1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 September 30, 1997
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 1-4014
FINA, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1820692
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Fina Plaza, Dallas, Texas 75206
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 750-2400
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 over the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
29,220,472 Class A as of October 21, 1997
2,000,000 Class B as of October 21, 1997
2
FINA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,240 $ 1,585
Accounts and notes receivable 526,346 552,553
Inventories 334,430 318,565
Prepaid expenses and other current assets 33,051 31,995
---------- ----------
Total current assets 899,067 904,698
---------- ----------
Property, plant, and equipment; net of $1,605,707 accumulated
depreciation at 9/30/97 and $1,504,018 at 12/31/96 1,731,353 1,720,965
Other assets 243,163 230,159
---------- ----------
$2,873,583 $2,855,822
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term obligations $ 112,995 $ 71,735
Current installments of long term debt and lease obligations 62,702 37,188
Accounts payable and accrued liabilities 562,678 633,034
---------- ----------
Total current liabilities 738,375 741,957
---------- ----------
Long term debt, excluding current installments 528,521 587,290
Other deferred credits and liabilities 308,335 279,290
Stockholders' equity:
Preferred stock of $1 par value. Authorized 4,000,000 shares;
none issued -- --
Class A common stock of $.50 par value. Authorized
38,000,000 shares; issued and outstanding 29,219,072 and
29,216,172 shares in 1997 and 1996 14,610 14,608
Class B common stock of $.50 par value. Authorized
and issued 2,000,000 shares 1,000 1,000
Additional paid-in capital 450,999 450,899
Retained earnings 831,743 780,778
---------- ----------
Total stockholders' equity 1,298,352 1,247,285
Commitments and contingencies -- --
---------- ----------
$2,873,583 $2,855,822
========== ==========
See accompanying notes to consolidated financial statements.
3
FINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------------- ---------------------------
1997 1996 1997 1996
----------- ------------ ----------- -----------
Revenues:
Sales and other operating revenues $ 1,111,641 $ 993,264 $ 3,260,267 $ 3,005,669
Interest and other, net (1,307) (947) 5,780 (3,965)
----------- ----------- ----------- -----------
1,110,334 992,317 3,266,047 3,001,704
----------- ----------- ----------- -----------
Costs and expenses:
Cost of raw materials and products purchased 842,107 743,170 2,495,933 2,270,754
Direct operating expenses 97,649 100,654 277,714 290,716
Selling, general, and administrative expenses 26,181 19,882 72,441 63,883
Taxes, other than on income 14,444 12,127 42,606 36,022
Dry holes and abandonments 3,047 2,948 14,465 10,468
Depreciation, depletion, amortization,
and lease impairment 51,402 44,456 149,493 125,359
Interest charges, net 9,435 9,189 28,739 28,684
----------- ----------- ----------- -----------
1,044,265 932,426 3,081,391 2,825,886
----------- ----------- ----------- -----------
Earnings before income taxes 66,069 59,891 184,656 175,818
Income taxes 22,476 21,025 61,890 60,851
----------- ----------- ----------- -----------
Net earnings $ 43,593 $ 38,866 $ 122,766 $ 114,967
=========== =========== =========== ===========
Earnings per common share (note 2) $ 1.40 $ 1.25 $ 3.93 $ 3.68
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
4
FINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
1997 1996
--------- ---------
Cash flows from operating activities:
Net earnings $ 122,766 $ 114,967
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion, amort., lease impairment & aband 150,201 125,662
Net equity in losses of affiliates 4,073 4,046
Loss (gain) on sale of assets (8,255) (3,003)
Changes in assets and liabilities:
Accounts and notes receivable 26,207 (129,405)
Inventories (15,865) (22,859)
Prepaid expenses and other current assets (1,056) (10,322)
Accounts payable and accrued liabilities (68,738) 25,080
Current and deferred income taxes 33,144 36,202
Other (18,461) (30,582)
--------- ---------
Net cash provided by operating activities 224,016 109,786
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (160,895) (146,340)
Proceeds from sale of assets 12,933 12,683
Investments in and advances to affiliates (8,705) (40,475)
--------- ---------
Net cash used in investing activities (156,667) (174,132)
--------- ---------
Cash flows from financing activities:
Additions to long term debt and lease obligations 939 254,418
Payments of long term debt and lease obligations (34,194) (232,964)
Net change in short term obligations 41,260 99,365
Issuance of common stock 102 302
Dividends paid (71,801) (62,429)
--------- ---------
Net cash provided (used) in financing activities (63,694) 58,692
--------- ---------
Net increase (decrease) in cash and cash equivalents 3,655 (5,654)
Cash and cash equivalents at beginning of year 1,585 7,271
--------- ---------
Cash and cash equivalents at end of period $ 5,240 $ 1,617
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FINA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(1) The information furnished reflects all adjustments which are, in the
opinion of management, necessary to a fair presentation of the results
of the interim periods presented. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily
indicative of the operating results for the full fiscal year.
(2) Earnings per common share is based on the weighted average number of
outstanding shares. Shares issuable upon the exercise of stock options
are excluded from the computation since their effect is insignificant.
The weighted average number of outstanding shares was 31,218,197 and
31,216,172 for the three months ended September 30, 1997 and 1996,
respectively. The weighted average number of outstanding shares was
31,217,442 and 31,213,352 for the nine months ended September 30, 1997
and 1996, respectively.
(3) The Company is contingently liable under pending lawsuits and other
claims, some of which involve substantial sums. Considering certain
liabilities which have been set up for the lawsuits and claims, and the
difficulty in determining the ultimate liability in some of these
matters, internal counsel is of the opinion that the amounts, if any,
which ultimately might be due in connection with such lawsuits and
claims would not have a material adverse effect upon the Company's
consolidated financial condition.
(4) The notes to the consolidated financial statements on pages 19 through
34 of the Company's 1996 Form 10-K are an integral part of these
consolidated financial statements.
(5) Fina Oil and Chemical Company ("FOCC"), a wholly-owned subsidiary of
FINA, Inc., is the main operating subsidiary of the Company whose
principle lines of business include crude oil and natural gas
exploration and production; petroleum products refining, supply and
transportation and marketing; and chemicals manufacturing and marketing.
Following is summary consolidated financial data for FOCC (in
thousands):
September 30, December 31,
1997 1996
------------- -------------
Current assets $ 894,715 $ 818,116
Noncurrent assets 1,899,726 1,914,715
Current liabilities (725,315) (659,894)
Noncurrent liabilities (1) (1,877,511) (1,956,490)
=========== ===========
Net Assets $ 191,615 $ 116,447
=========== ===========
Three Months Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Sales and other operating revenues $ 976,153 $ 917,420 $2,865,926 $2,736,037
========== ========== ========== ==========
Gross profit (2) $ 102,508 $ 90,540 $ 285,315 $ 259,664
========== ========== ========== ==========
Net earnings $ 41,929 $ 37,664 $ 118,407 $ 101,113
========== ========== ========== ==========
(1) Primarily consists of payables to related parties.
(2) Gross profit is defined as sales and other operating revenues less cost
of raw materials and products purchased; direct operating expenses; taxes, other
than on income; and depreciation, depletion, amortization and lease impairment.
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FINA, INC.
UNAUDITED SEGMENT INFORMATION
-------------------------------- --------------------------------
THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
-------------------------------- --------------------------------
EARNINGS (Thousands, except share and per-share amounts)
Upstream $ 10,316 $ 11,428 $ 49,894 $ 44,488
Downstream $ 39,088 $( 1,317) $ 70,915 $ 1,848
Chemicals $ 31,634 $ 63,089 $ 107,283 $ 171,026
Corporate / Financing $( 14,969) $( 13,310) $( 43,436) $( 41,544)
Income Tax $( 22,476) $( 21,024) $( 61,890) $( 60,851)
------------ ------------ ------------ ------------
Total Net Earnings $ 43,593 $ 38,866 $ 122,766 $ 114,967
============ ============ ============ ============
Net Earnings Per Share $ 1.40 $ 1.25 $ 3.93 $ 3.68
Average Shares Outstanding 31,218,197 31,216,172 31,217,442 31,213,352
OPERATING STATISTICS
Upstream
Crude Oil Production - MBD 9.7 9.9 10.1 9.8
Natural Gas Production - MMCFD 183 152 185 143
Natural Gas Sales - MMCFD 767 488 725 510
Average Oil Price/BBL $ 16.85 $ 19.67 $ 18.11 $ 18.50
Average Natural Gas Sales Price/MCF $ 2.51 $ 2.44 $ 2.64 $ 2.59
Downstream
Refinery Throughput - MBD 237.1 213.5 232.9 218.3
Chemicals
Sales Volume - MMLB 1,063.7 933.4 3,073.3 2,807.9
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PART I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Net earnings were $43,593,000 for the quarter ended September 30, 1997
compared to $38,866,000 for the third quarter of 1996. Sales and other
operating revenues for third quarter 1997 were $1,111,641,000 compared to
$993,264,000 for third quarter 1996. Earnings per share were $1.40 compared to
$1.25 per share for the third quarter of last year.
The net earnings increase in the third quarter 1997 was largely
attributable to increased natural gas production, higher natural gas prices,
higher refining margins, and increased chemical volumes only partially offset
by lower industry Chemical margins. Third quarter was adversely impacted by
declining margins in chemical product lines.
For the nine months, net earnings were $122,766,000 compared to
$114,967,000 for the same period in 1996. The net earnings increase for the
nine months was largely attributable to increased natural gas production
volumes and prices, higher refining margins, record refinery throughputs, and
higher chemicals volumes only partially offset by eroding industry
chemical margins. Sales and other operating revenues increased to
$3,260,267,000 during the nine-month period compared to $3,005,669,000 for the
same period in 1996, primarily reflecting higher natural gas prices in the
Upstream and higher volumes in the Upstream, Downstream, and Chemicals
segments, only partially offset by lower chemical prices.
In October, 1997 a letter of intent was signed with BASF Corporation
to build a large steam cracker at the Port Arthur, Texas Refinery. With
a completion date in late 2000, the 3.75 billion pound per year facility is
expected to capitalize on the Company's expertise in refining and acquisition
of feedstocks and BASF Corporation's extensive steam cracker operating
experience. It will also help satisfy the Company's growing internal demand for
propylene and ethylene. The approximate cost to the Company is revised from the
Form 8-K filing to $400 million.
Capital expenditures for the nine months were $168,649,000
compared to $148,415,000 for the same period in 1996, reflecting increased
exploration and development activities in the Upstream and expansion projects
in Chemicals. An increase to the capital budget of $15,600,000 was approved by
the Board of Directors in October for increased drilling activities. The total
capital budget for 1997 is now $342,000,000.
In the Upstream, earnings before interest and income taxes (EBIT) were
$10,316,000 in the third quarter of 1997 compared to $11,428,000 for the same
period in 1996. For the nine-month period of 1997, Upstream EBIT was
$49,894,000 compared to $44,488,000 for the same period in 1996. Third quarter
earnings declined as higher natural gas production volumes and prices and lower
lifting costs were more than offset by lower crude oil production and prices
and decreased natural gas trading margins. For the nine months, natural gas
production volumes were up thirty (30) percent, wellhead prices increased eight
(8) percent, and Natural Gas Marketing sales volumes rose forty-two (42)
percent.
In the Downstream, earnings before interest and income taxes (EBIT)
were $39,088,000 in the third quarter of 1997 compared to a loss of $1,317,000
for the same period in 1996. For the nine-month period of 1997, Downstream EBIT
was $70,915,000 compared to $1,848,000 for the same period in 1996. Both third
quarter and nine-month improvements were due to higher refining margins and
operating efficiencies, including improved yields and increased throughputs.
Chemicals EBIT for the third quarter was $31,634,000, which
was a decrease from third quarter 1996's EBIT of $63,089,000. For the
nine-month period of 1997, Chemicals EBIT of $107,283,000 was down from
$171,026,000 in the corresponding period in 1996, reflecting lower industry
margins while sales volumes increased nine (9) percent and production volumes
rose six (6) percent, reflecting full-year operations of 1996 expansion
projects.
The Company's regular quarterly dividend of $.80 per share was paid on
September 18, 1997 to shareholders of record on September 5, 1997. On October
23, 1997, the Board of Directors voted a regular quarterly dividend of $.80 per
share to be paid on December 16, 1997 to shareholders of record on December 3,
1997.
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Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 2. Changes in Securities.
(a) Not Applicable
(b) Not Applicable
Item 3. Defaults upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
A Form 8-K was filed in the period on September 24, 1997 announcing
that a letter of intent had been signed with BASF Corporation to build
a 3.75 billion pound per year steam cracker at the Port Arthur, Texas
Refinery with an approximate cost of $350 million to be completed in
2000.
Exhibits incorporated herein by reference:
(27) Financial Data Schedule
9
SIGNATURES
Pursuant to the requirements 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.
FINA, Inc.
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(REGISTRANT)
Date: November 13, 1997
BY:
Geoffroy Petit
Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------
27 Financial Data Schedule