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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
FOR THE QUARTERLY PERIOD COMMISSION FILE
ENDED SEPTEMBER 30, 1994 NUMBER 1-10311
KANEB PIPE LINE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2287571
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2400 LAKESIDE BOULEVARD
RICHARDSON, TEXAS 75082
(Address of principle executive offices, including zip code)
(214) 699-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) 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
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KANEB PIPE LINE PARTNERS, L.P.
FORM 10-Q
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Page #
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<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
- Three and Nine Months Ended September 30, 1994 and 1993 1
Consolidated Condensed Balance Sheets
- September 30, 1994 and December 31, 1993 2
Consolidated Condensed Statements of Cash Flows
- Nine Months Ended September 30, 1994 and 1993 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - OTHER INFORMATION
Item 6. Exhibits
(a) Exhibit Index
Exhibit
-------
27 Financial Data Schedule
Signature 7
</TABLE>
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KANEB PIPE LINE PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(IN THOUSANDS - EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $20,718 $18,515 $57,925 $48,734
Costs and expenses:
Operating costs . . . . . . . . . . . . . . . . 8,639 8,154 24,504 20,891
Depreciation and amortization . . . . . . . . . 1,855 1,738 5,366 4,722
General and administrative . . . . . . . . . . . 1,125 1,185 3,631 3,382
------- ------- ------- -------
Total costs and expenses . . . . . . . . . . . 11,619 11,077 33,501 28,995
------- ------- ------- -------
Operating income . . . . . . . . . . . . . . . . . 9,099 7,438 24,424 19,739
Other income, net (principally interest) . . . . . 270 311 926 1,001
Interest expense . . . . . . . . . . . . . . . . . (913) (642) (2,654) (2,576)
Income tax expense . . . . . . . . . . . . . . . . (309) (123) (744) (381)
Minority interest in net income . . . . . . . . . . (80) (70) (217) (177)
------- ------- -------- -------
Net income . . . . . . . . . . . . . . . . . . . . 8,067 6,914 21,735 17,606
General partner's interest in net income . . . . . (80) (70) (217) (177)
------- ------- -------- -------
Limited partners' interest in net income . . . . . $ 7,987 $ 6,844 $21,518 $17,429
======= ======= ======= =======
Allocation of net income per Senior
Preference Unit . . . . . . . . . . . . . . . . $ .55 $ .55 $ 1.65 $ 1.65
======= ======= ======= =======
Weighted average number of Senior
Preference Units outstanding . . . . . . . . . . 7,250 7,250 7,250 6,250
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
1
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KANEB PIPE LINE PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,142 $ 15,061
Accounts receivable . . . . . . . . . . . . . . . . . . 4,974 4,504
Current portion of receivable from general partner . . . 2,166 1,954
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 2,331 1,667
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . 16,613 23,186
--------- ---------
Receivable from general partner . . . . . . . . . . . . . . 4,133 5,785
--------- ---------
Property and equipment . . . . . . . . . . . . . . . . . . 211,329 195,048
Less accumulated depreciation and amortization . . . . . . 67,040 61,612
--------- ---------
Net property and equipment . . . . . . . . . . . . . . 144,289 133,436
--------- ---------
$ 165,035 $ 162,407
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . $ 1,496 $ 3,850
Accounts payable, accrued expenses and distributions
payable . . . . . . . . . . . . . . . . . . . . . . . 14,042 12,058
Deferred terminaling fees . . . . . . . . . . . . . . . 1,658 1,600
Payable to general partner . . . . . . . . . . . . . . . 1,035 493
--------- ---------
Total current liabilities . . . . . . . . . . . . . . 18,231 18,001
--------- ---------
Long-term debt, less current portion . . . . . . . . . . . 44,022 41,814
--------- ---------
Other liabilities . . . . . . . . . . . . . . . . . . . . . 1,631 991
--------- ---------
Minority interest . . . . . . . . . . . . . . . . . . . . . 996 1,003
--------- ---------
Partners' capital . . . . . . . . . . . . . . . . . . . . . 100,155 100,598
--------- ---------
$ 165,035 $ 162,407
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
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KANEB PIPE LINE PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 21,735 $ 17,606
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . . 5,366 4,722
Minority interest in net income . . . . . . . . . . . 217 177
Deferred income taxes . . . . . . . . . . . . . . . . 716 365
Changes in current assets and liabilities . . . . . . 1,450 3,954
--------- --------
Net cash provided by operating activities . . . . . . 29,484 26,824
--------- --------
Investing Activities:
Acquisition of Support Terminal Services, Inc. . . . . . - (62,677)
Capital expenditures . . . . . . . . . . . . . . . . . . (16,295) (5,142)
---------- ---------
Net cash used by investing activities . . . . . . . . (16,295) (67,819)
---------- ---------
Financing Activities:
Changes in receivable from general partner . . . . . . . 1,440 1,256
Proceeds from issuance of partnership units . . . . . . - 53,163
Issuance of long-term debt . . . . . . . . . . . . . . . 8,350 65,101
Payments of long-term debt . . . . . . . . . . . . . . . (8,496) (51,668)
Distributions to partners . . . . . . . . . . . . . . . (22,402) (24,769)
---------- ---------
Net cash provided (used) by financing activities . . . (21,108) 43,083
---------- ---------
Increase (decrease) in cash . . . . . . . . . . . . . . . . (7,919) 2,088
Cash at beginning of period . . . . . . . . . . . . . . . . 15,061 3,388
---------- ---------
Cash at end of period . . . . . . . . . . . . . . . . . . . $ 7,142 $ 5,476
========== =========
Supplemental information - cash paid for interest . . . . . $ 2,580 $ 2,576
========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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KANEB PIPE LINE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements of Kaneb Pipe Line Partners,
L.P. ("KPP") for the periods ended September 30, 1994 and 1993 have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis. Significant accounting policies followed by the
Partnership are disclosed in the notes to the financial statements included in
the Partnership's Annual Report on Form 10-K for the period ended December 31,
1993. In the opinion of the Partnership's management, the accompanying
financial statements contain the adjustments, consisting of normal recurring
accruals, necessary to present fairly the financial position of the Partnership
at September 30, 1994 and the results of its operations and cash flows for the
periods ended September 30, 1994. Operating results for the three and nine
month periods ended September 30, 1994 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1994.
2. CASH DISTRIBUTIONS TO SENIOR PREFERENCE UNITHOLDERS
The distribution of $.55 for the third quarter of 1994 was declared to holders
of record as of October 31, 1994 and is payable on November 15, 1994.
4
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KANEB PIPE LINE PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
consolidated financial statements of Kaneb Pipe Line Partners LP and notes
thereto included elsewhere in this report.
FINANCIAL CONDITION
Cash provided by operations was $29.5 million and $26.8 million for the periods
ended September 30, 1994 and 1993, respectively. Capital expenditures were
$16.3 million in the 1994 period compared to $5.1 million in 1993. The
acquisition of the Westwego terminal for $8.6 million in June 1994 is included
in the 1994 capital expenditures. This acquisition was funded with a $5.2 draw
on KPP's credit line and existing cash. KPP anticipates that routine capital
expenditures will total approximately $3.0 million for the last quarter of
1994.
KPP intends to fund future cash distributions and maintenance capital
expenditures with cash and cash flows from operating activities. The
Partnership is finalizing a private debt placement which provides for the
refinancing of the existing bank debt.
Additional information relative to sources and uses of cash is presented in the
consolidated financial statements included in this report.
OPERATING RESULTS
PIPELINE OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------- -------------------------------
1994 1993 1994 1993
------- -------- --------- ----------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $12,201 $ 11,016 $ 34,054 $ 31,332
Operating costs . . . . . . . . . . . . . 4,540 4,222 13,110 12,202
Depreciation and amortization . . . . . . . 1,070 1,013 3,196 3,042
General and administrative
expenses . . . . . . . . . . . . . . . . 614 785 2,154 2,367
------- -------- -------- --------
Operating income . . . . . . . . . . . $ 5,977 $ 4,996 $ 15,594 $ 13,721
======= ======== ======== ========
</TABLE>
Operating income for the quarter ended September 30, 1994 increased $1.0
million over the third quarter of 1993, which is primarily attributable to the
tariff increase implemented by the Partnership on April 1, 1994. Operating
income for the nine months ended September 30, 1994 increased $1.9 million over
1993, as a result of a $2.8 million increase in revenues partially offset by
$.9 million increase in operating expenses. The increase in revenues is the
result of higher long-haul shipments and the effect of the tariff increase.
The increase in operating expenses is primarily related to greater power cost
and supplies related to the increase in long-haul shipments.
TERMINALING OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------- -------------------------------------
1994 1993 1994 1993 1993
----------- ---------- ------- ------- -------
(Pro forma) (Historical)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 8,517 $7,499 $23,871 $22,195 $17,402
Operating costs . . . . . . . . . . . . . . . . . . . 4,099 3,932 11,394 11,194 8,689
Depreciation and amortization . . . . . . . . . . . . 785 725 2,170 2,096 1,680
General and administrative expenses . . . . . . . . . 511 400 1,477 1,423 1,015
-------- ------ ------- ------- -------
Operating income . . . . . . . . . . . . . . . . . . . $ 3,122 $2,442 $ 8,830 $ 7,482 $ 6,018
======== ====== ======= ======= =======
</TABLE>
5
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Operating income increased $.7 million for the quarter ended September 30,
1994, as a result of an increase in the average monthly tankage utilized of
6,446,000 barrels in 1994 compared to 5,872,000 barrels in 1993. For the nine
months ended September 30, 1994 operating income increased to $8.8 million or
$1.3 million over the pro forma results for the 1993 period. This is
attributable to an increase of 2 cents per barrel to an average of 43.7 cents
per barrel in 1994, from 41.7 cents per barrel in 1993. The monthly average
tankage utilized for the nine months ended September 30, 1994 and 1993 were
6,075,000 and 5,916,000, respectively.
6
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
KANEB PIPE LINE PARTNERS, L.P.
(Registrant)
By KANEB PIPE LINE COMPANY
(Managing General Partner)
Date: November 11, 1994 /s/ Jimmy L. Harrison
Jimmy L. Harrison
Controller
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - - ------- ----------- ------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 7,142
<SECURITIES> 0
<RECEIVABLES> 4,974
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,613
<PP&E> 211,329
<DEPRECIATION> 67,040
<TOTAL-ASSETS> 165,035
<CURRENT-LIABILITIES> 18,231
<BONDS> 44,022
<COMMON> 0
0
0
<OTHER-SE> 100,155
<TOTAL-LIABILITY-AND-EQUITY> 165,035
<SALES> 0
<TOTAL-REVENUES> 57,925
<CGS> 0
<TOTAL-COSTS> 33,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,654
<INCOME-PRETAX> 22,479
<INCOME-TAX> 744
<INCOME-CONTINUING> 21,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,735
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.65
</TABLE>
