10-Q 1 o05019e10-q.txt FORM 10-Q 1 Page 1 of 8 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, 2000 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 incorporation or organization) (I.R.S. Employer Identification No.) 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 ~~July~~October 17 , 2000 200,000

2 Page 2 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. INDEX

Page No. PART I: FINANCIAL STATEMENTS Item 1. Financial Statements Chieftain International Funding Corp. Consolidated Condensed Balance Sheet - ~~June~~September 30, 2000 and December 31, 1999 3 Consolidated Condensed Statement of Income and Retained Earnings -Nine ~~Six~~ months ended ~~June~~September 30, 2000 and 1999 and Three months ended ~~June~~September 30, 2000 and 1999 4 Consolidated Condensed Statement of Cash Flows ~~Six~~Nine months ended ~~June~~September 30, 2000 and 1999 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

3 Page 3 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. (a subsidiary of Chieftain International (U.S.) Inc.) BALANCE SHEET

~~June~~SEPTEMBER 30 December 31 2000 1999 ----------- -----------~~------------------------------------------------------------------~~ (US$) (unaudited) ASSETS Current assets: Cash $ 3662,~~064~~236 $ 147,982 Due from affiliated companies 56,~~951~~170,~~273~~863 5,392,730 ----------- ----------- 56,~~987~~233,~~337~~099 5,540,712 Investment in preferred shares of Chieftain International (U.S.) Inc. at cost 78,500,000 78,500,000 ----------- ----------- $84,~~487~~733,~~337~~099 $84,040,712 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued $ 2423 $ 5,305 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 2,000 2,000 200,000 common shares Additional paid in capital 14,998,000 14,998,000 ~~Additional~~Retained ~~paid~~earnings ~~in capital~~ 6,~~084~~330,~~410~~173 5,632,504 ----------- ----------- ~~Retained earnings~~ 21,~~084~~330,~~410~~173 20,632,504 ----------- ----------- $84,~~487~~733,~~337~~099 $84,040,712 =========== ===========

4 Page 4 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. STATEMENT OF INCOME AND RETAINED EARNINGS

~~Six~~Nine months Three months -------------------------- --------------------------- Period ended ~~June~~September 30 2000 1999 2000 1999 ------------------------- ----------- ------------ ------------ ------------~~----------------------------~~ (US$) (unaudited) Revenue: Dividends $2 4,~~845~~268,~~625~~438 $2 4,~~845~~268,~~625~~438 $ 1,422,~~812~~813 $ 1,422,~~812~~813 Interest ~~161~~266,~~629~~654 97150,~~359~~302 90105,~~737~~025 5052,~~383~~943 ----------- ----------- ----------- ----------- 34,~~007~~535,~~254~~092 24,~~942~~418,~~984~~740 1,~~513~~527,~~549~~838 1,~~473~~475,~~195~~756 Expense: General and administrative 4156,~~276~~815 2548,~~865~~973 2315,~~254~~539 1723,~~572~~108 ----------- ----------- ----------- ----------- Income before income taxes and dividends on preferred shares 24,~~965~~478,~~978~~277 24,~~917~~369,~~119~~767 1,~~490~~512,~~295~~299 1,~~455~~452,~~623~~648 Income tax expense -- (Note 3) 4374,000 2536,000 2431,000 11,000 ----------- ----------- ----------- ----------- Net income before dividends on preferred shares 24,~~922~~404,~~978~~277 24,~~892~~333,~~119~~767 1,~~466~~481,~~295~~299 1,~~444~~441,~~623~~648 Dividends on preferred shares (23,~~471~~706,~~072~~608) (23,~~471~~706,~~072~~608) (1,235,536) (1,235,536) ----------- ----------- ----------- ----------- Net income applicable to common shares for the period ~~451~~697,~~906~~669 ~~421~~627,~~047~~159 ~~230~~245,~~759~~763 ~~209~~206,~~087~~112 Retained earnings, beginning of period 5,632,504 4,784,505 56,~~853~~084,~~651~~410 45,~~996~~205,~~465~~552 ----------- ----------- ----------- ----------- Retained earnings, end of period $ 6,~~084~~330,~~410~~173 $ 5,~~205~~411,~~552~~664 $ 6,~~084~~330,~~410~~173 $ 5,~~205~~411,~~552~~664 =========== =========== =========== ===========

5 Page 5 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. STATEMENT OF CASH FLOWS

~~Six~~Nine months ended ~~June~~September 30 2000 1999 ------------------------------------------- ---------- ---------~~--------------------~~ (US$) (unaudited) Operating activities: Net income applicable to common shares $~~451~~ 697,~~906~~669 $~~421~~ 627,~~047~~159 Change in non-cash working capital - Current liabilities (5,~~281~~282) (56,~~612~~343) --------- --------- ~~446~~692,~~625~~387 ~~415~~620,~~435~~816 Investing activity: Advances to affiliated companies (~~558~~778,~~543~~133) (~~474~~640,~~296~~020) --------- --------- Change in cash (~~111~~85,~~918~~746) (5819,~~861~~204) Beginning cash 147,982 121,495 --------- --------- Ending cash $ 3662,~~064~~236 $ 62102,~~634~~291 ========= =========

6 Page 6 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. NOTES TO FINANCIAL STATEMENTS September 30, 2000 and 1999 (unaudited) 1. Basis of Presentation: In the opinion of Chieftain International Funding Corp. ("Funding Corp."), the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as at September 30, 2000 and December 31, 1999 and the results of operations and cash flows for the nine months ended September 30, 2000 and 1999. Certain information and notes normally included in Funding Corp.'s financial statements prepared in accordance with Canadian generally accepted accounting principles have been condensed or omitted for interim reporting pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in Funding Corp.'s Annual Report on Form 10-K for the year ended December 31, 1999. 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, 2000 are not necessarily indicative of the results to be expected for the full year. 2. Preferred Shares: The Articles of Funding Corp. authorize the issuance of a maximum of 10,000,000 preferred shares with a par value of $1.00 each. In 1992, Funding Corp. sold 2,726,700 shares of $1.8125 convertible redeemable preferred stock at $25.00 per share through an underwritten public offering in the United States. Proceeds of the issuance of preferred shares, net of offering costs of $4.7 million, were $63.4 million. 3. Income Taxes: Funding Corp. and its parent company file corporate income tax returns on a consolidated basis. As a result, income taxes payable have been offset by the parent company's tax losses and are reflected in the amount due from the parent company. 7 Page 7 of 8 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, 2000 and 1999 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 2000 and 1999. Interest earned on short-term notes for the first nine months of 2000 was $266,654, a 77% increase from the amount earned in the comparable 1999 period. Such increase resulted from a 44% increase in average investment yield and a 24% increase in the average amount invested compared to the 1999 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. 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 $692,387 for the first nine months of 2000 compared with $620,816 for the 1999 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, 2000 and 1999 were $62,236 and $102,291, respectively. 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. 8 Page 8 of 8 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/ STANLEY A. MILNER -------------------------------- Stanley A. Milner, A.O.E., LL.D. President and Chief Executive Officer Principal Executive and Financial Officer Dated: October 17, 2000

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