-----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, Lm3/C2snxe0VbpcN6VO+Bqa1VoRHK38EOaAJx/hJssSoMdfJKIop/b6k+j0ac0km DtAxGe9Z1mMI1IH1ztGkgw== 0000840335-97-000005.txt : 19970814 0000840335-97-000005.hdr.sgml : 19970814 ACCESSION NUMBER: 0000840335-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE 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: 97658632 BUSINESS ADDRESS: STREET 1: 25129 OLD RD STREET 2: STE 322 CITY: NEWHALL STATE: CA ZIP: 91381 BUSINESS PHONE: 8052541220 MAIL ADDRESS: STREET 1: 25129 OLD ROAD STREET 2: # 322 CITY: NEWHALL STATE: CA ZIP: 91381 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 June 30, 1997 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) Registrant's 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 June 30, 1997 INDEX Part I. Financial Information Page Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 1997 and 1996 4 Condensed Consolidated Statement of Partners' Capital (Deficiency) for the Six Months Ended June 30, 1997 4 Condensed Consolidated Statements of Cash Flows for the Three Months and Six Months Ended June 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 7 Part II. Other Information 12 HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1997 1996 (Unaudited) (Audited) CURRENT ASSETS: Cash $2,263,000 $5,287,000 Accounts Receivable 5,626,000 5,148,000 Inventories 8,396,000 3,399,000 Prepaid Expenses 770,000 640,000 Total Current Assets 17,055,000 14,474,000 PROPERTY - Net 59,244,000 59,339,000 OTHER ASSETS 323,000 319,000 GOODWILL 1,730,000 1,759,000 TOTAL ASSETS $78,352,000 $75,891,000 CURRENT LIABILITIES: Accounts Payable $7,862,000 $6,913,000 Current Portion of Long-Term Obligations - 100,000 Accrued Interest 957,000 316,000 Other Accrued Liabilities 1,779,000 1,347,000 Total Current Liabilities 10,598,000 8,676,000 LONG-TERM OBLIGATIONS 28,174,000 28,174,000 PARTNERS' CAPITAL: General Partners 395,000 390,000 Limited Partners 39,185,000 38,651,000 Total Partners' Capital 39,580,000 39,041,000 TOTAL LIABILITIES AND PARTNERS' CAPITAL $78,352,000 $75,891,000
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 1997 1996 1997 1996 (Unaudited) (Unaudited) (Unaudited) (Unaudited) SALES $23,669,000 $26,099,000 $42,734,000 $43,308,000 COSTS AND EXPENSES: Material and Processing Costs 21,132,000 22,077,000 37,269,000 38,835,000 Selling and Administration Expenses 980,000 924,000 2,169,000 1,790,000 Interest Expense 896,000 1,315,000 1,769,000 2,604,000 Depreciation and Amortization 602,000 532,000 1,122,000 1,047,000 Total Costs and Expenses 23,610,000 24,848,000 42,329,000 44,276,000 NET INCOME(LOSS) $59,000 $1,251,000 $405,000 $(968,000) NET INCOME(LOSS) PER UNIT $0.00 $0.11 $0.01 $(0.08) LIMITED PARTNER EQUIVALENT UNITS OUTSTANDING 28,107,000 11,673,000 28,096,000 11,673,000
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
General Limited Partners Partners Totals Balance at January 1, 1997 $390,000 $38,651,000 $39,041,000 Earned Portion of Option Awards 1,000 133,000 134,000 Net Income for the Six Months Ended June 30, 1997 4,000 401,000 405,000 Balance at June 30, 1997 $395,000 $39,185,000 $39,580,000
HUNTWAY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Six Months Ended Ended June 30, June 30, 1997 1996 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income/(Loss) $ 405,000 $ (968,000) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 1,122,000 1,047,000 Changes in Operating Assets and Liabilities: Increase in Accounts Receivable (478,000) (1,259,000) Increase in Inventories (4,907,000) (2,783,000) Increase in Prepaid Expenses (130,000) (253,000) Increase in Accounts Payable 949,000 2,233,000 Increase in Accrued Liabilities 1,073,000 2,479,000 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,966,000) 496,000 CASH USED IN INVESTING ACTIVITIES: Additions to Property (922,000) (1,570,000) Additions to Other Assets (36,000) (395,000) NET CASH USED BY INVESTING ACTIVITIES (958,000) (1,965,000) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of Long-term Obligations (100,000) (100,000) NET CASH USED BY FINANCING ACTIVITIES (100,000) (100,000) NET(DECREASE) IN CASH (3,024,000) (1,569,000) CASH BALANCE - BEGINNING OF PERIOD 5,287,000 4,304,000 CASH BALANCE - END OF PERIOD $ 2,263,000 $ 2,735,000 INTEREST PAID IN CASH DURING THE PERIOD $ 1,128,000 $353,000
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements of Huntway Partners, L.P. and subsidiary as of June 30, 1997 and for the three and six month periods ended June 30, 1997 and 1996 are unaudited but, in the opinion of management, reflect all adjustments (consisting only of normal recurring 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, 1996. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards 128, Earnings per Share, which is effective for annual and interim periods ending after December 15, 1997. The Partnership does not believe that adoption of this standard will have an effect on the results of operations. 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. For the three months ended June 30, 1997 and 1996, the effect of LIFO was to increase net income by $765,000 and $161,000, respectively. For the six months ended June 30, 1997 and 1996, the effect of LIFO was to increase net income by $1,919,000 and $490,000, respectively. Inventories at June 30, 1997 and December 31, 1996 were as follows:
1997 1996 Finished Products $5,469,000 $2,533,000 Crude Oil and Supplies 3,200,000 3,058,000 8,669,000 5,591,000 Less LIFO Reserve (273,000) (2,192,000) Total $8,396,000 $3,399,000
2. CONTINGENCIES 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. The Partnership is not aware of any costs or loss contingencies relating to environmental laws and regulations that have not been recorded in its financial statements. However, future environmental costs cannot be reasonably estimated due to unknown factors. Although environmental costs may have a significant impact on results of operations for any single period, the partnership believes that such costs will not have a material adverse effect on the Partnerships financial position. MANAGEMENT'S 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 feedstocks and products such as gas oil, naphtha, kerosene distillate and heavy (bunker) fuel. Huntway's 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. The Partnerships primary product is liquid asphalt and some 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 have in the future, difficulty raising prices in the face of increasing crude costs. 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. Three Months Ended June 30, 1997 Compared with the Three Months Ended June 30, 1996 Second quarter 1997 net income was $59,000, or $.00 per unit, versus 1996 second quarter net income of $1,251,000, or $.11 cents per unit. The decline in results between quarters of $1,192,000 is principally attributable to significantly lower light product margins. Prices for Huntway's light-end products fell in the quarter commensurate with declining wholesale gasoline and diesel prices in California which reflected the impact of maximum production rates and increasing inventory levels of these products on the west coast. In contrast, asphalt margins improved as industry wide price increases early in the year generally held. The following table sets forth the effects of changes in price and volume on sales and material and processing costs on the quarter ended June 30, 1997 as compared to the quarter ended June 30, 1996:
Material & Barrels Sales Processing Net Sold Three Months ended June 30, 1996 $26,099,000 $22,077,000 $4,022,000 1,157,000 Effect of changes in price (2,362,328) (887,756) (1,474,571) Effect of changes in volume (67,672) (57,244) (10,429) (3,000) Three Months Ended June 30, 1997 $23,669,000 $21,132,000 $2,537,000 1,154,000
The net margin between sales and material and processing costs fell from $3.48 per barrel for the second quarter of 1996 to $2.20 per barrel for the second quarter of 1997. This decline in net margin of $1,485,000 is primarily attributable to the Partnership's poor light product margins in the quarter. Over all, light product prices fell by 22% compared to the second quarter of 1996 as wholesale gasoline and diesel prices declined due to high refinery run rates and increasing stocks of gasoline and diesel on the west coast. Asphalt pricing improved by 7% as price increases put into effect early in 1997 (after crude price increases throughout 1996) generally held. Over all, sales prices averaged $20.51 per barrel for the second quarter of 1997 as compared to $22.56 per barrel for the comparable quarter of 1996, a decline of $2.05, or 9%. This decline in pricing was partially offset by crude costs, which fell in response to generally higher world wide production levels, by 6% as compared to the comparable quarter of 1996. Over all, material and processing costs averaged $18.31 and $19.08 for the quarters ended June 30, 1997 and 1996, respectively, a decline of $0.77, or 4%. Selling, general and administrative costs increased by a nominal $56,000 as compared to the second quarter of 1996 primarily as a result of increased payroll expense. Interest expense was reduced in the quarter by $419,000 due to reduced debt levels. In December of 1996, the partnership completed the restructuring of its indebtedness with its senior and junior lenders. This resulted in a reduction in long-term debt and related accrued interest of $71,748,000 and the issuance of 13,786,000 new partnership units. Six Months Ended June 30, 1997 Compared with the Six Months Ended June 30, 1996 First half 1997 net income was $405,000, or $.01 per unit, versus 1996 first half net loss of $968,000, or $.08 cents per unit. The improvement in results between periods of $1,373,000 is principally attributable to significantly higher product margins. Margins on Huntway's light-end products rose slightly in the period as the poor light product margins of the second quarter failed to competely offset the exceptional first quarter results. First quarter light product margins reflected the impact of refinery turnarounds and outages as well as seasonal increases in middle distillates caused by winter heating oil demand while second quarter margins were adversely impacted by rising gasoline and diesel inventories caused by high production levels of these products. Asphalt margins improved as industry wide price increases early in the period generally held while crude prices fell. Asphalt margins also benefited as improved operating results in the first quarter, allowed the Partnership to forego the low- margin fuel oil sales that it made in the first half of 1996 for liquidity purposes. The following table sets forth the effects of changes in price and volume on sales and material and processing costs on the period ended June 30, 1997 as compared to the period ended June 30, 1996:
Material & Barrels Sales Processing Net Sold Six Months ended June 30, 1996 $43,308,000 $38,835,000 $4,473,000 2,044,000 Effect of changes in price 1,142,217 (27,040) 1,169,257 Effect of changes in volume (1,716,217) (1,538,960) (177,257) (81,000) Six Months Ended June 30, 1997 $42,734,000 $37,269,000 $5,465,000 1,963,000
The net margin between sales and material and processing costs improved from $2.18 per barrel for the first half of 1996 to $2.78 per barrel for the first half of 1997. This improvement in net margin of $992,000 is primarily attributable to the Partnership's improved margin on all products in the period. Asphalt prices improved by 12% compared to the first half of 1996 as price increases put into effect early in the period (after crude price increases throughout 1996) generally held. Light product prices, on the other hand, declined by 5% due to an oversupply of gasoline and diesel fuel in the second quarter. Over all, sales prices averaged $21.77 per barrel for the first half of 1997 as compared to $21.18 per barrel for the comparable period of 1996, an increase of $0.59, or 3%. All of this increase in pricing contributed to increased margins, as crude costs were virtually unchanged as compared to the comparable period of 1996. Over all, material and processing costs averaged $18.99 and $19.00 for the periods ended June 30, 1997 and 1996, respectively, a decrease of $0.01. Selling, general and administrative costs increased by $379,000 as compared to the first half of 1996 primarily as a result of incentive plan accruals and an increase in bad debt expense. Interest expense was reduced in the period by $835,000 due to reduced debt levels. In December of 1996, the partnership completed the restructuring of its indebtedness with its senior and junior lenders. Due to the volatility inherent in the Partnership's business, 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. Capital Resources And Liquidity The primary factors that affect the Partnership's cash requirements and liquidity position are fluctuations in the selling prices of 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 and 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 six months of 1997, operating activities used $1,966,000 in cash. The periods net income of $405,000 plus depreciation and amortization of $1,122,000 provided $1,527,000 in cash. A seasonal increase in inventory of $4,907,000 was partially financed by a similar seasonal increase in accounts payable of $949,000. Accrued liabilities increased by $1,073,000 as only one half of the interest accrued under the new debt agreements was scheduled for payment in the period, as well as increases in accruals for property taxes and incentive compensation. Prepaid expenses consumed $130,000 primarily due to turnaround costs while accounts receivable experienced a seasonal increase of $478,000. Investing activities consumed $958,000 during the first six months of 1996 primarily for refinery equipment including enhancements to the new polymer facilities and tankage for our Benicia refinery. Financing activities consumed $100,000 in the first six months of 1996 pursuant to a 1993 settlement with the State of Arizona. In comparison, during the first six months of 1996, operating activities provided $496,000 in cash. The periods net loss of $968,000 was offset by depreciation and amortization of $1,047,000. Seasonal increases in accounts receivable and inventory of $4,042,000 were financed by a similar seasonal increase in accounts payable of $2,233,000. Prepaid expenses increased by $253,000 primarily due to turnaround costs. Accrued interest increased by $2,252,000 as interest continued to accrue under the old debt agreement until the debt restructuring was completed in the last quarter of 1996. Investing activities consumed $1,965,000 during the first six months of 1996 primarily for refinery equipment including new polymer facilities and tankage for our Benicia refinery. Financing activities consumed $100,000 in the first six months of 1996 pursuant to a 1993 settlement with the State of Arizona. The Partnership believes its current level of letter of credit facilities are sufficient to guarantee requirements for crude oil purchases, collateralization of other obligations and for hedging activities at current crude price levels. However, due to the volatility in the price of crude oil, there can be no assurance that these facilities are adequate. If crude oil prices were to increase, the Partnership may be required to reduce its crude oil purchases, which would adversely impact profitability. Currently, the Partnership is negotiating with two of its senior lenders to repurchase or amend their Senior Notes and to repurchase units that were issued in December 1996. The Partnership is currently anticipating that it will refinance these debt and equity securities with a new convertible debt instrument. The Partnership is considering such a refinancing in order to continue to pursue its goal of ultimately reducing indebtedness and debt service requirements. The Partnership is also, currently in negotiations with other banks to replace its existing letter of credit agreement. Should the Partnership be successful in its efforts, it anticipates that its long-term debt will increase by up to $8,500,000 and that approximately 40% of its outstanding units will be redeemed. Although there can be no assurance that the Partnership will be successful in this refinance effort, if successful it is contemplated that the refinance will not significantly change annual interest expense but that the current annual sinking fund requirement of $3,232,000 would be reduced by approximately $2,500,000. At June 30, 1997, the cash position of the Partnership was $2,263,000. In the opinion of management, cash on hand, together with anticipated future cash flows, will be sufficient to meet Huntway's liquidity obligations for the next 12 months, regardless of whether Huntway is successful in refinancing its two largest senior lenders. PART II - OTHER INFORMATION Item 1. Legal Proceedings 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 other than as previously reported. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. 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 August 12, 1997. HUNTWAY PARTNERS, L.P. (Registrant) By: Warren J. Nelson Executive Vice President and Chief Financial Officer (Principal Accounting Officer) - 9 - - 18 - EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JUN-30-1997 2263000 0 5626000 0 8396000 17055000 76006000 16762000 78352000 10598000 28174000 0 0 39185000 395000 78352000 23669000 23669000 21734000 21734000 980000 0 896000 0 0 59000 0 0 0 59000 .00 0
-----END PRIVACY-ENHANCED MESSAGE-----