SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE, SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from __________ to __________
Commission file number 001-5083
A. Full title of the plan and the address of the plan, if difference from
that of the issuer named below:
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
B. Name of issuer of these securities held pursuant to the plan and the
address of its principal executive office:
KANEB SERVICES, INC.
2435 N. Central Expressway
Richardson, Texas 75080
<PAGE>
KANEB SERVICES, INC.
SAVINGS INVESTMENT
PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants F-2
Financial Statements:
Statement of Net Assets with Fund Information at December 31, 1997 F-3
Statement of Net Assets with Fund Information at December 31, 1996 F-5
Statement of Changes in Net Assets with Fund Information for the Year
Ended December 31, 1997 F-7
Statement of Changes in Net Assets with Fund Information for the Year
Ended December 31, 1996 F-9
Notes to Financial Statements F-11
Supplemental Schedules*:
Item 27a - Schedule of Assets Held for Investment Purposes
(Schedule I) F-15
Item 27d - Schedule of Reportable Transactions (Schedule II) F-16
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted because
they are not applicable.
<PAGE>
Report of Independent Accountants
To the Administrator and Participants of The
Kaneb Services, Inc. Savings Investment Plan
In our opinion, the accompanying statements of net assets with fund
information and the related statements of changes in net assets with fund
information present fairly, in all material respects, the net assets of The
Kaneb Services, Inc. Savings Investment Plan at December 31, 1997 and 1996 and
the changes in its net assets for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The additional information in
Schedules I and II is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by the Employee Retirement Income Security Act of 1974. The Fund
Information in the statement of net assets available for benefits and changes in
net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and the
changes in net assets available for benefits of each fund. Schedules I and II
and the Fund Information have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
PRICE WATERHOUSE LLP
Dallas, Texas
June 24, 1998
F - 2
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------------------------
Retirement Emerging S&P
Kaneb Money Equity Corporate Equity Equity
Stock Fund Market Fund Growth Fund Bond Fund Growth Fund Index Fund
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investments:
Kaneb Services, Inc.
Common Stock,
at market $ 7,494,128 $ -- $ -- $ -- $ -- $ --
Schwab Retirement
Money Market Fund -- 2,771,355 -- -- -- --
Fidelity Mt. Vernon
Growth Company Fund,
at market -- -- 3,494,194 -- -- --
T. Rowe Price New
Income Fund, at market -- -- -- 890,044 -- --
Warburg Pincus Emerging
Growth Fund, at market -- -- -- -- 648,186 --
Vanguard Index 500
Portfolio, at market -- -- -- -- -- 941,320
Janus Worldwide Fund,
at market -- -- -- -- -- --
Strong Government
Securities Fund, at market -- -- -- -- -- --
Participants' loans -- -- -- -- -- --
Accrued interest receivable -- -- 34,684 -- -- --
Contributions receivable 99,543 25,448 42,268 12,766 10,303 16,242
Distributions payable (21,212) (2,300) (4,471) (31) (1,148) (2,035)
Other receivables
(payables) 5,987 5,339 5,462 1,794 1,517 882
------------ ------------ ------------ ------------ ------------ ------------
Net assets $ 7,578,446 $ 2,799,842 $ 3,572,137 $ 904,573 $ 658,858 $ 956,409
============ ============ ============ ============ ============ ============
CONTINUED ON NEXT PAGE
See notes to financial statements.
F - 3
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1997
CONTINUED FROM THE PREVIOUS PAGE
Fund Information
--------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments:
Kaneb Services, Inc.
Common Stock,
at market $ -- $ -- $ -- $ 7,494,128
Schwab Retirement
Money Market Fund -- -- -- 2,771,355
Fidelity Mt. Vernon
Growth Company Fund,
at market -- -- -- 3,494,194
T. Rowe Price New
Income Fund, at market -- -- -- 890,044
Warburg Pincus Emerging
Growth Fund, at market -- -- -- 648,186
Vanguard Index 500
Portfolio, at market -- -- -- 941,320
Janus Worldwide Fund,
at market 1,062,289 -- -- 1,062,289
Strong Government
Securities Fund, at market -- 232,956 -- 232,956
Participants' loans -- -- 613,397 613,397
Accrued interest receivable -- -- -- 34,684
Contributions receivable 19,084 4,238 -- 229,892
Distributions payable (3,104) (410) (128) (34,839)
Other receivables
(payables) 2,029 324 (23,334) --
------------ ------------ ------------ ------------
Net assets $ 1,080,298 $ 237,108 $ 589,935 $ 18,377,606
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F - 4
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------
Retirement Emerging S&P
Kaneb Money Equity Corporate Equity Equity
Stock Fund Market Fund Growth Fund Bond Fund Growth Fund Index Fund
------------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investments:
Kaneb Services, Inc.
Common Stock,
at market $ 4,235,329 $ - $ - $ - $ - $ -
Schwab Retirement
Money Market Fund - 2,828,659 - - - -
Fidelity Mt. Vernon
Growth Company Fund,
at market - - 3,046,074 - - -
T. Rowe Price New
Income Fund, at market - - - 779,370 - -
Warburg Pincus Emerging
Growth Fund, at market - - - - 499,048 -
Vanguard Index 500
Portfolio, at market - - - - - 410,358
Janus Worldwide Fund,
at market - - - - - -
Strong Government
Securities Fund, at market - - - - - -
Participants' loans - - - - - -
Accrued interest receivable 804 - 110 - 1,363 19
Contributions receivable 85,152 40,131 41,769 13,471 11,025 7,430
Distributions payable (27,585) (138,159) (24,646) (2,758) (18,825) (15,964)
Other receivables 151 - - - - -
------------- -------------- ------------- ------------- ------------- -------------
Net assets $ 4,293,851 $ 2,730,631 $ 3,063,307 $ 790,083 $ 492,611 $ 401,843
============= ============== ============= ============= ============= =============
CONTINUED ON NEXT PAGE
See notes to financial statements.
F - 5
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1996
CONTINUED FROM THE PREVIOUS PAGE
Fund Information
------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Investments:
Kaneb Services, Inc.
Common Stock,
at market $ - $ - $ - $ 4,235,329
Schwab Retirement
Money Market Fund - - - 2,828,659
Fidelity Mt. Vernon
Growth Company Fund,
at market - - - 3,046,074
T. Rowe Price New
Income Fund, at market - - - 779,370
Warburg Pincus Emerging
Growth Fund, at market - - - 499,048
Vanguard Index 500
Portfolio, at market - - - 410,358
Janus Worldwide Fund,
at market 557,167 - - 557,167
Strong Government
Securities Fund, at market - 142,082 - 142,082
Participants' loans - - 532,311 532,311
Accrued interest receivable 54 - - 2,350
Contributions receivable 10,168 2,552 - 211,698
Distributions payable (14,856) - - (242,793)
Other receivables - - 18,268 18,419
------------- ------------- ------------- ------------
Net assets $ 552,533 $ 144,634 $ 550,579 $ 13,020,072
============= ============= ============= ============
</TABLE>
See notes to financial statements.
F - 6
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------------------------------
Retirement Emerging S&P
Kaneb Money Equity Corporate Equity Equity
Stock Fund Market Fund Growth Fund Bond Fund Growth Fund Index Fund
------------- ------------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Sponsor $ 523,982 $ 225,895 $ 113,831 $ 44,950 $ 28,470 $ 33,224
Participants 560,168 219,399 388,514 109,308 88,954 120,502
------------- ------------- ------------- -------------- ------------- -----------
Total contributions 1,084,150 445,294 502,345 154,258 117,424 153,726
------------- ------------- ------------- -------------- ------------- -----------
Investment income:
Net appreciation in fair value
of assets 2,677,171 - - - -
Investment income (loss) (804) 134,299 579,310 76,652 96,900 198,882
------------- ------------- ------------- -------------- ------------- -----------
Net investment income 2,676,367 134,299 579,310 76,652 96,900 198,882
------------- ------------- ------------- -------------- ------------- -----------
Total additions 3,760,517 579,593 1,081,655 230,910 214,324 352,608
Distributions and withdrawals (393,906) (328,048) (169,210) (40,058) (27,721) (101,030)
Transfers between funds (82,016) (182,334) (403,615) (76,362) (20,356) 302,988
------------- ------------- ------------- -------------- ------------- -----------
Net increase 3,284,595 69,211 508,830 114,490 166,247 554,566
Net assets, beginning of year 4,293,851 2,730,631 3,063,307 790,083 492,611 401,843
------------- ------------- ------------- -------------- ------------- -----------
Net assets, end of year $ 7,578,446 $ 2,799,842 $ 3,572,137 $ 904,573 $ 658,858 $ 956,409
============= ============= ============= ============== ============= ===========
CONTINUED ON NEXT PAGE
See notes to financial statements.
F - 7
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1997
CONTINUED FROM THE PREVIOUS PAGE
Fund Information
------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
----------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Contributions:
Sponsor $ 39,644 $ 12,516 $ - $ 1,022,512
Participants 148,988 37,044 - 1,672,877
----------- ------------- ------------ --------------
Total contributions 188,632 49,560 - 2,695,389
----------- ------------- ------------ --------------
Investment income:
Net appreciation in fair value
of assets - - - 2,677,171
Investment income (loss) 146,958 18,685 44,213 1,295,095
---------- ------------- ------------- --------------
Net investment income 146,958 18,685 44,213 3,972,266
---------- ------------- ------------- --------------
Total additions 335,590 68,245 44,213 6,667,655
Distributions and withdrawals (151,383) (37,659) (61,106) (1,310,121)
Transfers between funds 343,558 61,888 56,249 -
------------ ------------- ------------- --------------
Net increase 527,765 92,474 39,356 5,357,534
Net assets, beginning of year 552,533 144,634 550,579 13,020,072
------------ ------------- ------------- --------------
Net assets, end of year $ 1,080,298 $ 237,108 $ 589,935 $ 18,377,606
============ ============= ============= ==============
</TABLE>
See notes to financial statements.
F - 8
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------------------------------
U.S.
Government Retirement
Kaneb Securities Fixed Money Equity
Stock Fund Fund Equity Fund Income Fund Market Fund Growth Fund
------------- ------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Sponsor $ 490,757 $ 80,726 $ 37,646 $ 16,812 $ 165,877 $ 99,003
Participants 530,918 74,133 129,079 47,652 182,377 345,959
------------- ------------- -------------- ------------- ------------- -------------
Total contributions 1,021,675 154,859 166,725 64,464 348,254 444,962
------------- ------------- -------------- ------------- ------------- -------------
Investment income:
Net appreciation in fair value
of assets 1,131,466 - - - - 116,332
Investment income (loss) 3,807 65,275 143,444 (25,566) 111,717 113,798
------------- ------------- -------------- ------------- ------------- -------------
Net investment income (loss) 1,135,273 65,275 143,444 (25,566) 111,717 230,130
------------- ------------- -------------- ------------- ------------- -------------
Total additions 2,156,948 220,134 310,169 38,898 459,971 675,092
Distributions and withdrawals (256,899) (381,226) (159,493) (119,981) (445,841) (160,309)
Transfers between funds (86,600) (3,496,795) (2,853,325) (1,042,737) 2,716,501 2,548,524
------------- ------------- -------------- ------------- ------------- -------------
Net increase (decrease) 1,813,449 (3,657,887) (2,702,649) (1,123,820) 2,730,631 3,063,307
Net assets, beginning of year 2,480,402 3,657,887 2,702,649 1,123,820 - -
------------- ------------- -------------- ------------- ------------- -------------
Net assets, end of year $ 4,293,851 $ - $ - $ - $ 2,730,631 $ 3,063,307
============= ============= ============== ============= ============= =============
CONTINUED ON NEXT PAGE
See notes to financial statements.
F - 9
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS WITH FUND INFORMATION
DECEMBER 31, 1996
CONTINUED FROM THE PREVIOUS PAGE
Fund Information
---------------------------------------------------------------------------------------------
Emerging S&P Government
Corporate Equity Equity Worldwide Securities
Bond Fund Growth Fund Index Fund Equity Fund Fund Loan Fund Total
-------------- ----------- ------------- ------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions:
Sponsor $ 42,763 $ 16,774 $ 8,952 $ 12,110 $ 3,951 $ - $ 975,371
Participants 112,409 57,795 33,600 46,876 12,258 - 1,573,056
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Total contributions 155,172 74,569 42,552 58,986 16,209 - 2,548,427
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Investment income:
Net appreciation in
fair value of assets 675 44,505 44,864 5,195 2,895 - 1,345,932
Investment income
(loss) 36,882 22,608 8,338 40,307 3,540 20,893 545,043
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Net investment
income (loss) 37,557 67,113 53,202 45,502 6,435 20,893 1,890,975
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Total additions 192,729 141,682 95,754 104,488 22,644 20,893 4,439,402
Distributions and
withdrawals (34,738) (87,958) (28,948) (27,096) (769) (12,074) (1,715,332)
Transfers between
funds 632,092 438,887 335,037 475,141 122,759 210,516 -
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Net increase
(decrease) 790,083 492,611 401,843 552,533 144,634 219,335 2,724,070
Net assets, beginning
of year - - - - - 331,244 10,296,002
-------------- ------------- ------------- ------------- ------------- -------------- -------------
Net assets, end
of year $ 790,083 $ 492,611 $ 401,843 $ 552,533 $ 144,634 $ 550,579 $ 13,020,072
============== ============= ============= ============= ============= ============== =============
</TABLE>
See notes to financial statements.
F - 10
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. PLAN DESCRIPTION
The Kaneb Services, Inc. Savings Investment Plan (the "Plan") is a defined
contribution plan for employees of Kaneb Services, Inc. ("Kaneb" or
"Sponsor") and its wholly-owned domestic subsidiaries (the "Companies").
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). A copy of the Plan document and amendments
is available from the Plan Administrator. Participants should refer to the
Plan document and amendments for more detailed information regarding
provisions of the Plan.
The Plan was established on April 1, 1991 and permits all full-time
employees of the Companies as of that date, or who become employees
thereafter and have completed one year of service, to contribute 2% to 12%
of base compensation on a pretax basis into participant accounts. In
addition to a mandatory contribution equal to 2% of base compensation per
year for each Plan participant, the Companies make matching contributions
of 25% or 50% of the amount contributed by a Plan participant up to 6% of
base compensation. Employee contributions, together with earnings thereon,
are not subject to forfeiture. That portion of a participant's account
balance attributable to the Companies' contributions, together with
earnings thereon, will be vested over a five-year period at 20% per year.
Participants may borrow from the Plan an amount not to exceed the lesser of
50% of such participant's vested account balance or $50,000 reduced by the
highest loan balance in the preceding 12 months. Contributions to the Plan
are held in a trust and invested by the Plan's trustee in the investment
funds described in Note 3. Effective April 1, 1996, the Plan was amended
for additional investment fund choices and to change the Plan's asset
valuation period from quarterly to daily. In connection with these changes,
The Charles Schwab Trust Company replaced Texas Commerce Bank as trustee
and Leggette & Company replaced The Wyatt Company as the Plan's record
keeper. The Vice President of Human Resources of Kaneb serves as the Plan
Administrator. All administrative and trust expenses of the Plan are paid
by Kaneb.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Plan maintains its accounts on the accrual basis of accounting.
Investments
Investments are recorded in the Plan accounts at market value based on
quoted market prices at year-end. The appreciation or depreciation of those
investments is recorded as an unrealized increase or decrease in the Plan's
net assets.
Federal income taxes
The Internal Revenue Service ("IRS") has ruled the Plan meets the
requirements of Sections 401(a) and 401(k) of the Internal Revenue Code
("Code") and the trust is exempt from federal income taxes under Section
501(a) of the code. The IRS granted a favorable letter of determination to
the Plan in February 1997. The Plan Administrator and the Plan's tax
counsel believe the Plan is currently designed and being operated in
compliance with the applicable requirements of the Code. Under present
federal income tax laws and regulations, a participant will not be subject
to federal income taxes on the contributions made by his employer or
withheld from his compensation under the Plan, or on the interest,
dividends or profits on the sale of securities received by the Plan
trustee, until the participant's account is distributed or unqualifiedly
made available to him.
The Code limits contributions to the Plan in several respects. The total
amount deferred by each participant cannot exceed a specified dollar limit
which, for calendar years 1997 and 1996 was $9,500. Participant
compensation in excess of $160,000 for 1997 and $150,000 for 1996 is
excluded in calculating participant deferrals and employer matching
contributions. Total contributions during any Plan year, including both
participants' deferrals and employer matching contributions, may not exceed
the maximum amount the employer may deduct for federal income tax purposes
for the year. Additional rules apply to prevent discrimination in favor of
highly compensated employees.
F - 11
<PAGE>
3. INVESTMENT PROGRAMS
December 31, 1997
-----------------------------
Number
of Shares Fair Value
--------------- ------------
Investments at fair value as determined
by quoted market price:
Kaneb Services, Inc. Common Stock 1,444,512.000 $ 7,494,128
================ ============
Investments at fair value:
Schwab Retirement Money Market Fund 2,771,354.530 $ 2,771,355
Fidelity Mt. Vernon Growth Company Fund 80,660.057 3,494,194
T. Rowe Price New Income Fund 98,130.581 890,044
Warburg Pincus Emerging Growth Fund 17,161.408 648,186
Vanguard Index 500 Portfolio 10,450.986 941,320
Janus Worldwide Fund 28,117.759 1,062,289
Strong Government Securities Fund 21,670.369 232,956
Participants' Loans - 613,397
---------------- ------------
3,027,545.690 10,653,741
---------------- ------------
Total investment at fair value 4,472,057.690 $ 18,147,869
================ ============
December 31, 1996
------------------------------
Number
of Shares Fair Value
---------------- ------------
Investments at fair value as determined
by quoted market price:
Kaneb Services, Inc. Common Stock 1,303,178.000 $ 4,235,329
================ ============
Investments at fair value:
Schwab Retirement Money Market Fund 2,828,658.980 $ 2,828,659
Fidelity Mt. Vernon Growth Company Fund 75,286.066 3,046,074
T. Rowe Price New Income Fund 87,668.184 779,370
Warburg Pincus Emerging Growth Fund 15,022.510 499,048
Vanguard Index 500 Portfolio 5,933.454 410,358
Janus Worldwide Fund 16,538.057 557,167
Strong Government Securities Fund 13,557.454 142,082
Participants' Loans - 532,311
---------------- ------------
3,042,664.705 8,795,069
---------------- ------------
Total investment at fair value 4,345,842.705 $ 13,030,398
================ ============
Each participant has the option to specify the investment of contributions
made through payroll deductions and 2% employer mandatory contributions
into any one of, or divided among, each of the available investment funds
mentioned above for the periods ended December 31, 1997 and 1996. Employer
matching contributions are invested in the Kaneb Stock Fund.
Contributions designated to the Kaneb Stock Fund are invested in Kaneb
Services, Inc. Common Stock. The Plan either purchases shares in the open
market at the prevailing market price or shares are contributed directly by
the Sponsor based upon the closing trade price on the last day of each
month.
Contributions designated to the Schwab Retirement Money Market Fund are
invested primarily in a short-term portfolio of commercial paper,
certificates of deposit, corporate debt obligations and other bank issues.
F - 12
<PAGE>
Contributions designated to the Fidelity Mt.Vernon Growth Company Fund are
invested in the common stock and convertible securities of companies which
have above-average growth potential, such as lesser known companies in new
and emerging areas of the economy or larger or revitalized companies that
hold a strong position in the market.
Contributions designated to the T. Rowe Price New Income Fund are invested
in income-producing investment-grade debt securities.
Contributions designated to the Warburg Pincus Emerging Growth Fund are
invested in the common stock of smaller companies which have passed their
start-up phase and show positive earnings and prospects of achieving
significant profit and gain in a relatively short period of time.
Contributions designated to the Vanguard Index 500 Portfolio are invested
in all 500 stocks in the S&P 500 Index in approximately the same
proportions as they are represented in the S&P 500. This Fund seeks to
match the S&P 500 Index.
Contributions designated to the Janus Worldwide Fund are invested in common
stocks of foreign and domestic issuers. This Fund has the flexibility to
invest on a worldwide basis in companies of any size and seeks long-term
growth of capital in a manner consistent with the preservation of capital.
Contributions designated to the Strong Government Securities Fund are
primarily invested in U.S. government securities. The Fund's net assets may
also be invested in other investment-grade debt obligations.
Each of the investment funds listed in the accompanying Statements of Net
Assets with Fund Information represent 5% or more of total net assets
available for benefits with the exception of the Warburg Pincus Emerging
Growth Fund and the Strong Government Securities Fund at December 31, 1997
and the Vanguard Index 500 Portfolio, the Janus Worldwide Fund and the
Strong Government Securities Fund at December 31, 1996.
4. CONTRIBUTIONS
Sponsor contributions to the Kaneb Stock Fund may be made in the form of
Kaneb Services, Inc. Common Stock purchased by the Sponsor or cash with
which the trustee subsequently purchases Kaneb Services, Inc. Common Stock
on the open market. During 1997, Sponsor contributions of $523,982 and
participant contributions of $560,168 were used by the trustee to purchase
306,205 shares of Kaneb Services, Inc. Common Stock on the open market.
During 1996, Sponsor contributions of $490,757 and participant
contributions of $530,918 were used by the trustee to purchase 389,434
shares of Kaneb Services, Inc.
Common Stock on the open market.
Contributions receivable at December 31, 1997 and 1996 included $81,284 and
$84,668 of employer contributions and $148,608 and $127,030 of
contributions withheld from participants' compensation, respectively.
All Plan contributions are participant directed with the exception of
employer matching contributions which are automatically invested in the
Kaneb Stock Fund.
F - 13
<PAGE>
5. DISTRIBUTIONS AND WITHDRAWALS
Distributions and withdrawals represent distributions to Plan participants
who have retired, terminated employment or applied and qualified for a
hardship distribution.
Distributions payable as of December 31, 1997 and 1996 were $34,839 and
$242,793, respectively. Distributions payable are recorded on Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, but not yet paid as of that date.
6. FORFEITURES
Employer matching contributions forfeited by participants upon withdrawing
from the Plan may be credited to their account upon returning to the Plan
if certain requirements are met. During 1997 and 1996, approximately
$42,020 and $45,378 of forfeitures were used to offset employer
contributions, respectively.
F - 14
<PAGE>
KANEB SERVICES INC. SAVINGS INVESTMENT PLAN SCHEDULE I
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
Number Market
Number of Issuer and Title of Issue of Shares Cost Value (a)
- ----------------------------------- ------------- ------------ ------------
KANEB STOCK FUND
- ----------------
Kaneb Services, Inc. Common Stock 1,444,512.000 $ 4,486,849 $ 7,494,128
============== ============ ============
RETIREMENT MONEY MARKET FUND
- ----------------------------
Schwab Retirement Money Market Fund 2,771,354.530 $ 2,771,355 $ 2,771,355
============== ============ ============
EQUITY GROWTH FUND
- ------------------
Fidelity Mt. Vernon Growth Company Fund 80,660.057 $ 3,255,693 $ 3,494,194
============== ============= ============
CORPORATE BOND FUND
- -------------------
T. Rowe Price New Income Fund 98,130.581 $ 871,846 $ 890,044
============== ============= ============
EMERGING EQUITY GROWTH FUND
- ---------------------------
Warburg Pincus Emerging Growth Fund 17,161.408 $ 569,063 $ 648,186
============== ============= ============
S&P EQUITY INDEX FUND
- ---------------------
Vanguard Index 500 Portfolio 10,450.986 $ 756,674 $ 941,320
============== ============= ============
WORLDWIDE EQUITY FUND
- ---------------------
Janus Worldwide Fund 28,117.759 $ 1,015,612 $ 1,062,289
============== ============= ============
GOVERNMENT SECURITIES FUND
- --------------------------
Strong Government Securities Fund 21,670.369 $ 226,282 $ 232,956
============== ============= ============
LOAN FUND
- ---------
Participants' Loans (b) - $ 613,397 $ 613,397
============== ============= =============
(a) Market value represents closing prices at December 31, 1997.
(b) Interest rates ranging from 7% to 10% and maturities of one to seven years.
F - 15
<PAGE>
KANEB SERVICES INC. SAVINGS INVESTMENT PLAN SCHEDULE II
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Description Purchase Selling Cost of # of
Identity of Party Involved of Assets Price Price Assets Net Gain Transactions
- -------------------------------- ----------------- --------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Equity Growth Fund 20,052 Units $ -- $ 875,726 $ 788,293 $ 87,433 161
Equity Growth Fund 25,426 Units 1,114,243 -- 1,114,243 -- 127
Worldwide Equity Fund 20,562 Units 777,601 -- 777,601 -- 138
Kaneb Services, Inc. 306,205 shares 1,284,401 -- 1,284,401 -- 44
Common Stock
Retirement Money Market
Fund 1,036,159 Units -- 1,036,159 1,036,159 -- 197
Retirement Money Market
Fund 978,854 Units 978,854 -- 978,854 -- 143
</TABLE>
F - 16
<PAGE>
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrator has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE KANEB SERVICES, INC.
SAVINGS INVESTMENT PLAN
Date: June 26, 1998 By: /s/ WILLIAM H. KETTLER
----------------------
William H. Kettler,
Vice President
Human Resources
(Plan Administrator)
