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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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 (Zip Code/Postal Code)
executive offices)
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 July 21 , 1999 200,000
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I: FINANCIAL STATEMENTS
--------------------
Item 1. Financial Statements
------- --------------------
Chieftain International Funding Corp.
-------------------------------------
Consolidated Condensed Balance Sheet -
June 30, 1999 and December 31, 1998 3
Consolidated Condensed Statement of Income and Retained Earnings -
Six months ended June 30, 1999 and 1998 and
Three months ended June 30, 1999 and 1998 4
Consolidated Condensed Statement of Changes in Financial Position -
Six months ended June 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
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
(a subsidiary of Chieftain International (U.S.) Inc.)
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30 December 31
1999 1998
------------- -------------
(US$)
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 62,634 $ 121,495
Due from affiliated companies 5,046,552 4,572,256
------------- --------------
5,109,186 4,693,751
Investment in preferred shares of Chieftain
International (U.S.) Inc. at cost 78,500,000 78,500,000
------------- --------------
$ 83,609,186 $ 83,193,751
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $ 731 $ 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 5,205,552 4,784,505
------------- --------------
20,205,552 19,784,505
------------- --------------
$ 83,609,186 $ 83,193,751
============= ==============
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Six months ended June 30 Three months ended June 30
1999 1998 1999 1998
---------------- ------------------ ------------------ ------------------
(US$)
(unaudited)
<S> <C> <C> <C> <C>
Revenue:
Dividends $ 2,845,625 $ 2,845,625 $ 1,422,812 $ 1,422,812
Interest 97,359 98,904 50,383 50,099
------------- ------------- ------------- -------------
2,942,984 2,944,529 1,473,195 1,472,911
Expense:
General and administrative 25,865 132,340 17,572 14,732
------------- ------------- ------------- -------------
Income before income taxes and
dividends on preferred shares 2,917,119 2,812,189 1,455,623 1,458,179
Income tax (recovery) - (Note 3) 25,000 (12,000) 11,000 12,000
------------- ------------- ------------- -------------
Net income before dividends on
preferred shares 2,892,119 2,824,189 1,444,623 1,446,179
Dividends on preferred shares (2,471,072) (2,471,072) (1,235,536) (1,235,536)
------------- ------------- ------------- -------------
Net income applicable to
common shares for the period 421,047 353,117 209,087 210,643
Retained earnings,
beginning of period 4,784,505 4,016,654 4,996,465 4,159,128
------------- ------------- ------------- -------------
Retained earnings, end of period $ 5,205,552 $ 4,369,771 $ 5,205,552 $ 4,369,771
============= ============= ============= =============
</TABLE>
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CHIEFTAIN INTERNATIONAL FUNDING CORP.
STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
Six months ended June 30 1999 1998
- ------------------------ ---------- ----------
(US$)
(unaudited)
<S> <C> <C>
Operating activities:
Net income applicable to common shares $ 421,047 $ 353,117
Change in non-cash working capital --
Current liabilities (5,612) (5,776)
--------- ---------
415,435 347,341
Investing activity:
Advances to affiliated companies (474,296) (293,185)
--------- ---------
Change in cash (58,861) 54,156
Beginning cash 121,495 45,351
--------- ---------
Ending cash $ 62,634 $ 99,507
========= =========
</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 June 30, 1999 and December 31, 1998 and
the results of operations and changes in financial position for the six
months ended June 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 changes in financial position for the six
month period ended June 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 - Six months ended June 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
$2,845,625 for each of the first six months of 1999 and 1998.
Interest earned on short-term notes for the first six months of 1999 was
$97,359, a 2% decrease from the amount earned in the comparable 1998 period.
Such decrease resulted from a 15% decrease in average investment yield and a
17% increase in the average amount invested compared to the 1998 first six
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 $415,435 for the first six months
of 1999 compared with $347,341 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 June 30, 1999 and 1998 were $62,634 and $99,507, 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: July 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1999 BALANCE SHEET AND THE STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE SIX
MONTHS ENDED JUNE 30, 1999 INCLUDED IN THE COMPANY'S JUNE 30, 1999 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 62,634
<SECURITIES> 0
<RECEIVABLES> 5,046,552<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,109,186
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,609,186<F2>
<CURRENT-LIABILITIES> 731
<BONDS> 0
0
2,726,700
<COMMON> 2,000
<OTHER-SE> 80,879,755<F3>
<TOTAL-LIABILITY-AND-EQUITY> 83,609,186
<SALES> 0
<TOTAL-REVENUES> 2,942,984<F4>
<CGS> 0
<TOTAL-COSTS> 25,865
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,917,119
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 2,892,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,892,119
<EPS-BASIC> 2.11
<EPS-DILUTED> 2.11
<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 $5,205,552 in calculating other stockholders' equity.
<F4>Revenues are earned exclusively from transactions with parent company.
</FN>
</TABLE>
