-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PlN8TbQ/lM8en7sUeuU05J4evZ75quM7J/5hDHSNXQxjYwEJ1uAKLyvac4S9fvdv Xgvy6cAtHPtho8heWCic/w== 0000856465-02-000001.txt : 20020414 0000856465-02-000001.hdr.sgml : 20020414 ACCESSION NUMBER: 0000856465-02-000001 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020212 ITEM INFORMATION: Other events FILED AS OF DATE: 20020212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT INDUSTRIES INC CENTRAL INDEX KEY: 0000856465 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 860642718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10398 FILM NUMBER: 02537181 BUSINESS ADDRESS: STREET 1: 23733 N SCOTTSDALE RD CITY: SCOTTSDALE STATE: AZ ZIP: 85255 BUSINESS PHONE: 4805858888 MAIL ADDRESS: STREET 1: 23733 N SCOTTSDALE RD CITY: SCOTTSDALE STATE: AZ ZIP: 85255 8-K 1 yorktown-8k.txt YORKTOWN REFINERY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 8, 2002 GIANT INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware (State or jurisdiction of incorporation) 1-10398 86-0642718 (Commission File Number) (IRS Employer Identification No.) 23733 North Scottsdale Road Scottsdale, Arizona 85255 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (480) 585-8888 ITEM 5. OTHER EVENTS On February 8, 2002, Giant Industries, Inc. ("Giant") and BP Corporation North America Inc. and BP Products North America Inc. (collectively, "BP") executed an Asset Purchase Agreement pursuant to which Giant will purchase BP's Yorktown, Virginia Refinery and related assets. The purchase price for the assets is $127,500,000, plus the value of inventory at closing. The agreement also provides for an additional payment not to exceed $25,000,000, which is payable over three years commencing January 1, 2003 if certain refining margins levels are met. The transaction is subject to obtaining certain regulatory approvals and satisfying certain contingencies, including the waiver of a right of first refusal held by an adjacent property owner. The transaction is expected to close in the second quarter of 2002. The transaction will be financed with a combination of bank debt and cash on hand. For additional information regarding the transaction, see the Press Release and related information attached hereto as Exhibits 99.1 and 99.2, which documents are incorporated herein by reference. 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. /s/ GARY R. DALKE ------------------------------------- Gary R. Dalke Vice President and Accounting Officer (Principal Accounting Officer) Date: February 12, 2002 INDEX TO EXHIBITS Exhibit Number Description - ------- -------------------------------------------------- 99.1 Press Release, dated as of February 12, 2002. 99.2 Conference Call Script, dated as of February 12, 2002. EX-99 3 exhibit99-1.txt PRESS RELEASE EXHIBIT 99.1 GIANT INDUSTRIES, INC. GI LISTED NYSE NEWS RELEASE Contact: Mark B. Cox Vice President, Treasurer, & Financial Officer Giant Industries, Inc. (480) 585-8888 Sarah Howell, BP, NY Press Office (212) 451-8021 FOR IMMEDIATE RELEASE February 12, 2002 GIANT INDUSTRIES, INC. ANNOUNCES ACQUISITION OF YORKTOWN, VIRGINIA REFINERY FROM BP Scottsdale, Arizona (February 12, 2002) - Giant Industries, Inc. [NYSE: GI] and BP p.l.c. [NYSE: BP] announced today that they have reached an agreement for Giant to acquire BP's Yorktown, Virginia refinery for $127.5 million plus the value of inventory at closing, currently estimated to be $42 million. Additionally, the agreement includes potential payments not to exceed $25 million if certain refining margin levels are met beginning in the year 2003 and concluding at the end of 2005. All regulatory approvals and contingencies are expected to be resolved including a right of first refusal held by adjacent property owner. The transaction is projected to close in the second quarter. The refinery acquisition will be financed with a combination of bank debt and cash on hand. The refinery is located in Yorktown, Virginia, on the York River and has a crude oil processing capacity of 62,000 barrels per day. The product slate, approximately 50% gasoline, also includes a wide range of products such as diesel fuel, heating oil and coke. The refinery is the only refinery in Virginia and is able to serve the local area, as well as the New York Harbor. Jim Acridge, Giant's Chairman and Chief Executive Officer stated, "I believe we have found a refining operation with as much flexibility as any in the United States. A portion of the market served by the refinery enjoys local distribution benefits similar to those of our current refinery operations. This purchase more than doubles our refining capacity, bringing this total to approaching 100,000 barrels per day. This refinery has the ability to select from a wide range of world crude oils and raw material supplies to produce very high percentages of high value light products at prices that can produce strong netbacks. This refinery is well positioned to do several things: deliver product to many nearby market terminals on short notice to supplement unexpected shortages; to market to a number of markets selected to respond to stronger product margins; and to exchange products to and from the Gulf Coast and New York Harbor." Acridge continued, "Furthermore, over recent years, the area has enjoyed solid population growth and product demand both in Virginia and the surrounding areas. The refinery personnel and their long-term experience in operating the Yorktown refinery are an ingredient that we are fortunate to inherit and we expect to maintain the workforce currently employed by BP at Yorktown." "We are delighted that Giant has recognized this refinery is a top performer, and that they plan to offer employment to all of the current workforce. This is an important reassurance to our employees, the markets and the communities served," said Ross Pillari, President of BP America. The Bank of America served as financial advisor to Giant and Rothschild, Inc. has served as advisor to BP. Giant Industries, Inc., headquartered in Scottsdale, Arizona, is a refiner and marketer of petroleum products. Giant owns and operates two New Mexico crude oil refineries, a 260 mile crude oil gathering pipeline system based in Farmington, NM, which services the refineries, finished products distribution terminals in Albuquerque, NM and Flagstaff, AZ., a fleet of 150 crude oil and finished product truck transports, a Travel Center on I-40 east of Gallup, and a chain of 164 retail service station/convenience stores in New Mexico, Colorado, Utah, and Arizona. Giant is also the parent company of Phoenix Fuel Co., Inc., Arizona's largest independent petroleum products distributor. Visit Giant's website at www.Giant.com. BP is one of the world's largest petroleum and petrochemicals companies. Its main activities are exploration and production of crude oil and natural gas; oil refining, marketing and transportation; gas marketing and power generation; and the production and marketing of petrochemicals. The company also manufactures and sells photo-voltaic panels for solar power generation. Visit BP's website at www.BP.com. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This press release and the attached Fact Sheet contains forward- looking statements that involve known and unknown risks and uncertainties. Forward-looking statements are identified by words or phrases such as "believes," "expects," "anticipates," "estimates," "should," "could," "plans," "intends," variations of such words and phrases, and other similar expressions. While these forward-looking statements are made in good faith, and reflect the Company's current judgment regarding such matters, actual results could vary materially from the forward-looking statements. Important factors that could cause actual results to differ from forward-looking statements include, but are not limited to: the ability to satisfy regulatory contingencies and approval requirements; the availability and costs of crude oil, other refinery feedstocks and refined products; changes in the cost or availability of third-party vessals, pipelines and other means of transporting feedstocks and products; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on behalf of the Company, are expressly qualified in their entirety by the foregoing. Forward-looking statements made by the Company represent its judgement on the dates such statements are made. The Company assumes no obligation to update any forward-looking statements to reflect new or changed events or circumstances. FACT SHEET REFINERY AT A GLANCE Location: Yorktown, Virginia Capacity: 61,900 barrels per stream day (bpsd) of crude oil Major Processing Units: Vacuum Unit 41,000 bpsd Fluid Catalytic Cracking Unit 28,130 bpsd Delayed Coking Unit 19,500 bpsd Catalytic Reforming 11,900 bpsd NAPTHA Desulfurization Unit 12,500 bpsd Distillate Desulfurizer Unit 19,000 bpsd Feedstocks: Coastal location provides access to worldwide crude oil and feedstocks Products: Gasoline (52%) Distillates (33%) Other Products (15%) Complexity Rating: 11.0 (based upon Solomon report) Primary Markets: Virginia (Yorktown, Norfolk) Maryland (Salisbury) North Carolina New York Harbor Employees: Approximately 194 proprietary employees and 60 contracted employees
PRO FORMA FORECASTED FINANCIAL INFORMATION (Yorktown Refinery Only) (Nearest $ millions, except per share data) Unaudited Pro Forma Forecasts --------------- ---------------------------------------------- YTD 5 Year 2000 09/30/01 Average 2002e 2003e 2004e 2005e 2006e EBITDA $72.0 $53.0 $47.6 $32.5 $38.7 $45.1 $62.8 $58.7 Net Earnings N/A N/A $16.5 $7.8 $11.5 $15.3 $26.0 $22.1 Incremental EPS N/A N/A $1.93 $0.91 $1.35 $1.80 $3.04 $2.59
Notes to Pro Forma Forecasted Financial Information: 1. The pro forma forecasted financial information presented above represents the estimated effects of the Yorktown Refinery only and excludes Giant's existing operations. 2. Although EBITDA is not defined by GAAP, the Company believes that it is an important industry measurement. EBITDA is defined as earnings before interest expense, income tax, depreciation and amortization. The forecasted pro forma EBITDA is based upon estimates of forecasted refinery margins prepared by an independent third party consultant and the Company's estimates of operating and other costs over the forecast period. The EBITDA for the calendar year 2000 and the nine months ended September 30, 2001 are unaudited and are back-cast. 3. Estimated net earnings are after depreciation, interest expense and a 40% provision for income taxes. Interest expense was calculated using the anticipated initial financing structure. 4. The incremental earnings per share (EPS) estimate assumes a weighted average number of Giant's shares of 8.554 million outstanding over the forecast period. EX-99 4 exhibit99-2.txt SCRIPT EXHIBIT 99.2 CONFERENCE CALL FOR THE ACQUISITION OF THE YORKTOWN REFINERY Mark Good morning and thank you for listening in today. You should have received a fax this morning announcing the signing of an agreement to acquire the Yorktown, Virginia refinery from BP. If you did not, please contact Melissa Lyon, my executive assistant at (480) 585-8720 or e-mail her at mlyon@giant.com and she will fax or e-mail one to you. Joining me today on the call are: Jim Acridge - our Chairman and Chief Executive Officer Fred Holliger - Executive Vice President and Chief Operating Officer Gary Dalke - Vice President and Accounting Officer Carl Shook - Executive Vice President - Refining Group And Leroy Crow - Executive Vice President - Refining Group However, before we begin my General Counsel asks that I make the following disclosure. This conference call may contain forward- looking statements that involve risks and uncertainties, including, but not limited to, the ability to satisfy contingencies and regulatory approval requirements; the availability and costs of crude oil, other refinery feed stocks and refined products; changes in the cost or availability of third-party vessels, pipelines and other means of transporting feed stocks and products, expectations about the industries in which Giant operates, management beliefs, and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Before I turn the call over to Jim, I would like to first review the financial details of the release. We announced this morning that we have reached an agreement with BP to acquire their Yorktown, Virginia refinery for $127.5 million plus the value of inventory at closing, currently estimated to be $42 million. In addition, the agreement includes contingency payments (or what is commonly referred to as an "earn-out") of up to $25 million, which will be paid if certain refining margin levels are exceeded. The contingency period begins in 2003 and has a term of three years. We will initially finance the transaction primarily with debt, but will also utilize cash on hand. I will now turn the call over to Jim to discuss the acquisition in greater detail. Following Jim's comments, we'll open the floor to your questions. Jim Thank you, Mark. I thank everyone listening on the call today. We appreciate your interest and participation today. Before discussing Yorktown specifically today, I want to mention two of our management team here today, these being Carl Shook and John Stokes. These two individuals came to Giant 20 years ago with our acquisition of the Ciniza refinery. Carl was with Shell for 17 years - 2 of those years were in the Hague. John was Assistant Refining Manager and has since been the Refinery Manager at our Bloomfield refinery and presently serves a dual role as Refinery Manager for Bloomfield and Ciniza. Giant has had as a strategic objective to diversify our refining operations into new regions. As you know, Giant's operations have been focused in the Four Corners area of the Southwest. This area has been an attractive refining market for a number of years. We believe it has provided more stable cash flow and earnings than have generally been experienced by refineries located in other regions of the United States. The tradeoff, however, has been limited opportunities for capacity growth and limited upside during periods of high industry-wide refining margins. What we and others are searching for as you know, is a well-balanced portfolio that includes both assets that provide more stable returns as well as those that provide potentially higher but also more volatile returns. This acquisition provides Giant with the opportunity to more effectively balance the risk/return profile of our assets. The Yorktown refinery is a technologically sophisticated refinery capable of producing a wide variety of high value products. This refinery has one of the highest ratios of upgrading capacity of any East Coast refinery. The refinery has a Solomon complexity rating of 11. This refinery can produce both conventional and RFG gasoline, as well as high and low sulfur diesel, resulting in a significant amount of flexibility to take advantage of attractive product opportunities in the New York Harbor and elsewhere on the East Coast. Having processed 21 different types of crude oil slates last year Yorktown has the ability to process a varied range of raw materials that may allow us to take advantage of raw material availability options and to be opportunistic when distressed cargos are available. As the only refinery located in the state of Virginia, we believe that a portion of the market served by the refinery does have benefits similar to those we have enjoyed over the years in our existing refining operations. We also like the future expansion potential of this refinery. Our preliminary research leads us to believe that relative low cost/high economic return opportunities exist to expand the refinery's capacity. One of Giant's strengths is managing its raw materials and finished product logistics and distribution. The location of this refinery allows it to serve a number of different East Coast markets enabling Giant to take advantage of these strengths. We believe that many of these markets were not aggressively pursued by the refinery's prior owner because, as a major oil company, the prior owner had other objectives relating to its worldwide operations which did not necessarily include maximizing the potential of this relatively small refinery. Finally, quite simply, the Yorktown refinery has demonstrated the ability to make money. If you've had an opportunity to review the fact sheet that was part of the press release, you probably noticed that the facility had EBITDA of approximately $72 million in 2000 and $53 million for the first nine months of 2001. Based upon the mid cycle margin forecast developed by our industry consultant, you will notice that we projected earnings that appear to be somewhat conservative in relation to the most recent actual results. Looking at the 5-year average forecast EBITDA of $47.6 million and a price of 127.5 million, we are paying approximately 2.7 times EBITDA. Looking at the last full year EBITDA of $72.0 million we are paying approximately 1.8 times EBITDA. If you prefer to evaluate the cost per barrel of processing capacity that is approximately $2,100 per barrel. As was mentioned in the press release, we are financing this transaction with bank debt as well as cash on hand. As a result, our leverage will be increasing to a level that exceeds our comfort level and ongoing goals; however, we believe the cash flows we can enjoy when added to our existing operations will allow for debt reduction in a timely manner. We are in the process of reevaluating the capital and operating budgets for 2002 of our current operations and are placing a greater emphasis on divesting of retail assets that are not delivering acceptable returns. The purchase of Yorktown is a very positive and potentially "Company changing event." Our existing employees are looking forward to the growth and opportunities that this acquisition will bring, and we hope that the people that will become a part of Giant because of this acquisition are excited as well. As we have become more knowledgeable of the Yorktown refinery, the markets it serves, and the markets it can access, the flexibility these offer, the new industry doors and the growth rate of the surrounding area, et cetera, we have become more excited and positive about this acquisition. We still have a great deal to learn about all the many nuances and subtleties involved here, some of those being the political climate, the unique products demand and unique needs of our customers, but we will learn them quickly. We have been in the refining business for 30 years; we currently have some very talented personnel and we believe we are acquiring assets that include a good number of capable and talented people as well. We are definitely expanding our horizons, but we believe it is a step we are ready and prepared to take. I'll now open the call up for any questions you may have. -----END PRIVACY-ENHANCED MESSAGE-----