Exhibit 22.1 to Form 8-K of Kaneb Pipe Line Partners, L.P.
News Release:
For immediate release For more information, contact:
Investor Relations
(972) 699-4055
KANEB SERVICES ANNOUNCES PLAN TO UNLOCK COMPANY VALUE BY DISTRIBUTING
ITS PIPELINE, TERMINALING AND PRODUCT MARKETING BUSINESS TO SHAREHOLDERS
Highlights
o Shareholders will receive immediate, significant benefit through long-term,
cash-yielding shares of new entity
o Shareholders will retain shares in growth-oriented technology and technical
services business
o Company intends to complete distribution by mid-year 2001
DALLAS, TEXAS (November 27, 2000) - Kaneb Services, Inc. (NYSE: KAB) today
announced the decision of the Board of Directors to unlock the Company's value
by distributing its pipeline, terminaling and product marketing business to its
shareholders in the form of a new Limited Liability Company (L.L.C.). This new
L.L.C. will own the general partner interest and 5.1 million limited partner
units of Kaneb Pipe Line Partners, L.P. (the Partnership), currently held by
Kaneb Services, and the Company's wholly owned petroleum product marketing
subsidiary. Kaneb Services' shareholders will retain their stake in the
Company's growth businesses, which are focused on technology and technical
services.
"We are very pleased to announce the plan to distribute our pipeline,
terminaling and product marketing business to our shareholders, giving them both
immediate value and a strong cash-yielding security for the long term," said
John R. Barnes, Chairman, President and CEO of Kaneb Services, Inc. "We are
equally excited that this plan will unlock our value as a growth company focused
on information technology and technical services, which are valuable businesses
in the marketplace and in the stock market."
The Company's intention is to complete this action by mid-year 2001. The Company
also intends to apply for listing of the L.L.C. on the New York Stock Exchange,
where the Partnership units as well as Kaneb Services' common stock currently
trade.
According to Mr. Barnes, "We have elected to create this entity in the form of
an L.L.C., which will be treated as a partnership for Federal income tax
purposes. This maximizes value for our shareholders by allowing us to distribute
available cash on a quarterly basis and eliminate double taxation. We believe
that the L.L.C. value is greater than what the whole company has recently been
trading at. At the same time, our shareholders will retain their stake in a
strong growth company focused on technology and technical services."
Unlike a dividend that is taxed at the full rate for ordinary income, the
planned distribution of pro-rata shares in the new L.L.C. will be taxed at a
capital gains rate, and that rate will apply only to a portion of the value
distributed to the shareholders. The taxable portion is the amount by which the
market value of the L.L.C. shares, when they are distributed, exceeds an
allocated portion of the cost of Kaneb Services' shares. A shareholder's new
basis in the L.L.C. shares, which can be used, going forward, to shelter
ordinary income from future L.L.C. distributions, is the same as the market
value of the L.L.C. shares when distributed. Kaneb Services will apply its
valuable net operating loss carryforwards to minimize the Company's taxable gain
from this transaction.
"We are very pleased to announce this exciting plan," Mr. Barnes said. "We will
deliver an immediate and significant benefit to our shareholders, and
substantial opportunities for growth in the future."
ABOUT KANEB PIPELINE, TERMINALING AND PRODUCT MARKETING
As general partner, Kaneb Services operates, manages and controls the operations
of Kaneb Pipe Line Partners, L.P. through its wholly owned subsidiary, Kaneb
Pipe Line Company (KPL), which owns a general partner interest and a 28% limited
partner interest (5.1 million units).
Kaneb Pipe Line Partners, L.P. (NYSE: KPP) is engaged in the transport of
refined petroleum products and the terminaling and storage of petroleum products
and specialty liquids. The Partnership was formed in September 1989 to own a
2,075 mile common carrier pipeline system operating from Kansas to North Dakota
that has been managed by Kaneb Pipe Line Company, the general partner, since
1953. The Partnership increased its pipeline assets with the purchase of 550
miles of pipeline in Wyoming, Colorado and South Dakota in February 1995, and
175 miles in Iowa and South Dakota in December 1998. The Partnership entered the
liquids terminaling business with a large acquisition in 1993, and has more than
tripled the size of this operation through subsequent acquisitions. The
Partnership is a major transporter of refined petroleum products in the Midwest
and is the third largest independent liquids terminaling company in the United
States. Worldwide operations include 61 facilities in 26 states and the United
Kingdom.
In the third quarter 2000, the Partnership announced the largest acquisition in
its history, which, when completed, will significantly increase the
Partnership's West Coast presence and add 7.8 million barrels to its total
tankage capacity. In the same period, the Partnership also announced an East
Coast acquisition that will add another 1.6 million barrels to its total
capacity.
Kaneb Services' product marketing group operates as a gasoline and petroleum
products wholesaler in the Great Lakes and Rocky Mountain regions, as well as
California. The product marketing group buys product from major oil companies
and small refineries, and resells to more than 200 independent distributors.
This group occupies an important niche in petroleum products distribution,
providing gasoline producers another outlet for their production and independent
distributors a reliable source of product.
For the trailing twelve-month period (October 1, 1999 through September 30,
2000), cash distributions to Kaneb Services from its Partnership interests and
cash flow from its product marketing business totaled $18.9 million, exclusive
of any accounting and other adjustments that may be made in the preparation of
pro formas that will be included in an information statement to be published to
shareholders before the L.L.C. distribution.
ABOUT KANEB TECHNOLOGY AND TECHNICAL SERVICES
Kaneb Services' Information Technology Group is comprised of complementary
businesses in niche, high-growth, technology-based markets. InformaTech, Inc.
(ITI), is a provider of Internet and Intranet communications and applications,
network design and installation, bandwidth infrastructure implementation, secure
network architecture and fiber cabling. InformaTech's medical technology
services division specializes in telemedicine planning, design, implementation,
application development and systems integration, including the design of Virtual
Radiology Environments (VRE) that allow transmission of real-time digital images
for diagnosis by medical specialists worldwide. Ellsworth Associates, Inc., is a
leading provider of complex systems design and applications programming, and is
well known for its expertise in creating Internet-based systems for
state-of-the-art database applications. Double Eagle Communications and Cabling,
Inc. is a leading provider of voice and data cabling and network support
services. Fields Financial Services, Inc. provides data management services for
financial institutions, insurance companies and equipment leasing companies. Its
services include coordination of high-volume communications among financial
institutions, insurance companies and borrowers regarding the status of
insurance coverage.
Furmanite Worldwide, Inc., one of the world's largest specialty technical
services companies, partners with clients to solve a variety of engineering
problems in a rapid, reliable manner. From energy and pulp and paper, to
refineries and pharmaceutical plants, to petrochemical and chemical plants, to
food processing and national defense work, Furmanite offers a portfolio of
engineering solutions to the challenges inherent in multiple industries.
Furmanite operates more than 40 offices on five continents.
As reported for the trailing twelve-month period (October 1, 1999 through
September 30, 2000), business segment revenues for technology and technical
services totaled $137.2 million and operating income totaled $12.2 million.
ABOUT KANEB SERVICES, INC.
Kaneb Services, Inc. (NYSE: KAB) provides technology and technical services
worldwide. Headquartered in Dallas, Texas, Kaneb Services' operations consist of
information technology companies focused on network services, data management
and telemedicine, and an international technical services firm. Kaneb Services,
as general partner, also manages and operates the pipeline and terminal assets
owned by Kaneb Pipe Line Partners, L.P. (NYSE: KPP), and operates a refined
petroleum product marketing service. For more information, visit www.kaneb.com.
Certain of the Company's statements in this press release are not purely
historical, and as such are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These include statements
regarding management's intentions, plans, beliefs, expectations or projections
of the future. Forward-looking statements involve risks and uncertainties,
including without limitation, the various risks inherent in the Company's
business, and other risks and uncertainties detailed from time to time in the
Company's periodic reports filed with the Securities and Exchange Commission.
One or more of these factors have affected, and could in the future affect, the
Company's business and financial results in future periods, and could cause
actual results to differ materially from plans and projections. There can be no
assurance that the forward-looking statements made in this document will prove
to be accurate, and issuance of such forward-looking statements should not be
regarded as a representation by the Company, or any other person, that the
objectives and plans of the Company will be achieved. All forward-looking
statements made in this press release are based on information presently
available to management, and the Company assumes no obligation to update any
forward-looking statements.
