<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 June 30, 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 July 12, 1996
Limited Partnership Units 12,054,480 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 and six months
ended June 30, 1996 and 1995
Consolidated Balance Sheets 2
June 30, 1996 and December 31, 1995
Consolidated Statements of Cash Flows 3
for the six months ended June 30, 1996
and 1995
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis 7-9
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
</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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
$44,633 $46,011 Revenue $ 90,902 $ 90,245
Costs and expenses
25,435 22,700 Operating expenses 48,289 44,654
2,838 2,824 Depreciation and amortization 5,695 5,656
3,381 2,600 General and administrative expenses 6,609 5,204
31,654 28,124 Total costs and expenses 60,593 55,514
12,979 17,887 Operating income 30,309 34,731
Other income (expenses)
413 267 Interest income 688 478
(5,463) (5,397) Interest and debt expense (10,955) (10,840)
2,330 (222) Minority interests and other 1,875 (429)
(2,720) (5,352) Total other income (expenses) (8,392) (10,791)
$10,259 $12,535 Net income $ 21,917 $ 23,940
Net income allocated to General
$ 102 $ 125 Partner $ 219 $ 239
Net income allocated to Limited
$10,157 $12,410 Partners $ 21,698 $ 23,701
$ 0.84 $ 1.03 Net income per unit $ 1.80 $ 1.97
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 17,678 $ 16,213
Temporary investments 5,795 895
Trade receivables 15,370 16,295
Inventories 1,657 1,561
Prepaid and other current assets 7,780 7,272
Total current assets 48,280 42,236
Property, plant and equipment, net 508,097 509,944
Other non-current assets 465 466
Total assets $556,842 $552,646
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt $ 5,950 $ -
Accounts payable 2,354 2,406
Accrued and other current liabilities 22,696 23,016
Total current liabilities 31,000 25,422
Long-term debt 208,050 214,000
Minority interests 2,815 2,781
Other non-current liabilities 48,357 48,258
Commitments and contingent liabilities - -
Total liabilities 290,222 290,461
Partners' capital
General Partner 2,666 2,622
Limited Partners 263,954 259,563
Total partners' capital 266,620 262,185
Total liabilities and partners'
capital $556,842 $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>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 21,917 $ 23,940
Adjustments to reconcile income to net cash
provided by operating activities:
Gain on sale of land (2,871) -
Depreciation and amortization 5,695 5,656
Minority interests 225 248
Distributions to minority interests (191) (170)
Changes in assets and liabilities:
Temporary investments (4,900) 806
Trade receivables 925 2,986
Inventories (96) (83)
Prepaid and other current assets (508) 243
Accounts payable (52) 915
Accrued and other current liabilities (320) 419
Other non-current assets 1 (106)
Other non-current liabilities 99 (1)
Total adjustments (1,993) 10,913
Net cash provided by operating activities 19,924 34,853
Cash flows from investing activities:
Capital expenditures (4,397) (8,695)
Proceeds from sale of land 3,444 -
Expenditures for disposal of property,
plant and equipment, net (24) (44)
Net cash used in investing activities (977) (8,739)
Cash flows from financing activities:
Capital contribution 8 3
Proceeds from exercise of unit options 768 272
Distributions to Unitholders (18,258) (16,999)
Net cash used in financing activities (17,482) (16,724)
Net increase in cash and cash equivalents 1,465 9,390
Cash and cash equivalents at beginning of period 16,213 6,071
Cash and cash equivalents at end of period $ 17,678 $ 15,461
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 11,179 $ 11,016
</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 consolidated 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 June
30, 1996 and the results of operations for the three month and six month
periods ended June 30, 1996 and 1995, and cash flows for the six month
periods ended June 30, 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 these 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 219 21,698 21,917
Distributions (183) (18,075) (18,258)
Exercise of unit options and
capital contributions 8 768 776
Partners' Capital - 6/30/96 $2,666 $263,954 $266,620
</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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Units outstanding from
beginning of period 12,168,919 12,143,191 12,151,242 12,137,434
Weighted average number
of units issued upon
exercise of unit options 4,749 2,961 15,565 5,203
Weighted average number
of units outstanding 12,173,668 12,146,152 12,166,807 12,142,637
</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 $.75 per unit payable
on August 30, 1996 to unitholders of record on August 6, 1996. The total
distribution will amount to approximately $9,132,000.
5. RESTRUCTURING
In order to reduce future payroll and benefit costs, the General Partner
offered a voluntary early retirement program to certain salaried employees
of Buckeye Pipe Line Company (the "Manager") who were at least 55 years old
with a minimum of 15 years of service. A total of 23 employees accepted
the early retirement offer. The General Partner also terminated
involuntarily seven other employees under the terms of its existing
severance policy. Total costs of $2.5 million, related to the
restructuring, were charged to operating costs and expenses during the
second quarter of the year.
<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
Second Quarter
Revenue for the second quarter 1996 was $44.6 million or 3.0 percent less
than revenue of $46.0 million for the second quarter 1995. Volume for the
second quarter 1996 was 982,900 barrels per day, 12,000 barrels per day or
1.2 percent less than volume of 994,900 barrels per day for the second
quarter 1995. During the second quarter, gasoline and distillate volumes
fell below the second quarter of last year, while turbine fuel volumes rose
slightly. Declines in gasoline and distillate deliveries generally reflect
a reduction in inventories held by marketers in response to a significant
increase in product prices early in the period. Gasoline volumes declined
2.0 percent from 1995 levels, while distillate volumes declined 3.5 percent
from second quarter 1995 levels. Turbine fuel volumes increased by 0.3
percent over second quarter 1995 levels. The majority of the volume
increase occurred at JFK and Newark airports.
Costs and expenses for the second quarter 1996 were $31.7 million or 12.8
percent greater than costs and expenses of $28.1 million for the second
quarter 1995. In order to reduce future payroll and benefit costs, the
General Partner offered a voluntary early retirement program to certain
salaried employees of the Manager. A total of 23 employees accepted the
early retirement offer. The General Partner also terminated involuntarily
seven other employees. Total costs associated with the restructuring
amounted to $2.5 million. Future savings in payroll and benefit expense
resulting from the restructuring are estimated to exceed $3.2 million per
year. Other expense increases over second quarter 1995 resulted from
additional use of outside services and additional costs of payroll
overheads. Offsetting these increases to some extent were decreases in
power costs and supplies expense.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $2.7 million for the second quarter 1996 as
compared to a net expense of $5.4 million for the second quarter 1995.
During the quarter, the Partnership sold three parcels of land for a net
gain of $2.9 million. Proceeds from the land sales amounted to $3.4
million. The land sold was not used in the direct operation of the
pipeline system. Interest expense of $5.5 million for the second quarter
1996 was comparable to the second quarter 1995 interest expense of $5.4
million.
First Six Months
Revenue for the first six months of 1996 was $90.9 million or 0.8 percent
greater than revenue of $90.2 million for the first six months of 1995.
Volume for the first six months of 1996 was 995,100 barrels per day, 7,100
barrels per day or 0.7 percent less than volume of 1,002,200 barrels per
day for the first six months of 1995. The effect of tariff increases in
May and June of 1995 more than offset the slight volume decline. During
the first six months, gasoline and turbine fuel volumes fell below the
first six months of last year, while distillate volumes increased.
Gasoline volumes declined 1.9 percent from 1995 levels. This decline in
gasoline deliveries reflects a reduction in inventories held by marketers
in response to a significant increase in product prices early in the second
quarter. Also, severe winter storms, particularly in the Northeast,
curtailed both air and ground traffic during January and February. Turbine
fuel volumes were down by 0.8 percent from last year as volumes lost
because of the severe winter weather were not completely offset by second
quarter gains. Distillate volumes rose by 1.2 percent from 1996 levels.
While severe winter weather negatively impacted gasoline and turbine fuel
volumes, it had a favorable impact on distillate volumes on a year-to-date
basis.
Costs and expenses for the first six months of 1996 were $60.6 million as
compared to $55.5 million for the first six months of 1995. As discussed
above in Results of Operations-Second Quarter, the Partnership recorded a
one-time $2.5 million restructuring charge. Also, the additional use of
outside services and increases in payroll overhead and casualty loss
expense contributed to expense increases over 1995 levels. Offsetting
these increases to some extent were decreases in power costs and supplies
expense during the first six months of 1996 as compared to the first six
months of 1995.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $8.4 million for the first six months of
1996 as compared to a net expense of $10.8 million for the first six months
of 1995. The majority of this favorable variance is related to the $2.9
million gain recognized on the sale of land during the second quarter.
Interest expense of $11.0 million for the first six months of 1996 was
slightly greater than interest expense of $10.8 million for the first six
months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at June 30, 1996 is highlighted in
the following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of
6/30/96 12/31/95
<S> <C> <C>
Current ratio 1.6 to 1 1.7 to 1
Ratio of cash and cash equivalents,
temporary investments and trade
receivables to current liabilities 1.3 to 1 1.3 to 1
Working capital (in thousands) $17,280 $16,814
Ratio of total debt to total capital .44 to 1 .45 to 1
Book value (per Unit) $21.90 $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 six months ended June 30, 1996, cash provided by operations of
$19.9 million was derived principally from net income before depreciation
of $27.6 million offset by a $4.9 million use of cash for operating working
capital purposes. Cash was used primarily for increases in temporary
investments and prepaid and other current assets and reductions in accrued
and other current liabilities. Decreases in accounts receivable provided a
source of cash. A $2.9 million gain on sale of land was deducted from net
income before arriving at cash provided by operating activities. Remaining
cash sources of $0.1 million were related to an increase in non-current
liabilities.
For the six months ended June 30, 1995, cash provided by operations of
$34.9 million was derived principally from net income before depreciation
of $29.6 million and operating working capital decreases of $5.4 million.
Changes in operating working capital were primarily due to a decrease in
temporary investments and trade receivables and an increase in accounts
payable. Remaining net cash uses, which amounted to $0.1 million, were
related to an increase in non-current assets.
Debt Obligation and Credit Facilities
At June 30, 1996, the Partnership had $208.0 million in outstanding long-
term debt and $6.0 million in current debt representing the First Mortgage
Notes of Buckeye Pipe Line Company, L.P. ("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 June 30, 1996, there were no outstanding
borrowings under these facilities.
At June 30, 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 June 30, 1996, approximately 91 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the six months ended June 30, 1996 totaled $4.4
million compared to $8.7 million during the six months ended June 30, 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 June 30,
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: July 16, 1996 By: /s/ Steven C. Ramsey
Steven C. Ramsey
Senior Vice President, Finance
and Chief Financial Officer
(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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $ 10,259 $ 12,535 $ 21,917 $ 23,940
Primary earnings per Unit
Net income $ 0.84 $ 1.03 $ 1.80 $ 1.97
Fully-diluted earnings
per Unit
Net income $ 0.84 $ 1.03 $ 1.80 $ 1.97
Weighted average number of
Units outstanding:
Units outstanding at
June 30 12,173,668 12,146,152 12,166,807 12,142,637
Exercise of Options reduced
by the number of Units
purchased with proceeds
(Primary) 17,723 15,982 19,743 16,610
Total Units outstanding -
Primary 12,191,391 12,162,134 12,186,550 12,159,247
Units outstanding at
June 30 12,173,668 12,146,152 12,166,807 12,142,637
Exercise of Options reduced
by the number of Units
purchased with proceeds
(Fully-diluted) 17,744 15,990 20,656 17,632
Total Units outstanding -
Fully-diluted 12,191,412 12,162,142 12,187,463 12,160,269
</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
Regulations S-K item 601(b)(11).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,678
<SECURITIES> 5,795
<RECEIVABLES> 15,370
<ALLOWANCES> 0
<INVENTORY> 1,657
<CURRENT-ASSETS> 48,280
<PP&E> 557,935
<DEPRECIATION> 49,838
<TOTAL-ASSETS> 556,842
<CURRENT-LIABILITIES> 31,000
<BONDS> 208,050
0
0
<COMMON> 0
<OTHER-SE> 266,620
<TOTAL-LIABILITY-AND-EQUITY> 556,842
<SALES> 0
<TOTAL-REVENUES> 90,902
<CGS> 0
<TOTAL-COSTS> 60,593
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,955
<INCOME-PRETAX> 21,917
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,917
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,917
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.80
</TABLE>
