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, 1998
[ ] 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>
THE KANEB SERVICES, INC.
SAVINGS INVESTMENT PLAN
Financial Statements and
Supplemental Schedules
December 31, 1998 and 1997
(with Independent Auditors' Report Thereon)
<PAGE>
KANEB SERVICES, INC.
SAVINGS INVESTMENT PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statement of Net Assets Available for Benefits with Fund Information
at December 31, 1998 2
Statement of Net Assets Available for Benefits with Fund Information
at December 31, 1997 3
Statement of Changes in Net Assets Available for Benefits with Fund
Information for the Year Ended December 31, 1998 4
Statement of Changes in Net Assets Available for Benefits with Fund
Information for the Year Ended December 31, 1997 5
Notes to Financial Statements 6
Schedules
1 Line 27a - Schedule of Assets Held for Investment Purposes 11
2 Line 27d - Schedule of Reportable Transactions 12
<PAGE>
Independent Auditors' Report
To the Administrator and Participants of
The Kaneb Services, Inc. Savings Investment Plan
We have audited the accompanying statement of net assets available for benefits
with fund information of The Kaneb Services, Inc. Savings Investment Plan as of
December 31, 1998 and the related statement of changes in net assets available
for benefits with fund information for the year then ended. 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 audit. The
accompanying financial statements of The Kaneb Services, Inc. Savings Investment
Plan as of and for the year ended December 31, 1997 where audited by other
auditors whose report thereon dated June 24, 1998 expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Kaneb
Services, Inc. Savings Investment Plan as of December 31, 1998, and the changes
in net assets available for benefits for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes as of December 31, 1998 and the schedule of reportable
transactions for the year ended December 31, 1998, are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The individual fund information in the
statement of net assets available for benefits and the statement of 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
changes in net assets available for benefits of each fund. These supplemental
schedules and fund information are the responsibility of the Plan's management.
The supplemental schedules and 1998 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.
KPMG LLP
June 25, 1999
Dallas, Texas
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1998
<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
------------- ----------- ----------- ------------- ------------- -------------
Assets
Investments, at fair value
(notes 2(a) and 3):
<S> <C> <C> <C> <C> <C> <C>
Kaneb Services, Inc.
Common Stock $6,485,498 $ -- $ -- $ -- $ -- $ --
Schwab Retirement
Money Market Fund -- 2,979,751 -- -- -- --
Fidelity Mt. Vernon
Growth Company Fund -- -- 4,466,777 -- -- --
T. Rowe Price New
Income Fund -- -- -- 994,334 -- --
Warburg Pincus Emerging
Growth Fund -- -- -- -- 708,161 --
Vanguard Index 500
Portfolio -- -- -- -- -- 1,584,404
Janus Worldwide Fund -- -- -- -- -- --
Strong Government
Securities Fund -- -- -- -- -- --
Participants' loans -- -- -- -- -- --
Receivables:
Accrued interest receivable -- -- 38,435 -- -- --
Contributions receivable 117,439 38,663 41,755 12,396 9,831 20,964
Loan repayment
receivable 10,191 4,911 5,989 1,747 940 1,470
---------- ---------- ---------- ---------- ---------- ----------
Net assets available
for benefits $6,613,128 $3,023,325 $4,552,956 $1,008,477 $ 718,932 $1,606,838
========== ========== ========== ========== ========== ==========
</TABLE>
CONTINUED ON THE NEXT PAGE
See accompanying notes to financial statements.
2
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1998
CONTINUED FROM THE PREVIOUS PAGE
<TABLE>
<CAPTION>
Fund information
---------------------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
------------- ------------- ------------- -----------
Assets
Investments, at fair value
(notes 2(a) and 3)
<S> <C> <C> <C> <C>
Kaneb Services, Inc.
Common Stock $ -- $ -- $ -- $ 6,485,498
Schwab Retirement
Money Market Fund -- -- -- 2,979,751
Fidelity Mt. Vernon
Growth Company Fund -- -- -- 4,466,777
T. Rowe Price New
Income Fund -- -- -- 994,334
Warburg Pincus Emerging
Growth Fund -- -- -- 708,161
Vanguard Index 500
Portfolio -- -- -- 1,584,404
Janus Worldwide Fund 1,420,010 -- -- 1,420,010
Strong Government
Securities Fund -- 478,194 -- 478,194
Participants' loans -- -- 748,352 748,352
Receivables:
Accrued interest receivable -- -- -- 38,435
Contributions receivable 19,427 6,947 -- 267,422
Loan repayment
receivable 1,751 300 (27,299) --
----------- ----------- ----------- -----------
Net assets available
for benefits $ 1,441,188 $ 485,441 $ 721,053 $20,171,338
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
2a
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS 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
------------- ----------- ----------- ------------- ------------- -------------
Assets
Investments, at fair value
(notes 2(a) and 3):
<S> <C> <C> <C> <C> <C> <C>
Kaneb Services, Inc.
Common Stock $ 7,494,128 $ -- $ -- $ -- $ -- $ --
Schwab Retirement
Money Market Fund -- 2,771,355 -- -- -- --
Fidelity Mt. Vernon
Growth Company Fund -- -- 3,494,194 -- -- --
T. Rowe Price New
Income Fund -- -- -- 890,044 -- --
Warburg Pincus Emerging
Growth Fund -- -- -- -- 648,186 --
Vanguard Index 500
Portfolio -- -- -- -- -- 941,320
Janus Worldwide Fund -- -- -- -- -- --
Strong Government
Securities Fund -- -- -- -- -- --
Participants' loans -- -- -- -- -- --
Receivables:
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)
Loan repayment receivable 5,987 5,339 5,462 1,794 1,517 882
----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for benefits $ 7,578,446 $ 2,799,842 $ 3,572,137 $ 904,573 $ 658,858 $ 956,409
=========== =========== =========== =========== =========== ===========
</TABLE>
CONTINUED ON THE NEXT PAGE
See accompanying notes to financial statements.
3
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
CONTINUED FROM THE PREVIOUS PAGE
<TABLE>
<CAPTION>
Fund information
--------------------------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
------------- ------------- ------------- -------------
Assets
Investments, at fair value
(notes 2(a) and 3):
<S> <C> <C> <C> <C>
Kaneb Services, Inc.
Common Stock $ -- $ -- $ -- $ 7,494,128
Schwab Retirement
Money Market Fund -- -- -- 2,771,355
Fidelity Mt. Vernon
Growth Company Fund -- -- -- 3,494,194
T. Rowe Price New
Income Fund -- -- -- 890,044
Warburg Pincus Emerging
Growth Fund -- -- -- 648,186
Vanguard Index 500
Portfolio -- -- -- 941,320
Janus Worldwide Fund 1,062,289 -- -- 1,062,289
Strong Government
Securities Fund -- 232,956 -- 232,956
Participants' loans -- -- 613,397 613,397
Receivables:
Accrued interest receivable -- -- -- 34,684
Contributions receivable 19,084 4,238 -- 229,892
Distributions payable (3,104) (410) (128) (34,839)
Loan repayment receivable 2,029 324 (23,334) --
------------ ------------ ------------ ------------
Net assets available
for benefits $ 1,080,298 $ 237,108 $ 589,935 $ 18,377,606
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
3a
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<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 $ 621,509 $ 268,511 $ 118,148 $ 43,556 $ 31,342 $ 51,775
Participants 711,864 213,192 385,334 105,875 93,974 202,541
----------- ----------- ----------- ----------- ----------- -----------
Total contributions 1,333,373 481,703 503,482 149,431 125,316 254,316
----------- ----------- ----------- ----------- ----------- -----------
Investment income:
Net appreciation (depreciation)
in fair value of assets and
investment income (1,933,377) 134,969 965,887 46,482 42,731 326,064
----------- ----------- ----------- ----------- ----------- -----------
Total additions (600,004) 616,672 1,469,369 195,913 168,047 580,380
Distributions and withdrawals (395,246) (236,850) (237,670) (116,660) (61,447) (50,899)
Transfers between funds 29,932 (156,339) (250,880) 24,651 (46,526) 120,948
----------- ----------- ----------- ----------- ----------- -----------
Net change in assets (965,318) 223,483 980,819 103,904 60,074 650,429
Net assets available for
benefits, beginning of year 7,578,446 2,799,842 3,572,137 904,573 658,858 956,409
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
benefits, end of year $ 6,613,128 $ 3,023,325 $ 4,552,956 $ 1,008,477 $ 718,932 $ 1,606,838
=========== =========== =========== =========== =========== ===========
</TABLE>
CONTINUED ON THE NEXT PAGE
See accompanying notes to financial statements.
4
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
CONTINUED FROM PREVIOUS PAGE
<TABLE>
<CAPTION>
Fund information
------------------------------------------------------------
Government
Worldwide Securities
Equity Fund Fund Loan Fund Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contributions:
Sponsor $ 49,116 $ 15,482 $ -- $ 1,199,439
Participants 189,787 52,526 -- 1,955,093
------------ ------------ ------------ ------------
Total contributions 238,903 68,008 -- 3,154,532
------------ ------------ ------------ ------------
Investment income:
Net appreciation (depreciation)
in fair value of assets and
investment income 291,462 21,913 -- (103,869)
------------ ------------ ------------ ------------
Total additions 530,365 89,921 -- 3,050,663
Distributions and withdrawals (77,644) (62,525) (17,990) (1,256,931)
Transfers between funds (91,831) 220,937 149,108 --
------------ ------------ ------------ ------------
Net change in assets 360,890 248,333 131,118 1,793,732
Net assets available for
benefits, beginning of year 1,080,298 237,108 589,935 18,377,606
------------ ------------ ------------ ------------
Net assets available for
benefits, end of year $ 1,441,188 $ 485,441 $ 721,053 $ 20,171,338
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4a
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED 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 change in assets 3,284,595 69,211 508,830 114,490 166,247 554,566
Net assets available for
benefits, beginning of year 4,293,851 2,730,631 3,063,307 790,083 492,611 401,843
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
benefits, end of year $ 7,578,446 $ 2,799,842 $ 3,572,137 $ 904,573 $ 658,858 $ 956,409
=========== =========== =========== =========== =========== ===========
</TABLE>
CONTINUED ON THE NEXT PAGE
See accompanying notes to financial statements.
5
<PAGE>
THE KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
CONTINUED FROM THE PREVIOUS PAGE
<TABLE>
<CAPTION>
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 change in assets 527,765 92,474 39,356 5,357,534
Net assets available for
benefits, beginning of year 552,533 144,634 550,579 13,020,072
------------ ------------ ------------ ------------
Net assets available for
benefits, end of year $ 1,080,298 $ 237,108 $ 589,935 $ 18,377,606
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
5a
<PAGE>
THE KANEB SERVICES, INC.
SAVINGS INVESTMENT PLAN
Notes to Financial Statements
December 31, 1998 and 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. The Charles Schwab
Trust Company serves as trustee and Leggette & Company serves 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.
(a) Investments
The Plan's investments are stated at fair value based on quoted
market prices. Participant loans are valued at unpaid principal
balance which approximates fair value. Purchases and sales of
securities are recorded on a trade-date basis.
(b) Federal Income Taxes
The Internal Revenue Service ("IRS") has ruled the Plan meets the
requirements of Section 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 accounts is distributed or
made available to him in an unqualified manner.
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 1998 and 1997 was
$10,000 and $9,500, respectively. Participant compensation in
excess of $160,000 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.
(c) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
(3) Investment Programs
The Plan's investments at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------- -------------------------------
Number Fair Number Fair
of Shares value of shares value
----------------- ------------- -------------- -------------
Investments at fair value as
determined by quoted market price:
<S> <C> <C> <C> <C>
Kaneb Services, Inc. Common Stock 1,622,033.000 $ 6,485,498* 1,444,512.000 $ 7,494,128*
=============== ============== ============== =============
Investments at fair value:
Schwab Retirement Money Market Fund 2,979,750.990 $ 2,979,751* 2,771,354.530 $ 2,771,355*
Fund
Fidelity Mt. Vernon Growth 87,583.862 4,466,777* 80,660.057 3,494,194*
Company Fund
T. Rowe Price New Income Fund 112,864.210 994,334 98,130.581 890,044
Warburg Pincus Emerging Growth 17,717.313 708,161 17,161.408 648,186
Fund
Vanguard Index 500 Portfolio 13,904.381 1,584,404* 10,450.986 941,320*
Janus Worldwide Fund 29,983.328 1,420,010* 28,117.759 1,062,289*
Strong Government Securities 44,441.828 478,194 21,670.369 232,956
Fund
Participants' Loans -- 748,352 -- 613,397
--------------- ------------- -------------- -------------
3,286,245.912 13,379,983 3,027,545.690 10,653,741
--------------- ------------- --------------- -------------
4,908,278.912 $ 19,865,481 4,472,057.690 $ 18,147,869
=============== ============= =============== =============
</TABLE>
* Represents 5% or more of total net assets available for benefits.
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, 1998
and 1997. 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.
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 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.
(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 1998, Sponsor contributions of $621,509
and participant contributions of $711,864 were used by the trustee to
purchase 312,266 shares of 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.
Contributions receivable at December 31, 1998 and 1997 included $103,311
and $81,284 of employer contributions and $164,111 and $148,608 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.
(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.
(6) Forfeitures
At December 31, 1998 and 1997, forfeited nonvested accounts totaled
$26,929 and $42,020, respectively. These amounts, forfeited by
participants upon withdrawing from the Plan, will be used to reduce
future employer contributions. These amounts may also be credited to
their account upon returning to the Plan if certain requirements are met.
(7) Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31, 1998
-----------------
Net assets available for benefits per the
financial statements $ 20,171,338
Amounts allocated to withdrawing participants (248,677)
------------
Net assets available for benefits per the Form 5500 $ 19,922,661
============
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Year Ended
December 31, 1998
-----------------
Benefits paid to participants per the financial
statements $ 1,256,931
Add: Amounts allocated to withdrawing participants
at December 31, 1998 248,677
------------
Benefits paid to participants per the Form 5500 $ 1,505,608
============
Amounts allocated to withdrawing participants are recorded on the 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.
(8) Plan Termination
Although it has not expressed any intent to do so, the Sponsor has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
(9) Year 2000 (unaudited)
The Plan could be adversely affected if the computer systems and those of
service providers used by the Plan or the Trustee do not properly process
and calculate date related information from and after January 1, 2000.
This is commonly known as the "Year 2000 Problem." The Sponsor is taking
steps that it believes are reasonably designed to address the Year 2000
Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by each of
the Plan's other major service providers. At this time, however, there
can be no assurance that these steps will be sufficient to avoid any
material adverse effect on the Plan's activities and, accordingly, its
net assets available for benefits and changes therein.
<PAGE>
KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN SCHEDULE I
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
Number Current
Number of Issuer and Title of Issue of Shares Cost Value
- ------------------------------------ ------------- ---------- ----------
KANEB STOCK FUND
*Kaneb Services, Inc. Common Stock 1,622,033.000 $5,663,680 $6,485,498
========== ==========
RETIREMENT MONEY MARKET FUND
Schwab Retirement Money Market Fund 2,979,750.990 $2,979,751 $2,979,751
========== ==========
EQUITY GROWTH FUND
Fidelity Mt. Vernon Growth Company Fund 87,583.862 $3,665,280 $4,466,777
========== ==========
CORPORATE BOND FUND
T. Rowe Price New Income Fund 112,864.210 $1,006,731 $ 994,334
========== ==========
EMERGING EQUITY GROWTH FUND
Warburg Pincus Emerging Growth Fund 17,717.313 $ 604,522 $ 708,161
========== ==========
S&P EQUITY INDEX FUND
Vanguard Index 500 Portfolio 13,904.381 $1,148,367 $1,584,404
========== ==========
WORLDWIDE EQUITY FUND
Janus Worldwide Fund 29,983.328 $1,143,672 $1,420,010
========== ==========
GOVERNMENT SECURITIES FUND
Strong Government Securities Fund 44,441.828 $ 478,538 $ 478,194
========== ==========
LOAN FUND
*Participants' Loans (a) -- $ 748,352 $ 748,352
========== ==========
* Party-in-interest
(a) Interest rates ranging from 7% to 10% and maturities of one to seven years.
<PAGE>
KANEB SERVICES, INC. SAVINGS INVESTMENT PLAN SCHEDULE II
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Current
Expense value
No. of incurred of asset on
Trans- Purchase Selling with Cost of transaction
Identity of Party Involved actions price price Transaction assets date Net gain
- ------------------------------------------ ------ ---------- --------- ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases:
Fidelity Mt. Vernon Growth Company Fund 106 $ 966,228 $ -- $ -- $ 966,228 $ 966,228 $ --
Kaneb Services, Inc. Common Stock 36 1,630,805 -- -- 1,630,805 1,630,805 --
Schwab Retirement Money Market Fund 117 803,322 -- -- 803,322 803,322 --
Sales:
Fidelity Mt. Vernon Growth Company Fund 84 -- 644,568 -- 556,640 644,568 87,928
Kaneb Services, Inc. Common Stock 72 -- 684,736 -- 434,119 684,736 250,617
Schwab Retirement Money Market Fund 129 -- 594,925 -- 594,925 594,925 --
</TABLE>
<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 29, 1999 By: /s/ WILLIAM H. KETTLER
----------------------
William H. Kettler, Vice President
Human Resources
(Plan Administrator)
