<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, 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.)
5 Radnor Corp. Ctr., Suite 500
100 Matsonford Rd.
Radnor, PA 19087
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 610-254-4600
3900 Hamilton Boulevard, Allentown, PA 18103
(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 30, 1997
Limited Partnership Units 12,069,330 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,
1997 and 1996
Consolidated Balance Sheets 2
March 31, 1997 and December 31, 1996
Consolidated Statements of Cash Flows 3
for the three months ended March 31,
1997 and 1996
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
March 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue $ 43,815 $ 46,269
-------- --------
Costs and expenses
Operating expenses 20,885 22,854
Depreciation and amortization 2,851 2,857
General and administrative expenses 3,235 3,228
-------- --------
Total costs and expenses 26,971 28,939
-------- --------
Operating income 16,844 17,330
-------- --------
Other income (expenses)
Interest income 549 275
Interest and debt expense (5,415) (5,492)
Minority interests and other (452) (455)
-------- --------
Total other income (expenses) (5,318) (5,672)
-------- --------
Net income $ 11,526 $ 11,658
======== ========
Net income allocated to General Partner $ 115 $ 117
Net income allocated to Limited Partners $ 11,411 $ 11,541
Net income allocated to General and Limited
Partners per Partnership Unit $ 0.95 $ 0.96
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 19,522 $ 17,416
Temporary investments 12,993 14,528
Trade receivables 8,244 12,536
Inventories 1,752 1,732
Prepaid and other current assets 6,926 7,715
-------- --------
Total current assets 49,437 53,927
Property, plant and equipment, net 512,471 511,646
Other non-current assets 2,184 2,264
-------- --------
Total assets $564,092 $567,837
======== ========
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt $ 13,150 $ 11,900
Accounts payable 390 4,279
Accrued and other current liabilities 24,574 24,088
-------- --------
Total current liabilities 38,114 40,267
Long-term debt 197,875 202,100
Minority interests 2,938 2,913
Other non-current liabilities 46,544 46,578
Commitments and contingent liabilities - -
-------- --------
Total liabilities 285,471 291,858
-------- --------
Partners' capital
General Partner 2,786 2,760
Limited Partners 275,835 273,219
-------- --------
Total partners' capital 278,621 275,979
-------- --------
Total liabilities and partners' capital $564,092 $567,837
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,526 $ 11,658
-------- --------
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation and amortization 2,851 2,857
Minority interests 121 124
Distributions to minority interests (96) (95)
Changes in assets and liabilities:
Temporary investments 1,535 895
Trade receivables 4,292 1,255
Inventories (20) (35)
Prepaid and other current assets 789 (1,022)
Accounts payable (3,889) (1,661)
Accrued and other current liabilities 486 (4,382)
Other non-current assets 80 1
Other non-current liabilities (34) (16)
-------- --------
Total adjustments 6,115 (2,079)
-------- --------
Net cash provided by operating activities 17,641 9,579
-------- --------
Cash flows from investing activities:
Capital expenditures (3,670) (935)
Expenditures for disposal of property,
plant and equipment, net (6) (7)
-------- --------
Net cash used in investing activities (3,676) (942)
-------- --------
Cash flows from financing activities:
Capital contribution 3 6
Proceeds from exercise of unit options 254 560
Payment of long-term debt (2,975) -
Distributions to Unitholders (9,141) (9,125)
-------- --------
Net cash used in financing activities (11,859) (8,559)
-------- --------
Net increase in cash and cash equivalents 2,106 78
Cash and cash equivalents at beginning of period 17,416 16,213
-------- --------
Cash and cash equivalents at end of period $ 19,522 $ 16,291
======== ========
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 5,431 $ 5,539
</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, 1996, which is derived from audited financial
statements, include all adjustments necessary to present fairly the
Partnership's financial position as of March 31, 1997 and the results of
operations and cash flows for the three month periods ended March 31, 1997 and
1996.
The Financial Accounting Standards Board issued Statement No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which provides consistent standards for determining if transfers
of financial assets are sales or secured borrowings and which revises the
accounting rules for liabilities extinguished by an in-substance defeasance.
The Partnership adopted Statement No. 125 on January 1, 1997 with no impact on
the Partnership's operating results or financial condition.
The American Institute of Certified Public Accountants issued Statement of
Position 96-1, "Environmental Remediation Liabilities," effective for 1997,
which clarifies the accounting for environmental remediation liabilities.
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.
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.
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 115 11,411 11,526
Distributions (92) (9,049) (9,141)
Exercise of unit options and
capital contributions 3 254 257
------ -------- --------
Partners' Capital - 3/31/97 $2,786 $275,835 $278,621
====== ======== ========
</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,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Units outstanding from
beginning of period 12,182,000 12,151,242
Weighted average number
of units issued upon
exercise of unit options 3,884 8,803
---------- ----------
Weighted average number
of units outstanding 12,185,884 12,160,045
========== ==========
</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 30, 1997 to unitholders of record on May 6, 1997. The total distribution
will amount to approximately $9,143,000.
<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 1997 was $43.8 million or 5.4 percent less than
revenue of $46.3 million for the first quarter 1996. Volume for the first
quarter of 1997 was 986,600 barrels per day, 20,800 barrels per day or 2.1
percent less than volume of 1,007,400 barrels per day for the first quarter
1996. Distillate volumes declined by 7.3 percent from 1996 levels primarily
as the result of milder winter weather in the Northeast. Temperatures on
average were 9 percent warmer during the first quarter 1997 than temperatures
experienced during the first quarter of 1996. Gasoline volumes during the
first quarter were 2.6 percent less than volumes during the first quarter of
1996. Gasoline deliveries to upstate New York were negatively affected by
Canadian imports and by a loss of business to a competing pipeline. In the
Midwest, a shipper has been able to use its own pipeline system for
transporting additional gasoline following a new connection with another
pipeline. Offsetting these declines, to some extent, was an increase in
gasoline volumes to locations previously served by barge. Some terminals that
were previously supplied by the barges have been closed. Turbine fuel volumes
during the first quarter 1997 were 4.9 percent greater than first quarter 1996
volumes. The most significant increases were at J.F.K. and LaGuardia airports
in New York and at Newark airport in New Jersey. A portion of this increase
is attributable to the mild winter weather as fewer flights had to cancel
during the first quarter 1997 than during the first quarter 1996. Tariff
increases instituted during the third quarter 1996 contributed approximately
$500,000 of additional revenue over the first quarter 1996.
Costs and expenses for the first quarter of 1997 were $27.0 million or 6.6
percent less than costs and expenses of $28.9 million for the first quarter of
1996. Declines in payroll expense resulting from the second quarter 1996
early retirement and termination program were partially offset by increases in
payroll overheads related to the Employee Stock Ownership Plan. In addition,
operating power, casualty loss and property and other tax expense were less
than first quarter 1996 expense.
Other income (expenses), which is the net on non-operating income and
expenses, was a net expense of $5.3 million for the first quarter of 1997
compared to a net expense of $5.7 million for the first quarter of 1996. The
majority of this expense is related to interest on long-term debt of $5.4 and
$5.5 million for the first quarters of 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at March 31, 1997 is highlighted in the
following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of
------------------------
3/31/97 12/31/96
-------- --------
<S> <C> <C>
Current ratio 1.3 to 1 1.3 to 1
Ratio of cash and cash equivalents,
temporary investments and trade
receivables to current liabilities 1.1 to 1 1.1 to 1
Working capital (in thousands) $11,323 $13,660
Ratio of total debt to total capital .43 to 1 .43 to 1
Book value (per Unit) $22.86 $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 three months ended March 31, 1997, cash provided by operations of
$17.6 million was derived principally from net income before depreciation of
$14.4 million and increased collection of trade receivables of $4.3 million.
During the third quarter of 1996 the Partnership began invoicing customers on
a weekly rather than a monthly basis thereby reducing outstanding trade
receivables.
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.
Debt Obligation and Credit Facilities
At March 31, 1997, the Partnership had $197.9 million in outstanding long-term
debt and $13.1 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. At
March 31, 1997, there were no outstanding borrowings under these facilities.
At March 31, 1997, the ratio of total debt to total capital was 43 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, 1997, approximately 91 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the three months ended March 31, 1997 totaled $3.7
million compared to $0.9 million during the three months ended March 31, 1996.
During both periods, capital expenditures were paid from internally generated
funds.
OTHER MATTERS
Accounting Pronouncements
The Financial Accounting Standards Board issued Statement No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which provides consistent standards for determining if transfers
of financial assets are sales or secured borrowings and which revises the
accounting rules for liabilities extinguished by an in-substance defeasance.
The Partnership adopted Statement No. 125 on January 1, 1997 with no impact on
the Partnership's operating results or financial condition.
The American Institute of Certified Public Accountants issued Statement of
Position 96-1, "Environmental Remediation Liabilities," effective for 1997,
which clarifies the accounting for environmental remediation liabilities.
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.
<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, 1996.
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, 1997.
<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: May 6, 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 Page
<C> <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 March 31,
-----------------------------
1997 1996
------ ------
<S> <C> <C>
Net income $ 11,526 $ 11,658
Primary earnings per Unit
Net Income $ 0.94 $ 0.96
Fully-diluted earnings per Unit
Net income $ 0.94 $ 0.96
Weighted average number of Units
outstanding:
Units outstanding at March 31 12,185,884 12,160,045
Exercise of Options reduced by the
number of Units purchased with
proceeds (Primary) 30,004 21,729
---------- ----------
Total Units outstanding - Primary 12,215,888 12,181,774
========== ==========
Units outstanding at March 31 12,185,884 12,160,045
Exercise of Options reduced by the
number of Units purchased with
proceeds (Fully-diluted) 30,033 23,510
---------- ----------
Total Units outstanding -
Fully-diluted 12,215,917 12,183,555
========== ==========
</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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,522
<SECURITIES> 12,993
<RECEIVABLES> 8,244
<ALLOWANCES> 0
<INVENTORY> 1,752
<CURRENT-ASSETS> 49,437
<PP&E> 566,508
<DEPRECIATION> 54,037
<TOTAL-ASSETS> 564,092
<CURRENT-LIABILITIES> 38,114
<BONDS> 197,875
0
0
<COMMON> 0
<OTHER-SE> 278,621
<TOTAL-LIABILITY-AND-EQUITY> 564,092
<SALES> 0
<TOTAL-REVENUES> 43,815
<CGS> 0
<TOTAL-COSTS> 26,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,415
<INCOME-PRETAX> 11,526
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,526
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
</TABLE>
