-----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, LiAit1BqTljOecMdkDuVQKZeHxP7aevPLqp7UWsaujAk1RwivC5dGV7OpbhLic3t riJzX//vuO+6jk1NDXGBEg== 0000859636-96-000017.txt : 19961118 0000859636-96-000017.hdr.sgml : 19961118 ACCESSION NUMBER: 0000859636-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIDE COMPANIES LP CENTRAL INDEX KEY: 0000859636 STANDARD INDUSTRIAL CLASSIFICATION: PIPE LINES (NO NATURAL GAS) [4610] IRS NUMBER: 752313597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10473 FILM NUMBER: 96665978 BUSINESS ADDRESS: STREET 1: 1209 NORTH FOURTH ST CITY: ABILENE STATE: TX ZIP: 79601 BUSINESS PHONE: 9156748000 MAIL ADDRESS: STREET 1: PO BOX 3237 CITY: ABILENE STATE: TX ZIP: 79604 10-Q 1 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 quarterly period ended September 30, 1996 Commission file number 1-10473 PRIDE COMPANIES, L.P. (Name of registrant) Delaware 75-2313597 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1209 North Fourth Street, Abilene, Texas 79601 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (915) 674-8000 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 [ ] Indicate the number of units outstanding of each of the issuer's classes of units, as of the latest practicable date. Class Outstanding at November 1, 1996 Convertible Preferred Units 4,700,000 Common Units 5,250,000 PART I. Item 1. Financial Information PRIDE COMPANIES, L.P. BALANCE SHEETS (Unaudited) (Amounts in thousands, except unit amounts)
September 30, December 31, 1996 1995 ___________ ____________ ASSETS: Current assets: Cash and cash equivalents $ 457 $ 288 Accounts receivable, less allowance for doubtful accounts 15,522 16,205 Inventories 19,283 14,248 Prepaid expenses 1,640 1,606 ___________ ___________ Total current assets 36,902 32,347 Property, plant and equipment 136,153 137,778 Accumulated depreciation 35,504 32,941 ___________ ___________ Property, plant and equipment - net 100,649 104,837 Other assets 1,186 1,122 ___________ ___________ $ 138,737 $ 138,306 LIABILITIES AND PARTNERS' CAPITAL: Current liabilities: Accounts payable $ 31,184 $ 26,241 Accrued payroll and related benefits 1,676 1,568 Accrued taxes 3,705 3,797 Other accrued liabilities 4,057 2,807 Current portion of long-term debt 5,019 3,447 ___________ ___________ Total current liabilities 45,641 37,860 Long-term debt, excluding current portion 49,709 53,053 Deferred income taxes 2,622 2,718 Other long-term liabilities 8,785 8,662 Partners' capital: Preferred units (4,700,000 units authorized and outstanding) 15,871 17,739 Common units (5,250,000 units authorized and outstanding) 15,936 18,022 General partners' interest 173 252 ___________ ___________ Total partners' capital 31,980 36,013 ___________ ___________ $ 138,737 $ 138,306 See accompanying notes. /TABLE PRIDE COMPANIES, L.P. STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per unit amounts)
Three Months Ended September 30, 1996 1995 ______________ ___________ Revenues $ 145,884 $ 126,920 Cost of sales and operating expenses, excluding depreciation 142,666 121,007 Marketing, general and administrative expenses 2,479 2,479 Depreciation 1,721 1,744 ____________ ___________ Operating income (loss) (982) 1,690 Other income (expense): Interest income 25 13 Interest expense (1,457) (1,598) Credit and loan fees (785) (440) Other - net (1) 35 ____________ ___________ Income (loss) before income taxes (3,200) (300) Income tax expense (benefit) (15) (14) ____________ ___________ Net income (loss) $ (3,185) $ (286) General partners' interest $ (62) $ (5) Net income (loss) allocable to unitholders $ (3,123) $ (281) Net income (loss) per unit $ (0.31) $ (.03) See accompanying notes. /TABLE PRIDE COMPANIES, L.P. STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per unit amounts)
Nine Months Ended September 30, 1996 1995 ______________ ___________ Revenues $ 450,670 $ 424,935 Cost of sales and operating expenses, excluding depreciation 435,341 412,112 Marketing, general and administrative expenses 7,573 7,975 Depreciation 5,241 5,258 ____________ ___________ Operating income (loss) 2,515 (410) Other income (expense): Interest income 111 76 Interest expense (4,380) (4,921) Credit and loan fees (2,346) (699) Other - net 34 109 ____________ ___________ Income (loss) before income taxes (4,066) (5,845) Income tax expense (benefit) (33) (27) ____________ ___________ Net income (loss) $ (4,033) $ (5,818) General partners' interest $ (79) $ (116) Net income (loss) allocable to unitholders $ (3,954) $ (5,702) Net income (loss) per unit $ (0.40) $ (0.57) See accompanying notes. /TABLE PRIDE COMPANIES, L.P. STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
Nine Months Ended September 30, 1996 1995 ____________ ___________ Cash flows from operating activities: Net income (loss) $ (4,033) $ (5,818) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Noncash charges (credits) to earnings: Depreciation 5,241 5,258 (Gain) loss on sale of property, plant and equipment (27) (18) Deferred tax benefit (96) (82) Net effect of changes in: Accounts receivable 683 69 Inventories (5,035) 2,018 Prepaid expenses (34) (629) Accounts payable (including non-current) 5,338 (584) Accrued liabilities 1,266 (243) ____________ ___________ Total adjustments 7,336 5,789 ____________ ___________ Net cash provided by (used in) operating activities 3,303 (29) Cash flows from investing activities: Purchases of property, plant and equipment (1,311) (839) Proceeds from disposal of property, plant and equipment 47 106 Other (95) 6 ____________ ___________ Net cash provided by (used in) investing activities (1,359) (727) Cash flows from financing activities: Proceeds from debt and credit facilities 17,585 32,398 Payments on debt and credit facilities (19,357) (30,946) Other (3) (89) ____________ ___________ Net cash provided by (used in) financing activities (1,775) 1,363 ____________ ___________ Net increase (decrease) in cash and cash equivalents 169 607 Cash and cash equivalents at the beginning of the period 288 35 ____________ ___________ Cash and cash equivalents at the end of the period $ 457 $ 642 See accompanying notes. /TABLE PRIDE COMPANIES, L.P. NOTES TO FINANCIAL STATEMENTS 1. Organization Pride Companies, L.P. (the "Partnership"), a Delaware limited partnership, owns and operates a modern simplex petroleum refinery facility located near Abilene, Texas (the "Refinery"), a crude oil gathering business (the "Crude Gathering System") that gathers, transports, and resells and redelivers crude oil in the Texas and New Mexico markets, and certain integrated product pipeline operations (the "Products System"). The Partnership's operations are considered a single industry segment, the refining of crude oil and the sale of the resulting petroleum products. The primary purpose of the Crude Gathering System is to supply the Refinery with crude oil at strategic locations for input into the Refinery. The Crude Gathering System consists of a series of gathering lines and a fleet of trucks which transport crude oil into third party pipelines and into the system's primary asset, a common carrier pipeline which delivers crude oil to and terminates at the Refinery. The Products System consists of certain product pipelines which originate at the Refinery and terminate at the Partnership's marketing terminals. Pride SGP ("Pride SGP" or the "Special General Partner") serves as special general partner of the Partnership and owns a 0.1% general partner interest and the 5,250,000 common units ("Common Units"). Pride Refining, Inc. serves as the managing general partner of the Partnership and owns a 1.9% general partner interest (the "Managing General Partner"). 2. Accounting Policies The financial statements of the Partnership include all of its majority owned subsidiaries including limited partnership interests where the Partnership has significant control through related parties. All intercompany transactions have been eliminated and minority interest has been provided where applicable. The financial statements included in this quarterly report on Form 10-Q are unaudited and condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. In the opinion of management, all material adjustments necessary to present fairly the financial position, results of operations, and cash flows for such periods have been included. Interim period results are not necessarily indicative of the results to be achieved for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements of the Partnership presented in its Annual Report on Form 10-K for the year ended December 31, 1995 include a summary of significant accounting policies that should be read in conjunction with this quarterly report on Form 10-Q. In connection with its crude gathering system operations, as first purchaser of crude oil and as a service to its custom gathering customers, the Partnership will make distribution of payments to the various revenue and royalty interest owners. Often, the legal rights of the interest owners are unclear or the owners cannot be located for long periods of time. When such is the case, the Partnership retains the liability for the payments until the ownership interest is clarified or the owners located, at which time payment is made. When an owner cannot be located, state statutes generally require that the unpaid amounts be escheated to the state after the passage of a specified number of years. Because such liabilities take years to be cleared up and paid, an estimate has been made of the amounts expected to be paid during the next year and classified as current accounts payable, with the remainder classified as other long-term liabilities. Certain amounts in the financial statements for the prior year have been reclassified to conform to the 1996 presentation. The Partnership has two subsidiaries that are corporations whose operations are subject to federal income taxes. Net Income (Loss) per Unit is calculated using the weighted average number of Units outstanding during the period (4,700,000 convertible preferred units and 5,250,000 Common Units) divided into the Partnership's net income (loss) after adjusting for general partner allocations. 3. Related Party Transactions In accordance with the Amended and Restated Agreement of Limited Partnership of Pride Companies, L.P. ("Partnership Agreement"), the Managing General Partner conducts, directs and exercises control over substantially all of the activities of the Partnership. The Managing General Partner has a 1.9% interest in the income and cash distributions of the Partnership, subject to certain adjustments. Certain members of the management of the Managing General Partner are also members of the management of Pride SGP, which has a 0.1% general partner interest and a 51.7% limited partner interest in the Partnership. The Partnership has no directors or officers; however, directors and officers of the Managing General Partner are employed by the Partnership to function in this capacity. Compensation of these persons and any other expenses incurred on behalf of the Partnership by the Managing General Partner and Pride SGP are paid by the Partnership. Certain conflicts of interest, including potential non-arm's length transactions, could arise as a result of the relationships described above. The Board of Directors and management of the Managing General Partner have a duty to manage the Partnership in the best interests of the unitholders and consequently must exercise good faith and integrity in handling the assets and affairs of the Partnership. 4. Inventories
Inventories are valued at the At At lower of cost or market and September 30, December 31, consist of: 1996 1995 (in thousands) _____________________________ ___________ ___________ Crude oil $ 12,828 $ 10,981 Refined products and blending materials 12,780 5,589 ___________ ___________ 25,608 16,570 LIFO reserve (7,388) (3,426) ___________ ___________ Petroleum inventories 18,220 13,144 Spare parts and supplies 1,063 1,104 ___________ ___________ $ 19,283 $ 14,248
The last-in/first-out (LIFO) inventory cost method is used for crude oil and refined products and blending materials. The weighted average inventory cost method is used for spare parts and supplies. 5. Long-term Debt On November 14, 1996, the Partnership's credit facility was amended to extend the maturity date to October 1, 1997. Under this credit facility, the Partnership has a $6,500,000 standby letter of credit facility for general corporate purposes and the purchase of crude oil and other refinery feedstocks ("Facility A") and a $45,000,000 standby letter of credit facility for the purchase of crude oil ("Facility B"). The fee on outstanding Facility A and Facility B standby letters of credit is 1 and 1/2% per annum. For the unused portion of the standby letter of credit facility, the fee is one-half of 1% per annum. Though no advances had been drawn under either the Facility A or Facility B letter of credit facility, the Partnership did have approximately $721,000 and $43.1 million, respectively, in outstanding standby letters of credit as of September 30, 1996. The credit agreement was amended to provide at the banks' discretion an additional $8,000,000 standby letter of credit facility for the purchase of crude oil and other refinery feedstocks ("Special LC Facility"). The fee on outstanding Special LC Facility standby letters of credit is 3% per annum. There is no commitment fee for the unused portion of the Special LC Facility. The Partnership had approximately $6.1 million outstanding under the Special LC Facility as of September 30, 1996. Under the amended credit facility, the Partnership has available to it a revolving line of credit of $8.0 million (the "Revolver") and a $45.0 million term loan (the "Term Loan"). The amount available under the Revolver is subject to a borrowing base which includes a reduction by the amount of letters of credit issued under Facility A. Advances under the Revolver and Term Loan bear interest at prime plus 2% and 3%, respectively, payable monthly. The prime rate was 8.25% as of September 30, 1996. The Term Loan is subject to a facility fee of 5% per annum effective January 1, 1996 and payable at maturity which is October 1, 1997. As of September 30, 1996, the Partnership had accrued $1.0 million in facility fees. This fee will be discontinued if the proposed amendments to the partnership agreement are adopted. The amount accrued at that time will be forgiven. See "Financial Condition - Financial Resources and Liquidity." The Partnership has pledged substantially all its assets as collateral. In addition, the General Partners guaranteed the facility and Pride SGP as guarantor has pledged its assets as collateral for such loans. The Partnership may elect to prepay the credit facilities without any prepayment penalty. The fee for the unused portion of the Revolver is one-half of 1% per annum. At September 30, 1996, the balances outstanding on the Revolver and Term Loan were $2.3 million and $42.2 million, respectively. Under the new credit facility, the Partnership is required to make scheduled principal payments of $120,000 each month beginning September 5, 1996 plus quarterly principal payments in the amount of 80% of excess cash, as defined in the credit agreement, for the preceding quarter. The Partnership has classified $1.7 million of the Term Loan as current as of September 30, 1996. Advances under the Revolver are subject to repayment on a daily basis. As a result, the full amount outstanding at September 30, 1996 has been included in the current portion of long-term debt. Subject to the borrowing base, the Partnership may borrow any amounts previously repaid. The facility also includes a $2.5 million uncommitted line of credit ("Uncommitted Line"). Advances under the Uncommitted Line are made solely at the lenders' discretion and bear interest at the prime rate plus 4%. The Uncommitted Line must be completely paid off for fifteen consecutive days each month. There were no advances outstanding under the Uncommitted Line at September 30, 1996. The amended credit facility also requires the Partnership to pay a monthly fee of $10,000 and restricts the payment of distributions to unitholders throughout the term of the amended credit agreement. Future distributions will be dependent on payment in full of bank debt, expiration of all liabilities for letters of credit, and the termination of the credit agreement. The Partnership has a nonrecourse loan from Diamond Shamrock with an outstanding principal balance of $5.8 million at September 30, 1996, bearing interest at 8% per annum with monthly principal and interest payments. The assets of Pride Borger, Inc., a wholly owned subsidiary of the Partnership, which owns 50% of the Texas Plains Pipeline System, are pledged as collateral. Pride Borger, Inc. has also guaranteed the note. Monthly principal payments are made to Diamond Shamrock based on the number of throughput barrels for the prior month in the Texas Plains Pipeline System. Current maturities are estimated to be $54,000 as of September 30, 1996. In 1996, the Partnership acquired the other 50% interest in the Texas Plains System from Scurlock Permian. Pride SGP has made unsecured loans to the Partnership in the principal amount of $2.5 million bearing interest at prime plus 2%. The loans mature October 1, 1997. During 1995, the Partnership converted non-interest bearing accounts payable to the United States Government related to pricing adjustments which had been accrued since 1993 to a $2.4 million installment loan. The principal balance was $1.6 million at September 30, 1996. The note bears interest based on the rate set by the Secretary of the Treasury. This rate was 7.0% as of September 30, 1996. The note requires monthly payments of $84,000. The note matures June 1, 1998. The Partnership has classified $934,000 of the note as current as of September 30, 1996. On January 9, 1995, the Partnership executed a note to a local bank related to the renovation and refinancing of its administrative offices in Abilene. Previously, the Partnership leased additional office space from a third party. The note bears interest at prime plus one-half of 1% and had an outstanding principal balance of $377,000 at September 30, 1996. The note matures January 9, 2000. The Partnership has classified $16,000 of the note as current as of September 30, 1996. 6. Preferred and Common Units At September 30, 1996, 4,700,000 Preferred Units were outstanding, representing an approximate 46.3% limited partner interest in the Partnership. The Preferred Units are cumulative, entitled to a minimum quarterly distribution of $0.65 per unit through the Initial Conversion Date which is the first day of the third calendar quarter in which the payment of all cumulative arrearages to Preferred Unitholders have been paid, and all arrearages must be paid before the Common Unitholders may receive distributions. The Preferred Units are convertible into Common Units on the Initial Conversion Date. The Common Units are also cumulative and entitled to a quarterly distribution of $0.65 per unit; however, no Common Unit arrearages will be paid after the Initial Conversion Date, and any such accumulated arrearages then existing will be cancelled. The general partners are entitled to 2% of all distributions. At September 30, 1996, cumulative arrearages were $13.65 per Common Unit which totaled $71.7 million and $12.00 per Preferred Unit which totaled $56.4 million. Such arrearages will be cancelled if phase 2 of the restructuring is approved by unitholders. See "Financial Condition - Financial Resources and Liquidity." Under the terms of the Partnership's credit agreement, the bank restricted the payment of distributions to unitholders throughout the term of the credit agreement. Future distributions will be dependent on payment in full of the bank debt, expiration of all liabilities for letters of credit, and the termination of the credit agreement. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Overview Pride Companies, L.P. is a Delaware limited partnership which owns and operates a petroleum refining business ("Refinery"), products pipeline business ("Products System"), and crude oil gathering business ("Crude Gathering System"). The Crude Gathering System is the primary source of crude supply for the Refinery, although some gathering is done for others. It gathers crude at the wellhead and then buys and sells crude oil so that it can deliver crude through its Crude Gathering System to the Refinery. After the crude is processed into petroleum products at the Refinery, it is marketed and if necessary transported to the Partnership's terminals through the Products System's pipelines. The following is a discussion of the results of operations for the Partnership. This discussion should be read in conjunction with the financial statements included in this report. General The Partnership's operating results depend principally on the rate of utilization of the Refinery, the margins between the prices of its refined petroleum products and the cost of crude oil, the volume throughput on the Products System, and the volume throughput on and margins from the transportation and resale of crude oil from its Crude Gathering System. Higher Refinery utilization allows the Partnership to spread its fixed costs across more barrels, thereby lowering the fixed costs per barrel of crude oil processed. The refining business is highly competitive, and the Partnership's margins are significantly impacted by general industry margins. Industry margins are determined by a variety of regional, national, and global trends, including oil prices, weather, and economic conditions, among other things. The Refinery's JP-8 (a grade of military aviation fuel) prices are influenced by these trends since the pricing for JP-8 is based on Jet A, a kerosene-based product, and the price of diesel and heating fuels affect the price of kerosene. In 1991, the Partnership completed construction of the catalytic reformer unit ("CRU") that allows it to refine naphtha into unleaded gasoline. Prior to construction of the CRU, almost all naphtha went into the production of JP-4, a grade of military jet fuel. The CRU provided the Partnership an alternative market for its naphtha in the short-term and prepared it for the conversion of the military fuel from JP-4 to JP-8 that was effective in April 1994 for East and Gulf Coast bases. JP-8 is a kerosene-based fuel and without the CRU the Partnership would not have had a market for its naphtha. As a result of the CRU, the Partnership has entered into sales and exchange agreements with eight major oil companies. When the diesel desulfurization unit ("DDU") went on line in the third quarter of 1993, it marked the completion of a three-year diversification process that allows the Partnership to refine more valuable products and expand its markets. In addition to completing the diversification process, the construction of the DDU also met the challenge of present environmental regulations. Federal law required the sulfur content in all diesel produced for highway use to be reduced by October 1, 1993. Margins in the Crude Gathering System are influenced by the level of competition and the price of crude oil. When prices are higher, crude oil can generally be resold at higher margins. Additionally, transportation charges trend upward when higher crude oil prices stimulate increased exploration and development. Conversely, when crude oil prices decrease, margins on the resale of crude oil as well as transportation charges tend to decrease. In evaluating the financial performance of the Partnership, management believes it is important to look at operating income, excluding depreciation in addition to operating income which is after depreciation. Operating income, excluding depreciation measures the Partnership's ability to generate and sustain working capital and ultimately cash flows from operations. However, such measure is before debt service so it does not indicate the amount available for distribution, reinvestment or other discretionary uses. Gross revenues primarily reflect the level of crude oil prices and are not necessarily an accurate reflection of the Partnership's profitability. Also important to the evaluation of the Refinery's performance are barrels of crude oil refined, gross margin (revenue less cost of crude) per barrel, and operating expense per barrel, excluding depreciation. Third quarter 1996 compared to third quarter 1995 General. Net loss for the third quarter of 1996 was $3.2 million compared to a net loss of $286,000 for the third quarter of 1995. The decline was primarily a result of weak refining margins in the third quarter of 1996. Although refined product prices increased during the third quarter of 1996, they increased at a slower rate than crude costs. Credit and loan fees also increased $204,000 during the third quarter of 1996 due to increased facility fees. Operating loss was $982,000 for the third quarter of 1996 compared to operating income of $1.7 million for the third quarter of 1995. Operating income, excluding depreciation, for the third quarter of 1996 decreased to $739,000 from $3.4 million for the third quarter of 1995 as a result of weak refining margins. The following table details the operating income (loss); depreciation; and the operating income (loss), excluding depreciation (in thousands), for the third quarter of 1996 and 1995.
Operating Income Operating (Loss) Income Excluding (Loss) Deprec. Deprec. _______ _______ ________ Third Quarter 1996 Refinery and Products System $(2,534) $ 1,236 $ (1,298) Crude Gathering System 1,552 485 2,037 _______ _______ ________ Total $ (982) $ 1,721 $ 739 Third Quarter 1995 Refinery and Products System $ 280 $ 1,231 $ 1,511 Crude Gathering System 1,410 513 1,923 _______ _______ ________ Total $ 1,690 $ 1,744 $ 3,434
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery and Products System was $2.5 million for the third quarter of 1996 compared to operating income of $280,000 for the third quarter of 1995. Depreciation expense for the Refinery and Products System was approximately $1.2 million for both the third quarter of 1996 and the third quarter of 1995. Operating loss, excluding depreciation, of the Refinery and Products System was $1.3 million for the third quarter of 1996 compared to operating income, excluding depreciation, of $1.5 million for the third quarter of 1995. Operating loss of the Refinery was $2.8 million for the third quarter of 1996 compared to $90,000 for the same period in 1995. The decline was due to weak refining margins in the third quarter of 1996. Depreciation expense for the Refinery alone was $1.0 million for both the third quarter of 1996 and the third quarter of 1995. Operating loss, excluding depreciation, of the Refinery was $1.8 million for the third quarter of 1996 compared to operating income, excluding depreciation, of $923,000 for the third quarter of 1995. Refinery gross margin per barrel was $0.90 for the third quarter of 1996 versus $1.92 for the same period in 1995. Refinery throughput averaged 32,339 BPD for the third quarter of 1996 versus 29,322 BPD for the same period in 1995. Operating expenses per barrel, excluding depreciation, were $1.12 for the third quarter of 1996 and the third quarter of 1995. Operating income for the Products System was $266,000 for the third quarter of 1996 compared to $370,000 for the third quarter of 1995. Depreciation expense for the Products System was $221,000 for the third quarter of 1996 compared to $218,000 for the third quarter of 1995. Operating income, excluding depreciation, for the Products System decreased to $486,000 for the third quarter of 1996 from $588,000 for the same period in 1995 principally as a result of decreased pipeline volumes to the Aledo and San Angelo terminals in the third quarter of 1996. Total transportation volumes were 13,385 BPD for the third quarter of 1996 compared to 16,025 BPD for the same period in 1995. CRUDE GATHERING SYSTEM -- Operating income for the Crude Gathering System was $1.6 million for the third quarter of 1996 compared to $1.4 million for the same period in 1995. Depreciation expense for the Crude Gathering System decreased to $485,000 for the third quarter of 1996 from $513,000 for the third quarter of 1995. Operating income, excluding depreciation, for the Crude Gathering System was $2.0 million for the third quarter of 1996 and $1.9 million for the third quarter of 1995. The net margin was $0.31 per barrel for the third quarter of 1996 versus $0.25 per barrel for the same period in 1995. Due to the elimination of several marginal contracts, the volume of crude oil gathered by the Crude Gathering System decreased to 53,635 BPD for the third quarter of 1996 from 62,546 BPD for the third quarter of 1995. First nine months 1996 compared to first nine months 1995 GENERAL -- Net loss for the first nine months of 1996 was $4.0 million compared to net loss of $5.8 million for the first nine months of 1995. The improvement was primarily a result of higher crude gathering operating margins during the first nine months of 1996 due to the high spot price of crude oil. This was partially offset by weaker refining margins and higher credit and loan fees of $1.6 million during the first nine months of 1996. The increase in credit and loan fees was mainly a result of facility fees of $1.0 million incurred during the first nine months of 1996. Also, the Partnership had a one-time nonrecurring reversal of an accrual for facility fees of $234,000 for the first nine months of 1995 for periods prior to 1995. Operating income was $2.5 million for the first nine months of 1996 compared to an operating loss of $410,000 for the first nine months of 1995. Operating income, excluding depreciation, increased for the first nine months of 1996 to $7.8 million from $4.8 million for the first nine months of 1995 as a result of stronger crude gathering margins which was partially offset by weaker refining margins. The table below details the operating income (loss); depreciation; and the operating income (loss), excluding depreciation by division (in thousands) for the first nine months of 1996 and 1995.
Operating Income Operating (Loss) Income Excluding (Loss) Deprec. Deprec. _______ _______ ________ First Nine Months 1996 Refinery and Products System $(5,219) $ 3,736 $ (1,483) Crude Gathering System 7,734 1,505 9,239 _______ _______ ________ Total $ 2,515 $ 5,241 $ 7,756 First Nine Months 1995 Refinery and Products System $(3,323) $ 3,715 $ 392 Crude Gathering System 2,913 1,543 4,456 _______ _______ ________ Total $ (410) $ 5,258 $ 4,848
REFINERY AND PRODUCTS SYSTEM -- Operating loss of the Refinery and Products System was $5.2 million for the first nine months of 1996 compared to operating loss of $3.3 million for the first nine months of 1995. Depreciation expense for the Refinery and Products System was $3.7 million for both the first nine months of 1996 and the first nine months of 1995. Operating loss, excluding depreciation, of the Refinery and Products System was $1.5 million for the first nine months of 1996 compared to operating income, excluding depreciation, of $392,000 for the first nine months of 1995. Operating loss of the Refinery was $6.1 million for the first nine months of 1996 compared to $4.5 million for the first nine months of 1995. Refining margins decreased for the first nine months of 1996 due to the higher cost of crude relative to the posting price of crude during the first nine months of 1996 as compared to the same period in 1995. Depreciation expense for the Refinery alone was $3.1 million for both the first nine months of 1996 and the first nine months of 1995. Operating loss, excluding depreciation, of the Refinery was $3.0 million for the first nine months of 1996 compared to $1.5 million for the first nine months of 1995. Refinery gross margin per barrel was $1.16 for the first nine months of 1996 versus $1.37 for the same period in 1995. Refinery throughput averaged 32,289 BPD during the first nine months of 1996 versus 31,149 BPD for the same period in 1995. Operating expenses per barrel, excluding depreciation, were $1.09 for the first nine months of 1996 versus $1.08 for the same period in 1995. Operating income for the Products System was $876,000 for the first nine months of 1996 compared to $1.2 million for the first nine months of 1995. Depreciation expense for the Products System was $661,000 for the first nine months of 1996 and $654,000 for the first nine months of 1995. Operating income, excluding depreciation, for the Products System decreased to $1.5 million for the first nine months of 1996 from $1.9 million for the same period in 1995 as a result of decreased volumes. Total transportation volumes were 13,390 BPD for the first nine months of 1996 compared to 15,734 BPD for the same period in 1995. CRUDE GATHERING SYSTEM -- Operating income for the Crude Gathering System was $7.7 million for the first nine months of 1996 compared to $2.9 million for the same period in 1995 due to the high spot price of crude relative to the posting price of crude in the first nine months of 1996. Depreciation expense for the Crude Gathering System was $1.5 million for both the first nine months of 1996 and the first nine months of 1995. Operating income, excluding depreciation, for the Crude Gathering System was $9.2 million for the first nine months of 1996 and $4.5 million for the first nine months of 1995. The net margin was $0.47 per barrel for the first nine months of 1996 compared to $0.16 per barrel for the first nine months of 1995. Due to the elimination of several marginal contracts, the volume of crude oil gathered by the Crude Gathering System decreased to 59,996 BPD for the first nine months of 1996 from 67,801 BPD for the first nine months of 1995. Factors and Trends Affecting Operating Results A number of factors have affected the Partnership's operating results, both indirectly and directly, such as environmental compliance, other regulatory requirements, industry trends and price of crude oil, inventory prices, and seasonality and weather. The Managing General Partner of the Partnership expects that such conditions will continue to affect the Partnership's business to varying degrees in the future. The order in which these factors are discussed is not intended to represent their relative significance. ENVIRONMENTAL COMPLIANCE -- Increasing public and governmental concern about air quality is expected to result in continued regulation of air emissions. Regulations relating to carbon monoxide and regulations on oxygen content in gasoline and sulfur content in diesel fuel are expected to be increasingly important as a means of improving air quality in urban areas. The Partnership plans to spend approximately $905,000 in 1996, 1997 and 1998 on several projects to maintain compliance with various other environmental requirements including $400,000 for a sewer system upgrade. Effective January 1, 1995, the Clean Air Act Amendment of 1990 required that certain areas of the country use reformulated gasoline ("RFG"). The Abilene and San Angelo market areas do not require RFG. Collin, Dallas, Denton, and Tarrant Counties, which comprise the Dallas-Fort Worth ("DFW") metroplex area, do require RFG; however, the Partnership's Aledo terminal lies outside this area and is allowed to supply conventional gasoline that is not destined for sale in these four counties. In addition to the requirement for RFG in certain areas, new but much less restrictive regulations took effect that impose new quality standards for conventional gasoline in the rest of the country. Management does not anticipate that these have had or will have a material adverse effect on the Partnership's operations. In early 1993, the United States Environmental Protection Agency ("EPA") filed an administrative complaint and compliance order against the Partnership. The complaint initially proposed an assessment of $553,000 in penalties and fulfillment of a compliance order at an unspecified cost against the Partnership. The principal violations alleged by the EPA include the failure to properly monitor ground water and to implement a ground water monitoring program. The Partnership has verbally agreed to settle the complaint for $92,000 in penalties payable in three installments with the last payment due in 1999. OTHER REGULATORY REQUIREMENTS -- The Partnership is also subject to the rules and regulations of Occupational Safety and Health Administration, Texas Air Control Board, Texas Railroad Commission, and Texas Water Commission. INDUSTRY TRENDS AND PRICE OF CRUDE OIL -- Industry trends and the price of crude oil will continue to affect the Partnership's business. While refined products are generally sold at a margin above crude oil prices, fluctuations in the price of crude oil can have a significant short-term effect on refining margins because there is usually a lag in the movement of product prices, both up and down, in relation to the movement of crude oil prices. The general level of crude oil prices can also have a significant effect on the margins in the crude gathering business. Margins in the Crude Gathering System generally tend to be influenced by competition and the general price level of crude oil. When prices are higher, crude oil can generally be resold at higher margins. Additionally, transportation charges are slightly less competitive when higher crude oil prices result in increased exploration and development. Conversely, when crude oil prices decrease, margins on the resale of crude oil and transportation charges generally tend to decrease. INVENTORY PRICES -- The Partnership uses the last-in/first-out (LIFO) method of determining inventory values. This method minimizes the effect of fluctuations in inventory prices on earnings by matching current costs with current revenue. The LIFO method is the predominant method used in the refining industry. SEASONALITY AND WEATHER -- Gasoline consumption is typically highest in the United States in the summer months and lowest in the winter months. As a result, margins for gasoline tend to be higher in the summer months. Diesel consumption in the southern United States is generally higher just prior to and during the winter months when commercial trucking is routed on southern highways to avoid severe weather conditions further north. Additionally, diesel fuel prices tend to increase during the winter months when refiners divert heating fuels to northern areas. During unseasonably warm winters, as was experienced during 1995, diesel prices do not trend up as in colder, longer winters. The Refinery's JP-8 prices are influenced by these trends since the pricing for JP-8 is based on Jet A, a kerosene based product, and the price of diesel and heating fuels affect the price of kerosene. OTHER FACTORS -- The Partnership was awarded contracts from the United States Government for the right to supply 106 million gallons of JP-8 to ten military installations in Texas for the period from April 1, 1996 through March 31, 1997. Financial Condition Inflation The Partnership's operations would be adversely impacted by significant, sustained increases in crude oil and other energy prices. Although the Partnership's operating costs are generally impacted by inflation, the Managing General Partner does not expect general inflationary trends to materially adversely impact the Partnership's businesses. Financial Resources and Liquidity The Partnership's operations require substantial amounts of working capital and open lines of credit which the Partnership believes are currently adequate to provide funds to sustain operations at present levels. The Partnership receives payments from the United States Government, major oil companies, and other customers within approximately 7 to 15 days from shipment in the case of products sales and by the 20th of the following month in the case of third-party crude oil sales and exchanges. The Partnership maintains inventory in the amount of approximately 10 to 20 days of sales. The Partnership generally pays for crude oil feedstock on the 20th of the month following the month in which it is received. As a result, the Partnership's operating cycle is such that it generally receives cash for the refined products on a basis roughly equal to the average terms on which it pays for the crude oil feedstock. Letters of credit are an integral part of the operations of the Crude Gathering System since the Partnership takes title to both first purchased barrels and custom gathered barrels. On November 14, 1996, the Partnership's credit facility was amended to extend the maturity date to October 1, 1997. Under this credit facility, the Partnership has a $6,500,000 standby letter of credit facility for general corporate purposes and the purchase of crude oil and other refinery feedstocks ("Facility A") and a $45,000,000 standby letter of credit facility for the purchase of crude oil ("Facility B"). The fee on outstanding Facility A and Facility B standby letters of credit is 1 and 1/2% per annum. For the unused portion of the standby letter of credit facility, the fee is one- half of 1% per annum. Though no advances had been drawn under either the Facility A or Facility B letter of credit facility, the Partnership did have approximately $721,000 and $43.1 million, respectively, in outstanding standby letters of credit as of September 30, 1996. The credit agreement was amended to provide at the banks' discretion an additional $8,000,000 standby letter of credit facility for the purchase of crude oil and other refinery feedstocks ("Special LC Facility"). The fee on outstanding Special LC Facility standby letters of credit is 3% per annum. There is no commitment fee for the unused portion of the Special LC Facility. The Partnership had approximately $6.1 million outstanding under the Special LC Facility as of September 30, 1996. Under the restated and amended credit facility, the Partnership has available to it a revolving line of credit of $8.0 million (the "Revolver") and a $45.0 million term loan (the "Term Loan"). The amount available under the Revolver is subject to a borrowing base which includes a reduction by the amount of letters of credit issued under Facility A. Advances under the Revolver and Term Loan bear interest at prime plus 2% and 3%, respectively, payable monthly. The prime rate was 8.25% as of September 30, 1996. The Term Loan is subject to a facility fee of 5% per annum commencing January 1, 1996 and payable at maturity which is October 1, 1997. As of September 30, 1996, the Partnership had accrued $1.0 million in facility fees. This fee will be discontinued if the proposed amendments to the partnership agreement, as discussed later, are adopted. The amount accrued at that time will be forgiven. The Partnership has pledged substantially all its assets as collateral. In addition, the General Partners guaranteed the facility and Pride SGP as guarantor has pledged its assets as collateral for such loans. The Partnership may elect to prepay the credit facilities without any prepayment penalty. The fee for the unused portion of the Revolver is one-half of 1% per annum. At September 30, 1996, the balances outstanding on the Revolver and Term Loan were $2.3 million and $42.2 million, respectively. The Partnership is required to make scheduled principal payments of $120,000 each month beginning September 5, 1996 plus quarterly principal payments in the amount of 80% of excess cash, as defined in the credit agreement, for the preceding quarter. The Partnership has classified $1.7 million of the Term Loan as current as of September 30, 1996. Advances under the Revolver are subject to repayment on a daily basis. As a result, the full amount outstanding at September 30, 1996 has been included in the current portion of long-term debt. Subject to the borrowing base, the Partnership may borrow any amounts previously repaid. The facility also includes a $2.5 million uncommitted line of credit ("Uncommitted Line"). Advances under the Uncommitted Line are made solely at the lenders' discretion and bear interest at the prime rate plus 4%. The Uncommitted Line must be completely paid off for fifteen consecutive days each month. There were no advances outstanding under the Uncommitted Line at September 30, 1996. The amended credit facility also requires the Partnership to pay a monthly fee of $10,000 and restricts the payment of distributions to unitholders throughout the term of the amended credit agreement. Future distributions will be dependent on payment in full of bank debt, expiration of all liabilities for letters of credit, and the termination of the credit agreement. The Partnership has a nonrecourse loan from Diamond Shamrock with an outstanding principal balance of $5.8 million at September 30, 1996, bearing interest at 8% per annum with monthly principal and interest payments. The assets of Pride Borger, Inc., a wholly owned subsidiary of the Partnership, which owns 50% of the Texas Plains Pipeline System, are pledged as collateral. Pride Borger, Inc. has also guaranteed the note. Monthly principal payments are made to Diamond Shamrock based on the number of throughput barrels for the prior month in the Texas Plains Pipeline System. Current maturities are estimated to be $54,000 at September 30, 1996. In 1996, the Partnership acquired the other 50% interest in the Texas Plains System from Scurlock Permian. Pride SGP has made unsecured loans to the Partnership in the principal amount of $2.5 million bearing interest at prime plus 2%. The loans mature October 1, 1997. During 1995, the Partnership converted non-interest bearing accounts payable to the United States Government related to pricing adjustments which had been accrued since 1993 to a $2.4 million installment loan. The principal balance was $1.6 million at September 30, 1996. The note bears interest based on the rate set by the Secretary of the Treasury. This rate was 7.0% as of September 30, 1996. The note requires monthly payments of $84,000. The note matures June 1, 1998. The Partnership has classified $934,000 of the note as current as of September 30, 1996. On January 9, 1995, the Partnership executed a note to a local bank related to the renovation and refinancing of its administrative offices in Abilene. Prior to this, the Partnership had to lease additional office space from a third party. The note bears interest at prime plus one-half of 1% and had an outstanding principal balance of $377,000 at September 30, 1996. The note matures January 9, 2000. The Partnership has classified $16,000 of the note as current as of September 30, 1996. Cash flows have been and will continue to be significantly affected by fluctuations in the cost and volume of crude oil and refined products held in inventory and the timing of accounts receivable collections. Cash flows are also affected by refining margins and crude oil gathering margins. The Partnership's operations have generated losses in each of the last five years and current ratios of less than one to one in each of the last three years. These conditions and financial results were primarily a result of depressed refining margins along with increasing depreciation expense and interest expense and related fees. Crude gathering volumes have also decreased. The Partnership's return to profitability and long-term viability is dependent upon restructuring its credit facility, increased volumes and/or improved profit margins, as well as continued cost control initiatives. Management believes the extension of the existing credit facility to October 1, 1997 sufficiently alleviates any short-term threats to the liquidity of the Partnership. Though management has and will continue to pursue options regarding increasing volumes and margins and reducing costs, including limiting any significant capital expenditures, these improvements will be gradual and, in many cases, will take sustained periods of time to implement in order to achieve profitability. The most significant and urgent need of the Partnership is to effect a complete restructuring and recapitalization of the Partnership's debt and equity. On August 13, 1996, the Partnership completed the first ("Phase 1") of three phases which called for the execution of documents with the Partnership's bank lenders. In phase two ("Phase 2"), the Partnership is seeking unitholder approval to convert the outstanding preferred units into common units. The Partnership sent out consent solicitation material to unitholders in October, 1996. Approval requires at least two-thirds of both classes of units to vote in favor of the conversion. If approved, the preferred unitholders will own 93.1% of the equity of the Partnership, up from 46.3%, and all preferred and common unit arrearages will be cancelled. In addition, the credit facility will automatically be extended to November 30, 1997, the term loan will be reduced to $25.0 million, three notes will be created for the remaining portion of the previously outstanding term loan, the interest rate on the debt will be reduced, and the facility fee will be cancelled. As of November 14, 1996, in excess of two- thirds of both the preferred and common units had been voted in favor of the proposal. The voting period ends at 5:00 p.m. central time on November 15, 1996 unless extended by the Partnership. Phase three ("Phase 3") anticipates the refinancing of the letter of credit line, the revolving line, and the term loan. Upon completion of Phase 3, the banks have agreed to convert two of the notes to a convertible preferred equity. The third note, if not refinanced, can be converted to equity at the banks' election. During the first nine months of 1996, the Partnership expensed $583,000 related to this proposed restructuring of its credit facility. This is in addition to the $873,000 expensed for the year ended December 31, 1995. The Managing General Partner is hopeful Phase 2 will be completed in the fourth quarter of 1996 and Phase 3 will be completed by March 31, 1997. There can be no assurance the Partnership will be able to complete them as outlined. If the Partnership fails to complete them, it will have to pursue other means of effecting a restructuring and recapitalization prior to the maturity of its credit facility on October 1, 1997. If the Partnership is successful in completing the restructuring and recapitalization of the Partnership, the Managing General Partner believes it will enhance the Partnership's financial strength, flexibility and future access to capital markets as well as lowering interest expense. Capital Expenditures The Partnership incurred maintenance capital expenditures of $347,000 for the third quarter of 1996. Cash Distributions At September 30, 1996, 4,700,000 Preferred Units were outstanding, representing an approximate 46.3% limited partner interest in the Partnership. The Preferred Units are cumulative, entitled to a minimum quarterly distribution of $0.65 per unit through the Initial Conversion Date which is the first day of the third calendar quarter in which the payment of all cumulative arrearages to Preferred Unitholders have been paid, and all arrearages must be paid before the Common Unitholders may receive distributions. The Preferred Units are convertible into Common Units on the Initial Conversion Date. The Common Units are also cumulative and entitled to a quarterly distribution of $0.65 per unit; however, no Common Unit arrearages will be paid after the Initial Conversion Date, and any such accumulated arrearages then existing will be cancelled. The general partners are entitled to 2% of all distributions. At September 30, 1996, cumulative arrearages were $13.65 per Common Unit which totaled $71.7 million and $12.00 per Preferred Unit which totaled $56.4 million. Such arrearages will be cancelled if phase 2 of the restructuring is approved by unitholders. See "Financial Condition - Financial Resources and Liquidity." Under the terms of the Partnership's credit agreement, the bank restricted the payment of distributions to unitholders throughout the term of the credit agreement. Future distributions will be dependent on payment in full of the bank debt, expiration of all liabilities for letters of credit, and the termination of the credit agreement. PART II. Other Information Item 1. Legal Proceedings In early 1993, the United States Environmental Protection Agency ("EPA") filed an administrative complaint and compliance order against the Partnership. The complaint initially proposed an assessment of $553,000 in penalties and fulfillment of the compliance order at an unspecified cost against the Partnership. The principal violations alleged by the EPA include the failure to properly monitor ground water and to implement a ground water monitoring program. The Partnership has verbally agreed to settle the complaint for $92,000 in penalties payable in three installments with the last payment due in 1999. The Partnership has filed a substantial claim against the Defense Fuel Supply Center relating to erroneous pricing of fuel purchased over a period of several years from the Partnership and its predecessors. The ultimate outcome of this matter cannot presently be determined. The Partnership is involved in various claims and routine litigation incidental to its business for which damages are sought. Management believes that the outcome of all claims and litigation is either adequately insured or will not have a material adverse effect on the Partnership's financial position or results of operations. Item 2. Changes in Securities None Item 3. Defaults in 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: 4.1 Certificate of Limited Partnership of the Partnership (incorporated by reference to Exhibit 3.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1- 10473)). 4.2 Amended and Restated Agreement of Limited Partnership of Pride Companies, L.P. (incorporated by reference to Exhibit 3.2 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.3 First Amendment to the Amended and Restated Agreement of Limited Partnership of Pride Companies, L.P. (incorporated by reference to Exhibit 4.2 of the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (Commission File No. 1- 10473)). 4.4 Deposit Agreement among the Partnership and the Depository (incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.5 Transfer Application (included as Exhibit A to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.6 Form of Depositary Receipt for Preferred Units of Pride Companies, L.P. (included as Exhibit A to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.7 Form of Depositary Receipt for Common Units of Pride Companies, L.P. (included as Exhibit B to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 27 Financial Date Schedule for Third Quarter 1996. 28.1 First Amendment to Loan Agreement, dated as of August 27, 1996, among the Partnership (Borrower), Pride Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors), and NationsBank of Texas, N.A. (Agent), and NationsBank of Texas, N.A. and Bank One Texas, N.A. (Lenders). 28.2 Second Amendment to Loan Agreement, dated as of November 14, 1996, among the Partnership (Borrower), Pride Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors), and NationsBank of Texas, N.A. (Agent), and NationsBank of Texas, N.A. and Bank One Texas, N.A. (Lenders). 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. PRIDE COMPANIES, L.P. By: Pride Refining, Inc. as its Managing General Partner (Registrant) November 14, 1996 Brad Stephens Date Brad Stephens Chief Executive Officer (Signing on behalf of Registrant) November 14, 1996 George Percival Date George Percival Principal Financial Officer (Signing as Principal Financial Officer) PRIDE COMPANIES, L.P. Exhibits to Report to Form 10-Q INDEX TO EXHIBITS Exhibit Number (Reference to Item 601 of Regulation S-K) _________________ 4.1 Certificate of Limited Partnership of the Partnership (incorporated by reference to Exhibit 3.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1- 10473)). 4.2 Amended and Restated Agreement of Limited Partnership of Pride Companies, L.P. (incorporated by reference to Exhibit 3.2 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.3 First Amendment to the Amended and Restated Agreement of Limited Partnership of Pride Companies, L.P. (incorporated by reference to Exhibit 4.2 of the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (Commission File No. 1- 10473)). 4.4 Deposit Agreement among the Partnership and the Depository (incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.5 Transfer Application (included as Exhibit A to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.6 Form of Depositary Receipt for Preferred Units of Pride Companies, L.P. (included as Exhibit A to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 4.7 Form of Depositary Receipt for Common Units of Pride Companies, L.P. (included as Exhibit B to the Deposit Agreement, which is incorporated by reference to Exhibit 4.1 of the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (Commission File No. 1-10473)). 27 Financial Data Schedule for Third Quarter 1996. 28.1 First Amendment to Loan Agreement, dated as of August 27, 1996, among the Partnership (Borrower), Pride Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors), and NationsBank of Texas, N.A. (Agent), and NationsBank of Texas, N.A. and Bank One Texas, N.A. (Lenders). 28.2 Second Amendment to Loan Agreement, dated as of November 14, 1996, among the Partnership (Borrower), Pride Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc. (Guarantors), and NationsBank of Texas, N.A. (Agent), and NationsBank of Texas, N.A. and Bank One Texas, N.A. (Lenders). EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 457 0 15,522 0 19,283 36,902 136,153 35,504 138,737 45,641 49,709 0 15,871 15,936 173 138,737 450,670 450,670 435,341 435,341 5,241 0 4,380 (4,066) (33) (4,033) 0 0 0 (4,033) (0.40) (0.40)
EX-99 3 EXHIBIT 28.1 FIRST AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT AGREEMENT THIS FIRST AMENDMENT TO FIFTH RESTATED AND AMENDED CREDIT AGREEMENT (herein called the "Amendment") made as of the 27th day of August, 1996, by and among Pride Companies, L.P., a Delaware limited partnership ("Borrower"), Pride Refining, Inc., a Texas corporation ("Pride Refining"), Pride SGP, Inc., a Texas corporation ("Pride SGP"), Desulfur Partnership, a Texas general partnership ("Desulfur Partnership"), Pride Marketing of Texas (Cedar Wind), Inc., a Texas corporation ("Pride Marketing"), Pride Borger, Inc., a Delaware corporation ("Pride Borger"), NationsBank of Texas, N.A., a national banking association, as Agent ("Agent"), and Lenders named on Schedule 1 to the Original Agreement ("Lenders"), W I T N E S S E T H: WHEREAS, Borrower, Pride Refining, Pride SGP, Desulfur Partnership, Pride Marketing, Pride Borger, Agent and Lenders have entered into that certain Credit Agreement dated as of August 13, 1996 (the "Original Agreement") for the purpose and consideration therein expressed, whereby Lenders became obligated to make loans to Borrower as therein provided; and WHEREAS, Borrower, Agent and Lenders desire to amend the original Agreement to provide for an uncommitted letter of credit facility; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement and in consideration of the loans which may hereafter be made by Lenders to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I Definitions and References Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Amendment. Section 1.2. Other Defined Terms. Unless the context otherwise requires, the following terms when used in this Amendment shall have the meanings assigned to them in this Section 1.2. "Amendment" shall mean this First Amendment to Fifth Restated and Amended Credit Agreement. "Credit Agreement" shall mean the Original Agreement as amended hereby. ARTICLE II Amendments to Original Agreement Section 2.1. Defined Terms. The definition of "Letter of Credit" in Section 1.1 of the Original Agreement is hereby amended in its entirety to read as follows: "'Letter of Credit' shall mean any Facility A Letter of Credit, Facility B Letter of Credit or Special Letter of Credit issued, renewed or extended by Agent pursuant to this Agreement or the Loan Documents, together with any letter(s) of credit issued, renewed or extended by Agent pursuant to the Original Credit Agreement." The following definition of "Special Letter of Credit" is hereby added to Section 1.1 of the Original Agreement immediately following the definition of "Series C Units": "'Special Letter of Credit' has the meaning specified in Section 3.01(d)." Section 2.2. Special Letters of Credit. Section 3.01 of the Original Agreement is hereby amended by adding the following clause (d) immediately following clause (c) thereof: "(d) Special Letters of Credit. Determining Lenders may elect, in their sole discretion, to direct Agent to issue, renew or extend, for the account of Borrower, one or more irrevocable standby Letters of Credit ('Special Letters of Credit') from time to time upon a request by Borrower. Borrower must give Agent either a properly completed Letter of Credit Request or a CATS Request at least one Business Day prior to the date Borrower desires a Special Letter of Credit to be issued, renewed or extended. Notwithstanding any course of dealing between Borrower, Agent or any Lender or any prior Special Letter of Credit being issued, renewed or extended by Agent and notwithstanding anything contained in this Agreement or any other Loan Document to the contrary, neither Agent nor any Lender has any obligation or commitment whatsoever to issue, renew or extend any Special Letter of Credit, and the decision for Agent to issue, renew or extend any Special Letter of Credit shall be made solely in the discretion of Determining Lenders. Special Letters of Credit may be issued only to support obligations of Borrower for purchases of crude oil and other refinery feed stocks into the refinery known as the Pride Refinery, located in Jones County, Texas." Section 2.3. Conditions. The heading to Section 3.02 of the Original Agreement is hereby amended in its entirety to read as follows: "Conditions to Letters of Credit". Section 2.4. Terms of Letters of Credit. Section 3.03(b) of the Original Agreement is hereby amended by adding the following sentence to the end thereof: "The expiry date of any Special Letter of Credit shall be determined by Determining Lenders in their sole discretion, provided that in no event shall such expiry date be later than the Maturity Date (as then known)." Section 3.03(e) of the Original Agreement is hereby amended in its entirety to read as follows: "(e) Agent may amend, renew and extend any Letter of Credit (other than a Special Letter of Credit), upon receipt of the necessary instructions from Borrower as Agent may require. Any Special Letter of Credit may be amended, renewed or extended by Agent only upon receipt of the necessary instructions from Borrower as Agent may require and the written consent of the Determining Lenders." ARTICLE III Conditions of Effectiveness Section 3.1. Effective Date. This Amendment shall become effective as of the date first above written when, and only when, Agent shall have received, at Agent's office, a counterpart of this Amendment executed and delivered by Borrower and each Lender. ARTICLE IV Representations and Warranties Section 4.1. Representations and Warranties of Borrower. In order to induce each Lender to enter into this Amendment, Borrower represents and warrants to each Lender that: (a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof. (b) Each Related Person is duly authorized to execute and deliver this Amendment, and Borrower is and will continue to be duly authorized to borrow monies and to perform its obligations under the Credit Agreement. Each Related Person has duly taken all corporate and partnership action necessary to authorize the execution and delivery of this Amendment and to authorize the performance of the obligations of such Related Person hereunder. (c) The execution and delivery by each Related Person of this Amendment, the performance by each Related Person of its obligations hereunder and the consultation of the transactions contemplated hereby do not and will not conflict with any provision of law, statute, rule or regulation or of the partnership agreement, articles of incorporation and bylaws of any Related Person, or of any material agreement, judgment, license, order or permit applicable to or binding upon any Related Person, or result in the creation of any lien, charge or encumbrance upon any assets or properties of any Related Person. Except for those which have been obtained, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by each Related Person of this Amendment or to consummate the transactions contemplated hereby. (d) When duly executed and delivered, this Amendment will be a legal and binding obligation of each Related Person, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application. ARTICLE V Miscellaneous Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lenders under the Credit Agreement, the Notes, or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement, the Notes or any other Loan Document. Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of the Related Person herein shall survive the execution and delivery of this Amendment and the performance hereof, including without limitation the making or granting of the Loans, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by any Related Person hereunder or under the Credit Agreement to any Lender shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Borrower under this Amendment and under the Credit Agreement. Section 5.3. Loan Documents. This Amendment is a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto. Section 5.4. Governing Law. This Amendment shall be governed by and construed in accordance the laws of the State of Texas and any applicable laws of the United States of America in all respects, including construction, validity and performance. Section 5.5. Counterparts. This Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Amendment. THIS AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. IN WITNESS WHEREOF, this Amendment is executed as of the date first above written. BORROWER: PRIDE COMPANIES, L.P., a Delaware limited partnership By: PRIDE REFINING, INC., a Texas corporation, Managing General Partner By: Brad Stephens Chief Executive Officer GUARANTORS: PRIDE REFINING, INC. By: Brad Stephens Chief Executive Officer PRIDE SGP, INC. By: Brad Stephens Chief Executive Officer PRIDE MARKETING OF TEXAS (CEDAR WIND), INC. By: Brad Stephens President DESULFUR PARTNERSHIP By: Pride Marketing of Texas (Cedar Wind), Inc., its General Partner By: Brad Stephens President PRIDE BORGER, INC. By: Wayne Malone President AGENT: NATIONSBANK OF TEXAS, N.A. By: Jay T. Wampler Vice President LENDERS: NATIONSBANK OF TEXAS, N.A. By: Jay T. Wampler Vice President BANK ONE, TEXAS, N.A. By: Randall Durant Vice President CONSENT AND AGREEMENT Each of Pride Refining, Pride SGP and Desulfur Partner hereby consents to the provisions of this Agreement and the transactions contemplated herein, and hereby ratifies and confirms the Second Restated Guaranty Agreement dated as of August 13, 1996, made by it for the benefit of Lenders and Agent, and agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect. PRIDE REFINING, INC. By: Brad Stephens Chief Executive Officer PRIDE SGP, INC. By: Brad Stephens Chief Executive Officer DESULFUR PARTNERSHIP By: Pride Marketing of Texas (Cedar Wind), Inc., its general partner By: Brad Stephens President CONSENT AND AGREEMENT Pride Marketing and Pride Borger hereby consents to the provisions of this Agreement and the transactions contemplated herein, and hereby ratifies and confirms the Restated Guaranty Agreement dated as of August 13, 1996, made by it for the benefit of Lenders and Agent, and agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect. PRIDE MARKETING OF TEXAS (CEDAR WIND), INC. By: Brad Stephens President PRIDE BORGER, INC. By: Wayne Malone President EX-99 4 EXHIBIT 28.2 AGREEMENT Reference is hereby made to that certain Fifth Restated and Amended Credit Agreement dated as of August 13, 1996, as amended by the First Amendment to Fifth RestaTed and Amended Credit Agreement dated as of August 27, 1996 (as so amended, the "Credit Agreement") among Pride Companies, L.P. ("Borrower"), Pride Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc. (collectively, the "Guarantors"), NationsBank of Texas, N.A., a national banking association, as Agent ("Agent"), and Bank One, Texas, N.A. and NationsBank of Texas, N.A., as Lenders (sometimes collectively referred to herein as "Lenders" and each individually, a "Lender"). Capitalized terms used herein shall have the meanings given them in the Credit Agreement. Borrower has requested, and Agent and Lenders have agreed to amend the Credit Agreement for the purposes expressed herein. In consideration of the mutual covenants and agreements contained herein and in the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lenders, Agent, Borrower and Guarantors agree as follows: 1. Definitions. The definition of "Maturity Date" in Section 1.01 of the Credit Agreement is hereby amended in its entirety to read as follows: "'Maturity Date' shall mean the earlier to occur of October 1, 1997 or the date of any Acceleration, provided that beginning on the Restructuring Trigger Date and at all times thereafter, the term 'Maturity Date' shall mean the earlier to occur of November 30, 1997, or the date of any Acceleration." 2. Ratification of Documents. The Credit Agreement as hereby amended is ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to refer to this Agreement also. The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein operate as a waiver of any right, power or remedy of Agent or any Lender under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Documents. 3. Loan Document. This Agreement is a Loan Document and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto. 4. Counterparts. This Agreement may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of November 14, 1996. PRIDE COMPANIES, L.P., a Delaware limited partnership By: PRIDE REFINING, INC., a Texas corporation, Managing General Partner By: Brad Stephens Chief Executive Officer PRIDE REFINING, INC. By: Brad Stephens Chief Executive Officer PRIDE SGP, INC. By: Brad Stephens Chief Executive Officer PRIDE MARKETING OF TEXAS (CEDAR WIND), INC. By: Brad Stephens President DESULFUR PARTNERSHIP By: Pride Marketing of Texas (Cedar Wind), Inc., its General Partner By: Brad Stephens President PRIDE BORGER, INC. By: Wayne Malone President NATIONSBANK OF TEXAS, N.A., as agent By: Jay T. Wampler Vice President NATIONSBANK OF TEXAS, N.A. By: Jay T. Wampler Vice President BANK ONE, TEXAS, N.A. By: Randall Durant Vice President CONSENT AND AGREEMENT Each of Pride Refining, Pride SGP and Desulfur Partnership hereby consents to the provisions of this Agreement and the transactions contemplated herein, and hereby ratifies and confirms the Second Restated Guaranty Agreement dated as of August 13, 1996, made by it for the benefit of Lenders and Agent, and agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect. PRIDE REFINING, INC. By: Brad Stephens Chief Executive Officer PRIDE SGP, INC. By: Brad Stephens Chief Executive Officer DESULFUR PARTNERSHIP By: Pride Marketing of Texas (Cedar Wind), Inc., its general partner By: Brad Stephens President CONSENT AND AGREEMENT Each of the undersigned hereby consents to the provisions of this Agreement and the transactions contemplated herein, and hereby ratifies and confirms the Restated Guaranty Agreement dated as of August 13, 1996, made by it for the benefit of Lenders and Agent, and agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect. PRIDE MARKETING OF TEXAS (CEDAR WIND), INC. By: Brad Stephens President PRIDE BORGER, INC. By: Wayne Malone President -----END PRIVACY-ENHANCED MESSAGE-----