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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-12872
EOTT ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 76-0424520
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1330 Post Oak Boulevard
Suite 2700
Houston, Texas 77056
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(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 993-5200
----------------------------------------------------
(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 / /
1
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EOTT ENERGY PARTNERS, L.P.
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended June 30, 1997 and 1996, and
Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets (Unaudited) -
June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statement of Partners' Capital (Unaudited) -
Six Months Ended June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . $ 1,933,011 $ 1,692,296 $ 4,212,179 $ 3,244,516
Cost of Sales . . . . . . . . . . . . . . . . . 1,909,775 1,645,920 4,154,025 3,165,895
------------- ------------ ------------- -------------
Gross Margin . . . . . . . . . . . . . . . . . 23,236 46,376 58,154 78,621
Expenses
Operating expenses . . . . . . . . . . . . . 23,765 30,770 49,216 53,943
Depreciation and amortization . . . . . . . 4,152 4,979 8,276 8,924
------------ ------------- ------------- ------------
27,917 35,749 57,492 62,867
------------ ------------- ------------- ------------
Operating Income (Loss) . . . . . . . . . . . (4,681) 10,627 662 15,754
Other Income (Expense)
Interest income . . . . . . . . . . . . . . 121 184 247 252
Interest and related charges . . . . . . . . (1,631) (794) (3,034) (1,712)
Other, net . . . . . . . . . . . . . . . . . - (5) (152) (16)
------------ ------------- ------------ ------------
Total . . . . . . . . . . . . . . . . . . (1,510) (615) (2,939) (1,476)
------------ ------------- ------------ ------------
Net Income (Loss) . . . . . . . . . . . . . . . $ (6,191) $ 10,012 $ (2,277) $ 14,278
============ ============ ============ ============
Net Income (Loss) Per Unit . . . . . . . . . . $ (0.32) $ 0.52 $ (0.12) $ 0.74
============ ============ ============ ============
Number of Units Outstanding . . . . . . . . . . 18,830 18,830 18,830 18,830
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,379 $ 5,261
Trade and other receivables, net of allowance for doubtful
accounts of $2,469 and $2,266, respectively . . . . . . . . . . . . . . 512,386 704,784
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,376 169,298
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,021 9,496
------------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 662,162 888,839
------------- ------------
Property, Plant & Equipment, at cost . . . . . . . . . . . . . . . . . . . . . 231,174 213,449
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . 92,931 85,667
------------- ------------
Net property, plant & equipment . . . . . . . . . . . . . . . . . . . . 138,243 127,782
------------- ------------
Other Assets, net of amortization . . . . . . . . . . . . . . . . . . . . . . . 8,381 9,576
------------- ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 808,786 $ 1,026,197
============= ============
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 603,442 $ 818,673
Accrued taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,690 8,465
Note payable - affiliate (Note 5) . . . . . . . . . . . . . . . . . . . . . 39,300 24,228
Short-term borrowings - affiliate . . . . . . . . . . . . . . . . . . . . . 57,600 38,500
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 615
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,777 19,521
------------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 713,441 910,002
------------- ------------
Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 931
------------- ------------
Commitments and Contingencies (Note 9)
Additional Partnership Interests (Note 7) . . . . . . . . . . . . . . . . . . . 9,091 9,091
------------- ------------
Partners' Capital
Common Unitholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,301 33,984
Special Unitholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,953 29,908
Subordinated Unitholders . . . . . . . . . . . . . . . . . . . . . . . . . 32,584 40,065
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,806 2,216
------------- ------------
Total Partners' Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,644 106,173
------------- ------------
Total Liabilities and Partners' Capital . . . . . . . . . . . . . . . . . . . . $ 808,786 $ 1,026,197
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of net income (loss) to net cash
provided by operating activities -
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,277) $ 14,278
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,261 7,909
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . 1,015 1,015
Losses on disposal of assets . . . . . . . . . . . . . . . . . . . . . . - 135
Changes in components of working capital -
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,398 (45,730)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,922 9,722
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . (525) (4,199)
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (215,231) 44,729
Accrued taxes payable . . . . . . . . . . . . . . . . . . . . . . . . (775) 1,145
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . (14,744) 9,522
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . - (1,655)
Other assets and liabilities. . . . . . . . . . . . . . . . . . . . . . . 180 -
------------- ------------
Net Cash Provided By Operating Activities . . . . . . . . . . . . . . . . . . . 4,224 36,871
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . - 880
Additions to property, plant and equipment . . . . . . . . . . . . . . . . (17,725) (3,713)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (8)
------------- ------------
Net Cash Used In Investing Activities . . . . . . . . . . . . . . . . . . . . . (17,722) (2,841)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings . . . . . . . . . . . . . . . . . . . . . (304) (5,264)
Increase in short-term borrowings - affiliate . . . . . . . . . . . . . . . 19,100 11,500
Decrease in note payable . . . . . . . . . . . . . . . . . . . . . . . . . - (85,000)
Increase in note payable - affiliate . . . . . . . . . . . . . . . . . . . 15,072 24,228
Distributions to Unitholders. . . . . . . . . . . . . . . . . . . . . . . . (18,252) (10,579)
Issuance of Common Units . . . . . . . . . . . . . . . . . . . . . . . . . - 29,772
Contribution from General Partner . . . . . . . . . . . . . . . . . . . . . - 604
------------- ------------
Net Cash Provided By (Used In) Financing Activities . . . . . . . . . . . . . . 15,616 (34,739)
------------- ------------
Increase (Decrease) In Cash and Cash Equivalents . . . . . . . . . . . . . . . 2,118 (709)
Cash and Cash Equivalents, Beginning of Period . . . . . . . . . . . . . . . . 5,261 2,276
------------- ------------
Cash and Cash Equivalents, End of Period . . . . . . . . . . . . . . . . . . . $ 7,379 $ 1,567
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
(UNAUDITED)
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COMMON SPECIAL SUBORDINATED GENERAL
UNITHOLDERS UNITHOLDERS UNITHOLDERS PARTNER
------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 . . . . . . . . . . . $ 33,984 $ 29,908 $ 40,065 $ 2,216
Net loss . . . . . . . . . . . . . . . . . . . . . (1,183) (217) (831) (46)
Cash distributions . . . . . . . . . . . . . . . . (9,500) (1,738) (6,650) (364)
------------- ------------ ------------- ------------
Balance at June 30, 1997 . . . . . . . . . . . . . $ 23,301 $ 27,953 $ 32,584 $ 1,806
============= ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In connection with a reorganization of the business conducted by EOTT
Energy Corp., an indirect wholly-owned subsidiary of Enron Corp. ("Enron"),
into limited partnership form and a concurrent initial public offering of
Common Units of EOTT Energy Partners, L.P. ("EOTT" or the "Partnership")
effective March 24, 1994, the net assets of EOTT Energy Corp., its wholly-owned
foreign subsidiary, EOTT Energy Ltd., and Enron Products Marketing Company
("EPMC") were acquired by three operating limited partnerships in which the
Partnership is directly or indirectly the 99% limited partner. EOTT Energy
Corp., a Delaware corporation, serves as the General Partner of the Partnership
and its related operating limited partnerships. The accompanying condensed
consolidated financial statements and related notes present the financial
position as of June 30, 1997 and December 31, 1996, and the results of
operations for the three and six months ended June 30, 1997 and 1996, cash
flows for the six months ended June 30, 1997 and 1996 and changes in partners'
capital for the six months ended June 30, 1997.
The financial statements included herein have been prepared by the
Partnership without audit pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they reflect all
adjustments (which consist solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial results for 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. However, the Partnership believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996 filed with the SEC.
Certain reclassifications have been made to prior period amounts to conform
with the current period presentation.
2. FORMATION AND OFFERING
On March 24, 1994, the General Partner completed an initial public offering
of 10 million Common Units at $20.00 per unit, representing limited partner
interests in the Partnership. In addition to its aggregate approximate 2%
general partner interest in the Partnership, the General Partner owns an
approximate 37% subordinated limited partner interest. Enron, through its
purchase of EOTT Common and Special Units, directly holds an approximate 11%
interest in the Partnership.
3. HEDGING ACTIVITIES/REVENUE RECOGNITION
EOTT enters primarily into futures and over-the-counter transactions in an
effort to minimize the impact of market fluctuations on inventories and other
contractual commitments. Realized and unrealized changes in the market value
of these transactions, which are entered into and accordingly designated as
hedges, are deferred until the gain or loss on the hedged transaction is
recognized in accordance with Statement of Financial Accounting Standards
("SFAS") No. 80. Any cash flow recognition resulting from hedging activities
is treated in the same manner as the underlying transaction. Based on the
historical correlations between the New York Mercantile Exchange ("NYMEX")
price for West Texas Intermediate crude at Cushing, Oklahoma and the various
trading hubs at which EOTT trades, EOTT management believes the hedging program
has been effective in minimizing the overall price risk. EOTT continuously
monitors the basis differentials between its various trading hubs and Cushing,
Oklahoma to further manage its basis exposure.
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
It is EOTT's policy to seek to maintain at all times purchase and sale
positions that are substantially balanced in order to minimize exposure to
price fluctuations and to lock in margins, although certain risks cannot be
fully hedged. EOTT has certain basis risks (the risk that price relationships
between delivery points, classes of products or delivery periods will change)
which cannot be completely hedged.
Periodically, EOTT enters into agreements to sell United States dollars for
Canadian dollars to hedge commitments to sell petroleum in the United States
that is purchased in Canada. Any gains or losses resulting from these
commitments are recorded with the purchase and sale of crude oil and are
included in the determination of net income (loss).
EOTT recognizes revenue on the accrual method based on the right to receive
payment for goods and services delivered to third parties.
Derivatives. In addition to hedging its lease barrel purchases, EOTT
provides price risk management products to its energy customer base. EOTT
provides these products through a variety of financial instruments including
forward contracts involving physical delivery of crude oil; swap agreements,
which require payments to (or receipt of payments from) counterparties based on
the differential between a fixed and variable price for the commodity
specified; and other contractual arrangements. Activities for trading purposes
are accounted for using the mark-to-market method of accounting and the gain or
loss is recorded to cost of sales in the period of the change in the market.
Trading activities have been immaterial to EOTT's financial position and
results of operations. Activities for non-trading purposes consist of
transactions entered into to hedge the impact of market fluctuations on assets,
liabilities, or contractual commitments. Changes in the market value of these
transactions are deferred until the gain or loss on the hedged item is
recognized.
4. ACQUISITION OF PIPELINE ASSETS
On February 1, 1997, the Partnership acquired over 400 miles of intrastate
and interstate common carrier pipelines in Louisiana and Texas from CITGO
Pipeline Company ("CITGO Pipeline Acquisition"). Current shipped volumes
associated with these assets amount to approximately 48,000 barrels per day
from leases in certain regions of ArkLaTex, West Texas and southern Louisiana.
Storage associated with the pipeline systems totals approximately 0.5 million
barrels. The purchase price was approximately $12 million and was financed
with term debt from Enron.
5. CREDIT RESOURCES AND LIQUIDITY
On June 30, 1995, Enron agreed to provide credit support (the "Enron
Facility") to the Partnership in the form of guarantees, letters of credit,
loans and letters of indemnity. The total amount of the Enron Facility is $600
million, as amended December 19, 1996, and the facility has a maturity of March
31, 1998, as amended February 25, 1997. The agreement contains sublimits on the
availability of the Enron Facility of $75 million for working capital loans and
$200 million for letters of credit. Letter of credit fees are based on actual
charges by the banks which range from .20% - .375% per annum. Interest on
outstanding loans is charged at the London Interbank Offered Rate ("LIBOR")
plus .25% per annum.
The Enron Facility is subject to defined borrowing base limitations
relating to the Partnership's activities and to the maintenance and protection
of the collateral. The Enron Facility permits distributions to Unitholders
subject to certain limitations based on the Partnership's earnings and other
factors. These covenants and restrictions are not expected to materially
affect EOTT's ability to operate the ongoing Partnership business.
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1996, EOTT had an additional $24.2 million of term debt
outstanding with Enron under a financing arrangement dated January 3, 1996 for
acquisitions and other capital projects (the "Term Loan"). This financing was
initially provided at a rate of LIBOR plus 1% per annum until March 31, 1996, a
rate of LIBOR plus 1.5% through June 30, 1996 and a rate of LIBOR plus .3%
effective September 15, 1996. On February 25, 1997, with an effective date of
February 11, 1997, this note was extended in maturity to March 31, 1998 from
its March 31, 1997 maturity date and the amount available was increased to
$39.3 million. In connection with the CITGO Pipeline Acquisition, an
additional $12 million of term debt was borrowed to finance the acquisition.
The Enron Facility is secured by a first priority lien on and security
interest in all receivables and inventory of the Partnership. The borrowing
base is the sum of cash and cash equivalents, specified percentages of eligible
receivables, inventory, and products contracted for or delivered but not
billed. The Enron Facility is non-recourse to the General Partner and the
General Partner's assets. The Partnership is restricted from entering into
additional financing arrangements without the prior approval of Enron.
At December 31, 1996, EOTT was in technical violation of the negative
covenant relating to the Leverage Ratio in the Enron Facility and Term Loan -
due principally to increased volumes of business and increases in the price of
crude. At June 30, 1997, EOTT was in violation of the Leverage Ratio and the
Minimum Working Capital Ratio due principally to the operating loss associated
with the deterioration of grade and basis differentials in the crude oil
markets. EOTT received waivers from Enron for both periods.
At December 31, 1995, EOTT had $85 million of short-term borrowings
outstanding with a commercial bank. Such borrowings were at an average annual
interest rate of 7.0% and primarily funded the working capital requirements as
well as the bridge financing utilized in the Mississippi-Alabama pipeline
acquisition from Amerada Hess Corporation. Subsequent to year end 1995, as
further discussed in Note 7 to the Condensed Consolidated Financial Statements,
the short-term borrowings were repaid.
The General Partner believes that the Enron Facility will be sufficient to
support the Partnership's crude oil and refined product purchasing activities
and working capital requirements. No assurance, however, can be given that the
General Partner will not be required to reduce or restrict the Partnership's
gathering and marketing activities because of limitations on its ability to
obtain credit support and financing for its working capital needs.
The Partnership's ability to obtain letters of credit to support its
purchases of crude oil or refined petroleum products is fundamental to the
Partnership's gathering and marketing activities. Additionally, EOTT has a
significant need for working capital due to the large dollar volume of trading
and marketing transactions in which it engages. Any significant decrease in
the Partnership's financial strength, regardless of the reason for such
decrease, may increase the number of transactions requiring letters of credit
or other financial support, may make it more difficult for the Partnership to
obtain such letters of credit, and/or may increase the cost of obtaining them.
This could in turn adversely affect the Partnership's ability to maintain or
increase the level of its purchasing and marketing activities or otherwise
adversely affect the Partnership's profitability and Available Cash as defined
in the Partnership Agreement and amendments thereto.
Generally, the Partnership will distribute 100% of its Available Cash
within 45 days after the end of each quarter to Unitholders of record and to
the General Partner. Available Cash consists generally of all of the cash
receipts of the Partnership adjusted for its cash distributions and net changes
to reserves. The full definition of Available Cash is set forth in the
Partnership Agreement and amendments thereto, a form which is filed as an
exhibit to the Annual Report on Form 10-K. Distributions of Available Cash to
the Subordinated Unitholders are subject to the prior rights of the Common
Unitholders to receive the Minimum Quarterly Distribution ("MQD") for each
quarter during the Subordination Period, and to receive any arrearages in the
distribution of the MQD on the Common Units for prior quarters during the
Subordination Period. MQD is $0.475 per unit with respect to each quarter.
Enron has committed to provide total cash
9
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
distribution support in an amount necessary to pay MQDs on Common and Special
Units, with respect to quarters ending on or before March 31, 1998, in an amount
up to an aggregate of $29 million (of which $9 million has been previously
advanced) in exchange for additional partnership interests ("APIs").
The Partnership Agreement authorizes EOTT to issue other equity securities,
the proceeds from which could be used to provide additional funds for
acquisitions or other Partnership needs.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense was $2.4 million and $1.4 million for the
six months ended June 30, 1997 and 1996, respectively.
On January 5, 1996, EOTT repaid the outstanding balance of the loan related
to the financing of an information systems development project.
7. TRANSACTIONS WITH ENRON AND RELATED PARTIES
Revenue and Cost of Sales. A summary of revenue and cost of sales with
Enron and its affiliates is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . $ 8,683 $ 9,466 $ 23,509 $ 15,694
Cost of Sales . . . . . . . . . . . . $ 18,325 $ 23,754 $ 44,229 $ 50,333
</TABLE>
Revenue in 1997 and 1996 consists primarily of crude oil sales to Enron
Reserve Acquisition Corp. Cost of sales consists primarily of crude oil and
condensate purchases from Enron Oil & Gas Company and natural gas liquids
purchases from Enron Gas Liquids, Inc. These transactions, in the opinion of
management, are no less favorable than can be obtained from unaffiliated third
parties.
Related party receivables at June 30, 1997 and December 31, 1996 were $2.7
million and $3.8 million, respectively, and are classified as trade and other
receivables. Related party payables at June 30, 1997 and December 31, 1996
were $6.9 million and $11.1 million, respectively, and are classified as trade
accounts payable.
Additional Partnership Interests ("APIs"). On May 15, 1995 and August 14,
1995, Enron paid $4.3 million and $4.8 million, respectively in support of
EOTT's first and second quarter 1995 distributions to its Common Unitholders
and the General Partner. In exchange for the distribution support, Enron
received APIs in the Partnership. APIs have no voting rights and are
non-distribution bearing; however, APIs will be entitled to be redeemed if,
with respect to any quarter, the MQD and any Common Unit Arrearages have been
paid, but only to the extent that Available Cash with respect to such quarter
exceeds the amount necessary to pay the MQD on all Units and any Common Unit
Arrearages. In February 1997, the General Partner amended the Partnership
agreement to provide that a holder of APIs may, at its option, waive its right
to receive distributions of Available Cash to which it would otherwise be
entitled and to provide that in such case the Partnership may retain such cash
for later distribution to partners or for use in the Partnership's business in
subsequent periods. The Partnership's Available Cash for the fourth quarter of
1996 was substantially in excess of the amount necessary to distribute the MQD
on all outstanding Units, and upon adoption of the amendment, Enron, the holder
of APIs, waived its right to receive such excess
10
<PAGE> 11
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
cash in redemption of APIs. Enron has committed to support payment of EOTT
common distributions up to an aggregate of $29 million through March 1998, as
necessary.
Financing of Pipeline Acquisition. On January 3, 1996, EOTT and Enron
concluded financing arrangements related to the acquisition of pipeline and
related assets from Amerada Hess Corporation in which the Partnership (i)
issued and sold to Enron 1,830,011 Common Units for $29.8 million in cash in a
private placement which were subsequently exchanged for Special Units in July
1996 (ii) issued a promissory note to Enron for $24.2 million originally due
June 30, 1996 (subsequently amended to March 31, 1998), which carries a per
annum interest rate of LIBOR plus 1% through March 31, 1996, a rate of LIBOR
plus 1.5% through June 30, 1996 and a rate of LIBOR plus .3% effective
September 15, 1996 (see Note 5 for further discussion) and (iii) received a $.6
million capital contribution related to the General Partner's approximate 2%
interest in the Partnership. The balance of the purchase price was financed
through short-term borrowings from Enron. Collectively, these proceeds,
together with short-term borrowings from Enron, were used by EOTT to repay the
bridge financing discussed in Note 5.
As discussed further in Note 4, the CITGO Pipeline Acquisition was financed
with term debt from Enron.
8. OTHER INCOME (EXPENSE), NET
The components of other income (expense), net are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
1997 1996 1997 1996
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Gain (loss) on foreign currency transactions . . $ 70 $ 94 $ (120) $ 76
Gain (loss) on disposal of fixed assets . . . . - (122) - (135)
Other, net . . . . . . . . . . . . . . . . . . . (70) 23 (32) 43
----------- ----------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . $ - $ (5) $ (152) $ (16)
=========== =========== ========== ==========
</TABLE>
9. LITIGATION AND OTHER CONTINGENCIES
EOTT is, in the ordinary course of business, a defendant in various
lawsuits, some of which are covered in whole or in part by insurance. The
Partnership is responsible for all litigation and other claims relating to the
business acquired from EOTT Energy Corp., although the Partnership will be
entitled to the benefit of certain insurance maintained by Enron covering
occurrences prior to the closing of the offering. The Partnership believes
that the ultimate resolution of litigation, individually and in the aggregate,
will not have a materially adverse impact on the Partnership's financial
position or results of operations. Various legal actions have arisen in the
ordinary course of business, the most significant of which are discussed in
"Part I, Item 3. Legal Proceedings" of EOTT's Annual Report filed on Form 10-K
for the year ended December 31, 1996.
The Partnership believes that it has obtained or has applied for all of the
necessary permits required by federal, state, and local environmental agencies
for the operation of its business. Further, the Partnership believes that
there are no outstanding liabilities or claims relating to environmental
matters individually, and in the aggregate, which would have a material adverse
impact on the Partnership's financial position or results of operations.
11
<PAGE> 12
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10. NEW ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 - "Earnings Per
Share". SFAS No. 128 is effective for fiscal years beginning after December
15, 1997 and when adopted, it will require restatement of prior years' net
income (loss) per unit. SFAS No. 128 is intended to provide consistency in the
calculation of earnings per share in the United States with the calculation in
other countries and reduce the complexity of the earnings per share
calculation. The Partnership is currently evaluating the effects of SFAS 128;
however, management believes that the new standard will not have a dilutive
effect on net income per unit.
11. SUBSEQUENT EVENTS
On July 14, 1997, the Board of Directors of EOTT Energy Corp., as General
Partner, declared the Partnership's regular quarterly cash distribution of
$.475 for all Common and Special Units for the period April 1, 1997 through
June 30, 1997. The second quarter distribution will be paid on August 14, 1997
to the General Partner and all Common and Special Unitholders of record as of
July 31, 1997 from the Partnership's Available Cash.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNER, L.P.
EOTT is one of the largest independent gatherers and marketers of crude oil
in North America, with operations throughout most of the United States and in
Canada. EOTT also engages, to a lesser extent, in refined products marketing as
well as gathering and marketing of natural gas liquids ("NGLs"), and other
crude oil-related marketing activities. The following review of the results of
operations and financial condition should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
EOTT reported a net loss of $6.2 million or $.32 per unit for the second
quarter of 1997 compared to net income of $10.0 million or $.52 per unit for
the second quarter of 1996. The second quarter loss in 1997 is attributable to
a significant decline in gross margins as a result of deterioration in grade
and basis differentials in the North American crude gathering business.
Unusually favorable market conditions in the second quarter of 1996 enabled
EOTT to capture higher margins on basis differentials.
Selected financial data for EOTT's business segments are summarized below,
in millions:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -------------------------
1997 1996 1997 1996
------------ ------------ ---------- --------------
<S> <C> <C>
Revenues:
North American crude oil . . . . . . . $ 1,721.9 $ 1,555.2 $ 3,738.2 $ 2,966.0
Refined products marketing . . . . . . 211.1 137.1 474.0 279.4
Intersegment revenues . . . . . . . . - - - (0.9)
------------ ---------- --------- ------------
Total . . . . . . . . . . . . . . . $ 1,933.0 $ 1,692.3 $ 4,212.2 $ 3,244.5
============ ========== ========= ============
Gross margin:
North American crude oil . . . . . . . $ 22.3 $ 44.5 $ 55.6 $ 76.0
Refined products marketing . . . . . . 0.9 1.8 2.5 2.6
------------ ---------- --------- ------------
Total . . . . . . . . . . . . . . . $ 23.2 $ 46.3 $ 58.1 $ 78.6
============ ========== ========= ============
Operating income (loss):
North American crude oil . . . . . . . $ (0.2) $ 17.4 $ 9.9 $ 28.8
Refined products marketing . . . . . . 0.4 0.7 1.3 0.8
Corporate . . . . . . . . . . . . . . (4.9) (7.5) (10.5) (13.8)
------------ ---------- --------- ------------
Total . . . . . . . . . . . . . . . $ (4.7) $ 10.6 $ 0.7 $ 15.8
============ ========== ========= ============
</TABLE>
Gross margin is the difference between the sales prices of crude oil or
other petroleum products and the costs of crude oil and other products
purchased, including costs paid to third parties for transportation and
handling charges. Both of EOTT's business segments are characterized by large
volumes and generally very thin and volatile profit margins on purchase and
sale transactions. The absolute price levels for crude oil and refined
products do not necessarily bear a direct relationship to margins per barrel,
although such price levels significantly impact revenues and cost of sales. As
a result, period-to-period variations in revenues and cost of sales are not
meaningful, and therefore are not discussed.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996.
North American Crude Oil: The operating loss for the North American Crude
Oil segment was $0.2 million for the second quarter 1997, compared to operating
income of $17.4 million for the same period in 1996. Gross margin decreased
$22.2 million to $22.3 million in the second quarter of 1997 due primarily to
the deterioration in grade and basis differentials. Operating expenses of
$22.5 million for the second quarter of 1997 were $4.6 million lower than in
the second quarter of 1996 due primarily to lower benefits and other employee
related costs partially offset by increased operating costs associated with the
recent acquisition of pipeline assets.
Refined Products Marketing: Refined Products Marketing operating income
was $0.4 million for the second quarter 1997 compared to $0.7 million for the
same period in 1996. Gross margin decreased $0.9 million to $0.9 million in the
second quarter of 1997 due primarily to a lack of seasonal demand for refined
products. Additionally, operating expenses for the second quarter of 1997
decreased $0.6 million compared to the same period last year due to lower
benefits and other employee related costs.
Corporate and Other: Corporate costs were $4.9 million for the second
quarter 1997 compared to $7.5 million in the second quarter 1996. The decrease
is due primarily to lower benefits and other employee related costs, lower
systems operating costs and lower liability and casualty insurance costs.
Interest and related charges in the second quarter 1997 were $1.6 million
compared to $0.8 million for the same period in 1996. The increase is due to
higher average short-term debt required to meet working capital needs,
primarily related to higher crude inventories during the period and debt used
to finance the recent acquisition of crude oil pipeline assets in the first
quarter of 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30,1996.
North American Crude Oil: Operating income for the North American Crude
Oil segment was $9.9 million for the first half of 1997, compared to $28.8
million for the same period in 1996. Gross margin decreased $20.4 million to
$55.6 million in the first half of 1997 due primarily to unfavorable grade and
basis differentials in the North American crude gathering business. Operating
expenses of $45.7 million for the first half of 1997 were $1.5 million lower
than in the first half of 1996 due to lower benefits and other employee related
costs partially offset by increased operating costs associated with the recent
acquisition of pipeline and related assets.
Refined Products Marketing: Operating income for Refined Products
Marketing was $1.3 million for the first half of 1997, compared to $0.8 million
for the same period in 1996. Trade volumes were 100,600 barrels per day ("bpd")
in the first half of 1997 compared to 61,200 bpd in 1996. Gross margin in the
first half of 1997 was relatively flat compared to the same period in 1996.
Operating expenses of $1.2 million for the first half of 1997 were $0.6 million
lower than in the first half of 1996 due primarily to lower benefits and other
employee related costs.
Corporate and Other: Corporate and other costs of $10.5 million for the
first half of 1997 were $3.3 million lower compared to the first half of 1996
due primarily to lower benefits and other employee related costs, lower
liability and casualty insurance costs and lower system operating costs.
Interest and related charges for the first half of 1997 were $3.0 million
compared to $1.7 million for the same period in 1996. The increase is due to
higher average short-term debt required to meet working capital needs, primarily
related to higher crude inventories during the period and debt used to finance
the acquisition of crude oil pipeline assets in the first quarter of 1997.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES
General
Management anticipates cash generated from operating activities will be
sufficient to fund short-term liquidity as well as sustaining capital
expenditures for the foreseeable future.
Cash Flows From Operating Activities
Net cash provided by operating activities decreased $32.7 million to $4.2
million for the first half of 1997 compared to $36.9 million for the same
period in 1996 primarily due to a net loss for the period as a result of a
significant decline in gross margin due to a deterioration in grade and basis
differentials in the North American crude gathering business and an increase in
the cash requirements related to NYMEX trading activities.
Cash Flows From Investing Activities
Net cash used in investing activities totaled $17.7 million for the first
half of 1997 compared to $2.8 million for the same period in 1996, primarily
due to the pipeline acquisition from CITGO Pipeline Company. There were no
asset sales in 1997 compared to $0.9 million in proceeds from asset sales in
1996. Additions to property, plant, and equipment of $17.7 million in 1997
include $12.0 million for the pipeline acquisition, $2.7 million for pipeline
connections and improvements and $2.0 million for information systems
development. The Partnership expects to incur approximately $3-4 million in
sustaining capital expenditures for the remainder of 1997.
Cash Flows From Financing Activities
Net cash provided by financing activities totaled $15.6 million for the
first half of 1997 compared to net cash used of $34.7 million for the same
period in 1996. The 1997 amount primarily represents short-term borrowings to
fund working capital needs and finance the recent pipeline acquisition reduced
by full distributions paid to all Unitholders for the period October 1, 1996
through March 31, 1997. During the first half of 1996, EOTT issued 1.8 million
Common Units in exchange for $29.8 million in a private placement with Enron.
EOTT also received $24.2 million in exchange for a promissory note issued to
Enron. These proceeds, together with other short term borrowings from Enron,
were used by EOTT to repay $85 million in bridge financing related in part to
the acquisition of pipeline assets from Amerada Hess on December 29, 1995.
Working Capital and Credit Resources
On June 30, 1995, Enron agreed to provide credit support (the "Enron
Facility") to the Partnership in the form of guarantees, letters of credit,
loans and letters of indemnity. The total amount of the Enron Facility is $600
million, as amended December 19, 1996, and the facility has a maturity of March
31, 1998, as amended February 25, 1997. The agreement contains sublimits on
the availability of the Enron Facility of $75 million for working capital loans
and $200 million for letters of credit. Letter of credit fees are based on
actual charges by the banks which range from .20% - .375% per annum. Interest
on outstanding loans is charged at the London Interbank Offered Rate ("LIBOR")
plus .25% per annum.
The Enron Facility is subject to defined borrowing base limitations
relating to the Partnership's activities and to the maintenance and protection
of the collateral. The Enron Facility permits distributions to Unitholders
subject to certain limitations based on the Partnership's earnings and other
factors. These
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
covenants and restrictions are not expected to materially affect EOTT's ability
to operate the ongoing Partnership business.
At December 31, 1996, EOTT had an additional $24.2 million of term debt
outstanding with Enron under a financing arrangement dated January 3, 1996 for
acquisitions and other capital projects (the "Term Loan"). This financing was
initially provided at a rate of LIBOR plus 1% per annum until March 31, 1996, a
rate of LIBOR plus 1.5% through June 30, 1996 and a rate of LIBOR plus .3%
effective September 15, 1996. On February 25, 1997, with an effective date of
February 11, 1997, this note was extended in maturity to March 31, 1998 from
its March 31, 1997 maturity date and the amount available was increased to
$39.3 million. In connection with the CITGO Pipeline Acquisition, an
additional $12 million of term debt was borrowed to finance the acquisition.
The Enron Facility is secured by a first priority lien on and security
interest in all receivables and inventory of the Partnership. The borrowing
base is the sum of cash and cash equivalents, specified percentages of eligible
receivables, inventory, and products contracted for or delivered but not
billed. The Enron Facility is non-recourse to the General Partner and the
General Partner's assets. The Partnership is restricted from entering into
additional financing arrangements without the prior approval of Enron.
At December 31, 1996, EOTT was in technical violation of the negative
covenant relating to the Leverage Ratio in the Enron Facility and Term Loan -
due principally to increased volumes of business and increases in the price of
crude. At June 30, 1997, EOTT was in violation of the Leverage Ratio and the
Minimum Working Capital Ratio due principally to the operating loss associated
with the deterioration of grade and basis differentials in the crude oil
markets. EOTT received waivers from Enron for both periods.
At December 31, 1995, EOTT had $85 million of short-term borrowings
outstanding with a commercial bank. Such borrowings were at an average annual
interest rate of 7.0% and primarily funded the working capital requirements as
well as the bridge financing utilized in the Mississippi-Alabama pipeline
acquisition from Amerada Hess Corporation. Subsequent to year end 1995, as
further discussed in Note 7 to the Condensed Consolidated Financial Statements,
the short-term borrowings were repaid.
The General Partner believes that the Enron Facility will be sufficient to
support the Partnership's crude oil and refined product purchasing activities
and working capital requirements. No assurance, however, can be given that the
General Partner will not be required to reduce or restrict the Partnership's
gathering and marketing activities because of limitations on its ability to
obtain credit support and financing for its working capital needs.
The Partnership's ability to obtain letters of credit to support its
purchases of crude oil or refined petroleum products is fundamental to the
Partnership's gathering and marketing activities. Additionally, EOTT has a
significant need for working capital due to the large dollar volume of trading
and marketing transactions in which it engages. Any significant decrease in
the Partnership's financial strength, regardless of the reason for such
decrease, may increase the number of transactions requiring letters of credit
or other financial support, may make it more difficult for the Partnership to
obtain such letters of credit, and/or may increase the cost of obtaining them.
This could in turn adversely affect the Partnership's ability to maintain or
increase the level of its purchasing and marketing activities or otherwise
adversely affect the Partnership's profitability and Available Cash as defined
in the Partnership Agreement and amendments thereto.
Generally, the Partnership will distribute 100% of its Available Cash
within 45 days after the end of each quarter to Unitholders of record and to
the General Partner. Available Cash consists generally of all of the cash
receipts of the Partnership adjusted for its cash distributions and net changes
to reserves. The full definition of Available Cash is set forth in the
Partnership Agreement and amendments thereto, a form which is filed as an
exhibit to the Annual Report on Form 10-K. Distributions of Available Cash to
the
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
Subordinated Unitholders are subject to the prior rights of the Common
Unitholders to receive the Minimum Quarterly Distribution ("MQD") for each
quarter during the Subordination Period, and to receive any arrearages in the
distribution of the MQD on the Common Units for prior quarters during the
Subordination Period.
MQD is $0.475 per unit with respect to each quarter. Enron has committed
to provide total cash distribution support in an amount necessary to pay MQDs
on Common and Special Units, with respect to quarters ending on or before March
31, 1998, in an amount up to an aggregate of $29 million (of which $9 million
has been previously advanced) in exchange for additional partnership interests
("APIs"). As a result of the losses from its discontinued West Coast processing
operations EOTT did not have sufficient Available Cash to make the 1995 first or
second quarter MQD. Accordingly, first and second quarter Common Unit and
General Partner distributions totaling $4.3 million and $4.8 million,
respectively, were made from the Enron cash support commitment. The APIs
purchased by Enron are not entitled to cash distributions or voting rights. The
APIs are required to be redeemed if and to the extent that Available Cash for
any quarter exceeds an amount necessary to distribute the MQD on all Common and
Subordinated Units and to eliminate arrearages, if any, in the MQD on Common
Units for prior periods. In February 1997, the General Partner amended the
Partnership Agreement to provide that a holder of APIs may, at its option, waive
its right to receive distributions of Available Cash to which it would otherwise
be entitled and to provide that in such case the Partnership may retain such
cash for later distribution to partners or for use in the Partnership's business
in subsequent periods. The Partnership's Available Cash for the fourth quarter
of 1996 was substantially in excess of the amount necessary to distribute the
MQD on all outstanding Units, and upon adoption of the amendment, Enron, the
holder of APIs, waived its right to receive such excess cash in redemption of
APIs.
The Partnership Agreement authorizes EOTT to issue other equity securities,
the proceeds from which could be used to provide additional funds for
acquisitions or other Partnership needs.
OUTLOOK
Gross margins for 1996 benefited from unusually strong crude oil market
conditions which enabled higher per barrel margins in the core crude oil
gathering business. Early in the second quarter of 1997, crude oil margins hit
some of the lowest levels in the last five years. EOTT has made progress in
renegotiating many of its lease barrel contracts to reflect current market
conditions and anticipates improved financial results during the third quarter.
Information Regarding Forward-Looking Information
The statements in this Quarterly Report on Form 10-Q that are not
historical information are 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. Such forward looking statements include the discussions
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Although the Partnership believes that its expectations regarding
future events are based on reasonable assumptions, it can give no assurance
that its goals will be achieved or that its expectations regarding future
developments will prove to be correct. Important factors that could cause
actual results to differ materially from those in the forward looking
statements herein include the Partnership's success in obtaining additional
lease barrels, developments relating to possible acquisitions or business
combination opportunities, industry conditions, the success of the
Partnership's risk management activities and conditions of the capital and
equity markets during the periods covered by the forward looking statements.
17
<PAGE> 18
PART II. OTHER INFORMATION
EOTT ENERGY PARTNERS, L.P.
ITEM 1. Legal Proceedings
See Part I. Item 1, Note 9 to the Condensed Consolidated Financial
Statements entitled "Litigation and Other Contingencies," which is
incorporated herein by reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
None
18
<PAGE> 19
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.
EOTT ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
Date: August 14, 1997 By: EOTT ENERGY CORP. as
General Partner
/s/ STEVEN A. APPELT
---------------------------------------
Steven A. Appelt
Vice President, Chief Financial Officer
(Principal Accounting Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000917464
<NAME> EOTT ENERGY PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 7,379
<SECURITIES> 0
<RECEIVABLES> 514,855
<ALLOWANCES> 2,469
<INVENTORY> 132,376
<CURRENT-ASSETS> 662,162
<PP&E> 231,174
<DEPRECIATION> 92,931
<TOTAL-ASSETS> 808,786
<CURRENT-LIABILITIES> 713,441
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 85,644<F1>
<TOTAL-LIABILITY-AND-EQUITY> 808,786
<SALES> 4,212,179
<TOTAL-REVENUES> 4,212,179
<CGS> 4,154,025
<TOTAL-COSTS> 4,211,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,034
<INCOME-PRETAX> (2,277)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,277)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,277)
<EPS-PRIMARY> (0.12)<F2>
<EPS-DILUTED> (0.12)
<FN>
<F1>"Other SE" represents consolidated Partners' Capital
<F2>EPS represents earnings per Common and Special Units
</FN>
</TABLE>
