<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[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 _______.
Commission File Number: 1-10398
GIANT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0642718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23733 North Scottsdale Road, Scottsdale, Arizona 85255
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(602) 585-8888
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 [ ]
Number of Common Shares outstanding at July 31, 1998: 10,993,267 shares.
<PAGE>
<PAGE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1998 (Unaudited) and December 31, 1997
Condensed Consolidated Statements of Earnings (Loss) Three
and Six Months Ended June 30, 1998 and 1997 (Unaudited)
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 (Unaudited)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE<PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,062 $ 82,592
Accounts receivable, net 54,400 57,070
Inventories 60,277 57,598
Prepaid expenses and other 8,286 7,016
Deferred income taxes 2,800 2,800
--------- ---------
Total current assets 126,825 207,076
--------- ---------
Property, plant and equipment 463,912 402,600
Less accumulated depreciation and amortization (131,950) (120,773)
--------- ---------
331,962 281,827
--------- ---------
Goodwill, net 17,980 18,363
Other assets 26,398 28,105
--------- ---------
$ 503,165 $ 535,371
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,391 $ 562
Accounts payable 43,190 55,546
Accrued expenses 31,021 39,243
--------- ---------
Total current liabilities 75,602 95,351
--------- ---------
Long-term debt, net of current portion 265,878 275,557
Deferred income taxes 25,762 25,887
Other liabilities 4,478 5,109
Commitments and contingencies (Notes 4 and 5)
Common stockholders' equity 131,445 133,467
--------- ---------
$ 503,165 $ 535,371
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
(In thousands except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 157,014 $ 154,123 $ 302,730 $ 270,261
Cost of products sold 112,748 112,057 218,500 198,645
----------- ----------- ----------- -----------
Gross margin 44,266 42,066 84,230 71,616
Operating expenses 24,261 18,307 49,154 34,129
Depreciation and amortization 6,774 5,566 13,563 10,571
Selling, general and administrative expenses 6,237 5,360 12,052 9,808
----------- ----------- ----------- -----------
Operating income 6,994 12,833 9,461 17,108
Interest expense, net 5,809 3,305 11,408 5,773
----------- ----------- ----------- -----------
Earnings (loss) before income taxes 1,185 9,528 (1,947) 11,335
Provision (benefit) for income taxes 426 3,853 (1,024) 4,536
----------- ----------- ----------- -----------
Net earnings (loss) $ 759 $ 5,675 $ (923) $ 6,799
=========== =========== =========== ===========
Earnings (loss) per common share:
Basic $ 0.07 $ 0.51 $ (0.08) $ 0.61
=========== =========== =========== ===========
Assuming dilution $ 0.07 $ 0.51 $ (0.08) $ 0.61
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (923) $ 6,799
Adjustments to reconcile net earnings (loss) to net
cash (used) provided by operating activities:
Depreciation and amortization 13,563 10,571
Deferred income taxes (125) 1,623
Other 224 513
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Decrease in receivables 2,773 185
Increase in inventories (2,679) (12,201)
(Increase) decrease in prepaid expenses and other (1,331) 493
Decrease in accounts payable (12,356) (2,698)
(Decrease) increase in accrued expenses (968) 1,175
-------- --------
Net cash (used) provided by operating activities (1,822) 6,460
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash received (26,260) (47,029)
Purchases of property, plant and equipment and other assets (38,378) (18,466)
Refinery acquisition contingent payment (7,244) (6,910)
Proceeds from sale of property, plant and equipment 2,191 246
-------- --------
Net cash used by investing activities (69,691) (72,159)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt 5,000 120,850
Payments of long-term debt (13,850) (58,244)
Payment of dividends (1,100) (1,114)
Purchase of treasury stock (1,084)
Deferred financing costs (67) (201)
-------- --------
Net cash (used) provided by financing activities (10,017) 60,207
-------- --------
Net decrease in cash and cash equivalents (81,530) (5,492)
Cash and cash equivalents:
Beginning of period 82,592 12,628
-------- --------
End of period $ 1,062 $ 7,136
======== ========
</TABLE>
Noncash Investing and Financing Activities. In the second quarter of
1997, the Company exchanged an office building and a truck maintenance
shop with net book values totaling approximately $1,300,000 and recorded
$22,904,000 for capital leases as part of the acquisition of the Thriftway
Assets.
See accompanying notes to condensed consolidated financial statements.<PAGE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring nature.
Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The enclosed financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
In March 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share", which is effective for financial statements for
both interim and annual periods ending after December 15, 1997. The
Company has implemented this Statement and, as required, has restated
earnings per share ("EPS") for all periods presented. This new standard
requires dual presentation of "basic" and "diluted" EPS on the face of
the earnings statement and requires a reconciliation of the numerator
and denominator of the basic and diluted EPS calculations (See Note 2).
Basic earnings per common share is computed on the weighted average
number of shares of common stock outstanding during each period.
Earnings per common share assuming dilution is computed on the weighted
average number of shares of common stock outstanding plus additional
shares representing the exercise of outstanding common stock options
using the treasury stock method.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income", which is effective for fiscal 1998 financial statements for
both interim and annual periods. SFAS No. 130 requires that an
enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and
additional capital in the equity section of a statement of financial
position. The Company has no items of other comprehensive income for the
periods presented in these financial statements.
In June 1997, the FASB also issued SFAS No. 131 "Disclosures About
Segments of an Enterprise and Related Information", which is effective
for fiscal 1998. This statement need not be applied to fiscal 1998
interim financial statements. SFAS No. 131 establishes standards for the
way that public enterprises report information about operating segments
in annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to stockholders. It also establishes standards
for disclosures about products and services, geographic areas and major
customers. The Company has not completed evaluating the effects this
Statement will have on its financial reporting and disclosures. The
Statement will have no effect on the Company's financial position or
results of operations.
<PAGE>
<PAGE>
NOTE 2 - EARNINGS PER SHARE:
As discussed in Note 1, the following is a reconciliation of
the numerators and denominators of the basic and diluted per share
computations for net earnings (loss) as required by SFAS No. 128:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------------
1998 1997
-------------------------------- --------------------------------
Per Per
Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common
share - basic
Net earnings $ 759,000 10,993,267 $ 0.07 $5,675,000 11,070,954 $0.51
Effect of dilutive
stock options 150,948 102,465
--------- ---------- ------ ---------- ---------- -----
Earnings per common share
- assuming dilution
Net earnings $ 759,000 11,144,215 $ 0.07 $5,675,000 11,173,419 $0.51
========= ========== ====== ========== ========== =====
Six Months Ended June 30,
-------------------------------------------------------------------
1998 1997
-------------------------------- --------------------------------
Per Per
Loss Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) per common
share - basic
Net earnings (loss) $(923,000) 10,993,267 $(0.08) $6,799,000 11,084,336 $0.61
Effect of dilutive
stock options * 107,038
--------- ---------- ------ ---------- ---------- -----
Earnings (loss) per common
share - assuming dilution
Net earnings (loss) $(923,000) 10,993,267 $(0.08) $6,799,000 11,191,374 $0.61
========= ========== ====== ========== ========== =====
</TABLE>
*The additional shares would be antidilutive due to the net loss.
There were no transactions subsequent to June 30, 1998, that
if the transactions had occurred before June 30, 1998, would
materially change the number of common shares or potential common
shares outstanding as of June 30, 1998.
<PAGE>
<PAGE>
NOTE 3 - INVENTORIES:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(In thousands)
<S> <C> <C>
Inventories consist of the following:
First-in, first-out ("FIFO") method:
Crude oil $16,104 $12,736
Refined products 21,082 25,562
Refinery and shop supplies 7,805 7,530
Merchandise 4,483 4,640
Retail method:
Merchandise 6,412 5,840
------- -------
55,886 56,308
Allowance for last-in, first-out
("LIFO") method 11,141 4,220
Allowance for lower of cost or market (6,750) (2,930)
------- -------
$60,277 $57,598
======= =======
</TABLE>
The portion of inventories valued on a LIFO basis totaled
$40,927,000 and $37,714,000 at June 30, 1998 and December 31,
1997, respectively. The following data will facilitate
comparison with the operating results of companies using the
FIFO method of inventory valuation.
If inventories had been determined using the FIFO method at
June 30, 1998 and 1997, net earnings and diluted earnings per
share for the three months ended June 30, 1998 and 1997 would
have been higher (lower) by $379,000 and $0.03, and $(1,496,000)
and $(0.13), respectively. For the six months ended June 30,
1998 and 1997, net earnings and diluted earnings per share would
have been lower by $(1,834,000) and $(0.17), and $(3,364,000)
and $(0.30), respectively.
<PAGE>
<PAGE>
NOTE 4 - LONG-TERM DEBT:
In August 1997, the Company issued $150,000,000 of 9% senior
subordinated notes due 2007 (the "9% Notes")and in November 1993, the
Company issued $100,000,000 of 9 3/4% senior subordinated notes due
2003 (the "9 3/4% Notes", and collectively with the 9% Notes, the
"Notes"). The Indentures supporting the Notes contain covenants that,
among other things, restrict the ability of the Company and its
subsidiaries to create liens, incur or guarantee debt, pay dividends,
sell certain assets or subsidiary stock, engage in certain mergers,
engage in certain transactions with affiliates or alter the Company's
current line of business. In addition, subject to certain conditions,
the Company is obligated to offer to purchase a portion of the Notes at
a price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, with the net cash
proceeds of certain sales or other dispositions of assets. Upon a
change of control, which would include the proposed merger with Holly
Corporation as described in Note 6, the Company will be required to
offer to purchase all of the Notes at 101% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase.
Repayment of the Notes is jointly and severally guaranteed on an
unconditional basis by the Company's direct and indirect wholly-owned
subsidiaries, subject to a limitation designed to ensure that such
guarantees do not constitute a fraudulent conveyance. Except as
otherwise allowed in the Indenture pursuant to which the Notes were
issued, there are no restrictions on the ability of such subsidiaries
to transfer funds to the Company in the form of cash dividends, loans
or advances. General provisions of applicable state law, however, may
limit the ability of any subsidiary to pay dividends or make
distributions to the Company in certain circumstances.
Separate financial statements of the subsidiaries are not included
herein because the subsidiaries are jointly and severally liable for
repayment of the Notes; the aggregate assets, liabilities, earnings and
equity of the subsidiaries are substantially equivalent to the assets,
liabilities, earnings and equity of the Company on a consolidated basis;
and the separate financial statements and other disclosures concerning the
subsidiaries are not deemed material to investors.
<PAGE>
<PAGE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
The Company and certain subsidiaries are defendants to various
legal actions. Certain of these pending legal actions involve or may
involve claims for compensatory, punitive or other damages. Litigation
is subject to many uncertainties and it is possible that some of these
legal actions, proceedings or claims could be decided adversely.
Although the amount of liability at June 30, 1998 with respect to
these matters is not ascertainable, the Company believes that any
resulting liability should not materially affect the Company's
financial condition or results of operations.
Federal, state and local laws and regulations relating to health
and the environment affect nearly all of the operations of the
Company. As is the case with other companies engaged in similar
industries, the Company faces significant exposure from actual or
potential claims and lawsuits involving environmental matters. These
matters include soil and water contamination, air pollution and
personal injuries or property damage allegedly caused by substances
manufactured, handled, used, released or disposed of by the Company.
Future expenditures related to health and environmental matters
cannot be reasonably quantified in many circumstances due to the
speculative nature of remediation and clean-up cost estimates and
methods, imprecise and conflicting data regarding the hazardous
nature of various types of substances, the number of other
potentially responsible parties involved, various defenses which may
be available to the Company and changing environmental laws and
interpretations of environmental laws.
The United States Environmental Protection Agency notified the
Company in May 1991 that it may be a potentially responsible party
for the release or threatened release of hazardous substances,
pollutants, or contaminants at the Lee Acres Landfill (the "Landfill"),
which is owned by the United States Bureau of Land Management (the
"BLM") and which is adjacent to the Company's Farmington refinery.
This refinery was operated until 1982. Although a final plan of action
for the Landfill has not yet been adopted by the BLM, the BLM has
developed a proposed plan of action, which it projects will cost
approximately $3,900,000 to implement. This cost projection is based
on certain assumptions which may or may not prove to be correct, and
is contingent on confirmation that the remedial actions, once
implemented, are adequately addressing Landfill contamination. For
example, if assumptions regarding groundwater mobility and
contamination levels are incorrect, the BLM is proposing to take
additional remedial actions with an estimated cost of approximately
$1,800,000. Potentially responsible party liability is joint and
several, such that a responsible party may be liable for all of the
clean-up costs at a site even though it was responsible for only a
small part of such costs. Based on current information, the Company
does not believe it needs to record a liability in relation to the
BLM's proposed plan.
The Company has established an environmental liability accrual of
approximately $2,800,000. Approximately $800,000 relates to ongoing
environmental projects, including the remediation of a hydrocarbon
plume at the Company's Farmington refinery and hydrocarbon
contamination on and adjacent to 5.5 acres the Company owns in
Bloomfield, New Mexico. The remaining amount of approximately
$2,000,000 relates to an original estimate of approximately
$2,300,000, recorded in the second quarter of 1996, of certain
environmental obligations assumed in the acquisition of the Bloomfield
refinery. The environmental accrual is recorded in the current and
long-term sections of the Company's Consolidated Balance Sheet.
The Company has received several tax notifications and
assessments from the Navajo Tribe relating to crude oil and natural
gas removed from properties located outside the boundaries of the
Navajo Indian Reservation in an area of disputed jurisdiction,
including a $1,800,000 severance tax assessment issued in November
1991. The Company has invoked its appeal rights with the Tribe's Tax
Commission in connection with this assessment and intends to oppose
the assessment. It is the Company's position that it is in substantial
compliance with laws applicable to the disputed area and, therefore,
the Company has accrued a liability in regards thereto for
substantially less than the amount of the original assessment. It is
possible that the Company's assessments will have to be litigated by
the Company before final resolution. In addition, the Company may
receive further tax assessments.<PAGE>
<PAGE>
NOTE 6 - ACQUISITIONS AND MERGER:
On February 10, 1998, the Company completed the purchase of the
assets of DeGuelle Oil Company and the stock of DeGuelle Enterprises
(collectively "DeGuelle") for $9.75 million. DeGuelle is a Durango,
Colorado-based petroleum marketing company. Included in the purchase
were seven service station/convenience stores, two cardlock commercial
fleet fueling facilities, a gasoline and diesel storage bulk plant and
related transportation equipment. All of the facilities are located in
southwestern Colorado and are supplied by the Company's refineries. In
1997, DeGuelle had sales of approximately 10.0 million gallons of
gasoline and diesel fuel in addition to 35,000 gallons of lubricants.
In the last week of June 1998, the Company completed the
acquisition of seventeen service station/convenience stores from
Kaibab Industries, Inc. In addition, one other unit was leased under
an operating lease arrangement for a period of two years. An
additional fifteen units were acquired in July 1998. In addition,
other related equipment, fuel truck/transports, fuel inventories and
undeveloped real estate was acquired. The retail units, located
throughout Arizona, include fifteen in the greater Phoenix area and
eleven in the Tucson market, with the balance located primarily in
southern and eastern Arizona. These units have had sales of
approximately 70.0 million gallons of refined petroleum products per
year.
On April 15, 1998, the Company announced that it had entered into
an Agreement and Plan of Merger (the "Merger Agreement") with Holly
Corporation ("Holly"). Pursuant to the Merger Agreement, among other
things:
(i) Holly will be merged with and into Giant; and
(ii) Based upon the number of shares of Giant Common Stock and
Holly Common Stock and the number of Holly stock options and Holly
phantom stock rights outstanding as of April 30, 1998, each
outstanding share of Holly Common Stock will be converted into the
right to receive approximately 1.33 shares of Giant Common Stock plus
$2.886 in cash.
Holly, listed on the American Stock Exchange, is an independent
refiner of petroleum and petroleum derivatives and produces high-value
light products such as gasoline, diesel fuel and jet fuel that are
sold primarily in the southwestern United States, northern Mexico and
Montana. Principal gasoline customers include other refiners,
convenience store chains, independent marketers, an affiliate of the
Mexican energy company PEMEX and retailers. Its diesel fuel is sold to
end users, wholesalers, and independent dealers. Jet fuel is sold
primarily to the military. Subsidiaries of Holly operate refineries in
New Mexico and Montana and own, lease, and operate 950 miles of
refined product pipelines, 625 miles of crude oil gathering pipelines,
seven product terminals, and an asphalt marketing business.
The merger has received the approval of both companies' Boards of
Directors and stockholders. Completion of the transaction is subject
to, among other things, receiving necessary government approvals. The
Company has received a second request for information from the Federal
Trade Commission ("FTC") and has been working with the FTC and the
State of New Mexico during their review. <PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
EARNINGS (LOSS) BEFORE INCOME TAXES
- -----------------------------------
For the three months ended June 30, 1998, earnings before income
taxes were $1.2 million, a decrease of approximately $8.3 million from
earnings before income taxes of $9.5 million for the three months
ended June 30, 1997. For the six months ended June 30, 1998, the
Company incurred a loss before income taxes of $1.9 million, a
decrease of approximately $13.2 million from earnings before income
taxes of $11.3 million for the six months ended June 30, 1997. The
decrease in earnings in each period is primarily due to (i) a 19%
decline in refinery margins, partially related to non-cash charges for
reductions in the carrying value of inventories of approximately $2.9
million and $3.9 million for the three and six month periods of 1998,
respectively; (ii) increased interest costs related to (a) the
issuance of $150.0 million of senior subordinated notes in August 1997
to finance the acquisition of various service station/convenience
stores and related assets (the "Thriftway Assets", the "DeGuelle
Assets" and the "Kaibab Assets") and Phoenix Fuel Co., Inc. ("Phoenix
Fuel") (collectively the "Acquisitions"), and (b) capital lease
obligations recorded in connection with the Thriftway Assets; (iii)
increased operating and administrative expenses primarily related to
the Acquisitions and planning for future growth; and (iv) a decrease
in refinery sourced sales volumes of approximately 9% and 6% for the
three and six month periods, respectively, due in part to a major
maintenance turnaround at the Ciniza refinery. These items resulting
in earnings decreases were offset in part by earnings from the
Acquisitions and an increase in volumes and margins realized from
finished product sold by the Company's retail operations, separate
from the Thriftway, DeGuelle and Kaibab Assets.
REVENUES
- --------
Revenues for the three months ended June 30, 1998, increased
approximately $2.9 million or 2% to $157.0 million from $154.1 million
in the comparable 1997 period. The increase is primarily due to the
Acquisitions, offset in part by a 22% decline in refinery weighted
average selling prices and a 9% decrease in refinery sourced finished
product sales volumes.
For the quarter, volumes of refined products sold through the
Company's retail units increased approximately 42% from 1997 levels
primarily due to the Thriftway and DeGuelle Assets, along with a 10%
increase in the volumes of finished product sold from the Company's
other retail operations, primarily due to a 34% increase in the volume
of finished product sold from the Company's travel center. The
increased travel center volumes are due in large part to improved
marketing programs put in place during 1997.
Revenues for the six months ended June 30, 1998, increased
approximately $32.4 million or 12% to $302.7 million from $270.3
million in the comparable 1997 period. The increase is primarily due
to the Acquisitions, offset in part by a 24% decline in refinery
weighted average selling prices and a 6% decrease in refinery sourced
finished product sales volumes.
For the six month period, volumes of refined products sold
through the Company's retail units increased approximately 52% from
1997 levels primarily due to the Thriftway and DeGuelle Assets, along
with an 8% increase in the volumes of finished product sold from the
Company's other retail operations, primarily due a 36% increase in the
volume of finished product sold from the Company's travel center. The
increased travel center volumes are due in large part to improved
marketing programs put in place during 1997.
COST OF PRODUCTS SOLD
- ---------------------
For the three months ended June 30, 1998, cost of products sold
increased $0.7 million or 1% to $112.8 million from $112.1 million in
the corresponding 1997 period. For the six months ended June 30, 1998,
cost of products sold increased $19.9 million or 10% to $218.5 million
from $198.6 million in the corresponding 1997 period. The increases
are primarily due to the Acquisitions, offset in part by a 29% decline
in average crude oil costs and a decrease in refinery sourced finished
product sales volumes. In addition, 1998 cost of products sold
increased as a result of a reduction in the carrying value of
inventories related to a decline in crude oil and refined product
prices.
OPERATING EXPENSES
- ------------------
For the three months ended June 30, 1998, operating expenses
increased approximately $6.0 million or 33% to $24.3 million from
$18.3 million for the three months ended June 30, 1997. For the six
months ended June 30, 1998, operating expenses increased approximately
$15.0 million or 44% to $49.1 million from $34.1 million for the six
months ended June 30, 1997.
Approximately 96% for the quarter and 90% year-to-date of the
increase is due to the Acquisitions. For the Company's other
operations, 1998 costs increased because of repair and maintenance
projects at the Ciniza refinery and increased payroll and related
costs. These increases were offset in part by a reduction in general
insurance expenses and chemical and additive costs. Increased payroll
and related costs relate primarily to general wage increases and
expanded retail operations.
DEPRECIATION AND AMORTIZATION
- -----------------------------
For the three months ended June 30, 1998, depreciation and
amortization increased approximately $1.2 million or 22% to $6.8
million from $5.6 million in the same 1997 period. For the six months
ended June 30, 1998, depreciation and amortization increased
approximately $3.0 million or 28% to $13.6 million from $10.6 million
in the same 1997 period.
Approximately 70% for the quarter and 71% year-to-date of the
increase is due to the Acquisitions. The remaining increases are
primarily related to construction, remodeling and upgrades in retail,
refining and transportation operations and the amortization of 1997
Bloomfield refinery turnaround costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
For the three months ended June 30, 1998, selling, general and
administrative expenses ("SG&A") increased approximately $0.9 million
or 16% to $6.2 million from $5.3 million in the corresponding 1997
period. For the six months ended June 30, 1998, SG&A increased
approximately $2.2 million or 23% to $12.0 million from $9.8 million
in the corresponding 1997 period.
Approximately 28% for the quarter and 34% year-to-date of the
increase is due to SG&A associated with the operations of Phoenix
Fuel. The remaining increases are primarily the result of higher
payroll and related costs, outside services and other costs, in large
part due to the Acquisitions and planning for future growth. These
increases are offset in part by an approximate $0.8 million decrease
in management incentive bonus accruals in the 1998 periods compared to
the 1997 periods.
INTEREST EXPENSE, NET
- ---------------------
For the three months ended June 30, 1998, net interest expense
(interest expense less interest income) increased approximately $2.5
million or 76% to $5.8 million from $3.3 million in the comparable
1997 period. For the six months ended June 30, 1998, net interest
expense increased approximately $5.6 million or 98% to $11.4 million
from $5.8 million in the comparable 1997 period.
The increase is primarily due to additional long-term debt
related to the Acquisitions, including the issuance of $150.0 million
of senior subordinated notes in August 1997 and capital lease
obligations recorded in connection with the purchase of the Thriftway
Assets at the end of May 1997. This increase was partially offset by
an increase in interest and investment income due to an increase in
excess funds available for investment resulting from the issuance of
the senior subordinated notes. The effects of fluctuations in interest
rates applicable to invested funds were nominal.
INCOME TAXES
- ------------
The provision for income taxes for the three months ended June
30, 1998 and the three and six months ended June 30, 1997, along with
the income tax benefit for the six months ended June 30, 1998 were
computed in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, resulting in an effective tax rate of
approximately 36% for the 1998 three month period, a 53% benefit rate
for the 1998 six month period and a 40% effective tax rate for the
comparable 1997 periods. The difference in the effective tax/benefit
rates is primarily due to deferred tax adjustments.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
- -------------------------
Operating cash flows declined in the first six months of 1998 in
relation to the comparable 1997 period, primarily as the result of a
net loss in the 1998 period. Net cash used by operating activities
totaled $1.8 million for the six months ended June 30, 1998, compared
to $6.5 million provided by operations in the comparable 1997 period.
WORKING CAPITAL
- ---------------
Working capital at June 30, 1998 consisted of current assets of
$126.8 million and current liabilities of $75.6 million, or a current
ratio of 1.68:1. At December 31, 1997, the current ratio was 2.17:1
with current assets of $207.1 million and current liabilities of $95.4
million.
Current assets have decreased since December 31, 1997, primarily
due to a decrease in cash and cash equivalents and accounts
receivable, offset in part by an increase in inventories and prepaid
items. Accounts receivable have decreased primarily due to a decline
in finished product selling prices. Inventories have increased
primarily due to an increase in pipeline crude oil volumes and an
increase in retail inventories resulting from recent acquisitions.
These increases were offset in part by a decline in crude oil and
refined product prices, along with a decrease in terminal and refinery
onsite finished product volumes resulting in part from the Ciniza
refinery turnaround. The pipeline crude oil volume increases are also
partially related to the turnaround at the Ciniza refinery. Current
liabilities have declined due to a decrease in accounts payable and
accrued expenses. Accounts payable have decreased primarily as a
result of a decline in the cost of raw materials. Accrued expenses
have decreased primarily as a result of the payment of a contingency
incurred in connection with the acquisition of the Bloomfield
refinery, management incentive and other bonuses and ESOP and 401(k)
contributions.
CAPITAL EXPENDITURES AND RESOURCES
- ----------------------------------
Net cash used in investing activities for the purchase of
property, plant and equipment and other assets, excluding business
acquisitions, totaled approximately $38.4 million for the first six
months of 1998. Expenditures included amounts for the Ciniza refinery
second quarter turnaround, refinery and transportation equipment and
facility upgrades, capacity enhancement projects for the refineries,
construction costs for two new retail units, acquisition of land for
future retail units and continuing retail equipment and system
upgrades.
On February 10, 1998, the Company completed the purchase of the
assets of DeGuelle Oil Company and the stock of DeGuelle Enterprises
(collectively "DeGuelle") for $9.75 million. DeGuelle is a Durango,
Colorado-based petroleum marketing company. Included in the purchase
were seven service station/convenience stores, two cardlock commercial
fleet fueling facilities, a gasoline and diesel storage bulk plant and
related transportation equipment. All of the facilities are located in
southwestern Colorado and are supplied by the Company's refineries. In
1997, DeGuelle had sales of approximately 10.0 million gallons of
gasoline and diesel fuel in addition to 35,000 gallons of lubricants.
The Ciniza refinery began a major, every four year, maintenance
turnaround in mid-April 1998 that was completed in early June 1998,
approximately twenty days beyond the anticipated completion date. The
delay in returning to normal operations was due to a number of
factors, including but not limited to, unexpected mechanical repairs
encountered, problems of the prime contractor and a number of start up
problems. The refinery is currently running at full capacity. During
this turnaround, the major operating units at the refinery were
inspected and necessary repairs and maintenance performed. The work
plan was based on extending the frequency of major turnarounds from
four to five years. In addition to the maintenance procedures, certain
other procedures were performed that are expected to increase reformer
capacity from 6,700 bbls per day to 7,300 bbls per day. The expansion
of the reformer increases the Company's ability to produce high-value
products, provides flexibility in gasoline conversion and increases
the refinery's capability to process condensate.
In the last week of June 1998, the Company completed the
acquisition of seventeen service station/ convenience stores from
Kaibab Industries, Inc. In addition, one other unit was leased under
an operating lease arrangement for a period of two years. An
additional fifteen units were acquired in July 1998. In addition,
other related equipment, fuel truck/transports, fuel inventories and
undeveloped real estate was acquired. The retail units, located
throughout Arizona, include fifteen in the greater Phoenix area and
eleven in the Tucson market, with the balance located primarily in
southern and eastern Arizona. These units have had sales of
approximately 70.0 million gallons of refined petroleum products per
year.
CAPITAL STRUCTURE
- -----------------
At June 30, 1998 and December 31, 1997, the Company's long-term
debt was 66.9% and 67.4% of total capital, respectively. The Company's
net debt (long-term debt less cash and cash equivalents) to total
capitalization percentages were 66.8% and 59.1% at June 30, 1998 and
December 31, 1997, respectively.
The Company's capital structure includes $150.0 million of 9%
senior subordinated notes due 2007 (the "9% Notes") and $100.0 million
of 9 3/4% senior subordinated notes due 2003 (the "9 3/4% Notes", and
collectively with the 9% Notes, the "Notes"). The Indentures
supporting the Notes contain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to create
liens, incur or guarantee debt, pay dividends, sell certain assets or
subsidiary stock, engage in certain mergers, engage in certain
transactions with affiliates or alter the Company's current line of
business. In addition, subject to certain conditions, the Company is
obligated to offer to purchase a portion of the Notes at a price equal
to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase, with the net cash proceeds
of certain sales or other dispositions of assets. Upon a change of
control, which would include the proposed merger with Holly
Corporation as described below, the Company will be required to offer
to purchase all of the Notes at 101% of the principal amount thereof,
plus accrued interest, if any, to the date of purchase.
Repayment of the Notes is jointly and severally guaranteed on an
unconditional basis by the Company's direct and indirect wholly-owned
subsidiaries, subject to a limitation designed to ensure that such
guarantees do not constitute a fraudulent conveyance. Except as
otherwise allowed in the Indentures pursuant to which the Notes were
issued, there are no restrictions on the ability of such subsidiaries
to transfer funds to the Company in the form of cash dividends, loans
or advances. General provisions of applicable state law, however, may
limit the ability of any subsidiary to pay dividends or make
distributions to the Company in certain circumstances.
No separate financial statements of the subsidiaries are included
herein because the subsidiaries are jointly and severally liable for
the repayment of the Notes; the aggregate assets, liabilities,
earnings, and equity of the subsidiaries are substantially equivalent
to the assets, liabilities, earnings, and equity of the Company on a
consolidated basis; and the separate financial statements and other
disclosures concerning the subsidiaries are not deemed material to
investors.
The Company has a Credit Agreement, (as amended, the "Agreement")
with a group of banks with a maturity date of May 23, 2000. The
Agreement contains a $70.0 million unsecured capital expenditure
facility. On May 23, 1999, the borrowing commitment under the capital
expenditure facility is required to be reduced by $20.0 million. At
June 30, 1998, there were no outstanding balances under this facility.
In addition, the Agreement contains a three-year unsecured working
capital facility to provide working capital and letters of credit in
the ordinary course of business. The availability under this working
capital facility is the lesser of (i) $40.0 million, or (ii) the
amount determined under a borrowing base calculation tied to eligible
accounts receivable and inventories as defined in the Agreement. At
June 30, 1998, the lesser amount was $40.0 million. There were $5.0
million of direct borrowings outstanding under this working capital
facility at June 30, 1998, and there were approximately $16.8 million
of irrevocable letters of credit outstanding, primarily to secure
purchases of raw materials. At July 31, 1998, there were $18.0 million
of direct borrowings and $16.8 million of irrevocable letters of
credit outstanding. Pursuant to the terms of a waiver of compliance
regarding certain covenants in the Agreement, which is in effect from
June 24, 1998 through and ending on the earlier of (a) the effective
date of the merger of the Company with Holly Corporation or (b)
September 1, 1998, the amount of credit extensions may not exceed
$60.0 million (exclusive of letters of credit of approximately $16.8
million) during this period as long as the Company is not in
compliance with the covenants.
The interest rate on these unsecured facilities is tied to
various short-term indices. At June 30, 1998, this rate was
approximately 6.5% per annum. The Company is required to pay a
quarterly commitment fee based on the unused amount of each facility.
The Agreement contains certain covenants and restrictions which
require the Company to, among other things, maintain a minimum
consolidated net worth; minimum fixed charge coverage ratio and
minimum funded debt to total capitalization percentage. It also places
limits on investments, prepayment of senior subordinated debt,
guarantees, liens and restricted payments. The Agreement is guaranteed
by substantially all of the Company's direct and indirect wholly-owned
subsidiaries.
In connection with the acquisition of the Thriftway Assets in May
1997, the Company recorded approximately $22.9 million of capital
lease obligations with an interest rate of 11.3%. In the first six
months of 1998, the Company purchased fifty-two of the sixty-four
service station/convenience stores subject to these capital lease
obligations for approximately $13.7 million, thereby reducing long-
term debt. As a result, interest expense will be reduced by
approximately $1.5 million per year or $128,000 per month.
On June 10, 1998, the Company's Board of Directors declared a
cash dividend on common stock of $0.05 per share payable to
stockholders of record on June 26, 1998. This dividend was paid on
July 10, 1998. Future dividends, if any, are subject to the results of
the Company's operations, existing debt covenants and declaration by
the Company's Board of Directors.
OTHER
- -----
Federal, state and local laws and regulations relating to health
and the environment affect nearly all of the operations of the
Company. As is the case with other companies engaged in similar
industries, the Company faces significant exposure from actual or
potential claims and lawsuits involving environmental matters. These
matters include soil and water contamination, air pollution and
personal injuries or property damage allegedly caused by substances
manufactured, handled, used, released or disposed of by the Company.
Future expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances for various reasons,
including the speculative nature of remediation and cleanup cost
estimates and methods, imprecise and conflicting data regarding the
hazardous nature of various types of substances, the number of other
potentially responsible parties involved, various defenses which may
be available to the Company and changing environmental laws and
interpretations of environmental laws.
Rules and regulations implementing federal, state and local laws
relating to health and the environment will continue to affect the
operations of the Company. The Company cannot predict what health or
environmental legislation or regulations will be enacted or become
effective in the future or how existing or future laws or regulations
will be administered or enforced with respect to products or
activities of the Company. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of the
regulatory agencies, could have an adverse effect on the financial
position and the results of operations of the Company and could
require substantial expenditures by the Company for the installation
and operation of refinery equipment, pollution control systems and
other equipment not currently possessed by the Company.
On April 15, 1998, the Company announced that it had entered into
an Agreement and Plan of Merger (the "Merger Agreement") with Holly
Corporation ("Holly"). Pursuant to the Merger Agreement, among other
things:
(i) Holly will be merged with and into Giant; and
(ii) Based upon the number of shares of Giant Common Stock and
Holly Common Stock and the number of Holly stock options and Holly
phantom stock rights outstanding as of April 30, 1998, each
outstanding share of Holly Common Stock will be converted into the
right to receive approximately 1.33 shares of Giant Common Stock plus
$2.886 in cash.
Holly, listed on the American Stock Exchange, is an independent
refiner of petroleum and petroleum derivatives and produces high-value
light products such as gasoline, diesel fuel and jet fuel that are
sold primarily in the southwestern United States, northern Mexico and
Montana. Principal gasoline customers include other refiners,
convenience store chains, independent marketers, an affiliate of the
Mexican energy company PEMEX and retailers. Its diesel fuel is sold to
end users, wholesalers, and independent dealers. Jet fuel is sold
primarily to the military. Subsidiaries of Holly operate refineries in
New Mexico and Montana and own, lease, and operate 950 miles of
refined product pipelines, 625 miles of crude oil gathering pipelines,
seven product terminals, and an asphalt marketing business.
The merger has received the approval of both companies' Boards of
Directors and stockholders. Completion of the transaction is subject
to, among other things, receiving necessary government approvals. The
Company has received a second request for information from the Federal
Trade Commission ("FTC") and has been working with the FTC and the
State of New Mexico during their review.
The Company believes that local crude oil production annually
approximates local crude oil demand in the Four Corners area where the
Company's two refineries are located. In the past, the Company was
able to supplement local crude oil supplies and process up to 1,500
bbls per day of Alaska North Slope crude oil ("ANS") through its
gathering systems interconnection with the ARCO and Texas-New Mexico
common carrier pipeline systems. The Company understands that the ARCO
Pipeline mainline, which was used to transport ANS to the Four Corners
area, is being sold and that plans are to convert the mainline to a
natural gas pipeline. The Company has not purchased any ANS in 1998
and does not expect the loss of this supply source to have a material
impact on the Company. Based on projections of local crude oil
availability from the field, the Company believes an adequate supply
of crude oil and other feedstocks will be available from local
producers, crude oil sourced through various common carrier pipelines
and other sources to sustain refinery operations for the foreseeable
future at substantially the levels currently being experienced.
However, there is no assurance that this situation will continue. Any
significant long-term interruption in crude oil supply or the crude
oil transportation systems would have an adverse effect on the
Company's operations.
The Company continues to evaluate other supplemental crude oil
supply alternatives for its refineries on both a short-term and long-
term basis.
The Company is aware of a number of actions, proposals or
industry discussions regarding product pipeline projects that could
impact portions of its marketing areas. One of these projects, the
expansion of the ATA Line (formerly called the Emerald Line) into
Albuquerque was completed in 1997. Another of these announced
projects, which would result in a refined products pipeline from
Southeastern New Mexico to the Albuquerque and Four Corners areas, is
reportedly scheduled for completion in 1998. In addition, various
proposals or actions have been announced to increase the supply of
pipeline-supplied products to El Paso, Texas, which is connected by
pipeline to the Albuquerque area to the north. The completion of some
or all of these projects would result in increased competition by
increasing the amount of refined products available in the
Albuquerque, Four Corners and other areas, as well as allowing
additional competitors improved access to these areas.
In 1997, the Company outlined a three phase program for Year 2000
("Y2K") compliance. The Y2K issue is the result of certain computer
systems using a two-digit format rather than four to define the
applicable year. Such computer systems will be unable to properly
interpret dates beyond the year 1999, which could lead to system
failure or miscalculations causing disruptions of operations. The
Company has identified three major areas determined to be critical for
successful compliance (1) financial and information system
applications, (2) manufacturing and process applications and (3)
business relationships.
The Company has hired an outside consultant to act as its Y2K
project manager. This consultant will direct the Company's efforts in
identifying and resolving Y2K issues.
In the financial and information system area, a number of
applications have been identified as being Y2K compliant due to their
recent implementation. The Company's core financial and reporting
systems are not Y2K compliant but were already scheduled for
replacement by mid-1999. Some subsidiary financial systems will either
be added to this replacement project or will require internal systems
revisions to be Y2K compliant. The Company believes it will cost
approximately $2.5 million to replace the core financial and reporting
systems and has identified the potential for 4,000 man hours of work
to bring the remaining financial and information system applications
into compliance at an estimated cost of approximately $0.8 million.
This work will be accomplished with internal manpower as well as
outside consultants on an as needed basis. Approximately two-thirds of
the cost is expected to be incurred in 1998 and the remainder in 1999.
The Company is also evaluating the possibility of replacing some of
the remaining non-compliant systems in an effort to reduce the
projected man-hours involved to bring the systems into compliance. The
Company believes that all critical issues have been identified in this
area and that resources are available to bring these systems into
compliance.
In the manufacturing and process area, a complete inventory of
the software and hardware at all locations (including embedded chip
applications) is expected to be completed by the end of August 1998. A
plan of action will then be developed for each item identified, to
include, compliance issues, a timetable for completion and a cost
estimate.
In the business relationship area, the Company continues to
correspond with its business partners in order to identify and resolve
Y2K issues that could have an impact on each others operations. The
Company has sent compliance letters to its business partners and
continues to follow-up with those who have not responded. The Company
has not identified any significant problems relating to the responses
it has received to these compliance letters.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: This report contains forward-looking statements
that involve risks and uncertainties, including but not limited to
economic, competitive and governmental factors affecting the Company's
operations, markets, products, services and prices; the completion of
the merger with Holly Corporation; the adequacy of raw material
supplies; the potential effects of various pipeline projects as they
relate to the Company's market area and future profitability; the
ability of the Company to become Y2K compliant and other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings required to be
reported pursuant to Item 103 of Regulation S-K. The Company is a
party to ordinary routine litigation incidental to its business. In
addition, there is hereby incorporated by reference the information
regarding contingencies in Note 5 to the Unaudited Condensed
Consolidated Financial Statements set forth in Item 1, Part I hereof
and the discussion of certain contingencies contained herein under the
heading "Liquidity and Capital Resources - Other."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A special meeting of stockholders was held on June 26, 1998.
(b) Proxies for the meeting were solicited under Regulation 14A. The
meeting did not involve election of directors.
(c) The matters voted upon and the results of the voting were as
follows:
(1) The Agreement and Plan of Merger (the "Merger Agreement"),
dated April 14, 1998 between Giant Industries, Inc.
("Giant") and Holly Corporation was approved. The vote was
as follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
9,207,702 10,899 14,739
(2) The proposal to amend and restate Giant's certificate
of incorporation in its entirety was approved. The
vote was as follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
8,872,306 344,880 16,154
(3) The proposal to amend and restate Giant's bylaws in
their entirety was approved. The vote was as follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
8,866,519 349,171 17,650
(4) The proposal to issue authorized but unissued Common
Stock of the Corporation in accordance with the terms
of the Merger Agreement was approved. The vote was as
follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
9,096,190 74,922 62,228
(5) Giant Industries, Inc. 1998 Stock Incentive Plan was
approved. The vote was as follows:
SHARES VOTED SHARES VOTED SHARES VOTED
"FOR" "AGAINST" "ABSTAINING"
------------ ------------ ------------
7,103,957 2,106,852 22,530
<PAGE>
<PAGE>
ITEM 5. OTHER INFORMATION
In the event that a stockholder desires to present a proposal at
the Company s 1999 Annual Meeting without seeking to have the proposal
included in the Company s Proxy Statement, Company proxies will not be
allowed to use their discretionary voting authority in connection with
the proposal if the stockholder provides a written statement to the
Company that the stockholder intends to deliver a proxy statement and
form of proxy to holders of at least the percentage of the Company s
voting shares required under applicable law to carry the proposal.
The statement must be provided to the Company by the earlier of: (i)
February 13, 1999, unless the date of the Company s annual meeting is
changed more than thirty days from the prior year, in which case the
statement must be received by the Company within a reasonable time
before the Company mails its proxy materials for the current year; and
(ii) the time period specified in the Company s Bylaws for the receipt
of stockholder notices. The Company s Bylaws provide that notice of a
stockholder proposal must be delivered to or mailed and received at
the principal executive offices of the Company not less than ninety
days nor more than one hundred twenty days prior to the Annual
Meeting, provided, however, that in the event that less than one
hundred days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to
be timely must be so received not later than the close of business on
the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever
first occurs. The stockholder must include the statement in the
stockholder s filed proxy materials. Immediately after the
stockholder solicits the percentage of stockholders required to carry
the proposal, the stockholder must also provide the Company with a
statement from a solicitor or other person with knowledge confirming
that the necessary steps have been taken to deliver a proxy statement
and form of proxy to holders of at least the percentage of the
Company s voting shares required under applicable law to carry the
proposal. All statements should be sent to Secretary of the Company
at Giant Industries, Inc., 23733 North Scottsdale Road, Scottsdale,
Arizona 85255. Reference is made to Securities and Exchange
Commission Rule 14a-4, 17 C.F.R. Section 240.14a-4.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit:
27 - Financial Data Schedule.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
for the three months ended June 30, 1998.<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 10-Q for the
quarter ended June 30, 1998 to be signed on its behalf by the
undersigned thereunto duly authorized.
GIANT INDUSTRIES, INC.
/s/ A. WAYNE DAVENPORT
--------------------------------------------
A. Wayne Davenport
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: August 5, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,062
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60,277
<CURRENT-ASSETS> 126,825
<PP&E> 463,912
<DEPRECIATION> 131,950
<TOTAL-ASSETS> 503,165
<CURRENT-LIABILITIES> 75,602
<BONDS> 265,878
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 503,165
<SALES> 302,730
<TOTAL-REVENUES> 302,730
<CGS> 218,500
<TOTAL-COSTS> 281,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,947)
<INCOME-TAX> (1,024)
<INCOME-CONTINUING> (923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (923)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
