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, 2000 Number 001-10311
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.)
2435 North Central Expressway
Richardson, Texas 75080
(Address of principle executive offices, including zip code)
(972) 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 Units of the Registrant outstanding at November 1, 2000: 18,310,000
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Page No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income -- Three and Nine Months
Ended September 30, 2000 and 1999 1
Condensed Consolidated Balance Sheets -- September 30, 2000
and December 31, 1999 2
Condensed Consolidated Statements of Cash Flows -- Nine
Months Ended September 30, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands -- Except Per Unit Amounts)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 41,051 $ 41,573 $ 116,169 $ 117,589
-------------- ------------- ------------- --------------
Costs and expenses:
Operating costs 17,336 18,057 51,620 51,403
Depreciation and amortization 4,004 3,764 11,940 11,149
General and administrative 2,245 2,301 7,262 6,975
-------------- ------------- ------------- --------------
Total costs and expenses 23,585 24,122 70,822 69,527
-------------- ------------- ------------- --------------
Operating income 17,466 17,451 45,347 48,062
Interest and other income, net 84 103 225 385
Interest expense (3,036) (3,107) (9,016) (10,401)
-------------- ------------- -------------- ---------------
Income before minority interest
and income taxes 14,514 14,447 36,556 38,046
Minority interest in net income (142) (140) (359) (370)
Income tax provision (253) (472) (629) (1,072)
-------------- ------------- ------------- ---------------
Net income 14,119 13,835 35,568 36,604
General partner's interest in net income (435) (481) (1,238) (1,218)
-------------- ------------- ------------- ---------------
Limited partners' interest in net income $ 13,684 $ 13,354 $ 34,330 $ 35,386
============== ============= ============= ==============
Allocation of net income per Unit $ .75 $ .76 $ 1.87 $ 2.14
============= ============= ============= =============
Weighted average number of Partnership
Units outstanding 18,310 17,560 18,310 16,560
============== ============= ============= ==============
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
--------------------------------------------------------------------------------
September 30 December 31
2000 1999
----------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,123 $ 5,127
Accounts receivable 19,256 16,929
Prepaid expenses and other 4,260 5,036
-------- --------
Total current assets 29,639 27,092
-------- --------
Property and equipment 456,110 439,537
Less accumulated depreciation 133,887 122,654
-------- --------
Net property and equipment 322,223 316,883
-------- --------
Investment in affiliate 22,168 21,978
-------- --------
$374,030 $365,953
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $ 48,000 $ --
Accounts payable and accrued expenses 18,793 14,980
Accrued distributions payable 13,372 13,372
Payable to general partner 1,742 1,411
-------- --------
Total current liabilities 81,907 29,763
-------- --------
Long-term debt, less current portion 117,101 155,987
Other liabilities and deferred taxes 10,795 10,882
Minority interest 1,006 1,033
Commitments and contingencies
Partners' capital 163,221 168,288
-------- --------
$374,030 $365,953
======== ========
See notes to consolidated financial statements.
2
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
2000 1999
--------- --------
<S> <C> <C>
Operating activities:
Net income $ 35,568 $ 36,604
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,940 11,149
Minority interest in net income 359 370
Equity in earnings of affiliate, net of distributions (285) (2,515)
Deferred income taxes 629 1,110
Changes in other liabilities (1,525) --
Changes in working capital components 2,593 70
-------- --------
Net cash provided by operating activities 49,279 46,788
-------- --------
Investing activities:
Capital expenditures (6,434) (11,243)
Acquisitions of terminals (12,053) (44,390)
Other, net (481) (1,642)
-------- --------
Net cash used in investing activities (18,968) (57,275)
-------- --------
Financing activities:
Changes in payable to general partner -- (5,000)
Issuance of debt 16,500 50,919
Payments of debt (5,700) (57,447)
Distributions to partners, including minority interest (40,115) (38,478)
Net proceeds from issuance of KPP units -- 65,574
-------- --------
Net cash provided by (used in)
financing activities (29,315) 15,568
-------- --------
Increase in cash and cash equivalents 996 5081
Cash and cash equivalents at beginning of period 5,127 849
-------- --------
Cash and cash equivalents at end of period $ 6,123 $ 5,930
======== ========
Supplemental cash flow information - cash paid for interest $ 7,919 $ 8,845
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements of Kaneb Pipe
Line Partners, L.P. and its subsidiaries (the "Partnership") for the three
and nine month periods ended September 30, 2000 and 1999, 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 consolidated financial
statements included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1999. In the opinion of the Partnership's
management, the accompanying condensed consolidated financial statements
contain the adjustments, consisting of normal recurring accruals, necessary
to present fairly the consolidated financial position of the Partnership at
September 30, 2000 and the consolidated results of operations and cash
flows for the periods ended September 30, 2000 and 1999. Operating results
for the three and nine months ended September 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000.
2. ACQUISITION OF TERMINALS
On February 1, 1999, the Partnership, through two wholly-owned indirect
subsidiaries, acquired six terminals in the United Kingdom from GATX
Terminal Limited for (pound)22.6 million (approximately $37.2 million) plus
transaction costs and the assumption of certain liabilities. The
acquisition, which was initially financed by term loans from a bank, has
been accounted for using the purchase method of accounting. $13.3 million
of the term loans were repaid in July 1999 with the proceeds from a public
unit offering (see Note 3). The remaining portion ($24.1 million) is due in
January 2002.
3. PUBLIC OFFERING OF UNITS
In July 1999, the Partnership issued 2.25 million limited partnership units
in a public offering at $30.75 per Unit, generating approximately $65.6
million in net proceeds. A portion of the proceeds was used to repay in
full the Partnership's $15.0 million promissory note, the $25.0 million
revolving credit facility and $18.3 million in term loans (including $13.3
million in term loans resulting from the United Kingdom terminal
acquisition referred to in Note 2.)
4. COMPREHENSIVE INCOME
Comprehensive income for the three and nine months ended September 30, 2000
and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 14,119 $ 13,835 $ 35,568 $ 36,604
Other comprehensive income (loss)
- foreign currency translation
adjustment 12 460 (913) (197)
----------- ----------- ----------- -----------
Comprehensive income $ 14,131 $ 14,295 $ 34,655 $ 36,407
=========== =========== =========== ===========
</TABLE>
5. CASH DISTRIBUTIONS
The Partnership makes quarterly distributions of 100% of its Available
Cash, as defined in the Partnership Agreement, to holders of limited
partnership units ("Unitholders") and the general partner. Available Cash
consists generally of all the cash receipts of the Partnership, plus the
beginning cash balance less all of its cash disbursements and reserves. The
Partnership expects to make distributions of all Available Cash within 45
days after the end of each quarter to Unitholders of record on the
applicable record date. A cash distribution of $0.70 per unit for each of
the first and second quarter of 2000 was paid on May 15, 2000 and August
14, 2000, respectively. A cash distribution of $0.70 per unit for the third
quarter of 2000 was declared to holders of record on October 31, 2000 and
is payable on November 14, 2000.
6. CONTINGENCIES
Certain operations of the Partnership are subject to Federal, state and
local laws and regulations relating to protection of the environment.
Although the Partnership believes that its operations are in general
compliance with applicable environmental regulation, risks of additional
costs and liabilities are inherent in its operations, and there can be no
assurance that significant costs and liabilities will not be incurred by
the Partnership. It is possible that other developments could result in
substantial costs and liabilities to the Partnership. These include but are
not limited to increasingly stringent environmental laws, regulations,
enforcement policies thereunder, and claims for damages to property or
persons resulting from the operations of the Partnership.
Certain subsidiaries of the Partnership were sued in a Texas state court in
1997 by Grace Energy Corporation ("Grace"), the entity from which the
Partnership acquired ST Services in 1993. The lawsuit involves
environmental response and remediation allegedly resulting from jet fuel
leaks in the early 1970's from a pipeline. The pipeline, which connected a
former Grace terminal with Otis Air Force Base in Massachusetts, was
abandoned in 1976, when the connecting terminal was sold to an unrelated
entity.
The lawsuit involves environmental response and remediation required by the
State of Massachusetts. Grace alleged that subsidiaries of the Partnership
acquired the abandoned pipeline, as part of the acquisition of ST Services
in 1993, and assumed responsibility for environmental damages allegedly
caused by the jet fuel leaks. Grace sought a ruling that these subsidiaries
are responsible for all present and future remediation expenses for these
leaks and that Grace has no obligation to indemnify these subsidiaries for
these expenses.
In the lawsuit, Grace also sought indemnification for expenses that it has
incurred since 1996 of approximately $3.5 million for response and
remediation required by the State of Massachusetts and for additional
expenses that it expects to incur in the future. The consistent position of
the Partnership's subsidiaries is that they did not acquire the abandoned
pipeline as part of the 1993 ST transaction, and therefore did not assume
any responsibility for the environmental damage nor any liability to Grace
for the pipeline.
At the end of the trial on May 19, 2000, the jury returned a verdict
including findings that Grace had breached a provision of the 1993
acquisition agreement and that the pipeline was abandoned prior to 1978. On
July 17, 2000, the Judge entered final judgment in the case, which is now
on appeal to the Dallas Court of Appeals, that Grace take nothing from the
subsidiaries on its claims, including claims for future expenses. Although
the Partnership's subsidiaries have not incurred any expenses in connection
with the remediation, the court also ruled, in effect, that the
subsidiaries would not be entitled to an indemnification from Grace if any
such expenses were incurred in the future. However, the Judge let stand a
prior summary judgment ruling that the pipeline was an asset of the
Partnership acquired as part of the 1993 ST transaction. The Judge also
awarded attorney fees to Grace.
While the judgment means that the subsidiaries have no obligation to
reimburse Grace for the approximately $3.5 million it has incurred, as
required by the State of Massachusetts, the Partnership's subsidiaries have
filed an appeal of the judgment finding that the Otis Pipeline was
transferred to them and the award of attorney fees.
The Otis Air Force Base is a part of the Massachusetts Military Reservation
("MMR"), which has been declared a Superfund Site pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act. The
MMR Site contains nine groundwater contamination plumes, two of which are
allegedly associated with the pipeline, and various other waste management
areas of concern, such as landfills. The United States Department of
Defense and the United States Coast Guard, pursuant to a Federal Facilities
Agreement, have been responding to the Government remediation demand for
most of the contamination problems at the MMR Site. Grace and others have
also received and responded to formal inquiries from the United States
Government in connection with the environmental damages allegedly resulting
from the jet fuel leaks. The Partnership's subsidiaries have voluntarily
responded to an invitation from the Government to provide information
indicating that they do not own the pipeline. In connection with a
court-ordered mediation between Grace and the subsidiaries, the Government
advised the parties in April 1999 that it has identified the two spill
areas that it believes to be related to the pipeline that is the subject of
the Grace suit. The Government advised the parties that it believes it has
incurred costs of approximately $34 million, and expects in the future to
incur costs of approximately $55 million, for remediation of one of the
spill areas. This amount was not intended to be a final accounting of costs
or to include all categories of costs. The Government also advised the
parties that it could not at that time allocate its costs attributable to
the second spill area. The Partnership believes that the ultimate cost of
the remediation, while substantial, will be considerably less than the
Government has indicated.
The Government has made no claims against the Partnership or any other
person on account of this matter. The Partnership believes that if any such
claims were made, its subsidiaries would have substantial defenses to such
claims. Under Massachusetts law, the party responsible for remediation of a
facility is the last owner before the abandonment, which was a Grace
company. The Partnership does not believe that either the Grace litigation
or any claims that may be made by the Government will adversely affect its
ability to make cash distributions to its unitholders, but there can be no
assurances in that regard.
The Partnership has other contingent liabilities resulting from litigation,
claims and commitments incident to the ordinary course of business.
Management believes, based on the advice of counsel, that the ultimate
resolution of such contingencies will not have a materially adverse effect
on the financial position or results of operations of the Partnership.
7. BUSINESS SEGMENT DATA
The Partnership conducts business through two principal operations; the
"Pipeline Operations," which consists primarily of the transportation of
refined petroleum products in the Midwestern states as a common carrier,
and the "Terminaling Operations," which provide storage for petroleum
products, specialty chemicals and other liquids.
The Partnership measures segment profit as operating income. Total assets
are those controlled by each reportable segment.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Business segment revenues:
Pipeline operations $ 19,567 $ 18,708 $ 52,298 $ 50,054
Terminaling operations 21,484 22,865 63,871 67,535
----------- ----------- ----------- -----------
$ 41,051 $ 41,573 $ 116,169 $ 117,589
=========== =========== =========== ===========
Business segment profit:
Pipeline operations $ 10,233 $ 10,053 $ 26,700 $ 26,121
Terminaling operations 7,233 7,398 18,647 21,941
----------- ----------- ----------- -----------
Operating income 17,466 17,451 45,347 48,062
Interest and other income, net 84 103 225 385
Interest expense (3,036) (3,107) (9,016) (10,401)
----------- ----------- ----------- -----------
Income before minority interest
and income taxes $ 14,514 $ 14,447 $ 36,556 $ 38,046
=========== =========== =========== ===========
September 30, December 31,
2000 1999
------------ ------------
Total assets:
Pipeline operations $ 105,420 $ 104,774
Terminaling operations 268,610 261,179
------------ ------------
$ 374,030 $ 365,953
============ ============
</TABLE>
<PAGE>
KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
--------------------------------------------------------------------------------
This discussion should be read in conjunction with the consolidated
financial statements of Kaneb Pipe Line Partners, L.P. (the "Partnership")
and notes thereto included elsewhere in this report.
Operating Results:
Pipeline Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 19,567 $ 18,708 $ 52,298 $ 50,054
Operating costs 6,997 6,565 18,839 17,768
Depreciation and amortization 1,293 1,273 3,877 3,811
General and administrative 1,044 817 2,882 2,354
----------- ----------- ----------- -----------
Operating income $ 10,233 $ 10,053 $ 26,700 $ 26,121
=========== =========== =========== ===========
</TABLE>
Pipeline revenues are based on volumes shipped and the distances over which
such volumes are transported. For the three and nine months ended September
30, 2000, revenues increased 5% and 4%, respectively, compared to the same
1999 periods, due to an overall increase in short-haul volumes shipped.
Barrel miles totaled 4.7 billion and 5.1 billion for the three months ended
September 30, 2000 and 1999, respectively, and 13.1 billion and 13.7
billion for the nine months ended September 30, 2000 and 1999,
respectively.
Operating costs, which include fuel and power costs, materials and
supplies, maintenance and repair costs, salaries, wages and employee
benefits, and property and other taxes, increased by 7% and 6% for the
three and nine month periods ended September 30, 2000, respectively, when
compared to the same 1999 periods, due to the increase in short-haul
volumes shipped. General and administrative costs, which include
managerial, accounting, and administrative personnel costs, office rental
and expense, legal and professional costs and other non-operating costs
increased by $0.2 million and $0.5 million for the three and nine month
periods ended September 30, 2000 over the comparable prior year periods.
<PAGE>
Terminaling Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 21,484 $ 22,865 $ 63,871 $ 67,535
Operating costs 10,339 11,492 32,781 33,635
Depreciation and amortization 2,711 2,491 8,063 7,338
General and administrative 1,201 1,484 4,380 4,621
----------- ----------- ----------- -----------
Operating income $ 7,233 $ 7,398 $ 18,647 $ 21,941
=========== =========== =========== ===========
</TABLE>
On February 1, 1999, the Partnership acquired six terminals in the United
Kingdom from GATX Terminals Limited for approximately $37.2 million plus
transaction costs and the assumption of certain liabilities (the "United
Kingdom Terminal Acquisition"). The acquisition of the six locations, which
have an aggregate tankage capacity of 5.4 million barrels, was initially
financed by term loans from a bank. $13.3 million of the term loans were
repaid in July 1999 with the proceeds from a public unit offering (See
Liquidity and Capital Resources). Three of the terminals, handling
petroleum products, chemicals and molten sulfur, respectively, operate in
England. The remaining three facilities, two in Scotland and one in
Northern Ireland, are primarily petroleum terminals. All six terminals are
served by deepwater marine docks.
Terminaling revenues decreased by $1.4 million and $3.7 million,
respectively, for the three and nine month periods ended September 30,
2000, compared to the same 1999 periods. Revenue increases resulting from
the United Kingdom and other 1999 terminal acquisitions were more than
offset by decreases in tank utilization due to unfavorable domestic market
conditions. Average annual tankage utilized for the nine months ended
September 30, 2000 decreased to 20.8 million barrels, down from 22.5
million barrels for the comparable prior year period, primarily the result
of unusually high utilization at the Partnership's largest petroleum
storage facility in 1999. For the nine months ended September 30, 2000,
average annualized revenues per barrel of tankage utilized increased to
$4.09 per barrel, compared to $4.00 per barrel for the same prior year
period, the result of the storage of a higher proportionate volume of
specialty chemicals, which are historically at higher per barrel rates than
petroleum products.
For the three and nine month periods ended September 30, 2000, operating
costs decreased by $1.2 million and $0.9 million, respectively, when
compared to the same 1999 periods, due to decreases in costs resulting from
the overall decline in volumes stored. General and administrative costs
decreased by $0.3 million and $0.2 million, respectively, for the three and
nine month periods ended September 30, 2000, when compared to 1999, due to
the decreased level of business. Total tankage capacity (30.5 million
barrels at September 30, 2000) has been, and is expected to remain,
adequate to meet existing customer storage requirements. Customers consider
factors such as location, access to cost effective transportation and
quality of service, in addition to pricing, when selecting terminal
storage.
Liquidity and Capital Resources
During the first nine months of 2000, 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 $49.3 million and $46.8 million for the
nine months ended September 30, 2000 and 1999, respectively. Capital
expenditures (excluding acquisitions) were $6.4 million for the nine months
ended September 30, 2000, compared to $11.2 million during the same 1999
period. The Partnership anticipates that routine maintenance capital
expenditures will total approximately $8 million to $12 million (excluding
acquisitions) for the year ending December 31, 2000. At September 30, 2000,
the Partnership had a working capital deficit of $52.3 million, due
primarily to $35.0 million of mortgage notes which are due in June 2001 and
$13.0 million of bank debt due in January 2001. Management expects to
refinance the mortgage notes and bank debt prior to maturity with long-term
bank financing or through a public debt or unit offering.
On September 22, 2000, the Partnership entered into a definitive agreement
to acquire Shore Terminals LLC, the owner of seven terminals with a total
tankage capacity of approximately 7.8 million barrels, for $106 million in
cash and 2 million partnership units. The cash portion of the purchase
price will be funded with long-term bank financing. Four of the terminals
are located in California, with the remaining three being located in
Washington, Oregon and Nevada. The closing of the acquisition, which is
subject to certain regulatory approvals, is expected to occur in late
December or early January 2001.
In July 1999, the Partnership issued 2.25 million limited partnership units
in a public offering at $30.75 per Unit, generating approximately $65.6
million in net proceeds. A portion of the proceeds was used to repay in
full the Partnership's $15.0 million promissory note, the $25.0 million
revolving credit facility and $18.3 million in term loans (including $13.3
million in term loans resulting from the United Kingdom Terminal
Acquisition.)
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 $0.70 per unit were declared to all Unitholders in the
first, second and third quarters of 2000 and $2.80 per unit was declared in
the calendar year 1999.
The Partnership expects 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 borrowings and/or future public unit offerings.
Additional information relative to sources and uses of cash is presented in
the financial statements included in this report.
Allocation of Net Income and Earnings
Net income or loss is allocated between limited partner interests and the
general partner pro rata based on the aggregate amount of cash
distributions declared (including general partner incentive distributions).
Beginning in 1997, distributions by the Partnership of Available Cash
reached the Second Target Distribution, as defined in the Partnership
Agreement, which entitled the general partner to receive certain incentive
distributions at different levels of cash distributions. Earnings per Unit
shown on the consolidated statements of income are calculated by dividing
the limited partners' interest in net income by the weighted average number
of Units outstanding. If the allocation of income had been made as if all
income had been distributed in cash, earnings per Unit would have been
$0.73 and $0.75 for the three months and $1.90 and $2.13 for the nine
months ended September 30, 2000 and 1999, respectively.
Recent Accounting Pronouncement
The Partnership has assessed the reporting and disclosure requirements of
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes the accounting and reporting standards for
such activities. Under SFAS No. 133, companies must recognize all
derivative instruments on its balance sheet at fair value. Changes in the
value of derivative instruments which are considered hedges, will either be
offset against the change in fair value of the hedged item through
earnings, or recognized in other comprehensive income until the hedged item
is recognized in earnings, depending on the nature of the hedge. The
Partnership will adopt SFAS No. 133, as amended, in the first quarter of
2001. Currently the Partnership is not a party to any derivative contracts,
and does not anticipate that adoption will have a material effect on the
Partnership's results of operations or financial position.
<PAGE>
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.
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 14, 2000 //s//
-------------------------------
Jimmy L. Harrison
Vice President and Controller
