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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
---
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
Commission Exact Name of Registrant as Specified in State of I.R.S. Employer
File Number its Charter, Principal Office Address and Incorporation Identification No.
Telephone Number
- ------------ ---------------------------------------------- ------------------ ---------------------
1-16827 Premcor Inc. Delaware 43-1851087
1700 East Putnam Avenue Suite 500
Old Greenwich, Connecticut 06870
(203) 698-7500
1-13514 Premcor USA Inc. Delaware 43-1495734
1700 East Putnam Avenue Suite 500
Old Greenwich, Connecticut 06870
(203) 698-7500
1-11392 The Premcor Refining Group Inc. Delaware 43-1491230
1700 East Putnam Avenue Suite 500
Old Greenwich, Connecticut 06870
(203) 698-7500
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.
Premcor Inc. Yes (X) No ( )
Premcor USA Inc. Yes (X) No ( )
The Premcor Refining Group Inc. Yes (X) No ( )
Number of shares of the registrant's common stock (only one class for each
registrant) outstanding as of August 6, 2002:
Premcor Inc. 57,468,935 shares
Premcor USA Inc. 100 shares (100% owned by
Premcor Inc.)
The Premcor Refining Group Inc. 100 shares (100% owned by
Premcor USA Inc.)
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Form 10-Q
June 30, 2002
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Premcor Inc.:
Independent Accountants' Report.................................................................... 2
Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002.............................. 3
Consolidated Statements of Operations for the Three Months and
Six Months Ended June 30, 2001 and 2002........................................................ 4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2002.............. 5
Premcor USA Inc.:
Independent Accountants' Report ................................................................... 6
Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002.............................. 7
Consolidated Statements of Operations for the Three Months and
Six Months Ended June 30, 2001 and 2002........................................................ 8
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2002.............. 9
The Premcor Refining Group Inc.:
Independent Accountants' Report ................................................................... 10
Consolidated Balance Sheets as of December 31, 2001 and June 30, 2002 ............................. 11
Consolidated Statements of Operations for the Three Months and
Six Months Ended June 30, 2001 and 2002........................................................ 12
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2002.............. 13
Notes to Consolidated Financial Statements (Premcor Inc., Premcor USA Inc., and
The Premcor Refining Group Inc. Combined)...................................................... 14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 35
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................................... 54
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................... 56
Item 2. Changes in Securities and Use of Proceeds ........................................................... 56
Item 6. Exhibits and Reports on Form 8-K..................................................................... 57
Signature
FORM 10-Q - PART I. FINANCIAL INFORMATION
This Quarterly Report on Form 10-Q represents a combined report for three
registrants, Premcor Inc., Premcor USA Inc., or Premcor USA, and The Premcor
Refining Group Inc., or PRG. PRG is a wholly owned subsidiary of Premcor USA and
is the principal operating company. PRG, together with its wholly owned
subsidiary, Sabine River Holding Corp., or Sabine, own and operate three
refineries. Premcor USA is a wholly owned subsidiary of Premcor Inc.
The results of operations for Premcor Inc. and Premcor USA principally
reflect the results of operations of PRG. The consolidated financial statements
of PRG and Premcor USA differ primarily for the effects of some minor pipeline
operations of Premcor USA, that mainly serve PRG, and long-term debt of
stand-alone Premcor USA. The consolidated financial statements of Premcor USA
and Premcor Inc. differ primarily for the effects of Premcor Inc.'s stand-alone
general and administrative costs and interest income.
Included in this Quarterly Report on Form 10-Q are balance sheets,
statements of operations, and statements of cash flows for the applicable
periods for Premcor Inc., Premcor USA, and PRG. The information reflected in the
combined, consolidated footnotes is equally applicable to all three companies
except where indicated otherwise. The Management Discussion and Analysis of
Financial Condition and Results of Operations is presented at the Premcor Inc.
level and is also equally applicable to all three companies except where
otherwise noted.
1
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of Premcor Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Premcor Inc. (the "Company") as of June 30, 2002, the related condensed
consolidated statements of operations for the three-month and six-month periods
ended June 30, 2001 and 2002, and the related condensed consolidated statements
of cash flows for the six-month periods then ended. These financial statements
are the responsibility of the Company's management.
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 auditing standards generally accepted in the United States of America, 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 such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 10 to the condensed consolidated financial statements, the
Company changed its method of accounting for stock based compensation issued to
employees.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of December 31, 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 11, 2002 (March 29, 2002 as
to Note 15 and April 15, 2002 as to Notes 10 & 19), we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2001 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
St. Louis, Missouri
August 5, 2002
2
PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
December 31, June 30,
2001 2002
------------- -------------
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 510.1 $ 180.5
Short-term investments........................................................ 1.7 1.7
Cash and cash equivalents restricted for debt service......................... 30.8 65.4
Accounts receivable, net of allowance of $1.3 and $1.3........................ 148.3 280.4
Inventories................................................................... 318.3 329.8
Prepaid expenses and other.................................................... 52.3 36.8
Net assets held for sale...................................................... -- 61.2
----------- -----------
Total current assets....................................................... 1,061.5 955.8
PROPERTY, PLANT AND EQUIPMENT, NET.............................................. 1,299.6 1,194.7
DEFERRED INCOME TAXES........................................................... -- 68.6
OTHER ASSETS.................................................................... 148.7 146.1
----------- -----------
$ 2,509.8 $ 2,365.2
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 366.4 $ 481.2
Accrued expenses ............................................................. 95.4 97.5
Accrued taxes other than income............................................... 35.7 31.7
Current portion of long-term debt............................................. 81.4 9.9
----------- -----------
Total current liabilities.................................................. 578.9 620.3
LONG-TERM DEBT.................................................................. 1,391.4 923.5
DEFERRED INCOME TAXES........................................................... 16.7 --
OTHER LONG-TERM LIABILITIES..................................................... 109.1 142.5
COMMITMENTS AND CONTINGENCIES................................................... -- --
MINORITY INTEREST............................................................... 24.2 --
EXCHANGEABLE PREFERRED STOCK
($0.01 par value per share; 250,000 shares authorized;
92,284 shares issued and outstanding in 2001)................................. 94.8 --
COMMON STOCKHOLDERS' EQUITY:
Common, $0.01 par value per share, 53,000,000 authorized, 25,720,589 issued
and outstanding in 2001 and 150,000,000 authorized, 57,461,435 issued and
outstanding in 2002; Class F Common, $0.01 par value, 7,000,000 authorized,
6,101,010 issued and outstanding in 2001.................................... 0.3 0.6
Paid-in capital................................................................. 323.7 847.4
Retained deficit................................................................ (29.3) (169.1)
----------- -----------
Total common stockholders' equity.......................................... 294.7 678.9
----------- -----------
$ 2,509.8 $ 2,365.2
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; amounts in millions, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
2001 2002 2001 2002
----------- ----------- ----------- -----------
NET SALES AND OPERATING REVENUES ..................................... $ 1,818.3 $ 1,679.0 $ 3,504.7 $ 2,907.3
EXPENSES:
Cost of sales ..................................................... 1,337.3 1,523.4 2,742.9 2,585.0
Operating expenses ................................................ 118.1 114.1 250.9 228.6
General and administrative expenses ............................... 16.6 14.4 29.2 28.9
Stock option compensation expense ................................. -- 3.8 -- 5.7
Depreciation ...................................................... 12.9 11.8 25.9 24.2
Amortization ...................................................... 10.0 10.1 18.6 19.9
Refinery restructuring and other charges .......................... -- 16.6 150.0 158.6
----------- ----------- ----------- -----------
1,494.9 1,694.2 3,217.5 3,050.9
OPERATING INCOME (LOSS) ............................................... 323.4 (15.2) 287.2 (143.6)
Interest and finance expense ....................................... (40.4) (32.9) (82.3) (67.4)
Loss on extinguishment of long-term debt ........................... -- (19.3) -- (19.3)
Interest income .................................................... 5.1 2.9 9.8 6.4
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
MINORITY INTEREST .................................................. 288.1 (64.5) 214.7 (223.9)
Income tax (provision) benefit ..................................... (103.3) 23.5 (47.3) 84.9
Minority interest .................................................. (7.6) 0.9 (10.9) 1.7
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS .............................. 177.2 (40.1) 156.5 (137.3)
Loss from discontinued operations, net of tax benefit of $5.5 ...... -- -- (8.5) --
----------- ----------- ----------- -----------
NET INCOME (LOSS) ..................................................... 177.2 (40.1) 148.0 (137.3)
Preferred stock dividends .......................................... (2.7) -- (5.2) (2.5)
----------- ----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS .................... $ 174.5 $ (40.1) $ 142.8 $ (139.8)
=========== =========== =========== ===========
Basic net income (loss) per common share:
Income (loss) from continuing operations ............................ $ 5.49 $ (0.82) $ 4.76 $ (3.47)
Discontinued operations ............................................. -- -- (0.27) --
----------- ----------- ----------- -----------
Net income (loss) ................................................... $ 5.49 $ (0.82) $ 4.49 $ (3.47)
=========== =========== =========== ===========
Weighted average common shares outstanding ............................ 31.8 48.7 31.8 40.3
Diluted net income (loss) per common share:
Income (loss) from continuing operations ............................ $ 5.06 $ (0.82) $ 4.39 $ (3.47)
Discontinued operations ............................................. -- -- (0.25) --
----------- ----------- ----------- -----------
Net income (loss) ................................................... $ 5.06 $ (0.82) $ 4.14 $ (3.47)
=========== =========== =========== ===========
Weighted average common shares outstanding ............................ 34.5 48.7 34.5 40.3
Pro forma for adoption of SFAS No. 123:
Income (loss) from continuing operations ............................ $ 177.0 $ (40.3) $ 156.2 $ (137.6)
Net income (loss) available to common stockholders .................. $ 174.3 $ (40.3) $ 142.5 $ (140.1)
Net income (loss) per common share:
Basic ............................................................ $ 5.48 $ (0.83) $ 4.48 $ (3.48)
Diluted .......................................................... $ 5.05 $ (0.83) $ 4.13 $ (3.48)
The accompanying notes are an integral part of these financial statements.
4
PREMCOR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollars in millions)
For the Six Months
Ended June 30,
-------------------------------------
2001 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................................................... $ 148.0 $ (137.3)
Discontinued operations................................................................. 8.5 --
Adjustments
Depreciation......................................................................... 25.9 24.2
Amortization......................................................................... 24.2 24.9
Deferred income taxes................................................................ 43.5 (85.3)
Refinery restructuring and other charges............................................. 118.1 103.6
Write-off of deferred financing costs ............................................... -- 9.5
Minority interest.................................................................... 10.9 (1.7)
Other, net........................................................................... (0.7) 17.5
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other...................................... 52.5 (116.6)
Inventories.......................................................................... 31.1 (11.5)
Accounts payable, accrued expenses, and taxes other than income ..................... (75.1) 113.0
Cash and cash equivalents restricted for debt service................................ -- 8.3
---------- ----------
Net cash provided by (used in) operating activities of continuing operations....... 386.9 (51.4)
Net cash used in operating activities of discontinued operations................... (2.5) (3.4)
---------- ----------
Net cash provided by (used in) operating activities................................ 384.4 (54.8)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment.......................................... (40.2) (38.5)
Expenditures for turnaround............................................................. (38.3) (31.7)
Cash and cash equivalents restricted for investment in capital additions................ -- 4.3
Other................................................................................... 0.5 0.2
---------- ----------
Net cash used in investing activities.............................................. (78.0) (65.7)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments................................................................. (0.7) (637.1)
Proceeds from the issuance of common stock, net......................................... -- 482.0
Cash and cash equivalents restricted for debt repayment................................. -- (42.9)
Deferred financing costs................................................................ (1.8) (11.1)
---------- ----------
Net cash used in financing activities.............................................. (2.5) (209.1)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................................... 303.9 (329.6)
CASH AND CASH EQUIVALENTS, beginning of period............................................ 290.1 510.1
---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................................................. $ 594.0 $ 180.5
========== ==========
The accompanying notes are an integral part of these financial statements.
5
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of Premcor USA Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Premcor USA Inc. (the "Company") as of June 30, 2002, the related condensed
consolidated statements of operations for the three-month and six-month periods
ended June 30, 2001 and 2002, and the related condensed consolidated statements
of cash flows for the six-month periods then ended. These financial statements
are the responsibility of the Company's management.
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 auditing standards generally accepted in the United States of America, 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 such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 10 to the condensed consolidated financial statements, the
Company changed its method of accounting for stock based compensation issued to
employees. Additionally, the condensed consolidated financial statements have
been restated to give retroactive effect to the contribution of Sabine River
Holding Corp. common stock owned by Premcor Inc. to The Premcor Refining Group
Inc. (the "Sabine Restructuring"), which has been accounted for in a manner
similar to a pooling of interests as described in Notes 1 and 3 to the condensed
consolidated financial statements.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of December 31, 2001, and the related consolidated statements of
operations, stockholder's equity, and cash flows for the year then ended (not
presented herein). In our reports dated February 11, 2002 (March 5, 2002 as to
Note 15 & 19), we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2001 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived after giving effect to the restatement for
the Sabine Restructuring described in Notes 1 and 3 to the condensed
consolidated financial statements.
Deloitte & Touche LLP
St. Louis, Missouri
August 5, 2002
6
PREMCOR USA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
December 31, June 30,
2001 2002
----------------- -----------------
ASSETS (as restated, (unaudited)
see Note 1)
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 508.0 $ 135.6
Short-term investments......................................................... 1.7 1.7
Cash and cash equivalents restricted for debt service.......................... 30.8 65.4
Accounts receivable, net of allowance of $1.3 and $1.3......................... 148.3 280.3
Receivable from affiliates..................................................... 40.7 64.4
Inventories.................................................................... 318.3 329.8
Prepaid expenses and other..................................................... 42.7 36.8
Net assets held for sale....................................................... -- 61.2
----------- -----------
Total current assets........................................................ 1,090.5 975.2
PROPERTY, PLANT AND EQUIPMENT, NET............................................... 1,299.6 1,186.7
DEFERRED INCOME TAXES............................................................ -- 68.7
OTHER ASSETS..................................................................... 144.5 141.8
----------- -----------
$ 2,534.6 $ 2,372.4
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................... $ 366.4 $ 481.0
Payable to affiliates.......................................................... 28.4 61.2
Accrued expenses .............................................................. 99.4 98.6
Accrued taxes other than income............................................... 35.7 31.7
Current portion of long-term debt.............................................. 81.4 9.9
----------- -----------
Total current liabilities................................................... 611.3 682.4
LONG-TERM DEBT................................................................... 1,391.4 923.5
DEFERRED INCOME TAXES............................................................ 16.7 --
OTHER LONG-TERM LIABILITIES...................................................... 109.1 142.5
COMMITMENTS AND CONTINGENCIES.................................................... -- --
MINORITY INTEREST................................................................ 24.2 --
EXCHANGEABLE PREFERRED STOCK
($0.01 par value per share; 250,000 shares authorized;
92,284 shares issued and outstanding in 2001).................................. 94.8 --
COMMON STOCKHOLDER'S EQUITY:
Common, $0.01 par value per share, 100 authorized, issued and outstanding...... 0.1 0.1
Paid-in capital................................................................ 315.9 792.8
Retained deficit............................................................... (28.9) (168.9)
----------- -----------
Total common stockholder's equity........................................... 287.1 624.0
----------- -----------
$ 2,534.6 $ 2,372.4
=========== ===========
The accompanying notes are an integral part of these financial statements.
7
PREMCOR USA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; amounts in millions)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------- ------------------------------
2001 2002 2001 2002
-------------- -------------- -------------- --------------
(as (as
restated, restated,
see Note 1) see Note 1)
NET SALES AND OPERATING REVENUES............................... $ 1,818.3 $ 1,679.0 $ 3,504.7 $ 2,907.3
EXPENSES:
Cost of sales................................................ 1,337.3 1,523.4 2,742.9 2,585.0
Operating expenses........................................... 118.1 114.1 250.9 228.6
General and administrative expenses.......................... 16.5 14.4 29.1 28.8
Stock option compensation expense............................ -- 3.8 -- 5.7
Depreciation................................................. 12.9 11.8 25.9 24.2
Amortization................................................. 10.0 10.1 18.6 19.9
Refinery restructuring and other charges..................... -- 16.6 150.0 158.6
----------- ----------- ----------- -----------
1,494.8 1,694.2 3,217.4 3,050.8
OPERATING INCOME (LOSS)........................................ 323.5 (15.2) 287.3 (143.5)
Interest and finance expense................................. (40.5) (32.9) (82.3) (67.4)
Loss on extinguishment of long-term debt..................... -- (19.3) -- (19.3)
Interest income.............................................. 5.2 2.2 9.8 5.9
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST........................................ 288.2 (65.2) 214.8 (224.3)
Income tax (provision) benefit............................... (102.7) 23.8 (46.8) 85.1
Minority interest............................................ (7.6) 0.9 (10.9) 1.7
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS ...................... 177.9 (40.5) 157.1 (137.5)
Loss from discontinued operations, net of tax benefit of
$5.5....................................................... -- -- (8.5) --
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................................. 177.9 (40.5) 148.6 (137.5)
Preferred stock dividends.................................... (2.7) -- (5.2) (2.5)
----------- ----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDER.............. $ 175.2 $ (40.5) $ 143.4 $ (140.0)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
8
PREMCOR USA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollars in millions)
For the Six Months
Ended June 30,
------------------------------------
2001 2002
---------------- ---------------
(as restated,
see Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................... $ 148.6 $ (137.5)
Discontinued operations............................................................. 8.5 --
Adjustments
Depreciation..................................................................... 25.9 24.2
Amortization.................................................................... 24.2 24.9
Deferred income taxes............................................................ 43.4 (85.4)
Refinery restructuring and other charges......................................... 118.1 103.6
Write-off of deferred financing costs............................................ -- 9.5
Minority interest................................................................ 10.9 (1.7)
Other, net....................................................................... (0.7) 17.6
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other.................................. 52.6 (126.1)
Inventories...................................................................... 31.2 (11.5)
Accounts payable, accrued expenses, and taxes other than income ................. (77.4) 109.9
Affiliate receivables/payables................................................... 1.6 9.1
Cash and cash equivalents restricted for debt service............................ -- 8.3
---------- ---------
Net cash provided by (used in) operating activities of continuing operations... 386.9 (55.1)
Net cash used in operating activities of discontinued operations............... (2.5) (3.4)
---------- ---------
Net cash provided by (used in) operating activities............................ 384.4 (58.5)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment...................................... (40.2) (38.5)
Expenditures for turnaround......................................................... (38.3) (31.7)
Cash and cash equivalents restricted for investment in capital additions............ -- 4.3
Proceeds from disposal of assets.................................................... 0.5 0.2
---------- ---------
Net cash used in investing activities.......................................... (78.0) (65.7)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments............................................................. (0.7) (637.1)
Capital contributions, net.......................................................... -- 442.9
Cash and cash equivalents restricted for debt service............................... -- (42.9)
Deferred financing costs............................................................ (1.8) (11.1)
---------- ---------
Net cash used in financing activities.......................................... (2.5) (248.2)
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 303.9 (372.4)
CASH AND CASH EQUIVALENTS, beginning of period........................................ 290.1 508.0
---------- ---------
CASH AND CASH EQUIVALENTS, end of period.............................................. $ 594.0 $ 135.6
========== =========
The accompanying notes are an integral part of these financial statements.
9
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of The Premcor Refining Group Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of The
Premcor Refining Group Inc. (the "Company") as of June 30, 2002, the related
condensed consolidated statements of operations for the three-month and
six-month periods ended June 30, 2001 and 2002, and the related condensed
consolidated statements of cash flows for the six-month periods then ended.
These financial statements are the responsibility of the Company's management.
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 auditing standards generally accepted in the United States of America, 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 such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 10 to the condensed consolidated financial statements, the
Company changed its method of accounting for stock based compensation issued to
employees. Additionally, the condensed consolidated financial statements have
been restated to give retroactive effect to the contribution of Sabine River
Holding Corp. common stock owned by Premcor Inc. to The Premcor Refining Group
Inc. (the "Sabine Restructuring"), which has been accounted for in a manner
similar to a pooling of interests as described in Notes 1 and 3 to the condensed
consolidated financial statements.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of the
Company as of December 31, 2001, and the related consolidated statements of
operations, stockholder's equity, and cash flows for the year then ended (not
presented herein). In our reports dated February 11, 2002 (March 5, 2002 as to
Note 18), we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2001 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived after giving effect to the restatement for the Sabine
Restructuring described in Notes 1 and 3 to the condensed consolidated financial
statements.
Deloitte & Touche LLP
St. Louis, Missouri
August 5, 2002
10
THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
December 31, June 30,
2001 2002
---------------- -----------------
ASSETS (as restated, (unaudited)
see Note 1)
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 482.5 $ 118.5
Short-term investments........................................................... 1.7 1.7
Cash and cash equivalents restricted for debt service............................ 30.8 65.4
Accounts receivable, net of allowance of $1.3 and $1.3........................... 148.3 280.3
Receivable from affiliates....................................................... 31.3 50.4
Inventories...................................................................... 318.3 329.8
Prepaid expenses and other....................................................... 42.7 36.6
Net assets held for sale......................................................... -- 61.2
----------- -----------
Total current assets.......................................................... 1,055.6 943.9
PROPERTY, PLANT AND EQUIPMENT, NET................................................. 1,298.7 1,185.8
DEFERRED INCOME TAXES.............................................................. -- 33.9
OTHER ASSETS....................................................................... 142.8 141.9
----------- -----------
$ 2,497.1 $ 2,305.5
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................. $ 366.4 $ 481.0
Payable to affiliates............................................................ 49.8 83.7
Accrued expenses................................................................. 93.1 92.0
Accrued taxes other than income.................................................. 35.7 31.7
Current portion of long-term debt................................................ 81.4 9.9
----------- -----------
Total current liabilities..................................................... 626.4 698.3
LONG-TERM DEBT..................................................................... 1,247.0 880.0
DEFERRED INCOME TAXES.............................................................. 46.6 --
OTHER LONG-TERM LIABILITIES........................................................ 109.1 142.5
COMMITMENTS AND CONTINGENCIES...................................................... -- --
MINORITY INTEREST.................................................................. 24.2 --
COMMON STOCKHOLDER'S EQUITY:
Common, $0.01 par value per share, 1000 authorized, 100 issued and
outstanding.................................................................... 0.1 0.1
Paid-in capital.................................................................. 242.9 511.5
Retained earnings................................................................ 200.8 73.1
----------- -----------
Total common stockholder's equity............................................. 443.8 584.7
----------- -----------
$ 2,497.1 $ 2,305.5
=========== ===========
The accompanying notes are an integral part of these financial statements.
11
THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; amounts in millions)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------- -------------------------
2001 2002 2001 2002
---- ---- ---- ----
(as restated, (as
see Note 1) restated,
see Note 1)
NET SALES AND OPERATING REVENUES.......................... $ 1,818.3 $ 1,679.0 $ 3,504.7 $ 2,907.3
EXPENSES:
Cost of sales........................................... 1,337.8 1,526.3 2,743.8 2,588.3
Operating expenses ..................................... 117.8 113.9 250.5 228.3
General and administrative expenses..................... 16.5 14.4 29.1 28.8
Stock option compensation expense....................... -- 3.8 -- 5.7
Depreciation............................................ 12.9 11.8 25.9 24.2
Amortization............................................ 10.0 10.1 18.6 19.9
Refinery restructuring and other charges................ -- 16.6 150.0 158.6
----------- ----------- ----------- ----------
1,495.0 1,696.9 3,217.9 3,053.8
OPERATING INCOME (LOSS)................................... 323.3 (17.9) 286.8 (146.5)
Interest and finance expense............................ (35.6) (27.5) (72.5) (58.0)
Loss on extinguishment of long-term debt................ -- (9.3) -- (9.3)
Interest income......................................... 4.8 2.2 8.8 4.4
----------- ----------- ----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST................................... 292.5 (52.5) 223.1 (209.4)
Income tax (provision) benefit.......................... (104.2) 19.4 (67.3) 80.0
Minority interest....................................... (7.6) 0.9 (10.9) 1.7
------------ ----------- ----------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................. 180.7 (32.2) 144.9 (127.7)
Loss from discontinued operations, net of tax benefit of
$5.5................................................. -- -- (8.5) --
----------- ----------- ----------- ----------
NET INCOME (LOSS)......................................... $ 180.7 $ (32.2) $ 136.4 $ (127.7)
=========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements.
12
THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollars in millions)
For the Six Months
Ended June 30,
--------------------------------
2001 2002
------------ ------------
(as restated
see Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................. $ 136.4 $ (127.7)
Discontinued operations............................................................ 8.5 --
Adjustments
Depreciation.................................................................... 25.9 24.2
Amortization.................................................................... 23.9 24.8
Deferred income taxes........................................................... 53.4 (80.5)
Refinery restructuring and other charges........................................ 118.1 103.6
Write-off of deferred financing costs........................................... -- 7.9
Minority interest............................................................... 10.9 (1.7)
Other, net...................................................................... (0.8) 17.2
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other................................. 52.5 (125.9)
Inventories..................................................................... 31.2 (11.5)
Accounts payable, accrued expenses, and taxes other than income ................ (79.8) 109.6
Affiliate receivables/payables.................................................. 13.0 14.8
Cash and cash equivalents restricted for debt service........................... -- 8.3
--------- ---------
Net cash provided by (used in) operating activities of continuing operations.. 393.2 (36.9)
Net cash used in operating activities of discontinued operations.............. (2.5) (3.4)
--------- ---------
Net cash provided by (used in) operating activities........................... 390.7 (40.3)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment..................................... (40.2) (38.5)
Expenditures for turnaround........................................................ (38.3) (31.7)
Cash and cash equivalents restricted for investment in capital additions........... -- 4.3
Other.............................................................................. 0.1 0.2
--------- ---------
Net cash used in investing activities......................................... (78.4) (65.7)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments............................................................ (0.7) (438.6)
Cash and cash equivalents restricted for debt repayment............................ -- (42.9)
Capital contributions, net ........................................................ -- 234.6
Deferred financing costs........................................................... (1.8) (11.1)
--------- ---------
Net cash used in financing activities......................................... (2.5) (258.0)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. 309.8 (364.0)
CASH AND CASH EQUIVALENTS, beginning of period....................................... 251.2 482.5
---------- ---------
CASH AND CASH EQUIVALENTS, end of period............................................. $ 561.0 $ 118.5
========== =========
The accompanying notes are an integral part of these financial statements.
13
FORM 10-Q - PART I
ITEM 1. FINANCIAL STATEMENTS (continued)
PREMCOR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2002
(tabular dollar amounts in millions of U.S. dollars)
1. Basis of Preparation and Recent Developments
Premcor Inc. (the "Company"), a Delaware corporation, was incorporated in
April 1999. Premcor Inc. owns all of the outstanding common stock of Premcor USA
Inc. ("Premcor USA"), and Premcor USA owns all of the outstanding common stock
of The Premcor Refining Group Inc., ("PRG"). Following the completion of the
restructuring described in Note 3, referred to as the Sabine restructuring, PRG
owns all of the outstanding common stock of Sabine River Holding Corp.
("Sabine"). Sabine is the 1% general partner of Port Arthur Coker Company L.P.,
a limited partnership ("PACC"), and the 100% owner of Neches River Holding Corp.
("Neches"), which is the 99% limited partner of PACC. PACC is the 100% owner of
Port Arthur Finance Corp. ("PAFC"). The restructuring of Sabine as a wholly
owned subsidiary of PRG was an exchange of ownership interest between entities
under common control, and therefore was accounted for at the book value of
Sabine, similar to a pooling of interests. Accordingly, Premcor USA's and PRG's
historical financial statements have been restated to include the consolidated
results of operations, financial position, and cash flows of Sabine, as if the
combination had occurred on January 1, 2001.
Premcor Inc.'s principal operating subsidiaries are PRG and PACC. The
Company is one of the largest independent petroleum refiners and suppliers of
unbranded transportation fuels, heating oil, petrochemical feedstocks, petroleum
coke and other petroleum products in the United States. The Company owns and
operates three refineries with a combined crude oil throughput capacity of
490,000 barrels per day ("bpd"). The refineries are located in Port Arthur,
Texas; Lima, Ohio; and Hartford, Illinois.
On February 28, 2002, the Company announced its intention to discontinue
operations of its 70,000 bpd Hartford refinery in October 2002. Subsequently,
the Company changed the closing date to November 2002. The Company has concluded
that there is no economically viable manner of reconfiguring the refinery to
produce fuels which meet the new gasoline and diesel fuel specifications
mandated by the federal government. During the period prior to closing the
refinery, the focus will continue to be on employee safety and environmental
performance. Additionally, the Company is pursuing all opportunities, including
a sale of the refinery, to mitigate loss of jobs and refining capacity in the
Midwest.
On May 3, 2002, Premcor Inc. completed an initial public offering of 20.7
million shares of common stock. The initial public offering, plus the concurrent
purchases of 850,000 shares in the aggregate by Thomas D. O'Malley, the
Company's chairman of the board, chief executive officer and president, and two
independent directors of the Company, netted proceeds to Premcor Inc. of
approximately $482 million. The proceeds from the offering were committed to
retire debt of Premcor Inc.'s subsidiaries. See Note 8 Long-term Debt for
details on the use of these proceeds. Prior to the initial public offering,
Premcor Inc.'s common equity was privately held and controlled by Blackstone
Capital Partners III Merchant Banking Fund L.P. and its affiliates
("Blackstone"). Premcor Inc.'s other principal shareholder was a subsidiary of
Occidental Petroleum Corporation ("Occidental"). As a result of these sales of
Premcor Inc.'s common stock and the Sabine restructuring described in Note 3,
Blackstone's ownership was reduced to approximately 48% and Occidental's
ownership was reduced to approximately 13%.
This Quarterly Report on Form 10-Q represents a combined report for three
registrants, Premcor Inc., Premcor USA and PRG. The accompanying unaudited
consolidated financial statements of Premcor Inc., Premcor USA, and PRG and
their respective subsidiaries are presented pursuant to the rules and
regulations of the United States Securities and Exchange Commission in
accordance with the disclosure requirements for Form 10-Q. In the opinion of the
management of the Company, the unaudited consolidated financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary to fairly state the results for the interim periods
14
presented. Operating results for the three-month and six-month periods ended
June 30, 2002 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2002. These combined consolidated notes apply
equally to Premcor Inc., Premcor USA, and PRG, unless otherwise noted. These
unaudited financial statements should be read in conjunction with the audited
financial statements and notes for the years ended December 31, 2001 and 2000
included in Premcor Inc.'s Registration Statement on Form S-1/A dated April 29,
2002 and Premcor USA's and PRG's Annual Report on Form 10-K for the year ended
December 31, 2001.
2. New and Proposed Accounting Standards
In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections.
SFAS 145 rescinds SFAS No. 4, Reporting Gains and Losses from the Extinguishment
of Debt; SFAS No. 44, Accounting for Intangible Assets of Motor Carriers; and
SFAS No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements.
SFAS No. 145 also amends SFAS No. 13, Accounting for Leases, as it relates to
sale-leaseback transactions and other transactions structured similar to a
sale-leaseback as well as amends other pronouncements to make various technical
corrections. The provisions of SFAS No. 145 as they relate to the rescission of
SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The
provision of this statement related to the amendment to SFAS No. 13 shall be
effective for transactions occurring after May 15, 2002. All other provisions of
this statement shall be effective for financial statements on or after May 15,
2002. As permitted by the pronouncement, the Company has elected early adoption
of SFAS No. 145 and, accordingly, has included the loss on extinguishment of
long-term debt in "Income from continuing operations" as opposed to as an
extraordinary item, net of taxes, below "Income from continuing operations" in
its Statement of Operations.
On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, and SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. The adoption of these standards did not have a material
impact on the Company's financial position and results of operations; however,
SFAS No. 144 was utilized in the accounting for the Company's announced
intention to discontinue refining operations at the Hartford, Illinois refinery
in November 2002. See Note 4, Refinery Restructuring and Other Charges for
details of the Hartford refinery shutdown.
In July 2001, the Financial Accounting Standards Board approved SFAS No.
143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses when a
liability should be recorded for asset retirement obligations and how to measure
this liability. The initial recording of a liability for an asset retirement
obligation will require the recording of a corresponding asset that will be
required to be amortized. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. The implementation of SFAS No. 143 is not expected to have
a material impact on the Company's financial position or results of operations.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued an exposure draft of a proposed
statement of position ("SOP") entitled Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment. If adopted as proposed,
this SOP will require companies to expense as incurred turnaround costs, which
it terms as "the non-capital portion of major maintenance costs." Adoption of
the proposed SOP would require that any existing unamortized turnaround costs be
expensed immediately. If this proposed change were in effect at June 30, 2002,
the Company would have been required to write-off unamortized turnaround costs
of approximately $104 million. Unamortized turnaround costs will change in 2002
as maintenance turnarounds are performed and past maintenance turnarounds are
amortized. If adopted in its present form, charges related to this proposed
change would be taken in the first quarter of 2003 and would be reported as a
cumulative effect of an accounting change, net of income tax, in the
consolidated statements of operations.
3. Sabine Restructuring
On June 6, 2002, PRG and Sabine completed a series of transactions ("the
Sabine restructuring") that resulted in Sabine and its subsidiaries becoming
wholly owned subsidiaries of PRG. Sabine, through its principal operating
subsidiary, PACC, owns and operates a heavy oil processing facility, which is
operated in conjunction with PRG's Port Arthur, Texas refinery. Prior to the
Sabine restructuring, Sabine was 90% owned by Premcor Inc. and 10% owned by
Occidental Petroleum Corporation.
15
The Sabine restructuring was permitted by the successful consent
solicitation of the holders of PAFC's 12 1/2% Senior Notes due 2009. The Sabine
restructuring was accomplished according to the following steps, among others:
.. Premcor Inc. contributed $225.6 million in proceeds from its initial public
offering of common stock to Sabine. Sabine used the proceeds from the
equity contribution, plus cash on hand, to prepay $221.4 million of its
senior secured bank loan and to pay a dividend of $141.4 million to Premcor
Inc.;
.. Commitments under Sabine's senior secured bank loan, working capital
facility, and certain insurance policies were terminated and related
guarantees were released;
.. PRG's existing working capital facility was amended and restated to, among
other things, permit letters of credit to be issued on behalf of Sabine;
.. Occidental exchanged its 10% interest in Sabine for 1,363,636 newly issued
shares of Premcor Inc. common stock;
.. Premcor Inc. contributed its 100% ownership interest in Sabine to Premcor
USA and Premcor USA, in turn, contributed its 100% ownership interest to
PRG; and
.. PRG fully and unconditionally guaranteed, on a senior unsecured basis, the
payment obligations under the PAFC 12 1/2% Senior Notes due 2009. The
guarantee was issued in a private placement made in reliance on an
exemption from the registration requirements of the Securities Act. Due to
the PRG guarantee, Sabine is no longer required to file periodic reports
under the Securities Exchange Act of 1934, as amended. PRG and Sabine have
agreed to file a registration statement under the Securities Act to
register the notes and the PRG guarantee, not later than 120 days from June
6, 2002.
Premcor Inc.'s acquisition of the 10% ownership in Sabine was accounted for
under the purchase method. The purchase price was based on the exchange of
1,363,636 shares of Premcor Inc. common stock for the 10% interest in Sabine and
was valued at $30.5 million or approximately $22 per share. The purchase price
of the 10% minority interest in Sabine exceeded the book value by $8.0 million.
Based on an appraisal of the Sabine assets, the excess of the purchase price
over the book value of the minority interest was recorded by Premcor Inc. as an
investment in property, plant and equipment and will be depreciated over the
remaining lives of the assets. Because the purchase price did not exceed the
fair value of the underlying assets, no goodwill was recognized.
As discussed in Note 1, the contribution of Premcor Inc.'s 100% ownership
interest in Sabine to PRG was an exchange of ownership interest between entities
under common control, and therefore was accounted for at the book value of
Sabine, similar to a pooling of interests. Accordingly, Premcor USA's and PRG's
historical financial statements have been restated to include the consolidated
results of operations, financial position, and cash flows of Sabine as if the
combination had occurred on January 1, 2001.
16
4. Refinery Restructuring and Other Charges
In 2002, the Company recorded refinery restructuring and other charges of
$158.6 million, $142.0 million in the first quarter and $16.6 million in the
second quarter.
The year-to-date charge consisted of the following:
.. a $137.4 million charge related to the announced shutdown of refining
operations at the Hartford, Illinois refinery,
.. a $22.3 million charge related to the restructuring of the Company's
management team and administrative functions,
.. income of $5.0 million related to the unanticipated sale of a portion of
the Blue Island refinery assets previously written off,
.. a $2.5 million charge related to the termination of certain guarantees at
PACC as part of the Sabine restructuring, and
.. a $1.4 million loss related to idled assets held for sale.
The second quarter charge consisted of the following:
.. an additional $6.2 million charge related to the announced shutdown of
refining operations at the Hartford, Illinois refinery,
.. a $6.5 million charge related to the restructuring of the Company's
administrative functions,
.. a $2.5 million charge related to the termination of certain guarantees at
PACC as part of the Sabine restructuring, and
.. a $1.4 million loss related to idled assets held for sale.
Hartford Refinery
In February 2002, the Company announced that it would shutdown refining
operations at the Hartford, Illinois refinery in October 2002. Although the
Hartford refinery has marginally contributed to the Company's earnings in the
past, the Company has concluded that there is no economically viable manner of
reconfiguring the refinery to produce fuels which meet new gasoline and diesel
fuel standards mandated by the federal government. The Company is pursuing all
options, including the sale of the refinery, to mitigate the loss of jobs and
refinery capacity in the Midwest. The Company has extended the closing date of
the refinery by one month to November 2002 in order to provide additional time
for consideration of certain opportunities. The Company believes that it is more
likely to maximize value of the refinery if the refinery is operating when a
transaction is consummated.
Since the Hartford refinery operation had been only marginally profitable
over the last 10 years and since substantial investment would be required to
meet new required product specifications in the future, the Company's reduced
refining capacity resulting from the shutdown is not expected to have a
significant negative impact on net income or cash flow from operations. The only
anticipated effect on net income and cash flow in the future will result from
the actual shutdown process, including recovery of realizable asset value, and
subsequent environmental site remediation, which will occur over a number of
years. Unless there is a need to adjust the shutdown reserve in the future as
discussed below, there should be no significant effect on net income beyond
2002.
A pretax charge of $131.2 million was recorded in the first quarter of 2002
and an additional pretax charge of $6.2 million was recorded in the second
quarter of 2002. The total charge included $70.7 million of non-cash long-lived
asset write-offs to reduce the refinery assets to their estimated net realizable
value of $61.0 million. The net realizable value was determined by estimating
the value of the assets in a sale or operating lease transaction. The Company
has had preliminary discussions with third parties regarding such a transaction,
but there can be no assurance that one will be completed. In the event, that a
sale or lease transaction is not completed, the net realizable value may be less
than $61.0 million and a further write-down may be required. The net realizable
value was recorded as a current asset on the balance sheet. In the second
quarter of 2002, the Company completed an evaluation of its warehouse stock,
catalysts, chemicals, and additives inventories, and the Company determined that
a portion of these inventories would not be recoverable upon the closure of the
refinery. Accordingly, the Company wrote-down these assets by $3.2 million.
17
The total charge also included a reserve for future costs of $62.5 million
as itemized below. The Hartford restructuring reserve balance and net cash
activity as of June 30, 2002 is as follows:
Reserve as of
Initial Reserve Net Cash Outlay June 30, 2002
----------------- ---------------- -----------------
Employee severance.......................... $ 16.6 $ 0.1 $ 16.5
Plant closure/equipment remediation......... 12.9 4.4 8.5
Site clean-up/environmental matters......... 33.0 -- 33.0
--------- ----------- --------
$ 62.5 $ 4.5 $ 58.0
========= =========== ========
The initial reserve included an additional $1.9 million charge recorded in
the second quarter of 2002 that related primarily to the cancellation of various
capital projects that were underway prior to the announced closure. Management
adopted an exit plan that details the shutdown of the process units at the
refinery and the subsequent environmental remediation of the site. The Company
expects the majority of the shutdown of the process units will be completed in
the fourth quarter of 2002. The Company estimates that 315 employees, both
hourly (covered by collective bargaining agreements) and salaried, will be
terminated due to this shutdown, 98% of which are scheduled to be terminated in
November of 2002. The site clean-up and environmental reserve takes into account
costs that are reasonably foreseeable at this time. As the site remediation plan
is refined and work is performed, further adjustments of the reserve may be
necessary, and such adjustments may be material.
Finally, the total charge included a $1.1 million reserve, which was
recorded in the second quarter of 2002, related to post-retirement expenses that
were extended to certain employees who were nearing the retirement requirements.
This liability was recorded in "Other Long-term Liabilities" on the balance
sheet together with the Company's other post retirement liabilities.
Company Management Restructuring
In February 2002, the Company began the restructuring of its executive
management team and subsequently its administrative functions with the hiring of
Thomas D. O'Malley as chairman, chief executive officer, and president and
William E. Hantke as executive vice president and chief financial officer. In
the first quarter of 2002, the Company recognized severance expense of $5.0
million and non-cash compensation expense of $5.7 million resulting from
modifications of stock option terms related to the resignation of the officers
who previously held these positions. In addition, the Company incurred a charge
of $5.0 million for the cancellation of a monitoring agreement with an affiliate
of Blackstone. In the second quarter of 2002, the Company commenced a
restructuring of its St. Louis-based general and administrative operations and
recorded a charge of $6.5 million for severance, outplacement and other
employee-related restructuring expenses.
Blue Island Closure Reserve
As of June 30, 2001, the Company had recorded a $150 million restructuring
charge related to the January 2001 closure of the Blue Island, Illinois
refinery. The Blue Island restructuring reserve balance and net cash activity as
of June 30, 2002 is as follows:
Reserve as of Reserve as of
December 31, 2001 Net Cash Outlay June 30, 2002
--------------------- ----------------- -----------------
Employee severance.......................... $ 2.1 $ 1.5 $ 0.6
Plant closure/equipment remediation......... 13.9 2.5 11.4
Site clean-up/environmental matters......... 20.5 4.0 16.5
-------- ---------- ---------
$ 36.5 $ 8.0 $ 28.5
======== ========== =========
The Company expects to spend approximately $16 million in 2002 related to
the reserve for future costs, with the majority of the remainder to be spent
over the next several years. The site clean-up and environmental reserve takes
into account costs that are reasonably foreseeable at this time. As the site
remediation plan is finalized and work is performed, further adjustments of the
reserve may be necessary. In 2002, environmental risk insurance policies
covering the Blue Island refinery site have been procured and bound. Final
policies will be issued pending
18
the insurers' concurrence that the terms of the remediation contract, as
executed, are materially consistent with the proposed contract submitted as part
of the application process. The Company expects to finalize and execute the
remediation contract in the third quarter of 2002. This insurance program will
allow the Company to quantify and, within the limits of the policy, cap its cost
to remediate the site, and provide insurance coverage from future third party
claims arising from past or future environmental releases. The remediation cost
overrun policy has a term of ten years and, subject to certain exceptions and
exclusions, provides $25 million in coverage in excess of a self-insured
retention amount of $26 million. The pollution legal liability policy provides
for $25 million in aggregate coverage and per incident coverage in excess of a
self insured retention of $250,000 per incident. The Company believes this
program also provides governmental agencies financial assurance that, once
begun, remediation of the site will be completed in a timely and prudent manner.
5. Loss on Extinguishment of Long-Term Debt
In the second quarter of 2002, Premcor USA recorded a loss of $19.3 million
related to the early redemption and repurchase of portions of its long-term debt
as described in Note 8 Long-term Debt. This loss included premiums associated
with the early repayment of long-term debt of $9.2 million, a write-off of
unamortized deferred financing costs related to the prepaid debt of $9.5
million, and the write-off of a prepaid premium for an insurance policy
guaranteeing the interest and principal payments on Sabine's long-term debt of
$0.6 million. PRG recorded a loss of $9.3 million related to this early
redemption of long-term debt, of which $0.9 million related to premiums, $7.8
million related to the write-off of deferred financing costs, and $0.6 million
related to the write-off of debt guarantee fees at Sabine.
6. Inventories
The carrying value of inventories consisted of the following:
December 31, June 30,
2001 2002
----------- ---------
Crude oil...................................... $ 77.0 $ 97.3
Refined products and blendstocks............... 218.7 211.9
Warehouse stock and other...................... 22.6 20.6
------------ ----------
$ 318.3 $ 329.8
============ ==========
The market value of crude oil, refined products and blendstocks inventories
at June 30, 2002 was approximately $127.1 million (December 31, 2001 - $5
million) above carrying value.
As of January 1, 2002, PACC changed its method of inventory valuation from
first-in first-out ("FIFO") to last-in first-out ("LIFO") for crude oil and
blendstock inventories. Management believes this change is preferable in that it
achieves a more appropriate matching of revenues and expenses. The adoption of
this inventory accounting method on January 1, 2002 did not have an impact on
pretax earnings. The adoption of the LIFO method resulted in $0.4 million ($0.01
per basic share) and $12.5 million ($0.31 per basic share) less net income for
the three-month and six-month periods ended June 30, 2002 than if the FIFO
method had been used for the same period. Cost for warehouse stock continues to
be determined under the FIFO method.
19
7. Other Assets
Other assets consisted of the following:
December 31, June 30,
2001 2002
------------ ----------
Deferred turnaround costs................................ $ 97.9 $ 103.9
Deferred financing costs................................. 32.6 29.2
Cash restricted for investment in capital additions...... 9.9 5.6
Investment in affiliates................................. 4.7 4.7
Other.................................................... 3.6 2.7
--------- ---------
$ 148.7 $ 146.1
========= =========
Amortization of deferred financing costs for the three and six-month
periods ended June 30, 2002 was $2.5 million (2001 - $2.9 million) and $5.0
million (2001 - $5.9 million) and was included in "Interest and finance
expense". In the first quarter of 2002, the Company incurred $1.1 million of
deferred financing costs for fees to obtain a waiver related to insurance
coverage required under PACC's common security agreement with certain bond
holders ("CSA"). In the second quarter of 2002, the Company incurred $10.0
million of deferred financing costs related to the consent solicitation process
of the Sabine restructuring and wrote-off $9.5 million related to the early
repayment of long-term debt. Included in the $9.5 million write-off of deferred
financing costs was $1.6 million related to Premcor USA stand alone long-term
debt.
PRG and Premcor USA "Other Assets" of $141.8 million and $141.9 million,
respectively exclude $4.2 million of investments in affiliates held by Premcor
Inc. stand-alone.
20
8. Long-term Debt and Exchangeable Preferred Stock
Long-term debt and exchangeable preferred stock consisted of the following:
December 31, June 30,
2001 2002
------------ ----------
8 5/8% Senior Notes due August 15, 2008
("8 5/8% Senior Notes")/(1)/ ................................... $ 109.8 $ 109.8
8 3/8% Senior Notes due November 15, 2007
("8 3/8% Senior Notes")/(1)/ ................................... 99.6 99.6
8 7/8% Senior Subordinated Notes due November 15, 2007
("8 7/8% Senior Subordinated Notes")/(1)/ ...................... 174.2 174.3
Floating Rate Term Loan due November 15, 2003 and 2004
("Floating Rate Loan")/(1)/ .................................... 240.0 240.0
9 1/2% Senior Notes due September 15, 2004
("9 1/2% Senior Notes")/(1)/ ................................... 150.4 -
12 1/2% Senior Notes due January 15, 2009............................
("12 1/2% Senior Notes")/(2)/ .................................. 255.0 255.0
Bank Senior Loan Agreement/(2)/ ..................................... 287.6 -
Ohio Water Development Authority Environmental Facilities Revenue
Bonds due December 01, 2031
("Series 2001 Ohio Bonds")/(1)/ ................................ 10.0 10.0
Obligations under capital leases/(1)/ ............................... 1.8 1.2
------------ ----------
1,328.4 889.9
Less current portion of debt ....................................... 81.4 9.9
------------ ----------
Total long-term debt at PRG 1,247.0 880.0
10 7/8% Senior Notes due December 1, 2005
("10 7/8% Senior Notes")/(3)/ .................................. 144.4 -
11 1/2% Subordinated Debentures due October 1, 2009 ("11 1/2%
Subordinated Debentures")/(3)/ ................................ - 43.5
------------ ----------
Total long-term debt at Premcor Inc. and Premcor USA $ 1,391.4 $ 923.5
============ ==========
Exchangeable Preferred Stock/(3)/ ................................... $ 94.8 $ --
============ ==========
(1) Issued or borrowed by PRG
(2) Issued or borrowed by PAFC
(3) Issued or borrowed by Premcor USA
During the second quarter of 2002, Premcor Inc. contributed $442.9 million
of its initial public offering proceeds to its subsidiaries for the early
redemption and repurchase of a portion of their outstanding long-term debt. In
June 2002, PRG redeemed the remaining $150.4 million of its 9 1/2% Senior
Secured Notes due September 15, 2004 at par, and Premcor USA redeemed the
remaining $144.4 million of its 10 7/8% Senior Secured Notes, including a $5.2
million premium, mainly from capital contributions received from Premcor Inc.
On April 1, 2002, Premcor USA exchanged all of its 11 1/2% Exchangeable
Preferred Stock for 11 1/2% Subordinated Debentures due October 2009. During the
second quarter of 2002, Premcor USA purchased, in the open market, $54.1 million
in aggregate principal amount of its 11 1/2% Subordinated Debentures at 105.75%
of their principal amount, which amounted to a $3.1 million premium, mainly from
capital contributions received from Premcor Inc. Premcor USA may pay the
interest on the remaining balance of these debentures in-kind until the April 1,
2003 interest payment, after which time it is required to make interest payments
in cash.
In January 2002, PACC made a $66.2 million principal payment on its Bank
Senior Loan Agreement, of which $59.7 million represented a mandatory prepayment
pursuant to the CSA and related secured account
21
structure. In June 2002, as part of the Sabine restructuring, PACC prepaid the
remaining balance of $221.4 million on the Bank Senior Loan Agreement at a $0.9
million premium, with cash on hand and an $84.2 million net capital contribution
from Premcor Inc.
Prior to the Sabine restructuring, the CSA required that PACC carry
insurance coverage with specified terms. Due to the effects of the events of
September 11, 2001 on the insurance market, coverage meeting such terms was not
available on commercially reasonable terms, and as a result, PACC's insurance
program was not in full compliance with the required insurance coverage at
December 31, 2001. PACC received a waiver from the requisite parties.
Subsequently, the CSA has been amended as part of the Sabine restructuring and
the new provisions regarding insurance coverage take into consideration a
changing economic environment and its effects on the insurance markets in
general. Under the amended CSA PACC has some specific insurance requirements,
but principally must ensure that coverage is consistent with customary standards
in its industry. There is also a provision that allows for thirty days notice to
requisite parties of any inability to comply with the specific terms without any
event of a default. As of June 30, 2002, PACC was in compliance with the
insurance coverage requirements of the amended CSA.
9. Working Capital Facility
In March 2002, PRG received a waiver regarding the maintenance of the
tangible net worth covenant related to its $650 million working capital credit
agreement, which allows for the exclusion of $120 million of the pretax
restructuring charge related to the closure of the Hartford refinery.
As part of the Sabine restructuring, Sabine terminated its insurance policy
that guaranteed its Maya crude oil purchase obligations and its $35 million
bank working capital facility that guaranteed Sabine's non-Maya crude oil
purchase obligations. In May 2002, PRG amended its $650 million working capital
facility principally to allow for the inclusion of Sabine crude oil purchase
obligations. As amended, the $650 million limit can be extended by $50 million
at the request of PRG in integral multiples of $5 million, the borrowing base
calculation was amended to include PACC inventory, and the tangible net worth
covenant was changed to $400 million from $150 million.
10. Stock Option Plans
In conjunction with the management change discussed in Note 4 above,
Premcor Inc. adopted two new stock incentive plans. The 2002 Special Stock
Incentive Plan was adopted in connection with the employment of Thomas D.
O'Malley and allows for the issuance of options for the purchase of Premcor Inc.
common stock. Under this plan, options on 3,400,000 shares of Premcor Inc.
common stock may be awarded. As of June 30, 2002, options for 2,950,000 shares
of Premcor Inc. common stock had been granted, options for 2,200,000 shares at
an exercise price of $10 per share and options for 750,000 shares at an exercise
price of $22.50 per share. Options granted under this plan vest 1/3 on each of
the first three anniversaries of the date of grant. The options for 750,000
shares referenced above were granted to Mr. O'Malley pursuant to his employment
agreement.
The 2002 Equity Incentive Plan was adopted to award key employees,
directors, and consultants with various stock options, stock appreciation
rights, restricted stock, performance-based awards and other common stock based
awards of Premcor Inc. common stock. Under the 2002 Equity Incentive Plan,
options for 1,500,000 shares of Premcor Inc. common stock may be awarded. As of
June 30, 2002, options for 1,023,500 shares of Premcor Inc. common stock were
granted as follows: options for 435,000 shares at an exercise price of $10 per
share, options for 240,000 shares at an exercise price of $22.50 per share, and
options for 348,500 shares at an exercise price of $24 per share. Options
granted under this plan vest 1/3 on each of the first three anniversaries of the
date of grant. These options included options for 100,000 shares granted to two
directors pursuant to agreements with the Company.
During the second quarter of 2002, the Company elected to adopt the fair
value based expense recognition provisions of SFAS No. 123, Accounting for
Stock-Based Compensation ("SFAS
22
No. 123"). The Company previously applied the intrinsic value based expense
recognition provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No. 25"). SFAS No. 123 provides that the adoption of the fair
value based method is a change to a preferable method of accounting. As provided
by SFAS No. 123, the stock option compensation expense is calculated based only
on stock options granted in the year of election and thereafter. The fair value
of these options was estimated on the grant date using the Black-Sholes
option-pricing model with the following weighted average assumptions as of June
30, 2002: a) assumed risk-free rate of 5.06%, b) expected life of 3.7 years, c)
expected volatility of 38.9%, and d) no expected dividends. All stock options
granted prior to January 1, 2002 continue to be accounted for under APB No. 25.
In relation to the two new 2002 stock incentive programs, the Company had
recognized stock option compensation expense of $1.6 million in the quarter
ended March 31, 2002, and would have recognized $2.8 million and $4.4 million
for the three-month and six-month periods ended June 30, 2002, respectively,
under APB No. 25. The adoption of SFAS No. 123 increased stock option
compensation expense by $1.0 million and $1.3 million for the three-month and
six-month periods ended June 30, 2002, respectively. The adoption of SFAS No.
123 increased the Company's net loss by $0.6 million (less than $0.01 per basic
share) and $0.8 million (less than $0.01 per basic share) for the three-month
and six-month periods ended June 30, 2002, respectively.
Since nonvested awards issued to employees prior to January 1, 2002 were
and continue to be accounted for using the intrinsic value based provisions of
APB No. 25, the prospective application of employee stock-based compensation
expense determined using the fair value based method is not necessarily
indicative of future expense amounts when the fair value based method will apply
to all outstanding, nonvested awards.
The effects of the adoption of SFAS No. 123 on loss from continuing
operations, net loss available to common stockholders, and net loss per share
for the three-month period ended March 31, 2002 are as follows:
Loss from continuing operations and net loss available to common
stockholders:
As reported $ (99.5)
Revised for adoption of SFAS No. 123 $ (99.7)
Net loss per common share (in whole dollars):
As reported $ (3.13)
Revised for adoption of SFAS No. 123 $ (3.14)
In March 2002, the Company recorded $5.7 million of non-cash, stock option
compensation expense related to the modification of option terms for two former
executives and this amount is included in "refinery restructuring and other
charges". With respect to all stock option grants outstanding at June 30, 2002,
the Company will record future non-cash stock option compensation expense and
additional paid-in capital of $44.6 million over the applicable vesting periods
of the grants.
11. Interest and Finance Expense
Interest and finance expense included in Premcor Inc.'s and Premcor USA's
statements of operations consisted of the following:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ------------------
2001 2002 2001 2002
-------- --------- -------- --------
Interest expense................. $ 37.2 $ 30.7 $ 77.0 $ 62.8
Financing costs.................. 4.3 3.5 7.8 7.7
Capitalized interest............. (1.1) (1.3) (2.5) (3.1)
-------- --------- -------- --------
$ 40.4 $ 32.9 $ 82.3 $ 67.4
======== ========= ======== ========
23
Interest and finance expense included in PRG's statements of operations
consisted of the following:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ------------------
2001 2002 2001 2002
-------- -------- -------- --------
Interest expense................. $ 32.5 $ 25.2 $ 67.5 $ 53.5
Financing costs.................. 4.2 3.5 7.6 7.6
Capitalized interest............. (1.1) (1.2) (2.6) (3.1)
-------- -------- -------- --------
$ 35.6 $ 27.5 $ 72.5 $ 58.0
======== ======== ======== =======
Cash paid for interest for the three-month and six-month periods ended June
30, 2002 was $33.3 million (2001 - $35.2 million) and $71.2 million (2001 -
$78.8 million), respectively, for Premcor USA. Cash paid for interest for the
three-month and six-month periods ended June 30, 2002 was $25.2 million (2001 -
$25.7 million) and $63.0 million (2001 - $69.3 million), respectively, for PRG.
12. Income Taxes
Premcor USA received net cash income tax refunds during the three-month and
six-month periods ended June 30, 2002 of $0.7 million (2001 - $2.4 million net
cash income tax payments) and $12.4 million (2001 - $0.3 million net cash income
tax payments), respectively. PRG received net cash income tax refunds during the
three-month and six-month periods ended June 30, 2002 of $0.7 million (2001 -
$2.4 million net cash income tax payments) and $12.4 million (2001 - $2.8
million net cash income tax payments), respectively.
The income tax provision on the income from continuing operations before
income taxes for the six-month period ended June 30, 2001 of $47.3 million for
the Company and $46.8 million for Premcor USA included the effect of a reversal
during the first quarter of 2001 of the remaining deferred tax valuation
allowance of $30.0 million. The reversal of the remaining deferred tax valuation
allowance resulted from the analysis of the likelihood of realizing the future
tax benefit of federal and state tax loss carryforwards, alternative minimum tax
credits and federal and state business tax credits. The income tax provision on
the income from continuing operations before income taxes for the six-month
period ended June 30, 2001 of $67.3 million for PRG included the effect of the
reversal during the first quarter of 2001 of the remaining deferred tax
valuation allowance as described above of $12.4 million.
13. Discontinued Operations
In 2001, the Company recorded a pretax charge of $14.0 million, $8.5
million net of income taxes, related to environmental liabilities of
discontinued retail operations. This charge represented an increase in estimates
regarding the Company's environmental clean up obligation and was prompted by
the availability of new information concerning site by site clean up plans and
changing postures of state regulatory agencies.
14. Earnings per share
The diluted share base for the three-month and six-month periods ended June
30, 2002 excluded incremental common stock equivalents of 1,923,951 and
2,704,930, respectively, related to employee stock options and shareholder
warrants. These common stock equivalents were excluded due to their antidilutive
effect as a result of the Company's net loss available to common stockholders.
The diluted weighted average shares outstanding for the three-month and
six-month periods ended June 30, 2001 reflected the potential dilution that
could have occurred if all outstanding warrants were exercised. In the earnings
per share calculation, net income (loss) available to common stockholders
includes the deduction of preferred stock dividends when applicable.
15. Consolidating Financial Statements of PRG as Co-guarantor of PAFC's Senior
Notes
Presented below are the PRG consolidating balance sheets, statement of
operations, and cash flows as required by Rule 3-10 of the Exchange Act. As part
of the Sabine restructuring, PRG became a full and unconditional guarantor of
PAFC's 12 1/2% Senior Notes, along with PACC, Sabine, and Neches. Under Rule
3-10, the condensed consolidating balance sheets, statement of operations, and
cash flows presented below meet the requirements for
24
financial statements of the issuer and each guarantor of the notes since the
issuer and guarantors are all direct or indirect subsidiaries of PRG as well as
full and unconditional guarantors. PAFC issued and then loaned to PACC the
proceeds from the 12 1/2% Senior Notes, in order to finance PACC's heavy oil
processing facility. PACC owns and operates the heavy oil processing facility,
which is fully integrated with PRG's Port Arthur refinery. Both Sabine and
Neches have no material assets or operations.
25
THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
JUNE 30, 2002
Eliminations
Other Guarantor and Minority Consolidated
PRG PAFC Subsidiaries Interest PRG
--------- ---------- --------------- ------------ ------------
ASSETS (in millions)
CURRENT ASSETS:
Cash and cash equivalents................ $ 110.3 $ -- $ 8.2 $ -- $ 118.5
Short-term investments................... 1.7 -- -- -- 1.7
Cash and cash equivalents
restricted for debt service........... -- -- 65.4 -- 65.4
Accounts receivable...................... 280.3 -- -- -- 280.3
Receivable from affiliates............... 79.6 23.4 -- (52.6) 50.4
Inventories.............................. 293.9 -- 35.9 -- 329.8
Prepaid expenses and other............... 33.0 -- 3.6 -- 36.6
Net assets held for sale................. 61.2 -- -- -- 61.2
--------- ---------- --------------- ------------ ------------
Total current assets.......... ....... 860.0 23.4 113.1 (52.6) 943.9
PROPERTY, PLANT AND EQUIPMENT, NET......... 565.8 -- 620.0 -- 1,185.8
Deferred income taxes...................... 59.2 -- -- (25.3) 33.9
Investment in affiliate.................... 298.2 -- -- (298.2) --
Other assets............................... 124.5 -- 17.4 -- 141.9
Note receivable from affiliate............. 2.4 246.3 -- (248.7) --
--------- ---------- --------------- ------------ ------------
$ 1,910.1 $ 269.7 $ 750.5 $ (624.8) $ 2,305.5
========= ========== =============== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable......................... $ 384.8 $ -- $ 96.2 -- $ 481.0
Payable to affiliates.................... 59.5 -- 74.0 (49.8) 83.7
Accrued expenses and other............... 76.0 14.7 1.3 -- 92.0
Accrued taxes other than income.......... 28.1 -- 3.6 -- 31.7
Current portion of long-term debt........ 1.2 8.7 -- -- 9.9
Current portion of notes payable.........
to affiliate.......................... -- -- 2.8 (2.8) --
--------- ---------- --------------- ------------ ------------
Total current liabilities............. 549.6 23.4 177.9 (52.6) 698.3
LONG-TERM DEBT............................. 633.7 246.3 -- -- 880.0
DEFERRED INCOME TAXES...................... -- -- 25.3 (25.3) --
OTHER LONG-TERM LIABILITIES................ 142.3 -- 0.2 -- 142.5
NOTE PAYABLE TO AFFILIATE.................. -- -- 248.7 (248.7) --
COMMON STOCKHOLDER'S EQUITY:
Common stock............................. 0.1 -- 0.1 (0.1) 0.1
Paid-in capital.......................... 501.0 -- 206.0 (195.5) 511.5
Retained earnings (deficit).............. 83.4 -- 92.3 (102.6) 73.1
--------- ---------- --------------- ------------ ------------
Total common stockholder's
equity................................ 584.5 -- 298.4 (298.2) 584.7
--------- ---------- --------------- ------------ ------------
$ 1,910.1 $ 269.7 $ 750.5 $ (624.8) $ 2,305.5
========= ========== =============== ============ ============
26
THE PREMCOR REFINING GROUP INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002
Eliminations
Other and
Guarantor Minority Consolidated
PRG PAFC Subsidiaries Interest PRG
-------------- -------------- --------------- ------------- -------------
(in millions)