EXHIBIT 99
GIANT INDUSTRIES, INC.
NEWS RELEASE
Contact: Mark Cox,
V. P. Treasurer & Chief Financial Officer
(480) 585-8888
FOR IMMEDIATE RELEASE
August 6, 2002
GIANT INDUSTRIES, INC. PROVIDES UPDATE ON YORKTOWN
INTEGRATION, ANNOUNCES DEBT REDUCTION INITIATIVE
AND SECOND QUARTER 2002 OPERATING RESULTS
Scottsdale, AZ (August 6, 2002) - Giant Industries, Inc. [NYSE:
GI] today reported a net loss of $4.3 million or $0.50 per share, for
the second quarter ended June 30, 2002, compared to net earnings for
the second quarter of 2001 of $12.0 million or $1.33 per share.
Excluding a pre-tax charge of $1.3 million due to the impairment of
retail assets to be sold, the Company's net loss for the second quarter
of 2002 would have been $3.5 million or $0.41 per share. For the first
half of 2002, the Company reported a net loss of $4.2 million or $0.49
per share versus net earnings of $12.9 million or $1.44 per share for
the first six months of 2001.
Giant's second quarter 2002 operating results were adversely
impacted by weak refining margins and costs associated with the
transition of the Yorktown refinery from BP's to Giant's ownership.
During the first 47 days of ownership of the Yorktown refinery,
refining margins were negatively impacted by lower crack spreads
brought about by general industry conditions and, more specifically,
the cost and quantity of crude oil and products that were in place at
the refinery at the time of the acquisition. At the Ciniza and
Bloomfield refineries, the crack spreads were $6.41 per barrel during
the second quarter 2002, significantly below the high crack spreads of
$12.27 per barrel experienced during the same period in 2001.
Fred Holliger, Giant's Chairman and CEO stated: "Like most
refiners, our margins were lower than what we traditionally experience
in the second quarter. In addition to specific items related to
Yorktown, diesel margins were particularly weak due to the continued
oversupply of distillates throughout most areas of the country as a
result of the post September 11th drop in jet fuel demand and the
warmer than normal winter weather in the Northeast. I believe that
these conditions are short-term in nature and are to be expected from
time to time in our cyclical industry, and, as a result, my outlook
for the Company and our industry remains optimistic."
With regard to Giant's retail operations, Holliger remarked,
"overall profitability in our retail operations continued to be
dampened by the performance of our service station/convenience stores
located in the Phoenix and Tucson markets. Excluding the Phoenix and
Tucson operations, we are continuing to experience nice growth in our
retail fuel and merchandise sales."
Holliger went on to note that "the integration of the Yorktown
refinery is proceeding ahead of schedule. As part of the Yorktown
acquisition, we negotiated a supply agreement with BP, which
guaranteed the supply of feedstock to the refinery. Due to the
successful efforts of our supply personnel, however, we have been able
to enter into agreements with several crude oil suppliers to supply us
feedstocks on more favorable terms than the terms of our BP supply
agreement. Additionally, on the marketing side, our efforts have
significantly increased the sales at the refinery rack to third
parties that have resulted in higher price realizations and better
efficiency. We are continuing to work to reduce excess inventory at
Yorktown and, partly as a result of this reduction, our debt is
approximately $10 million less at July 31, 2002 than it was at June
30, 2002. I am confident that the opportunities that we identified
prior to the acquisition of Yorktown are there, and we will continue
to capitalize on them."
"With the above mentioned improvements and opportunities, and
recent strengthening of industry refining margins relative to the
second quarter, like the rest of the industry we anticipate improved
refining margins in the third quarter. Gasoline margins have already
started to improve and we expect distillate margins to improve as the
year progresses," added Holliger.
Holliger continued, "In today's market, we recognize the
importance of actively managing our balance sheet, especially with
regard to reducing our levels of debt to allow us to return to levels
of leverage more consistent with our position prior to the Yorktown
acquisition. We intend to reduce our debt by a number of different
means."
"As we had planned, we have implemented a targeted asset sale
program in order to dispose of non-core properties. The initial
stages of this program have already yielded several successes:
1. We have entered into a letter of intent, and are in the
process of negotiating a purchase agreement, for the sale of nine
service station/convenience stores in Phoenix. This transaction
should close before the end of the third quarter.
2. We have entered into a letter of intent for the sale of the
remaining twenty-six service station/convenience stores in our Phoenix
and Tucson markets. We anticipate that this transaction could close
sometime in the fourth quarter.
Together, these two sales are expected to net over $30 million in
proceeds that we anticipate will be applied to further reduce our debt
level. In the second quarter, we recorded a pre-tax impairment of $1.3
million relative to the potential sale of the twenty-six service
station/convenience stores in our Phoenix and Tucson markets. If both
of the above transactions are completed, we expect to record a net
overall gain of approximately $2.0 million.
3. We have met with a number of real estate professionals to
discuss the potential sale of our corporate headquarters and, in fact,
we are negotiating for the sale of this property."
"Assuming the successful completion of these sales, our goal is
to reduce debt by $50 million prior to year-end."
"Additionally, although of less monetary significance, but
exemplary of our continuing commitment to improve earnings and
rationalize our debt levels, we have initiated cost cutting measures
that should reduce our overhead costs in excess $1.7 million compared
to 2001. Upon completion of the retail sales described above, we
should be able to reduce our retail overhead by an additional $500,000
per year. I directed our strategic business units to review their
capital budgets and eliminate every dollar of capital they could
without compromising our safety and environmental requirements. This
effort, which we previously announced, reduced our 2002 capital
expenditure budget from over $38 million to $25 million. Furthermore,
while we have already made significant reductions in our inventory
levels at Yorktown, we expect to further reduce our average working
capital requirements by approximately $10 million as compared to our
requirements at June 30, 2002. We are also in the process of
attempting to obtain a postponement of expenditures to meet low sulfur
fuels standards as mandated by the EPA at the Yorktown refinery."
Giant Industries, Inc., headquartered in Scottsdale, Arizona, is
a refiner and marketer of petroleum products. Giant owns and operates
one Virginia and two New Mexico crude oil refineries, a crude oil
gathering pipeline system based in Farmington, New Mexico, which
services the New Mexico refineries, finished products distribution
terminals in Albuquerque, New Mexico and Flagstaff, Arizona, a fleet
of 145 crude oil and finished product truck transports, a Travel
Center on I-40 east of Gallup, and a chain of 145 retail service
station/convenience stores in New Mexico, Colorado, and Arizona. Giant
is also the parent Company of Phoenix Fuel Co., Inc., an Arizona
wholesale petroleum products distributor. For more information, please
visit Giant's website at www.giant.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: This press release contains forward-looking
statements that involve known and unknown risks and uncertainties.
Forward-looking statements are identified by words or phrases such as
"believes," "expects," "anticipates," "estimates," "should," "could,"
"plans," "intends," "will," variations of such words and phrases, and
other similar expressions. While these forward-looking statements are
made in good faith, and reflect the Company's current judgment
regarding such matters, actual results could vary materially from the
forward-looking statements. Important factors that could cause actual
results to differ from forward-looking statements included, but not
limited to: the sale of retail assets, improvement in refining
margins, expectations for debt reduction, our continued ability to
negotiate favorable crude oil supply agreements, continued growth in
retail fuel and merchandise sales, reductions in operating costs, our
ability to reduce inventory at Yorktown, the integration of the
Yorktown refinery and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission. All
subsequent written and oral forward-looking statements attributable to
the Company, or persons acting on behalf of the Company, are expressly
qualified in their entirety by the foregoing. Forward-looking
statements made by the Company represent its judgment on the dates
such statements are made. The Company assumes no obligation to update
any forward-looking statements to reflect new or changed events or
circumstances.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except shares and per share data)
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Three Months Ended Six Months Ended
June 30, June 30,
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2002 2001 2002 2001
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Net revenues $ 299,238 $ 281,158 $ 487,634 $ 532,370
Cost of products sold 246,385 209,917 388,224 410,419
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Gross margin 52,853 71,241 99,410 121,951
Operating expenses 33,260 28,737 59,671 57,585
Depreciation and amortization 9,244 7,940 17,807 15,854
Selling, general and administrative expenses 5,889 8,755 11,086 15,338
Net loss on disposal/write-down of assets 1,033 343 1,063 482
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Operating income 3,427 25,466 9,783 32,692
Interest expense (9,527) (6,040) (15,530) (12,083)
Amortization/write-off of financing costs (909) (198) (1,117) (397)
Interest and investment income 261 487 325 1,050
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Earnings (loss) before income taxes (6,748) 19,715 (6,539) 21,262
Provision (benefit) for income taxes (2,464) 7,762 (2,378) 8,359
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Net earnings (loss) $ (4,284) $ 11,953 $ (4,161) $ 12,903
================================================================================================
Net earnings (loss) per common share:
Basic $ (0.50) $ 1.33 $ (0.49) $ 1.44
Assuming dilution $ (0.50) $ 1.33 $ (0.49) $ 1.44
================================================================================================
Weighted average number of shares outstanding:
Basic 8,566,271 8,957,684 8,560,109 8,952,873
Assuming dilution 8,566,271 8,979,676 8,560,109 8,966,732
================================================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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June 30, December 31,
2002 2001
(Unaudited) (Audited)
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Assets
Current assets $ 215,012 $ 135,981
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Property, plant and equipment 658,185 525,345
Less accumulated depreciation and
amortization (212,588) (201,823)
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445,597 323,522
Other assets 59,719 47,671
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Total Assets $ 720,328 $ 507,174
===========================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 101,579 $ 78,837
Long-term debt, net of current portion 436,919 256,749
Deferred income taxes 30,395 32,772
Other liabilities 19,092 2,406
Stockholders' equity 132,343 136,410
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Total Liabilities and Stockholders' Equity $ 720,328 $ 507,174
===========================================================================
Certain reclassifications have been made to the year 2001 financial statements
to conform to classifications used in 2002. These reclassifications had no
effect on reported earnings or stockholders' equity.
OPERATING STATISTICS
2 Qtr. 1 Qtr. 4 Qtr. 3 Qtr. 2 Qtr.
2002 2002 2001 2001 2001
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Refining
- --------
Four Corners Operations:
Crude Oil/NGL Throughput (BPD) 33,144 33,785 28,781 35,102 35,398
Refinery Sourced Sales Barrels (BPD) 34,060 31,161 28,919 32,830 35,709
Avg. Crude Oil Costs ($/Bbl) $ 23.48 $ 18.90 $ 19.74 $ 25.19 $ 26.28
Refining Margins ($/Bbl) $ 6.41 $ 7.36 $ 8.31 $ 9.45 $ 12.27
Retail Fuel Volumes Sold as a % of Four
Corners Refinery's Sourced Sales Barrels 38% 41% 45% 43% 41%
Yorktown Operations:*
Crude Oil/NGL Throughput (BPD) 53,563 -- -- -- --
Refinery Sourced Sales Barrels (BPD) 54,610 -- -- -- --
Avg. Crude Oil Costs ($/Bbl) $ 26.77 -- -- -- --
Refining Margins ($/Bbl) $ 1.68 -- -- -- --
Retail
- ------
Fuel Gallons Sold (000's) 49,727 48,237 50,793 54,591 55,374
Fuel Margins ($/gal) $ 0.16 $ 0.13 $ 0.15 $ 0.18 $ 0.17
Merchandise Sales ($ in 000's) $37,984 $32,837 $35,217 $38,858 $37,630
Merchandise Margins 28% 28% 27% 28% 29%
Number of Units at End of Period 146 150 151 165 168
Phoenix Fuel
- ------------
Fuel Gallons Sold (000's) 90,524 92,471 93,215 91,794 104,229
Fuel Margins ($/gal) $ 0.05 $ 0.05 $ 0.04 $ 0.05 $ 0.05
Lubricant Sales ($ in 000's) $ 5,002 $ 5,387 $ 5,655 $ 6,217 $ 5,422
Lubricant Margins 18% 17% 14% 16% 19%
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Operating Income (Loss) (in 000's)
Refining - Four Corners Operations $ 8,347 $ 9,059 $ 9,593 $16,904 $28,566
- Yorktown Operations (3,090) -- -- -- --
Retail 1,869 (672) (71) 3,121 2,526
Phoenix Fuel 1,567 1,473 424 1,082 1,757
Corporate (4,233) (3,474) (3,544) (5,753) (7,040)
Net loss on disposal/write-down of assets (1,033) (30) (4,429) (1,301) (343)
Allowance for related party note
and interest receivable -- -- (5,409) -- --
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Total $ 3,427 $ 6,356 $ (3,436) $ 14,053 $ 25,466
===========================================================================================
Capital Expenditures (in 000's)**
Refining - Four Corners Operations $ 4,170 $ 890 $ 6,148 $ 4,015 $ 1,751
- Yorktown Operations 304 -- -- -- --
Retail 136 308 1,493 859 513
Phoenix Fuel 57 216 203 204 279
Corporate 553 918 1,068 85 164
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Total $ 5,220 $ 2,332 $ 8,912 $ 5,163 $ 2,707
===========================================================================================
Selected Financial Data
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June 30, December 31,
2002 2001
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Working Capital (In Millions) $113,433 $ 57,144
Current Ratio 2.12:1 1.72:1
Long-Term Debt As A Percent of Total Capital 76.8% 65.3%
Net Debt As A Percent of Total Capital 76.3% 62.8%
Book Value Per Share $ 15.44 $ 15.95
Net cash provided by operating activities*** $ 5,072 $ 65,256
EBITDA**** $ 26,188 $ 93,004
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Share Price Data and Dividends (NYSE: GI)
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High Low Close Dividends
-------------------------------------
2002 2nd Quarter $12.55 $7.50 $8.00 $ --
2002 1st Quarter $10.39 $8.21 $10.30 $ --
2001 4th Quarter $9.30 $7.80 $9.23 $ --
2001 3rd Quarter $10.90 $7.07 $8.25 $ --
2001 2nd Quarter $11.40 $7.10 $8.80 $ --
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*The Yorktown Refinery was purchased on May 14, 2002.
**Excludes the acquisition of the Yorktown Refinery in the
second quarter of 2002 and the repurchase of certain service
stations in the third quarter of 2001.
***Net cash provided by operating activities for June 30, 2002
and December 31, 2001 is for six and twelve months,
respectively.
****EBITDA is defined as earnings before interest expense,
taxes, depreciation, amortization, and certain non-cash charges.
During the first six months of 2002, non-cash items consisted of
a $3.3 million gain for a lower of cost or market inventory
adjustment, which is included in cost of products sold, and
certain non-cash losses and write-downs of $1.6 million. EBITDA
for the second quarter of 2002 was $14.5 million. For the year
2001, non-cash charges consisted of a loss on the disposal or
write-down of assets for $6.2 million, an allowance for a
related party note and interest receivable for $5.4 million, and
a $3.3 million adjustment for lower of cost or market inventory
write-downs, which was included in cost of products sold. The
calculation of EBITDA is not based on U.S. GAAP, and you should
not consider it as an alternative to net earnings or cash flows
from operating activities (which are determined in accordance
with U.S. GAAP), as an indicator of operating performance or as
a measure of liquidity. EBITDA may not be comparable to
similarly titled measures used by other entities.