e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the transition period from to
Commission file number 1-31219
SUNOCO LOGISTICS PARTNERS L.P.
(Exact name of registrant as specified in its charter)
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Delaware
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23-3096839 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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Mellon Bank Center |
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1735 Market Street, Suite LL, Philadelphia, PA
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19103-7583 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (866) 248-4344
Former name, former address and formal fiscal year, if changed since last report: Not Applicable
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer
in Rule 12b-2 of the Exchange Act.: Large accelerated filer o Accelerated filer þ
Non-accelerated filer
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
At April 28, 2006, the number of the registrants Common Units outstanding was 20,164,051, and its
Subordinated Units outstanding was 5,691,819.
SUNOCO LOGISTICS PARTNERS L.P.
INDEX
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Page No. |
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3 |
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4 |
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5 |
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6 |
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22 |
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25 |
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27 |
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28 |
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28 |
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28 |
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28 |
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28 |
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28 |
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29 |
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30 |
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2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
SUNOCO LOGISTICS PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except unit and per unit amounts)
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Three Months Ended |
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March 31, |
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2006 |
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2005 |
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Revenues |
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Sales and other operating revenue: |
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Affiliates (Note 3) |
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$ |
478,321 |
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$ |
476,923 |
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Unaffiliated customers |
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782,650 |
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534,926 |
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Other income |
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2,391 |
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3,627 |
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Total Revenues |
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1,263,362 |
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1,015,476 |
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Costs and Expenses |
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Cost of products sold and operating expenses |
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1,214,786 |
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974,911 |
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Depreciation and amortization |
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8,946 |
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8,122 |
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Selling, general and administrative expenses |
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15,003 |
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11,917 |
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Total Costs and Expenses |
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1,238,735 |
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994,950 |
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Operating Income |
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24,627 |
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20,526 |
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Net interest cost paid to affiliates (Note 3) |
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309 |
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65 |
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Other interest cost and debt expense, net |
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6,450 |
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5,163 |
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Capitalized interest |
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(556 |
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Net Income |
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$ |
18,424 |
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$ |
15,298 |
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Calculation of Limited Partners interest in Net Income (Note 4): |
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Net Income |
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$ |
18,424 |
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$ |
15,298 |
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Less: General Partners interest in Net Income |
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(1,344 |
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(922 |
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Limited Partners interest in Net Income |
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$ |
17,080 |
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$ |
14,376 |
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Net Income per Limited Partner unit: |
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Basic |
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$ |
0.66 |
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$ |
0.60 |
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Diluted |
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$ |
0.66 |
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$ |
0.59 |
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Weighted average Limited Partners units outstanding (Note 4): |
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Basic |
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25,819,210 |
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24,090,548 |
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Diluted |
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25,944,752 |
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24,288,379 |
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(See Accompanying Notes)
3
SUNOCO LOGISTICS PARTNERS L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
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March 31, |
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December 31, |
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2006 |
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2005 |
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Assets |
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(UNAUDITED) |
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Current Assets |
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Cash and cash equivalents |
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$ |
4,951 |
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$ |
21,645 |
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Advances to affiliates (Note 3) |
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9,817 |
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Accounts receivable, affiliated companies (Note 3) |
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129,156 |
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136,536 |
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Accounts receivable, net |
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669,839 |
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584,509 |
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Inventories: |
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Crude oil |
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48,579 |
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27,561 |
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Materials, supplies and other |
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724 |
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700 |
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Total Current Assets |
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863,066 |
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770,951 |
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Properties, plants and equipment |
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1,411,136 |
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1,287,542 |
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Less accumulated depreciation and amortization |
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(480,770 |
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(472,706 |
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Properties, plants and equipment, net |
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930,366 |
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814,836 |
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Investment in affiliates (Note 5) |
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68,683 |
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69,097 |
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Deferred charges and other assets |
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32,066 |
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25,801 |
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Total Assets |
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$ |
1,894,181 |
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$ |
1,680,685 |
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Liabilities and Partners Capital |
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Current Liabilities |
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Accounts payable |
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$ |
840,760 |
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$ |
720,127 |
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Accrued liabilities |
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26,440 |
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32,884 |
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Accrued taxes other than income |
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17,679 |
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20,986 |
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Advances from affiliates (Note 3) |
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5,750 |
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Total Current Liabilities |
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884,879 |
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779,747 |
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Long-term debt (Note 6) |
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465,116 |
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355,573 |
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Other deferred credits and liabilities |
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23,308 |
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21,954 |
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Commitments and contingent liabilities (Note 7) |
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Total Liabilities |
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1,373,303 |
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1,157,274 |
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Partners Capital: |
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Limited partners interest |
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513,560 |
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515,512 |
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General partners interest |
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7,318 |
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7,899 |
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Total Partners Capital |
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520,878 |
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523,411 |
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Total Liabilities and Partners Capital |
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$ |
1,894,181 |
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$ |
1,680,685 |
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(See Accompanying Notes)
4
SUNOCO LOGISTICS PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
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Three Months Ended |
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March 31 , |
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2006 |
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2005 |
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
18,424 |
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$ |
15,298 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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8,946 |
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8,122 |
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Restricted unit incentive plan expense |
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806 |
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821 |
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Changes in working capital pertaining to operating activities net of
the effect of acquisitions: |
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Accounts receivable, affiliated companies |
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7,380 |
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(8,534 |
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Accounts receivable, net |
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(85,330 |
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(140,056 |
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Inventories |
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(18,853 |
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(19,866 |
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Accounts payable and accrued liabilities |
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114,155 |
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149,117 |
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Accrued taxes other than income |
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(3,307 |
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(599 |
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Other |
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(3,443 |
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298 |
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Net cash provided by operating activities |
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38,778 |
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4,601 |
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Cash Flows from Investing Activities: |
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Capital expenditures |
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(18,228 |
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(7,841 |
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Acquisitions |
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(109,448 |
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Net cash used in investing activities |
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(127,676 |
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(7,841 |
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Cash Flows from Financing Activities: |
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Distributions paid to Limited Partners and General Partner |
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(20,360 |
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(15,955 |
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Payments of statutory withholding on net issuance of Limited Partner units under
restricted unit incentive plan |
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(1,443 |
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(2,863 |
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Contributions from General Partner for Limited Partner unit transactions |
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74 |
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137 |
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Advances to affiliates, net |
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(15,567 |
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1,571 |
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Contributions from affiliate |
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361 |
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Borrowings under credit facility |
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109,500 |
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Net cash provided by /(used in) financing activities |
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72,204 |
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(16,749 |
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Net change in cash and cash equivalents |
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(16,694 |
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(19,989 |
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Cash and cash equivalents at beginning of year |
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21,645 |
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52,660 |
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Cash and cash equivalents at end of period |
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$ |
4,951 |
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$ |
32,671 |
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(See Accompanying Notes)
5
SUNOCO LOGISTICS PARTNERS L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Sunoco Logistics Partners L.P. (the Partnership) is a publicly traded Delaware limited
partnership formed by Sunoco, Inc. (Sunoco) in October 2001 to acquire a substantial portion of
Sunocos logistics business. The Partnership owns and operates a geographically diverse portfolio
of complementary assets, consisting of refined product pipelines, terminalling and storage assets,
crude oil pipelines, and crude oil acquisition and marketing assets located in the Northeast,
Midwest and South Central United States.
The consolidated financial statements reflect the results of Sunoco Logistics Partners
L.P. and its wholly-owned partnerships, including Sunoco Logistics Partners Operations L.P. (the
Operating Partnership). Equity ownership interests in corporate joint ventures, which are not
consolidated, are accounted for under the equity method.
The accompanying condensed consolidated financial statements are presented in accordance
with the requirements of Form 10-Q and accounting principles generally accepted in the United
States for interim financial reporting. They do not include all disclosures normally made in
financial statements contained in Form 10-K. In managements opinion, all adjustments necessary for
a fair presentation of the results of operations, financial position and cash flows for the periods
shown have been made. All such adjustments are of a normal recurring nature. Results for the three
months ended March 31, 2006 are not necessarily indicative of results for the full year 2006.
Millenium and Kilgore Pipeline Acquisition
On March 1, 2006, the Partnership purchased a Texas crude oil pipeline system from affiliates
of Black Hills Energy, Inc. for approximately $41.4 million. The system consists of (a) the
Millennium Pipeline, a 200-mile, 12-inch crude oil pipeline with 65,000 barrels per day operating
capacity, originating near the Partnerships Nederland Terminal, and terminating at Longview Texas;
(b) the Kilgore Pipeline, a 190-mile, 10-inch crude oil pipeline with 35,000 barrels per day
capacity originating in Kilgore, Texas and terminating at refineries in the Houston, Texas region;
(c) approximately 800,000 shell barrels of storage capacity at Kilgore, and Longview, Texas,
340,000 of which are active; (d) a crude oil sales and marketing business; and (e) crude oil line
fill and working inventory.
The purchase price of the acquisition (including $0.6 million to be paid in the second quarter
2006 for inventory) was funded with $41.5 million of borrowings under the Partnerships Credit
Facility, and has been tentatively allocated within the Western Pipeline System business segment to
the assets acquired based on their relative fair values at the acquisition date. The following is a
summary of the effects of the transaction on the Partnerships consolidated financial position (in
thousands of dollars):
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Increase in: |
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Inventories |
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$ |
2,189 |
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Properties, plants and equipment, net |
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37,126 |
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Deferred charges and other assets |
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2,133 |
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Cash paid for acquisition |
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$ |
41,448 |
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The results of the acquisition are included in the financial statements from the date of
acquisition.
Amdel and White Oil Pipeline Acquisition
On March 1, 2006, the Partnership also acquired a Texas crude oil pipeline system from Alon
USA Energy, Inc. for approximately $68.0 million. The system consists of (a) the Amdel Pipeline, a
503-mile, 10-inch common carrier crude oil pipeline with 27,000 barrels per day operating capacity,
originating at the Nederland Terminal, and terminating at Midland, Texas, and (b) the White Oil
Pipeline, a 25-mile, 10-inch crude oil pipeline with 40,000 barrels per day operating capacity,
6
originating at the Amdel Pipeline and terminating at Alons Big Spring, Texas refinery. Alon
has also agreed to ship a minimum of 15,000 barrels per day under a 10-year, throughput and
deficiency agreement on the pipelines. These pipelines are currently idled and are scheduled to be
returned to service on June 1, 2006. The Partnership also expects to complete a $12 million
program to expand capacity on the Amdel Pipeline from 27,000 to 40,000 barrels per day, and to
construct new tankage at the Nederland Terminal to service these new volumes by the end of 2006.
The purchase price of the acquisition was funded with $68.0 million of borrowings under the
Partnerships Credit Facility, and has been tentatively allocated to property, plants and equipment
based on the relative fair value of the assets acquired on the acquisition date within the Western
Pipeline System business segment.
Mesa Pipe Line System Interest Acquisition
On December 5, 2005, the Partnership purchased a subsidiary of Sunoco which owned a 7.2
percent undivided interest in the Mesa Pipe Line system for approximately $1.3 million. The Mesa
Pipe Line system consists of an 80-mile, 24-inch crude oil pipeline from Midland, Texas to Colorado
City, Texas, with an operating capacity of 316,000 barrels per day, and approximately 800,000
barrels of tankage at Midland. The Mesa pipeline connects to the West Texas Gulf pipeline, which
supplies crude oil to the Mid-Valley pipeline. On December 29, 2005, the Partnership purchased an
additional 29.8 percent interest in Mesa from Chevron for $5.3 million, increasing its combined
interest to 37.0 percent. The purchase prices of the acquisitions were funded with $6.6 million of
borrowings under the Partnerships Credit Facility, and were allocated on a preliminary basis to
property, plants and equipment within the Western Pipeline System business segment. The results of
the acquisitions are included in the financial statements from the dates of acquisition.
The Partnership and Plains All American Pipeline are the owners of the undivided interest in
Mesa. On April 21, 2006, the Partnership and Plains All American Pipeline agreed to extend the Mesa
operating agreement, previously scheduled to expire on June 30, 2006, until December 31, 2009.
Corsicana to Wichita Falls Pipeline Acquisition
On August 1, 2005, the Partnership purchased, from an affiliate of Exxon Mobil Corporation, a
crude oil pipeline system and storage facilities located in Texas for $100.0 million. The pipeline
system consists primarily of a 187-mile, 16-inch pipeline with an operating capacity of 125,000
barrels per day. It originates at a crude oil terminal in Corsicana, Texas and terminates at
Wichita Falls, Texas. The storage facilities include the Corsicana terminal, which has 2.9 million
barrels of shell capacity for crude oil, and the Ringgold, Texas terminal, which consists of 0.5
million barrels of shell capacity for crude oil. In addition, the Partnership invested
approximately $16.0 million to construct a new 20-mile, 24-inch pipeline to connect the Corsicana
to Wichita Falls pipeline to the West Texas Gulf pipeline, in which the Partnership has a 43.8%
ownership interest. Construction on the new 20-mile pipeline was completed in December 2005, and
the pipeline is currently operational. The purchase price of the acquisition was funded with $56.5
million of proceeds from the August 2005 units offering (see
Note 8), $18.5 million of net borrowings
under the Partnerships Credit Facility, and $25.0 million of cash on hand, and was allocated to
property, plants and equipment within the Western Pipeline System business segment. The results of
the acquisition are included in the financial statements from the date of acquisition.
3. |
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Related Party Transactions |
Advances To and From Affiliates
The Partnership has a treasury services agreement with Sunoco pursuant to which it, among
other things, participates in Sunocos centralized cash management program. Under this program, all
of the Partnerships cash receipts and cash disbursements are processed, together with those of
Sunoco and its other subsidiaries, through Sunocos cash accounts with a corresponding credit or
charge to an intercompany account. The intercompany balances are settled periodically, but no less
frequently than monthly. Amounts due from Sunoco earn interest at a rate equal to the average rate
of the Partnerships third-party money market investments, while amounts due to Sunoco bear
interest at a rate equal to the interest rate provided in the Partnerships revolving credit
facility (see Note 6).
Selling, general and administrative expenses in the condensed consolidated statements of
income include costs incurred by Sunoco for the provision of certain centralized corporate
functions such as legal, accounting, treasury, engineering, information technology, insurance and
other corporate services, including the administration of employee benefit plans. These are
provided to the Partnership under an omnibus agreement (Omnibus Agreement) with Sunoco for an
annual administrative fee. The fee for the annual period ended December 31, 2005 was $8.4 million.
In January 2006, the parties extended the term of Section 4.1 of the Omnibus Agreement (which
concerns the Partnerships obligation to pay the annual fee for provision of certain general and
administrative services) by one year. The annual administrative fee
7
applicable
to this one-year extension is $7.7 million, which reflects the Partnership directly incurring some of
these general and administrative costs. These costs may be increased if the acquisition or
construction of new assets or businesses requires an increase in the level of general and
administrative services received by the Partnership. There can be no assurance that Section 4.1 of
the Omnibus Agreement will be extended beyond 2006, or that, if extended, the administrative fee
charged by Sunoco will be at or below the current administrative fee. In the event that the
Partnership is unable to obtain such services from Sunoco or third parties at or below the current
cost, the Partnerships financial condition and results of operations may be adversely impacted.
The annual administrative fee does not include the costs of shared insurance programs,
which are allocated to the Partnership based upon its share of the cash premiums incurred. This fee
also does not include salaries of pipeline and terminal personnel or other employees of the general
partner, or the cost of their employee benefits. These employees are employees of the Partnerships
general partner or its affiliates, which are wholly-owned subsidiaries of Sunoco. The Partnership
has no employees. Allocated Sunoco employee benefit plan expenses for employees who work in the
pipeline, terminalling, storage and crude oil gathering operations, including senior executives,
include non-contributory defined benefit retirement plans, defined contribution 401(k) plans,
employee and retiree medical, dental and life insurance plans, incentive compensation plans, and
other such benefits. The Partnership is reimbursing Sunoco for these costs and other direct
expenses incurred on its behalf. These expenses are reflected in cost of products sold and
operating expenses and selling, general and administrative expenses in the condensed consolidated
statements of income.
Accounts Receivable, Affiliated Companies
Affiliated revenues in the condensed consolidated statements of income consist of sales
of crude oil as well as the provision of crude oil and refined product pipeline transportation,
terminalling and storage services to Sunoco, Inc. (R&M) (Sunoco R&M). Sales of crude oil are
computed using the formula-based pricing mechanism of a supply agreement with Sunoco R&M.
Management of the Partnership believes these terms in the aggregate to be comparable to those that
could be negotiated with an unrelated third party. Pipeline revenues are generally determined using
posted tariffs. The Partnership has throughput agreements with Sunoco R&M under which the
Partnership is charging Sunoco R&M fees for services provided under these agreements comparable to
those charged in arms-length, third-party transactions. Under these agreements, Sunoco R&M has
agreed to pay the Partnership a minimum level of revenues for transporting and terminalling refined
products and crude oil for the period specified in the agreements.
Under other agreements between the parties, Sunoco R&M is, among other things, purchasing
from the Partnership, at market-based rates, particular grades of crude oil that the Partnerships
crude oil acquisition and marketing business purchases for delivery to certain pipelines. These
agreements automatically renew on a monthly basis unless terminated by either party on 30 days
written notice. Sunoco R&M also leases the Partnerships 58 miles of interrefinery pipelines
between Sunoco R&Ms Philadelphia and Marcus Hook refineries for a term of 20 years, ending in
2022.
Capital Contributions
The Partnership has agreements with Sunoco R&M which requires Sunoco R&M to, among other
things, reimburse the Partnership for certain expenditures. These agreements include:
|
|
|
the Omnibus Agreement, which requires Sunoco R&M to, among other things, reimburse the
Partnership for up to $10.0 million of expenditures required at the Marcus Hook Tank Farm
and the Darby Creek Tank Farm to maintain compliance with existing industry standards and
regulatory requirements; |
|
|
|
|
the Interrefinery Lease Agreement, which requires Sunoco R&M to reimburse the
Partnership for any non-routine maintenance expenditures incurred, as defined, during the
term of the agreement; and |
|
|
|
|
the Eagle Point purchase agreement, which requires Sunoco R&M to reimburse the
Partnership for certain maintenance capital and expense expenditures incurred regarding
the assets acquired, as defined, up to $5.0 million through March 2014. |
For the three months ended March 31, 2005, the Partnership incurred $0.4 million of
maintenance capital expenditures under these agreements. No amounts were incurred under these
agreements for the three months ended March 31, 2006. The reimbursement of these amounts were
recorded by the Partnership as capital contributions to Partners Capital within the condensed
consolidated balance sheet at March 31, 2005.
In August 2005, the Partnership sold 1.5 million common units in a public offering. In
September 2005, the Partnership sold an additional 125,000 common units to cover over-allotments in
connection with the August 2005 sale. As a result of this issuance of 1.625 million common units,
the general partner contributed $1.3 million to the Partnership to maintain its
8
2.0 percent general partner interest. The Partnership recorded this amount as a capital
contribution to Partners Capital within its condensed consolidated balance sheet.
In February 2006 and 2005, the Partnership issued 0.1 million and 0.2 million common
units, respectively, to participants in the Sunoco Partners LLC Long-Term Incentive Plan (LTIP)
upon completion of award vesting requirements. As a result of these net issuances of common units,
the general partner contributed $0.1 million in each period to the Partnership to maintain its 2.0
percent general partner interest. The Partnership recorded these amounts as capital contributions
to Partners Capital within its condensed consolidated balance sheets.
Asset Acquisition
On December 5, 2005, the Partnership acquired a subsidiary of Sunoco which owned a 7.2
percent undivided interest in the Mesa Pipe Line system for approximately $1.3 million (see Note
2). Since the acquisition was from a related party, the interest in the entity was recorded by the
Partnership at Sunocos historical cost of $0.2 million, and the $1.1 million difference between
the purchase price and the cost basis of the assets was recorded by the Partnership as a capital
distribution.
Redemption of Common Units
In May and June 2005, the Partnership sold a total of 2.775 million common units in a
public offering (see Note 8). The net proceeds from the sale were used to redeem 2.775 million
common units owned by Sunoco for $99.6 million. Also in connection with the equity offering, Sunoco
agreed to reimburse the Partnership for transaction costs incurred by the Partnership.
Reimbursement of these costs of $0.4 million occurred during the third quarter of 2005 when the
transaction costs were finalized, and the reimbursement was accounted for as an increase to
Partners Capital within the Partnerships condensed consolidated balance sheet.
Conversion of Subordinated Units
A total of 5,691,820 subordinated limited partner units, equal to one-half of the
originally issued subordinated units held by the general partner, were converted to common units,
2,845,910 each on February 15, 2006 and February 15, 2005, as the Partnership met the requirements
set forth in the partnership agreement (see Note 9).
4. |
|
Net Income Per Unit Data |
Except as discussed in the following paragraph, basic and diluted net income per limited
partner unit is calculated by dividing net income, after deducting the amount allocated to the
general partners interest, by the weighted-average number of limited partner common and
subordinated units outstanding during the period.
Emerging Issues Task Force Issue No. 03-06 (EITF 03-06) Participating Securities and
the Two-Class Method under FASB Statement No. 128 addresses the computation of earnings per share
by entities that have issued securities other than common stock that contractually entitle the
holder to participate in dividends and earnings of the entity. EITF 03-06 provides that the
general partners interest in net income is to be calculated based on the amount that would be
allocated to the general partner if all the net income for the period were distributed, and not on
the basis of actual cash distributions for the period. The Partnership applied EITF 03-06
prospectively beginning with the third quarter of 2005. The application of EITF 03-06 may have an
impact on earnings per limited partner unit in future periods if there are material differences
between net income and actual cash distributions or if other participating securities are issued.
The effect of applying EITF 03-06 to periods prior to the third quarter of 2005, however, would not
have been material.
The general partners interest in net income consists of its 2.0 percent general partner
interest and incentive distributions, which are increasing percentages, up to 50 percent of
quarterly distributions in excess of $0.50 per limited partner unit (see Note 12). The general
partner was allocated net income of $1.3 million (representing 7.3 percent of total net income for
the period) for the three months ended March 31, 2006, and $1.0 million (representing 6.0 percent
of total net income for the period) for the three months ended March, 31, 2005. Diluted net income
per limited partner unit is calculated by dividing net income applicable to limited partners by
the sum of the weighted-average number of common and subordinated units outstanding and the
dilutive effect of incentive unit awards, as calculated by the treasury stock method.
The following table sets forth the reconciliation of the weighted average number of
limited partner units used to compute basic net income per limited partner unit to those used to
compute diluted net income per limited partner unit for the three months ended March 31, 2006 and
2005:
9
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Weighted average number of limited partner units outstanding basic |
|
|
25,819,210 |
|
|
|
24,090,548 |
|
Add effect of dilutive unit incentive awards |
|
|
125,542 |
|
|
|
197,831 |
|
|
|
|
|
|
|
|
Weighted average number of limited partner units diluted |
|
|
25,944,752 |
|
|
|
24,288,379 |
|
|
|
|
|
|
|
|
5. |
|
Investment in Affiliates |
The Partnerships ownership percentages in corporate joint ventures as of March 31, 2006
and December 31, 2005 are as follows:
|
|
|
|
|
|
|
Equity |
|
|
|
Ownership |
|
|
|
Percentage |
|
Explorer Pipeline Company |
|
|
9.4 |
% |
Wolverine Pipe Line Company |
|
|
31.5 |
% |
West Shore Pipe Line Company |
|
|
12.3 |
% |
Yellowstone Pipe Line Company |
|
|
14.0 |
% |
West Texas Gulf Pipe Line Company |
|
|
43.8 |
% |
The following table provides summarized combined statement of income data on a 100
percent basis for the Partnerships corporate joint venture interests for the three months ended
March 31, 2006 and 2005 (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Income Statement Data: |
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
83,356 |
|
|
$ |
87,021 |
|
Net income |
|
$ |
20,738 |
|
|
$ |
24,437 |
|
The following table provides summarized combined balance sheet data on a 100 percent
basis for the Partnerships corporate joint venture interests as of March 31, 2006 and December 31,
2005 (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
Current assets |
|
$ |
105,613 |
|
|
$ |
100,241 |
|
Non-current assets |
|
$ |
465,081 |
|
|
$ |
468,994 |
|
Current liabilities |
|
$ |
83,313 |
|
|
$ |
80,054 |
|
Non-current liabilities |
|
$ |
430,697 |
|
|
$ |
437,004 |
|
Net equity |
|
$ |
56,684 |
|
|
$ |
52,177 |
|
The Partnerships investments in Wolverine, West Shore, Yellowstone, and West Texas Gulf
at March 31, 2006 include an excess investment amount of approximately $55.4 million, net of
accumulated amortization of $2.1 million. The excess investment is the difference between the
investment balance and the Partnerships proportionate share of the net assets of the entities. The
excess investment was allocated to the underlying tangible and intangible assets. Other than land
and indefinite-lived intangible assets, all amounts allocated, principally to pipeline and related
assets, are amortized using the straight-line method over their estimated useful life of 40 years
and included within depreciation and amortization in the condensed consolidated statements of
income.
The components of long-term debt are as follows (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Credit Facility |
|
$ |
216,100 |
|
|
$ |
106,600 |
|
Senior Notes |
|
|
250,000 |
|
|
|
250,000 |
|
Less unamortized bond discount |
|
|
(984 |
) |
|
|
(1,027 |
) |
|
|
|
|
|
|
|
|
|
$ |
465,116 |
|
|
$ |
355,573 |
|
|
|
|
|
|
|
|
10
Sunoco Logistics Partners Operations L.P., a wholly-owned entity of the Partnership (the
Operating Partnership), has a $300 million Credit Facility available to fund the Operating
Partnerships working capital requirements, to finance future acquisitions and for general
partnership purposes. It may also be used to fund the quarterly distribution to a maximum of $20.0
million. Borrowing under this distribution sublimit must be reduced to zero each year for a 15-day
period. The Credit Facility matures in November 2010 and may be prepaid at any time. It bears
interest at the Operating Partnerships option, at either (i) LIBOR plus an applicable margin or
(ii) the higher of the federal funds rate plus 0.50 percent or the Citibank prime rate (each plus
the applicable margin). The interest rate on the outstanding borrowings at March 31, 2006 and 2005
was 5.0 percent and 3.2 percent, respectively. The Credit Facility contains various covenants
limiting the Operating Partnerships ability to incur indebtedness; grant certain liens; make
certain loans, acquisitions and investments; make any material change to the nature of its
business; acquire another company; or enter into a merger or sale of assets, including the sale or
transfer of interests in the Operating Partnerships subsidiaries. The Credit Facility also
contains covenants (each as defined in the credit agreement) requiring the Operating Partnership to
maintain, on a rolling four-quarter basis, a maximum total debt to EBITDA ratio of 4.75 to 1, which
can generally be increased to 5.25 to 1 during an acquisition period; and an interest coverage
ratio of at least 3.0 to 1. The Operating Partnership is in compliance with these covenants as of
March 31, 2006. The Partnerships ratio of total debt to EBITDA was 3.4 to 1 and the interest
coverage ratio was 4.6 to 1 for the three months ended March 31, 2006.
On March 1, 2006, the Partnership completed its acquisition of two Texas crude oil
pipeline systems for a total of $109.4 million. (See Note 2). The Partnership financed these
transactions with $109.5 million of borrowings under the Credit Facility. At March 31, 2006, the
Partnership had $83.9 million available under the $300 million Credit Facility.
The Senior Notes are at 7.25 percent, due February 15, 2012, and were issued by the
Operating Partnership at 99.325 percent of the principal amount. The discount of 0.675 percent is
amortized on a straight-line basis over the term of the Senior Notes and is included within
interest expense in the condensed consolidated statements of income. The Senior Notes are
redeemable, at a make-whole premium, and are not subject to sinking fund provisions. The Senior
Notes contain various covenants limiting the Operating Partnerships ability to incur certain
liens, engage in sale/leaseback transactions, or merge, consolidate or sell substantially all of
its assets. The Operating Partnership is in compliance with these covenants as of March 31, 2006.
In addition, the Senior Notes are also subject to repurchase by the Operating Partnership, at the
option of the holders of the Senior Notes, at a price equal to 100 percent of their principal
amount, plus accrued and unpaid interest upon a change of control to a non-investment grade entity.
The Partnership and the operating partnerships of the Operating Partnership serve as
joint and several guarantors of the Senior Notes and of any obligations under the Credit Facility.
The guarantees are full and unconditional. See Note 12 for supplemental condensed consolidating
financial information.
7. |
|
Commitments and Contingent Liabilities |
The Partnership is subject to numerous federal, state and local laws which regulate the
discharge of materials into the environment or that otherwise relate to the protection of the
environment. These laws and regulations result in liabilities and loss contingencies for
remediation at the Partnerships facilities and at third-party or formerly owned sites. The accrued
liability for environmental remediation in the condensed consolidated balance sheets was $0.6
million for the periods ended March 31, 2006 and December 31, 2005. There are no liabilities
attributable to unasserted claims, nor have any recoveries from insurance been assumed.
Total future costs for environmental remediation activities will depend upon, among other
things, the identification of any additional sites, the determination of the extent of any
contamination at each site, the timing and nature of required remedial actions, the technology
available and needed to meet the various existing legal requirements, the nature and extent of
future environmental laws, inflation rates and the determination of the Partnerships liability at
multi-party sites, if any, in light of uncertainties with respect to joint and several liability,
and the number, participation levels and financial viability of other parties. As discussed below,
the Partnerships future costs will also be impacted by an indemnification from Sunoco.
Sunoco has indemnified the Partnership for 30 years from environmental and toxic tort
liabilities related to the assets contributed to the Partnership that arise from the operation of
such assets prior to the closing of the Partnerships initial public offering (IPO) on February
8, 2002. Sunoco has indemnified the Partnership for 100 percent of all such losses asserted within
the first 21 years of closing of the February 2002 IPO. Sunocos share of liability for claims
asserted thereafter will decrease by 10 percent a year. For example, for a claim asserted during
the twenty-third year after closing of the February 2002 IPO, Sunoco would be required to indemnify
the Partnership for 80 percent of its loss. There is no monetary cap on the amount of indemnity
coverage provided by Sunoco. The Partnership has agreed to indemnify Sunoco and its affiliates for
events and conditions associated with the operation of the Partnerships assets that occur on or
after the
11
closing of the February 2002 IPO and for environmental and toxic tort liabilities to the
extent Sunoco is not required to indemnify the Partnership.
Sunoco has also indemnified the Partnership for liabilities, other than environmental and
toxic tort liabilities related to the assets contributed to the Partnership, that arise out of
Sunocos ownership and operation of the assets prior to the closing of the February 2002 IPO and
that are asserted within 10 years after closing of the February 2002 IPO. In addition, Sunoco has
indemnified the Partnership from liabilities relating to certain defects in title to the assets
contributed to the Partnership and associated with failure to obtain certain consents and permits
necessary to conduct its business that arise within 10 years after closing of the February 2002 IPO
as well as from liabilities relating to legal actions pending against Sunoco or its affiliates as
of February 2, 2002, or events and conditions associated with any assets retained by Sunoco or its
affiliates.
Management of the Partnership does not believe that any liabilities which may arise from
claims indemnified by Sunoco would be material in relation to the consolidated financial position
of the Partnership at March 31, 2006.
There are certain other pending legal proceedings related to matters arising after the
February 2002 IPO which are not indemnified by Sunoco. Management believes that any liabilities
that may arise from these legal proceedings will not be material in relation to the consolidated
financial position of the Partnership at March 31, 2006.
8. Equity Offerings
In August 2005, the Partnership sold 1.5 million common units in a public offering. In
September 2005, the Partnership sold an additional 125,000 common units to cover over-allotments in
connection with the August 2005 sale. The purchase price for the over allotment was equal to the
offering price in the August 2005 sale. The units were issued under the Partnerships previously
filed Form S-3 shelf registration statement. The total sale of units resulted in total gross
proceeds of $63.4 million, and net proceeds of $60.4 million, after the underwriters commission
and legal, accounting and other transaction expenses. Net proceeds of the sale were used to repay
$56.5 million of the debt incurred to finance the August 1, 2005 purchase of a Texas crude oil
pipeline system and storage facilities with the balance for general partnership purposes. As a
result of this issuance of 1.625 million common units, the general partner contributed $1.3 million
to the Partnership to maintain its 2.0 percent general partner interest.
In May 2005, the Partnership sold 2.5 million common units in a public offering. In June
2005, the Partnership sold an additional 275,000 common units to cover over-allotments in
connection with the May 2005 sale. The purchase price for the over-allotment was equal to the
offering price in the May 2005 sale. The units were issued under the Partnerships previously filed
Form S-3 shelf registration statement. The sale of units resulted in total gross proceeds of $104.1
million, and net proceeds of $99.2 million, after underwriters commissions and legal, accounting
and other transaction expenses. Net proceeds from the sale were used to redeem 2.775 million common
units owned by Sunoco. The redemption price per unit was equal to the public offering price per
unit after the underwriters commissions.
At March 31, 2006, Sunocos ownership in the Partnership, including its 2.0 percent general
partner interest, was 47.9 percent.
Within 45 days after the end of each quarter, the Partnership distributes all cash on
hand at the end of the quarter, less reserves established by the general partner in its discretion.
This is defined as available cash in the partnership agreement. The general partner has broad
discretion to establish cash reserves that it determines are necessary or appropriate to properly
conduct the Partnerships business. The Partnership will make quarterly distributions to the extent
there is sufficient cash from operations after establishment of cash reserves and payment of fees
and expenses, including payments to the general partner.
The Partnership had 5,691,819 subordinated units issued as of March 31, 2006, all of
which were held by the general partner and for which there is no established public trading market.
The Partnership originally issued 11,383,639 subordinated units to its general partner in
connection with the 2002 IPO. The subordination period is generally defined in the partnership
agreement as the period that ends on the first day of any quarter beginning after December 31, 2006
if (1) the Partnership has distributed at least the minimum quarterly distribution on all
outstanding units with respect to each of the immediately preceding three consecutive,
non-overlapping four-quarter periods; and (2) the adjusted operating surplus, as defined in the
partnership agreement, during such periods equals or exceeds the amount that would have been
sufficient to enable the Partnership to distribute the minimum quarterly distribution on all
outstanding units on a fully diluted basis and the related distribution on the 2 percent general
partner interest during those periods. In addition, under the partnership agreement, one quarter
of the subordinated units may convert to common
12
units on a one-for-one basis after both December 31, 2004 and December 31, 2005, if the
Partnership meets the required tests for the preceding three consecutive, non-overlapping
four-quarter periods. When the subordination period ends, the rights of the holders of subordinated
units will no longer be subordinated to the rights of the holders of common units and the
subordinated units may be converted into common units.
During the subordination period, the Partnership will generally pay cash distributions each
quarter in the following manner:
|
|
|
First, 98 percent to the holders of common units and 2 percent to the general partner,
until each common unit has received a minimum quarterly distribution of $0.45, plus any
arrearages from prior quarters; |
|
|
|
|
Second, 98 percent to the holders of subordinated units and 2 percent to the general
partner, until each subordinated unit has received a minimum quarterly distribution of
$0.45; and |
|
|
|
|
Thereafter, in the manner discussed below. |
The Partnership has met the minimum quarterly distribution requirements on all
outstanding units for each of the three consecutive, non-overlapping four-quarter periods ended
December 31, 2004 and 2005. As a result, a total of 5,691,820 subordinated units were converted
into common units on a one-for-one basis, 2,845,910 each on February 15, 2005 and February 15,
2006. As of March 31, 2006, there are 5,691,819 subordinated units outstanding, all of which may
be converted in February 2007 as long as the Partnership continues to meet the financial tests
noted above for each of the three consecutive, non-overlapping four-quarter periods ending December
31, 2006.
After the subordination period, the Partnership will, in general, pay cash distributions
each quarter in the following manner:
|
|
|
|
|
|
|
|
|
|
|
Percentage of Distributions |
|
Quarterly Cash Distribution Amount per Unit |
|
Unitholders |
|
|
General Partner |
|
Up to minimum quarterly distribution ($0.45 per Unit) |
|
|
98 |
% |
|
|
2 |
% |
Above $0.45 per Unit up to $0.50 per Unit |
|
|
98 |
% |
|
|
2 |
% |
Above $0.50 per Unit up to $0.575 per Unit |
|
|
85 |
% |
|
|
15 |
% |
Above $0.575 per Unit up to $0.70 per Unit |
|
|
75 |
% |
|
|
25 |
% |
Above $0.70 per Unit |
|
|
50 |
% |
|
|
50 |
% |
If cash distributions exceed $0.50 per unit in a quarter, the general partner will
receive increasing percentages, up to 50 percent, of the cash distributed in excess of that amount.
These distributions are referred to as incentive distributions. The amounts shown in the table
under Percentage of Distributions are the percentage interests of the general partner and the
unitholders in any available cash from operating surplus that is distributed up to and including
the corresponding amount in the column Quarterly Cash Distribution Amount per Unit, until the
available cash that is distributed reaches the next target distribution level, if any. The
percentage interests shown for the unitholders and the general partner for the minimum quarterly
distribution are also applicable to quarterly distribution amounts that are less than the minimum
quarterly distribution.
Distributions paid by the Partnership for the period from January 1, 2005 through March
31, 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
|
Total Cash |
|
|
|
Distribution |
|
|
Total Cash |
|
|
Distribution to |
|
Date Cash |
|
per Limited |
|
|
Distribution to |
|
|
the General |
|
Distribution Paid |
|
Partner Unit |
|
|
Limited Partners |
|
|
Partner |
|
|
|
|
|
|
|
($ in millions) |
|
|
($ in millions) |
|
February 14, 2005 |
|
$ |
0.625 |
|
|
$ |
15.0 |
|
|
$ |
1.0 |
|
May 13, 2005 |
|
$ |
0.625 |
|
|
$ |
15.1 |
|
|
$ |
1.0 |
|
August 12, 2005 |
|
$ |
0.6375 |
|
|
$ |
15.4 |
|
|
$ |
1.1 |
|
November 12, 2005 |
|
$ |
0.675 |
|
|
$ |
17.4 |
|
|
$ |
1.5 |
|
February 14, 2006 |
|
$ |
0.7125 |
|
|
$ |
18.4 |
|
|
$ |
2.0 |
|
On April 20, 2006, Sunoco Partners LLC, the general partner of Sunoco Logistics Partners
L.P., declared an increase in the cash distribution for the first quarter 2006 of $0.0375 per
common and subordinated partnership unit ($0.15 annualized). The $22.4 million distribution,
including $3.0 million to the general partner, will be paid on May 15, 2006 to unitholders of
record at the close of business on May 8, 2006.
13
10. Business Segment Information
The following table sets forth condensed statement of income information concerning the
Partnerships business segments and reconciles total segment operating income to net income for the
three months ended March 31, 2006 and 2005, respectively (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Segment Operating Income |
|
|
|
|
|
|
|
|
Eastern Pipeline System: |
|
|
|
|
|
|
|
|
Sales and other operating revenue: |
|
|
|
|
|
|
|
|
Affiliates |
|
$ |
18,438 |
|
|
$ |
18,061 |
|
Unaffiliated customers |
|
|
6,838 |
|
|
|
5,443 |
|
Other income |
|
|
1,972 |
|
|
|
3,071 |
|
|
|
|
|
|
|
|
Total Revenues |
|
|
27,248 |
|
|
|
26,575 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
10,649 |
|
|
|
10,617 |
|
Depreciation and amortization |
|
|
2,650 |
|
|
|
2,599 |
|
Selling, general and administrative expenses |
|
|
4,068 |
|
|
|
4,659 |
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
17,367 |
|
|
|
17,875 |
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
9,881 |
|
|
$ |
8,700 |
|
|
|
|
|
|
|
|
Terminal Facilities: |
|
|
|
|
|
|
|
|
Sales and other operating revenue: |
|
|
|
|
|
|
|
|
Affiliates |
|
$ |
19,156 |
|
|
$ |
19,313 |
|
Unaffiliated customers |
|
|
9,957 |
|
|
|
8,614 |
|
Other Income |
|
|
7 |
|
|
|
1 |
|
|
|
|
|
|
|
|
Total Revenues |
|
|
29,120 |
|
|
|
27,928 |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
12,557 |
|
|
|
11,039 |
|
Depreciation and amortization |
|
|
3,700 |
|
|
|
4,084 |
|
Selling, general and administrative expenses |
|
|
3,473 |
|
|
|
3,268 |
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
19,730 |
|
|
|
18,391 |
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
9,390 |
|
|
$ |
9,537 |
|
|
|
|
|
|
|
|
Western Pipeline System: |
|
|
|
|
|
|
|
|
Sales and other operating revenue: |
|
|
|
|
|
|
|
|
Affiliates |
|
$ |
440,727 |
|
|
$ |
439,549 |
|
Unaffiliated customers |
|
|
765,855 |
|
|
|
520,869 |
|
Other income |
|
|
412 |
|
|
|
555 |
|
|
|
|
|
|
|
|
Total Revenues |
|
|
1,206,994 |
|
|
|
960,973 |
|
|
|
|
|
|
|
|
Cost of products sold and operating expenses |
|
|
1,191,580 |
|
|
|
953,255 |
|
Depreciation and amortization |
|
|
2,596 |
|
|
|
1,439 |
|
Selling, general and administrative expenses |
|
|
7,462 |
|
|
|
3,990 |
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
1,201,638 |
|
|
|
958,684 |
|
|
|
|
|
|
|
|
Operating Income |
|
$ |
5,356 |
|
|
$ |
2,289 |
|
|
|
|
|
|
|
|
Reconciliation of Segment Operating Income to Net Income: |
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
Eastern Pipeline System |
|
$ |
9,881 |
|
|
$ |
8,700 |
|
Terminal Facilities |
|
|
9,390 |
|
|
|
9,537 |
|
Western Pipeline System |
|
|
5,356 |
|
|
|
2,289 |
|
|
|
|
|
|
|
|
Total segment operating income |
|
|
24,627 |
|
|
|
20,526 |
|
Net interest expense |
|
|
6,203 |
|
|
|
5,228 |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
18,424 |
|
|
$ |
15,298 |
|
|
|
|
|
|
|
|
14
The following table provides the identifiable assets for each segment as of March 31,
2006 and December 31, 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
Eastern Pipeline System |
|
$ |
343,139 |
|
|
$ |
343,591 |
|
Terminal Facilities |
|
$ |
299,485 |
|
|
$ |
293,119 |
|
Western Pipeline System |
|
$ |
1,231,724 |
|
|
$ |
1,016,915 |
|
Corporate and other |
|
$ |
19,833 |
|
|
$ |
27,060 |
|
|
|
|
|
|
|
|
Total identifiable assets |
|
$ |
1,894,181 |
|
|
$ |
1,680,685 |
|
|
|
|
|
|
|
|
Corporate and other assets consist primarily of cash and cash equivalents, advances to
affiliates and deferred charges.
11. |
|
Exit Costs Associated with Western Pipeline Headquarters Relocation |
On June 10, 2005, the Partnership announced its intention to relocate its Western area
headquarters operations from Tulsa, Oklahoma to the Houston, Texas area. On September 1, 2005, the
Partnership executed an agreement to lease office space in Sugar Land, Texas. The Partnerships
general partner offered to relocate all affected employees. The Partnership substantially completed
the relocation during the first quarter 2006.
The total non-recurring expenses incurred in connection with the relocation plan amounted
to $4.9 million, including $2.9 recognized during the first quarter 2006. These costs consist
primarily of employee relocation costs, one-time termination benefits and new hire expenses. These
costs are included in selling, general and administrative expenses in the condensed statement of
income, and are included in the operating results for the Western Pipeline System segment. In
addition, the total capital expenditures associated with the move amounted to $5.5 million,
including $2.8 million in the first quarter 2006. These capital expenditures include furniture and
equipment, communication infrastructure and a pipeline control center. The Partnership does not
expect the remaining costs related to the relocation to be material.
12. |
|
Supplemental Condensed Consolidating Financial Information |
The Partnership and the operating subsidiaries of the Operating Partnership serve as joint and
several guarantors of the 7.25% Senior Notes and of any obligations under the Credit Facility. The
guarantees are full and unconditional. Given that certain, but not all subsidiaries of the
Partnership are guarantors, the Partnership is required to present the following supplemental
condensed consolidating financial information. For purposes of the following footnote, Sunoco
Logistics Partners, L.P. is referred to as Parent and Sunoco Logistics Partners Operations L.P.
is referred to as Subsidiary Issuer. Sunoco Partners Marketing and Terminals L.P. and Sunoco
Pipeline L.P. are collectively referred to as the Guarantor Subsidiaries and Sunoco Logistics
Partners GP LLC, Sunoco Logistics Partners Operations GP LLC, Sun Pipe Line Services (Out) LLC and
Sunoco Partners Lease Acquisition & Marketing LLC are referred to as Non-Guarantor Subsidiaries.
The following supplemental condensed consolidating financial information (in thousands)
reflects the Parents separate accounts, the Subsidiary Issuers separate accounts, the combined
accounts of the Guarantor Subsidiaries, the combined accounts of the Non-Guarantor Subsidiaries,
the combined consolidating adjustments and eliminations and the Parents consolidated accounts for
the dates and periods indicated. For purposes of the following condensed consolidating information,
the Parents investments in its subsidiaries and the Subsidiary Issuers investments in its
subsidiaries are accounted for under the equity method of accounting.
15
Statement of Income
Three Months Ended March 31, 2006
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating
revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
478,101 |
|
|
$ |
220 |
|
|
$ |
|
|
|
$ |
478,321 |
|
Unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
782,367 |
|
|
|
283 |
|
|
|
|
|
|
|
782,650 |
|
Equity in earnings of subsidiaries |
|
|
18,172 |
|
|
|
24,865 |
|
|
|
|
|
|
|
2 |
|
|
|
(43,039 |
) |
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
2,391 |
|
|
|
|
|
|
|
|
|
|
|
2,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
18,172 |
|
|
|
24,865 |
|
|
|
1,262,859 |
|
|
|
505 |
|
|
|
(43,039 |
) |
|
|
1,263,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold and
operating expenses |
|
|
|
|
|
|
|
|
|
|
1,214,564 |
|
|
|
222 |
|
|
|
|
|
|
|
1,214,786 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
8,915 |
|
|
|
31 |
|
|
|
|
|
|
|
8,946 |
|
Selling, general and administrative
expenses |
|
|
|
|
|
|
|
|
|
|
15,003 |
|
|
|
|
|
|
|
|
|
|
|
15,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
1,238,482 |
|
|
|
253 |
|
|
|
|
|
|
|
1,238,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
18,172 |
|
|
|
24,865 |
|
|
|
24,377 |
|
|
|
252 |
|
|
|
(43,039 |
) |
|
|
24,627 |
|
Net interest cost paid to/ (received
from) affiliates |
|
|
|
|
|
|
799 |
|
|
|
(490 |
) |
|
|
|
|
|
|
|
|
|
|
309 |
|
Other interest cost and debt
expenses, net |
|
|
|
|
|
|
6,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,450 |
|
Capitalized interest |
|
|
|
|
|
|
(556 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(556 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
18,172 |
|
|
$ |
18,172 |
|
|
$ |
24,867 |
|
|
$ |
252 |
|
|
$ |
(43,039 |
) |
|
$ |
18,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Statement of Income
Three Months Ended March 31, 2005
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating
revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
476,923 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
476,923 |
|
Unaffiliated customers |
|
|
|
|
|
|
|
|
|
|
534,926 |
|
|
|
|
|
|
|
|
|
|
|
534,926 |
|
Equity in earnings of subsidiaries |
|
|
15,296 |
|
|
|
21,043 |
|
|
|
|
|
|
|
2 |
|
|
|
(36,341 |
) |
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
3,627 |
|
|
|
|
|
|
|
|
|
|
|
3,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
15,296 |
|
|
|
21,043 |
|
|
|
1,015,476 |
|
|
|
2 |
|
|
|
(36,341 |
) |
|
|
1,015,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold and
operating expenses |
|
|
|
|
|
|
|
|
|
|
974,911 |
|
|
|
|
|
|
|
|
|
|
|
974,911 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
8,122 |
|
|
|
|
|
|
|
|
|
|
|
8,122 |
|
Selling, general and administrative
expenses |
|
|
|
|
|
|
|
|
|
|
11,917 |
|
|
|
|
|
|
|
|
|
|
|
11,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs and Expenses |
|
|
|
|
|
|
|
|
|
|
994,950 |
|
|
|
|
|
|
|
|
|
|
|
994,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
15,296 |
|
|
|
21,043 |
|
|
|
20,526 |
|
|
|
2 |
|
|
|
(36,341 |
) |
|
|
20,526 |
|
Net interest cost paid to/ (received
from) affiliates |
|
|
|
|
|
|
584 |
|
|
|
(519 |
) |
|
|
|
|
|
|
|
|
|
|
65 |
|
Other interest cost and debt
expenses, net |
|
|
|
|
|
|
5,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
15,296 |
|
|
$ |
15,296 |
|
|
$ |
21,045 |
|
|
$ |
2 |
|
|
$ |
(36,341 |
) |
|
$ |
15,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Balance Sheet
March 31, 2006
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
4,951 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,951 |
|
Advances to affiliates |
|
|
6,548 |
|
|
|
|
|
|
|
2,689 |
|
|
|
580 |
|
|
|
|
|
|
|
9,817 |
|
Accounts receivable, affiliated
companies |
|
|
|
|
|
|
|
|
|
|
129,156 |
|
|
|
|
|
|
|
|
|
|
|
129,156 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
669,839 |
|
|
|
|
|
|
|
|
|
|
|
669,839 |
|
Inventories
Crude oil |
|
|
|
|
|
|
|
|
|
|
48,579 |
|
|
|
|
|
|
|
|
|
|
|
48,579 |
|
Materials, supplies and other |
|
|
|
|
|
|
|
|
|
|
724 |
|
|
|
|
|
|
|
|
|
|
|
724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
6,548 |
|
|
|
4,951 |
|
|
|
850,987 |
|
|
|
580 |
|
|
|
|
|
|
|
863,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties, plants and
equipment, net |
|
|
|
|
|
|
|
|
|
|
924,903 |
|
|
|
5,463 |
|
|
|
|
|
|
|
930,366 |
|
Investment in affiliates |
|
|
511,329 |
|
|
|
971,728 |
|
|
|
68,683 |
|
|
|
86 |
|
|
|
(1,483,143 |
) |
|
|
68,683 |
|
Deferred charges and other assets |
|
|
|
|
|
|
1,496 |
|
|
|
30,553 |
|
|
|
17 |
|
|
|
|
|
|
|
32,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
517,877 |
|
|
$ |
978,175 |
|
|
$ |
1,875,126 |
|
|
$ |
6,146 |
|
|
$ |
(1,483,143 |
) |
|
$ |
1,894,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
$ |
840,760 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
840,760 |
|
Accrued liabilities |
|
|
1,109 |
|
|
|
2,286 |
|
|
|
22,870 |
|
|
|
175 |
|
|
|
|
|
|
|
26,440 |
|
Accrued taxes other than income |
|
|
|
|
|
|
|
|
|
|
17,679 |
|
|
|
|
|
|
|
|
|
|
|
17,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
1,109 |
|
|
|
2,286 |
|
|
|
881,309 |
|
|
|
175 |
|
|
|
|
|
|
|
884,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
465,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,116 |
|
Other deferred credits and liabilities |
|
|
|
|
|
|
|
|
|
|
23,308 |
|
|
|
|
|
|
|
|
|
|
|
23,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
1,109 |
|
|
|
467,402 |
|
|
|
904,617 |
|
|
|
175 |
|
|
|
|
|
|
|
1,373,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Partners Capital |
|
|
516,768 |
|
|
|
510,773 |
|
|
|
970,509 |
|
|
|
5,971 |
|
|
|
(1,483,143 |
) |
|
|
520,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Partners
Capital |
|
$ |
517,877 |
|
|
$ |
978,175 |
|
|
$ |
1,875,126 |
|
|
$ |
6,146 |
|
|
$ |
(1,483,143 |
) |
|
$ |
1,894,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Balance Sheet
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
21,645 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
21,645 |
|
Advances to affiliates |
|
|
|
|
|
|
|
|
|
|
5,506 |
|
|
|
|
|
|
|
(5,506 |
) |
|
|
|
|
Accounts receivable, affiliated
companies |
|
|
|
|
|
|
|
|
|
|
136,536 |
|
|
|
|
|
|
|
|
|
|
|
136,536 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
584,509 |
|
|
|
|
|
|
|
|
|
|
|
584,509 |
|
Inventories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil |
|
|
|
|
|
|
|
|
|
|
27,561 |
|
|
|
|
|
|
|
|
|
|
|
27,561 |
|
Materials, supplies and other |
|
|
|
|
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
|
|
|
|
21,645 |
|
|
|
754,812 |
|
|
|
|
|
|
|
(5,506 |
) |
|
|
770,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties, plants and
equipment, net |
|
|
|
|
|
|
|
|
|
|
809,342 |
|
|
|
5,494 |
|
|
|
|
|
|
|
814,836 |
|
Investment in affiliates |
|
|
464,986 |
|
|
|
778,106 |
|
|
|
69,291 |
|
|
|
(130 |
) |
|
|
(1,243,156 |
) |
|
|
69,097 |
|
Deferred charges and other assets |
|
|
|
|
|
|
2,459 |
|
|
|
23,325 |
|
|
|
17 |
|
|
|
|
|
|
|
25,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
464,986 |
|
|
$ |
802,210 |
|
|
$ |
1,656,770 |
|
|
$ |
5,381 |
|
|
$ |
(1,248,662 |
) |
|
$ |
1,680,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
|
|
|
$ |
720,127 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
720,127 |
|
Accrued liabilities |
|
|
1,171 |
|
|
|
6,800 |
|
|
|
24,913 |
|
|
|
|
|
|
|
|
|
|
|
32,884 |
|
Accrued taxes other than income |
|
|
|
|
|
|
|
|
|
|
20,986 |
|
|
|
|
|
|
|
|
|
|
|
20,986 |
|
Advances from affiliates |
|
|
5,945 |
|
|
|
|
|
|
|
|
|
|
|
5,311 |
|
|
|
(5,506 |
) |
|
|
5,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
7,116 |
|
|
|
6,800 |
|
|
|
766,026 |
|
|
|
5,311 |
|
|
|
(5,506 |
) |
|
|
779,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
355,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355,573 |
|
Other deferred credits and liabilities |
|
|
|
|
|
|
|
|
|
|
21,954 |
|
|
|
|
|
|
|
|
|
|
|
21,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
7,116 |
|
|
|
362,373 |
|
|
|
787,980 |
|
|
|
5,311 |
|
|
|
(5,506 |
) |
|
|
1,157,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Partners Capital |
|
|
457,870 |
|
|
|
439,837 |
|
|
|
868,790 |
|
|
|
70 |
|
|
|
(1,243,156 |
) |
|
|
523,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Partners
Capital |
|
$ |
464,986 |
|
|
$ |
802,210 |
|
|
$ |
1,656,770 |
|
|
$ |
5,381 |
|
|
$ |
(1,248,662 |
) |
|
$ |
1,680,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Statement of Cash Flows
Three Months Ended March 31, 2006
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net Cash Flows from
Operating Activities |
|
$ |
18,110 |
|
|
$ |
14,620 |
|
|
$ |
48,629 |
|
|
$ |
458 |
|
|
$ |
(43,039 |
) |
|
$ |
38,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
(18,228 |
) |
|
|
|
|
|
|
|
|
|
|
(18,228 |
) |
Acquisitions |
|
|
|
|
|
|
|
|
|
|
(109,448 |
) |
|
|
|
|
|
|
|
|
|
|
(109,448 |
) |
Intercompany |
|
|
14,671 |
|
|
|
(140,814 |
) |
|
|
77,671 |
|
|
|
5,433 |
|
|
|
43,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,671 |
|
|
|
(140,814 |
) |
|
|
(50,005 |
) |
|
|
5,433 |
|
|
|
43,039 |
|
|
|
(127,676 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution paid to Limited
Partners and General Partner |
|
|
(20,360 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,360 |
) |
Net contribution from General
Partner for Limited Partner
unit transactions |
|
|
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74 |
|
Advances to affiliates, net |
|
|
(12,495 |
) |
|
|
|
|
|
|
2,819 |
|
|
|
(5,891 |
) |
|
|
|
|
|
|
(15,567 |
) |
Borrowings under credit facility |
|
|
|
|
|
|
109,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,500 |
|
Payments of statutory
withholding on net issuance of
Limited Partner units under
restricted unit incentive plan |
|
|
|
|
|
|
|
|
|
|
(1,443 |
) |
|
|
|
|
|
|
|
|
|
|
(1,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,781 |
) |
|
|
109,500 |
|
|
|
1,376 |
|
|
|
(5,891 |
) |
|
|
|
|
|
|
72,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and
cash equivalents |
|
|
|
|
|
|
(16,694 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,694 |
) |
Cash and cash equivalents at
beginning of year |
|
|
|
|
|
|
21,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at end of period |
|
$ |
|
|
|
$ |
4,951 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Statement of Cash Flows
Three Months Ended March 31, 2005
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiary |
|
|
Subsidiary |
|
|
Guarantor |
|
|
Consolidating |
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Adjustments |
|
|
Total |
|
Net Cash Flows from
Operating Activities |
|
$ |
15,296 |
|
|
$ |
10,968 |
|
|
$ |
14,676 |
|
|
$ |
2 |
|
|
$ |
(36,341 |
) |
|
$ |
4,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
(7,841 |
) |
|
|
|
|
|
|
|
|
|
|
(7,841 |
) |
Intercompany |
|
|
(9,316 |
) |
|
|
(30,957 |
) |
|
|
3,934 |
|
|
|
(2 |
) |
|
|
36,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,316 |
) |
|
|
(30,957 |
) |
|
|
(3,907 |
) |
|
|
(2 |
) |
|
|
36,341 |
|
|
|
(7,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution paid to
Limited Partners and
General Partner |
|
|
(15,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,955 |
) |
Net contribution from
General Partner for Limited
Partner unit transactions |
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137 |
|
Advances to affiliates, net |
|
|
9,838 |
|
|
|
|
|
|
|
(8,267 |
) |
|
|
|
|
|
|
|
|
|
|
1,571 |
|
Payments of statutory
withholding on net issuance
of Limited Partner units
under restricted unit
incentive plan |
|
|
|
|
|
|
|
|
|
|
(2,863 |
) |
|
|
|
|
|
|
|
|
|
|
(2,863 |
) |
Contributions from affiliate |
|
|
|
|
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,980 |
) |
|
|
|
|
|
|
(10,769 |
) |
|
|
|
|
|
|
|
|
|
|
(16,749 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and
cash equivalents |
|
|
|
|
|
|
(19,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,989 |
) |
Cash and cash equivalents
at beginning of year |
|
|
|
|
|
|
52,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of
period |
|
$ |
|
|
|
$ |
32,671 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
32,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Recent Accounting Pronouncements
On January 1, 2006, the Partnership adopted Statement of Financial Accounting Standards No.
123 (revised 2004), Share-Based Payment (SFAS No. 123R), using the modified prospective
transition method. Among other things, SFAS No. 123R requires a fair-value-based method of
accounting for share-based payment transactions. Prior to adoption of SFAS No. 123R, the
Partnership followed the fair value method of accounting prescribed by SFAS No. 123, and thus,
adoption of SFAS No. 123R did not have a material impact on the Partnerships financial statements.
SFAS No. 123R also requires the use of a non-substantive vesting period approach for new
share-based payment transactions that vest when an employee becomes retirement eligible, as is the
case under the Partnerships Long-Term Incentive Plan (i.e., the vesting period cannot exceed the
date an employee becomes retirement eligible). For units awarded after January 1, 2006 to
retirement-eligible participants, the Partnership will accelerate expense recognition, as compared
to the vesting period approach the Partnership previously applied, which resulted in recognition of
compensation expense over the stated vesting period. No units were granted during the three months
ended March 31, 2006, and as a result, there was no impact on the Partnerships financial results
as a result of this provision. The future impact of the non-substantive vesting period will be
dependent upon the value of future awards granted to employees who are eligible to retire prior to
the stated vesting periods of those awards, however the Partnership does not expect the impact to
be material.
14. Subsequent Event
On April 17, 2006, the Partnership signed a definitive agreement to purchase a 50 percent
interest in a refined products terminal located in Syracuse, New York from Mobil Pipe Line Company,
an affiliate of Exxon Mobil Corporation. Total terminal storage is approximately 550 thousand
barrels. The transaction is subject to purchase rights held by an
existing owner and normal conditions to closing for assets of this nature. Closing is expected to
occur during the second quarter of 2006.
21
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations Three Months Ended March 31, 2006 and 2005
Sunoco Logistics Partners L.P.
Operating Highlights
Three Months Ended March 31, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Eastern Pipeline System:(1) |
|
|
|
|
|
|
|
|
Total shipments (barrel miles per day)(2) |
|
|
60,988,946 |
|
|
|
55,600,671 |
|
Revenue per barrel mile (cents) |
|
|
0.460 |
|
|
|
0.470 |
|
Terminal Facilities: |
|
|
|
|
|
|
|
|
Terminal throughput (bpd):
|
|
|
|
|
|
|
|
|
Refined product terminals |
|
|
383,233 |
|
|
|
396,022 |
|
Nederland terminal |
|
|
489,667 |
|
|
|
491,911 |
|
Refinery terminals(3) |
|
|
693,677 |
|
|
|
689,789 |
|
Western Pipeline System:(1)(4) |
|
|
|
|
|
|
|
|
Crude oil pipeline throughput (bpd) |
|
|
485,007 |
|
|
|
317,970 |
|
Crude oil purchases at wellhead (bpd) |
|
|
181,413 |
|
|
|
194,848 |
|
Gross margin per barrel of pipeline throughput (cents)(5) |
|
|
28.4 |
|
|
|
20.0 |
|
|
|
|
(1) |
|
Excludes amounts attributable to equity ownership interests in the
corporate joint ventures. |
|
(2) |
|
Represents total average daily pipeline throughput multiplied by the number of
miles of pipeline through which each barrel has been shipped. |
|
(3) |
|
Consists of the Partnerships Fort Mifflin Terminal Complex, the Marcus Hook
Tank Farm and the Eagle Point Dock. |
|
(4) |
|
Includes results from the Partnerships purchases of an undivided joint
interest in the Mesa Pipe Line system, the Corsicana to Wichita Falls, Texas pipeline system,
and the Millennium and Kilgore pipeline system from the acquisition dates. |
|
(5) |
|
Represents total segment sales and other operating revenue minus cost of
products sold and operating expenses and depreciation and amortization divided by crude oil
pipeline throughput. |
Analysis of Consolidated Net Income
Net income was $18.4 million for the first quarter 2006 as compared with $15.3 million
for the first quarter 2005, an increase of $3.1 million. The increase was due mainly to the
operating results of the acquisitions of the Corsicana to Wichita Falls, Texas pipeline system in
August 2005, and a 37.0 percent undivided joint interest in the Mesa Pipe Line system in December
2005, higher Western Pipeline System crude oil sales and marketing margins, and an increase in
total shipments in the Eastern Pipeline System. These increases were partially offset by $2.9
million of costs related to the relocation of the Western area headquarters from Tulsa, Oklahoma to
Sugar Land, Texas, which was substantially completed during the quarter.
Net interest expense increased $1.0 million to $6.2 million for the first quarter 2006 from
$5.2 million for the prior years quarter due to increased borrowings and higher interest rates on
borrowings under the Partnerships credit facility, partially offset by a $0.6 million increase in
capitalized interest. Total debt outstanding at March 31, 2006 of $465.1 million consists of
$249.0 million of the Senior Notes and $216.1 million of borrowings under the Partnerships credit
facility. The
Partnership increased the borrowings under its credit facility by $109.5 million during the
first quarter 2006 to fund the acquisitions of the Millennium and Kilgore pipelines and the Amdel
and White Oil pipelines in March 2006.
22
Analysis of Segment Operating Income
Eastern Pipeline System
Operating income for the Eastern Pipeline System increased $1.2 million to $9.9 million
for the first quarter 2006 from $8.7 million for the first quarter 2005. This increase was
primarily the result of a $1.8 million increase in sales and other operating revenue and a $0.6
million decrease in selling, general and administrative expenses, partially offset by a $1.1
million decrease in other income. Sales and other operating revenue increased from $23.5 million
for the prior years quarter to $25.3 million for the first quarter 2006 mainly due to an increase
in total shipments partially offset by a decrease in revenue per barrel mile. The increase in
shipments was due principally to higher throughput on the Marysville to Toledo crude oil pipeline
due to increased production at two third-party Canadian synthetic crude oil plants which
experienced reduced production in 2005 as a result of fire damage, and higher demand due to
expansion of a Detroit refinery served by the Marysville pipeline. Other income decreased $1.1
million to $2.0 million for the first quarter 2006, due principally to reduced pipeline volumes
experienced by one of the Partnerships joint venture interests.
Terminal Facilities
The Terminal Facilities business segment had operating income of $9.4 million for the
first quarter 2006, as compared to $9.5 million for the prior years first quarter. Total revenues
increased $1.2 million from the prior years first quarter to $29.1 million for the first quarter
2006 due primarily to an increase in revenues at the Partnerships Nederland Terminal. Operating
expenses increased $1.5 million from the prior years first quarter to $12.6 million for the first
quarter 2006 due principally to timing of scheduled maintenance activity and higher utilities
costs.
Western Pipeline System
Operating income for the Western Pipeline System increased $3.1 million to $5.4 million
for the first quarter 2006 from $2.3 million for the first quarter 2005. The increase was
primarily the result of higher crude oil sales and marketing margins, higher crude oil pipeline
volumes, including the results from the Corsicana to Wichita Falls, Texas crude oil pipeline system
acquired in August 2005. The increased revenues were partially offset by increases in operating
expenses, depreciation and selling, general administrative expenses. Total revenues and cost of
products sold and operating expenses increased in the first quarter 2006 compared with the prior
years quarter due principally to an increase in the price of crude oil. The average price of West
Texas Intermediate crude oil at Cushing, Oklahoma, increased to an average price of $63.53 per
barrel for the first quarter 2006 from $49.90 per barrel for the first quarter 2005. Depreciation
and amortization increased by $1.2 million due principally to the acquisitions of the Corsicana to
Wichita Falls, Texas crude oil pipeline in August 2005 and the Millennium and Kilgore, Texas crude
oil pipeline system in March 2006. Selling, general and administrative expenses increased $3.5
million due principally to $2.9 million of costs related to the Western area headquarters
relocation from Tulsa to Sugar Land, as well as increased costs associated with the acquired
assets. The relocation to Sugar Land was substantially completed in the first quarter 2006.
Liquidity and Capital Resources
Liquidity
Cash generated from operations and borrowings under the Credit Facility are the
Partnerships primary sources of liquidity. At March 31, 2006, the Partnership had a working
capital deficit of $21.8 million and available borrowing capacity under the Credit Facility of
$83.9 million. The Partnerships working capital position also reflects crude oil inventories based
on historical costs under the LIFO method of accounting. If the inventories had been valued at
their current replacement cost, the Partnership would have had working capital of $86.2 million at
March 31, 2006.
Capital Resources
The Partnership periodically supplements its cash flows from operations with proceeds from
debt and equity financing activities.
Credit Facility
Sunoco Logistics Partners Operations L.P., a wholly-owned subsidiary of the Partnership (the
Operating Partnership), has a $300 million Credit Facility available to fund working capital
requirements, to finance future acquisitions, and for general partnership purposes. The Credit
Facility matures in November 2010. It also includes a $20.0 million distribution sublimit that is
available for distributions, and may be
23
used to fund the quarterly distributions, provided the
total outstanding borrowings for distributions do not at any time exceed $20.0 million. The
Partnership will be required to reduce to zero all borrowings under the distribution sublimit under
the Credit Facility each year for 15 days.
At December 31, 2005, there was $106.6 million outstanding under the Credit Facility. On March
1, 2006, an additional $109.5 million was drawn against the Credit Facility to fund the
acquisitions of the Millennium and Kilgore pipeline system and the Amdel and White Oil pipeline
system. The amount outstanding under the Credit Facility at March 31, 2006 totaled $216.1 million.
The Partnership expects to offer additional equity and debt securities in the future to repay a
substantial portion of the additional indebtedness incurred under its credit facility, consistent
with the Partnerships conservative capital structure.
Equity Offerings
In August 2005, the Partnership sold 1.5 million common units in a public offering. In
September 2005, the Partnership sold an additional 125,000 common units to cover over-allotments in
connection with the August 2005 sale. The total sale of units resulted in total gross proceeds of
$63.4 million, and net proceeds of $60.4 million, after the underwriters commission and legal,
accounting and other transaction expenses. Net proceeds of the sale were used to repay $56.5
million of the debt incurred to finance the August 2005 purchase of the Corsicana to Wichita Falls,
Texas crude oil pipeline system and storage facilities, with the balance for general partnership
purposes. As a result of this issuance of 1.625 million common units, the general partner
contributed $1.3 million to the Partnership to maintain its 2.0 percent general partner interest.
In May 2005, the Partnership sold 2.5 million common units in a public offering. In June
2005, the Partnership sold an additional 275,000 common units to cover over-allotments in
connection with the May 2005 sale. The purchase price for the over-allotment was equal to the
offering price in the May 2005 sale. The sale of units resulted in total gross proceeds of $104.1
million, and net proceeds of $99.2 million, after underwriters commissions and legal, accounting
and other transaction expenses. Net proceeds from the sale were used to redeem 2.775 million common
units owned by Sunoco at a redemption price per unit equal to the public offering price per unit
after the underwriters commissions.
Shelf Registration Statement
On December 21, 2005, the Partnership, the Operating Partnership, and the Operating
Partnerships wholly-owned subsidiaries, as co-registrants, filed a shelf registration statement
with the Securities and Exchange Commission. This shelf registration, declared effective by the
SEC on April 11, 2006, permits the periodic offering and sale of up to $500 million of equity
securities by the Partnership or debt securities of the Operating Partnership (guaranteed by the
Partnership). The shelf registration statement also covers the resale of up to five million common
units by the Partnerships general partner. This shelf registration statement, replaced the
Partnerships shelf registration statement previously filed in March 2003. The amount, type and
timing of any offerings will depend upon, among other things, the funding requirements of the
Partnership, prevailing market conditions, and compliance with covenants in applicable debt
obligations of the Operating Partnership (including the Credit Facility).
Cash Flows and Capital Expenditures
Net cash provided by operating activities for the three months ended March 31, 2006 was
$38.8 million compared with $4.6 million for the first three months of 2005. Net cash provided by
operating activities for the first three months of 2006 was primarily generated by net income of
$18.4 million, depreciation and amortization of $8.9 million, and a $14.0 million decrease in
working capital. Working capital decreased primarily due to increases in accounts payable and
accrued expenses. Net cash provided by operating activities for the first three months of 2005 was principally
generated by net income of $15.3 million and depreciation and amortization of $8.1 million,
partially offset by a $19.9 million increase in working capital.
Net cash used in investing activities for the first three months of 2006 was $127.7
million compared with $7.8 million for the first three months of 2005. The increase between periods
is due primarily to the acquisitions of the Millennium and Kilgore pipeline system for $41.4
million and the Amdel and White Oil pipeline system for $68.0 million, both on March 1, 2006.
Net cash provided by financing activities for the first three months of 2006 was $72.2
million compared with $16.7 million net cash used in financing activities for the first three
months of 2005. Net cash provided by financing activities for the first three months of 2006 was
the result of $109.5 million of borrowings drawn against the Partnerships Credit Facility to fund
the acquisitions of the Millennium and Kilgore pipeline system and the Amdel and White Oil pipeline
system on March 1, 2006. This increase was partially offset by $20.4 million in distributions paid
to limited partners and the general partner, and a $15.6 million increase in advances to
affiliates. Net cash used in financing activities for the first three months of 2005 was mainly the
result of $16.0 million of cash distributions paid to the limited partners and the general partner.
24
Under a treasury services agreement with Sunoco, the Partnership participates in Sunocos
centralized cash management program. Advances to affiliates in the Partnerships condensed
consolidated balance sheets at March 31, 2006 represent amounts due from Sunoco under this
agreement. Advances from affiliates at December 31, 2005 represent amounts due to Sunoco under this
agreement.
Capital Requirements
The pipeline, terminalling, and crude oil transport operations are capital intensive,
requiring significant investment to maintain, upgrade or enhance existing operations and to meet
environmental and operational regulations. The capital requirements have consisted, and are
expected to continue to consist, primarily of:
|
|
|
Maintenance capital expenditures, such as those required to maintain equipment
reliability, tankage and pipeline integrity and safety, and to address environmental
regulations; and |
|
|
|
|
Expansion capital expenditures to acquire assets to grow the business and to expand
existing and construct new facilities, such as projects that increase storage or
throughput volume. |
The following table summarizes maintenance and expansion capital expenditures, including
net cash paid for acquisitions, for the periods presented (in thousands of dollars):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2006 |
|
|
2005 |
|
Maintenance |
|
$ |
6,439 |
|
|
$ |
4,901 |
|
Expansion |
|
|
116,913 |
|
|
|
2,940 |
|
|
|
|
|
|
|
|
|
|
$ |
123,352 |
|
|
$ |
7,841 |
|
|
|
|
|
|
|
|
Maintenance capital expenditures increased $1.5 million from the first quarter of 2005 to
the first quarter of 2006 due primarily to $2.8 million in capital expenditures related to the
Western area headquarters relocation, partially offset by a decrease in scheduled maintenance
activity due to differences in timing compared to the prior year. Management anticipates
maintenance capital expenditures to be approximately $25.0 million for the year ended December 31,
2006, excluding the $2.8 million related to the Western area headquarters relocation. Maintenance
capital expenditures for both periods presented include recurring expenditures such as pipeline
integrity costs, pipeline relocations, repair and upgrade of field instrumentation, including
measurement devices, repair and replacement of tank floors and roofs, upgrades of cathodic
protection systems, crude trucks and related equipment, and the upgrade of pump stations.
Expansion capital expenditures in the three months ended March 31, 2006 include $105.5 million
related to the acquisitions of the Millennium and Kilgore pipeline system and the Amdel and White
Oil pipeline system on March 1, 2006 (see Note 2 to the condensed consolidated financial
statements).
Expansion capital expenditures also include continuing construction at Nederland of new crude
oil storage tanks, installation of ethanol blending facilities at a number of refined product
terminals, as well as capitalized interest of $0.6 million. The Partnership intends to invest
approximately $131 million in internal expansion capital projects in 2006 and 2007. This internal
expansion program includes primarily the expansion of the Amdel Pipeline purchased in March 2006
and related tankage at the Nederland Terminal to service these new volumes, construction of new
tanks at the Nederland Terminal and pipeline connections to service the Millennium pipeline
purchased in March 2006, construction of new tanks and pipeline connections in the Eastern and
Western Pipeline systems, additional new tankage at the Nederland Terminal, expansion of the
Marysville crude oil pipeline, and installation of ethanol blending and ultra-low sulfur diesel
infrastructure at certain refined product terminals.
The Partnership expects to fund capital expenditures, including pending and future
acquisitions, from both cash provided by operations and, to the extent necessary, from the proceeds
of borrowings under the Credit Facility, other borrowings and the issuance of additional common
units.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is exposed to various market risks, including volatility in crude oil
commodity prices and interest rates. To manage such exposures, inventory levels and expectations of
future commodity prices and interest rates are monitored when making decisions with
25
respect to risk
management. The Partnership has not entered into derivative transactions that would expose it to
price risk.
The $300 million Credit Facility exposes the Partnership to interest rate risk since it
bears interest at a variable rate of 5.0 percent at March 31, 2006. A one percent change in
interest rates changes annual interest expense by approximately $2.2 million based upon outstanding
borrowings under the Credit Facility of $216.1 million at March 31, 2006.
Forward-Looking Statements
Some of the information included in this quarterly report on Form 10-Q contains
forward-looking statements, as such term is defined in Section 27A of the Securities Act of 1933
and Section 21E of the Exchange Act, and information relating to the Partnership that is based on
the beliefs of its management as well as assumptions made by and information currently available to
management.
Forward-looking statements discuss expected future results based on current and pending
business operations, and may be identified by words such as anticipates, believes, expects,
planned, scheduled or similar expressions. Although management of the Partnership believes
these forward-looking statements are reasonable, they are based upon a number of assumptions, any
or all of which may ultimately prove to be inaccurate. Statements made regarding future results are
subject to numerous assumptions, uncertainties and risks that may cause future results to be
materially different from the results stated or implied in this document.
The following are among the important factors that could cause actual results to differ
materially from any results projected, forecasted, estimated or budgeted:
|
|
|
Our ability to successfully consummate announced acquisitions or expansions and
integrate them into our existing business operations; |
|
|
|
|
Delays related to construction of, or work on, new or existing facilities and the
issuance of applicable permits; |
|
|
|
|
Changes in demand for, or supply of, crude oil, refined petroleum products and natural
gas liquids that impact demand for the Partnerships pipeline, terminalling and storage
services; |
|
|
|
|
Changes in the demand for crude oil we both buy and sell; |
|
|
|
|
The loss of Sunoco R&M as a customer or a significant reduction in its current level of
throughput and storage with the Partnership; |
|
|
|
|
An increase in the competition encountered by the Partnerships petroleum products
terminals, pipelines and crude oil acquisition and marketing operations; |
|
|
|
|
Changes in the financial condition or operating results of joint ventures or other
holdings in which the Partnership has an equity ownership interest; |
|
|
|
|
Changes in the general economic conditions in the United States; |
|
|
|
|
Changes in laws and regulations to which the Partnership is subject, including federal,
state, and local tax, safety, environmental and employment laws; |
|
|
|
|
Changes in regulations concerning required composition of refined petroleum products,
that result in changes in throughput volumes, pipeline tariffs and/or terminalling and
storage fees; |
|
|
|
|
Improvements in energy efficiency and technology resulting in reduced demand for petroleum products; |
|
|
|
|
The Partnerships ability to manage growth and/or control costs; |
|
|
|
|
The effect of changes in accounting principles and tax laws and interpretations of both; |
|
|
|
|
Global and domestic economic repercussions, including disruptions in the crude oil and
petroleum products markets, from terrorist activities, international hostilities and other
events, and the governments response thereto; |
|
|
|
|
Changes in the level of operating expenses and hazards related to operating facilities
(including equipment malfunction, explosions, fires, spills and the effects of severe
weather conditions); |
26
|
|
|
The occurrence of operational hazards or unforeseen interruptions for which the
Partnership may not be adequately insured; |
|
|
|
|
The age of, and changes in the reliability and efficiency of the Partnerships operating facilities; |
|
|
|
|
Changes in the expected level of capital, operating, or remediation spending related to environmental matters; |
|
|
|
|
Changes in insurance markets resulting in increased costs and reductions in the level
and types of coverage available; |
|
|
|
|
Risks related to labor relations and workplace safety; |
|
|
|
|
Non-performance by or disputes with major customers, suppliers or other business partners; |
|
|
|
|
Changes in the Partnerships tariff rates implemented by federal and/or state government regulators; |
|
|
|
|
The amount of the Partnerships indebtedness, which could make the Partnership
vulnerable to adverse general economic and industry conditions, limit the Partnerships
ability to borrow additional funds, place it at competitive disadvantages compared to
competitors that have less debt, or have other adverse consequences; |
|
|
|
|
Restrictive covenants in the Partnerships or Sunoco, Inc.s credit agreements; |
|
|
|
|
Changes in the Partnerships or Sunoco, Inc.s credit ratings, as assigned by ratings agencies; |
|
|
|
|
The condition of the debt capital markets and equity capital markets in the United
States, and the Partnerships ability to raise capital in a cost-effective way; |
|
|
|
|
Changes in interest rates on the Partnerships outstanding debt, which could increase the costs of borrowing; |
|
|
|
|
Claims of the Partnerships non-compliance with regulatory and statutory requirements; and |
|
|
|
|
The costs and effects of legal and administrative claims and proceedings against the
Partnership or any entity in which it has an ownership interest, and changes in the status
of, or the initiation of new litigation, claims or proceedings, to which the Partnership,
or any entity in which it has an ownership interest, is a party. |
These factors are not necessarily all of the important factors that could cause actual
results to differ materially from those expressed in any of the Partnerships forward-looking
statements. Other factors could also have material adverse effects on future results. The
Partnership undertakes no obligation to update publicly any forward-looking statement whether as a
result of new information or future events.
Item 4. Controls and Procedures
(a) As of the end of the fiscal quarter covered by this report, the Partnership carried
out an evaluation, under the supervision and with the participation of the management of Sunoco
Partners LLC, the Partnerships general partner (including the President and Chief Executive
Officer of Sunoco Partners LLC and the Vice President and Chief Financial Officer of Sunoco
Partners LLC), of the effectiveness of the design and operation of the Partnerships disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the
President and Chief Executive Officer of Sunoco Partners LLC and the Vice President and Chief
Financial Officer of Sunoco Partners LLC concluded that the Partnerships disclosure controls and
procedures are effective.
(b) No change in the Partnerships internal controls over financial reporting has
occurred during the fiscal quarter covered by this report that has materially affected, or that is
reasonably likely to materially affect, the Partnerships internal control over financial
reporting.
(c) Disclosure controls and procedures are designed to ensure that information required
to be disclosed in the Partnership reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified by the rules and forms of the
Securities and Exchange Commission. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed in the
Partnership reports under the Exchange Act is accumulated and communicated to management, including
the President and Chief Executive Officer of Sunoco Partners LLC and the Vice President and Chief
Financial Officer of Sunoco Partners LLC, as appropriate, to allow timely decisions regarding
required disclosure.
27
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Partnerships Sunoco Pipeline L.P. subsidiary operates the Mid-Valley Pipeline on
behalf of Mid-Valley Pipeline Company (an affiliate of Sunoco, Inc.) and its third-party
shareholders pursuant to an Operating Agency Agreement. In June 2005, Sunoco Pipeline L.P. and
Mid-Valley Pipeline Company received a letter from the U.S. Department of Justice, indicating its
intent to initiate a civil action on behalf of the U.S. Environmental Protection Agency against
Sunoco Pipeline L.P. and Mid-Valley Pipeline Company, for alleged violations of the Clean Water Act
arising from a January 2005 crude oil release by Mid-Valley Pipeline into the Kentucky River near
Worthville, Kentucky. According to the letter, the government could seek civil penalties of up to
the statutory maximum under the Clean Water Act, which are substantially in excess of $100,000.
However, the Partnership does not expect any penalties or fines that may be paid to have a material
adverse effect on the Partnership. Also, the Operating Agency Agreement obligates Mid-Valley
Pipeline Company and its shareholders to indemnify and hold-harmless the operator from and against
any claims arising out of its actions or omissions, including negligence, taken in good faith
performance of the agreement. As a result, the Partnership expects to be fully indemnified for
costs associated with the January 2005 release.
Item 1A. Risk Factors
There have been no material changes from the risk factors described previously in Part I, Item
1A of the Partnerships Annual Report on Form 10-K for the year ended December 31, 2005, filed on
March 1, 2006.
Item 2. Unregistered Sales of Equity Securities and Uses of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
28
Item 6. Exhibits
Exhibits
|
12.1 |
|
: Statement of Computation of Ratio of Earnings to Fixed Charges |
|
|
31.1 |
|
: Chief Executive Officer Certification of Periodic Report Pursuant to Exchange Act Rule 13a-14(a) |
|
|
31.2 |
|
: Chief Financial Officer Certification of Periodic Report Pursuant to Exchange act Rule 13a-14(a) |
|
|
32 |
|
: Chief Executive Officer and Chief Financial Officer Certification of Periodic Report Pursuant
to Exchange Act Rule 13a-14(b) and U.S.C. §1350 |
We are pleased to furnish this Form 10-Q to unitholders who request it by writing to:
Sunoco Logistics Partners L.P.
Investor Relations
Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103-7583
or through our website at www.sunocologistics.com.
29
SIGNATURE
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.
Sunoco Logistics Partners L.P.
|
|
|
|
|
By:
|
|
/s/ Colin A. Oerton
|
|
|
|
|
|
|
|
|
|
Colin A. Oerton |
|
|
|
|
Vice President & |
|
|
|
|
Chief Financial Officer |
|
|
Date: April 28, 2006
30
exv12w1
Exhibit 12.1
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
Sunoco Logistics Partners L.P.
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2006 |
|
Fixed Charges: |
|
|
|
|
Interest cost and debt expense |
|
$ |
6,859 |
|
Interest allocable to rental expense (a) |
|
|
480 |
|
|
|
|
|
Total |
|
$ |
7,339 |
|
|
|
|
|
Earnings:
|
|
|
|
|
Income before income tax expense |
|
$ |
18,424 |
|
Equity in income of less than 50 percent owned affiliated companies |
|
|
(2,202 |
) |
Dividends received from less than 50 percent owned affiliated companies |
|
|
2,456 |
|
Fixed charges |
|
|
7,339 |
|
Interest capitalized |
|
|
(556 |
) |
Amortization of previously capitalized interest |
|
|
41 |
|
|
|
|
|
Total |
|
$ |
25,502 |
|
|
|
|
|
Ratio of Earnings to Fixed Charges |
|
|
3.47 |
|
|
|
|
|
|
|
|
(a) |
|
Represents one-third of the total operating lease rental expense which is that portion
deemed to be interest. |
31
exv31w1
Exhibit 31.1
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Deborah M. Fretz, President and Chief Executive Officer of Sunoco Partners LLC, the
general partner of the registrant Sunoco Logistics Partners L.P., hereby certify that:
|
1. |
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
of Sunoco Logistics Partners L.P.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
entities, is made known to us by others within those entities, particularly during
the period in which this report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting. |
|
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and report
financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
Date: April 28, 2006
|
|
|
|
|
|
|
|
|
|
|
/s/ Deborah M. Fretz
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
Deborah M. Fretz |
|
|
|
|
|
Title:
|
President and Chief Executive Officer |
|
|
32
exv31w2
Exhibit 31.2
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Colin A. Oerton, Vice President and Chief Financial Officer of Sunoco Partners LLC,
the general partner of the registrant Sunoco Logistics Partners L.P., hereby certify that:
|
1. |
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
of Sunoco Logistics Partners L.P.; |
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to
the period covered by this report; |
|
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the period
presented in this report; |
|
|
4. |
|
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
entities, is made known to us by others within those entities, particularly during
the period in which this report is being prepared; |
|
|
b) |
|
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c) |
|
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and |
|
|
d) |
|
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting. |
|
5. |
|
The registrants other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and report
financial information; and |
|
|
b) |
|
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting. |
Date: April 28, 2006
|
|
|
|
|
|
|
|
|
|
|
/s/ Colin A. Oerton
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
Colin A. Oerton |
|
|
|
|
|
Title:
|
Vice President and Chief Financial Officer |
|
|
33
exv32
Exhibit 32
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
We, the undersigned Deborah M. Fretz and Colin A. Oerton, being, respectively, the
President and Chief Executive Officer and the Vice President and Chief Financial Officer, of Sunoco
Partners LLC, the general partner of the registrant Sunoco Logistics Partners L.P., do each hereby
certify that the registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in the periodic report fairly presents, in all material
respects, the financial condition and results of operations of Sunoco Logistics Partners L.P.
Date: April 28, 2006
|
|
|
|
|
|
|
|
|
|
|
/s/ Deborah M. Fretz
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
Deborah M. Fretz |
|
|
|
|
|
Title:
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Colin A. Oerton
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
Colin A. Oerton |
|
|
|
|
|
Title:
|
Vice President and Chief Financial Officer |
|
|
34