UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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, #322
Newhall, California 91381
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code: (805) 286-
1582
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Units New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be considered, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
At April 1, 1996, the aggregate market value of the Partnership
Units held by non-affiliates of the registrant was approximately
$3,110,667 based upon the closing price of its units on the New
York Stock Exchange Composite tape. At April 1, 1996, there were
11,556,250 Units outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K Part
Specified portions of Registrant's
Registration Statement on Form S-1 as amended by
Amendment No. 3, filed November 9, 1988 Part II
PART I
Item 1. Business of the Partnership
INTRODUCTION
Huntway Partners, L.P., a Delaware limited partnership (the
"Partnership"), owns three crude oil refineries located in
California and Arizona. The Partnership is currently operating
the two California refineries while the Arizona refinery has been
shutdown since August 1993 due to adverse market conditions.
The managing general partner of the Partnership is Huntway
Managing Partner, L.P. (the "Managing General Partner"), a
Delaware limited partnership. The Managing General Partner owns a
0.9% general partner interest in the Partnership. See "Cash
Distribution Policy" and "Management". The Managing General
Partner and Huntway Holdings, L.P. ("Huntway Holdings"), the
special general partner of the Partnership (the "Special General
Partner"), are collectively referred to herein as the "General
Partners". The General Partners are under common ownership.
The principal executive offices of the Partnership and General
Partners are located at 25129 The Old Road, Suite 322, Newhall,
California 91381 and their telephone number is (805) 286-1582.
General:
The three refineries owned by Huntway are located in Wilmington,
California, near Los Angeles Harbor, in Benicia, California, near
San Francisco Bay and in Coolidge, Arizona, which is midway
between Phoenix and Tucson. The Wilmington, Benicia and Coolidge
refineries have refining capacities of 6,000 barrels per day
("bpd"), 9,000 bpd and 8,500 bpd, respectively.
The two California refineries produce liquid asphalt products and
light-end products such as gas oil, diesel fuel, naphtha and
kerosene distillate, from crude oil obtained from onshore and
offshore California production sources. The Arizona refinery,
which was shut down in August 1993, also produced jet fuel and
diesel fuel. The California refineries supply liquid asphalt to
hot mix asphalt producers, material supply companies, contractors
and government agencies principally for use in road paving in
California, and to a lesser extent Arizona, Nevada, Utah, Oregon
and Mexico. The Arizona refinery is owned by a subsidiary of the
Partnership, Sunbelt Refining Company, L.P. ("Sunbelt"). The
refining business conducted by the Partnership, its subsidiary
and its predecessors since 1979 is referred to herein as
"Huntway".
Most competing refineries typically produce liquid asphalt as a
residual by-product from the refining of higher cost and higher
quality, light crude oil into products such as gasoline. In
contrast, Huntway's California refineries were designed
specifically for the production of liquid asphalt from lower
cost, lower quality, heavy crude oil produced in California.
Products and Markets:
Market Area
Huntway markets liquid asphalt primarily in California and, to a
lesser extent, in Nevada, Utah, Arizona and Oregon. The market
area served by the Wilmington refinery includes the southern
portion of California from Bakersfield to San Diego, into Baja,
California in Mexico, and east into southern Nevada and Arizona
(the "Southern Market"). The market area covered by the Benicia
refinery includes most of northern California from Monterey and
Modesto north to southern Oregon and east to northern Nevada and
Utah (the "Northern Market"). The Arizona refinery market area
is no longer serviced through its Sunbelt refinery, as the
refinery was shut down in August 1993.
Liquid Asphalt
Liquid asphalt is Huntway's principal product and accounted for
approximately 54% of its revenues in 1995 and 1994. The
principal uses of liquid asphalt are in road paving and, to a
lesser extent, in the manufacture of roofing products. About 82%
of Huntway's liquid asphalt sales consist of paving grade liquid
asphalt. The remaining 18% of Huntway's liquid asphalt is sold
for use in the production of roofing products such as tar paper
and roofing shingles, as a component of fuel oil sales and other
specialty products.
Paving grade liquid asphalt is sold by Huntway to hot mix asphalt
producers, material supply companies, contractors and government
agencies. These customers, in turn, mix liquid asphalt with sand
and gravel to produce "hot mix asphalt" which is used for road
paving.
Demand for liquid asphalt is generally lowest in the first
quarter of the calendar year, slightly higher in the second and
fourth quarters and significantly higher in the third calendar
quarter. In particular, liquid asphalt sales in the Northern
Market are somewhat more seasonal than sales in the Southern
Market (including Arizona) due to the rain and cold weather
usually experienced in the Northern Market during the winter
months, which affects road paving activities.
Gas Oil
Gas oil accounted for about 27% of Huntway's revenues during 1995
and 29% during 1994. This product is used either as a blending
stock to make marine diesel fuel or bunker fuel or by other
refiners as a feedstock for the production of gasoline and other
light petroleum products.
Kerosene Distillate and Naphtha
Kerosene distillate is primarily sold to customers to be used as
a refinery feedstock or diesel blendstock.
Huntway also produces a gasoline range naphtha which is sold to
other refiners for blending or production of finished gasoline
products. Sales of kerosene distillate and naphtha accounted for
approximately 18% and 19% of revenues in 1995 and 1994,
respectively.
Jet Fuel
Jet fuel, formerly produced in Arizona, was sold to the Defense
Fuels Supply Command - a branch of the U.S. government - and was
used as a military aviation fuel. Due to the closure of the
Sunbelt Refinery, Huntway did not sell jet fuel in 1994 or 1995
and it accounted for less than 10% of revenues in 1993.
Diesel Fuel
Diesel fuel, formerly produced in Arizona, was sold to
distributors as well as end users for use as a motor vehicle
fuel. Sales of diesel fuel accounted for less than 10% of
revenues in 1993. With the closure of the Sunbelt refinery,
Huntway is no longer producing diesel fuel and sold none in 1994
or 1995.
Bunker Fuel Blend Stock
This product is blended with lower viscosity blend stock to make
finished marine fuels used as a fuel by ocean going ships and
barges and is sold primarily to ship bunkering companies. Huntway
did not sell bunker fuel in 1994 but sold a record amount in 1995
due to extensive rain in the first half of the year. It
accounted for less than 1% of revenues in 1993.
Major Customers
One customer accounted for 17% of revenues in 1995 and 16% of
revenues in 1994. In the event that one or more customers
significantly reduces the level of their purchases from Huntway,
Huntway's management believes that it could find alternative
purchasers for the affected output and that such reduction would
not have a long-term material adverse effect upon the results of
Huntway's operations.
Factors Affecting Demand for Liquid Asphalt
General
Demand for liquid paving asphalt products is primarily affected
by federal, state and local highway spending, commercial
construction and the level of housing starts and the weather, all
of which are beyond the control of the Partnership. Government
highway spending provides a source of demand which is relatively
unaffected by normal business cycles but is dependent upon
appropriations. During 1995, approximately 80% of liquid asphalt
sales were ultimately funded by the public sector. However, 1994
results and, to some extent, 1995 results were adversely impacted
by the January 17, 1994 earthquake which diverted substantial
public funds designated for road transportation to freeway and
bridge repair. This repair effort primarily utilized concrete
and steel, and thereby depressed 1994 and 1995 public funding of
conventional asphalt paving. Historically, approximately 70% of
Huntway's liquid asphalt sales have been made to purchasers whose
business is directly tied to these various governmental
expenditures. Over the long term the demand for liquid asphalt
will also tend to be influenced by changes in population, the
level of commercial construction, and housing activity.
The depressed business environment in California in recent years
has adversely impacted demand for asphalt by the private sector.
Increased public sector demand has partially mitigated lower
private demand. In 1995, public sector work was delayed in the
first half of the year due to the heavy rainfall while, in 1994,
and to some extent in 1995, public funding was diverted to
freeway and bridge repair resulting from the January 1994
earthquake. Private asphalt demand rebounded slightly in 1995
due to an improved California economy and is expected to increase
in each of the next few years commensurate with the anticipated
expansion of the California economy.
In the first half of 1995, unusually heavy rainfall severely
depressed asphalt demand, as asphalt is not usually laid in rainy
weather. However, demand for asphalt did increase in the second
half of the year versus 1994 second half due to the backlog
created as a result of the poor weather experienced in the first
half of the year and a relatively dry fourth quarter 1995.
Government Funding
General. With the closure of the Sunbelt refinery in 1993,
Huntway's two remaining refineries are in California, therefore
the following discussion focuses on government highway funds
available in California.
Federal Funding. Federal funding of highway projects is
accomplished through the Federal Aid Highway Program. The
Federal Aid Highway Program is a federally assisted, state
administered program that distributes federal funds to the states
to construct and improve urban and rural highway systems. The
program is administered by the Federal Highway Administration
("FHWA"), an agency of the Department of Transportation.
Substantially all federal highway funds are derived from gasoline
user taxes assessed at the pump.
State and Local Funding. In addition to federal funding for
highway projects, states individually fund transportation
improvements with the proceeds of a variety of gasoline and other
taxes. In California, the California Department of
Transportation ("CALTRANS") administers state expenditures for
highway projects.
In June, 1990 voters in the state of California passed a measure
which increased state gasoline taxes from 9 cents per gallon to
14 cents per gallon effective August 1, 1990, and by an
additional 1 cent per gallon on each January 1 thereafter through
1994. The additional revenues available to the state are now
estimated to be about $14 billion over the decade. However, in
June 1994, voters in the State of California rejected a measure
that would have provided an additional $2.0 billion to pay for
damage to freeways and bridges resulting from the January 17,
1994 earthquake. Accordingly, State funding for earthquake
repair projects was achieved by utilizing funds from the existing
California transportation budget.
On March 26, 1996, the California electorate approved Proposition
192, the Seismic Retrofit Bond Act of 1996. This bond measure
will raise $2 billion to finance a seismic retrofit program for
state bridges, highway overpasses and interchanges and will have
the indirect effect of increasing expenditures for conventional
road repair and construction over that which would have been
spent had Proposition 192 not been approved.
Local governmental units (such as cities, counties and townships)
provide additional funding for road and highway projects through
various taxes and bond issues.
However, it should be noted that these past increases in
governmental funding and expenditures to date have not been
sufficient to entirely offset the decline in private sector
demand as previously outlined.
Crude Oil Supply
Huntway's California refineries require approximately 15,000 bpd
of crude oil when operating at their rated capacities. Total
refinery crude oil processing capacity in California is
approximately 1.9 million bpd according to the 1995 Refining
Survey published by the Oil & Gas Journal. Refinery capacity for
the West Coast of the United States, including Hawaii, is 2.9
million bpd. These refineries generally run an average of 90% of
their capacity. California refineries are supplied primarily by
onshore and offshore California production and by crude oil
transported from Alaska with some imports from South America,
Mexico, the Far East and Persian Gulf. Current production of
crude oil in California and Alaska alone totals approximately 2.5
million bpd. Legislation has been passed to allow for the export
of Alaskan North Slope Crude oil. Management does not believe
that this will significantly affect Huntway's ability to obtain
crude oil nor will it have a material effect on Huntway's cost of
crude oil.
Huntway's California refineries are located near substantial
crude oil reserves. A significant portion of this crude oil is
heavy, high sulfur crude oil, which is well-suited for liquid
asphalt production due to the higher percentage yield of liquid
asphalt per barrel.
The Arizona refinery is located adjacent to the All-American
Pipeline, a common carrier pipeline which transports crude oil
from California to Texas.
Huntway coordinates its purchases of crude oil to meet the supply
needs of all of its existing refineries. Huntway purchases a
substantial portion of its crude oil requirements under contracts
with a variety of crude oil producers for terms varying from 30
days to 90 days. In addition, Huntway supplements its contract
purchases with purchases of crude oil on the "spot" market.
Competition
The markets for refined petroleum products are highly competitive
and pricing is a primary competitive factor. With respect to
liquid asphalt, Huntway's management believes that Huntway's
reputation for consistently high product quality, its ability to
provide high levels of service and its long-standing
relationships with its major customers are important to its
continued success.
Huntway's five-state market area is served by numerous
refineries, including refineries operated by major integrated oil
companies and by other independent refiners. All of Huntway's
primary competitors are located in California and many have
larger refining capacity and greater financial resources than
does Huntway. In 1995, Huntway's management believes that Shell
Oil Company accounted for a majority of the volume of liquid
asphalt sales in the Northern Market and that Huntway accounted
for 20% to 25% of liquid asphalt sales in this market area. The
remaining 10% to 20% estimated market share is apportioned
amongst several other competitors located outside of the Northern
California area. Chevron ceased producing asphalt in Northern
California effective January 1, 1994. Huntway's management
believes that Paramount (formerly Enron) accounts for
approximately 50% of the liquid asphalt sales in the Southern
market and that Huntway and two other competing refineries
account for the majority of the remainder of liquid asphalt
sales.
Employees
Huntway currently has 71 full-time and 8 part-time employees.
None of Huntway's employees is represented by a union, and
management believes that labor relations have been excellent.
Environmental Matters
Huntway's refinery activities involve the transportation,
storage, handling and processing of crude oil and petroleum
products which contain substances regulated under various federal
and state environmental laws and regulations. Huntway is also
subject to federal, state and local laws and regulations relating
to air emissions and disposal of wastewater and hazardous waste,
as well as other environmental laws and regulations, including
those governing the handling, treatment, release and cleanup of
hazardous materials and wastes.
Huntway has from time to time expended significant resources,
both financial and management, to comply with environmental
regulations and permitting requirements and anticipates that it
will continue to be required to expend financial and management
resources for this purpose in the future. Stringent new
environmental regulations have been adopted recently which will
require most refiners in Huntway's market area to expend
substantial sums in order to comply. However, these regulations
principally impact refiners which produce motor vehicle fuels
which Huntway does not produce. Compliance with such regulations
and requirements has not had a material adverse effect on the
assets, financial position or results of operations of Huntway.
Huntway estimates that its environmentally-related remediation
expenditures in 1996 will total approximately $150,000 with such
expenditures totaling $65,000 in 1995 and $60,000 in 1994.
Environmentally-related remediation expenditures in 1994 and 1995
were less than anticipated due to permitting delays resulting
from regulatory agencies. This anticipated increase in costs in
1996 is primarily associated with the closure of a hazardous
waste surface impoundment at its Wilmington refinery including
remediation costs associated with removing approximately 20 to 30
drums improperly buried at the Wilmington refinery site prior to
its construction.
On May 19, 1995, during testing pursuant to the closure of a
waste water treatment pond, the Partnership discovered that
several drums of hazardous materials had been improperly disposed
of at the site of the Wilmington refinery. Subsequent
geophysical testing to date indicates that approximately 20 to 30
of such drums had been improperly disposed of at the site. The
materials had been stored in drums and disposed of under the
waste water treatment pond apparently at the time of its
construction. Although the Partnership believes that it has
claims against the former owners and operators of the site, as
well as the entities involved in the construction of the pond and
various insurance carriers which should substantially mitigate
the ultimate costs, the Partnership has accrued $294,000 as of
December 31, 1995 for remediation of the contamination.
Management does not believe, based upon the information known at
this time, that the remediation effort will have a material
adverse effect on the Partnership's results of operations or
financial position.
Item 2. Properties of the Partnership
Wilmington Refinery
The Wilmington refinery and its related facilities are located on
a seven-acre site under a lease expiring on December 31, 2003.
This ground lease covers three contiguous parcels: (a) land owned
by and leased directly from Industrial Asphalt on which Huntway's
tank farm is located; (b) land owned by the Southern Pacific
Railroad leased to Industrial Asphalt for a term ending June 1,
2032 on which the processing facility is located; and (c) two
strip parcels bordering the facility owned by Southern Pacific
and leased to Industrial Asphalt under a lease cancelable upon 30
days notice which are used for access to the refinery. In
addition, the ground lease grants Huntway a non-exclusive license
in Industrial Asphalt's rights of access to the properties under
an agreement with Southern Pacific. The Partnership has the
right to (i) purchase from Industrial Asphalt an undivided
interest in the land under the tank farm at fair market value and
(ii) assume the two Southern Pacific leases from Industrial
Asphalt. Wilmington has 108,000 barrels of crude oil storage on
site. Huntway also owns refined product tankage for storage of
liquid asphalt and other refined products which Huntway's
management believes is adequate for its needs.
Benicia Refinery
The Benicia refinery is located adjacent to the Carquinez Strait,
near the San Francisco Bay. The refinery and related facilities
are located on nineteen acres of land owned by Huntway. Crude
oil tankage at Benicia totals 216,000 barrels, while refined
product tankage for storage of liquid asphalt and light oils
totals 326,000 barrels. To enhance Benicia's ability to receive
crude oil by water and to ship finished products by ship and
barge, in 1984 Huntway leased dock and loading facilities for a
term expiring February 2031. The dock facilities are connected
to the refinery by two two-mile pipelines.
Arizona Refinery
The Arizona refinery and its related facilities are located on a
thirty-seven acre parcel leased from the City of Mesa under a
lease expiring on April 12, 2008 (with options to renew for up to
an additional twenty years until 2028). The Arizona refinery has
100,000 barrels of crude oil storage capacity, and 195,000
barrels of storage capacity for liquid asphalt and other refined
products.
Item 3. Legal Proceedings
In December 1992, the Partnership uncovered certain
irregularities in its financial accounts. These irregularities
extended to the accounting records utilized in the preparation of
the Partnership's quarterly reports on Form 10-Q for 1992, as
filed with the Securities and Exchange Commission (SEC). As a
result, the quarterly financial information was restated and
presented as a part of the Partnership's Annual Report on Form
10-K which was filed with the SEC on March 30, 1993. The Company
has reported all of these irregularities to appropriate
governmental authorities, including the Securities and Exchange
Commission and the U.S. Attorney's office. The Partnership was
notified in early December 1992 that the SEC was commencing an
informal investigation into these financial irregularities and
was further notified in late April 1993 that a formal
investigation had begun. The Partnership has cooperated fully
with the SEC in its investigation. In July of 1994, the
Partnership was notified that the SEC had concluded its
investigation and issued an order specifying that the Partnership
permanently cease and desist from committing or causing any
violations or future violations of Section 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-13 and
13b2-1 thereunder. The SEC did not order a monetary penalty as a
result of the investigations. The Partnership has consented to
the order without admitting or denying any factual allegations
contained in the order.
As a result of the Company's disclosures to the U.S. Attorney's
office, the Company has received a federal grand jury subpoena
seeking documents. The Company is responding to the subpoena and
cooperating with the U.S. Attorney's office in the course of this
investigation.
In December 1992, two lawsuits were filed against the Partnership
and certain of its present and former officers. The lawsuits
sought an unspecified amount of damages and alleged that certain
statements made by the Partnership failed to adequately disclose
material facts that would have impacted the trading value of the
Partnership's units. These lawsuits were settled in August 1993
pursuant to which the plaintiffs would receive a combination of
$1,200,000 in insurance proceeds and a $150,000 unsecured 7% note
payable which was paid in full by the Partnership on December 15,
1995.
Also in 1992, the Partnership and its subsidiary, Sunbelt
Refining Company, L.P., were charged by the State of Arizona with
violations of certain environmental regulations and provisions of
the Arizona refinery's installation permit. Sunbelt acknowledged
that it had certain environmental compliance problems in the
past, but believed that none of these resulted in any harm to
public health or to the environment. While Huntway and Sunbelt
have consistently denied that any criminal activity occurred, the
parties agreed on December 21, 1993 to settle both the State's
civil and criminal charges. As part of the settlement, Sunbelt
has agreed to pay a penalty of $700,000 over a period of seven
years without interest and to undertake certain environmental
improvements at the Arizona refinery. On December 21, 1993 and
January 7, 1994, the Partnership made payments against the
penalty of $150,000 and $100,000, respectively. The next
installment payment of $100,000 was paid on January 7, 1996. The
settlement, which consists of a civil consent judgment and a plea
agreement, has been reviewed and approved by the court, the U.S.
Attorney's Office and the U.S. Environmental Protection Agency.
Under the terms of the settlement, Huntway is released from any
further liability for the alleged violations and considers the
matter closed. Huntway has instituted new programs and
procedures to ensure that it is operating in compliance with all
environmental laws and regulations.
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.
Item 4. Submission of Matters to a Vote of Unitholders
No matters were submitted to a vote of Unitholders during
calendar year 1995.
PART II
Item 5. Market for Registrant's Units
and Related Unitholder Matters
Market
As of April 1, 1996 there were approximately 2,000 holders of
record of Huntway Partners, L.P. Units. The Units are traded on
the New York Stock Exchange under the ticker symbol "HWY". The
following table indicates the high and low sale prices of the
Huntway Partners, L.P. Preference Units as reported by the
Composite Transactions listing in the Wall Street Journal for the
periods indicated:
<TABLE>
<S> <C> <C> <C> <C>
Year Ended Distribution
1994 High Low Close Paid
1st Quarter 3 1 3/8 2 3/4 --
2nd Quarter 2 5/8 1 5/8 1 3/4 --
3rd Quarter 1 3/4 1 1/8 1 1/8 --
4th Quarter 1 1/4 5/8 1 --
Year Ended Distribution
1995 Paid
1st Quarter 1 1/2 5/8 --
2nd Quarter 1 1/8 5/8 5/8 --
3rd Quarter 7/8 1/2 1/2 --
4th Quarter 3/4 3/8 7/16 --
</TABLE>
Cash Distribution Policy
No cash distributions were paid to holders of Preference Units or
Common Units during 1995.
Cash distributions to holders of Preference Units were suspended
effective November, 1990 due to Huntway's operating and working
capital needs, coupled with its bank principal and capital
expenditure requirements.
Under the Partnership's June 23, 1993 restructuring agreement
with its principal lenders, cash distributions to unitholders are
prohibited until the earlier of payment in full on all
obligations to the lenders or December 31, 2008.
"Cash Distribution Policy" is incorporated by reference herein to
pages 17 through 20 of the Partnership's Registration Statement
on Form S-1 dated November 9, 1988, Registration No. 33-24445.
Item 6. Selected Financial Data
(In thousands except per unit and per barrel data)
The following historical selected financial data as of and for
each of the years in the five-year period ended December 31,
1995, are derived from the financial statements of Huntway
Partners, L.P., which have been audited by Deloitte & Touche
LLP, independent auditors, which financial statements and reports
thereon (except for 1991 and 1992 and as to the balance sheet,
1993) are included elsewhere herein. All of the selected
information should be read in conjunction with the financial
statements and notes thereto.
<TABLE>
<CAPTION>
Huntway Partners, L.P. Historical
Year Ended
December 31,
<S> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995
OPERATING DATA
Revenues $116,615 $105,463 $102,678 $79,139 $83,069
Materials, Processing,
Selling and Administrative
Cost and Expenses 101,888 106,577 94,249 (d) 74,803 80,462
Interest Expense 8,706 8,632 7,280 4,984 5,177
Plant Closure and Write
Down -- -- 16,013 (c) -- 9,492(f)
Depreciation and
Amortization 2,999 4,567 3,806 (e) 2,356 2,399
Net Income (Loss) $3,022 $(14,313) $(18,670)(c)(d)(e) $(3,004) $(14,461)
Net Income (Loss)
Per Unit (a) $0.26 $(1.24) $(1.60) $(0.26) $(1.24)
Barrels Sold 6,113 5,825 5,466 4,584 4,400
Revenues Per Barrel $19.08 $18.11 $18.78 $17.26 $18.88
BALANCE SHEET DATA
Working Capital $(19,981)(b)$(83,482)(b) $2,289(b) $2,725(b)$(91,796) (b)
Total Assets 110,891(b) 107,232(b) 90,745(b) 85,796(b) 74,383 (b)
Long-term Obligations 51,667 742 89,570 91,312 none
Partners' Capital 19,934(b) 5,621(b) (13,049)bcde (16,053)(b)(30,524) (b)
</TABLE>
a) Assumes that 11,556,250 units were outstanding in 1991
through 1995. The allocation to the general partners of their
interest in net income (loss) has been deducted before
computing net income (loss) per unit.
b) After the cumulative LIFO reserve of $641, $1,220, $36,
$1,203 and $1,170 in 1991, 1992, 1993, 1994 and 1995,
respectively - see Note 2.
c) Non-recurring charges recorded in June 1993 relating to the
Sunbelt refinery which was shut down in August 1993.
d) Includes $2,078 of non-recurring charges relating to
professional fees incurred relating to the restructuring of
indebtedness completed in 1993.
e) Includes $778 of non-recurring charges relating to
amortization of loan acquisition costs.
f) Write down of Sunbelt refinery assets to reflect expected
operation as a crude or product terminal in the future rather
than as a petroleum refinery.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Throughout the following discussion, the business operated by
Huntway Partners, L.P. is referred to as "Huntway".
The following should be read in conjunction with the foregoing
"Selected Financial Data" and the historical financial statements
and notes 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 jet fuel, diesel fuel, gas
oil, naphtha, kerosene distillate 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 selling and administration, interest
and depreciation expense provides the most meaningful basis for
comparing historical results of operations discussed below.
1995 COMPARED WITH 1994
Net loss for the year ended December 31, 1995 was $14,462,000, or
$1.24 per unit, compared with a net loss of $3,004,000, or $.26
per unit in 1994.
The increase in the net loss of $11,458,000 is due a $9,492,000,
or $.77 per unit write down of the company's Sunbelt refinery in
Arizona. As the company has determined that it is unlikely that
Sunbelt will be operated as a full blown refinery in the future
it has reduced the carrying value of the refinery in accordance
with FASB 121, Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be disposed of. Excluding
the Sunbelt write down the increase in the loss of $1,966,000 is
reflective of the impact of rising crude prices, increased
competition and unusually heavy rainfall in the first half of the
year. Through the first six months of 1995, the net loss
exceeded 1994 by $3,641,000.
In effect, Huntway experienced two completely distinct six month
periods in 1995. The first half of 1995 was very depressed
characterized by unusually high levels of rainfall which
depressed asphalt sales, rising crude prices and increased
competition. In the second half of 1995, crude prices fell as
demand for crude declined as major refineries on the West Coast
conducted major repair efforts. In addition, in the last six
months of the year, the weather in California was dry which is
conducive to asphalt sales, competition declined and, as
expected, demand for asphalt was strong due in part to the
backlog which had developed in the first half of the year as a
result of the wet weather.
Asphalt is not usually laid in rainy weather. Accordingly,
through the first half of 1995 sales of paving asphalt was down
19% versus the same period a year ago. During this same period,
crude prices rose an average of 29% in response to rising crude
prices and increased demand for California heavy crude as
refineries have begun to use more of this crude in their refinery
process. This increased demand for heavy California crudes has
been driven by the lower price of California crudes. Refineries
have begun to realize that these crudes can be used in their
refinery processes resulting in better margins between crude and
finished product prices.
The high levels of rainfall reduced asphalt demand which meant
that asphalt prices could not be raised in response to rising
crude costs. Moreover, West Coast refinery margins continued
weak reaching near ten-year lows in the first half of the year
due to rising crude costs and excess light-end inventories.
This, in turn, caused margins for Huntway's light-end products to
decline.
In the second half of 1995, Huntway's operating performance
improved. During this period, several large California
refineries reduced production due to refinery problems. This
decreased crude demand which lowered crude prices and increased
light-end prices due to a lower level of finished product being
refined.
This increase in finished light-end prices due to reduced supply
caused Huntway's light-end prices to increase. In addition, in
the second half of 1995 world crude prices fell due to increased
production throughout the world and relatively flat demand.
Meanwhile, asphalt prices and margins increased in California in
the second half of 1995 due to the combination of reduced
competition coupled with dry, warm weather throughout California
during the last six months of the year. Also, crude prices
declined as discussed above and demand for asphalt increased due
to the backlog created from the heavy rainfall in the first half
of the year.
The following table sets forth the effects of change in price and
volume on sales and crude and processing costs on the year ended
December 31, 1995 as compared to the year ended December 31,
1994:
<TABLE>
<S> <C> <C> <C> <C>
Materials & Net Barrels
Sales Processing Margin Sold
Year Ended December 31,
1994 $ 79,139,000 $ 70,621,000 $ 8,518,000 4,584,000
Effect of Changes in
Price 7,107,000 8,624,000 (1,517,000)
Effect of Changes in
Volume (3,177,000) (2,835,000) (342,000) (184,000)
Year Ended December 31,
1995 $ 83,069,000 $ 76,410,000 $ 6,659,000 4,400,000
</TABLE>
As reflected in the table above, the net margin fell $1,859,000,
or 21%, between periods. Volume in terms of barrels sold fell 4%
versus 1994 while material and processing costs rose 8% between
periods. In 1995, average product prices were $18.88 a barrel
versus $17.26 in 1994. Materials and processing costs averaged
$15.41 a barrel in 1994 and $17.42 a barrel in 1995.
The decrease in Huntway's net margin was caused by the poor first
half performance as discussed earlier. Overall, for the year,
revenues increased $3,930,000, or 4%, reflective of higher
product prices, however, material and processing costs rose at an
even higher 8%. This increase was due to rising crude oil prices
on the world market due to a myriad of market factors coupled
with increased demand for California heavy crude as refineries
are increasingly using this crude in their refinery process.
Asphalt sales to Mexico declined 64% in 1995 versus the prior
year due to the impact of the decline in the Mexican peso
relative to the U.S. dollar in late 1994 and through 1995. The
decline in the peso relative to the dollar makes Huntway's
refined petroleum products more expensive in Mexico. The
Partnership cannot determine whether the peso will rise or fall
relative to the dollar in 1996, however, if the peso remains at
current levels relative to the dollar, it is reasonable to
conclude that export sales to Mexico in 1996 may remain
depressed.
As discussed earlier, based on the companys review of refinery
assets it was determined that it is unlikely that the Sunbelt
refinery will be operated in the future as a full blown refinery.
This decision is primarily based on its belief that it may have
great difficulty in selling its light-end products at a profit if
the refinery were fully operational. The company may, however,
operate the refinery as an asphalt terminal in the future.
Accordingly, the company has determined that in accordance with
FASB 121 an impairment loss should be recognized and has recorded
a $9,492,000 loss in the current results of operations for the
year ended December 31, 1995.
Processing costs in 1995 approximated 1994 on a per-barrel basis
but was below prior year on an aggregate basis due to the 4%
decline in barrels sold primarily due to the unusually wet
weather experienced in the first half of the year which reduced
sales levels.
Selling, general and administrative expenses fell $363,000 in
1995 to $3,819,000 from 4,182,000 in 1994, or a decline of 9%.
This decline resulted from significantly lower bonus expense and
lower insurance expense. No management bonuses were paid in 1994
or 1995. Insurance expense continued to decline in 1995 due to
efforts to contain costs.
Interest expense increased $193,000, or 4%, from $4,984,000 in
1994 to $5,177,000 in 1995 due to higher debt levels.
Depreciation and amortization approximated the prior year
totaling $2,399,000 in 1995 versus $2,356,000 in 1994.
OUTLOOK AND FACTORS THAT AFFECT FUTURE RESULTS
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 prepay for crude oil or
reduce crude purchases, either of which could adversely impact
results of operations. The Partnership's primary product is
liquid asphalt. Several 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 several of Huntway's competitors, the
margins they receive on asphalt is not as important to their
operations as asphalt margins are to Huntway.
Crude costs per barrel increased in 1995 as compared to 1994 on a
per-barrel basis due to the combination of increased demand for
California crudes as more refineries outside California use these
crudes in their refinery process due to net lower costs and the
general world crude oil trend of heavy crude oil being valued
closer to lighter grades of crude oil. Additionally, Huntway
purchased more expensive crudes in 1995 than 1994 in order to
produce certain specialty asphalt products. In addition, world
crude prices as measured by W.T.I. increased $1.77 a barrel
between years due to a myriad of market factors including
O.P.E.C.'s desire to increase crude prices.
Crude costs increased in 1994 due to the effects of the January
17, 1994 Northridge earthquake and the curtailment of permits to
tanker offshore California production to market. The earthquake
destroyed one of the two primary pipelines bringing crude to the
Wilmington refinery. It is estimated that 50,000 barrels per day
of Los Angeles basin bound crude was curtailed as a result of the
earthquake. Additionally, tankering permits expired for over
20,000 barrels per day of crude oil which was being tankered by
marine vessel to Southern California. In July 1995, the
remaining primary pipeline carrying crude to the Los Angeles
basin completed the expansion of its capacity by 30,000 barrels a
day. A new pipeline to supply over 100,000 barrels per day of
crude oil to Los Angeles basin is currently under consideration
and may be in place by 1997 or 1998. Both of Huntway's
California refineries are vulnerable to disruption in operations
and reduced operating results due to the possibility of
additional earthquakes in California.
Legislation was passed in 1995 to lift the ban on the export of
ANS crude oil which could cause crude oil prices for all West
Coast refiners to increase. Although the Company does not
purchase a significant amount of ANS crude oil, prices of crude
oil it does purchase could increase and such an increase would
reduce the Company's margins and decrease profitability if
product prices do not increase to offset such increased cost.
Huntway's export business is vulnerable to fluctuation in the
Mexican Peso as the vast majority of its export business is to
Mexican end users. Huntway's export sales to Mexico declined in
1995 versus 1994 primarily due to the impact of the fall in the
Mexican peso relative to the dollar and the general economic
problems in Mexico.
Huntway's asphalt sales are very dependent on public funding
primarily at the state level. Long-term disruptions or declines
in the level of public funding would adversely impact operating
results.
In June 1990, voters in the state of California passed a measure
which increased state gasoline taxes from 9 cents per gallon to
14 cents per gallon effective August 1, 1990, and by an
additional 1 cent per gallon on each January 1 thereafter through
1994. The additional sales available to the state are now
estimated to be approximately $14 billion over the decade.
However, in June 1994, California voters rejected a measure that
would have provided an additional $2 billion to pay for damage to
freeways and bridges resulting from the January 17, 1994
earthquake. Accordingly, state funding for earthquake repair
projects was achieved by utilizing funds from the existing
California transportation budget. Local governmental units, such
as cities, counties and townships, provide additional funding for
road and highway projects through various taxes and bond issues.
On March 26, 1996, the California electorate approved the $2.0
billion Seismic Retrofit Proposition. Passage of Proposition
will result in a net increase in, construction of new and repair
of existing asphalt road projects in the state over that which
would have occurred if Proposition 192 had not been aproved as
the Proposition raises $2 billion of new money to be used to
seismic retrofit California's bridges, highways and overpasses.
Uncertainty also exists due to the weather, as cold, wet weather
is not conductive to asphalt road construction and repair.
Accordingly, late 1994 and first half 1995 results were adversely
impacted by the unusually heavy rainfall during this period.
Second half 1995 results were positively impacted due to the
backlog of road work that was created due to the first half rains
and due to the unusually dry, warm weather experienced in
California during the second half of the year.
The Company is subject to Federal, state and local laws,
regulations and ordinances that govern activities or operations
that might have adverse environmental effects, and that impose
liability for the costs of cleaning up, and certain damages
resulting from, sites of past spills, disposals, or other
releases of hazardous substances. Although Management believes
that the Company's operations procedures and safety precautions
are enforced stringently, there can be no assurance that
environmental problems will not occur in the future.
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.
The Partnership remains optimistic about export growth potential
and growth in the sale of higher margin polymer based asphalt
products. However, growth in these areas are also influenced by
funding uncertainties. Recent heavy rainfall in California has
damaged asphalt roads throughout the State which will eventually
lead to increased repair activity. Additionally, projected
population growth in California and an improving economy bodes
well for future public and private road construction activity.
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.
1994 COMPARED WITH 1993
Net loss for the year ended December 31, 1994 was $3,004,000, or
$.26 per unit, compared with a net loss of $18,670,000, or $1.60
per unit, during 1993.
The decrease in the net loss is principally attributable to costs
related to the closure and revaluation of the Sunbelt refinery in
1993. In 1993, the Partnership wrote down the carrying value of
the Sunbelt refinery and related assets to their estimated fair
values by recording a provision of $16,013,000 including a
provision for net estimated closure and maintenance costs during
the shut-down period. Additionally, net operating losses at
Sunbelt in 1993 were $630,000. Absent these charges, the
Partnership would have incurred a loss of $2,027,000 in 1993
versus a loss of $3,003,000 in 1994. The decrease in California
results between years is primarily due to reduced operating
margin partially offset by lower selling, general and
administrative and lower interest and depreciation and
amortization expense as explained below.
The following table sets forth the effects of changes in price
and volume on sales and crude oil processing costs on the year
ended December 31, 1994 as compared to the year ended December
31, 1993:
<TABLE>
<S> <C> <C> <C> <C>
Materials & Net Barrels
Sales Processing Margin Sold
Year Ended December 31,
1993 $ 102,678,000 $ 86,365,000 $ 16,313,000 5,414,000
Less Sunbelt
Contribution (18,522,000) (19,152,000) 630,000 (979,000)
Subtotal 84,156,000 67,213,000 16,943,000 4,435,000
Effect of Changes
in Price (4,467,000) 3,847,000 (8,314,000)
Effect of Changes
in Volume (550,000) (439,000) (111,000) (29,000)
Year Ended December
31, 1994 $ 79,139,000 $ 70,621,000 $ 8,518,000 4,406,000
</TABLE>
As reflected in the table above, the net margin fell $8,425,000,
or 50%, between periods. Volume in terms of barrels sold fell
less than 1% versus 1993 while crude and processing costs rose 3%
versus prior year. However, product prices fell 9% between
periods. In 1993, average product prices were $18.59 a barrel
versus $17.11 in 1994. Meanwhile, materials and processing costs
averaged $14.76 a barrel in 1993 versus $15.18 a barrel in 1994.
Huntway's 1994 operating results (and specifically asphalt
prices) were adversely impacted by the January 17, 1994
earthquake in Southern California. The earthquake reduced demand
for asphalt in Southern California due to lack of funding and a
lack of equipment and personnel. Transportation dollars (both
State and Federal) were diverted from conventional asphalt road
repair work to concrete, steel and engineering expenditures which
are all necessary to repair freeways and bridges. In addition,
road construction equipment and CALTRANS personnel were diverted
to earthquake repair projects. This lack of demand for asphalt
caused lower asphalt prices in Southern California. In Northern
California, additional competition beginning in the summer of
1994 caused asphalt prices to decline in the second half of the
year.
Huntway's other refined petroleum products such as gas oil,
naphtha and kerosene distillate also fell in price in 1994. The
fall in price for these products reflect a number of factors
including weak worldwide wholesale refinery margins as well as
the effects of excess diesel and gasoline inventories on the West
Coast of the United States coupled with the impact of clean fuel
requirements mandated to begin January 1, 1995. Cleaner,
reformulated fuels were mandated by the Environmental Protection
Agency (EPA) and the California Air Resources Board. The
production of the clean fuels in 1994 for sale in 1995 caused
inventories to increase on the West Coast as demand remained flat
and production increased. Inventories of fuels that did not meet
clean fuel specifications and that could not be sold at retail
effective January 1, 1995 were sold at reduced prices which, in
turn, caused Huntway's light oil prices to decline.
Major U.S. and European refineries experienced weak wholesale
margins in 1994 due to a myriad of market factors (most notably,
excess supply due to excess production); but for many of these
refineries, their proprietary retail outlets were achieving
strong margins which tended to mitigate their weak wholesale
margins. Huntway does not operate any retail outlets and,
accordingly, its margins for its other refined petroleum products
were hurt by weak wholesale refinery margins.
Despite the fact that average crude and processing costs in 1994
approximated 1993, crude costs rose throughout 1994 due to the
January 1994 earthquake which destroyed one of the two pipelines
which carried the heavy, lower-priced crude that Huntway
purchases for its Southern California refinery. As a result,
crude oil that could be delivered into the Los Angeles area was
able to command higher premiums which also contributed to higher
relative posted prices for all California crude oil.
Selling, general and administrative expenses fell sharply in 1994
to $4,182,000 versus $7,884,000 in 1993, or a decline of 47%.
This decline primarily reflects lower professional fees as 1993
results included significant professional fees relating to the
debt restructuring. In addition, insurance expenses were reduced
due to efforts installed to reduce costs and bad debt expense was
reduced due to better collection experience.
Interest expense declined $2,296,000, or 32%, due to the
restructuring of the Partnership's indebtedness in 1993.
Depreciation and amortization declined $1,450,000, or 38% due to
write down of certain Sunbelt-related assets in 1993 as well as
write off in 1993 of previously recorded loan origination fees.
CAPITAL RESOURCES AND LIQUIDITY
The pricing factors that affect the Partnership's cash
requirements and liquidity position are fluctuations in the
selling prices for its refined products caused by local market
supply and demand factors including public and private demand for
road construction and improvement. Secondly, 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, influence the Partnership's cash requirements and
liquidity positions. In addition, capital expenditure
requirements, including costs to maintain compliance with
environmental regulations as well as debt service requirements,
impact the Partnership's cash needs.
The Partnership's 1995 results were negatively impacted by record
rainfall in the first half of the year. As asphalt cannot be
laid in wet weather, asphalt sales and production levels were
reduced, which, in turn, caused light-end production to decline.
The reduced production levels caused processing costs per barrel
to increase, thereby reducing efficiency and profitability.
Moreover, Huntway's light-product margins were negatively
impacted by weak refinery margins throughout California due to
gasoline and diesel production exceeding demand. Huntway's
light-product prices are tied to finished gasoline and diesel
prices.
In addition, 1995 results, particularly first half results, were
negatively impacted due to lower funding levels by the public
sector. California state transportation dollars were partially
diverted in 1995 to fund earthquake retrofit projects and to make
up shortfalls in the general fund. The January 17, 1994
earthquake caused public funding (in the form of California state
transportation dollars) to be diverted from conventional asphalt
road repair projects to repair work on Southern California
freeways, overpasses and bridges damaged by the earthquake.
The combination of these factors caused the Partnership to sell
fuel oil at a lower margin relative to asphalt in the first half
of the year to generate cash flow and contain inventory. This
further depressed first half results.
A positive effect of the heavy rainfall in the first half of the
year was to create a backlog of work in the second half of the
year. This increased backlog and growth in the demand for
Huntway's specialized products caused second half results to
exceed the prior year and far exceed first half results. In the
first half of 1995, Huntway incurred a net loss of $5,674,000
versus a loss of $2,033,000 in the first half of 1994. In the
second half of the year Huntway, absent the non-cash Sunbelt
refinery asset write down of $9,492,000 discussed earlier, the
company earned a net profit of $704,000 versus a net loss in the
second half of 1994 of $971,000. The combination of these
factors caused the net loss in 1995, excluding the Sunbelt write
down to exceed the 1994 net loss by $1,966,000 adversely
impacting 1995 cash flow.
The combination of rising crude prices on world markets (due to
world-wide market factors), stronger demand for California crude
as refineries increasingly use these crudes in their refinery
process and Huntway's use of more expensive crude in 1995 in
order to make specialized products caused 1995 crude costs per
barrel to exceed 1994. Huntway expects world crude prices in
1996 to average moderately higher than 1995 while the cost of
Huntway's crudes are expected to rise due to purchase of a more
expensive crude slate and continued strong demand for California
heavy crude oil.
Cash declined $1,680,000 to $4,304,000 at December 31, 1995 from
$5,984,000 at December 31, 1994. Capital expenditures totaled
$447,000 in 1995 versus $669,000 in 1994. Principal payments on
debt totaled $628,000 in 1995 versus $4,478,000 in 1994.
Principal payments plus cash interest payments totaled $2,936,000
in 1995 versus $5,552,000 in 1994. Over the three year period
1992 to 1995, cash and cash equivalents increased by $4,160,000.
Net cash used by operating activities in 1995 totaled $435,000.
The net loss in 1995 of $14,461,000 was partially offset by the
write down of the refinery assets at Sunbelt of $9,492,000 as
discussed earlier and by depreciation and amortization of
$2,399,000. Cash flow was generated in 1995 from accrued but
unpaid interest on existing debt of $1,177,000 and accrued, but
unpaid interest recorded as PIK (payment in kind) notes in 1995
of $1,692,000. Increased accounts receivable used cash flow of
$2,310,000 as improved demand and excellent weather contributed
to fourth quarter 1995 revenues exceeding the prior year by
$3,303,000. Cash flow of $686,000 was generated from decreases
in inventory as increased sales levels in the fourth quarter of
1995 reduced inventory. In addition, cash flow of $73,000 was
generated from reductions in prepaid expenses due to lower
insurance costs and reduced turnaround expenses as less repair
work was conducted on the refineries in 1995 versus prior years
due to timing. Cash flow of $598,000 was also generated from
increases in accounts payable due to increased crude costs
relative to the prior year. Other accrued liabilities increased,
providing cash of $297,000 due to accrual of potential cleanup
expenses relating to the buried drums discovered in May 1995 at
the Wilmington refinery. Finally, cash flow of $78,000 was used
due to reductions in the Sunbelt closure reserve which provided
for maintenance costs during the shut-down period.
In 1994, net cash provided by operating activities totaled
$3,386,000 and included the net loss of $3,004,000 net of
depreciation and amortization of $2,356,000. In 1994, cash flow
of $3,899,000 was generated from conversion to debt of accrued
interest to debt. Cash flow of $1,644,000 was also generated
from reductions in accounts receivable due to reduced sales
levels stemming from the unusually high levels of rainfall during
the fourth quarter of 1994. Asphalt is not usually sold in wet,
cold weather. Cash of $927,000 was generated due to increased
accounts payable due to higher crude costs in late 1994.
Decreases in inventory also contributed $132,000 to cash flow in
1994. Cash of $275,000 was used in 1994 due to increases in
prepaid expenses caused by higher turnaround costs and the timing
of insurance expenditures. December accrued liabilities used
cash of $1,261,000 due to payments made against property tax
accruals. Finally, the Sunbelt closure reserve declined
$1,032,000 in 1994 to provide for closure and maintenance costs
during the shut-down period.
Operating cash flow determinants in 1993 include the net loss of
$18,670,000 inclusive of non-cash charges of $13,413,000 relating
to the write down of the Sunbelt refinery assets as well as
depreciation and amortization of $3,806,000. Additionally, new
debt of $6,538,000 was recorded due to conversion of accrued
interest. Other components of cash flow from operating
activities, which totaled $2,726,000 in 1993, include decreases
in inventory of $3,184,000 and decreases in accounts receivable
of $3,634,000 primarily due to the shutdown of the Partnership's
Sunbelt refinery; increases in accrued liabilities of $852,000
primarily relating to provisions for property taxes, decreases in
accounts payable of $6,352,000 relating to the shutdown of the
Arizona refinery and decreases of $4,193,000 in accounts payable
relating to Huntway as $3,871,000 of overdue crude obligations
were paid off with new borrowings in early 1993.
Investing activities, as defined for the Statement of Cash Flows,
have primarily related to expenditures for required environmental
compliance in 1993, 1994 and 1995. Investing activities in 1995
totaled $617,000 and were less than anticipated as certain
expenditures scheduled for 1995 were postponed due to discovery
of several buried drums at the Wilmington refinery. See Note 4,
Contingencies for further discussion of the discovery of these
drums. This discovery has postponed until 1996 the completion of
a waste water treatment facility at the Wilmington refinery.
However, delays resulting from discovery of the buried drums
could postpone completion of the waste water facility into 1997.
The Partnership currently anticipates that in 1996 its capital
expenditures will total approximately $4,000,000. These
expenditures are anticipated to be used for plant expansion and
to maintain compliance with environmental regulations. Capital
expenditures in 1996 will be financed through a combination of
cash on hand, operating cash flow and short-term borrowings.
Cash flows of $170,000 was spent in 1995 on professional fees
relating primarily to the debt restructuring and has been
recorded in other assets.
Cash flow from financing activities used $628,000 in cash in
1995. These payments represented payments made on March 31, 1995
and September 30, 1995 under the debt agreement with its lenders
as well as capital lease payments made in 1995, on refinery
equipment. This lease obligation was paid in full in 1995. Cash
flow from financing activities used $4,478,000 in cash in 1994 as
the Partnership paid its scheduled indebtedness under its
restructuring agreement with its lenders. In 1993, cash flow
from financing activities provided $6,031,000 in cash. These
borrowings were necessary as a result of reduced sales prices and
reduced volume in late 1992 and early 1993 and were used to
finance operations as well as to reduce accounts payable
obligations.
The Partnership has been in discussions with its lenders
regarding a possible refinancing or restructuring of its
indebtedness. The Partnership has also engaged an advisor to
assist it in this process.
In 1995, the Partnership made payments to its lenders of
$1,750,000. In 1995, a minimum of $4,000,000 was due to be paid
to the lenders. On December 4, 1995 the Partnership announced
that it did not make its scheduled $1,000,000 debt payment due
November 30, 1995 and was in default under its current indenture.
The Partnership also stated that it would not be making any
further payments under the current indenture which also provided
for a $1,250,000 payment on December 31, 1995 and for a
$5,000,000 payment in 1996 paid quarterly under a defined
formula. As a result, at December 31, 1995, substantially all of
the Partnership's outstanding indebtedness was classified as
current. The Partnership previously made a $1,250,000 payment on
October 3, 1995 and at that time was verbally informed by
substantially all of the Partnerships current lenders that they
did not intend to pursue their remedies under the current
indenture due to nonpayment while discussions regarding the
potential restructuring of the Partnerships indebtedness were
continuing. Discussions regarding the debt restructuring have
continued from October 1995 through the present.
As described below, the Partnership has reached an agreement in
principle with three of its four senior lenders representing 86%
of its senior debt to restructure its indebtedness over a ten-
year period. The Partnership has also reached agreement with the
holders of its junior subordinated debt on the restructuring plan
described below.
On April 15, 1996, the Partnership announced that it had reached
an agreement in principle to restructure its indebtedness with
its current lenders. The agreement which is subject to final
documentation and unitholder approval will reduce total
indebtedness from $95.5 million at December 31, 1995 to $25.6
million effective January 1, 1996. Under the agreement, the new
debt will carry an interest rate of 12%. The new debt will
mature ten years from date of closing, or December 31, 2005, and
will amortize ratably over years three through ten of the
agreement. No cash interest will be paid in 1996 unless cash net
of required capital expenditures in 1996 exceeds $6,000,000.
Cash in excess of $6,000,000 at December 31, 1996 net of funding
capital expenditures (not to exceed $4,150,000) will be paid to
the lenders on January 15, 1997. Such payment will replace,
dollar for dollar, required debt amortization in year three of
the agreement. In 1997, the Partnership is obligated to pay cash
interest and debt amortization based on 50% of excess cash flow
as defined. The agreement also specifies that Huntway can borrow
up to an additional $4.2 million in 1996 for plan expansion,
working capital and to finance inventory growth. Such short-term
borrowings must be fully funded by December 31, 1996. The
Partnership is currently in the process of seeking to obtain this
financing.
The Partnership will issue approximately 13.8 million new units
to its lenders, including approximately 1.1 million to its junior
noteholders as part of this transaction. The Partnership
currently has approximately 11.6 million units outstanding.
Additionally, the Partnership will retire approximately 3.9
million warrants previously distributed to its lenders. After
the transaction, approximately 1.1 million of new warrants will
be outstanding at a price of $.50 a unit. The agreement also
specifies that management will be issued options to acquire units
representing 10% of the fully-diluted equity of the Partnership
(inclusive of options already issued) at an exercise price of
$.50 per unit.
The Partnership has been seeking to negotiate with its other
senior lender (representing 14% of the senior debt) to secure its
agreement to the restructuring plan reached with the other senior
lenders. Presently, the Partnership has been unable to secure
this lender's approval of the restructuring plan. The
Partnership has pursued and continues to pursue the agreement of
this remaining senior lender to the consensual restructuring
plan.
However, if the Partnership is unable to obtain the unanimous
approval of its senior lenders to the consensual restructuring
plan, it will consider all alternatives available to achieve the
goals of the current plan, which will include seeking to
implement the plan without unanimous approval through the filing
of a "prepackaged" plan of reorganization under the U.S.
Bankruptcy Code. In that regard, the senior lenders who have
agreed to the consensual restructuring plan have said that they
will vote for a prepackaged plan of reorganization that would
implement the terms of the consensual restructuring plan, subject
to compliance with required solicitation procedures. Any such
prepackaged plan will provide for the continuing and timely
payment in full of all of the Partnership's obligations to
suppliers, other creditors (including all trade creditors) and
employees.
If a prepackaged joint plan of reorganization is required, it
will require substantial resources both in terms of professional
fees and management time and could create additional uncertainty,
which effects would adversely affect operating results.
If the Partnership is forced to file a prepackaged plan of
reorganization, it will seek the court's approval to implement
terms of the consensual restructuring plan without unanimous
senior lender approval. Under applicable bankruptcy law, a plan
of reorganization must be approved by the affirmative vote of 2/3
in dollar amount and in value of each class of security holders
which is impaired under the plan. The senior debt and the common
units will be the only classes of the Partnership's securities
that will be impaired under the prepackaged plan. As described
above, senior lenders, representing 86% in dollar amount and 75%
in number, have said they would vote for the plan. Management of
the Partnership believes that the terms of the prepackaged plan
are favorable to the Partnership's existing common unit holders
and expects that common unit holders will also approve the
prepackaged plan, if required.
The Partnership's current debt agreement provides for a
$17,500,000 letter of credit facility (LC). The facility
provides for crude purchases, hedging and other activities. Fees
for this facility are 2% on the face amount of any letter of
credit issued up to an aggregate of $14,500,000 and 3% on the
face amount of any letter of credit issued above that amount.
Management is addressing all areas of the Partnership's
operations in an effort to reduce costs, improve profitability
and to provide a sound basis for future operations. This
evaluation resulted in the decision in 1993 to temporarily
suspend operations at its Sunbelt refinery located in Coolidge,
Arizona, until such time as there is a sustained improvement in
market conditions. The primary factors involved in the
Partnership's decision were poor margins at the facility, a
limitation on working capital availability and, to a lesser
extent, the impact of an environmental lawsuit and investigations
filed by the State of Arizona which was settled in 1993. The
Partnership currently intends to eventually reopen the refinery
as a terminal when market conditions improve, which is not
expected until 1997 or beyond due to market factors including
transportation costs in moving product in and out of Arizona.
Additionally, the Partnership has temporarily frozen wages for
all employees effective January 1, 1995 and in 1995 made
modifications to its employee benefit package to conserve cash
and reduce costs.
In 1993, the Partnership settled two significant lawsuits. As
part of these settlements, the Partnership paid $250,000 in 1993
and another $100,000 in 1996 towards a $700,000 settlement with
the State of Arizona.
Assuming completion of the debt restructuring (which provides for
no principal and interest payments on indebtedness during 1996),
the Partnership currently believes it will be able to meet its
liquidity obligations for the next 12 to 24 months through a
combination of cash on hand and anticipated future operating cash
flows.
The Partnership believes its current level of letter of credit
facilities are sufficient to guarantee requirements for crude oil
purchases, collateralization of other obligations and for hedging
activities at current crude price levels. However, due to the
volatility in the price of crude oil (which has seen California
crude oil postings rise $4.50 a barrel since December 31, 1995),
there can be no assurance that these facilities will be adequate
in the future. If crude oil prices continued to increase beyond
the level of the Partnership's letter of credit facilities, it
would be required to reduce its crude oil purchases which would
adversely impact profitability.
INDEPENDENT AUDITORS' REPORT
Operating Committee and Partners
Huntway Partners, L.P.
(A Limited Partnership)
We have audited the accompanying consolidated balance sheets of
Huntway Partners, L.P. (a limited partnership) and subsidiary as
of December 31, 1995 and 1994 and the related consolidated
statements of operations, partners' capital (deficiency) and cash
flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of
the management of the Partnership. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Huntway Partners, L.P. and its subsidiary as of
December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Woodland Hills, California
February 7, 1996 (April 4, 1996
as to Note 1)
<TABLE>
<CAPTION>
HUNTWAY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(in thousands)
<S> <C> <C> <C>
ASSETS
Notes 1995 1994
Current Assets:
Cash $ 4,304 $ 5,984
Accounts Receivable 2, 3 4,820 2,485
Inventories 2, 3 3,320 4,044
Prepaid Expenses 676 749
Total Current Assets 13,120 13,262
Property - Net 2, 3, 5 58,677 69,857
Other Assets -- Net 2 780 805
Goodwill 2 1,816 1,872
Total $ 74,393 $ 85,796
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Current Liabilities:
Accounts Payable $ 6,582 $ 5,984
Current Portion of Long-term
Obligations 3, 4 94,445 2,418
Reserve for Plant Closure 5 164 242
Accrued Interest 1,417 241
Other Accrued Liabilities 2 1,949 1,652
Total Current Liabilities 104,557 10,537
Long-term Debt 3 90,862
Other Long-term Obligations 4 350 450
Commitments & Contingencies 4, 7, 8
Partners' Capital
(Deficiency): 3, 6, 9
General Partners (305) (160)
Limited Partners (30,209) (15,893)
Total Partners' Capital (Deficiency) (30,514) (16,053)
Total $ 74,393 $ 85,796
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
HUNTWAY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
(in thousands, except per unit data)
<S> <C> <C> <C> <C>
NOTES 1995 1994 1993
Sales 10 $ 83,069 $ 79,139 $ 102,678
Costs & Expenses:
Material & Processing Costs 2 76,643 70,621 86,365
Selling and Administration
Expenses 3,819 4,182 7,884
Plant Closure and Write Down 5 9,492 -- 16,013
Interest Expense 3 5,177 4,984 7,280
Depreciation and Amortization 2 2,399 2,356 3,806
Total Costs and Expenses 97,530 82,143 121,348
Net Income (Loss) 2 (14,461) (3,004) (18,670)
Net Income (Loss) Per Unit 2, 6 $ (1.24) $ (0.26) $ (1.60)
</TABLE>
<TABLE>
<CAPTION>
HUNTWAY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
For the years ended December 31, 1995, 1994 and 1993
(in thousands)
<S> <C> <C> <C>
General Limited
Partners Partners Totals
Balance at December 31, 1992 -- 5,621 5,621
Net Loss for the Year Ended
December 31, 1993 (130) (18,540) (18,670)
Balance at December 31, 1993 (130) (12,919) (13,049)
Net Loss for the Year Ended
December 31, 1994 (30) (2,974) (3,004)
Balance at December 31, 1994 (160) (15,893) (16,053)
Net Loss for the Year Ended
December 31, 1995 (145) (14,316) (14,461)
Balance at December 31, 1995 $ (305) $ (30,209) $ (30,514)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
HUNTWAY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Cash Flows From Operating Activities:
Net Income (Loss) $ (14,461) $ (3,004) $ (18,670)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by Operations:
Amortization of Loan Fees -- -- 1,026
Other Depreciation and Amortization 2,399 2,356 2,780
Interest Expense Paid by the Issuance of 1,693 3,899 6,538
Notes
Plant Closure and Write Down 9,492 -- 13,413
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Accts. Receivable (2,335) 1,644 3,634
Decrease in Inventories 711 132 3,184
Decrease (Increase) in Prepaid Expenses 73 (275) 1,207
(Decrease) in Deferred Revenues -- -- (1,967)
Change in Reserve for Plant Closure (78) (1,032) 1,274
Increase (Decrease) in Accounts Payable 598 927 (10,545)
Increase (Decrease) in Accrued Liabilities 1,473 (1,261) 852
Net Cash Provided By (Used By)
Operating Activities (435) 3,386 2,726
Cash Flows From Investing Activities:
Additions to Property (447) (745) (1,000)
Additions to Other Assets (170) 76 (156)
Net Cash Used By Investing Activities (617) (669) (1,156)
Cash Flows From Financing Activities:
Proceeds of Bank Notes Payable -- -- 5,872
Proceeds of Other Notes Payable -- -- 571
Repayments of Long-term Obligations (628) (4,478) (412)
Net Cash Provided by (Used by)
Financing Activities (628) (4,478) 6,031
Net Increase (Decrease) In Cash (1,680) (1,761) 7,601
Cash Balance Beginning of Year 5,984 7,745 144
Cash Balance End of Year $ 4,304 $ 5,984 $ 7,745
Supplemental Disclosures:
Interest Paid During the Period $ 2,308 $ 1,074 $ 1,127
See accompanying notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
On October 3, 1995, Huntway Partners, L.P. made a $1,250,000
payment to its existing lenders. On December 4, 1995, the
Partnership announced that it did not make its scheduled
$1,000,000 debt payment due November 30, 1995 and was, therefore,
in default under its indenture. At that time, the Partnership
was verbally informed by substantially all of its senior lenders
that they did not intend to pursue their remedies under the
current indenture due to nonpayment while discussions regarding
the potential restructuring of the Partnership's indebtedness was
continuing. Discussions regarding the debt restructuring have
continued from October 1995 through the present. The Partnership
also stated that it would not be making any further payments
under the current indenture which also provided for a $1,250,000
payment on December 31, 1995 and for a $5,000,000 payment in 1996
paid quarterly under a defined formula. As a result, at December
31, 1995, substantially all of the Partnership's outstanding
indebtedness was classified as current.
As described below, the Partnership has reached an agreement in
principle with three of its four senior lenders representing 86%
of its senior debt to restructure its indebtedness over a ten-
year period. The Partnership has also reached agreement with the
holders of its junior subordinated debt on the restructuring plan
described below.
On April 15, 1996, the Partnership announced that it had reached
an agreement in principle to restructure its indebtedness with
its current lenders. The agreement which is subject to final
documentation and unitholder approval will reduce total
indebtedness from $95.5 million at December 31, 1995 to $25.6
million effective January 1, 1996. Under the agreement, the new
debt will carry an interest rate of 12%. The new debt will
mature on December 31, 2005, and will amortize ratably over years
three through ten of the agreement. No cash interest will be
paid in 1996 unless cash net of required capital expenditures in
1996 exceeds $6,000,000. Cash in excess of $6,000,000 at
December 31, 1996 net of funding capital expenditures (not to
exceed $4,150,000) will be paid to the lenders on January 15,
1997. Such payment will replace, dollar for dollar, required
debt amortization in year three of the agreement. In 1997, the
Partnership is obligated to pay cash interest and debt
amortization based on 50% of excess cash flow as defined. The
agreement also specifies that Huntway can borrow up to an
additional $4.2 million in 1996 for plan expansion, working
capital and to finance inventory growth. Such short-term
borrowings must be fully funded by December 31, 1996. The
Partnership has been seeking to obtain this financing.
The Partnership will issue approximately 13.8 million new units
to its lenders, including approximately 1.1 million to its junior
noteholders as part of this transaction. The Partnership
currently has approximately 11.6 million units outstanding.
Additionally, the Partnership will retire approximately 3.9
million warrants previously distributed to its lenders. After
the transaction, approximately 1.1 million in new warrants will
be outstanding at a price of $.50 a unit. The agreement also
specifies that management will be issued options to acquire units
representing 10% of the fully-diluted equity of the Partnership
(inclusive of options already issued) at an exercise price of
$.50 per unit.
The Partnership has been seeking to negotiate with its other
senior lender (representing 14% of the senior debt) to secure its
agreement to the restructuring plan reached with the other senior
lenders. Presently, the Partnership has been unable to secure
this lender's approval of the restructuring plan. The
Partnership has pursued and continues to pursue the agreement of
this remaining senior lender to the consensual restructuring
plan.
However, if the Partnership is unable to obtain the unanimous
approval of its senior lenders to the consensual restructuring
plan, it will consider all alternatives available to achieve the
goals of the current plan, which will include seeking to
implement the plan without unanimous approval through the filing
of a "prepackaged" plan of reorganization under the U.S.
Bankruptcy Code. In that regard, the senior lenders who have
agreed to the consensual restructuring plan have said that they
will vote for a prepackaged plan of reorganization that would
implement the terms of the consensual restructuring plan, subject
to compliance with required solicitation procedures. Any such
prepackaged plan will provide for the continuing and timely
payment in full of all of the Partnership's obligations to
suppliers, other creditors (including all trade creditors) and
employees.
If the Partnership is forced to file a prepackaged plan of
reorganization, it will seek the court's approval to implement
terms of the consensual restructuring plan without unanimous
senior lender approval. Under applicable bankruptcy law, a plan
of reorganization must be approved by the affirmative vote of 2/3
in dollar amount and in value of each class of security holders
which is impaired under the plan. The senior debt and the common
units will be the only classes of the Partnership's securities
that will be impaired under the prepackaged plan. As described
above, senior lenders representing 86% in dollar amount and 75%
in number have said they would vote for the plan. Management of
the Partnership believes that the terms of the prepackaged plan
are favorable to the Partnership's existing common unit holders
and expects that common unit holders will also approve the
prepackaged plan, if required.
At December 31, 1995, the cash position of the Partnership was
$4.3 million. In the opinion of management, assuming completion
of the debt restructuring (which provides for no principal and
interest payments on indebtedness during 1996), cash on hand,
together with anticipated cash flow in 1996, will be sufficient
to meet Huntway's liquidity obligations for the next 12 to 24
months.
NOTE 2. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General. Huntway Partners is engaged primarily in the operation
of a 6,000 barrel-per-day oil refinery located in Southern
California, a 9,000 barrel-per-day oil refinery located in
Northern California and an 8,500 barrel-per-day refinery in
Arizona (see Note 5, Plant Closure), which produce and sell
refined petroleum products. Huntway Partners has adopted a
calendar year fiscal period.
The Partnership is subject to various environmental laws and
regulations of the United States and the states of California and
Arizona. As is the case with other companies engaged in similar
industries, the Partnership faces exposure from potential claims
and lawsuits involving environmental matters. These matters may
involve alleged soil and water contamination and air pollution.
The Partnership's policy is to accrue environmental and clean-up
costs when it is probable that a liability has been incurred and
the amount of the liability is reasonably estimable.
Total limited partnership units outstanding at December 31,
1995, 1994 and 1993 were 11,556,250. In addition, 3,886,816
warrants to purchase limited partnership units at $.875 per unit
through December 31, 2008 were issued as part of the
Partnership's June 23, 1993 restructuring.
Principles of Consolidation. The consolidated financial
statements include the accounts of Huntway Partners and its
subsidiary, Sunbelt Refining Company, L.P. ("Sunbelt"). All
significant inter-company items have been eliminated in
consolidation.
Exchange Transactions. In connection with its refinery
activities, the Partnership engages from time to time in exchange
transactions common to the industry where crude oil or refined
product is exchanged with other unrelated entities for similar
commodities. The accounting of such exchanges is based on the
recorded value of the commodities relinquished. There were no
exchange balances at December 31, 1995. Net exchange balances
included in accounts receivable at December 31, 1994 were
comprised of receivables of $3,403, offset by payables of
$28,332. The gain or loss from such transactions has not been
significant to Huntway Partners' consolidated financial
statements.
Environmental Costs. The Partnership expenses or capitalizes
costs associated with environmental clean-up and other repairs
and maintenance at its refineries in accordance with Emerging
Issues Task Force Topic 90-8 and exhibits thereto.
Turnaround Costs. Cost of turnarounds, which consist of complete
shutdown and inspection of a refinery unit for repair and
maintenance, are deferred and amortized over the estimated period
of benefit which generally ranges from two to five years.
Income Taxes. No provision has been made for income taxes in the
accompanying consolidated financial statements. The taxable
income or loss of the Partnership is allocated to each partner in
accordance with the provisions of the Partnership agreement.
The taxable income or loss allocated to the partners in any one
year may vary from the amount of income or loss reported for
financial statement purposes, due to differences between the time
that certain income and expense items are recognized and the time
when they are reported for financial statement purposes.
The partnership agreement provides generally that income, loss
and cash distributions be allocated 1 percent to the general
partner and 99 percent to the limited partners. In turn, each
partner's tax status will determine the appropriate income tax
for that partner's allocated share of Huntway Partners' taxable
income or loss.
Inventories. Crude oil and finished product inventories are
stated at cost determined by the last-in, first-out method (LIFO)
, which is not in excess of market.
Management believes the LIFO method of accounting for inventories
is preferable because it more closely matches revenues and
expenses and reflects the prevailing practice in the petroleum
industry.
The effect of LIFO was to decrease the net loss and net loss per
limited partners in 1995 by approximately $33,000 and less than
1/2 cent and to increase the net loss and net loss per limited
partner unit in 1994 by approximately $1,167,000 and 10 cents.
In 1993, the effect of LIFO was to decrease the net loss and net
loss per limited partner unit by approximately by $1,184,000 and
10 cents.
Inventories at December 31, 1995 and 1994 were as follows:
<TABLE>
<S> <C> <C>
1995 1994
Finished Products $ 2,295,000 $2,792,000
Crude Oil and Supplies 2,195,000 2,455,000
4,490,000 5,247,000
Less LIFO Reserve (1,170,000 ) (1,203,000 )
Total $ 3,320,000 $4,044,000
</TABLE>
Property and Depreciation. Property is stated at cost and
depreciated using the straight-line method over the estimated
useful lives of the assets. Facilities which are temporarily
closed are retained in the property accounts as idle facilities
and are depreciated.
Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results would differ from
these estimates. As discussed in Note 5, the Partnership has
written down its investment in the Sunbelt Refinery based upon
the best estimate of the outlook for the asphalt and light-end
market in Arizona.
Property at December 31, 1995 and 1994 consisted of:
<TABLE>
<S> <C> <C> <C>
Depreciable
Life 1995 1994
Land $ 2,176,000 $ 2,176,000
Buildings 40 yrs. 887,000 810,000
Refineries and Related Equipment 40 yrs. 66,730,000 66,510,000
Other 5 - 10 yrs. 999,000 1,032,000
Construction in Progress 444,000 261,000
Idle Facilities, Less Accumulated
Depreciation of $0 and
$1,938,000 as of December 31,
1995 and 1994, respectively 1,227,000 11,041,000
(See Note 5)
72,463,000 81,830,000
Less Accumulated Depreciation
and Amortization (13,786,000) (11,973,000)
Property - Net $ 58,677,000 $ 69,857,000
</TABLE>
Other Assets. Other assets are stated at cost and amortized,
where appropriate, using various methods over the useful lives of
the assets.
Other assets at December 31, 1995 and 1994 consisted of:
<TABLE>
<S> <C> <C>
1995 1994
Computer Software $ 604,000 $ 564,000
Deposits 442,000 361,000
Other 483,000 434,000
1,529,000 1,359,000
Less Accumulated Amortization (749,000) (554,000)
Other Assets - Net $ 780,000 $ 805,000
</TABLE>
Goodwill. Goodwill is stated at cost and amortized using the
straight-line method over a period of 40 years and relate to the
Partnership's California refineries. Huntway Partners'
refineries are designed to produce asphalt and unfinished light-
end products, and accordingly, are not prone to obsolescence to
the same degree as more sophisticated refineries. The
Partnership continually evaluates the existence of goodwill
impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the
two refineries. The related accumulated amortization at December
31, 1995 and 1994 was $471,000 and $415,000, respectively.
Interest Capitalization. Huntway Partners and Sunbelt capitalize
interest incurred in connection with the construction of refinery
facilities. No interest was capitalized in 1995, 1994, or 1993.
Deferred Revenues. Deferred revenues are recorded as cash is
collected on sales agreements which provide for future delivery
of refined products. Revenues are recognized as the refined
products are delivered.
Other Accrued Liabilities. Included in other accrued liabilities
are accrued property taxes of $611,000 and $497,000 at December
31, 1995 and 1994, respectively.
Reclassifications. Certain items in the prior years' financial
statements have been reclassified to conform to the 1994
presentation.
NOTE 3. FINANCING ARRANGEMENTS
In 1995, the Partnership made payments to its lenders of
$1,750,000. In 1995, a minimum of $4,000,000 was due to be paid
to the senior lenders.
On December 4, 1995, the Partnership announced that it did not
make its scheduled $1,000,000 debt payment due November 30, 1995
and was in default under its current indenture. The Partnership
also announced at that time that it would not be making any
further payments under its current indenture. As a result, at
December 31, 1995, substantially all of the Partnership's
outstanding indebtedness was classified as current.
On October 3, 1995, the Partnership made a $1,250,000 payment to
its lenders and at that time was verbally informed by
substantially all of its senior lenders that they did not intend
to pursue remedies under the current indenture due to nonpayment
while discussions regarding the potential restructuring of the
Partnership's debt were continuing.
On April 15, 1996, the Partnership announced that it had reached
agreement with three of its four senior lenders representing 86%
of its senior debt to restructure its indebtedness over a ten-
year period.
The agreement specifies, among other things, that total debt will
be reduced from $95.5 million to $25.6 million effective January
1, 1996. The new debt will carry an interest rate of 12%.
The agreement also specifies that no cash interest will be paid
in 1996 unless cash net of required capital expenditures in 1996
exceeds $6,000,000. Cash in excess of $6,000,000 at December 31,
1996 net of funding capital expenditures (not to exceed
$4,150,000) will be paid to the lenders on January 15, 1997.
Such payment will replace, dollar for dollar, required debt
amortization in year three and of the agreement. In 1997,the
Partnership is obligated to pay cash interest and debt
amortization based on 50% of excess cash flow as defined. The
agreement also specifies that Huntway can borrow up to an
additional $4.2 million in 1996 for plant expansion, working
capital and to finance inventory growth. Such short-term
borrowings must be fully funded by December 31, 1996. The
Partnership is seeking to obtain this financing.
The Partnership is seeking to obtain the approval of its
remaining senior lender to the restructuring agreement. However,
if the Partnership is unable to obtain unanimous approval of the
agreement, it will consider all alternatives available including
the filing of a prepackaged plan of reorganization under the
U.S. Bankruptcy Code.
The agreement provides for a $17,500,000 letter of credit
facility through December 31, 2000. This facility provides for
crude purchase, hedging and other activities. Fees for this
facility are 2% on the face amount of any letter of credit issued
up to an aggregate of $14,500,000 and 3% on any letter of credit
issued above that amount.
The Partnership's debt as of December 31, 1995 and December 31,
1994 consisted of the following:
<TABLE>
<S> <C> <C>
1995 1994
8% Senior Secured Notes due December 31, 2000 $24,904,000 $24,680,000
Subordinated Secured Notes due December 31, 2008 53,254,000 52,205,000
Bearing Interest at 4% Per Annum Until the
Earliest of December 31, 2000 or the Retirement
of the 8% Senior Secured Notes and Thereafter
at 12-1/4% Per Annum
Junior Subordinated Secured Debentures due 7,587,000 7,437,000
December 31, 2020 and Bearing Interest at 4%
Per Annum until the Retirement of the Senior
Secured Notes and Thereafter at 12% Per Annum
Series 1988 Variable Rate Demand Industrial 8,600,000 8,600,000
Development Bonds due September 1, 2008,
Interest Payable Monthly at Rates Determined
Weekly Based on Market Rates for Comparable
Interest (5.75% and 3.5% at December 31, 1994
and 1993, respectively) and Collateralized by a
Standby Letter of Credit Issued by a Bank
Capital Lease Obligations -- 358,000
Total 94,345,000 93,280,000
Less Amount Classified as Current (94,345,000 ) 2,418,000
Net Long-Term Debt $ -- $90,862,000
</TABLE>
All of the Partnership's assets serve as collateral for these
issues.
NOTE 4. CONTINGENCIES
On May 19, 1995, during testing pursuant to the closure of a
waste water treatment pond, the Partnership discovered that
several drums of hazardous materials had been improperly disposed
of at the site of the Wilmington refinery. Subsequent
geophysical testing to date indicates that approximately 20 to 30
of such drums had been improperly disposed of at the site. The
materials had been stored in drums and disposed of under the
waste water treatment pond apparently at the time of its
construction. Although the Partnership believes that it has
claims against the former owners and operators of the site, as
well as the entities involved in the construction of the pond and
various insurance carriers which should substantially mitigate
the ultimate costs, the Partnership has accrued $294,000 as of
December 31, 1995 for remediation of the contamination.
Management does not believe, based upon the information known at
this time, that the remediation effort will have a material
adverse effect on the Partnership's results of operations or
financial position.
The Partnership and its subsidiary, Sunbelt Refining Company,
L.P., were charged by the State of Arizona with violations of
certain environmental regulations and provisions of the Arizona
refinery's installation permit. Sunbelt acknowledged that it had
certain environmental compliance problems in the past, but
believed that none of these resulted in any harm to public health
or to the environment. While Huntway and Sunbelt have
consistently denied that any criminal activity occurred, the
parties agreed on December 21, 1993 to settle both the State's
civil and criminal charges. As part of the settlement, Sunbelt
has agreed to pay a penalty of $700,000 over a period of seven
years without interest and to undertake certain environmental
improvements at the Arizona refinery. Huntway has instituted new
programs and procedures to ensure that it is operating in
compliance with all environmental laws and regulations. As of
December 31, 1995 $450,000 remains to be paid. Of this amount,
$100,000 was paid in January of 1996 and is included in current
portion of long-term debt.
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.
NOTE 5. PLANT CLOSURE
In August 1993, the Partnership suspended operations at its
Sunbelt refinery located in Coolidge, Arizona. The primary
factors involved in this decision were poor margins at the
facility, limited working capital availability and, to a lesser
extent, the impact of an environmental lawsuit and investigation
filed by the State of Arizona which was settled in 1993.
Accordingly, at June 30, 1993, the Partnership wrote down the
carrying value of the refinery and related assets to their then
estimated fair values.
The provision for plant closure consisted of the following:
<TABLE>
<S> <C>
Provision for Closure and Maintenance Costs During
the Shut-down Period Beginning July 1, 1993 $ 2,600,000
Write Off of Intangible Assets Associated with
Ongoing Refining Operations 4,037,000
Write Down of Refining Assets to Estimated Fair 9,376,000
Value
Total $16,013,000
</TABLE>
Subsequently, through December 31, 1995, approximately $2,436,000
of closure and maintenance costs have been charged against the
reserve.
At December 31, 1995, pursuant to an evaluation of the operating
potential of the facility, the plant was further written down by
$9,492,000 to $1,227,000. This write down considered, among
other things, the outlook for the asphalt market in Arizona, the
regulatory environment impacting both the plant operations as
well as the formulation requirements of diesel and jet fuel in
the markets the plant would serve, as well as the ability of the
Partnership to market those products. This evaluation indicated
and it is the opinion of management that the likelihood of
operation as a petroleum refinery in the future is remote, but
that the facility may be operated effectively as a crude or
products terminal and storage facility at some time in the
future.
NOTE 6. EARNINGS PER UNIT AND ALLOCATION OF INCOME AND LOSS
Earnings per unit is calculated based upon the weighted average
number of limited partner equivalent units outstanding. Limited
partner equivalent units for the year ended December 31, 1995 and
1994 is calculated by adding to the 11,556,250 actual limited
partnership units outstanding 116,730 additional units
representing the general partners overall 1% interest.
For the year ended December 31, 1995, 1994, and 1993, the effect
of outstanding options and warrants is anti-dilutive and,
accordingly, has been excluded from the calculation.
Generally, partnership income and loss is allocated 1% to the
general partners and 99% to the limited partners. In 1993 and
1992, because the general partners' combined general and limited
capital accounts had been fully depleted, 100% of the losses were
allocated to the limited partners until their capital accounts
had also been reduced to zero. Thereafter, losses were allocated
1% to the general partners and 99% to the limited partners. The
Partnership reclassified in 1993 to general partners' capital
$979,000 of equity attributable to the general partners' limited
partnership interest previously classified as limited partners'
capital.
NOTE 7. LEASE COMMITMENTS
The Partnership has entered into certain ground leases for its
refinery facilities. Such leases range from five to 41 years in
duration. All such leases are classified as operating leases.
Future minimum annual rental payments required under operating
leases, which have non-cancelable lease terms in excess of one
year, as of December 31, 1995 are:
<TABLE>
<S> <C>
1996 $ 300,000
1997 300,000
1998 300,000
1999 300,000
2000 and Beyond 1,003,000
Total $2,213,000
</TABLE>
The Partnership also leases a deep water terminal facility in
Benicia, California. Under terms of the lease agreement, the
Partnership pay minimum annual lease payments of approximately
$539,000 through the year 2031, subject to an escalation clause.
This lease is cancelable upon one year's notice and accounted for
as an operating lease.
Rental expense for all operating leases (some of which have terms
of less than a year) was $1,022,000, $1,259,000, and $1,524,000
for the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 8. PROFIT SHARING AND TAX DEFERRED SAVINGS (401K) PLAN AND
PENSION PLAN
Huntway Partners has a profit sharing and tax deferred savings
(401K) plan and a defined contribution pension plan. The
Partnership' contributions to the plans generally vest to
participants on the basis of length of employment. Beginning in
1994, the Partnership matches up to 2% of participants pre-tax
contributions to the tax deferred savings (401K) plan.
Profit sharing contributions by the Partnership will be made from
profits in an amount up to 10 percent of the aggregate base
compensation of all participants in the plan, not to exceed the
Partnership' current net income. No contributions were made to
the plan during the last three years.
In addition, a minimum pension contribution equal to 4% (5%
prior to December 31, 1994) of participants' base compensation
must be made each year regardless of current profits or losses.
The amount of the Partnership' contributions to the plans charged
to income for the years ended December 31, 1995, 1994 and 1993
were $214,000, $205,000 and $281,000, respectively.
NOTE 9. UNIT OPTION PLAN
The Partnership maintains a 1989 Salaried Employee Partnership
Unit Option Plan (the "Plan") adopted by the Operating Committee.
The Plan is administered by a sub-committee (the "sub-committee")
of the Operating Committee. The Plan authorizes the Partnership
to grant to salaried officers and employees of the Partnership
non qualified options to purchase Partnership Units. The
Partnership has reserved 1,022,000 Partnership Units to be issued
pursuant to the exercise of options granted under the Plan. The
Plan will terminate on March 6, 1999. No person serving on the
Operating Committee or the Plan Committee, who is not an employee
of Huntway, is eligible to participate in the Plan.
On September 15, 1993, the sub-committee repriced 39,600 options
previously issued at prices from $3.50 per unit to $6.00 per unit
to an exercise price of $1 per unit. Under the repricing
agreement, 79,200 previously issued options were converted to
39,600 options (or 50%) at a new exercise price of $1 per unit.
Additionally, 25,000 previously issued options were canceled.
These newly priced options vest 50% on the second anniversary of
the option grant date and 50% on the third anniversary of the
option grant date, except in the case of (i) the optionees' death
or disability; (ii) retirement in the event the employee has
three years of service with the Partnership; or (iii) change in
control of the Managing General Partner.
The sub-committee granted 400,000 new options on October 15, 1993
at an exercise price of $1 per unit. These options were granted
to salaried officers and employees of the Partnership.
These options generally do not vest until the third anniversary
of the option grant date, except in the case of (i) the
optionees' death or disability; (ii) retirement in the event the
employee has three years of service with the Partnership; or
(iii) change in control of the Managing General Partner. All
options granted or repriced were at prices not less than fair
market value at dates of grant.
During 1995, 6,850 previously issued options terminated. The
sub-committee granted 589,250 new options on August 22, 1995 at
an exercise price of $.625 per unit.
At December 31, 1995, 1,022,000 options are outstanding, of which
103,133 are exerciseable. All exerciseable options have a strike
price of $1 a unit. As more fully explained in Note 1, the
Partnership has reached an agreement with a majority of its
senior lenders and with its junior note holders to restructure
its debt. The agreement specifies that management will be issued
options for 10% of the Partnership on a fully-diluted basis
(inclusive of options already issued) at a strike price of $.50 a
unit.
NOTE 10. SIGNIFICANT CUSTOMERS
One customer accounted for approximately 17.1% in 1995, 16% of
revenues in 1994 and 14% in 1993.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Huntway Operating Committee
The Partnership's business and affairs are managed by Huntway
Managing Partner, L.P. (the "Managing General Partner") rather
than a board of directors. Similarly, the Managing General
Partner is itself a partnership and its business and affairs are
managed by its general partner, Reprise Holdings, rather than a
board of directors. However, Reprise Holdings, as sole general
partner of the Managing General Partner, has established an
operating committee (the "Operating Committee") to consult with
Reprise Holdings with respect to the management of the Managing
General Partner and the Partnership, and has elected the
following individuals as members of the Operating Committee:
Juan Y. Forster, age 59, has been principally employed as the
President and Chief Executive Officer of Huntway for the past
five years.
Samuel M. Mencoff, age 39, has been principally employed as a
Vice President of Madison Dearborn Partners, Inc. since January,
1993. Prior to January, 1993, Mr. Mencoff served as Vice
President of First Capital Corporation of Chicago (FCCC). Mr.
Mencoff is sole director, President and Treasurer of Reprise
Holdings and is a general partner of Madison Dearborn Partners
III.
Justin S. Huscher, age 42, has been principally employed as a
Vice President of Madison Dearborn Partners, Inc. since January,
1993. Prior to January, 1993, Mr. Huscher served as a Senior
Investment Manager of First Chicago Investment Corporation, an
affiliate of FCCC. Mr. Huscher is Vice President and Secretary
of Reprise Holdings and is a general partner of Madison Dearborn
Partners III.
Raymond M. O'Keefe, age 70, has been principally employed for the
last five years as President and Chief Executive Officer of
Rokmanage, Inc., a management services firm. For that period and
more than the last five years, Mr. O'Keefe has served as
President and Chief Executive Officer of A. J. Land Company and
Harvard Gold Mining Company.
Members of the Operating Committee currently receive no
compensation from the Partnership or the Managing General Partner
for their services as members of the Operating Committee. The
Partnership reimburses the Operating Committee members for
expenses incurred in connection with such services.
Section 16 of the Securities and Exchange Act of 1934, as
amended, requires the Partnership's executive officers, members
of the Operating Committee and persons who beneficially own
greater than 10% of the Units to file reports of ownership and
changes in ownership with the SEC. Based solely upon its review
of copies of the Section 16 reports the Partnership has received,
the Partnership believes that during its fiscal year ended
December 31, 1994, all of its executive officers, members of the
Operating Committee and greater than 10% beneficial owners were
in compliance with their filing requirements
Partnership Officers
The following list sets forth: (i) the name and age of each
officer of the Partnership; (ii) the year in which each such
person first joined the Partnership; and (iii) all positions with
the Partnership presently held by each person named.
<TABLE>
<S> <C> <C> <C>
Year Joined
Name Age Huntway Office
Juan Y. Forster 59 1979 President & Chief Executive Officer
Lucian A. Nawrocki 50 1982 Executive Vice President,
Asphalt Sales
Warren J. Nelson 45 1993 Executive Vice President
& Chief Financial Officer
Terrance L. Stringer 54 1992 Executive Vice President
Charles R. Bassett 60 1982 Manager of Operations/Benicia
William G. Darnell 59 1982 Vice President & General
Manager/Benicia
Earl G. Fleisher 45 1991 Controller and Tax Manager
Michael W. Miller 37 1979 Manager of Operations/Wilmington
</TABLE>
Each of the persons named above has had the position with Huntway
set forth above for the past five years, except as follows:
Warren J. Nelson served as Executive Vice President and Chief
Financial Officer of Everest and Jennings International, Ltd,
from 1990 to 1992, as Acting Chief Financial Officer, Controller
and Chief Accounting Officer of Smith International, Inc. in
1990, and as Controller and Chief Accounting Officer of Smith
International, Inc. from 1988 through 1989.
Terrance L. Stringer served for three years as Vice President,
Supply and Marketing with Golden West Refining prior to joining
Huntway in early 1992. Prior to that he served in a variety of
management positions with TOSCO Corporation.
Earl G. Fleisher joined Huntway as Tax Manager in May of 1991 and
was appointed Controller in 1993. Prior to joining Huntway, Mr.
Fleisher was employed by Deloitte & Touche from 1979 to 1991.
Item 11. Officers' Compensation
Cash Compensation of Officers
For the year ended December 31, 1995, the Partnership paid or
accrued an aggregate of $1,207,000 compensation to its officers
as a group.
Compensation Pursuant to Plans
Pension Plan. The Partnership currently has in effect a defined
contribution pension plan as well as a 401-K deferred savings and
profit sharing plan. Pursuant to the terms of the pension plan,
each year Huntway contributes to the plan an amount equal to 4%
of each employee's annual "base compensation", which includes
base salary and overtime, but excludes any cash bonuses. Each
full-time employee of Huntway participates in the pension plan.
Contributions made to the pension plan vest in equal increments
over a period beginning upon completion of two years of service
and ending upon completion of seven years of service. The terms
of the 401-K deferred savings plan provide that the Partnership
match the employee's contributions up to 2% of qualifying
compensation. For the year ended December 31, 1995, Huntway paid
or accrued $60,000 to these plans on behalf of its officers as a
group.
Item 12. Principal Unitholders
The following tables set forth information regarding the number
of Limited Partnership Units owned as of April 1, 1996 by each
person known by the Partnership to be the beneficial owner of
more than five percent of all Limited Partnership Units
outstanding. Except as indicated below, each of the persons
named in the table has sole voting and investment power with
respect to the Units set forth opposite his or its name.
<TABLE>
<CAPTION>
Beneficial Ownership
<S> <C> <C>
Beneficial Owner Units Interest
Common Units:
First Capital Corporation 3,640,121 (1) 31.5%
of Chicago
One First National Plaza
Chicago, IL 60670
Bankers Trust Company 1,975,552 (2) 14.6%
280 Park Avenue
New York, New York 10017
Massachusetts Mutual Life 1,092,156 (2) 8.6%
Insurance Company
1295 State Street
Springfield, MA 01111
Mr. Andre Danesh 914,000 (3) 7.9%
Allied Financial Corp.
1583 Beacon Street
Brookline, MA 02146
Goldman, Sachs Group, L.P. 730,000 6.3%
and Goldman, Sachs & Co.
85 Broad Street
New York, NY 10904
Reprise Holdings, Inc. 653,286 5.7%
One First National Plaza
Chicago, IL 60670
All Officers and Operating 1,799,927 (4)(5) 15.7%
Committee Members as a Group
(12 persons)
</TABLE>
1) Includes 653,286 units held by Reprise Holdings, Inc. First
Capital Corporation of Chicago and Madison Dearborn Partners
III own all of the outstanding common stock of Reprise
Holdings, Inc., First Capital Corporation of Chicago and
Madison Dearborn Partners III disclaim beneficial ownership of
Units beneficially owned by Reprise Holdings, Inc.
2) All reported beneficial ownership of Units represents warrants
to purchase Units at an exercise price of $.875 per Unit
issued to the Partnership's lenders under the June 23, 1993
restructuring agreement. See Note 3 to the Consolidated
Financial Statements.
3) Includes 378,300 units held by Mr. Danesh; 243,700 units held
by Allied Financial Corporation's Profit Sharing Plan, of
which Mr. Danesh is the trustee; 159,900 units held by E & S
Investments, of which Mr. Danesh is the general manager; and
133,000 units held by Allied Financial Investments, of which
Mr. Danesh is a general partner.
4) Includes 62,500 and 341,958 Units held by Madison Dearborn
Partners VI and Madison Dearborn Partners III, respectively.
Samuel M. Mencoff and Justin S. Huscher, member of the
Operating Committee, serve as general partners of such
entities but disclaim beneficial ownership of Units held by
such entities. Also includes 653,286 Units held by Reprise
Holdings, Inc. Mr. Mencoff is the President and sole director
of Reprise Holdings, Inc. See also Note 1 above. Mr. Mencoff
disclaims beneficial ownership of the Units held by Reprise
Holding, Inc.
5) Includes options to acquire 103,133 Units exerciseable at $1 a
unit.
Item 13. Certain Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
The financial statement schedules and exhibits listed below are
filed as a part of this annual report.
(a)(2) Financial Statements Schedules
None
The financial statements schedules of the Partnership are omitted
because of the absence of the conditions under which they are
required or because the required information is included in the
financial statements or notes thereto.
(a)(3) Exhibits
Exhibit
Number Description of Exhibit
3.1 Amended and Restated Agreement of Limited Partnership
of Huntway
Partners, L.P. (incorporated by reference herein to
Exhibit A to the Prospectus included in the
Registration Statement on Form S-1, filed September 26,
1988, Registration
No. 33-24445).
3.2 Huntway Partners, L.P. Bylaws (incorporated by
reference
herein to Exhibit 3.2 of the Registration Statement on
Form S-1, as amended by Amendment No. 2, filed November
2,
1988, Registration No. 33-24445).
3.3 Amendment of Agreement of Limited Partnership of
Huntway
Partners, L.P. dated as of December 20, 1989
(incorporated
by reference herein to Exhibit 3.3 of the Annual Report
on
Form 10-K, filed March 30, 1990, Commission file No. 1-
10091)
4 Deposit Agreement by and among Huntway Partners, L.P.,
Bankers Trust Company and Huntway Managing Partner,
L.P.
(incorporated by reference herein to Exhibit 4 of the
Annual
Report on Form 10-K, filed March 29, 1989, Commission
file
No. 1-10091)
10.1 Amended and Restated Agreement of Limited Partnership
of
Huntway Managing Partner, L.P. dated as of December 22,
1989 (incorporated by reference herein to Exhibit 10.1
of
the Annual Report on Form 10-K, filed March 30, 1990,
Commission file No. 1-10091)
10.2 Huntway Partners, L.P. Amended and Restated Profit
Sharing
and Tax Deferred Savings Plan (incorporated by
reference
herein to Exhibit 10.2 of the Annual Report on Form 10-
K,
filed March 29, 1989, Commission file No. 1-10091)
Exhibit
Number Description of Exhibit
10.3 Huntway Partners, L.P. Money Purchase Pension Plan
(incorporated by reference herein to Exhibit 10.4 of
the
Registration Statement on Form S-1, filed September 26,
1988, Registration No. 33-24445).
10.4 Third Amended and Restated Credit Agreement dated as of
May 18, 1990 by and among Huntway Partners, L.P.,
Sunbelt
Refining Company, L.P. and Bankers Trust Company
(incorporated by reference herein to Exhibit 10.1 of
the
Quarterly Report on Form 10-Q, filed November 14,
1990, Commission file No. 1-10091)
10.5 First Amendment dated as of September 26, 1990 to the
Third Amended and Restated Credit Agreement dated as
of May 18, 1990 (incorporated by reference herein to
Exhibit 10.2 of the Quarterly Report on Form 10-Q,
filed November 14, 1990, Commission file No. 1-10091)
10.6 Second Amendment dated as of November 16, 1990 to the
Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to exhibit 10.6
of
the Annual Report on Form 10-K, filed March 28, 1991,
Commission file No. 1-10091)
10.7 Third Amendment dated as of November 20, 1990 to the
Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to exhibit 10.7
of
the Annual Report on Form 10-K, filed March 28, 1991,
Commission file No. 1-10091)
10.8 Fourth Amendment dated as of March 29, 1991 to the
Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.1
of
the Quarterly Report on Form 10-Q filed August 14,
1991,
Commission file No. 1-10091)
10.9 Fifth Amendment dated as of April 29, 1991 to the Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.2
of
the Quarterly Report on Form 10-Q filed August 14,
1991,
Commission file No. 1-10091)
10.10 Sixth Amendment dated as of May 31, 1991 to the Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.3
of
the Quarterly Report on Form 10-Q filed August 14,
1991,
Commission file No. 1-10091)
10.11 Seventh Amendment dated as of June 28, 1991 to the
Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.4
of
the Quarterly Report on Form 10-Q filed August 14,
1991,
Commission file No. 1-10091)
Exhibit
Number Description of Exhibit
10.12 Eighth Amendment dated as of July 30, 1991 to the Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.5
of
the Quarterly Report on Form 10-Q filed August 14,
1991,
Commission file No. 1-10091)
10.13 Ninth Amendment dated as of August 30, 1991 to the
Third
Amended and Restated Credit Agreement dated as of May
18,
1990 (incorporated by reference herein to Exhibit 10.1
of
the Quarterly Report on Form 10-Q filed November 14,
1991,
Commission file No. 1-0091)
10.14 Tenth Amendment and Limited Waiver dated as of October
28,
1991 to the Third Amended and Restated Credit Agreement
dated as of May 18, 1990 (incorporated by reference
herein
to Exhibit 10.2 of the Quarterly Report on Form 10-Q
filed
November 14, 1991, Commission file No. 1-10091)
10.15 Eleventh Amendment and Limited Waiver dated as of March
23,
1992 to the Third Amendment and Restated Credit
Agreement
dated as of May 18, 1990 (incorporated by reference
herein
to Exhibit 10.15 of the Annual Report on Form 10-K
filed
March 30, 1992, Commission file No. 1-10091)
10.16 Indenture of Trust and Security Agreement dated as of
December 1, 1987 from Huntway Refining Company, L.P. to
Security Pacific National Bank as Trustee (incorporated
by reference herein to Exhibit 10.6 of the Registration
Statement on Form S-1, filed September 26, 1988,
Registration No. 33-24445).
10.17 Amended and Restated Ground Lease dated as of July 31,
1987 by and between Industrial Asphalt and Huntway
Refining
Company (incorporated by reference herein to Exhibit
10.7
of the Registration Statement on Form S-1, filed
September 26,
1988, Registration No. 33-24445).
10.18 Asset Purchase Agreement dated August 23, 1987 between
Huntway Refining Company and Huntway Acquisition
Limited
Partnership (incorporated by reference herein to
Exhibit
10.8 of the Registration Statement on Form S-1, filed
September 26, 1988, Registration No. 33-24445).
10.19 Second Amended and Restated Agreement of Limited
Partnership
of Sunbelt Refining Company, L.P. (incorporated by
reference
herein to Exhibit 10.8 of the Annual Report on Form 10-
K,
filed March 30, 1990, Commission file No. 1-10091)
10.20 First Supplemental Indenture dated as of November 1,
1988
from Huntway Holdings, L.P. to Security Pacific
National Bank
(incorporated by reference herein to Exhibit 10.10 of
the
Annual Report on Form 10-K, filed March 29, 1989,
Commission
file No. 1-10091)
10.21 Huntway Partners, L.P. 1989 First Amendment to the
Salaried
Employees Partnership Unit Option Plan dated as of May
1991
Exhibit
Number Description of Exhibit
10.22 Indemnification Agreement dated as of November 9, 1988
(incorporated by reference herein to Exhibit 10.12 of
the
Annual Report on Form 10-K, filed March 29, 1989,
Commission file No. 1-10091)
10.23 Amended and Restated Agreement of Limited Partnership
of
Huntway Holdings, L.P. dated as of December 22, 1989
(incorporated by reference herein to Exhibit 10.12 of
the Annual Report on Form 10-K, filed March 30, 1990,
Commission file No. 1-10091)
10.24 Agreement for Liquidation of Limited Partner Interest
dated
as of October 30, 1989 by and among Sunbelt Refining
Company,
L.P. and James R. Bagley, John M. Schwarz, Hector
Monroy and
Fil Ventura (incorporated by reference herein to
Exhibit
10.13 of the Annual Report on Form 10-K, filed March
30,
1990, Commission file No. 1-10091)
10.25 Definitive Agreement between Huntway Partners, L.P. and
Reprise Holdings, L.P. dated as of May 3, 1990
(incorporated by reference herein to Exhibit 10.14 of
the Quarterly Report on Form 10-Q, filed May 15, 1990,
Commission file No. 1-10091)
10.26 Funding and Forbearance Agreement dated as of December
31,
1992 among Bankers Trust Company, Huntway Partners,
L.P.,
Massachusetts Mutual Life Insurance Company, Phoenix
Home
Life Mutual Insurance Company, Crown Life Insurance
Company,
Century Life Insurance Company and First Capital
Corporation
of Chicago and acknowledged by Sunbelt Refining
Company, L.P.,
Huntway Managing Partners, L.P. and Huntway Holdings,
L.P.
(incorporated by reference herein to Exhibit 10.1 of
the
Current Report on Form 8-K, filed March 1, 1993,
Commission
file No. 1-10091)
10.27 Huntway Partners, L.P./Sunbelt Refining Company L.P.
General
Restructuring Agreement Dated as of June 22, 1993
(incorporated by reference herein to Exhibit 10.27 of
the
current report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.28 Huntway Partners, L.P., as Issuer to Shawmut Bank N.A.,
as
Trustee, Collateralized Note Indenture Dated as of June
22,
1993 (incorporated by reference herein to Exhibit 10.28
of
the Current Report on Form 8-K, filed July 13, 1993,
Commission file No. 1-10091)
10.29 Huntway Partners, L.P., as Issuer to Shawmut Bank
Connecticut
National Association, as Trustee Subordinated Note
Indenture
Dated as of June 22, 1993 (incorporated by reference
herein
to Exhibit 10.29 of the Current Report on Form 8-K,
filed
July 13, 1993, Commission file No. 1-10091)
Exhibit
Number Description of Exhibit
10.30 Huntway Partners, L.P., as Issuer to IBJ Schroder Bank
&
Trust Company, as Trustee, Junior Subordinated
Debenture
Indenture Dated as of June 22, 1993 (incorporated by
reference herein to Exhibit 10.30 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.31 Letter of Credit and Reimbursement Agreement Dated as
of
June 22, 1993 between Huntway Partners, L.P., Sunbelt
Refining Company, L.P. and Bankers Trust Company
(incorporated by reference herein to Exhibit 10.31 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.32 Intercreditor and Collateral Trust Agreement Dated as
of
June 22, 1993 among Bankers Trust Company as LOC Bank
and
Bankers Trust Company, Massachusetts Mutual Life
Insurance
Company, Phoenix Home Life Mutual Insurance Company,
Crown
Life Insurance Company, Century Life of America and
Century
Life Insurance Company, as Holders of the Priority
Obligations, Senior Obligations and Subordinated
Obligations and United States Trust Company of New
York,
as Collateral Agent (incorporated by reference herein
to
Exhibit 10.32 of the Current Report on Form 8-K, filed
July 13, 1993, Commission file No. 1-10091)
10.33 Collateral Accounts Security Agreement (incorporated by
reference herein to Exhibit 10.33 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.34 Huntway Partners, L.P. 8% Priority Secured Note Due
1994
(incorporated by reference herein to Exhibit 10.34 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.35 Huntway Partners, L.P., 8% Senior Secured Note Due 2000
(incorporated by reference herein to Exhibit 10.35 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.36 Huntway Partners, L.P. Increasing Rate Subordinated
Note
(Other) Due 2008 (incorporated by reference herein to
Exhibit 10.36 of the Current Report on Form 8-K, filed
July 13, 1993, Commission file No. 1-10091)
10.37 Huntway Partners, L.P. Increasing Rate Subordinated
Note
(Sunbelt IDB) Due 2008 (incorporated by reference
herein
to Exhibit 10.37 of the Current Report on Form 8-K,
filed
July 13, 1993, Commission file No. 1-10091)
Exhibit
Number Description of Exhibit
10.38 Huntway Partners, L.P., Increasing Rate Junior
Subordinated
Debentures Due 2020 (incorporated by reference herein
to
Exhibit 10.38 of the Current Report on Form 8-K, filed
July 13, 1993, Commission file No. 1-10091)
10.39 Warrants to Purchase Common Units of Huntway Partners,
L.P., a Delaware Limited Partnership (incorporated by
reference herein to Exhibit 10.39 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.40 Assignment and Assumption Agreement (incorporated by
reference herein to Exhibit 10.40 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.41 Termination Agreement (incorporated by reference herein
to
Exhibit 10.41 of the Current Report on Form 8-K, filed
July 13, 1993, Commission file No. 1-10091)
10.42 Modification of Huntway Pledge and Security Agreement
(incorporated by reference herein to Exhibit 10.42 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.43 Modification of Huntway Current Assets Pledge and
Security
Agreement (incorporated by reference herein to Exhibit
10.43 of the Current Report on Form 8-K, filed July 13,
1993,
Commission file No. 1-10091)
10.44 Modification of Sunbelt Pledge and Security Agreement
(incorporated by reference herein to Exhibit 10.44 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission file No. 1-10091)
10.45 Modification of Huntway Managing General Partner
Pledge and Security Agreement (incorporated by
reference herein to Exhibit 10.45 of the Current
Report on Form 8-K, filed July 13, 1993,
Commission file No. 1-10091)
10.46 Modification of Huntway Special General Partner Pledge
and Security Agreement (incorporated by reference
herein
to Exhibit 10.46 of the Current Report on Form 8-K,
filed
July 13, 1993, Commission file No. 1-10091)
10.47 Amendment to Deed of Trust and Security Agreement
and Other Security Documents (California) (incorporated
by
reference herein to Exhibit 10.47 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.48 Amendment to Deed of Trust with Assignment of Rents and
Other Security Documents (Arizona) (incorporated by
reference herein to Exhibit 10.48 of the Current Report
on Form 8-K, filed July 13, 1993, Commission file
No. 1-10091)
Exhibit
Number Description of Exhibit Page No.
10.49 Assignment of Notes and Deed of Trust (California)
(incorporated by reference herein to Exhibit 10.49 of
the
Current Report on Form 8-K, filed July 13, 1993,
Commission
file No. 1-10091)
10.50 Assignment of Notes and Deed of Trust (Arizona)
(incorporated
by reference herein to Exhibit 10.50 of the Current
Report on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.51 Modification of Sunbelt Guaranty Agreement
(incorporated by
reference herein to Exhibit 10.51 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.52 Modification of Huntway Special General Partner
Guaranty
Agreement (incorporated by reference herein to Exhibit
10.52 of the Current Report on Form 8-K, filed July 13,
1993, Commission file No. 1-10091)
10.53 Modification of Huntway Guaranty Agreement
(incorporated
by reference herein to Exhibit 10.53 of the Current
Report
on Form 8-K, filed July 13, 1993, Commission file No.
1-10091)
10.54 Modification of Huntway Managing General Partner
Guaranty
Agreement (incorporated by reference herein to Exhibit
10.54
of the Current Report on Form 8-K, filed July 13, 1993,
Commission file No. 1-10091)
10.55 FCCC Acknowledgment and Agreement (incorporated by
reference herein to Exhibit 10.55 of the Current Report
on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.56 Amendment and Waiver of Registration Agreement
(incorporated
by reference herein to Exhibit 10.56 of the Current
Report on
Form 8-K, filed July 13, 1993, Commission file No. 1-
10091)
10.57 Agreement of Understanding dated March 11, 1996 49
18 Letter of concurrence from accountants relating to the
change
to the last-in, first-out (LIFO) method of accounting
for
inventories (incorporated by reference herein to
Exhibit 18
of the Annual Report on Form 10-K, filed March 30,
1990,
Commission file No. 1-10091)
22 Schedule of Subsidiaries (incorporated by reference
herein to
Exhibit 22 of the Registration Statement on Form S-1,
as
amended by Amendment No. 2, filed November 2, 1988,
Registration No. 33-24445).
28.1 Press Release of the Company dated December 8, 1992
(incorporated by reference herein to Exhibit 28.1 of
the
Current Report on Form 8-K, filed March 1, 1993,
Commission
file No. 1-10091)
28.2 Press Release of the Company dated December 10, 1992
(incorporated by reference herein to Exhibit 28.2 of
the
Current Report on Form 8-K, filed March 1, 1993,
Commission
file No. 1-10091)
Exhibit
Number Description of Exhibit
28.3 Press Release of the Company dated December 16, 1992
(incorporated by reference herein to Exhibit 28.3 of
the
Current Report on Form 8-K, filed March 1, 1993,
Commission
file No. 1-10091)
28.4 Press Release of the Company dated December 31, 1992
(incorporated by reference herein to Exhibit 28.4 of
the Current Report on Form 8-K, filed March 1, 1993,
Commission file No. 1-10091)
28.5 Complaint in Neal v. Forster, et al., No. 92-7264 SVW
(C.D. Cal.) (incorporated by reference herein to
Exhibit
28.5 of the Current Report on Form 8-K, filed March 1,
1993,
Commission file No. 1-10091)
28.6 Complaint in Van Elgort et al. v. Huntway Partners,
L.P.,
et al., No. 92-7314R (C.D. Cal.) (incorporated by
reference herein to Exhibit \28.6 of the Current Report
on Form 8-K, filed March 1, 1993, Commission file
No. 1-10091)
(b) Reports on Form 8-K
No reports on Form 8-K were filed in 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Huntway Partners, L.P. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of April, 1996.
HUNTWAY PARTNERS, L.P.
By: /s/ Juan Y. Forster
Juan Y. Forster
Chairman of the Operating Committee
President and Chief
Executive Officer
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
indicated on April 15, 1996.
Signature Title
/s/ Juan Y. Forster
Juan Y. Forster Member of Operating Committee and
Chief Executive Officer
/s/ Warren J. Nelson
Warren J. Nelson Executive Vice President and
Chief Financial and Accounting Officer
/s/ Justin S. Huscher
Justin S. Huscher Member of Operating Committee
/s/ Samuel M. Mencoff
Samuel M. Mencoff Member of Operating Committee
/s/ Raymond M. O'Keefe
Raymond M. O'Keefe Member of Operating Committee
AGREEMENT OF UNDERSTANDING
This AGREEMENT OF UNDERSTANDING (this "Agreement") is
made and entered into as of March 11, 1996 by and among Huntway
Partners, L.P., a Delaware limited partnership (the "Company"),
Sunbelt Refining Company, L.P., a Delaware limited partnership
("Sunbelt"), Huntway Managing Partner, L.P. ("HMP"), Huntway
Holdings, L.P. ("Holdings"), each of Bankers Trust Company
("Bankers Trust"), Massachusetts Mutual Life Insurance Company
("Mass Mutual"), Mellon Bank, N.A., as trustee for First Plaza
Group Trust as directed by Contrarian Capital Advisors, L.C.C. and
Oppenheimer & Co., Inc. for itself as as agent for certain
affiliates (individually, a "Senior Lender" and collectively, the
"Senior Lenders") and each of Madison Dearborn Partners III, an
Illinois general partnership and First Capital Corporation of
Chicago (individually a "Junior Lender" and collectively, the
"Junior Lenders"). Capitalized terms used herein but not otherwise
defined herein shall have the meanings given such terms in the
General Restructuring Agreement dated as of June 22, 1993 (the
"Restructuring Agreement") among the Company, Bankers Trust, Mass
Mutual, Crown Life Insurance Company, Century Life of America,
Century Life Insurance Company, Phoenix Home Life Mutual Insurance
Company, the Junior Lenders, Sunbelt, HMP and Holdings. The Senior
Lenders and the Junior Lenders are collectively referred to herein
as the "Lenders." The Company, the Lenders, Sunbelt, HMP and
Holdings are collectively referred to herein as the "Parties" and
individually as a "Party".
RECITALS
WHEREAS, the Lenders are the holders of all of the New
Securities, except such New Securities as are owned or held by
Ryback Management Corporation ("Ryback"), on behalf of itself and
its nominee(s);
WHEREAS, the Company and Sunbelt are obligated to the
Lenders under the Restructuring Documents, including, without
limitation, obligations with respect to the Collateralized Notes,
the Subordinated Notes and the Junior Subordinated Notes (any and
all such obligations collectively are referred to herein as the
"Existing Obligations");
WHEREAS, the Company is in default under certain
covenants and provisions of the Restructuring Documents;
WHEREAS, the Company and the Lenders have consented to a
restructuring of the Existing Obligations in accordance with the
terms and provisions set forth in the Term Sheet attached hereto as
Exhibit A (the "Consensual Term Sheet");
WHEREAS, the out-of-court restructuring of the Existing
Obligations contemplated by the Consensual Term Sheet requires,
among other things, the consent of Ryback, and Ryback has not given
such consent;
WHEREAS, as an alternative to the restructuring of the
Existing Obligations pursuant to the Consensual Term Sheet, the
Company and Lenders have negotiated the principal terms and
provisions of a prepackaged plan of reorganization (the "Plan"),
which are set forth in the Term Sheet attached hereto as Exhibit B
(the "Plan Term Sheet");
WHEREAS, the Company believes that it is in the best
interest of the Company and its creditors for the Company to seek
relief under chapter 11 of Title 11 of the U.S. Code (the
"Bankruptcy Code") and, concurrently therewith, file a proposed
plan of reorganization incorporating the terms of the Plan Term
Sheet unless Ryback consents to the terms of the Consensual Term
Sheet;
NOW, THEREFORE, in consideration of the premises and the
terms and conditions herein contained, the adequacy and sufficiency
of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Preparation of the Plan and other Materials.
Promptly upon execution of this Agreement, the Company shall
instruct its counsel to prepare the following: (a) a petition (the
"Petition") for relief under chapter 11 of the Bankruptcy Code; (b)
a plan of reorganization incorporating the terms and provisions of
the Plan Term Sheet (the "Plan"); (c) all schedules, motions,
pleadings and other papers necessary or useful in connection with
the filing of the Petition; and (d) a disclosure and solicitation
statement describing the Company and the Plan and seeking the
consent of each class of impaired claims and interests identified
in the Plan Term Sheet (the "Disclosure and Solicitation
Statement"). The Company's counsel shall coordinate with counsel
for the Lenders in the preparation of such documents.
2. Timetable for Plan, Disclosure and Solicitation and
Filing. The Company shall prepare the Plan and the Disclosure and
Solicitation Statement on or before May 13, 1996 and shall use its
reasonable best efforts to submit the Disclosure and Solicitation
Statement to the Securities and Exchange Commission for review on
or before May 20, 1996. The Company shall use its reasonable best
efforts to obtain the approval of the Disclosure and Solicitation
Statement by the Securities and Exchange Commission on or before
June 24, 1996 (the date of such approval being referred to herein
as the "SEC Approval Date"). Not later than three business days
after the SEC Approval Date, the Company shall distribute the
Disclosure and Solicitation Statement to all known members of each
class of impaired claims or interests identified in the Plan Term
Sheet and shall solicit the consent of each such class of claims
and interests in compliance with Bankruptcy Code Section 1126(b)
and Bankruptcy Rule 3018. The solicitation period shall remain
open for 30 calendar days. If each such class of impaired claims
or interests votes to accept the Plan in accordance with Bankruptcy
Code Section 1126 and Bankruptcy Rule 3018, the Company shall file
the Petition and the Plan not more than two business days after the
close of the solicitation period (the date on which the Petition is
filed being referred to herein as the "Petition Date"). The
Company shall use its reasonable best efforts to notice a hearing
to approve the compliance of the solicitation of consents to the
Plan with Bankruptcy Code Section 1126, which hearing shall convene
not more than 45 days after the Petition Date and shall conclude
not more than 48 days after the Petition Date. The Company shall
use its reasonable best efforts to notice a hearing on confirmation
of the Plan, which hearing shall convene not more than 45 days
after the Petition Date and shall conclude not more than 48 days
after the Petition Date.
3. Support of the Plan. Each Party will use its
reasonable best efforts to obtain confirmation of the Plan in
accordance with the Bankruptcy Code and the timetable set forth in
Section 2. Each Party will take all necessary and appropriate
actions to achieve confirmation including recommending to the
holders of impaired claims and interests that the Plan be
confirmed. No Party shall (a) object to confirmation of the Plan
or otherwise commence any proceeding to oppose or alter the Plan or
any other reorganization documents containing terms and conditions
consistent with those contained in the Plan Term Sheet (the "Plan
Documents"), (b) vote for, consent to, support or participate in
the formulation of any other plan of reorganization or liquidation
proposed or filed or to be proposed or filed in any chapter 11 or
chapter 7 case commenced in respect of the Company, (c) directly or
indirectly seek, solicit, support or encourage any other plan,
proposal or offer of dissolution, winding up, liquidation,
reorganization, merger or restructuring of the Company or any of
its subsidiaries that could reasonably be expected to prevent,
delay or impede the successful restructuring of the Company as
contemplated by the Plan Term Sheet, (d) object to the Disclosure
and Solicitation Statement or the compliance of the solicitation of
consents to the plan with Bankruptcy Code Section 1126 or (e) take
any other action that is inconsistent with, or that would delay
confirmation of the Plan; provided, however, that no Party shall be
barred from (x) objecting to the compliance with Bankruptcy Code
Section 1126 of the solicitation of the consent by such Party to
the Plan if the Disclosure and Solicitation Statement received by
such Party contains a material misstatement or omission or
(y) taking any action with respect to any matter which action is
not inconsistent with the Plan Term Sheet.
4. Acknowledgment. This Agreement is not and shall
not be deemed to be a solicitation for consents to the Plan. The
Lenders' acceptances of the Plan will not be solicited until the
Lenders have received the Disclosure and Solicitation Statement.
5. Termination of Lenders' Obligations. Each Lender
may terminate its obligations hereunder and rescind any vote on the
Plan by such Lender (which vote shall be null and void and have no
further force and effect) by giving written notice thereof to the
Parties if the Plan provides or is modified to provide for a
materially adverse distribution to such Lender than the
distribution for such Lender described in the Plan Term Sheet.
Senior Lenders (including at least one Senior Lender other than
Bankers Trust Company) holding a majority of the Restructured
Obligations may terminate the Senior Lenders' obligations hereunder
and rescind any vote on the Plan by the Lenders (which votes shall
be null and void and have no further force and effect) by giving
written notice thereof to the Parties if any of the following
occur: (a) the Plan or the Plan Documents provide or are modified
to provide or the Company moves to modify the Plan to provide for
distributions to holders of claims or interests that differ in any
material respect from the distributions to such holders described
in the Plan Term Sheet without the consent in writing by each of
the Parties that is adversely affected thereby, it being understood
that any improvement in the distribution to any Party under the
Plan shall be deemed to be materially adverse to all Parties; (b)
the Company violates any covenant in Section 1 or Section 2 (it
being understood that certain obligations in Section 2 require only
the Company's best reasonable efforts); (c) the Company fails to
obtain consent of each impaired class of claims or interests on or
before August 14, 1996 or the Company fails to file the Petition
and the Plan on or before August 16, 1996 or the Plan fails to be
confirmed on or before September 30, 1996; (d) after the filing of
the Plan the Company submits a second plan of reorganization that
does not incorporate the terms and provisions of the Plan Term
Sheet or moves to withdraw the Plan; or (e) the Company, the
Lenders and Ryback execute the Consensual Term Sheet on or before
the earlier of April 15, 1996 and the Petition Date.
6. Agreement not a Waiver. Nothing in this Agreement
constitutes a modification or waiver of any of the Lenders' rights
under the Restructuring Documents, at law or otherwise.
7. Representations and Warranties. Each Lender
represents and warrants to the other Parties that (a) such Lender
is the legal and beneficial owner of the New Securities set forth
opposite the name of such Lender on Schedule I annexed hereto, and
(b) such Lender has sole voting and dispositive power with respect
to the New Securities issued to such Lender and has full power and
authority to enter into this Agreement and perform its obligations
hereunder, and has not entered into any participation or other
agreement with any person with respect to any of the New Securities
held by such Lender or otherwise granted any person any authority
over the voting or disposition of such New Securities (other than
any such participation or other agreement that does not in any way
limit or restrict the undersigned Lender's ability to satisfy its
obligation hereunder with respect to all of the New Securities held
by such Lender). Each Party represents and warrants to the other
Parties that this Agreement is the legally valid and binding
agreement of such Party, enforceable against such Party in
accordance with its terms.
8. Miscellaneous.
(a) This Agreement, together with the Exhibits hereto,
constitute the complete agreement of the Parties with respect to
the subject matters referred to herein and supersede all prior or
contemporaneous negotiations, promises, covenants, agreements or
representations of every nature whatsoever with respect thereto,
all of which have become merged and finally integrated into this
Agreement. This Agreement cannot be amended, modified or
supplemented except by an instrument in writing executed by the
Parties.
(b) The Company agrees, at its cost and expense, to
execute and deliver, or to cause to be executed and delivered, all
such instruments and to take all such action as the Lenders may
reasonably request in order to effectuate the intent and purposes
of, and to carry out the terms of this Agreement. The Lenders
agree, at the cost and expense of the Company, to execute and
deliver, or to cause to be executed and delivered, all such
instruments and to take all such action as the Company may
reasonably request in order to effectuate the intent and purposes
of, and to carry out the terms of this Agreement.
(c) It is acknowledged and agreed by the Parties that
money damages would not be a sufficient remedy for any breach of
this Agreement by any Party and each non-breaching Party shall be
entitled to specific performance and injunctive or other equitable
relief as a remedy of such breach, and each Party agrees to waive
any requirement for the securing or posting of a bond in connection
with such remedy.
(d) Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall
be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Agreement.
(e) This Agreement shall become effective upon the
execution and delivery of counterparts hereof by each of the
parties listed on the signature pages hereof. This Agreement shall
be binding upon and inure to the benefit of the Parties and their
respective successors and assigns. The terms and provisions of
this Agreement shall be binding upon and inure to the benefit of
any assignee or transferee of the New Securities, and in the event
of such transfer or assignment, the rights, obligations and
privileges herein conferred upon the Lenders shall automatically
extend to and be vested in such transferee or assignee, all subject
to the terms and conditions hereof. Each Lender agrees not to
transfer, assign or participate any interest in or control or
authority over all or any part of the New Securities in any manner
without the express written assumption by such transferee of the
transferors' obligations hereunder. If the transferor has cast a
ballot or ballots in favor of the Plan prior to such transfer, the
transferee shall simultaneously with such transfer, assignment or
participation execute and deliver to the Company an affirmation of
such of the ballots as have been previously been delivered by such
transferor or a new ballot by such transferee in favor of the Plan.
The rights and obligations of the Company, Sunbelt, HMP and
Holdings hereunder cannot be assigned without the written consent
of all Lenders.
(f) This Agreement may be executed in counterparts,
each of which when so executed shall be an original, but all such
counterparts shall together constitute but one and the same
instrument. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF.
IN WITNESS WHEREOF, the due execution hereof by the
respective duly authorized general partner or officer of the
undersigned as of the date first written above.
HUNTWAY PARTNERS, L.P.
By: HUNTWAY MANAGING PARTNERS, 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
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of
Reprise Holdings, Inc., its
sole General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President
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
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of
Reprise Holdings, Inc.,
its sole General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President
BANKERS TRUST COMPANY
By: /s/ Carl O. Roark
Carl O. Roark
Managing Director
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
Michael L. Klofas
Second Vice President
MADISON DEARBORN PARTNERS III
By: /s/ Samuel M. Mencoff
Samuel M. Mencoff
General Partner
HUNTWAY MANAGING PARTNER, L.P.,
By: The Huntway Division of
Reprise Holdings, Inc., its
sole
General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President
HUNTWAY HOLDINGS, L.P.,
By: The Huntway Division of
Reprise Holdings, Inc., its
sole
General Partner
By: /s/ Juan Y. Forster
Juan Y. Forster
President
FIRST CAPITAL CORPORATION OF CHICAGO
By: /s/ Marie N. Berggren
Marie N. Berggren
Senior Vice President
OPPENHEIMER & CO, INC., for itself
and as Agent for certain affiliated
entities.
By: /s/ Janice Stanton
Janice Stanton
EXHIBIT A
HUNTWAY PARTNERS, L.P.
25129 THE OLD ROAD
SUITE 322
NEWHALL, CA 91381
January 8, 1996
Bankers Trust Company
Massachusetts Mutual Life Insurance Company
Crown Life Insurance Company
Century Life of America
Century Life Insurance Company
Ryback Management Corporation
Madison Dearborn Partners III
First Capital Corporation of Chicago
RE: Restructuring of Obligations under Collateralized Note
Indenture, Subordinated Note Indenture and Junior
Subordinated Debenture Indenture, each dated as of June
22, 1993 (collectively, the "indentures").
This term sheet, when fully executed by the parties hereto,
shall constitute the agreement in principle by such parties to
restructure the obligations (including any warrants) of Huntway
Partners, L.P. (the "Company") and Sunbelt Refining Company, L.P.
to the addressees listed above in accordance with the following
terms and conditions:
1. Senior Notes Holders of obligations under the
Collateralized Note Indenture and the
Subordinated Note Indenture (the
"Existing Lenders") will convert their
debt into $23,500,000 of Senior Secured
Notes (the "Senior Secured Notes") to be
comprised of $14,400,000 of funded debt
and $9,100,000 of a Bankers Trust
Industrial Development Bond Letter of
Credit (the "IDB L/C"). Funded debt to
be allocated pro rata to existing
lenders after giving effect to the
retention by Bankers Trust of the IDB
L/C.
The Company will replace the existing
$17,500,000 letter of credit facility
(the "Crude L/C") with a new letter of
credit facility (the "New Crude L/C")
within one year from the date of
closing.
2. Interest Rate 12% per year, payable 1/6 first quarter,
1/6 second quarter, 1/3 third quarter
and 1/3 fourth quarter. All interest
payments due in 1996 will be payable in-
kind with additional Senior Secured
Notes with the first cash interest
payment on the Senior Secured Notes due
March 31, 1997. Interest on the IDB L/C
portion of the debt to be paid at 12%
less costs relating to the Pinal County
Notes.
3. Maturity Ten (10) years from date of closing.
4. Option Redemption The Senior Secured Notes will be
redeemable at the Company's option in
whole or in part, upon not less than 30
nor more than 60 days notice, at the
redemption prices (expressed as
percentages of aggregate principal
amount) set forth below plus accrued and
unpaid interest thereon to the
applicable date of redemption, if
redeemed during the 12 month period
beginning on the periods indicated
below:
Callable at declining premium according
to the following schedule:
Year 1 112
Year 2 109.6
Year 3 107.2
Year 4 104.8
Year 5 102.4
Year 6 Par
5. Mandatory Redemption A. The Company will pay lenders
all cash in excess of $6,000,000 on
December 31, 1996 by January 15,
1997. Such cash balance will be
net of funding required for 1996
capital expenditure projects
including equipment outlined in
point 7, Equipment Financing. Such
capital expenditures in total will
not exceed $4,150,000. Any payment
made to lenders on January 15, 1997
will reduce required 1998 sinking
fund described in point C below.
B. Beginning in 1997, based on fiscal
1997 cash flow, the Company will
pay to the lenders 50% of excess
CDSA (as defined under the present
indenture) using the same
procedures for payment as addressed
under the current indentures. In
the event the Company converts to
corporate status, the CDSA
definition shall be changed to
reflect CDSA net of corporate
income taxes.
C. Commencing in year 3, the company
shall make annual sinking fund
payments on the Senior Secured
Notes in the amount of $2,937,500,
with 40% of such amount to be paid
on or before September 30 and 60%
of such amount to be paid on or
before December 31 of each
applicable year. The sinking fund
payments in years 3 through 10
shall be increased by an amount
necessary to fully amortize any
outstanding paid-in-kind Senior
Secured Notes over that eight-year
period.
6. Collateral Collateral for the IDB L/C and the
Senior Secured Notes will remain as it
currently is in the existing loan and
security documents. Existing lenders
will allow all current assets to
collateralize the New Crude LC when that
facility is obtained.
7. Equipment Financing Existing lenders will allow the Company
to borrow funds to build a 92,000 barrel
asphalt tank, extend the storage
capacity of two existing asphalt storage
tanks by a combined 18,000-19,000
barrels, and build two 5,000 barrel
polymer asphalt tanks plus associated
hardware at Benicia in 1996 and 1997.
Collateral for the financing of these
new capital expenditures will be only
these new assets themselves.
The equipment financing to build the two
5,000 barrel polymer asphalt tanks plus
associated hardware will be repaid by
December 31, 1996. Any amounts not
repaid by December 31, 1996 on the
92,000 barrel asphalt tank, or the two
asphalt extensions or any other
component of the planned 1996 capital
expenditures of $4,150,000 will be
deposited in a separate account at
Bankers Trust to be withdrawn in 1997
only for the purpose of paying off any
remaining amounts due on these 1996
capital projects.
8. Existing Junior The existing Junior Subordinated Notes
will be
Subordinated Note exchanged for New Subordinated Notes
(the "New Subordinated Notes") in a
principal amount of $2,070,000. The New
Subordinated Notes will mature 10 years
from the date of closing. No principal
payments or prepayments will be made on
the New Subordinated Notes until the
Senior Secured Notes are paid in full.
The New Subordinated Notes will pay
interest at a rate of 12% only in units
valued at the then current market price
(mechanics to be discussed). Any units
issued under this provision will not be
dilutive to equity as described under
number 10, Equity, below.
9. Covenants The Company will incorporate as much of
the current indenture as possible except
that financial covenant 415b will be
eliminated, covenant 422 (Liquidity
reserve) will be eliminated and the
Company and its lenders will agree on an
appropriate covenant 418 (capital
expenditure) for future years.
Lenders will allow an unsecured loan in
1996 not to exceed $2,000,000. Such
loan must be repaid in full by December
31, 1996.
10. Equity 50% of the equity of the reorganized
Huntway on a fully-diluted basis. The
equity to consist of units at no cost
(or shares if the Company converts to
Corporate status). Existing warrants
held by existing lenders to be retired.
The New Subordinated Noteholders to
receive 4.4% of the equity of the
reorganized Huntway on a fully-diluted
basis.
Operating Management of the Company to
own 10% (including the 1,022,000 options
already issued) of the equity of the
reorganized Huntway on a fully-diluted
basis.
The holders of the Senior Secured Notes
shall not sell or otherwise transfer the
equity securities issued to them at
closing for 180 days following the
closing; provided that the holders of
the New Subordinated Notes, the
Company's management and Andre Danesh
(with respect only to his 600,000 unit
finder's fee) shall have agreed not to
sell or otherwise transfer their equity
securities in the Company for such 180-
day period; provided further that on or
before the expiration of the 180-day
period, the equity securities issued at
the closing contemplated hereby shall be
registered.
11. Tax Matters All aspects of the tax consequences of
the exchange offer, including the tax
treatment relating to the cancellation
of indebtedness and the issuance of the
Senior Secured Notes and the limited
partnership interests, as such
consequences relate to both the Company
and the Existing Lenders (both as to the
old debt converted and the new debt and
equity received) shall be satisfactory
to the Company and the Existing Lenders.
The limited partnership agreement
amendments and the allocations and
capital account balances made in
connection with the consummation of the
exchange offer shall also be
satisfactory to the Existing Lenders.
The parties agree that the Company may
convert to corporate status following
the closing subject to the Existing
Lenders' prior written consent.
12. Information and Other The Limited Partnership Agreement
shall be
Rights amended as to provide the limited
partners (subject to the execution of
appropriate confidentiality agreements)
with rights to information concerning
the Company and its operations requested
by the holders of at least 25% of the
limited partnership interests and to be
consulted as to certain matters
specified in the Restructuring
Documents. In addition, the members of
the Operating Committee shall be
satisfactory to the Existing Lenders (so
long as the Existing Lenders hold at
least 25% of the limited partnership
interests); it being understood that the
current members of the Operating
Committee (who are identified on Exhibit
A hereto) are hereby deemed satisfactory
to the Existing Lenders. The parties
hereto further agree to permit Huntway
Managing Partners, L.P., following the
closing, to transfer its general
partnership interests in the Company to
an entity to be formed by the Company's
management and will consent to such
transfer, provided that such transfer
would not result in the loss of limited
liability of any limited partner, cause
the Company to be treated as a
corporation for federal income tax
purposes or otherwise cause adverse tax
consequences to the Existing Lenders.
13. Mutual Release In consideration of the consummation of
the transactions contemplated hereby,
the parties hereto and their respective
partners and other affiliates shall
receive at closing a full release of all
pre-closing obligations, liabilities,
agreements and claims relating to the
Company and its partners and other
affiliates.
The parties to this Term Sheet agree to use their good faith
efforts to consummate the transactions contemplated hereby. This
Term Sheet is subject to the preparation and execution of
definitive documentation satisfactory to the Existing Lenders,
the holders of the Junior Subordinated Notes and the Company,
containing terms and conditions consistent with the terms and
conditions set forth above (the "Restructuring Documents"). This
Term Sheet is intended merely as an outline of certain of the
material terms of such Restructuring Documents. It does not
include descriptions of all of the terms, conditions and other
provisions that are to be contained in the definitive
documentation relating to the debt and equity securities and
instruments described herein and it is not intended to limit the
scope of discussion and negotiation of any matters not
inconsistent with the specific matters set forth herein.
* * * * *
IN WITNESS WHEREOF, the due execution hereof by the
respective duly authorized officer of the undersigned as of the
date first written above.
HUNTWAY PARTNERS, L.P.
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
By: HUNTWAY HOLDINGS, L.P.,
Its Special 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
IN WITNESS WHEREOF, the due execution hereof by the
respective duly authorized officer of the undersigned as of the
date first written above.
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
By: HUNTWAY HOLDINGS, L.P.,
Its Special 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, the due execution hereof by the
respective duly authorized officer of the undersigned as of the
date first written above.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael Klofas
Michael Klofas
Second Vice President
CROWN LIFE INSURANCE COMPANY
By: /s/ H. E. Stackhouse
H. E. Stackhouse
AVP, Private Placements
By: /s/ Jeff Tiefenbach
Jeff Tiefenbach
Inv. Analyst, Bonds
CENTURY LIFE OF AMERICA
By: Century Investment Management Co.
By: /s/ Donald Heltner
Donald Heltner
Vice President
CENTURY LIFE INSURANCE COMPANY
By: Century Investment Management Co.
By: /s/ Donald Heltner
Donald Heltner
Vice President
IN WITNESS WHEREOF, the due execution hereof by the
respective duly authorized officer of the undersigned as of the
date first written above.
RYBACK MANAGEMENT CORPORATION, on
behalf of itself and its nominee(s).
By: _____________________________
Name:
Title:
MADISON DEARBORN PARTNERS III
By: /s/ Samuel M. Mencoff
Samuel M. Mencoff
FIRST CAPITAL CORPORATION OF CHICAGO
By: /s/ Harry H. Hallowell
Harry H. Hallowell
Vice President
EXHIBIT A
HUNTWAY PARTNERS, L.P.
CURRENT OPERATING COMMITTEE MEMBERS
Juan Y. Forster
Samuel M. Mencoff
Justin S. Huscher
Raymond M. O'Keefe
EXHIBIT B
Huntway Partners, L.P.
Term Sheet for
Prepackaged Plan of Reorganization
Classification and Treatment of Claims
and Equity Interests Under the Prepackaged Plan:
Administrative Expenses: Allowed administrative expenses
under section 503(b) and 507(a)(1) of the Bankruptcy Code
are to be paid in full, in cash, on the dates of the
Effective Date or the date on which such administrative
expenses become allowed, except to the extent the holder
agrees to a different treatment; provided, however, that
obligations incurred in the ordinary cause of business or
assumed by the debtor-in-possession shall be paid in full or
be performed by Huntway in the ordinary course of business
according to the terms of the obligations.
Priority Tax Claims: Allowed Priority Tax Claims (claims of
governmental units entitled to priority under Section 507(a)
(8) of the Bankruptcy Code) are to be paid in full, in cash,
on the effective date or as soon thereafter as practicable;
provided, however, that at Huntway's option, Huntway may pay
such allowed claims plus interest over a period not
exceeding six years after date of assessment thereof.
Class 1 - Other Priority Claims: Class 1 consists of claims
which are entitled to a priority under 507(a) of the
Bankruptcy Code (other than Administrative Expenses or
Priority Tax Claims), for example unsecured claims for
accrued employee compensation and benefits (not to exceed
$4,000 per employee). Allowed Class 1 claims will be paid
in full, in cash, on the effective date or as soon
thereafter as practicable, except to the extent that the
claimholder in such class agrees to a different treatment;
provided, however, that Other Priority Claims representing
obligations incurred in the ordinary course of business or
assumed by the debtor-in-possession shall be paid in full or
be performed by Huntway in the ordinary course of business
according to the terms of the obligations. Claims in Class
1 are unimpaired and holders of such claims are deemed to
have accepted the Prepackaged Plan.
Class 2 - Senior Lenders: Class 2 consists of all of the
Claims of the Senior Lenders arising under the
Collateralized Note Indenture and Subordinated Note
Indenture, including interest, fees, costs and expenses
provided thereunder, including post petition interest, fees,
costs and expenses pursuant to Section 506(b) of the
Bankruptcy Code (the "Senior Lenders Claims"). On the
effective date, allowed Class 2 Senior Lender claims will be
continuing obligations of Huntway as amended and modified
under a Post-Restructuring Indenture containing principal
terms and conditions set forth on Exhibit A annexed hereto
(the "Consensual Term Sheet"). Class 2 Claims shall be
separated into three subclasses. Class 2A Claims shall
consist of all of the Senior Lenders Claims of Bankers Trust
Company (including with respect to the Subordinated Notes.
Class 2B Claims shall consist of all of the Senior Lender
Claims (other than those of Bankers Trust Company), to the
extent such Claims are allowed secured claims. Class 2C
Claims shall consist of the unsecured portion of all Senior
Lender Claims (i.e., the allowed amount of such claims that
exceeds the value of the collateral securing Huntway's
obligations therefor) other than those of Bankers Trust
Company. The holder of Class 2A claims shall receive
$9,100,000 in unfunded Senior Secured Notes in respect of
the IDB L/C and $2,844,344 in funded Senior Secured Notes
described in Section 1 of the Consensual Term Sheet. The
holders of Class 2B and Class 2C claims will receive their
pro rata share of $11,555,656 in funded Senior Secured Notes
described in Section 1 of the Consensual Term Sheet. Claims
in Classes 2A, 2B and 2C are each impaired by the
Prepackaged Plan and holders of claims in such classes are
entitled to vote on the Prepackaged Plan in accordance with
the Prepackaged Plan and the Voting Instructions contained
therein (the "Voting Instructions").
Class 3 - Other Secured Claims: Class 3 consists of secured
claims, other than Senior Lender Claims, against Huntway
(the "Other Secured Claims") held by an entity, including a
creditor holding a judgment with respect to which a lien has
been perfected against Huntway, to the extent of the value,
pursuant to subsection 506(a) of the Bankruptcy Code, of any
interest in property of the estate securing such allowed
claim. The legal equitable and contractual rights of the
holders of Class 3 claims are unaltered by the Prepackaged
Plan and on the effective date, and subject to the
requirements of Section 1124(2) of the Bankruptcy Code, the
legal, equitable and contractual rights of the holders of
Class 3 claims shall be reinstated in full, in accordance
with the terms of the prepetition agreements, rights or
obligations of Huntway respecting such Class 3 claims;
provided, however, that the maturity date or dates of all
Other Secured Claims shall be reinstated to the date or
dates which existed prior to the date of any acceleration of
such Class 3 claims, subject to the legal and equitable
rights of the parties with respect to such claims as they
existed immediately prior to the filing of the Prepackaged
Plan. Class 3 is unimpaired and the holders of claims in
Class 3 are not entitled to vote to accept or reject the
Prepackaged Plan. No Class 3 claim shall be deemed allowed
or not allowed by virtue of the Prepackaged Plan or
confirmation of the Prepackaged Plan. Claims in Class 3 are
unimpaired and holders of such Claims are deemed to have
accepted the Prepackaged Plan.
Class 4 - Unsecured Claims: Class 4 consists of all claims
that are not Administrative Expenses, Priority Tax Claims,
Other Priority Claims (Class 1), Senior Lender Claims (Class
2), Other Secured Claims (Class 3) or Claims of Holders of
Junior Subordinated Notes (Class 5). Unsecured Claims
ordinarily consist of trade claims, claims for breach of
contract and damage claims. Huntway intends to seek the
approval of the Bankruptcy Court, as soon as is practicable
after commencement of the Prepackaged Chapter 11 Case, to
pay all trade claims and certain undisputed Class 4 Claims
in the ordinary course of business. The legal, equitable
and contractual rights of the holders of Class 4 Claims are
unaltered by the Prepackaged Plan and on the effective date,
and subject to the requirements of Section 1124(2) of the
Bankruptcy Code, the legal, equitable and contractual rights
of the holders of Class 4 claims shall be reinstated in full
in accordance with the terms of the prepetition agreements,
rights or obligations of Huntway respecting such Class 4
claims; provided, however that the maturity date or dates of
all Unsecured claims shall be reinstated to the date or
dates which existed prior to the date of any acceleration of
such Class 4 claims, subject to the legal and equitable
rights of the parties with respect to such Class 4 claims as
they existed immediately prior to the filing of the
Prepackaged Plan. No Class 4 claim shall be deemed allowed
or not allowed by virtue of the Prepackaged Plan or
confirmation of the Prepackaged Plan. Claims in Class 4 are
unimpaired and holders of such Claims are deemed to have
accepted the Prepackaged Plan.
Class 5 - Claims of Holders of Junior Subordinated Notes:
Class 5 consists of all claims of holders of each of the
Junior Subordinated Notes. The outstanding aggregate
principal amount of the Junior Subordinated Notes was
$7,736,907.42 as of December 31, 1995. On the effective
date or as soon thereafter as is practicable, a holder of an
allowed claim evidenced by a Junior Subordinated Note shall
receive, in full and final satisfaction of such holder's
Allowed Class 5 claim its pro rated portion of (a)
$2,070,000 principal of new Junior Subordinated Notes with
terms and conditions described in Section 8 of the
Consensual Term Sheet; and (b) 4.4% of Huntway's post-
reorganization partnership units on a fully-diluted basis,
subject to the exercise of the post-reorganization options
issued to Huntway employees in accordance with the
Prepackaged Plan. On the effective date, all Junior
Subordinated Notes will be cancelled, and the obligations of
Huntway represented by such instruments will be completely
discharged. Upon receipt by Huntway of a holder's Junior
Subordinated Notes, such holder will receive the
consideration provided for in the Prepackaged Plan. Claims
in Class 5 are impaired under the Prepackaged Plan and
holders of allowed Class 5 claims are entitled to vote on
the Prepackaged Plan in accordance with the Prepackaged Plan
and the Voting Instructions.
Class 6 - Equity Interests of Holders of Warrants: Class 6
consists of all equity interests of holders of Warrants for
the purchase of Huntway's partnership units. The
Prepackaged Plan provides that each holder of an allowed
equity interest in Class 6 will receive on the effective
date such holder's pro rata share of 50% of the Huntway
Partnership units on a fully-diluted basis, subject to the
exercise of the post-reorganization options issued to
Huntway employees in accordance with the Prepackaged Plan.
Equity interests in Class 6 are impaired and holders of
allowed Class 6 equity interests are entitled to vote on the
Prepackaged Plan in accordance with the Prepackaged Plan and
the Voting Instructions.
Class 7 - Equity Interests of Holders of Partnership Units:
Class 7 consists of all Equity Interests of holders of
Partnership Units. The Prepackaged Plan provides that each
holder of an allowed equity interest in Class 7 will retain
such holder's units from and after the effective date.
However, as a result of the issuance to holders of Class 5
Claims of approximately 1,115,077 additional units and of
the issuance to holders of Class 6 Claims of 12,671,327
additional units deliverable as of the effective date, the
ownership interest in Huntway represented by holders of
these units outstanding immediately prior to the effective
date will be reduced to approximately 45.6 percent, based on
shares outstanding as of the date of filing of the
Prepackaged Plan. Equity interests in Class 7 are impaired
and holders of allowed Class 7 equity interests are entitled
to vote on the Prepackaged Plan in accordance with the
Prepackaged Plan and the Voting Instructions.
Class 8 - Equity Interests of Holders of Unit Options:
Class 8 consists of all equity interests of holders of Unit
Options. The Prepackaged Plan provides that each holder of
an allowed Equity Interest in Class 8 will receive an equal
amount of Unit Options from and after the effective date on
terms and conditions set forth in the Prepackaged Plan. In
addition, in connection with the consummation of the
Prepackaged Plan, Huntway will implement a management
incentive option plan, pursuant to which Huntway will agree
to grant such number of options, which when added to the
Unit Options issued to Huntway employees pursuant to the
Prepackaged Plan, will result in Huntway employees'
ownership immediately after the effective date of 10% of the
post-reorganization units on a fully-diluted basis assuming
the exercise of all outstanding options. However, as a
result of the issuance to Holders of Class 5 Claims of
approximately 1,115,077 additional units and of the issuance
to the holders of Class 6 Claims of 12,671,327 additional
units, the ownership interest in Huntway that would be
represented by units receivable upon exercise of the Unit
Options would be reduced. Equity interests in Class 8 are
impaired and holders of allowed Class 8 equity Interests are
entitled to vote on the Prepackaged Plan in accordance with
the Prepackaged Plan and the Voting Instructions.
Executory Contracts, Unexpired Leases and Other Obligations
Executory Contracts and Unexpired Leases
The Prepackaged Plan provides that all executory contracts
and unexpired leases that exist between Huntway and any person
will be assumed. Entry of the Confirmation Order by the Clerk of
the Bankruptcy Court will constitute approval of such assumptions
pursuant to subsection 365(a) of the Bankruptcy Code. No
adequate assurance of future performance (other than promise to
perform under the executory contracts and unexpired leases) shall
be required pursuant to Section 365(b)(1)(C) of the Bankruptcy
Code, unless otherwise ordered by the Bankruptcy Court.
Employment and Compensation Agreements, Plans and Policies
The Prepackaged Plan provides that all employment and
severance agreements and policies, and all employee compensation
and benefit plans, contracts, agreements, policies, undertakings
and programs of Huntway, including, without limitation, savings
plans, key employee retention plans, retirement plans, health
care plans, disability plans, severance benefit plans, incentive
plans, and life and accidental death and dismemberment insurance
plans are, except as otherwise provided herein, treated as
executory contracts under the Prepackaged Plan and are assumed by
Huntway for all purposes.
Retiree Benefits
On and after the effective date, pursuant to Section
1129(a)(13) of the Bankruptcy Code, Huntway will continue to pay
all retiree benefits, as that term is defined in Section 1114 of
the Bankruptcy Code, at the level established pursuant to
subsection (e)(1)(B) or (g) of Section 1114, at any time prior to
confirmation of the Prepackaged Plan, for the duration of the
period Huntway has obligated itself to provide such benefits.
Collective Bargaining Agreements
Pursuant to Section 1113 of the Bankruptcy Code Huntway will
continue to honor its obligations under its collective bargaining
agreements after the Prepackaged Case is commenced. The
Prepackaged Plan will not affect or modify Huntway's obligations
under those agreements.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 4304
<SECURITIES> 0
<RECEIVABLES> 4820
<ALLOWANCES> 0
<INVENTORY> 3320
<CURRENT-ASSETS> 13120
<PP&E> 72463
<DEPRECIATION> 13786
<TOTAL-ASSETS> 74393
<CURRENT-LIABILITIES> 104557
<BONDS> 350
0
0
<COMMON> (30209)
<OTHER-SE> (305)
<TOTAL-LIABILITY-AND-EQUITY> 74393
<SALES> 83069
<TOTAL-REVENUES> 83069
<CGS> 79042
<TOTAL-COSTS> 79042
<OTHER-EXPENSES> 3819
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5177
<INCOME-PRETAX> (14461)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14461)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14461)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> 0
</TABLE>
