1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - KA
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): AUGUST 27, 1995
KANEB SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
1-5083 74-1191271
- --------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
2435 N. Central Expressway, Seventh Floor, Richardson, Texas 75080
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 699-4000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 18, 1995, the Registrant, through its wholly-owned
subsidiary, Kaneb Pipe Line Company, as general partner for and on behalf of
Kaneb Pipe Line Partners, L.P., its operating partnership, Kaneb Pipe Line
Operating Partnership, L.P., signed definitive purchase agreements to acquire
from Steuart Petroleum Company and certain of its affiliates (collectively,
"Steuart") the liquids terminaling assets of Steuart. The acquisition price of
$68 million was financed by bank borrowings. The Steuart terminaling assets
consist of seven petroleum products terminals located in the District of
Columbia, Florida, Georgia, Maryland and Virginia and the pipeline and
terminaling services to Andrews Air Force Base in Maryland. The terminals have
in the aggregate approximately 9 million barrels of storage capacity in 87
tanks. Steuart's two largest facilities are located near Washington, D.C. and
Jacksonville, Florida. The Piney Point, Maryland terminal is the closest deep
water petroleum storage facility to Washington D.C. The Piney Point Maryland
terminal has 30 tanks with approximately 5.5 million barrels of aggregate
storage capacity, which is currently used to store petroleum
products,consisting primarily of fuel oil. The Jacksonville terminal has 28
tanks with approximately 2.1 million barrels of aggregate storage capacity,
which is currently used to store petroleum products including gasoline, No. 2
oil, No. 6 oil, diesel, jet fuel, kerosene and bunker fuel.
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business to be acquired.
Report of Independent Accountants.
Statements of Revenues and Direct Operating Expenses - Years
Ended December 31, 1994 and 1992, Period from January 1,
1993 to June 8, 1993 and the Period from June 9, 1993 to
December 31, 1993;
Statements of Net Assets To Be Acquired - December 31, 1994
and 1993. Notes to Statements of Net Assets to be Acquired
and Statements of Revenues and Direct Operating Expenses.
(b) Pro forma financial information (unaudited).
(c) Exhibits.
10.1 Asset Purchase Agreement by and among Steuart Petroleum
Company, SPC Terminals, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.2 Piney Point Pipeline Asset Purchase Agreement by and
among Piney Point Industries, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.3 Purchase Agreement by and among Steuart Investment
Company, Support Terminals Operating Partnership, L.P. and
Kaneb Pipe Line Operating Partnership, L.P. for Cockpit Point
10.4 Amendment to Asset Purchase Agreements by and among
Steuart Petroleum Company, SPC Terminals, Inc., Piney Point
Industries, Inc., Steuart Investment Company, Support Terminals
Operating Partnership, L.P. and Kaneb Pipe Line Operating
Partnership, L.P.
23.1 Consent of Independent Accountants.
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SIGNATURE
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.
KANEB SERVICES, INC.
--------------------
(Registrant)
Date: January 3, 1996 /s/ Tony M. Regan
--------------------
Tony M. Regan
Controller
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SIGNATURE
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.
KANEB SERVICES, INC.
--------------------
(Registrant)
Date: January 3, 1996
--------------------
Tony M. Regan
Controller
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors of
Steuart Petroleum Company and
Steuart Investment Company
We have audited the accompanying statements of revenues and direct operating
expenses of SPC/SIC - Terminal Operations Division for the year ended December
31, 1992 and the period from January 1, 1993 to June 8, 1993. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
these statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of these statements. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1, the accompanying statements were prepared to present
the revenues and direct operating expenses attributable to SPC/SIC - Terminal
Operations Division, and are not intended to be a complete presentation of the
revenues and expenses of SPC/SIC - Terminal Operations Division.
In our opinion, such statements of revenues and direct operating expenses
present fairly, in all material respects, the revenues and direct operating
expenses of SPC/SIC - Terminal Operations Division for the year ended December
31, 1992 and the period from January 1, 1993 to June 8, 1993 in conformity with
the basis of presentation described in Note 1 and generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Washington, D.C.
August 18, 1995
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors of
Steuart Petroleum Company and
Steuart Investment Company
We have audited the accompanying statements of net assets to be acquired as of
December 31, 1993 and 1994 and the related statements of revenues and direct
operating expenses of SPC/SIC - Terminal Operations Division for the period
from June 9, 1993 to December 31, 1993 and the year ended December 31, 1994.
These financial statements are the responsibility of the Division's management.
Our responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets to be
acquired and the statements of revenues and direct operating expenses are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in these statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
these statements. We believe that our audits provide a reasonable basis for
our opinion.
As described in Note 1, the accompanying statements were prepared to present
the net assets to be acquired and the revenues and direct operating expenses
attributable to SPC/SIC - Terminal Operations Division, and are not intended to
be a complete presentation of the net assets or revenues and expenses of
SPC/SIC - Terminal Operations Division.
In our opinion, such statements of net assets to be acquired and statements of
revenues and direct operating expenses present fairly, in all material
respects, the net assets to be acquired as of December 31, 1993 and 1994 and
the revenues and direct operating expenses for the period from June 9, 1993 to
December 31, 1993 and the year ended December 31, 1994 of SPC/SIC - Terminal
Operations Division, in conformity with the basis of presentation described in
Note 1 and generally accepted accounting principles.
PRICE WATERHOUSE LLP
Washington, D.C.
August 18, 1995
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SPC/SIC-
TERMINAL OPERATIONS DIVISION
STATEMENTS OF NET ASSETS TO BE ACQUIRED
(In thousands)
December 31
----------- June 30, 1995
1993 1994 (unaudited)
---- ---- ---------------
Assets
------
Current assets - other receivables - environmental
reimbursements $ 330 $ - $ -
Property, plant and equipment, less accumulated
depreciation and amortization 42,171 44,571 44,335
Other assets
Investment in joint venture - 25 -
Other receivables - environmental reimbursements 418 300 300
-------- --------- ---------
Total assets 42,919 44,896 44,635
-------- --------- ---------
Liabilities
-----------
Current liabilities - environmental costs 525 200 200
Noncurrent liabilities - environmental costs 715 650 650
Accumulated losses of joint venture in excess of investment - - 42
-------- --------- ---------
Total liabilities 1,240 850 892
-------- --------- ---------
Net assets to be acquired $ 41,679 $ 44,046 $ 43,743
======== ========= =========
The accompanying notes are an integral part of these statements.
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SPC/SIC-
TERMINAL OPERATIONS DIVISION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(In thousands)
For the
six months
For the period from For the period from ended
For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30,
December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995
------------------ ------------------- ------------------- ------------------ ---- ----
(unaudited)
Revenues
Third party $17,124 $7,373 $ 9,759 $19,777 $10,865 $7,753
SPC-Marketing Division
and other (Note 8) 2,340 1,063 1,388 2,895 1,481 1,360
------- ------ ------- ------- ------- ------
19,464 8,436 11,147 22,672 12,346 9,113
Direct operating expenses
Sales and operations 8,512 4,184 5,084 9,283 4,666 3,790
Selling, general and administrative 1,090 638 888 1,679 816 800
Depreciation and amortization 1,418 687 2,218 4,267 2,104 2,196
------- ------ ------- ------- ------- ------
11,020 5,509 8,190 15,229 7,586 6,786
Losses of joint venture - - - 75 11 67
------- ------ ------- ------- ------- ------
Excess of revenues over
direct operating expenses and
losses of joint venture $ 8,444 $2,927 $ 2,957 $ 7,368 $ 4,749 $2,260
======= ====== ======= ======= ======= ======
The accompanying notes are an integral part of these statements.
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SPC/SIC-
TERMINAL OPERATIONS DIVISION
NOTES TO STATEMENTS OF NET ASSETS TO BE ACQUIRED AND STATEMENTS
OF REVENUES AND DIRECT OPERATING EXPENSES
(In thousands)
NOTE 1 - BASIS OF PRESENTATION
Kaneb Pipe Line Partners, L.P. ("KPP") expects to enter into agreements with
Steuart Petroleum Company ("SPC" or the "Company," a wholly-owned subsidiary of
Steuart Investment Company) and Steuart Investment Company ("SIC"), the
sellers, to acquire certain of the assets and assume certain of the liabilities
relating to the business of the terminal operations division of SPC, the
terminal operations and pipeline business of SIC and the partnership interest
of SPC Terminals Inc. (a wholly-owned subsidiary of Steuart Petroleum Company -
see Note 7). Such purchased net assets to be acquired are collectively
referred to herein as SPC/SIC - Terminal Operations Division or "Division."
The Division is engaged principally in the terminal storage and throughput
services business.
The assets to be acquired include five terminals (located in Piney Point,
Maryland; Washington, D.C. (2); Cockpit Point, Virginia and Jacksonville,
Florida) and a pipeline in Maryland. The businesses also include two leased
terminals (located in Brunswick, Georgia and Savannah, Georgia - see Note 7).
The accompanying special-purpose financial statements include the net assets to
be acquired and related revenues and direct operating expenses of the Division
and are not intended to be a complete presentation of the assets, liabilities
or the results of operations of the sellers or the Division on a stand-alone
basis. These financial statements do not reflect the revaluation of assets and
liabilities to be acquired by KPP to their fair market value at the date of
acquisition. The statements have been prepared in accordance with generally
accepted accounting principles and were derived from the historical accounting
records of SPC and SIC.
The statements of net assets to be acquired include the net assets of SPC and
SIC which are directly related to the businesses to be acquired. As a result,
the statements do not include cash, accounts and notes receivable, prepaid
expenses, accounts payable and accrued expenses and borrowings.
The statements of revenues and direct operating expenses include the revenue
and expenses directly attributable to the businesses, and also include an
allocation of certain expenses directly attributable to the businesses which
have been historically segregated by SPC and SIC in their accounting records.
Full historical financial statements, including certain general and
administrative expenses and other indirect expenses, interest expense and
income taxes, have not been presented due to the fact that management believes
it is not practicable to determine that portion which is attributable to the
Division. Management of the sellers believes the basis of allocating all other
expenses to be reasonable; however, the amounts could differ from amounts that
would be determined if the Division were operated on a stand-alone basis. In
addition, centralized cash accounts for the majority of
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disbursements exist at the sellers. As a result, statements of cash flows have
been excluded from the financial statements.
The statement of net assets to be acquired as of June 30, 1995 and the
statements of revenues and direct operating expenses for the six months ended
June 30, 1995 and 1994 are unaudited; however, in the opinion of management
these statements reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of these statements.
See Note 3 for a summary of the new basis of accounting.
NOTE 2- SIGNIFICANT ACCOUNTING POLICIES
Revenues
Revenues are recognized based upon contractual agreements relating to product
storage and transfer.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation charges are
computed by straight-line methods over the following useful lives:
Buildings and improvements 5-33 years
Machinery and equipment 3-20 years
Leasehold improvements 4-32 years
Maintenance and repairs are expensed as incurred; significant renewals and
betterments are capitalized. Maintenance and repair expense included in sales
and operations expenses for the year ended December 31, 1992, the period from
January 1, 1993 to June 8, 1993, the period from June 9, 1993 to December 31,
1993 and for the year ended December 31, 1994 was $1,697, $693, $1,581 and
$2,256, respectively.
Environmental matters
Environmental expenditures that relate to current operations are primarily
expensed as incurred. The Division has recorded a liability ($1,240, $850 and
$850 (unaudited) at December 31, 1993 and 1994 and June 30, 1995,
respectively), and a receivable for reimbursements ($748, $300 and $300
(unaudited) at December 31, 1993 and 1994 and June 30, 1995, respectively), for
future environmental costs. The Division's policy is to record a liability
when costs of remediation and/or cleanup of known environmental problems are
probable and the costs can be reasonably estimated. The Division's policy is
to record available reimbursements when qualification for reimbursement from
state funds is probable under various state laws and regulations. The portion
of the costs and reimbursements expected to be incurred and received beyond one
year are classified as noncurrent liabilities and other assets.
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NOTE 3 - NEW BASIS OF ACCOUNTING
Prior to June 9, 1993, SPC was fifty percent owned by SIC and fifty percent
owned by American AGIP Co., Inc. ("AGIP"), a wholly-owned subsidiary of AGIP
Petroli International, B.V., a Netherlands corporation whose ultimate sole
parent is Ente Nazionale Idrocarburi, an industrial conglomerate organized
under the laws of the Republic of Italy. Following the close of business on
June 8, 1993, SPC retired all of its existing common stock and redeemed the
shares previously held by AGIP.
The redemption of the common stock of the Company previously held by AGIP
resulted in the Company becoming wholly-owned by SIC, and therefore a new basis
of accounting was established. Consequently, the accompanying statements of
revenues and direct operating expenses include the year ended December 31, 1992
and the period from January 1, 1993 to June 8, 1993 (old basis) and the period
from June 9, 1993 to December 31, 1993, the year ended December 31, 1994 and
the six months ended June 30, 1995 and 1994 (new basis).
The consequences of establishing a new basis of accounting at June 9, 1993
included an increased adjustment to the carrying value of buildings and
improvements of $22,507. Differences in estimates made in establishing the
original new basis allocation resulted in an additional $2,270 increase in the
carrying value of buildings and improvements in 1994.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment (primarily petroleum terminaling and storage
facilities) are carried at cost and consist of the following:
December 31,
----------- June 30, 1995
1993 1994 (unaudited)
---- ---- -----------
Land $ 4,253 $ 4,253 $ 4,253
Buildings and improvements 41,873 48,124 50,068
Machinery and equipment 537 1,163 1,394
Leasehold improvements 96 96 96
Construction-in-progress 1,469 1,219 965
-------- -------- --------
48,228 54,855 56,776
Less accumulated depreciation ( 6,057) (10,284) (12,441)
-------- -------- --------
$ 42,171 $ 44,571 $ 44,335
======== ======== ========
Certain credit facilities of SPC are cross-collateralized by a first priority
interest in the property, plant and equipment of the Division.
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NOTE 5 - SALES TO MAJOR CUSTOMERS
The Division's revenues from major customers for the following periods amounted
to:
For the
six months
For the period from For the period from ended
For the year ended January 1, 1993 to June 9, 1993 to For the year ended June 30,
December 31, 1992 June 8, 1993 December 31, 1993 December 31, 1994 1994 1995
------------------ ------------------- ------------------- ------------------ ---- ----
(unaudited)
Electric utility $3,156 $1,188 $1,664 $5,267 $3,918 $1,412
Defense Fuel
Supply Center $1,893 $907 $1,350 $2,447 $1,241 $717
Aectra
(see Note 7) $2,478 $853 $1,265 $2,745 $1,140 $1,392
Effective February 1995, Defense Fuel Supply Center terminated one of its two
contracts with the Division prior to its scheduled expiration in June 1996.
The terminated contract provided for minimum annual revenues of approximately
$1,400.
NOTE 6 - EMPLOYEE BENEFIT PLANS
The sellers maintain profit-sharing plans that covers substantially all
employees. Contributions, which are made to the plans solely at the discretion
of the sellers' Boards of Directors, amounted to $113, $63, $83 and $208 for
the year ended December 31, 1992, the period from January 1, 1993 to June 8,
1993, the period from June 9, 1993 to December 31, 1993 and for the year ended
December 31, 1994, respectively. Benefits are payable to employees upon
retirement, disability or termination based upon their accumulated credits in
accordance with the provision of the plans. The plans may be terminated at the
option of the sellers. The sellers also maintain a 401(k) retirement plan
whereby they match a portion of the employees' contributions. The Division's
contributions to the plan amounted to $15, $6, $9 and $72 for the year ended
December 31, 1992, the period from January 1, 1993 to June 8, 1993, the period
from June 9, 1993 to December 31, 1993 and for the year ended December 31,
1994, respectively.
NOTE 7 - JOINT VENTURE
On May 27, 1994, SPC formed SPC Terminals Inc. (STI) as a wholly-owned
subsidiary. On this date, STI entered into a general partnership agreement
with Aectra Terminals Inc. (ATI) and formed Steuart-Aectra Terminals
Partnership No. 1 (SAT #1), which purchased a petroleum bulk terminal located
in Savannah, Georgia. Each partner has a 50% interest in the partnership.
STI's investment in SAT #1 is accounted for under the equity method. In 1994,
STI recorded a loss of $75 representing its approximate share of SAT #1 losses.
The Division has a five year lease on this terminal from SAT #1 expiring May
31, 1999 for the cost of the property insurance. During 1994, the Division
incurred approximately $17 in rent expense in connection with the lease. The
Division also has a five year throughput agreement with Aectra Refining
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and Marketing (Aectra) expiring May 31, 1999, whereby Aectra has agreed to
throughput a minimum amount of gasoline, gasoline components and distillates
each year at this terminal.
At December 31, 1994, SAT #1 had total assets of $1,816 (principally property,
plant and equipment), liabilities of $1,766 and partnership equity of $50. SAT
#1 incurred a net loss of $150 for the period from May 27, 1994 to December 31,
1994.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Division provides terminal storage and throughput services to the marketing
division of SPC. Revenue from such services amounted to $2,141, $989, $1,353
and $2,800 for the year ended December 31, 1992, the period from January 1,
1993 to June 8, 1993, the period from June 9, 1993 to December 31, 1993 and for
the year ended December 31, 1994, respectively.
The Division also provides office space to other divisions of SPC. Rental
revenues amounted to $199, $74, $35 and $95 for the year ended December 31,
1992, the period from January 1, 1993 to June 8, 1993, the period from June 9,
1993 to December 31, 1993 and for the year ended December 31, 1994,
respectively.
15
KANEB SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In February 1995, Kaneb Services, Inc. ("Kaneb") acquired, through its
interest in Kaneb Pipe Line Partners, L.P. (the"Partnership") the refined
petroleum product pipeline assets (the "West Pipeline") of Wyco Pipe Line
Company for $27.1 million. The West Pipeline was owned 60% by a subsidiary of
GATX Terminals Corporation and 40% by a subsidiary of Amoco Pipe Line Company.
The acquisition was financed by the sale of $27 million of first mortgage notes
to three insurance companies. The assets acquired from Wyco Pipe Line Company
did not include certain assets that were leased to Amoco Pipe Line Company, and
the purchase agreement did not provide for either (i) the continuation of an
arrangement with Amoco Pipe Line Company for the monitoring and control of
pipeline flows or (ii) the extension or assumption of certain credit agreements
that Wyco Pipe Line Company had with its shareholders.
On December 18, 1995, the Partnership purchased the liquids terminaling
assets from Steuart Petroleum Company and certain of its affiliates
(collectively, "Steuart"). The acquisition price of $68 million was financed
by bank borrowings. The asset purchase agreement includes a provision for an
earn-out payment based upon revenues of one of the terminals exceeding a
specified amount for a seven year period beginning in 1996. The contracts also
include a provision for the continuation of all terminaling contracts in place
at the time of the acquisition, including those contracts with Steuart. The
acquisition will be accounted for using the purchase method of accounting. The
total purchase price will be allocated to the assets and liabilities based on
their respective fair values based on valuations and other studies which are
not yet completed. The allocation of the purchase price presented in the
unaudited pro forma consolidated financial statements is preliminary and
subject to adjustment.
The following unaudited pro forma financial statements of Kaneb have been
derived from (i) the historical financial statements of Kaneb as of September
30, 1995 and for the year ended December 31, 1994 and the nine-month period
ended September 30, 1995, (ii) the historical financial statements of Wyco Pipe
Line Company for the year ended December 31, 1994 and the period ended February
24, 1995, and (iii) the statements of revenues and direct operating expenses
for the year ended December 31, 1994 and the nine-month period ended September
30, 1995 and the statements of net assets to be acquired as of September 30,
1995 of SPC/SIC -- Terminal Operations Division. The following unaudited pro
forma financial statements have been compiled as if Kaneb acquired the pipeline
assets of the West Pipeline and the liquids terminaling assets of Steuart as of
the beginning of the period for income statement purposes and as of September
30, 1995 for balance sheet purposes. The unaudited pro forma financial
statements should be read in conjunction with the notes accompanying such
unaudited pro forma financial statements and with the historical financial
statements and related notes of Kaneb, the historical financial statements and
related notes of Wyco Pipe Line Company and the historical statements of
revenues and direct operating expenses and statements of net assets to be
acquired and related notes of SPC/SIC -- Terminal Operations Division.
The unaudited pro forma financial statements may not be indicative of
the results that would have occurred if Kaneb had acquired the pipeline assets
of the West Pipeline and the liquids terminaling assets of Steuart on the dates
indicated or which will be obtained in the future.
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KANEB SERVICES, INC.
PRO FORMA STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
(In Thousands, except per share amounts)
(Unaudited)
Kaneb West Pipeline Acquisition Pro
Historical Nine Historical Adjustments- Forma
Months Ended Period Ended West West
September 30, 1995 February 24, 1995 Pipeline Pipeline
------------------ ----------------- --------------- ---------------
Revenues $ 156,613 $ 1,715 $ - $ 158,328
------------------ ----------------- --------------- ---------------
Costs and expenses:
Operating costs 112,388 1,441 - 113,829
Depreciation and amortization 9,821 128 (22) (a) 9,927
General and administrative 3,444 - - 3,444
------------------ ----------------- --------------- ---------------
Total costs and expenses 125,653 1,569 (22) 127,200
------------------ ----------------- --------------- ---------------
Operating income 30,960 146 22 31,128
Gain on sale of partnership interests 54,157 - - 54,157
Interest and other income (expense) (433) 17,111 (16,926) (b) (248)
Interest expense (12,893) - (350) (c) (13,243)
Amortization of excess of cost over fair value
of net assets of acquired business (1,387) - - (1,387)
Non-controlling interest in net income (10,573) - - (10,573)
Income taxes (1,880) (6,026) 6,026 (e) (1,880)
------------------ ----------------- --------------- ---------------
Net income 57,951 11,231 (11,228) 57,954
Dividends applicable to preferred stock 1,158 - - 1,158
------------------ ----------------- --------------- ---------------
Net income applicable to common stock $ 56,793 $ 11,231 $ (11,228) $ 56,796
================== ================= =============== ===============
Earnings per common share $ 1.70 $ 1.70
================== ===============
Pro
Steuart Forma-
Historical Acquisition West
Nine Months Ended Adjustments- Pipeline and
SepteMber 30, 1995 Steuart Steuart
------------------ ------------- ---------------
Revenues $ 12,589 $ 2,217 (f) $ 173,134
------------------ ------------- ---------------
Costs and expenses:
Operating costs 6,916 (584) (g) 120,161
Depreciation and amortization 3,313 792 (h) 14,032
General and administrative - - 3,444
------------------ ------------- ---------------
Total costs and expenses 10,229 208 137,637
------------------ ------------- ---------------
Operating income 2,360 2,009 35,497
Gain on sale of partnership interests - - 54,157
Interest and other income (expense) - - (248)
Interest expense - (3,825) (i) (17,068)
Amortization of excess of cost over fair value
of net assets of acquired business - - (1,387)
Non-controlling interest in net income - (253) (j) (10,826)
Income taxes - (26) (k) (1,906)
------------------ ------------- ---------------
Net income 2,360 (2,095) 58,219
Dividends applicable to preferred stock - - 1,158
------------------ ------------- ---------------
Net income applicable to common stock $ 2,360 $ (2,095) $ 57,061
================== ============= ===============
Earnings per common share $ 1.71
===============
See notes to unaudited pro forma financial statements.
17
KANEB SERVICES, INC.
PRO FORMA STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(In Thousands, except per share amounts)
(Unaudited)
Acquisition Pro
Adjustments - Forma
Kaneb West Pipeline West West
Historical Historical Pipeline Pipeline
------------ ------------- ------------- ------------
Revenues $ 208,722 $ 13,694 $ - $ 222,416
------------ ------------- ------------- ------------
Costs and expenses:
Operating costs 159,913 7,916 - 167,829
Depreciation and Amortization 12,807 1,042 (338) (a) 13,511
General and administrative 4,038 - - 4,038
------------ ------------- ------------- ------------
Total costs and expenses 176,758 8,958 (338) 185,378
------------ ------------- ------------- ------------
Operating income 31,964 4,736 338 37,038
Interest and other income 195 - - 195
Interest expense (13,752) - (2,260) (c) (16,012)
Amortization of excess of cost over fair value
of net assets of acquired business (1,846) - - (1,846)
Non-controlling interest in net income (12,567) - (1,242) (d) (13,809)
Income taxes (1,959) (1,850) 1,709 (e) (2,100)
------------ ------------- ------------- ------------
Net income 2,035 2,886 (1,455) 3,466
Dividends applicable to preferred stock 1,489 - - 1,489
------------ ------------- ------------- ------------
Net income applicable to common stock $ 546 $ 2,886 $ (1,455) $ 1,977
============ ================ ============= ============
Earnings per common share $ 0.02 $ 0.06
============ ============
Pro
Forma -
Acquisition West
Steuart Adjustments - Pipeline and
Historical Steuart Steuart
------------ --------------- -------------
Revenues $ 22,672 $ 2,956 (f) $ 248,044
------------ -------------- -------------
Costs and expenses:
Operating costs 11,037 (1,031)(g) 177,835
Depreciation and Amortization 4,267 1,207 (h) 18,985
General and administrative - - 4,038
------------ -------------- -------------
Total costs and expenses 15,304 176 200,858
------------ -------------- -------------
Operating income 7,368 2,780 47,186
Interest and other income - - 195
Interest expense - (5,100) (i) (21,112)
Amortization of excess of cost over fair value
of net assets of acquired business - - (1,846)
Non-controlling interest in net income - (2,346) (j) (16,155)
Income taxes - (243) (k) (2,343)
------------ -------------- -------------
Net income 7,368 (4,909) 5,925
Dividends applicable to preferred stock 1,489
------------ -------------- -------------
Net income applicable to common stock $ 7,368 $ (4,909) $ 4,436
============ ============== =============
Earnings per common share $ 0.14
==============
See notes to unaudited pro forma financial statements.
18
KANEB SERVICES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
September 30, 1995
(In Thousands)
(Unaudited)
Acquisition
Kaneb Adjustments Pro
Historical Steuart Forma
------------ ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 28,217 $ - $ 28,217
Accounts receivable, trade 33,903 - 33,903
Inventories 6,229 - 6,229
Prepaid expenses 5,496 - 5,496
------------ ------------ ------------
Total current assets 73,845 - 73,845
------------ ------------ ------------
Property and equipment, net 191,051 68,850 (l) 259,901
------------ ------------ ------------
Excess of cost over fair value of net
assets of acquired business 65,490 - 65,490
------------ ------------ ------------
Other assets 3,311 - 3,311
------------ ------------ ------------
$ 333,697 $ 68,850 $ 402,547
============ ============ ============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 3,997 $ - $ 3,997
Accounts payable 10,657 200 (m) 10,857
Accrued expenses 27,603 - 27,603
Accrued distribution payable 4,067 - 4,067
------------ ------------ ------------
Total current liabilities 46,324 200 46,524
------------ ------------ ------------
Long-term debt, less current portion 125,719 68,000 (n) 193,719
------------ ------------ ------------
Net liabilities of discontinued operations 3,051 - 3,051
------------ ------------ ------------
Deferred income taxes and other liabilities 6,742 650 (m) 7,392
------------ ------------ ------------
Non-controlling interest in Partnership 74,636 - 74,636
------------ ------------ ------------
Stockholders' equity 77,225 - 77,225
------------ ------------ ------------
$ 333,697 $ 68,850 $ 402,547
============ ============ ============
See notes to unaudited pro forma financial statements.
19
Kaneb Services, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
WEST PIPELINE
(a) Represents adjustments to the depreciation and amortization of the acquired
assets.
(b) Represents the gain on the sale of the pipeline assets that was recorded by
Wyco Pipe Line Company in February 1995 related to the sale of the West
Pipeline to the Partnership.
(c) Represents interest expense on $27 million of acquisition debt at 8.37% per
annum.
(d) Represents the allocation of the net income of the Partnership to the
non-controlling interest.
(e) Represents elimination of federal income taxes.
STEUART
(f) Represents the revenues resulting from a throughput agreement entered into
by Steuart in conjunction with the acquisition. The agreement provides
for a fixed volume of storage over a two year period.
(g) Represents adjustments to insurance expense to reflect the Partnership's
insurance rates and to remove duplicate operating expenses, primarily
related to management and clerical positions.
(h) Represents adjustments to the depreciation and amortization of the acquired
assets.
(i) Represents interest expense on $68 million of acquisition debt at an
assumed rate of 7.5% per annum.
(j) Represents the allocation of the net income of the Partnership to the
non-controlling interest.
(k) Represents state income taxes on the operations of the Steuart assets.
(l) Represents the preliminary allocation of the estimated fair value of the
acquired assets as the internal valuation of the assets is not complete
as of the date of this filing.
(m) Represents the assumption of environmental liabilites in connection with
the acquisition of the Steuart assets.
(n) Represents the issuance of $68 million of long-term debt, incurred in
connection with the acquisition of the Steuart assets.
20
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.1 Asset Purchase Agreement by and among Steuart Petroleum
Company, SPC Terminals, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.2 Piney Point Pipeline Asset Purchase Agreement by and among
Piney Point Industries, Inc., Support Terminals Operating
Partnership, L.P. and Kaneb Pipe Line Operating Partnership,
L.P.
10.3 Purchase Agreement by and among Steuart Investment Company,
Support Terminals Operating Partnership, L.P. and Kaneb Pipe
Line Operating Partnership, L.P. for Cockpit Point
10.4 Amendment to Asset Purchase Agreements by and among
Steuart Petroleum Company, SPC Terminals, Inc., Piney Point
Industries, Inc., Steuart Investment Company, Support
Terminals Operating Partnership, L.P. and Kaneb Pipe Line
Operating Partnership, L.P.
23.1 Consent of Independent Accountants