<PAGE> 1
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 June 30, 1998
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 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.
10(ten) shares of Common Stock as of August 12, 1998
The Registrant meets the condition set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
<PAGE> 2
FINA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,203 $1,271
Accounts and notes receivable 500,047 581,724
Inventories 280,398 345,235
Prepaid expenses and other current assets 41,708 47,732
---------- ----------
Total current assets 823,356 975,962
---------- ----------
Property, plant, and equipment; net of $1,678,288 accumulated
depreciation at 6/30/98 and $1,633,688 at 12/31/97 1,874,648 1,849,378
Other assets 182,406 189,334
---------- ----------
$2,880,410 $3,014,674
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term obligations $135,117 $27,478
Current installments of long term debt and lease obligations 59,779 63,860
Accounts payable and accrued liabilities 539,215 735,609
---------- ----------
Total current liabilities 734,111 826,947
---------- ----------
Long term debt, excluding current installments 544,195 594,988
Other deferred credits and liabilities 330,949 315,627
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 29,247,172 and
29,221,972 shares in 1998 and 1997 14,624 14,611
Class B common stock of $.50 par value. Authorized
and issued 2,000,000 shares 1,000 1,000
Additional paid-in capital 451,976 451,100
Retained earnings 803,555 810,401
---------- ----------
Total stockholders' equity 1,271,155 1,277,112
Commitments and contingencies - -
---------- ----------
$2,880,410 $3,014,674
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
FINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------- -------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sales and other operating revenues $1,019,348 $1,034,558 $2,037,357 $2,148,626
Interest and other, net 9,341 1,712 29,535 7,087
---------- ---------- ---------- ----------
1,028,689 1,036,270 2,066,892 2,155,713
---------- ---------- ---------- ----------
Costs and expenses:
Cost of raw materials and products purchased 787,201 775,710 1,625,995 1,653,826
Direct operating expenses 91,387 92,138 179,157 180,065
Selling, general, and administrative expenses 27,775 24,833 51,170 46,260
Taxes, other than on income 14,178 13,811 28,865 28,162
Dry holes and abandonments 191 9,363 771 11,418
Depreciation, depletion, amortization,
and lease impairment 48,142 50,613 96,871 98,091
Interest charges, net 8,740 9,699 17,603 19,304
---------- ---------- ---------- ----------
977,614 976,167 2,000,432 2,037,126
---------- ---------- ---------- ----------
Earnings before income taxes 51,075 60,103 66,460 118,587
Income taxes 17,960 20,080 23,323 39,414
---------- ---------- ---------- ----------
Net earnings $33,115 $40,023 $43,137 $79,173
========== ========== ========== ==========
Basic and diluted earnings per common share (note 2) $1.06 $1.28 $1.38 $2.54
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
FINA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(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
months ended June 30, 1998 are not necessarily indicative of the operating
results for the full fiscal year.
(2) Basic earnings per share (EPS) is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity. For the
periods presented herein, basic and diluted EPS are the same. The weighted
average number of outstanding common shares was 31,245,022 and 31,217,372
for the three months ended June 30, 1998 and 1997, respectively. The
weighted average number of outstanding common shares was 31,236,715
and 31,217,029 for the six months ended June 30, 1998 and 1997,
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 35
of the Company's 1997 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 principal
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):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Current assets $724,996 $846,240
Noncurrent assets 2,024,005 2,296,640
Current liabilities (638,194) (704,163)
Noncurrent liabilities (1) (1,953,470) (2,318,492)
---------- ----------
Net Assets $157,337 $120,225
========= =========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1998 1997 1998 1997
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Sales and other operating revenues $1,423,390 $1,889,773 $738,522 $929,674
========== ========== ======== ========
Gross profit (2) $100,420 $182,807 $72,174 $100,199
========== ========== ======== ========
Net earnings $39,165 $76,478 $29,782 $39,294
========== ========== ======== ========
</TABLE>
(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.
<PAGE> 5
Notes continued:
(6) Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of
comprehensive income in a full set of general-purpose financial
statements. Comprehensive income includes net income and other
comprehensive income which is generally comprised of changes in the fair
value of available-for-sale marketable securities, foreign currency
translation adjustments and adjustments to recognize additional minimum
pension liabilities. The Company had no accumulated other comprehensive
income at December 31, 1997 and no comprehensive income for three and six
months ended June 30, 1998 and 1997.
(7) Because of price declines in a majority of the products during 1998,
inventory was reduced to net realizable value. Inventory was reduced by
$19 million for the three months ended June 30, 1998 and $60 million for
the six months ended June 30, 1998.
<PAGE> 6
FINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $43,137 $79,173
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion, amort., lease impairment & abandonments 97,301 98,499
Net equity in losses of affiliates 2,869 2,894
Gain on sale of assets (32,601) (8,313)
Changes in assets and liabilities:
Accounts and notes receivable 81,677 12,770
Inventories 64,837 (51,616)
Prepaid expenses and other current assets 6,024 (2,198)
Accounts payable and accrued liabilities (211,260) (84,206)
Current and deferred income taxes 21,810 28,925
Other 10,329 (9,619)
------- ------
Net cash provided by (used in) operating activities 84,123 66,309
------- ------
Cash flows from investing activities:
Additions to property, plant and equipment (152,862) (78,982)
Proceeds from sale of assets 66,248 13,673
Investments in and advances to affiliates (1,247) (7,917)
------- ------
Net cash used in investing activities (87,861) (73,226)
------- ------
Cash flows from financing activities:
Additions to long term debt and lease obligations 1,007 906
Payments of long term debt and lease obligations (55,881) (30,055)
Net change in short term obligations 107,639 87,341
Issuance of common stock 888 49
Dividends paid (49,983) (46,826)
------- ------
Net cash provided by (used in) financing activities 3,670 11,415
------- ------
Net increase in cash and cash equivalents (68) 4,498
Cash and cash equivalents at beginning of year 1,271 1,585
------- ------
Cash and cash equivalents at end of period $1,203 $6,083
======= ======
</TABLE>
<PAGE> 7
FINA, INC.
UNAUDITED SEGMENT INFORMATION
<TABLE>
<CAPTION>
-------------------------- --------------------------
SECOND QUARTER SIX MONTHS
1998 1997 1998 1997
-------------------------- --------------------------
EARNINGS (Thousands, except share and per-share amounts)
--------
<S> <C> <C> <C> <C>
Upstream $19,276 $ 4,091 $47,313 $39,578
Downstream 20,191 29,820 21,318 31,827
Chemicals 29,288 40,575 27,607 75,649
Corporate / Financing (17,680) (14,383) (29,778) (28,467)
Income Tax (17,960) (20,080) (23,323) (39,414)
-------------------------- --------------------------
Total Net Earnings $33,115 $40,023 $43,137 $79,173
========================== ==========================
Net Earnings Per Share $1.06 $1.28 $1.38 $2.54
Average Shares Outstanding 31,245,022 31,217,372 31,236,715 31,217,029
OPERATING STATISTICS
--------------------
Upstream
Crude Oil Production - MBD 9.9 10.3 10.1 10.3
Natural Gas Production - MMCFD 184 183 182 186
Natural Gas Sales - MMCFD 1,237 673 1,329 700
Average Oil Price/BBL $11.24 $17.07 $12.12 $18.71
Average Natural Gas Sales Price/MCF $2.43 $2.29 $2.51 $2.71
Downstream
Refinery Throughput - MBD 235.4 229.0 228.8 230.6
Chemicals
Sales Volume - MMLB 1,059.9 1,009.2 2,073.4 2,009.6
</TABLE>
<PAGE> 8
PART I - Item 2
MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS.
On August 5, 1998, FINA, Inc. (the "Company") held a special meeting of
stockholders to vote on the Agreement and Plan of Merger dated as of February
17, 1998, as amended (the "Merger Agreement") and merger (the "Merger") pursuant
to which the Company would become an indirect wholly-owned subsidiary of
PetroFina S.A. ("PetroFina"). The Merger Agreement and Merger were
overwhelmingly approved by 29,905,856 of the 31,247,172 then outstanding shares.
As of August 5, 1998 the Company is indirectly now deemed to be 100% owned by
Petrofina Delaware, Incorporated, a subsidiary of PetroFina.
Pursuant to the Merger Agreement, each share of common stock, par
value US $.50 per share ("Share"), of the Company outstanding immediately prior
to the effective time of the Merger, other than Shares owned by PetroFina or its
subsidiaries, was converted into the right to receive (A) US $60 plus (B) one
warrant (a "Warrant") to purchase nine-tenths (0.9) of one American Depositary
Share (an "ADS"), each PetroFina ADS representing one-tenth (0.1) of one
ordinary voting share of PetroFina. The warrants will be exercisable for a
period of five years from the date of the Merger and will have an exercise
price of US $42.25 per ADS, subject to adjustment. Thus, a holder of 10
Warrants may purchase nine ADSs for an aggregate purchase price of US $380.25.
PetroFina listed the Warrants on The New York Stock Exchange, Inc.
Net earnings were $33,115,000 for the quarter ended June 30, 1998
compared to $40,023,000 for the second quarter of 1997. Sales and other
operating revenues were $1,019,348 for second quarter 1998 compared to
$1,034,558,000 for second quarter 1997. Earnings per share were $1.06 compared
to $1.28 per share for the second quarter of last year.
The net earnings decrease in the second quarter 1998 was largely
attributable to a non cash LIFO inventory write down of $12,143,000, after tax,
partially offset by a gain on sales of assets of $6,700,000, after tax. Sales
and other operating revenues of $1,019,348,000 were essentially unchanged from
the same period last year, with lower prices generally offset by higher
volumes.
For the six months of 1998, net earnings were $43,137,000 after a
non-cash LIFO inventory write-down of $38,820,000 and asset sales gains of
$20,709,000, both after-tax compared to net earnings of $79,173,000 for the same
period in 1997. Earnings per share for the first six months of 1998 were $1.38
compared to $2.54. Sales and other operating revenues were $2,037,357,000
compared to $2,148,626,000 for the six months of 1997.
There was no material change in the amount of revenue for the first
six months of 1998 compared to the same period in 1997. Dry hole and abandonment
expense decreased 93% in the first six months of 1998 compared to the same
period in 1997 primarily due to improved experience in the Upstream. Material
changes in the selling, general and administrative expenses from the same period
in 1998 compared to 1997 were substantially attributable to the Merger.
In the Upstream, earnings before interest and income taxes (EBIT) was
$47,313,000 in the first six months of 1998 compared to $39,578,000 for the same
period in 1997, and $19,276,000 for second quarter 1998 compared to $4,091,000
in second quarter 1997. Lower crude oil and natural gas prices and lower natural
gas production were more than offset by asset sales gains in the first half of
1998.
In the Downstream, earnings before interest and income taxes (EBIT)
was $21,318,000 in the first half of 1998 compared to $31,827,000 in the same
period last year, and $20,191,000 in the second quarter of 1998 compared to
$29,820,000 for the same period in 1997. Second quarter EBIT is after a non-cash
LIFO inventory write-down of $9,332,000 and an asset sales gain of $1,659,000.
Higher industry and refining margins and good operations are reflected in second
quarter results.
Chemicals earnings before interest and income taxes (EBIT) for the
first half of the year 1998 was $27,607,000, after a non-cash LIFO inventory
write-down of $44,572,000 before tax, compared to $75,649,000 in the same period
of 1997. For second quarter 1998, EBIT was $29,288,000 after a non-cash LIFO
inventory write-down of $9,335,000, compared to $40,575,000 in second quarter
1997. An 8% decline in average margins were only partially offset by a 3%
increase in sales volumes.
The Company's regular quarterly dividend of $.80 per share was paid on
June 15, 1998 to shareholders of record on June 3, 1998.
<PAGE> 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Following the February 25, 1997 announcement by PetroFina that it had
offered to purchase the outstanding common stock of the Company (other
than common stock held by PetroFina and its affiliates) (the "Public
Shares"), four putative class actions were filed against PetroFina,
certain affiliates including the Company, and the Company's directors
in the Court of Chancery in the State of Delaware (the "Court").
Following negotiation and the voluntary production of documents to
plaintiffs' counsel, plaintiffs and defendants in all of these
consolidated actions entered into a Memorandum of Understanding on
February 13, 1998 (the "MOU"). Under the MOU each of the four actions
will be settled, contingent upon confirmatory discovery, the closing of
the merger and the entry of a final judgment dismissing with prejudice
all claims between the plaintiff class members and the defendants.
Plaintiff class members include all holders of record of the Public
Shares between February 25, 1997 and July 13, 1998 (the "Record Date").
The terms of the settlement provide (i) for consideration of US $60 in
cash and one warrant as described in the Agreement and Plan of Merger
dated as of February 17, 1998, as amended, (ii) for the release of all
defendants from all claims arising from or related to the merger, and
(iii) that the defendants will not object to a request by plaintiffs
that the Court award attorneys' fees in an amount not exceeding US
$1,250,000 to be paid by the Company.
On May 14, 1998, the parties submitted a Stipulation of Settlement to
the Court, requesting a hearing to approve the settlement. By a
Scheduling Order entered on May 15, 1998 and amended on June 4 and July
10, 1998, respectively, the Court, (1) certified, for settlement
purposes only, a class (the "Class Members") consisting of all
stockholders of the Company between February 25, 1997 and the Record
Date; (2) required the Company to mail notice of the settlement to all
Class Members; (3) scheduled a hearing on September 23, 1998 at 1:30
p.m. in the Court in the Daniel L. Herrmann Courthouse, 1020 North King
Street, Wilmington, Delaware 19801 to consider the class certification,
proposed settlement and plaintiff's application for attorneys' fees;
and (4) set forth the procedures by which any class member may appear
at the hearing and object to the settlement.
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 on August 5, 1998 reporting a news release by
PetroFina S.A. that the merger by its wholly owned subsidiary and the
Company had been approved resulting in the Company being owned 100% by
PetroFina S.A. Prior to the August 5 Form 8-K, a Form 8-K had been filed
on July 29, 1998 announcing the Special Meeting of the Stockholders to
vote on the merger proposal.
Exhibits incorporated herein by reference:
(27) Financial Data Schedule
<PAGE> 10
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.
----------
(REGISTRANT)
Date: August 13, 1998
BY: /s/ KEVIN A. RUPP
--------------------------------------------
Vice President and Principal Accounting Officer
<PAGE> 11
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AND FROM CONSOLIDATED STATEMENTS OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,203
<SECURITIES> 0
<RECEIVABLES> 500,047
<ALLOWANCES> 0
<INVENTORY> 280,398
<CURRENT-ASSETS> 823,356
<PP&E> 3,552,936
<DEPRECIATION> (1,678,288)
<TOTAL-ASSETS> 2,880,410
<CURRENT-LIABILITIES> 734,111
<BONDS> 544,195
0
0
<COMMON> 15,624
<OTHER-SE> 1,271,155
<TOTAL-LIABILITY-AND-EQUITY> 2,880,410
<SALES> 2,037,357
<TOTAL-REVENUES> 2,066,892
<CGS> 1,625,995
<TOTAL-COSTS> 179,157
<OTHER-EXPENSES> 177,677
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,603
<INCOME-PRETAX> 66,460
<INCOME-TAX> 23,323
<INCOME-CONTINUING> 43,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,137
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 0
</TABLE>
