EX-99 2 exh991k3q.txt EXHIBIT 99.1 PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE For more information, contact: Investor Relations (972) 699-4041 Email: investor@kaneb.com KANEB Reports Third Quarter Results Highlights o Kaneb Pipe Line Partners, L.P. o Reports increase in net income; however, per unit amounts lower due to a cumulative 23% increase in units issued to fund acquisitions and reduce debt o EBITDA up 18% o Recently increased cash distributions by $.12 to $3.36 per year o Kaneb Services LLC o Reports increase in profits from operations in spite of dilution from additional units issued by KPP - net income lower due to prior year credits o Cash from operations up 18% o Recently increased cash distributions by $.15 to $1.90 per year DALLAS, TX (October 30, 2003) - KANEB today reported results for the quarter ended September 30, 2003. "We had solid gains in operating profit and cash flow during the quarter," said John R. Barnes, Chairman and Chief Executive Officer of KANEB, "and we recently increased our cash distributions as cash flows continue to improve." Edward D. Doherty, Chairman and CEO of the Partnership's General Partner said, "Our pipelines performed well this quarter but we had a difficult quarter in our terminaling operations due to abnormally high repairs and maintenance and insurance costs largely related to hurricane Isabel". The KANEB Companies are Kaneb Services LLC (NYSE: KSL) and Kaneb Pipe Line Partners, L.P. (NYSE: KPP, "the Partnership"). Kaneb Services LLC's wholly owned subsidiary, Kaneb Pipe Line Company LLC, is the Partnership's General Partner. 3Q 2003 RESULTS FOR KANEB SERVICES LLC Kaneb Services LLC reported $214.6 million in consolidated revenues for the quarter, compared with $184.1 million for the same period last year. For the nine months ended September 30, 2003, the consolidated revenues were $651.7 million, compared with $485.8 million for the prior year period. Income before gain on issuance of units by KPP and cumulative effect of change in accounting principle (see Supplemental Information in the attached table) was $5.9 million (after dilution from additional units issued by KPP), or $0.49 per share, for the third quarter, compared with $6.7 million, or $0.57 per share, in the third quarter last year. Last year's quarter was favorably impacted by a state tax credit and a nonrecurring state refund of an environmental expenditure totaling $1.0 million. For the nine months ended September 30, 2003, income before gain on issuance of units by KPP and cumulative effect of change in accounting principle (see Supplemental Information in the attached table) was $17.3 million (after dilution from additional units issued by KPP) or $1.47 per share, compared with $17.1 million or $1.45 per share, for the same prior year period. Reported net income for the three and nine months ended September 30, 2003 was $5.9 million and $27.9 million, respectively, compared with $6.7 million and $34.4 million for the respective prior year periods. Consolidated operating income for the quarter was $32.3 million, compared with $28.5 million for the third quarter 2002, and $98.7 million for the nine months ended September 30, 2003, compared with $80.0 million for the prior year. 3Q 2003 RESULTS FOR KANEB PIPE LINE PARTNERS, L.P. Kaneb Pipe Line Partners, L.P. reported revenues of $140.4 million, a $37.1 million increase over $103.3 million for the third quarter last year. Revenues for the nine months ended September 30, 2003 were $428.1 million compared with $271.6 million in the prior year period. Net income for the quarter was $20.1 million, or $0.63 per unit after a cumulative 23% increase in weighted average number of units outstanding, compared with $19.3 million for the third quarter of 2002, or $0.77 per unit, and for the nine months was $64.5 million, or $2.13 per unit after a cumulative 23% increase in weighted average number of units outstanding, compared with $53.5 million, or $2.22 per unit, for the respective prior year period. Pipeline revenues were $31.4 million, compared with $21.0 million for the third quarter last year, and operating income for the third quarter increased to $14.8 million, up from $9.5 million last year. Terminaling revenues and product sales increased to $109.0 million, compared with $82.3 million for the third quarter last year, and operating income for the third quarter was $17.2 million, compared with $18.4 million last year. ABOUT KANEB KANEB is a single business represented by two separate publicly traded entities on the New York Stock Exchange. KANEB's business is focused on mid-stream energy assets -- refined petroleum product pipelines, and petroleum and specialty liquids storage and terminaling facilities. KANEB is a major transporter of refined petroleum products in the Midwest and is the third largest independent liquids terminaling company in the world. Worldwide operations include facilities in 29 states, the District of Columbia, Canada, the Netherlands Antilles, Australia, New Zealand and the United Kingdom. Its publicly traded entities are Kaneb Services LLC (NYSE: KSL) and Kaneb Pipe Line Partners, L.P., (NYSE: KPP, "the Partnership"). Kaneb Services LLC was formed as a limited liability company in 2001 from assets previously held by Kaneb Services, Inc. (now Xanser Corporation). Those assets include the KPP general partner interest and incentive as well as 5.1 million Partnership units, a wholesale petroleum product marketing company, and a wholly owned subsidiary, Kaneb Pipe Line Company LLC, that manages and operates the pipeline and terminaling assets of KPP. KSL is a unique limited liability company, the only publicly traded, cash distributing entity taxed as a partnership that owns the general partner interest of another publicly traded master limited partnership. Kaneb Pipe Line Partners, L.P., a master limited partnership, was formed in 1989 to own a 2,075 mile common carrier pipeline system from Kansas to North Dakota that has been managed by Kaneb Pipe Line Company LLC since 1953. Pipeline acquisitions in 1995 and 1998 added 725 miles of pipeline in Colorado, Iowa, South Dakota and Wyoming. In 2002, the Partnership acquired the largest fertilizer pipeline in the country, a 2,000-mile pipeline system that runs from the Louisiana Gulf Coast to the upper Midwest states. In December 2002, the Partnership acquired a 400 mile products pipeline and four terminals in North Dakota and Minnesota. The Partnership entered the liquids terminaling business with a large acquisition in 1993, and has more than tripled the size of this operation through subsequent acquisitions. In 2001, the Partnership completed a $165 million acquisition of seven West Coast, U.S. terminals. In 2002, the Partnership completed a $300 million acquisition of two world-class terminaling facilities located in Point Tupper, Nova Scotia, Canada and on the island of St. Eustatius in the Netherlands Antilles and the acquisition of eight bulk liquid storage terminals in Australia and New Zealand. Certain of the statements in this press release are not purely historical, and as such are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding management's intentions, plans, beliefs, expectations or projections of the future. Forward-looking statements involve risks and uncertainties, including without limitation, the various risks inherent in the company's business, and other risks and uncertainties detailed from time to time in the companies' periodic reports filed with the Securities and Exchange Commission. One or more of these factors have affected, and could in the future affect, the company's business and financial results in future periods, and could cause actual results to differ materially from plans and projections. There can be no assurance that the forward-looking statements made in this document will prove to be accurate, and issuance of such forward-looking statements should not be regarded as a representation by the company, or any other person, that the objectives and plans of the company will be achieved. All forward-looking statements made in this press release are based on information presently available to management, and the company assumes no obligation to update any forward-looking statements. KANEB SERVICES LLC CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- --------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Consolidated revenues: Services $ 89,539 $ 75,184 $ 265,694 $ 207,946 Products 125,053 108,935 386,021 277,828 --------- --------- --------- --------- Total consolidated revenues 214,592 184,119 651,715 485,774 --------- --------- --------- --------- Consolidated costs and expenses: Cost of products sold 119,767 105,059 366,531 268,727 Operating costs 42,577 34,303 126,965 92,555 Depreciation and amortization 13,198 10,313 39,845 27,440 General and administrative 6,799 5,938 19,694 17,034 --------- --------- --------- --------- Total consolidated costs and expenses 182,341 155,613 553,035 405,756 --------- --------- --------- --------- Consolidated operating income 32,251 28,506 98,680 80,018 Consolidated interest and other income 69 259 208 482 Consolidated interest expense (10,855) (7,478) (28,816) (20,944) Consolidated loss on debt extinguishment -- -- -- (2,112) --------- --------- --------- --------- Consolidated income before gain on issuance of units by KPP, income taxes, interest of outside non-controlling partners in KPP's net income and cumulative effect of change in accounting principle 21,465 21,287 70,072 57,444 Gain on issuance of units by KPP -- -- 10,898 17,332 Income tax expense (969) (673) (3,597) (2,113) Interest of outside non-controlling partners in KPP's net income (14,634) (13,941) (49,151) (38,242) --------- --------- --------- --------- Income before cumulative effect of change in accounting principle 5,862 6,673 28,222 34,421 Cumulative effect of change in accounting principle - adoption of new accounting standard for asset retirement obligations -- -- (313) -- --------- --------- --------- --------- Net income $ 5,862 $ 6,673 $ 27,909 $ 34,421 ========= ========= ========= ========= Earnings per share: Basic: Before cumulative effect of change in accounting principle $ 0.50 $ 0.58 $ 2.45 $ 3.01 Cumulative effect of change in accounting principle -- -- (0.03) -- --------- --------- --------- --------- $ 0.50 $ 0.58 $ 2.42 $ 3.01 ========= ========= ========= ========= Diluted: Before cumulative effect of change in accounting principle $ 0.49 $ 0.57 $ 2.41 $ 2.93 Cumulative effect of change in accounting principle -- -- (0.03) -- --------- --------- --------- --------- $ 0.49 $ 0.57 $ 2.38 $ 2.93 ========= ========= ========= =========
KANEB SERVICES LLC SUPPLEMENTAL INFORMATION (In thousands, except per share amounts) (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Income before cumulative effect of change in accounting principle $ 5,862 $ 6,673 $ 28,222 $ 34,421 Gain on issuance of units by KPP -- -- (10,898) (17,332) --------- --------- --------- --------- Income before gain on issuance of units by KPP and cumulative effect of change in accounting principle $ 5,862 $ 6,673 $ 17,324 $ 17,089 ========= ========= ========= ========= Diluted earnings per share before gain on issuance of units by KPP and cumulative effect of change in accounting principle $ 0.49 $ 0.57 $ 1.47 $ 1.45 ========= ========= ========= ========= Weighted average diluted shares outstanding 11,889 11,751 11,751 11,756 ========= ========= ========= ========= Consolidated revenues (including KPP): Pipeline $ 31,449 $ 20,998 $ 88,807 $ 57,946 Terminaling 58,090 54,186 176,887 150,000 Product Marketing 125,053 108,935 386,021 277,828 --------- --------- --------- --------- $ 214,592 $ 184,119 $ 651,715 $ 485,774 ========= ========= ========= ========= Consolidated operating income (including KPP): Pipeline $ 14,839 $ 9,487 $ 39,036 $ 27,421 Terminaling 15,732 18,478 51,567 50,962 Product Marketing 2,219 803 9,634 2,937 General and administrative expenses (539) (262) (1,557) (1,302) --------- --------- --------- --------- $ 32,251 $ 28,506 $ 98,680 $ 80,018 ========= ========= ========= ========= Supplemental cash flow information: Distributions received from KPP $ 6,320 $ 5,616 $ 18,401 $ 15,996 General and administrative expenses (539) (262) (1,557) (1,302) Parent Company interest expense (147) (195) (474) (533) --------- --------- --------- --------- $ 5,634 $ 5,159 $ 16,370 $ 14,161 ========= ========= ========= ========= Cash distributed to shareholders $ 5,120 $ 4,749 $ 14,915 $ 13,602 ========= ========= ========= =========
KANEB PIPE LINE PARTNERS, L.P. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per unit amounts) (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenues: Services $ 89,539 $ 75,184 $ 265,694 $ 207,946 Products 50,865 28,120 162,415 63,702 --------- --------- --------- --------- Total revenues 140,404 103,304 428,109 271,648 --------- --------- --------- --------- Costs and expenses: Cost of products sold 46,835 26,501 146,035 59,433 Operating costs 42,366 34,082 126,339 91,845 Depreciation and amortization 13,188 10,302 39,814 27,408 General and administrative 5,999 4,549 17,266 14,111 --------- --------- --------- --------- Total costs and expenses 108,388 75,434 329,454 192,797 --------- --------- --------- --------- Operating income 32,016 27,870 98,655 78,851 Interest and other income 43 233 132 414 Interest expense (10,660) (7,202) (28,178) (20,132) Loss on debt extinguishment -- -- -- (2,112) --------- --------- --------- --------- Income before minority interest, income taxes and cumulative effect of change in accounting principle 21,399 20,901 70,609 57,021 Minority interest in net income (203) (195) (668) (540) Income tax expense (1,076) (1,410) (3,815) (2,981) --------- --------- --------- --------- Income before cumulative effect of change in accounting principle 20,120 19,296 66,126 53,500 Cumulative effect of change in accounting principle - adoption of new accounting standard for asset retirement obligations -- -- (1,577) -- --------- --------- --------- --------- Net income 20,120 19,296 64,549 53,500 General partner's interest in net income (2,275) (1,414) (6,174) (4,112) --------- --------- --------- --------- Limited partners' interest in net income $ 17,845 $ 17,882 $ 58,375 $ 49,388 ========= ========= ========= ========= Allocation of net income per unit: Before cumulative effect of change in accounting principle $ 0.63 $ 0.77 $ 2.19 $ 2.22 Cumulative effect of change in accounting principle -- -- (0.06) -- --------- --------- --------- --------- $ 0.63 $ 0.77 $ 2.13 $ 2.22 ========= ========= ========= ========= Weighted average number of Partnership units outstanding 28,318 23,100 27,403 22,237 ========= ========= ========= =========
KANEB PIPE LINE PARTNERS, L.P. SUPPLEMENTAL INFORMATION
Three Months Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenues (in 000s): Pipeline $ 31,449 $ 20,998 $ 88,807 $ 57,946 Terminaling 58,090 54,186 176,887 150,000 Product sales 50,865 28,120 162,415 63,702 --------- --------- --------- --------- $ 140,404 $ 103,304 $ 428,109 $ 271,648 ========= ========= ========= ========= Operating income (in 000s): Pipeline $ 14,839 $ 9,487 $ 39,036 $ 27,421 Terminaling 15,732 18,478 51,567 50,962 Product sales 1,445 (95) 8,052 468 --------- --------- --------- --------- $ 32,016 $ 27,870 $ 98,655 $ 78,851 ========= ========= ========= ========= Depreciation and amortization (in 000s): Pipeline $ 3,540 $ 1,385 $ 10,548 $ 4,132 Terminaling 9,433 8,728 28,533 22,813 Product sales 215 189 733 463 --------- --------- --------- --------- $ 13,188 $ 10,302 $ 39,814 $ 27,408 ========= ========= ========= ========= Capital expenditures (in 000s): Pipeline $ 2,273 $ 2,348 $ 6,490 $ 7,148 Terminaling 7,261 5,353 25,195 14,661 Product sales 7 10 368 120 --------- --------- --------- --------- $ 9,541 $ 7,711 $ 32,053 $ 21,929 ========= ========= ========= ========= EBITDA (in 000s): Income before cumulative effect of change in accounting principle $ 20,120 $ 19,296 $ 66,126 $ 53,500 Interest expense 10,660 7,202 28,178 20,132 Loss on debt extinguishment -- -- -- 2,112 Income tax expense 1,076 1,410 3,815 2,981 Depreciation and amortization 13,188 10,302 39,814 27,408 Interest and other income (43) (233) (132) (414) Minority interest in net income 203 195 668 540 --------- --------- --------- --------- $ 45,204 $ 38,172 $ 138,469 $ 106,259 ========= ========= ========= ========= Petroleum pipeline operating statistics - Barrel miles shipped (in billions) 5.4 5.0 15.8 13.7 ========= ========= ========= ========= Terminaling operating statistics: Average annual barrels of tankage utilized (in millions) 45.9 47.8 47.1 45.3 ========= ========= ========= ========= Average annual revenues per barrel of tankage utilized $ 5.02 $ 4.50 $ 5.02 $ 4.43 ========= ========= ========= =========