SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1995
Commission File Number 1-10091
HUNTWAY PARTNERS, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware
36-3601653
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification No.)
25129 The Old Road, Suite 322
Newhall, California
(Address of Principal Executive Offices)
91381
(Zip Code)
Registrant's Telephone Number Including Area Code: (805) 286-
1582
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(b) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
QUARTERLY REPORT ON FORM 10-Q
HUNTWAY PARTNERS, L.P.
For the Quarter Ended March 31, 1995
INDEX
Part I. Financial Information
Page
Condensed Consolidated Balance Sheets as
of March 31, 1995 and December 31, 1994 3
Condensed Consolidated Statements of
Operations for the Three Months
Ended March 31, 1995 and 1994 4
Condensed Consolidated Statement of
Partners' Capital (Deficiency) for the Three Months
Ended March 31, 1995 4
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended
March 31, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements 6
Management's Discussion and Analysis
of Results of Operations and
Financial Condition 7
Part II. Other Information 11
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,286 $ 5,984
Accounts Receivable 2,789 2,485
Inventories 5,247 4,044
Prepaid Expenses 802 749
Total Current Assets 11,124 13,262
PROPERTY - Net 69,429 69,857
OTHER ASSETS 897 805
GOODWILL 1,859 1,872
TOTAL ASSETS $ 83,309 $ 85,796
CURRENT LIABILITIES:
Accounts Payable $ 6,358 $ 5,984
Current Portion of
Long-Term Obligations 2,463 2,418
Reserve for Plant Closure 214 242
Accrued Interest 218 241
Other Accrued Liabilities 1,756 1,652
Total Current Liabilities 11,009 10,537
LONG-TERM OBLIGATIONS 91,741 91,312
</TABLE>
<TABLE>
PARTNERS' CAPITAL:
<S> <C> <C>
General Partners (194) (160)
Limited Partners (19,247) (15,893)
Total Partners' Capital (Deficiency) (19,441) (16,053)
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 83,309 $ 85,796
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<CAPTION>
March 31, March 31,
1995 1994
Unaudited Unaudited
<S> <C> <C>
SALES $ 12,278 $ 13,752
COSTS AND EXPENSES:
Material and Processing Costs 12,768 11,668
Selling and Administration Expenses 1,081 1,249
Interest Expense 1,255 1,229
Depreciation and Amortization 562 555
Total Costs and Expenses 15,666 14,701
NET LOSS $ 3,388 $ 949
NET LOSS PER UNIT $ 0.29 $ 0.08
LIMITED PARTNER EQUIVALENT
UNITS OUTSTANDING 11,673 11,673
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(DEFICIENCY)
(in thousands)
<C>
General Limited
Partners Partners Totals
<S> <C> <C> <C>
Balance at January 1, 1995 $ (160) $ (15,893) $ (16,053)
Net Loss for the Three Months
Ended March 31, 1995 (34) (3,354) (3,388)
Balance at March 31, 1995 $ (194) $ (19,247) $ (19,441)
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
Three Three
Months Ended Months Ended
March 31, March 31,
1995 1994
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (3,388) $ (949)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operating Activities:
Interest Expense Paid by the Issuance of Notes 596 1,035
Depreciation and Amortization 562 555
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Accounts Receivable (278) 63
Increase in Inventories (1,193) (1,041)
Increase in Prepaid Expenses (53) (549)
Decrease in Reserves for Plant Closure (28) (340)
Increase in Accounts Payable 374 984
Increase (Decrease) in Accrued Liabilities 66 (849)
NET CASH USED BY OPERATING ACTIVITIES (3,342) (1,091)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property (107) (518)
Additions to Other Assets (140) 14
NET CASH USED BY INVESTING ACTIVITIES (247) (504)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Long-term Obligations (123) (588)
NET CASH USED BY FINANCING ACTIVITIES (123) (588)
NET DECREASE IN CASH (3,698) (2,183)
CASH BALANCE - BEGINNING OF PERIOD 5,984 7,745
CASH BALANCE - END OF PERIOD $ 2,286 $ 5,562
INTEREST PAID IN CASH DURING THE PERIOD $ 682 $ 244
</TABLE>
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements
of Huntway Partners, L.P. and subsidiary as of March 31, 1995 and
for the three month periods ended March 31, 1995 and 1994 are
unaudited, but in the opinion of management, reflect all
adjustments necessary for a fair presentation of such financial
statements in accordance with generally accepted accounting
principles. The results of operations for an interim period are
not necessarily indicative of results for a full year. The
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto contained in the Partnership's annual report for the year
ended December 31, 1994.
Crude oil and finished product inventories are stated at
cost determined by the last-in, first-out method, which is not in
excess of market. The effect of LIFO on first quarter 1995
results was to increase the net loss by $314,000 and to increase
the net loss by $29,000 for the first quarter of 1994.
Inventories at March 31, 1995 and December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Finished Products $3,694 $2,792
Crude Oil and Supplies 3,070 2,455
6,764 5,247
Less LIFO Reserve (1,517) (1,203)
Total $5,247 $4,044
</TABLE>
2. FINANCIAL ARRANGEMENTS
As of March 30, 1995, the Partnership was not in compliance
with cash flow covenants of its primary borrowings which require
the partnership to maintain cash flow before debt service of at
least $3,000,000 during the most recent four quarter period.
Huntway anticipated this event and obtained a waiver of
compliance from its lenders regarding this covenant through June
30, 1995.
3. CONTINGENCIES
The Partnership is party to a number of lawsuits and other
proceedings arising out of the ordinary course of its business.
While the results of such lawsuits and proceedings cannot be
predicted with certainty, management does not expect that the
ultimate liability, if any, will have a material adverse effect
on the consolidated financial position or results of operations
of the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with
the financial statements included elsewhere in this report.
Results of Operations
Huntway is principally engaged in the processing and sale of
liquid asphalt products, as well as the production of other
refined petroleum products such as gas oil, naphtha, kerosene
distillate, diesel fuel, jet fuel and bunker fuel.
Huntway's ability to generate income depends principally
upon the margins between the prices for its refined petroleum
products and the cost of crude oil, as well as upon demand for
liquid asphalt, which affects both price and sales volume.
Historically, refined petroleum product prices (including
prices for liquid asphalt, although to a lesser degree than
Huntway's other refined petroleum products) generally fluctuate
with crude oil price levels. Accordingly, there has not been a
relationship between total revenues and income due to the
volatile commodity character of crude oil prices.
Accordingly, income before interest and depreciation
provides the most meaningful basis for comparing historical
results of operations discussed below.
A number of uncertainties exist that may affect Huntway's
future operations including the possibility of further increases
in crude costs that may not be able to be passed on to customers
in the form of higher prices. Additionally, crude costs could
rise to such an extent that Huntway may not have sufficient
letter of credit availability to purchase all the crude it needs
to sustain operations to capacity, especially during the summer
season. If this occurred, Huntway would be forced to reduce
crude purchases which could adversely impact results of
operations. The Partnership's primary product is liquid asphalt.
Most of Huntway's competitors produce liquid asphalt as a by-
product and are of much greater size and have much larger
financial resources than the Partnership. Accordingly, the
Partnership has in the past, and may in the future, have
difficulty raising prices in the face of increasing crude costs.
As for many of Huntway's competitors, the margins they receive on
asphalt is not as important to their operations as asphalt
margins are to Huntway.
Three Months Ended March 31, 1995 Compared with the Three Months
Ended March 31, 1994
The 1995 first quarter net loss was $3,388,000, or 29 cents
per unit, compared with a 1994 first quarter net loss of
$949,000, or 8 cents per unit. A loss is normally expected in
the winter quarter because asphalt road repair work slows down as
a result of cold, wet weather. However, as explained below,
current quarter results were worse than usual due to the
combination of heavy rains, rising crude costs and weak refinery
margins.
The $2,439,000 increase in the net loss is principally
attributable to unseasonably high rainfall in California during
the first three months of 1995 versus the prior year. As asphalt
cannot be laid in rainy weather, sales of conventional paving
asphalt fell 32% between quarters. Additionally, crude costs
rose between quarters an average of $3.90 a barrel, or 39%.
Crude costs rose in the quarter in response to rising world crude
prices and increased demand for California heavy crude as
refineries are increasingly using this crude in their refinery
processes. Due to reduced demand, asphalt prices could not be
raised in response to rising crude costs. In addition, West
Coast refinery margins continued weak reaching near ten-year
lows. This results from a combination of rising crude costs and
excess light-end inventory. Accordingly, prices for the
Partnership's other refined petroleum products fell relative to
the increase in crude costs. To maintain cash flow, the
Partnership sold low-margin fuel oil in the quarter which reduced
the Partnership's asphalt margins and contributed to the negative
operating margins incurred by the Partnership in the first
quarter. Fuel oil is a blend of asphalt and gas oil.
The following table sets forth the effects of changes in
price and volume on sales and crude and processing costs on the
quarter ended March 31, 1995 as compared to the quarter ended
March 31, 1994:
<TABLE>
<CAPTION>
Crude & Barrels
Sales Processing Net Sold
(In Thousands)
<S> <C> <C> <C> <C>
Quarter ended March 31, 1994 $ 13,752 $ 11,668 $ 2,084 898
Effect of changes in price 792 3,023 (2,231)
Effect of changes in volume (2,266) (1,923) (343) (148)
Quarter ended March 31, 1995 $ 12,278 $ 12,768 $ (490) 750
</TABLE>
As reflected in the table, the net margin between sales and crude
and processing costs declined from $2.32 per barrel for the first
quarter of 1994 to $(0.65) per barrel for the first quarter of
1995. This decline in net margin of $2,574,000 is primarily
attributable to significantly increased crude cost which the
Partnership was unable to pass on to its customers. Volume
increased slightly in Southern California as heavy rains in the
quarter forced the sale of fuel oil in order to reduce excess
asphalt inventory. Sales in Northern California declined
significantly as a result of inclement weather. Sales prices
averaged $16.37 per barrel for the first quarter of 1995 as
compared to $15.31 per barrel for the comparable quarter of 1994,
an increase of $1.06 or 7%. This modest increase in pricing was
more than offset by an increase in crude and processing costs
which averaged $17.02 and $12.99 for the quarter ended March 31,
1995 and 1994, respectively, an increase of $4.03 or 31%.
Selling, general and administrative costs decreased $168,000
compared to the first quarter of 1994 primarily as a result of
lower professional and investor relations fees.
Interest expense and depreciation and amortization expense
were consistent with the prior year.
As a result of the factors described above, the outlook for
the balance of the year is uncertain, as results will depend to a
large extent on crude prices and public funding availability.
Recent heavy rainfall in California has damaged asphalt roads
throughout the State which will eventually lead to increased
repair activity. However, when this work will occur is uncertain
as State funding for road construction remains a concern.
Because of the foregoing, as well as other factors affecting
the Partnership's operating results, past financial performance
should not be considered to be a reliable indicator of future
performance and investors should not use historical trends to
anticipate results or trends in future periods.
Capital Resources And Liquidity
The primary factors that affect the Partnership's cash
requirements and liquidity position are fluctuations in the
selling prices of our refined products caused by local market
supply and demand factors including public and private demand for
road construction and improvement as well as demand for diesel
fuel and gasoline, as well as fluctuations in the cost of crude
oil which is impacted by a myriad of market factors, both foreign
and domestic. In addition, capital expenditure requirements,
including costs to maintain compliance with environmental
regulations as well as debt service requirements, also impact the
Partnership's cash needs.
In the first quarter of 1995, operating activities consumed
$3,328,000 in cash primarily resulting from the period's net loss
of $3,388,000. The effect of non-cash items of $1,158,000 was
offset by increased inventories of $1,193,000 caused by higher
crude costs despite a 13% decline in barrels.
Investing activities consumed $247,000 during the first
quarter of 1995 primarily for refinery equipment and deposits.
Financing activities only consumed a nominal $123,000 in the
first quarter of 1995.
In comparison, operating activities in the first quarter of
1994 consumed $1,091,000 in cash primarily resulting from the
period's net loss of $949,000 offset by depreciation and
amortization of $555,000 and interest expense paid by the
issuance of notes of $1,035,000. Turnaround costs incurred at
each of the two California refineries consumed $376,000 in cash
while the expenditure of $340,000 relating to closure,
maintenance and other costs was charged against the Sunbelt
refinery closure reserve. Finally, due to generally low crude
prices during the quarter, inventories were maintained at
increased levels resulting in an increase in inventory of
$1,041,000 offset by increases in accounts payable of $984,000.
Investing activities consumed $504,000 during the first
quarter of 1994 primarily for refinery equipment.
Financing activities consumed an additional $588,000 in the
first quarter of 1994 consisting primarily of the initial
principal payment of $499,000 on the priority secured notes.
The Partnership is pursuing a further restructuring of its
indebtedness and has engaged an advisor to assist it in this
process. The Partnership cannot determine if it will be
successful in refinancing its current indebtedness nor can it
presently determine what impact a possible refinancing would have
on its current financial position. The Partnership has
negotiated with current lenders regarding the terms on which this
debt might be repaid or restructured in the event a refinancing
can be accomplished through the issuance of debt and equity
securities. It is contemplated that a refinancing would reduce
the aggregate principal amount of debt outstanding and aggregate
interest expense and would result in substantial dilution to
existing unitholders through the issuance of new equity
securities, whether for cash or in conjunction with a new debt
financing.
The Partnership currently believes it will be able to meet
its obligations through a combination of cash on hand and
anticipated future operating cash flows. However, due to the
volatility of the business in which the Partnership operates,
there can be no assurance that such cash flow will be adequate to
sustain operations and service indebtedness.
The Partnership believes its current level of letter of
credit facilities are sufficient to guarantee expected near-term
requirements for crude oil purchases, collateralization of other
obligations and for hedging activities. However, due to the
volatility in the price of crude oil, there can be no assurance
that these facilities will be adequate.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is party to a number of additional lawsuits
and other proceedings arising out of the ordinary course of its
business. While the results of such lawsuits and proceedings
cannot be predicted with certainty, management does not expect
that the ultimate liability, if any, will have a material adverse
effect on the consolidated financial position or results of
operations of the Partnership other than as previously reported.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit Page
10.57 Waiver 13
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
May 11, 1995.
HUNTWAY PARTNERS, L.P.
(Registrant)
By: /s/ Warren J. Nelson
Warren J. Nelson
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2286
<SECURITIES> 0
<RECEIVABLES> 2789
<ALLOWANCES> 0
<INVENTORY> 5247
<CURRENT-ASSETS> 11124
<PP&E> 83874
<DEPRECIATION> 14445
<TOTAL-ASSETS> 83309
<CURRENT-LIABILITIES> 11009
<BONDS> 91741
<COMMON> (19247)
0
0
<OTHER-SE> (194)
<TOTAL-LIABILITY-AND-EQUITY> 83309
<SALES> 12278
<TOTAL-REVENUES> 0
<CGS> 13330
<TOTAL-COSTS> 13330
<OTHER-EXPENSES> 1081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1255
<INCOME-PRETAX> (3388)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3388)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> 0
</TABLE>
WAIVER
This WAIVER dated as of March 31, 1995 (this Agreement) is
entered into by and among Huntway Partners, L.P. (Huntway),
Sunbelt Refining Company, L.P. (Sunbelt, and together with
Huntway, the Company) and the Lenders executing the signature
pages hereto. This Waiver is entered into pursuant to Section
104 of that certain Collateralized Note Indenture dated as of
June 22, 1993 (as in effect on the date hereof, the Indenture)
between the Company and the Trustee. Capitalized terms used
herein but not otherwise defined herein shall have the meanings
assigned to such terms in the Indenture.
WHEREAS, the Company and the Trustee are parties to the
Indenture;
WHEREAS, the Company has requested that the Lenders waive, for
the quarters ending March 31, 1995 and June 30, 1995, the
requirement contained in Section 415(a) of the Indenture that the
Company will not permit Consolidated EBITDA as of the last day of
each quarter for the four consecutive quarter (ending on or after
December 31, 1993) period ended on such day to be less than
$3,000,000;
WHEREAS, the Holders have agreed to provide a waiver of Section
415(a) of the Indenture, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the terms
and conditions herein contained, the sufficiency of which is
hereby acknowledged, the Holders and the Company hereby agree as
follows:
SECTION 1. Waiver. Upon the Effective Date (but with effect
from and after the date hereof), the undersigned Holders hereby
waive compliance by the Company with the following covenant
contained in Section 415(a) of the Indenture with respect to the
quarter ended March 31, 1995 and quarter ended June 30, 1995:
(a) The Company will not permit Consolidated EBITDA as of the
last day of each quarter for four consecutive quarter (ending on
or after December 31, 1993) period ended on such day to be less
than $3,000,000.
SECTION 2. Effectiveness. Upon the date and at the time (the
Effective Date) at which the Trustee has received counterparts
of this Waiver executed by each of the Holders (for purposes of
which, receipt of a telecopied copy of a counterpart executed by
a Holder shall be deemed receipt of such executed counterpart),
the waivers set forth in Section 1 above shall become effective
with retroactive effect as if executed on the date hereof.
SECTION 3. Effect of Waiver; No Implied Waivers. The
Indenture is hereby ratified and confirmed in all respects and
all terms, conditions and provisions of the Indenture, except as
waived by this Waiver, shall remain in full force and effect. It
is hereby agreed that, except as specifically provided herein,
this Waiver does not in any way waive, amend, modify, affect or
impair the terms and conditions of the Indenture, and all terms
and conditions of the Indenture are to remain in full force and
effect unless otherwise specifically amended, waived or changed
pursuant to the terms and conditions of this Waiver.
Nothing in this Waiver shall be deemed or construed as a waiver
of any right or remedy the Trustee or the Lenders may have as of
the date hereof or hereafter in relation to any unwaived or
uncured Default or Event of Default.
SECTION 4. Counterparts. This Waiver may be executed in any
number of counterparts (including telecopy counterparts), and by
the parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same
instrument.
SECTION 5. Governing Law. THIS WAIVER SHALL BE DEEMED
TO BE
MADE UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF
NEW YORK.
* * * * * *
IN WITNESS WHEREOF, this Waiver is duly executed by the
respective duly authorized officer of the undersigned as of the
date first written above.
HUNTWAY PARTNERS, L.P., a
Delaware Limited Partnership
By: HUNTWAY MANAGING PARTNER, L.P.,
its Managing General Partner
By: The Huntway Division of
Reprise Holdings, Inc.,
its Sole General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President and
Chief Executive Officer
SUNBELT REFINING COMPANY, L.P.
By: HUNTWAY PARTNERS, L.P.,
its sole General Partner
By: HUNTWAY MANAGING PARTNER, L.P.
its Managing General Partner
By: The Huntway Division of
Reprise Holdings, Inc.,
its Sole General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President and
Chief Executive Officer
BANKERS TRUST COMPANY
By: /s/ Carl O. Roark
Carl O. Roark
Managing Director
IN WITNESS WHEREOF, this Waiver is duly executed by the
respective duly authorized officer of the undersigned as of the
date first written above.
MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
Michael L. Klofas
Second Vice President
RYBACK MANAGEMENT CORPORATION,
on behalf of itself and/or its
nominees(s) under
the Indenture
By: /s/ Robert A. Lange
Robert A. Lange
Senior Vice President
CROWN LIFE INSURANCE COMPANY
By: /s/ H. E. Stackhouse
H. E. Stackhouse
Assistant Vice President,
Private Placement
CROWN LIFE INSURANCE COMPANY
By: /s/ Jeff Tiefenbach
Jeff Tiefenbach
CENTURY LIFE OF AMERICA
By: Century Investment Management
Company
By: /s/ Donald Heltner
Donald Heltner
Vice President
CENTURY LIFE INSURANCE COMPANY
By: Century Investment Management
Company
By: /s/ Donald Heltner
Donald Heltner
Vice President
19
