-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q9eZwUKv9GuULgi0+f/skQEN1flc1jn9J5RjjW5QDQaPIxYdqu271ouNsTlcR2Vx wB7UQubmE661wM0dDzfCmw== 0000840335-95-000010.txt : 19951119 0000840335-95-000010.hdr.sgml : 19951119 ACCESSION NUMBER: 0000840335-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTWAY PARTNERS L P CENTRAL INDEX KEY: 0000840335 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 363601653 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10091 FILM NUMBER: 95593025 BUSINESS ADDRESS: STREET 1: 25129 OLD RD STE 322 CITY: NEWHALL STATE: CA ZIP: 91381 BUSINESS PHONE: 8052541220 MAIL ADDRESS: STREET 1: PO BOX 7033 CITY: VAN NUYS STATE: CA ZIP: 91409 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 1995 Commission File Number 1-10091 HUNTWAY PARTNERS, L.P. (Exact Name of Registrant as Specified in its Charter) Delaware 36-3601653 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 25129 The Old Road, Suite 322 Newhall, California (Address of Principal Executive Offices) 91381 (Zip Code) Registrants Telephone Number Including Area Code: (805) 286-1582 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(b) 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 . QUARTERLY REPORT ON FORM 10-Q HUNTWAY PARTNERS, L.P. For the Quarter Ended September 30, 1995 INDEX Part I. Financial Information Page Condensed Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Operations for the Three and Nine months Ended September 30, 1995 and 1994 4 Condensed Consolidated Statement of Partners Capital (Deficiency) for the Nine months Ended September 30, 1995 4 Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Managements Discussion and Analysis of Results of Operations and Financial Condition 8 Part II. Other Information 13 HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
Sept. 30, Dec. 31, 1995 1994 (Audited) CURRENT ASSETS: Cash $ 1,721 $ 5,984 Accounts receivable 8,340 2,510 Inventories 3,553 4,019 Prepaid expenses 655 749 Total current assets 14,269 13,262 PROPERTY - net 68,439 69,857 OTHER ASSETS 768 805 GOODWILL 1,830 1,872 TOTAL ASSETS $ 85,306 $ 85,796 CURRENT LIABILITIES: Accounts payable $ 8,530 $ 5,984 Current portion of long-term obligations 4,224 2,418 Reserve for plant closure 214 242 Accrued interest 1,317 241 Other accrued liabilities 1,754 1,652 Total current liabilities 16,039 10,537 LONG-TERM OBLIGATIONS 90,834 91,312 PARTNERS CAPITAL (DEFICIT) (21,567) (16,053) TOTAL LIABILITIES AND PARTNERS CAPITAL $ 85,306 $ 85,796
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)
Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1995 1994 1995 1994 SALES $27,345 $26,110 $ 60,684 $ 60,057 COSTS AND EXPENSES: Material and Processing Costs 24,301 23,159 57,667 53,143 Selling and Administration Expenses 895 851 2,818 3,205 Interest Expense 1,328 1,248 3,884 3,743 Depreciation and Amortization 661 649 1,829 1,795 Total Costs and Expenses 27,185 25,907 66,198 61,886 NET INCOME (Loss) $ 160 $ 203 $ (5,514) $ (1,829) NET INCOME/(LOSS) PER EQUIVALENT LIMITED PARTNER UNIT $ 0.01 $ 0.02 $ (0.47) $ (0.16) EQUIVALENT LIMITED PARTNER UNITS OUTSTANDING 11,673 13,359 11,673 11,673
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF PARTNERS CAPITAL (DEFICIT) (in thousands)
General Limited Partners Partners Totals Balance at January 1, 1995 (Audited) $ (160) $(15,893) $(16,053) Net Loss for the Nine Months Ended September 30, 1995 (55) (5,459) (5,514) Balance at September 30, 1995 $ (215) $(21,352) $(21,567)
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Nine Months Nine Months Ended Ended Sept. 30, 1995 Sept. 30, 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (5,514) $ (1,829) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: Depreciation and Amortization 1,829 1,795 Interest Expense Paid by the Issuance of Notes 1,692 3,180 Changes in Operating Assets and Liabilities: Decrease (Increase) in Accounts Receivable (5,830) (2,341) Decrease (Increase) in Inventories 428 902 Decrease (Increase) in Prepaid Expenses 94 (394) Increase (Decrease) in Reserve for Plant Closure (28) (854) Increase (Decrease) in Accounts Payable 2,546 2,730 Increase (Decrease) in Accrued Liabilities 1,179 (783) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (3,604) 2,406 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Property (186) (654) Additions to Other Assets (108) (76) NET CASH (USED) BY INVESTING ACTIVITIES (294) (730) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of Long-Term Obligations (365) (4,137) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (365) (4,137) NET INCREASE (DECREASE) IN CASH (4,263) (2,461) CASH BALANCE - BEGINNING OF PERIOD 5,984 7,745 CASH BALANCE - END OF PERIOD $ 1,721 $ 5,284 INTEREST PAID DURING THE PERIOD $ 1,114 $ 606
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (All dollar amounts in thousands) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements of Huntway Partners, L.P. and subsidiary as of September 30, 1995 and for the three and nine month periods ended September 30, 1995 and 1994 are unaudited, but in the opinion of management, reflect all adjustments necessary for a fair presentation of such financial statements in accordance with generally accepted accounting principles. The results of operations for an interim period are not necessarily indicative of results for a full year. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Partnerships annual report for the year ended December 31, 1994. Crude oil and finished product inventories are stated at cost determined by the last-in, first-out method, which is not in excess of market. The effect of LIFO on nine months 1995 and 1994 results was to increase the net loss by $2,000 and $1,020,000, respectively. For the third quarter of 1995 and 1994, the effect of LIFO was to increase net income by $616,000 and $293,000, respectively. Inventories at September 30, 1995 and December 31, 1994 were as follows:
1995 1994 Finished Products $1,492 $2,792 Crude Oil and Supplies 3,266 2,430 4,758 5,222 Less LIFO Reserve (1,205) (1,203) Total $3,553 $4,019
2. FINANCIAL ARRANGEMENTS As of September 30, 1995, the Partnership was not in compliance with cash flow covenants of its primary borrowings which require the partnership to maintain cash flow before debt service of at least $3,000,000 during the most recent four quarter period. The Partnerships lenders have agreed to issue a waiver of compliance regarding this covenant. 3. CONTINGENCIES On May 19, 1995, during testing pursuant to the closure of a waste water treatment pond, the Partnership discovered that several drums of hazardous materials had been improperly disposed of at the site of the Wilmington refinery. Subsequent geophysical testing to date indicates that approximately 20 to 30 of such drums had been improperly disposed of at the site. The materials had been stored in drums and disposed of under the waste water treatment pond apparently at the time of its construction. Although the Partnership believes that it has claims against the former owners and operators of the site, as well as the entities involved in the construction of the pond and various insurance carriers which should substantially mitigate the ultimate costs, the Partnership has accrued $325,000 as of September 30, 1995 for remediation of the contamination. Management does not believe, based upon the information known at this time, that the remediation effort will have a material adverse effect on the Partnerships results of operations or financial position. The Partnership is party to a number of lawsuits and other proceedings arising out of the ordinary course of its business. While the results of such lawsuits and proceedings cannot be predicted with certainty, management does not expect that the ultimate liability, if any, will have a material adverse effect on the consolidated financial position or results of operations of the Partnership. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the financial statements included elsewhere in this report. Results of Operations Huntway is principally engaged in the processing and sale of liquid asphalt products, as well as the production of other refined petroleum products such as gas oil, naphtha, kerosene distillate, diesel fuel, jet fuel and bunker fuel. Huntways ability to generate income depends principally upon the margins between the prices for its refined petroleum products and the cost of crude oil, as well as upon demand for liquid asphalt, which affects both price and sales volume. Historically, refined petroleum product prices (including prices for liquid asphalt, although to a lesser degree than Huntways other refined petroleum products) generally fluctuate with crude oil price levels. Accordingly, there has not been a relationship between total revenues and income due to the volatile commodity character of crude oil prices. Accordingly, income before interest, depreciation and amortization provides the most meaningful basis for comparing historical results of operations discussed below. A number of uncertainties exist that may affect Huntways future operations including the possibility of further increases in crude costs that may not be able to be passed on to customers in the form of higher prices. Additionally, crude costs could rise to such an extent that Huntway may not have sufficient letter of credit availability to purchase all the crude it needs to sustain operations to capacity, especially during the summer season. If this occurred, Huntway would be forced to reduce crude purchases which could adversely impact results of operations. The Partnerships primary product is liquid asphalt. Most of Huntways competitors produce liquid asphalt as a by- product and are of much greater size and have much larger financial resources than the Partnership. Accordingly, the Partnership has in the past, and may in the future, have difficulty raising prices in the face of increasing crude costs. Three Months Ended September 30, 1995 Compared with the Three Months Ended September 30, 1994 The 1995 third quarter net income was $160,000, or 1 cent per unit, versus 1994 third quarter net income of $203,000, or 2 cents per unit. The nominal decrease of $43,000 in net income between quarters is principally attributable to costs associated with the Arizona refinery which was charged against the closure reserve in 1994. The following table sets forth the effects of changes in price and volume on sales and crude and processing costs on the quarter ended September 30, 1995 as compared to the quarter ended September 30, 1994:
Materials & Barrels Sales Processing Net Sold (In Thousands) Period ended Sept. 30, 1994 $ 60,057 $ 53,143 $ 6,914 3,500 Effect of changes in price 4,556 8,001 (3,445) Effect of changes in volume (3,929) (3,477) (452) (229) Period ended Sept. 30, 1995 $ 60,684 $ 57,667 $ 3,017 3,271
As reflected in the table, the net margin between sales and crude and processing costs improved from $2.08 per barrel for the third quarter of 1994 to $2.20 per barrel for the third quarter of 1995. This improvement in net margin of $93,000 is primarily attributable to the Partnership being able to pass on to its customers crude cost increases due to heavy late summer demand and to improved margins. Sales prices averaged $19.76 per barrel for the third quarter of 1995 as compared to $18.44 per barrel for the comparable quarter of 1994, an increase of $1.32, or 7%. This increase in pricing was partially offset by increased material and processing costs which averaged $17.56 and $16.36 for the quarter ended September 30, 1995 and 1994, respectively, an increase of $1.20, or 7%. Selling, general and administrative costs increased $44,000 compared to the third quarter of 1994 as 1994 received the benefit of the recovery of a previously written-off receivable of $110,000 offset by the elimination of bonus accruals in 1995. Interest expense and depreciation and amortization expense were generally consistent with the prior year. Because of the foregoing, as well as other factors affecting the Partnerships operating results, past financial performance should not be considered to be a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods. Nine months Ended September 30, 1995 Compared with the Nine months Ended September 30, 1994 The net loss was $5,514,000, or 47 cents per unit, compared with the comparable 1994 period net loss of $1,829,000, or 16 cents per unit. As explained below, current period results were much worse than usual due to a combination of heavy rains, rising crude costs and generally weak refinery margins in the first half of 1995. The $3,685,000 increase in the net loss is principally attributable to unseasonably high rainfall in California during the first four months of 1995 versus the prior year. As asphalt cannot be laid in rainy weather, barrels of paving asphalt sold fell 7% from the level achieved in the comparable period of 1994. Additionally, crude prices rose between periods an average of $2.37 a barrel, or 19%. Crude costs rose in response to rising world crude prices and increased demand for California heavy crude as refineries are increasingly using this crude in their refinery processes. Due to reduced demand in the first half of the year, asphalt prices could not be raised in response to rising crude costs. In addition, West Coast refinery margins continued weak throughout much of the first nine months of the year. These comparatively weak refinery margins result from a combination of rising crude costs and excess light-end inventory. Accordingly, margins for the Partnerships other refined petroleum products fell. To maintain cash flow, the Partnership sold low- margin fuel oil in the first half of 1995 which contributed to the negative operating margins incurred by the Partnership in the period. Fuel oil is a blend of asphalt and gas oil. The following table sets forth the effects of changes in price and volume on sales and crude and processing costs on the nine month period ended September 30, 1995 as compared to the nine month period ended September 30, 1994:
Materials & Barrels Sales Processing Net Sold (In Thousands) Three months ended Sept. 30, 1994 $ 26,110 $ 23,159 $ 2,951 1,416 Effect of changes in price 1,825 1,665 160 Effect of changes in volume (590) (523) (67) (32) Three months ended Sept. 30, 1995 $ 27,345 $ 24,301 $ 3,044 1,384
As reflected in the table, the net margin between sales and crude and processing costs declined from $1.98 per barrel for the first nine months of 1994 to $0.92 per barrel for the first nine months of 1995. This decline in net margin of $3,897,000 is primarily attributable to significantly increased crude costs which the Partnership was unable to pass on to its customers. Volume declined slightly in Southern California and heavy rains in the period forced the sale of fuel oil in order to reduce excess asphalt inventory. Sales in Northern California declined as a result of the inclement weather. Sales prices averaged $18.55 per barrel for the first nine months of 1995 as compared to $17.16 per barrel for the comparable period of 1994, an increase of $1.39, or 8%. This modest increase in pricing was more than offset by increases in material and processing costs which averaged $17.63 and $15.18 for the nine months ended September 30, 1995 and 1994, respectively, an increase of $2.45 or 16%. Selling, general and administrative costs decreased $387,000 compared to the comparable period of 1994 primarily as a result of lower professional and investor relations fees as well as elimination of management bonus accruals. Interest expense and depreciation and amortization expense were consistent with the prior year. Capital Resources And Liquidity The primary factors that affect the Partnerships cash requirements and liquidity position are fluctuations in the selling prices of our refined products caused by local market supply and demand factors including public and private demand for road construction and improvement as well as demand for diesel fuel and gasoline, as well as fluctuations in the cost of crude oil which is impacted by a myriad of market factors, both foreign and domestic. In addition, capital expenditure requirements, including costs to maintain compliance with environmental regulations as well as debt service requirements, also impact the Partnerships cash needs. In the first nine months of 1995, operating activities consumed $3,604,000 in cash primarily resulting from the periods net loss of $5,514,000 offset by non-cash items of $3,521,000. Seasonal increases in accounts receivable of $5,830,000 were financed by similar seasonal increases in accounts payable which increased by $2,546,000 and by a decrease in inventories of $428,000. Accrued liabilities increased by $1,179,000 due to increased accrued interest which was substantially paid down on October 3, 1995 commensurate with a $1,250,000 payment to the Partnerships senior lenders. Investing activities consumed $294,000 during the first nine months of 1995 primarily for refinery equipment and deposits. Financing activities consumed $365,000 in the first nine months of 1995 primarily for reduction in the capital lease obligation. In comparison, through the first nine months of 1994, operating activities provided $2,406,000 in cash primarily resulting from the periods net loss of $1,829,000 offset by non- cash items of $4,975,000. Prepaid expenses increased $394,000 primarily due to turnaround costs incurred at each of the two California refineries. The expenditure of $854,000 relating to closure, maintenance and other costs was charged against the Sunbelt refinery closure reserve. Inventory decreased $902,000 through the first nine months of the year while accounts receivable increased by $2,341,000 due to higher seasonal sales levels. Accrued liabilities declined $783,000 primarily due to property tax payments. These factors were offset by increased accounts payable of $2,730,000 due to higher crude purchases. Investing activities consumed $730,000 during the first half of 1994 primarily for refinery equipment. Financing activities consumed an additional $4,137,000 in the first half of 1994 consisting primarily of principal payments on the priority secured notes. The Partnership is negotiating with its lenders a restructuring or refinancing of its indebtedness and has been assisted in this process by an outside advisor. It is contemplated that such restructuring or refinancing would reduce the aggregate principal amount of debt outstanding as well as aggregate interest expense and would result in substantial dilution to existing unitholders through the issuance of new equity securities. On October 3, 1995, the Partnership made the scheduled third quarter payment of $1,250,000. The Partnership has informed its lenders that it will not make any additional payments under the current indenture. The current indenture, as amended, provides for a $1,000,000 payment due November 30, 1995 and a $1,250,000 payment due December 31, 1995. In addition, the current indenture provides for a $5,000,000 payment in 1996 paid quarterly under a defined formula. Substantially all of the Partnerships current senior lenders have verbally informed the Partnership that they do not intend to pursue their remedies under the current indenture due to nonpayment while discussions regarding the potential restructuring or refinancing of the Partnerships indebtedness are continuing. Management currently believes, based on discussion it has had with its current senior lenders, that a successful restructuring or refinancing of its current indebtedness is possible but cannot be assured. The Partnership currently believes it will be able to meet its operating obligations through a combination of cash on hand and anticipated future operating cash flows. However, due to the volatility of the business in which the Partnership operates, there can be no assurance that such cash flow will be adequate to sustain operations and service indebtedness. The Partnership believes its current level of letter of credit facilities are sufficient to guarantee expected near-term requirements for crude oil purchases, collateralization of other obligations and for hedging activities. However, due to the volatility in the price of crude oil, there can be no assurance that these facilities will be adequate. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Partnership is party to a number of additional lawsuits and other proceedings arising out of the ordinary course of its business. While the results of such lawsuits and proceedings cannot be predicted with certainty, management does not expect that the ultimate liability, if any, will have a material adverse effect on the consolidated financial position or results of operations of the Partnership other than as previously reported. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 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, on November 13, 1995. HUNTWAY PARTNERS, L.P. (Registrant) By:/s/ Warren J. Nelson Warren J. Nelson Executive Vice President and Chief Financial Officer (Principal Accounting Officer) - - 21 - EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 9-MOS DEC-31-1995 SEP-30-1995 1721 0 8340 0 3553 14269 83953 15514 85306 16039 90834 (21352) 0 0 (215) 85306 60684 60684 59496 59496 2818 0 3884 (5514) 0 (5514) 0 0 0 (5514) (.47) 0
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