Attached files
file | filename |
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8-K/A - FORM 8-K/A - BUCKEYE PARTNERS, L.P. | h81139e8vkza.htm |
EX-23.1 - EX-23.1 - BUCKEYE PARTNERS, L.P. | h81139exv23w1.htm |
EX-99.1 - EX-99.1 - BUCKEYE PARTNERS, L.P. | h81139exv99w1.htm |
Exhibit 99.2
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Introduction |
F-2 | |||
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet at December 31, 2010 |
F-4 | |||
Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations for the Year
Ended December 31, 2010 |
F-5 | |||
Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements |
F-6 |
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
On December 18, 2010, Buckeye Partners, L.P. (the Partnership), through a wholly owned
subsidiary, entered into a sale and purchase agreement with affiliates of FRC Founders Corporation
(First Reserve), pursuant to which the Partnership agreed to acquire First Reserves indirect 80%
interest in FR Borco Coop Holdings, L.P. (FRBCH), the indirect owner of Bahamas Oil Refining
Company International Limited (BORCO) for $1.15 billion, financed through a combination of debt
and equity, including the issuance of Class B partnership units (Class B Units) and Partnership
limited partner units (LP Units) to First Reserve. BORCO is the fourth largest oil and petroleum
products storage terminal in the world and the largest petroleum products facility in the Caribbean
with current storage capacity of approximately 21.6 million barrels. On January 18, 2011, the
Partnership completed the purchase of First Reserves 80% interest in BORCO. The BORCO acquisition
was structured as the acquisition by the Partnership of all of the partnership interests in FR
Borco Topco, L.P. (BORCO Topco), which indirectly owned First Reserves 80% interest in BORCO.
In connection with the BORCO acquisition, on January 18, 2011, the Partnership repaid all of
BORCOs outstanding indebtedness and settled BORCOs interest rate derivative instruments,
consisting of approximately $318.2 million.
Vopak Bahamas B.V. (Vopak), which is based in The Netherlands, owned the remaining 20%
interest in FRBCH. On February 16, 2011, Vopak sold its 20% interest in FRBCH to the Partnership
for approximately $278.7 million of cash and equity, which is a proportionate price and on the same
terms and conditions as those in the sale and purchase agreement with First Reserve.
In aggregate, the Partnership paid approximately $1.75 billion in a combination of cash and
equity to acquire 100% of BORCO, including $318.2 million to repay BORCOs outstanding indebtedness
and settle BORCOs interest rate derivative instruments.
On January 13, 2011, the Partnership sold $650.0 million aggregate principal amount of 4.875%
Notes due 2021 (the 4.875% Notes) in an underwritten public offering. The notes were issued at
99.62% of their principal amount. Total proceeds from this offering, after underwriters fees,
expenses and debt issuance costs of $4.5 million, were approximately $643.0 million, and were used
to fund a portion of the purchase price of the BORCO acquisition.
On January 18 and 19, 2011, the Partnership issued 5,794,725 LP Units and 1,314,870 Class B
Units to institutional investors for aggregate consideration of approximately $425.0 million to
fund a portion of the BORCO acquisition. On January 18, 2011, the Partnership issued 2,483,444 LP
Units and 4,382,889 Class B Units to First Reserve as $400.0 million of consideration to fund a
portion of the BORCO acquisition. On February 16, 2011, the Partnership issued 620,861 LP Units
and 1,095,722 Class B Units to Vopak as $100.0 million of consideration to fund a portion of the
BORCO acquisition. The remaining purchasing price was funded with cash on hand at closing,
primarily with proceeds from the offering of the 4.875% Notes, and borrowings under the
Partnerships unsecured revolving credit agreement (Credit Facility).
Prior to the BORCO acquisition, on November 19, 2010, the Partnership completed the
acquisition of all of the economic interest in Buckeye GP Holdings L.P. (Holdings) pursuant to a
plan and agreement of merger (the Holdings Merger Agreement). Pursuant to the Holdings Merger
Agreement, all Holdings units were converted into LP Units. The Partnerships existing partnership
agreement was amended and restated to provide for the cancellation of the incentive distribution
rights and the approximate 0.5% general partner interest in the Partnership owned directly by the
Partnerships general partner was converted into a non-economic general partner interest in the
Partnership.
Prior to the consummation of the Holdings Merger Agreement, the Partnership, a publicly-traded
limited partnership, was a consolidated subsidiary of Holdings, which was also a publicly-traded
limited partnership. Upon approval by the unitholders of both Holdings and the Partnership and
upon satisfaction of all other conditions set forth in the Holdings Merger Agreement, Holdings
became a subsidiary of the Partnership, with the Partnership as the sole limited partner of
Holdings and the general partner of Holdings continuing as the non-economic general partner of
Holdings. For accounting purposes, Holdings was considered the accounting acquirer of the
Partnerships
F-2
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
noncontrolling interest. The changes in Holdings ownership interest were accounted for as an
equity transaction and no gain or loss was recognized as a result of the merger.
The unaudited pro forma condensed combined financial statements give effect to the BORCO
acquisition and the Holdings Merger Agreement. The unaudited pro forma condensed combined
consolidated balance sheet gives effect to the BORCO acquisition as if it had occurred on December
31, 2010, and the unaudited pro forma condensed combined consolidated statements of operations for
the year ended December 31, 2010 give effect to the BORCO acquisition and the Holdings Merger
Agreement as if these transactions had occurred on January 1, 2010. The historical consolidated
financial information has been adjusted to give effect to pro forma events that are (1) directly
attributable to the BORCO acquisition and the Holdings Merger Agreement; (2) factually supportable;
and (3) with respect to the statements of operations, expected to have a continuing impact.
The following pro forma financial statements should be read in conjunction with:
| the accompanying notes to the Unaudited Pro Forma Condensed Combined Consolidated Financial Statements; |
| the historical audited consolidated financial information and accompanying notes of the Partnership, which have been filed by the Partnership in its 2010 annual report on Form 10-K, filed on February 28, 2011; and |
| the audited consolidated financial statements of BORCO Topco as of and for the years ended December 31, 2010 and 2009 filed by the Partnership as Exhibit 99.1 to the current report on Form 8-K to which these Unaudited Pro Forma Condensed Combined Consolidated Financial Statements are filed as an Exhibit. |
F-3
BUCKEYE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2010
(In thousands, except unit amounts)
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2010
(In thousands, except unit amounts)
FR Borco | Effect of | |||||||||||||||
Buckeye | Topco, L.P. and | FR Borco | ||||||||||||||
Partners, L.P. | Subsidiaries | Topco, L.P. | Combined | |||||||||||||
Historical | Historical | Acquisition | Pro Forma | |||||||||||||
ASSETS |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 13,626 | $ | 26,014 | $ | 420,375 | (b) | $ | 45,928 | |||||||
(808,665 | ) (c) | |||||||||||||||
(2,039 | ) (d) | |||||||||||||||
(315,063 | ) (e) | |||||||||||||||
643,305 | (f) | |||||||||||||||
180,396 | (h) | |||||||||||||||
(112,021 | ) (i) | |||||||||||||||
Trade receivables, net |
167,274 | 2,814 | | 170,088 | ||||||||||||
Construction and pipeline relocation receivables |
6,803 | | | 6,803 | ||||||||||||
Inventories |
351,605 | 1,568 | | 353,173 | ||||||||||||
Derivative assets |
1,634 | | | 1,634 | ||||||||||||
Prepaid and other current assets |
85,689 | 4,559 | | 90,248 | ||||||||||||
Total current assets |
626,631 | 34,955 | 6,288 | 667,874 | ||||||||||||
Property, plant and equipment, net |
2,305,884 | 577,032 | 532,068 | (j) | 3,414,984 | |||||||||||
Equity investments |
107,047 | | | 107,047 | ||||||||||||
Goodwill |
432,124 | 141,346 | (141,346 | ) (l) | 927,086 | |||||||||||
494,962 | (l) | |||||||||||||||
Intangible assets, net |
44,067 | 248,535 | (102,035 | ) (j) | 190,567 | |||||||||||
Other non-current assets |
58,463 | 10,933 | (10,516 | ) (e) | 63,105 | |||||||||||
4,225 | (f) | |||||||||||||||
Total assets |
$ | 3,574,216 | $ | 1,012,801 | $ | 783,646 | $ | 5,370,663 | ||||||||
LIABILITIES |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Line of credit |
$ | 284,300 | $ | | $ | | $ | 284,300 | ||||||||
Current portion of long-term debt |
1,525 | 4,927 | (4,927 | ) (e) | 1,525 | |||||||||||
Accounts payable |
68,530 | 29,524 | (117 | ) (e) | 97,937 | |||||||||||
Derivative liabilities |
17,285 | 15,019 | (15,019 | ) (e) | 17,285 | |||||||||||
Accrued and other current liabilities |
144,880 | 8,335 | (2,039 | ) (d) | 151,176 | |||||||||||
Total current liabilities |
516,520 | 57,805 | (22,102 | ) | 552,223 | |||||||||||
Long-term debt |
1,519,393 | 295,000 | (295,000 | ) (e) | 2,347,319 | |||||||||||
647,530 | (f) | |||||||||||||||
180,396 | (h) | |||||||||||||||
Other non-current liabilities |
128,043 | 4,000 | 2,790 | (k) | 134,833 | |||||||||||
Total liabilities |
2,163,956 | 356,805 | 513,614 | 3,034,375 | ||||||||||||
PARTNERS CAPITAL |
||||||||||||||||
Partners capital |
1,413,664 | 524,808 | (524,808 | ) (m) | 2,339,692 | |||||||||||
505,653 | (n) | |||||||||||||||
420,375 | (b) | |||||||||||||||
Accumulated other comprehensive loss |
(21,259 | ) | | | (21,259 | ) | ||||||||||
Noncontrolling interests |
17,855 | 131,188 | (131,188 | ) (m) | 17,855 | |||||||||||
Total partners capital |
1,410,260 | 655,996 | 270,032 | 2,336,288 | ||||||||||||
Total liabilities and partners capital |
$ | 3,574,216 | $ | 1,012,801 | $ | 783,646 | $ | 5,370,663 | ||||||||
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements.
F-4
BUCKEYE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
(In thousands, except per unit amounts)
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
(In thousands, except per unit amounts)
FR Borco | Effect of | |||||||||||||||||||||||
Buckeye | Effect of | Buckeye | Topco, | FR Borco | ||||||||||||||||||||
Partners, | Holdings | Partners, | L.P. and | Topco, | ||||||||||||||||||||
L.P. | Merger | L.P. | Subsidiaries | L.P. | Combined | |||||||||||||||||||
Historical | Agreement | Historical | Historical | Acquisition | Pro Forma | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Product sales |
$ | 2,469,210 | $ | | $ | 2,469,210 | $ | | $ | | $ | 2,469,210 | ||||||||||||
Transportation and other services |
682,058 | | 682,058 | 185,558 | 9,583 | (j) | 877,199 | |||||||||||||||||
Total revenue |
3,151,268 | | 3,151,268 | 185,558 | 9,583 | 3,346,409 | ||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||
Cost of product sales and natural gas
storage services |
2,462,275 | | 2,462,275 | | | 2,462,275 | ||||||||||||||||||
Operating expenses |
278,245 | | 278,245 | 48,510 | | 326,755 | ||||||||||||||||||
Depreciation and amortization |
59,590 | | 59,590 | 40,831 | 11,333 | (j) | 111,754 | |||||||||||||||||
Loss on disposal of operating assets |
| | | 7,394 | | 7,394 | ||||||||||||||||||
General and administrative |
50,599 | | 50,599 | 17,835 | (4,078 | ) (d) | 64,356 | |||||||||||||||||
Equity plan modification expense |
21,058 | | 21,058 | | | 21,058 | ||||||||||||||||||
Total costs and expenses |
2,871,767 | | 2,871,767 | 114,570 | 7,255 | 2,993,592 | ||||||||||||||||||
Operating income |
279,501 | | 279,501 | 70,988 | 2,328 | 352,817 | ||||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Earnings from equity investments |
11,363 | | 11,363 | 398 | | 11,761 | ||||||||||||||||||
Interest and debt expense |
(89,169 | ) | | (89,169 | ) | (19,784 | ) | (12,326 | ) (g) | (120,381 | ) | |||||||||||||
(1,082 | ) (h) | |||||||||||||||||||||||
1,980 | (d) | |||||||||||||||||||||||
Other income (expense) |
(687 | ) | | (687 | ) | 1,041 | | 354 | ||||||||||||||||
Total other expense |
(78,493 | ) | | (78,493 | ) | (18,345 | ) | (11,428 | ) | (108,266 | ) | |||||||||||||
Net income |
201,008 | | 201,008 | 52,643 | (9,100 | ) | 244,551 | |||||||||||||||||
Noncontrolling interests |
(157,928 | ) | 157,467 | (a) | (461 | ) | (10,529 | ) | 10,529 | (m) | (461 | ) | ||||||||||||
Net income attributable
to parent |
$ | 43,080 | $ | 157,467 | $ | 200,547 | $ | 42,114 | $ | 1,429 | $ | 244,090 | ||||||||||||
Earnings per unit: |
||||||||||||||||||||||||
Basic |
$ | 1.66 | $ | 2.81 | $ | 2.80 | ||||||||||||||||||
Diluted |
$ | 1.65 | $ | 2.80 | $ | 2.80 | ||||||||||||||||||
Weighted average number of
units outstanding: |
||||||||||||||||||||||||
Basic |
26,016 | 45,413 | (a) | 71,429 | 15,693 | (n) | 87,122 | (o) | ||||||||||||||||
Diluted |
26,086 | 45,413 | (a) | 71,499 | 15,693 | (n) | 87,192 | (p) | ||||||||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements.
F-5
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed combined consolidated financial information is presented as
of and for the year ended December 31, 2010. The underlying pro forma adjustments are based upon
currently available information and certain estimates and assumptions made by the management of the
Partnership; therefore, actual results could differ materially from the pro forma information.
However, management believes the assumptions provide a reasonable basis for presenting the
significant effects of the BORCO acquisition and the ongoing effect from the Holdings Merger
Agreement. The management of the Partnership believes the pro forma adjustments give appropriate
effect to those assumptions and are properly applied in the pro forma information.
The Holdings Merger Agreement resulted in Holdings being considered the surviving consolidated
entity for accounting purposes rather than the Partnership, which is the surviving consolidated
entity for legal and reporting purposes. As a result, the Holdings Merger Agreement was accounted
for in Holdings consolidated financial statements as an equity transaction in accordance with
Financial Accounting Standards Board Accounting Standards Codification 810-10-45, Consolidation
Overall Changes in Parents Ownership Interest in a Subsidiary (FASB ASC 810). The Partnerships
consolidated balance sheet as of December 31, 2010 reflects the reclassification of noncontrolling
interests as of the date of the Holdings Merger Agreement associated with certain third-party
ownership interests in the Partnership to limited partners interests. However, in order to
present the ongoing effect of the Holdings Merger Agreement on noncontrolling interests in the
statement of operations, noncontrolling interests that were eliminated as a result of the Holdings
Merger Agreement were eliminated in the unaudited pro forma condensed consolidated statement of
operations as if the merger occurred on January 1, 2010.
The BORCO acquisition is reflected in the unaudited pro forma condensed combined consolidated
financial statements as being accounted for based on the acquisition method of accounting. The
total estimated purchase price is calculated as described in Note 2 to the pro forma financial
statements. The unaudited pro forma condensed combined consolidated financial statements give
effect to preliminary estimates of the fair value of BORCOs tangible and separately identifiable
intangible assets and liabilities. The fair value measurements utilize estimates based on key
assumptions of the BORCO acquisition, including prior acquisition experience, benchmarking of
similar acquisitions and historical and current market data.
Based on the Partnerships review of BORCOs summary of significant accounting policies
disclosed in its financial statements and discussions with BORCOs management, the nature and
amount of any adjustments to the historical financial statements of BORCO to conform its accounting
policies to those of the Partnership are not expected to be material. The Partnership is
conducting a further review of BORCOs accounting policies and financial statements, which may
result in revisions to BORCOs policies and classifications to conform to those of the Partnership.
The unaudited pro forma condensed combined consolidated financial information reflects the
issuance to First Reserve of approximately 4.38 million Class B Units and approximately 2.48
million Partnership LP Units with an aggregate value of $407.4 million and the issuance to Vopak of
approximately 1.10 million Class B Units and approximately 0.62 million Partnership LP Units with
an aggregate value of $98.3 million. Such issuances, combined with (i) $644.0 million of cash
consideration paid to First Reserve, (ii) $164.6 million of cash consideration paid to Vopak and
(iii) $112.0 million of cash paid on behalf of First Reserve and Vopak, consisting of $32.7 million
of cash paid on behalf of First Reserve to various third-parties and $79.3 million of cash used to
fund an escrow account resulting from the acquisition of BORCO, resulted in a total purchase price
of $1.43 billion.
Estimated transaction costs have been eliminated from the unaudited pro forma condensed
combined consolidated statements of operations as they reflect non-recurring charges directly
related to the BORCO acquisition and are not expected to have a continuing impact. The payment of
the anticipated transaction costs that had not yet been paid as of December 31, 2010 are reflected
in the unaudited pro forma condensed combined consolidated balance sheet, as a reduction of cash
and current liabilities as the amounts were accrued for in the Partnerships financial statements
as of December 31, 2010.
F-6
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
These unaudited pro forma condensed combined consolidated financial statements do not reflect
the effects of any cost savings or other synergies that may be achieved as a result of the BORCO
acquisition, are based on assumptions that the Partnership believes are reasonable under the
circumstances and are intended for informational purposes only. These statements do not necessarily
reflect the results of operations or financial position of the Partnership that would have resulted
had the BORCO acquisition actually been consummated as of the indicated dates, and are not
necessarily indicative of the future results of operations or the future financial position of the
Partnership.
Note 2. BORCO Acquisition Purchase Price and Purchase Accounting Adjustments
The following table provides information regarding the pro forma purchase price, the pro forma
adjustments to recorded assets and liabilities and goodwill related to BORCO (in thousands):
Issuance of approximately 4.38 million Class B Units to First Reserve |
$ | 254,619 | ||||||
Issuance of approximately 2.48 million LP Units to First Reserve |
152,772 | |||||||
Issuance of approximately 1.10 million Class B Units to Vopak |
60,069 | |||||||
Issuance of approximately 0.62 million LP Units to Vopak |
38,193 | |||||||
Cash consideration to First Reserve |
644,049 | |||||||
Cash consideration to Vopak |
164,616 | |||||||
Cash paid on behalf of sellers |
112,021 | |||||||
Consideration issued to effect the transaction |
$ | 1,426,339 | ||||||
Net assets acquired: |
||||||||
BORCO partners capital |
655,996 | |||||||
Estimated adjustments to reflect net assets acquired at fair value: |
||||||||
Property, plant and equipment, net |
532,068 | |||||||
Intangible assets, net |
(102,035 | ) | ||||||
Other non-current assets |
(10,516 | ) | ||||||
Other non-current liabilities |
(2,790 | ) | ||||||
Historical BORCO goodwill |
(141,346 | ) | ||||||
931,377 | ||||||||
Pro forma goodwill relating to BORCO |
$ | 494,962 | ||||||
The LP Units issued to First Reserve and Vopak were based on the closing prices of the
Partnerships LP Units on the day of closing of the acquisitions, which for First Reserve on
January 18, 2011 was $68.35 per LP Unit, and for Vopak on February 16, 2011 was $64.50 per LP Unit.
The value attributed to the LP Units issued to both First Reserve and Vopak reflect a 10%
discount, consistent with the discount on the LP Units issued to the institutional investors. The
Class B Units issued to First Reserve and Vopak were also valued based on the closing price of the
Partnerships LP Units on the respective dates of closing of the acquisitions, and each reflected a
15% discount, consistent with the discount on the Class B Units issued to institutional investors
and primarily related to the option of the Partnership to pay Class B Unit distributions with cash
or by issuing additional Class B Units, with the number of Class B Units issued based upon the
volume-weighted average price of the LP Units for the 10 trading days immediately preceding the
date the distributions are declared, less a discount of 15%.
The preliminary allocation of the purchase price to the fair values of assets to be acquired
and liabilities to be assumed includes pro forma adjustments for the fair value of property, plant
and equipment, intangible assets and goodwill. Any additional adjustments to reflect BORCOs
assets and liabilities at fair value would affect the pro forma goodwill relating to BORCO, and may
affect depreciation or amortization expense in the future. Accordingly, the final allocation could
result in significantly different amounts from the amounts presented in the pro forma information.
For example, if it were determined that the fair value of BORCOs property, plant and equipment
exceeds its preliminary estimated fair value by $100 million, goodwill would decrease by a like
amount,
F-7
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
and depreciation expense would increase by approximately $3.7 million per year, based on an
estimated average remaining useful asset life of 27 years. In addition, if it were determined
that the fair value of BORCOs intangible assets exceeds its preliminary estimated fair value by
$25 million, goodwill would decrease by a like amount, and amortization expense would increase by
approximately $1.0 million per year, based on an estimated average remaining useful asset life of
25 years.
Note 3. Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined consolidated
financial statements are as follows:
(a) | Reflects the reclassification to limited partners interest of net income previously allocated to noncontrolling interest in consolidated subsidiaries as reported by Holdings related primarily to the Partnerships public limited partner unitholders. In order to present the ongoing effect of the Holdings Merger Agreement on noncontrolling interests in the statement of operations, noncontrolling interests that were eliminated as a result of the Holdings Merger Agreement were eliminated in the unaudited pro forma condensed consolidated statement of operations as if the merger occurred on January 1, 2010. In addition, the weighted average number of units outstanding, on a pro forma basis, has been adjusted to reflect the number of Partnership LP Units that were outstanding on the date of the Holdings Merger Agreement as if those units had been outstanding on January 1, 2010. |
(b) | Reflects cash proceeds from the issuance of approximately 1.31 million Class B Units to institutional investors at a value of $57.04 per unit and approximately 5.79 million LP Units at a value of $60.40 per unit for an aggregate amount of $425 million, less issuance costs of approximately $4.6 million. |
(c) | Reflects cash consideration of $644.0 million paid to First Reserve and $164.6 million paid to Vopak for the acquisition of BORCO. |
(d) | Reflects the elimination of estimated transaction costs of $6.1 million from the pro forma statement of operations as they reflect non-recurring charges directly related to the BORCO acquisition and are not expected to have a continuing impact. Also reflects the payment of estimated non-recurring BORCO acquisition costs of approximately $2.0 million that had been accrued for as of December 31, 2010. These transaction costs are shown as an adjustment to current liabilities to reflect the payment of the accrued amounts. |
(e) | Reflects the repayment of BORCOs existing debt of $299.9 million, the settlement of its interest rate derivative instruments of $15.0 million, the write-off of unamortized debt issuance costs from other assets of $10.5 million and the payment of accrued interest (in accounts payable) of $0.1 million. The write-off of the unamortized debt issuance costs is not reflected in the unaudited pro forma condensed combined consolidated statement of operations as the write-off is non-recurring and is not expected to have a continuing impact. |
(f) | Reflects the issuance of new debt used to finance the BORCO acquisition. The Partnership issued $650.0 million aggregate principal amount of 4.875% Notes due 2021 on January 13, 2011 (4.875% Notes). The 4.875% Notes were issued at 99.62% of their principal amount. Debt issuance costs for the 4.875% Notes were approximately $4.2 million, which will be amortized over the ten-year term of the 4.875% Notes. |
(g) | Reflects: (i) the elimination of BORCOs historical interest expense of $19.8 million related to its existing debt and debt issuance costs, as a result of the Partnerships repayment of such debt; (ii) interest expense of $31.7 million on the 4.875% Notes; and (iii) amortization of $0.4 million of debt issuance costs on the 4.875% Notes. |
F-8
BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
(h) | Reflects borrowings of $180.4 million under the Partnerships unsecured revolving credit facility to fund a portion of the purchase price of the acquisition of BORCO, and the related interest expense of $1.0 million, calculated using the weighted average interest rate under the Partnerships unsecured revolving credit facility for borrowings outstanding at December 31, 2010 of 0.6%. |
(i) | Reflects amounts paid on behalf of the sellers of $112.0 million, including $79.3 million to be held in escrow related to Bahamian transfer taxes payable. |
(j) | Reflects an increase in BORCOs property, plant and equipment to the estimated fair value and the related increase to depreciation expense. The estimated remaining useful lives of the property, plant and equipment range from 4 to 30 years. Also reflects a net decrease in BORCOs identifiable intangible assets to the estimated fair value, with the elimination of BORCOs existing intangible assets, $204.0 million of value attributed to customer relationships and a negative value of $57.5 million attributed to unfavorable storage contracts. The estimated remaining useful lives of the customer relationships approximate 25 years, and the related amortization is reflected as an adjustment to amortization expense. The remaining useful lives of the unfavorable storage contracts approximate 6 years, and the related amortization is reflected as an increase to revenue. |
(k) | Reflects an increase to record other non-current liabilities at fair value. |
(l) | Reflects the elimination of BORCOs historical goodwill and the recognition of goodwill resulting from the BORCO acquisition. |
(m) | Reflects the elimination of BORCOs partners capital balances and the elimination of BORCOs noncontrolling interests as the Partnership acquired 100% of BORCO. |
(n) | Reflects the recognition of Class B Units and LP Units issued to First Reserve and Vopak and the Class B Units and LP Units issued to the institutional investors. |
(o) | The Partnerships pro forma basic weighted average number of units outstanding was calculated as follows (in thousands): |
Year Ended | ||||
December 31, | ||||
2010 | ||||
Pro forma basic weighted average number of LP Units outstanding |
71,429 | |||
Class B Units and LP Units issued in connection with BORCO acquisition
weighted average |
15,693 | |||
Pro forma basic weighted average number of Class B Units and LP Units
outstanding |
87,122 | |||
The pro forma basic weighted average number of LP Units outstanding of 71.4 million and the pro forma basic weighted average number of Class B Units and LP Units outstanding of 87.1 million give effect to the Holdings Merger Agreement as the LP Units issued in that transaction had been outstanding on January 1, 2010. |
The Class B Units represent a separate class of the Partnerships limited partnership interests. The Class B Units share equally with the LP Units (i) with respect to the payment of distributions and (ii) in the event of a liquidation of the Partnership. The Partnership has the option to pay distributions on the Class B Units with cash or by issuing additional Class B Units, with the number of Class B Units issued based upon the volume-weighted average price of the LP Units for the 10 trading days immediately preceding the date the distributions are declared, less a discount of 15%. During 2011, the Partnership expects the number of its |
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BUCKEYE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
units outstanding to increase, as the Partnership may settle the quarterly distribution payments in connection with the Class B Units by issuing additional Class B Units, rather than through the payment of cash. Had such units been outstanding during 2010 and the Partnership elected to settle the quarterly distribution payments by issuing additional Class B Units, approximately 0.5 million additional Class B Units would have been issued during the year, which would have reduced both basic and diluted earnings per unit by $0.02 based on the increase in the weighted average number of units outstanding. |
The Class B Units have the same voting rights as if they were outstanding LP Units and are entitled to vote as a separate class on any matters that materially adversely affect the rights or preferences of the Class B Units in relation to other classes of partnership interests or as required by law. |
(p) | The Partnerships pro forma diluted weighted average number of units outstanding was calculated as follows (in thousands): |
Year Ended | ||||
December 31, | ||||
2010 | ||||
Pro forma diluted weighted average number of LP Units outstanding |
71,499 | |||
Class B Units and LP Units issued in connection with BORCO acquisition
weighted average |
15,693 | |||
Pro forma diluted weighted average number of Class B Units and LP Units
outstanding |
87,192 | |||
The pro forma diluted weighted average number of LP Units outstanding of 71.5 million and the pro forma diluted weighted average number of Class B Units and LP Units outstanding of 87.2 million give effect to the Holdings Merger Agreement as if the LP Units issued in that transaction had been outstanding on January 1, 2010. |
The Class B Units convert into LP Units on a one-for-one basis on the earlier of (a) the date on which at least 4 million barrels of incremental storage capacity are placed in service by BORCO and (b) the third anniversary of the closing of the BORCO acquisition. |
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