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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003
OR
[ ] 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: 1-4998
ATLAS PIPELINE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 23-3011077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
311 Rouser Road
Moon Township, Pennsylvania 15108
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (412) 262-2830
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and December 31, 2002................ 2
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2003 and 2002 (Unaudited)............................................................. 3
Consolidated Statement of Partners' Capital (Unaudited) for the Nine Months
Ended September 30, 2003............................................................................ 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and
2002 (Unaudited)................................................................................... 5
Notes to Consolidated Financial Statements - September 30, 2003 (Unaudited)........................... 6 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................11 - 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ 19
Item 4. Evaluation of Disclosure Controls and Procedures...................................................... 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................................................... 20
SIGNATURES.......................................................................................................... 21
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2003 2002
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 20,097,500 $ 1,858,600
Accounts receivable.............................................................. - 500,000
Prepaid expenses................................................................. 81,400 26,800
--------------- --------------
Total current assets........................................................... 20,178,900 2,385,400
Property and equipment:
Gas gathering and transmission facilities........................................ 33,527,000 29,384,000
Less-accumulated depreciation.................................................... (6,885,400) (5,619,600)
---------------- --------------
Net property and equipment..................................................... 26,641,600 23,764,400
Goodwill (net of accumulated amortization of $285,300).............................. 2,304,600 2,304,600
Other assets (net of accumulated amortization of $86,000 and $0).................... 1,707,000 60,900
--------------- --------------
$ 50,832,100 $ 28,515,300
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities......................................... $ 971,700 $ 107,800
Accounts payable-affiliates...................................................... 1,885,000 347,200
Distribution payable............................................................. 3,029,200 1,873,800
--------------- --------------
Total current liabilities...................................................... 5,885,900 2,328,800
Long-term debt...................................................................... - 6,500,000
Partners' capital:
Common unitholders, 2,713,659 and 1,621,159 units outstanding.................... 43,976,100 19,163,500
Subordinated unitholder, 1,641,026 units outstanding............................. 611,100 683,700
General partner.................................................................. 359,000 (160,700)
--------------- --------------
Total partners' capital........................................................ 44,946,200 19,686,500
--------------- --------------
$ 50,832,100 $ 28,515,300
=============== ==============
See accompanying notes to consolidated financial statements
2
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------- -------------- ---------------
REVENUES:
Transportation and compression................................ $ 4,162,600 $ 2,666,100 $ 11,816,000 $ 7,857,400
Interest and other income..................................... 36,400 700 60,800 5,100
------------- ------------- -------------- ---------------
4,199,000 2,666,800 11,876,800 7,862,500
COST AND EXPENSES:
Transportation and compression................................ 606,900 475,900 1,830,900 1,480,800
General and administrative.................................... 435,300 366,500 1,301,000 1,158,000
Depreciation and amortization................................. 438,100 376,000 1,265,800 1,083,700
Interest...................................................... 50,100 57,000 212,600 140,000
------------- ------------- -------------- ---------------
1,530,400 1,275,400 4,610,300 3,862,500
------------- ------------- -------------- ---------------
Net income.................................................... $ 2,668,600 $ 1,391,400 $ 7,266,500 $ 4,000,000
============= ============= ============== ===============
Net income - limited partners................................. $ 2,351,600 $ 1,290,200 $ 6,610,800 $ 3,725,400
============= ============= ============== ===============
Net income - general partners................................. $ 317,000 $ 101,200 $ 655,700 $ 274,600
============= ============= ============== ===============
Basic and diluted net income per limited partner unit......... $ .54 $ .40 $ 1.72 $ 1.14
============= ============= ============== ===============
Weighted average limited partner units outstanding............ 4,354,685 3,262,185 3,854,456 3,262,185
============= ============= ============== ===============
See accompanying notes to consolidated financial statements
3
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Unaudited)
Number of Limited
Partner Units Capital (Deficit) Total
--------------------------- -------------------------------------------- Partners'
Common Subordinated Common Subordinated General Partner Capital (Deficit)
------------ ------------ ------------ ------------ --------------- -----------------
Balance at January 1, 2003............. 1,621,159 1,641,026 $ 19,163,500 $ 683,700 $ (160,700) $ 19,686,500
Issuance of common units, net of
offering costs....................... 1,092,500 - 25,181,600 - - 25,181,600
Capital contribution................... - - - - 538,500 538,500
Distributions to partners.............. - - (2,481,700) (1,870,800) (345,200) (4,697,700)
Distributions payable.................. - - (1,682,500) (1,017,400) (329,300) (3,029,200)
Net income............................. - - 3,795,200 2,815,600 655,700 7,266,500
------------ ---------- ------------ ------------ ---------- --------------
Balance at September 30, 2003.......... 2,713,659 1,641,026 $ 43,976,100 $ 611,100 $ 359,000 $ 44,946,200
============ ========== ============ ============ ========== ==============
See accompanying notes to consolidated financial statements
4
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
2003 2002
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................................... $ 7,266,500 $ 4,000,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation..................................................................... 1,265,800 1,083,700
Amortization of deferred finance costs........................................... 86,000 28,900
Changes in operating assets and liabilities:
Decrease in accounts receivable and prepaid expenses............................. 445,400 621,600
Increase in accounts payable and accrued liabilities............................. 2,401,700 152,800
-------------- -------------
Net cash provided by operating activities...................................... 11,465,400 5,887,000
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of gathering systems................................................... - (165,000)
Capital expenditures................................................................ (4,143,000) (3,787,300)
Increase in other assets............................................................ (868,300) -
---------------- -------------
Net cash used in investing activities.......................................... (5,011,300) (3,952,300)
----------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under revolving credit facility.......................................... 2,000,000 3,515,800
Repayments of revolving credit facility............................................. (8,500,000) -
Capital contributions............................................................... 538,500 -
Issuance of common units, net of offering costs..................................... 25,181,600 -
Distributions paid to partners...................................................... (6,571,500) (5,687,300)
(Increase) decrease in other assets................................................. (863,800) 10,000
---------------- -------------
Net cash provided by (used in) financing activities............................ 11,784,800 (2,161,500)
---------------- -------------
Increase (decrease) in cash and cash equivalents.................................... 18,238,900 (226,800)
Cash and cash equivalents, beginning of period...................................... 1,858,600 2,162,200
---------------- -------------
Cash and cash equivalents, end of period............................................ $ 20,097,500 $ 1,935,400
================ =============
See accompanying notes to consolidated financial statements
5
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Partnership and its
wholly-owned subsidiaries as of September 30, 2003 and for the three month and
nine month periods ended September 30, 2003 and 2002 are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted in this Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange Commission.
However, in the opinion of management, these interim financial statements
include all the necessary adjustments to fairly present the results of the
interim periods presented. The unaudited interim consolidated financial
statements should be read in conjunction with the audited financial statements
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2002. The results of operations for the nine months ended September
30, 2003 may not necessarily be indicative of the results of operations for the
full year ending December 31, 2003.
Certain reclassifications have been made to the consolidated financial
statements for the three month and nine month periods ended September 30, 2002
to conform to the presentation for the three month and nine month periods ended
September 30, 2003.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair Value of Financial Instruments
For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair values because of the short maturities of these items.
Net Income Per Unit
There is no difference between basic and diluted net income per limited
partner unit since there are no potentially dilutive units outstanding. Net
income per limited partner unit is determined by dividing net income, after
deducting the general partner's 2% and incentive interest, by the weighted
average number of outstanding common units and subordinated units.
Comprehensive Income
Comprehensive income includes net income and all other changes in the
equity of a business during a period from non-owner sources. These changes,
other than net income, are referred to as "other comprehensive income." The
Partnership has no elements of comprehensive income, other than net income, to
report.
Cash Flow Statements
For purposes of the statements of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less are considered to
be cash equivalents.
6
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2003
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Segment Information
The Partnership has one business segment, the transportation segment,
which derives its revenues primarily from the transportation of natural gas that
it receives from producers. Transportation revenues are, for the most part,
based on contractual arrangements with Atlas America, Inc. and its affiliates.
Supplemental Disclosure of Cash Flow Information
Information for the nine months ended September 30, 2003 and 2002,
respectively, is as follows:
2003 2002
------------- -------------
Cash paid for:
Interest.......................... $ 126,500 $ 83,600
============= =============
Goodwill
Goodwill is evaluated for impairment in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 142. As of January 1, 2002, the date
of adoption, the Partnership had unamortized goodwill in the amount of $2.3
million. In 2002, the Partnership completed the transitional and annual
impairment tests required by SFAS 142, which involved the use of estimates
related to the fair market value of the business operations associated with the
goodwill. These tests did not indicate an impairment loss. The Partnership will
continue to evaluate its goodwill at least annually and will reflect the
impairment of goodwill, if any, in operating income in the income statement in
the period in which the impairment is indicated. The Partnership will perform
its annual impairment evaluation at year-end.
Concentration of Credit Risk
Financial instruments, which potentially subject the Partnership to
concentrations of credit risk, consist principally of periodic temporary
investments of cash. The Partnership places its temporary cash investments in
high quality short-term money market instruments and deposits with high quality
financial institutions. At September 30, 2003, the Partnership and its
subsidiaries had $20.1 million in deposits at one bank, of which $19.7 million
was over the insurance limit of the Federal Deposit Insurance Corporation. No
losses have been experienced on such investments.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred and a corresponding increase in
the carrying amount of the related long-lived asset. The adoption of SFAS 143 as
of January 1, 2003 had no impact on the Partnership's results of operations or
financial position.
7
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2003
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
New Accounting Standards - (Continued)
In April 2002, SFAS 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued.
SFAS 145 rescinds the automatic treatment of gains and losses from
extinguishments of debt as extraordinary unless they meet the criteria for
extraordinary items as outlined in Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations, Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS 145 also requires sale-leaseback accounting for
certain lease modifications that have economic effects similar to a
sale-leaseback transaction and makes various corrections to existing
pronouncements. The provisions of this statement are effective for financial
statements issued by the Partnership in 2003. The adoption of SFAS 145 as of
January 1, 2003 did not have a material impact on the Partnership's results of
operations or its financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses
significant issues relating to the recognition, measurement, and reporting of
costs associated with exit and disposal activities, including restructuring
activities, and nullifies the guidance in Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". The provisions of this statement are effective for exit and
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The adoption of SFAS 146 as of January 1, 2003 did not
have a material impact on the Partnership's results of operations or its
financial position.
NOTE 3 - DISTRIBUTION DECLARED
The Partnership will generally make quarterly cash distributions of
substantially all of its available cash, defined generally as cash on hand at
the end of the quarter less cash reserves deemed appropriate to provide for
future operating costs and potential acquisitions.
On September 20, 2003, the Partnership declared a cash distribution of
$.62 per unit on its outstanding common units and subordinated units. The
distribution represents the available cash flow for the three months ended
September 30, 2003. The $3,029,200 distribution, which includes a distribution
of $329,300 to the general partner, will be paid on November 7, 2003 to
unitholders of record on September 30, 2003.
Available cash is initially distributed 98% to our limited partners and
2% to our general partner. These distribution percentages are modified to
provide for incentive distributions to be paid to our general partner in the
event that quarterly distributions to unitholders exceed certain specified
targets. Incentive distributions are generally defined as all cash distributions
paid to our general partner that are in excess of 2% of the aggregate amount of
cash being distributed. The general partner's incentive distribution for the
distributions that we declared for the three months and nine months ended
September 30, 2003 was $268,600 and $519,400, respectively. The general
partner's incentive distribution for the distributions that we declared for the
three months and nine months ended September 30, 2002 was $74,600 and $198,100,
respectively.
8
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2003
(Unaudited)
NOTE 4 - CREDIT FACILITY
In September 2003, the Partnership amended and increased its credit
facility from $15.0 million to $20.0 million. Borrowings under the facility are
secured by a lien on and security interest in all the property of the
Partnership and its subsidiaries, including pledges by the Partnership of the
issued and outstanding equity interests in its subsidiaries. Up to $3.0 million
of the facility may be used for standby letters of credit. No such letters of
credit have been issued under the facility. The revolving credit facility has a
term ending in December 2005 and bears interest at one of two rates, elected at
the Partnership's option:
o the base rate plus the applicable margin; or
o the adjusted LIBOR rate plus the applicable margin.
The base rate for any day equals the higher of the federal funds rate
plus 1/2 of 1% or the Wachovia Bank prime rate. Adjusted LIBOR is LIBOR divided
by 1.00 minus the percentage prescribed by the Federal Reserve Board for
determining the reserve requirement for euro currency funding. The applicable
margin is as follows:
o where the Partnership's leverage ratio, as defined in the credit
facility agreement, is less than or equal to 1.5, the applicable
margin is 0.00% for base rate loans and 1.50% for LIBOR loans;
o where the Partnership's leverage ratio is greater than 1.5 but
less than or equal to 2.5, the applicable margin is 0.25% for base
rate loans and 1.75% for LIBOR loans;
o where the Partnership's leverage ratio is greater than 2.5 but
less than or equal to 3.0, the applicable margin is 0.50% for base
rate loans and 2.00% for LIBOR loans; and
o where the Partnership's leverage ratio is greater than 3.0, the
applicable margin is 0.75% for base rate loans and 2.50% for LIBOR
loans.
At September 30, 2003, there were no outstanding borrowings under this
credit facility.
The credit facility requires the Partnership to maintain specified net
worth and specified ratios of current assets to current liabilities and debt to
EBITDA, and requires it to maintain a specified interest coverage ratio. At
September 30, 2003, the Partnership was in compliance with all of the financial
covenants.
NOTE 5 - PUBLIC OFFERING OF COMMON UNITS
In May 2003, the Partnership completed a public offering of 1,092,500
common units of limited partner interest. The net proceeds after underwriting
discounts and commissions were approximately $25.2 million. These proceeds were
used in part to repay existing indebtedness of $8.5 million. The Partnership
intends to use the balance of these proceeds to fund future capital projects and
for working capital.
9
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 30, 2003
(Unaudited)
NOTE 6 - PENDING ACQUISITION
In September 2003, the Partnership entered into a purchase and sale
agreement with SEMCO Energy, Inc. ("SEMCO") pursuant to which the Partnership or
its designee will purchase all of the outstanding equity of SEMCO's wholly-owned
subsidiary, Alaska Pipeline Company, which owns an intrastate natural gas
transmission pipeline that delivers gas to metropolitan Anchorage (the
"Acquisition"). The total consideration, payable in cash at closing, will be
approximately $95.0 million, subject to an adjustment based on the amount of
working capital that Alaska Pipeline has at closing.
Consummation of the Acquisition is subject to a number of conditions,
including receipt of governmental and non-governmental consents and approvals
and the absence of a material adverse change in Alaska Pipeline's business.
Among the required governmental authorizations are approval of the Regulatory
Commission of Alaska and expiration, without adverse action, of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act. The purchase and
sale agreement may be terminated by either the Partnership or SEMCO if the
transaction is not consummated by June 16, 2004. The purchase and sale agreement
contains customary representations, warranties and indemnifications.
As part of the Acquisition, at closing, Alaska Pipeline and ENSTAR
Natural Gas Company ("ENSTAR"), a division of SEMCO which conducts its gas
distribution business in Alaska, will enter into a Special Contract for Gas
Transportation pursuant to which ENSTAR will pay a reservation fee for use of
all of the pipeline's transportation capacity of $943,000 per month, plus $.075
per thousand cubic feet, or mcf, of gas transported, for 10 years. During 2002,
total gas volumes transported on the Alaska Pipeline system averaged 130,000 mcf
per day. SEMCO will execute a gas transmission agreement with Alaska Pipeline
pursuant to which SEMCO will be obligated to make up any difference if the
Regulatory Commission of Alaska reduces the transportation rates payable by
ENSTAR pursuant to the Special Contract.
Further, Alaska Pipeline will enter into an Operation and Maintenance
and Administrative Services Agreement with ENSTAR under which ENSTAR will
continue to operate and maintain the pipeline for at least 5 years for a fee of
$334,000 per month for the first three years. Thereafter, ENSTAR's fee will be
adjusted for inflation.
The Partnership has received a commitment from Friedman, Billings,
Ramsey Group, Inc. ("FBR") to make a $25 million preferred equity investment in
a special purpose vehicle (the "SPV"), to be jointly owned and controlled by FBR
and the Partnership, which entity will be the acquirer of Alaska Pipeline. Under
the terms of the FBR commitment, the Partnership will have the right, during the
18 months following the closing of the Acquisition, to purchase FBR's preferred
equity interest in the SPV at FBR's original cost plus accrued and unpaid
preferred distributions and a premium. If the Partnership does not purchase
FBR's interest, FBR has the right to require Resource America, the parent of the
Partnership's general partner, to purchase this interest. Resource America will
then have the right to require the Partnership to purchase the equity interest
from it. The Partnership intends to make a $24.0 million common equity
investment in the SPV which the Partnership will fund in part through its
existing $20.0 million credit facility. The SPV has received a commitment from
Wachovia Bank, National Association and Wachovia Capital Markets, LLC for a $50
million credit facility to partially finance the Acquisition. Up to $25 million
of borrowings under the facility will be secured by a lien on and security
interest in all of the SPV's property. In addition, upon the earlier to occur of
the termination of the Partnership's subordination period or the amendment of
the restrictions in the partnership agreement on the Partnership's incurrence of
debt, the Partnership will guarantee all borrowings under the facility, securing
the guarantee with a pledge of its interest in the SPV.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
When used in this Form 10-Q, the words "believes" "anticipates"
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties more
particularly described in Item 1, under the caption "Risk Factors", in our
annual report on Form 10-K for 2002. These risks and uncertainties could cause
actual results to differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. We undertake no obligation to publicly release the results of any
revisions to forward-looking statements which we may make to reflect events or
circumstances after the date of this Form 10-Q or to reflect the occurrence of
unanticipated events.
The following discussion provides information to assist in
understanding our financial condition and results of operations. This discussion
should be read in conjunction with our consolidated financial statements and
related notes appearing elsewhere in this report.
General
Our principal business objective is to generate income for distribution
to our unitholders from the transportation of natural gas through our gathering
systems. We completed an initial public offering of our common units in February
2000 and used the proceeds of that offering to acquire the gathering systems
formerly owned by Atlas America, Inc. and its affiliates, all subsidiaries of
Resource America, Inc. The gathering systems gather natural gas from wells in
eastern Ohio, western New York, and western Pennsylvania and transport the
natural gas primarily to public utility pipelines. To a lesser extent, the
gathering systems transport natural gas to end-users.
Results of Operations
In the three months and nine months ended September 30, 2003 and 2002,
our principal revenues came from the operation of our pipeline gathering systems
that transport and compress natural gas. Two variables that affect our
transportation revenues are:
o the volumes of natural gas transported by us which, in turn,
depend upon the number of wells connected to our gathering system,
the amount of natural gas they produce, and the demand for that
natural gas; and
o the transportation fees paid to us which, in turn, depend upon the
price of the natural gas we transport, which itself is a function
of the relevant supply and demand in the Mid-Atlantic and
Northeastern areas of the United States.
We set forth the average volumes we transported, our average
transportation rates per mcf and revenues received by us for the periods
indicated in the following table:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------- -------------- --------------
Average daily throughput volumes (mcf)........................ 54,609 51,264 53,146 50,510
============= ============= ============== ==============
Average transportation rate (per mcf)......................... $ .83 $ .57 $ .81 $ .57
============= ============ ============== ==============
Total transportation and compression revenues................. $ 4,162,600 $ 2,666,100 $ 11,816,000 $ 7,857,400
============= ============= ============== ==============
11
Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002
Revenues. Our transportation and compression revenue increased to
$4,162,600 in the three months ended September 30, 2003 from $2,666,100 in the
three months ended September 30, 2002. The increase of $1,496,500 (56%) resulted
from an increase in the average transportation rate paid to us ($1,241,400) and
an increase in the volumes of natural gas we transported ($255,100).
Our transportation rates are primarily at fixed percentages of the
sales price of natural gas transported. Our transportation rates for most of the
natural gas produced by Atlas America and its affiliates also have specified
minimums. Our average transportation rate was $.83 per mcf in the three months
ended September 30, 2003 as compared to $.57 per mcf in the three months ended
September 30, 2002, an increase of $.26 per mcf (46%). In the three months ended
September 30, 2003, natural gas prices increased significantly over the prior
year period. As a result, our average transportation rate increased.
Our average daily throughput volumes were 54,609 mcf in the three
months ended September 30, 2003 as compared to 51,264 mcf in the three months
ended September 30, 2002, an increase of 3,345 (7%) mcf per day. The increase in
the three months ended September 30, 2003 was a result of new wells added to our
system. During the three months and twelve months ended September 30, 2003 we
added 44 and 240 new wells, respectively, to our system as compared to 40 and
202 wells added in the prior similar periods.
Costs and Expenses. Our transportation and compression expenses
increased to $606,900 in the three months ended September 30, 2003 as compared
to $475,900 in the three months ended September 30, 2002, an increase of
$131,000 (28%). Our average cost per mcf of transportation and compression was
$.12 in the three months ended September 30, 2003 as compared to $.10 in the
three months ended September 30, 2002, an increase of $.02 (20%). This increase
resulted primarily from an increase in compressor expenses due to the addition
of more compressors and increased lease rates for our compressors in the three
months ended September 30, 2003 as compared to the prior year. We are in the
process of purchasing several compressors, which we anticipate will reduce
future compressor expenses on a per mcf basis.
Our general and administrative expenses increased to $435,300 in the
three months ended September 30, 2003 as compared to $366,500 in the three
months ended September 30, 2002, an increase of $68,800 (19%). This increase
resulted from an increase of $200,000 in allocations of compensation and
benefits from Atlas America and its affiliates due to an increase in management
time spent during the three months ended September 30, 2003 on our pending
acquisition of Alaska Pipeline Company. This increase was largely offset by a
decrease in professional fees which, in the prior period, had been at higher
than normal levels due to costs associated with the proposed acquisition of
Triton Coal Company.
Our depreciation expense increased to $438,100 in the three months
ended September 30, 2003 as compared to $376,000 in the three months ended
September 30, 2002, an increase of $62,100 (17%). This increase resulted from
the increased asset base associated with pipeline extensions and compressor
upgrades.
Our interest expense decreased to $50,100 in the three months ended
September 30, 2003 as compared to $57,000 in the three months ended September
30, 2002. This decrease of $6,900 (12%) resulted from decreased borrowings in
the three months ended September 30, 2003 because in the three months ended June
30, 2003 we repaid all of our existing debt with proceeds from our public
offering. Our interest expense in the three months ended September 30, 2003
consisted of commitment fees on amounts not drawn on our credit facility and
amortization of our debt issuance costs.
12
Nine Months Ended September 30, 2003 Compared to Nine Months Ended September
30, 2002
Revenues. Our transportation and compression revenue increased to
$11,816,000 in the nine months ended September 30, 2003 from $7,857,400 in the
nine months ended September 30, 2002. The increase of $3,958,600 (50%) resulted
from an increase in the average transportation rate paid to us ($3,372,600) and
an increase in the volumes of natural gas we transported ($586,000).
Our average transportation rate was $.81 per mcf in the nine months
ended September 30, 2003 as compared to $.57 per mcf in the nine months ended
September 30, 2002, an increase of $.24 per mcf (42%). In the nine months ended
September 30, 2003, natural gas prices increased significantly over the prior
year period. Since our transportation rates are generally at fixed percentages
of the sale prices of our natural gas, the higher prices resulted in an increase
in our average transportation rate.
Our average daily throughput volumes were 53,146 mcf in the nine months
ended September 30, 2003 as compared to 50,510 mcf in the nine months ended
September 30, 2002, an increase of 2,636 (5%) mcf per day. The increase in the
nine months ended September 30, 2003 was a result of new wells added to our
system. During the nine and twelve months ended September 30, 2003 we added 197
and 240, respectively, new wells to our system compared to 152 and 202 wells in
the prior period.
Costs and Expenses. Our transportation and compression expenses
increased to $1,830,900 in the nine months ended September 30, 2003 as compared
to $1,480,800 in the nine months ended September 30, 2002, an increase of
$350,100 (24%). Our average cost per mcf of transportation and compression was
$.13 in the nine months ended September 30, 2003 as compared to $.11 in the nine
months ended September 30, 2002, an increase of $.02 (18%). This increase
resulted primarily from an increase in compressor expenses due to the addition
of more compressors and increased lease rates for our compressors in the nine
months ended September 30, 2003 as compared to the prior year. We are in the
process of purchasing several compressors, which we which we anticipate will
reduce future compressor expenses on a per mcf basis.
Our general and administrative expenses increased to $1,301,000 in the
nine months ended September 30, 2003 as compared to $1,158,000 in the nine
months ended September 30, 2002, an increase of $143,000 (12%). This increase
resulted from an increase of $400,000 in allocations of compensation and
benefits from Atlas America and its affiliates due to an increase in management
time spent during the period on potential acquisitions and our public offering.
This increase was largely offset by a decrease in professional fees which, in
the prior period, had been at higher than normal levels due to costs associated
with the proposed acquisition of Triton Coal Company.
Our depreciation expense increased to $1,265,800 in the nine months
ended September 30, 2003 as compared to $1,083,700 in the nine months ended
September 30, 2002, an increase of $182,100 (17%). This increase resulted from
the increased asset base associated with pipeline extensions and compressor
upgrades.
Our interest expense increased to $212,600 in the nine months ended
September 30, 2003 as compared to $140,000 in the nine months ended September
30, 2002. This increase of $72,600 (52%) resulted from an increase in amounts
outstanding on our credit facility to finance pipeline extensions and an
increase in amortization of deferred finance costs in the current period as
compared to the prior period due to costs associated with obtaining our new
credit facility. In the three months ended June 30, 2003, we repaid all of our
existing debt with proceeds from our public offering.
13
Liquidity and Capital Resources
Our primary cash requirements, in addition to normal operating
expenses, are for debt service, maintenance capital expenditures, expansion
capital expenditures and quarterly distributions to our unitholders and general
partner. In addition to cash generated from operations, we have the ability to
meet our cash requirements, (other than distributions to our unitholders and
general partner) through borrowings under our credit facility or the issuance of
additional common units. In general, we expect to fund:
o cash distributions, maintenance capital expenditures and interest
payments through existing cash and cash flows from operating
activities;
o expansion capital expenditures and working capital deficits
through the retention of cash and additional borrowings; and
o debt principal payments through additional borrowings as they
become due or by the issuance of additional common units.
In September 2003 we entered into an agreement to purchase Alaska
Pipeline Company, subject to certain conditions, principally the expiration of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and
the approval of the Regulatory Commission of Alaska. We discuss this transaction
and its potential effects on our liquidity and capital resources in "Pending
Acquisition."
At September 30, 2003, we had no outstanding borrowings and $20.0
million of remaining borrowing capacity under our credit facility.
14
The following table summarizes our financial condition and liquidity at
the dates indicated:
September 30, December 31,
2003 2002
------------- -------------
Current ratio.............................................................. 3.4x 1.0x
Working capital............................................................ $ 14,293,000 $ 56,600
Ratio of long-term debt to total partners' capital......................... N/A .33x
During the nine months ended September 30, 2003, net cash provided by
operations of $11,465,400 was derived from $8,618,300 of income from operations
before depreciation and amortization and changes in our operating assets and
liabilities. Cash flow from operations before depreciation and amortization was
$5,112,600 in the nine months ended September 30, 2002. The current period
increase was principally due to the increase in the average transportation rate
we received in the current year as compared to the prior period. During the nine
months ended September 30, 2003, our accounts payable and accrued liabilities
increased as a result of advances from Atlas America and liabilities in
connection with expenses associated with the pending acquisition of Alaska
Pipeline Company.
Net cash used in investing activities was $5,011,300 for the nine
months ended September 30, 2003, an increase of $1,059,000 from $3,952,300 in
the nine months ended September 30, 2002. The principal reason for this increase
was an increase in expenditures related to transaction costs associated with our
pending acquisition.
Net cash provided by financing activities was $11,784,800 for the nine
months ended September 30, 2003, an increase of $13,946,300 from cash used in
financing activities of $2,161,500 in the nine months ended September 30, 2002.
The principal reason for the increase was the completion of our public offering
in May 2003, which provided net cash of $17,220,100 after repayment of our
outstanding indebtedness. Offsetting this increase was an increase in
distributions and cash spent on other assets as a result of financing costs
associated with obtaining a new credit facility.
Capital Expenditures
Our property and equipment was approximately 52% and 83% of our total
consolidated assets at September 30, 2003 and December 31, 2002, respectively.
Capital expenditures, other than the acquisitions of pipelines, were $4,143,000
and $3,787,300 for the nine months ended September 30, 2003 and 2002,
respectively. These capital expenditures principally consisted of costs relating
to expansion of our existing gathering systems to accommodate new wells drilled
in our service area and compressor upgrades. During the nine months ended
September 30, 2003, we connected 197 new wells to our gathering system. As of
September 30, 2003, we were committed to expend approximately $2,790,000 in
connection with our decision to purchase our compressors rather than lease them
and approximately $2,363,000 on pipeline extensions. In addition, we anticipate
capital expenditures in 2004 for maintenance and expansion associated with
Alaska Pipeline Company, our pending acquisition, to total $5,200,000. Our
capital expenditures could increase materially if the number of wells connected
to our gathering systems increases significantly.
15
Pending Acquisition
As described in Note 6 to our consolidated financial statements, we
have agreed to acquire Alaska Pipeline Company for $95.0 million. We anticipate
expenses in connection with the transaction will be approximately $4.0 million.
The acquisition is contingent upon the satisfaction of certain conditions,
principally approval of the transaction by the Regulatory Commission of Alaska
and the expiration of waiting periods under the Hart Scott Rodino Antitrust
Improvements Act. If, as we believe will be the case, we obtain these approvals
and consummate the transaction, we intend to fund the acquisition price and
expenses as follows:
o We will borrow all of the $20.0 million available under our
existing credit facility. We will use this amount, plus $4.0
million of working capital, to make a common equity contribution
to APC Acquisition, LLC, a newly-formed entity that will acquire
Alaska Pipeline Company.
o Friedman, Billings, Ramsey Group, Inc. has committed to make a
$25.0 million preferred equity contribution in APC Acquisition.
o APC Acquisition has received a commitment for a $50.0 million
credit facility to be administered by Wachovia Bank. It will
borrow $50.0 million under this facility.
We may seek to replace or repay the equity financing from Friedman,
Billings, Ramsey Group and some portion of either or both of the Wachovia Bank
credit facilities with equity capital obtained through an offering of our common
units. If we determine not to make an offering of our common units or seek other
alternative financing, the debt and preferred equity financings will remain in
place. Although the continuation of these financings will reduce our capacity
for further borrowing and reduce the amount of cash from operations that would
otherwise be available to us from the combination of our operations with those
of Alaska Pipeline Company, we believe that our remaining liquidity and capital
resources would be more than sufficient to meet our post-acquisition operational
needs.
Long-Term Debt
We increased our credit facility to $20.0 million in September 2003.
Our principal purpose in obtaining the increase in the facility was to enable us
to fund our pending acquisition of Alaska Pipeline Company and acquisitions of
other gas gathering systems. In May 2003 we used proceeds from our public
offering to repay our existing indebtedness of $8,500,000.
16
Contractual Obligations and Commercial Commitments
The following table summarizes our contractual obligations and
commercial commitments at September 30, 2003:
Payments Due By Period
--------------------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Contractual cash obligations Total 1 Year Years Years Years
- ---------------------------- ------------ ----------- ------------- ----------- ----------
Long-term debt............................... $ - $ - $ - $ - $ -
Capital lease obligations.................... - - - - -
Operating leases............................. 451,600 209,400 171,000 71,200 -
Unconditional purchase obligations........... - - - - -
Other long-term obligations.................. - - - - -
------------ ----------- ------------- ----------- ----------
Total contractual cash obligations........... $ 451,600 $ 209,400 $ 171,000 $ 71,200 $ -
============ =========== ============= =========== ==========
The operating leases represent lease commitments for compressors with
varying expiration dates. These commitments are routine and were made in the
normal course of our business.
Amount of Commitment Expiration Per Period
(in thousands)
--------------------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Other commercial commitments: Total 1 Year Years Years Years
- ---------------------------- ------------ ----------- ------------- ----------- ----------
Standby letters of credit................ $ - $ - $ - $ - $ -
Guarantees............................... - - - - -
Standby replacement commitments.......... - - - - -
Other commercial commitments............. 5,153,000 5,153,000 - - -
----------- ------------ ------------ ---------- ----------
Total commercial commitments............. $ 5,153,000 $ 5,153,000 $ - $ - $ -
=========== ============ ============ ========== ==========
Other commercial commitments relate to commitments to purchase our
compressors rather than lease them and expenditures for pipeline extensions.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of actual revenues and
expenses during the reporting period. Although we believe our estimates are
reasonable, actual results could differ from those estimates. We summarize our
significant accounting policies in Note 2 to our Consolidated Financial
Statements in our annual report on Form 10-K for 2002. The critical accounting
policies and estimates that we have identified are discussed below.
Revenue and Expenses
We routinely make accruals for both revenues and expenses due to the
timing of receiving information from third parties and reconciling our records
with those of third parties. We have determined these estimates using available
market data and valuation methodologies. We believe our estimates for these
items are reasonable, but there is no assurance that actual amounts will not
vary from estimated amounts.
17
Depreciation and Amortization
We calculate our depreciation based on the estimated useful lives and
salvage values of our assets. However, factors such as usage, equipment failure,
competition, regulation or environmental matters could cause us to change our
estimates, thus impacting the future calculation of depreciation and
amortization.
Impairment of Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," whenever events or changes in circumstances
indicate that the carrying amount of long-lived assets may not be recoverable,
we determine if our long-lived assets are impaired by comparing the carrying
amount of an asset or group of assets with the estimated future cash flows
associated with such asset or group of assets. If the carrying amount is greater
than the estimated future cash flows, an impairment loss is recognized in the
amount of the excess, if any, of such carrying amount over the fair value of the
asset or group of assets.
Goodwill
At September 30, 2003, we had $2.3 million of goodwill, all of which
relates to our acquisition of pipeline assets. We test our goodwill for
impairment each year. Our test during 2002 resulted in no impairment. We will
continue to evaluate our goodwill at least annually and will reflect the
impairment of goodwill, if any, in operating income in the income statement in
the period in which the impairment is indicated. Our next annual evaluation of
goodwill for impairment will be as of December 31, 2003.
Recently Issued Financial Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). SFAS
143 requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred and a corresponding
increase in the carrying amount of the related long-lived asset. The adoption of
SFAS 143 as of January 1, 2003 did not have a material impact on results of
operations or financial position.
In April 2002, SFAS 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued.
SFAS 145 rescinds the automatic treatment of gains and losses from
extinguishments of debt as extraordinary unless they meet the criteria for
extraordinary items as outlined in Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations, Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS 145 also requires sale-leaseback accounting for
certain lease modifications that have economic effects similar to a
sale-leaseback transaction and makes various corrections to existing
pronouncements. The provisions of this statement are effective for financial
statements issued by us in 2003. The adoption of SFAS 145 as of January 1, 2003
did not have a material impact on our results of operations or our financial
position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses significant
issues relating to the recognition, measurement, and reporting of costs
associated with exit and disposal activities, including restructuring
activities, and nullifies the guidance in Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The provisions of this statement are effective for exit and
disposal activities that are initiated after December 31, 2002. The adoption of
SFAS 146 did not have a material impact on our results of operations or
financial position.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of our assets and liabilities are denominated in U.S. dollars, and
as a result, we do not have exposure to currency exchange risks.
We do not engage in any interest rate, foreign currency exchange rate
or commodity price-hedging transactions, and as a result, we do not have
exposure to derivatives risk.
Our major market risk exposure is in the pricing applicable to natural
gas sales. Realized pricing is primarily driven by spot market prices for
natural gas. Pricing for natural gas production has been volatile and
unpredictable for several years.
Market risk inherent in our debt is the potential change arising from
increases or decreases in interest rates. Changes in variable rate debt usually
do not affect the fair value of the debt instrument, but may affect our future
earnings and cash flows.
We have a $20.0 million revolving credit facility to fund the expansion
of our existing gathering systems and the acquisition of other gas gathering
systems. We had no amounts drawn on this facility at September 30, 2003.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in Securities Exchange Act of
1934 reports is recorded, processed, summarized and reported within the time
periods specified by the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including the chief executive
officer and chief financial officer of our general partner, as appropriate, to
allow timely decisions regarding required disclosures. In designing and
evaluating the disclosure controls and procedures, our management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and our management necessarily was required to apply its judgement in evaluating
the cost-benefit relationship of possible controls and procedures.
We have carried out an evaluation, under the supervision of the chief
executive officer and chief financial officer of our general partner, of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. As a result of that evaluation, the chief
executive officer and chief financial officer of our general partner concluded
that our disclosure controls and procedures are effective.
19
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports On Form 8-K
(a) Exhibits:
2.1 Purchase and Sale Agreement dated September 16, 2003 between
Atlas Pipeline Partners, L.P. and SEMCO Energy, Inc. (1)
3.1 Amended and Restated Agreement of Limited Partnership of
Atlas Pipeline Partners, L.P. (2)
3.2 Certificate of Limited Partnership of Atlas Pipeline
Partners, L.P. (2)
4.1 Common unit certificate (2)
10.1 Amended and Restated Agreement of Limited Partnership of
Atlas Pipeline Operating Partnership, L.P. dated February 2,
2002. (2)
10.2 Omnibus Agreement among Atlas Pipeline Partners, L.P., Atlas
Pipeline Operating Partnership, L.P., Atlas America, Inc.,
Resource Energy Inc. and Viking Resources Corporation dated
February 2, 2000. (2)
10.3 Master Natural Gas Agreement among Atlas Pipeline Partners,
L.P., Atlas Operating Pipeline Partnership, L.P., Atlas
America, Inc., Resource Energy, Inc. and Viking Resources
Corporation dated February 2, 2002. (2)
10.4 Credit Agreement among Atlas Pipeline Partners, L.P.,
Wachovia Bank, National Association and certain subsidiaries
of Atlas Pipeline Partners, L.P. as guarantors dated
December 27, 2002. (3)
10.4(a) First Amendment to Credit Agreement, dated January 30,
2003. (3)
10.4(b) Second Amendment to Credit Agreement, dated March 28,
2003. (3)
10.4(c) Third Amendment to Credit Agreement, dated September 15,
2003.
10.5 Natural Gas Gathering Agreement among Atlas Pipeline
Partners, L.P., Atlas Pipeline Operating Partnership, L.P.,
Atlas Resources, Inc., Atlas Energy Group, Inc., Atlas Noble
Corp., Resource Energy, Inc. and Viking Resources
Corporation dated January 1, 2002. (3)
31.1 Rule 13a-14(a) - 15d - 14(a) Certification
31.2 Rule 13a-14(a) - 15d - 14(a) Certification
32.1 Section 1350 Certification
32.2 Section 1350 Certification
- ---------------
(1) Files previously as an exhibit to our current report on Form 8-K dated
September 16, 2003 and by this reference incorporated herein.
(2) Filed previously as an exhibit to our Registration Statement on Form S-1
(Registration No. 333-85193) and by this reference incorporated herein.
(3) Filed previously as an exhibit to our annual report on Form 10-K for the
year ended December 31, 2002 and by this reference incorporated herein.
(b) Reports on Form 8-K:
During the quarter ended September 30, 2003, the Partnership filed a
current report on Form 8-K dated September 16, 2003 under Item 5
regarding entering into a purchase and sale agreement with SEMCO
Energy, Inc. to acquire all the outstanding equity of Alaska Pipeline
Company.
20
SIGNATURES
ATLAS PIPELINE PARTNERS, L.P.
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.
By: Atlas Pipeline Partners GP, LLC, its General Partner
Date: December 12, 2003 By: /s/ Edward E. Cohen
---------------------------
EDWARD E. COHEN
Chairman of the Managing Board of the General Partner
(Chief Executive Officer of the General Partner)
Date: December 12, 2003 By: /s/ Steven J. Kessler
---------------------------
STEVEN J. KESSLER
Chief Financial Officer of the General Partner
Date: December 12, 2003 By: /s/ Michael L. Staines
---------------------------
MICHAEL L. STAINES
President, Chief Operating Officer,
Secretary and Managing Board Member of the General Partner
Date: December 12, 2003 By: /s/ NANCY J. McGURK
-------------------
Chief Accounting Officer of the General Partner
21