes
Serie 2001-A1 December, 2001 2010 7.8% 95,000 quarterly quarterly
Serie 2001-A2 December, 2001 2010 Libor 3 M + 2.05% 55,000 quarterly quarterly
Serie 2001-B December, 2001 2011 7.65% 300,000 quarterly quarterly
Serie 2001-C December, 2001 2013 Libor 3 M + 2.10% 300,000 quarterly quarterly
Serie 2003-B May, 2003 2013 5.548% 190,850 quarterly quarterly
Serie 2003-A May, 2003 2015 6.436% 466,000 quarterly quarterly
-------------
1,406,850
-------------
1,706,850
Sale of Future Receivables (7,200)
repurchased (e)
-------------
1,699,650
Senior Exchangeable Notes (c) October, 2001 2007 4.750% 338,416 semiannually bullet
Global Step-up Notes March, 2003 2008 9.000% (d) 400,000 semiannually bullet
Global Step-up Notes repurchased (19,923)
(e)
-------------
380,077
Global Notes
Global Notes July, 2003 2013 9.125% 500,000 semiannually bullet
Global Notes September, 2003 2013 9.125% 256,524 semiannually bullet
(e)
Global Notes December, 2003 2018 8.375% 750,000 semiannually bullet
-------------
1,506,524
Global Notes repurchased (e) (18,439)
-------------
1,488,085
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
7. Short-Term Financing and Long-Term Debt--Continued
Long term financing - additional information--Continued
(a) The three series of Senior Notes issued in 2001 have fixed
interest rates with interest payable semi-annually. So long as
any note of the issuances remains outstanding, the Company is
prohibited from creating or permitting any lien, other than a
"PIFCo permitted lien" as defined in each of the issuances'
prospectus, by the Company on any of the Company's assets to
secure additional indebtedness, except under certain
conditions. These issuances are general senior unsecured and
unsubordinated obligations of the Company and will rank equal
in right of payment with all other unsecured and
unsubordinated obligations of the Company that are not
expressly subordinated in right of payment. The failure by the
Company to make required payments of principal, interest or
other amounts will compel PETROBRAS to fulfill payment
obligations.
PETROBRAS entered into standby purchase agreements in support
of the obligations of PIFCo under the issuances and their
respective indentures. PETROBRAS has the obligation to
purchase from the noteholders any unpaid amounts of principal,
interest or other amounts due under the notes and the
indenture. This purchase obligation exists, subject to certain
limitations, irrespective of whether any such amounts are due
at maturity of the notes or otherwise.
(b) Respective to the Senior and Junior Notes issued pursuant to
the structured finance program, PETROBRAS and PFL have certain
contracts (Master Export Contract and Prepayment Agreement)
between themselves and a special purpose entity not related to
PETROBRAS, PF Export Receivables Master Trust ("PF Export"),
relating to the prepayment of export receivables to be
generated by PFL by means of sales on the international market
of fuel oil and other products acquired from PETROBRAS.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
7. Short-Term Financing and Long-Term Debt--Continued
Long term financing - additional information--Continued
As stipulated in the contracts, PFL assigned the rights to future
receivables in the amount of US$ 1,800,000 (1st and 2nd tranches) to PF
Export, which, in turn, issued and delivered to PFL the following
securities, also in the amount of US$ 1,800,000:
- US$ 1,500,000 in Senior Trust Certificates, which were
negotiated by PFL on the international market at face value.
The amount was transferred to PETROBRAS as prepayment for
exports to be made to PFL, according to the prepayment
agreement.
- US$ 300,000 in Junior Trust Certificates, which are held in
the portfolio of PFL. If PF Export incurs any losses on the
receipt of the value of the export receivables transferred by
PFL, these losses will be compensated by the Junior Trust
Certificates.
The assignment of rights to future export receivables represents a
liability of PFL, which will be settled by the transfer of the
receivables to PF Export as and when they are generated. This liability
will bear interest on the same basis as the Senior and Junior Trust
Certificates, as described above.
As long as any Senior Trust Certificates or amounts payable to the
insurers that are guaranteeing the payments to the holders of the
Senior Trust Certificates remain outstanding, PETROBRAS is required to
export to the Company, during each quarterly delivery period, (a) at
least 80% of the total volume of heavy fuel oil exported by Petrobras
during such period and (b) certain oil products having an aggregate
value (as determined by the net invoice amount at which such products
are actually sold by PFL) equal to, at least, the debt service
requirements of the Senior Trust Certificates multiplied by a coverage
ratio. Moreover, certain additional receivables, as defined in the
agreements, are to be generated by the sale of eligible products to
other buyers, to make the aggregate amount of both exports and
additional receivables equal to 1.2 times the debt service. PETROBRAS
also agrees that its average daily gross exports of heavy fuel oil for
any rolling 12-month period will be equal to at least 70,000 barrels.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
7. Short-Term Financing and Long-Term Debt--Continued
Long term financing - additional information--Continued
PETROBRAS will not be relieved of its obligations to deliver the oil
products under the export prepayment program in the amounts set forth
for any reason, including, but not limited to force majeure or
non-payment by PFL.
(c) These notes were issued in connection with PETROBRAS' purchase of a
controlling interest in Perez Companc S.A. (currently PEPSA) and
Petrolera Perez Companc S.A.
(d) After April 1, 2006, the rate will be set at 12.375% per annum.
(e) The aggregate amount of US$ 54,004 was reclassified from cash and
cash equivalents as it relates to the portion of PIFCo's debt
included in the portfolio of a short-term investment fund.
(f) At December 31, 2003, pursuant to clarification from PIFCo legal
advisors, the Junior Trust Certificates are presented in full amount
rather than following a schedule of amortization ratably with the
Senior Trust Certificates, as previously stated.
Long-term maturities
December 31, 2003
-------------------
2005 259,348
2006 408,878
2007 994,756
2008 990,171
2009 173,218
Thereafter 2,998,965
-------------------
5,825,336
===================
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
8. Fair Value
Fair values are derived either from quoted market prices available, or, in
their absence, the present value of expected cash flows. The fair values
reflect the cash that would have been received or paid if the instruments
were settled at year end. Fair values of cash and cash equivalents, trade
receivables, short-term debt and trade payables approximate their carrying
values. Fair value for long-term lines of credit approximates carrying
value due to the nature of the transactions.
The Company's long-term debt included US$ 5,825 thousand and US$ 3,248
thousand, of which US$ 5,440 thousand and US$ 2,788 thousand related to
senior notes, sales of future receivables, senior exchangeable notes,
global step-up notes and global notes at December 31, 2003 and 2002 and
had estimated fair values of US$ 5,898 thousand and US$ 2,702 thousand,
respectively.
The Company's long-term asset related to the export prepayment program
included US$ 1,707 thousand and US$ 900 thousand at December 31, 2003 and
2002, and had fair values of US$ 1,724 thousand and US$ 900 thousand,
respectively.
9. Commitments and Contingencies
(a) Commitments - Purchases
In an effort to ensure procurement of oil products for the Company's
customers, the Company currently has several short-term contracts
which collectively obligate it to purchase a minimum of approximately
139,344 barrels of crude oil and oil products per day at market
prices.
PETROBRAS INTERNATIONAL FINANCE COMPANY AND SUBSIDIARIES
(A wholly-owned subsidiary of PETROLEO BRASILEIRO S.A. - PETROBRAS)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars)
9. Commitments and Contingencies--Continued
(b) Purchase Option - Platforms
The Company has maintained the right to exercise the call option on
the existing Subchartered Asset Option Agreements with PNBV, for the
Platforms P-8, P-15, P-32 and P-47, after the expiration of the
Charter terms with PNBV. Upon exercise of the call option, the
Company will purchase all of the vessels for the greater of (i) the
purchase price, any unpaid and accrued charter hire for all of the
vessels, or any costs and expenses which PNBV has incurred or may
incur by virtue of any such purchase, and the amount equal to the
default amount set forth in each of the charters for all of the
Vessels; and (ii) Ten (10) dollars from PNBV, representation or
warranty of any kind or character, and assume and succeed to all
rights, duties and obligations of PNBV under the charters.
PIFCo may designate any affiliate or subsidiary to perform its
obligations under this agreement.
* * *
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.
PETROBRAS INTERNATIONAL FINANCE COMPANY - PIFCo
By: /s/ Almir Guilherme Barbassa
-------------------------------------------
Name: Almir Guilherme Barbassa
Title: Chairman of the Board
Date: April 12, 2004