10-Q 1 o05893e10-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: June 30, 2001 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 incorporation or organization) 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 August 14, 2001 3,427,959 2 Page 2 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. INDEX

~~MARCH~~Page 31No. ~~December~~PART 31I: ~~2001~~FINANCIAL ~~2000~~STATEMENTS ~~--------------------------------------------------------------------------------------------------~~Item ~~(US$)~~1. ~~(unaudited)~~Financial ~~ASSETS~~Statements ~~Current~~Chieftain ~~assets:~~International ~~Cash~~Funding $Corp. ~~183,533~~Consolidated $Condensed ~~27,488~~Balance ~~Due~~Sheet ~~from~~- ~~affiliated~~June ~~companies 6~~30,~~693,331~~ ~~6,576,734~~2001 ~~-------------------------------~~and ~~6,876,864~~December 631,~~604,222~~ ~~Investment~~2000 in3 ~~preferred~~Consolidated ~~shares~~Condensed Statement of ~~Chieftain~~Income ~~International~~and ~~(U.S.)~~Retained ~~Inc.~~Earnings at- ~~cost~~Six ~~78,500,000~~months ~~78,500,000~~ended ~~-------------------------------~~June ~~$85~~30,~~376,864~~ ~~$85,104,222~~2001 ~~===============================~~and ~~LIABILITIES~~2000 ~~AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable~~ and ~~accrued~~Three $months ~~6,600~~ended $June 630,~~600~~ ~~Preferred~~2001 ~~shares~~and ~~issued~~2000 ~~(Note~~4 2)Consolidated ~~63,402,903~~Condensed ~~63,402,903~~Statement ~~Common~~of ~~shareholder's~~Cash ~~equity:~~Flows ~~Share~~Six ~~capital~~months ~~Authorized~~ended ~~10,000,000~~June ~~common shares~~30, ~~par~~2001 ~~value~~and ~~$0.01~~2000 ~~each~~5 ~~Issued~~Notes ~~2,000~~to ~~2,000~~Consolidated ~~200,000~~Condensed ~~common~~Financial ~~shares~~Statements ~~Additional~~6 ~~paid~~Item in2. ~~capital~~Management's ~~14,998,000~~Discussion ~~14,998,000~~and ~~Retained~~Analysis ~~earnings~~of ~~6,967,361~~Financial ~~6,694,719~~Condition ~~-------------------------------~~and ~~21,967,361~~Results ~~21,694,719~~of ~~-------------------------------~~Operations ~~$85,376,864~~7 ~~$85,104,222~~Signatures ~~===============================~~8

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

~~Three~~JUNE ~~months~~30 ~~ended~~December ~~March~~ 31 2001 2000 ----------------------------------------------------------------------------------------------- (US$) (unaudited) ~~Revenue~~ASSETS Current assets: ~~Dividends~~Cash $ 1179,~~422,813~~505 $ 127,~~422,813~~488 ~~Interest~~Due ~~148~~from affiliated companies 6,~~314~~857,174 706,~~892~~576,734 --------------------------- 17,~~571~~036,~~127~~679 16,~~493~~604,~~705~~222 ~~Expense:~~Investment ~~General~~in ~~and~~preferred ~~administrative~~shares 15of Chieftain International (U.S.) Inc. at cost 78,~~949~~500,000 1878,~~022~~500,000 --------------------------- ~~Income~~$85,536,679 ~~before~~$85,104,222 ~~income~~=========================== ~~taxes~~LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and ~~dividends~~accrued on$ ~~preferred~~3,000 $ 6,600 Preferred shares 1issued (Notes 2,~~555~~4) 63,~~178~~402,903 163,~~475~~402,~~683~~903 ~~Income~~Common ~~tax~~shareholder's ~~expense~~equity: -Share capital Authorized 10,000,000 common shares, par value $0.01 each Issued (Note 34) 472,000 192,000 ~~---------------------------~~200,000 ~~Net~~common ~~income~~shares ~~before~~Additional ~~dividends~~paid onin ~~preferred~~capital ~~shares 1~~14,~~508~~998,~~178~~000 114,~~456~~998,~~683~~000 ~~Dividends~~Retained onearnings ~~preferred shares (1~~7,~~235~~130,~~536)~~776 (16,~~235~~694,~~536)~~719 --------------------------- ~~Net income applicable to common shares 272~~22,~~642 221~~130,~~147~~776 ~~Retained earnings~~21, ~~beginning of period 6,~~694,719 ~~5,632,504~~ --------------------------- ~~Retained earnings, end of period~~ $ 685,~~967~~536,~~361~~679 $ 585,~~853~~104,~~651~~222 ===========================

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

Six months Three months --------------------------- ---------------------------- Period ended ~~March~~June 3130 2001 2000 2001 2000 ----------------------------------------------------------------------------------------------------- (US$) (unaudited) ~~Operating~~Revenue: ~~activities~~Dividends $ 2,845,625 $ 2,845,625 $ 1,422,812 $ 1,422,812 Interest 227,148 161,629 78,834 90,737 ----------------------------------------------------------- 3,072,773 3,007,254 1,501,646 1,513,549 Expense: ~~Net~~General and administrative 131,644 41,276 115,695 23,254 ----------------------------------------------------------- Income before income ~~applicable~~taxes toand ~~common~~dividends on preferred shares $2,941,129 ~~272~~2,~~642~~965,978 $1,385,951 ~~221~~1,~~147~~490,295 ~~Change~~Income intax ~~non~~expense (recovery) -~~cash~~ ~~working~~(Note ~~capital~~3) -34,000 ~~Current~~43,000 ~~liabilities~~(13,000) 24,000 -- -- ------------------------------------------------------- ~~272~~Net income before dividends on preferred shares 2,~~642~~907,129 ~~221~~2,~~147~~922,978 ~~Investing~~1,398,951 ~~activity:~~1,466,295 ~~Advances~~Dividends toon ~~affiliated~~preferred ~~companies~~shares (~~116~~2,~~597~~471,072) (~~282~~2,~~271~~471,072) (1,235,536) (1,235,536) ----------------------------------------------------------- ~~Change~~Net inincome ~~cash~~applicable ~~156~~to common shares for the period 436,~~045~~057 ~~(61~~451,~~124)~~906 ~~Beginning~~163,415 ~~cash~~230,759 27Retained earnings,~~488~~ ~~147~~beginning of period 6,~~982~~694,719 5,632,504 6,967,361 5,853,651 ----------------------------------------------------------- ~~Ending~~Retained ~~cash~~earnings, end of period $ ~~183~~7,~~533~~130,776 $ 866,~~858~~084,410 $ 7,130,776 $ 6,084,410 ============================================================

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

6 Page 6 of 8 CHIEFTAIN INTERNATIONAL FUNDING CORP. NOTES TO FINANCIAL STATEMENTS June 30, 2001 and 2000 (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 June 30, 2001 and December 31, 2000 and the results of operations and cash flows for the six months ended June 30, 2001 and 2000. 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, 2000. 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 six month period ended June 30, 2001 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. 4. Subsequent events: Subsequent to June 30, 2001, 2,582,377 $1.8125 convertible redeemable preferred shares were converted. This was facilitated by the issuance of 3,227,959 Funding Corp. common shares to its parent company and also resulted in a charge to retained earnings of approximately $33 million. Pursuant to its Offer to Purchase dated June 28, 2001, Hunt Oil Company, through its wholly-owned subsidiary Hunt Oil Canadian Acquisition III Corporation, accepted the 19,025,501 common shares of Chieftain International, Inc., Funding Corp's ultimate parent, which were tendered to the Offer on August 3, 2001. 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 - Six months ended June 30, 2001 and 2000 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 2001 and 2000. Interest earned on short-term notes for the first six months of 2001 was $227,148, a 41% increase from the amount earned in the comparable 2000 period. Such increase resulted from a 26% increase in average investment yield and a 14% increase in the average amount invested compared to the 2000 first six months. 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 decreased to $432,557 for the first six months of 2001 compared with $446,625 for the 2000 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, 2001 and 2000 were $179,505 and $36,064 respectively. Subsequent to June 30, 2001, 2,582,377 $1.8125 convertible redeemable preferred shares were converted. This was facilitated by the issuance of 3,227,959 Funding Corp. common shares to its parent company and also resulted in a charge to retained earnings of approximately $33 million. Pursuant to its Offer to Purchase dated June 28, 2001, Hunt Oil Company, through its wholly-owned subsidiary Hunt Oil Canadian Acquisition III Corporation, accepted the 19,025,501 common shares of Chieftain International, Inc., Funding Corp's ultimate parent, which were tendered to the Offer on August 3, 2001. 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/ Donald F. Robillard, Jr. ------------------------------------------------- Donald F. Robillard, Jr. Senior Vice President and Chief Financial Officer Dated: August 14, 2001

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