<PAGE>
TABLE OF CONTENTS
Page
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PART I
Items 1 and 2. Business and Properties...................... 2
General............................................. 2
Markets and Product Demand.......................... 4
Principal Customers................................. 4
Capital Expenditures................................ 5
Description of the Pipeline System.................. 5
Description of the Truck Loading Terminals.......... 7
Maintenance......................................... 7
Competition and Business Considerations............. 7
Regulation.......................................... 8
Employees........................................... 9
Item 3. Legal Proceedings................................... 9
Item 4. Submission of Matters to a Vote of Security Holders. 12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.............................. 12
Item 6. Selected Financial Data............................. 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 14
Item 8. Financial Statements and Supplementary Data......... 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 21
PART III
Item 10. Directors and Executive Officers of the Registrant. 21
Item 11. Executive Compensation............................. 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................. 24
Item 13. Certain Relationships and Related Transactions..... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................. 25
Signatures.................................................. 26
Index to Financial Statements............................... 28
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
PART I
Items 1 and 2. Business and Properties.
General:
Santa Fe Pacific Pipeline Partners, L.P. (the "Registrant") is a
Delaware limited partnership formed in 1988 to acquire and
operate, through SFPP, L.P., formerly Southern Pacific Pipe Lines
Partnership, L.P. (the "Operating Partnership"), the refined
petroleum products pipeline business of Santa Fe Pacific
Corporation ("Santa Fe"). The Registrant and the Operating
Partnership are collectively referred to as the "Partnership".
Santa Fe Pacific Pipelines, Inc. (the "General Partner"), a
wholly owned subsidiary of SFP Pipeline Holdings, Inc., which is
in turn a wholly owned indirect subsidiary of Santa Fe, owns a 1%
general partnership interest in the Registrant and a 1% general
partnership interest in the Operating Partnership. In its
capacities as general partner of both the Registrant and the
Operating Partnership, the General Partner also manages their
operations. The General Partner owns 8,148,148 common depositary
units ("Common Units"), representing a 41.7% limited partner
interest in the Registrant. Public ownership in the Registrant,
represented by the 11,000,000 preference depositary units
("Preference Units"), is 56.3%. As of January 1, 1994, all
differences and distinctions between the Preference Units and
Common Units were eliminated and the Preference Units will
henceforth be treated as and called Common Units.
The Partnership is one of the largest independent pipeline common
carriers of refined petroleum products ("products") in the United
States, and the largest in the western United States, in terms of
product deliveries, barrel miles, and pipeline mileage, with
approximately 3,300 miles of pipeline serving six states.
The Partnership transports products via pipeline, including
gasoline, diesel fuel and commercial and military jet fuel,
primarily for major petroleum companies, independent refiners,
the United States military, and marketers and distributors of
such products. The Partnership also operates 14 truck loading
terminals and provides pipeline service to 44 customer-owned
terminals, three commercial airports, and 12 military bases. The
Partnership's pipelines (collectively, the "Pipeline System")
are: (1) the South Line, which is composed of two segments, the
West Line, which transports products from Los Angeles to Phoenix
and Tucson, Arizona and various intermediate points, and the East
Line, which transports products from El Paso, Texas to Tucson,
Phoenix and various intermediate points; (2) the North Line,
which transports products primarily from the San Francisco Bay
area to various cities in northern California and western Nevada;
(3) the Oregon Line, which transports products between Portland
and Eugene, Oregon, and one intermediate point; and (4) the San
Diego Line, which transports products from Los Angeles to San
Diego, California and various intermediate points.
<PAGE>
Substantially all of the Pipeline System's transportation
services constitute common carrier operations that are subject to
federal or state tariff regulation.
The following table reflects the total volumes and barrel miles
of products delivered by the Pipeline System for each of the
years indicated:
Total Volumes and Barrel Miles Transported (a)
------------------------------------------------
1993 1992 1991
-------------- -------------- --------------
Barrel Barrel Barrel
Volume Miles Volume Miles Volume Miles
------ ------ ------ ------ ------ ------
South Line
West Line(b).. 112.0 21,214 101.5 17,163 106.3 18,455
East Line..... 20.7 7,188 26.6 9,674 22.2 7,661
North Line..... 149.0 12,891 145.4 12,648 144.4 12,358
Oregon Line.... 12.2 1,373 12.8 1,424 13.3 1,488
San Diego
Line(b)....... 38.8 3,913 37.1 3,903 34.9 3,742
------ ------ ------ ------ ------ ------
Total......... 332.7 46,579 323.4 44,812 321.1 43,704
====== ====== ====== ====== ====== ======
(a) Volumes are expressed in millions of barrels of products and
barrel miles are shown in millions. A barrel mile is the movement
of a barrel of product for a distance of one mile.
(b) Product volumes delivered through the West Line to the San
Diego Line are in turn delivered through the San Diego Line to
the shipper's ultimate destination for such volumes. Although
such volumes are transported in two of the principal pipelines of
the Pipeline System, this table reflects such volume only in the
San Diego Line from which ultimate delivery is made.
Although the mix of the products transported varies among the
pipeline segments constituting the Pipeline System, such
variation is not substantial. Tariffs charged for transportation
do not vary for different product types. The following table sets
forth the volumes of gasoline, jet fuels and diesel fuel
transported by the Pipeline System during the years indicated (in
millions of barrels):
Volumes Delivered by Product Type
---------------------------------
1993 1992 1991
--------- --------- ---------
Gasoline............... 219.6 211.2 208.0
Diesel fuel............ 59.1 56.0 54.9
Jet fuels.............. 54.0 56.2 58.2
--------- --------- ---------
Total............. 332.7 323.4 321.1
========= ========= =========
<PAGE>
Markets and Product Demand:
The Partnership currently serves approximately 75 shippers in the
products market, with the largest customers consisting of major
petroleum companies, independent refiners, the United States
military, and marketers and distributors of products. The volume
of products transported in the Pipeline System is directly
affected by demand for such products in the geographic regions
served by the Partnership. Such market demand varies based upon
the different end uses to which the products delivered through
the Pipeline System may be applied. A substantial portion of
product volumes transported in the Pipeline System is gasoline,
the demand for which is dependent on such factors as prevailing
economic conditions and demographic changes in the market served
by the Pipeline System, competition in certain markets and, to a
lesser degree, product prices. Portions of the Partnership's
business can experience seasonal variations; overall, however,
volumes are only moderately seasonal, with lower than average
volumes being transported during the first and fourth quarters of
each year.
Principal Customers:
Of the approximately 75 shippers served by the Partnership on a
system-wide basis in 1993, the largest shippers on each of the
pipeline segments were the same entities. The chart below
reflects the percentage of transportation revenues attributable
to the top 10 shippers on the South Line, North Line, Oregon Line
and San Diego Line during each of the periods indicated, based
upon total product volumes shipped during the years indicated.
Revenue Percentage
Attributable to Top 10 Shippers
-----------------------------------
1993 1992 1991
----------- ---------- ----------
South Line
West Line.............. 85% 93% 88%
East Line.............. 90 93 96
North Line............... 81 85 87
Oregon Line.............. 98 98 98
San Diego Line........... 93 92 91
Between 72% and 75% of the refined petroleum products transported
in the Pipeline System during each of the calendar years 1991
through 1993 were shipped by major petroleum companies.
Partnership revenues attributable to three major petroleum
companies each exceeded 10% of total 1993 revenues, and,
individually, accounted for 16.9%, 12.9% and 10.2% of total
operating revenues. In 1992, these same customers accounted for
17.1%, 13.7% and 10.8% of total operating revenues, and, in 1991,
they accounted for 16.0%, 13.1% and 10.9% of total operating
revenues.
Products delivered to military facilities accounted for 4.6%,
5.3% and 5.7% of total volumes shipped by the Partnership during
1993, 1992 and 1991, respectively. Military volumes are dependent
on the level of activity at military bases served by the Pipeline
System. Since 1991, the United States Congress has approved, and
<PAGE>
may continue to approve, ongoing plans to reduce the overall
level of military activity. As of yearend 1993, three military
bases historically served by the Partnership had been closed and
realignment of certain other bases continues to occur, with the
level of activity decreased at certain bases and increased at
others.
Capital Expenditures:
For the year ended December 31, 1993, Partnership capital
expenditures aggregated $21.1 million, of which approximately $5
million was used for revenue-generating projects, and the balance
for sustaining projects. The planned 1994 capital program
aggregates approximately $22 million, of which approximately $4
million is planned for income-enhancing projects, with the
balance expected to be invested in sustaining projects. The
Partnership presently anticipates that ongoing capital
expenditures will aggregate approximately $25 to $30 million per
year over the next five years, however, additional facility
improvements, pipeline expansions or acquisitions may be pursued
under certain circumstances. (See also Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources.)
Description of the Pipeline System:
The South Line of the Pipeline System consists of two pipeline
segments, the West Line and the East Line:
The West Line consists of approximately 555 miles of primary
pipeline and currently transports products for approximately 50
shippers from eight refineries and three pipeline terminals in
the Los Angeles Basin to Phoenix and Tucson, Arizona and various
intermediate commercial and military delivery points. In 1993,
1992 and 1991, the West Line transported averages of 307,000,
278,000 and 291,000 barrels per day, respectively, of which
averages of 100,000, 78,000 and 87,000 barrels per day,
respectively, were delivered to Phoenix and Tucson. Also, a
significant portion of West Line volumes are transported to
Colton, California for local distribution and for delivery to
Calnev Pipeline, an unaffiliated common carrier of refined
petroleum products to Las Vegas, Nevada and intermediate points.
The West Line serves Partnership terminals located in Colton and
Imperial, California as well as in Phoenix and Tucson.
The East Line is comprised of two parallel lines originating in
El Paso, Texas and continuing approximately 300 miles west to the
Tucson terminal and one line continuing northwest approximately
130 miles from Tucson to Phoenix. All products received by the
East Line at El Paso come from two refineries in El Paso or are
delivered through connections with non-affiliated pipelines from
refineries in Odessa, Texas and Artesia, New Mexico. The East
Line transports refined petroleum products for approximately 20
shippers. In 1993, 1992 and 1991, the East Line transported
averages of 57,000, 73,000 and 61,000 barrels per day,
respectively, of refined petroleum products, of which averages of
27,000, 38,000 and 26,000 barrels per day, respectively, were
delivered to Phoenix. The East Line serves the Partnership's
terminals located in Tucson and Phoenix.
<PAGE>
In December 1993, Diamond Shamrock announced plans to construct a
new products pipeline from its refinery near Dumas, Texas to El
Paso. In addition to supplying its El Paso area demand, Diamond
Shamrock plans to connect this pipeline to the Partnership's East
Line for potential deliveries to Tucson and Phoenix. Completion
of the project is anticipated in the Spring of 1995.
In August 1992, the second phase of the East Line expansion
became operational and increased the daily pumping capacity
between El Paso and Tucson from 67,000 barrels to 95,000 barrels,
and increased daily pumping capacity from Tucson to Phoenix from
25,000 barrels to 55,000 barrels. Since October 1992, when El
Paso Refinery, L.P. filed a petition for reorganization under the
federal bankruptcy laws and its refinery was shut down, the
pipeline has operated substantially below capacity. During the
third quarter of 1993, this refinery began operating at a reduced
level under new ownership, and Partnership management expects
that a portion of the refinery's production will continue to be
shipped to Arizona. While increased movements into the Arizona
market from El Paso displace higher tariff volumes supplied from
Los Angeles on the West Line, such shift of supply sourcing has
not had, and is not expected to have, a material effect on the
Partnership's results of operations.
The North Line of the Pipeline System consists of approximately
1,040 miles of pipeline in six pipeline segments originating in
Richmond, Concord and Bakersfield, California. This line serves
Partnership terminals located in Brisbane, Bradshaw, Chico,
Fresno and San Jose, California, and Sparks, Nevada. The North
Line delivers refined petroleum products for approximately 45
shippers. A substantial portion of the products delivered through
the North Line comes from refineries in the San Francisco Bay
area. A small percentage of supply is received from various
pipeline and marine terminals that deliver products from foreign
and domestic ports. Substantially all of the products shipped
through the Bakersfield-Fresno segment of the North Line are
supplied by a refinery located in Bakersfield.
The Oregon Line is a 114-mile pipeline serving approximately 10
shippers. The Oregon Line receives products from marine terminals
in Portland and from Olympic Pipeline, a non-affiliated carrier,
which transports products from the Puget Sound area to Portland.
From its origination point in Portland, the Oregon Line extends
south and serves Partnership terminals located in Albany and
Eugene, Oregon.
The San Diego Line is a 135-mile pipeline serving major
population areas in Orange County (immediately south of Los
Angeles) and San Diego. Approximately 20 shippers transport
products on this line, supplied by the same refineries and
terminals that supply the West Line. The San Diego Line
originates from the pumping station at Norwalk, California on the
West Line and extends south to serve Partnership terminals in the
cities of Orange and San Diego.
<PAGE>
Description of the Truck Loading Terminals:
The Partnership's operations include 14 truck loading terminals
with an aggregate usable tankage capacity of approximately 8.2
million barrels. Terminals are located at destination points on
each of the lines as well as at certain intermediate points along
each line where deliveries are made. These terminals furnish
short-term product storage, truck loading and ancillary services,
such as vapor recovery, additive injection, oxygenate blending,
and quality control. The truck loading capacity of the terminals
ranges from two to 12 trucks at a time. Approximately 128
million, 128 million and 132 million barrels of products were
delivered to commercial customers at such terminals during 1993,
1992 and 1991, respectively, resulting in Partnership storage and
terminaling revenues of $33.5 million, $30.1 million and $29.4
million during such years, respectively.
Utilization of and demand for the Partnership's terminaling
services varies widely throughout the Pipeline System and depends
on whether the major petroleum companies and other shippers or
independent terminal operators have terminal facilities and the
necessary tankage capacity at locations where the Partnership has
facilities. The Partnership does not own terminal facilities at
all pipeline delivery locations. At certain locations, product
deliveries are made to facilities owned by shippers or
independent terminal operators.
Truck loading and other terminal services are provided by the
Partnership, and a separate fee (in addition to transportation
tariffs) is charged. Rates charged for terminaling services are
not economically regulated by the Federal Energy Regulatory
Commission ("FERC") or any state agency.
Maintenance:
To prolong the useful life of the Pipeline System and terminals,
routine preventive maintenance is performed. Such maintenance
includes cathodic protection to prevent corrosion, periodic
internal inspection of the Pipeline System and weekly patrols of
the Pipeline System rights-of-way. The Pipeline System is
patrolled at regular intervals to identify excavation or other
activities by third parties which, if left unchecked, could
result in damage to the pipeline.
A computer-based pipeline monitoring system ("SCADA"),
continuously monitors pipeline operating conditions, including
pressures, temperatures, pumping rates and equipment
configuration, on a real-time basis. In addition to providing
remote monitoring and control of certain operating equipment,
SCADA automatically alerts a 24-hour operator if changes in flow
conditions require attention. Use of this information by
operating personnel allows them to respond quickly to potential
system problems.
Competition and Business Considerations:
The Partnership conducts its operations without the benefit of
exclusive franchises from government entities. In addition, the
Partnership provides common carrier transportation services
<PAGE>
through the Pipeline System at posted tariffs, and, in virtually
all cases, without long-term contracts for transportation service
with its customers. Demand for transportation services in the
Pipeline System arises, ultimately, from demand for refined
petroleum products in the geographic regions it serves. This
demand is primarily a function of total and per capita fuel
consumption, prevailing economic and demographic conditions,
alternate modes of transportation, alternate product sources and,
to a lesser extent, price.
Because pipelines are generally the lowest cost method for
intermediate and long-haul overland product movement, the
Pipeline System's most significant competitors are proprietary
pipelines owned and operated by major oil companies in the areas
where the Pipeline System delivers products, refineries within
the Partnership's market areas and trucks. The Partnership
believes that high capital costs, tariff regulation,
environmental considerations and problems in acquiring rights-of-
way make it unlikely that a competing pipeline system comparable
in size and scope to the Pipeline System will be built in the
foreseeable future, provided that the Pipeline System has
available capacity to satisfy demand and its tariffs remain at
reasonable levels. However, the possibility of pipelines being
constructed to serve specific markets is a continuing competitive
factor. Trucks may competitively deliver products in certain
markets.
For more than ten years, an individual entrepreneur has attempted
to gain investor support for a petroleum products refinery in the
Phoenix area. Because of the risk of this venture, and the large
investment required, necessary funding has never developed.
During 1993, this individual continued to seek and receive
certain permits with respect to construction of a refinery with
an initial capacity of approximately 30,000 barrels per day,
however, once again, there is no indication that necessary
financing will be available. Should such a refinery be
constructed, the Partnership's throughput on the South Line would
be negatively affected, however, the financial impact could be at
least partially offset through rate increases.
Regulation:
Tariff Regulation
Substantially all of the Partnership's pipeline operations are
common carrier operations that are subject to federal or state
rate regulation. The Partnership's interstate common carrier
pipeline operations are subject to rate regulation by the FERC
under a "trended original cost" methodology adopted in 1985 for
establishing a liquid petroleum pipeline's tariffs. The
methodology is subject to clarification and reconsideration in
individual cases and leaves many issues for determination on a
case-by-case basis. In addition, pipelines that can demonstrate
that they operate in competitive markets may be allowed to
establish tariffs under a less stringent form of "light-handed"
rate regulation. Intrastate common carrier operations of the
Pipeline System in California are subject to regulation by the
California Public Utilities Commission ("CPUC") under a
"depreciated book plant" methodology. (See also Item 7.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Other Matters - Rate Regulation.)
Environmental and Safety Regulation
The Partnership's operations are subject to federal, state and
local laws and regulations relating to protection of the
environment, including laws and regulations relating to water,
air, solid waste and hazardous substances. The discharge of, or
contamination of property by, hazardous materials may arise from
transportation and storage of such materials in the Pipeline
System. The normal operations of the Pipeline System may expose
the Partnership to claims and potential liability for injuries to
employees, other persons, property, and the environment. (See
also Item 3. Legal Proceedings and Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Other Matters - Environmental Matters.) The
Partnership's operations are also subject to operating and safety
regulation by the Department of Transportation and various other
federal, state and local agencies.
Employees:
The Partnership does not have any employees, officers or
directors. The General Partner is responsible for management and
operation of the Partnership. As of December 31, 1993, regular,
full-time employees of the General Partner numbered 433.
Item 3. Legal Proceedings.
East Line Litigation and FERC Proceeding:
In August 1992, two East Line refiners, Navajo Refining Company
("Navajo") and El Paso Refinery, L.P. ("El Paso") and its
general partner, El Paso Refining, Inc., filed separate, though
similar, lawsuits against the Partnership in New Mexico and
Texas, respectively, seeking total actual damages in excess of
$190 million, plus punitive damages, arising from the
Partnership's alleged failure to provide additional pipeline
capacity to Phoenix and Tucson, Arizona from El Paso, Texas. The
Navajo action also sought an injunction to prohibit the
Partnership from reversing the direction of flow (from westbound
to eastbound) of its six-inch diameter pipeline between Phoenix
and Tucson. Generally, the lawsuits allege that the refiners
proceeded with significant refinery expansions under the belief
that the Partnership would provide whatever pipeline capacity was
required to transport their product into Arizona, and that they
were damaged by their inability to ship additional volumes into
that highly competitive market.
In addition, El Paso filed a protest/complaint with the FERC in
September 1992 seeking to block the reversal of the six-inch
pipeline and challenging the Partnership's proration policy as
well as the Partnership's existing East Line tariffs. The FERC
ruled in April 1993, and has subsequently confirmed on rehearing,
that the challenges to proration, line reversal and East Line
tariffs must proceed under a complaint proceeding. That ruling
expressly places the burden of proof on the complaining parties,
<PAGE>
who must show that the Partnership's rates and practices there at
issue violate the requirements of the Interstate Commerce Act.
In August 1993, Chevron U.S.A. Products Company ("Chevron") filed
a complaint with the FERC challenging the Partnership's West Line
tariffs and claiming that a service charge at the Partnership's
Watson Station is in violation of the Interstate Commerce Act. In
September 1993, the FERC ruled that the Partnership's West Line
tariffs are deemed "just and reasonable" under the Energy Policy
Act of 1992 and may only be challenged on the basis of "changed
circumstances" and consolidated the various outstanding matters
into a single proceeding. ARCO Products Company and Texaco
Refining and Marketing Inc. intervened in the proceeding in
January 1994. Navajo, Refinery Holding Company, L.P., a
partnership formed by El Paso's long-term, secured creditors that
purchased El Paso's refinery in May 1993, and an association of
airlines serving the Phoenix airport constitute the remaining
major outside parties to this FERC proceeding. Navajo, which had
been under a 1985 FERC rate case settlement moratorium
prohibiting it from challenging the Partnership's rates until
November 1993, filed a separate complaint against both the East
Line and West Line tariffs in December 1993.
In November 1993, the FERC Administrative Law Judge ordered the
Partnership to prepare a cost and revenue study, within certain
guidelines, detailing rate base, revenues, and cost of service
for calendar year 1993. On February 14, 1994, the Partnership
submitted the 1993 cost and revenue study for its South Line to
the parties to the FERC proceeding. Additional discovery requests
were filed by the shippers and FERC staff on or before March
14, 1994. The present procedural schedule calls for the shippers
to present their case against the Partnership in late May 1994,
and the FERC staff to present their case by late June 1994,
although this timetable may be extended. The Partnership is
maintaining a vigorous defense in the FERC proceeding as well
as continuing efforts to resolve these matters.
In October 1992, El Paso filed a petition for reorganization
under Chapter 11 of the federal bankruptcy laws and halted
refinery operations. All activity in El Paso's civil action
against the Partnership has been stayed indefinitely by virtue of
the bankruptcy proceeding. In November 1993, the El Paso
bankruptcy was converted from a Chapter 11 to a Chapter 7
proceeding, and an interim trustee was appointed. In addition, El
Paso's general partner is presently in Chapter 11 bankruptcy
proceedings. In February 1994, a permanent trustee and a new
judge were named to handle these proceedings.
On July 28, 1993, the Partnership reached a settlement with
Navajo whereby Navajo agreed to dismiss its pending civil
litigation in New Mexico and withdraw any challenge to the
direction of flow of the six-inch pipeline, including any such
challenge in the FERC proceeding. The Partnership agreed to make
certain cash payments to Navajo over three years and to
undertake and complete an additional pipeline capacity expansion
between El Paso and Phoenix if certain events related to volume
levels and proration of pipeline capacity should occur within
the next five years.
<PAGE>
During the quarter ended September 30, 1993, the Partnership
recorded a $12 million provision for litigation costs, which
reflects the terms of the Navajo settlement as well as
anticipated legal fees and other costs related to defense and
ultimate resolution of the FERC proceeding and the remaining
civil action brought by El Paso and its general partner. It is
the opinion of management that any additional costs, in excess
of recorded liabilities, incurred to defend and resolve these
matters, or any capital expenditures which may be required under
the terms of the Navajo settlement, will not have a material
adverse effect on the Partnership's financial condition;
nevertheless, it is possible that the Partnership's results of
operations, in particular quarterly or annual periods, could be
materially affected by the ultimate resolution of these matters.
Environmental Matters:
The Partnership is, from time to time, subject to environmental
clean up and enforcement actions. In particular, the federal
Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA" or "Superfund" law) generally imposes joint and
several liability for cleanup and enforcement costs, without
regard to fault or the legality of the original conduct, on
current or predecessor owners and operators of a site. Since
August 1991, the Partnership, along with several other
respondents, has been involved in one cleanup ordered by the
United States Environmental Protection Agency ("EPA") related to
ground water contamination in the vicinity of the Partnership's
storage facilities and truck loading terminal at Sparks, Nevada.
In addition, the Partnership is also involved in six ground water
hydrocarbon remediation efforts under administrative orders
issued by the California Regional Water Quality Control Board at,
or adjacent to, its facilities at Colton, Concord, Mission
Valley, Brisbane, San Jose and West Sacramento, California.
The investigation and remediation at the Sparks terminal is also
the subject of a lawsuit brought in January 1991 by the Nevada
Division of Environmental Protection against the respondents to
the EPA order in the Second Judicial District Court of the State
of Nevada. This lawsuit was subsequently joined by the County of
Washoe Health District and the City of Sparks, Nevada and seeks
unspecified, but potentially significant, damages. The
Partnership may be required to pay in excess of $100,000 in fines
arising from these lawsuits. In addition, the Partnership is one
of the defendants in a number of lawsuits brought by property
owners seeking unspecified, but potentially significant, damages
for alleged property value diminishment attributable to soil or
ground water contamination arising from the defendants'
operations. To date, no significant progress has been made in any
of these cases. The Partnership is vigorously defending itself in
these actions, although it may pursue settlement discussions in
certain cases to avoid the costs and uncertainties of extended
litigation.
During the quarter ended June 30, 1993, the EPA issued a Notice
of Violations to the Partnership associated with an oxygenate
blending equipment malfunction at the Partnership's Phoenix
terminal. The amount and terms of the fines and associated
costs arising from this Notice of Violations remains under
<PAGE>
discussion with the EPA, however, management believes that the
total cost to the Partnership will not be material to its results
of operations or financial condition, but may be in excess of
$100,000.
Reference is made to Note 6 to the Partnership's consolidated
financial statements, beginning on page 38 of this Report, for
further discussion of these matters.
Other:
The Partnership is also party to a number of other legal actions
arising in the ordinary course of business. While the final
outcome of these legal actions cannot be predicted with
certainty, it is the opinion of management that none of these
legal actions, when finally resolved, will have a material
adverse effect on the Partnership's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
the fourth quarter of 1993.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Information as to the principal markets on which the Registrant's
Preference Units are traded, the high and low sales prices of
such Units and distributions declared on such Units for the two
years ended December 31, 1993, and the approximate number of
record holders of such Units is set forth in Note 11 to the
Partnership's consolidated financial statements on page 45 of
this Report.
Upon the payment of the cash distribution for the fourth quarter
of 1993, the period of subordination of the Partnership's Common
Units to its Preference Units ended. The subordination period,
which began in December 1988, was a period during which cash
distributions on the Common Units were subject to the
preferential rights of the holders of the publicly traded
Preference Units to receive the minimum quarterly distribution of
$0.55 per unit. As of January 1, 1994, all differences and
distinctions between the Preference Units and the Common Units
were eliminated, as a result of which Common Units will have
equivalent rights with respect to cash distributions. From and
after January 1, 1994, the Preference Units will be treated as
and called Common Units. Notice will be given to holders of
Preference Units in the near future informing them of the method
for exchanging their Preference Units for Common Units.
Item 6. Selected Financial Data.
The following table sets forth, for the periods and at the dates
indicated, selected consolidated financial data for the
Partnership.
<PAGE>
Year Ended December 31,
--------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
(in thousands, except per unit data)
Income Statement Data:
Total revenues..... $187,945 $192,868 $193,438 $205,025 $219,471
Operating expenses
(excluding
depreciation &
amortization) (a). 80,608 78,110 80,775 95,340 122,178
Depreciation &
amortization ..... 14,351 15,884 16,834 18,327 18,971
Operating income... 92,986 98,874 95,829 91,358 78,322
Interest expense... 35,633 37,327 36,924 36,937 37,086
Income before
cumulative effect
of accounting
change ........... 59,285 63,560 60,604 54,118 41,616
Cumulative effect
of accounting
change (b)........ -- -- -- (16,407) --
Net income......... $ 59,285 $ 63,504 $ 60,604 $ 37,711 $ 41,616
Per Unit Data:
Income before
cumulative effect
of accounting
change............ $ 3.07 $ 3.28 $ 3.10 $ 2.77 $ 2.13
Cumulative effect
of accounting
change............ -- -- -- (0.84) --
Net income......... 3.07 3.28 3.10 1.93 2.13
Cash distributions
paid.............. 1.778 2.50 2.70 2.80 2.80
Cash distributions
declared.......... 2.30 2.55 2.75 2.80 2.80
Capital
Expenitures....... $ 35,652 $ 29,236 $ 27,715 $ 30,931 $ 21,084
Balance Sheet Data
(at year end):
Properties, plant
and equipment,
net.............. $583,675 $598,021 $605,461 $618,098 $616,610
Total assets...... 646,163 665,177 677,480 684,852 696,980
Long-term debt.... 355,000 355,000 355,000 355,000 355,000
Total partners'
capital.......... 272,977 288,092 296,075 279,010 265,851
(a) 1993 operating expenses include a $27.0 million provision for
environmental and litigation costs and 1992 operating expenses
include a $10.0 million provision for environmental costs.
(b) Effective January 1, 1992, the Partnership adopted new
accounting standards for postretirement and postemployment
benefits (Statements of Financial Accounting Standards Nos. 106
and 112).
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
1993 Compared with 1992:
The Partnership reported 1993 net income of $41.6 million, or
$2.13 per unit, compared to net income of $37.7 million, or $1.93
per unit, in 1992. Excluding the effects of provisions for
environmental and litigation costs aggregating $27 million in
1993 and a $10 million provision for environmental costs in 1992,
1993 net income would have been $68.1 million, or $3.48 per unit,
compared to net income of $63.9 million, or $3.27 per unit,
before the cumulative effect of an accounting change in 1992.
Total 1993 revenues of $219.5 million were 7% above prior year
levels. Trunk revenues of $171.8 million were $10.7 million
higher than in 1992 due to higher volumes, a longer average
length of haul, a favorable shift of volumes from the East Line
to the West Line and the full year effect in 1993 of a May 1992
California intrastate tariff increase. Total volumes transported
increased 2.9% in 1993, with commercial volumes 3.6% higher, and
military volumes approximately 10% lower, than in 1992. The
longer average haul reflects increased deliveries to Arizona and
Nevada, as well as increased deliveries to Tucson from Los
Angeles as a result of reduced supply from El Paso refineries in
1993. The refinery formerly owned by El Paso Refinery, L.P.,
which had been out of service since that company entered
bankruptcy in October 1992, began operating at a reduced level
during the third quarter of 1993. Management expects that a
portion of this refinery's production will continue to be shipped
to Arizona, resulting in a shift of certain volumes from the West
Line back to the East Line in 1994. Storage and terminaling
revenues were $3.2 million higher due to a January 1993 terminal
services rate increase. Other revenues increased $0.5 million due
to higher volumes.
Total 1993 operating expenses of $141.1 million included a $15.0
million provision to increase the Partnership's existing reserve
for environmental remediation and investigation costs and a
$12.0 million provision to reflect anticipated legal fees and
other costs related to defense and ultimate resolution of certain
East Line civil litigation as well as a related Federal Energy
Regulatory Commission ("FERC") proceeding. Total 1992 operating
expenses of $113.7 million included a $10.0 million provision for
environmental remediation costs. Excluding the environmental and
litigation provisions, 1993 operating expenses of $114.1 million
were $10.5 million, or 10%, higher than in 1992, with higher
field operating expenses ($5.0 million), general and
administrative expenses ($3.0 million), power cost ($0.8
million), facilities costs ($0.7 million) and depreciation and
amortization ($0.6 million), and a smaller product gain ($0.4
million) accounting for that increase. The increase in field
operating expenses is largely attributable to higher major
maintenance costs due to preventative pipeline repairs associated
with the Partnership's ongoing internal inspection program and
flood damage repairs, partially offset by lower environmental
remediation costs subsequent to recording the $15.0 million
<PAGE>
provision in September 1993. Also contributing to higher field
operating expenses were $1.5 million in pipeline inspection costs
associated with the potential conversion of one of the
Partnership's pipelines to crude oil service, greater usage of
drag reducing agent to increase capacity on certain lines and
higher salary costs. The increase in general and administrative
expense is largely attributable to higher outside legal and
consulting costs associated with the East Line civil litigation
and FERC proceeding that were incurred prior to recording the
$12.0 million litigation provision in September 1993. The
increase in power cost reflects increased volumes and length of
haul. The increase in facilities costs primarily resulted from
higher right of way rentals and property taxes. This increase in
property taxes and the increase in depreciation and amortization
expense resulted from the Partnership's expanding capital asset
and software base. The product gain is within industry
measurement standards and may vary from period to period.
1992 Compared with 1991:
1992 net income of $54.1 million, before the cumulative effect of
an accounting change, was $6.5 million, or 11%, lower than in
1991, primarily due to a $10.0 million provision for
environmental costs recorded in the third quarter of 1992.
Excluding the environmental provision, 1992 net income before the
cumulative effect of the accounting change would have been $63.9
million, or 5.5%, higher than in 1991.
Total 1992 revenues of $205.0 million were 6% above prior year
levels. Trunk revenues of $161.1 million were 4% higher than in
1991 due to the May 1992 California intrastate tariff increase,
which generated an additional $4.1 million in revenues, and
increased volumes and longer average length of haul. Total
volumes transported increased 0.7% in 1992, with commercial
volumes 1% higher and military volumes 6% lower than in 1991.
Long-haul deliveries to Arizona and Nevada improved over prior
year levels, while short-haul movements in the Los Angeles area
and between San Francisco Bay area refineries were lower,
contributing to an overall 2.5% increase in barrel-miles. Total
California deliveries approximated 1991 levels. During much of
1992, East Line volumes increased, and West Line volumes
decreased, as a result of East Line capacity expansions completed
in late 1991 and 1992 and the shift of Phoenix-bound volumes from
the West Line to the East Line. Storage and terminaling revenues
of $34.0 million were 2% higher in 1992 due to increased volumes
and a military rate increase. Other revenues, of $9.9 million,
increased about 85% due to new services offered to customers,
including the vapor handling system at Watson Station and
detergent additive injection at all California terminals.
Total operating expenses of $113.7 million were $16.1 million
higher than in 1991, largely as the result of the $10.0 million
provision recorded for environmental remediation costs at the
Partnership's Sparks, Nevada terminal and two facilities in
California. Excluding that provision, operating expenses would
have been $6.1 million, or 6%, higher than in 1991, with higher
field operating expenses ($1.7 million), depreciation and
amortization ($1.5 million), general and administrative expenses
<PAGE>
($1.2 million), facilities costs ($0.9 million) and a smaller
product gain ($0.7 million) accounting for that increase. The
increase in field operating expenses is largely attributable to
higher environmental compliance and remediation costs, greater
usage of drag reducing agent to increase East Line capacity, and
higher salary cost. Depreciation and amortization increased due
to an expanding capital base, higher composite depreciation rates
in 1992, and amortization of pipeline system operating software.
The increase in general and administrative expense is largely
attributable to the $1.8 million current year accrual resulting
from the change in accounting for postretirement and
postemployment benefits effective January 1, 1992, higher outside
legal costs associated with lawsuits and a FERC proceeding
initiated by certain East Line shippers in September 1992, and
higher information services costs, partially offset by lower
employee health insurance and incentive compensation program
costs. The increase in facilities costs resulted from higher
insurance premiums for environmental and related coverage. The
product gain is within industry measurement standards and may
vary from period to period. Excluding the environmental provision
and the current year accrual of $1.8 million associated with the
accounting change, operating expenses would have been up $4.2
million, or 4%, over the prior year.
Other income, net was $2.1 million lower in 1992 due to lower
market interest rates on short-term investments and a $1.1
million nonrecurring arbitration award in 1991. Effective January
1, 1992, the Partnership adopted new accounting standards for
postretirement and postemployment benefits (Statements of
Financial Accounting Standards Nos. 106 and 112). As a result,
1992 net income was reduced by $16.4 million, or $0.84 per unit,
representing the cumulative effect of the new principle for years
prior to 1992.
Financial Condition - Liquidity and Capital Resources
For the year ended December 31, 1993, cash flow from operations
before working capital and minority interest adjustments totaled
$82.8 million, compared to $84.0 million in 1992. Working capital
cash requirements were $2.2 million in 1993, whereas in 1992
working capital components provided an additional $2.0 million in
cash flow, largely due to the maturity of $4.9 million in short-
term investments in 1992 and due to timing differences in
collection of accounts receivable and payment of accrued
obligations. The $81.6 million of net cash provided by operations
in 1993 was largely used to pay cash distributions of $55.9
million and fund capital expenditures of $21.1 million, resulting
in a net increase in cash and cash equivalents of $4.8 million
for the year. Total cash and cash equivalents of $32.2 million at
December 31, 1993 included $14.0 million for the fourth quarter
1993 cash distribution, which was paid in February 1994.
Since the useful lives of the pipeline system and terminal
properties are generally long and technological change is
limited, replacement of facilities is relatively infrequent. The
principal need for capital, therefore, has been in connection
with capacity expansions, service enhancements, compliance with
increasingly stringent environmental and safety regulations and
<PAGE>
installation of Supervisory Control and Data Acquisition
("SCADA") equipment and related operations systems software.
For the year ended December 31, 1993, Partnership capital
expenditures aggregated $21.1 million, of which approximately $5
million was used for revenue-generating projects, and the balance
for sustaining projects. The primary revenue-generating project
was completion of the second phase of an expansion of East Line
capacity which became operational in August 1992 and increased
the daily pumping capacity between El Paso, Texas and Tucson,
Arizona from 67,000 barrels to 95,000 barrels, and increased
daily capacity from Tucson to Phoenix, Arizona from 25,000
barrels to 55,000 barrels. 1993 sustaining expenditures were
primarily in the areas of environmental and safety compliance,
operating systems software development, replacement of two flood
damaged river crossings in Arizona, pipeline relocations,
investments towards reducing or containing power costs, station
automation and cathodic protection. Environmental and safety
projects included additions and modifications to storage tanks
and vapor recovery systems to comply with more stringent
regulations, oily water handling facilities and fire protection
improvements. Such expenditures aggregated approximately $5
million in 1993 and are expected to increase over time in
response to increasingly rigorous governmental environmental and
safety standards. Systems software development included the
application of knowledge-based systems to products movement
scheduling and enhancements to the SCADA system.
The planned 1994 capital program aggregates approximately $22
million, of which approximately $4 million is planned for income-
enhancing projects, with the balance expected to be invested in
sustaining projects. The Partnership presently anticipates that
ongoing capital expenditures will average approximately $25 to
$30 million per year over the next five years, however additional
facility improvements, pipeline expansions or acquisitions may be
pursued under certain circumstances. The Partnership is currently
investigating the potential conversion of one of its pipelines to
crude oil service. Should the Partnership proceed with the crude
line project, in addition to the necessary capital investment, a
significant portion of the associated expenditures may be
required to be expensed.
The Partnership expects that it will generally finance its
ongoing capital program with internally-generated funds, however
the Partnership may use borrowed funds or proceeds from
additional equity offerings to finance a portion of future
capital expenditures. Future capital expenditures will continue
to depend on numerous factors, some of which are beyond the
Partnership's control, including demand for refined petroleum
products in the pipeline system's market areas, governmental
regulations and the availability of sufficient funds from
operations to pay for such expenditures.
Due to the capital-intensive nature of the Partnership's
business, inflation generally causes an understatement of
operating expenses because depreciation is based on the
historical costs of assets rather than the replacement costs of
assets.
<PAGE>
Long-term debt at December 31, 1993 and 1992 consisted of
$355 million of First Mortgage Notes at an average interest rate
of 10.51% per annum. Principal repayments are required beginning
December 15, 1994, however, the Partnership intends to refinance
some or all of this debt as it becomes payable. To facilitate
such refinancing and provide for additional financial
flexibility, the Partnership arranged a $60 million multi-year
term credit facility and a $20 million working capital facility
with three banks in October 1993. The term facility may be used
for refinancing a portion of the Partnership's long-term debt and
capital projects, while the working capital facility replaced a
$20 million facility originally established in April 1990 and is
available for general short-term borrowing purposes. To date,
neither of these facilities have been utilized.
Other Matters
Environmental Matters:
The Partnership's transportation and terminal operations are
subject to extensive regulation under federal, state and local
environmental laws concerning, among other things, the
generation, handling, transportation and disposal of hazardous
materials, and the Partnership is, from time to time, subject to
environmental cleanup and enforcement actions. In particular, the
federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund" law) generally imposes
joint and several liability for cleanup and enforcement costs,
without regard to fault or the legality of the original conduct,
on current or predecessor owners and operators of a site. Along
with several other respondents, the Partnership is presently
involved in one cleanup ordered by the United States
Environmental Protection Agency ("EPA") related to ground water
contamination in the vicinity of the Partnership's storage
facilities and truck loading terminal at Sparks, Nevada. In
addition, the Partnership is also involved in six ground water
hydrocarbon remediation efforts under administrative orders
issued by the California Regional Water Quality Control Board at,
or adjacent to, certain of its facilities in California. The
Partnership is cooperating with the United States military in
investigating the extent of its responsibility with respect to
ground water hydrocarbon contamination adjacent to its pump
station and a major military fuel storage facility at Norwalk,
California. The Partnership is also cooperating with a request
from the Arizona Department of Environmental Quality to
participate in a joint industry investigation of possible ground
water hydrocarbon contamination in the vicinity of the
Partnership's terminal at Phoenix. The Partnership is also
involved in soil and ground water remediation projects, at and
adjacent to various other terminal and pipeline locations, that
have not been mandated by government agencies but are conducted
in the ordinary course of business. In a number of these cleanup
projects, the Partnership is participating with other entities
ranging from large integrated petroleum companies to certain less
financially sound parties.
During the quarter ended September 30, 1993, the Partnership
completed a comprehensive re-evaluation of its potential
<PAGE>
liabilities associated with environmental remediation activities
and, as a result, recorded a $15 million provision to increase
its existing reserve for environmental remediation costs. This
provision reflects the estimated cost of completing all
remediation projects presently known to be required, either by
government mandate or in the ordinary course of business, as well
as the cost of performing preliminary environmental
investigations at several locations, including the investigation
of potential contamination in the vicinity of the Partnership's
Phoenix terminal. During the quarter ended September 30, 1992,
the Partnership recorded a $10 million provision for
environmental remediation costs at Sparks, Nevada and two sites
in California. The cash expenditures related to these projects
are primarily expected to occur over the next five years;
however, certain remediation projects, including the largest
project at Sparks, are expected to continue for a period of
approximately ten years.
Estimates of the Partnership's ultimate liabilities associated
with environmental remediation activities and related costs are
particularly difficult to make with certainty due to the number
of variables involved, including the early stage of
investigation at certain sites, the lengthy time frames required
to complete remediation at most locations, the number of parties
involved, the number of remediation alternatives available, and
the uncertainty of potential recoveries from third parties.
Based on the information presently available, it is the opinion
of management that any such costs, to the extent they exceed
recorded liabilities, will not have a material adverse effect on
the Partnership's financial condition; nevertheless, it is
possible that the Partnership's results of operations in
particular quarterly or annual periods could be materially
affected as conditions change or additional information becomes
available.
Rate Regulation:
The Partnership's interstate common carrier pipeline operations
are subject to rate regulation by the Federal Energy Regulatory
Commission ("FERC") under a methodology adopted in 1985 for
establishing allowable rates for liquid petroleum pipelines. The
methodology is subject to clarification in individual cases and
leaves many issues for determination on a case-by-case basis. In
addition, rates may be established under an alternative form of
"light-handed" rate regulation where it can be demonstrated that
the carrier lacks significant market power. Intrastate common
carrier operations in California are also subject to regulation
by the California Public Utilities Commission ("CPUC"). In 1993,
tariffs subject to FERC and CPUC regulation each accounted for
approximately one-half of total transportation revenues.
The Energy Policy Act of 1992 required the FERC to develop a
simplified rate-making methodology for oil pipelines by October
1993, and also established as "just and reasonable" all existing
pipeline tariffs that had not been under protest for 365 days
prior to the date the bill was passed. This excluded the
Partnership's East Line tariffs, which had been challenged in
September 1992. In October 1993, the FERC issued Order 561
establishing a new rate-making methodology, to be effective
<PAGE>
January 1995, that would allow for annual indexing of tariffs,
with the indexing factor based on changes in the Producer Price
Index minus one percent. The Partnership and other parties
petitioned for a rehearing of the FERC order because the index
selected by the FERC does not adequately reflect historical cost
increases incurred by the industry. The FERC granted the request
for rehearing for purposes of reconsideration of the index and
has also issued Notices of Inquiry regarding cost-based rate-
making under certain conditions, and market-based rates for
carriers that can demonstrate lack of market power. At the
present time, it is not possible to predict with certainty what
final simplified rate-making methodology will be adopted or what
effect such methodology may have on future Partnership tariffs.
East Line Litigation and FERC Proceeding:
Certain of the Partnership's shippers have filed civil suits and
initiated a FERC proceeding alleging, among other things, that
the shippers had been damaged by the Partnership's failure to
fulfill alleged promises to expand the East Line's capacity
between El Paso, Texas and Phoenix, Arizona to meet shipper
demand. The FERC proceeding also involves claims, among other
things, that certain of the Partnership's tariffs and charges on
the East and West Lines are excessive.
During the quarter ended September 30, 1993, the Partnership
recorded a $12 million provision for litigation costs, which
reflects the terms of settlement of one of the civil actions, as
well as anticipated legal fees and other costs related to
defense and ultimate resolution of the FERC proceeding and the
remaining civil action. Management believes that it has acted
properly with respect to its expansion of the East Line.
Management also believes that the Partnership's tariffs are just
and reasonable and, so long as certain of the underlying
assumptions and interpretations of rate-making methodology made
by the Partnership in supporting these tariffs are ruled upon
favorably, that these tariffs will be upheld should the FERC
proceeding progress to its completion. However, because of the
nature of FERC rate-making methodology, it is not possible to
predict with certainty whether the Partnership's assumptions and
rate-making approach will be upheld by the FERC and, hence, it
is impossible to predict the outcome of the FERC proceeding. It
is the opinion of management that any additional costs, in
excess of recorded liabilities, incurred to resolve these
matters, or any capital expenditures for further expansion of
the East Line, which may be required if certain events occur
during the next five years, will not have a material adverse
effect on the Partnership's financial condition; nevertheless,
it is possible that the Partnership's results of operations, in
particular quarterly or annual periods, could be materially
affected by the ultimate resolution of these matters.
Demand for Refined Petroleum Products:
Demand for transportation and terminaling services is principally
a function of product consumption and competition in markets
served by the pipeline system. Commercial volumes are generally
dependent upon such factors as prevailing economic conditions,
demographic changes, transportation and terminaling alternatives
<PAGE>
and, to a lesser degree, product prices. Military volumes are
dependent upon the level of activity at military bases served by
the Partnership.
Partnership management anticipates that commercial deliveries of
refined petroleum products will continue to gradually increase as
the economies of those Western states served by the Partnership
continue to recover from the economic downturn that has been
apparent since late 1990. Military volumes, which accounted for
5% of total 1993 volumes, showed improvement over 1992 in the
fourth quarter, but are not expected to increase over the
foreseeable future. As of year end 1993, three military bases
historically served by the Partnership had been closed and
realignment of certain other bases continues to occur.
During 1993, the pipeline systems, on average, operated at
approximately 75% of capacity. While capacity utilization on
individual system segments generally ranged from 70% to 90% of
capacity, the lines from the Los Angeles area to San Diego and
Colton, California operated at full capacity for a portion of the
year and the line from Rocklin, California to Reno, Nevada was
prorated for a significant period during the year.
Overall, volumes have been moderately seasonal, with somewhat
lower than average volumes being transported during the first and
fourth quarters of each year, although deliveries to specific
locations also experience seasonal variations.
Item 8. Financial Statements and Supplementary Data.
The Partnership's consolidated financial statements, together
with the report thereon of Price Waterhouse dated January 28,
1994, are set forth on pages 29 through 49 of this Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no officers, directors or employees. Set forth
below is certain information concerning the directors and
executive officers of the General Partner.
Edward F. Swift, age 70, is a director of the General Partner,
Chairman of the Audit Committee and a member of the Compensation
and Benefits Committee and Committee on Directors. He has been a
consultant to Lehman Brothers (investment bankers) since 1990 and
previously had been an advisory director of Shearson Lehman
Hutton, Inc. (investment banker and broker-dealer) since 1988.
Mr. Swift is also a director of Santa Fe and Illinois Tool Works,
Inc.
<PAGE>
Orval M. Adam, age 63, is a director of the General Partner,
Chairman of the Compensation and Benefits Committee and a member
of the Audit Committee and Committee on Directors. He retired in
January 1991 from his position as Senior Vice President and Chief
Financial Officer of Santa Fe, which he held since April 1988.
Mr. Adam is also a director of SFP Pipeline Holdings, Inc., the
sole shareholder of the General Partner.
Wilford D. Godbold, Jr., age 55, is a director of the General
Partner and a member of the Audit Committee and Committee on
Directors. Mr. Godbold has served as President and Chief
Executive Officer of Zero Corporation (container manufacturer)
since 1984. Mr. Godbold is also a director of Zero Corporation,
Pacific Enterprises and Southern California Gas Company.
Robert D. Krebs, age 51, is a director of the General Partner,
Chairman of the Committee on Directors and a member of the
Compensation and Benefits Committee. Mr. Krebs has served as
Chairman, President and Chief Executive Officer of Santa Fe since
June 1988 and, previously, served as President and Chief
Executive Officer of Santa Fe from July 1987. Mr. Krebs is a
director of Santa Fe and the Atchison, Topeka and Santa Fe
Railway Company and is also a director of Phelps Dodge
Corporation, Northern Trust Corporation, Catellus Development
Corporation and Santa Fe Energy Resources, Inc.
Denis E. Springer, age 48, is a director of the General Partner
and a member of the Compensation and Benefits Committee and
Committee on Directors. Mr. Springer has been Senior Vice
President and Chief Financial Officer of Santa Fe since October
1993. Mr. Springer previously served Santa Fe as Senior Vice
President, Treasurer and Chief Financial Officer since January
1992, Vice President, Treasurer and Chief Financial Officer since
January 1991 and Vice President-Finance from April 1988 to
December 1990. Mr. Springer is also a director of SFP Pipeline
Holdings, Inc., the sole shareholder of the General Partner, and
the Atchison, Topeka and Santa Fe Railway Company.
Irvin Toole, Jr., age 52, is President, Chief Executive Officer
and Chairman of the Board of Directors of the General Partner.
From November 1988 until assignment to his present position in
September 1991, Mr. Toole served as Senior Vice President,
Treasurer and Chief Financial Officer, and previously as Vice
President-Administration from February 1986 to November 1988. Mr.
Toole is also Chairman of the Board of Directors of SFP Pipeline
Holdings, Inc., the sole shareholder of the General Partner.
Robert L. Edwards, age 38, is a director of the General Partner
and has been Senior Vice President, Treasurer and Chief Financial
Officer of the General Partner since December 1991. Mr. Edwards
served Santa Fe from July 1990 through November 1991 as Vice
President-Administration; from March 1989 through June 1990 as
Vice President-Human Resources and Administration; and from June
1988 through February 1989 as Assistant Vice President-Executive
Department. Prior to that, Mr. Edwards held various executive
positions with the General Partner since May 1985. Mr. Edwards is
also a director of SFP Pipeline Holdings, Inc., the sole
shareholder of the General Partner.
<PAGE>
John M. Abboud, age 51, has been Senior Vice President of the
General Partner since 1985. In his current capacity, Mr. Abboud
is responsible for operations, engineering and environmental
affairs.
Barry R. Pearl, age 44, has been Senior Vice President of the
General Partner since January 1992, with responsibility for
business development, planning and information systems. Mr. Pearl
previously served as Vice President-Business Development and
Planning between November 1988 and January 1992 and Vice
President-Operations between May 1986 and November 1988.
Lyle B. Boarts, age 50, is Vice President-Human Resources of the
General Partner. Mr. Boarts joined the General Partner in June
1986 as the Director of Human Resources and was named to his
current position in November 1988.
R. Gregory Cunningham, age 48, was appointed Vice President-
General Counsel in January 1994. Previously, he served as General
Counsel of the General Partner since January 1991 and, prior to
such date, as General Attorney since November 1985.
William M. White, age 48, has served as Vice President-
Engineering of the General Partner, with responsibility for
engineering and construction, since January 1993. Mr. White
previously was Manager-Northern District from May 1986 through
December 1992.
Burnell H. DeVos III, age 40, has served as Controller and
Secretary of the General Partner since January 1993. Mr. DeVos
was Assistant Controller of the General Partner from May 1989
through December 1992 and, previously, was Controller of a Los
Angeles law firm from February 1989 through May 1989, and a
Senior Audit Manager at Price Waterhouse through February 1989.
Patrick L. Avery, age 41, has served as Vice President-
Environmental and Safety of the General Partner since October
1993. Mr. Avery was Corporate Environmental Manager at Amerada
Hess Corporation from October 1992 to October 1993. Previously,
he held various positions at ARCO Products Company since 1982,
including Director-California Government Relations and
Environmental Health and Safety Manager at ARCO's Los Angeles
refinery.
Messrs. Krebs, Springer and Edwards each filed a delinquent Form
3, "Initial Statement of Beneficial Ownership of Securities,"
during 1993. In addition, neither Mr. White nor Mr. Avery filed a
Form 3 upon appointment to his present position and each has,
therefore, filed a delinquent Form 3 in 1994. In February 1994,
Mr. Edwards filed a delinquent Form 4 in connection with one
transaction.
Item 11. Executive Compensation.
The directors, officers and employees of the General Partner
receive no direct compensation from the Partnership for their
services to the Partnership. The Partnership reimburses the
General Partner for all direct costs incurred in managing the
<PAGE>
Partnership and all indirect costs (principally salaries and
other general and administrative costs) allocable to the
Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security Ownership of Certain Beneficial Owners
To the best of the General Partner's knowledge, the following
persons are the only persons who are beneficial owners of more
than five percent of the Registrant's equity securities:
Percent
Title of Class Name and Address Amount of Class
-------------- ------------------------- --------- --------
Common Units Santa Fe Pacific
Pipelines, Inc. 8,148,148 100%
888 South Figueroa Street
Los Angeles, CA 90017
(b) Security Ownership of Management
As of March 1, 1994, Units beneficially held by all directors and
officers as a group represent less than 1% of the Partnership's
outstanding Units.
Item 13. Certain Relationships and Related Transactions.
The Registrant and the Operating Partnership are managed by the
General Partner pursuant to the Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership
Agreement"), and the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Operating
Partnership Agreement").
Under the Partnership Agreement and Operating Partnership
Agreement, the General Partner and certain related parties are
entitled to reimbursement of all direct and indirect costs and
expenses related to the business activities of the Partnership
and the Operating Partnership. These costs and expenses include
compensation and benefits payable to officers and employees of
the General Partner, payroll taxes, corporate office building
rentals, general and administrative costs, and legal and other
professional services fees. These costs to the Partnership
totaled $43.0 million, $37.1 million and $35.8 million in 1993,
1992 and 1991, respectively.
The Partnership Agreement provides for incentive distribution
payments to the General Partner out of the Partnership's
"Available Cash" (as defined in the Partnership Agreement) which
increase as quarterly distributions to Unitholders exceed certain
specified targets. The incremental incentive distributions
payable to the General Partner are 8%, 18% and 28% of all
distributions of Available Cash that exceed, respectively, $0.60,
$0.65 and $0.70 per Unit. Such incentive distributions aggregated
$1.2 million in 1993 and in 1992 and $0.8 million in 1991.
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as a part of this report:
(1) Financial Statements and
(2) Financial Statement Schedules: See Index to Financial
Statements on page 28 for financial statements and financial
statement schedules filed as a part of this Report.
(3) Exhibits: The following exhibits are filed as a part of this
Report. With the exception of Exhibits 21 and 24, all
exhibits listed herein are incorporated by reference, with
the location of the exhibit in the Registrant's previous
filing indicated parenthetically.
Exhibit
Number Description
------- -----------------------------------------------------------
3.1 Amended and Restated Agreement of Limited Partnership of
the Registrant, dated as of December 19, 1988. (1988 Form
10-K - Exhibit 3.1)
3.2 Amended and Restated Agreement of Limited Partnership of
the Operating Partnership, dated as of December 19, 1988.
(1988 Form 10-K - Exhibit 3.2)
3.3 Certificate of Limited Partnership of the Registrant, dated
as of August 23, 1988. (1988 Form 10-K - Exhibit 3.3)
3.4 Certificate of Limited Partnership of the Operating
Partnership, dated as of August 23, 1988. (1988 Form 10-K
- Exhibit 3.5)
3.5 Assumption Agreement between the Registrant and Santa Fe
Pacific Pipelines, Inc., dated as of December 7, 1989.
(1989 Form 10-K - Exhibit 3.4)
3.6 Amendment No. 1 to Amended and Restated Agreement of
Limited Partnership of the Registrant, dated as of December
7, 1989. (1989 Form 10-K - Exhibit 3.2)
3.7 Certificate of Amendment to Certificate of Limited
Partnership of the Registrant, dated as of December 7,
1989. (1989 Form 10-K - Exhibit 3.3)
3.8 Amendment No. 1 to Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of December 7, 1989. (1989 Form 10-K - Exhibit 3.5)
3.9 Certificate of Amendment to Certificate of Limited
Partnership of the Operating Partnership, dated as of
December 7, 1989. (1989 Form 10-K - Exhibit 3.6)
3.10 Amendment No. 2 to Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as
of January 24, 1990. (1989 Form 10-K - Exhibit 3.8)
3.11 Certificate of Amendment No. 2 to Certificate of Limited
Partnership of the Operating Partnership, dated as of
January 30, 1990. (1989 Form 10-K - Exhibit 3.9)
4.1 Form of Deposit Agreement between the Registrant, American
Stock Transfer & Trust Company and the General Partner, as
attorney-in-fact for holders of units and depositary
receipts. (Form S-1 Registration Statement No. 33-24395
- Exhibit 4.1)
<PAGE>
4.2 First Mortgage Note Agreement, dated December 8, 1988
(a conformed composite of 54 separate note agreements,
identical except for signatures). (1988 Form 10-K - Exhibit
4.2)
4.3 Deed of Trust, Security Agreement and Fixture Filing, dated
December 8, 1988, between the Operating Partnership, the
General Partner, Chicago Title Insurance Company and
Security Pacific National Bank. (1988 Form 10-K - Exhibit
4.3)
4.4 Trust Agreement, dated December 19, 1988, between the
Operating Partnership, the General Partner and Security
Pacific National Bank. (1988 Form 10-K - Exhibit 4.4)
4.5 The Operating Partnership has established a $60 million
term credit facility with three banks, dated as of October
14, 1993. As the maximum allowable borrowings under this
facility do not exceed 10% of the Registrant's total
assets, this instrument is not filed as an exhibit to this
Report, however, the Registrant hereby agrees to furnish a
copy of such instrument to the Security and Exchange
Commission upon request.
21 Subsidiaries of the Registrant*
24 Powers of attorney*
* Filed herewith.
(b) Reports on Form 8-K filed during the quarter ended December 31,
1993: None
SIGNATURES
Santa Fe Pacific Pipeline Partners, L.P., pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
(Registrant)
By: Santa Fe Pacific Pipelines, Inc., as
General Partner
Dated: March 25, By: /s/ IRVIN TOOLE, JR.
1994 --------------------------------------
Irvin Toole, Jr.
Chairman, President and Chief
Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities with Santa Fe
Pacific Pipelines, Inc., as General Partner, and on the date
indicated.
Signature Title
----------------------------- -------------------------
Chairman, President and
Chief Executive Officer
/s/ IRVIN TOOLE, JR. (Principal Executive
----------------------------- Officer)
Irvin Toole, Jr. and Director
Senior Vice President,
Treasurer
and Chief Financial
Officer
/s/ ROBERT L. EDWARDS (Principal Financial
----------------------------- Officer)
Robert L. Edwards and Director
/s/ BURNELL H. DEVOS III Controller and
----------------------------- Secretary
Burnell H. DeVos III (Principal Accounting
Officer)
EDWARD F. SWIFT*
-----------------------------
Edward F. Swift Director
ORVAL M. ADAM*
-----------------------------
Orval M. Adam Director
WILFORD D. GODBOLD, JR.*
-----------------------------
Wilford D. Godbold, Jr. Director
ROBERT D. KREBS*
-----------------------------
Robert D. Krebs Director
DENIS E. SPRINGER*
-----------------------------
Denis E. Springer Director
*By: /s/ ROBERT L. EDWARDS Senior Vice President,
----------------------------- Treasurer
Robert L. Edwards, and Chief Financial
attorney in fact Officer
Dated: March 25, 1994
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
INDEX TO FINANCIAL STATEMENTS
Page
--------
Financial Statements:
Report of Independent Accountants................................ 29
Consolidated Balance Sheet as of December 31, 1993 and 1992 ..... 30
Consolidated Statement of Income for
the three years ended December 31, 1993....................... 31
Consolidated Statement of Cash Flows for
the three years ended December 31, 1993....................... 32
Consolidated Statement of Partners' Capital for
the three years ended December 31, 1993....................... 33
Notes to Consolidated Financial Statements....................... 34
Financial Statement Schedules for
the three years ended December 31, 1993:
V - Property, Plant and Equipment............................... 47
VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment......................... 48
X - Supplementary Income Statement Information.................. 49
All other schedules have been omitted because they are not applicable
or the required information is presented in the financial statements
or notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Santa Fe Pacific Pipeline Partners, L.P.
In our opinion, the consolidated financial statements listed in
the index appearing on page 28 present fairly, in all material
respects, the financial position of Santa Fe Pacific Pipeline
Partners, L.P. and its majority-owned operating partnership at
December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Partnership'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.
Note 2 to the consolidated financial statements includes a
description of a change in the method of accounting for
postretirement and postemployment benefits effective January 1,
1992.
PRICE WATERHOUSE
Los Angeles, California
January 28, 1994
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31,
----------------------
1993 1992
--------- ---------
A S S E T S
Current assets
Cash and cash equivalents.................... $ 32,162 $ 27,356
Accounts receivable, net .................... 32,787 28,151
Other current assets......................... 2,801 2,882
--------- ---------
Total current assets.................... 67,750 58,389
--------- ---------
Properties, plant and equipment .................. 683,082 668,397
Less accumulated depreciation ............... 66,472 50,299
--------- ---------
Net properties, plant and equipment .... 616,610 618,098
Other assets...................................... 12,620 8,365
--------- ---------
Total assets............................ $ 696,980 $ 684,852
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable............................. $ 2,403 $ 2,994
Accrued liabilities.......................... 33,235 18,599
--------- ---------
Total current liabilities............... 35,638 21,593
Long-term debt ................................... 355,000 355,000
Other long-term liabilities ...................... 39,283 27,763
--------- ---------
Total liabilities ...................... 429,921 404,356
--------- ---------
Minority interest ................................ 1,208 1,486
--------- ---------
Commitments and contingencies (Note 6)............
--------- ---------
Partners' capital
General Partner ............................. 1,208 1,486
Common Unitholder............................ 52,454 57,936
Preference Unitholders ...................... 212,189 219,588
--------- ---------
Total partners' capital ................ 265,851 279,010
--------- ---------
Total liabilities and partners' capital $ 696,980 $ 684,852
========= =========
See Notes to Consolidated Financial Statements.
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per unit amounts)
Year ended December 31,
--------------------------
1993 1992 1991
-------- -------- --------
Operating revenues
Trunk revenues............................. $171,848 $161,116 $154,800
Storage and terminaling revenues........... 37,213 34,020 33,314
Other revenues............................. 10,410 9,889 5,324
-------- -------- --------
Total operating revenues.............. 219,471 205,025 193,438
-------- -------- --------
Operating expenses
Field operating expenses................... 36,325 31,331 29,680
General and administrative expenses........ 22,378 19,420 18,178
Facilities costs........................... 19,555 18,876 18,000
Depreciation and amortization.............. 18,971 18,327 16,834
Power cost................................. 18,940 18,116 17,975
Provisions for environmental
and litigation costs (Note 6) ........... 27,000 10,000 --
Product (gains) losses..................... (2,020) (2,403) (3,058)
-------- -------- --------
Total operating expenses.............. 141,149 113,667 97,609
-------- -------- --------
Operating income................................ 78,322 91,358 95,829
Interest expense................................ 37,086 36,937 36,924
Other income, net............................... 1,262 843 2,899
-------- -------- --------
Net income before minority interest and
cumulative effect of accounting change.... 42,498 55,264 61,804
Less minority interest ........................ (882) (1,146) (1,200)
-------- -------- --------
Net income before cumulative effect
of accounting change ........................... 41,616 54,118 60,604
Cumulative effect of change in accounting
for postretirement and postemployment
benefits, net of minority interest ........... -- 16,407 --
-------- -------- --------
Net income ..................................... $ 41,616 $ 37,711 $ 60,604
======== ======== ========
Income per Unit:
Before cumulative effect of accounting change .. $ 2.13 $ 2.77 $ 3.10
Cumulative effect of accounting change ......... -- (0.84) --
-------- -------- --------
Net income ..................................... $ 2.13 $ 1.93 $ 3.10
======== ======== ========
Operating expenses reflected above include
the following expenses incurred by, and
reimbursed to, the General Partner (Note 7) .. $ 43,025 $ 37,065 $ 35,810
======== ======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year ended December 31,
-------------------------------
1993 1992 1991
--------- --------- ---------
Cash flows from operating activities:
Net income ............................... $ 41,616 $ 37,711 $ 60,604
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization .......... 18,971 18,327 16,834
Cumulative effect of change
in accounting principle .............. -- 16,407 --
Provisions for environmental
and litigation costs ................ 27,000 10,000 --
Environmental and litigation costs paid (4,275) (275) --
Other, net ............................. (464) 1,825 --
Minority interest in net income ........ 882 1,146 1,200
Changes in--
Accounts receivable .................. (4,636) (820) (1,281)
Accounts payable and
accrued liabilities ................ 2,375 (2,689) 4,041
Other current assets.................. 81 5,460 3,475
--------- --------- ---------
Total adjustments................... 39,934 49,381 24,269
--------- --------- ---------
Net cash provided by
operating activities............. 81,550 87,092 84,873
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures ..................... (21,084) (30,931) (27,715)
Other .................................... 276 487 1,041
--------- --------- ---------
Net cash used by
investing activities............. (20,808) (30,444) (26,674)
Cash flows from financing activities:
Distributions to partners
and minority interest ................. (55,936) (55,936) (53,542)
--------- --------- ---------
Increase in cash and cash equivalents ...... 4,806 712 4,657
Cash and cash equivalents--
Beginning of year ........................ 27,356 26,644 21,987
--------- --------- ---------
End of year .............................. $ 32,162 $ 27,356 $ 26,644
========= ========= =========
Interest paid............................... $ 37,326 $ 37,326 $ 37,326
========= ========= =========
See Notes to Consolidated Financial Statements.
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(In thousands)
General Common Preference
Partner Unitholder Unitholders Total
-------- --------- --------- ---------
Partners' capital
at December 31, 1990 ............ $ 1,569 $ 61,765 $224,758 $288,092
1991 net income ................... 1,200 25,278 34,126 60,604
1991 cash distributions ........... (921) (22,000) (29,700) (52,621)
-------- --------- -------- ---------
Partners' capital
at December 31, 1991 ............ 1,848 65,043 229,184 296,075
1992 net income before cumulative
effect of accounting change ..... 1,146 22,542 30,430 54,118
Cumulative effect of
accounting change ............... (347) (6,834) (9,226) (16,407)
1992 cash distributions ........... (1,161) (22,815) (30,800) (54,776)
-------- --------- -------- ---------
Partners' capital
at December 31, 1992 ............ 1,486 57,936 219,588 279,010
1993 net income ................... 882 17,333 23,401 41,616
1993 cash distributions ........... (1,160) (22,815) (30,800) (54,775)
-------- --------- -------- ---------
Partners' capital
at December 31, 1993 ............ $ 1,208 $ 52,454 $212,189 $265,851
======== ======== ======== =========
See Notes to Consolidated Financial Statements.
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Accounting
The accompanying consolidated financial statements include the
accounts of Santa Fe Pacific Pipeline Partners, L.P. (the
"Trading Partnership") and SFPP, L.P., (the "Operating
Partnership"), collectively referred to as the "Partnership", on
a consolidated basis. The Trading Partnership is a publicly
traded limited partnership organized under the laws of the state
of Delaware in 1988 which owns a 99% limited partnership interest
in the Operating Partnership, through which the Partnership
conducts all its operations. The Operating Partnership was
acquired by the Trading Partnership in December 1988 and is
engaged in the transportation of refined petroleum products and
related services. The Operating Partnership is managed by its
general partner, Santa Fe Pacific Pipelines, Inc. (the "General
Partner"), which, by virtue of this 1% general partner interest,
represents the minority interest in the Partnership's
consolidated financial statements. The General Partner, which is
a wholly owned indirect subsidiary of Santa Fe Pacific
Corporation ("Santa Fe"), also holds the 1% general partner
interest in the Trading Partnership and, therefore, in total,
holds a 2% general partner interest in the Partnership on a
consolidated basis. In addition, the General Partner owns
approximately 42% of the limited partner interests in the Trading
Partnership ("common units"). Public ownership represented by the
preference units is approximately 56%.
Revenue Recognition
Substantially all revenues are derived from pipeline
transportation and storage and terminaling charges and are
recognized in income upon delivery. Other revenues, primarily
incidental service charges and tank and land rentals, are
recognized as earned.
The Partnership's interstate common carrier pipeline operations
are subject to rate regulation by the Federal Energy Regulatory
Commission ("FERC") under a "trended original cost methodology"
adopted in 1985 for establishing a petroleum products pipeline's
tariffs. The methodology is subject to clarification and
reconsideration in individual cases and leaves many issues for
determination on a case-by-case basis.
Properties, Plant and Equipment
Properties are stated at cost and include capitalized interest on
borrowed funds. Additions and replacements are capitalized.
Expenditures for maintenance and repairs are charged to income.
Upon sale or retirement of depreciable properties, cost less
salvage is charged to accumulated depreciation.
<PAGE>
Properties are depreciated on a straight-line basis over the
estimated service lives of the related assets. Rates for the
Partnership's interstate pipeline properties are prescribed by
the FERC. The Partnership's intrastate pipeline properties and
its terminal properties are depreciated using similar rates. The
following annual rates were used in computing depreciation:
Rights-of-way.......... ............................... 2.60%
Line pipe, fittings and pipeline construction. 2.22% to 2.60%
Buildings and field equipment................. 2.95% to 4.00%
Storage tanks and delivery facilities......... 3.10% to 3.20%
Vehicles, office and communications equipment 3.00% to 15.70%
Income Per Unit
Income per unit is computed based upon net income of the
Partnership less an allocation of income to the general partner
of the Trading Partnership in accordance with the partnership
agreement, and is based upon 19,148,148 partnership units,
comprising 11,000,000 preference and 8,148,148 common units. The
quarterly allocation of net income to the general partner of the
Trading Partnership (which is always equivalent to the minority
interest in net income) is based on its percentage of cash
distributions from Available Cash at the end of each quarter (see
Note 10). The general partner of the Trading Partnership was
allocated 2.07%, 2.07% and 1.94% of net income before minority
interest for 1993, 1992 and 1991, respectively.
Cash Equivalents and Short Term Investments
The Partnership considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Income Tax
For federal and state income tax purposes, the Partnership is not
a taxable entity. Accordingly, the taxable income or loss
resulting from the operations of the Partnership is ultimately
includable in the federal and state income tax returns of the
general and limited partners, and may vary substantially from the
income or loss reported for financial reporting purposes.
NOTE 2 - 1992 CHANGE IN METHOD OF ACCOUNTING FOR POSTRETIREMENT
AND POSTEMPLOYMENT BENEFITS
During the fourth quarter of 1992, the General Partner and the
Partnership adopted Statement of Financial Accounting Standards
("FAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", and FAS No. 112, "Employers'
Accounting for Postemployment Benefits", retroactive to January
1, 1992. FAS No. 106 requires that an actuarial method be used to
accrue the expected cost of postretirement health care and other
benefits over employees' years of service. FAS No. 112 relates to
benefits provided to former or inactive employees after
employment but before retirement and requires recognition of
these benefits if they are vested and payment is probable and
reasonably estimable. Prior to 1992, the costs of postretirement
<PAGE>
and postemployment benefits were generally expensed when paid.
For the Partnership, the cumulative effect of the accounting
change attributable to years prior to 1992 was to decrease 1992
net income by $16,407,000, net of minority interest of $347,000.
The impact of FAS No. 106 comprised approximately 95% of the
change. Additionally, 1992 general and administrative expenses
were approximately $1,825,000 higher as a result of the change in
accounting for these costs.
NOTE 3 - DETAIL OF SELECTED BALANCE SHEET ACCOUNTS
December 31,
------------------
1993 1992
-------- --------
(in thousands)
Accounts receivable:
Trade accounts receivable............. $22,587 $18,654
Recollectible construction and
maintenance expenditures other...... 10,200 9,497
-------- --------
$32,787 $28,151
======== ========
Accrued liabilities:
East Line litigation costs............ $ 6,570 $ --
Environmental remediation costs....... 6,270 1,170
Military product loss reserve......... 5,111 3,873
Property taxes........................ 3,210 1,924
Capital expenditures and
major maintenance................... 2,685 2,763
Interest.............................. 1,709 1,709
Postretirement and postemployment
benefits............................ 800 500
Insurance premiums and claims......... 656 3,389
Other................................. 6,224 3,271
-------- --------
$33,235 $18,599
======== ========
Other long-term liabilities:
Postretirement and postemployment
benefits............................ $19,403 $18,938
Environmental remediation costs....... 16,880 8,825
East Line litigation costs............ 3,000 --
-------- --------
$39,283 $27,763
======== ========
<PAGE>
NOTE 4 - PROPERTIES
Properties, plant and equipment consist of the following:
December 31,
--------------------
1993 1992
--------- ---------
(in thousands)
Land.................................... $ 55,545 $ 56,680
Rights-of-way........................... 12,601 12,522
Line pipe, fittings and pipeline
construction.......................... 287,008 283,848
Buildings and equipment................. 162,412 152,284
Storage tanks and delivery facilities... 144,678 140,293
Construction in progress................ 20,838 22,770
--------- ---------
683,082 668,397
Less accumulated depreciation........... 66,472 50,299
--------- ---------
$616,610 $618,098
========= =========
Depreciation expense aggregated $16,921,000, $16,148,000 and
$14,974,000 in 1993, 1992 and 1991, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following First Mortgage Notes
(the "Notes") at December 31, 1993 and 1992 (in thousands):
Series A 9.85% due December 1994..... $ 11,000
Series B 10.00% due December 1995..... 17,000
Series C 10.05% due December 1996..... 22,000
Series D 10.15% due December 1997..... 28,500
Series E 10.25% due December 1998..... 32,500
Series F 10.70% due December 1999
through 2004.................. 244,000
--------
$355,000
========
The Partnership intends to refinance the Series A Notes on a
long-term basis upon their maturity and, therefore, has included
them in long-term debt at December 31, 1993. The Series F Notes
become payable in annual installments ranging from $31.5 million
in 1999 to the final payment of $49.5 million in December 2004.
The Notes may also be prepaid beginning in 1999 in full or in
part at a price equal to par plus, in certain circumstances, a
premium.
The Notes are secured by mortgages on substantially all of the
properties of the Partnership ("the Mortgaged Property"). The
Notes contain covenants specifying certain limitations on the
Partnership's operations including the amount of additional debt
or equity that may be issued, cash distributions, investments and
property dispositions. Management does not believe such
limitations will adversely affect the Partnership's ability to
<PAGE>
fund its operations or planned capital expenditures.
The fair value of the Partnership's long-term debt is
approximately $450 million at December 31, 1993. Such estimate
represents the present value of interest and principal payments
on the Notes discounted at present market yields, and assumes the
Series F Notes will be prepaid in full in 1999 at par plus a
premium.
Interest on the Notes is payable semiannually in June and
December. Interest capitalized during the years 1993, 1992 and
1991 aggregated $598,000, $760,000 and $756,000, respectively.
The Partnership arranged a $60 million multi-year term credit
facility and a $20 million working capital facility with three
banks in October 1993. The term facility may be used for
refinancing a portion of the Partnership's long-term debt and
capital projects, and may be utilized on a revolving basis
through October 1997, with any outstanding balance at that time
converted to a three-year amortizing term loan. Borrowings under
this facility would also be secured by the Mortgaged Property and
would generally be subject to the same terms and conditions of
the First Mortgage Notes. The working capital facility replaced a
$20 million facility originally established in April 1990, and is
subject to annual renewal. Advances under this credit line can be
used for general Partnership purposes and would be secured by
certain of the Partnership's accounts receivable. This facility
may not be utilized for a 45-day period, the designation of such
period to be at the Partnership's discretion, during each year,
and is also subject to other reasonable and customary terms and
conditions. Both facilities provide for certain interest rate
options. To date, neither of these facilities have been utilized.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
East Line Litigation and FERC Proceeding
Certain of the Partnership's shippers have filed civil suits and
initiated a Federal Energy Regulatory Commission ("FERC")
proceeding alleging, among other things, that the shippers had
been damaged by the Partnership's failure to fulfill alleged
promises to expand the East Line's capacity between El Paso,
Texas and Phoenix, Arizona to meet shipper demand. The FERC
proceeding also involves claims, among other things, that certain
of the Partnership's tariffs and charges on its East and West
Lines are excessive.
In July 1993, the Partnership reached a settlement with one of
these shippers, Navajo Refining Company ("Navajo"), whereby
Navajo agreed to dismiss its pending civil litigation in New
Mexico and withdraw any challenge to the direction of flow of
the Partnership's six-inch pipeline between Phoenix and Tucson,
Arizona, including any such challenge in the FERC proceeding.
The Partnership agreed to make certain cash payments to Navajo
over three years and to undertake and complete an additional
pipeline capacity expansion between El Paso, Texas and Phoenix
if certain events related to volume levels and proration of
pipeline capacity should occur within the next five years.
<PAGE>
During the quarter ended September 30, 1993, the Partnership
recorded a $12 million provision for litigation costs, which
reflects the terms of the Navajo settlement as well as
anticipated legal fees and other costs related to defense and
ultimate resolution of the FERC proceeding and the remaining
civil action brought by El Paso Refinery, L.P. and its general
partner. Management believes that it has acted properly with
respect to expansion of the East Line and the direction of flow
of the six-inch pipeline from Phoenix to Tucson. Management also
believes that the Partnership's tariffs are just and reasonable
and, if certain of the underlying assumptions and
interpretations of rate-making methodology made by the
Partnership in supporting these tariffs are ruled upon
favorably, that these tariffs will be upheld should the FERC
proceeding progress to its completion. However, because of the
nature of FERC rate-making methodology, it is not possible to
predict with certainty whether the Partnership's assumptions and
rate-making approach will be upheld by the FERC and, hence, it
is impossible to predict the outcome of the FERC proceeding. It
is the opinion of management that any additional costs, in
excess of recorded liabilities, incurred to defend and resolve
these matters, or any capital expenditures which may be required
under the terms of the Navajo settlement, will not have a
material adverse effect on the Partnership's financial
condition; nevertheless, it is possible that the Partnership's
results of operations, in particular quarterly or annual
periods, could be materially affected by the ultimate resolution
of these matters.
Environmental
The Partnership's transportation and terminal operations are
subject to extensive regulation under federal, state and local
environmental laws concerning, among other things, the
generation, handling, transportation and disposal of hazardous
materials and the Partnership is, from time to time, subject to
environmental cleanup and enforcement actions. In particular, the
federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "Superfund" law) generally imposes
joint and several liability for cleanup and enforcement costs,
without regard to fault or the legality of the original conduct,
on current or predecessor owners and operators of a site. Along
with several other respondents, the Partnership is presently
involved in one cleanup ordered by the United States
Environmental Protection Agency ("EPA") related to ground water
contamination in the vicinity of the Partnership's storage
facilities and truck loading terminal at Sparks, Nevada. In
addition, the Partnership is also involved in six ground water
hydrocarbon remediation efforts under administrative orders
issued by the California Regional Water Quality Control Board at,
or adjacent to, its facilities at Colton, Concord, Mission
Valley, Brisbane, San Jose and West Sacramento, California. In
April 1993, the Partnership was notified that the United States
military expects the Partnership to participate in the
remediation of ground water hydrocarbon contamination in the
vicinity of the Partnership's pump station at Norwalk,
California, which is adjacent to a major military fuel storage
facility. The Partnership is currently investigating the extent
of its responsibility for the contamination. The Partnership is
<PAGE>
cooperating with a request from the Arizona Department of
Environmental Quality to participate in a joint industry
investigation of possible ground water hydrocarbon contamination
in the vicinity of the Partnership's terminal at Phoenix. The
Partnership is also involved in soil and ground water remediation
projects at and adjacent to various other terminal and pipeline
locations, that have not been mandated by government agencies but
are conducted in the ordinary course of business. In a number of
these cleanup projects, the Partnership is participating with
other entities ranging from large integrated petroleum companies
to certain less financially sound parties.
During the quarter ended September 30, 1993, the Partnership
completed a comprehensive re-evaluation of its potential
liabilities associated with environmental remediation activities
and, as a result, recorded a $15 million provision to increase
its existing reserve for environmental remediation costs. This
provision reflects the estimated cost of completing all
remediation projects presently known to be required, either by
government mandate or in the ordinary course of business, as well
as the cost of performing preliminary environmental
investigations at several locations, including the investigation
of potential contamination in the vicinity of the Partnership's
Phoenix terminal. During the quarter ended September 30, 1992,
the Partnership recorded a $10 million provision for
environmental remediation costs at Sparks, Nevada and two sites
in California. The cash expenditures related to these projects
are primarily expected to occur over the next five years;
however, certain remediation projects, including the largest
project at Sparks, are expected to continue for a period of
approximately ten years.
Estimates of the Partnership's ultimate liabilities associated
with environmental remediation activities and related costs are
particularly difficult to make with certainty due to the number
of variables involved, including the early stage of
investigation at certain sites, the lengthy time frames required
to complete remediation at most locations, the number of parties
involved, the number of remediation alternatives available, and
the uncertainty of potential recoveries from third parties.
Based on the information presently available, it is the opinion
of management that any such costs, to the extent they exceed
recorded liabilities, will not have a material adverse effect on
the Partnership's financial condition; nevertheless, it is
possible that the Partnership's results of operations in
particular quarterly or annual periods could be materially
affected as conditions change or additional information becomes
available.
Other Claims and Litigation
The Partnership is also party to a number of other legal actions
arising in the ordinary course of business. While the final
outcome of these other legal actions cannot be predicted with
certainty, it is the opinion of management that none of these
other legal actions, when finally resolved, will have a material
adverse effect on the consolidated financial condition of the
Partnership; nevertheless, it is possible that the Partnership's
results of operations, in particular quarterly or annual
<PAGE>
periods, could be materially affected by the ultimate resolution
of these matters.
Lease Commitments
The General Partner leases space in an office building and
certain computer equipment, the rent on which is charged to the
Partnership. The General Partner's total lease commitments not
subject to cancellation at December 31, 1993 are as follows:
$2,135,000 in 1994, $2,105,000 in 1995 and $1,330,000 in 1996.
The Partnership also leases certain rights-of-way and land under
agreements that can be canceled at any time should they not be
required for operations. The annual payments associated with
these leases aggregated approximately $5 million in 1993, however
a substantial portion of this amount is subject to renegotiation
effective January 1, 1994. While the lessor has requested a
significant increase in the annual lease payment for 1994 and
future years, it is not presently possible to predict the annual
rent associated with these leases which will be established
either through negotiation or arbitration. Rental expense for all
operating leases was $7,130,000, $6,600,000 and $7,000,000 for
the years 1993, 1992 and 1991, respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Partnership has no employees and is managed by the General
Partner. Under certain partnership and management agreements, the
General Partner and Santa Fe or its subsidiaries are entitled to
reimbursement of all direct and indirect costs related to the
business activities of the Partnership. These expenses, which are
included in field operating and general and administrative
expenses in the Partnership's statement of income, totaled $43.0
million, $37.1 million and $35.8 million for the years 1993, 1992
and 1991, respectively, and include compensation and benefits
payable to officers and employees of the General Partner, payroll
taxes, corporate office building rentals, general and
administrative costs, tax information and reporting costs and
legal and other professional services fees.
NOTE 8 - PENSION AND POSTRETIREMENT PLANS
The General Partner is included with certain other affiliates in
the trusteed non-contributory Santa Fe Pacific Retirement Plan
("the Plan") which fully complies with ERISA requirements. The
Plan covers substantially all officers and employees of Santa Fe
and its subsidiaries not covered by collective bargaining
agreements. Benefits payable under the Plan are based on years of
service and compensation during the sixty highest paid
consecutive months of service during the ten years immediately
preceding retirement. Santa Fe's funding policy is to contribute
annually at a rate not less than the ERISA minimum, and not more
than the maximum amount deductible for income tax purposes. Since
the General Partner is included with certain other affiliates,
detailed Plan information for the General Partner is not
available in all cases, however, as of September 30, 1993, the
fair value of Plan assets allocated to employees associated with
<PAGE>
the Partnership's operations was $51.4 million, and the actuarial
present value of projected Plan obligations, discounted at 7.0%,
was $47.5 million. The expected return on the market value of
Plan assets was 9.75% and compensation levels were assumed to
increase at 4.0% per year. Primarily as a result of the excess of
Plan assets over liabilities, pension income of $435,000,
$605,000 and $290,000 was recognized in 1993, 1992 and 1991,
respectively.
In addition to the defined benefit pension plan, salaried
employees who have attained age 55 and who have rendered 10 years
of service are eligible for both medical benefits and life
insurance coverage during retirement. The retiree medical plan is
contributory and provides benefits to retirees, their covered
dependents and beneficiaries. Retiree contributions are adjusted
annually. The plan also contains fixed deductibles, coinsurance
and out-of-pocket limitations. The life insurance plan is non-
contributory and covers retirees only.
The Partnership adopted FAS No. 106 effective January 1, 1992
(see Note 2). Net periodic postretirement benefit cost in 1993
and 1992 was $1,557,000 and $2,231,000, respectively, and
included the following components (in thousands):
Life Insurance
Medical Plan Plan
----------------- -----------------
1993 1992 1993 1992
------- ------- ------- -------
Service cost............... $ 553 $ 718 $ 37 $ 26
Interest cost.............. 1,066 1,275 213 212
Amortization of prior
service credit........... (312) -- -- --
------- ------- ------- -------
Net periodic postretirement
benefit cost............. $1,307 $1,993 $ 250 $ 238
======= ======= ======= =======
Prior to 1992, the costs of these benefits were generally
recognized when paid and were $430,000 in 1991.
<PAGE>
The Partnership's policy is to fund benefits payable under the
medical and life insurance plans as due. The following table
shows the reconciliation of the plans' obligations to amounts
accrued at December 31, 1993 and 1992 (in thousands):
Life Insurance
Medical Plan Plan
----------------- -----------------
1993 1992 1993 1992
-------- -------- -------- --------
Accumulated postretirement
benefit obligation:
Retirees.................... $ 5,253 $ 4,252 $ 2,086 $ 1,985
Fully eligible active
plan participants......... 1,148 753 -- --
Other active plan
participants................ 9,199 7,124 648 576
-------- -------- -------- --------
15,600 12,129 2,734 2,561
Unrecognized prior
service credit............ 3,763 4,075 -- --
Unrecognized net gain (loss) (2,249) 46 (243) (42)
-------- -------- -------- --------
Accrued postretirement
liability................. $17,114 $16,250 $ 2,491 $ 2,519
======== ======== ======== ========
The unrecognized prior service credit, which is the result of a
plan amendment effective January 1, 1993, will be amortized
straight-line over the average future service to full eligibility
of the active population. For 1994, the assumed health care cost
trend rate for managed care medical costs is 11.5% and is assumed
to decrease gradually to 5% by 2006 and remain constant
thereafter. For medical costs not in managed care, the assumed
health care cost trend is 14% in 1994 and is assumed to decrease
gradually to 6.5% by 2006 and remain constant thereafter. The
health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed
health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation
for the medical plan by $2.9 million and the aggregate of the
service and interest components of net periodic postretirement
benefit cost recognized in 1993 by $330,000. In 1993, the assumed
health care cost trend rate for managed care medical costs was
12% and was assumed to decrease gradually to 5.5% by 2006 and
remain constant thereafter. For medical costs not in managed
care, the assumed health care cost trend was 15% in 1993 and was
assumed to decrease gradually to 6.5% by 2006 and remain constant
thereafter. The weighted-average discount rate assumed in
determining the accumulated postretirement benefit obligation was
7% and 8.5% in 1993 and 1992, respectively. The assumed weighted-
average salary increase was 4.0% and 5.5% in 1993 and 1992,
respectively.
<PAGE>
NOTE 9 - OPERATING REVENUE FROM MAJOR CUSTOMERS
Operating revenues received from three major petroleum companies
each exceeded 10% of total 1993 revenues and, individually,
account for 16.9%, 12.9% and 10.2% of total operating revenues.
In 1992, these same customers accounted for 17.1%, 13.7% and
10.8% of total operating revenues and, in 1991, they accounted
for 16.0%, 13.1% and 10.9% of total operating revenues.
NOTE 10 - CASH DISTRIBUTIONS
The Partnership makes quarterly cash distributions of
substantially all of its available cash, generally defined as
consolidated cash receipts less consolidated cash expenditures
and such retentions for working capital, anticipated capital
expenditures and contingencies as the General Partner deems
appropriate or as are required by the terms of the Notes.
Distributions are made 98% to the common and preference
unitholders (the "unitholders") and 2% to the General Partner,
subject to the payment of incentive distributions to the General
Partner which increase as quarterly distributions to unitholders
exceed certain specified target levels. The incremental incentive
distributions payable to the General Partner are 8%, 18% and 28%
of all quarterly distributions of available cash that exceed,
respectively, $0.60, $0.65 and $0.70 per common and preference
unit. Such incentive distributions aggregated $1,202,000 in 1993
and in 1992 and $770,000 in 1991.
Cash distributions declared for the four quarters ended
December 31, 1993, 1992 and 1991 aggregated $2.80, $2.80 and
$2.75 per unit, respectively. In January 1994 the Partnership
announced a fourth quarter 1993 distribution of $0.70 per common
and preference unit, payable in February 1994.
Prior to December 31, 1993, in the event that there was not
sufficient available cash to pay the minimum distribution of
$0.55 per unit to all unitholders at the end of a quarter,
preference unitholders were entitled to receive the minimum
quarterly distribution, plus any arrearages, prior to any
distribution of available cash to the common unitholders. With
the Partnership having met certain financial criteria, this
subordination period ended on December 31, 1993, and all units
will henceforth have equivalent rights with respect to cash
distributions and shall be called common units. Since the
formation of the Partnership in December 1988, there has been no
arrearage of cash distributions.
<PAGE>
NOTE 11 - SUMMARIZED QUARTERLY OPERATING RESULTS
AND PREFERENCE UNIT INFORMATION (UNAUDITED)
Quarterly results of operations are summarized below:
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In thousands, except per unit amounts)
1993:
Net revenues................. $49,674 $57,222 $56,778 $55,797
Operating income............. 21,758 29,150 1,478 25,936
Net income (loss)............ 12,516 19,674 (7,326) 16,752
Income (loss) per unit....... $ 0.64 $ 1.01 $ (0.37) $ 0.86
1992:
Net revenues................. $47,153 $52,752 $53,382 $51,738
Operating income............. 21,823 27,606 16,700 25,229
Net income before cumulative
effect of accounting change 12,639 18,380 7,369 15,730
Net income (loss)............ (3,768) 18,380 7,369 15,730
Income per unit before
cumulative effect of
accounting change.......... $ 0.65 $ 0.94 $ 0.38 $ 0.80
Income (loss) per unit....... (0.19) 0.94 0.38 0.80
Notes: Third quarter 1993 included a $27.0 million provision for
environmental and litigation costs and third quarter 1992
included a $10.0 million provision for environmental costs. First
quarter 1992 included the $16.4 million cumulative effect of an
accounting change. The sum of net income (loss) per unit for the
four quarters of 1993 does not equal net income per unit for the
full year due to the effect of rounding differences.
<PAGE>
Santa Fe Pacific Pipeline Partners, L.P. units are traded on the
New York Stock Exchange, under the symbol SFL. The quarterly
price range per unit and cash distributions declared per unit for
1993 and 1992 are summarized below:
High Low Cash
Unit Unit Distributions
Price Price Declared
------ ------ -------------
1993:
Fourth Quarter.................... 39-7/8 36-3/8 $0.70
Third Quarter..................... 40 36-3/8 0.70
Second Quarter.................... 40-3/4 36-3/8 0.70
First Quarter..................... 39-3/4 35-3/4 0.70
1992:
Fourth Quarter.................... 39-1/4 33-1/4 $0.70
Third Quarter..................... 39-3/4 34-3/8 0.70
Second Quarter.................... 35-3/8 30-3/4 0.70
First Quarter..................... 36-5/8 31-3/4 0.70
As of January 31, 1994, there were approximately 18,000 holders
of Partnership units.
<PAGE>
SCHEDULE V
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Year ended December 31, 1993
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes(a) of year
--------- --------- --------- --------- ---------
Land.................... $ 56,680 $ 321 $ (1,456) $ -- $ 55,545
Rights-of-way........... 12,522 79 -- -- 12,601
Line pipe, fittings and
pipeline construction. 283,848 3,178 (7) (13) 287,008
Buildings and equipment. 152,284 10,040 (481) 569 162,412
Storage tanks and
delivery facilities... 140,293 5,245 (84) (776) 144,678
Construction in progress 22,770 2,221 -- (4,153) 20,838
--------- --------- --------- --------- ---------
$668,397 $ 21,084 $ (2,028) $ (4,371) $683,082
========= ========= ========= ========= =========
Year ended December 31, 1992
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes(a) of year
--------- --------- --------- --------- ---------
Land.................... $ 56,655 $ 25 $ -- $ -- $ 56,680
Rights-of-way........... 11,875 210 -- 437 12,522
Line pipe, fittings and
pipeline construction. 278,803 8,388 (83) (3,260) 283,848
Buildings and equipment. 135,733 14,824 (1,864) 3,591 152,284
Storage tanks and
delivery facilities... 132,252 9,921 (594) (1,286) 140,293
Construction in progress 27,138 (2,437) -- (1,931) 22,770
--------- --------- --------- --------- ---------
$642,456 $ 30,931 $ (2,541) $ (2,449) $668,397
========= ========= ========= ========= =========
Year ended December 31, 1991
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes(a) of year
--------- --------- --------- --------- ---------
Land.................... $ 56,653 $ 2 $ -- $ -- $ 56,655
Rights-of-way........... 11,646 37 -- 192 11,875
Line pipe, fittings and
pipeline construction. 278,501 633 (156) (175) 278,803
Buildings and equipment. 127,749 8,195 (266) 55 135,733
Storage tanks and
delivery facilities... 122,904 11,049 (977) (724) 132,252
Construction in progress 23,983 7,799 -- (4,644) 27,138
--------- --------- --------- --------- ---------
$621,436 $ 27,715 $ (1,399) $ (5,296) $642,456
========= ========= ========= ========= =========
(a)Other changes in "Construction in progress" primarily reflect the reclass-
ification of certain software costs to the "Other assets" caption of the
Partnership's consolidated balance sheet and reclassifications of certain
properties between categories upon final valuation for rate-making purposes.
<PAGE>
SCHEDULE VI
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
Year ended December 31, 1993
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes of year
--------- --------- --------- --------- ---------
Rights-of-way........... $ 1,071 $ 326 $ -- $ -- $ 1,397
Line pipe, fittings and
pipeline construction. 25,858 6,807 (7) (13) 32,645
Buildings and equipment. 11,907 5,483 (481) (16) 16,893
Storage tanks and
delivery facilities... 11,463 4,305 (83) (148) 15,537
--------- --------- --------- --------- ---------
$ 50,299 $ 16,921 $ (571) $ (177) $ 66,472
========= ========= ========= ========= =========
Year ended December 31, 1992
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes of year
--------- --------- --------- --------- ---------
Rights-of-way........... $ 752 $ 319 $ -- $ -- $ 1,071
Line pipe, fittings and
pipeline construction. 19,391 6,683 (83) (133) 25,858
Buildings and equipment. 8,885 5,026 (1,864) (140) 11,907
Storage tanks and
delivery facilities... 7,967 4,120 (594) (30) 11,463
--------- --------- --------- --------- ---------
$ 36,995 $ 16,148 $ (2,541) $ (303) $ 50,299
========= ========= ========= ========= =========
Year ended December 31, 1991
-----------------------------------------------------
Balance at Balance
beginning Additions Other at end
of year at cost Retirements changes of year
--------- --------- --------- --------- ---------
Rights-of-way........... $ 491 $ 261 $ -- $ -- $ 752
Line pipe, fittings and
pipeline construction. 12,983 6,714 (156) (150) 19,391
Buildings and equipment. 4,863 4,364 (266) (76) 8,885
Storage tanks and
delivery facilities... 5,078 3,635 (977) 231 7,967
--------- --------- --------- --------- ---------
$ 23,415 $ 14,974 $ (1,399) $ 5 $ 36,995
========= ========= ========= ========= =========
<PAGE>
SCHEDULE X
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
The following have been charged to expense:
Year ended December 31,
-------------------------------
1993 1992 1991
-------- -------- -------
1. Maintenance and repairs ................ $24,000(a) $20,320(a) $ 9,385
2. Depreciation and amortization
of intangible assets, preoperating
costs and similar deferrals ............ 2,050 2,180 2,215
3. Taxes, other than payroll and
income taxes ........................... 12,350 12,175 10,865
(a) These amounts include provisions for environmental costs of $15 million
and $10 million in 1993 and 1992, respectively.
<PAGE>
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
The following is a subsidiary of the Registrant:
SFPP, L.P., a Delaware limited partnership
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC PIPELINE PARTNERS, L.P., a
Delaware limited partnership (the "Registrant"), will file with
the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;
and
WHEREAS, Santa Fe Pacific Pipelines, Inc. (the "General
Partner") is the general partner of the Registrant; and
WHEREAS, the undersigned holds the office in the General
Partner as set forth below his name;
NOW THEREFORE, the undersigned hereby constitutes and
appoints Robert L. Edwards, his attorney, with full power to act
for him in his name, place and stead, to sign his name to the
Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1993; and to any and all amendments to such
Annual Report on Form 10-K, and hereby ratifies and confirms all
that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 23rd day of February 1994.
/s/ EDWARD F. SWIFT
-------------------------------
Edward F. Swift
Director
<PAGE>
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC PIPELINE PARTNERS, L.P., a
Delaware limited partnership (the "Registrant"), will file with
the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;
and
WHEREAS, Santa Fe Pacific Pipelines, Inc. (the "General
Partner") is the general partner of the Registrant; and
WHEREAS, the undersigned holds the office in the General
Partner as set forth below his name;
NOW THEREFORE, the undersigned hereby constitutes and
appoints Robert L. Edwards, his attorney, with full power to act
for him in his name, place and stead, to sign his name to the
Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1993; and to any and all amendments to such
Annual Report on Form 10-K, and hereby ratifies and confirms all
that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 28th day of February 1994.
/s/ ORVAL M. ADAM
-------------------------------
Orval M. Adam
Director
<PAGE>
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC PIPELINE PARTNERS, L.P., a
Delaware limited partnership (the "Registrant"), will file with
the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;
and
WHEREAS, Santa Fe Pacific Pipelines, Inc. (the "General
Partner") is the general partner of the Registrant; and
WHEREAS, the undersigned holds the office in the General
Partner as set forth below his name;
NOW THEREFORE, the undersigned hereby constitutes and
appoints Robert L. Edwards, his attorney, with full power to act
for him in his name, place and stead, to sign his name to the
Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1993; and to any and all amendments to such
Annual Report on Form 10-K, and hereby ratifies and confirms all
that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 23rd day of February 1994.
/s/ WILFORD D. GODBOLD, JR.
-------------------------------
Wilford D. Godbold, Jr.
Director
<PAGE>
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC PIPELINE PARTNERS, L.P., a
Delaware limited partnership (the "Registrant"), will file with
the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;
and
WHEREAS, Santa Fe Pacific Pipelines, Inc. (the "General
Partner") is the general partner of the Registrant; and
WHEREAS, the undersigned holds the office in the General
Partner as set forth below his name;
NOW THEREFORE, the undersigned hereby constitutes and
appoints Robert L. Edwards, his attorney, with full power to act
for him in his name, place and stead, to sign his name to the
Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1993; and to any and all amendments to such
Annual Report on Form 10-K, and hereby ratifies and confirms all
that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 28th day of February 1994.
/s/ ROBERT D. KREBS
-------------------------------
Robert D. Krebs
Director
<PAGE>
POWER OF ATTORNEY
WHEREAS, SANTA FE PACIFIC PIPELINE PARTNERS, L.P., a
Delaware limited partnership (the "Registrant"), will file with
the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;
and
WHEREAS, Santa Fe Pacific Pipelines, Inc. (the "General
Partner") is the general partner of the Registrant; and
WHEREAS, the undersigned holds the office in the General
Partner as set forth below his name;
NOW THEREFORE, the undersigned hereby constitutes and
appoints Robert L. Edwards, his attorney, with full power to act
for him in his name, place and stead, to sign his name to the
Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1993; and to any and all amendments to such
Annual Report on Form 10-K, and hereby ratifies and confirms all
that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power
of Attorney this 28th day of February 1994.
/s/ DENIS E. SPRINGER
-------------------------------
Denis E. Springer
Director
