-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kzpSpRiV8ACvaYbUhrCtSTDH/Psqr7WFHKUYZYe7KFkil+7ned+81gDvsqXUtunZ NJ1fxW1UhM4tX/iQbPMN1g== 0000810316-95-000016.txt : 19950517 0000810316-95-000016.hdr.sgml : 19950516 ACCESSION NUMBER: 0000810316-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAMOND SHAMROCK INC CENTRAL INDEX KEY: 0000810316 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 742456753 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09409 FILM NUMBER: 95537448 BUSINESS ADDRESS: STREET 1: P O BOX 696000 CITY: SAN ANTONIO STATE: TX ZIP: 78230 BUSINESS PHONE: 2106416800 MAIL ADDRESS: STREET 1: P O BOX 696000 CITY: SAN ANTONIO STATE: TX ZIP: 78230 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND SHAMROCK R&M INC DATE OF NAME CHANGE: 19900207 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended March 31, 1995 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: 1-9409 DIAMOND SHAMROCK, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2456753 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9830 Colonnade Boulevard, San Antonio, Texas 78230 (Address of principal executive offices) (Zip Code) 210-641-6800 (Registrant's telephone number, including area code) _____________________________________________________________________ (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. (X)YES ( )NO APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ( )YES ( )NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of Common Stock outstanding at April 30, 1995: 29,020,412 PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements DIAMOND SHAMROCK, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (dollars in millions, except per share data) Three Months Ended March 31, 1995 1994 REVENUES Sales and operating revenues $ 676.7 $ 583.8 Other revenues, net 4.2 4.5 680.9 588.3 COSTS AND EXPENSES Cost of products sold and operating expenses 613.1 514.7 Depreciation 18.7 17.0 Selling and administrative 18.3 15.9 Taxes other than income taxes 10.3 9.5 Interest 11.4 10.5 671.8 567.6 Income Before Tax Provision 9.1 20.7 Provision for Income Taxes 3.7 8.5 Net Income 5.4 12.2 Dividend Requirement on Preferred Stock 1.1 1.1 Earnings Applicable to Common Shares $ 4.3 $ 11.1 Primary Earnings Per Share $ 0.15 $ 0.38 Fully Diluted Earnings Per Share $ 0.15 $ 0.38 Cash Dividends Per Share Common $ 0.14 $ 0.13 Preferred $ 0.625 $ 0.625 Weighted Average Common Shares Outstanding (thousands of shares) Primary 29,024 29,142 Fully Diluted 32,332 32,399 See accompanying Notes to Consolidated Financial Statements. DIAMOND SHAMROCK, INC. CONSOLIDATED BALANCE SHEET (dollars in millions, except per share data) March 31, December 31, 1995 1994 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 16.5 $ 27.4 Receivables, less doubtful receivables of $6.6; $5.8 in 1994 205.1 211.6 Inventories Finished products 104.8 109.6 Raw materials 64.9 148.3 Supplies 33.8 33.1 203.5 291.0 Prepaid expenses 7.0 10.4 Total Current Assets 432.1 540.4 Properties and Equipment, less accumulated depreciation of $628.0; $609.3 in 1994 1,070.9 1,026.1 Deferred Charges and Other Assets 55.7 54.3 $1,558.7 $1,620.8 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Long-term debt payable within one year $ 3.9 $ 3.9 Accounts payable 117.2 199.3 Accrued taxes 61.9 65.3 Accrued royalties 6.0 6.7 Current portion of Long-term Liability 8.0 8.0 Other accrued liabilities 76.9 90.9 Total Current Liabilities 273.9 374.1 Long-term Debt 532.1 509.2 Deferred Income Taxes 84.7 81.5 Other Liabilities and Deferred Credits 77.0 67.0 Stockholders' Equity Preferred Stock, $.01 par value Authorized shares - 25,000,000 Issued and Outstanding shares - 1,725,000; 1,725,000 in 1994 0.0 0.0 Common Stock, $.01 par value Authorized shares - 75,000,000 Issued shares - 29,016,101; 29,014,711 in 1994 Outstanding shares - 29,016,101; 28,896,917 in 1994 0.3 0.3 Paid-in Capital 447.3 447.3 ESOP Stock and Stock Held in Treasury (42.2) (45.4) Retained Earnings 185.6 186.8 Total Stockholders' Equity 591.0 589.0 $1,558.7 $1,620.8 See accompanying Notes to Consolidated Financial Statements. DIAMOND SHAMROCK, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (dollars in millions) Three Months Ended March 31, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5.4 $ 12.2 Adjustments to arrive at net cash provided by operating activities: Depreciation 18.7 17.0 Deferred income taxes 3.2 8.5 Loss on sale of properties and equipment 0.0 0.4 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 6.5 1.2 Decrease (increase) in inventories 87.5 6.2 Decrease (increase) in prepaid expenses 3.4 2.6 Increase (decrease) in accounts payable (82.1) 6.6 Increase (decrease) in taxes payable (3.4) (0.2) Increase (decrease) in accrued liabilities (14.7) 17.4 Other, net 1.5 0.7 NET CASH PROVIDED BY OPERATING ACTIVITIES 26.0 72.6 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of properties and equipment 0.0 0.7 Purchase of properties and equipment (51.5) (33.2) Expenditures for investments (0.2) (1.6) NET CASH (USED IN) INVESTING ACTIVITIES (51.7) (34.1) CASH FLOWS FROM FINANCING ACTIVITIES: Increases in long-term debt 138.9 50.2 Repayments of long-term debt (116.0) (76.2) Payments of long-term liability (3.0) (2.6) Issuance of Common Stock - 0.9 Sale of Common Stock held in treasury - 0.1 Dividends paid (5.1) (4.8) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 14.8 (32.4) Net increase (decrease) in cash and cash equivalents (10.9) 6.1 Cash and cash equivalents at beginning of period 27.4 12.8 Cash and cash equivalents at end of period $ 16.5 $ 18.9 In January 1995, the Company acquired a portion of a crude oil import and storage terminal in a non-cash transaction under an installment purchase arrangement. The purchase price was $12.0 million. See accompanying Notes to Consolidated Financial Statements. DIAMOND SHAMROCK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Financial Statements The consolidated financial statements as of March 31, 1995 and for the three months ended March 31, 1995 and 1994 are unaudited, but in the opinion of Diamond Shamrock, Inc. (the "Company"), all adjustments (consisting only of normal accruals) necessary for a fair presentation of consolidated results of operations, consolidated financial position, and consolidated cash flows at the date and for the periods indicated have been included. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 1994 Annual Report to Stockholders and incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K"). With respect to the unaudited consolidated financial information of the Company as of March 31, 1995, and for the three months ended March 31, 1995 and 1994, Price Waterhouse LLP has made a review (based on procedures adopted by the American Institute of Certified Public Accountants) and not an audit, as set forth in their separate report appearing herein. Such a report is not a "report" or "part of a Registration Statement" within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11 of such Act do not apply. 2. Inventories Inventories are valued at the lower of cost or market with cost determined primarily under the Last-in, First-out (LIFO) method. At March 31, 1995, inventories of crude oil and refined products of the Refining and Wholesale segment were valued at market values (lower than LIFO cost). Motor fuel products of the Retail segment, and propylene products in the Allied Businesses segment were recorded at their LIFO costs. Costs of all other inventories are determined on an average cost method. 3. Long-term Debt As of March 31, 1995, the Company had outstanding $150.0 million of debt designated as the 10.75% Senior Notes, $30.0 million of which was payable within one year. On May 1, 1995, the Company refinanced the $30.0 million repayment using credit facilities which are classified as long-term debt. Therefore, the current portion of the 10.75% Senior Notes outstanding as of March 31, 1995 was classified as long-term debt. 4. Commitments and Contingencies In connection with the 1987 Spin-off from Maxus Energy Corporation ("Maxus"), the Company agreed to assume a share of certain liabilities of Maxus' businesses discontinued or disposed of prior to the Spin-off date (see Note 16 of the 1994 Form 10-K). The Company's total liability for such shared costs is limited to $85.0 million. The Company has reimbursed Maxus for a total of $66.6 million as of March 31, 1995, including $3.0 million paid during the three months ended March 31, 1995. See Note 3 of the 1994 Form 10-K for a discussion of the change in the method of accounting for the liability. REVIEW BY INDEPENDENT ACCOUNTANTS With respect to the unaudited consolidated financial information of the Company as of March 31, 1995 and the three months ended March 31, 1995 and 1994, Price Waterhouse LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated May 11, 1995, appearing below, states that they did not audit and they do not express an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited consolidated financial information because that report is not a "report" or "part of a Registration Statement" prepared or certified by Price Waterhouse LLP within the meaning of Sections 7 and 11 of the Act. REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Diamond Shamrock, Inc. We have reviewed the consolidated interim financial information included in the Report on Form 10-Q of Diamond Shamrock, Inc. (the "Company") and its subsidiaries as of March 31, 1995 and for the quarter then ended. This financial information is the responsibility of the management of Diamond Shamrock, Inc. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial information for it to be in conformity with generally accepted accounting principles. We previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of the Company as of December 31, 1994, and the related consolidated statements of operations and of cash flows for the year then ended (not presented herein), and in our report dated February 24, 1995, which included an explanatory paragraph regarding the Company's changes in accounting for its long-term shared cost liability, income taxes and post-retirement benefits other than pensions, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /S/ PRICE WATERHOUSE LLP Price Waterhouse LLP San Antonio, Texas May 11, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following are the Company's sales and operating revenues and operating profit for the three months ended March 31, 1995 and 1994. Business segment operating profit is sales and operating revenues less applicable segment operating expense. In determining the operating profit of the three business segments, neither interest expense nor administrative expenses are included. Three Months Ended March 31, 1995 1994 Sales and Operating Revenues: Refining and Wholesale $ 324.8 $ 304.0 Retail 247.4 212.4 Allied Businesses 104.5 67.4 Total Sales and Operating Revenues $ 676.7 $ 583.8 Operating Profit: Refining and Wholesale $ 8.4 $ 32.4 Retail 15.1 8.2 Allied Businesses 13.1 4.4 Total Operating Profit $ 36.6 $ 45.0 Consolidated Results First Quarter 1995 vs 1994 Sales and operating revenues of $676.7 million for the first quarter of 1995 were 15.9% higher than in the same period of 1994, due to a 55.0% increase in Allied Businesses sales, reflecting a $23.5 million increase in polymer grade propylene sales prices and volumes. Also contributing to the increase in sales and operating revenues was a 13.1% and a 6.7% increase in retail gasoline sales prices and volumes, respectively, and a 9.5% increase in refined products sales prices compared to the first quarter of 1994. During the first quarter of 1995, the Company had net income of $5.4 million compared to net income of $12.2 million in the 1994 first quarter. The Company's first quarter results were negatively impacted by lower refinery margins. Partially offsetting the decrease in refining margins during the first quarter of 1995 was an improvement in the demand for polymer grade propylene in the Company's Allied Businesses segment and an 18.9% increase in retail fuel margins compared to the first quarter of 1994. Inventories are valued at the lower of cost or market with cost determined primarily under the Last-in, First-out (LIFO) method. At March 31, 1995, inventories of crude oil and refined products of the Refining and Wholesale segment were valued at market values (lower than LIFO cost). Motor fuel products of the Retail segment, and propylene products in the Allied Businesses segment were recorded at their LIFO costs. All other inventories are determined on an average cost method. Estimating the financial impact of changes in the valuation of refinery inventories due to such inventories being valued at market is difficult because of the number of variables that must be considered. For operating purposes, management attempts to estimate the impact of changes in valuation of refinery inventories on net income. The estimated after tax change in inventory values was a positive $1.8 million and a negative $5.3 million in the first quarters of 1995 and 1994, respectively. Segment Results First Quarter 1995 vs First Quarter 1994 During the first quarter of 1995 the Refining and Wholesale segment had sales and operating revenues of $324.8 million compared to $304.0 million during the first quarter of 1994. The increase in sales and operating revenues was primarily due to a 9.5% increase in refined product sales prices. Operating profit in the first quarter of 1995 decreased $24.0 million from the first quarter of 1994, primarily due to a 43.5% decrease in refinery margins from the same period a year ago. Industry refining margins during the first quarter were the weakest in recent years, reflecting a surplus of heating oil because of the extremely mild winter and confusion in the new reformulated gasoline ("RFG") market as several areas opted out, or attempted to opt out, of the RFG requirements. The Retail segment in the first quarter of 1995 reflected a 16.5% increase in sales and operating revenues. Such increase was primarily due to a 13.1% and a 6.7% increase in retail gasoline prices and volumes, respectively. Operating profit in the first quarter of 1995 was $15.1 million compared to $8.2 million in the first quarter of 1994. The increase was primarily due to an 18.9% and a 6.3% increase in retail gasoline and merchandise margins, respectively. During the first quarter of 1995, the Allied Businesses segment reflected an increase in sales and operating revenues of 55.0%, primarily due to a $23.5 million increase in sales volumes and prices in the Company's propane/propylene business, reflecting continued strong demand for polymer grade propylene. Also contributing to the increase in sales and operating revenues was a 28.7% increase from the Company's natural gas liquids marketing business, reflecting a 16.6% and a 10.4% increase in natural gas liquids sales volumes and prices, respectively. Operating profits were $13.1 million for the first quarter of 1995 compared to $4.4 million in the first quarter of 1994. Operating profits increased primarily due to a $6.1 million and a $3.3 million increase in operating profit from the Company's propane/propylene and Nitromite fertilizer businesses, respectively. The outlook for the refining and marketing industry for the rest of 1995 is positive. Refining margins are already showing significant improvement as gasoline demand remains strong. Based on the expectation of continued strong demand for gasoline, spurred by a growing economy and industry-wide low gasoline inventory levels, refining margins are expected to improve even further as the summer driving season approaches. Additionally, the Company's recently completed Corpus Christi crude oil terminal and related pipeline to Three Rivers, as well as product pipelines and refinery projects planned for completion in 1995, will continue to improve the Company's refining margins relative to the industry. Liquidity and Capital Resources Cash Flow and Working Capital For the three months ended March 31, 1995, cash provided by operations was $26.0 million, compared with $72.6 million in the same period of 1994. Working capital at March 31, 1995 was down $8.1 million from December 31, 1994, and consisted of current assets of $432.1 million and current liabilities of $273.9 million, or a current ratio of 1.6. At December 31, 1994, current assets were $540.4 million and current liabilities were $374.1 million, or a current ratio of 1.4. The decrease in working capital in the first quarter of 1995 was primarily due to a 30.1% decrease in inventories. Crude oil inventories were higher than normal at December 31, 1994, primarily due to the Company's decision to purchase additional crude oil in December 1994 in order to overcome potential supply disruptions caused by the implementation of the Oil Pollution Act of 1990. The 41.2% decrease in accounts payable reflected the payment in the first quarter of 1995 for the additional crude oil purchased in December 1994 and the return to lower inventory levels. Capital Expenditures In recent years capital expenditures have represented a variety of projects designed to expand and maintain up-to-date refinery facilities, improve terminal and distribution systems, modernize and expand retail outlets, comply with environmental regulatory requirements, and pursue new ventures in related businesses. The Company's capital expenditures budget for 1995 has been increased to approximately $250.0 million from an earlier estimate of $225.0 million. Such increases are primarily attributable to the recently announced plans to construct a second 730 million pound per year propylene splitter at Mont Belvieu, scheduled to begin the second quarter of 1995 with completion slated for the fourth quarter of 1996, and a terminal at El Paso and pipeline from McKee. Also included in the Company's 1995 capital expense budget are amounts associated with the Company's decision to own outright rather than lease more of the retail outlets to be built or acquired in 1995. The Company announced in February 1995 plans to increase the capacity and efficiency of its Three Rivers, Texas refinery with an expansion of the crude unit and construction of a DeMetalized Oil (DMO) hydrotreater, a hydrogen plant, and a sulfur recovery plant. The expansion will increase the capacity of the refinery from 72,000 barrels per day to 85,000 barrels per day and allow heavy oils to be upgraded to more profitable products. The project, which is scheduled to begin in the spring of 1995 with completion slated for the second quarter of 1996, will increase the production of gasoline and diesel at the refinery by about 10 percent. The Company also announced in February that it is expanding operations at its Mont Belvieu hydrocarbon facility. As part of the expansion project, the Company recently completed drilling a brine production well at the facility's East Terminal and purchased four underground storage wells at the facility's West Terminal from Enron. In addition, the Company is installing pumping and metering equipment at both terminals. The Company's capital and investment expenditures during 1994 were $162.1 million. The Company's capital expenditures were $63.5 million during the first three months of 1995, including a non-cash investment of $12.0 million for the crude oil terminal acquired under an installment purchase. The Company anticipates that its capital expenditures, as well as expenditures for debt service, lease obligations, working capital, and dividend requirements might at times exceed cash generated by operations. To the extent that the Company's requirements exceed cash generated by operations, the Company anticipates that it may access its commercial paper and bank money market facilities or issue medium- to long-term notes. The Company may also consider other alternatives depending upon various factors, including changes in its capital requirements, results of operations, and developments in the capital markets. The Company continued to expand its retail marketing business in the first three months of 1995 with the acquisition of 21 outlets in New Mexico. In addition, the Company opened 9 new outlets through March 31, 1995. The newly opened outlets are leased by the Company under a pre-existing long-term lease arrangement. The Company has leased approximately $163.9 million in retail outlets and related equipment under these arrangements. At March 31, 1995, approximately $26.1 million of the $190.0 million commitment remained available to construct and/or acquire retail outlets. The Company presently anticipates leasing approximately 8 to 10 additional outlets during 1995. On February 13, 1995, the Company issued $75.0 million in non-callable debentures due June 15, 2015. The proceeds from the issuance of the debentures were and will continue to be used for general corporate purposes, including payment of a scheduled $30.0 million principal installment on the Company's 10.75% Senior Notes, and to fund anticipated capital expenditures in 1995. Regulatory Matters It is expected that rules and regulations implementing the federal, state, and local laws relating to health and environmental quality will continue to affect the operations of the Company. The Company cannot predict what health or environmental legislation, rules or regulations will be enacted in the future or how existing or future laws, rules or regulations will be administered or enforced with respect to products or activities of the Company. However, compliance with more stringent laws or regulations, as well as more expansive interpretation of existing laws and their more vigorous enforcement by the regulatory agencies could have an adverse effect on the operations of the Company and could require substantial additional expenditures by the Company, such as for the installation and operation of pollution control systems and equipment. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Second Amendment to Ground Lease Agreement between Brazos River Leasing L.P. and Diamond Shamrock Refining and Marketing Company dated as of June 1, 1994. 10.2 Second Amendment to Facilities Lease Agreement between Brazos River Leasing L.P. and Diamond Shamrock Refining and Marketing Company dated as of June 1, 1994. 10.3 Fourth Amendment to Ground Lease Agreement between Brazos River Leasing L.P. and Diamond Shamrock Refining and Marketing Company dated as of September 16, 1994. 10.4 Fourth Amendment to Facilities Lease Agreement between Brazos River Leasing L.P. and Diamond Shamrock Refining and Marketing Company dated as of September 16, 1994. 15.1 Independent Accountants' Awareness Letter 27.1 Financial Data Schedule (b) Reports on Form 8-K Reports on Form 8-K were filed by the Company in the first quarter of 1995, on January 25, 1995 and on February 6, 1995. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIAMOND SHAMROCK, INC. By /S/GARY E. JOHNSON Gary E. Johnson Vice President and Controller (Principal Accounting Officer) May 11, 1995 EX-10.1 2 Exhibit 10.1 SECOND AMENDMENT TO GROUND LEASE AGREEMENT between BRAZOS RIVER LEASING L.P. and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY Dated as of June 1, 1994 This Second Amendment to Ground Lease Agreement has been manually executed in 12 counterparts, numbered consecutively from 1 through 12, of which this is No. ____. To the extent, if any, that this Second Amendment to Ground Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any jurisdiction), no security interest in this Second Amendment to Ground Lease Agreement may be created or perfected through the transfer or possession of any counterpart other than the original counterpart which shall be the counterpart identified as counterpart No. 1. SECOND AMENDMENT TO GROUND LEASE AGREEMENT This Second Amendment to Ground Lease Agreement is made and entered into as of June 1, 1994, by and between BRAZOS RIVER LEASING L.P. ("Brazos") and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY ("Diamond Shamrock R & M"). W I T N E S S E T H: WHEREAS, Brazos and Diamond Shamrock R & M have heretofore entered into a Ground Lease Agreement, dated as of October 30, 1992 (the "Ground Lease Agreement"); and WHEREAS, Brazos and Diamond Shamrock R & M desire to amend the Ground Lease Agreement to set forth their mutual agreement; and WHEREAS, Brazos and Diamond Shamrock R & M agree that the provisions of this amendment shall apply, to the extent provided by law, to each Property leased by Brazos under the Ground Lease Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Brazos and Diamond Shamrock R & M agree that the Ground Lease Agreement is hereby amended as follows: 1. The definition of "Basic Rent" in Section 1.01 of the Ground Lease Agreement is hereby amended to delete from paragraph (iii) thereof the reference to "0.95%" and insert in lieu thereof "0.20%". 2. Brazos and Diamond Shamrock R & M agree that this Second Amendment to Ground Lease Agreement shall not be effective until the approvals required by Section 9.01 of the Credit Agreement have been obtained as evidenced by the execution of the Fourth Amendment and Modification Agreement by the necessary parties under the Credit Agreement. 3. Defined terms used in this Second Amendment to Ground Lease Agreement and not otherwise defined herein have the meanings ascribed to those terms in the Ground Lease Agreement. IN WITNESS WHEREOF, Brazos and Diamond Shamrock R & M have caused this Second Amendment to Ground Lease Agreement to be executed and delivered by their duly authorized officers as of the day and year first above written. BRAZOS RIVER LEASING L.P. By: Headwater Investments L.P., its General Partner By: Headwater Holdings, Inc., its General Partner By: /S/ GREGORY C. GREENE Gregory C. Greene, President DIAMOND SHAMROCK REFINING AND MARKETING COMPANY By: /S/ R.C. BECKER Name: R.C. Becker Title: Vice President and Treasurer W2822.TW EX-10.2 3 Exhibit 10.2 SECOND AMENDMENT TO FACILITIES LEASE AGREEMENT between BRAZOS RIVER LEASING L.P. and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY Dated as of June 1, 1994 This Second Amendment to Facilities Lease Agreement has been manually executed in 12 counterparts, numbered consecutively from 1 through 12, of which this is No. ____. To the extent, if any, that this Second Amendment to Facilities Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any jurisdiction), no security interest in this Second Amendment to Facilities Lease Agreement may be created or perfected through the transfer or possession of any counterpart other than the original counterpart which shall be the counterpart identified as counterpart No. 1. SECOND AMENDMENT TO FACILITIES LEASE AGREEMENT This Second Amendment to Facilities Lease Agreement is made and entered into as of June 1, 1994, by and between BRAZOS RIVER LEASING L.P. ("Brazos") and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY ("Diamond Shamrock R & M"). W I T N E S S E T H: WHEREAS, Brazos and Diamond Shamrock R & M have heretofore entered into a Facilities Lease Agreement, dated as of October 30, 1992, (the "Facilities Lease Agreement"); and WHEREAS, Brazos and Diamond Shamrock R & M desire to amend the Facilities Lease Agreement to set forth their mutual agreement; and WHEREAS, Brazos and Diamond Shamrock R & M agree that the provisions of this amendment shall apply, to the extent provided by law, to each Facility leased by Brazos under the Facilities Lease Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Brazos and Diamond Shamrock R & M agree that the Facilities Lease Agreement is hereby amended as follows: 1. The definition of "Basic Rent" in Section 1.01 of the Facilities Lease Agreement is hereby amended to delete from paragraph (iii) thereof the reference to "0.95%" and insert in lieu thereof "0.20%". 2. Brazos and Diamond Shamrock R & M agree that this Second Amendment to Facilities Lease Agreement shall not be effective until the approvals required by Section 9.01 of the Credit Agreement have been obtained as evidenced by the execution and delivery of the Fourth Amendment and Modification Agreement by the necessary parties under the Credit Agreement. 3. Defined terms used in this Second Amendment to Facilities Lease Agreement and not otherwise defined herein have the meanings ascribed to those terms in the Facilities Lease Agreement. IN WITNESS WHEREOF, Brazos and Diamond Shamrock R & M have caused this Second Amendment to Facilities Lease Agreement to be executed and delivered by their duly authorized officers as of the day and year first above written. BRAZOS RIVER LEASING L.P. By: Headwater Investments L.P., its General Partner By: Headwater Holdings, Inc., its General Partner By: /S/ GREGORY C. GREENE, Gregory C. Greene, President DIAMOND SHAMROCK REFINING AND MARKETING COMPANY By: /S/ R.C. BECKER Name: R.C. Becker Title: Vice President and Treasurer W2819.TW EX-10.3 4 Exhibit 10.3 FOURTH AMENDMENT TO GROUND LEASE AGREEMENT between BRAZOS RIVER LEASING L.P. and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY Dated as of September 16, 1994 This Fourth Amendment to Ground Lease Agreement has been manually executed in 8 counterparts, numbered consecutively from 1 through 8, of which this is No. ____. To the extent, if any, that this Fourth Amendment to Ground Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any jurisdiction), no security interest in this Fourth Amendment to Ground Lease Agreement may be created or perfected through the transfer or possession of any counterpart other than the original counterpart which shall be the counterpart identified as counterpart No. 1. FOURTH AMENDMENT TO GROUND LEASE AGREEMENT This Fourth Amendment to Ground Lease Agreement is made and entered into as of September 16, 1994, by and between BRAZOS RIVER LEASING L.P. ("Brazos") and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY ("Diamond Shamrock R & M"). W I T N E S S E T H: WHEREAS, Brazos and Diamond Shamrock R & M have heretofore entered into a Ground Lease Agreement, dated as of April 23, 1992 (the "Ground Lease Agreement"); and WHEREAS, Brazos and Diamond Shamrock R & M desire to amend the Ground Lease Agreement to set forth their mutual agreement; and WHEREAS, Brazos and Diamond Shamrock R & M agree that the provisions of this amendment shall apply, to the extent provided by law, to each Property leased by Brazos under the Ground Lease Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Brazos and Diamond Shamrock R & M agree that the Ground Lease Agreement is hereby amended as follows: 1. The definition of "Basic Rent" in Section 1.01 of the Ground Lease Agreement is hereby amended to delete from paragraph (iii) thereof the reference to "1.25%" and insert in lieu thereof ".50%, or, if all or a portion of the borrowings which initially funded the Acquisition Cost of such Property were advanced to Brazos at a time when the aggregate total of all other borrowings then outstanding under the Credit Agreement equaled or exceeded $45,000,000.00, .20%,". 2. Brazos and Diamond Shamrock R & M agree that this Fourth Amendment to Ground Lease Agreement shall not be effective until the approvals required by Section 9.01 of the Credit Agreement have been obtained as evidenced by the execution of Amendment No. 4 to the Credit Agreement by the necessary parties under the Credit Agreement. 3. Defined terms used in this Fourth Amendment to Ground Lease Agreement and not otherwise defined herein have the meanings ascribed to those terms in the Ground Lease Agreement. IN WITNESS WHEREOF, Brazos and Diamond Shamrock R & M have caused this Fourth Amendment to Ground Lease Agreement to be executed and delivered by their duly authorized officers as of the day and year first above written. BRAZOS RIVER LEASING L.P. By: Headwater Investments L.P., its General Partner By: Headwater Holdings, Inc., its General Partner By: /S/ GREGORY C. GREENE Gregory C. Greene, President DIAMOND SHAMROCK REFINING AND MARKETING COMPANY By: /S/ R.C. BECKER Name: R.C. Becker Title: Vice President and Treasurer W2817.TW EX-10.4 5 Exhibit 10.4 FOURTH AMENDMENT TO FACILITIES LEASE AGREEMENT between BRAZOS RIVER LEASING L.P. and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY Dated as of September 16, 1994 This Fourth Amendment to Facilities Lease Agreement has been manually executed in 8 counterparts, numbered consecutively from 1 through 8, of which this is No. ____. To the extent, if any, that this Fourth Amendment to Facilities Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any jurisdiction), no security interest in this Fourth Amendment to Facilities Lease Agreement may be created or perfected through the transfer or possession of any counterpart other than the original counterpart which shall be the counterpart identified as counterpart No. 1. FOURTH AMENDMENT TO FACILITIES LEASE AGREEMENT This Fourth Amendment to Facilities Lease Agreement is made and entered into as of September 16, 1994, by and between BRAZOS RIVER LEASING L.P. ("Brazos") and DIAMOND SHAMROCK REFINING AND MARKETING COMPANY ("Diamond Shamrock R & M"). W I T N E S S E T H: WHEREAS, Brazos and Diamond Shamrock R & M have heretofore entered into a Facilities Lease Agreement, dated as of April 23, 1992, the "Facilities Lease Agreement"); and WHEREAS, Brazos and Diamond Shamrock R & M desire to amend the Facilities Lease Agreement to set forth their mutual agreement; and WHEREAS, Brazos and Diamond Shamrock R & M agree that the provisions of this amendment shall apply, to the extent provided by law, to each Facility leased by Brazos under the Facilities Lease Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Brazos and Diamond Shamrock R & M agree that the Facilities Lease Agreement is hereby amended as follows: 1. The definition of "Basic Rent" in Section 1.01 of the Facilities Lease Agreement is hereby amended to delete from paragraph (iii) thereof the reference to "1.25%" and insert in lieu thereof ".50%, or, if all or a portion of the borrowings which initially funded the Acquisition Cost of such Property were advanced to Brazos at a time when the aggregate total of all other borrowings then outstanding under the Credit Agreement equaled or exceeded $45,000,000, .20%,". 2. Brazos and Diamond Shamrock R & M agree that this Fourth Amendment to Facilities Lease Agreement shall not be effective until the approvals required by Section 9.01 of the Credit Agreement have been obtained as evidenced by the execution of Amendment No. 3 to the Credit Agreement by the necessary parties under the Credit Agreement. 3. Defined terms used in this Fourth Amendment to Facilities Lease Agreement and not otherwise defined herein have the meanings ascribed to those terms in the Facilities Lease Agreement. IN WITNESS WHEREOF, Brazos and Diamond Shamrock R & M have caused this Fourth Amendment to Facilities Lease Agreement to be executed and delivered by their duly authorized officers as of the day and year first above written. BRAZOS RIVER LEASING L.P. By: Headwater Investments L.P., its General Partner By: Headwater Holdings, Inc., its General Partner By: /S/ GREGORY C. GREENE, Gregory C. Greene President DIAMOND SHAMROCK REFINING AND MARKETING COMPANY By: /S/ R.C. BECKER, Name: R.C. Becker Title: Vice President and Treasurer W2818.TW EX-15.1 6 EXHIBIT 15.1 INDEPENDENT ACCOUNTANTS' AWARENESS LETTER Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that Diamond Shamrock, Inc. has included our report dated May 11, 1995 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the Prospectuses constituting part of its Registration Statements on Form S-3 (Nos. 33-67166 and 33-67556) filed on August 9, 1993, and August 18, 1993, respectively, and on Form S-8 (Nos. 33-15268, 33-34306, 33-50573 and 33-59025) filed on June 22, 1987, April 13, 1990, October 6, 1993 and May 2, 1995, respectively. We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /S/ PRICE WATERHOUSE LLP Price Waterhouse LLP San Antonio, Texas May 11, 1995 EX-27 7
5 3-MOS DEC-31-1995 MAR-31-1995 16,500 0 211,700 6,600 203,500 432,100 1,698,900 628,000 1,558,700 273,900 0 300 0 0 590,700 1,558,700 676,700 676,700 613,100 613,100 43,100 0 11,400 9,100 3,700 5,400 0 0 0 5,400 0.15 0.15
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