<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1996 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 1-9356
BUCKEYE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 23-2432497
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3900 Hamilton Boulevard
Allentown, PA 18103
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 610-770-4000
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x
No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 17, 1996
Limited Partnership Units 12,047,230 Units
<PAGE>
BUCKEYE PARTNERS, L.P.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 1
for the three months ended March 31,
1996 and 1995
Consolidated Balance Sheets 2
March 31, 1996 and December 31, 1995
Consolidated Statements of Cash Flows 3
for the three months ended March 31,
1996 and 1995
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis 7-8
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE>
Part I - Financial Information
Item 1. Consolidated Financial Statements
Buckeye Partners, L.P.
Consolidated Statements of Income
(In thousands, except per Unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenue $46,269 $44,234
Costs and expenses
Operating expenses 22,854 21,954
Depreciation and amortization 2,857 2,832
General and administrative expenses 3,228 2,604
Total costs and expenses 28,939 27,390
Operating income 17,330 16,844
Other income (expenses)
Interest income 275 211
Interest and debt expense (5,492) (5,443)
Minority interests and other (455) (207)
Total other income (expenses) (5,672) (5,439)
Net income $11,658 $11,405
Net income allocated to General Partner $ 117 $ 114
Net income allocated to Limited Partners $11,541 $11,291
Net income allocated to General and Limited
Partners per Partnership Unit $ 0.96 $ 0.94
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 16,291 $ 16,213
Temporary investments - 895
Trade receivables 15,040 16,295
Inventories 1,596 1,561
Prepaid and other current assets 8,294 7,272
Total current assets 41,221 42,236
Property, plant and equipment, net 508,029 509,944
Other non-current assets 465 466
Total assets $549,715 $552,646
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt $ 2,975 $ -
Accounts payable 745 2,406
Accrued and other current liabilities 18,634 23,016
Total current liabilities 22,354 25,422
Long-term debt 211,025 214,000
Minority interests 2,810 2,781
Other non-current liabilities 48,242 48,258
Commitments and contingent liabilities - -
Total liabilities 284,431 290,461
Partners' capital
General Partner 2,653 2,622
Limited Partners 262,631 259,563
Total partners' capital 265,284 262,185
Total liabilities and partners'
capital $549,715 $552,646
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,658 $ 11,405
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation and amortization 2,857 2,832
Minority interests 124 117
Distributions to minority interests (95) (83)
Changes in assets and liabilities:
Temporary investments 895 400
Trade receivables 1,255 3,491
Inventories (35) (90)
Prepaid and other current assets (1,022) 204
Accounts payable (1,661) (1,127)
Accrued and other current liabilities (4,382) (1,076)
Other non-current assets 1 (106)
Other non-current liabilities (16) 90
Total adjustments (2,079) 4,652
Net cash provided by operating activities 9,579 16,057
Cash flows from investing activities:
Capital expenditures (935) (4,827)
Expenditures for disposal of property,
plant and equipment, net (7) (36)
Net cash used in investing activities (942) (4,863)
Cash flows from financing activities:
Capital contribution 6 1
Proceeds from exercise of unit options 560 158
Distributions to Unitholders (9,125) (8,496)
Net cash used in financing activities (8,559) (8,337)
Net increase in cash and cash equivalents 78 2,857
Cash and cash equivalents at beginning of period 16,213 6,071
Cash and cash equivalents at end of period $ 16,291 $ 8,928
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 5,539 $ 5,548
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BUCKEYE PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying financial statements of
Buckeye Partners, L.P. (the "Partnership"), which are unaudited except for
the Balance Sheet as of December 31, 1995, which is derived from audited
financial statements, include all adjustments necessary to present fairly
the Partnership's financial position as of March 31, 1996 and the results
of operations and cash flows for the three month periods ended March 31,
1996 and 1995.
Effective January 1, 1996, the Partnership has adopted Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation," which requires expanded disclosures of stock-based
compensation arrangements with employees. SFAS 123 encourages, but does
not require, compensation cost to be measured based on the fair value of
the equity instrument awarded. The Partnership, however, has elected to
continue to recognize compensation cost based on the intrinsic value of the
equity instrument awarded as promulgated in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." The
Partnership will disclose the required pro-forma effect on net income and
earnings per unit in the 1996 annual financial statements.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the financial statements do not include all of the information
and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1995.
2. CONTINGENCIES
The Partnership and its subsidiaries (the "Operating Partnerships"), in the
ordinary course of business, are involved in various claims and legal
proceedings, some of which are covered in whole or in part by insurance.
Buckeye Management Company (the "General Partner") is unable to predict the
timing or outcome of these claims and proceedings. Although it is possible
that one or more of these claims or proceedings, if adversely determined,
could, depending on the relative amounts involved, have a material effect
on the Partnership's results of operations for a future period, the General
Partner does not believe that their outcome will have a material effect on
the Partnership's consolidated financial condition.
Environmental
Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a potentially responsible party ("PRP") under federal laws or
a respondent under state laws relating to the generation, disposal, or
release of hazardous substances into the environment. These proceedings
generally relate to potential liability for clean-up costs. The total
potential remediation costs relating to these clean-up sites cannot be
reasonably estimated. With respect to each site, however, the Operating
Partnership involved is one of several or as many as several hundred PRPs
that would share in the total costs of clean-up under the principle of
joint and several liability. The General Partner believes that the
generation, handling and disposal of hazardous substances by the Operating
Partnerships and their predecessors have been in material compliance with
applicable environmental and regulatory requirements. Additional claims
for the cost of cleaning up releases of hazardous substances and for damage
to the environment resulting from the activities of the Operating
Partnerships or their predecessors may be asserted in the future under
various federal and state laws. Although the Partnership has made a
provision for certain legal expenses relating to these matters, the General
Partner is unable to determine the timing or outcome of any pending
proceedings or of any future claims and proceedings.
Guaranteed Investment Contract
The Buckeye Pipe Line Company Retirement and Savings Plan (the "Plan") held
a guaranteed investment contract ("GIC") issued by Executive Life Insurance
Company ("Executive Life"), which entered conservatorship proceedings in
the state of California in April 1991. The GIC was purchased in July 1989,
with an initial principal investment of $7.4 million earning interest at an
effective rate per annum of 8.98 percent through June 30, 1992. Pursuant
to the Executive Life Plan of Rehabilitation, the Plan has received an
interest only contract from Aurora National Life Assurance Company in
substitution for its Executive Life GIC. The contract provides for semi-
annual interest payments at a rate of 5.61 percent per annum through
September 1998, the maturity date of the contract. In addition, the Plan
is to receive certain additional cash payments through the maturity date of
the contract pursuant to the Plan of Rehabilitation. The timing and amount
of these additional cash payments cannot be estimated accurately at this
time. In May 1991, the General Partner, in order to safeguard the basic
retirement and savings benefits of its employees, announced its intention
to enter an arrangement with the Plan that would guarantee that the Plan
would receive at least its initial principal investment of $7.4 million
plus interest at an effective rate per annum of 5 percent from July 1,
1989. The General Partner's present intention is to effectuate its
commitment no later than September 1998. The costs and expenses of the
General Partner's employee benefit plans are reimbursable by the
Partnership under the applicable limited partnership and management
agreements. The General Partner believes that an adequate provision has
been made for costs which may be incurred by the Partnership in connection
with the guarantee.
3. PARTNERS' CAPITAL
Partners' capital consists of the following:
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
(In thousands)
<S> <C> <C> <C>
Partners' Capital - 1/1/96 $2,622 $259,563 $262,185
Net Income 117 11,541 11,658
Distributions (92) (9,033) (9,125)
Exercise of unit options and
capital contributions 6 560 566
Partners' Capital - 3/31/96 $2,653 $262,631 $265,284
</TABLE>
Earnings per unit is calculated on the basis of the weighted average number
of units outstanding. The potential dilution represented by units issuable
from the exercise of outstanding unit options is less than three percent
and is therefore not reflected in the earnings per unit presentation. The
weighted average number of units outstanding used to calculate earnings per
unit was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Units outstanding from
beginning of period 12,151,242 12,137,434
Weighted average number
of units issued upon
exercise of unit options 8,803 1,688
Weighted average number
of units outstanding 12,160,045 12,139,122
</TABLE>
4. CASH DISTRIBUTIONS
The Partnership will generally make quarterly cash distributions of
substantially all of its available cash, generally defined as consolidated
cash receipts less consolidated cash expenditures and such retentions for
working capital, anticipated cash expenditures and contingencies as the
General Partner deems appropriate or as are required by the terms of the
Mortgage Note Indenture.
The Partnership has declared a cash distribution of $0.75 per unit payable
on May 31, 1996 to unitholders of record on May 6, 1996. The total
distribution will amount to approximately $9,127,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Amounts in the following discussion and analysis of financial condition and
results of operations relate to continuing operations unless otherwise
indicated.
RESULTS OF OPERATIONS
First Quarter
Revenue for the first quarter 1996 was $46.3 million or 4.8 percent greater
than revenue of $44.2 million for the first quarter 1995. Volume for the
first quarter 1996 was 1,007,400 barrels per day, 2,200 barrels per day or
0.2 percent less than volume of 1,009,600 barrels per day for the first
quarter 1995. The effect of tariff increases instituted in May and June of
1995, along with increases in longer haul movements at higher tariff rates,
more than offset the slight decline in volumes transported. Distillate
volumes increased by 4.7 percent over 1995 levels primarily as the result
of colder weather in the Northeast. Temperatures averaged 12.1 percent
colder during the first quarter of 1996 than temperatures experienced
during the first quarter of 1995. Gasoline and turbine fuel volumes were
both 1.9 percent lower during the first quarter of 1996 than the first
quarter of 1995. Severe winter storms, particularly in the Northeast,
curtailed both air and ground traffic during January and February. In
addition, refined petroleum product inventories were reduced during the
first quarter of 1996 resulting in less physical deliveries than might
otherwise have occurred.
Costs and expenses for the first quarter of 1996 were $28.9 million or 5.5
percent greater than costs and expenses of $27.4 million for the first
quarter of 1995. Expense increases over last year occurred in payroll
overheads, casualty losses, outside services and rentals. Offsetting these
increases, to some extent, were declines in supplies, operating power and
travel expenses.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $5.7 million for the first quarter of 1996
and a net expense of $5.4 million for the first quarter of 1995. The
majority of the expense is related to interest on long-term debt, of which
the principal outstanding was equal during the two periods.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at March 31, 1996 is highlighted in
the following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of
3/31/96 12/31/95
<S> <C> <C>
Current ratio 1.8 to 1 1.7 to 1
Ratio of cash and cash equivalents,
temporary investments and trade
receivables to current liabilities 1.4 to 1 1.3 to 1
Working capital (in thousands) $18,867 $16,814
Ratio of total debt to total capital .44 to 1 .45 to 1
Book value (per Unit) $21.80 $21.58
</TABLE>
The Partnership's cash flow from operations is generally sufficient to meet
current working capital requirements. In addition, the Partnership
maintains $26.0 million in short-term credit facilities under which there
are no current outstanding borrowings.
Cash Provided by Operations
For the three months ended March 31, 1996, cash provided by operations of
$9.6 million was derived principally from net income before depreciation of
$14.5 million, offset by a $4.9 million use of cash in operating working
capital changes.
For the three months ended March 31, 1995, cash provided by operations of
$16.1 million was derived principally from net income before depreciation
of $14.2 million and a $1.9 million source of cash primarily from operating
working capital changes.
Debt Obligation and Credit Facilities
At March 31, 1996, the Partnership had $211.0 million in outstanding long-
term debt and $3.0 million in current debt representing the First Mortgage
Notes of Buckeye. The First Mortgage Notes are collateralized by
substantially all of Buckeye's property, plant and equipment.
The indenture, as amended and pursuant to which the First Mortgage Notes
were issued, permits Buckeye, under certain circumstances, to issue
additional First Mortgage Notes provided that the aggregate principal
amount of First Mortgage Notes outstanding after such issuance does not
exceed $275 million.
The Partnership maintains a $15 million unsecured revolving credit facility
with a commercial bank. This facility, which has options to extend
borrowings through September 1999, is available to the Partnership for
general purposes, including capital expenditures and working capital. In
addition, Buckeye has a $10 million short-term line of credit secured by
accounts receivable. Laurel Pipe Line Company, L.P. has an unsecured $1
million line of credit. At March 31, 1996, there were no outstanding
borrowings under these facilities.
At March 31, 1996, the ratio of total debt to total capital was 44 percent.
For purposes of the calculation of this ratio, total capital consists of
current and long-term debt, minority interests in subsidiaries and
partners' capital.
Capital Expenditures
At March 31, 1996, approximately 92 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the three months ended March 31, 1996 totaled
$0.9 million compared to $4.8 million during the three months ended March
31, 1995. During both periods, capital expenditures were paid from
internally generated funds.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
For information concerning the Partnership's legal proceedings, see Item 3
of the Partnership's Form 10-K for the fiscal year ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Computation of Earnings Per Unit
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31,
1996.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BUCKEYE PARTNERS, L.P.
(Registrant)
By: Buckeye Management Company,
as General Partner
Dated: April 23, 1996 By: /s/ E. R. Varalli
E. R. Varalli
Executive Vice President,
Chief Financial Officer and
Treasurer
(Principal Accounting and
Financial Officer)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Page
<S> <C> <C>
11 Computation of Earnings Per Unit
</TABLE>
<PAGE>
EXHIBIT (11)
BUCKEYE PARTNERS, L.P.
COMPUTATION OF EARNINGS PER UNIT
(In thousands, except for Units and per Unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
1996 1995
<S> <C> <C>
Net income $ 11,658 $ 11,405
Primary earnings per Unit
Net Income $ 0.96 $ 0.94
Fully-diluted earnings per Unit
Net income $ 0.96 $ 0.94
Weighted average number of Units
outstanding:
Units outstanding at March 31 12,160,045 12,139,122
Exercise of Options reduced by the
number of Units purchased with
proceeds (Primary) 21,729 17,240
Total Units outstanding - Primary 12,181,774 12,156,362
Units outstanding at March 31 12,160,045 12,139,122
Exercise of Options reduced by the
number of Units purchased with
proceeds (Fully-diluted) 23,510 17,763
Total Units outstanding -
Fully-diluted 12,183,555 12,156,885
</TABLE>
Although not required to be presented in the income statement under
provisions of APB Opinion No. 15, this calculation is submitted in
accordance with Regulation S-K item 601(b)(11).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 16,291
<SECURITIES> 0
<RECEIVABLES> 15,040
<ALLOWANCES> 0
<INVENTORY> 1,596
<CURRENT-ASSETS> 41,221
<PP&E> 559,214
<DEPRECIATION> 51,185
<TOTAL-ASSETS> 549,715
<CURRENT-LIABILITIES> 22,354
<BONDS> 211,025
0
0
<COMMON> 0
<OTHER-SE> 265,284
<TOTAL-LIABILITY-AND-EQUITY> 549,715
<SALES> 0
<TOTAL-REVENUES> 46,269
<CGS> 0
<TOTAL-COSTS> 28,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,492
<INCOME-PRETAX> 11,658
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,658
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,658
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.96
</TABLE>
