<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, 1997 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.)
Five Radnor Corporate Center, Suite 500
100 Matsonford Road
Radnor, PA 19087
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 610-254-4600
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 15, 1997
Limited Partnership Units 12,073,730 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, 1997 and 1996
Consolidated Balance Sheets 2
June 30, 1997 and December 31, 1996
Consolidated Statements of Cash Flows 3
for the six months ended June 30, 1997
and 1996
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis 7-10
of Financial Condition and Results
of Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
</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,
- ------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
$46,398 $44,633 Revenue $90,213 $90,902
- ------- ------- ------- -------
Costs and expenses
23,168 25,435 Operating expenses 44,053 48,289
2,842 2,838 Depreciation and amortization 5,693 5,695
3,742 3,381 General and administrative expenses 6,977 6,609
- ------- ------- ------- -------
29,752 31,654 Total costs and expenses 56,723 60,593
- ------- ------- ------- -------
16,646 12,979 Operating income 33,490 30,309
Other income (expenses)
528 413 Interest income 1,077 688
(5,343) (5,463) Interest and debt expense (10,758) (10,955)
(450) 2,330 Minority interests and other (902) 1,875
- ------- ------- ------- -------
(5,265) (2,720) Total other income (expenses) (10,583) (8,392)
- ------- ------- ------- -------
$11,381 $10,259 Net income $22,907 $21,917
======= ======= ======= =======
Net income allocated to General
$ 114 $ 102 Partner $ 229 $ 219
Net income allocated to Limited
$11,267 $10,157 Partners $22,678 $21,698
$ 0.93 $ 0.84 Net income per unit $ 1.88 $ 1.80
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 18,216 $ 17,416
Temporary investments 12,845 14,528
Trade receivables 10,281 12,536
Inventories 1,758 1,732
Prepaid and other current assets 6,411 7,715
-------- --------
Total current assets 49,511 53,927
Property, plant and equipment, net 514,318 511,646
Other non-current assets 2,104 2,264
-------- --------
Total assets $565,933 $567,837
======== ========
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt $ 14,400 $ 11,900
Accounts payable 745 4,279
Accrued and other current liabilities 26,959 24,088
-------- --------
Total current liabilities 42,104 40,267
Long-term debt 193,650 202,100
Minority interests 2,961 2,913
Other non-current liabilities 46,273 46,578
Commitments and contingent liabilities - -
-------- --------
Total liabilities 284,988 291,858
-------- --------
Partners' capital
General Partner 2,809 2,760
Limited Partners 278,136 273,219
-------- --------
Total partners' capital 280,945 275,979
-------- --------
Total liabilities and partners' capital $565,933 $567,837
======== ========
</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,
---------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $22,907 $21,917
------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of land - (2,871)
Depreciation and amortization 5,693 5,695
Minority interests 239 225
Distributions to minority interests (191) (191)
Changes in assets and liabilities:
Temporary investments 1,683 (4,900)
Trade receivables 2,255 925
Inventories (26) (96)
Prepaid and other current assets 1,304 (508)
Accounts payable (3,534) (52)
Accrued and other current liabilities 2,871 (320)
Other non-current assets 160 1
Other non-current liabilities (305) 99
Total adjustments 10,149 (1,993)
------- -------
Net cash provided by operating activities 33,056 19,924
------- -------
Cash flows from investing activities:
Capital expenditures (8,240) (4,397)
Proceeds from sale of land - 3,444
Expenditures for disposal of property,
plant and equipment, net (125) (24)
------- -------
Net cash used in investing activities (8,365) (977)
------- -------
Cash flows from financing activities:
Capital contribution 3 8
Proceeds from exercise of unit options 341 768
Payment of long-term debt (5,950) -
Distributions to Unitholders (18,285) (18,258)
------- -------
Net cash used in financing activities (23,891) (17,482)
------- -------
Net increase in cash and cash equivalents 800 1,465
Cash and cash equivalents at beginning of period 17,416 16,213
------- -------
Cash and cash equivalents at end of period $18,216 $17,678
======= =======
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 10,899 $ 11,179
</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 that
the Balance Sheet as of December 31, 1996 is derived from audited financial
statements, include all adjustments necessary to present fairly the
Partnership's financial position as of June 30, 1997 and the results of
operations for the three month and six month periods ended June 30, 1997 and
1996, and cash flows for the six month periods ended June 30, 1997 and 1996.
The Partnership adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," on January 1, 1997 with no impact on the
Partnership's operating results or financial condition. Statement No. 125
provides consistent standards for determining if transfers of financial
assets are sales or secured borrowings and revises the accounting rules for
liabilities extinguished by an in-substance defeasance.
On January 1, 1997, the Partnership adopted the American Institute of
Certified Public Accountants Statement of Position 96-1, "Environmental
Remediation Liabilities," which clarifies the accounting for environmental
remediation liabilities. The adoption had no significant impact on the
Partnership's operating results or financial condition.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This new
standard requires dual presentation of basic and diluted earnings per share
(EPS) on the face of the statement of earnings and requires reconciliation of
the numerators and denominators of the basic and diluted EPS calculations.
This statement will be effective for the Partnership's 1997 Annual Report
including interim periods to be presented therein; however, earlier
application is not permitted. The Partnership expects that its current EPS
calculation will be the same as basic EPS and that basic EPS will not be
materially different than diluted EPS.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" that will be effective in 1998. The
Partnership does not anticipate reporting comprehensive income due to
immateriality. The Financial Accounting Standards Board also issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Partnership currently complies with most provisions of this
statement, and any incremental disclosure is not expected to be material.
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, 1996.
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 or results of operations.
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.
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 - 1/1/97 $2,760 $273,219 $275,979
Net Income 229 22,678 22,907
Distributions (183) (18,102) (18,285)
Exercise of unit options and
capital contributions 3 341 344
------ -------- --------
Partners' Capital - 6/30/97 $2,809 $278,136 $280,945
====== ======== ========
</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,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Units outstanding from
beginning of period 12,189,071 12,168,919 12,182,000 12,151,242
Weighted average number
of units issued upon
exercise of unit options 1,742 4,749 6,348 15,565
---------- ---------- ---------- ----------
Weighted average number
of units outstanding 12,190,813 12,173,668 12,188,348 12,166,807
========== ========== ========== ==========
</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.
<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 1997 was $46.4 million or 4.0 percent greater
than revenue of $44.6 million for the second quarter 1996. Volume for the
second quarter 1997 was 1,022,100 barrels per day, 39,200 barrels per day or
4.0 percent greater than volume of 982,900 barrels per day for the second
quarter 1996. Gasoline volumes during the second quarter 1997 were 3.2
percent greater than gasoline volumes during the second quarter 1996. In the
East, strong market growth, particularly in the Harrisburg, Altoona and
Pittsburgh, Pennsylvania markets, offset declines in the upstate New York
area due to shifts to other pipelines and Canadian imports. In the Midwest,
spot shipments related to an extended refinery turnaround added to the volume
increase. Distillate volumes during the second quarter 1997 were 10.2
percent greater than distillate volumes during the second quarter 1996.
Volumes were higher due primarily to shippers taking advantage of attractive
prices and summer fill programs occurring earlier than last year. In
addition, demand increased as the second quarter of 1997 averaged 9 percent
colder than the second quarter of 1996. Turbine fuel volumes also increased
during the quarter and were 3.2 percent greater than 1996 levels. Increased
demand at Newark and Miami airports was the primary cause of this increase.
Tariff increases instituted during the third quarter 1996 contributed
approximately $0.5 million of additional revenue over the second quarter
1996.
Costs and expenses for the second quarter 1997 were $29.8 million or 6.0
percent less than costs and expenses of $31.7 million for the second quarter
1996. The primary cause for the decrease was a reduction in payroll expense
related to an early retirement and staff reduction program implemented in the
second quarter of 1996. In addition, during the second quarter 1996, the
Partnership recorded a one-time restructuring charge of $2.5 million related
to the early retirement and staff reduction program. Offsetting this
favorable variance to some extent were increases in professional fees and
operating rents.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $5.3 million for the second quarter 1997
compared to a net expense of $2.7 million during the second quarter 1996.
During the second quarter 1996, the Partnership recorded a net gain of $2.9
million on the sale of land which did not recur in 1997.
First Six Months
Revenue for the first six months of 1997 was $90.2 million or 0.8 percent
less than revenue of $90.9 million for the first six months of 1996. Volume
for the first six months of 1997 was 1,004,500 barrels per day, 9,400 barrels
per day or 0.9% greater than volume of 995,100 barrels per day for the first
six months of 1996. Gasoline volumes were higher than 1996 levels due to
strong market growth throughout Pennsylvania. An extended refinery
turnaround in the Midwest also added to the favorable variance. However,
longer-haul and higher tariff rate volumes to upstate New York declined due
to volume shifts to other pipelines and Canadian imports. Distillate volumes
were comparable to 1996 levels. During the first quarter 1997 volumes were
weak due to the milder winter than that experienced in 1996. Distillate
volumes recovered during the second quarter 1997 on colder spring
temperatures and early inventory building due to attractive product prices.
Turbine fuel volumes increased on strong demand at Newark and Miami Airports.
Tariff increases instituted during the third quarter 1996 contributed
approximately $1.0 million of additional revenue over the first six months of
1996.
Costs and expenses for the first six months of 1997 were $56.7 million or 6.4
percent less than costs and expenses of $60.6 for the first six months of
1996. Declines in payroll expense resulting from the second quarter 1996
early retirement and staff reduction program were partially offset by
increases in payroll overheads related to the Employee Stock Ownership Plan
(the "ESOP"). In addition, property tax and casualty loss expenses were less
than 1996 while professional fees and operating rents were greater than 1996.
Other income (expenses), which is the net of non-operating income and
expenses, was a net expense of $10.6 million for the first six months of 1997
compared to a net expense of $8.4 million for the first six months of 1996.
A $2.9 million gain recorded on the sale of land in 1996 did not recur in
1997. This variance was partially offset by increased interest income on
higher cash balances.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at June 30, 1997 is highlighted in the
following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of
---------------------
6/30/97 12/31/96
------- --------
<S> <C> <C>
Current ratio 1.2 to 1 1.3 to 1
Ratio of cash and cash equivalents,
temporary investments and trade
receivables to current liabilities 1.0 to 1 1.1 to 1
Working capital (in thousands) $ 7,407 $ 13,660
Ratio of total debt to total capital .42 to 1 .43 to 1
Book value (per Unit) $ 23.04 $ 22.65
</TABLE>
The Partnership's cash flow from operations is generally sufficient to meet
current working capital requirements. In addition, the Partnership maintains
$25.0 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, 1997, cash provided by operations of $33.1
million was derived principally from net income before depreciation of $28.6
million and a $4.6 million source of cash from operating working capital
changes. Cash was derived primarily from reductions in temporary investments
and the collection of trade receivables.
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.
Debt Obligation and Credit Facilities
At June 30, 1997, the Partnership had $193.6 million in outstanding long-term
debt and $14.4 million in current debt representing the First Mortgage Notes
of Buckeye Pipe Line Co., 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. At June 30, 1997, there were no outstanding borrowings
under these facilities.
At June 30, 1997, the ratio of total debt to total capital was 42 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, 1997, approximately 91 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the six months ended June 30, 1997 totaled $8.2
million compared to $4.4 million during the six months ended June 30, 1996.
During both periods, capital expenditures were paid from internally generated
funds.
During the second quarter of 1997, the General partner elected to implement a
five year plan to install automated field equipment at 52 receipt and
delivery locations throughout its systems. Total capital expenditures
related to this automation program are estimated to be $9.4 million over the
five year period and will be included in the Partnership's capital
expenditure plans. The installation of these automated facilities will
result in cost reductions as each facility is completed over the five year
period.
OTHER MATTERS
Accounting Pronouncements
The Partnership adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," on January 1, 1997 with no impact on the
Partnership's operating results or financial condition. Statement No. 125
provides consistent standards for determining if transfers of financial
assets are sales or secured borrowings and revises the accounting rules for
liabilities extinguished by an in-substance defeasance.
On January 1, 1997, the Partnership adopted the American Institute of
Certified Public Accountants Statement of Position 96-1, "Environmental
Remediation Liabilities," which clarifies the accounting for environmental
remediation liabilities. The adoption had no significant impact on the
Partnership's operating results or financial condition.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This new
standard requires dual presentation of basic and diluted earnings per share
(EPS) on the face of the statement of earnings and requires reconciliation of
the numerators and denominators of the basic and diluted EPS calculations.
This statement will be effective for the Partnership's 1997 Annual Report
including interim periods to be presented therein; however, earlier
application is not permitted. The Partnership expects that its current EPS
calculation will be the same as basic EPS and that basic EPS will not be
materially different than diluted EPS.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" that will be effective in 1998. The
Partnership does not anticipate reporting comprehensive income due to
immateriality. The Financial Accounting Standards Board also issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Partnership currently complies with most provisions of this
statement, and any incremental disclosure is not expected to be material.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Shakerdge Litigation Settlement
- -------------------------------
On June 24, 1997, counsel for the parties entered into a stipulation of
settlement in Shakerdge v. Martinelli et al, a putative class action
complaint ("Class Action") that was filed in December 1996 in the Delaware
Court of Chancery against the Partnership, the General Partner, BMC
Acquisition Company, Glenmoor Partners, LLP and the directors of the General
Partner. The complaint alleged that the terms of the General Partner's
proposal to restructure its Employee Stock Ownership Plan (the "ESOP
Restructuring"), as negotiated by management and the special committee of the
General Partner's board of directors (the "Special Committee"), were unfair
and would be dilutive to Unitholders; that the defendants engaged in conduct
constituting self-dealing; and that the defendants breached their fiduciary
and other common law duties to the plaintiff.
The General Partner and the other defendants deny the allegations of the
complaint, but in order to avoid the distraction, burden and expense of
further litigation and to avoid any further delay in providing the
Unitholders with the opportunity to vote on the ESOP Restructuring, and
without any party admitting liability, the parties have agreed to modify the
terms of the ESOP Restructuring in certain respects. The proxy statement for
the special meeting of Unitholders scheduled for August 11, 1997 (the
"Meeting") reflects the final terms of the ESOP Restructuring as modified by
the settlement.
The principal terms of the settlement affecting the ESOP Restructuring are
(i) a reduction in the upper limit of the aggregate dollar value of the LP
Units to be issued to the ESOP from $67,038,478 to $64,200,000; (ii) an
increase in the level of quarterly cash distributions per LP Unit from $0.85
to $0.88 (an increase in the projected annual distribution level from $3.40
to $3.52 per year) beginning with the first quarterly distribution after the
Meeting provided that the ESOP Restructuring is approved by the Unitholders
at the meeting and there has been no adverse change in the business of the
Partnership; and (iii) further revisions in the incentive compensation
formula negotiated between management and the Special Committee to reduce the
amount of incentive compensation payable to the General Partner by at least
$121,000 per year at annual distribution levels below $4.20, and to increase
incentive compensation at annual distribution levels above $4.40.
The settlement is subject to a number of conditions, including approval of
the proposed ESOP Restructuring by the Unitholders, and to court approval.
The settlement will expressly provide for the dismissal of all claims with
prejudice and without cost to any party except as described below. If the
two proposals to be considered by the Unitholders at the Meeting are
approved, the settlement permits the ESOP Restructuring to be consummated
prior to final court approval.
The stipulation of settlement provides that plaintiff's counsel will apply to
the court for an award of counsel fees and expenses in an amount not
exceeding $1.5 million in the aggregate. Defendants have agreed not to
object to an application by plaintiff's counsel which does not exceed such
amount. A separate Notice of Pendency of Class Action, Proposed Settlement
of Class Action and Settlement Hearing will be distributed to members of the
proposed class. Any expenses relating to the settlement, including any award
of counsel fees and expenses to plaintiff's counsel and the cost of
distributing notice of the proposed settlement, will be paid or reimbursed by
the Partnership after court approval and dismissal of the complaint.
Freeport Pipeline Litigation Settlement
- ---------------------------------------
On May 30, 1997, counsel for the parties entered into a stipulation of
settlement in In re Buckeye Pipe Line Litigation, a consolidated class action
pending in the Court of Common Pleas for Allegheny County, Pennsylvania. The
litigation was filed against the Partnership and certain of its affiliates
after a landslide near Freeport, Pennsylvania on March 30, 1990 caused a
rupture to one of the Partnership's pipelines that resulted in a release of
petroleum products. Plaintiffs allege in their complaint that the petroleum
release caused damage and inconvenience to individuals and businesses, and
that Buckeye is responsible for these losses under a number of theories.
Buckeye has denied the allegations set forth in the complaint; but to avoid
the costs and distractions of further litigation, Buckeye has agreed to
settle the matter on the terms and conditions set forth in the stipulation of
settlement.
The settlement agreement provides that Buckeye will establish a settlement
fund of up to a maximum of $1.3 million to be paid to members of the class
who submit claims. The proposed class would consist of those residents and
business entities which on March 30, 1990 drew their drinking, industrial or
commercial water through the facilities of the Harrison Township or
Breckenridge Township, Pennsylvania water authorities, and which suffered
either a loss of water or a total suspension of water service, and which
submit claim forms with appropriate documentation in accordance with the
proposed order of settlement. Each claimant would be entitled to a payment
of no more than $100. To the extent the settlement fund exceeds the value of
the claims submitted, the excess amount of the settlement fund will revert to
Buckeye.
In the settlement agreement, plaintiff's counsel has agreed that its request
for fees and expenses will not exceed $375,000, and defendants have agreed
not to oppose an application to the Court for fees and expenses up to that
amount.
The settlement is subject to court approval. The parties have filed with the
court a joint motion for preliminary approval of settlement and certification
of settlement class, setting time for opt-outs and submitting claim forms,
and notice of hearing on final certification of class, final approval of the
settlement and certification of settlement class, and on award of attorneys'
fees and costs. Notice to the class will be provided by publication
following court approval of the motions for preliminary approval of the
settlement agreement and class certification.
Buckeye's insurance carriers have been reimbursing Buckeye on a consistent
basis since 1990 for covered claims arising from the Freeport pipeline
rupture. The insurance carriers have agreed to fund the settlement fund, and
to pay all fees and expenses associated with the proposed settlement. It is
not anticipated, therefore, that the settlement will have an adverse
financial impact on Buckeye.
For additional information concerning these matters and other legal
proceedings, see Item 3 of the Partnership's Form 10-K for the fiscal year
ended December 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Computation of Earnings Per Unit
27 - Financial Data Schedule
(b) Buckeye Partners, L.P. filed a Current Report on Form 8-K on June 24,
1997 announcing that the terms of the proposed restructuring of its Employee
Stock Ownership Plan were revised as part of a settlement of class action
litigation pending in the Delaware state court.
<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 22, 1997 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
- -------------- -----------
<S> <C>
11 Computation of Earnings per Unit
27 Financial Data Schedule
</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,
------------------- -------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $ 11,381 $ 10,259 $ 22,907 $ 21,917
Primary earnings per Unit
Net income $ 0.93 $ 0.84 $ 1.87 $ 1.80
Fully-diluted earnings per Unit
Net income $ 0.93 $ 0.84 $ 1.87 $ 1.80
Weighted average number of Units
outstanding:
Units outstanding at June 30 12,190,813 12,173,668 12,188,348 12,166,807
Exercise of Options reduced by the
number of Units purchased with
proceeds (Primary) 28,103 17,723 28,910 19,743
---------- ---------- ---------- ----------
Total Units outstanding - Primary 12,218,916 12,191,391 12,217,258 12,186,550
========== ========== ========== ==========
Units outstanding at June 30 12,190,813 12,173,668 12,188,348 12,166,807
Exercise of Options reduced by the
number of Units purchased with
proceeds (Fully-diluted) 31,782 17,744 32,675 20,656
Total Units outstanding - ---------- ---------- ---------- ----------
Fully-diluted 12,222,595 12,191,412 12,221,023 12,187,463
========== ========== ========== ==========
</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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,216
<SECURITIES> 12,845
<RECEIVABLES> 10,281
<ALLOWANCES> 0
<INVENTORY> 1,758
<CURRENT-ASSETS> 49,511
<PP&E> 569,615
<DEPRECIATION> 55,297
<TOTAL-ASSETS> 565,933
<CURRENT-LIABILITIES> 42,104
<BONDS> 193,650
0
0
<COMMON> 0
<OTHER-SE> 280,945
<TOTAL-LIABILITY-AND-EQUITY> 565,933
<SALES> 0
<TOTAL-REVENUES> 90,213
<CGS> 0
<TOTAL-COSTS> 56,723
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,758
<INCOME-PRETAX> 22,907
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,907
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,907
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
</TABLE>
