SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 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 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 April 25, 2000
- ------------------------- -----------------------------
Limited Partnership Units 26,799,906 Units
<PAGE>
<TABLE>
<CAPTION>
BUCKEYE PARTNERS, L.P.
INDEX
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, 2000 and 1999
Consolidated Balance Sheets 2
March 31, 2000 and December 31, 1999
Consolidated Statements of Cash Flows 3
for the three months ended
March 31, 2000 and 1999
Notes to Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis 8-11
of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures 11
about Market Risk
Part II. Other Information
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part I - Financial Information
Buckeye Partners, L.P.
Consolidated Statements of Income
(In thousands, except per Unit amounts)
(Unaudited)
Three Months Ended
March 31,
---------------------
2000 1999
---- ----
<S> <C> <C>
Revenue
Transportation $49,276 $46,881
Refining 46,844 6,741
------- -------
Total Revenue 96,120 53,622
------- -------
Costs and expenses
Cost of refined products sold 43,083 6,119
Operating expenses 22,490 18,976
Depreciation and amortization 4,442 4,207
General and administrative expenses 3,974 4,507
------- -------
Total costs and expenses 73,989 33,809
------- -------
Operating income 22,131 19,813
------- -------
Other income (expenses)
Investment income 365 14
Interest and debt expense (4,459) (4,057)
Minority interests and other (2,427) (1,763)
------- -------
Total other income (expenses) (6,521) (5,806)
------- -------
Net income $15,610 $14,007
======= =======
Net income allocated to General Partner $ 141 $ 127
Net income allocated to Limited Partners $15,469 $13,880
Earnings per Partnership Unit:
Net income allocated to General and
Limited Partners per Partnership Unit $ 0.58 $ 0.52
Earnings per Partnership Unit -
assuming dilution:
Net income allocated to General and
Limited Partners per Partnership Unit $ 0.58 $ 0.52
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Buckeye Partners, L.P.
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 9,031 $ 22,003
Trade receivables 11,827 9,718
Inventories 17,704 18,397
Prepaid and other current assets 5,070 5,509
-------- --------
Total current assets 43,632 55,627
Property, plant and equipment, net 564,301 556,904
Other non-current assets 60,685 61,754
-------- --------
Total assets $668,618 $674,285
======== ========
Liabilities and partners' capital
Current liabilities
Accounts payable $ 17,063 $ 18,961
Accrued and other current liabilities 19,769 23,517
-------- --------
Total current liabilities 36,832 42,478
Long-term debt 266,000 266,000
Minority interests 2,653 2,853
Other non-current liabilities 46,695 45,965
Commitments and contingent liabilities - -
-------- --------
Total liabilities 352,180 357,296
-------- --------
Partners' capital
General Partner 2,543 2,548
Limited Partners 313,895 314,441
-------- --------
Total partners' capital 316,438 316,989
-------- --------
Total liabilities and partners' capital $668,618 $674,285
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Buckeye Partners, L.P.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $15,610 $14,007
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,442 4,207
Minority interests (12) 161
Distributions to minority interests (188) (159)
Changes in assets and liabilities,
net of acquisitions:
Trade receivables (2,109) (2,149)
Inventories 693 (1,796)
Prepaid and other current assets 439 (533)
Accounts payable (1,898) 3,043
Accrued and other current liabilities (3,748) (3,321)
Other non-current assets (194) 246
Other non-current liabilities 730 569
------- -------
Total adjustments (1,845) 268
------- -------
Net cash provided by operating activities 13,765 14,275
------- -------
Cash flows from investing activities:
Capital expenditures (10,509) (4,543)
Acquisitions - (18,740)
Expenditures for disposal of property,
plant and equipment, net (67) (37)
------- -------
Net cash used in investing activities (10,576) (23,320)
------- -------
Cash flows from financing activities:
Proceeds from exercise of unit options 64 263
Borrowings - 26,000
Distributions to Unitholders (16,225) (14,171)
------- -------
Net cash provided by (used in)
financing activities (16,161) 12,092
------- -------
Net increase in cash and cash equivalents (12,972) 3,047
Cash and cash equivalents at beginning of
period 22,003 8,341
------- -------
Cash and cash equivalents at end of period $ 9,031 $11,388
======= =======
Supplemental cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 4,457 $ 4,021
</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, 1999 is derived from audited financial
statements, include all adjustments necessary to present fairly the
Partnership's financial position as of March 31, 2000 and the results of
operations for the three month periods ended March 31, 2000 and 1999 and cash
flows for the three month periods ended March 31, 2000 and 1999. The results
of operations for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the full year ending December 31,
2000.
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, 1999.
2.ACQUISITIONS
On March 4, 1999, the Partnership acquired the fuels division of American
Refining Group, Inc. for an initial purchase price of $12,990,000. In January
2000, the Partnership made an additional payment of $747,000 pursuant to a
contingent payment agreement. The assets acquired included a refined
petroleum products terminal and a transmix processing facility located in
Indianola, Pennsylvania, a transmix processing facility located in Hartford,
Illinois. The Partnership operates the former ARG processing business under
the name of Buckeye Refining Company, LLC ("BRC").
On March 31, 1999, the Partnership acquired certain assets from Seagull
Products Pipeline Corporation and Seagull Energy Corporation for a total
purchase price of $5,750,000. The assets acquired consisted primarily of six
pipeline operating agreements for major chemical companies in the Gulf Coast
area, a 16-mile pipeline (a portion of which is leased to a chemical company),
and related assets. The Partnership operates the pipeline assets acquired from
Seagull under the name of Buckeye Gulf Coast Pipe Lines, LLC ("BGC").
Pro forma results of operations for the Partnership, assuming the acquisition
of the ARG and Seagull assets had occurred at the beginning of the period
indicated below, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
------------------
(In thousands,
except per Unit amounts)
<S> <C>
Revenue $ 64,422
Net income $ 13,275
Earnings per Unit $ 0.49
</TABLE>
The unaudited pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the combinations been in effect at the
beginning of the period presented, or of future results of operations of the
entities.
3. SEGMENT INFORMATION
The Partnership has two reportable segments, the transportation segment and
the refining segment, which are organized on the basis of products and
service. The transportation segment derives its revenues from the
transportation of refined petroleum products that it receives from refineries,
connecting pipelines and marine terminals. The refining segment derives its
revenues from the refining of transmix and the wholesale marketing of the
resulting product to others for distribution to consumers. Transmix generally
consists of various grades and types of refined petroleum products that are
commingled during handling or transportation by a pipeline system.
Management evaluates its performance on the basis of operating income. The
Partnership accounts for intersegment sales and transfers as if the sales or
transfers were to third parties at current market prices. Such intersegment
sales and transfers are eliminated in consolidation.
The Partnership's reportable segments are distinct business enterprises that
offer different products or services. Revenues from the transportation
segment are generally subject to regulation or are under contract and tend to
be less variable than revenues from the refining segment. The refining
segment's revenues, to a large extent, are dependent on the market price of
refined petroleum products that, for the most part, are beyond the control of
management. The segments also require different technology, marketing and risk
management strategies.
The following is a summary of each reportable segment's profit and loss and
the segment's assets as of and for the period ended March 31, 2000.
<TABLE>
<CAPTION>
Trans- Inter-
portation Refining company Total
--------- -------- ------- -----
(In thousands)
<S> <C> <C> <C> <C>
Revenues from external
customers $ 49,873 $46,867 $ (620) $ 96,120
Intersegment revenues 597 23 (620) -
Operating income 20,857 1,274 - 22,131
Segment assets 639,518 31,366 (2,266) 668,618
Expenditures for property,
plant and equipment 10,233 276 - 10,509
</TABLE>
All revenues are from sources within the United States.
The following is a summary of each reportable segment's profit and loss and
the expenditures for property, plant and equipment for the period ended March
31, 1999. The refining segment's results of operations include the period from
the March 4, 1999 (date of acquisition) through March 31, 1999.
<TABLE>
<CAPTION>
Trans- Inter-
portation Refining company Total
--------- -------- ------- -----
(In thousands)
<S> <C> <C> <C> <C>
Revenues $ 47,061 $6,741 $(180) $53,622
Intersegment revenues 180 - (180) -
Operating income 19,780 33 - 19,813
Expenditures for property,
plant and equipment 4,543 - - 4,543
</TABLE>
All revenues are from sources within the United States.
The following is a summary of each reportable segment's assets as of December
31, 1999.
<TABLE>
<CAPTION>
Trans- Inter-
portation Refining company Total
--------- -------- ------- -----
(In thousands)
<S> <C> <C> <C> <C>
Segment assets $647,519 $30,615 $(3,849) $674,285
</TABLE>
4. 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 Pipe Line 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. Typically, an Operating
Partnership is one of many PRP's for a particular site and its contribution of
total waste at the site is minimal. However, because CERCLA and similar
statutes impose liability without regard to fault and on a joint and several
basis, the liability of an Operating Partnership in connection with such
proceedings could be material. The total potential remediation costs relating
to these clean-up sites cannot be reasonably estimated.
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.
5. INVENTORIES
Inventories consist of transmix, fuel oils, gasoline and other specialty
products, as well as pipeline materials and supplies which includes pipe,
valves, pumps, electrical/electronic components, drag reducing agent and other
miscellaneous items. Inventories are valued at the lower of cost or market on
the first-in first-out method. Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Transmix $ 11,813 $ 12,319
Gasoline, distillates and jet fuel 1,186 1,664
Pipeline materials and supplies 4,705 4,414
-------- --------
Total $ 17,704 $ 18,397
======== ========
</TABLE>
The Partnership hedges a substantial portion of its exposure to inventory
price fluctuations with commodity futures contracts for the sale of gasoline
and fuel oil. At March 31, 2000 the Partnership had hedged approximately 53
percent of its petroleum product inventory and had approximately $163,000 of
unrealized losses related to futures contracts held on March 31, 2000. BRC's
operating income of $1.3 million for the three months ended March 31, 2000
includes approximately $2.5 million in realized losses related to investments
in futures contracts.
6. LONG-TERM DEBT
As of March 31, 2000, the Partnership had $240.0 million of Senior Notes
outstanding. The Senior Notes are scheduled to mature in the period 2020 to
2024 and bear interest from 6.89 percent to 6.98 percent. In addition, the
Partnership had $26.0 million of its $100 million Credit Agreement
outstanding. The weighted average interest rate for the $26.0 million debt
was 6.67 percent at March 31, 2000.
7. PARTNERS' CAPITAL
Partners' capital consists of the following:
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
(In thousands)
<S> <C> <C> <C>
Partners' Capital - 1/1/00 $2,548 $314,441 $316,989
Net Income 141 15,469 15,610
Distributions (146) (16,079) (16,225)
Exercise of unit options - 64 64
------ -------- --------
Partners' Capital - 3/31/00 $2,543 $313,895 $316,438
====== ======== ========
</TABLE>
The following is a reconciliation of basic and dilutive income per Partnership
Unit for the three month period ended March 31:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------
2000 1999
--------------------- ---------------------
Income Units Per Income Units Per
(Numer- (Denomi- Unit (Numer- (Denomi- Unit
ator) nator) Amount ator) nator) Amount
------- -------- ------ ------- -------- ------
(in thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income $15,610 $14,007
------- -------
Basic earnings per
Partnership Unit 15,610 27,042 $0.58 14,007 26,993 $0.52
Effect of dilutive
securities - options - 72 - - 94 -
------- ------ ----- ------ ------ -----
Diluted earnings per
Partnership Unit $15,610 27,114 $0.58 $14,007 27,087 $0.52
======= ====== ===== ======= ====== =====
</TABLE>
Options reported as dilutive securities are related to unexercised options
outstanding under the Partnership's Unit Option Plan.
8. 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.
The Partnership has declared a cash distribution of $0.60 per unit payable on
May 31, 2000 to unitholders of record on May 4, 2000. The total distribution
will amount to approximately $16,226,000.
9. ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board issued Statement No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral
of Effective Date of FASB Statement No. 133." This statement defers the
effective date of FASB Statement No. 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. Management has not completed its evaluation of
the effect of this statement on the Partnership's financial statements.
10. SUBSEQUENT EVENT
In April 2000, the Partnership announced that it entered into agreements that
provide for the Partnership to receive a 3.5 percent equity interest in Aerie
Networks, Inc. ("Aerie") in exchange for assisting Aerie with its development
of a fiber optics network along a portion of the Partnership's pipeline
rights-of-way. No cash investment or expense is required by the Partnership.
The Partnership, and 11 other natural gas, oil and liquid petroleum pipeline
companies and telecommunications affiliates, are providing Aerie with over
14,500 miles of rights-of-way on which to build the single largest capacity
broadband network in the U.S. The pipeline rights-of-way will serve as the
foundation for Aerie's planned 20,000 mile broadband fiber optic network that
will connect 194 cities. The Partnership's agreement to provide access to its
rights-of-way is contingent on Aerie's success in raising additional capital.
At this time, it is not possible to estimate the value of the Partnership's
equity interest in Aerie, however, such investment may be material to the
Partnership's financial position in the future. The interest in Aerie will be
accounted for on a cost basis.
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 from the transportation of refined petroleum products for the first
quarter 2000 was $49.3 million or 5.1 percent greater than revenue of $46.9
million for the first quarter 1999. Volumes for the first quarter of 2000 were
1,041,800 barrels per day, 9,100 barrels per day or 0.9 percent less than
volumes of 1,050,900 barrels per day for the first quarter 1999. Additional
revenue of $1.4 million from BGC operating contracts as well as longer haul
movements during the first quarter 2000 than during the first quarter of 1999
resulted in increased transportation revenue. Average transportation revenue
was 49.7 cents per barrel during the first quarter 2000 as compared to 49.1
cents per barrel during the first quarter 1999. Gasoline volumes were 0.9
percent greater during the first quarter 2000 than the first quarter 1999. In
the East, volumes were strong to both the Pittsburgh, Pennsylvania market area
and to the upstate New York market area. Volumes also increased on the Long
Island system as a result of increased deliveries to the Inwood, New York
area. Gasoline volumes declined in the Midwest where demand was generally
weak with the exception of the Columbus and Cleveland, Ohio areas and the Bay
City and Flint, Michigan areas where demand has been strong since the closure
of the a refinery in Alma, Michigan. Distillate volumes during the first
quarter 2000 declined by 1.9 percent from first quarter 1999 levels. In the
East, deliveries were down to most areas served as the result of warmer winter
temperatures. In the Midwest, volumes increased primarily as a result of a new
connection in the Indianapolis, Indiana area. Turbine fuel volumes were 0.1
percent less during the first quarter 2000 than the first quarter 1999. In the
East, volumes were down primarily as the result of decreased deliveries to
Pittsburgh airport. In the Midwest, turbine fuel volumes were down slightly
due to declines in deliveries to the Toledo, Ohio area. Increased demand at
J.F.K. Airport partially offset other turbine fuel declines.
Refining operating revenue for first quarter 2000 was $46.8 million compared
to $6.7 million for the period March 4, 1999 (date of acquisition) through
March 31, 1999. The Partnership began refining operations on March 4, 1999
with the acquisition BRC. BRC's revenue during the first quarter 2000 was
derived from the sale of 15.0 million gallons of gasoline and 21.8 million
gallons of distillate products. Revenue from the sale of gasoline during the
first quarter 2000 was $20.0 million while revenue from the sale of distillate
products was $26.8 million. In November 1999, BRC entered into a contract
with a major integrated oil company to sell all the refined product produced
at its Indianola, Pennsylvania facility to such company. Total revenue under
the contract for the first quarter 2000 was approximately $42.0 million.
Costs and expenses for the first quarter 2000 were $74.0 million including
$45.6 million in expenses related to the refining operations of BRC and $1.4
million in expenses related to BGC's operations. Excluding the expenses of
BRC and BGC, costs and expenses were $27.0 million, which were equal to costs
and expenses incurred during the first quarter 1999. Declines in payroll,
supplies and professional fee expense offset increases in property tax
expense.
Other expenses totaled $6.5 million during the first quarter 2000 as compared
to $5.8 million during the first quarter 1999. Interest expense increased as
borrowings incurred during the first quarter 1999 to finance acquisitions were
outstanding for the full first quarter 2000. In addition, incentive
compensation payments to the General Partner increased during the first
quarter 2000 as compared to the first quarter 1999 due to an increase in the
level of cash distributions paid to limited partners.
Competition and Other Business Conditions
The Partnership's refining segment is subject to competition from other
refiners and marketers of refined petroleum products and is subject to market
price risks representing the difference between the purchase cost of transmix
and the market price of refined petroleum products at the time of resale. In
order to reduce the level of market price risk the General Partner has adopted
a policy of hedging a substantial portion of BRC's exposure to inventory price
fluctuations with commodity futures contracts for the sale of gasoline and
fuel oil.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's financial condition at March 31, 2000 is highlighted in the
following comparative summary:
Liquidity and Capital Indicators
<TABLE>
<CAPTION>
As of
------------------------
3/31/00 12/31/99
------- --------
<S> <C> <C>
Current ratio 1.2 to 1 1.3 to 1
Ratio of cash and cash equivalents,
and trade receivables to
current liabilities 0.6 to 1 0.7 to 1
Working capital - in thousands $6,800 $13,149
Ratio of total debt to total capital .45 to 1 .45
Book value (per Unit) $11.70 $11.72
</TABLE>
The Partnership's cash flows from operations are generally sufficient to meet
current working capital requirements. In addition, the Partnership has a $100
million credit agreement (the "Credit Agreement") which expires on December
16, 2003. At March 31, 2000 there was $26.0 million borrowed under the Credit
Agreement.
Cash Provided by Operations
For the three months ended March 31, 2000, cash provided by operations of
$13.8 million was derived principally from $20.1 million of income before
depreciation and amortization. Changes in current assets and current
liabilities resulted in a net cash use of $6.6 million. Increases in trade
receivables are related to BRC's operations and were partially offset by a
corresponding increase in BRC's accounts payable. Accrued and other current
liabilities declined primarily as a result of payments to the general partner
for its services. Cash provided by operations was used to pay distributions
to Unitholders of $16.2 million. Changes in non-current assets and
liabilities resulted in a net cash source of $0.5 million.
Debt Obligation and Credit Facilities
At March 31, 2000, the Partnership had $266.0 million in outstanding long-term
debt representing $240.0 million of Senior Notes and $26.0 million of
borrowings under the Credit Facility.
The indenture pursuant to which the Senior Notes were issued (the "Senior Note
Indenture") contains covenants which affect Buckeye Pipe Line Company, L.P.
("Buckeye"), Laurel Pipe Line Company, L.P. and Buckeye Pipe Line Company of
Michigan, L.P. (the "Indenture Parties"). Generally, the Senior Note
Indenture (a) limits outstanding indebtedness of Buckeye based upon certain
financial ratios of the Indenture Parties, (b) prohibits the Indenture Parties
from creating or incurring certain liens on their property, (c) prohibits the
Indenture Parties from disposing of property which is material to their
operations, and (d) limits consolidation, merger and asset transfers of the
Indenture Parties.
The Credit Agreement permits borrowings of up to $100 million and contains
covenants that affect Buckeye and the Partnership. Generally, the Credit
Agreement (a) limits outstanding indebtedness of Buckeye based upon certain
financial ratios contained in the Credit Agreement, (b) prohibits Buckeye from
creating or incurring certain liens on its property, (c) prohibits the
Partnership or Buckeye from disposing of property which is material to its
operations, and (d) limits consolidation, merger and asset transfers by
Buckeye and the Partnership.
At March 31, 2000, the ratio of total debt to total capital was 45 percent.
For purposes of the calculation of this ratio, total capital consists of long-
term debt, minority interests in subsidiaries and partners' capital.
Capital Expenditures
At March 31, 2000, approximately 84 percent of total consolidated assets
consisted of property, plant and equipment.
Capital expenditures during the three months ended March 31, 2000 totaled
$10.5 million and were $6.0 million greater than capital expenditures for the
three months ended March 31, 1999. Of the $10.5 million in capital
expenditures, $10.2 million was related to the transportation segment and $0.3
million was related to the refining segment. The Partnership continues to
make capital expenditures in connection with the automation of its pipeline
facilities and improvements to its facilities in order to increase capacity,
reliability, integrity and efficiency. Estimated total capital expenditures
for 2000, exclusive of acquisitions, amount to $39.3 million.
In March 2000, the Partnership purchased a petroleum products terminal from BP
Amoco at a cost of $3.0 million. The terminal is located in Taylor, Michigan,
near the Detroit airport, and has a capacity of approximately 280,000 barrels
of petroleum product. The Partnership is currently expanding its pipeline
from East Chicago, Indiana to Lima, Ohio. The capacity expansion will enable
the Partnership to transport additional petroleum products anticipated to be
shipped in connection with a major pipeline project under construction by a
third party. Of the $6.0 million total estimated cost of this expansion, $1.2
million was spent during the first quarter 2000.
The Partnership continues to make capital expenditures for, among other
things, various facility improvements that facilitate increased pipeline
volumes, facility automation, renewal and replacement of several tank roofs,
upgrades to field instrumentation and cathodic protection systems and the
installation and replacement of mainline pipe and valves. The Partnership is
also constructing additional office space that will replace currently leased
facilities.
OTHER MATTERS
Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board issued Statement No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral
of Effective Date of FASB Statement No. 133." This statement defers the
effective date of FASB Statement No. 133 to fiscal quarters of fiscal years
beginning after June 15, 2000. Management has not completed its evaluation of
the effect of this statement on the Partnership's financial statements.
Forward Looking Statements
This SEC Form 10-Q includes forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the General Partner believes that its
expectations are based on reasonable assumptions, it can give no assurance
that such assumptions will materialize. For instance, cost savings to be
realized in connection with the automation of pipeline facilities depend upon,
among other things, the field automation projects being implemented
effectively and on time. Similarly, increased revenues anticipated to be
realized in connection with pipeline expansion projects are dependent upon,
among other things, the expansion projects being implemented effectively and
on time, and the use of the increased capacity by shippers on the pipeline
systems.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
The Partnership is exposed to market risks resulting from changes in interest
rates and commodity prices. Market risk represents the risk of loss that may
impact the Partnership's results of operations, the consolidated financial
position or operating cash flows. The Partnership is not exposed to any
market risk due to rate changes on its Senior Notes but is exposed to market
risk related to the interest rate on its Credit Agreement. The Partnership is
also exposed to market risk on commodity futures contracts that it holds for
the sale of gasoline and fuel oil.
Market Risk - Other than Trading Instruments
The Partnership has market risk exposure on its Credit Agreement due to its
variable rate pricing that is based on the bank's base rate or at a rate based
on LIBOR. As of March 31, 2000, a 1 percent increase or decrease in the
applicable rate under the Credit Agreement will result in an interest expense
fluctuation of approximately $0.3 million.
Market Risk - Trading Instruments
The Partnership hedges a substantial portion of its exposure to inventory
price fluctuations with commodity futures contracts for the sale of gasoline
and fuel oil. At March 31, 2000 the Partnership had hedged approximately 53
percent of BRC's inventory and held commodity futures contracts for the sale
of 1.7 million gallons of gasoline and 8.8 million gallons of fuel oil. A
$0.01 per gallon increase in the market price of gasoline and fuel oil would
result in a loss of approximately $105,000 in the futures contracts. A $0.01
per gallon decrease in the market price of gasoline and fuel oil would result
in a gain of approximately $105,000 in the futures contracts.
Part II - Other Information
Item 5. Other Information
Effective April 25, 2000, C. Richard Wilson retired from the Board of
Directors. Mr. Wilson was Chief Operating Officer of the General Partner from
January 1987 until July 1998, and President of the General Partner from
February 1991 until July 1998. He served as a Director since February 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
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 Pipe Line Company,
as General Partner
Dated: April 25, 2000 By:/s/ Steven C. Ramsey
Steven C. Ramsey
Senior Vice President, Finance
and Chief Financial Officer
(Principal Accounting and
Financial Officer)
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