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, 2001
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from . . . . to . . . .
Commission file number 1-7627
FRONTIER OIL CORPORATION
(Exact name of registrant as specified in its charter)
| | Wyoming | | 74-1895085 |
| | (State or other jurisdiction of | | (I.R.S. Employer |
| | incorporation or organization) | | Identification No.) |
| | | | |
| | 10000 Memorial Drive, Suite 600 | | 77024-3411 |
| | Houston, Texas | | (Zip Code) |
| | (Address of principal executive offices) | | |
Registrant’s telephone number, including area code:(713) 688-9600
| |
|
| | Former name, former address and former fiscal year, if
changed since last report. |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . . .
Registrant’s number of common shares outstanding as of August 2, 2001: 25,995,858
FRONTIER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
INDEX
| | Page |
| Part I - Financial Information | |
| Item 1. Financial Statements | 1 |
| Item 2. Management’s Discussion and Analysis of Financial | |
| Condition and Results of Operations | 7 |
| Part II - Other Information | 13 |
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q concerning us which are (1) projections of revenues, earnings, earnings per share, capital expenditures or other financial items, (2) statements of plans and objectives for future operations, including acquisitions, (3) statements of future economic performance, or (4) statements of assumptions or estimates underlying or supporting the foregoing are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Exchange Act. The ultimate accuracy of forward-looking statements is subject to a wide range of business risks and changes in circumstances, and actual results and outcomes often differ from expectations.
All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.
Definitions of Terms
bbl(s) = barrel(s)
bpd = barrel(s) per day
PART I - FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
Six Months Ended Three Months Ended
June 30 June 30
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenues:
Refined products (1) $ 986,685 $ 975,051 $ 557,563 $ 525,558
Other (1,893) 1,351 (3,914) 1,145
---------- ---------- ---------- ----------
984,792 976,402 553,649 526,703
---------- ---------- ---------- ----------
Costs and Expenses:
Refining operating costs (1) 850,831 914,820 441,253 475,184
Selling and general expenses 8,603 5,930 5,276 3,347
Depreciation 12,284 11,358 6,204 5,689
---------- ---------- ---------- ----------
871,718 932,108 452,733 484,220
---------- ---------- ---------- ----------
Operating Income 113,074 44,294 100,916 42,483
Interest Expense, Net 15,353 16,745 8,166 8,493
---------- ---------- ---------- ----------
Income Before Income Taxes 97,721 27,549 92,750 33,990
Provision for Income Taxes 14,308 1,728 13,849 2,087
---------- ---------- ---------- ----------
Net Income $ 83,413 $ 25,821 $ 78,901 $ 31,903
========== ========== ========== ==========
Basic Earnings Per Share
of Common Stock: $ 3.15 $ .94 $ 2.99 $ 1.16
========== ========== ========== ==========
Diluted Earnings Per Share
of Common Stock: $ 3.05 $ .92 $ 2.86 $ 1.13
========== ========== ========== ==========
(1) Prior year data restated to conform to current year presentation.
The accompanying notes are an integral part of these financial statements.
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
June 30, 2001 and December 31, 2000 2001 2000
---------- ----------
ASSETS
Current Assets:
Cash, including cash equivalents of
$63,014 in 2001 and $62,593 in 2000 $ 84,034 $ 64,446
Trade receivables, less allowance for doubtful
accounts of $500 in 2001and 2000 81,884 69,220
Other receivables 11,942 8,905
Inventory of crude oil, products and other 130,867 125,481
Deferred tax current assets 4,021 687
Other current assets 1,667 3,780
---------- ----------
Total current assets 314,415 272,519
---------- ----------
Property, Plant and Equipment, at cost:
Refineries and pipeline 397,519 389,874
Furniture, fixtures and other equipment 5,582 5,364
---------- ----------
403,101 395,238
Less - Accumulated depreciation 104,526 92,245
---------- ----------
298,575 302,993
Other Assets 12,279 12,701
---------- ----------
$ 625,269 $ 588,213
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 165,285 $ 171,563
Revolving credit facility - 23,000
Accrued turnaround cost 11,106 17,531
Accrued liabilities and other 22,914 11,972
Accrued interest 4,248 4,843
---------- ----------
Total current liabilities 203,553 228,909
---------- ----------
Long-Term Debt 220,450 239,583
Long-Term Accrued Turnaround Cost 13,324 13,525
Post-Retirement Employee Liabilities 18,889 17,847
Deferred Credits and Other 2,996 3,072
Deferred Income Taxes 9,874 3,853
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares authorized,
no shares issued - -
Common stock, no par, 50,000,000 shares authorized,
29,744,924 and 29,190,004 shares issued in 2001 and 2000 57,414 57,359
Paid-in capital 94,941 89,706
Retained earnings (deficit) 32,151 (49,916)
Treasury stock, 3,491,760 shares and 2,622,596 shares
in 2001 and 2000 (26,395) (15,725)
Deferred employee compensation, 260,306 restricted shares in 2001 (1,928) -
---------- ----------
Total Shareholders' Equity 156,183 81,424
---------- ----------
$ 625,269 $ 588,213
========== ==========
The accompanying notes are an integral part of these financial statements.
FRONTIER OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, 2001 2000
---------- ----------
OPERATING ACTIVITIES
Net income $ 83,413 $ 25,821
Depreciation 12,284 11,358
Deferred credits and other 5,024 793
Change in working capital from operations (25,131) (4,715)
---------- ----------
Net cash provided by operating activities 75,590 33,257
---------- ----------
INVESTING ACTIVITIES
Additions to property and equipment (8,888) (3,345)
Other (79) -
---------- ----------
Net cash used in investing activities (8,967) (3,345)
---------- ----------
FINANCING ACTIVITIES
Refining credit facility borrowings (repayments) (23,000) (26,000)
Repayments of debt:
9-1/8% Senior Notes (16,910) -
Issuance of common stock 1,783 1,963
Purchase of treasury stock (8,602) (489)
Other (306) (50)
---------- ----------
Net cash used in financing activities (47,035) (24,576)
---------- ----------
Increase in cash and cash equivalents 19,588 5,336
Cash and cash equivalents, beginning of period 64,446 38,345
---------- ----------
Cash and cash equivalents, end of period $ 84,034 $ 43,681
========== ==========
The accompanying notes are an integral part of these financial statements.
FRONTIER OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 2001
(Unaudited)
1. Financial statement presentation
Financial statement presentation
The condensed consolidated financial statements include the accounts of Frontier Oil Corporation, a Wyoming corporation, and its wholly owned subsidiaries, including Frontier Holdings Inc., collectively referred to as Frontier or the Company. These financial statements have been prepared by the registrant without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and include all adjustments (comprised of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that the financial statements included herein be read in conjunction with the financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2000.
The Company is an independent energy company engaged in crude oil refining and wholesale marketing of refined petroleum products (the “refining operations”). The Company operates refineries (“the Refineries”) in Cheyenne, Wyoming and El Dorado, Kansas with a total crude oil capacity of over 150,000 barrels per day. The Company focuses its marketing efforts in the Rocky Mountain and Plains States regions of the United States. The Company purchases the crude oil to be refined and markets the refined petroleum products produced, including various grades of gasoline, diesel fuel, jet fuel, asphalt, chemicals and petroleum coke.
Earnings per share
Basic earnings per share has been computed based on the weighted average number of common shares outstanding. Diluted earnings per share assumes the additional dilution for the exercise of in-the-money stock options. No adjustments to income are used in the calculation of earnings per share. The basic and diluted average shares outstanding are as follows:
Six Months Ended Three Months Ended
June 30 June 30
2001 2000 2001 2000
---------- ---------- ---------- ----------
Basic 26,464,641 27,468,549 26,374,765 27,539,080
Diluted 27,330,115 28,081,997 27,622,937 28,152,528
New accounting statement adopted January 1, 2001
In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137 which delayed the effective date of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. SFAS No. 133, as amended by SFAS No. 137 and No. 138, cannot be applied retroactively and must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after the transition date of December 31, 1998. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the statements of operations, and requires a company to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting treatment.
Upon adoption of SFAS No. 133 on January 1, 2001, the Company redesignated the natural gas collars it had in place to hedge its natural gas purchases for the first quarter of 2001 as cash flow hedges. Accordingly at January 1, 2001, the Company recorded the costless collars at fair market value by increasing other current assets by $3.9 million ($4.1 million net of deferred tax current assets of $.2 million) and increasing cumulative adjustment to other comprehensive income (equity account) by a corresponding amount. The costless collars were closed out during the first quarter of 2001 and the realized gain of $2.4 million reduced refinery operating expense when the corresponding natural gas was purchased.
The Company utilizes derivative instruments to protect against price declines on foreign crude oil purchases and these contracts qualify for hedge accounting as fair value hedges under SFAS No. 133. The Company also uses derivative instruments to fix margins on certain gasoline production and hedge inventory. The Company’s derivative contracts to fix margins or hedge inventory currently do not qualify for hedge accounting under SFAS No. 133. At June 30, 2001 the Company has no open derivative instruments. Realized futures trading net losses on inventories and/or future production in 2001 and the ineffective portion of fair value hedges on crude oil was $2.4 million for the first six months of 2001 and is reflected as a reduction of other income.
2. Schedule of major components of inventory
June 30, December 31,
2001 2000
------------- -------------
(in thousands)
Crude oil $ 29,737 $ 39,947
Unfinished products 48,292 36,078
Finished products 36,045 33,587
Process chemicals 3,898 2,743
Repairs and maintenance supplies and other 12,895 13,126
------------- -------------
$ 130,867 $ 125,481
============= =============
Inventories of crude oil, other unfinished oils and all finished products are recorded at the lower of cost on a first in, first out (FIFO) basis or market.
3. Restricted stock plan
On March 13, 2001 the Company established the Frontier Oil Corporation Restricted Stock Plan (the “Plan”) covering 1,000,000 shares of common stock held as treasury stock by the Company. The Plan’s purpose is to permit grants of shares, subject to restrictions, to key employees of the Company and is intended to promote the interests of the Company by encouraging key employees of the Company to acquire or increase their equity interest in the Company and to provide a means whereby they may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company thereby advancing the interests of the Company and its stockholders. The Plan is also contemplated to enhance the ability of the Company to attract and retain the services of key employees who are important to the growth and profitability of the Company. It is intended that the Plan work in conjunction with the Company’s annual bonus program for employees whereby all or a portion of a bonus awarded shall be paid in the form of restricted stock granted under the Plan. Shares awarded under the Plan entitle the shareholder to all rights of common stock ownership except that the shares may not be sold, transferred or pledged during the restriction period except as provided for in the Plan.
As of June 30, 2001 the Company has granted 260,306 restricted shares of common stock of which 25% vest in March, 2002, 25% vest in March, 2003 and 50% vest in March, 2004. The shares were recorded at the market value on the date of issuance (March 13, 2001) as deferred employee compensation (equity account) and will be amortized to compensation expense over the respective vesting periods of the stock. Amortization expense was $128,000 for the quarter and six months ended June 30, 2001.
4. Canadian Tax Assessment
Prior to the sale of its Canadian oil and gas operations in June 1997, the Company conducted business in Canada. As a result of an audit in 1999 of its Canadian tax returns for the years 1995, 1996 and 1997 conducted by the Canada Customs and Revenue Agency (formerly Revenue Canada), the Company was assessed for approximately C$27 million of additional taxes. More than C$20 million of this assessment related to certain foreign exploration and development expenditure (“FEDE”) deductions. As previously reported, the Company and the Canada Customs and Revenue Agency were awaiting the passage of legislation drafted and released by the Department of Finance in Canada that would eliminate this portion of the assessment. On June 14, 2001, the legislation received Royal Assent and was thereby passed into law. As a result, the major portion of the Canadian tax assessment is vacated. In addition to the FEDE assessment, approximately C$2 million of the original assessment related to minor items, which the Company did not dispute and settled in 2000 through a cash payment of C$1.1 million and the application of tax pools.
Accordingly, only approximately C$5 million of the original assessment (plus accumulated interest on this amount estimated to be C$3.4 million) remains to be resolved. The outstanding amount relates to the deductibility of interest and certain related financing costs in 1995, which were not previously challenged by the Canada Customs and Revenue Agency in its audits of prior periods. With the recent passing of the long-awaited FEDE legislation, the Company is currently preparing its appeal of the deductibility of the interest and related expenses. While the Company acknowledges the inherent uncertainties associated with any tax disputes, management believes that this matter will be resolved without any further material effect on the Company’s financial position, results of operations or liquidity. Since a reasonable estimate of any possible assessment the Company may be required to pay is not possible at this time, no accrual has been made.
5. El Dorado Contingent Earn-Out Payment
As part of the consideration for the acquisition of the El Dorado refinery in November 1999, the Company may be required to make contingent earn-out payments for each of the years 2001 through 2007. These annual payments are calculated on a calendar year basis, and are equal to one-half of the excess over $60 million of the El Dorado refinery’s revenues less its material costs and operating costs, other than depreciation. The total amount of these contingent payments is capped at $40 million, with an annual cap of $7.5 million. Such contingency payments, if any, will be recorded as additional acquisition cost when the contingent payment is determinable beyond a reasonable doubt. If the contingent payment were calculated based on the Company’s earnings for the six months ended June 30, 2001, the Company would make an earn-out payment of $7.5 million in early 2002.
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS
The terms “Frontier” and “we” refer to Frontier Oil Corporation and its subsidiaries.
Six months ended June 30, 2001 compared with the same period in 2000
We had net income for the six months ended June 30, 2001 of $83.4 million, or $3.05 per diluted share, compared to net income of $25.8 million, or $.92 per diluted share, for the same period in 2000.
Operating income increased $68.8 million in 2001 versus 2000 due to an increase in the refined product spread (revenues less material costs) of $91.1 million, offset by a decrease in other income of $3.2 million and increases in refining operating expenses of $15.4 million, selling and general costs of $2.7 million and depreciation of $926,000.
Refined product revenues and refining operating costs are impacted by changes in the price of crude oil. The average price of crude oil was lower in 2001 than in 2000. The refined product spread was $8.71 per barrel in 2001 compared to $4.96 per barrel in 2000. The Cheyenne refinery refined product spread was $10.12 per barrel in 2001 compared to $5.18 per barrel in 2000. The improved product spread was due to improved light product margins and an increase in the light/heavy spread. The El Dorado refinery refined product spread was $8.15 per barrel in 2001 compared to $4.86 per barrel in 2000 due to improved light product margins and an increase in the WTI/WTS crude oil price spread.
Refined product revenues increased $11.6 million or 1% due to increased overall sales prices offset by decreased sales volumes. While the average gasoline price increased $3.76 per barrel and average diesel and jet fuel prices increased $3.05 per barrel, we experienced a 7% overall decrease in sales volumes. Yields of gasoline decreased 5% while yields of diesel and jet fuel decreased 1% in 2001 compared to the same period in 2000. The primary reason for the decreased sales and yields was the major turnaround, or planned maintenance, at the El Dorado refinery which commenced in mid-March and was completed in mid-April. The Cheyenne refinery throughput and resulting yields in the first three months of 2001 was constrained by asphalt inventory storage availability that was impacted by increased throughput during the fourth quarter of 2000.
Other income decreased $3.2 million to a loss of $1.9 million in 2001 due to $2.4 million realized futures trading net losses on inventories and/or future production in 2001 compared to an $864,000 net gain in 2000.
Refining operating costs decreased $64.0 million or 7% from 2000 levels due to decreases in material, freight and other costs offset by higher refinery operating expenses. Material, freight and other costs per bbl decreased 3% or $.71 per bbl in 2001 primarily due to lower crude oil prices. The Cheyenne refinery material, freight and other costs of $26.09 per barrel decreased from $26.40 per barrel in 2000 due to lower crude oil prices and an increased light/heavy spread but offsetting these were higher feed, blendstock and purchased product prices, whose prices are not impacted by lower crude oil prices . The heavy crude oil utilization rate at the Cheyenne refinery expressed as a percentage of total crude oil decreased to 91% in 2001 from 92% in 2000. The light/heavy spread averaged $7.88 per barrel compared to $3.66 per barrel in the first six months of 2000. The El Dorado refinery material, freight and other costs of $28.52 per barrel decreased from $29.42 per barrel due to lower crude oil prices offset by higher feed and blendstock prices, whose prices are not impacted by lower crude oil prices. Refining operating expense per barrel was $3.68 in 2001 compared to $2.88 per barrel in 2000. Higher natural gas costs comprised approximately 44 percent of the per barrel operating expense increase with the remainder being due to decreased yields and sales. The Cheyenne refinery operating expense per barrel increased $.71 to $3.42 per barrel in 2001 while the El Dorado refinery operating expense was $3.78 per barrel in 2001 increasing from the 2000 operating expense of $2.95 per barrel.
Selling and general expenses increased $2.7 million or 45% for the six months ended June 30, 2001 because of increased personnel and other costs relating to the El Dorado refinery acquisition.
Depreciation increased $926,000 or 8% in the 2001 six-month period as compared to the same period in 2000 because of increases in capital investments.
The interest expense decrease of $1.4 million or 8% in 2001 was attributable to repurchases of 9-1/8% Senior Notes and 11-3/4% Senior Notes during 2000 and 2001, less interest expense and fees on the revolving credit facility and more interest income. Average debt for the six months decreased from $302 million in 2000 to $277 million in 2001.
Income taxes increased as a result of the full utilization of our previously unbenefitted deferred tax assets late in the period.
Three months ended June 30, 2001 compared with the same period in 2000
We had net income for the three months ended June 30, 2001 of $78.9 million, or $2.86 per diluted share, compared to net income of $31.9 million, or $1.13 per diluted share, for the same period in 2000.
Operating income increased $58.4 million in 2001 versus 2000 due to an increase in the refined product spread (revenues less material costs) of $68.8 million, offset by a decrease in other income of $5.1 million and increases in refining operating expenses of $2.9 million, selling and general costs of $1.9 million and depreciation of $515,000.
Refined product revenues and refining operating costs are impacted by changes in the price of crude oil. The average price of crude oil was lower in 2001 than in 2000. The refined product spread was $11.32 per barrel in 2001 compared to $6.38 per barrel in 2000. The Cheyenne refinery refined product spread was $11.94 per barrel in 2001 compared to $6.19 per barrel in 2000. The improved product spread was due to improved light product margins and an increase in the light/heavy spread. The El Dorado refinery refined product spread was $11.04 per barrel in 2001 compared to $6.47 per barrel in 2000 due to improved light product margins and an increase in the WTI/WTS crude oil price spread.
Refined product revenues increased $32.0 million or 6% due to increased overall sales prices offset by decreased sales volumes. While the average gasoline price increased $4.42 per barrel and average diesel and jet fuel prices increased $3.43 per barrel, we experienced a 3% overall decrease in sales volumes. Yields of gasoline increased 4% while yields of diesel and jet fuel increased 3% in 2001 compared to the same period in 2000. The primary reason for the decreased sales was the major turnaround, or planned maintenance, at the El Dorado refinery which commenced in mid-March and was completed in mid-April.
Other income decreased $5.1 million to a loss of $3.9 million in 2001 due to $4.2 million realized futures trading net losses on inventories and/or future production in 2001 compared to an $864,000 net gain in 2000.
Refining operating costs decreased $33.9 million or 7% from 2000 levels due to decreases in material, freight and other costs offset by higher refinery operating expenses. Material, freight and other costs per bbl decreased 6% or $1.69 per bbl in 2001 primarily due to lower crude oil prices. The Cheyenne refinery material, freight and other costs of $25.51 per barrel decreased from $26.75 per barrel in 2000 due to lower crude oil prices and an increased light/heavy spread but offsetting these were higher feed, blendstock and purchased product prices, whose prices are not impacted by lower crude oil prices. The heavy crude oil utilization rate at the Cheyenne refinery expressed as a percentage of total crude oil decreased to 88% in 2001 from 92% in 2000 due to limited asphalt inventory storage availability. The light/heavy spread averaged $7.55 per barrel compared to $3.44 per barrel in the three months ended June 2000. The El Dorado refinery material, freight and other costs of $27.79 per barrel decreased from $29.69 per barrel due to lower crude oil prices offset by higher feed and blendstock prices, whose prices are not impacted by lower crude oil prices. Refining operating expense per barrel was $3.30 in 2001 compared to $3.01 per barrel in 2000. Higher utility costs at the El Dorado refinery and decreased sales volumes overall were the main components of the per barrel operating expense increase. The Cheyenne refinery operating expense per barrel increased $.36 to $2.86 per barrel in 2001 while the El Dorado refinery operating expense was $3.49 per barrel in 2001 increasing from the 2000 operating expense of $3.24 per barrel.
Selling and general expenses increased $1.9 million or 58% for the three months ended June 30, 2001 because of increased personnel and other costs relating to the El Dorado refinery acquisition.
Depreciation increased $515,000 or 9% in the 2001 three-month period as compared to the same period in 2000 because of increases in capital investments.
The interest expense decrease of $327,000 or 4% in 2001 was attributable to repurchases of 9-1/8% Senior Notes and 11-3/4% Senior Notes during 2000 and 2001 and less interest expense and fees on the revolving credit facility. Average debt for the three months decreased from $300 million in 2000 to $279 million in 2001.
Income taxes increased as a result of the full utilization of our previously unbenefitted deferred tax assets late in the period.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30, 2001 was $75.6 million compared to $33.3 million cash provided by operating activities for the six months ended June 30, 2000. Working capital changes required $25.1 million and $4.7 million of cash flows for the first six months of 2001 and 2000, respectively.
At June 30, 2001, we had $84.0 million of cash and cash equivalents, $112.9 million available under our line of credit and working capital of $110.9 million. In addition, we purchased $16.9 million of 9-1/8% Senior Notes during the first six months of 2001 and had committed to purchase $2.333 million of 11-3/4% Senior Notes which were purchased in early July 2001.
Additions to property and equipment in the first six months of 2001 of $8.9 million increased $5.5 million from the first six months in 2000. Total capital expenditures for 2001 are currently planned to be approximately $23.7 million.
In June 2001 our Board of Directors authorized an additional two million shares under our previously announced stock repurchase program bringing the total authorization to six million shares which may be purchased and held as treasury shares. Through December 2000, 2,345,900 shares of common stock had been purchased under this program. During the first six months of 2001, an additional 1,027,600 were purchased or committed to purchase for approximately $11.3 million under this program.
Our Board of Directors declared an initial quarterly cash dividend in June 2001 of $.05 per share payable on July 16, 2001 to shareholders of record on June 29, 2001. The total cash required for this dividend is $1.3 million.
Our refining revolving credit facility was amended, effective June 20, 2001, to extend the facility expiration date from November 16, 2002 to June 15, 2004.
Market Risk - Derivative Instruments. Other income includes futures trading losses of $2.4 million and $4.2 million, for the six months and three months ended June 30, 2001, respectively, on derivative instruments to hedge inventories and/or production in 2001 and the ineffective portion of fair value hedges on crude oil.
At June 30, 2001, we have no open commodity derivative contracts.
REFINING OPERATING STATISTICAL INFORMATION
Consolidated:
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Raw material input (bpd)
Light crude 30,423 39,520 34,951 35,336
Heavy and intermediate crude 109,308 101,642 112,124 106,370
Other feed and blend stocks 14,554 14,571 14,779 13,515
---------- ---------- ---------- ----------
Total 154,285 155,733 161,854 155,221
Manufactured product yields (bpd)
Gasoline 73,264 76,988 77,283 74,074
Diesel and jet fuel 50,462 50,796 52,653 51,049
Asphalt 4,748 6,066 6,228 7,444
Chemicals 1,623 1,842 1,584 1,810
Other 21,767 17,124 20,508 17,550
---------- ---------- ---------- ----------
Total 151,864 152,816 158,256 151,927
Total product sales (bpd)
Gasoline 77,363 83,664 81,761 82,275
Diesel and jet fuel 50,183 51,666 51,294 52,470
Asphalt 5,381 5,627 8,928 8,393
Chemicals 1,576 2,247 1,455 2,582
Other 14,703 16,742 16,093 18,509
---------- ---------- ---------- ----------
Total 149,206 159,946 159,531 164,229
Operating margin information (per sales bbl) (1)
Average sales price $ 36.54 $ 33.50 $ 38.41 $ 35.16
Raw material, freight and other costs (2) 27.83 28.54 27.09 28.78
---------- ---------- ---------- ----------
Product spread 8.71 4.96 11.32 6.38
Refinery operating expenses, excl depreciation 3.68 2.88 3.30 3.01
Depreciation .45 .38 .42 .38
---------- ---------- ---------- ----------
Operating margin $ 4.58 $ 1.70 $ 7.60 $ 2.99
Average West Texas Intermediate
crude oil price at Cushing, OK $ 28.61 $ 29.74 $ 27.53 $ 29.75
Average sales price (per sales bbl) (1)
Gasoline $ 41.16 $ 37.40 $ 44.79 $ 40.37
Diesel and jet fuel 37.26 34.21 38.46 35.03
Asphalt 20.94 23.89 22.34 25.29
Chemicals 76.45 62.96 83.83 68.89
Other 11.14 11.06 10.61 12.19
(1) Prior year data restated to conform to current year presentation.
(2) FIFO inventory accounting.
REFINING OPERATING STATISTICAL INFORMATION
Cheyenne Refinery:
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Raw material input (bpd)
Light crude 3,345 3,084 4,943 3,190
Heavy crude 32,956 35,138 35,684 37,414
Other feed and blend stocks 4,362 5,085 4,212 4,887
---------- ---------- ---------- ----------
Total 40,663 43,307 44,839 45,491
Manufactured product yields (bpd)
Gasoline 16,507 17,776 17,688 17,939
Diesel 12,824 12,469 13,859 12,887
Asphalt 4,748 6,066 6,228 7,444
Other 5,631 5,671 6,178 5,933
---------- ---------- ---------- ----------
Total 39,710 41,982 43,953 44,203
Total product sales (bpd)
Gasoline 20,661 22,284 21,694 23,462
Diesel 12,435 12,334 13,522 12,508
Asphalt 5,381 5,627 8,928 8,393
Other 4,134 6,166 4,515 6,421
---------- ---------- ---------- ----------
Total 42,611 46,411 48,659 50,784
Operating margin information (per sales bbl) (1)
Average sales price $ 36.21 $ 31.58 $ 37.45 $ 32.94
Raw material, freight and other costs (2) 26.09 26.40 25.51 26.75
---------- ---------- ---------- ----------
Product spread 10.12 5.18 11.94 6.19
Refinery operating expenses, excl depreciation 3.42 2.71 2.86 2.50
Depreciation .87 .72 .76 .66
---------- ---------- ---------- ----------
Operating margin $ 5.83 $ 1.75 $ 8.32 $ 3.03
Light/heavy crude spread (per bbl) $ 7.88 $ 3.66 $ 7.55 $ 3.44
Average sales price (per sales bbl) (1)
Gasoline $ 43.63 $ 38.49 $ 47.06 $ 41.07
Diesel 40.03 36.05 41.68 36.90
Asphalt 20.94 23.89 22.34 25.29
Other 7.49 4.65 8.40 5.48
(1) Prior year data restated to conform to current year presentation.
(2) FIFO inventory accounting.
REFINING OPERATING STATISTICAL INFORMATION
El Dorado Refinery:
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Raw material input (bpd)
Light crude 27,077 36,436 30,007 32,147
Heavy and intermediate crude 76,352 66,505 76,440 68,956
Other feed and blend stocks 10,192 9,485 10,567 8,627
---------- ---------- ---------- ----------
Total 113,621 112,426 117,014 109,730
Manufactured product yields (bpd)
Gasoline 56,757 59,212 59,595 56,135
Diesel and jet fuel 37,638 38,327 38,794 38,162
Chemicals 1,623 1,842 1,584 1,810
Other 16,136 11,453 14,330 11,617
---------- ---------- ---------- ----------
Total 112,154 110,834 114,303 107,724
Total product sales (bpd)
Gasoline 56,702 61,380 60,067 58,812
Diesel and jet fuel 37,748 39,332 37,773 39,962
Chemicals 1,576 2,247 1,455 2,582
Other 10,569 10,576 11,578 12,088
---------- ---------- ---------- ----------
Total 106,595 113,535 110,873 113,444
Operating margin information (per sales bbl) (1)
Average sales price $ 36.67 $ 34.28 $ 38.83 $ 36.16
Raw material, freight and other costs (2) 28.52 29.42 27.79 29.69
---------- ---------- ---------- ----------
Product spread 8.15 4.86 11.04 6.47
Refinery operating expenses, excl depreciation 3.78 2.95 3.49 3.24
Depreciation .28 .25 .27 .25
---------- ---------- ---------- ----------
Operating margin $ 4.09 $ 1.66 $ 7.28 $ 2.98
WTI/WTS crude spread (per bbl) $ 3.75 $ 1.80 $ 3.77 $ 1.90
Average sales price (per sales bbl) (1)
Gasoline $ 40.27 $ 37.00 $ 43.97 $ 40.09
Diesel and jet fuel 36.35 33.63 37.30 34.44
Chemicals 76.45 62.96 83.83 68.89
Other 12.57 14.80 11.47 15.75
(1) Prior year data restated to conform to current year presentation.
(2) FIFO inventory accounting.
PART II - OTHER INFORMATION
| ITEM 1. | Legal Proceedings -
None, which in the opinion of management would have a material impact on the registrant.
|
| ITEM 2. | Changes in Securities -
There have been no changes in the constituent instruments defining the rights of the holders of any class of registered securities during the current quarter.
|
| ITEM 3. | Defaults Upon Senior Securities -
None.
|
| ITEM 4. | Submission of Matters to a Vote of Security Holders -
None.
|
| ITEM 5. | Other Information -
None.
|
| ITEM 6. | Exhibits and Reports on Form 8-K -
(a) Exhibits
10.01 - Second amendment to Revolving Credit Agreement and Guaranty and First Amendment to Clawback Agreement dated June 20, 2001 among Frontier Oil and Refining Company, as borrower, each of Frontier Holdings Inc., Frontier Refining & Marketing Inc., Frontier Refining Inc., Frontier El Dorado Refining Company and Frontier Pipeline Inc., as guarantors, the lenders named therein and Union Bank of California, N.A., as administrative agent for the lenders.
(b) Reports on Form 8-K
None.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | FRONTIER OIL CORPORATION
By: /s/ Nancy J. Zupan
Nancy J. Zupan
Vice President - Controller
(principal accounting officer)
|
Date: August 7, 2001
