1
EXHIBIT 99.1
EXCEL PARALUBES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED
DECEMBER 31, 2000
2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Excel Paralubes
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, partners' deficit and cash flows present
fairly, in all material respects, the financial position of Excel Paralubes and
its subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of Excel Paralubes' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As described in Notes 8 and 12 to the consolidated financial statements, Excel
Paralubes has significant transactions with its partners.
January 24, 2001
3
EXCEL PARALUBES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
2000 1999
Assets
Current assets:
Cash and cash equivalents $ 1,298,958 $ 444,598
Accounts receivable - related party 26,825,856 54,309,277
Inventory 10,942,673 11,405,294
Other current assets 226,931 357,024
------------- -------------
Total current assets 39,294,418 66,516,193
Property, plant and equipment, net 378,431,618 395,742,089
Intangible assets, net 22,120,162 23,502,672
Other assets 10,478,837 11,364,350
------------- -------------
Total assets $ 450,325,035 $ 497,125,304
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 6,523,466 $ 2,451,425
Accounts payable and accrued liabilities -
related party 2,073,963 3,414,399
Current portion of long-term debt 3,657,600
Short-term notes payable 77,088,000 84,501,000
Interest payable 5,945,833 5,945,833
------------- -------------
Total current liabilities 95,288,862 96,312,657
Long-term debt 486,342,400 490,000,000
Other long-term liabilities 11,861,951 33,888,637
Partners' deficit (143,168,178) (123,075,990)
------------- -------------
Total liabilities and partners' deficit $ 450,325,035 $ 497,125,304
============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
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EXCEL PARALUBES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------
2000 1999 1998
Revenues:
Net sales - related party $437,555,086 $306,353,812 $269,663,968
Processing fees - related party 10,440,453 9,675,680 10,019,790
------------ ------------ ------------
Total revenues 447,995,539 316,029,492 279,683,758
------------ ------------ ------------
Costs and expenses:
Cost of goods sold - related party 302,367,338 196,893,691 145,882,471
Operating expense 46,383,759 46,798,951 47,712,610
General and administrative expense 1,222,152 1,098,486 1,064,681
Depreciation and amortization 16,848,576 17,661,409 17,281,029
Loss on disposition of asset 2,435,591
Interest expense 40,768,853 38,888,051 38,046,184
Taxes other than income 161,458 124,320 208,663
------------ ------------ ------------
Total costs and expenses 410,187,727 301,464,908 250,195,638
------------ ------------ ------------
Net income $ 37,807,812 $ 14,564,584 $ 29,488,120
============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
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EXCEL PARALUBES
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
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ATLAS
CONOCO, PROCESSING
INC. CO. TOTAL
Balance, January 1, 1998 $ (37,389,347) $ (37,389,347) $ (74,778,694)
Distributions (29,175,000) (29,175,000) (58,350,000)
Net income for the year
ended December 31, 1998 14,744,060 14,744,060 29,488,120
------------- ------------- -------------
Balance, December 31, 1998 (51,820,287) (51,820,287) (103,640,574)
Distributions (17,000,000) (17,000,000) (34,000,000)
Net income for the year
ended December 31, 1999 7,282,292 7,282,292 14,564,584
------------- ------------- -------------
Balance, December 31, 1999 (61,537,995) (61,537,995) (123,075,990)
Distributions (28,950,000) (28,950,000) (57,900,000)
Net income for the year
ended December 31, 2000 18,903,906 18,903,906 37,807,812
------------- ------------- -------------
Balance, December 31, 2000 $ (71,584,089) $ (71,584,089) $(143,168,178)
============= ============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
6
EXCEL PARALUBES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------
2000 1999 1998
Cash flows from operating activities:-
Net income $ 37,807,812 $ 14,564,584 $ 29,488,120
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 16,848,576 17,661,409 17,281,029
Loss on asset retirements 2,435,591
(Increase) decrease in accounts
receivable 27,483,421 (14,605,091) 2,011,862
Decrease in inventory 462,621 770,963 1,721,292
(Increase) decrease in other current assets 130,093 (272,358) (18,924)
Increase (decrease) in accounts
payable and accrued liabilities 2,731,605 99,645 (17,105,118)
Decrease in intangible assets 56,955
Decrease in other long-term assets 885,513
Increase (decrease) in long-term
liabilities (9,818,624) 5,123,612 11,601,197
------------ ------------ ------------
Net cash provided by operating
activities 78,966,608 23,342,764 45,036,413
------------ ------------ ------------
Cash flows from investing activities:
Additions to property, plant
and equipment (13,821,545) (4,787,101) (2,557,498)
Proceeds from sale of assets 1,022,297 12,500
------------ ------------ ------------
Net cash used in investing activities (12,799,248) (4,787,101) (2,544,998)
------------ ------------ ------------
Cash flows from financing activities:
Cash distributions to partners (57,900,000) (34,000,000) (58,350,000)
Net proceeds (payment) from issuance/
retirement of commercial paper (7,413,000) 15,301,000 16,400,000
------------ ------------ ------------
Net cash used in financing activities (65,313,000) (18,699,000) (41,950,000)
------------ ------------ ------------
Net increase (decrease) in cash 854,360 (143,337) 541,415
Cash balance at beginning of year 444,598 587,935 46,520
------------ ------------ ------------
Cash balance at end of year $ 1,298,958 $ 444,598 $ 587,935
============ ============ ============
Supplementary cash flow information:
Cash paid for interest $ 40,132,046 $ 39,160,407 $ 38,096,674
The accompanying notes are an integral part of these consolidated
financial statements.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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1. ORGANIZATION
Excel Paralubes (Excel or the Joint Venture), a general partnership,
was formed pursuant to the laws of the state of Texas on August 2, 1994
and was created for the purpose of constructing and operating a lube
oil hydrocracker facility. Excel is a partnership which is equally
owned by Conoco Inc. (Conoco) and Atlas Processing Company (Atlas
Processing), a 100%-owned subsidiary of Pennzoil-Quaker State Company
(Pennzoil). Excel Paralubes Funding Corporation (Excel Funding), a
Delaware corporation, was formed to execute and administer the
financing arrangements of the Joint Venture and is a wholly-owned
subsidiary of Excel.
As more fully described in Notes 8 and 12, Excel and its partners have
entered into several long-term purchase and supply contracts,
administrative and processing agreements and partner guarantees.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The accompanying consolidated financial statements have been prepared
on the accrual basis in accordance with accounting principles generally
accepted in the United States of America which require management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform to
the current year's presentation.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Excel and
its wholly-owned subsidiary. All intercompany accounts and transactions
have been eliminated.
CASH AND CASH EQUIVALENTS
Cash consists of cash on deposit at financial institutions and cash
equivalents in the form of time deposits with original maturities of
three months or less.
INVENTORIES
Inventories consist principally of feedstocks. All inventories are
valued at the lower of cost or market, cost being determined by the
last-in, first-out (LIFO) method. The total LIFO reserves required at
December 31, 2000 and 1999 were ($1,241,612) and $1,376,006,
respectively.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost and consists primarily
of refining equipment in service at year end. Property, plant and
equipment is being depreciated on a straight-line basis principally
over 28 years, the estimated life of the assets. When fixed assets are
sold or retired, cost and accumulated depreciation are eliminated from
the accounts, and gains or losses are recorded in income.
Long-lived assets are reviewed periodically for impairment whenever
events or changes in circumstances indicate the carrying amount may not
be recoverable. If the fair value is less than the carrying amount of
the asset, a loss is recognized in the accompanying consolidated
statement of operations for the difference. Fair value is generally
determined from estimated, discounted, future net cash flows.
CATALYST RECLAMATION AND TURNAROUND COSTS
Catalyst reclamation and turnaround costs are accrued as long-term
liabilities over the period between reclamations and turnarounds based
on estimates of the scope and the future costs for these activities.
INTANGIBLE ASSETS
Intangible assets consist of license fees. License fees are being
amortized on a straight-line basis over the 20 year life of the license
agreement. Intangible assets are reassessed periodically to determine
whether any potential impairment exists.
REVENUE RECOGNITION
Revenues from the sale of base oil and co-products produced are
recognized when title passes upon delivery, and are presented net of
partner rebates.
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development expenditures are recorded in operating
expenses and primarily represent pilot plant costs surrounding the
operating activities of the hydrocracker facility. For the years ended
December 31, 2000, 1999 and 1998, Excel expensed $171,003, $1,371,836
and $1,029,216, respectively, for research and development
expenditures.
INCOME TAXES
Excel is treated as a tax partnership under the provisions of
Subchapter K of the Internal Revenue Code. Accordingly, the
accompanying financial statements do not reflect a provision for income
taxes since Excel's results of operations and related credits and
deductions will be passed through to and taken into account by its
partners in computing their respective tax liabilities. No income taxes
have been recorded for Excel's wholly-owned subsidiary as it has had no
taxable income.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Accruals for environmental matters are recorded in operating expenses
when it is probable that a liability has been incurred and the amount
of the liability can be reasonably estimated.
CONCENTRATION OF RISK
All of Excel's trade receivables are from Conoco and Atlas Processing.
Although collection of these receivables could be influenced by
economic factors affecting the petroleum industry, the risk of
significant loss is considered remote.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), as amended
by Statement of Financial Accounting Standards No. 137 and 138 is
effective for fiscal years beginning after June 15, 2000.
SFAS 133 requires all derivatives be recognized in the balance sheet as
either assets or liabilities and measured at fair value. Derivatives
that are not hedges must be adjusted to fair value through current
earnings. If a derivative qualifies as a hedge, depending on the nature
of the hedge, changes in the fair value of the derivative, to the
extent effective, will either be offset against the change in fair
value of the hedged assets, liabilities, or from future commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in current earnings. The ineffective portion
of a derivative designated as a hedge is immediately recognized in
current earnings.
The Joint Venture does not utilize derivative financial instruments for
hedging or any other purposes. Additionally, the Joint Venture has
evaluated its contracts and agreements for embedded derivatives and
determined that no transition adjustment will be required in adopting
SFAS 133.
3. INVENTORIES
At December 31, 2000 and 1999, inventory consisted of the following:
2000 1999
VGO $ 8,137,148 $ 7,312,809
LVW Lube stock 2,558,824 1,325,773
Other 1,488,313 1,390,706
LIFO reserve (1,241,612) 1,376,006
------------ ------------
$ 10,942,673 $ 11,405,294
============ ============
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
During 2000, inventory quantities were reduced. This reduction resulted
in a liquidation of LIFO inventory quantities carried at lower costs
prevailing in prior years as compared with the cost of 2000 purchases,
the effect of which decreased cost of goods sold and increased net
income by $169,513.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2000 and 1999 is
summarized below:
2000 1999
Plant and equipment $ 416,025,560 $ 416,665,463
Buildings 6,951,849 6,673,213
Improvements 3,108,420 17,241,508
Office furniture and equipment 782,849 1,710,774
Construction in progress 14,055,129 2,462,020
------------- -------------
440,923,807 444,752,978
Less - accumulated depreciation 62,492,189 49,010,889
------------- -------------
$ 378,431,618 $ 395,742,089
============= =============
Depreciation expense was $15,466,066, $15,014,760 and $15,439,073 for
the years ended December 31, 2000, 1999 and 1998, respectively.
In conjunction with Excel's scheduled turnaround activities in 2000,
the Joint Venture reevaluated the economics associated with owning the
catalyst used in its manufacturing process and decided instead to lease
the replacement catalyst (Note 9). As a result, the catalyst that had
been purchased and capitalized in conjunction with the originally
planned construction was retired resulting in a charge of $14.6 million
to earnings. Additionally, an accrual for $12.2 million for the
reclamation of the original catalyst was reversed to earnings as a
result of the decision to lease. The net loss of $2.4 million is
presented on the accompanying consolidated statement of operations.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
5. INTANGIBLE ASSETS
Intangible assets at December 31, 2000 and 1999 are summarized below:
2000 1999
License fees $ 27,650,202 $ 27,650,202
Less - accumulated amortization 5,530,040 4,147,530
------------ ------------
$ 22,120,162 $ 23,502,672
============ ============
Amortization cost associated with license fees was $1,382,510, in 2000,
1999 and 1998.
6. INCOME TAXES
As of December 31, 2000 and 1999, the tax bases of the Joint Venture's
assets were greater (less) than the financial statement carrying values
as summarized below:
2000 1999
Inventory $ 965,667 $ 965,667
Property, plant and equipment, net (159,050,448) (86,445,915)
Intangible assets, net (2,167,952) 44,771
-------------- --------------
$ (160,252,733) $ (85,435,477)
============== ==============
7. DEBT
On November 5, 1996, Excel Funding issued $240 million of 7.125% senior
bonds. Interest payable on these bonds is due semiannually on May 1 and
November 1 each year. Semiannual principal payments are due beginning
in 2001 through 2011. The first principal payments of $1,828,800 are
due on May 1 and November 1, 2001 and are therefore classified as
current debt in the balance sheet.
On November 6, 1995, Excel Funding issued $250 million of 7.43% senior
bonds. Interest payable on these bonds is due semiannually on May 1 and
November 1 each year. The first principal payment of $19,375,000 is due
on May 1, 2011.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
Maturities of Excel's senior bonds are as follows:
YEAR ENDED
DECEMBER 31,
2001 $ 3,657,600
2002 13,348,800
2003 15,691,200
2004 20,073,600
2005 21,734,400
Thereafter 415,494,400
-------------
$ 490,000,000
=============
Recourse under the bonds is limited to the revenues and assets of
Excel. Certain restrictive covenants limit the ability of Excel to
incur additional debt, make distributions to the partners, make
investments or create liens. The most restrictive of these covenants is
the Joint Venture's requirement to maintain a debt service coverage
ratio in excess of 1.8 to 1 at anytime.
Excel has a variable rate $145 million line of credit with a syndicate
of banks which expires in May 2001. At December 31, 2000 and 1999, the
line of credit remained unused. This credit facility is intended for
support of commercial notes. Through the credit facility, the
commercial notes can be converted to term loans with the related bank
syndicate at the Joint Venture's discretion for a period not to exceed
one year. The weighted-average interest rate on the $77.1 million and
$84.5 million of commercial paper outstanding at December 31, 2000 and
1999, was 7.6% and 6.5%, respectively.
Interest costs incurred in 2000, 1999 and 1998, including amortization
of debt issuance costs, totaled $40,768,853, $38,888,051 and
$38,046,184, respectively. Interest costs incurred during the period
required to bring assets to the condition and location for their
intended use are capitalized as part of acquisition costs. In 2000,
1999 and 1998, there were no interest costs capitalized.
8. RELATED PARTY TRANSACTIONS
Conoco has been designated as the operator of the partnership and, in
that capacity, provides substantially all technical and administrative
assistance and services in connection with Excel's operations. Charges
for these services were approximately $10,140,000, $9,700,000 and
$9,400,000 during 2000, 1999 and 1998, respectively, and are included
in administrative expenses and operating costs. Included in such
charges are the costs of
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
the operators' salaries and wages, which include related benefits such
as pensions and other postretirement benefits, allocable to Excel.
Excel has no employees.
Excel and Conoco have joint ownership of certain processing units
constructed at or adjacent to Conoco's Lake Charles Refinery. Variable
costs associated with certain of these units are allocated on the basis
of usage. Fixed costs are allocated based on the ownership percentage
of the applicable units.
As operator, Conoco is responsible for processing and paying Excel's
invoices. Disbursements made by the partner on Excel's behalf are
reimbursed semimonthly by Excel. At December 31, 2000 Excel owed Conoco
a net amount of $1,611,897. At December 31, 1999 Conoco owed Excel
$1,056,692.
Excel has entered into a long-term sale and purchase agreement whereby
Conoco and Atlas Processing have agreed to purchase from Excel all base
oil production (within certain specifications) and at least the amount
taken by the other party, up to a maximum of 50% each of Excel's
expected output, at a market-based price (less an annual rebate which
is subordinate in right of payment to the senior debt of Excel). If
either Conoco or Atlas Processing fails to purchase its required amount
of Excel's output, that party is obligated to pay to Excel the amount
that Excel would have earned had the party made such purchases. Base
oil sales made to the partners, net of rebates, were $299,631,266,
$213,887,942 and $198,884,886 for 2000, 1999 and 1998, respectively.
Excel and Conoco have entered into a long-term sale and purchase
agreement which requires Conoco to purchase all co-products (within
certain specifications) produced by Excel, with the exception of
sulfur, at market-based prices as specified in the agreement.
Co-product sales made to Conoco were $137,923,820, $92,465,870 and
$70,779,082 during 2000, 1999 and 1998.
Excel and Conoco have entered into a long-term feedstock sale and
purchase agreement whereby Excel agrees to purchase from Conoco all of
the required volume of vacuum gas oil (VGO) and hydrogen needed by the
hydrocracker facility. These feedstocks must meet certain quality
specifications and are purchased at a market-based price as specified
in the agreement. Feedstocks purchased by Excel under the agreement
were $294,000,163, $196,122,727 and $143,959,735 during 2000, 1999 and
1998, respectively. At certain times, the Joint Venture may purchase
additional feedstock from third parties when Conoco's volumes do not
meet periodic requirements for the hydrocracker facility.
Excel and Conoco have entered into long-term processing agreements
which require Conoco to pay processing fees for the use of the vacuum
unit and hydrogen supply facilities. The fee
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
for the vacuum unit is equal to $1.50 for each barrel of VGO produced
from the unit, not to exceed $6,740,000 in any one year. Fees for the
hydrogen supply facilities are $23,000 per day for each day the
facilities are utilized, not to exceed $4,202,000 in any one year.
Processing fees received for these facilities were $10,440,453,
$9,675,680 and $10,019,790 during 2000, 1999 and 1998, respectively.
In accordance with a long-term agreement between Excel and Conoco,
Excel pays Conoco a fixed monthly fee of $73,875 for use of Conoco's
wastewater facility. This fee will continue through December 31, 2024
and amounted to $886,500, $886,500 and $826,400 in 2000, 1999 and 1998,
respectively. The fee is included in the accompanying consolidated
statement of operations.
9. OPERATING LEASES
In February 2000, Excel entered into an operating lease agreement with
ExxonMobil Corporation (ExxonMobil) to lease a performance catalyst.
The operating lease requires a minimum two year commitment with annual
options for renewal thereafter. The Joint Venture expects to extend the
lease to four years to coincide with expected turnaround activities.
The catalyst must be returned to ExxonMobil at the end of the lease
term.
Excel leases the project site land from Conoco. The lease expires on
December 31, 2024; at which time, the lease will automatically be
extended for successive renewal terms of five years each unless either
the lessee or lessor elects to terminate the lease.
The following details the future lease payments required of Excel for
the five succeeding years and thereafter:
2001 $ 6,160,899
2002 7,387,332
2003 5,915,616
2004 5,057,115
2005 3,094,818
Thereafter 47,150,400
------------
$ 74,766,180
============
Rental expense under operating leases was $2,890,400, $2,481,600 and
$2,481,600 for 2000, 1999 and 1998.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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10. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 2000 and 1999, Excel had outstanding long-term debt
with a carrying value of $490 million. Based on borrowing rates
available at the respective balance sheet dates, the fair value of this
debt was approximately $443 million and $450 million as of December 31,
2000 and 1999, respectively. The reported amounts of financial
instruments such as cash equivalents, accounts receivable and
short-term notes payable approximate fair value because of their short
maturities.
11. COMMITMENTS AND CONTINGENCIES
Excel does not maintain general liability (including sudden and
accidental pollution) insurance coverage. In the event of a major
disruption of Excel's operations, the Partners will evaluate at that
time whether to refurbish Excel's operations to normal levels.
On July 31, 1995, a Petition for Class Action was filed in the 14th
Judicial District Court, Parish of Calcasieu, State of Louisiana,
against Conoco and a contractor that excavated soil from the project
site, by persons upon whose property such soil was placed, alleging
that the soil contained harmful and dangerous materials, including
asbestos and/or lead. The plaintiffs seek unspecified damages,
including punitive or exemplary, compensatory and clean-up damages and
attorneys' fees. Conoco intends to vigorously defend the litigation.
Conoco is voluntarily removing and replacing contaminated soils from
affected properties. Based on the agreements that Excel has with
Conoco, management of Excel determined that Excel was potentially
obligated to Conoco for a portion of the amounts paid by Conoco in
connection with this litigation and related remediation. As such, Excel
agreed to reimburse Conoco for a portion of the costs. Excel paid
$73,920, $70,456 and $136,015 in 2000, 1999 and 1998, respectively.
Excel does not believe that the litigation or future remediation
expenses will have a material adverse effect on Excel's financial
condition or results of operations.
12. GUARANTEES
Conoco and Atlas Processing have entered into a Partner Loan Agreement
with Excel and the First National Bank of Chicago, as agent on behalf
of holders of certain debt of Excel, pursuant to which Conoco and Atlas
Processing agreed to provide liquidity support to Excel up to an
aggregate amount of $60 million outstanding at any time during the
existence of a liquidity cash flow deficit.
Pennzoil has guaranteed all of Atlas Processing's obligations and E. I.
duPont de Nemours and Company (DuPont) has guaranteed all of Conoco's
obligations under all Excel offtake and operating agreements as
described in Note 8.
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EXCEL PARALUBES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
In August 1999, DuPont completed the final step in its planned
divestiture of its ownership interest in Conoco. As a result of
DuPont's previous ownership interest in Conoco, the DuPont guarantee of
Conoco's obligations to Excel may be terminated if (i) the ratings of
the Excel senior bonds, after giving effect to the guaranteed
termination, are affirmed to be at least the lower of (a) A3 and A- or
(b) the ratings in effect just prior to the termination of the
guarantee; (ii) all of Excel's senior bonds are paid in full or (iii)
66-2/3% of the senior debt holders agree to a change in the terms of
the guarantee. As of December 31, 2000, the DuPont guarantee of
Conoco's obligations to Excel as described in Note 8 remained in place.
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