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 March 31, 1997
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 May 1, 1997
Common Units 4,950,000<PAGE>
<TABLE>
PART I. Item 1. Financial Information
PRIDE COMPANIES, L.P.
BALANCE SHEETS
(Amounts in thousands, except unit amounts)
<CAPTION>
March 31,
1997 December 31,
(unaudited) 1996
___________ ____________
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 458 $ 472
Accounts receivable, less allowance
for doubtful accounts 13,144 18,163
Inventories 17,055 19,171
Prepaid expenses 934 1,286
___________ ___________
Total current assets 31,591 39,092
Property, plant and equipment 137,091 136,778
Accumulated depreciation 38,908 37,224
___________ ___________
Property, plant and equipment - net 98,183 99,554
Other assets 1,061 1,070
___________ ___________
$ 130,835 $ 139,716
LIABILITIES AND PARTNERS' CAPITAL:
Current liabilities:
Accounts payable $ 27,277 $ 33,517
Accrued payroll and related benefits 1,294 1,498
Accrued taxes 3,630 4,805
Other accrued liabilities 2,008 2,095
Current portion of long-term debt 9,218 6,516
___________ ___________
Total current liabilities 43,427 48,431
Long-term debt, excluding current portion 49,477 50,417
Deferred income taxes 2,512 2,590
Other long-term liabilities 8,734 8,680
Partners' capital:
Common units (5,275,000 units
authorized, 4,950,000
outstanding) 26,619 29,474
General partners' interest 66 124
___________ ___________
Total partners' capital 26,685 29,598
___________ ___________
$ 130,835 $ 139,716
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 March 31,
1997 1996
______________ ___________
<S> <C> <C>
Revenues $ 142,455 $ 150,364
Cost of sales and operating expenses,
excluding depreciation 139,371 143,274
Marketing, general and
administrative expenses 2,391 2,567
Depreciation 1,718 1,765
____________ ___________
Operating income (loss) (1,025) 2,758
Other income (expense):
Interest income 9 20
Interest expense (1,334) (1,491)
Credit and loan fees (589) (805)
Other - net (21) 27
____________ ___________
Income (loss) before income taxes (2,960) 509
Income tax expense (benefit) (47) 1
____________ ___________
Net income (loss) $ (2,913) $ 508
General partners' interest $ (58) $ 10
Net income (loss) allocable
to unitholders $ (2,855) $ 498
Net income (loss) per unit
- before conversion $ (.58) $ .05
Net income (loss) per unit
- after conversion $ (.58) $ .10
See accompanying notes.
/TABLE
<PAGE>
<TABLE>
PRIDE COMPANIES, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Three Months Ended March 31,
1997 1996
____________ ___________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,913) $ 508
Adjustments to reconcile net
income (loss) to net cash provided
by (used in) operating activities:
Noncash charges (credits) to earnings:
Depreciation 1,718 1,765
(Gain) loss on sale of
property, plant and equipment 24 (23)
Deferred tax benefit (78) (32)
Net effect of changes in:
Accounts receivable 5,019 (3,760)
Inventories 2,116 471
Prepaid expenses 352 303
Accounts payable and other
long-term liabilities (6,186) 1,382
Accrued liabilities (1,466) 597
____________ ___________
Total adjustments 1,499 703
____________ ___________
Net cash provided by (used in)
operating activities (1,414) 1,211
Cash flows from investing activities:
Purchases of property, plant and
equipment (369) (406)
Proceeds from disposal of property,
plant and equipment 5 42
Other 2 (24)
____________ ___________
Net cash provided by (used in)
investing activities (362) (388)
Cash flows from financing activities:
Proceeds from debt and credit
facilities 41,608 8,550
Payments on debt and credit
facilities (39,846) (9,381)
Other - (4)
____________ ___________
Net cash provided by (used in)
financing activities 1,762 (835)
____________ ___________
Net increase (decrease) in cash and
cash equivalents (14) (12)
Cash and cash equivalents at the
beginning of the period 472 288
____________ ___________
Cash and cash equivalents at the
end of the period $ 458 $ 276
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. In that connection, it purchases and resells crude
oil in order to provide a supply of the appropriate grade of 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 Refining, Inc. (the "Managing General Partner") owns a
1.9% general partner interest in and serves as the managing general
partner of the Partnership. Pride SGP, Inc. ("Special General
Partner" or "Pride SGP") owns a 0.1% general partner interest in
and serves as the special general partner of the Partnership. The
Managing General Partner and the Special General Partner
(collectively the "General Partners") collectively own a 2% general
partner interest. The Partnership adopted certain amendments to
its partnership agreement (the "Amendments"), which were effective
December 31, 1996 and modified the capital structure of the
Partnership. In addition to its general partner interest, the
Special General Partner owns a 4.9% interest in the Partnership
through ownership of common limited partner units with terms
specified by the Amendments ("Common Units"). Public ownership
represented by the remaining Common Units is 93.1%. Prior to the
effectiveness of the Amendments, the Special General Partner owned
a 51.7% limited partner interest in the Partnership through
ownership of common limited partner units ("Old Common Units"), and
the public owned a 46.3% interest in the Partnership through
ownership of convertible preferred limited partner units
("Preferred Units").
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, 1996
include a summary of significant accounting policies that should be
read in conjunction with this quarterly report on Form 10-Q. The
Partnership has two subsidiaries that are corporations which are
separate taxable entities whose operations are subject to federal
income taxes.
Net Income (Loss) per Unit - Before Conversion is calculated
using the actual weighted average number of units outstanding
during the period (4,950,000 Common Units for the period ended
March 31, 1997 and 4,700,000 Preferred Units and 5,250,000 Old
Common Units for the period ended March 31, 1996) divided into the
Partnership's net income (loss) after adjusting for general partner
allocations. Net Income (Loss) per Unit - After Conversion is
calculated based on the weighted average number of Common Units
outstanding as a result of the Amendments which were effective
December 31, 1996 (4,950,000 Common Units for the periods ended
March 31, 1997 and 1996) divided into the Partnership's net income
(loss) after adjusting for general partner allocations. In
February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("SFAS 128"). The adoption
of SFAS 128 is not expected to have a material effect on the
Partnership's prior periods or present earnings per unit
calculation.
3. Related Party Transactions
In accordance with the Second 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 4.9%
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 March 31, December 31,
consist of: 1997 1996
(in thousands)
_____________________________ ___________ ___________
<S> <C> <C>
Crude oil $ 12,474 $ 14,543
Refined products and blending
materials 8,402 12,002
___________ ___________
20,876 26,545
LIFO reserve (4,910) (8,381)
___________ ___________
Petroleum inventories 15,966 18,164
Spare parts and supplies 1,089 1,007
___________ ___________
$ 17,055 $ 19,171
</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
The Partnership's credit facility was amended and restated on
August 13, 1996. On May 15, 1997, the Partnership's credit
facility was amended to extend the maturity date to April 1, 1998.
Under the credit facility at December 31, 1996, the Partnership had
a $6.5 million standby letter of credit facility for general
corporate purposes and the purchase of crude oil and other refinery
feedstocks ("Facility A") and a $45.0 million standby letter of
credit facility for the purchase of crude oil ("Facility B"). On
February 25, 1997, at the request of management, the credit
agreement was amended and the amount available under Facility B was
reduced to $42.5 million in exchange for an incremental $2.5
million of availability on an uncommitted line of credit. 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 standby letter of credit facility, the Partnership did
have approximately $721,000 and $42.3 million, respectively, in
outstanding standby letters of credit at March 31, 1997. The
credit agreement also provides, at the banks' discretion, an
additional $8.0 million 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 $1.0 million in outstanding standby letters of credit
under the Special LC Facility as of March 31, 1997. As a result of
the decline in crude oil prices in the first quarter of 1997 and
management's expectations for lower average crude oil prices for
the remainder of the year compared with 1996, the Partnership
believes its current letter of credit facilities, supplemented by
the Special LC Facility, are adequate.
Prior to an amendment on March 31, 1997 to the credit
facility, the Partnership had available to it a revolving line of
credit of $8.0 million, a $24.6 million term loan (the "Term Loan")
and a total of $16.8 million in three series of convertible senior
secured notes (collectively the "Senior Secured Notes"). On March
31, 1997, the credit agreement was amended to provide a $12.0
million revolving line of credit ("Revolver"). At March 31, 1997,
the balances outstanding on the Revolver, Term Loan and the Senior
Secured Notes were $7.4 million, $24.6 million and $16.8 million,
respectively. Under the amended credit facility, the Partnership
is required to make quarterly principal payments on the Term Loan
in the amount of excess cash, as defined in the credit agreement,
for the preceding quarter. The Partnership has classified $647,000
of the Term Loan as current as of March 31, 1997.
Advances under the Revolver and Term Loan bear interest at
prime plus 1 and 1/2% and 2%, respectively, payable monthly. The
prime rate was 8 and 1/2% as of March 31, 1997. The Senior Secured
Notes issued to the lenders under the credit facility consist of
$2.5 million in Convertible Senior Secured Series A Promissory
Notes ("Note A"), $9.3 million in Convertible Senior Secured Series
B Promissory Notes ("Note B"), and $5.0 million in Convertible
Senior Secured Series C Promissory Notes ("Note C"). The Senior
Secured Notes bear interest at prime plus 1% payable monthly, and
have the same maturity as the credit facility. Under certain
circumstances, the Senior Secured Notes are convertible at the
holders' election into Common Units. The entire amount outstanding
under the Senior Secured Notes has been classified as long-term as
of March 31, 1997.
The Partnership has pledged substantially all its assets as
collateral for the credit facility and the Senior Secured Notes.
In addition, the General Partners guaranteed the facility and Pride
SGP as guarantor has pledged its assets at no cost to the
Partnership as collateral for such loans. The Partnership may
elect to prepay the credit facilities without any prepayment
penalty.
Advances under the Revolver are subject to repayment on a
daily basis. As a result, the full amount outstanding at March 31,
1997 has been included in the current portion of long-term debt.
A total of $8.5 million of the Revolver is subject to a borrowing
base which includes a reduction by the amount of letters of credit
issued under Facility A. Subject to the borrowing base on $8.5
million of the Revolver, the Partnership may borrow any amounts
previously repaid. The remaining $3.5 million of the Revolver does
not require a borrowing base and, accordingly, is available at all
times. The Partnership may borrow any amounts previously repaid
under this portion of the Revolver. The fee for the unused portion
of the Revolver is one-half of 1% per annum. The credit facility
also requires the Partnership to pay a monthly fee of $10,000.
Prior to the March 31, 1997 amendment of the credit facility,
it included an uncommitted line of credit ("Uncommitted Line"). On
February 25, 1997, the Uncommitted Line was increased from $2.5
million to $5.0 million as a result of losses generated in the
fourth quarter of 1996 and January 1997 and due to a decline in
inventory values, both of which negatively affected the
Partnership's borrowing base for purposes of advances under the
Revolver. On March 31, 1997, the revolving facility was increased
$4.0 million and the Uncommitted Line was eliminated. Advances
under the Uncommitted Line were made solely at the lenders'
discretion and bore interest at the prime rate plus 4%.
The Partnership has two outstanding financing agreements to
fund working capital with Pride SGP which were entered into on
March 26, 1993 and September 7, 1995. Pride SGP made the unsecured
loans to the Partnership in the principal amount of $2.5 million
bearing interest at prime plus 1%. The prime rate was 8 and 1/2%
at March 31, 1997. The loans mature April 1, 1998.
The Partnership also has a nonrecourse loan from Diamond
Shamrock with an outstanding balance of $5.8 million at March 31,
1997, bearing interest at 8% per annum with monthly interest
payments. The assets of Pride Borger, which owns 50% of the Texas
Plains System, are pledged as collateral. Pride Borger also
guarantees 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 System. Current maturities are
estimated to be $148,000 at March 31, 1997.
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
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 $369,000 as of March 31, 1997. The note
matures January 9, 2000. The Partnership has classified $17,000 of
the note as current as of March 31, 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 $1.1 million as of
March 31, 1997. The note bears interest based on the rate set by
the Secretary of the Treasury. This rate was 6.375% as of March
31, 1997. The note requires monthly payments of $84,000 and
matures June 1, 1998. The Partnership has classified $962,000 of
the note as current as of March 31, 1997.
6. Common Units
At March 31, 1997, 4,950,000 Common Units were outstanding,
representing a 98% limited partner interest in the Partnership.
The general partners are entitled to 2% of all distributions.
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, among other things, payment in full of the
bank debt, expiration of all liabilities related to letters of
credit, and the termination of the credit agreement.
7. Contingencies
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.<PAGE>
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 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 of
the Partnership. This discussion should be read in conjunction
with the financial statements included in this report.
Forward Looking Statements
This Form 10-Q contains certain forward looking statements.
Such statements are typically punctuated by words or phrases such
as "anticipate," "estimate," "projects," "should," "may,"
"management believes," and words or phrases of similar import.
Such statements are subject to certain risks, uncertainties or
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated,
estimated or projected. Among the key factors that may have a
direct bearing on the Partnership's results of operations and
financial conditions are: (i) the rate of utilization of the
Refinery, (ii) the margins between the prices of the Partnership's
refined petroleum products and the cost of crude oil, (iii) the
volume throughput on and margins from the transportation and resale
of crude oil from the Partnership's Crude Gathering System, (iv)
the impact of current and future laws and governmental regulations
affecting the refining industry in general and the Partnership's
operations in particular, and (v) the ability of the Partnership to
effect a restructuring and recapitalization prior to the maturity
of its credit facility.
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 military aviation
fuel prices are influenced by these trends since the pricing for
military aviation fuel is based on Jet A, a kerosene-based product,
and the price of diesel and heating fuels affects the price of
kerosene.
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 addition, starting in 1995, the intrasystem pricing of
crude oil between the Refinery and the Crude Gathering System is
based on a spot price above posting for such crude oil. An
increase in the spot price above posting for crude oil will have a
negative impact on the Refinery and have a positive impact on the
Crude Gathering System. On the other hand, a decrease in the spot
price above posting for crude oil will have a positive impact on
the Refinery and a negative impact on the Crude Gathering System.
The average spot price above posting for crude oil was $2.36 for
the three months ended March 31, 1997 compared to $2.16 for the
three months ended March 31, 1996; thus, negatively affecting the
Refinery and positively affecting the Crude Gathering System.
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 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.
<PAGE>
First Quarter 1996 Compared to First Quarter 1995
GENERAL -- Net loss for the first quarter of 1997 was $2.9
million compared to net income of $508,000 for the first quarter of
1996. The decline was primarily a result of weaker refining and
crude gathering margins during the first quarter of 1997 compared
to the same period last year. The decline was partially offset by
lower interest expense and credit and loan fees in the first
quarter of 1997 compared to the first quarter of 1996.
Operating loss was $1.0 million for the first quarter of 1997
compared to operating income of $2.8 million for the first quarter
of 1996. Operating income, excluding depreciation, for the first
quarter of 1997 decreased to $693,000 from $4.5 million for the
first quarter of 1996.
The following table details the operating income (loss);
depreciation; and the operating income (loss), excluding
depreciation (in thousands), for the first quarter of 1997 and
1996.
<TABLE>
<CAPTION>
Operating
Income
Operating (Loss)
Income Excluding
(Loss) Deprec. Deprec.
_______ _______ ________
<S> <C> <C> <C>
First Quarter 1997
Refinery and Products System $(2,188) $ 1,237 $ (951)
Crude Gathering System 1,163 481 1,644
_______ _______ ________
Total $(1,025) $ 1,718 $ 693
First Quarter 1996
Refinery and Products System $ 584 $ 1,249 $ 1,833
Crude Gathering System 2,174 516 2,690
_______ _______ ________
Total $ 2,758 $ 1,765 $ 4,523
</TABLE>
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery
and Products System was $2.2 million for the first quarter of 1997
compared to operating income of $584,000 for the first quarter of
1996. Depreciation expense for the Refinery and Products System
was approximately $1.2 million for both the first quarter of 1997
and the first quarter of 1996. Operating loss, excluding
depreciation, of the Refinery and Products System was $951,000 for
the first quarter of 1997 compared to operating income, excluding
depreciation, of $1.8 million for the first quarter of 1996.
Operating loss of the Refinery was $2.2 million for the first
quarter of 1997 compared to operating income of $236,000 for the
same period in 1996. Depreciation expense for the Refinery alone
was $1.0 million for both the first quarter of 1997 and the first
quarter of 1996. Operating loss, excluding depreciation, of the
Refinery was $1.2 million for the first quarter of 1997 compared to
operating income, excluding depreciation, of $1.3 million for the
first quarter of 1996.
Refinery gross margin per barrel was $1.08 for the first
quarter of 1997 versus $1.99 for the same period in 1996. The
decrease in the gross margin primarily reflects the increased spot
price above posting for crude oil, the decreased margin on the
military aviation fuel sold to the government under the contract
that covers the period April 1, 1996 through March 31, 1997 and the
increased residuum sales in January 1997 due to the increased
residuum yield during 1996. The increased sales negatively
affected the Partnership since the value of residuum is
substantially lower than other refined products that the
Partnership sells. Towards the end of 1996, the Partnership began
running a lighter slate of crude oil which has resulted in a
decreased residuum yield. Refinery throughput averaged 30,746 BPD
for the first quarter of 1997 versus 33,177 BPD for the same period
in 1996. Operating expenses per barrel, excluding depreciation,
were $1.13 for the first quarter of 1997 compared to $1.09 for the
first quarter of 1996.
Operating income for the Products System was $55,000 for the
first quarter of 1997 compared to $348,000 for the first quarter of
1996. The decrease for the first quarter of 1997 was a result of
lower transportation volumes and higher operating expenses.
Depreciation expense for the Products System was $218,000 for the
first quarter of 1997 compared to $220,000 for the first quarter of
1996. Operating income, excluding depreciation, for the Products
System decreased to $273,000 for the first quarter of 1997 from
$568,000 for the same period in 1996. Total transportation volumes
were 12,484 BPD for the first quarter of 1997 compared to 13,979
BPD for the same period in 1996.
CRUDE GATHERING SYSTEM -- Operating income for the Crude
Gathering System was $1.2 million for the first quarter of 1997
compared to $2.2 million for the same period in 1996 due to a
decline in crude gathering margins. Although the spot price above
posting for crude oil sold to the refinery was higher in the first
quarter of 1997 than the first quarter of 1996, the amount paid
above posting for such crude oil to third parties increased more
than the spot price above posting for such period. Depreciation
expense for the Crude Gathering System decreased to $481,000 for
the first quarter of 1997 from $516,000 for the first quarter of
1996. Operating income, excluding depreciation, for the Crude
Gathering System was $1.6 million for the first quarter of 1997 and
$2.7 million for the first quarter of 1996. The net margin was
$0.27 per barrel for the first quarter of 1997 versus $0.36 per
barrel for the same period in 1996. Due to the elimination of
several marginal contracts, the volume of crude oil gathered by the
Crude Gathering System decreased to 48,590 BPD for the first
quarter of 1997 from 66,570 BPD for the first quarter of 1996.
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 matters, industry trends and price of
crude oil, inventory prices, and seasonality and weather. The
Managing General Partner 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. In response to
environmental regulations that became effective in October 1993,
the Partnership constructed a DDU at the Refinery to reduce the
sulfur content of highway use diesel fuel. In addition, the
Partnership plans to spend approximately $957,000 in the aggregate
in 1997, 1998 and 1999 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. New regulations took
effect that imposed new quality standards for conventional gasoline
in the rest of the country; however, they were much less
restrictive than the RFG regulations. Management does not believe
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 an adequate ground
water monitoring program. The Partnership has 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, among others, the
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 -- In 1993, the Partnership adopted the last-
in/first-out (LIFO) method of determining inventory values. LIFO
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. The Refinery's
military aviation fuel prices are influenced by these trends since
the pricing for military aviation fuel 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 has been awarded contracts
from the United States Government for the right to supply
approximately 103 million gallons of military aviation fuel to
eight military installations in Texas and Oklahoma for the period
from April 1, 1997 through March 31, 1998.
<PAGE>
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 have a material adverse impact on
the Partnership's business.
Financial Resources and Liquidity
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 14 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.
The Partnership's credit facility was amended and restated on
August 13, 1996. On May 15, 1997 the Partnership's credit facility
was amended to extend the maturity date to April 1, 1998. Under
the credit facility at December 31, 1996, the Partnership had a
$6.5 million standby letter of credit facility for general
corporate purposes and the purchase of crude oil and other refinery
feedstocks ("Facility A") and a $45.0 million standby letter of
credit facility for the purchase of crude oil ("Facility B"). On
February 25, 1997, at the request of management, the credit
agreement was amended and the amount available under Facility B was
reduced to $42.5 million in exchange for an incremental $2.5
million of availability on an uncommitted line of credit. 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 standby letter of credit facility, the Partnership did
have approximately $721,000 and $42.3 million, respectively, in
outstanding standby letters of credit at March 31, 1997. The
credit agreement also provides, at the banks' discretion, an
additional $8.0 million 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 $1.0 million in outstanding standby letters of credit
under the Special LC Facility as of March 31, 1997. As a result of
the decline in crude oil prices in the first quarter of 1997 and
management's expectations for lower average crude oil prices for
the remainder of the year compared with 1996, the Partnership
believes its current letter of credit facilities, supplemented by
the Special LC Facility, are adequate.
Prior to an amendment on March 31, 1997 to the credit
facility, the Partnership had available to it a revolving line of
credit of $8.0 million, a $24.6 million term loan (the "Term Loan")
and a total of $16.8 million in three series of convertible senior
secured notes (collectively the "Senior Secured Notes"). On March
31, 1997, the credit agreement was amended to provide a $12.0
million revolving line of credit ("Revolver"). At March 31, 1997,
the balances outstanding on the Revolver, Term Loan and the Senior
Secured Notes were $7.4 million, $24.6 million and $16.8 million,
respectively. Under the amended credit facility, the Partnership
is required to make quarterly principal payments on the Term Loan
in the amount of excess cash, as defined in the credit agreement,
for the preceding quarter. The Partnership has classified $647,000
of the Term Loan as current as of March 31, 1997.
Advances under the Revolver and Term Loan bear interest at
prime plus 1 and 1/2% and 2%, respectively, payable monthly. The
prime rate was 8 and 1/2% as of March 31, 1997. The Senior Secured
Notes issued to the lenders under the credit facility consist of
$2.5 million in Convertible Senior Secured Series A Promissory
Notes ("Note A"), $9.3 million in Convertible Senior Secured Series
B Promissory Notes ("Note B"), and $5.0 million in Convertible
Senior Secured Series C Promissory Notes ("Note C"). The Senior
Secured Notes bear interest at prime plus 1% payable monthly, and
have the same maturity as the credit facility. Under certain
circumstances, the Senior Secured Notes are convertible at the
holders' election into Common Units. The entire amount outstanding
under the Senior Secured Notes has been classified as long-term as
of March 31, 1997.
The Partnership has pledged substantially all its assets as
collateral for the credit facility and the Senior Secured Notes.
In addition, the General Partners guaranteed the facility and Pride
SGP as guarantor has pledged its assets at no cost to the
Partnership as collateral for such loans. The Partnership may
elect to prepay the credit facilities without any prepayment
penalty.
Advances under the Revolver are subject to repayment on a
daily basis. As a result, the full amount outstanding at March 31,
1997 has been included in the current portion of long-term debt.
A total of $8.5 million of the Revolver is subject to a borrowing
base which includes a reduction by the amount of letters of credit
issued under Facility A. Subject to the borrowing base on $8.5
million of the Revolver, the Partnership may borrow any amounts
previously repaid. The remaining $3.5 million of the Revolver does
not require a borrowing base and, accordingly, is available at all
times. The Partnership may borrow any amounts previously repaid
under this portion of the Revolver. The fee for the unused portion
of the Revolver is one-half of 1% per annum. The credit facility
also requires the Partnership to pay a monthly fee of $10,000.
Prior to the March 31, 1997 amendment of the credit facility,
it included an uncommitted line of credit ("Uncommitted Line"). On
February 25, 1997, the Uncommitted Line was increased from $2.5
million to $5.0 million as a result of losses generated in the
fourth quarter of 1996 and January 1997 and due to a decline in
inventory values, both of which negatively affected the
Partnership's borrowing base for purposes of advances under the
Revolver. On March 31, 1997, the revolving facility was increased
$4.0 million and the Uncommitted Line was eliminated. Advances
under the Uncommitted Line were made solely at the lenders'
discretion and bore interest at the prime rate plus 4%.
The Partnership has two outstanding financing agreements to
fund working capital with Pride SGP which were entered into on
March 26, 1993 and September 7, 1995. Pride SGP made the unsecured
loans to the Partnership in the principal amount of $2.5 million
bearing interest at prime plus 1%. The prime rate was 8 and 1/2%
at March 31, 1997. The loans mature April 1, 1998.
The Partnership also has a nonrecourse loan from Diamond
Shamrock with an outstanding balance of $5.8 million at March 31,
1997, bearing interest at 8% per annum with monthly interest
payments. The assets of Pride Borger, which owns 50% of the Texas
Plains System, are pledged as collateral. Pride Borger also
guarantees 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 System. Current maturities are
estimated to be $148,000 at March 31, 1997.
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
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 $369,000 as of March 31, 1997. The note
matures January 9, 2000. The Partnership has classified $17,000 of
the note as current as of March 31, 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 $1.1 million as of
March 31, 1997. The note bears interest based on the rate set by
the Secretary of the Treasury. This rate was 6.375% as of March
31, 1997. The note requires monthly payments of $84,000 and
matures June 1, 1998. The Partnership has classified $962,000 of
the note as current as of March 31, 1997.
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 six years and current ratios of less than one to one in
each of the last four years. These financial results are primarily
a result of depressed refining margins along with increasing
depreciation expense and interest expense and related fees through
1995. Crude gathering volumes have also decreased. Under the new
jet fuel contract with the U. S. Government which begins on April
1, 1997 and ends on March 31, 1998, the Partnership will supply
approximately 2.5% less military aviation fuel than it supplied
under the previous contract; however, the prices awarded compared
to the base reference price net of transportation under this
contract have improved approximately 0.9 cents per gallon from the
prices in the previous contract, which will more than offset the
impact of the reduced volumes.
The losses incurred in the first quarter of 1997 were funded
by additional borrowing which became available under the
Partnership's revolving credit facility.
The Partnership's return to profitability is principally
dependent upon restructuring its credit facility, increased volumes
and/or improved profit margins, as well as continued cost control
initiatives. However, the return to profitability could be
affected if refined products are brought into West Texas from the
Gulf Coast via pipeline by a competitor. The Partnership's long-
term viability is dependent upon its effecting a restructuring and
recapitalization. Although no assurances can be given, management
believes the extension of the existing facility to April 1, 1998
alleviates 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. As a result,
Management is also reviewing other strategic alternatives,
including redeployment of its operating assets, possible asset
sales and alliances with other companies.
The most significant and urgent need of the Partnership is to
effect a restructuring and recapitalization of the Partnership's
debt and equity. On August 13, 1996, the Partnership completed the
first of three phases ("Phase One") which called for the execution
of documents with the banks' lenders. Phase Two ("Phase Two") was
completed effective December 31, 1996 when the Unitholders adopted
amendments to the Partnership Agreement. The amendment included
the conversion of the outstanding Preferred Units and Old Common
Units into Common Units and the cancellation of all preferred and
common unit arrearages. As part of Phase Two, the banks converted
a portion of their Term Loan into Senior Secured Notes, lowered
certain interest rates and credit and loan fees and extended the
maturity. In phase three ("Phase Three"), the Partnership plans to
refinance with additional third party creditors the letter of
credit facility, the Revolver, the Term Loan and a portion of the
Senior Secured Notes. Any Series B and Series C Senior Secured
Notes not refinanced would automatically convert to a preferred
convertible equity security. During the first quarter of 1997, the
Partnership expensed $267,000 related to the restructuring of the
Limited Partnership Agreement and its credit facility and
recapitalization. This is in addition to the $2.0 million expensed
during the two year period ended December 31, 1996. On March 31,
1997, the Partnership reached an agreement with the bank lenders
whereby they agreed to extend the maturity date of the credit
facility to January 1, 1998, waive non-compliance with certain
restrictive covenants and amend certain restrictive covenants
thereafter. In addition, the bank lenders increased the revolving
line of credit $4.0 million and eliminated the $5.0 million
Uncommitted Line. In exchange for such amendments, the Partnership
agreed to pay $80,000. On May 15, 1997, an amendment was executed
to extend the maturity date of the credit facility to April 1, 1998
in exchange for a fee of $89,000.
The Managing General Partner had originally hoped to complete
Phase Three by the end of the first quarter of 1997. The Managing
General Partner and its advisors, with the concurrence of the bank
lenders, concluded that conditions were not optimal to pursue the
Phase Three financing as originally contemplated. At this time,
the Managing General Partner cannot predict when, or if, Phase
Three will be completed. If the Partnership is successful in
arranging a complete 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 lower interest expense. However, if
the Partnership fails to complete Phase Three, it will have to
pursue other means of effecting a restructuring and
recapitalization, including redeployment of assets, asset sales and
strategic alliances, prior to the maturity of its credit facility
on April 1, 1998.
Capital Expenditures
The Partnership incurred capital expenditures of $369,000 for
the first quarter of 1997.
Cash Distributions
At March 31, 1997, 4,950,000 Common Units were outstanding,
representing a 98% limited partner interest in the Partnership.
The general partners are entitled to 2% of all distributions.
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, among other things, payment in full of the
bank debt, expiration of all liabilities for letters of credit, and
the termination of the credit agreement.
<PAGE>
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 an adequate ground
water monitoring program. The Partnership has agreed to settle the
complaint for $92,000 in penalties payable in three annual
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 Second Amended and Restated Agreement of Limited
Partnership of the Partnership (incorporated by reference
to Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1996
(Commission File No. 1-10473)).
4.3 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)).
4.4 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.5 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (incorporated by reference to Exhibit 4.5
of the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (Commission File No.
1-10473)).
27 Financial Data Schedule for the First Quarter of 1997.
28.1 Fourth Amendment to Loan Agreement, dated as of May 15,
1997, among the Partnership ("Borrower"), Pride Refining,
Inc., Pride SGP, Inc., Desulfur Partnership, Pride
Marketing of Texas (Cedar Wind), Inc., and Pride Borger,
Inc. (collectively Guarantors) and NationsBank of Texas,
N.A. as Agent, and NationsBank of Texas, N.A. and Bank
One Texas, N.A. as 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)
May 15, 1997 Brad Stephens
Date Brad Stephens
Chief Executive Officer
(Signing on behalf of Registrant)
May 15, 1997 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 Second Amended and Restated Agreement of Limited
Partnership of the Partnership (incorporated by reference
to Exhibit 3.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1996
(Commission File No. 1-10473)).
4.3 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)).
4.4 Transfer Application (included as Exhibit A to the
Deposit Agreement, which is incorporated by reference to
Exhibit 4.2 of the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1990
(Commission File No. 1-10473)).
4.5 Form of Depositary Receipt for Common Units of Pride
Companies, L.P. (incorporated by reference to Exhibit 4.5
of the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (Commission File No.
1-10473)).
27 Financial Data Schedule for the First Quarter of 1997.
28.1 Fourth Amendment to Loan Agreement, dated as of May 15,
1997, among the Partnership ("Borrower"), Pride Refining,
Inc., Pride SGP, Inc., Desulfur Partnership, Pride
Marketing of Texas (Cedar Wind), Inc., and Pride Borger,
Inc. (collectively Guarantors) and NationsBank of Texas,
N.A. as Agent, and NationsBank of Texas, N.A. and Bank
One Texas, N.A. as Lenders.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 458
<SECURITIES> 0
<RECEIVABLES> 13,144
<ALLOWANCES> 0
<INVENTORY> 17,055
<CURRENT-ASSETS> 31,591
<PP&E> 137,091
<DEPRECIATION> 38,908
<TOTAL-ASSETS> 130,835
<CURRENT-LIABILITIES> 43,427
<BONDS> 49,477
0
0
<COMMON> 26,619
<OTHER-SE> 66
<TOTAL-LIABILITY-AND-EQUITY> 130,835
<SALES> 142,455
<TOTAL-REVENUES> 142,455
<CGS> 139,371
<TOTAL-COSTS> 139,371
<OTHER-EXPENSES> 1,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,334
<INCOME-PRETAX> (2,960)
<INCOME-TAX> (47)
<INCOME-CONTINUING> (2,913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,913)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> (.58)
</TABLE>
EXHIBIT 28.1
FOURTH AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT
AGREEMENT (herein called the "Amendment") made as of the 15th day
of May, 1997, 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 Fifth Restated and Amended Credit
Agreement dated as of August 13, 1996, as amended by that certain
First Amendment to Fifth Restated and Amended Credit Agreement
dated as of August 17, 1996, that certain Second Amendment to Fifth
Restated and Amended Credit Agreement dated as of February 25,
1997, and that certain Third Amendment to Fifth Restated and
Amended Credit Agreement dated as of March 31, 1997 (as so amended,
the "Original Agreement") for the purpose and consideration therein
expressed, whereby Lenders became obligated to make loans to
Borrower as therein provided;
WHEREAS, Borrower has requested Agent and Lenders to extend
the Maturity Date, and Agent and Lenders have agreed to do so,
subject to the terms and conditions contained herein;
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 Fourth 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 definitions of "Adjusted
Cash Proceeds", "Affiliate", "EBITDAR" and "Maturity Date" in
Section 1.1 of the Original Agreement are hereby amended in their
entirety to read as follows:
"Adjusted Cash Proceeds" shall mean the remainder of (i) all
cash received by Borrower or any of its Subsidiaries outside the
ordinary course of business, including but not limited to
consideration for or in connection with the sale, lease, transfer
or other disposition of any assets or properties, whether owned or
leased by Borrower or any Related Person, but excluding
consideration received in connection with (a) the sale of goods and
services in the ordinary course of business or (b) Litigation
Settlements or Equity Offerings MINUS (ii) any costs, expenses and
fees (including attorney's fees) actually paid by Borrower out of
such cash proceeds and which have not otherwise been deducted in
any period in the determination of Excess Cash. For purposes of
this definition the terms "Litigation Settlements" and "Equity
Offerings" have the meanings given them in Section 2.06(c). For
the convenience of the parties, the sale or other disposition of
any assets which are sold for fair consideration not in excess of
$25,000 in the case of any single sale or in the aggregate with all
such sales not in excess of $250,000 during a Calendar Quarter
shall not be treated as Adjusted Cash Proceeds until the last day
of the Calendar Quarter in which the sale occurred.
"`Affiliate' of any Person shall mean any other Person
directly or indirectly, controlling, controlled by, or under common
control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person. With respect to any
Related Person, without limiting the foregoing, `Affiliate' shall
also include any officer or director of any Related Person or any
shareholder or unitholder of any Related Person holding more than
5% of the securities of any Related Person (but excluding the
Lenders), any relative who would be an heir at law of any such
individual, or any corporation, trust or other entity controlled by
any such individual or relative or of which any such individual or
relative is a beneficiary.
"`EBITDAR' shall mean for any Accounting Period the net
income of Borrower for such Accounting Period determined in
accordance with GAAP PLUS the sum of (i) interest expense of
Borrower for such Accounting Period, (ii) all Fees and Expenses of
Borrower for such Accounting Period, but excluding the Amendment
Fees, (iii) depreciation, amortization, losses attributable to the
sale of assets and all other non-cash charges of Borrower during
such period (including but not limited to deferred compensation and
accrued obligations under incentive bonus plans and unit
appreciation rights) to the extent deducted in determining such net
income and (iv) Rentals expense of Borrower during such period
MINUS (i) gains and other sources of earnings not involving current
receipt of cash by Borrower, to the extent included in determining
such net income, (ii) gains and other sources of earnings
constituting Adjusted Cash Proceeds actually applied by Borrower to
the Obligations in accordance with Section 2.06(c)(i) during such
Accounting Period, to the extent included in determining such net
income, and (iii) the amount of any Litigation Settlement (as
defined in Section 2.06(c)(ii) actually applied by Borrower to the
Obligations in accordance with Section 2.06(c)(ii), during such
Accounting Period, to the extent included in determining such net
income, provided that for purposes of the calculation of EBITDAR,
Restructuring Fees that are capitalized shall not be included in
the determination of net income of Borrower.
"`Maturity Date' shall mean the earlier to occur of April 1,
1998, or the date of any Acceleration."
Section 2.2 Prepayments. Section 2.06 of the Original
Agreement is hereby amended to add the following clause (c) (iv):
"(iv) Each prepayment under this Section 2.06(c) shall be
made immediately upon the receipt of the applicable proceeds or
consideration, except as provided in the definition of Adjusted
Cash Proceeds."
Section 2.3. Negative Covenants. Section 7.15 of the
Original Agreement is hereby amended in its entirety to read as
follows:
"7.15. Employment Agreement; Compensation to Directors and
Shareholders. No Related Person shall enter into, consent to the
execution of, or permit to exist, any employment agreement with any
officer or employee of such Related Person who is also a director
or a shareholder of such Related Person or any other Related
Person, including without limitation any agreement providing a
minimum term of employment or payment upon severance or termination
of employment, PROVIDED, however, the foregoing shall not prohibit
payment or distribution of accrued benefits under qualified
retirement plans and other benefit plans available for all
employees plus accrued compensation for the period of employment.
No Related Person shall make any payment under the annual incentive
bonus plan or the unit appreciation rights plan or other incentive
bonus plan with or for the benefit of any executive officer of a
Related Person; PROVIDED, however, the Related Person may make such
payment upon completion of the refinancing and may accrue amounts
for such payment upon completion of the Refinancing; PROVIDED,
however, the foregoing shall not prohibit payment, in the form of
common units of the Borrower, but not in cash or property, under
the unit appreciation rights plan to the extent rights have been
issued thereunder prior to January 1, 1997."
The Original Agreement is hereby amended to add the following
Section 7.16:
"7.16 Agreements Resulting in Defaults. No Related Person
shall enter into or otherwise bind itself to any contract or
agreement which contemplates a transaction or action, or would
result in a transaction or action, which constitutes a Default or
Event of Default."
Section 2.4. Exhibits. Exhibit "L" to the Original Agreement
is hereby amended to read as Exhibit L attached hereto.
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
(i) Agent shall have received, at Agent's office, a counterpart of
this Amendment executed and delivered by Borrower and each Lender
and (ii) Borrower shall have paid to Agent, in cash, for the
benefit of Lenders, in consideration of Lenders agreeing to the
transactions contemplated herein, an amendment fee in the amount of
$89,965.
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 ia 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 and
thereunder.
(c) The execution and delivery by each Related Person of
this Amendment, the performance by each Related Person of its
obligations hereunder and thereunder and the consummation 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 and the Renewal Notes or to
consummate the transactions contemplated hereby or thereby.
(d) When duly executed and delivered, each of 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 he 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 or any other Loan Document
nor constitute a waiver of any provision of the Credit Agreement,
the Notes or any other Loan Document nor constitute a waiver of any
Default or Event of Default.
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 with 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. Collateral Documents. Each Related Person
hereby agrees to deliver to Agent within ten days from the date
hereof, such supplements, amendments and/or modifications of and to
the existing Collateral Documents as the Agent shall request, in
form and substance acceptable to the Agent, to reflect of record
the extension of the Maturity Date.
Section 5.6. 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
Senior Vice President
LENDERS:
NATIONSBANK OF TEXAS, N.A.
By: Jay T. Wampler
Senior 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
President
DESULFUR PARTNERSHIP
By: Pride Marketing of Texas
(Cedar Wind), Inc.,
its general partner
By: Brad Stephens
President
CONSENT AND AGREEMENT
Pride Marketing 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
<PAGE>
EXHIBIT "L"
1. Lease of Marmon truck tractors in the ordinary course of
business from Parks Well Servicing Company consistent with the
disclosures in the Borrower's annual reports.
2. Fees paid to Pride Refining, Inc. for reimbursement of
expenses paid by Pride Refining, Inc. for the benefit of Borrower.
3. Fees paid to Pride SGP, Inc. for use of the Hearne Comyn
Pipeline, in the ordinary course of business.
4. Aircraft rental between Borrower and certain officers
consistent with the disclosures in the Borrower's annual reports.
5. Transactions of Related Persons with Affiliates in
respect to services performed or goods provided in the ordinary and
customary course of business of such Related Person and in the
ordinary and customary course of business of such Affiliate on
terms no less favorable to the Related Person than would have been
attainable at the time in arm's length dealings with Persons who
are not Affiliates.
6. Other transactions of Related Persons with Affiliates for
fair value not to exceed $10,000 in respect of any particular
Affiliate.<PAGE>
AGREEMENT
This Agreement is entered into by the undersigned as of May
15, 1997. Reference is hereby made to that certain Note Agreement
dated as of August 13, 1996 (as from time to time amended, modified
or supplemented, the "Note Agreement") among Pride Companies, L.P.,
a Delaware limited partnership (the "Company"), Pride Refining,
Inc., a Texas corporation ("Managing General Partner"), Pride SGP,
Inc., a Texas corporation ("Special General Partner") and Bank One,
Texas, N.A. and NationsBank of Texas, N.A., as Purchasers
("Purchasers"). Capitalized terms used and not otherwise defined
herein have the meanings given them in the Note Agreement.
The Company has requested Purchasers to extend the maturity
date of the Series A Notes, the Series B Notes and the Series C
Notes, and Purchasers have agreed to do so, subject to the terms
and conditions contained herein.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Amendments to Note Agreement. Each reference in
Paragraphs 1A, 1B and 1C of the Note Agreement to a maturity date
of "January 1, 1998" for the Series A Notes, the Series B Notes and
the Series C Notes is hereby amended to read "April 1, 1998."
2. Conditions to Effectiveness of Agreement. This Agreement
shall become effective as of the date first above written when and
only when Purchasers shall have received a counterpart of this
Agreement executed and delivered by all parties hereto.
3. Ratification of Documents; Securities Documents. The
Note Agreement as amended hereby is ratified and confirmed in all
respects. 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 any Purchaser under the
Note Agreement nor constitute a waiver of any provision of the Note
Agreement. This Agreement is a Securities Document, and all
provisions in the Note Agreement pertaining to Securities 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.
THIS AGREEMENT AND THE OTHER SECURITIES 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, the undersigned have executed this
Agreement as of May 15, 1997.
PRIDE COMPANIES, L.P.
By: Pride Refining, Inc., 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
NATIONSBANK OF TEXAS, N.A.
By: Jay T. Wampler
Senior 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, Agent (as such terms are defined in the
Credit Agreement), and Purchasers 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
President
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 Second Restated Guaranty Agreement dated
as of August 13, 1996, made by it for the benefit of Lenders,
Agent, and Purchasers 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: Dave Caddell
Vice President
<PAGE>
AGREEMENT
This Agreement is entered into by the undersigned as of
March 31, 1997. Reference is hereby made to that certain Note
Agreement dated as of August 13, 1996 (as from time to time
amended, modified or supplemented, the "Note Agreement") among
Pride Companies, L.P., a Delaware limited partnership (the
"Company"), Pride Refining, Inc., a Texas corporation ("Managing
General Partner"), Pride SGP, Inc., a Texas corporation ("Special
General Partner") and Bank One, Texas, N.A. and NationsBank of
Texas, N.A., as Purchasers ("Purchasers"). Capitalized terms used
and not otherwise defined herein have the meanings given them in
the Note Agreement.
The Company has requested Purchasers to extend the maturity
date of the Series A Notes, the Series B Notes and the Series C
Notes, and Purchasers have agreed to do so, subject to the terms
and conditions contained herein.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Amendments to Note Agreement. Each reference in
Paragraphs 1A, 1B and 1C of the Note Agreement to a maturity date
of "November 30, 1997" for the Series A Notes, the Series B Notes
and the Series C Notes is hereby amended to read "January 1, 1998."
2. Conditions to Effectiveness of Agreement. This Agreement
shall become effective as of the date first above written when and
only when Purchasers shall have received a counterpart of this
Agreement executed and delivered by all parties hereto.
3. Ratification of Documents; Securities Documents. The
Note Agreement as amended hereby is ratified and confirmed in all
respects. 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 any Purchaser under the
Note Agreement nor constitute a waiver of any provision of the Note
Agreement. This Agreement is a Securities Document, and all
provisions in the Note Agreement pertaining to Securities 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.
THIS AGREEMENT AND THE OTHER SECURITIES 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, the undersigned have executed this
Agreement as of March 31, 1997.
PRIDE COMPANIES, L.P.
By: Pride Refining, Inc., 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
NATIONSBANK OF TEXAS, N.A.
By: Jay T. Wampler
Senior 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, Agent (as such terms are defined in the
Credit Agreement), and Purchasers 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
President
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 Second Restated Guaranty Agreement dated
as of August 13, 1996, made by it for the benefit of Lenders,
Agent, and Purchasers 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: Dave Caddell
Vice President
