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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): July 21, 1998
LAKEHEAD PIPE LINE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10934 39-1715850
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
LAKE SUPERIOR PLACE, 21 WEST SUPERIOR STREET, DULUTH, MN 55802-2067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (218) 725-0100
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ITEM 5. OTHER EVENTS
Footnote 2 to the audited Consolidated Statement of Financial Position
of Lakehead Pipe Line Company, Inc. at December 31, 1997 and 1996 originally
filed with the Registrant's Form 8-K, dated July 21, 1998, has been revised and
is included in the financial statements filed as Exhibit 99.1 to this Amendment
No. 1 to Form 8-K. Lakehead Pipe Line Company, Inc. is the general partner of
Lakehead Pipe Line Partners, L.P.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
Exhibit No. Description
99.1 Consolidated Statement of Financial Position of Lakehead
Pipe Line Company, Inc. at December 31, 1997 and 1996,
together with Report of Independent Public Accountants.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment No. 1 to the report to be signed
on its behalf by the undersigned thereunto duly authorized.
LAKEHEAD PIPE LINE PARTNERS, L.P.
(Registrant)
By: Lakehead Pipe Line Company, Inc.
as General Partner
/s/ M. A. Maki
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M. A. Maki
Chief Accountant
(Principal Financial and
Accounting Officer)
Date: September 14, 1998
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INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
99.1 Consolidated Statement of Financial Position of Lakehead
Pipe Line Company, Inc. at December 31, 1997 and 1996,
together with Report of Independent Public Accountants.
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EXHIBIT 99.1
LAKEHEAD PIPE LINE COMPANY, INC.
(A WHOLLY OWNED SUBSIDIARY OF INTERPROVINCIAL PIPE LINE INC.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 1997 and 1996
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and
Board of Directors of
Lakehead Pipe Line Company, Inc.
In our opinion, the accompanying consolidated statement of financial position,
presents fairly, in all material respects, the financial position of Lakehead
Pipe Line Company, Inc. (a wholly owned subsidiary of Interprovincial Pipe Line
Inc.) and its subsidiaries at December 31, 1997 and 1996 in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Company's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our
audit of this statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 12, 1998
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LAKEHEAD PIPE LINE COMPANY, INC.
(a wholly owned subsidiary of Interprovincial Pipe Line Inc.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(United States dollars in millions)
<TABLE>
<CAPTION>
December 31,
1997 1996
-------- ---------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................................... $ 0.2 $ 1.7
Accounts receivable............................................................ 2.8 4.1
Loans to affiliated companies (Note 7)......................................... 13.7 197.5
-------- --------
16.7 203.3
Loans to Affiliated Company (Note 7)............................................... 198.6 -
Investment in Master Limited Partnership (Note 3).................................. 42.0 24.7
Investment in Frontier Pipeline Company (Note 6)................................... 6.5 1.2
Deferred Charges and Other......................................................... 4.8 5.0
-------- --------
$ 268.6 $ 234.2
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LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Loans from affiliated companies (Note 7)....................................... $ 6.5 $ 1.6
Accounts payable and other..................................................... 1.7 2.9
Income and other taxes......................................................... 2.2 -
-------- --------
10.4 4.5
Deferred Income Taxes (Note 5)..................................................... 144.1 138.9
Minority Interest (Note 2)......................................................... 0.2 0.2
Contingencies (Note 8).............................................................
-------- --------
154.7 143.6
-------- --------
Shareholder's Equity:
Common stock...................................................................
Authorized - 500,000 shares, at $50 par value each.........................
Issued - 400,000 shares.................................................... 20.0 20.0
Contributed surplus............................................................ 6.6 6.6
Retained earnings.............................................................. 87.3 64.0
-------- --------
113.9 90.6
-------- --------
$ 268.6 $ 234.2
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</TABLE>
The accompanying notes to the consolidated financial statement are an
integral part of this statement.
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LAKEHEAD PIPE LINE COMPANY, INC.
(a wholly owned subsidiary of Interprovincial Pipe Line Inc.)
NOTES TO THE 1997 AND 1996 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(United States dollars in millions)
NOTE 1 - NATURE OF OPERATIONS
Lakehead Pipe Line Company, Inc. ("Company") is the general partner of Lakehead
Pipe Line Partners, L.P. and Lakehead Pipe Line Company, Limited Partnership,
collectively known as the "Partnership". As the sole general partner, the
Company is responsible for management and operation of the Partnership.
Consolidated subsidiaries primarily engage in investment and lending activities.
The Company is owned by Interprovincial Pipe Line Inc. ("Parent"), a Canadian
corporation owned by IPL Energy Inc. ("IPLE") of Calgary, Alberta, Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated statement of financial position of the Company is prepared
in accordance with generally accepted accounting principles in the United
States and conforms in all material respects with the historical cost
accounting standards of the International Accounting Standards Committee. The
preparation of a statement of financial position in conformity with United
States generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities.
Principles of Consolidation
The consolidated statement of financial position includes the accounts of the
Company, its wholly owned subsidiaries, LPL Financial Inc., IPL Frontier
Holdings (U.S.A.) Inc., Westcoast Oil & Gas Corp. and LPL Commerce ("Cayman")
Inc., and its 99% limited partner interest in Lakehead Services, Limited
Partnership ("Services Partnership"). The 1% general partner interest in the
Services Partnership is accounted for as a minority interest. The equity method
is used to account for the effective 2% general partner and 14.6% (1996 - 16%)
limited partner interest in the Partnership and a 43.75% (1996 - 35%)
partnership interest in Frontier Pipeline Company ("Frontier") because the
Company significantly influences their operations. The Partnership and Frontier
are not consolidated due to the absence of majority ownership and control by
the Company. Although the Company is the sole general partner of the
Partnership, the partnership agreement provides unaffiliated limited partners
with important voting rights with respect to the Partnership's operations and
the Company's continued existence as its general partner.
Cash Equivalents
Cash equivalents are defined as all highly marketable securities with a maturity
of three months or less when purchased and are accounted for as held-to-maturity
securities and valued at amortized cost.
Deferred Income Taxes
Deferred income taxes are accounted for using the liability method. Under this
method, deferred income taxes reflect the impact of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations. These deferred income
taxes are measured by applying currently enacted tax laws.
NOTE 3 - INVESTMENT IN MASTER LIMITED PARTNERSHIP
On December 27, 1991, the Company transferred substantially all of its assets
and liabilities related to its pipeline business to the Partnership, a Delaware
Master Limited Partnership. The Company has an effective 2% general partner and
14.6% limited partner interest in the Partnership.
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The assets, liabilities and partners' capital of the Partnership are summarized
below:
<TABLE>
<CAPTION>
December 31,
1997 1996
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<S> <C> <C>
Current assets.................................................................... $ 204.6 $ 207.5
Deferred charges and other........................................................ 4.4 4.9
Property, plant and equipment, net................................................ 850.3 763.5
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$ 1,059.3 $ 975.9
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Current liabilities............................................................... $ 63.4 $ 61.6
Long-term debt.................................................................... 463.0 463.0
Accrued rate refunds and related interest......................................... 28.6 50.3
Minority interest................................................................. 2.5 1.4
Partners' capital................................................................. 501.8 399.6
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$ 1,059.3 $ 975.9
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</TABLE>
NOTE 4 - REVOLVING CREDIT FACILITY AGREEMENT
The Services Partnership has a $205.0 million Revolving Credit Facility
Agreement which was amended in September 1996 to effectively reduce the
interest rate spread, extend the maturity date to at least September 2001, and
replace the standby fee with a facility fee. The maturity date is subject to
extension on an annual basis. Under the terms of the facility, the Services
Partnership and the Partnership may draw down funds up to a combined maximum
amount of $205.0 million. The facility provides for variable interest rates and
carries a facility fee of 0.075% (1996 - 0.085%) per annum on the entire $205.0
million. At both December 31, 1997 and 1996, $52.0 million and $153.0 million
of the facility was utilized by the Services Partnership and Partnership,
respectively. In conjunction with its borrowings under this facility, in 1991
the Services Partnership irrevocably placed U.S. government securities in a
trust to be used solely for satisfying its scheduled payments of both interest
and principal on these borrowings. The trust assets at December 31, 1997
amounted to $57.1 million (1996 - $57.0 million). This transaction was
recognized as an in-substance defeasance and the debt is considered to be
extinguished. The facility contains various restrictive covenants applicable to
the Services Partnership, including restrictions on the incurrence of certain
other indebtedness and liens, mergers and investments.
NOTE 5 - INCOME TAXES
Deferred income tax liabilities of $144.1 million at December 31, 1997 (1996 -
$141.5 million, partially offset by deferred tax assets of $2.6 million), have
arisen principally as a result of the gain deferral, for income tax purposes, on
the transfer of assets to the Partnership.
NOTE 6 - FRONTIER PIPELINE COMPANY
The Company has a 43.75% (1996 - 35%) general partner interest in Frontier and
is required to support, to this extent, Frontier's financial obligations. On
February 1, 1997, the Company acquired an additional 8.75% interest in Frontier
for $3.2 million. Frontier is a Wyoming general partnership which owns and
operates a 290 mile crude oil pipeline in Utah and Wyoming.
NOTE 7 - RELATED PARTY TRANSACTIONS
At December 31, 1997, accounts receivable include $2.0 million (1996 - $1.3
million) from the Partnership. Accounts payable include $1.2 million (1996 -
$1.2 million) to Parent and affiliated companies.
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At December 31, 1997, the Company has short-term loans outstanding from IPLE of
$6.5 million. These loans which are due on demand carry an interest rate of
8.0%.
At December 31, 1996, the Company had short-term loans outstanding from IPL
Energy (U.S.A.) Inc. ("IPLE (USA)"), an affiliated Delaware Corporation owned by
IPLE, of $1.6 million. During 1997, the Company was loaned an additional $1.8
million. All loans were repaid in 1997, accrued interest at 130% of the
monthly short-term applicable federal rate and averaged 7.52% during 1997
(1996 - 7.02%).
During 1997 the Company was loaned $0.5 million from IPL Patoka Pipeline
Holdings (U.S.A.) Inc. ("IPL Patoka"), a wholly-owned subsidiary of IPLE (USA).
These loans, which were repaid in 1997, accrued interest at 130% of the monthly
short-term applicable federal rate and averaged 7.65% during the year.
At December 31, 1996, the Company had Canadian dollar denominated short-term
loans outstanding to IPLE of $265.2 million Canadian, with a U.S. equivalent of
$193.6 million. These short-term loans had interest rates ranging from 3.32% to
6.38%. As these loans matured during August 1997, they were converted to a
15-year U.S. dollar denominated long-term demand loan. At December 31, 1997, the
amount outstanding for the long-term demand loan to IPLE was $198.6 million due
to mature on August 22, 2012. The interest rate on the loan is 8.0% per annum,
payable semi-annually.
At December 31, 1997, the Company has short-term loans outstanding to IPLE (USA)
of $13.0 million. These loans bear interest at 130% of the monthly short-term
applicable federal rate and averaged 7.30% during the year.
At December 31, 1997, the Company has short-term loans outstanding to IPL Patoka
of $0.6 million. These loans bear interest at 130% of the monthly short-term
applicable federal rate and averaged 7.30% during the year.
At December 31, 1997, the Company has a short-term loan outstanding to IPL
Toledo Pipeline (U.S.A.) Inc., a wholly-owned subsidiary of IPLE (USA), of $0.1
million. This loan bears interest at 130% of the monthly short-term applicable
federal rate and averaged 7.17% during the year.
At December 31, 1996, the Company had short-term loans outstanding to Portal
Pipe Line Company Inc., a wholly-owned subsidiary of IPLE (USA), of $3.9
million. These loans which were repaid in 1997, accrued interest at 130% of the
monthly short-term applicable federal rate and averaged 7.11% during the year
(1996 - 7.56%).
NOTE 8 - CONTINGENCIES
In connection with the transfer of its pipeline business to the Partnership, the
Company will indemnify the Partnership from and against substantially all
liabilities, including liabilities relating to environmental matters, arising
from operations prior to the transfer. This indemnification does not apply to
amounts that the Partnership would be able to recover in its tariff rates or
through insurance, or to any liabilities relating to a change in laws after
December 27, 1991. In addition, in the event of default, the Company, as sole
general partner, is subject to recourse with respect to the Partnership's
long-term debt which amounted to $463.0 million at December 31, 1997 and 1996.
NOTE 9 - FINANCIAL INSTRUMENTS
The carrying amounts of cash equivalents approximate fair value because of the
short maturity of these instruments.
Based on the lending and borrowing rates currently available for instruments
with similar terms and the same remaining maturities, the carrying amount of the
affiliated advances and loans approximate fair value.
Based on quoted market prices for the Partnership's publicly held Class A Common
Units as at December 31, 1997, the fair value of the Company's 16.6% (1996 -
18%) ownership of the Partnership, which is carried at $42.0 million (1996 -
$24.7 million), is estimated to be approximately $194.3 million (1996 - $151.9
million). This method values the general partner interest (2%) on the same basis
as the limited partner's interest, and does not attribute any value to the
incentive distribution.
The Company's net monetary assets of $265.2 million denominated in Canadian
dollars at December 31, 1996 had exposures to fluctuations in exchange rates.
Accordingly, the Company entered into foreign exchange contracts with major
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financial institutions to offset the impact of U.S. income taxes on gains and
losses arising from the translation of the Company's Canadian dollar denominated
monetary items. At December 31, 1996, the Company had foreign exchange
contracts, maturing at various times during 1997, to purchase $150.5 million
Canadian dollars for a contracted amount of $112.1 million. Based on quoted
market rates at December 31, 1996, the fair value of the Company's foreign
exchange contracts was $109.9 million. Due to the conversion of all Canadian
dollar denominated monetary assets to U.S. dollar denominated monetary assets
during 1997 (Note 7), the Company has no further exposure to fluctuations in
exchange rates and consequently, has no foreign exchange contracts outstanding
at December 31, 1997.
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