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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[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
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Commission file number: 33-51630
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
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(Exact name of registrant as specified in its charter)
Nevada 98-0127391
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 TD Tower, 10088 - 102 Avenue
Edmonton, Alberta, Canada T5J 2Z1
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(Address of principal executive offices) (Zip Code/Postal Code)
Registrants' telephone number, including area code: (780) 425-1950
Not Applicable
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of each Class Date Number Outstanding
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Common Shares, no par value August 14, 2001 3,427,959
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
INDEX
Page No.
PART I: FINANCIAL STATEMENTS
Item 1. Financial Statements
Chieftain International Funding Corp.
Consolidated Condensed Balance Sheet -
June 30, 2001 and December 31, 2000 3
Consolidated Condensed Statement of Income and Retained Earnings -
Six months ended June 30, 2001 and 2000 and
Three months ended June 30, 2001 and 2000 4
Consolidated Condensed Statement of Cash Flows
Six months ended June 30, 2001 and 2000 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Signatures 8
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
(a subsidiary of Chieftain International (U.S.) Inc.)
BALANCE SHEET
JUNE 30 December 31
2001 2000
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(US$)
(unaudited)
ASSETS
Current assets:
Cash $ 179,505 $ 27,488
Due from affiliated companies 6,857,174 6,576,734
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7,036,679 6,604,222
Investment in preferred shares of Chieftain International
(U.S.) Inc. at cost 78,500,000 78,500,000
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$85,536,679 $85,104,222
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $ 3,000 $ 6,600
Preferred shares issued (Notes 2,4) 63,402,903 63,402,903
Common shareholder's equity:
Share capital
Authorized
10,000,000 common shares, par value $0.01 each
Issued (Note 4) 2,000 2,000
200,000 common shares
Additional paid in capital 14,998,000 14,998,000
Retained earnings 7,130,776 6,694,719
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22,130,776 21,694,719
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$85,536,679 $85,104,222
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF INCOME AND RETAINED EARNINGS
Six months Three months
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Period ended June 30 2001 2000 2001 2000
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(US$)
(unaudited)
Revenue:
Dividends $ 2,845,625 $ 2,845,625 $ 1,422,812 $ 1,422,812
Interest 227,148 161,629 78,834 90,737
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3,072,773 3,007,254 1,501,646 1,513,549
Expense:
General and administrative 131,644 41,276 115,695 23,254
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Income before income taxes and
dividends on preferred shares 2,941,129 2,965,978 1,385,951 1,490,295
Income tax expense (recovery)
- (Note 3) 34,000 43,000 (13,000) 24,000
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Net income before dividends on
preferred shares 2,907,129 2,922,978 1,398,951 1,466,295
Dividends on preferred shares (2,471,072) (2,471,072) (1,235,536) (1,235,536)
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Net income applicable to
common shares for the period 436,057 451,906 163,415 230,759
Retained earnings,
beginning of period 6,694,719 5,632,504 6,967,361 5,853,651
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Retained earnings, end of period $ 7,130,776 $ 6,084,410 $ 7,130,776 $ 6,084,410
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF CASH FLOWS
Six months ended June 30 2001 2000
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(US$)
(unaudited)
Operating activities:
Net income applicable to common shares $ 436,057 $ 451,906
Change in non-cash working capital -
Current liabilities (3,600) (5,281)
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432,457 446,625
Investing activity:
Advances to affiliated companies (280,440) (558,543)
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Change in cash 152,017 (111,918)
Beginning cash 27,488 147,982
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Ending cash $ 179,505 $ 36,064
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001 and 2000
(unaudited)
1. Basis of Presentation:
In the opinion of Chieftain International Funding Corp. ("Funding Corp."),
the accompanying unaudited financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present
fairly the financial position as at June 30, 2001 and December 31, 2000 and
the results of operations and cash flows for the six months ended June 30,
2001 and 2000. Certain information and notes normally included in Funding
Corp.'s financial statements prepared in accordance with Canadian generally
accepted accounting principles have been condensed or omitted for interim
reporting pursuant to the rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in
Funding Corp.'s Annual Report on Form 10-K for the year ended December 31,
2000.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make informed judgements and
estimates. Actual results may differ from those estimates.
The results of operations and cash flows for the six month period ended
June 30, 2001 are not necessarily indicative of the results to be expected
for the full year.
2. Preferred Shares:
The Articles of Funding Corp. authorize the issuance of a maximum of
10,000,000 preferred shares with a par value of $1.00 each.
In 1992, Funding Corp. sold 2,726,700 shares of $1.8125 convertible
redeemable preferred stock at $25.00 per share through an underwritten
public offering in the United States. Proceeds of the issuance of preferred
shares, net of offering costs of $4.7 million, were $63.4 million.
3. Income Taxes:
Funding Corp. and its parent company file corporate income tax returns on a
consolidated basis. As a result, income taxes payable have been offset by
the parent company's tax losses and are reflected in the amount due from
the parent company.
4. Subsequent events:
Subsequent to June 30, 2001, 2,582,377 $1.8125 convertible redeemable
preferred shares were converted. This was facilitated by the issuance of
3,227,959 Funding Corp. common shares to its parent company and also
resulted in a charge to retained earnings of approximately $33 million.
Pursuant to its Offer to Purchase dated June 28, 2001, Hunt Oil Company,
through its wholly-owned subsidiary Hunt Oil Canadian Acquisition III
Corporation, accepted the 19,025,501 common shares of Chieftain
International, Inc., Funding Corp's ultimate parent, which were tendered to
the Offer on August 3, 2001.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Chieftain International Funding Corp., a special purpose subsidiary of Chieftain
International (U.S.) Inc., was formed in 1992 for the primary purpose of
financing the U.S. business operations of its parent.
Analysis of Operating Results - Six months ended June 30, 2001 and 2000
Funding Corp.'s income is derived from dividends on preferred shares and
interest on short-term notes, all of which are issued by its parent company,
Chieftain International (U.S.) Inc.
Dividends received on 3,140,000 redeemable Class B preferred shares amounted to
$2,845,625 for each of the first six months of 2001 and 2000.
Interest earned on short-term notes for the first six months of 2001 was
$227,148, a 41% increase from the amount earned in the comparable 2000 period.
Such increase resulted from a 26% increase in average investment yield and a 14%
increase in the average amount invested compared to the 2000 first six months.
Income taxes are calculated on interest income less general and administrative
costs. Dividends received from the parent are tax exempt.
Capital Resources and Liquidity
Funding Corp. is dependent upon the dividend income from its investment in
preferred shares of its parent company to provide funds for payment of dividends
on its publicly-held preferred shares.
Funds provided from operations decreased to $432,557 for the first six months of
2001 compared with $446,625 for the 2000 comparable period. Funds not required
for current working capital were invested in short-term notes issued and payable
by the parent company.
Cash balances at June 30, 2001 and 2000 were $179,505 and $36,064 respectively.
Subsequent to June 30, 2001, 2,582,377 $1.8125 convertible redeemable preferred
shares were converted. This was facilitated by the issuance of 3,227,959 Funding
Corp. common shares to its parent company and also resulted in a charge to
retained earnings of approximately $33 million.
Pursuant to its Offer to Purchase dated June 28, 2001, Hunt Oil Company, through
its wholly-owned subsidiary Hunt Oil Canadian Acquisition III Corporation,
accepted the 19,025,501 common shares of Chieftain International, Inc., Funding
Corp's ultimate parent, which were tendered to the Offer on August 3, 2001.
Information Regarding Forward Looking Financial Statements
This 10-Q contains forward-looking statements that are subject to risk factors
associated with the Company's business. The Company believes that the
expectations reflected in these statements are reasonable, but may be affected
by a variety of factors affecting the Company's business.
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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.
Chieftain International Funding Corp.
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(Registrant)
/s/ Donald F. Robillard, Jr.
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Donald F. Robillard, Jr.
Senior Vice President and Chief Financial Officer
Dated: August 14, 2001