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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: September 30, 1999
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: 33-51630
--------
CHIEFTAIN INTERNATIONAL FUNDING CORP.
-------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 98-0127391
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1201 TD Tower, 10088 - 102 Avenue
Edmonton, Alberta, Canada T5J 2Z1
- ----------------------------------- ----------------------
(Address of principal executive offices) (Zip Code/Postal Code)
Registrants' telephone number, including area code: (780) 425-1950
Not Applicable
- --------------------------------------------------------------------------------
(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
-------------- ---------------
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
- ---------------------------- -------------------- ----------------------
Common Shares, no par value October 29, 1999 200,000
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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 -
September 30, 1999 and December 31, 1998 3
Consolidated Condensed Statement of Income and Retained Earnings -
Nine months ended September 30, 1999 and 1998 and
Three months ended September 30, 1999 and 1998 4
Consolidated Condensed Statement of Cash Flows -
Nine months ended September 30, 1999 and 1998 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
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(US$)
(unaudited)
ASSETS
Current assets:
Cash $ 102,291 $ 121,495
Due from affiliated companies 5,212,276 4,572,256
---------------------------
5,314,567 4,693,751
Investment in preferred shares of Chieftain International
(U.S.) Inc. at cost 78,500,000 78,500,000
---------------------------
$83,814,567 $83,193,751
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $ -- $ 6,343
Preferred shares issued (Note 2) 63,402,903 63,402,903
Common shareholder's equity:
Share capital
Authorized
10,000,000 common shares, par value $0.01 each
Issued
200,000 common shares 2,000 2,000
Additional paid in capital 14,998,000 14,998,000
Retained earnings 5,411,664 4,784,505
---------------------------
20,411,664 19,784,505
---------------------------
$83,814,567 $83,193,751
===========================
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Nine months Three months
Period ended September 30 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(US$)
(unaudited)
Revenue:
Dividends $ 4,268,438 $ 4,268,438 $ 1,422,813 $ 1,422,813
Interest 150,302 153,069 52,943 54,165
--------------------------------------------------------------
4,418,740 4,421,507 1,475,756 1,476,978
Expense:
General and administrative 48,973 155,635 23,108 23,295
--------------------------------------------------------------
Income before income taxes and
dividends on preferred shares 4,369,767 4,265,872 1,452,648 1,453,683
Income tax (recovery) - (Note 3) 36,000 (1,000) 11,000 11,000
--------------------------------------------------------------
Net income before dividends on
preferred shares 4,333,767 4,266,872 1,441,648 1,442,683
Dividends on preferred shares (3,706,608) (3,706,608) (1,235,536) (1,235,536)
--------------------------------------------------------------
Net income applicable to
common shares for the period 627,159 560,264 206,112 207,147
Retained earnings,
beginning of period 4,784,505 4,016,654 5,205,552 4,369,771
--------------------------------------------------------------
Retained earnings, end of period $ 5,411,664 $ 4,576,918 $ 5,411,664 $ 4,576,918
==============================================================
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF CHANGES IN CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended September 30 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
(US$)
(unaudited)
Operating activities:
Net income applicable to common shares $ 627,159 $ 560,264
Change in non-cash working capital -
Current liabilities (6,343) (5,776)
------------------------
620,816 554,488
Investing activity:
Advances to affiliated companies (640,020) (506,182)
------------------------
Change in cash (19,204) 48,306
Beginning cash 121,495 45,351
------------------------
Ending cash $ 102,291 $ 93,657
========================
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
NOTES TO FINANCIAL STATEMENTS
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 September 30, 1999 and December 31,
1998 and the results of operations and cash flows for the nine months ended
September 30, 1999 and 1998. 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 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,
1998.
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 nine month period ended
September 30, 1999 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. follows the tax allocation method of accounting for the tax
effect of all timing differences between taxable income and accounting
income.
Funding Corp. and its parent file their corporate income tax return on a
consolidated basis. As a result, the current taxes payable will be offset
by utilization of the parent company's operating loss.
The tax benefit relating to loss utilization has been deducted from the
amount owing by the parent company.
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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 - Nine months ended September 30, 1999 and 1998
- -----------------------------------------------------------------------------
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
$4,268,438 for each of the first nine months of 1999 and 1998.
Interest earned on short-term notes for the first nine months of 1999 was
$150,302, a 2% decrease from the amount earned in the comparable 1998 period.
Such decrease resulted from a 14% decrease in average investment yield and a 17%
increase in the average amount invested compared to the 1998 first nine months.
Future dividend income is expected to remain constant while interest income
should increase, subject to rate fluctuations, reflecting increases in
short-term investment amounts.
General and administrative expenses decreased significantly due to non-recurring
professional fees incurred in the first quarter of 1998 in respect of regulatory
matters.
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 increased to $620,816 for the first nine months
of 1999 compared with $554,488 for the 1998 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 September 30, 1999 and 1998 were $102,291 and $93,657,
respectively.
Year 2000 Disclosure
- --------------------
All internal computer related services are performed by Chieftain International,
Inc., the ultimate parent of the Company, which has informed us that it is
confident that such services should continue to be provided after Year 2000
subject to further assurances sought from third parties. The Company's
assessment of third parties' readiness was substantially completed by June 30,
1999. The Company continues to monitor the readiness of significant third
parties in order to obtain assurances that interruptions, if any, will be held
to a minimum. The Company is
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confident that any Year 2000 related computer problems are not likely to result
in any material loss of revenue. Related costs are not expected to be material.
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.
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.
- -------------------------------------
(Registrant)
/s/ E. L. Hahn
- -----------------------------------------------
Senior Vice President, Finance and Treasurer
(Principal Financial Officer)
Dated: October 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1999 BALANCE SHEET AND THE STATEMENT OF INCOME AND RETAINED
EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 INCLUDED IN THE COMPANY'S
SEPTEMBER 30, 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 102,291
<SECURITIES> 0
<RECEIVABLES> 5,212,276<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,314,567
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,814,567<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
2,726,700
<COMMON> 2,000
<OTHER-SE> 81,085,867<F3>
<TOTAL-LIABILITY-AND-EQUITY> 83,814,567
<SALES> 0
<TOTAL-REVENUES> 4,418,740<F4>
<CGS> 0
<TOTAL-COSTS> 48,973
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,369,767
<INCOME-TAX> 36,000
<INCOME-CONTINUING> 4,333,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,333,767
<EPS-BASIC> 3.14
<EPS-DILUTED> 3.14
<FN>
<F1>Receivables are due from affiliated companies.
<F2>An investment in preferred shares of Chieftain International (U.S.) Inc., at
cost of $78,500,000 has been included in total assets.
<F3>Additional paid-in capital of $14,998,000 (attributable to common stock) and
$60,676,203 (attributable to preferred stock) has been added to retained
earnings of $5,411,664 in calculating other stockholders' equity.
<F4>Revenues are earned exclusively from transactions with parent company.
</FN>
</TABLE>
