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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, 1997 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
----- -----
Number of Senior Preference Units of the Registrant outstanding at April 30,
1997: 7,250,000. Number of Preference Units of the Registrant outstanding at
April 30, 1997: 4,650,000.
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1997
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Page No.
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Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income
-- Three Months Ended March 31, 1997 and 1996 1
Condensed Consolidated Balance Sheets
-- March 31, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Cash Flows
-- Three Months Ended March 31, 1997 and 1996 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 and Reports on Form 8-K 6
Signature 7
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS -- EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues $ 28,579 $ 27,826
-------- --------
Costs and expenses:
Operating costs 12,402 12,108
Depreciation and amortization 2,878 2,708
General and administrative 1,270 1,410
-------- --------
Total costs and expenses 16,550 16,226
-------- --------
Operating income 12,029 11,600
Other income, net (principally interest) 106 184
Interest expense (2,854) (2,730)
-------- --------
Income before minority interest and income taxes 9,281 9,054
Minority interest in net income (90) (86)
Income tax provision (284) (291)
-------- --------
Net income 8,907 8,677
General partner's interest in net income (90) (86)
-------- --------
Limited partners' interest in net income $ 8,817 $ 8,591
======== ========
Allocation of net income per Senior Preference Unit
and Preference Unit $ .55 $ .55
======== ========
Weighted average number of Partnership units outstanding:
Senior Preference Units 7,250 7,250
======== ========
Preference Units 4,650 4,650
======== ========
</TABLE>
See notes to consolidated financial statements.
1
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,833 $ 8,196
Accounts receivable 11,572 11,540
Current portion of receivable from general partner 276 975
Prepaid expenses 4,198 4,321
-------- --------
Total current assets 26,879 25,032
-------- --------
Property and equipment 338,580 337,202
Less accumulated depreciation and
amortization 90,246 87,469
-------- --------
Net property and equipment 248,334 249,733
-------- --------
$275,213 $274,765
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $ 2,107 $ 2,036
Accounts payable, accrued expenses
and distributions payable 19,727 18,715
Deferred terminaling fees 3,110 2,874
Payable to general partner 861 711
-------- --------
Total current liabilities 25,805 24,336
-------- --------
Long-term debt, less current portion 138,899 139,453
-------- --------
Other liabilities and deferred taxes 6,982 6,612
-------- --------
Minority interest 1,015 1,024
-------- --------
Partners' capital 102,512 103,340
-------- --------
$275,213 $274,765
======== ========
</TABLE>
See notes to consolidated financial statements.
2
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 8,907 $ 8,677
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,878 2,708
Minority interest in net income 90 86
Deferred income taxes 268 291
Changes in working capital components 1,591 (688)
-------- --------
Net cash provided by operating activities 13,734 11,074
-------- --------
Investing activities:
Capital expenditures (1,876) (2,076)
Other 397 14
-------- --------
Net cash used by investing activities (1,479) (2,062)
-------- --------
Financing activities:
Changes in receivable from general partner 699 610
Payments of long-term debt (483) (422)
Distributions to partners (9,834) (9,014)
-------- --------
Net cash used by financing activities (9,618) (8,826)
-------- --------
Increase in cash 2,637 186
Cash at beginning of period 8,196 6,307
-------- --------
Cash at end of period $ 10,833 $ 6,493
======== ========
Supplemental information - cash paid for interest $ 1,521 $ 2,603
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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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 consolidated financial statements of Kaneb Pipe Line
Partners, L.P. and its subsidiaries (the "Partnership") for the periods
ended March 31, 1997 and 1996 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 consolidated financial statements included in the
Partnership's Annual Report on Form 10-K for the period ended December 31,
1996. In the opinion of the Partnership's management, the accompanying
consolidated financial statements contain the adjustments, consisting of
normal recurring accruals, necessary to present fairly the consolidated
financial position of the Partnership at March 31, 1997 and the
consolidated results of its operations and cash flows for the period ended
March 31, 1997 and 1996. Operating results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.
2. CASH DISTRIBUTIONS TO UNITHOLDERS
The cash distribution of $.60 per Unit for the fourth quarter of 1996 was
made on February 14, 1997. A cash distribution of $.60 for the first
quarter of 1997 was declared to holders of record as of April 30, 1997 and
is payable on May 15, 1997.
4
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
During the first three months of 1997, 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 $13.7 million and $11.1 million for the
periods ended March 31, 1997 and 1996, respectively. Capital expenditures
were $1.9 million in the 1997 period compared to $2.1 million in 1996. The
Partnership anticipates that capital expenditures will total approximately
$8.0 to $10.0 million (excluding any further acquisitions) for the year
1997.
The Partnership intends to fund future cash distributions and maintenance
capital expenditures with cash and cash flows from operating activities.
Expansionary capital expenditures are expected to be funded through
additional Partnership borrowing.
The Partnership makes distributions of 100% of its available cash to
Unitholders and the General Partner. Available cash consists generally of
all the cash receipts less all cash disbursements and reserves.
Distributions of $.60 per unit were declared to all Unitholders in the
first quarter of 1997 and $2.30 per unit was declared in the calendar year
1996.
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,
-----------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Revenues $13,869 $14,396
Operating costs 5,370 5,977
Depreciation and amortization 1,203 1,185
General and administrative 610 662
------- -------
Operating income $ 6,686 $ 6,572
======= =======
</TABLE>
For the quarter ended March 31, 1997, revenues decreased 4% primarily due
to the adverse effect on product demand caused by abnormally high amounts
of snow and rainfall in the northern Midwest. Operating income increased
2% as operating cost reductions more than offset the revenue decline.
5
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
TERMINALING OPERATIONS
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Revenues $14,710 $13,430
Operating costs 7,032 6,131
Depreciation and amortization 1,675 1,523
General and administrative 660 748
------- -------
Operating income $ 5,343 $ 5,028
======= =======
</TABLE>
For the quarter ended March 31, 1997, operating income increased 6% over
the same period in 1996, primarily as a result of the acquisition of two
terminaling facilities acquired in the fourth quarter of 1996 in addition
to an increase in the profitability of terminals acquired in December
1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K - none
6
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KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
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, 1997 /s/ Jimmy L. Harrison
-------------------------------
Jimmy L. Harrison
Controller
7
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,833
<SECURITIES> 0
<RECEIVABLES> 11,654
<ALLOWANCES> 82
<INVENTORY> 0
<CURRENT-ASSETS> 26,879
<PP&E> 338,580
<DEPRECIATION> 90,246
<TOTAL-ASSETS> 275,213
<CURRENT-LIABILITIES> 25,805
<BONDS> 138,899
0
0
<COMMON> 0
<OTHER-SE> 102,512
<TOTAL-LIABILITY-AND-EQUITY> 275,213
<SALES> 0
<TOTAL-REVENUES> 28,579
<CGS> 0
<TOTAL-COSTS> 16,550
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,854
<INCOME-PRETAX> 9,191
<INCOME-TAX> 284
<INCOME-CONTINUING> 8,907
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,907
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
