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, 1999
[ ] 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 Schedule
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
The Kaneb Services, Inc.
Savings Investment Plan
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits
at December 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1999 and 1998 3
Notes to Financial Statements 4
Schedule
1 Schedule of Assets Held for Investment Purposes
at End of Year - December 31, 1999 10
<PAGE>
Independent Auditors' Report
To the Administrator and Participants of
The Kaneb Services, Inc. Savings Investment Plan
We have audited the accompanying statements of net assets available for benefits
of The Kaneb Services, Inc. Savings Investment Plan as of December 31, 1999 and
1998 and the related statements of changes in net assets available for benefits
for the years 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1999 and 1998, and the
changes in net assets available for benefits for the years 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 schedule of assets held for
investment purposes at December 31, 1999 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is 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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 9, 2000
Dallas, Texas
<PAGE>
The Kaneb Services, Inc.
Savings Investment Plan
Statements Of Net Assets Available For Benefits
December 31, 1999 And 1998
1999 1998
----------- -----------
Assets:
Investments, at fair value (note 3) $27,072,367 $19,865,481
Accrued income receivable 11,571 38,435
Contributions receivable 332,450 267,422
----------- -----------
$27,416,388 $20,171,338
=========== ===========
See accompanying notes to financial statements.
<PAGE>
The Kaneb Services, Inc.
Savings Investment Plan
Statements Of Changes In Net Assets Available For Benefits
Years Ended December 31, 1999 And 1998
1999 1998
------------ ------------
Additions to net assets attributed to:
Contributions:
Sponsor $ 1,320,073 $ 1,199,439
Participants 2,323,254 1,955,093
Plan assets transferred in due to
plan merger (note 9) 1,371,059 -
------------ ------------
Total contributions 5,014,386 3,154,532
Investment income:
Net appreciation (depreciation) in fair
value of assets, interest and
investment income 4,058,539 (103,869)
------------ ------------
Total additions 9,072,925 3,050,663
Deductions from net assets attributed to:
Distributions and withdrawals (1,827,875) (1,256,931)
------------ ------------
Net change in assets 7,245,050 1,793,732
Net assets available for benefits,
beginning of year 20,171,338 18,377,606
------------ ------------
Net assets available for benefits, end of year $ 27,416,388 $ 20,171,338
============ ============
See accompanying notes to financial statements.
<PAGE>
The Kaneb Services, Inc.
Savings Investment Plan
Notes to Financial Statements
December 31, 1999 and 1998
(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 (the "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.
Effective July 1, 1999, the Plan was amended to include additional
investment fund choices (see note 3), to increase the maximum percentage
employee contribution from 12% to 15%, and to allow the participants of the
Ellsworth Associates, Inc. 401(K) Plan (the "Ellsworth Plan") to
participate in the Plan (see note 9).
(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.
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, Accounting for and
Reporting Certain Defined Contribution Plan Investments and Other
Disclosure Matters (SOP 99-3). SOP 99-3 simplifies the disclosure for
certain investments and is effective for plan years ending after
December 15, 1999. The Plan adopted SOP 99-3 during the Plan year
ending December 31, 1999. Accordingly, information previously required
to be disclosed about participant-directed fund investment programs is
not presented in the Plan's 1999 financial statements. The Plan's 1998
financial statements have been reclassified to conform with the
current year's presentation.
(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. In June 2000, an
additional favorable determination letter was received which related
to plan amendments made during 1999. The Plan Administrator believes
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 are 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 1999 and 1998 was $10,000.
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, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------------- ------------------------------
Number Fair Number Fair
Of Shares value Of shares value
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Investments at fair value as determined
by quoted market price:
Kaneb Services, Inc. Common Stock 1,734,865.000 $ 7,605,535* 1,622,033.000 $ 6,485,498*
Investments at fair value:
Schwab Retirement Money Market Fund 3,631,465.970 3,631,466* 2,979,750.990 2,979,751*
Fidelity Mt. Vernon Growth Company Fund - - 87,583.862 4,466,777*
T. Rowe Price New Income Fund - - 112,864.210 994,334
Warburg Pincus Emerging Growth Fund - - 17,717.313 708,161
Vanguard Index 500 Portfolio 17,397.749 2,354,437* 13,904.381 1,584,404*
Janus Worldwide Fund 35,932.856 2,746,348* 29,983.328 1,420,010*
Strong Government Securities Fund 52,641.465 533,284 44,441.828 478,194
Robertson Stephens Emerging Growth Fund 31,466.039 1,914,353* - -
Fidelity Dividend Growth Fund 182,277.147 5,284,214* - -
Pimco Total Return Fund Class D 88,487.763 876,029 - -
Janus Twenty Fund 13,505.747 1,133,789 - -
Artison International Fund 3,600.246 105,683 - -
Participant's Loans - 887,229 - 748,352
------------- ------------- ------------- --------------
4,056,774.982 19,446,832 3,286,245.912 13,379,983
------------- ------------- ------------- --------------
5,791,639.982 $ 27,072,367 4,908,278.912 $ 19,865,481
============= ============= ============= ==============
</TABLE>
* Represents 5% or more of total net assets available for benefits.
<PAGE>
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, 1999 and 1998. 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.
For the period ended December 31, 1998, contributions designated to the
Fidelity Mt. Vernon Growth Company Fund were 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. In July 1999, investments in the Growth Company Fund were
transferred to the Fidelity Dividend Growth Fund. Contributions designated
to the Dividend Growth Fund are invested primarily in income-producing
equity securities considered to have the potential for capital
appreciation.
For the period ended December 31, 1998, contributions designated to the T.
Rowe Price New Income Fund were invested in income-producing
investment-grade debt securities. In July 1999, investments in the New
Income Fund were transferred to the Pimco Total Return Fund. This fund
invests primarily in income producing investment-grade debt securities.
For the period ended December 31, 1998, contributions designated to the
Warburg Pincus Emerging Growth Fund were 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. In July 1999, investments in the Warburg
Pincus Emerging Growth Fund were transferred to the Robertson Stephens
Emerging Growth Fund. Contributions designated to this fund are invested in
the equity securities of companies which have above-average growth
potential due to superior products or services, operating characteristics
and financial capabilities.
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.
Contributions designated to the Janus Twenty Fund are invested primarily in
a concentrated portfolio of between 20 and 30 common stocks with strong
current financial positions and the potential for future growth.
Contributions designated to the Artisan International Fund are invested in
equity securities issued by companies that exhibit potential for dividend
growth.
(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 1999, Sponsor contributions of $694,265,
participant contributions of $811,518 and assets transferred from the
Ellsworth Plan of $139,453 were used by the trustee to purchase 372,192
shares of 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.
Contributions receivable at December 31, 1999 and 1998 included $120,986
and $103,311 of employer contributions and $211,464 and $164,111 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, 1999 and 1998, forfeited nonvested accounts totaled $24,594
and $26,929, 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:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Net assets available for benefits per the financial
statements $ 27,416,388 $ 20,171,338
Amounts allocated to withdrawing participants (18,149) (248,677)
----------------- -----------------
Net assets available for benefits per the Form 5500 $ 27,398,239 19,922,661
================= =================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Benefits paid to participants per the financial
statements $ 1,827,875 $ 1,256,931
Amounts allocated to withdrawing participants 18,149 248,677
----------------- -----------------
Benefits paid to participants per the Form 5500 $ 1,846,024 $ 1,505,608
================= =================
</TABLE>
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) Ellsworth Plan Merger
In March 1999, a wholly-owned subsidiary of Kaneb acquired the common stock
of Ellsworth Associates, Inc. On July 1, 1999 the Ellsworth Plan was merged
into the Kaneb Plan and all assets of the Ellsworth Plan were liquidated
and transferred to the Trustee for the Plan.
<PAGE>
Schedule 1
The Kaneb Services, Inc.
Savings Investment Plan
Schedule of Assets Held for Investment Purposes
at End of Year December 31, 1999
<TABLE>
<CAPTION>
Number Current
Name of Issuer and Title of Issue of shares Cost Value
----------------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Kaneb Stock Fund
* Kaneb Services, Inc. Common Stock 1,734,865.000 $6,562,887 $7,605,535
========== ==========
Retirement Money Market Fund
Schwab Retirement Money Market Fund 3,631,465.970 $3,514,007 $3,631,466
========== ==========
S&P Equity Index Fund
Vanguard Index 500 Portfolio 17,397.749 $1,699,557 $2,354,437
========== ==========
Worldwide Equity Fund
Janus Worldwide Fund 35,932.856 $1,554,439 $2,746,348
========== ==========
Government Securities Fund
Strong Government Securities Fund 52,641.465 $ 559,515 $ 533,284
========== ==========
Emerging Growth Fund
Robertson Stephens Emerging Growth Fund 31,466.039 $1,188,571 $1,914,353
========== ==========
Dividend Growth Fund
Fidelity Dividend Growth Fund 182,277.147 $5,826,671 $5,284,214
========== ==========
Total Return Fund
Pimco Total Return Fund Class D 88,487.763 $ 894,436 $ 876,029
========== ==========
Twenty Fund
Janus Twenty Fund 13,505.747 $ 908,193 $1,133,789
========== ==========
International Fund
Artisan International Fund 3,600.246 $ 74,078 $ 105,683
========== ==========
Loan Fund
* Participants' Loans -- $ 887,229 $ 887,229
========== ==========
</TABLE>
* Party-in-interest
(a) Interest rates ranging from 7% to 10% and maturities of one to seven years.
See accompanying independent auditors' report.
<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 ____, 2000 By: /s/ WILLIAM H. KETTLER
--------------------------
William H. Kettler
Vice President - Human Resources
(Plan Administrator)
