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 MARCH 31, 1994
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
WAINOCO 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.)
1200 Smith Street, Suite 2100 77002-4367
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 658-9900
Not Applicable
----------------------------------------------------------
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 April 28, 1994:
27,237,452
WAINOCO OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1994
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 6
Part II - Other Information 11
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share)
For the three months ended March 31, 1994 1993
- ------------------------------------ -------- --------
Revenues:
Refined products $ 62,298 $ 72,390
Oil and gas sales 9,398 9,892
Other 510 1,353
-------- --------
72,206 83,635
-------- --------
Costs and Expenses:
Refining operating costs 53,664 70,568
Oil and gas operating costs 3,233 3,067
Selling and general expenses 2,987 2,884
Depreciation, depletion and amortization 5,958 5,866
-------- --------
65,842 82,385
-------- --------
Operating Income 6,364 1,250
Interest Expense, Net 5,061 5,217
-------- --------
Income (Loss) Before Income Taxes 1,303 (3,967)
Provision (Benefit) for Income Taxes (172) (72)
-------- --------
Net Income (Loss) $ 1,475 $ (3,895)
======== ========
Income (Loss) Per Share $ .05 $ (.18)
======== ========
The accompanying notes are an integral part of these financial statements.
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except shares)
March 31, 1994 and December 31, 1993 1994 1993
- ------------------------------------ -------- --------
ASSETS
Current Assets:
Cash, including cash equivalents of
$1,901 in 1994 and $2,078 in 1993 $ 2,034 $ 3,770
Trade receivables 15,602 16,281
Joint operators and other receivables 2,767 2,790
Inventory of crude oil, products and other 24,432 21,086
Other current assets 1,710 2,331
-------- --------
Total current assets 46,545 46,258
-------- --------
Property and Equipment, at cost:
Oil and gas properties, on a full-cost basis 444,401 448,649
Refinery and pipeline 127,921 124,705
Furniture, fixtures and other equipment 5,839 5,820
-------- --------
578,161 579,174
Less - Accumulated depreciation, depletion
and amortization 337,134 334,905
-------- --------
241,027 244,269
Other Assets 5,976 6,284
-------- --------
$293,548 $296,811
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 27,593 $ 30,514
Oil and gas proceeds payable 3,894 4,095
Accrued interest 3,239 5,681
Current maturities of long-term debt 1,000 0
Accrued turnaround cost 3,478 3,741
Accrued liabilities and other 3,564 4,132
-------- --------
Total current liabilities 42,768 48,163
-------- --------
Long-Term Debt, net of current maturities:
Revolving credit facilities 23,000 18,700
12% Senior Notes 100,000 100,000
7 3/4% Convertible Subordinated Debentures 46,000 46,000
10 3/4% Subordinated Debentures 12,221 12,200
-------- --------
181,221 176,900
-------- --------
Deferred Revenue and Other 2,787 3,410
Deferred Income Taxes 2,328 2,298
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $100 par value,
500,000 shares authorized, no shares issued 0 0
Common stock, no par, 50,000,000 shares authorized,
27,297,452 shares and 27,122,177 shares issued
in 1994 and 1993, respectively 57,171 57,153
Paid-in capital 81,714 80,855
Retained earnings (deficit) (64,822) (66,297)
Commitments to issue common stock, 175,275 shares 0 883
Cumulative translation adjustment (9,322) (6,233)
Treasury stock, 60,000 shares (270) (270)
Deferred employee compensation (27) (51)
-------- --------
Total Shareholders' Equity 64,444 66,040
$293,548 $296,811
======== ========
The accompanying notes are an integral part of these financial statements.
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the three months ended March 31, 1994 1993
- ------------------------------------ -------- --------
OPERATING ACTIVITIES
Net income (loss) $ 1,475 $ (3,895)
Depreciation, depletion and amortization 5,958 5,866
Deferred revenue and other (281) 357
-------- --------
7,152 2,328
Change in working capital from operations (6,317) 546
-------- --------
Net cash provided by operating activities 835 2,874
INVESTING ACTIVITIES
Additions to property and equipment (7,910) (10,371)
Sales of oil and gas properties 803 801
Net cash distributed as operator of properties (1,049) (473)
-------- --------
Net cash used in investing activities (8,156) (10,043)
FINANCING ACTIVITIES
Long-term bank borrowings 8,300 8,400
Payments of long-term bank debt (3,000) (700)
Other 268 1
-------- --------
Net cash provided by financing activities 5,568 7,701
Effect of exchange rate changes on cash 17 67
-------- --------
Increase (decrease) in Cash and Cash Equivalents (1,736) 599
Cash and Cash Equivalents, beginning of period 3,770 3,710
-------- --------
Cash and Cash Equivalents, end of period $ 2,034 $ 4,309
======== ========
The accompanying notes are an integral part of these financial statements.
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 1994
(Unaudited)
1. Financial statement presentation and earnings per share
Financial statement presentation
The condensed consolidated financial statements include the accounts of
Wainoco Oil Corporation, a Wyoming Corporation, and its wholly owned
subsidiaries, including Wainoco Oil & Gas Company and Frontier Holdings Inc.
("Frontier" or the "Refinery"), collectively referred to as Wainoco 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 generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Wainoco 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
Wainoco's annual report on Form 10-K for the year ended December 31, 1993.
Nonrecurring transactions
During the first quarter of 1993, the Company received payments of
insurance proceeds, as reimbursement for losses incurred, resulting in
nonrecurring income of $1.0 million, which has been classified as other
income in the consolidated statement of operations.
Earnings per share
Primary and fully diluted earnings per share have been computed on the
weighted average number of common shares outstanding and assume the exercise
of stock option shares for the three months ended March 31, 1994. The effect
of dilution for the fully diluted computation was immaterial. No effect was
given for the addition of dilutive stock options for the three months ended
March 31, 1993 as a loss was incurred. The primary and fully diluted average
shares outstanding for the three months ended March 31, 1994 and 1993 were
27,330,353 and 22,062,177, respectively.
2. Schedule of major components of inventory
March 31, December 31,
--------- -----------
1994 1993
---- ----
Crude oil $ 3,951 $ 2,803
Unfinished products 5,533 4,487
Finished products 8,779 7,435
Chemicals and in-transit inventory 1,439 1,589
Repairs and maintenance supplies and other 4,730 4,772
-------- --------
$ 24,432 $ 21,086
======== ========
3. Accounting policy for oil and gas properties
Wainoco follows the accounting policy (commonly referred to as "full-
cost" accounting) of capitalizing costs incurred in the acquisition,
exploration and development of oil and gas reserves. No gains or losses are
recognized upon the sale or disposition of oil and gas properties, except for
significant transactions.
Wainoco computes the provision for depreciation, depletion and
amortization of oil and gas properties, by country, on a quarterly basis
using the composite unit-of-production method based on future gross revenue
attributable to proved reserves.
4. Securities offering
In July, 1993, the Company sold five million shares of common stock
through a public offering. The net proceeds of $20.8 million were used to
pay down borrowings under its revolving credit facilities and to retire $5
million principal amount of its 10 3/4% Subordinated Debentures which were
applied to its 1993 and 1994 sinking fund requirements.
5. Canadian drilling program
In July 1993, the Company's Canadian oil and gas division entered into a
drilling program with a third party and received $883,000 in exchange for a
commitment to issue 175,275 shares of its common stock and distribute
Canadian tax deductions attributable to certain of the Company's exploration
and development activities in Canada. The shares were issued March 8, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1994 compared with the same period in 1993
The Company had net income for the three months ended March 31, 1994 of
$1,475,000, or $.05 per share, compared to a net loss of $3,895,000, or $.18
per share, for the same period in 1993.
Revenues decreased 14% as compared to the same period in 1993, primarily
the result of refined products revenues decreasing 14%. The decrease in
refined product revenues results from the 13% decrease in average product
sales prices, primarily reflecting a decrease in the price of crude oil.
Oil and gas revenues decreased 5% as a result of decreased oil prices in
the United States and decreased natural gas production in the United States
and Canada. Natural gas production declined 13% and oil production decreased
a modest 3% in 1994 in part as a result of compressor repairs at two large
fields in Canada and reduced drilling in 1992 and 1993 due to the large
capital requirements of the refinery. The price of oil was $5.03/bbl, or
30%, lower in the 1994 three-month period as compared to the same period in
1993. However, these decreases were offset by increases in the average price
for natural gas in Canada of 33% and in the United States of 11%. The
average price for natural gas in Canada in Canadian dollars actually rose
42%, to C$1.93/mcf from C$1.36/mcf, but the Canadian/United States dollar
exchange rate fell from last year's first quarter average of .7934 to .7455,
resulting in the smaller 33% price increase in United States dollars.
Refining operating costs decreased 24% in 1994 due to declines in crude
oil prices (material costs) as operating expenses excluding depreciation were
higher primarily the result of a 4% increase in product yields and costs
related to increased asphalt sales.
Oil and gas operating costs increased 5% in 1994 primarily as a result
of higher workover costs, pipeline repairs and facility overhaul costs.
The Refinery had good operations on a comparative basis as yields
increased 4% and operating margins increased $1.97/bbl in the quarter ended
March 31, 1994 as compared to the same period in 1993. Crack spreads for
unleaded gasoline and diesel were significantly wider than in the 1994
period.
Depreciation, depletion and amortization increased 2% in the 1994 three-
month period as compared to the same period in 1993. Refining DD&A increased
32% in the three-month period ended March 31, 1994 as a result of the
Refinery capital plant improvement program completed in late 1993. Oil and
gas operations DD&A decreased 5% primarily the result of lower oil and gas
sales. As a percentage of oil and gas sales, the DD&A rate remained at 44%
in the 1994 three-month period.
OPERATING EARNINGS BY SEGMENT
The following (in thousands) presents the operating income (loss) by
operating segment, by country for the three months ended March 31, 1994 and
1993. Operating income (loss) is income (loss) before net interest expense
and provision for income taxes and does not include unallocated net corporate
expense of $661,000 and $704,000 in the three months ended March 31, 1994 and
1993, respectively.
Oil and Gas
Exploration and Production
----------------------------
United
Refining States Canada Total
-------- -------- -------- --------
Three Months Ended March 31,
1994 - Operating margin $ 8,779 $ 1,633 $ 4,897 $ 6,530
Selling and general expenses 1,128 593 605 1,198
Depreciation, depletion
and amortization 1,835 1,653 2,470 4,123
-------- -------- -------- --------
Operating income (loss) $ 5,816 $ (613) $ 1,822 $ 1,209
======== ======== ======== ========
1993 - Operating margin $ 3,083 $ 2,577 $ 4,356 $ 6,933
Selling and general expenses 1,213 528 592 1,120
Depreciation, depletion
and amortization 1,388 1,946 2,395 4,341
-------- -------- -------- --------
Operating income $ 482 $ 103 $ 1,369 $ 1,472
======== ======== ======== ========
REFINING OPERATING STATISTICAL INFORMATION
Three Months Ended
March 31,
------------------
1994 1993
-------- --------
Raw material input (bpd)
Sweet crude 6,885 7,131
Sour crude 24,904 24,967
Other feed and blend stocks 4,653 3,103
-------- --------
Total 36,442 35,201
Manufactured product yields (bpd)
Gasoline 16,029 14,458
Distillates 12,860 12,268
Asphalt and other 6,210 7,116
-------- --------
Total 35,099 33,842
Total product sales (bpd)
Gasoline 18,573 18,256
Distillates 12,258 12,159
Asphalt and other 4,954 5,739
-------- --------
Total 35,785 36,154
Operating margin information (per sales bbl)
Average sales price $ 19.34 $ 22.25
Material costs
(under FIFO inventory accounting) 12.80 17.82
Product spread 6.54 4.43
Operating expenses excluding depreciation 3.87 3.87
Depreciation .55 .41
-------- --------
Operating margin $ 2.12 $ .15
Manufactured product margin
before depreciation (per bbl) $ 2.68 $ .59
Purchase product margin (per purchased product bbl) $ 0 $ (.77)
Sweet/sour spread (per bbl) $ 3.99 $ 4.76
Average sales price (per sales bbl)
Gasoline $ 21.72 $ 25.24
Distillates 20.90 24.03
Asphalts and other 6.56 8.98
OIL AND GAS EXPLORATION AND PRODUCTION STATISTICAL INFORMATION
Three Months Ended
March 31,
------------------
1994 1993
-------- --------
Revenue (in thousands)
Net oil and condensate sales
Canada $ 624 $ 816
United States 2,151 3,214
-------- --------
2,775 4,030
-------- --------
Net gas sales
Canada 5,301 4,591
United States 1,322 1,271
-------- --------
6,623 5,862
-------- --------
$ 9,398 $ 9,892
======== ========
Production
Net oil and condensate (bbls)
Canada 60,000 58,000
United States 172,000 180,000
-------- --------
232,000 238,000
======== ========
Net gas (mmcf)
Canada 3,677 4,269
United States 607 650
-------- --------
4,284 4,919
======== ========
Price
Average oil and condensate sales (per bbl)
before deduction for production taxes
Canada $ 10.36 $ 14.14
United States 12.52 17.90
Weighted average 11.96 16.99
Average gas sales (per mcf) before
deduction for production taxes
Canada $ 1.44 $ 1.08
United States 2.18 1.96
Weighted average 1.55 1.19
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $835,000 and $2,874,000
for the three months ended March 31, 1994 and 1993, respectively. Cash from
financing activities in the three months ended March 31, 1994 and 1993 was
provided primarily by the Company's bank lines of credit of $5,300,000 and
$7,700,000 net of repayments of bank debt and production loans of $3,000,000
and $700,000, respectively.
In July 1993, the Company raised $21,346,000, before offering expenses
of approximately $500,000, from a 5,000,000 share equity offering which was
used to make long-term debt repayments against its bank lines of credit.
Subsequently, the Company reborrowed $5,000,000 to retire an equal principal
amount of its 10 3/4% Subordinated Debentures.
At March 31, 1994, the Company had $25,206,000 available under its oil
and gas lines of credit and $15,000,000 under the Frontier line of credit.
The estimated five-year maturities of long-term debt are $2,500,000 in 1995,
1996 and 1997 and $5,000,000 in 1998 assuming that the oil and gas reserved-
based credit facilities are extended. As of March 31, 1994, there is a
$1,000,000 current maturity on the United States credit facility. However,
the Company is finalizing a new United States credit agreement which it
anticipates to complete in the second quarter of 1994. The new revolving
loan would convert to a five-year term loan in 1995 with payments commencing
in December 1996.
Net cash used in investing activities was $8,156,000 and $10,043,000 for
the three months ended March 31, 1994 and 1993, respectively. Capital
expenditures of approximately $23,200,000 are currently budgeted for 1994, of
which $6,540,000 had been accrued as of March 31, 1994. The Company has been
engaged in a capital improvement program for the Refinery which commenced in
1992 and was completed in September 1993. This program, among other things,
enables the Company to produce new products required under the Clean Air Act
Amendments of 1990, increases the amount of sour crude processed, increases
the amount of low sulfur diesel produced and improves operating reliability.
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 -
10.1 Engagement Contract between the Company and John B. Ashmun.
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.
WAINOCO OIL CORPORATION
By: /s/ George E. Aldrich
---------------------------
George E. Aldrich
Vice President - Controller
Date: April 28, 1994