Ultramar Diamond Shamrock Corp. Reports Record Third Quarter Profits
26 October 2000
Ultramar Diamond Shamrock Corp. Reports Record Third Quarter Profits
SAN ANTONIO--Oct. 26, 2000--Ultramar Diamond Shamrock Corp. today reported third quarter 2000 net income of $127.6 million or $1.47 per basic share.For the same period last year the company reported net income of $84.2 million or $0.97 per basic share. This is the third consecutive quarter that Ultramar Diamond Shamrock has posted record profits.
This year's third quarter results include pre-tax expense accruals of $7.2 million to increase reserves for uncollectible receivables and $1.7 million in losses from various asset disposals. Before items, net income was $132.9 or $1.53 per basic share. Included in the 1999 third quarter results were pre-tax gains from the sale of assets of $1.2 million. Before those gains, net income from operations was $83.4 million or $0.96 per share.
Operating earnings before interest, taxes and depreciation (EBITDA) in the quarter totaled $308.5 million compared to $236.1 million in the third quarter a year ago.
For the first nine months, net income is a record $325.2 million or $3.75 per basic share compared to $148.6 million or $1.71 per basic share for the first nine months of 1999. Operating EBITDA is $819.2 million for the first nine months of this year compared to $552.7 million in 1999.
"Our quality leverage to industry margins, solid operations, continuing self-help and the addition of the Avon refinery allowed us to report record earnings for the third straight quarter," said Jean Gaulin, UDS Chairman and chief executive officer. "We are very pleased with the operations at the Avon refinery. Throughput rates are up, per barrel operating costs are lower than expected and the people at the plant are doing a tremendous job."
The company closed on the purchase of the Avon refinery on Aug. 31, 2000. For the first thirty days of operation, which are included in the third quarter results, the Avon refinery generated $41.0 million of EBITDA.
Ultramar Diamond Shamrock's composite of industry refining margins averaged $8.69 per barrel for the third quarter of 2000 compared to $4.53 per barrel for the same period last year. Without the addition of the Avon refinery, the composite refining margin would have been $7.31 per barrel in 2000.
Public Invited to Listen, Live, to Analyst Conference Call
Via the Internet
Beginning at 3:00 pm EDT on Thursday, Oct. 26, 2000, the company will broadcast, live, a conference call with analysts concerning this release. To listen to the call, go to the Financial Information section of the Web site and select "Live Webcast" link.
Ultramar Diamond Shamrock Corp. , with about $14.0 billion in annual revenues and more than 20,000 employees, is one of the largest independent refining and marketing companies in North America. The company operates seven refineries in the United States and Canada with a total throughput capacity of 850,000 barrels per day and has over 5,000 branded retail gasoline/convenience merchandise stores, the majority of which are branded Diamond Shamrock, Ultramar, Beacon or Total. The corporation also has growing petrochemicals and home heating oil businesses. Please visit our Web site at http://www.udscorp.com for more information including annual reports, press releases, SEC forms 10-K and 10-Q, and audio archives of recent conference calls.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in millions, except per share amounts)
Three Months Ended September 30,
2000 1999
------------------------ --------------------------
US Northeast US Northeast
System System Total System System Total
------ --------- ------- ------ -------- --------
SALES AND OTHER
REVENUES(a) $3,421.5 $1,095.2 $4,516.7 $3,054.2 $785.1 $3,839.3
OPERATING COSTS
AND EXPENSES
Cost of products
sold(a) 2,371.7 758.4 3,130.1 1,986.5 520.9 2,507.4
Operating
expenses(b) 251.4 23.1 274.5 229.7 20.4 250.1
Selling, general
and
administrative
expenses(c) 38.9 44.1 83.0 32.8 40.1 72.9
Taxes other than
income taxes(d) 507.4 216.7 724.1 585.5 193.1 778.6
Depreciation and
amortization 52.0 11.3 63.3 51.3 9.6 60.9
-------- -------- -------- -------- ------ --------
OPERATING INCOME $200.1 $41.6 241.7 $168.4 $1.0 169.4
======== ======== ======== ======== ====== ========
Interest
expense, net (29.3) (30.4)
Equity income from
joint ventures 3.5 5.8
Gain (loss) on
sale of assets (1.7) 1.2
----- ------
INCOME BEFORE
INCOME TAXES 214.2 146.0
Provision for
income taxes (84.0) (59.2)
Dividend on
preferred stock
of a subsidiary (2.6) (2.6)
----- ------
NET INCOME $127.6 $84.2
===== ======
Net income per share:
Basic $1.47 $0.97
Diluted $1.47 $0.97
Weighted average number of shares
(in thousands):
Basic 86,794 86,631
Diluted 87,003 86,807
(a) Total sales and other revenues for the third quarter of 2000
increased 18% over third quarter 1999 due primarily to the
increase in refined product prices at both the wholesale and
retail level. The refined product prices increased as a result of
crude oil costs increasing $11 per barrel from the third quarter
of 1999 to the third quarter of 2000.
(b) Operating expenses in the US System increased 9% due to the
acquisition of the Avon refinery on August 31, 2000, and higher
fuel gas and utility costs to run the refineries. Partially
offsetting the higher refining costs were lower retail operating
expenses as the Company sold 416 convenience stores in 1999 and
closed the Alma refinery in December 1999.
(c) Selling, general and administrative expenses in both the US and
Northeast Systems increased 14% primarily due to higher provisions
for uncollectible receivables.
(d) Taxes other than income taxes decreased in the US System as sales
volumes declined from 1999 levels (see note 2 above), while the
Northeast System experienced higher sales volumes, especially in
the retail business.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in millions, except per share amounts)
Nine Months Ended September 30,
2000 1999
------------------------ ---------------------------
US Northeast US Northeast
System System Total System System Total
------ --------- ------- ------ --------- --------
SALES AND OTHER
REVENUES(a) $9,033.8 $3,122.1 $12,155.9 $7,925.6 $2,014.0 $9,939.6
OPERATING COSTS
AND EXPENSES
Cost of
products
sold (a) 6,146.6 2,147.3 8,293.9 4,956.2 1,215.4 6,171.6
Operating
expenses(b) 676.6 69.4 746.0 688.5 62.8 751.3
Selling,
general and
administrative
expenses(c) 97.8 128.7 226.5 103.4 115.9 219.3
Taxes other than
income
taxes(d) 1,494.7 591.4 2,086.1 1,710.3 549.1 2,259.4
Depreciation and
amortization 152.2 33.6 185.8 148.7 28.7 177.4
-------- -------- --------- -------- --------- -------
OPERATING
INCOME $465.9 $151.7 617.6 $318.5 $42.1 360.6
======== ======== ======== =========
Interest expense,
net(e) (84.6) (100.6)
Equity income
from joint
ventures 15.8 14.7
Diamond 66 exit
costs(f) -- (11.0)
Loss on sale
of assets (1.8) (0.6)
--------- --------
INCOME BEFORE
INCOME TAXES 547.0 263.1
Provision for
income taxes (214.1) (106.8)
Dividend on
preferred stock
of a subsidiary (7.7) (7.7)
--------- --------
NET INCOME $325.2 $148.6
========= ========
Net income per share:
Basic $3.75 $1.71
Diluted $3.74 $1.71
Weighted average number of shares
(in thousands):
Basic 86,759 86,594
Diluted 86,922 86,711
(a) Total sales and other revenues for the nine months ended September
30, 2000, increased 22% over 1999's comparable period due
primarily to the increase in refined product prices resulting from
increasing crude oil costs in 2000. The cost of crude oil
increased from approximately $22 per barrel at September 30, 1999,
to above $33 per barrel at September 30, 2000.
(b) Operating expenses in the US System decreased 2% primarily due to
lower retail operating expenses as the Company sold 416
convenience stores in 1999 and closed the Alma refinery in
December 1999. Partially offsetting the lower retail operating
expenses were higher fuel gas and utility costs to run the
refineries and additional operating expenses incurred at the Avon
refinery, acquired on August 31, 2000.
(c) Selling, general and administrative expenses in the US System
decreased 5% primarily due to the recovery of environmental
insurance claims. In the Northeast System, selling expenses have
increased to support the higher level of retail sales.
(d) Taxes other than income taxes decreased in the US System as sales
volumes declined from 1999 levels (see note 2 above), while the
Northeast System experienced higher sales volumes, especially in
the retail business.
(e) Net interest expense decreased 16% in the first nine months of
2000 as compared to the same period in 1999 due to the 1999 debt
reductions. Partially offsetting the impact of the 1999 debt
reductions were $700 million of additional borrowings related to
the acquisition of the Avon refinery on August 31, 2000.
(f) In March 1999, the Company and Phillips Petroleum Company
terminated discussions relating to the formation of Diamond 66 and
expensed the related transaction costs.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
SCHEDULES OF OPERATING INCOME BY BUSINESS SEGMENT
(unaudited, in millions)
Three Months Ended September 30,
2000 1999
----------------------- ---------------------
US Northeast US Northeast
System System Total System System Total
------- ------ ----- ------ ------ -----
Operating Income
by Business Segment
Refining(a) $222.0 $40.6 $262.6 $174.5 $1.6 $176.1
Retail(b) 6.9 8.3 15.2 16.0 3.6 19.6
Petrochemical/NGL(c) 0.7 -- 0.7 0.2 -- 0.2
------ ------ ------ ------ ---- ------
Segment Operating Income
Before Admin Expenses $229.6 $48.9 278.5 $190.7 $5.2 195.9
====== ====== ====== ====
Administrative
Expenses(d) (36.8) (26.5)
---- ------
Consolidated
Operating Income $241.7 $169.4
====== ======
(a) Refining operations in the third quarter of 2000, for both the US
and Northeast Systems, continued to improve over 1999 levels due
to both improved refinery gross profit margins and the
acquisition, on August 31, 2000, of the Avon refinery located in
Northern California. The Avon refinery's gross profit margin was
$13.55 per barrel for September 2000 as wholesale gasoline prices
continued to rise along with crude oil costs throughout the month
and the quarter. The refinery gross profit margin at the Quebec
refinery improved to $4.13 per barrel in 2000 from $2.30 per
barrel in 1999 and the US System refineries gross profit margin
improved to $6.77 per barrel in 2000 from $5.29 per barrel in
1999. Excluding Avon's operations from 2000 and Alma's operations
from 1999, the US System refineries gross profit margin improved
to $6.18 per barrel in 2000 from $5.36 per barrel in 1999.
Partially offsetting the improved refining margins are increased
refinery operating costs, including fuel gas and utility costs,
which have increased along with the run up in crude oil and
natural gas prices. Refinery operating costs in the US System
refineries increased from $1.74 per barrel in 1999 to $2.32 per
barrel in 2000. In the Northeast System, refinery operating costs
per barrel decreased from $1.06 per barrel in 1999 to $0.93 per
barrel in 2000 due to increased throughput in 2000. In the third
quarter of 1999, the Quebec refinery's throughput decreased
slightly due to a two-week turnaround on the crude oil unit.
(b) Retail operations for the US System were negatively impacted by
the run up in wholesale gasoline prices during the third quarter
of 2000, resulting in lower fuel margins as compared to a year
ago. While retail pump prices held steady during the summer
driving season in most parts of the United States, wholesale
gasoline prices increased in tandem with crude oil costs. In the
US System the 5% decline in the fuel margin was partially offset
by a 15% increase in the fuel volume sold per store and an
increase in the merchandise margin to 26.9%. In the Northeast
System the fuel margin increased 7% and the fuel volume increased
5% resulting in significantly improved retail operating income.
(c) The Petrochemical operating income excludes $3.5 million of equity
income from joint ventures, which is included in other income. In
1999, these joint ventures contributed $5.8 million of equity
income.
(d) Administrative expenses increased $10.3 million in the third
quarter of 2000 versus 1999 primarily due to the accrual of
additional reserves for uncollectible receivables.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
SCHEDULES OF OPERATING INCOME BY BUSINESS SEGMENT
(unaudited, in millions)
Nine Months Ended September 30,
2000 1999
----------------------- ----------------------
US Northeast US Northeast
System System Total System System Total
Operating Income
by Business Segment
Refining(a) $513.2 $136.4 $649.6 $333.3 $15.4 $348.7
Retail(b) 22.7 36.1 58.8 49.0 44.2 93.2
Petrochemical/NGL(c) 2.2 -- 2.2 2.5 -- 2.5
----- ----- ------ ----- ----- -----
Segment Operating Income
Before Admin Expenses $538.1 $172.5 710.6 $384.8 $59.6 444.4
====== ====== ====== =====
Administrative
Expenses(d) (93.0) (83.8)
------ -----
Consolidated
Operating Income $617.6 $360.6
====== ======
(a) For the first nine months of 2000, the refining operations
continued to improve over 1999 levels due primarily to improve
refinery margins in the Northeast and the addition of the Avon
refinery on the West Coast. Excluding the Alma refinery results in
1999 and the Avon refinery results in 2000, the US System refinery
gross profit margin for the first nine months of 2000 increased
$1.69 per barrel to $6.04 per barrel and throughput increased 6%.
In the Northeast System, the refinery gross profit margin at the
Quebec refinery has increased $2.75 per barrel to $4.62 per barrel
and the refinery is running at full capacity, 160,000 barrels per
day, to meet consumer demand. Refinery operating costs in the US
System for the first nine months of 2000 increased to $2.00 per
barrel from $1.78 per barrel in 1999. In the Northeast System,
refinery operating costs per barrel decreased from $0.94 per
barrel in the first nine months of 1999 to $0.87 per barrel in the
comparable period in 2000 as a result of higher throughput levels
in 2000.
(b) The US Retail operations continue to be negatively impacted by an
11% decline in fuel margins as a result of wholesale gasoline
prices increasing faster than retail pump prices. Partially
offsetting the impact of the negative fuel margin was a 13%
increase in fuel volumes sold per store, a 6% increase in
merchandise sales per store and an increase in the merchandise
margin to 27.4% over the same period in 1999.
(c) The Petrochemical operating income excludes $15.8 million of
equity income from joint ventures, which is included in other
income. In the first half of 1999, these joint ventures
contributed $14.7 million of equity income.
(d) Administrative expenses increased 11% in 2000 versus 1999
primarily due to the amortization expense related to the Company's
newly implemented SAP information system and higher accruals for
uncollectible receivables.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
OPERATING DATA
(unaudited)
Third Third First First
Quarter Quarter Nine Months Nine Months
US SYSTEM: 2000 1999 2000 1999
---------- ---- ---- ---- ----
Mid-Continent Refineries(a)
------------------------
Throughput (bpd) 373,200 400,700 367,200 402,600
Refinery gross profit
margin ($/bbl) 5.74 4.86 6.36 3.72
Operating cost ($/bbl)(c) 2.27 1.74 2.02 1.79
West Coast Refineries(b)
---------------------
Throughput (bpd) 181,300 131,500 155,700 130,300
Refinery gross profit
margin ($/bbl) 8.90 6.60 6.02 5.98
Operating cost ($/bbl)(c) 2.41 1.73 1.94 1.74
Retail Marketing
----------------
Company operated retail
outlets (average): 1,507 1,907 1,537 1,935
Company operated:
Fuel volume (bpd) 165,344 180,404 160,366 177,415
Fuel volume per
store (gal/day) 4,606 4,009 4,388 3,891
Fuel margin
(cents/gallon) 9.6 10.1 9.9 11.1
Merchandise sales
($/day) 3,156,632 3,794,010 3,018,930 3,594,413
Merchandise sales
per store ($/day) 2,095 1,990 1,965 1,857
Merchandise margins
(% of sales) 26.9 25.1 27.4 26.1
Net operating cost
(cents/gallon)(d) 6.0 5.6 5.8 6.1
ROCE% (e,f) 17.7 9.1
NORTHEAST SYSTEM:
----------------
Quebec Refinery
---------------
Throughput (bpd) 158,300 128,600 160,800 146,600
Refinery gross profit
margin ($/bbl) 4.13 2.30 4.62 1.87
Operating cost ($/bbl) 0.93 1.06 0.87 0.94
Retail Marketing
----------------
Sales (bpd) 66,400 63,300 70,700 66,600
Average fuel margin
(cents/gallon) 22.4 20.9 22.8 23.9
ROCE% (e,f) 22.9 15.6
PETROCHEMICALS:
--------------
Polymer grade propylene
sales (mmlbs) 410.9 321.6 1,149.3 1,066.2
Polymer grade propylene
margin (cents/lb) 1.8 1.7 2.2 2.4
ROCE% (e,f) 8.4 8.4
OVERALL
-------
ROCE% (e,f) 15.1 7.9
(a) In December 1999, the Alma refinery was permanently shut down and
ceased operations. Excluding the Alma operations from the
Mid-continent refineries 1999 amounts, results in the following:
Third First
Quarter Nine Months
1999 1999
---- ----
Throughput (bpd) 353,200 352,000
Refinery gross profit
margin ($/bbl) 4.90 3.75
Operating cost ($/bbl) 1.68 1.71
(b) On August 31, 2000, the Company acquired the Avon refinery which
is included in the West Coast operations. For the month of
September 2000 Avon's operations included the following:
Throughput (bpd) 136,200
Refinery gross
profit margin ($/bbl) 13.55
Operating cost ($/bbl) 3.51
(c) Refinery operating cost per barrel increased in 2000 over 1999 due
primarily to higher fuel gas and utility costs.
(d) Net operating cost is defined as retail operating expenses, net of
merchandise contributions, per gallon of fuel sales.
(e) Last 12 months, excludes administrative expense except for overall
calculations.
(f) ROCE computations do not include the Diamond 66 exit costs
recorded in March 1999.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
ANALYSIS OF EARNINGS
(UNAUDITED IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended September 30
Refng. Mktng. PChem. Admin. Total
------ ------ ------ ------ -----
1999 Reported EBIT, net 176.1 19.6 6.0 (26.5) 175.2
Discontinued Operations (14.5) (3.1) (17.5)
1999 Reported EBIT from
Continuing Operations 161.6 16.5 6.0 (26.5) 157.7
2000 EBIT Improvements 27.0 3.1 (0.9) 29.2
Avon Refinery 38.2 38.2
2000 Sustainable EBIT 226.9 19.6 6.0 (27.4) 225.0
2000 Shift-in-Base
UDS Composite
Crack Spreads 134.7 134.7
Third Quarter 2000 $7.31/bbl
Third Quarter 1999 $4.53/bbl
------------------ ----
Change $2.78/bbl
Lag Effect (27.8) (27.8)
Third Quarter 2000 $1.16/bbl
Third Quarter 1999 $3.01/bbl
------------------ ----
Change ($1.85)/bbl
Retail Fuel Margins 1.7 1.7
Petrochemical Values (1.8) (1.8)
Total 2000
Shift-in-Base 106.9 1.7 (1.8) 0.0 106.8
2000 EBIT before
Non-Recurring Items 333.8 21.3 4.2 (27.4) 331.8
Other Gains/(Losses)
Wholesale Margin
Weakness (28.6) (28.6)
Asphalt\Black Oil
Margin Weakness (9.5) (9.5)
Increased Fuel
Gas Costs (14.8) (14.8)
Increased International
Freight (7.7) (7.7)
Reserve for
Uncollectible
Receivables (2.0) (5.2) (7.2)
Other (10.7) (4.1) (4.2) (19.0)
2000 Reported EBIT, net 262.6 15.2 4.2(a) (36.8) 245.2(a)
Interest Expense (29.3)
Net Loss on Asset Sales (1.7)
Income Taxes (84.0)
After-Tax TOPrS Dividend (2.6)
-----
Net Income 127.6
Shares Outstanding 86.8
2000 Reported Earnings
per Share $1.47
(a) Including Diamond-Koch equity income of $3.5 million.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
ANALYSIS OF EARNINGS
(UNAUDITED IN MILLIONS, EXCEPT PER SHARE DATA)
Nine Months Ended September 30
Refng. Mktng. PChem. Admin. Total
------ ------ ------ ------ -----
1999 Reported EBIT, net 348.7 93.2 17.2 (83.8) 375.3
Discontinued Operations (25.8) (10.8) (36.6)
1999 Reported EBIT from
Continuing Operations 322.9 82.4 17.2 (83.8) 338.7
Non - Recurring (Gains)
/ Losses in 1999 Base
Insurance Recoveries
/ Reserve Reductions (6.3) (5.0) (11.3)
1999 Sustainable EBIT 316.6 77.4 17.2 (83.8) 327.4
2000 EBIT Improvements 59.1 15.9 (1.3) 73.6
Avon Refinery 38.2 38.2
2000 Sustainable EBIT 413.9 93.3 17.2 (85.1) 439.3
2000 Shift-in-Base
UDS Composite
Crack Spreads(a) 416.4 416.4
YTD September 2000 $6.86/bbl
YTD September 1999 $3.82/bbl
------------------ ----
Change $3.04/bbl
Lag Effect (25.9) (25.9)
YTD September 2000 $1.27/bbl
YTD September 1999 $1.93/bbl
------------------ ----
Change ($0.66)/bbl
Retail Fuel Margins (25.4) (25.4)
Petrochemical Values 0.8 0.8
Total 2000 Shift-in-Base 390.5 (25.4) 0.8 0.0 365.9
2000 EBIT before
Non-Recurring Items 804.4 67.8 18.0 (85.1) 805.2
Other Gains/(Losses)
Wholesale Margin Weakness (80.8) (80.8)
Asphalt\Black Oil
Margin Weakness (27.7) (27.7)
Increased Fuel Gas Costs (25.8) (25.8)
Increased International
Freight (9.5) (9.5)
Insurance Recoveries,
Net of Expense Accruals (2.0) (0.5) (2.5)
Other (11.1) (7.0) (7.4) (25.5)
2000 Reported EBIT, net 649.6 58.8 18.0(a) (93.0) 633.4(b)
Interest Expense (84.6)
Net Loss on Asset Sales (1.8)
Income Taxes (214.1)
After-Tax TOPrS Dividend (7.7)
-----
Net Income 325.2
Shares Outstanding 86.8
2000 Reported
Earnings per Share $3.75
(a) Adjusted for volumes not sold directly into the Group 3 market.
(b) Including Diamond-Koch equity income of $15.8 million.