<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       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 001-10311

                         KANEB PIPE LINE PARTNERS, L.P.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                 75-2287571
(State or other jurisdiction of        (I.R.S. Employer Identification No.)
Incorporation or Organization)

                          2435 NORTH CENTRAL EXPRESSWAY
                             RICHARDSON, TEXAS 75080
          (Address of principle executive offices, including zip code)

                                 (972) 699-4000
              (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
              -----                                              ------

Number of Units of the Registrant outstanding at April 30, 2001: 20,285,090.

================================================================================



<PAGE>   2


KANEB PIPE LINE PARTNERS, L.P.  AND SUBSIDIARIES


FORM 10-Q
QUARTER ENDED MARCH 31, 2001
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                          Page No.
                          Part I. Financial Information

<S>       <C>                                                             <C>
Item 1.   Financial Statements (Unaudited)

          Consolidated Statements of Income -- Three Months Ended
            March 31, 2001 and 2000                                           1

          Condensed Consolidated Balance Sheets -- March 31, 2001
            and December 31, 2000                                             2

          Condensed Consolidated Statements of Cash Flows -- Three
            Months Ended March 31, 2001 and 2000                              3

          Notes to Consolidated Financial Statements                          4

Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations                    10

Item 3.   Quantitative and Qualitative Disclosure About Market Risk          14

                           Part II. Other Information

Item 6.   Exhibits and Reports on Form 8-K                                   14
</TABLE>



<PAGE>   3


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS -- EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED
                                                               MARCH 31,
                                                       ------------------------
                                                          2001           2000
                                                       ---------       --------
                                                       (Restated)
<S>                                                    <C>             <C>
Revenues                                                $ 48,069       $ 36,680
                                                        --------       --------
Costs and expenses:
      Operating costs                                     21,655         17,280
      Depreciation and amortization                        5,751          3,975
      General and administrative                           2,328          2,503
                                                        --------       --------

           Total costs and expenses                       29,734         23,758
                                                        --------       --------

Operating income                                          18,335         12,922
Interest and other income, net                               708             59
Interest expense                                          (4,721)        (3,019)
                                                        --------       --------

Income before minority interest, income taxes
     and extraordinary item                               14,322          9,962
Minority interest                                           (141)           (97)
Income tax provision                                        (235)          (298)
                                                        --------       --------

Income before extraordinary item                          13,946          9,567
Extraordinary item - loss on debt extinguishment,
     net of minority interest and income taxes            (5,757)            --
                                                        --------       --------
Net income                                                 8,189          9,567

General partner's interest in net income                    (408)          (390)
                                                        --------       --------

Limited partners' interest in net income                $  7,781       $  9,177
                                                        ========       ========

Allocation of net income per unit:
     Before extraordinary item                          $    .67       $    .50
     Extraordinary item                                     (.29)            --
                                                        --------       --------
                                                        $    .38       $    .50
                                                        ========       ========
Weighted average number of Partnership
     units outstanding                                    20,285         18,310
                                                        ========       ========
</TABLE>

                 See notes to consolidated financial statements.


                                        1

<PAGE>   4


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                          MARCH 31,
                                                            2001      DECEMBER 31,
                                                         (UNAUDITED)      2000
                                                         -----------  ------------
                                                         (Restated)
<S>                                                       <C>           <C>
         ASSETS
Current assets:
     Cash and cash equivalents                            $ 14,498      $  4,758
     Accounts receivable                                    21,108        21,091
     Prepaid expenses and other                              5,631         5,291
                                                          --------      --------

         Total current assets                               41,237        31,140
                                                          --------      --------

Property and equipment                                     633,938       458,926
Less accumulated depreciation                              149,788       137,571
                                                          --------      --------

     Net property and equipment                            484,150       321,355
                                                          --------      --------

Investment in affiliates                                    22,031        22,568
                                                          --------      --------

                                                          $547,418      $375,063
                                                          ========      ========

     LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
     Current portion of long-term debt                    $ 22,725      $     --
     Accounts payable and accrued expenses                  22,888        17,491
     Accrued distributions payable                          14,814        13,372
     Payable to general partner                              1,913         1,889
                                                          --------      --------

         Total current liabilities                          62,340        32,752
                                                          --------      --------

Long-term debt, less current portion                       257,500       166,900

Other liabilities and deferred taxes                        16,600        13,676

Minority interest                                              899           968

Commitments and contingencies

Partners' capital                                          210,079       160,767
                                                          --------      --------

                                                          $547,418      $375,063
                                                          ========      ========
</TABLE>

                See notes to consolidated financial statements.

                                        2


<PAGE>   5


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                     THREE MONTHS ENDED
                                                                         MARCH 31,
                                                                 -------------------------
                                                                   2001            2000
                                                                 ---------       ---------
                                                                 (Restated)
<S>                                                              <C>             <C>
Operating activities:
   Net income                                                    $   8,189       $   9,567
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation and amortization                                   5,751           3,975
     Minority interest                                                 141              97
     Equity in earnings of affiliates, net of distributions            114           1,175
     Deferred income taxes                                             235             298
     Extraordinary item                                              5,757              --
     Changes in working capital components                           7,304           3,000
                                                                 ---------       ---------

         Net cash provided by operating activities                  27,491          18,112
                                                                 ---------       ---------

Investing activities:
   Capital expenditures                                             (3,037)         (2,336)
   Acquisition of terminals, net of cash acquired                 (106,810)             --
   Other, net                                                          125            (151)
                                                                 ---------       ---------

         Net cash used in investing activities                    (109,722)         (2,487)
                                                                 ---------       ---------

Financing activities:
   Issuance of debt                                                257,500           2,000
   Payment of debt                                                (150,715)         (1,982)
   Distributions, including minority interest                      (14,814)        (13,372)
                                                                 ---------       ---------

         Net cash provided by (used in)
               financing activities                                 91,971         (13,354)
                                                                 ---------       ---------

Increase in cash and cash equivalents                                9,740           2,271
Cash and cash equivalents at beginning of period                     4,758           5,127
                                                                 ---------       ---------

Cash and cash equivalents at end of period                       $  14,498       $   7,398
                                                                 =========       =========

Supplemental cash flow information:
   Cash paid for interest                                        $   3,623       $   1,957
                                                                 =========       =========
   Non-cash investing and financing activities -
     Issuance of units for acquisition of terminals              $  56,488       $      --
                                                                 =========       =========
</TABLE>


                See notes to consolidated financial statements.

                                        3

<PAGE>   6


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

1.       RESTATEMENT OF FINANCIAL STATEMENTS

         The Partnership's results of operations and financial position as of
         and for the three months ended March 31, 2001 have been restated to
         reflect unrealized gains on two interest rate lock contracts (see Note
         8), as follows (in thousands, except per unit amounts):

<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                              March 31, 2001
                                                         ------------------------
                                                            As              As
                                                         Reported        Restated
                                                         ---------      ---------
<S>                                                      <C>            <C>
         Prepaid expenses and other                      $   5,037      $   5,631
         Minority interest                               $     893      $     899
         Partners' capital                               $ 209,491      $ 210,079
         Interest and other income, net                  $     114      $     708
         Income before extraordinary item                $  13,358      $  13,946
         Income per unit, before extraordinary item      $    0.64      $    0.67
</TABLE>

2.       SIGNIFICANT ACCOUNTING POLICIES

         The unaudited condensed consolidated financial statements of Kaneb Pipe
         Line Partners, L.P. and its subsidiaries (the "Partnership") for the
         three month periods ended March 31, 2001 and 2000, have been prepared
         in accordance with generally accepted accounting principles.
         Significant accounting policies followed by the Partnership are
         disclosed in the notes to the consolidated financial statements
         included in the Partnership's Annual Report on Form 10-K for the year
         ended December 31, 2000. In the opinion of the Partnership's
         management, the accompanying condensed consolidated financial
         statements contain the adjustments, consisting of normal recurring
         accruals, necessary to present fairly the consolidated financial
         position of the Partnership and its consolidated subsidiaries at March
         31, 2001 and the consolidated results of their operations and cash
         flows for the periods ended March 31, 2001 and 2000. Operating results
         for the three months ended March 31, 2001 are not necessarily
         indicative of the results that may be expected for the year ending
         December 31, 2001.

3.       ACQUISITION AND FINANCING

         On January 3, 2001, the Partnership, through a wholly-owned subsidiary,
         acquired Shore Terminals LLC ("Shore") for $107 million in cash and
         1,975,090 Partnership units (valued at $56.5 million on the date of
         contract and announcement). Financing for the cash portion of the
         purchase price was supplied under a new $275 million unsecured
         revolving credit agreement with a group of banks. The acquisition has
         been accounted for using the purchase method of accounting. Assuming
         the acquisition occurred on January 1, 2000, unaudited pro forma
         revenues, net income and net income per unit for the three months ended
         March 31, 2000 would be $44.4 million, $10.4 million and $0.51,
         respectively.


                                       4
<PAGE>   7


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------


         The $128 million of first mortgage notes outstanding at December 31,
         2000 which were due in varying amounts from 2001 to 2016, were repaid
         in full in January of 2001 with the proceeds from the $275 million
         revolving credit facility. Under the provisions of the mortgage notes,
         the Partnership incurred a $6.5 million prepayment penalty, before
         minority interest and income taxes, which has been recognized as an
         extraordinary expense in the first quarter of 2001.

4.       COMPREHENSIVE INCOME

         Comprehensive income for the three months ended March 31, 2001 and 2000
         is as follows (in thousands):

<TABLE>
<CAPTION>

                                                   Three Months Ended
                                                         March 31,
                                                  ----------------------
                                                     2001         2000
                                                  --------       -------
                                                  (Restated)
<S>                                               <C>            <C>
         Net income                                $ 8,189       $ 9,567
         Other comprehensive income - foreign
           currency translation adjustment            (695)          155
                                                   -------       -------

         Comprehensive income                      $ 7,494       $ 9,722
                                                   =======       =======
</TABLE>


5.       CASH DISTRIBUTIONS

         The Partnership makes quarterly distributions of 100% of its Available
         Cash, as defined in the Partnership Agreement, to holders of limited
         partnership units ("Unitholders") and the general partner. Available
         Cash consists generally of all the cash receipts of the Partnership,
         plus the beginning cash balance less all of its cash disbursements and
         reserves. The Partnership expects to make distributions of all
         Available Cash within 45 days after the end of each quarter to
         Unitholders of record on the applicable record date. A cash
         distribution of $0.70 per unit for the fourth quarter of 2000 was paid
         on February 14, 2001. A cash distribution of $0.70 per unit for the
         first quarter of 2001 was declared to holders of record on April 30,
         2001 and was paid on May 15, 2001.

6.       CONTINGENCIES

         The operations of the Partnership are subject to Federal, state and
         local laws and regulations in the United States and the United Kingdom
         relating to protection of the environment. Although the Partnership
         believes its operations are in general compliance with applicable
         environmental regulations, risks of additional costs and liabilities
         are inherent in pipeline and terminal operations, and there can be no
         assurance that significant costs and liabilities will not be incurred
         by the Partnership. Moreover, it is possible that other developments,
         such as increasingly stringent environmental laws, regulations and
         enforcement policies thereunder, and



                                       5
<PAGE>   8


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------


         claims for damages to property or persons resulting from the operations
         of the Partnership, could result in substantial costs and liabilities
         to the Partnership.

         On April 7, 2000, a fuel oil pipeline in Maryland owned by Potomac
         Electric Power Company ("PEPCO") ruptured. The pipeline was operated by
         a partnership of which ST Services, a wholly-owned subsidiary of the
         Partnership, is general partner. PEPCO has reported that, through
         December 2000, it incurred approximately $66 million in clean-up costs
         and expects to incur total cleanup costs of $70 million to $75 million.
         Since May 2000, ST Services has participated provisionally in a
         minority share of the cleanup expense, which has been funded by ST
         Services' insurance carriers. The Partnership cannot predict the
         amount, if any, that ultimately may be determined to be ST Services'
         share of the remediation expense, but it believes that such amount will
         be covered by insurance and will not materially affect the
         Partnership's financial condition.

         As a result of the rupture, purported class actions have been filed in
         federal and state court in Maryland by property and/or business owners
         alleging damages in unspecified amounts against PEPCO and ST Services
         under various theories, including the federal Oil Pollution Act. The
         court has ordered a consolidated complaint to be filed in this action.
         ST Services' insurance carriers have assumed the defense of these
         actions. While the Partnership cannot predict the amount, if any, of
         any liability it may have in these suits, it believes that such amounts
         will be covered by insurance and that these actions will not have a
         material adverse effect on its financial condition.

         PEPCO and ST Services have agreed with the State of Maryland to pay
         costs of assessing natural resource damages under the federal Oil
         Pollution Act, but they cannot predict at this time the amount of any
         damages that may be claimed by Maryland. The Partnership believes that
         both the assessment costs and such damages are covered by insurance and
         will not materially affect the Partnership's financial condition.

         The U.S. Department of Transportation has issued a Notice of Proposed
         Violation to PEPCO and ST Services alleging violations over several
         years of pipeline safety regulations and proposing a civil penalty of
         $674,000. ST Services and PEPCO have contested the allegations of
         violations and the proposed penalty. The ultimate amount of any penalty
         attributable to ST Services cannot be determined at this time, but the
         Partnership believes that this matter will not have a material effect
         on the Partnership's financial condition.

         Certain subsidiaries of the Partnership were sued in a Texas state
         court in 1997 by Grace Energy Corporation ("Grace"), the entity from
         which the Partnership acquired ST Services in 1993. The lawsuit
         involves environmental response and remediation allegedly resulting
         from jet fuel leaks in the early 1970's from a pipeline. The pipeline,
         which connected a former Grace terminal with Otis Air Force Base in
         Massachusetts, was abandoned in 1976, when the connecting terminal was
         sold to an unrelated entity.

         Grace alleged that subsidiaries of the Partnership acquired the
         abandoned pipeline, as part of the acquisition of ST Services in 1993,
         and assumed responsibility for environmental


                                       6
<PAGE>   9


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------

         damages allegedly caused by the jet fuel leaks. Grace sought a ruling
         that these subsidiaries are responsible for all present and future
         remediation expenses for these leaks and that Grace has no obligation
         to indemnify these subsidiaries for these expenses.

         In the lawsuit, Grace also sought indemnification for expenses that it
         has incurred since 1996 of approximately $3.5 million for response and
         remediation required by the State of Massachusetts and for additional
         expenses that it expects to incur in the future. The consistent
         position of the Partnership's subsidiaries is that they did not acquire
         the abandoned pipeline as part of the 1993 ST Services transaction, and
         therefore did not assume any responsibility for the environmental
         damage nor any liability to Grace for the pipeline.

         At the end of the trial on May 19, 2000, the jury returned a verdict
         including findings that Grace had breached a provision of the 1993
         acquisition agreement and that the pipeline was abandoned prior to
         1978. On July 17, 2000, the Judge entered final judgment in the case,
         which is now on appeal to the Dallas Court of Appeals, that Grace take
         nothing from the subsidiaries on its claims, including claims for
         future expenses. Although the Partnership's subsidiaries have not
         incurred any expenses in connection with the remediation, the court
         also ruled, in effect, that the subsidiaries would not be entitled to
         an indemnification from Grace if any such expenses were incurred in the
         future. However, the Judge let stand a prior summary judgment ruling
         that the pipeline was an asset of the Partnership acquired as part of
         the 1993 ST Services transaction. The Judge also awarded attorney fees
         to Grace.

         While the judgment means that the subsidiaries have no obligation to
         reimburse Grace for the approximately $3.5 million it has incurred, as
         required by the State of Massachusetts, the Partnership's subsidiaries
         have filed an appeal of the judgment finding that the Otis Pipeline was
         transferred to them and the award of attorney fees.

         On April 2, 2001, Grace filed a petition in bankruptcy, which created
         an automatic stay against actions against Grace. This automatic stay
         will affect the appeal of this matter. The Texas court of appeals has
         issued an order staying all proceedings of the appeal because of the
         bankruptcy. Once the stay is lifted, the Partnership's subsidiaries
         that are party to the lawsuit intend to resume vigorous prosecution of
         the appeal.

         The Otis Air Force Base is a part of the Massachusetts Military
         Reservation ("MMR"), which has been declared a Superfund Site pursuant
         to the Comprehensive Environmental Response, Compensation and Liability
         Act. The MMR Site contains nine groundwater contamination plumes, two
         of which are allegedly associated with the pipeline, and various other
         waste management areas of concern, such as landfills. The United States
         Department of Defense and the United States Coast Guard, pursuant to a
         Federal Facilities Agreement, have been responding to the Government
         remediation demand for most of the contamination problems at the MMR
         Site. Grace and others have also received and responded to formal
         inquiries from the United States Government in connection with the
         environmental damages allegedly resulting from the jet fuel leaks. The
         Partnership's subsidiaries have voluntarily responded to an invitation
         from the Government to provide information indicating that they do not
         own the pipeline. In connection with a court-ordered mediation between
         Grace and the subsidiaries,


                                       7
<PAGE>   10

KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------


         the Government advised the parties in April 1999 that it has identified
         the two spill areas that it believes to be related to the pipeline that
         is the subject of the Grace suit. The Government advised the parties
         that it believes it has incurred costs of approximately $34 million,
         and expects in the future to incur costs of approximately $55 million,
         for remediation of one of the spill areas. This amount was not intended
         to be a final accounting of costs or to include all categories of
         costs. The Government also advised the parties that it could not at
         that time allocate its costs attributable to the second spill area. The
         Partnership believes that the ultimate cost of the remediation, while
         substantial, will be considerably less than the Government has
         indicated.

         The Government has made no claims against the Partnership or any other
         person on account of this matter. The Partnership believes that if any
         such claims were made, its subsidiaries would have substantial defenses
         to such claims. Under Massachusetts law, the party responsible for
         remediation of a facility is the last owner before the abandonment,
         which was a Grace company. The Partnership does not believe that either
         the Grace litigation or any claims that may be made by the Government
         will adversely affect its ability to make cash distributions to its
         unitholders, but there can be no assurances in that regard.

         The Partnership has other contingent liabilities resulting from
         litigation, claims and commitments incident to the ordinary course of
         business. Management believes, based on the advice of counsel, that the
         ultimate resolution of such contingencies will not have a materially
         adverse effect on the financial position or results of operations of
         the Partnership.


7.       BUSINESS SEGMENT DATA

         The Partnership conducts business through two principal operations; the
         "Pipeline Operations," which consists primarily of the transportation
         of refined petroleum products in the Midwestern states as a common
         carrier, and the "Terminaling Operations," which provide storage for
         petroleum products, specialty chemicals and other liquids.

         The Partnership measures segment profit as operating income. Total
         assets are those controlled by each reportable segment (in thousands):

<TABLE>
<CAPTION>

                                          Three Months Ended
                                               March 31,
                                         --------------------
                                          2001          2000
                                         -------      -------
<S>                                      <C>          <C>
         Business segment revenues:
            Pipeline operations          $16,169      $15,248
            Terminaling operations        31,900       21,432
                                         -------      -------
                                         $48,069      $36,680
                                         =======      =======
</TABLE>


                                       8
<PAGE>   11

KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                             Three Months Ended
                                                                   March 31,
                                                           ------------------------
                                                              2001           2000
                                                           ---------       --------
                                                           (Restated)
<S>                                                        <C>             <C>
         Business segment profit:
            Pipeline operations                             $  7,268       $  7,237
            Terminaling operations                            11,067          5,685
                                                            --------       --------
               Operating income                               18,335         12,922
            Interest and other income, net                       708             59
            Interest expense                                  (4,721)        (3,019)
                                                            --------       --------
               Income before minority interest, income
                   taxes and extraordinary item             $ 14,322       $  9,962
                                                            ========       ========
</TABLE>


<TABLE>
<CAPTION>

                                                           March 31,    December 31,
                                                             2001           2000
                                                           ----------   ------------
                                                           (Restated)
<S>                                                        <C>          <C>
         Total assets:
            Pipeline operations                             $107,969      $102,656
            Terminaling operations                           439,449       272,407
                                                            --------      --------
                                                            $547,418      $375,063
                                                            ========      ========
</TABLE>


8.   DERIVATIVE INSTRUMENTS

         Effective January 1, 2001, the Partnership adopted the provisions of
         SFAS No. 133, "Accounting For Derivative Instruments and Hedging
         Activities", which establishes the accounting and reporting standards
         for such activities. Under SFAS No. 133, companies must recognize all
         derivative instruments on its balance sheet at fair value. Changes in
         the value of derivative instruments, which are considered hedges, are
         offset against the change in fair value of the hedged item through
         earnings, or recognized in other comprehensive income until the hedged
         item is recognized in earnings, depending on the nature of the hedge.
         SFAS No. 133 requires that unrealized gains and losses on derivatives
         not qualifying for hedge accounting be recognized currently in
         earnings. On January 1, 2001, the Partnership was not a party to any
         derivative contracts, accordingly, initial adoption of SFAS No. 133 at
         that date did not have any effect on the Partnership's result of
         operations or financial position.

         In March of 2001, a wholly-owned subsidiary of the Partnership entered
         into two contracts for the purpose of locking in interest rates on $100
         million of anticipated ten-year public debt offerings. As the interest
         rate locks were not designated as hedging instruments pursuant to the
         requirements of SFAS No. 133, increases or decreases in the fair value
         of the contracts are included as a component of interest and other
         income, net. For the three months ended March 31, 2001, an unrealized
         gain of $0.6 million and an asset of the same amount, based on the fair
         value of the instruments at March 31, 2001, was recorded on these
         contracts. On May 22, 2001, the contracts were settled resulting in an
         aggregate gain of $3.8 million.


                                       9
<PAGE>   12


KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


         This discussion should be read in conjunction with the consolidated
         financial statements of Kaneb Pipe Line Partners, L.P. (the
         "Partnership") and notes thereto included elsewhere in this report.

         OPERATING RESULTS:

         PIPELINE OPERATIONS

<TABLE>
<CAPTION>

                                            Three Months Ended
                                                  March 31,
                                            --------------------
                                              2001         2000
                                            -------      -------
                                               (in thousands)
<S>                                         <C>          <C>
         Revenues                           $16,169      $15,248
         Operating costs                      6,803        5,814
         Depreciation and amortization        1,299        1,293
         General and administrative             799          904
                                            -------      -------
            Operating income                $ 7,268      $ 7,237
                                            =======      =======
</TABLE>

         Pipeline revenues are based on volumes shipped and the distances over
         which such volumes are transported. For the three months ended March
         31, 2001, pipeline revenues increased by $0.9 million when compared to
         the same 2000 period, due to increases in barrel miles shipped and
         increases in terminaling charges. Barrel miles totaled 4.1 billion for
         the three month period ended March 31, 2001, compared to 4.0 billion
         for the first quarter of 2000.

         For the three months ended March 31, 2001, operating costs, which
         include fuel and power costs, materials and supplies, maintenance and
         repair costs, salaries, wages and employee benefits, and property and
         other taxes, increased by $1.0 million, when compared to the three
         months ended March 31, 2000, due primarily to increases in fuel and
         power costs and expenses from pipeline relocation projects. General and
         administrative costs, which include managerial, accounting, and
         administrative personnel costs, office rental and expense, legal and
         professional costs and other non-operating costs, remained relatively
         flat, when compared to the first quarter of 2000.

         TERMINALING OPERATIONS

<TABLE>
<CAPTION>

                                                   Three Months Ended
                                                         March 31,
                                                   --------------------
                                                     2001         2000
                                                   -------      -------
                                                      (in thousands)
<S>                                                <C>          <C>
         Revenues                                  $31,900      $21,432
         Operating costs                            14,852       11,466
         Depreciation and amortization               4,452        2,682
         General and administrative                  1,529        1,599
                                                   -------      -------
             Operating income                      $11,067      $ 5,685
                                                   =======      =======
</TABLE>


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<PAGE>   13

KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


         On January 3, 2001, the Partnership, through a wholly-owned subsidiary,
         acquired Shore Terminals LLC ("Shore") for $107 million in cash and
         1,975,090 Partnership units. Financing for the cash portion of the
         purchase price was supplied under a new $275 million unsecured
         revolving credit agreement with a bank. See "Liquidity and Capital
         Resources". Shore owns seven terminals, located in four states, with a
         total tankage capacity of 7.8 million barrels. All of the terminals
         handle petroleum products and, with the exception of one, have deep
         water access.

         Terminaling revenues increased by $10.5 million for the three month
         period ended March 31, 2001, compared to the same 2000 period, due to
         the Shore acquisition and overall increases in utilization at existing
         locations, the result of relatively favorable market conditions.
         Average annual tankage utilized for the three months ended March 31,
         2001 increased to 30.0 million barrels from 21.0 million barrels for
         the comparable prior year period. Approximately 85% of the increase in
         both revenues and average annual tankage utilized was attributable to
         Shore. For the three months ended March 31, 2001, average annualized
         revenues per barrel of tankage utilized increased to $4.25 per barrel,
         compared to $4.09 per barrel for the same prior year period, the result
         of favorable market conditions, when compared to the first quarter of
         2000.

         For the three month period ended March 31, 2001, operating costs
         increased by $3.4 million when compared to the same 2000 period,
         primarily the result of the Shore acquisition. General and
         administrative costs for the three months ended March 31, 2001 remained
         flat when compared to the first quarter of 2000.

         Total tankage capacity (38.3 million barrels at March 31, 2001) has
         been, and is expected to remain, adequate to meet existing customer
         storage requirements. Customers consider factors such as location,
         access to cost effective transportation and quality of service, in
         addition to pricing, when selecting terminal storage.


         INTEREST EXPENSE

         For the three months ended March 31, 2001, interest expense increased
         by $1.7 million, compared to the three months ended March 31, 2000, due
         to increases in debt resulting from the Shore acquisition.


         LIQUIDITY AND CAPITAL RESOURCES

         During the first quarter of 2001, the Partnership's working capital
         requirements for operations, capital expenditures and cash
         distributions were funded through the use of internally generated
         funds.


                                       11
<PAGE>   14

KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


         Cash provided by operations was $27.5 million and $18.1 million for the
         periods ended March 31, 2001 and 2000, respectively. Capital
         expenditures (excluding acquisitions) were $3.0 million and $2.3
         million for the three month period ended March 31, 2001 and 2000,
         respectively. The Partnership anticipates that routine maintenance
         capital expenditures will total approximately $12 million to $15
         million (excluding acquisitions) for the year ending December 31, 2001.

         In December of 2000, the Partnership entered into a credit agreement
         with a group of banks that provides for a $275 million unsecured
         revolving credit facility through December 2003. The credit facility
         bears interest at variable rates and has a variable commitment fee on
         the unutilized amounts. The credit facility contains operational and
         financial covenants, including limitations on investments, sales of
         assets and transactions with affiliates. Absent an event of default,
         the covenants do not restrict distributions to unitholders. At March
         31, 2001 $257.5 million was drawn on the facility at an interest rate
         of 6.04%, which is due in December of 2003.

         In August of 2000, a wholly-owned subsidiary of the Partnership filed a
         shelf registration statement on Form S-3 for the issuance of up to $500
         million of public debt securities. In March of 2001, this subsidiary
         entered into two contracts for the purpose of locking in interest rates
         on $100 million of the anticipated ten-year public debt offerings. In
         May of 2001, the Partnership announced that, due to increases in
         ten-year Treasury rates, coupled with the declines in floating interest
         rates, it has elected to defer issuance of the public debt securities.
         For the three months ended March 31, 2001, an unrealized gain of $0.6
         million and an asset of the same amount, based on the fair value of the
         instruments at March 31, 2001, was recorded on these contracts. On May
         22, 2001, the contracts were settled resulting in an aggregate gain of
         $3.8 million.

         The $128 million of first mortgage notes outstanding at December 31,
         2000 which were due in varying amounts from 2001 to 2016, were repaid
         in full in January of 2001 with the proceeds from the $275 million
         revolving credit facility. Under the provisions of the mortgage notes,
         the Partnership incurred a $6.5 million prepayment penalty, before
         minority interest and income taxes, which has been recognized as an
         extraordinary expense in the first quarter of 2001.

         The Partnership makes distributions of 100% of its Available Cash to
         unitholders and the general partner. Available Cash consists generally
         of all the cash receipts less all cash disbursements and reserves.
         Distributions of $0.70 per unit were declared to all unitholders in the
         first quarter of 2001 and $2.80 per unit was declared in the calendar
         year 2000.

         The Partnership expects to fund future cash distributions and
         maintenance capital expenditures with cash and cash flows from
         operating activities. Expansionary capital expenditures are expected to
         be funded through additional Partnership borrowings and/or future
         public unit offerings.


                                       12
<PAGE>   15

KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


         Additional information relative to sources and uses of cash is
         presented in the financial statements included in this report.

         ALLOCATION OF NET INCOME AND EARNINGS

         Net income or loss is allocated between limited partner interests and
         the general partner pro rata based on the aggregate amount of cash
         distributions declared (including general partner incentive
         distributions). Beginning in 1997, distributions by the Partnership of
         Available Cash reached the Second Target Distribution, as defined in
         the Partnership Agreement, which entitled the general partner to
         receive certain incentive distributions at different levels of cash
         distributions. Earnings per unit shown on the consolidated statements
         of income are calculated by dividing the limited partners' interest in
         net income by the weighted average number of units outstanding. If the
         allocation of income had been made as if all income had been
         distributed in cash, earnings per unit would have been $0.40 and $0.52
         for the three months ended March 31, 2001 and 2000, respectively.


                                       13
<PAGE>   16



KANEB PIPE LINE PARTNERS, L.P. AND SUBSIDIARIES

--------------------------------------------------------------------------------


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         In March of 2001, a wholly-owned subsidiary of the Partnership entered
into two contracts for the purpose of locking in interest rates on $100 million
of the anticipated ten-year public debt offerings. As the interest rate locks
were not designated as hedging instruments pursuant to the requirements of SFAS
No. 133, increases or decreases in the fair value of the contracts are included
as a component of interest and other income, net. For the three months ended
March 31, 2001, an unrealized gain of $0.6 million and an asset of the same
amount, based on the fair value of the instruments at March 31, 2001, was
recorded on these contracts. On May 22, 2001, the contracts were settled
resulting in an aggregate gain of $3.8 million.


                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.
                  None.

         (b)      Reports on Form 8-K

                  Current Report on Form 8-K regarding the Acquisition of Shore
                  Terminals LLC, located in California, Washington, Oregon and
                  Nevada, filed January 18, 2001.

                  Current Report on Form 8-K/A updating the Acquisition of Shore
                  Terminals LLC, located in California, Washington, Oregon and
                  Nevada, filed March 19, 2001.

                                    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.

                                          KANEB PIPE LINE PARTNERS, L.P.
                                          (Registrant)
                                          By KANEB PIPE LINE COMPANY
                                            -----------------------------------
                                          (Managing General Partner)


Date:     May 24, 2001                    /s/ JIMMY L. HARRISON
                                          -------------------------------------
                                          Jimmy L. Harrison
                                          Executive Vice President


                                       14