UNITED STATES SECURITIES AND EXCHANGE PRIVATE 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 June 30, 1998
Commission File Number 1-11234
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 76-0380342
---------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification
incorporation or organization) Number)
1301 McKinney St.
Suite 3450
Houston, Texas 77010
---------------------------------- -----------------------------
(Address of principal executive (Zip Code)
Offices)
(713) 844-9500
-------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The Registrant had 46,730,657 Common Units outstanding at August 10, 1998.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. - Financial Statements (Unaudited)
Consolidated Statement of Income - Three Months and
Six Months Ended June 30, 1998 and 1997 3
Consolidated Balance Sheet - June 30, 1998 and
December 31, 1997 4
Consolidated Statement of Cash Flows - Six Months
Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 3. - Quantitative and Qualitative Disclosures about
Market Risk 20
PART II. OTHER INFORMATION
ITEM 1. - Legal Proceedings 21
ITEM 5. - Other Information 21
ITEM 6. - Exhibits and Reports on Form 8-K 21
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Unit Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1988 1997 1998 1997
-------------------- --------------------
Revenue $ 82,044 $ 16,036 $ 118,785 $ 35,168
Costs and Expenses
Cost of products sold 1,873 1,557 2,726 3,718
Operations and maintenance 12,462 3,260 18,822 7,077
Fuel and power 6,096 1,021 9,241 2,726
Depreciation and amortization 9,671 2,585 14,390 5,140
General and administrative 9,064 2,209 14,158 4,254
Taxes, other than income taxes 3,507 604 4,986 1,526
------ ------ ------ ------
42,673 11,236 64,323 24,441
------ ------ ------ ------
Operating Income 39,371 4,800 54,462 10,727
Other Income (Expense)
Equity 5,325 1,616 10,607 2,455
Interest expense (12,719) (3,231) (18,622) (6,514)
Interest income and Other, net (1,249) 101 (1,693) 256
Minority Interest (415) (29) (477) (64)
--------- ------- -------- -------
Income Bef. Income Taxes and
Extraordinary charge 30,313 3,257 44,277 6,860
Income Tax Expenses - 391 - 566
-------- ------- -------- ------
Income Before Extraordinary charge 30,313 2,866 44,277 6,294
Extraord. charge on early
Extinguishment of debt - - (13,611) -
-------- -------- --------- ------
Net Income $ 30,313 $ 2,866 $ 30,666 $6,294
======== ======== ========= ======
Calculation of Limited Partners'
Interest in Net Income:
Income Before Extraordinary
Charge $ 30,313 $ 2,866 $ 44,277 $6,294
Less: General partner's Interest
in Net Income (9,562) (984) (12,427) (1,043)
--------- -------- --------- -------
Limited Partners' Net Income
bef. extraord. charge 20,751 1,882 31,850 5,251
Less: Extraord. charge on early
exting.of debt - - (13,611) -
--------- -------- --------- -------
Limited Partners' Net Income $ 20,751 $ 1,882 $ 18,239 $5,251
========= ======== ========= =======
Net Income per Unit before
Extraordinary charge $ 0.50 $ 0.14 $ 1.00 $ 0.40
======== ======== ========= =======
Net Income per Unit $ 0.50 $ 0.14 $ 0.57 $ 0.40
======== ======== ========= =======
Number of Units used in
Computation 41,908 13,020 31,763 13,020
======== ======== ========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
June 30, December 31,
1998 1997
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 40,080 $ 9,612
Accounts receivable (net of
allowance for doubtful accounts) 39,919 8,569
Inventories
Products 3,515 1,901
Materials and supplies 2,403 1,710
----------- ------------
85,917 21,792
----------- ------------
Property, Plat and Equipment, at cost $1,744,062 $ 290,620
Less accumulated depreciation 52,418 45,653
----------- ------------
$1,691,644 $ 244,967
----------- ------------
Investments in Partnerships 127,347 31,711
----------- ------------
Deferred Charges and Other Assets 16,473 14,436
----------- ------------
TOTAL ASSETS $1,921,381 $ 312,906
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Account payable $ 16,826 $ 4,930
Accrued liabilities 14,431 3,585
Accrued benefits 17,668 -
Accrued taxes 4,942 2,861
----------- ------------
53,867 11,376
----------- ------------
Long-Term Liabilities and Deferred
Credits
Long-term Debt 429,592 146,824
Other 110,139 2,997
---------- ----------
539,731 149,821
---------- ----------
Minority Interest 18,582 1,485
---------- ----------
Partners' Capital
Common Units 1,298,405 146,840
General Partner 10,796 3,384
---------- ----------
1,309,201 150,224
---------- ----------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $1,921,381 $ 312,906
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
1998 1997
----------- ----------
Cash Flows from Operating Activities
Reconciliation of net income to net cash
provided by operating activities
Net income $ 30,666 $ 6,294
Extraordinary charge on early extinguishment
of debt 13,611 -
Depreciation and amortization 14,390 5,140
Equity in earnigs of partnerships (10,607) (2,455)
Distributions from investments in partnerships 7,082 4,722
Changes in components of working capital, and
Other, net (785) (1,766)
El Paso Settlement (8,000) -
---------- ----------
Net Cash Provided by Operating Activities 46,357 11,935
---------- ----------
Cash Flows From Investing Activities
Acquisition of assets (74,706) -
Additions to property, plant and equipment for
expansion and maintenance projects (9,424) (1,610)
Sale of property, plant and equipment 33 -
Contributions to partnership investments 26,155) (2,033)
---------- --------
Net Cash Used in Investing Activities (110,252) (3,643)
---------- --------
Cash Flows From Financing Activities
Issuance of debt 265,054 24,600
Payment of debt (337,895) (24,491)
Unit registration costs (8) (74)
Cost of refinancing long-term debt (16,428) -
Proceeds from issuance of common units 212,303 -
Contributions from General Partner's Minority
Interest 11,737 -
Distributions to partners
Common Units (32,184) (8,202)
General Partner (7,698) (133)
Minority interest (518) (85)
--------- --------
Net Cash Provided by (Used In) Financing Activities 94,363 (8,385)
--------- --------
Increase (Decrease) in Cash and Cash Equivalents 30,468 (93)
Cash and Cash Equivalents, Beginning of Period 9,612 14,299
--------- --------
Cash and Cash Equivalents, End of Period $ 40,080 $14,206
========= ========
Noncash Investing and Financing Activities
Contribution of net asses to partnership
investments $ 59,311 $ -
Pacific Operations assets acquired by the
issuance of Common Units $943,202 $ -
Pacific Operations asses acquired by the
assumption of liabilities $531,906 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
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KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The unaudited consolidated financial statements included herein have been
prepared by Kinder Morgan Energy Partners, L.P. (the "Partnership") pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial results for the
interim periods. Certain information and notes normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Partnership believes, however, that the disclosures are adequate to make the
information presented not misleading. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1997 ("Form 10-K").
The Limited Partners' Net Income per Unit was computed by dividing the
Limited Partners' interest in Net Income before and after the extraordinary
charge on early extinguishment of debt by the weighted average number of Common
Units outstanding during the period.
Certain reclassifications have been made to the consolidated financial
statements for the prior year to conform with the current presentation.
2. Acquisitions
Santa Fe
Kinder Morgan Operating L.P. "D" ("OLP-D"), a Delaware limited partnership,
acquired on March 6, 1998, 99.5% of SFPP, L.P. ("SFPP"), the operating
partnership of Santa Fe Pacific Pipeline Partners, L.P. ("Santa Fe"). The
transaction was accounted for under the purchase method of accounting and was
valued at more than $1.4 billion inclusive of liabilities assumed. The
Partnership acquired the interest of Santa Fe's common unit holders in SFPP in
exchange for approximately 26.6 million Common Units (1.39 Common Units of the
Partnership for each Santa Fe common unit). The Partnership paid $84.4 million
to Santa Fe Pacific Pipelines, Inc. (the "former SF General Partner") in
exchange for the general partner interest in Santa Fe. The $84.4 million was
borrowed under the Loan Facility (see Note 5). Also on March 6, 1998, SFPP
redeemed from the SF General Partner a .5% interest in SFPP for $5.8 million.
The redemption was paid from SFPP's cash reserves. After the redemption, the SF
General Partner continues to own a .5% special limited partner interest in SFPP.
Assets acquired in this transaction comprise the Partnership's Pacific
Operations, which include over 3,300 miles of pipeline and thirteen owned and
operated terminals.
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Shell CO2 Company
On March 5, 1998, the Partnership and affiliates of Shell Oil Company
("Shell") agreed to combine their CO2 activities and assets into a partnership,
Shell CO2 Company, Ltd. ("Shell CO2 Company"), to be operated by a Shell
affiliate. The Partnership acquired, through a newly created limited liability
company, a 20% interest in Shell CO2 Company in exchange for contributing the
Central Basin Pipeline and approximately $25 million in cash. The $25 million
was borrowed under the Loan Facility (see Note 5). The Partnership accounts for
its partnership interest in Shell CO2 Company under the equity method as part of
the Mid-Continent Operations.
Pro Forma Information
The following summarized unaudited Pro Forma Consolidated Income Statement
information for the six months ended June 30, 1998 and 1997, assumes the
acquisition had occurred as of January 1, 1997. The unaudited Pro Forma
financial results have been prepared for comparative purposes only and may not
be indicative of the results that would have occurred if the Partnership had
acquired the assets of SFPP and its interest in Shell CO2 Company on the dates
indicted or which will be attained in the future. Amounts presented below are in
thousands, except for per Common Unit amounts:
Pro Forma
Six Months Ended
June 30,
Income Statement 1998 1997
------------------------------
Revenues $158,032 $154,617
Operating Income $69,603 $59,331
Net Income before extraordinary charge $53,357 $35,678
Net Income $39,746 $35,678
Net Income Per Common Unit before extraord.
charge $0.90 $.76
Net Income per Common Unit $0.57 $.76
3. Litigation
FERC Proceedings
Prior to the Partnership's acquisition of SFPP, several complaints had been
filed with the Federal Energy Regulatory Commission (FERC) challenging SFPP's
rates for the East Line, West Line, Sepulveda Line, and the Watson station. An
initial decision by the FERC Administrative Law Judge was issued on September
25, 1997 (the "Initial Decision"). The Initial Decision upheld SFPP's position
that "changed circumstances" were not shown to exist on the West Line, thereby
retaining the just and reasonable status of all West Line rates that were
"grandfathered" under the Energy Policy Act of 1992. In addition, the Initial
Decision determined that SFPP's East Line rates were not grandfathered under the
Energy Policy Act and also included rulings that were generally adverse to SFPP
regarding certain cost of service issues.
If the Initial Decision is affirmed in current form by the FERC, the
Partnership estimates that the total reparations and interest that would be
payable approximate the reserves that have been recorded as of June 30, 1998.
The Partnership also estimates that the Initial Decision, in its current form,
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and if also applied to the Sepulveda Line and the Watson station rates, would
reduce prospective revenues by approximately $8 million annually, the same rate
at which the Partnership is currently accruing its reserve.
California Public Utilities Commission Proceeding
A complaint was filed on April 7, 1997 with the California Public Utilities
Commission ("CPUC") challenging rates charged by SFPP for intrastate
transportation of refined petroleum products. SFPP filed responsive testimony
defending the justness and reasonableness of its rates. On June 18, 1998, a CPUC
Administrative Law Judge issued a proposed decision, finding that the evidence
of record did not support complainants' claim that rates charged for service
within the State of California by SFPP are unjust or unreasonable under the
California Public Utilities Code. In light of his findings, the Judge dismissed
the complaints filed against SFPP by certain of its shippers. On August 6, 1998,
the Partnership announced that the CPUC affirmed the proposed decision of its
Administrative Law Judge and dismissed the complaints filed by certain shippers
against the California rates of SFPP.
Environmental
SFPP, along with several other respondents, has been involved in one
cleanup ordered by the United States Environmental Protection Agency ("EPA")
related to ground water contamination in the vicinity of SFPP's storage
facilities and truck loading terminals at Sparks, Nevada. The EPA approved the
respondent's remediation plan, which began in 1995. In addition, SFPP is
presently involved in 18 ground water hydrocarbon remediation efforts under
administrative orders issued by the California Regional Water Quality Control
Board and two other state agencies. SFPP is involved in environmental cleanup
efforts at sights not governed by administrative orders. SFPP is also involved
in environmental proceedings related to ground water and soil contamination in
Elmira, California.
The General Partner is a defendant in two proceedings (one by the State of
Illinois and one by the Department of Transportation) relating to alleged
environmental and safety violations for events relating to a fire that occurred
at the Morris storage field in September 1994.
The Partnership has recorded reserves for environmental costs which reflect
the estimated cost of completing all remediation projects presently known to be
required either by government mandate or in the ordinary course of business.
Although no assurance can be given, based upon the information presently
available, it is the opinion of management that the Partnership's environmental
costs, to the extent they exceed recorded liabilities, will not have a material
adverse effect on the Partnership's financial condition, liquidity or ability to
maintain its quarterly cash distributions at the current level.
Other
The Partnership and SFPP, in the ordinary course of business, are
defendants in various lawsuits relating to the Partnership's assets. Although no
assurance can be given, the Partnership believes, based on its experience to
date, that the ultimate resolution of such items will not have a material impact
on its financial position or results of operations.
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<PAGE>
For more detailed information regarding litigation, refer to the
Partnership's Form 10-K, Item 3, Legal Proceedings.
4. Distributions
On May 15, 1998, the Partnership paid a cash distribution for the quarterly
period ended March 31, 1998, of $0.5625 per Common Unit. The distribution was
declared on April 21, 1998, payable to unitholders of record as of April 30,
1998.
On July 15, 1998, the Partnership declared a cash distribution for the
quarterly period ended June 30, 1998, of $0.63 per Common Unit. The distribution
will be paid on August 14, 1998, to unitholders of record as of July 31, 1998.
5. Long-Term Debt
In February 1998, the Partnership entered into a $325 million revolving
credit facility (Loan Facility) expiring in February 2005. The Loan Facility has
an outstanding balance of $50 million at June 30, 1998. On June 12, 1998, the
Partnership received $212.30 million from an equity offering of approximately
6.1 million Common Units, which was primarily used to pay down long-term debt
related to the Loan Facility. The Loan Facility provides for principal payments
equal to the amount by which the outstanding balance is in excess of the amount
available, which reduces quarterly commencing in May 2000. The Loan Facility
also provides, at the Partnership's option, a floating interest rate equal to
either the administrative agent's base rate (but not less than the Federal Funds
Rate plus .5% per year) or LIBOR plus a margin ranging from .75% to 1.5% per
year based on the Partnership's ratio of funded indebtedness to cash flow, as
defined in the Loan Facility. The Loan Facility contains certain restrictive
covenants including, but not limited to, the incurrence of additional
indebtedness, making investments, and making cash distributions other than
quarterly distributions from available cash as provided by the Partnership
Agreement. The Partnership used the proceeds from the Loan Facility to refinance
the existing first mortgage notes, including a prepayment premium, to fund the
cash investment in Shell CO2 Company, and to fund the acquisition of the general
partner interest in Santa Fe (Note 2). The prepayment premium and the write-off
of the associated unamortized debt issue costs are reflected as an extraordinary
charge in the accompanying condensed consolidated statement of income.
SFPP's long-term debt primarily consists of its Series E and Series F first
mortgage notes and a bank credit facility. At June 30, 1998, the outstanding
balances under the Series E notes, Series F notes, and bank credit facility were
$32.5 million, $244.0 million, and $78.5 million, respectively. The annual
interest rate on the Series E and Series F notes is 10.25% and 10.70%,
respectively, the maturity is December 1998 and December 2004, respectively, and
interest is payable semiannually in June and December. The Partnership intends
to refinance the Series E notes on a long-term basis upon their maturity and
therefore, has included them in long-term debt. The Series F notes are payable
in annual installments of $31.5 million in 1999, $32.5 million in 2000, $39.5
million in 2001, and $42.5 million in 2002. The first mortgage notes may also be
prepaid beginning in 1999 in full or in part at a price equal to par plus, in
certain circumstances, a premium. The first
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mortgage notes are secured by mortgages on substantially all of the properties
of SFPP (the Mortgaged Property). The notes contain certain covenants limiting
the amount of additional debt or equity that may be issued and limiting the
amount of cash distributions, investments, and property dispositions. The bank
credit facility provides for borrowings of up to $175 million due in August 2000
and interest, at a short-term Eurodollar rate, payable quarterly. Borrowings
($78.5 million at June 30, 1998) under this facility are also secured by the
Mortgaged Property and are generally subject to the same terms and conditions as
the first mortgage notes.
6. Partners' Capital
At December 31, 1997 and June 30, 1998, Partners' capital consisted of
13,249,200 and 45,868,657 Common Units, respectively, held by third parties and
862,000 Common Units held by the General Partner. Together, these 14,111,200
Common Units at December 31, 1997 and 46,730,657 Common Units at June 30, 1998
represent the limited partners' interest and an effective 98% economic interest
in the Partnership, exclusive of the incentive distribution. On June 12, 1998,
the Partnership issued 6,070,578 Common Units in a public offering.
For the purposes of maintaining partner capital accounts, the Partnership
Agreement specifies that items of income and loss shall be allocated among the
partners in accordance with their respective interests. Normal allocations
according to percentage interests are done only, however, after giving effect to
any priority income allocations in an amount equal to incentive distributions
allocated 100% to the General Partner.
Incentive distributions paid to the General Partner are determined by the
amount quarterly distributions to unitholders exceed certain specified target
levels. The Partnership's cash distribution of $.5625 per Common Unit paid on
May 15, 1998 for the first quarter of 1998 required an incentive distribution to
the General Partner of $5,485,621. The Partnership's cash distribution of $.315
per Common Unit for the same period of the prior year required an incentive
distribution to the General Partner of $25,143. The increased incentive
distribution reflects the increased distribution of $.2475 per Common Unit and
the issuance of additional Common Units since March 31, 1997.
The Partnership's declared distribution for the second quarter of 1998 of
$.63 per Common Unit will result in an incentive distribution to the General
Partner of $9,352,984. This compares to the Partnership's cash distribution of
$.50 per Common Unit and incentive distribution to the General Partner of
$964,600 for the second quarter of 1997. The increase in the 1998 second quarter
incentive distribution over the distribution paid for the second quarter of 1997
is a result of the $.13 increase in the distribution per Common Unit as well as
the higher number of Common Units outstanding on June 30, 1998.
7. Subsequent Events
Plantation Pipe Line Company
On June 17, 1998, the Partnership announced that it had entered into a
Stock Purchase Agreement, with an affiliate of Shell Pipe Line Corporation, for
the purchase of Shell's 24% interest in Plantation Pipe Line Company for $110
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million. The consummation of the acquisition is subject to the satisfaction of
certain customary closing conditions and Federal Trade Commission approval.
Plantation Pipe Line Company owns and operates a 3,100 mile pipeline system
throughout the southeastern United States which serves as a common carrier of
refined petroleum products to various metropolitan areas, including Atlanta,
Georgia; Charlotte, North Carolina; and the Washington, D.C. area.
Hall-Buck Marine, Inc.
On June 29, 1998, the Partnership announced that it had signed a letter of
intent to acquire Hall-Buck Marine, Inc. ("Hall-Buck") for approximately $100
million. Hall-Buck, headquartered in Sorrento, Louisiana, is a leading
independent operator of dry bulk terminals, operating twenty terminals on the
Mississippi River, the Ohio River, and the Pacific Coast. Hall-Buck primarily
stores and loads petroleum coke, coal, and other materials for major oil
companies and other industrial customers. In addition, Hall-Buck owns all of the
common stock of River Consulting Incorporated, a nationally recognized leader in
the design and construction of bulk material facilities and port related
structures.
The Partnership will exchange approximately $77 million in Common Units for
all of the outstanding stock of Hall-Buck and will assume approximately $23
million of existing debt. The transaction is subject to the execution of a
definitive purchase agreement and certain regulatory approvals. Closing of the
transaction is anticipated to occur in the third quarter with a July 1, 1998
effective date.
Coal Marketing Alliance
On July 8, 1998, the Partnership announced that it had entered into a
long-term coal marketing alliance with Southern Company's wholesale energy
marketing affiliate, Southern Company Energy Marketing L.P. Under terms of the
five year agreement, the new alliance will jointly market coal transloading,
blending, and storage services at the Partnership's Cora terminal, south of St.
Louis, and its Grand Rivers terminal, in southwestern Kentucky. The agreement
contemplates a range of 3.3 to 8.3 million tons of incremental volume to be
marketed through the terminals over the life of the alliance.
In addition, the alliance plans to expand the services currently available
at these coal terminals to include a full array of products to provide customers
with customized products to meet their individual coal and energy requirements.
Both the Cora and the Grand Rivers terminals are strategically located to
develop liquid markets for buyers and sellers of coal originating in Western and
Illinois Basin production areas. The coal is transported to domestic markets
throughout the Midwest, East Coast, and Southeastern United States via barge,
truck, or rail as well as to overseas markets.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Second Quarter 1998 Compared With Second Quarter 1997
The Partnership's net income before extraordinary charge increased to
$30.31 million in the second quarter of 1998 compared to $2.87 million in the
second quarter of 1997. The increase resulted primarily from the inclusion of
earnings attributable to the Pacific Operations (formerly Santa Fe Pacific
Pipeline Partners), which were acquired March 6, 1998. The period-to-period
increase also reflects higher earnings from each of the other reportable
business segments: Mid-Continent Operations, Coal Operations, and Fractionation
and Processing. Higher overall quarterly earnings were partially offset by
higher debt expense and higher general and administrative expenses. Increases in
both categories of expense were likewise related to the acquisition of the
Pacific Operations.
The Pacific Operations reported quarterly net income of $40.02 million from
total revenues of $65.49 million. The amount reflects strong demand for
gasoline, jet fuel, and diesel fuel in the Partnership's West Coast markets.
The Mid-Continent Operations' earnings increased 68% to $6.65 million in
1998 compared to $3.95 million in 1997. Mid-Continent Operations consist of the
North System, the Cypress Pipeline, and the Partnership's equity investment in
Shell CO2 Company. The Partnership realized a significant earnings increase in
CO2 activities due to its joint venture with Shell. Revenues for the segment
totaled $7.96 million in 1998 compared to $10.24 million last year. This was
chiefly due to Central Basin Pipeline being accounted for under the equity
method in 1998.
Earnings from the Coal Operations segment increased to $3.91 million in
1998 compared to $3.58 million in 1997. This 9% increase was principally due to
higher income from the marketing of coal to utilities and industrial customers
and to the inclusion of the earnings from the Grand Rivers coal terminal, which
was acquired in September 1997. Revenues from Coal Operations increased 51% in
1998 over the prior year. Total revenues of $8.33 million for the quarter ended
June 30, 1998, compared to $5.51 million in the same period of 1997 was the
result of a 41% increase in coal tons transferred, partially offset by just
slightly lower coal transfer rates.
The Fractionation and Processing business segment reported earnings of
$1.23 million in the first quarter of 1998. This amount was 137% higher than the
$.52 million in earnings reported in the comparable period of 1997. The increase
was primarily due to higher earnings from the Partnership's equity interest in
the Mont Belvieu Fractionator. Fractionation earnings increased due to higher
volumes and the elimination of corporate taxes and certain start up costs
incurred in 1997 for the 1996 plant expansion.
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Operating statistics for the second quarter are as follows:
Second Quarter
1998 1997
---------------------------
Pacific Operations **
Delivery Volumes (MMBbls) 99.4 -
Average Tariff ($/Bbl) $.62 -
Mid-Continent Operations ***
Delivery Volumes (MMBbls) 10.5 9.6
Average Tariff ($/Bbl) $.62 $.69
Coal Operations
Transport Volumes (MM Tons) 3.1 2.2
Average Revenues ($/Ton) $1.33 $1.34
Earnings contribution by business segment for the second quarter is as
follows:
Earnings Contribution by Business Segment*
(Unaudited)
(In Thousands)
Second Quarter
1998 1997
---------------------------
Pacific Operations** $40,023 -
Mid-Continent Operations $6,652 $3,954
Coal Operations $3,909 $3,580
Fractionation and Processing $1,229 $522
------------------------------------------------------------------------
* Excludes general and administrative expenses, debt costs, and
minority interest.
** Pacific Operations were acquired on March 6, 1998.
*** Excludes CO2 volumes for 1998.
Cost of products sold increased 20% to $1.87 million in the quarter ended
June 30, 1998 compared to $1.56 million in the same period of 1997. The increase
was due to higher purchase/sale contracts from coal marketing activities.
Overall higher cost of products sold was partially offset by excluding costs
related to the Central Basin Pipeline, which was transferred to Shell Co2
Company in March 1998 and accounted for under the equity method in 1998.
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Fuel and power expenses increased to $6.10 million in 1998 compared to
$1.02 million in 1997. Excluding the $4.88 million in expense reported by the
Pacific Operations, fuel and power expense increased 20% in 1998, primarily due
to higher volumes of products transported by the Mid-Continent segment and
significantly higher volumes transferred by the Coal Operations segment.
Operating and maintenance expenses, combined with general and
administrative expenses, were $21.53 million in the second quarter of 1988. This
amount compares to $5.47 million in the second quarter of 1997. Excluding the
expenses of acquired asses (Pacific Operations and the Grand Rivers coal
terminal), operations and maintenance expenses remained flat. The increase in
general and administrative costs reflects spending associated with new
acquisitions and investments made by the Partnership.
Depreciation and amortization expense increased to $9.67 million in 1998
compared to $2.59 million in 1997. The increase was attributable to the
inclusion of the Pacific Operations, which reported depreciation expense of
$7.35 million in the quarter.
Taxes, other than income taxes, increased $2.90 million in the second
quarter of 1998 compared to the second quarter of last year. The increase was
attributable to the inclusion of the Pacific Operations, which reported taxes,
other than income of $2.96 million in the quarter.
Equity in earnings of partnerships increased $3.71 million in the second
quarter of 1998 compared to 1997. This resulted primarily from the recognition
of $3.63 million of earnings from the Partneship's equity investment in Shell
CO2 Company.
Interest expense increased $9.49 million in the second quarter of 1998
compared to last year primarily duet o debt assumed by the Partnership as part
the acquisition of the Pacific Operations.
Interest income and Other, net, which includes interest income and other
non-operating income and expense, decreased $1.35 million in 1998 compared to
1997. The decrease was primarily due to expense accruals made for the FERC Rate
Case reserve established for the Pacific Operations.
Page 14 of 23
<PAGE>
Six Months Ended June 30, 1998 Compared With Six Months Ended June 30, 1997
For the six months ended June 30, 1998, the Partnership reported $44.28
million as net income before extraordinary charge. This amount compares to $6.29
million reported as net income from the first half of 1997. The 1998 amount
includes $52.89 million in income earned by the Pacific Operations, which has
been consolidated since March 1998. Excluding the Pacific Operations' income
(from revenue of $86.26 million), the Partnership reported a 43% increase in
earnings from its remaining three reportable business segments. Higher overall
earnings in the first six months of 1998 were partially offset by higher debt
expense and higher general and administrative expenses.
The Mid-Continent Operations reported earnings of $14.78 million for the
first six months of 1998 compared to $10.46 million for the same period last
year. The increase was mainly due to higher earnings from CO2 activities. Due to
the Partnership's investment in Shell CO2 Company, earnings from CO2 operations
were $8.07 million in 1998 compared to $3.20 million in 1997. The overall
increase in segment earnings was partially offset by pipeline income, which was
down versus last year. Warmer weather resulted in lower volumes moved by the
North System, and average tariff rates for the segment were down slightly
compared to last year. Excluding the results of the Central Basin Pipeline,
which was reported under the equity method in 1998, pipeline revenue and income
was $17.02 million and $6.71 million, respectively, in the first six months of
1998. This compared to revenues and income of $20.07 million and $7.26 million,
respectively, for the same period last year.
Earnings from Coal Operations increased 21% to $6.36 million in the first
half of 1998 compared to $5.24 million in the same period of 1997. Segment
revenues for the first six months of 1998 increased 78% compared with the same
1997 period. Although coal revenues have been negatively impacted by railroad
transportation congestion, significantly higher marketing revenues as well as
the addition of the Grand Rivers terminal bolstered year-to-date revenues.
Income attributable to the Fractionation and Processing segment increased
to $2.51 million for 1998 compared to $.81 million in 1997. Earnings from the
Partnership's investment in the Mont Belview Fractionator increased 91% due to
higher fractionation volumes. Due to the assignment of the Mobil agreement and
the leasing of the Painter facility, revenues for the first half of 1998 were
down compared to last year.
Page 15 of 23
<PAGE>
Operating statistics for the first six months of 1998 and 1997 are as
follows:
Six Months Ended
June 30,
1998 1997
-----------------
Pacific Operation **
Delivery Volumes (MMBbls) 129.3 -
Average Tariff ($/Bbl) $.63 -
Mid-Continent Operations ***
Delivery Volumes (MMBbls) 22.3 21.6
Average Tariff ($/Bbl) $.70 $.78
Coal Operations
Transport Volumes (MM Tons) 6.1 3.9
Average Revenues ($/Tons) $1.30 $1.37
Earnings contribution by business segment for the first six months of 1998
and 1997 is as follows:
Earnings Contribution by Business Segment*
(Unaudited)
(In Thousands)
Six Months Ended
June 30,
1998 1997
-----------------
Pacific Operations** $52,888 -
Mid-Continent Operations $14,780 $10,462
Coal Operations $6,359 $5,237
Fractionation and Processing $2,510 $812
------------------------------------------------------------------------
* Excludes general and administrative expenses, debt costs, and
minority interest.
** Pacific Operations were acquired on March 6, 1998.
*** Excludes CO2 volumes for 1998.
Cost of products sold decreased 27% to $2.73 million in 1998 compared to
$3.72 million in 1997. Lower purchase/sale contracts reported by the Mid-
Continent segment more than offset higher cost of goods sold incurred by the
Coal Operations segment.
Page 16 of 23
<PAGE>
Excluding the $6.31 million in expense incurred by the Pacific Operations,
year-to-date fuel and power expense increased 8% in 1998 as compared to 1997.
The increase was due to a higher level of coal tons transferred.
Operating and maintenance expenses, combined with general and
administrative expenses, totaled $32.98 million for 1998. This compares to
$11.33 million for the first six months of 1997. Excluding the $11.25 million
reported by the Pacific Operations, operations and maintenance expenses
increased 7% in 1998 versus last year. The 1998 increase reflects the addition
of the Grand Rivers coal terminal and higher expense from the Coal Operations
segment because of higher coal transfer volumes. The net increase was partially
offset by lower operations and maintenance expenses from the Mid Continent
segment due to lower transportation volumes on the North System.
Depreciation and amortization expense increased to $14.39 million in 1998
compared to $5.14 million in 1997. The increase was attributable to the
inclusion of the Pacific operations, which reported depreciation expense of
$9.76 million for the first six months of 1998.
Excluding the $3.74 million in expense incurred by the Pacific operations,
taxes, other than income taxes, decreased 18% in the first half of 1998 compared
to the same period a year ago. Lower expenses were reported by the Mid-Continent
Operations as a result of the Co, joint venture with Shell.
Equity in earnings of partnerships increased $8.15 million in the first
half of 1998 compared to the first half of 1997. This resulted from the
recognition of $7.25 million of earnings from the Partnership's equity
investment in Shell Co, Company and a 22% increase in earnings from the equity
investment in Mont Belvieu Associates due to higher fractionation volumes.
Interest expense increased $12.11 million in the first half of 1998
compared to the same period last year. This was principally due to debt assumed
by the Partnership as part of the acquisition of the Pacific operations as well
as higher average outstanding balances on revolving credit agreements.
Interest income and Other, net, which includes interest income and other
non-operating income and expense, decreased $1.95 million in the first six
months of 1998 compared to last year. The decrease was primarily owing to
expense relating to the FERC Rate Case reserve for the Pacific operations.
Financial Condition
General
The Partnership's primary cash requirements, in addition to normal
operating expenses, are debt service, sustaining capital expenditures,
discretionary capital expenditures, and quarterly distributions to partners. In
addition to utilizing cash generated from operations, the Partnership could meet
its cash requirements through the utilization of credit facilities or by issuing
additional limited partner interests in the Partnership. The Partnership expects
to fund future cash distributions and sustaining capital expenditures with
existing cash and cash flows from operating activities. Expansion capital
expenditures are expected to be funded through additional Partnership
borrowings. Interest payments are expected to be paid from cash
Page 17 of 23
<PAGE>
flows from operating activities and debt principal payments will be met by
additional borrowings as they become due.
Cash Provided by Operating Activities
Net cash provided by operating activities was $46.36 million for the first
six months of 1998 versus $11.94 million for the comparable period of 1997. The
period-to-period net cash flow increase was $34.42 million. Higher earnings,
chiefly due to the acquisition of the Pacific Operations, accounted for $24.37
million of the increase. Higher depreciation, directly attributable to the
Pacific operations, accounted for $9.25 million of the increase.
Cash Used in Investing Activities
Cash used in investing activities totaled $110.25 million for the six month
period ended June 30, 1998 compared with $3.64 million for the same 1997 period.
The $106.61 million increase was the result of $74.71 million used for the March
6, 1998 acquisition of the Pacific operations and $25 million used for the
Partnership's cash investment in Shell C02 Company
Excluding the effect of assets purchased in the acquisition of the Pacific
operations, additions to property, plant, and equipment, were $9.42 million in
the first half of 1998 compared to $1.61 million for the first half of 1997.
These additions of property, plant and equipment include both expansion and
maintenance projects. The 1998 increase was mainly due to property additions for
the Pacific Operations since the date of acquisition and property additions
related to the expansion of the Coal Operations.
Cash Provided by Financing Activities
Cash provided by financing activities was $94.36 million for the six month
period ended June 30, 1998, compared to $8.39 million cash used in the six month
period ended June 30, 1997. This increase of $102.75 million was the result of
$212.30 million in proceeds received from the June 1998 issuance of
approximately 6.1 million Common Units. Additionally, $11.74 million was
received as a result of General Partner contributions made to maintain its
minority interest in the operating partnerships. The net increase in cash
provided by financing activities was partially offset by a $72.95 million
increase in cash used for overall debt financing activities, $16.43 million for
the cost of refinancing long-term debt, and an increase of $31.98 million in
distributions to partners.
The Partnership's debt instruments generally require the Partnership to
maintain a reserve for current debt service obligations. The purpose of the
reserve is to lessen differences in the amount of Available Cash from quarter to
quarter due to timing of required principal and interest payments (which may
only be required on a semi-annual or annual basis) and to provide a source of
funds to make such payments.
Distributions to partners increased to $40.40 million for the six month
period ended June 30, 1998, compared to $8.42 million in the comparable 1997
period. This increase was attributable to increased distributions paid to Common
Unitholders of $1.125 per Common Unit in 1998 compared to $.63 per Common Unit
in 1997, the issuance of additional Common Units since June 30, 1997, and
increased incentive distributions paid to the General Partner.
Page 18 of 23
<PAGE>
The Partnership believes that the increase in paid distributions per Unit
resulted from favorable operating results in 1998. On July 15, 1998, the
Partnership announced an increase in its quarterly distribution from $.5625 to
$.63 per Common Unit (a 12% increase over the prior quarter's distribution and a
100% increase over the distribution paid in May 1997), effective with the
distribution for the second quarter. The Partnership believes that future
operating results will continue to support similar levels of quarterly cash
distributions, however, no assurance can be given that future distributions will
continue at such levels.
The Partnership Agreement requires the Partnership to distribute 100% of
"Available Cash" (as defined in the Partnership Agreement) to the Partners
within 45 days following the end of each calendar quarter in accordance with
their respective percentage interests. Available Cash consists generally of all
cash receipts of the Partnership and its operating partnerships, less cash
disbursements and net additions to reserves, and amounts payable to the former
Santa Fe general partner in respect of its .5% interest in SFPP.
Available Cash of the Partnership generally is distributed 98% to the
Limited Partners (including the approximately 2% limited partner interest of the
General Partner) and 2% to the General Partner. This general requirement is
modified to provide for incentive distributions to be paid to the General
Partner in the event that quarterly distributions to unitholders exceed certain
specified targets.
In general, Available Cash for each quarter is distributed, first, 98% to
the Limited Partners and 2% to the General Partner until the Limited Partners
have received a total of $0.3025 per Unit for such quarter, second, 85% to the
limited Partners and 15% to the General Partner until the Limited Partners have
received a total of $.3575 per Unit for such quarter, third, 75% to the Limited
Partners and 25t to the General Partner until the Limited Partners have received
a total of $.4675 per Unit for such quarter, and fourth, thereafter 50% to the
Limited Partners and 50% to the General Partner. Incentive distributions are
generally defined as all cash distributions that are in excess of 2% of the
aggregate amount of cash being distributed. The General Partner's incentive
distribution declared by the Partnership for the second quarter of 1998 was
$9,352,984.
Capital Requirements for Recent Transactions
Plantation Pipe Line Company The Partnership has announced that it had
entered into a Stock Purchase Agreement, with an affiliate of Shell Pipe Line
Corporation, for the purchase of a 24t interest in Plantation Pipe Line Company
for a sum in excess of $100 million. The Partnership plans to fund the stock
purchase by borrowing necessary funds from its Loan Facility.
Hall-Buck Marine, Inc. The Partnership has announced that it had signed a
letter of intent to exchange approximately $75 million in Common Units for all
of the outstanding stock of Hall-Buck. The transaction will not require cash
financing.
Information Regarding Forward Looking Statements
This filing includes forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward looking statements are identified as any
Page 19 of 23
<PAGE>
statement that does not relate strictly to historical or current facts. They use
words such as plans, expects, anticipates, estimates, will and other words and
phrases of similar meaning. Although the Partnership believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Such forward looking statements involve known and
unknown risks and uncertainties. The Partnership's actual actions or results may
differ materially from those discussed in the forward looking statements.
Specific factors which could cause actual results to differ from those in the
forward looking statements, include, among others:
_ price trends and overall demand for NGLS, refined petroleum products,
CO2, and coal in the United States (which may be affected by general
levels of economic activity, weather, alternative energy sources,
conservation and technological advances);
_ changes in the Partnership's tariff rates set by FERC and the
California Public Utilities Commission:
_ the Partnership's ability to integrate the Pacific operations (and
other future acquisitions) into its existing operations;
_ with respect to the Coal Terminals, the ability of railroads to
deliver coal to the terminals on a timely basis;
_ the Partnership's ability to successfully identify and close strategic
acquisitions and realize cost savings;
_ the discontinuation of operations at major end-users of the products
transported by its liquids pipelines (such as refineries,
petrochemical plants, or military bases); and
_ the condition of the capital markets in the United States.
See Items 1 and 2 "Business and Properties - Risk Factors" of the Annual
Report filed on Form 10-K with the Securities and Exchange Commission on March
31, 1998 for a more detailed description of these and other factors that may
affect the forward looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
Page 20 of 23
<PAGE>
PART II. OTHER INFORMATION
KINDER MORGAN ENERGY PARTNERS, L.P. AND SUBSIDIARIES
ITEM 1. Legal Proceedings
See Part I, Item 1, Note 3 to Consolidated Financial Statements entitled
"Litigation" which is incorporated herein by reference.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form S-K
(a) Exhibits.
*3.1 Second Amended and Restated Agreement of Limited Partnership entered
into as of January 14, 1998, but to be effective as of February 14,
1997 (Exhibit 3.1 to Amendment No. 1 to the Partnership's Registration
Statement on Form S-4 (File No. 33344519)) Filed February 4, 1998 ("
1998 S-4" )
*4.1 Credit Agreement dated February 17, 1998 among Kinder Morgan Energy
Partners, L.P., Kinder Morgan Operating L.P. 11 B", the Subsidiary
Guarantors, the Lenders, Goldman Sachs Credit Partners, L.P. and First
Union National Bank (Exhibit 4.9 to the Partnership's 1997 Form 10-K)
*4.2 Pledge Agreement dated February 17, 1998 among Kinder Morgan Energy
Partners, L.P., the Lenders, Goldman Sachs Credit Partners, L.P. and
First Union National Bank (Exhibit 4.10 to 1997 Form 10K)
*4.3 Pledge Agreement dated February 17, 1998 among Kinder Morgan Operating
L.P. I All, the Lenders, Goldman Sachs Credit Partners, L.P. and
First Union National Bank (Exhibit 4.11 to 1997 Form 10K)
*4.4 Pledge Agreement dated February 17, 1998 among Kinder Morgan Operating
L.P. "D" the Lenders, Goldman Sachs Credit Partners, L.P. and First
Union National Bank (Exhibit 4.12 to 1997 Form 10K)
*4.5 Pledge Agreement dated February 17,1998 among Kinder Morgan Natural
Gas Liquids Corporation, the Lenders, Goldman Sachs Credit Partners,
L.P. and First Union National Bank (Exhibit 4.13 to 1997 Form 10-K)
Page 21 of 23
<PAGE>
*4.6 First Mortgage Note Agreement dated December 8, 1988 among Southern
Pacific Pipe Lines Partnership, L.P. (now known as SFPP, L.P.) and the
Purchasers listed on Schedule A (a conformed composite of 54 separate
agreements, identical except for signatures) (Exhibit 4.2 to Form 10-K
for Santa Fe Pacific Pipelines, L.P. for 1988 (" Santa Fe 1988 Form
10-K" )
*4.6.1 Consent and Amendment dated as of December 19, 1997 between the
noteholders and SFPP, L.P. (a conformed composite of the separate
agreements with each noteholders identical except for
signatures) (Exhibit 4.14.1 to 1997 Form 10-K)
*4.7 Deed of Trust, Security Agreement and Fixture Filing, dated December
8, 1988, between SFPP, L.P., its general partner, Chicago Title
Insurance Company and Security Pacific National Bank (Exhibit 4.3 to
Santa Fe 1988 Form 10-K)
*4.8 Trust Agreement dated December 19, 1988, between SFPP., its general
partner and Security Pacific National Bank (Exhibit 4.4 to Santa Fe
1988 Form 10-K)
*4.9 Amended and Restated Credit Agreement dated as of August 11, 1997
among SFPP, L.P., Bank of America National Trust and Savings
Association, as agent, Texas Commerce Bank National Association, as
syndication agent, Bank of Montreal, as documentation agent,
BancAmerica Securities, Inc., as arranger, and the lenders that are
signatories thereto. As the maximum allowable borrowings under this
facility do not exceed 10%- of the Registrant's total assets, this
instrument is not filed as an exhibit to this Report, however, the
Registrant hereby agrees to furnish a copy of such instrument to the
Securities and Exchange Commission upon request.
27 Financial Data Schedule as of and for the six months ended June 30,
1998
*Incorporated by reference.
(b) Reports on Form 8-K.
Current Report dated March 5, 1998, on Form 8-K, as amended April 1,
1998, April 3, 1998 and April 13, 1998. The acquisition of SFPP, L.P.,
the operating partnership of Santa Fe Pacific Pipeline Partners, L.P.,
and the formation of Shell CO, Company were disclosed in Item 2 of
this report. The purchase agreement for the Santa Fe acquisition and
the principal documents related to the formation of Shell CO, Company
were filed as Exhibits pursuant to Item 7. The financial statements of
Santa Fe Pacific Pipeline Partners, L.P., as of December 31, 1996 and
1997 and for each of the three years in the period ended December 31,
1997, were included under Item 7. Also disclosed in Item 7 were the
pro forma financial statements of the Registrant giving effect to the
acquisition of Santa Fe Pacific Pipeline Partners, L.P. and the
formation of Shell CO, Company as of December 31, 1997 and for the
year ended December 31, 1997.
Page 22 of 23
<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.
KINDER MORGAN ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
By: Kinder Morgan G.P., Inc.
as General Partner
Date: August 10, 1998 By: /s/ David G. Dehaemers, Jr.
-----------------------------------
David G. Dehaemers, Jr.
Vice President, Treasurer and
Chief Financial Officer
Page 23 of 23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMA-
TION EXTRACTED FROM CONSOLIDATED STATEMENT OF
INCOME - THREE MONTHS AND SIX MONTHS ENDED JUNE
30, 1998 AND 1997; CONSOLIDATED BALANCE SHEET
- JUNE 30, 1998 AND DECEMBER 31, 1997; AND CONSOL-
IDATED STATEMENT OF CASH FLOWS - SIX MONTHS ENDED
JUNE 30, 1998 AND 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 40,080
<SECURITIES> 0
<RECEIVABLES> 44,749
<ALLOWANCES> 4,830
<INVENTORY> 5,918
<CURRENT-ASSETS> 85,917
<PP&E> 1,744,062
<DEPRECIATION> 52,418
<TOTAL-ASSETS> 1,921,381
<CURRENT-LIABILITIES> 53,867
<BONDS> 429,592
0
0
<COMMON> 0
<OTHER-SE> 1,309,201
<TOTAL-LIABILITY-AND-EQUITY> 1,921,381
<SALES> 118,785
<TOTAL-REVENUES> 118,785
<CGS> 2,726
<TOTAL-COSTS> 64,323
<OTHER-EXPENSES> (8,437)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,622
<INCOME-PRETAX> 44,277
<INCOME-TAX> 0
<INCOME-CONTINUING> 44,277
<DISCONTINUED> 0
<EXTRAORDINARY> (13,611)
<CHANGES> 0
<NET-INCOME> 30,666
<EPS-PRIMARY> 0.57 <F1>
<EPS-DILUTED> 0.57 <F1>
<FN>
<F1> A 2-for-1 stock split occurred effective as of October 1, 1997. Prior
Financial Data Schedules have not been restated to reflect this stock
split.
</FN>
</TABLE>
