EXHIBIT 99
GIANT INDUSTRIES, INC.
NEWS RELEASE
Contact: Mark B. Cox
Executive Vice President, Treasurer, & Chief Financial Officer
Giant Industries, Inc.
(480) 585-8888
FOR IMMEDIATE RELEASE
August 9, 2004
GIANT INDUSTRIES, INC. ANNOUNCES
SECOND QUARTER NET EARNINGS
Scottsdale, AZ (August 9, 2004) - Giant Industries, Inc. [NYSE: GI]
announced today net earnings of $5.0 million or $0.44 per diluted share
for the second quarter ended June 30, 2004. Net earnings were $447,000
or $0.05 per diluted share, for the second quarter ended June 30, 2003.
For the first half of 2004, the Company reported net earnings of $9.5
million or $0.93 per diluted share versus net earnings of $2.1 million or
$0.24 per diluted share for the first six months of 2003.
During the second quarter, the Company completed its previously announced
refinancing plan and issued $150 million of 8% senior subordinated notes
due 2014 and approximately 3.3 million shares of common stock raising
approximately $58 million. Net proceeds from the offerings were used to
refinance the Company's outstanding 9% senior subordinated notes due 2007
and to retire approximately $51 million of the Company's 11% senior
subordinated notes due 2012. Fees and expenses related to the financing
resulted in a net after-tax charge of $9.9 million, or approximately
$0.88 per share. Excluding the effect of the after-tax charge related to
the refinancing, net earnings for the second quarter would have been
$14.9 million, or $1.32 per diluted share, which would have been the
highest quarterly net earnings in the history of the company. For the
first six months of 2004, net earnings would have been $18.9 million or
$1.85 per diluted share, excluding the after-tax costs related to the
refinancing.
Fred Holliger, Giant's Chairman and CEO said, "The first six months of
this year have certainly been strong from an earnings perspective. Our
net earnings for the second quarter and year-to-date significantly
exceeded our financial performance for the same period last year. This
performance was even more significant when you consider that it was
achieved in spite of the refinancing related charges recognized in this
year's second quarter."
Commenting on 2004 year-to-date operations, Holliger said, "Our refining
operations had earnings before tax of $50.0 million in the first half of
2004 compared to $22.6 million for the same period last year. This
improvement was primarily the result of improved refining margins at all
three refineries and increased production at the Yorktown refinery. The
Refining group's contribution to earnings in the second quarter was
negatively impacted by reduced production at the Ciniza refinery due to
the fire in the alkylation unit that occurred on April 8, 2004, and the
incurrence of insurance deductibles and other related uninsured expenses
of $1.8 million relative to the fire."
"Our retail operations have also performed well in the first half of
2004. Year-to-date, same store fuel gallon sales are up almost 5% over
the prior year level and our same store merchandise sales are up in
excess of 6% over the prior year level."
"Phoenix Fuel Company continued to experience strong growth in both
wholesale and cardlock fuel sales that contributed to before tax earnings
growth of approximately 30% from approximately $3.0 million in the first
six months of 2003 to $3.9 million in the first six months of 2004."
Holliger continued, "We recently completed an amendment to our revolving
credit facility that extends the maturity of the facility for an
additional three years, substantially reduces our existing borrowing and
letter of credit costs and relaxes some of the covenants. In
contemplation of potential future growth, we also expanded the size of
our bank group to accommodate a larger credit facility should it become
useful. We are appreciative of the support that we have received from our
banks, including their recognition of the significant improvement in our
overall financial condition as evidenced by the terms of our revised
credit facility."
"On July 14, 2004, we also prepaid the remaining balance on the term loan
that we entered into to finance a portion of the acquisition of the
Yorktown refinery. This prepayment reduced our level of outstanding debt
by approximately $18 million, further reduced our interest expense and
removed the security liens on our fixed assets. This prepayment was the
final step in our recent refinancing. While the refinancing did cost
approximately $9.9 million after tax, I believe it's important to note
that we did reduce our interest expense by approximately $6.3 million
annually on an after tax basis in comparison to the 2003 level, assuming
no future borrowings on our revolving credit facility."
"Today, we have no indebtedness outstanding other than our senior
subordinated notes. Since June 30, 2002, we have reduced our debt by
approximately $157 million and have achieved a long-term debt to total
capital percentage ratio of 58.5%. We are striving to reduce this
percentage to the mid-to-low 50's level."
"We are in the process of completing repairs on the alkylation unit at
the Ciniza refinery and we anticipate restarting the unit in the near
future. The repairs took longer than initially anticipated as we
experienced delays in receiving a vessel and instrumentation necessary to
complete the repairs. We are currently working with our insurance
providers to receive reimbursement of a substantial amount of the repair
costs."
"In the month of September, we will be significantly reducing the
production at our Yorktown refinery as we perform various upgrades
throughout the refinery. These upgrades will allow us to substantially
increase the amount of acidic crude oil that can be processed under the
crude supply agreement that we entered into with Statoil earlier this
year. The increased processing of higher acid crude oil should further
reduce crude oil costs, improve the high-value product output, and
contribute significantly to higher earnings."
Relative to third quarter performance, Holliger remarked, "Overall, we
believe that our current refining fundamentals are more positive now than
the same time last year. Same store fuel volumes and merchandise sales
for our retail group are above the prior year's levels. Merchandise
margins are, however, lower than they were this time last year. Phoenix
Fuel currently continues to see growth in both wholesale and unmanned
fleet fueling volumes with stronger margins than the same time last
year."
Giant's senior management will hold a conference call at 2:00 p.m. EDT on
August 10, 2004 to discuss this earnings release and provide an update on
company operations. The conference call will be broadcast live on the
company's website at www.giant.com.
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 crude oil and
finished product truck transports, and a chain of 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.
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 include, but are not limited to: the risk that we will
not be able to attain expected debt reductions or interest savings, the
risk that we will not be able to restart the alkylation unit at our
Ciniza refinery in the near future, the risk that we will not receive
anticipated levels of reimbursement from our insurance carriers in
connection with the damage done to the Ciniza refinery by the fire in the
alkylation unit, the risk that upgrades at our Yorktown refinery will not
occur when scheduled, on budget, or achieve our projected results, the
risk that the anticipated benefits from the use of crude oil purchased
from Statoil will not be realized, the risk that current refining
fundamentals will not continue, the risk that growth experienced by
Phoenix Fuel and our retail division will not continue, and the risk that
retail merchandise margins will continue to decline, 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
circumstance.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except shares and per share data)
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Three Months Six Months
Ended June 30, Ended June 30,
- ---------------------------------------------------------------------------------------------------
2004 2003 2004 2003
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Net revenues $ 654,300 $ 408,852 $1,195,312 $ 889,465
Cost of products sold 557,536 338,792 1,018,448 748,340
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Gross margin 96,764 70,060 176,864 141,125
Operating expenses 43,596 41,258 87,845 80,380
Depreciation and amortization 9,247 9,398 18,371 18,491
Selling, general and administrative expenses 10,052 7,271 18,252 14,295
Net (gain) loss on disposal/write-down of assets 79 (187) 93 218
- ---------------------------------------------------------------------------------------------------
Operating income 33,790 12,320 52,303 27,741
Interest expense (8,688) (9,865) (18,049) (20,024)
Costs associated with early debt extinguishment (10,875) - (10,875) -
Amortization/write-off of financing costs (5,857) (1,197) (6,815) (2,388)
Interest and investment income 42 59 81 83
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Earnings from continuing operations before
income taxes 8,412 1,317 16,645 5,412
Provision for income taxes 3,112 545 6,767 2,238
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Earnings from continuing operations
before cumulative effect of change in
accounting principle 5,300 772 9,878 3,174
Discontinued operations, net of income
tax benefit of $191, $217, $229 and $264 (312) (325) (372) (396)
Cumulative effect of change in accounting
principle, net of income tax benefit of $469 - - - (704)
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) $ 4,988 $ 447 $ 9,506 $ 2,074
===================================================================================================
Net earnings (loss) per common share:
Basic
Continuing operations $ 0.48 $ 0.09 $ 1.00 $ 0.37
Discontinued operations (0.03) (0.04) (0.04) (0.05)
Cumulative effect of change in
accounting principle - - - (0.08)
- ---------------------------------------------------------------------------------------------------
$ 0.45 $ 0.05 $ 0.96 $ 0.24
===================================================================================================
Assuming dilution
Continuing operations $ 0.47 $ 0.09 $ 0.97 $ 0.36
Discontinued operations (0.03) (0.04) (0.04) (0.04)
Cumulative effect of change in
accounting principle - - - (0.08)
- ---------------------------------------------------------------------------------------------------
$ 0.44 $ 0.05 $ 0.93 $ 0.24
===================================================================================================
Weighted average number of shares outstanding:
Basic 10,997,348 8,780,857 9,910,068 8,676,895
Assuming dilution 11,271,425 8,861,823 10,182,446 8,738,746
===================================================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
- ---------------------------------------------------------------------------------------
June 30, 2004 December 31, 2003
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Assets
Current assets $ 256,506 $ 251,807
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Property, plant and equipment 640,055 632,483
Less accumulated depreciation and amortization (248,805) (236,441)
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391,250 396,042
Other assets 61,665 51,805
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Total Assets $ 709,421 $ 699,654
=======================================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 152,707 $ 154,408
Long-term debt, net of current portion 292,507 355,601
Deferred income taxes 31,447 28,039
Other liabilities and deferred income 25,242 22,170
Stockholders' equity 207,518 139,436
- ---------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 709,421 $ 699,654
=======================================================================================
Certain reclassifications have been made to the 2003 financial statements to conform to
classifications used in 2004. These reclassifications had no effect on reported earnings or
stockholders' equity.
OPERATING STATISTICS
2 Qtr. 2004 1 Qtr. 2004 4 Qtr. 2003 3 Qtr. 2003 2 Qtr. 2003
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Refining
- --------
Four Corners Operations:
Crude Oil/NGL Throughput (BPD) 26,463 28,280 29,992 29,244 31,854
Refinery Sourced Sales Barrels (BPD) 25,175 27,615 27,489 30,147 30,472
Avg. Crude Oil Costs ($/Bbl) $ 35.97 $ 32.61 $ 29.24 $ 28.90 $ 27.90
Refining Margins ($/Bbl) $ 12.44 $ 8.35 $ 8.07 $ 9.51 $ 9.41
Retail Fuel Volumes Sold as a % of
Four Corners Refinery's Sourced
Sales Barrels 40% 36% 37% 35% 38%
Yorktown Operations:
Crude Oil/NGL Throughput (BPD) 67,639 61,200 61,540 60,485 52,316
Refinery Sourced Sales Barrels (BPD) 69,862 63,824 59,307 62,937 54,046
Avg. Crude Oil Costs ($/Bbl) $ 35.53 $ 32.68 $ 29.47 $ 28.54 $ 28.06
Refining Margins ($/Bbl) $ 6.20 $ 5.55 $ 4.47 $ 4.61 $ 2.82
Retail(1)
- ---------
Fuel Gallons Sold (000's) 38,439 37,681 38,782 41,254 43,902
Fuel Margins ($/gal) $ 0.21 $ 0.16 $ 0.19 $ 0.21 $ 0.22
Merchandise Sales ($ in 000's) $ 34,541 $ 30,844 $ 32,148 $ 35,387 $ 34,570
Merchandise Margins 24% 27% 28% 29% 30%
Number of Operating Units at End
of Period 125 127 127 127 129
Phoenix Fuel
- ------------
Fuel Gallons Sold (000's) 124,342 112,844 111,110 109,903 105,148
Fuel Margins ($/gal) $ 0.06 $ 0.05 $ 0.06 $ 0.05 $ 0.05
Lubricant Sales ($ in 000's) $ 7,827 $ 6,875 $ 6,508 $ 6,140 $ 6,212
Lubricant Margins 13% 13% 14% 16% 15%
- --------------------------------------------------------------------------------------------------------
Operating Income (Loss) (before
corporate allocations) (in 000's)
- ---------------------------------
Refining - Four Corners Operations $ 13,704 $ 6,161 $ 6,445 $ 13,269 $ 12,715
- Yorktown Operations 21,811 14,435 5,988 10,540 (2,847)
Retail(1) 2,614 988 2,582 5,052 4,834
Phoenix Fuel 2,963 2,113 2,492 2,101 2,284
Corporate (7,256) (5,268) (4,891) (6,147) (5,033)
Net (loss) gain on disposal/write-down
of assets(1) (549) (14) (96) (1,272) (175)
- --------------------------------------------------------------------------------------------------------
Total(1) $ 33,287 $ 18,415 $ 12,520 $ 23,543 $ 11,778
========================================================================================================
Capital Expenditures (in 000's)(3)
- ----------------------------------
Refining - Four Corners Operations(2) $ 15,637 $ 744 $ 4,052 $ 654 $ 257
- Yorktown Operations 1,981 1,872 448 (87) 4,317
Retail 438 258 1,458 490 120
Phoenix Fuel 465 328 229 271 129
Corporate 115 11 102 112 55
- --------------------------------------------------------------------------------------------------------
Total $ 18,636 $ 3,213 $ 6,289 $ 1,440 $ 4,878
========================================================================================================
(1) Includes discontinued operations.
(2) Includes payments related to the Ciniza fire incident.
(3) Excludes Yorktown refinery acquisition contingent payments.
Selected Financial Data
June 30, 2004 December 31, 2003
- --------------------------------------------------------------------------------
Working Capital (In Millions) $103,799 $ 97,399
Current Ratio 1.68:1 1.63:1
Long-Term Debt As A Percent of Total Capital(4) 58.5% 71.8%
Net Debt As A Percent of Total Capital(5) 56.6% 70.2%
Book Value Per Share(6) $ 17.03 $ 15.87
Net cash provided by operating activities(7) $ 26,537 $ 62,349
- --------------------------------------------------------------------------------
(4) Long-term debt represents long-term debt, net of current portion. Total capital
represents long-term debt, net of current portion, plus total stockholders' equity.
(5) Net debt represents long-term debt, net of current portion, less cash and cash
equivalents. Total capital represents long-term debt, net of current portion, less cash
and cash equivalents plus total stockholders' equity.
(6) Book value per share represents total stockholders' equity divided by number of common
shares outstanding.
(7) Net cash provided by operating activities for June 30, 2004 and December 31, 2003 is
for six and twelve months, respectively.
Share Price Data (NYSE: GI)
High Low Close
- -------------------------------------------
2004 2nd Quarter $22.16 $15.37 $22.00
2004 1st Quarter $25.44 $11.71 $20.70
2003 4th Quarter $12.73 $ 7.10 $11.98
2003 3rd Quarter $ 8.10 $ 5.57 $ 7.23
2003 2nd Quarter $ 6.32 $ 4.42 $ 5.96
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