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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 March 31, 1996 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 Identification No.)
Incorporation or Organization)
2435 NORTH CENTRAL EXPRESSWAY
RICHARDSON, TEXAS 75080
(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. AND SUBSIDIARIES
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1996
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<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
-- Three Months Ended March 31, 1996 and 1995 1
Condensed Consolidated Balance Sheets
-- March 31, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Cash Flows
-- Three Months Ended March 31, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 7
Signature 8
</TABLE>
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS -- EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
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<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
<S> <C> <C>
Revenues $ 27,826 $ 20,382
---------------- ---------------
Costs and expenses:
Operating costs 12,108 8,558
Depreciation and amortization 2,708 2,011
General and administrative 1,410 1,187
---------------- ---------------
Total costs and expenses 16,226 11,756
---------------- ---------------
Operating income 11,600 8,626
Other income, net (principally interest) 184 231
Interest expense (2,730) (1,375)
---------------- ---------------
Income before minority interest and income tax expense 9,054 7,482
Minority interest in net income (86) (73)
Income tax expense (291) (110)
---------------- ---------------
Net income 8,677 7,299
General partner's interest in net income (86) (73)
---------------- ---------------
Limited partners' interest in net income $ 8,591 $ 7,226
================ ===============
Allocation of net income per Senior Preference Unit
and Preference Unit $ .55 $ .55
================ ===============
Weighted average number of Units outstanding:
Senior Preference Units 7,250 7,250
================ ===============
Preference Units 4,650 5,650
================ ===============
</TABLE>
See notes to consolidated financial statements.
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
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<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 6,493 $ 6,307
Accounts receivable 10,494 10,210
Current portion of receivable from general partner 2,659 2,571
Prepaid expenses 2,240 1,254
------------ -------------
Total current assets 21,886 20,342
------------ -------------
Receivable from general partner, less current portion 276 974
------------ -------------
Property and equipment 324,765 323,671
Less accumulated depreciation and
amortization 79,879 77,200
------------ -------------
Net property and equipment 244,886 246,471
------------ -------------
$ 267,048 $ 267,787
============ =============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $ 1,838 $ 1,777
Accounts payable, accrued expenses
and distributions payable 16,899 17,018
Deferred terminaling fees 2,498 2,634
Payable to general partner 847 963
------------ -------------
Total current liabilities 22,082 22,392
------------ -------------
Long-term debt, less current portion 136,006 136,489
------------ -------------
Other liabilities and deferred taxes 7,466 7,160
------------ -------------
Minority interest 994 998
------------ -------------
Partners' capital 100,500 100,748
------------ -------------
$ 267,048 $ 267,787
============ =============
</TABLE>
See notes to consolidated financial statements.
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
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<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Operating activities:
Net income $ 8,677 $ 7,299
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,708 2,011
Minority interest in net income 86 73
Deferred income taxes 291 107
Changes in working capital components (688) 1,171
-------------- --------------
Net cash provided by operating activities 11,074 10,661
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Investing activities:
Capital expenditures (2,076) (2,177)
Acquisition of the West Pipeline - (27,100)
Other 14 (43)
-------------- --------------
Net cash used by investing activities (2,062) (29,320)
-------------- --------------
Financing activities:
Changes in receivable from general partner 610 532
Issuance of long-term debt - 28,500
Payments of long-term debt (422) (1,867)
Distributions to partners (9,014) (8,208)
-------------- --------------
Net cash provided (used) by financing activities (8,826) 18,957
-------------- --------------
Increase in cash 186 298
Cash at beginning of period 6,307 4,145
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Cash at end of period $ 6,493 $ 4,443
============== ==============
Supplemental information - cash paid for interest $ 2,603 $ 497
============== ==============
</TABLE>
See notes to consolidated financial statements.
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited financial statements of Kaneb Pipe Line Partners, L.P. (the
"Partnership") for the periods ended March 31, 1996 and 1995 have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Significant accounting policies followed by
the Partnership were disclosed in the notes to the financial statements
included in the Partnership's Annual Report on Form 10K for the period
ended December 31, 1995. 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 March 31, 1996 and the results of its
operations and cash flows for the period ended March 31, 1996. Operating
results for the three month-period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1996.
2. ACQUISITIONS
In February 1995, the Partnership acquired, through Kaneb Pipe Line
Operating Partnership, L.P., the refined petroleum product pipeline assets
(the "West Pipeline") of Wyco Pipe Line Company for $27.1 million plus
transaction costs and the assumption of certain environmental liabilities.
The West Pipeline was owned 60% by a subsidiary of GATX Terminals
Corporation and 40% by a subsidiary of Amoco Pipe Line Company. The
acquisition was financed by the issuance of $27 million of first mortgage
notes. The assets acquired from Wyco Pipe Line Company did not include
certain assets that were leased to Amoco Pipe Line Company and the purchase
agreement did not provide for either (i) the continuation of an arrangement
with Amoco Pipe Line Company for the monitoring and control of pipeline
flows or (ii) the extension or assumption of certain credit agreements that
Wyco Pipe Line Company had with its shareholders.
In December 1995, the Partnership acquired the liquids terminaling assets
of Steuart Petroleum Company and certain of its affiliates (collectively,
"Steuart") for $68 million, plus transaction costs and the assumption of
certain environmental liabilities. The acquisition price was financed by a
$68 million bank bridge loan. The asset purchase agreements include a
provision for an earn-out payment based upon revenues of one of the
terminals exceeding a specified amount for a seven-year period beginning in
January 1996. The agreements also include a provision for the continuation
of all material terminaling contracts in place at the time of the
acquisition, including those contracts with Steuart.
The acquisitions have been accounted for using the purchase method of
accounting. The total purchase price has been allocated to the assets and
liabilities based on their respective fair values based on valuations and
other studies. The allocation of the Steuart purchase price presented in
the consolidated financial statements is preliminary and subject to
adjustment.
The following summarized unaudited pro forma consolidated results of
operations for the three months ended March 31, 1996 and 1995, assume the
acquisitions occurred as of the beginning of each period presented. The
unaudited pro forma financial results have been prepared for comparative
purposes only and may not be indicative of the results that would have
occurred if the Partnership had acquired the pipeline
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
assets of the West Pipeline and the liquids terminaling assets of Steuart
on the dates indicated or which will be attained in the future.
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------------------
1996 1995
------------ -------------
(unaudited)
<S> <C> <C>
Revenues $ 27,826,000 $ 28,101,000
============ =============
Net Income $ 8,677,000 $ 7,824,000
============ =============
Allocation of net income per SPU and PU $ .55 $ .55
============ =============
</TABLE>
3. CASH DISTRIBUTIONS TO UNITHOLDERS
The cash distribution of $.55 per unit for the fourth quarter of 1995 was
made on February 14, 1996. The distribution of $.55 for the first quarter
of 1996 was declared to holders of record as of April 29, 1996 and is
payable on May 15, 1996.
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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Financial Condition
During the first three months of 1996, the Partnership's working capital
requirements for operations, capital expenditures and cash distributions were
funded through the use of internally generated funds.
Cash provided by operations was $11.1 million and $10.7 million for the periods
ended March 31, 1996 and 1995, respectively. Capital expenditures were $2.1
million in the 1996 period compared to $2.2 million in 1995. The Partnership
anticipates that capital expenditures will total approximately $8.0 million
(excluding any acquisitions) for the year 1996.
The Partnership intends to fund future cash distributions and maintenance
capital expenditures with cash and cash flows from operating activities.
Additional information relative to sources and uses of cash is presented in the
financial statements included in this report.
Operating results
PIPELINE OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Revenues $ 14,396 $ 11,634
Operating costs 5,977 4,378
Depreciation and amortization 1,185 1,181
General and administrative 662 672
------------- -------------
Operating income $ 6,572 $ 5,403
============= =============
</TABLE>
For the quarter ended March 31, 1996, revenues increased 24%, operating costs
increased 37% and operating income increased 22% over the comparable prior year
period, primarily as a result of the acquisition of the West Pipeline in
February 1995.
TERMINALING OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Revenues $ 13,430 $ 8,748
Operating costs 6,131 4,180
Depreciation and amortization 1,523 830
General and administrative 748 515
------------- -------------
Operating income $ 5,028 $ 3,223
============= =============
</TABLE>
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
For the quarter ended March 31, 1996, revenues increased 54% over the same
period of 1995, primarily as a result of the acquisition of the terminaling
assets of Steuart Petroleum Company in December 1995. The average tankage
utilized increased 95% to 12.6 million barrels as a direct result of the
Steuart terminal acquisition. As the Steuart terminaling assets primarily store
pertroleum products, which have a lower price per barrel storage fee than other
specialty chemicals, the average annualized revenue per barrel stored decreased
to $4.25 in the first quarter of 1996 compared to $5.40 per barrel in the first
quarter of 1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Report dated August 27, 1995, on Form 8-K/A was filed on January
3, 1996, pursuant to Item 2 of that form. Statements of Revenues
and Direct Operating Expenses and Statements of Net Assets to be
Acquired of Steuart Petroleum Company and affiliates and pro forma
financial statements of the Registrant were included in Item 7 of
this filing.
7
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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: May 7, 1996 /s/ Jimmy L. Harrison
------------------------------------
Jimmy L. Harrison
Controller
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,493
<SECURITIES> 0
<RECEIVABLES> 10,494
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,886
<PP&E> 324,765
<DEPRECIATION> 79,879
<TOTAL-ASSETS> 267,048
<CURRENT-LIABILITIES> 22,082
<BONDS> 136,006
<COMMON> 0
0
0
<OTHER-SE> 100,500
<TOTAL-LIABILITY-AND-EQUITY> 267,048
<SALES> 0
<TOTAL-REVENUES> 27,826
<CGS> 0
<TOTAL-COSTS> 16,226
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,730
<INCOME-PRETAX> 8,968
<INCOME-TAX> 291
<INCOME-CONTINUING> 8,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,677
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
