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    Giant Industries Back on Track

    Refiner/marketer returning to the black after two years of bad investments, poor decisions.

    SCOTTSDALE, Ariz. -- Giant Industries survived the 1970s gas crunch and the real-estate crash in the early 1990s, and is now working its way out from under a mountain of debt and cash-flow problems that have dogged the company for the past two years.

    In the first six months of this year, the refiner and marketer of petroleum products earned $2.07 million on revenue of $891.01 million. That was a significant improvement over the $4.16-million loss posted for the first six months of 2002 on revenue of $468.88 million, according to The Arizona Republic. During the year the company also managed to reduce long-term debt by $58 million to $378.74 million.

    "People are responding to the fact we stated a strategy a year ago and have executed," Giant's chief financial officer Mark Cox said.

    In 2002, the company was hit by a confluence of bad luck, some of its own making. It paid more than it intended for a refinery in Virginia and saw interest rates jump from 9.5 to 11 percent by the time it closed in the $200-million financing for the deal. Rising crude oil prices then squeezed its profit margin, and post-Sept. 11 travel jitters took their toll on the company's gas and jet fuel sales. Personal loans to founder Jim Acridge that were not being paid back also gave investors the jitters.

    However, Acridge was forced out last year, and chief financial officer Fred Holliger moved into the chairman's office. Holliger renegotiated the company's debt, but had to give lenders considerable control over the company, the report said.

    Loan covenants agreed to in late October restrict the company's borrowing and capital expenditures and give lenders the right to approve asset sales or changes in accounting practices.

    Meanwhile, the company put strict cost controls in place and began selling non-core assets, including underperforming gas stations and convenience stores, raw land and the company's north Scottsdale headquarters.

    The market also helped. A drop in crude oil prices earlier this year helped the company's margins, and the improving economy has boosted retail sales. "We can heal up fast if the economy turns around," Holliger said. "A $1 per barrel improvement in margins translated to $34 million at the bottom line."

    Giant Industries at a Glance
    Core business: Refiner/marketer operates more than 132 convenience stores in Arizona and New Mexico and Colorado.
    Headquarters: Scottsdale, Ariz.
    Chairman: Fred Holliger.
    Founded: 1961.
    2002 Revenue: $1.28 billion.

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