SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 1-10473
PRIDE COMPANIES, L.P.
(Name of registrant)
Delaware 75-2313597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1209 North Fourth Street, Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(915) 674-8000
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 [ ]
Indicate the number of units outstanding of each of the
issuer's classes of units, as of the latest practicable date.
Class Outstanding at November 1, 1996
Convertible Preferred Units 4,700,000
Common Units 5,250,000<PAGE>
<TABLE>
PART I. Item 1. Financial Information
PRIDE COMPANIES, L.P.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except unit amounts)
<CAPTION>
September 30, December 31,
1996 1995
___________ ____________
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 457 $ 288
Accounts receivable, less allowance
for doubtful accounts 15,522 16,205
Inventories 19,283 14,248
Prepaid expenses 1,640 1,606
___________ ___________
Total current assets 36,902 32,347
Property, plant and equipment 136,153 137,778
Accumulated depreciation 35,504 32,941
___________ ___________
Property, plant and equipment - net 100,649 104,837
Other assets 1,186 1,122
___________ ___________
$ 138,737 $ 138,306
LIABILITIES AND PARTNERS' CAPITAL:
Current liabilities:
Accounts payable $ 31,184 $ 26,241
Accrued payroll and related benefits 1,676 1,568
Accrued taxes 3,705 3,797
Other accrued liabilities 4,057 2,807
Current portion of long-term debt 5,019 3,447
___________ ___________
Total current liabilities 45,641 37,860
Long-term debt, excluding current portion 49,709 53,053
Deferred income taxes 2,622 2,718
Other long-term liabilities 8,785 8,662
Partners' capital:
Preferred units (4,700,000 units
authorized and outstanding) 15,871 17,739
Common units (5,250,000 units
authorized and outstanding) 15,936 18,022
General partners' interest 173 252
___________ ___________
Total partners' capital 31,980 36,013
___________ ___________
$ 138,737 $ 138,306
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per unit amounts)
<CAPTION>
Three Months Ended September 30,
1996 1995
______________ ___________
<S> <C> <C>
Revenues $ 145,884 $ 126,920
Cost of sales and operating expenses,
excluding depreciation 142,666 121,007
Marketing, general and
administrative expenses 2,479 2,479
Depreciation 1,721 1,744
____________ ___________
Operating income (loss) (982) 1,690
Other income (expense):
Interest income 25 13
Interest expense (1,457) (1,598)
Credit and loan fees (785) (440)
Other - net (1) 35
____________ ___________
Income (loss) before income taxes (3,200) (300)
Income tax expense (benefit) (15) (14)
____________ ___________
Net income (loss) $ (3,185) $ (286)
General partners' interest $ (62) $ (5)
Net income (loss) allocable
to unitholders $ (3,123) $ (281)
Net income (loss) per unit $ (0.31) $ (.03)
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per unit amounts)
<CAPTION>
Nine Months Ended September 30,
1996 1995
______________ ___________
<S> <C> <C>
Revenues $ 450,670 $ 424,935
Cost of sales and operating expenses,
excluding depreciation 435,341 412,112
Marketing, general and
administrative expenses 7,573 7,975
Depreciation 5,241 5,258
____________ ___________
Operating income (loss) 2,515 (410)
Other income (expense):
Interest income 111 76
Interest expense (4,380) (4,921)
Credit and loan fees (2,346) (699)
Other - net 34 109
____________ ___________
Income (loss) before income taxes (4,066) (5,845)
Income tax expense (benefit) (33) (27)
____________ ___________
Net income (loss) $ (4,033) $ (5,818)
General partners' interest $ (79) $ (116)
Net income (loss) allocable
to unitholders $ (3,954) $ (5,702)
Net income (loss) per unit $ (0.40) $ (0.57)
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended September 30,
1996 1995
____________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,033) $ (5,818)
Adjustments to reconcile net
income (loss) to net cash provided
by (used in) operating activities:
Noncash charges (credits) to earnings:
Depreciation 5,241 5,258
(Gain) loss on sale of
property, plant and equipment (27) (18)
Deferred tax benefit (96) (82)
Net effect of changes in:
Accounts receivable 683 69
Inventories (5,035) 2,018
Prepaid expenses (34) (629)
Accounts payable (including
non-current) 5,338 (584)
Accrued liabilities 1,266 (243)
____________ ___________
Total adjustments 7,336 5,789
____________ ___________
Net cash provided by (used in)
operating activities 3,303 (29)
Cash flows from investing activities:
Purchases of property, plant and
equipment (1,311) (839)
Proceeds from disposal of property,
plant and equipment 47 106
Other (95) 6
____________ ___________
Net cash provided by (used in)
investing activities (1,359) (727)
Cash flows from financing activities:
Proceeds from debt and credit
facilities 17,585 32,398
Payments on debt and credit
facilities (19,357) (30,946)
Other (3) (89)
____________ ___________
Net cash provided by (used in)
financing activities (1,775) 1,363
____________ ___________
Net increase (decrease) in cash and
cash equivalents 169 607
Cash and cash equivalents at the
beginning of the period 288 35
____________ ___________
Cash and cash equivalents at the
end of the period $ 457 $ 642
See accompanying notes.
/TABLE
<PAGE>
PRIDE COMPANIES, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization
Pride Companies, L.P. (the "Partnership"), a Delaware limited
partnership, owns and operates a modern simplex petroleum refinery
facility located near Abilene, Texas (the "Refinery"), a crude oil
gathering business (the "Crude Gathering System") that gathers,
transports, and resells and redelivers crude oil in the Texas and
New Mexico markets, and certain integrated product pipeline
operations (the "Products System"). The Partnership's operations
are considered a single industry segment, the refining of crude oil
and the sale of the resulting petroleum products. The primary
purpose of the Crude Gathering System is to supply the Refinery
with crude oil at strategic locations for input into the Refinery.
The Crude Gathering System consists of a series of gathering lines
and a fleet of trucks which transport crude oil into third party
pipelines and into the system's primary asset, a common carrier
pipeline which delivers crude oil to and terminates at the
Refinery. The Products System consists of certain product
pipelines which originate at the Refinery and terminate at the
Partnership's marketing terminals.
Pride SGP ("Pride SGP" or the "Special General Partner")
serves as special general partner of the Partnership and owns a
0.1% general partner interest and the 5,250,000 common units
("Common Units"). Pride Refining, Inc. serves as the managing
general partner of the Partnership and owns a 1.9% general partner
interest (the "Managing General Partner").
2. Accounting Policies
The financial statements of the Partnership include all of its
majority owned subsidiaries including limited partnership interests
where the Partnership has significant control through related
parties. All intercompany transactions have been eliminated and
minority interest has been provided where applicable. The
financial statements included in this quarterly report on Form 10-Q
are unaudited and condensed and do not contain all information
required by generally accepted accounting principles to be included
in a full set of financial statements. In the opinion of
management, all material adjustments necessary to present fairly
the financial position, results of operations, and cash flows for
such periods have been included. Interim period results are not
necessarily indicative of the results to be achieved for the full
year. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results
could differ from those estimates.
The financial statements of the Partnership presented in its
Annual Report on Form 10-K for the year ended December 31, 1995
include a summary of significant accounting policies that should be
read in conjunction with this quarterly report on Form 10-Q. In
connection with its crude gathering system operations, as first
purchaser of crude oil and as a service to its custom gathering
customers, the Partnership will make distribution of payments to
the various revenue and royalty interest owners. Often, the legal
rights of the interest owners are unclear or the owners cannot be
located for long periods of time. When such is the case, the
Partnership retains the liability for the payments until the
ownership interest is clarified or the owners located, at which
time payment is made. When an owner cannot be located, state
statutes generally require that the unpaid amounts be escheated to
the state after the passage of a specified number of years.
Because such liabilities take years to be cleared up and paid, an
estimate has been made of the amounts expected to be paid during
the next year and classified as current accounts payable, with the
remainder classified as other long-term liabilities. Certain
amounts in the financial statements for the prior year have been
reclassified to conform to the 1996 presentation. The Partnership
has two subsidiaries that are corporations whose operations are
subject to federal income taxes.
Net Income (Loss) per Unit is calculated using the weighted
average number of Units outstanding during the period (4,700,000
convertible preferred units and 5,250,000 Common Units) divided
into the Partnership's net income (loss) after adjusting for
general partner allocations.
3. Related Party Transactions
In accordance with the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P. ("Partnership
Agreement"), the Managing General Partner conducts, directs and
exercises control over substantially all of the activities of the
Partnership. The Managing General Partner has a 1.9% interest in
the income and cash distributions of the Partnership, subject to
certain adjustments. Certain members of the management of the
Managing General Partner are also members of the management of
Pride SGP, which has a 0.1% general partner interest and a 51.7%
limited partner interest in the Partnership.
The Partnership has no directors or officers; however,
directors and officers of the Managing General Partner are employed
by the Partnership to function in this capacity. Compensation of
these persons and any other expenses incurred on behalf of the
Partnership by the Managing General Partner and Pride SGP are paid
by the Partnership.
Certain conflicts of interest, including potential non-arm's
length transactions, could arise as a result of the relationships
described above. The Board of Directors and management of the
Managing General Partner have a duty to manage the Partnership in
the best interests of the unitholders and consequently must
exercise good faith and integrity in handling the assets and
affairs of the Partnership.
4. Inventories
<TABLE>
<CAPTION>
Inventories are valued at the At At
lower of cost or market and September 30, December 31,
consist of: 1996 1995
(in thousands)
_____________________________ ___________ ___________
<S> <C> <C>
Crude oil $ 12,828 $ 10,981
Refined products and blending
materials 12,780 5,589
___________ ___________
25,608 16,570
LIFO reserve (7,388) (3,426)
___________ ___________
Petroleum inventories 18,220 13,144
Spare parts and supplies 1,063 1,104
___________ ___________
$ 19,283 $ 14,248
</TABLE>
The last-in/first-out (LIFO) inventory cost method is used for
crude oil and refined products and blending materials. The
weighted average inventory cost method is used for spare parts and
supplies.
5. Long-term Debt
On November 14, 1996, the Partnership's credit facility was
amended to extend the maturity date to October 1, 1997. Under this
credit facility, the Partnership has a $6,500,000 standby letter of
credit facility for general corporate purposes and the purchase of
crude oil and other refinery feedstocks ("Facility A") and a
$45,000,000 standby letter of credit facility for the purchase of
crude oil ("Facility B"). The fee on outstanding Facility A and
Facility B standby letters of credit is 1 and 1/2% per annum. For
the unused portion of the standby letter of credit facility, the
fee is one-half of 1% per annum. Though no advances had been drawn
under either the Facility A or Facility B letter of credit
facility, the Partnership did have approximately $721,000 and $43.1
million, respectively, in outstanding standby letters of credit as
of September 30, 1996. The credit agreement was amended to provide
at the banks' discretion an additional $8,000,000 standby letter of
credit facility for the purchase of crude oil and other refinery
feedstocks ("Special LC Facility"). The fee on outstanding Special
LC Facility standby letters of credit is 3% per annum. There is no
commitment fee for the unused portion of the Special LC Facility.
The Partnership had approximately $6.1 million outstanding under
the Special LC Facility as of September 30, 1996.
Under the amended credit facility, the Partnership has
available to it a revolving line of credit of $8.0 million (the
"Revolver") and a $45.0 million term loan (the "Term Loan"). The
amount available under the Revolver is subject to a borrowing base
which includes a reduction by the amount of letters of credit
issued under Facility A. Advances under the Revolver and Term Loan
bear interest at prime plus 2% and 3%, respectively, payable
monthly. The prime rate was 8.25% as of September 30, 1996. The
Term Loan is subject to a facility fee of 5% per annum effective
January 1, 1996 and payable at maturity which is October 1, 1997.
As of September 30, 1996, the Partnership had accrued $1.0 million
in facility fees. This fee will be discontinued if the proposed
amendments to the partnership agreement are adopted. The amount
accrued at that time will be forgiven. See "Financial Condition -
Financial Resources and Liquidity." The Partnership has pledged
substantially all its assets as collateral. In addition, the
General Partners guaranteed the facility and Pride SGP as guarantor
has pledged its assets as collateral for such loans. The
Partnership may elect to prepay the credit facilities without any
prepayment penalty. The fee for the unused portion of the Revolver
is one-half of 1% per annum. At September 30, 1996, the balances
outstanding on the Revolver and Term Loan were $2.3 million and
$42.2 million, respectively. Under the new credit facility, the
Partnership is required to make scheduled principal payments of
$120,000 each month beginning September 5, 1996 plus quarterly
principal payments in the amount of 80% of excess cash, as defined
in the credit agreement, for the preceding quarter. The
Partnership has classified $1.7 million of the Term Loan as current
as of September 30, 1996.
Advances under the Revolver are subject to repayment on a
daily basis. As a result, the full amount outstanding at September
30, 1996 has been included in the current portion of long-term
debt. Subject to the borrowing base, the Partnership may borrow
any amounts previously repaid.
The facility also includes a $2.5 million uncommitted line of
credit ("Uncommitted Line"). Advances under the Uncommitted Line
are made solely at the lenders' discretion and bear interest at the
prime rate plus 4%. The Uncommitted Line must be completely paid
off for fifteen consecutive days each month. There were no
advances outstanding under the Uncommitted Line at September 30,
1996.
The amended credit facility also requires the Partnership to
pay a monthly fee of $10,000 and restricts the payment of
distributions to unitholders throughout the term of the amended
credit agreement. Future distributions will be dependent on
payment in full of bank debt, expiration of all liabilities for
letters of credit, and the termination of the credit agreement.
The Partnership has a nonrecourse loan from Diamond Shamrock
with an outstanding principal balance of $5.8 million at September
30, 1996, bearing interest at 8% per annum with monthly principal
and interest payments. The assets of Pride Borger, Inc., a wholly
owned subsidiary of the Partnership, which owns 50% of the Texas
Plains Pipeline System, are pledged as collateral. Pride Borger,
Inc. has also guaranteed the note. Monthly principal payments are
made to Diamond Shamrock based on the number of throughput barrels
for the prior month in the Texas Plains Pipeline System. Current
maturities are estimated to be $54,000 as of September 30, 1996.
In 1996, the Partnership acquired the other 50% interest in the
Texas Plains System from Scurlock Permian.
Pride SGP has made unsecured loans to the Partnership in the
principal amount of $2.5 million bearing interest at prime plus 2%.
The loans mature October 1, 1997.
During 1995, the Partnership converted non-interest bearing
accounts payable to the United States Government related to pricing
adjustments which had been accrued since 1993 to a $2.4 million
installment loan. The principal balance was $1.6 million at
September 30, 1996. The note bears interest based on the rate set
by the Secretary of the Treasury. This rate was 7.0% as of
September 30, 1996. The note requires monthly payments of $84,000.
The note matures June 1, 1998. The Partnership has classified
$934,000 of the note as current as of September 30, 1996.
On January 9, 1995, the Partnership executed a note to a local
bank related to the renovation and refinancing of its
administrative offices in Abilene. Previously, the Partnership
leased additional office space from a third party. The note bears
interest at prime plus one-half of 1% and had an outstanding
principal balance of $377,000 at September 30, 1996. The note
matures January 9, 2000. The Partnership has classified $16,000 of
the note as current as of September 30, 1996.
6. Preferred and Common Units
At September 30, 1996, 4,700,000 Preferred Units were
outstanding, representing an approximate 46.3% limited partner
interest in the Partnership. The Preferred Units are cumulative,
entitled to a minimum quarterly distribution of $0.65 per unit
through the Initial Conversion Date which is the first day of the
third calendar quarter in which the payment of all cumulative
arrearages to Preferred Unitholders have been paid, and all
arrearages must be paid before the Common Unitholders may receive
distributions. The Preferred Units are convertible into Common
Units on the Initial Conversion Date. The Common Units are also
cumulative and entitled to a quarterly distribution of $0.65 per
unit; however, no Common Unit arrearages will be paid after the
Initial Conversion Date, and any such accumulated arrearages then
existing will be cancelled. The general partners are entitled to
2% of all distributions. At September 30, 1996, cumulative
arrearages were $13.65 per Common Unit which totaled $71.7 million
and $12.00 per Preferred Unit which totaled $56.4 million. Such
arrearages will be cancelled if phase 2 of the restructuring is
approved by unitholders. See "Financial Condition - Financial
Resources and Liquidity."
Under the terms of the Partnership's credit agreement, the
bank restricted the payment of distributions to unitholders
throughout the term of the credit agreement. Future distributions
will be dependent on payment in full of the bank debt, expiration
of all liabilities for letters of credit, and the termination of
the credit agreement.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Overview
Pride Companies, L.P. is a Delaware limited partnership which
owns and operates a petroleum refining business ("Refinery"),
products pipeline business ("Products System"), and crude oil
gathering business ("Crude Gathering System").
The Crude Gathering System is the primary source of crude
supply for the Refinery, although some gathering is done for
others. It gathers crude at the wellhead and then buys and sells
crude oil so that it can deliver crude through its Crude Gathering
System to the Refinery. After the crude is processed into
petroleum products at the Refinery, it is marketed and if necessary
transported to the Partnership's terminals through the Products
System's pipelines.
The following is a discussion of the results of operations for
the Partnership. This discussion should be read in conjunction
with the financial statements included in this report.
General
The Partnership's operating results depend principally on the
rate of utilization of the Refinery, the margins between the prices
of its refined petroleum products and the cost of crude oil, the
volume throughput on the Products System, and the volume throughput
on and margins from the transportation and resale of crude oil from
its Crude Gathering System. Higher Refinery utilization allows the
Partnership to spread its fixed costs across more barrels, thereby
lowering the fixed costs per barrel of crude oil processed. The
refining business is highly competitive, and the Partnership's
margins are significantly impacted by general industry margins.
Industry margins are determined by a variety of regional, national,
and global trends, including oil prices, weather, and economic
conditions, among other things. The Refinery's JP-8 (a grade of
military aviation fuel) prices are influenced by these trends since
the pricing for JP-8 is based on Jet A, a kerosene-based product,
and the price of diesel and heating fuels affect the price of
kerosene.
In 1991, the Partnership completed construction of the
catalytic reformer unit ("CRU") that allows it to refine naphtha
into unleaded gasoline. Prior to construction of the CRU, almost
all naphtha went into the production of JP-4, a grade of military
jet fuel. The CRU provided the Partnership an alternative market
for its naphtha in the short-term and prepared it for the
conversion of the military fuel from JP-4 to JP-8 that was
effective in April 1994 for East and Gulf Coast bases. JP-8 is a
kerosene-based fuel and without the CRU the Partnership would not
have had a market for its naphtha. As a result of the CRU, the
Partnership has entered into sales and exchange agreements with
eight major oil companies.
When the diesel desulfurization unit ("DDU") went on line in
the third quarter of 1993, it marked the completion of a three-year
diversification process that allows the Partnership to refine more
valuable products and expand its markets. In addition to
completing the diversification process, the construction of the DDU
also met the challenge of present environmental regulations.
Federal law required the sulfur content in all diesel produced for
highway use to be reduced by October 1, 1993.
Margins in the Crude Gathering System are influenced by the
level of competition and the price of crude oil. When prices are
higher, crude oil can generally be resold at higher margins.
Additionally, transportation charges trend upward when higher crude
oil prices stimulate increased exploration and development.
Conversely, when crude oil prices decrease, margins on the resale
of crude oil as well as transportation charges tend to decrease.
In evaluating the financial performance of the Partnership,
management believes it is important to look at operating income,
excluding depreciation in addition to operating income which is
after depreciation. Operating income, excluding depreciation
measures the Partnership's ability to generate and sustain working
capital and ultimately cash flows from operations. However, such
measure is before debt service so it does not indicate the amount
available for distribution, reinvestment or other discretionary
uses. Gross revenues primarily reflect the level of crude oil
prices and are not necessarily an accurate reflection of the
Partnership's profitability. Also important to the evaluation of
the Refinery's performance are barrels of crude oil refined, gross
margin (revenue less cost of crude) per barrel, and operating
expense per barrel, excluding depreciation.
Third quarter 1996 compared to third quarter 1995
General. Net loss for the third quarter of 1996 was $3.2
million compared to a net loss of $286,000 for the third quarter of
1995. The decline was primarily a result of weak refining margins
in the third quarter of 1996. Although refined product prices
increased during the third quarter of 1996, they increased at a
slower rate than crude costs. Credit and loan fees also increased
$204,000 during the third quarter of 1996 due to increased facility
fees.
Operating loss was $982,000 for the third quarter of 1996
compared to operating income of $1.7 million for the third quarter
of 1995. Operating income, excluding depreciation, for the third
quarter of 1996 decreased to $739,000 from $3.4 million for the
third quarter of 1995 as a result of weak refining margins.
The following table details the operating income (loss);
depreciation; and the operating income (loss), excluding
depreciation (in thousands), for the third quarter of 1996 and
1995.
<TABLE>
<CAPTION>
Operating
Income
Operating (Loss)
Income Excluding
(Loss) Deprec. Deprec.
_______ _______ ________
<S> <C> <C> <C>
Third Quarter 1996
Refinery and Products System $(2,534) $ 1,236 $ (1,298)
Crude Gathering System 1,552 485 2,037
_______ _______ ________
Total $ (982) $ 1,721 $ 739
Third Quarter 1995
Refinery and Products System $ 280 $ 1,231 $ 1,511
Crude Gathering System 1,410 513 1,923
_______ _______ ________
Total $ 1,690 $ 1,744 $ 3,434
</TABLE>
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery
and Products System was $2.5 million for the third quarter of 1996
compared to operating income of $280,000 for the third quarter of
1995. Depreciation expense for the Refinery and Products System
was approximately $1.2 million for both the third quarter of 1996
and the third quarter of 1995. Operating loss, excluding
depreciation, of the Refinery and Products System was $1.3 million
for the third quarter of 1996 compared to operating income,
excluding depreciation, of $1.5 million for the third quarter of
1995.
Operating loss of the Refinery was $2.8 million for the third
quarter of 1996 compared to $90,000 for the same period in 1995.
The decline was due to weak refining margins in the third quarter
of 1996. Depreciation expense for the Refinery alone was $1.0
million for both the third quarter of 1996 and the third quarter of
1995. Operating loss, excluding depreciation, of the Refinery was
$1.8 million for the third quarter of 1996 compared to operating
income, excluding depreciation, of $923,000 for the third quarter
of 1995.
Refinery gross margin per barrel was $0.90 for the third
quarter of 1996 versus $1.92 for the same period in 1995. Refinery
throughput averaged 32,339 BPD for the third quarter of 1996 versus
29,322 BPD for the same period in 1995. Operating expenses per
barrel, excluding depreciation, were $1.12 for the third quarter of
1996 and the third quarter of 1995.
Operating income for the Products System was $266,000 for the
third quarter of 1996 compared to $370,000 for the third quarter of
1995. Depreciation expense for the Products System was $221,000
for the third quarter of 1996 compared to $218,000 for the third
quarter of 1995. Operating income, excluding depreciation, for the
Products System decreased to $486,000 for the third quarter of 1996
from $588,000 for the same period in 1995 principally as a result
of decreased pipeline volumes to the Aledo and San Angelo terminals
in the third quarter of 1996. Total transportation volumes were
13,385 BPD for the third quarter of 1996 compared to 16,025 BPD for
the same period in 1995.
CRUDE GATHERING SYSTEM -- Operating income for the Crude
Gathering System was $1.6 million for the third quarter of 1996
compared to $1.4 million for the same period in 1995. Depreciation
expense for the Crude Gathering System decreased to $485,000 for
the third quarter of 1996 from $513,000 for the third quarter of
1995. Operating income, excluding depreciation, for the Crude
Gathering System was $2.0 million for the third quarter of 1996 and
$1.9 million for the third quarter of 1995. The net margin was
$0.31 per barrel for the third quarter of 1996 versus $0.25 per
barrel for the same period in 1995. Due to the elimination of
several marginal contracts, the volume of crude oil gathered by the
Crude Gathering System decreased to 53,635 BPD for the third
quarter of 1996 from 62,546 BPD for the third quarter of 1995.
First nine months 1996 compared to first nine months 1995
GENERAL -- Net loss for the first nine months of 1996 was $4.0
million compared to net loss of $5.8 million for the first nine
months of 1995. The improvement was primarily a result of higher
crude gathering operating margins during the first nine months of
1996 due to the high spot price of crude oil. This was partially
offset by weaker refining margins and higher credit and loan fees
of $1.6 million during the first nine months of 1996. The increase
in credit and loan fees was mainly a result of facility fees of
$1.0 million incurred during the first nine months of 1996. Also,
the Partnership had a one-time nonrecurring reversal of an accrual
for facility fees of $234,000 for the first nine months of 1995 for
periods prior to 1995.
Operating income was $2.5 million for the first nine months of
1996 compared to an operating loss of $410,000 for the first nine
months of 1995. Operating income, excluding depreciation,
increased for the first nine months of 1996 to $7.8 million from
$4.8 million for the first nine months of 1995 as a result of
stronger crude gathering margins which was partially offset by
weaker refining margins.
The table below details the operating income (loss);
depreciation; and the operating income (loss), excluding
depreciation by division (in thousands) for the first nine months
of 1996 and 1995.
<TABLE>
<CAPTION>
Operating
Income
Operating (Loss)
Income Excluding
(Loss) Deprec. Deprec.
_______ _______ ________
<S> <C> <C> <C>
First Nine Months 1996
Refinery and Products System $(5,219) $ 3,736 $ (1,483)
Crude Gathering System 7,734 1,505 9,239
_______ _______ ________
Total $ 2,515 $ 5,241 $ 7,756
First Nine Months 1995
Refinery and Products System $(3,323) $ 3,715 $ 392
Crude Gathering System 2,913 1,543 4,456
_______ _______ ________
Total $ (410) $ 5,258 $ 4,848
</TABLE>
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery
and Products System was $5.2 million for the first nine months of
1996 compared to operating loss of $3.3 million for the first nine
months of 1995. Depreciation expense for the Refinery and Products
System was $3.7 million for both the first nine months of 1996 and
the first nine months of 1995. Operating loss, excluding
depreciation, of the Refinery and Products System was $1.5 million
for the first nine months of 1996 compared to operating income,
excluding depreciation, of $392,000 for the first nine months of
1995.
Operating loss of the Refinery was $6.1 million for the first
nine months of 1996 compared to $4.5 million for the first nine
months of 1995. Refining margins decreased for the first nine
months of 1996 due to the higher cost of crude relative to the
posting price of crude during the first nine months of 1996 as
compared to the same period in 1995. Depreciation expense for the
Refinery alone was $3.1 million for both the first nine months of
1996 and the first nine months of 1995. Operating loss, excluding
depreciation, of the Refinery was $3.0 million for the first nine
months of 1996 compared to $1.5 million for the first nine months
of 1995.
Refinery gross margin per barrel was $1.16 for the first nine
months of 1996 versus $1.37 for the same period in 1995. Refinery
throughput averaged 32,289 BPD during the first nine months of 1996
versus 31,149 BPD for the same period in 1995. Operating expenses
per barrel, excluding depreciation, were $1.09 for the first nine
months of 1996 versus $1.08 for the same period in 1995.
Operating income for the Products System was $876,000 for the
first nine months of 1996 compared to $1.2 million for the first
nine months of 1995. Depreciation expense for the Products System
was $661,000 for the first nine months of 1996 and $654,000 for the
first nine months of 1995. Operating income, excluding
depreciation, for the Products System decreased to $1.5 million for
the first nine months of 1996 from $1.9 million for the same period
in 1995 as a result of decreased volumes. Total transportation
volumes were 13,390 BPD for the first nine months of 1996 compared
to 15,734 BPD for the same period in 1995.
CRUDE GATHERING SYSTEM -- Operating income for the Crude
Gathering System was $7.7 million for the first nine months of 1996
compared to $2.9 million for the same period in 1995 due to the
high spot price of crude relative to the posting price of crude in
the first nine months of 1996. Depreciation expense for the Crude
Gathering System was $1.5 million for both the first nine months of
1996 and the first nine months of 1995. Operating income,
excluding depreciation, for the Crude Gathering System was $9.2
million for the first nine months of 1996 and $4.5 million for the
first nine months of 1995. The net margin was $0.47 per barrel for
the first nine months of 1996 compared to $0.16 per barrel for the
first nine months of 1995. Due to the elimination of several
marginal contracts, the volume of crude oil gathered by the Crude
Gathering System decreased to 59,996 BPD for the first nine months
of 1996 from 67,801 BPD for the first nine months of 1995.
Factors and Trends Affecting Operating Results
A number of factors have affected the Partnership's operating
results, both indirectly and directly, such as environmental
compliance, other regulatory requirements, industry trends and
price of crude oil, inventory prices, and seasonality and weather.
The Managing General Partner of the Partnership expects that such
conditions will continue to affect the Partnership's business to
varying degrees in the future. The order in which these factors
are discussed is not intended to represent their relative
significance.
ENVIRONMENTAL COMPLIANCE -- Increasing public and governmental
concern about air quality is expected to result in continued
regulation of air emissions. Regulations relating to carbon
monoxide and regulations on oxygen content in gasoline and sulfur
content in diesel fuel are expected to be increasingly important as
a means of improving air quality in urban areas. The Partnership
plans to spend approximately $905,000 in 1996, 1997 and 1998 on
several projects to maintain compliance with various other
environmental requirements including $400,000 for a sewer system
upgrade.
Effective January 1, 1995, the Clean Air Act Amendment of 1990
required that certain areas of the country use reformulated
gasoline ("RFG"). The Abilene and San Angelo market areas do not
require RFG. Collin, Dallas, Denton, and Tarrant Counties, which
comprise the Dallas-Fort Worth ("DFW") metroplex area, do require
RFG; however, the Partnership's Aledo terminal lies outside this
area and is allowed to supply conventional gasoline that is not
destined for sale in these four counties. In addition to the
requirement for RFG in certain areas, new but much less restrictive
regulations took effect that impose new quality standards for
conventional gasoline in the rest of the country. Management does
not anticipate that these have had or will have a material adverse
effect on the Partnership's operations.
In early 1993, the United States Environmental Protection
Agency ("EPA") filed an administrative complaint and compliance
order against the Partnership. The complaint initially proposed an
assessment of $553,000 in penalties and fulfillment of a compliance
order at an unspecified cost against the Partnership. The
principal violations alleged by the EPA include the failure to
properly monitor ground water and to implement a ground water
monitoring program. The Partnership has verbally agreed to settle
the complaint for $92,000 in penalties payable in three
installments with the last payment due in 1999.
OTHER REGULATORY REQUIREMENTS -- The Partnership is also
subject to the rules and regulations of Occupational Safety and
Health Administration, Texas Air Control Board, Texas Railroad
Commission, and Texas Water Commission.
INDUSTRY TRENDS AND PRICE OF CRUDE OIL -- Industry trends and
the price of crude oil will continue to affect the Partnership's
business. While refined products are generally sold at a margin
above crude oil prices, fluctuations in the price of crude oil can
have a significant short-term effect on refining margins because
there is usually a lag in the movement of product prices, both up
and down, in relation to the movement of crude oil prices. The
general level of crude oil prices can also have a significant
effect on the margins in the crude gathering business. Margins in
the Crude Gathering System generally tend to be influenced by
competition and the general price level of crude oil. When prices
are higher, crude oil can generally be resold at higher margins.
Additionally, transportation charges are slightly less competitive
when higher crude oil prices result in increased exploration and
development. Conversely, when crude oil prices decrease, margins
on the resale of crude oil and transportation charges generally
tend to decrease.
INVENTORY PRICES -- The Partnership uses the last-in/first-out
(LIFO) method of determining inventory values. This method
minimizes the effect of fluctuations in inventory prices on
earnings by matching current costs with current revenue. The LIFO
method is the predominant method used in the refining industry.
SEASONALITY AND WEATHER -- Gasoline consumption is typically
highest in the United States in the summer months and lowest in the
winter months. As a result, margins for gasoline tend to be higher
in the summer months. Diesel consumption in the southern United
States is generally higher just prior to and during the winter
months when commercial trucking is routed on southern highways to
avoid severe weather conditions further north. Additionally,
diesel fuel prices tend to increase during the winter months when
refiners divert heating fuels to northern areas. During
unseasonably warm winters, as was experienced during 1995, diesel
prices do not trend up as in colder, longer winters. The
Refinery's JP-8 prices are influenced by these trends since the
pricing for JP-8 is based on Jet A, a kerosene based product, and
the price of diesel and heating fuels affect the price of kerosene.
OTHER FACTORS -- The Partnership was awarded contracts from
the United States Government for the right to supply 106 million
gallons of JP-8 to ten military installations in Texas for the
period from April 1, 1996 through March 31, 1997.
Financial Condition
Inflation
The Partnership's operations would be adversely impacted by
significant, sustained increases in crude oil and other energy
prices. Although the Partnership's operating costs are generally
impacted by inflation, the Managing General Partner does not expect
general inflationary trends to materially adversely impact the
Partnership's businesses.
Financial Resources and Liquidity
The Partnership's operations require substantial amounts of
working capital and open lines of credit which the Partnership
believes are currently adequate to provide funds to sustain
operations at present levels. The Partnership receives payments
from the United States Government, major oil companies, and other
customers within approximately 7 to 15 days from shipment in the
case of products sales and by the 20th of the following month in
the case of third-party crude oil sales and exchanges. The
Partnership maintains inventory in the amount of approximately 10
to 20 days of sales. The Partnership generally pays for crude oil
feedstock on the 20th of the month following the month in which it
is received. As a result, the Partnership's operating cycle is
such that it generally receives cash for the refined products on a
basis roughly equal to the average terms on which it pays for the
crude oil feedstock.
Letters of credit are an integral part of the operations of
the Crude Gathering System since the Partnership takes title to
both first purchased barrels and custom gathered barrels. On
November 14, 1996, the Partnership's credit facility was amended to
extend the maturity date to October 1, 1997. Under this credit
facility, the Partnership has a $6,500,000 standby letter of credit
facility for general corporate purposes and the purchase of crude
oil and other refinery feedstocks ("Facility A") and a $45,000,000
standby letter of credit facility for the purchase of crude oil
("Facility B"). The fee on outstanding Facility A and Facility B
standby letters of credit is 1 and 1/2% per annum. For the unused
portion of the standby letter of credit facility, the fee is one-
half of 1% per annum. Though no advances had been drawn under
either the Facility A or Facility B letter of credit facility, the
Partnership did have approximately $721,000 and $43.1 million,
respectively, in outstanding standby letters of credit as of
September 30, 1996. The credit agreement was amended to provide at
the banks' discretion an additional $8,000,000 standby letter of
credit facility for the purchase of crude oil and other refinery
feedstocks ("Special LC Facility"). The fee on outstanding Special
LC Facility standby letters of credit is 3% per annum. There is no
commitment fee for the unused portion of the Special LC Facility.
The Partnership had approximately $6.1 million outstanding under
the Special LC Facility as of September 30, 1996.
Under the restated and amended credit facility, the
Partnership has available to it a revolving line of credit of $8.0
million (the "Revolver") and a $45.0 million term loan (the "Term
Loan"). The amount available under the Revolver is subject to a
borrowing base which includes a reduction by the amount of letters
of credit issued under Facility A. Advances under the Revolver and
Term Loan bear interest at prime plus 2% and 3%, respectively,
payable monthly. The prime rate was 8.25% as of September 30,
1996. The Term Loan is subject to a facility fee of 5% per annum
commencing January 1, 1996 and payable at maturity which is October
1, 1997. As of September 30, 1996, the Partnership had accrued
$1.0 million in facility fees. This fee will be discontinued if
the proposed amendments to the partnership agreement, as discussed
later, are adopted. The amount accrued at that time will be
forgiven. The Partnership has pledged substantially all its assets
as collateral. In addition, the General Partners guaranteed the
facility and Pride SGP as guarantor has pledged its assets as
collateral for such loans. The Partnership may elect to prepay the
credit facilities without any prepayment penalty. The fee for the
unused portion of the Revolver is one-half of 1% per annum. At
September 30, 1996, the balances outstanding on the Revolver and
Term Loan were $2.3 million and $42.2 million, respectively. The
Partnership is required to make scheduled principal payments of
$120,000 each month beginning September 5, 1996 plus quarterly
principal payments in the amount of 80% of excess cash, as defined
in the credit agreement, for the preceding quarter. The
Partnership has classified $1.7 million of the Term Loan as current
as of September 30, 1996.
Advances under the Revolver are subject to repayment on a
daily basis. As a result, the full amount outstanding at September
30, 1996 has been included in the current portion of long-term
debt. Subject to the borrowing base, the Partnership may borrow
any amounts previously repaid.
The facility also includes a $2.5 million uncommitted line of
credit ("Uncommitted Line"). Advances under the Uncommitted Line
are made solely at the lenders' discretion and bear interest at the
prime rate plus 4%. The Uncommitted Line must be completely paid
off for fifteen consecutive days each month. There were no
advances outstanding under the Uncommitted Line at September 30,
1996.
The amended credit facility also requires the Partnership to
pay a monthly fee of $10,000 and restricts the payment of
distributions to unitholders throughout the term of the amended
credit agreement. Future distributions will be dependent on
payment in full of bank debt, expiration of all liabilities for
letters of credit, and the termination of the credit agreement.
The Partnership has a nonrecourse loan from Diamond Shamrock
with an outstanding principal balance of $5.8 million at September
30, 1996, bearing interest at 8% per annum with monthly principal
and interest payments. The assets of Pride Borger, Inc., a wholly
owned subsidiary of the Partnership, which owns 50% of the Texas
Plains Pipeline System, are pledged as collateral. Pride Borger,
Inc. has also guaranteed the note. Monthly principal payments are
made to Diamond Shamrock based on the number of throughput barrels
for the prior month in the Texas Plains Pipeline System. Current
maturities are estimated to be $54,000 at September 30, 1996. In
1996, the Partnership acquired the other 50% interest in the Texas
Plains System from Scurlock Permian.
Pride SGP has made unsecured loans to the Partnership in the
principal amount of $2.5 million bearing interest at prime plus 2%.
The loans mature October 1, 1997.
During 1995, the Partnership converted non-interest bearing
accounts payable to the United States Government related to pricing
adjustments which had been accrued since 1993 to a $2.4 million
installment loan. The principal balance was $1.6 million at
September 30, 1996. The note bears interest based on the rate set
by the Secretary of the Treasury. This rate was 7.0% as of
September 30, 1996. The note requires monthly payments of $84,000.
The note matures June 1, 1998. The Partnership has classified
$934,000 of the note as current as of September 30, 1996.
On January 9, 1995, the Partnership executed a note to a local
bank related to the renovation and refinancing of its
administrative offices in Abilene. Prior to this, the Partnership
had to lease additional office space from a third party. The note
bears interest at prime plus one-half of 1% and had an outstanding
principal balance of $377,000 at September 30, 1996. The note
matures January 9, 2000. The Partnership has classified $16,000 of
the note as current as of September 30, 1996.
Cash flows have been and will continue to be significantly
affected by fluctuations in the cost and volume of crude oil and
refined products held in inventory and the timing of accounts
receivable collections. Cash flows are also affected by refining
margins and crude oil gathering margins.
The Partnership's operations have generated losses in each of
the last five years and current ratios of less than one to one in
each of the last three years. These conditions and financial
results were primarily a result of depressed refining margins along
with increasing depreciation expense and interest expense and
related fees. Crude gathering volumes have also decreased.
The Partnership's return to profitability and long-term
viability is dependent upon restructuring its credit facility,
increased volumes and/or improved profit margins, as well as
continued cost control initiatives. Management believes the
extension of the existing credit facility to October 1, 1997
sufficiently alleviates any short-term threats to the liquidity of
the Partnership. Though management has and will continue to pursue
options regarding increasing volumes and margins and reducing
costs, including limiting any significant capital expenditures,
these improvements will be gradual and, in many cases, will take
sustained periods of time to implement in order to achieve
profitability. The most significant and urgent need of the
Partnership is to effect a complete restructuring and
recapitalization of the Partnership's debt and equity. On August
13, 1996, the Partnership completed the first ("Phase 1") of three
phases which called for the execution of documents with the
Partnership's bank lenders. In phase two ("Phase 2"), the
Partnership is seeking unitholder approval to convert the
outstanding preferred units into common units. The Partnership
sent out consent solicitation material to unitholders in October,
1996. Approval requires at least two-thirds of both classes of
units to vote in favor of the conversion. If approved, the
preferred unitholders will own 93.1% of the equity of the
Partnership, up from 46.3%, and all preferred and common unit
arrearages will be cancelled. In addition, the credit facility
will automatically be extended to November 30, 1997, the term loan
will be reduced to $25.0 million, three notes will be created for
the remaining portion of the previously outstanding term loan, the
interest rate on the debt will be reduced, and the facility fee
will be cancelled. As of November 14, 1996, in excess of two-
thirds of both the preferred and common units had been voted in
favor of the proposal. The voting period ends at 5:00 p.m. central
time on November 15, 1996 unless extended by the Partnership.
Phase three ("Phase 3") anticipates the refinancing of the
letter of credit line, the revolving line, and the term loan. Upon
completion of Phase 3, the banks have agreed to convert two of the
notes to a convertible preferred equity. The third note, if not
refinanced, can be converted to equity at the banks' election.
During the first nine months of 1996, the Partnership expensed
$583,000 related to this proposed restructuring of its credit
facility. This is in addition to the $873,000 expensed for the
year ended December 31, 1995.
The Managing General Partner is hopeful Phase 2 will be
completed in the fourth quarter of 1996 and Phase 3 will be
completed by March 31, 1997. There can be no assurance the
Partnership will be able to complete them as outlined. If the
Partnership fails to complete them, it will have to pursue other
means of effecting a restructuring and recapitalization prior to
the maturity of its credit facility on October 1, 1997. If the
Partnership is successful in completing the restructuring and
recapitalization of the Partnership, the Managing General Partner
believes it will enhance the Partnership's financial strength,
flexibility and future access to capital markets as well as
lowering interest expense.
Capital Expenditures
The Partnership incurred maintenance capital expenditures of
$347,000 for the third quarter of 1996.
Cash Distributions
At September 30, 1996, 4,700,000 Preferred Units were
outstanding, representing an approximate 46.3% limited partner
interest in the Partnership. The Preferred Units are cumulative,
entitled to a minimum quarterly distribution of $0.65 per unit
through the Initial Conversion Date which is the first day of the
third calendar quarter in which the payment of all cumulative
arrearages to Preferred Unitholders have been paid, and all
arrearages must be paid before the Common Unitholders may receive
distributions. The Preferred Units are convertible into Common
Units on the Initial Conversion Date. The Common Units are also
cumulative and entitled to a quarterly distribution of $0.65 per
unit; however, no Common Unit arrearages will be paid after the
Initial Conversion Date, and any such accumulated arrearages then
existing will be cancelled. The general partners are entitled to
2% of all distributions. At September 30, 1996, cumulative
arrearages were $13.65 per Common Unit which totaled $71.7 million
and $12.00 per Preferred Unit which totaled $56.4 million. Such
arrearages will be cancelled if phase 2 of the restructuring is
approved by unitholders. See "Financial Condition - Financial
Resources and Liquidity."
Under the terms of the Partnership's credit agreement, the
bank restricted the payment of distributions to unitholders
throughout the term of the credit agreement. Future distributions
will be dependent on payment in full of the bank debt, expiration
of all liabilities for letters of credit, and the termination of
the credit agreement.
PART II. Other Information
Item 1. Legal Proceedings
In early 1993, the United States Environmental Protection
Agency ("EPA") filed an administrative complaint and compliance
order against the Partnership. The complaint initially proposed an
assessment of $553,000 in penalties and fulfillment of the
compliance order at an unspecified cost against the Partnership.
The principal violations alleged by the EPA include the failure to
properly monitor ground water and to implement a ground water
monitoring program. The Partnership has verbally agreed to settle
the complaint for $92,000 in penalties payable in three
installments with the last payment due in 1999.
The Partnership has filed a substantial claim against the
Defense Fuel Supply Center relating to erroneous pricing of fuel
purchased over a period of several years from the Partnership and
its predecessors. The ultimate outcome of this matter cannot
presently be determined.
The Partnership is involved in various claims and routine
litigation incidental to its business for which damages are sought.
Management believes that the outcome of all claims and litigation
is either adequately insured or will not have a material adverse
effect on the Partnership's financial position or results of
operations.
Item 2. Changes in Securities
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
4.1 Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.1 of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 (Commission File No. 1-
10473)).
4.2 Amended and Restated Agreement of Limited Partnership of
Pride Companies, L.P. (incorporated by reference to
Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.3 First Amendment to the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P.
(incorporated by reference to Exhibit 4.2 of the
Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 (Commission File No. 1-
10473)).
4.4 Deposit Agreement among the Partnership and the
Depository (incorporated by reference to Exhibit 4.1 of
the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (Commission File No.
1-10473)).
4.5 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.1 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.6 Form of Depositary Receipt for Preferred Units of Pride
Companies, L.P. (included as Exhibit A to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
4.7 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (included as Exhibit B to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
27 Financial Date Schedule for Third Quarter 1996.
28.1 First Amendment to Loan Agreement, dated as of August 27,
1996, among the Partnership (Borrower), Pride Refining,
Inc., Pride SGP, Inc., Desulfur Partnership, Pride
Marketing of Texas (Cedar Wind), Inc., and Pride Borger,
Inc. (Guarantors), and NationsBank of Texas, N.A.
(Agent), and NationsBank of Texas, N.A. and Bank One
Texas, N.A. (Lenders).
28.2 Second Amendment to Loan Agreement, dated as of
November 14, 1996, among the Partnership
(Borrower), Pride Refining, Inc., Pride SGP, Inc.,
Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc. (Guarantors), and
NationsBank of Texas, N.A. (Agent), and NationsBank of
Texas, N.A. and Bank One Texas, N.A. (Lenders).
b. Reports on Form 8-K:
None<PAGE>
SIGNATURES
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 thereunto duly authorized.
PRIDE COMPANIES, L.P.
By: Pride Refining, Inc.
as its Managing General Partner
(Registrant)
November 14, 1996 Brad Stephens
Date Brad Stephens
Chief Executive Officer
(Signing on behalf of Registrant)
November 14, 1996 George Percival
Date George Percival
Principal Financial Officer
(Signing as Principal Financial
Officer)
<PAGE>
PRIDE COMPANIES, L.P.
Exhibits to
Report to Form 10-Q
INDEX TO EXHIBITS
Exhibit Number
(Reference to
Item 601 of
Regulation S-K)
_________________
4.1 Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.1 of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 (Commission File No. 1-
10473)).
4.2 Amended and Restated Agreement of Limited Partnership of
Pride Companies, L.P. (incorporated by reference to
Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.3 First Amendment to the Amended and Restated Agreement of
Limited Partnership of Pride Companies, L.P.
(incorporated by reference to Exhibit 4.2 of the
Partnership's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 (Commission File No. 1-
10473)).
4.4 Deposit Agreement among the Partnership and the
Depository (incorporated by reference to Exhibit 4.1 of
the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 (Commission File No.
1-10473)).
4.5 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.1 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.6 Form of Depositary Receipt for Preferred Units of Pride
Companies, L.P. (included as Exhibit A to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
4.7 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (included as Exhibit B to the Deposit
Agreement, which is incorporated by reference to Exhibit
4.1 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (Commission File
No. 1-10473)).
27 Financial Data Schedule for Third Quarter 1996.
28.1 First Amendment to Loan Agreement, dated as of August 27,
1996, among the Partnership (Borrower), Pride Refining,
Inc., Pride SGP, Inc., Desulfur Partnership, Pride
Marketing of Texas (Cedar Wind), Inc., and Pride Borger,
Inc. (Guarantors), and NationsBank of Texas, N.A.
(Agent), and NationsBank of Texas, N.A. and Bank One
Texas, N.A. (Lenders).
28.2 Second Amendment to Loan Agreement, dated as of
November 14, 1996, among the Partnership
(Borrower), Pride Refining, Inc., Pride SGP, Inc.,
Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc. (Guarantors), and
NationsBank of Texas, N.A. (Agent), and NationsBank of
Texas, N.A. and Bank One Texas, N.A. (Lenders).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 457
<SECURITIES> 0
<RECEIVABLES> 15,522
<ALLOWANCES> 0
<INVENTORY> 19,283
<CURRENT-ASSETS> 36,902
<PP&E> 136,153
<DEPRECIATION> 35,504
<TOTAL-ASSETS> 138,737
<CURRENT-LIABILITIES> 45,641
<BONDS> 49,709
0
15,871
<COMMON> 15,936
<OTHER-SE> 173
<TOTAL-LIABILITY-AND-EQUITY> 138,737
<SALES> 450,670
<TOTAL-REVENUES> 450,670
<CGS> 435,341
<TOTAL-COSTS> 435,341
<OTHER-EXPENSES> 5,241
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,380
<INCOME-PRETAX> (4,066)
<INCOME-TAX> (33)
<INCOME-CONTINUING> (4,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,033)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
EXHIBIT 28.1
FIRST AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT
AGREEMENT (herein called the "Amendment") made as of the 27th day
of August, 1996, by and among Pride Companies, L.P., a Delaware
limited partnership ("Borrower"), Pride Refining, Inc., a Texas
corporation ("Pride Refining"), Pride SGP, Inc., a Texas
corporation ("Pride SGP"), Desulfur Partnership, a Texas general
partnership ("Desulfur Partnership"), Pride Marketing of Texas
(Cedar Wind), Inc., a Texas corporation ("Pride Marketing"),
Pride Borger, Inc., a Delaware corporation ("Pride Borger"),
NationsBank of Texas, N.A., a national banking association, as
Agent ("Agent"), and Lenders named on Schedule 1 to the Original
Agreement ("Lenders"),
W I T N E S S E T H:
WHEREAS, Borrower, Pride Refining, Pride SGP, Desulfur
Partnership, Pride Marketing, Pride Borger, Agent and Lenders
have entered into that certain Credit Agreement dated as of
August 13, 1996 (the "Original Agreement") for the purpose and
consideration therein expressed, whereby Lenders became obligated
to make loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the
original Agreement to provide for an uncommitted letter of credit
facility;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and in the
Original Agreement and in consideration of the loans which may
hereafter be made by Lenders to Borrower, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as
follows:
ARTICLE I
Definitions and References
Section 1.1. Terms Defined in the Original Agreement.
Unless the context otherwise requires or unless otherwise
expressly defined herein, the terms defined in the Original
Agreement shall have the same meanings whenever used in this
Amendment.
Section 1.2. Other Defined Terms. Unless the context
otherwise requires, the following terms when used in this
Amendment shall have the meanings assigned to them in this
Section 1.2.
"Amendment" shall mean this First Amendment to Fifth
Restated and Amended Credit Agreement.
"Credit Agreement" shall mean the Original Agreement as
amended hereby.
ARTICLE II
Amendments to Original Agreement
Section 2.1. Defined Terms. The definition of "Letter of
Credit" in Section 1.1 of the Original Agreement is hereby
amended in its entirety to read as follows:
"'Letter of Credit' shall mean any Facility A Letter of
Credit, Facility B Letter of Credit or Special Letter of
Credit issued, renewed or extended by Agent pursuant to this
Agreement or the Loan Documents, together with any letter(s)
of credit issued, renewed or extended by Agent pursuant to
the Original Credit Agreement."
The following definition of "Special Letter of Credit" is
hereby added to Section 1.1 of the Original Agreement immediately
following the definition of "Series C Units":
"'Special Letter of Credit' has the meaning specified
in Section 3.01(d)."
Section 2.2. Special Letters of Credit. Section 3.01 of the
Original Agreement is hereby amended by adding the following
clause (d) immediately following clause (c) thereof:
"(d) Special Letters of Credit. Determining Lenders
may elect, in their sole discretion, to direct Agent to
issue, renew or extend, for the account of Borrower, one or
more irrevocable standby Letters of Credit ('Special Letters
of Credit') from time to time upon a request by Borrower.
Borrower must give Agent either a properly completed Letter
of Credit Request or a CATS Request at least one Business
Day prior to the date Borrower desires a Special Letter of
Credit to be issued, renewed or extended. Notwithstanding
any course of dealing between Borrower, Agent or any Lender
or any prior Special Letter of Credit being issued, renewed
or extended by Agent and notwithstanding anything contained
in this Agreement or any other Loan Document to the
contrary, neither Agent nor any Lender has any obligation or
commitment whatsoever to issue, renew or extend any Special
Letter of Credit, and the decision for Agent to issue, renew
or extend any Special Letter of Credit shall be made solely
in the discretion of Determining Lenders. Special Letters
of Credit may be issued only to support obligations of
Borrower for purchases of crude oil and other refinery feed
stocks into the refinery known as the Pride Refinery,
located in Jones County, Texas."
Section 2.3. Conditions. The heading to Section 3.02 of the
Original Agreement is hereby amended in its entirety to read as
follows: "Conditions to Letters of Credit".
Section 2.4. Terms of Letters of Credit. Section 3.03(b) of
the Original Agreement is hereby amended by adding the following
sentence to the end thereof:
"The expiry date of any Special Letter of Credit shall be
determined by Determining Lenders in their sole discretion,
provided that in no event shall such expiry date be later
than the Maturity Date (as then known)."
Section 3.03(e) of the Original Agreement is hereby amended
in its entirety to read as follows:
"(e) Agent may amend, renew and extend any Letter of
Credit (other than a Special Letter of Credit), upon receipt
of the necessary instructions from Borrower as Agent may
require. Any Special Letter of Credit may be amended,
renewed or extended by Agent only upon receipt of the
necessary instructions from Borrower as Agent may require
and the written consent of the Determining Lenders."
ARTICLE III
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become
effective as of the date first above written when, and only when,
Agent shall have received, at Agent's office, a counterpart of
this Amendment executed and delivered by Borrower and each
Lender.
ARTICLE IV
Representations and Warranties
Section 4.1. Representations and Warranties of Borrower.
In order to induce each Lender to enter into this Amendment,
Borrower represents and warrants to each Lender that:
(a) The representations and warranties contained in
Article V of the Original Agreement are true and correct at
and as of the time of the effectiveness hereof.
(b) Each Related Person is duly authorized to execute
and deliver this Amendment, and Borrower is and will
continue to be duly authorized to borrow monies and to
perform its obligations under the Credit Agreement. Each
Related Person has duly taken all corporate and partnership
action necessary to authorize the execution and delivery of
this Amendment and to authorize the performance of the
obligations of such Related Person hereunder.
(c) The execution and delivery by each Related Person
of this Amendment, the performance by each Related Person of
its obligations hereunder and the consultation of the
transactions contemplated hereby do not and will not
conflict with any provision of law, statute, rule or
regulation or of the partnership agreement, articles of
incorporation and bylaws of any Related Person, or of any
material agreement, judgment, license, order or permit
applicable to or binding upon any Related Person, or result
in the creation of any lien, charge or encumbrance upon any
assets or properties of any Related Person. Except for
those which have been obtained, no consent, approval,
authorization or order of any court or governmental
authority or third party is required in connection with the
execution and delivery by each Related Person of this
Amendment or to consummate the transactions contemplated
hereby.
(d) When duly executed and delivered, this Amendment
will be a legal and binding obligation of each Related
Person, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights
and by equitable principles of general application.
ARTICLE V
Miscellaneous
Section 5.1. Ratification of Agreements. The Original
Agreement as hereby amended is hereby ratified and confirmed in
all respects. Any reference to the Credit Agreement in any Loan
Document shall be deemed to be a reference to the Original
Agreement as hereby amended. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or
remedy of Lenders under the Credit Agreement, the Notes, or any
other Loan Document nor constitute a waiver of any provision of
the Credit Agreement, the Notes or any other Loan Document.
Section 5.2. Survival of Agreements. All representations,
warranties, covenants and agreements of the Related Person herein
shall survive the execution and delivery of this Amendment and
the performance hereof, including without limitation the making
or granting of the Loans, and shall further survive until all of
the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by any
Related Person hereunder or under the Credit Agreement to any
Lender shall be deemed to constitute representations and
warranties by, and/or agreements and covenants of, Borrower under
this Amendment and under the Credit Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan
Document, and all provisions in the Credit Agreement pertaining
to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be
governed by and construed in accordance the laws of the State of
Texas and any applicable laws of the United States of America in
all respects, including construction, validity and performance.
Section 5.5. Counterparts. This Amendment may be separately
executed in counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be
deemed to constitute one and the same Amendment.
THIS AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Amendment is executed as of the
date first above written.
BORROWER:
PRIDE COMPANIES, L.P., a
Delaware limited
partnership
By: PRIDE REFINING, INC., a Texas
corporation, Managing General
Partner
By:
Brad Stephens
Chief Executive Officer
GUARANTORS:
PRIDE REFINING, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE SGP, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE MARKETING OF TEXAS (CEDAR
WIND), INC.
By:
Brad Stephens
President
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas
(Cedar Wind), Inc., its
General Partner
By:
Brad Stephens
President
PRIDE BORGER, INC.
By:
Wayne Malone
President
AGENT:
NATIONSBANK OF TEXAS, N.A.
By:
Jay T. Wampler
Vice President
LENDERS:
NATIONSBANK OF TEXAS, N.A.
By:
Jay T. Wampler
Vice President
BANK ONE, TEXAS, N.A.
By:
Randall Durant
Vice President
CONSENT AND AGREEMENT
Each of Pride Refining, Pride SGP and Desulfur Partner
hereby consents to the provisions of this Agreement and the
transactions contemplated herein, and hereby ratifies and
confirms the Second Restated Guaranty Agreement dated as of
August 13, 1996, made by it for the benefit of Lenders and Agent,
and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
PRIDE REFINING, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE SGP, INC.
By:
Brad Stephens
Chief Executive Officer
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas
(Cedar Wind), Inc., its
general partner
By:
Brad Stephens
President
CONSENT AND AGREEMENT
Pride Marketing and Pride Borger hereby consents to the
provisions of this Agreement and the transactions contemplated
herein, and hereby ratifies and confirms the Restated Guaranty
Agreement dated as of August 13, 1996, made by it for the benefit
of Lenders and Agent, and agrees that its obligations and covenants
thereunder are unimpaired hereby and shall remain in full force and
effect.
PRIDE MARKETING OF TEXAS (CEDAR
WIND), INC.
By:
Brad Stephens
President
PRIDE BORGER, INC.
By:
Wayne Malone
President
EXHIBIT 28.2
AGREEMENT
Reference is hereby made to that certain Fifth Restated and
Amended Credit Agreement dated as of August 13, 1996, as amended by
the First Amendment to Fifth RestaTed and Amended Credit Agreement
dated as of August 27, 1996 (as so amended, the "Credit Agreement")
among Pride Companies, L.P. ("Borrower"), Pride Refining, Inc.,
Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas
(Cedar Wind), Inc., and Pride Borger, Inc. (collectively, the
"Guarantors"), NationsBank of Texas, N.A., a national banking
association, as Agent ("Agent"), and Bank One, Texas, N.A. and
NationsBank of Texas, N.A., as Lenders (sometimes collectively
referred to herein as "Lenders" and each individually, a "Lender").
Capitalized terms used herein shall have the meanings given them in
the Credit Agreement.
Borrower has requested, and Agent and Lenders have agreed to
amend the Credit Agreement for the purposes expressed herein.
In consideration of the mutual covenants and agreements
contained herein and in the Credit Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Lenders, Agent, Borrower and Guarantors agree
as follows:
1. Definitions. The definition of "Maturity Date" in
Section 1.01 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"'Maturity Date' shall mean the earlier to occur of
October 1, 1997 or the date of any Acceleration, provided that
beginning on the Restructuring Trigger Date and at all times
thereafter, the term 'Maturity Date' shall mean the earlier to
occur of November 30, 1997, or the date of any Acceleration."
2. Ratification of Documents. The Credit Agreement as hereby
amended is ratified and confirmed in all respects. Any reference
to the Credit Agreement in any Loan Document shall be deemed to
refer to this Agreement also. The execution, delivery and
effectiveness of this Agreement shall not, except as expressly
provided herein operate as a waiver of any right, power or remedy
of Agent or any Lender under the Credit Agreement or any other Loan
Document nor constitute a waiver of any provision of the Credit
Agreement or any other Loan Documents.
3. Loan Document. This Agreement is a Loan Document and all
provisions in the Credit Agreement pertaining to Loan Documents
apply hereto.
4. Counterparts. This Agreement may be separately executed
in counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of November 14, 1996.
PRIDE COMPANIES, L.P., a Delaware
limited partnership
By: PRIDE REFINING, INC., a Texas
corporation, Managing General
Partner
By:
Brad Stephens
Chief Executive Officer
PRIDE REFINING, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE SGP, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE MARKETING OF TEXAS (CEDAR
WIND), INC.
By:
Brad Stephens
President
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas (Cedar
Wind), Inc., its General
Partner
By:
Brad Stephens
President
PRIDE BORGER, INC.
By:
Wayne Malone
President
NATIONSBANK OF TEXAS, N.A., as agent
By:
Jay T. Wampler
Vice President
NATIONSBANK OF TEXAS, N.A.
By:
Jay T. Wampler
Vice President
BANK ONE, TEXAS, N.A.
By:
Randall Durant
Vice President
CONSENT AND AGREEMENT
Each of Pride Refining, Pride SGP and Desulfur Partnership
hereby consents to the provisions of this Agreement and the
transactions contemplated herein, and hereby ratifies and confirms
the Second Restated Guaranty Agreement dated as of August 13, 1996,
made by it for the benefit of Lenders and Agent, and agrees that
its obligations and covenants thereunder are unimpaired hereby and
shall remain in full force and effect.
PRIDE REFINING, INC.
By:
Brad Stephens
Chief Executive Officer
PRIDE SGP, INC.
By:
Brad Stephens
Chief Executive Officer
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas (Cedar
Wind), Inc., its general
partner
By:
Brad Stephens
President
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of
this Agreement and the transactions contemplated herein, and hereby
ratifies and confirms the Restated Guaranty Agreement dated as of
August 13, 1996, made by it for the benefit of Lenders and Agent,
and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.
PRIDE MARKETING OF TEXAS (CEDAR
WIND), INC.
By:
Brad Stephens
President
PRIDE BORGER, INC.
By:
Wayne Malone
President
