MAGELLAN MIDSTREAM PARTNERS LP - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 1-16335

Magellan Midstream Partners, L.P.

(Exact name of registrant as specified in its charter)

Delaware

73-1599053

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74121-2186

(Address of principal executive offices and zip code)

(918) 574-7000

(Registrant’s telephone number, including area code)

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 ¨

As of August 5, 2004, there were outstanding 24,130,541 common units and 4,259,771 subordinated units.

TABLE OF CONTENTS


		Page
	PART I

	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	MAGELLAN MIDSTREAM PARTNERS, L.P.

	Consolidated Statements of Income for the three and six months ended June 30, 2003 and 2004	2

	Consolidated Balance Sheets as of December 31, 2003 and June 30, 2004	3

	Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2004	4

	Notes to Consolidated Financial Statements	5

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31

ITEM 4.	CONTROLS AND PROCEDURES	32

	FORWARD-LOOKING STATEMENTS	32

	PART II

	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	33

ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	34

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	34

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	34

ITEM 5.	OTHER INFORMATION	34

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	35

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2004			2003			2004
Transportation and terminals revenues:
Third party	$	90,845		$	103,699		$	170,308		$	192,629
Affiliate		4,871			—			13,122			—
Product sales revenues:
Third party		11,472			38,521			43,420			82,735
Affiliate		737			—			790			—

Total revenues		107,925			142,220			227,640			275,364
Costs and expenses:
Operating		42,350			42,911			75,709			79,911
Environmental		154			18,123			1,951			42,328
Environmental reimbursements		(72	)		(17,909	)		(1,258	)		(41,324	)
Product purchases		12,033			32,382			39,851			70,881
Depreciation and amortization		8,883			9,822			18,262			19,344
Affiliate general and administrative		16,485			13,507			26,923			26,394

Total costs and expenses		79,833			98,836			161,438			197,534
Equity earnings		—			148			—			268

Operating profit		28,092			43,532			66,202			78,098
Interest expense		8,499			8,704			17,530			17,219
Interest income		(28	)		(1,000	)		(554	)		(1,446	)
Debt prepayment premium		—			12,666			—			12,666
Write-off of unamortized debt placement fees		—			5,002			—			5,002
Debt placement fee amortization		762			656			1,309			1,338
Gain on derivative		—			(953	)		—			(953	)

Net income	$	18,859		$	18,457		$	47,917		$	44,272

Allocation of net income:
Limited partners’ interest	$	20,498		$	17,465		$	47,506		$	41,339
General partner’s interest		(1,639	)		992			411			2,933

Net income	$	18,859		$	18,457		$	47,917		$	44,272

Basic net income per limited partner unit	$	0.75		$	0.63		$	1.75		$	1.50

Weighted average number of limited partner units outstanding used for basic net income per unit calculation		27,190			27,797			27,190			27,595

Diluted net income per limited partner unit	$	0.75		$	0.63		$	1.74		$	1.50

Weighted average number of limited partner units outstanding used for diluted net income per unit calculation		27,190			27,860			27,254			27,649

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	December 31, 2003			June 30, 2004
	December 31, 2003			June 30, 2004
				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	111,357		$	51,951
Restricted cash		8,223			5,854
Accounts receivable (less allowance for doubtful accounts of $319 and $288 at December 31, 2003 and June 30, 2004, respectively)		19,615			22,105
Other accounts receivable		14,579			46,372
Affiliate accounts receivable		9,324			8,465
Inventory		17,588			15,007
Acquisition prepayment		—			24,622
Other current assets		3,941			9,215

Total current assets		184,627			183,591
Property, plant and equipment, at cost		1,371,847			1,414,892
Less: accumulated depreciation		431,298			446,977

Net property, plant and equipment		940,549			967,915
Equity investment		—			25,300
Goodwill		22,057			22,006
Other intangibles (less accumulated amortization of $911 and $1,561 at December 31, 2003 and June 30, 2004, respectively)		11,417			10,766
Long-term affiliate receivables		13,472			6,999
Long-term receivables		9,077			19,226
Debt placement costs (less accumulated amortization of $2,761 and $2,419 at December 31, 2003 and June 30, 2004, respectively)		10,618			10,333
Other noncurrent assets		3,113			2,544

Total assets	$	1,194,930		$	1,248,680

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	21,200		$	16,606
Affiliate accounts payable		257			2,237
Outstanding checks		6,961			1,865
Accrued affiliate payroll and benefits		15,077			10,140
Accrued taxes other than income		14,286			14,954
Accrued interest payable		8,196			6,941
Environmental liabilities		12,243			35,567
Deferred revenue		10,868			10,093
Accrued product purchases		11,585			6,575
Current portion of long-term debt		900			—
Other current liabilities		5,616			8,352

Total current liabilities		107,189			113,330
Long-term debt		569,100			551,690
Long-term affiliate payable		1,509			3,215
Other deferred liabilities		4,455			4,257
Environmental liabilities		14,528			28,946
Commitments and contingencies
Partners’ capital:
Partners’ capital		498,920			542,837
Accumulated other comprehensive (loss) income		(771	)		4,405

Total partners’ capital		498,149			547,242

Total liabilities and partners’ capital	$	1,194,930		$	1,248,680

See notes to consolidated financial statements.

MAGELLAN MIDSTREAM PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2003		2004
Operating Activities:
Net income	$	47,917	$	44,272
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,262		19,344
Debt placement fee amortization		1,309		1,338
Write-off of unamortized debt placement fees		—		5,002
Loss on sale and retirement of assets		1,971		1,746
Earnings in equity investment		—		(268	)
Debt prepayment premium		—

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