UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-12295 GENESIS ENERGY, L.P. (Exact name of registrant as specified in its charter) Delaware 76-0513049 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 500 Dallas, Suite 2500, Houston, Texas 77002 (Address of principal executive offices) (Zip Code) (713) 860-2500 (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 -------- -------- This report contains 14 pages 2 GENESIS ENERGY, L.P. Form 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 5 Condensed Consolidated Statement of Partners' Capital for the Six Months Ended June 30, 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 3 GENESIS ENERGY, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) June 30, December 31, 1998 1997 -------- -------- Assets Current assets Cash and cash equivalents $ 3,737 $ 11,812 Accounts receivable - Trade 193,912 209,869 Related party 302 - Inventories 6,160 7,033 Other 4,904 3,488 -------- -------- Total current assets 209,015 232,202 Property and equipment, at cost 107,118 105,102 Less: Accumulated depreciation (17,361) (16,464) -------- -------- Net property and equipment 89,757 88,638 Other assets, net of amortization 14,051 10,274 -------- -------- Total assets $312,823 $331,114 ======== ======== Liabilities and Partners' Capital Current liabilities Accounts payable - Trade $194,492 $215,159 Related party 2,696 2,832 Accrued liabilities 9,687 6,547 -------- -------- Total current liabilities 206,875 224,538 Long-term debt 5,000 - Commitments and contingencies (Note 8) Minority interests 28,859 28,225 Partners' capital Common unitholders, 8,625 units issued and outstanding 70,646 76,783 General partner 1,443 1,568 -------- -------- Total partners' capital 72,089 78,351 -------- -------- Total liabilities and partners' capital $312,823 $331,114 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 4 GENESIS ENERGY, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per unit amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 1998 1997 1998 1997 -------- -------- ---------- ---------- REVENUES: Gathering and marketing revenues Unrelated parties $556,831 $840,537 $1,185,229 $1,570,058 Related parties 966 45,597 18,466 258,502 Pipeline revenues 4,016 4,552 8,375 8,608 -------- -------- ---------- ---------- Total revenues 561,813 890,686 1,212,070 1,837,168 COST OF SALES: Crude costs, unrelated parties 547,634 862,496 1,173,976 1,766,458 Crude costs, related parties 2,459 18,738 14,812 49,654 Field operating costs 3,643 2,926 7,004 6,274 Pipeline operating costs 2,030 1,587 3,895 2,809 -------- -------- ---------- ---------- Total cost of sales 555,766 885,747 1,199,687 1,825,195 -------- -------- ---------- ---------- GROSS MARGIN 6,047 4,939 12,383 11,973 EXPENSES: General and administrative 2,780 2,180 5,521 4,313 Depreciation and amortization 2,005 1,567 3,638 3,132 Nonrecurring charge (Note 5) 373 - 373 - -------- -------- ---------- ---------- OPERATING INCOME 889 1,192 2,851 4,528 OTHER INCOME (EXPENSE): Interest, net 112 369 290 461 Other, net 13 41 32 43 -------- -------- ---------- ---------- Net income before minority interests 1,014 1,602 3,173 5,032 Minority interests 203 320 634 1,006 -------- -------- ---------- ---------- NET INCOME $ 811 $ 1,282 $ 2,539 $ 4,026 ======== ======== ========== ========== NET INCOME PER COMMON UNIT - BASIC AND DILUTED $ 0.09 $ 0.15 $ 0.29 $ 0.46 ======== ======== ========== ========== NUMBER OF COMMON UNITS OUTSTANDING 8,625 8,625 8,625 8,625 ======== ======== ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements. 5 GENESIS ENERGY, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 1998 1997 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,539 $4,026 Adjustments to reconcile net income to net cash provided by (used in) operating activities - Depreciation 3,171 2,897 Amortization of intangible assets 467 235 Minority interests equity in earnings 634 1,006 Loss (gain) on disposals of fixed assets 233 (47) Other noncash charges 814 33 Changes in components of working capital - Accounts receivable 15,655 105,802 Inventories 873 3,104 Other current assets (1,416) 383 Accounts payable (20,803) (109,638) Accrued liabilities 2,326 610 -------- --------- Net cash provided by operating activities 4,493 8,411 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (4,661) (1,313) Increase in other assets (4,244) (10) Proceeds from sales of assets 138 304 -------- --------- Net cash used in investing activities (8,767) (1,019) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under Credit Facilities 5,000 - Distributions: To common unitholders (8,625) (5,693) To general partner (176) (116) -------- --------- Net cash used in financing activities (3,801) (5,809) -------- --------- Net (decrease) increase in cash and cash equivalents (8,075) 1,583 Cash and cash equivalents at beginning of period 11,812 11,878 -------- --------- Cash and cash equivalents at end of period $ 3,737 $ 13,461 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 6 GENESIS ENERGY, L.P. CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (In thousands) (Unaudited) Partners' Capital --------------------------- Common General Unitholders Partner Total ------- ------- ------- Partners' capital at December 31, 1997 $76,783 $1,568 $78,351 Net income for the six months ended June 30, 1998 2,488 51 2,539 Distributions during the six months ended June 30, 1998 (8,625) (176) (8,801) ------- ------ ------- Partners' capital at June 30, 1998 $70,646 $1,443 $72,089 ======= ====== ======= The accompanying notes are an integral part of these condensed consolidated financial statements. 7 GENESIS ENERGY, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Formation and Offering In December 1996, Genesis Energy, L.P. ("GELP") completed an initial public offering of 8.6 million Common Units at $20.625 per unit, representing limited partner interests in GELP of 98%. Genesis Energy, L.L.C. (the "General Partner") serves as general partner of GELP and its operating limited partnership, Genesis Crude Oil, L.P. ("GCOLP"). The General Partner owns a 2% general partner interest in GELP. Transactions at Formation At the closing of the offering, GELP contributed the net proceeds of the offering to GCOLP in exchange for an 80.01% general partner interest in GCOLP. With the net proceeds of the offering, GCOLP purchased a portion of the crude oil gathering, marketing and pipeline operations of Howell Corporation ("Howell") and made a distribution to Basis Petroleum, Inc. ("Basis") in exchange for its conveyance of a portion of its crude oil gathering and marketing operations. GCOLP issued an aggregate of 2.2 million subordinated limited partner units ("Subordinated OLP Units") to Basis and Howell to obtain the remaining operations. Basis' Subordinated OLP units were transferred to its then parent, Salomon Smith Barney Holdings Inc. ("Salomon") in May 1997. Unless the context otherwise requires, the term "the Partnership" hereafter refers to GELP and its operating limited partnership. 2. Basis of Presentation The accompanying financial statements and related notes present the consolidated financial position as of June 30, 1998 and 1997 for GELP and its results of operations, cash flows and changes in partners' capital for the three and six months ended June 30, 1998 and 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, 1997 filed with the SEC. Basic net income per Common Unit is calculated on the number of outstanding Common Units of 8,625,000. For this purpose, the 2% General Partner interest is excluded from net income. Diluted net income per Common Unit did not differ from basic net income per Common Unit for either period presented. The Common Units that will be issued in accordance with the Restricted Unit Plan are antidilutive. 3. Adoption of Accounting Standards SFAS No. 130, "Reporting Comprehensive Income", was issued in June 1997, with adoption required for fiscal years beginning after December 31, 1997. SFAS No. 130 requires the presentation of an additional income measure (termed "comprehensive income"), which adjusts traditional net income for certain items that previously were only reflected as direct charges to equity. For the three and six month periods ended June 30, 1998 and 1997, there is not a difference between "traditional" net income and comprehensive net income. SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", was issued in June 1997, establishing standards for the way that public business enterprises report information about operating segments and related information in interim and annual financial statements. The Partnership has evaluated the applicability of the statement and has concluded that the Partnership does not meet the criteria which required business segment reporting. 8 SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued in June 1998. This new standard, which the Partnership will be required to adopt in the year 2000, will change the method of accounting for changes in the fair value of certain derivative instruments by requiring that an entity recognize the derivative at fair value as an asset or liability on its balance sheet. Depending on the purpose of the derivative and the item it is hedging, the changes in fair value of the derivative will be recognized in current earnings or as a component of other comprehensive income in partners' capital. The Partnership has started the process of evaluating the impact that this statement will have on its results of operations and financial position. This new standard could increase volatility in net income and comprehensive income. 4. Credit Resources GCOLP entered into credit facilities with Salomon (collectively, the "Credit Facilities"), pursuant to a Master Credit Support Agreement. GCOLP's obligations under the Credit Facilities are secured by its receivables, inventories, general intangibles and cash. Guaranty Facility Salomon is providing a Guaranty Facility through December 31, 1999 in connection with the purchase, sale and exchange of crude oil by GCOLP. The aggregate amount of the Guaranty Facility is limited to $400 million for the year ending December 31, 1998 and $300 million for the year ending December 31, 1999 (to be reduced in each case by the amount of any obligation to a third party to the extent that such third party has a prior security interest in the collateral). GCOLP pays a guarantee fee to Salomon which will increase over the term of the facility, thereby increasing the cost of the credit support provided to GCOLP under the Guaranty Facility from a below-market rate to a rate that may be higher than rates paid to independent financial institutions for similar credit. At June 30, 1998, the aggregate amount of obligations covered by guarantees was $174 million, including $103 million in payable obligations and $71 million of estimated crude oil purchase obligations for July 1998. Working Capital Facility Until replacement as described below, Salomon provided GCOLP with a Working Capital Facility of up to $50 million, which amount included direct cash advances not to exceed $35 million outstanding at any one time and letters of credit that may be required in the ordinary course of GCOLP's business. The Partnership had no letters of credit outstanding at June 30, 1998. Direct cash advances of $5 million were outstanding at June 30, 1998. In August 1998, GCOLP entered into a revolving credit/loan agreement ("Loan Agreement") with Bank One, Texas, N.A. ("Bank One") to replace the Working Capital Facility that had been provided by Salomon. The Loan Agreement provides for loans or letters of credit in the aggregate not to exceed the greater of $35 million or the Borrowing Base (as defined in the Loan Agreement). Loans will bear interest at a rate chosen by GCOLP which would be one or more of the following: (a) a Floating Base Rate (as defined in the Loan Agreement) that is generally the prevailing prime rate less one percent; (b) a rate based on the Federal Funds Rate plus one and one-half percent or (c) a rate based on LIBOR plus one and one-quarter percent. The Loan Agreement provides for a revolving period until August 14, 2000, with interest to be paid monthly. All loans outstanding on August 14, 2000, are due at that time. The Loan Agreement is collateralized by the accounts receivable and inventory of GCOLP, subject to the terms of an Intercreditor Agreement between Bank One and Salomon. There is no compensating balance requirement under the Loan Agreement. A commitment fee of 0.35% on the available portion of the commitment is provided for in the agreement. Material covenants and restrictions include requirements to maintain a ratio of current assets to current liabilities of at least 1:1 and to maintain tangible net worth, as defined in the Loan Agreement, of $65 million. There can be no assurance of the availability or the terms of credit for the Partnership. The General Partner believes that the Loan Agreement and Guaranty Facility will be sufficient to support the Partnership's crude oil purchasing activities and working capital requirements during the terms of these agreements. No assurance, however, can be given that the General Partner will not be required to reduce or restrict the Partnership's gathering 9 and marketing activities because of limitations on its ability to obtain credit support and financing for its working capital needs. 5. Nonrecurring Charge In the second quarter of 1998, the Partnership shut-in its Main Pass pipeline. A charge of $373,000 was recorded, consisting of $109,000 of costs related to the shut-in and a non-cash write-down of the asset of $264,000. 6. Transactions with Related Parties Sales, purchases and other transactions with affiliated companies, in the opinion of management, are conducted under terms no more or less favorable than those conducted with unaffiliated parties. Sales and Purchases of Crude Oil A summary of sales to and purchases from related parties of crude oil is as follows (in thousands). Six Months Six Months Ended Ended June 30, June 30, 1998 1997 ------- --------- Sales to affiliates $18,466 $258,502 Purchases from affiliates $14,812 $ 49,654 General and Administrative Services The Partnership does not directly employ any persons to manage or operate its business. Those functions are provided by the General Partner. The Partnership reimburses the General Partner for all direct and indirect costs of these services. Total costs reimbursed to the General Partner by the Partnership were $7,667,000 and $7,509,000 for the six months ended June 30, 1998 and 1997, respectively. The Partnership entered into a Corporate Services Agreement with Basis pursuant to which Basis, directly or through its affiliates, provided certain administrative and support services for the benefit of the Partnership. Such services included human resources, tax, accounting, data processing, NYMEX transaction clearing and other similar administrative services. The Partnership ceased to receive services under the agreement at December 31, 1997. Charges by Basis under the Corporate Services Agreement during the period in 1997 that Basis was a related party to the Partnership were approximately $400,000. Treasury Services The Partnership entered into a Treasury Management Agreement with Basis. Effective May 1, 1997, Salomon replaced Basis as a party to the Treasury Management Agreement. Under the Treasury Management Agreement, the Partnership invests excess cash with Salomon and earns interest at market rates. At June 30, 1998, the Partnership had no funds deposited with Salomon. At June 30, 1997, Salomon owed the Partnership $10,000,000 under the Treasury Management Agreement. Such amount has been classified in the consolidated balance sheet as cash and cash equivalents. For the six months ended June 30, 1998, the Partnership earned interest of $242,000 on the investments with Salomon. For the six months ended June 30, 1997, the Partnership earned interest of $299,000 on these loans by the Partnership to Basis and Salomon. Credit Facilities As discussed in Note 4, Salomon provides Credit Facilities to the Partnership. For the six months ended June 30, 1998 and 1997, the Partnership paid Salomon $317,000 and $403,000, respectively, for guarantee fees under the Credit Facilities. The Partnership paid Salomon $5,000 for interest under the Credit Facilities during the six months ended June 30, 1998. The Partnership paid Basis $85,000 for interest under the Credit Facilities during the 1997 period. 10 7. Supplemental Cash Flow Information Cash received by the Partnership for interest was $306,000 and $615,000 for the six months ended June 30, 1998 and 1997, respectively. Payments of interest were $16,000 and $115,000 for the six months ended June 30, 1998 and 1997, respectively. 8. Contingencies The Partnership is subject to various environmental laws and regulations. Policies and procedures are in place to monitor compliance. The Partnership's management has made an assessment of its potential environmental exposure and determined that such exposure is not material to its consolidated financial position, results of operations or cash flows. As part of the formation of the Partnership, Basis and Howell agreed to be responsible for certain environmental conditions related to their ownership and operation of their respective assets contributed to the Partnership and for any environmental liabilities which Basis or Howell may have assumed from prior owners of these assets. The Partnership is subject to lawsuits in the normal course of business and examination by tax and other regulatory authorities. Such matters presently pending are not expected to have a material adverse effect on the financial position, results of operations or cash flows of the Partnership. As part of the formation of the Partnership, Basis and Howell agreed to each retain liability and responsibility for the defense of any future lawsuits arising out of activities conducted by Basis and Howell prior to the formation of the Partnership and have also agreed to cooperate in the defense of such lawsuits. 9. Distributions On July 7, 1998, the Board of Directors of the General Partner declared a cash distribution of $0.50 per Unit for the quarter ended June 30, 1998. The distribution will be paid August 14, 1998, to the General Partner and all Common Unitholders of record as of the close of business on July 31, 1998. The Subordinated OLP Unitholders will not receive a distribution for the quarter. 11 GENESIS ENERGY, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Genesis Energy, L.P., operates crude oil common carrier pipelines and is one of the largest independent gatherers and marketers of crude oil in North America, with operations concentrated in Texas, Louisiana, Alabama, Florida, Mississippi, New Mexico, Kansas and Oklahoma. 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 Selected financial data for this discussion of the results of operations follows, in thousands, except barrels per day. Three Months Ended Six Months Ended June 30, Ended June 30, 1998 1997 1998 1997 -------- -------- -------- -------- Gross margin Gathering and marketing $ 4,061 $ 1,974 $ 7,903 $ 6,174 Pipeline $ 1,986 $ 2,965 $ 4,480 $ 5,799 General and administrative expenses $ 2,780 $ 2,180 $ 5,521 $ 4,313 Depreciation and amortization $ 2,005 $ 1,567 $ 3,638 $ 3,132 Nonrecurring charge $ 373 $ - $ 373 $ - Operating income $ 889 $ 1,192 $ 2,851 $ 4,528 Interest income (expense), net $ 112 $ 369 $ 290 $ 461 Barrels per day Wellhead 126,224 103,559 118,361 105,041 Bulk and exchange 320,137 391,592 331,577 365,808 Pipeline 84,753 93,466 87,123 87,163 Gross margin from gathering and marketing operations is generated by the difference between the price of crude oil at the point of purchase and the price of crude oil at the point of sale, minus the associated costs of aggregation and transportation. The absolute price levels of crude oil do not necessarily bear a relationship to gross margin, 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 generally not meaningful in analyzing the variation in gross margin. Such changes are not addressed in the following discussion. Pipeline gross margins are primarily a function of the level of throughput and storage activity and are generated by the difference between the regulated published tariff and the fixed and variable costs of operating the pipeline. Changes in revenues, volumes and pipeline operating costs, therefore, are relevant to the analysis of financial results of the Partnership's pipeline operations. Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997 Gross margin from gathering and marketing operations was $7.9 million for the six months ended June 30, 1998, as compared to $6.2 million for the six months ended June 30, 1997. The increase primarily resulted from the renegotiations of purchase contracts and the acquisition of the gathering and marketing assets of Falco S&D, Inc. ("Falco") in April 1998. Pipeline gross margin was $4.5 million for the six months ended June 30, 1998, as compared to the pipeline gross margin of $5.8 million for the first six months of 1997. Pipeline revenues decreased $0.2 million. Although total throughput was unchanged, a higher percentage of shipments were made on lower tariff systems. Pipeline operating costs increased $1.1 million due to repairs on the Main Pass pipeline during the first quarter of 1998, lease 12 payments beginning in the second quarter of 1998 on a new segment of pipeline and increased routine maintenance expenditures. General and administrative expenses increased $1.2 million between the 1998 and 1997 six-month periods. This increase can be attributed to three items. In the 1998 period, the Partnership recorded a non-cash charge of $0.8 million related to its Restricted Unit Plan. The estimated total charge for the Restricted Unit Plan is being recognized over the three-year vesting period beginning in 1998. In addition, in 1998 the Partnership no longer benefited from the sharing of certain services with Basis Petroleum, Inc., under the terms of a Corporate Services Agreement, as it did in 1997. The third item relates to the additional marketing and administrative personnel added by the Partnership in April 1998 as a result of the Falco asset acquisition. Depreciation and amortization increased $0.5 million between the six months ended June 30, 1998 and the same period in 1997. This increase resulted primarily from depreciation and amortization in the second quarter of 1998 on the assets acquired from Falco. In the 1998 six-month period, the Partnership recorded a nonrecurring charge of $0.4 million as a result of the shut-in of its Main Pass pipeline. The charge consisted of $0.1 million of costs related to the shut-in and a $0.3 million write-down of the asset. Three Months Ended June 30, 1998 Compared with Three Months Ended June 30, 1997 Gross margin from gathering and marketing was $4.1 million for the three months ended June 30, 1998, as compared to $2.0 million for the three months ended June 30, 1997. The improvement primarily resulted from the renegotiations of purchase contracts and the acquisition of the gathering and marketing assets of Falco. Pipeline gross margin was $2.0 million for the three months ended June 30, 1998, as compared to $3.0 million for the three months ended June 30, 1997. This decrease of $1.0 million in gross margin can be attributed to a decline in revenues of $0.5 million and the lease payment and increase in maintenance expenditures discussed above. The revenue decrease between the second quarter periods is primarily attributable to volume declines during the second quarter of 1998 associated with low crude oil prices. General and administrative expenses increased $0.6 million between the 1998 and 1997 quarters primarily as a result of the same factors that are discussed above related to the increase in general and administrative expenses between the six-month periods. The increase in depreciation and amortization between the second quarter period is attributable to depreciation and amortization of the assets acquired from Falco. Also, as discussed above, the Partnership recorded a nonrecurring charge in the second quarter of 1998 related to its Main Pass pipeline. Liquidity and Capital Resources Cash Flows Cash flows from operating activities were $4.5 million for the six months ended June 30, 1998. In the 1997 six-month period, cash flows from operating activities were $8.4 million. The change between the two periods results primarily from the difference in net income and variations in the timing of payment of crude purchase obligations. For the six months ended June 30, 1998, cash flows utilized in investing activities were $8.8 million as a result of additions in property and equipment, primarily related to the acquisition of the gathering and marketing assets of Falco and to pipeline operations. In the 1997 first six months, investing activities utilized cash flows of $1.0 million as a result of property and equipment additions related to pipeline operations. Cash flows used in financing activities by the Partnership during the first six months of 1998 totaled $3.8 million. Distributions paid to the common unitholders and the general partner totaling $8.8 million utilized cash flows. Borrowings under the Credit Facilities of $5.0 million for capital expenditures provided financing cash flows. In the 1997 six month period cash flows utilized in financing activities were $5.8 million, representing distributions to the common unitholders and the general partner. 13 Working Capital and Credit Resources As discussed in Note 4 of the Notes to Condensed Consolidated Financial Statements, Salomon provided a Working Capital Facility to the Partnership until August 1998. At this time, that Working Capital Facility was replaced with a revolving credit/loan agreement ("Loan Agreement") with Bank One, Texas, N.A. ("Bank One"). The Loan Agreement provides for loans or letters of credit in the aggregate not to exceed the greater of $35 million or the Borrowing Base (as defined in the Loan Agreement). Loans will bear interest at a rate chosen by GCOLP which would be one or more of the following: (a) a Floating Base Rate (as defined in the Loan Agreement) that is generally the prevailing prime rate less one percent; (b) a rate based on the Federal Funds Rate plus one and one-half percent or (c) a rate based on LIBOR plus one and one-quarter percent. The Loan Agreement provides for a revolving period until August 14, 2000, with interest to be paid monthly. All loans outstanding on August 14, 2000, are due at that time. The Loan Agreement is collateralized by the accounts receivable and inventory of GCOLP, subject to the terms of an Intercreditor Agreement between Bank One and Salomon. There is no compensating balance requirement under the Loan Agreement. A commitment fee of 0.35% on the available portion of the commitment is provided for in the agreement. Material covenants and restrictions include requirements to maintain a ratio of current assets to current liabilities of at least 1:1 and to maintain tangible net worth, as defined in the Loan Agreement, of $65 million. Forward Looking Statements The statements in this 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. 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 changes in regulations, the Partnership's success in obtaining additional lease barrels, refiner demand for various grades of crude oil and the resulting changes in pricing relationships, developments relating to possible acquisitions or business combination opportunities, the success of the Partnership's risk management activities and conditions of the capital markets and equity markets during the periods covered by the forward looking statements. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Part I. Item 1. Note 8 to the Condensed Consolidated Financial Statements entitled "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 14 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. GENESIS ENERGY, L.P. (A Delaware Limited Partnership) By: GENESIS ENERGY, L.L.C., as General Partner Date: August 14, 1998 By: /s/ Allyn R. Skelton, II ------------------------------ Allyn R. Skelton, II Chief Financial Officer