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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2001
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 001-12138
PDV America, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51-0297556
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
750 Lexington Avenue, New York, New York 10022
(Address of principal executive office) (Zip Code)
(212) 753-5340
(Registrant's telephone number, including area code)
N.A.
--------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $1.00 par value 1,000
- ------------------------------ -----
(Class) (outstanding at April 30, 2001)
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PDV AMERICA, INC.
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2001
TABLE OF CONTENTS
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Page
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS......................................................................1
Item 1. Financial Statements (Unaudited)................................................................2
Condensed Consolidated Balance Sheets - March 31, 2001 and December 31, 2000....................2
Condensed Consolidated Statements of Income and Comprehensive Income -
Three-Month Periods Ended March 31, 2001 and 2000...............................................3
Condensed Consolidated Statement of Shareholder's Equity - Three-Month Period
Ended March 31, 2001............................................................................4
Condensed Consolidated Statements of Cash Flows - Three-Month Periods Ended
March 31, 2001 and 2000.........................................................................5
Notes to the Condensed Consolidated Financial Statements........................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................17
PART II. OTHER INFORMATION.......................................................................................21
Item 1. Legal Proceedings..............................................................................21
Item 6. Exhibits and Reports on Form 8-K...............................................................21
SIGNATURES ...............................................................................................22
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Specifically, all statements under the caption "Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations" relating to
capital expenditures and investments related to environmental compliance and
strategic planning, purchasing patterns of refined products and capital
resources available to PDV America and its subsidiaries are forward-looking
statements. In addition, when used in this document, the words "anticipate,"
"estimate," "prospect" and similar expressions are used to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, such as increased inflation, continued access to capital markets
and commercial bank financing on favorable terms, increases in regulatory
burdens, changes in prices or demand for the products of PDV America and its
subsidiaries as a result of competitive actions or economic factors and changes
in the cost of crude oil, feedstocks, blending components or refined products.
Such statements are also subject to the risks of increased costs in related
technologies and such technologies producing anticipated results. Should one or
more of these risks or uncertainties materialize, actual results may vary
materially from those estimated, anticipated or projected. Although PDV America
believes that the expectations reflected by such forward-looking statements are
reasonable based on information currently available to the PDV America and its
subsidiaries, no assurances can be given that such expectations will prove to
have been correct.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------------------------------
March 31,
2001 December 31,
(Unaudited) 2000
------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 126,913 $ 20,751
Accounts receivable, net 1,029,013 1,372,712
Due from affiliates 42,040 59,519
Inventories 992,149 1,156,065
Prepaid expenses and other 22,388 16,439
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Total current assets 2,212,503 2,625,486
NOTES RECEIVABLES FROM PDVSA AND AFFILIATE 798,000 798,000
PROPERTY, PLANT AND EQUIPMENT - NET 3,267,078 3,287,277
INVESTMENTS IN AFFILIATES 713,269 712,560
OTHER ASSETS 229,798 211,855
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TOTAL ASSETS $ 7,220,648 $ 7,635,178
================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Short-term bank loans $ - $ 37,500
Accounts payable 729,589 1,039,756
Payables to affiliates 332,171 452,026
Taxes other than income 232,438 210,986
Other current liabilities 206,144 245,864
Income taxes payable 61,584 74,152
Current portion of deferred income taxes 36,177 43,950
Current portion of long-term debt 70,292 47,078
Current portion of capital lease obligation 18,248 26,649
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Total current liabilities 1,686,643 2,177,961
LONG-TERM DEBT 1,493,765 1,518,639
CAPITAL LEASE OBLIGATION 67,322 67,322
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 209,813 206,339
OTHER NONCURRENT LIABILITIES 214,612 215,030
DEFERRED INCOME TAXES 610,878 629,163
MINORITY INTEREST 31,552 31,518
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDER'S EQUITY
Common stock, $1.00 par, 1,000 shares authorized, issued and
outstanding 1 1
Additional capital 1,532,435 1,532,435
Retained earnings 1,377,205 1,259,135
Accumulated other comprehensive loss (3,578) (2,365)
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Total shareholder's equity 2,906,063 2,789,206
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TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 7,220,648 $ 7,635,178
================================================
(See Notes to the Condensed Consolidated Financial Statements.)
2
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Dollars in Thousands)
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Three Months
Ended March 31,
------------------------------------------------
2001 2000
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REVENUES:
Sales $ 4,895,632 $ 4,779,203
Sales to affiliates 65,919 52,341
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4,961,551 4,831,544
Equity in earnings of affiliates 23,631 10,827
Interest income from affiliates 16,544 21,315
Other income (expense) - net 991 (1,917)
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5,002,717 4,861,769
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COST OF SALES AND EXPENSES:
Cost of sales and operating expenses 4,757,046 4,702,591
Selling, general and administrative expenses 51,192 49,301
Interest expense:
Capital leases 2,407 2,867
Other 28,613 37,703
Minority interest 34 691
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4,839,292 4,793,153
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INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 163,425 68,616
INCOME TAXES 58,955 24,887
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INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 104,470 43,729
CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES, NET OF RELATED INCOME
TAXES OF $7,977 13,600 -
------------------------------------------------
NET INCOME 118,070 43,729
OTHER COMPREHENSIVE INCOME (LOSS):
Cash flow hedges:
Cumulative effect, accounting for derivatives, net of related
income taxes of $(850) (1,450) -
Less: reclassification adjustment for derivative losses included
in net income, net of related income taxes of $139 237 -
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OTHER COMPREHENSIVE INCOME (LOSS) (1,213) -
------------------------------------------------
------------------------------------------------
COMPREHENSIVE INCOME $ 116,857 $ 43,729
================================================
(See Notes to the Condensed Consolidated Financial Statements.)
3
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (Unaudited)
(Dollars and Shares in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Accumulated
Other
Common Stock Additional Retained Comprehensive
Shares Amount Capital Earnings Loss Total
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BALANCE, JANUARY 1, 2001 1 $ 1 $ 1,532,435 $ 1,259,135 $ (2,365) $ 2,789,206
Net income - - - 118,070 - 118,070
Other comprehensive income (loss) - - - - (1,213) (1,213)
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BALANCE, MARCH 31, 2001 1 $ 1 $ 1,532,435 $ 1,377,205 $ (3,578) $ 2,906,063
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(See Notes to the Condensed Consolidated Financial Statements.)
4
PDV AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
Three Months
Ended March 31,
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2001 2000
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CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 192,045 $ 281,888
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,436) (30,841)
Proceeds from sale of property, plant and equipment 629 3,814
Decrease in restricted cash - 3,015
Loans to LYONDELL-CITGO Refining LP (1,300) (2,700)
Investments in and advances to other affiliates (96) (5,500)
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(38,203) (32,212)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) proceeds from short-term bank loans (37,500) 131,000
Net repayments on revolving bank loans - (447,000)
Proceeds from issuance of tax-exempt bonds 25,000 -
Payment on taxable bonds (25,000) -
Payments of capital lease obligations (8,402) -
Repayments of other debt (1,778) (1,778)
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(47,680) (317,778)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 106,162 (68,102)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,751 113,414
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 126,913 $ 45,312
==============================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amount capitalized $ 37,359 $ 46,391
==============================================
Income taxes $ 111,808 $ 31
==============================================
(See Notes to the Condensed Consolidated Financial Statements.)
5
PDV AMERICA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
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1. BASIS OF PRESENTATION
The financial information for PDV America, Inc. ("PDV America")
subsequent to December 31, 2000 and with respect to the interim
three-month periods ended March 31, 2001 and 2000 is unaudited. In the
opinion of PDV America's management, such interim information contains
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of such periods. The
results of operations for the three-month periods ended March 31, 2001
and 2000 are not necessarily indicative of the results to be expected
for the full year. Reference is made to PDV America's Annual Report for
the fiscal year ended December 31, 2000 on Form 10-K, dated March 30,
2001, for additional information.
The condensed consolidated financial statements include the accounts of
PDV America and its wholly owned subsidiaries, CITGO Petroleum
Corporation ("CITGO"), VPHI Midwest, Inc. ("Midwest") and PDV USA, Inc.
("PDV USA"), as well as CITGO's 65%-owned subsidiary, Cit-Con Oil
Corporation and Midwest's wholly owned subsidiary, PDV Midwest
Refining, L.L.C. ("PDVMR"). Each of these subsidiaries, together with
PDV America, are herein referred to collectively as, the "Companies."
2. CHANGE IN ACCOUNTING PRINCIPLE
On January 1, 2001 the Companies adopted the Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The statement, as amended,
establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity
recognizes all derivatives, at fair value, as either assets or
liabilities in the statement of financial position with an offset
either to shareholder's equity and comprehensive income or income
depending upon the classification of the derivative. Certain of the
derivative instruments identified at January 1, 2001 under the
provisions of SFAS No. 133 had been previously designated in hedging
relationships that addressed the variable cash flow exposure of
forecasted transactions. Under the transition provisions of SFAS No.
133, on January 1, 2001, the Companies recorded an after-tax,
cumulative-effect-type transition charge of $1.5 million to accumulated
other comprehensive income related to these derivatives. Certain of the
derivative instruments identified at January 1, 2001 under the
provisions of SFAS No. 133 had been previously designated in hedging
relationships that addressed the fair value of certain forward purchase
and sale commitments. Under the transition provisions of SFAS No. 133,
on January 1, 2001, the Companies recorded fair value adjustments to
the subject derivatives and related commitments resulting in the
recording of a net after-tax, cumulative-effect-type transition charge
of $0.2 million to net income. The remaining derivatives identified at
January 1, 2001 under the provisions of SFAS No. 133, consisting of
certain forward purchases and sales, had not previously been considered
derivatives under accounting principles generally accepted in the
United States of America. Under the transition provisions of SFAS No.
133, on January 1, 2001, the Companies recorded an after-tax,
cumulative-effect-type benefit of $13.8 million to net income related
to these derivatives.
The Companies did not elect subsequent hedge accounting for derivatives
existing at January 1, 2001. Accordingly, all changes in the fair value
of those derivatives have been recorded in income. Prospectively, the
Companies plan to elect hedge accounting only under limited
circumstances involving derivatives with initial terms of 90 days or
greater and notional amounts of $25 million or greater.
6
3. INVENTORIES
Inventories, primarily at LIFO, consist of the following:
March 31, December 31,
2001 2000
-------------- ------------
(Unaudited)
(000's omitted)
Refined products.......................................... $ 705,373 $ 809,953
Crude oil................................................. 209,771 269,831
Materials and supplies.................................... 77,005 76,281
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$ 992,149 $ 1,156,065
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4. LONG-TERM DEBT
March 31, December 31,
2001 2000
-------------- ------------
(Unaudited)
(000's omitted)
Senior Notes $200 million face amount, due 2006 with
interest rate of 7.875%.............................. $ 199,845 $ 199,837
Senior Notes due 2003 with interest rate
of 7.875%............................................ 498,732 498,614
Private Placement Senior Notes, due 2001 to 2006 with
interest rates from 9.03% to 9.30%................... 96,753 96,753
Master Shelf Agreement Senior Notes, due 2002
to 2009 with interest rates from 7.17%
to 8.94%............................................. 260,000 260,000
Tax-Exempt Bonds, due 2004 to 2031 with
variable and fixed interest rates.................... 354,370 329,370
Taxable Bonds, due 2026 to 2028 with variable
interest rates....................................... 149,000 174,000
Cit-Con bank credit agreement............................. 5,357 7,143
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1,564,057 1,565,717
Current portion of long-term debt......................... (70,292) (47,078)
-------------- ------------
$ 1,493,765 $ 1,518,639
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5. INVESTMENT IN LYONDELL-CITGO REFINING LP
LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a
refinery in Houston, Texas with a refining capacity of 265 thousand
barrels per day. LYONDELL-CITGO is owned 41.25% by subsidiaries of
CITGO and 58.75% by Lyondell Chemical Company (collectively, the
"Owners"). This refinery processes heavy crude oil supplied by
Petroleos de Venezuela, S.A. (together with one or more of its
subsidiaries, "PDVSA") under a long-term supply contract that expires
in 2017. CITGO purchases substantially all of the gasoline, diesel and
jet fuel produced at the refinery under a long-term contract.
On February 9, 2001, PDVSA notified LYONDELL-CITGO that, effective
February 1, 2001, it had declared force majeure under the contract
described above. Under a force majeure declaration, PDVSA may reduce
the amount of crude oil that it would otherwise be required to supply
under this agreement. If PDVSA reduces its delivery of crude oil,
LYONDELL-CITGO
7
may be required to use alternative sources to obtain its required
supply of crude oil, which may result in reduced operating margins. As
of March 31, 2001, PDVSA's deliveries of crude oil to LYONDELL-CITGO
have not been reduced due to PDVSA's declaration of force majeure.
CITGO has notes receivable from LYONDELL-CITGO that totaled $35 million
at March 31, 2001 and December 31, 2000. The notes bear interest at
market rates and are due July 1, 2003. These notes are included in
other assets in the accompanying consolidated balance sheets.
CITGO accounts for its investment in LYONDELL-CITGO using the equity
method of accounting and records its share of the net earnings of
LYONDELL-CITGO based on allocations of income agreed to by the Owners.
Information on CITGO's investment in LYONDELL-CITGO follows:
March 31, December 31,
2001 2000
------------- -------------
(Unaudited)
(000's omitted)
Carrying value of investment.............................. $ 519,159 $ 518,333
Notes receivable.......................................... 35,278 35,278
Participation interest.................................... 41% 41%
Summary of financial position:
Current assets....................................... $ 321,000 $ 310,000
Non-current assets................................... 1,364,000 1,386,000
Current liabilities.................................. 837,000 867,000
Non-current liabilities.............................. 323,000 321,000
Member's equity...................................... 526,000 508,000
Three Months Ended March 31,
----------------------------------
2001 2000
------------- -------------
(Unaudited)
Equity in net income...................................... $ 14,898 $ 6,276
Cash distribution received................................ 15,372 23,137
Summary of operating results:
Revenue.............................................. $ 910,117 $ 859,288
Gross profit......................................... 71,999 47,873
Net income........................................... 41,824 21,810
LYONDELL-CITGO has a $450 million term credit facility and a $70
million revolving credit facility that are due in September 2001. The
Owners are currently pursuing a refinancing of the indebtedness.
CITGO's management believes that this debt will be refinanced.
6. COMMITMENTS AND CONTINGENCIES
Litigation and Injury Claims - Various lawsuits and claims arising in
the ordinary course of business are pending against the Companies. The
Companies record accruals for potential losses when, in management's
opinion, such losses are probable and reasonably estimable. If known
lawsuits and claims were to be determined in a manner adverse to the
Companies, and in amounts greater than the Companies' accruals, then
such determinations could have a material adverse effect on the
Companies' results of operations in a given reporting period. However,
in the
8
opinion of the Companies' management, the ultimate resolution of these
lawsuits and claims will not exceed, by a material amount, the amount
of the accruals and the insurance coverage available to the Companies.
This opinion is based upon the current assessment of the Companies'
management and counsel of these lawsuits and claims. The most
significant lawsuits and claims are discussed below.
Four former marketers of The UNO-VEN Company ("UNO-VEN") have filed a
class action complaint against UNO-VEN alleging improper termination of
the UNO-VEN Marketer Sales Agreement under the Petroleum Marketing
Practices Act in connection with PDVMR's 1997 acquisition of Unocal's
interest in UNO-VEN. This class action has been certified for liability
purposes. The lawsuit is pending in the U.S. District Court in
Wisconsin. PDVMR has filed a motion for summary judgment. The
Companies, including PDVMR, jointly and severally, have agreed to
indemnify UNO-VEN and certain other related entities against certain
liabilities and claims, including this matter.
A lawsuit is pending against PDVMR and CITGO in the Illinois state
court which claims damages as a result of PDVMR's invoicing a
partnership, in which it is a partner, and an affiliate of the other
partner of the partnership, alleging excessive charges for electricity
used by these entities' facilities located adjacent to the Lemont,
Illinois refinery. The Companies have denied all allegations and are
pursuing their defenses.
In May 1997, a fire occurred at CITGO's Corpus Christi refinery. No
serious personal injuries were reported. Approximately 1,300 claims
have been resolved for immaterial amounts. There are seventeen related
lawsuits pending in Corpus Christi, Texas state court against CITGO on
behalf of approximately 9,000 individuals alleging property damages,
personal injury and punitive damages. None of these are presently
scheduled for trial.
A class action lawsuit is pending in Corpus Christi, Texas state court
against CITGO which claims damages for reduced value of residential
properties as a result of alleged air, soil and groundwater
contamination. CITGO has purchased 275 adjacent properties included in
the lawsuit and settled those related property damage claims. CITGO has
contested an agreement that purported to provide for settlement of the
remaining property damage claims for $5 million payable by it. Motions
by CITGO and the plaintiffs for summary judgment related to the
enforcement of this agreement are currently under consideration by the
court.
A lawsuit alleging wrongful death and personal injury filed in 1996
against CITGO and other industrial facilities in Corpus Christi, Texas
state court was brought by persons who claim that exposure to refinery
hydrocarbon emissions have caused various forms of illness. The lawsuit
is scheduled for trial in 2002.
Litigation is pending in federal court in Lake Charles, Louisiana
against CITGO by a number of current and former refinery employees and
applicants asserting claims of racial discrimination in connection with
CITGO's employment practices. A trial involving two plaintiffs resulted
in verdicts for CITGO. The Court granted CITGO summary judgment with
respect to another group of claims; this has been appealed to the Fifth
Circuit Court of Appeals. No trials of the remaining cases are set
pending this appeal.
CITGO is among defendants to class action lawsuits in North Carolina,
New York and Illinois alleging contamination of water supplies by
methyl tertiary butyl ether, a component of gasoline. These actions
allege that methyl tertiary butyl ether poses public health risks and
seek damages as well as remediation of the alleged contamination. These
matters are in early stages of discovery. The Illinois case has been
transferred to New York and consolidated with the case pending in New
York. CITGO has denied all of the allegations and is pursuing its
defenses.
9
In 1999, a group of U.S. independent oil producers filed petitions
under the U.S. antidumping and countervailing duty laws against imports
of crude oil from Venezuela, Iraq, Mexico and Saudi Arabia. These laws
provide for the imposition of additional duties on imports of
merchandise if (1) the U.S. Department of Commerce, after
investigation, determines that the merchandise has been sold to the
Untied States at dumped prices or has benefited from countervailing
subsidies, and (2) the U.S. International Trade Commission determines
that the imported merchandise has caused or threatened material injury
to the U.S. industry producing like product. The amount of the
additional duties imposed is generally equal to the amount of the
dumping margin and subsidies found on the imports on which the duties
are assessed. No duties are owed on imports made prior to the formal
initiation of an investigation by the U.S. Department of Commerce. In
1999, prior to initiation of a formal investigation, the U.S.
Department of Commerce dismissed the petitions. In 2000, the U.S. Court
of International Trade overturned this decision and remanded the case
to the U.S. Department of Commerce for reconsideration; this has been
appealed.
Environmental Compliance and Remediation - The Companies are subject to
various federal, state and local environmental laws and regulations
which may require the Companies to take action to correct or improve
the effects on the environment of prior disposal or release of
petroleum substances by the Companies or other parties. Maintaining
compliance with environmental laws and regulations in the future could
require significant capital expenditures and additional operating
costs.
PDV America's accounting policy establishes environmental reserves as
probable site restoration and remediation obligations become reasonably
capable of estimation. Based on currently available information,
including the continuing participation of former owners in remediation
actions and indemnification agreements with third parties, PDV America
believes that its accruals are sufficient to address its environmental
cleanup obligations.
In 1992, CITGO reached an agreement with a state agency to cease usage
of certain surface impoundments at CITGO's Lake Charles refinery by
1994. A mutually acceptable closure plan was filed with the state in
1993. CITGO and its former owner are participating in the closure and
sharing the related costs based on estimated contributions of waste and
ownership periods. The remediation commenced in December 1993. In 1997,
CITGO presented a proposal to a state agency revising the 1993 closure
plan. In 1998 and 2000, CITGO submitted further revisions as requested
by the state agency. A ruling on the proposal, as amended, is expected
in 2001 with final closure to begin in 2002.
In 1992, an agreement was reached between CITGO and its former owner
concerning a number of environmental issues which provides in part that
the former owner will continue to share the costs of certain specific
environmental remediation and certain tort liability actions based on
ownership periods and specific terms of the agreement.
The Texas Natural Resources Conservation Commission conducted
environmental compliance reviews at the Corpus Christi refinery in 1998
and 1999. The Texas Natural Resources Conservation Commission has
issued notices of violation related to each of the reviews and has
proposed fines of approximately $970,000 based on the 1998 review and
$700,000 based on the 1999 review. The first notice of violation was
issued in January 1999 and the second notice of violation was issued in
December 1999. Most of the alleged violations refer to recordkeeping
and reporting issues, failure to meet required emission levels, and
failure to properly monitor emissions. A hearing on the merits has been
scheduled for November 2001. CITGO intends to vigorously contest the
alleged violations and proposed fines.
In June 1999, CITGO and numerous other industrial companies received
notice from the U.S. Environmental Protection Agency, that the U.S.
Environmental Protection Agency believes these companies have
contributed to contamination in the Calcasieu Estuary, in the proximity
of Lake
10
Charles, Calcasieu Parish, Louisiana and are Potentially Responsible
Parties under the Comprehensive Environmental Response, Compensation,
and Liability Act. The Environmental Protection Agency made a demand
for payment of its past investigation costs from CITGO and other
Potentially Responsible Parties and is conducting a Remedial
Investigation/Feasibility Study under its authority under the
Comprehensive Environmental Response, Compensation, and Liability Act.
CITGO and other Potentially Responsible Parties may be potentially
responsible for the costs of the Remedial Investigation/Feasibility
Study. CITGO disagrees with the Environmental Protection Agency's
allegations and intends to contest this matter.
In January 2001, CITGO and PDVMR received notices of violation from the
Environmental Protection Agency alleging violations of the Federal
Clean Air Act. The notices of violation are an outgrowth of inspections
and formal information requests regarding CITGO's and PDVMR's
compliance with the Federal Clean Air Act. The notices of violation
cover CITGO's Lake Charles, Louisiana and Corpus Christi, Texas
refineries and the PDVMR Lemont, Illinois refinery operated by CITGO.
For the Lake Charles and Lemont facilities, the notices of violation
allege, among other things, violations of the "New Source Review"
provisions of the Federal Clean Air Act, which address installation and
permitting of new and modified air emission sources. For the Corpus
Christi facility, the notice of violation alleges violations of various
monitoring, leak detection and repair requirements of the Federal Clean
Air Act. If the Companies were to be found to have violated the
provisions cited in the notices of violation, they could be subject to
possible penalties and capital expenditures for installation or
upgrading of pollution control equipment or technologies. The
likelihood of an unfavorable outcome and the amount or range of any
potential loss cannot reasonably be estimated at this time.
In October 1999, the Louisiana Department of Environmental Quality
issued CITGO a notice of violation and potential penalty alleging
violation of benzene NESHAPS regulations covering benzene emissions
from wastewater treatment operations at CITGO's Lake Charles, Louisiana
refinery and requested additional information. CITGO anticipates
resolving this for an immaterial amount.
In November 1999, the Attorney General's Office of Illinois filed a
complaint in the 12th Judicial Circuit Court, Will County, Illinois
against PDVMR and CITGO alleging damages from several releases to the
air of contaminants from PDVMR's refinery. The initial complaint
alleged violations and potential compliance action. The Attorney
General's office later made a demand for penalties of approximately
$150,000. While CITGO and PDVMR disagree with the Attorney General's
alleged violations and proposed penalty demand, they are cooperating
with the agency and anticipate reaching an agreement with the agency to
resolve this lawsuit by the end of 2001.
Conditions which require additional expenditures may exist with respect
to various sites of the Companies including, but not limited to, the
Companies' operating refinery complexes, closed refineries, service
stations and crude oil and petroleum product storage terminals. The
amount of such future expenditures, if any, is indeterminable.
Derivative Commodity and Financial Instruments - The Companies enter
into petroleum futures contracts, options and other over-the-counter
commodity derivatives, primarily to reduce its inventory purchase and
product sale exposure to market risk. In the normal course of business,
the Companies also enter into certain petroleum commodity forward
purchase and sale contracts that qualify as derivatives. At March 31,
2001, the balance sheet captions prepaid expenses and other current
assets and other current liabilities include $3 million and $1 million,
respectively, related to the fair values of open commodity derivatives.
The Companies have also entered into various interest rate swaps to
manage its risk related to interest rate changes on its debt. The fair
value of the interest rate swap agreements in place at March 31, 2001,
based on the estimated amount that the Companies would receive or pay
to
11
terminate the agreements as of that date and taking into account
current interest rates, was a loss of $3 million, the offset of which
is recorded in the balance sheet caption other current liabilities. In
connection with the determination of fair market value, the Companies
consider the creditworthiness of the counter parties, but no adjustment
was determined to be necessary as a result.
7. RELATED PARTY TRANSACTIONS
CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to the
crude oil requirements for each of CITGO's refineries. These crude oil
supply agreements contain force majeure provisions that entitle the
supplier to reduce the quantity of crude oil and feedstocks delivered
under the crude supply agreements under specified circumstances. On
February 9, 2001, PDVSA notified CITGO that it had declared force
majeure, effective February 1, 2001, under each of the long-term crude
oil supply agreements it has with CITGO. Under a force majeure
declaration, PDVSA may reduce the amount of crude oil that it would
otherwise be required to supply under these agreements. If PDVSA
reduces its delivery of crude oil, CITGO may be required to use
alternative sources to obtain their required supply of crude oil, which
may result in reduced operating margins.
As of March 31, 2001, PDVSA's deliveries of crude oil to CITGO have not
been reduced due to PDVSA's declaration of force majeure. It is not
possible for CITGO to forecast future financial impacts of this force
majeure condition on CITGO's costs or the duration of the force
majeure.
These contracts also contain provisions which entitle the supplier to
reduce the quantity of crude oil and feedstocks delivered under the
crude supply agreements and oblige the supplier to pay CITGO the deemed
margin under that contract for each barrel of reduced crude oil and
feedstocks. During the three-month periods ended March 31, 2001 and
2000, PDVSA did not deliver naphtha pursuant to two of the contracts
and, as a result, naphtha costs, net of deemed margin, were higher by
$2 million and $1 million, respectively, than what would have otherwise
been the case.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion of the financial condition and results of
operations of PDV America should be read in conjunction with the unaudited
condensed consolidated financial statements of PDV America included elsewhere
herein. Reference is made to PDV America's Annual Report for the fiscal year
ended December 31, 2000 on Form 10-K, dated March 30, 2001, for additional
information and a description of factors that may cause substantial fluctuations
in the earnings and cash flows of PDV America.
In the first quarter ended March 31, 2001, PDV America generated net
income of $118.1 million on revenue of $5.0 billion compared to net income of
$43.7 million on revenues of $4.9 billion for the same period last year. (See
"Results of Operation - Gross margin" below).
CITGO's revenue accounted for over 99% of PDV America's consolidated
revenues in the first three months of 2001 and 2000. PDVMR's sales of $459
million for the three-month period ended March 31, 2001 were primarily to CITGO
and, accordingly, these were eliminated in consolidation.
LYONDELL-CITGO owns and operates a refinery in Houston, Texas that
processes heavy crude oil supplied by PDVSA under a long-term supply contract
that expires in 2017. CITGO purchases substantially all of the gasoline, diesel
and jet fuel produced at the refinery under a long-term contract.
On February 9, 2001, PDVSA notified LYONDELL-CITGO that, effective
February 1, 2001, it had declared force majeure under the contract described
above. Under a force majeure declaration, PDVSA may reduce the amount of crude
oil that it would otherwise be required to supply under this agreement. If PDVSA
reduces its delivery of crude oil, LYONDELL-CITGO may be required to use
alternative sources to obtain its required supply of crude oil, which may result
in reduced operating margins. As of March 31, 2001, PDVSA's deliveries of crude
oil to LYONDELL-CITGO have not been reduced due to PDVSA's declaration of force
majeure.
CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
long-term crude oil supply agreements with PDVSA with respect to the crude oil
requirements for each of CITGO's refineries. These crude oil supply agreements
contain force majeure provisions that entitle the supplier to reduce the
quantity of crude oil and feedstocks delivered under the crude supply agreements
under specified circumstances. On February 9, 2001, PDVSA notified CITGO that it
had declared force majeure, effective February 1, 2001, under each of the
long-term crude oil supply agreements it has with CITGO. Under a force majeure
declaration, PDVSA may reduce the amount of crude oil that it would otherwise be
required to supply under these agreements. If PDVSA reduces its delivery of
crude oil, CITGO may be required to use alternative sources to obtain their
required supply of crude oil, which may result in reduced operating margins.
As of March 31, 2001, PDVSA's deliveries of crude oil to CITGO have not
been reduced due to PDVSA's declaration of force majeure. It is not possible for
CITGO to forecast future financial impacts of this force majeure condition on
CITGO's costs or the duration of the force majeure.
These contracts also contain provisions which entitle the supplier to
reduce the quantity of crude oil and feedstocks delivered under the crude supply
agreements and oblige the supplier to pay CITGO the deemed margin under that
contract for each barrel of reduced crude oil and feedstocks. During the
three-month periods ended March 31, 2001 and 2000, PDVSA did not deliver naphtha
pursuant to two of the contracts and, as a result, naphtha costs, net of deemed
margin, were higher by $2 million and $1 million, respectively, than what would
have otherwise been the case.
Results of Operations
The following table summarizes the sources of PDV America's sales
revenues and sales volumes for the three-month periods ended March 31, 2001 and
2000:
PDV America's Sales Revenues and Volumes
Three Months Three Months
Ended March 31, Ended March 31,
--------------------- ---------------------
2001 2000 2001 2000
------- ------- ------- -------
($ in millions) (MM gallons)
Gasoline............................................ $ 2,660 $ 2,655 3,014 3,141
Jet fuel............................................ 482 494 573 611
Diesel/#2 fuel...................................... 1,188 1,094 1,457 1,380
Asphalt............................................. 50 47 90 77
Petrochemicals and industrial products.............. 426 391 536 386
Lubricants and waxes................................ 142 115 70 56
------- ------- ------- -------
Total refined product sales................... 4,948 4,796 5,740 5,651
Other sales......................................... 14 36
------- ------- ------- -------
Total sales.................................... $ 4,962 $ 4,832 5,740 5,651
======= ======= ======= =======
13
The following table summarizes PDV America's cost of sales and
operating expenses for the three-month periods ended March 31, 2001 and 2000:
PDV America's Cost of Sales and Operating Expenses
Three Months
Ended March 31,
--------------------------
2001 2000
------- --------
($ in millions)
Crude oil.................................................................. $ 1,326 $ 1,461
Refined products........................................................... 2,462 2,435
Intermediate feedstocks.................................................... 309 317
Refining and manufacturing costs........................................... 301 251
Other operating costs, expenses and inventory changes...................... 359 239
------- --------
Total cost of sales and operating expenses............................ $ 4,757 $ 4,703
======= ========
Sales revenues and volumes. Sales increased $130 million, or
approximately 3%, in the three-month period ended March 31, 2001 as compared to
the same period in 2000. This was due to an increase in average sales price of
1% and an increase in sales volume of 2%. (See PDV America's Sales Revenues and
Volumes table above.)
Equity in earnings of affiliates. Equity in earnings of affiliates
increased by $13 million for the three-month period ended March 31, 2001 as
compared to the same period in 2000. The increase was primarily due to the
change in the earnings of LYONDELL-CITGO. CITGO's share of these earnings
increased $9 million, from $6 million in the first three months of 2000 to $15
million in the first three months of 2001. LYONDELL-CITGO's increased earnings
are primarily due to higher deliveries and processing of crude oil under the
crude supply agreement with PDVSA as well as higher margins on spot crude oil,
partially offset by higher energy costs and interest expense.
Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $54 million or 1%, in the quarter ended March 31, 2001 as
compared to the same period in 2000. (See PDV America's Cost of Sales and
Operating Expenses table above.)
The Companies purchase refined products to supplement the production
from its refineries to meet marketing demands and resolve logistical issues.
Refined product purchases represented 52% of the Companies' total cost of sales
and operating expenses for the first quarters of both 2001 and 2000. The
Companies estimate that margins on purchased products, on average, are lower
than margins on produced products due to the fact that the Companies can only
receive the marketing portion of the total margin received on the produced
refined products. However, purchased products are not segregated from produced
products of the Companies and margins may vary due to market conditions and
other factors beyond the Companies' control. As such, it is difficult to measure
the effects on profitability of changes in volumes of purchased products. In the
near term, other than normal refinery turnaround maintenance, the Companies do
not anticipate operational actions or market conditions that might cause a
material change in anticipated purchased product requirements; however, there
could be events beyond the control of the Companies which impact the volume of
refined products purchased. (See also "Factors Affecting Forward-Looking
Statements".)
Gross margin. The gross margin for the three-month period ended March
31, 2001 was approximately 3.6 cents per gallon, compared to approximately 2.3
cents per gallon for the same period in 2000. In the three-month period ended
March 31, 2001, the revenue per gallon component increased approximately 1%
while the cost per gallon component was essentially unchanged. As a result, the
gross
14
margin increased by approximately $0.013 on a per gallon basis in the quarter
ended March 31, 2001 compared to the same period in 2000.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased in the first quarter of 2001 by 4%, from $49
million in the first quarter of 2000 to $51 million in the first quarter of
2001. The difference is principally due to the recovery of approximately $5
million of bad debt reserves related to credit card receivables in the first
quarter of 2000. The recovery was in connection with the sale of CITGO's
proprietary consumer credit card receivables and related credit card program on
March 1, 2000 as described below.
Interest Expense. Interest expense decreased by $10 million in the
three-month period ended March 31, 2001 as compared to the same period in 2000.
This was primarily due to the lower average amount outstanding under the
revolving and short-term borrowing facilities during the first quarter of 2001
that was made possible by cash flows from operating activities.
Liquidity and Capital Resources
For the three-month period ended March 31, 2001, the Companies'
consolidated net cash provided by operating activities totaled approximately
$192 million. Operating cash flows were derived from net income of $118 million,
depreciation and amortization of $73 million, and net changes in working capital
of $1 million. The more significant changes in working capital included the
decrease in accounts receivable, including receivables from affiliates, of
approximately $367 million, the decrease in inventories of approximately $164
million and the decrease in accounts payable and other current liabilities,
including payables to affiliates, of approximately $388 million.
Net cash used in investing activities totaled $38 million for the
three-month period ended March 31, 2001 consisting primarily of capital
expenditures of $37 million, compared to $31 million for the same period in
2000.
Net cash used in financing activities totaled $47 million for the
three-month period ended March 31, 2001 consisting primarily of $38 million net
repayment on short-term borrowings and the payment of capital lease obligations
of $8 million.
As of March 31, 2001, capital resources available to the Companies
included cash generated by operations, available borrowing capacity under
CITGO's committed bank facilities of $550 million and $190 million of
uncommitted short-term borrowing facilities with various banks and $100 million
available borrowing capacity under PDVMR's revolving credit facility with
various banks. Additionally, the remaining $400 million from CITGO's shelf
registration with the Securities and Exchange Commission for $600 million of
debt securities may be offered and sold from time to time. PDV America's
management believes that the Companies have sufficient capital resources to
carry out planned capital spending programs, including regulatory and
environmental projects in the near term, and to meet currently anticipated
future obligations as they arise. The Companies periodically evaluates other
sources of capital in the marketplace and anticipates that long-term capital
requirements will be satisfied with current capital resources and future
financing arrangements, including the issuance of debt securities. The
Companies' ability to obtain such financing will depend on numerous factors,
including market conditions and the perceived creditworthiness of the Companies
at that time.
On March 1, 2000, CITGO sold its proprietary consumer credit card
receivables and related credit card program to Associates First Capital
Corporation. In this transaction, Associates First Capital Corporation acquired
approximately $19 million in receivables from CITGO and $113 million from Royal
Bank of Canada that had previously been purchased from CITGO under a revolving
sale facility. In addition, Associates First Capital Corporation acquired 1.2
million active consumer accounts. The sale did not affect CITGO's commercial or
fleet credit card programs.
15
In April 2000, CITGO amended an agreement to sell trade accounts
receivable on an ongoing basis and without recourse. The amendment increased the
amount of such receivables that can be sold to $225 million. The amended
agreement has a minimum term of one year and is renewable for successive annual
terms by mutual agreement.
The Companies are in compliance with their obligations under their debt
financing arrangements at March 31, 2001.
New Accounting Standard
On January 1, 2001 the Companies adopted the SFAS No. 133. The
statement, as amended, establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives, at fair value, as either assets or liabilities in the
statement of financial position with an offset either to shareholder's equity
and comprehensive income or income depending upon the classification of the
derivative. Certain of the derivative instruments identified at January 1, 2001
under the provisions of SFAS No. 133 had been previously designated in hedging
relationships that addressed the variable cash flow exposure of forecasted
transactions. Under the transition provisions of SFAS No. 133, on January 1,
2001, the Companies recorded an after-tax, cumulative-effect-type transition
charge of $1.5 million to accumulated other comprehensive income related to
these derivatives. Certain of the derivative instruments identified at January
1, 2001, under the provisions of SFAS No. 133, had been previously designated in
hedging relationships that addressed the fair value of certain forward purchase
and sale commitments. Under the transition provisions of SFAS No. 133, on
January 1, 2001, the Companies recorded fair value adjustments to the subject
derivatives and related commitments resulting in the recording of a net
after-tax, cumulative-effect-type transition charge of $0.2 million to net
income. The remaining derivatives identified at January 1, 2001 under the
provisions of SFAS No. 133, consisting of certain forward purchases and sales,
had not previously been considered derivatives under accounting principles
generally accepted in the United States of America. Under the transition
provisions of SFAS No. 133, on January 1, 2001, the Companies recorded an
after-tax, cumulative-effect-type benefit of $13.8 million to net income related
to these derivatives.
PDV America did not elect subsequent hedge accounting for derivatives
existing at January 1, 2001. Accordingly, all changes in the fair value of those
derivatives have been recorded in income. Prospectively, PDV America plans to
elect hedge accounting only under limited circumstances involving derivatives
with initial terms of 90 days or greater and notional amounts of $25 million or
greater.
Proposed Accounting Change
The American Institute of Certified Public Accountants has issued a
"Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
deferred non-capital major maintenance costs be expensed immediately. This
statement also has provisions that will change the method of determining
depreciable lives. The impact on future depreciation expense is not determinable
at this time. The exposure draft indicates that this change will be required to
be adopted for years beginning after December 15, 2001, and will be reported as
a cumulative effect of an accounting change in the consolidated statement of
income. At March 31, 2001, PDV America had included turnaround costs of $111
million in other assets. PDV America's management has not determined the amount,
if any, of these costs that could be capitalized under the provisions of the
exposure draft.
16
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Introduction. The Companies have exposure to price fluctuations of
crude oil and refined products as well as fluctuations in interest rates. To
manage these exposures, management has defined certain benchmarks consistent
with its preferred risk profile for the environment in which the Companies
operate and finance its assets. The Companies do not attempt to manage the price
risk related to all of its inventories of crude oil and refined products. As a
result, at March 31, 2001, the Companies were exposed to the risk of broad
market price declines with respect to a substantial portion of its crude oil and
refined product inventories. The following disclosures do not attempt to
quantify the price risk associated with such commodity inventories.
Commodity Instruments. CITGO balances its crude oil and petroleum
product supply/demand and manages a portion of its price risk by entering into
petroleum commodity derivatives.
Non-Trading Commodity Derivatives
Open Positions at March 31, 2001
Maturity Contracted Contract Market
Commodity Derivative Date Volume Value Value
- ---------------------- --------------------------------- ----------- ---------- ----------- -----------
($ in millions)
------------------------
No Lead Gasoline (1) Futures Purchased 2001 2,007 $ 75.6 $ 76.7
Forward Purchase Contracts 2001 3,752 $ 132.3 $ 132.7
Forward Sale Contracts 2001 2,975 $ 104.8 $ 106.3
Distillates (1) Futures Purchased 2001 1,171 $ 34.6 $ 34.8
Futures Purchased 2002 299 $ 9.0 $ 9.0
OTC Swap Options Purchased 2001 10 $ - $ -
OTC Swap Options Sold 2001 10 $ - $ -
OTC Swap Options Purchased 2002 30 $ - $ -
OTC Swap Options Sold 2002 30 $ - $ (0.1)
Forward Purchase Contracts 2001 1,174 $ 34.8 $ 34.3
Forward Sale Contracts 2001 1,419 $ 42.9 $ 42.8
Crude Oil (1) Futures Purchased 2001 200 $ 5.3 $ 5.3
Forward Purchase Contracts 2001 7,254 $ 201.7 $ 190.0
Forward Sale Contracts 2001 8,295 $ 230.8 $ 217.3
Natural Gas (2) Futures Purchased 2001 40 $ 2.1 $ 2.0
OTC Swap Options Purchased 2001 100 $ - $ 0.3
OTC Swap Options Sold 2001 120 $ - $ (0.4)
- -----------
(1) Thousands of barrels
(2) Ten-thousands of mmbtu
17
Non-Trading Commodity Derivatives
Open Positions at March 31, 2000
Maturity Contracted Contract Market
Commodity Derivative Date Volume Value(2) Value
- ---------------------- --------------------------------- ----------- ---------- ----------- -----------
($ in millions)
------------------------
No Lead Gasoline (1) Futures Purchased 2000 69 $ 2.5 $ 2.5
Futures Sold 2000 60 $ 2.1 $ 2.2
OTC Swap Options Purchased 2000 1,500 $ (0.5) $ -
OTC Swap Options Sold 2000 1,500 $ 0.5 $ (0.1)
OTC Swaps (Pay Floating/Receive Fixed)(4) 2000 500 $ 14.0 $ 16.6
Heating Oil (1) Futures Purchased 2000 71 $ 1.8 $ 2.0
Futures Purchased 2001 19 $ 0.5 $ 0.5
Futures Sold 2000 75 $ 2.4 $ 2.5
OTC Swaps (Pay Floating/Receive Fixed)(4) 2000 400 $ 9.7 $ 11.5
OTC Swaps (Pay Fixed/Receive Floating)(4) 2000 10 $ 0.2 $ 0.3
Crude Oil (1) OTC Swaps (Pay Fixed/Receive Floating)(4) 2000 900 $ 21.0 $ 23.8
Natural Gas (3) Futures Purchased 2000 15 $ 0.4 $ 0.4
- -----------
(1) 1,000 barrels per contract
(2) Weighted average price
(3) 10,000 mmbtu per contract
(4) Floating price based on marked index designated in contract; fixed price
agreed upon at date of contract.
Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At March 31,
2001, CITGO's primary exposures were to LIBOR and floating rates on tax exempt
bonds.
For interest rate swaps, the table below presents notional amounts and
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contracts.
18
Non-Trading Interest Rate Derivatives
Open Positions at March 31, 2001
Notional
Expiration Fixed Rate Principal
Variable Rate Index Date Paid Amount
- ------------------------- -------------- ------------- ----------------
($ in millions)
J.J. Kenny February 2005 5.30% $ 12
J.J. Kenny February 2005 5.27% 15
J.J. Kenny February 2005 5.49% 15
----------------
$ 42
================
Non-Trading Interest Rate Derivatives
Open Positions at March 31, 2000
Notional
Expiration Fixed Rate Principal
Variable Rate Index Date Paid Amount
- ------------------------- -------------- ------------- ----------------
($ in millions)
One-month LIBOR May 2000 6.28% $ 25
J.J. Kenny May 2000 4.72% 25
J.J. Kenny February 2005 5.30% 12
J.J. Kenny February 2005 5.27% 15
J.J. Kenny February 2005 5.49% 15
----------------
$ 92
================
The fair value of the interest rate swap agreements in place at March
31, 2001, based on the estimated amount that CITGO would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates, was a loss of $3 million.
For debt obligations, the table below presents principal cash flows and
related weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on implied forward rates in the yield curve at
the reporting date.
19
Debt Obligations
At March 31, 2001
Expected Average
Fixed Average Fixed Variable Variable Interest
Expected Maturities Rate Debt Interest Rate Rate Debt Rate
- -------------------------------------------------------------------------------------------------------------------
($ in millions) ($ in millions)
2001 $ 40 9.11% $ 5 5.52%
2002 36 8.78% - -
2003 560 7.98% - -
2004 31 8.02% 16 6.71%
2005 11 9.30% - -
Thereafter 380 7.99% 485 8.49%
----------------- ------------ -------------- ---------------
Total $ 1,058 8.07% $ 506 8.40%
================= ============ ============== ===============
Fair Value $ 1,080 $ 506
================= ==============
Debt Obligations
At March 31, 2000
Expected Average
Fixed Average Fixed Variable Variable Interest
Expected Maturities Rate Debt Interest Rate Rate Debt Rate
- -------------------------------------------------------------------------------------------------------------------
($ in millions) ($ in millions)
2000 $ 290 7.94% $ 167 7.17%
2001 40 9.11% 7 7.54%
2002 36 8.78% - -
2003 560 7.98% - -
2004 31 8.02% 16 8.71%
Thereafter 391 8.02% 485 9.32%
----------------- ------------ -------------- ---------------
Total $ 1,348 8.04% $ 675 8.77%
================= ============ ============== ===============
Fair Value $ 1,319 $ 675
================= ==============
20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The required information is incorporated by reference into Part II of
this Report from Note 6 of the Notes to the Condensed Consolidated Financial
Statements included in Part I of this Report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K:
-------------------
None.
21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PDV AMERICA, INC.
Date: May 14, 2001 /s/ Carlos Jorda
-----------------------------------------
Carlos Jorda
President, Chief Executive Officer,
Chief Financial Officer and Director
Date: May 14, 2001 /s/ Jose I. Moreno
-----------------------------------------
Jose I. Moreno
Secretary and Director
22