<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NO. 1-13603
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0329620
(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NUMBER)
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(713) 759-3636
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether each 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
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 38,412 $ 23,267
Short-term investments ................................. 1,475 1,475
Accounts receivable, trade ............................. 15,949 22,425
Inventories ............................................ 5,862 8,451
Other .................................................. 4,534 2,633
------------ ------------
Total current assets ................................ 66,232 58,251
------------ ------------
Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $220,101 and $214,044) 620,179 611,695
Investments .............................................. 5,241 5,242
Intangible assets ........................................ 34,448 34,926
Advances to limited partner .............................. 2,354 2,354
Other assets ............................................. 11,011 11,748
------------ ------------
Total assets ........................................ $ 739,465 $ 724,216
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities ............... $ 7,188 $ 7,413
Accounts payable, general partner ...................... 3,144 3,817
Accrued interest ....................................... 6,703 13,265
Other accrued taxes .................................... 5,212 6,370
Other .................................................. 7,950 9,298
------------ ------------
Total current liabilities ........................... 30,197 40,163
------------ ------------
Senior Notes ............................................. 389,761 389,753
Other long-term debt ..................................... 83,000 63,000
Other liabilities and deferred credits ................... 2,914 3,071
Partners' capital:
General partner's interest ............................. 2,365 2,309
Limited partner's interest ............................. 231,228 225,920
------------ ------------
Total partners' capital ............................. 233,593 228,229
------------ ------------
Total liabilities and partners' capital ............. $ 739,465 $ 724,216
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 3
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
Operating revenues:
Transportation - Refined products ......... $ 28,030 $ 25,596
Transportation - LPGs ..................... 23,117 26,595
Mont Belvieu operations ................... 4,471 2,897
Other - net .............................. 8,160 6,062
------------ ------------
Total operating revenues ............... 63,778 61,150
------------ ------------
Costs and expenses:
Operating, general and administrative ..... 19,112 17,121
Operating fuel and power .................. 7,222 6,559
Depreciation and amortization ............. 6,783 6,763
Taxes - other than income taxes ........... 2,323 2,509
------------ ------------
Total costs and expenses ............... 35,440 32,952
------------ ------------
Operating income ....................... 28,338 28,198
Interest expense ............................ (8,320) (7,536)
Interest costs capitalized .................. 1,010 142
Other income - net .......................... 612 402
------------ ------------
Net income ............................. $ 21,640 $ 21,206
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 21,640 $ 21,206
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization .......................... 6,783 6,763
Equity in loss (income) of affiliate ................... (78) 74
Decrease (increase) in accounts receivable, trade ...... 6,476 (946)
Decrease in inventories ................................ 2,589 638
Decrease (increase) in other current assets ............ (1,901) 31
Decrease in accounts payable and accrued expenses ...... (9,966) (11,829)
Other .................................................. 517 (541)
------------ ------------
Net cash provided by operating activities ......... 26,060 15,396
------------ ------------
Cash flows from investing activities:
Proceeds from cash investments ............................ -- 3,000
Purchases of cash investments ............................. -- (1,235)
Capital expenditures ...................................... (14,788) (11,069)
------------ ------------
Net cash used in investing activities ............. (14,788) (9,304)
------------ ------------
Cash flows from financing activities:
Proceeds from term loan ................................... 20,000 --
Advances to limited partner ............................... -- (410)
Distributions ............................................. (16,127) (14,677)
------------ ------------
Net cash provided by (used in) financing activities 3,873 (15,087)
------------ ------------
Net increase (decrease) in cash and cash equivalents ........ 15,145 (8,995)
Cash and cash equivalents at beginning of period ............ 23,267 36,723
------------ ------------
Cash and cash equivalents at end of period .................. $ 38,412 $ 27,728
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Interest paid during the period (net of capitalized interest) $ 13,779 $ 14,182
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
TE Products Pipeline Company, Limited Partnership (the "Partnership"),
a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P.
(the "Parent Partnership") owns a 98.9899% interest as the sole limited partner.
On March 31, 2000, Texas Eastern Products Pipeline Company, a Delaware
corporation and general partner of the Partnership, was reorganized into Texas
Eastern Products Pipeline Company, LLC (the "Company" or "General Partner"), a
Delaware limited liability company. Additionally on March 31, 2000, Duke Energy
Corporation ("Duke Energy"), contributed its ownership of the General Partner to
Duke Energy Field Services, LLC ("DEFS"). DEFS is a joint venture between Duke
Energy and Phillips Petroleum Company. Duke Energy holds a majority interest in
DEFS.
The Company, an indirect wholly-owned subsidiary of DEFS, owns a
1.0101% general partner interest in the Partnership. The Company, as general
partner, performs all management and operating functions required for the
Partnership pursuant to the Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership (the "Partnership Agreement"). The general
partner is reimbursed by the Partnership for all reasonable direct and indirect
expenses incurred in managing the Partnership.
The accompanying unaudited consolidated financial statements reflect
all adjustments, which are, in the opinion of management, of a normal and
recurring nature and necessary for a fair statement of the financial position of
the Partnership as of March 31, 2000, and the results of operations and cash
flows for the periods presented. The results of operations for the three months
ended March 31, 2000, are not necessarily indicative of results of operations
for the full year 2000. The interim financial statements should be read in
conjunction with the Partnership's consolidated financial statements and notes
thereto presented in the TE Products Pipeline Company, Limited Partnership
Annual Report on Form 10-K for the year ended December 31, 1999. Certain amounts
from the prior year have been reclassified to conform to current presentation.
The Partnership has one business segment: the transportation, storage
and terminaling of refined products and liquefied petroleum gases ("LPGs"). The
Partnership's interstate transportation operations, including rates charged to
customers, are subject to regulations prescribed by the Federal Energy
Regulatory Commission ("FERC"). Refined products and LPGs are referred to
herein, collectively, as "petroleum products" or "products."
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement establishes standards for and disclosures of derivative
instruments and hedging activities. In July 1999, the FASB issued SFAS No. 137
to delay the effective date of SFAS No. 133 until fiscal years beginning after
June 15, 2000. The Partnership expects to adopt this standard effective January
1, 2001. The Partnership is currently evaluating the impact of this statement on
its financial condition and results of operations.
NOTE 3. INVESTMENTS
SHORT-TERM INVESTMENTS
The Partnership routinely invests cash in liquid short-term investments
as part of it cash management program. Investments with maturities at date of
purchase of 90 days or less are considered cash equivalents. At March 31, 2000,
short-term investments included $1.5 million of investment-grade corporate
notes, which mature
5
<PAGE> 6
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
within one year. All short-term investments are classified as held-to-maturity
securities and are stated at amortized cost. The aggregate fair value of such
securities approximates amortized cost at March 31, 2000.
LONG-TERM INVESTMENTS
At March 31, 2000, the Partnership had $5.2 million invested in
investment-grade corporate notes, which have varying maturities through 2004.
These securities are classified as held-to-maturity securities and are stated at
amortized cost. The aggregate fair value of such securities approximates
amortized cost at March 31, 1999.
NOTE 4. INVENTORIES
Inventories are carried at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
Gasolines ................................... $ 1,532 $ 3,270
Propane ..................................... 168 223
Butanes ..................................... 58 605
Fuel oil .................................... 200 386
Other products .............................. 436 613
Materials and supplies ...................... 3,468 3,354
------------ ------------
Total ............................. $ 5,862 $ 8,451
============ ============
</TABLE>
The costs of inventories were lower than market at March 31, 2000, and
December 31, 1999.
NOTE 5. LONG TERM DEBT
SENIOR NOTES
On January 27, 1998, the Partnership completed the issuance of $180
million principal amount of 6.45% Senior Notes due 2008, and $210 million
principal amount of 7.51% Senior Notes due 2028 (collectively the "Senior
Notes"). The 6.45% Senior Notes due 2008 are not subject to redemption prior to
January 15, 2008. The 7.51% Senior Notes due 2028 may be redeemed at any time
after January 15, 2008, at the option of the Partnership, in whole or in part,
at a premium.
The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year. The Senior Notes are unsecured obligations of the Partnership and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Partnership. The indenture governing the Senior Notes contains covenants,
including, but not limited to, covenants limiting (i) the creation of liens
securing indebtedness and (ii) sale and leaseback transactions. However, the
indenture does not limit the Partnership's ability to incur additional
indebtedness.
OTHER LONG TERM DEBT
In connection with the purchase of the fractionation assets from DEFS
as of March 31, 1998, TEPPCO Colorado received a $38 million bank loan from
SunTrust Bank ("SunTrust"). The SunTrust loan bears interest at a
6
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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
rate of 6.53%, which is payable quarterly. The principal balance of the loan is
payable in full on April 21, 2001. The Partnership is guarantor on the loan.
On May 17, 1999, the Partnership entered into a $75 million term loan
agreement to finance construction of three new pipelines between the
Partnership's terminal in Mont Belvieu, Texas and Port Arthur, Texas. The loan
agreement has a term of five years. SunTrust is the administrator of the loan.
At March 31, 2000, $45 million was outstanding under the term loan agreement.
Principal will be paid quarterly as follows, with the remaining principal
balance payable on May 17, 2004.
<TABLE>
<CAPTION>
QUARTERLY PERIODS ENDING PAYMENT AMOUNT
------------------------ --------------
<S> <C>
June 2001 through March 2002 $2.50 million
June 2002 through March 2003 $3.75 million
June 2003 through March 2004 $5.00 million
</TABLE>
The interest rate for the $75 million term loan is based on the
Partnership's option of either SunTrust's prime rate, the federal funds rate or
LIBOR rate in effect at the time of the borrowings and is adjusted monthly,
bimonthly, quarterly or semi-annually. Interest is payable quarterly from the
time of borrowing. The weighted average interest rate for amounts outstanding
under the term loan at March 31, 2000 was 7.36%.
Both the $38 million term loan and the $75 million term loan with
SunTrust contain restrictive financial covenants that require the Partnership to
maintain a minimum level of partners' capital as well as debt-to-earnings,
interest coverage and capital expenditure coverage ratios. At March 31, 2000,
the Partnership was in compliance with all financial covenants related to these
loan agreements.
WORKING CAPITAL FACILITIES
On May 17, 1999, the Partnership entered into a five-year $25 million
revolving credit agreement. SunTrust is the administrative agent. The interest
rate is based on the Partnership's option of either SunTrust's prime rate, the
federal funds rate or LIBOR rate in effect at the time of the borrowings and is
payable quarterly. Interest rates are adjusted monthly, bimonthly, quarterly or
semi-annually. The Partnership has not made any borrowings under this revolving
credit facility.
The revolving credit agreement with SunTrust contains restrictive
financial covenants that require the Partnership to maintain a minimum level of
partners' capital as well as debt-to-earnings, interest coverage and capital
expenditure coverage ratios. At March 31, 2000, the Partnership was in
compliance with all financial covenants related to this loan agreement.
NOTE 6. CASH DISTRIBUTIONS
The Partnership makes quarterly cash distributions of all of its
Available Cash, generally defined as consolidated cash receipts less
consolidated cash disbursements and cash reserves established by the general
partner in its sole discretion. Generally, distributions are made 98.9899% to
the Parent Partnership and 1.0101% to the general partner.
On February 4, 2000, the Partnership paid a cash distribution of $16.1
million for the fourth quarter of 1999. Additionally, on April 14, 2000, the
Partnership declared a cash distribution of $17.6 million for the quarter ended
March 31, 2000. The distribution was paid on May 5, 2000. The distribution
increase reflects the Partnership's success in improving cash flow levels.
7
<PAGE> 8
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 7. CONTINGENCIES
In the fall of 1999, the Company and the Partnership became involved in
a lawsuit in Jackson County Circuit Court, Jackson County, Indiana. In Ryan E.
McCleery and Marcia S. McCleery, et al. v. Texas Eastern Corporation, et al.
(including the Company and Partnership), plaintiffs contend, among other things,
that the Company and other defendants stored and disposed of toxic and hazardous
substances and hazardous wastes in a manner that caused the materials to be
released into the air, soil and water. They further contend that the release
caused damages to the plaintiffs. In their Complaint, the plaintiffs allege
strict liability for both personal injury and property damage together with
gross negligence, continuing nuisance, trespass, criminal mischief and loss of
consortium. Furthermore, the plaintiffs are seeking compensatory, punitive and
treble damages. The Company has filed an Answer to the Complaint, denying the
allegations, as well as various other motions. This case is in the early stages
of discovery and is not covered by insurance. The Company is defending itself
vigorously against this lawsuit. The Partnership cannot estimate the loss, if
any, associated with this pending lawsuit.
The Partnership is involved in various other claims and legal
proceedings incidental to its business. In the opinion of management, these
claims and legal proceedings will not have a material adverse effect on the
Partnership's consolidated financial position, results of operations or cash
flows.
The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes its operations are in material compliance with
applicable environmental regulations, risks of significant costs and liabilities
are inherent in pipeline operations, and there can be no assurance that
significant costs and liabilities will not be incurred. Moreover, it is possible
that other developments, such as increasingly strict environmental laws and
regulations and enforcement policies thereunder, and claims for damages to
property or persons resulting from the operations of the pipeline system, could
result in substantial costs and liabilities to the Partnership. The Partnership
does not anticipate that changes in environmental laws and regulations will have
a material adverse effect on its financial position, operations or cash flows in
the near term.
The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM is expected to issue a Record of
Decision formally approving the remediation program. After the Record of
Decision has been issued, the Partnership will enter into an Agreed Order for
the continued operation and maintenance of the program. The Partnership has
accrued $1.2 million at March 31, 2000 for future costs of the remediation
program for the Seymour terminal. In the opinion of the Company, the completion
of the remediation program will not have a material adverse impact on the
Partnership's financial condition, results of operations or liquidity.
Tariff rates of interstate oil pipeline companies are currently
regulated by the FERC, primarily through an index methodology, whereby a
pipeline company is allowed to change its rates based on the change from year to
year in the Producer Price Index for finished goods less 1% ("PPI Index"). In
the alternative, interstate oil pipeline companies may elect to support rate
filings by using a cost-of-service methodology, competitive market showings
("Market Based Rates") or agreements between shippers and the oil pipeline
company that the rate is acceptable ("Settlement Rates").
In May 1999, the Partnership filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. Such application is currently under review by the FERC. The FERC
approved a request of the Partnership waiving the requirement to adjust refined
products transportation
8
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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
tariffs pursuant to the PPI Index while its Market Based Rates application is
under review. Under the PPI Index, refined products transportation rates in
effect on June 30, 1999 would have been reduced by approximately 1.83% effective
July 1, 1999. If any portion of the Market Based Rates application is denied by
the FERC, the Partnership has agreed to refund, with interest, amounts collected
after June 30, 1999, under the tariff rates in excess of the PPI Index. As a
result of the refund obligation potential, the Partnership has deferred all
revenue recognition of rates charged in excess of the PPI Index. At March 31,
2000, the amount deferred for possible rate refunds, including interest, totaled
approximately $1.2 million.
In July 1999, certain shippers filed protests with the FERC on the
Partnership's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in a competitive market determination
in those destination markets under protest.
Substantially all of the petroleum products transported and stored by
the Partnership are owned by the Partnership's customers. At March 31, 2000, the
Partnership had approximately 9.6 million barrels of products in its custody
owned by customers. The Partnership is obligated for the transportation, storage
and delivery of such products on behalf of its customers. The Partnership
maintains insurance adequate to cover product losses through circumstances
beyond its control.
NOTE 8. CURRENT DEVELOPMENTS
In March 2000, the Partnership, CMS Energy Corporation and Marathon
Ashland Petroleum LLC announced an agreement to form a limited liability company
that will own and operate an interstate refined petroleum products pipeline
extending from the upper Texas Gulf Coast to Illinois. Each of the companies
will own a one-third interest in the limited liability company. The
Partnership's participation in this joint venture is in lieu of its previously
announced expansion plan to construct a new pipeline from Beaumont, Texas, to
Little Rock, Arkansas. The Partnership recognized $0.9 million of expense in
March 2000 to write-off project evaluation costs related to the abandoned
construction plan.
The limited liability company will build a 70-mile, 24-inch diameter
pipeline connecting the Partnership's facility in Beaumont, Texas, with the
start of an existing 720-mile, 26-inch diameter pipeline extending from
Longville, Louisiana, to Bourbon, Illinois. The pipeline, which has been named
Centennial Pipeline, will pass through portions of Texas, Louisiana, Arkansas,
Mississippi, Tennessee, Kentucky and Illinois. CMS Panhandle Pipe Line
Companies, which owns the existing 720-mile pipeline, has made a filing with the
FERC to take the line out of natural gas service as part of the regulatory
process. Conversion of the pipeline to refined products service is expected to
be completed by the end of 2001. The Centennial Pipeline will intersect the
Partnership's existing mainline near Lick Creek, Illinois, where a new two
million barrel refined petroleum products storage terminal will be built.
In May 2000, the Company signed a definitive agreement to acquire
certain assets of ARCO Pipe Line Company ("ARCO"), a wholly owned subsidiary of
Atlantic Richfield Company, for $318.5 million. The purchase includes ARCO's
interest in a crude oil transportation pipeline from the Texas Gulf Coast to
Cushing, Oklahoma, Mid-continent crude distribution services, and crude oil
terminal facilities. This purchase agreement replaced a previously announced
definitive agreement signed in March 2000 to acquire the stock of ARCO for $355
million, which included ARCO's interest in a refined products transportation
pipeline from the Texas Gulf Coast to Cushing. The transaction is expected to
be accounted for under the purchase method for accounting purposes. The
purchase is expected to close during the second quarter of 2000, however, it is
contingent upon the satisfaction of regulatory requirements. The Company is
currently evaluating financing alternatives of the purchase, including external
borrowing and the issuance of additional limited partner Units.
9
<PAGE> 10
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Under the proposed transaction, the Company will acquire ARCO's
50-percent ownership interest in Seaway Pipeline Company's ("Seaway") 500-mile,
30-inch diameter pipeline that carries mostly imported crude oil from a marine
terminal at Freeport, Texas, to Cushing. The line has a capacity of 350,000
barrels per day. The Partnership will assume ARCO's role as operator of Seaway.
The Company will also acquire: (i) ARCO's crude oil terminal facilities in
Cushing and Midland, Texas, including the line transfer and pumpover business
at each location; (ii) an undivided ownership interest in both the Rancho
Pipeline, a 400-mile, 24-inch diameter, crude oil pipeline from West Texas to
Houston, and the Basin Pipeline, a 416-mile, crude oil pipeline running from
Jal, New Mexico, through Midland to Cushing, both of which will be operated by
another joint owner; and (iii) the receipt and delivery pipelines known as the
West Texas Trunk System, which is located around the Midland terminal.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following information is provided to facilitate increased
understanding of the 2000 and 1999 interim consolidated financial statements and
accompanying notes presented in Item 1. Material period-to-period variances in
the consolidated statements of income are discussed under "Results of
Operations." The "Financial Condition and Liquidity" section analyzes cash flows
and financial position. Discussion included in "Other Matters" addresses key
trends, future plans and contingencies. Throughout these discussions, management
addresses items that are reasonably likely to materially affect future liquidity
or earnings.
The Partnership's operations consist primarily of the transportation,
storage and terminaling of petroleum products and the fractionation of natural
gas liquids ("NGLs"). Revenues are derived from the transportation of refined
products and LPGs, the storage and short-haul shuttle transportation of LPGs at
the Mont Belvieu, Texas, complex, sale of product inventory and other ancillary
services. Labor and electric power costs comprise the two largest operating
expense items of the Partnership. Operations are somewhat seasonal with higher
revenues generally realized during the first and fourth quarters of each year.
Refined products volumes are generally higher during the second and third
quarters because of greater demand for gasolines during the spring and summer
driving seasons. LPGs volumes are generally higher from November through March
due to higher demand in the Northeast for propane, a major fuel for residential
heating.
RESULTS OF OPERATIONS
For the quarter ended March 31, 2000, the Partnership reported net
income of $21.6 million, compared with net income of $21.2 million for the first
quarter of 1999. The $0.4 million increase in net income resulted primarily from
a $2.6 million increase in operating revenues and a $0.2 million increase in
other income, partially offset by a $2.5 million increase in costs and expenses.
See discussion below of factors affecting net income for the comparative
periods.
Volume and average tariff information:
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, PERCENTAGE
--------------------------------- INCREASE
2000 1999 (DECREASE)
------------ ------------ ------------
<S> <C> <C> <C>
VOLUMES DELIVERED
(in thousands of barrels)
Refined products 29,613 28,155 5%
LPGs 11,693 13,172 (11%)
Mont Belvieu operations 7,072 6,885 3%
------------ ------------ ------------
Total 48,378 48,212 --
============ ============ ============
AVERAGE TARIFF PER BARREL
Refined products $ 0.95(a) $ 0.91 4%
LPGs 1.98 2.02 (2%)
Mont Belvieu operations 0.16 0.16 --
Average system tariff per barrel $ 1.08 $ 1.11 (3%)
============ ============ ============
</TABLE>
(a) Net of amounts deferred related to potential refund obligation.
Refined products transportation revenues increased $2.4 million for the
quarter ended March 31, 2000, compared with the prior-year quarter, as a result
of a 5% increase in volumes delivered and a 4% increase in the refined products
average tariff per barrel. The increase in volumes delivered was primarily
attributable to increased deliveries of motor fuel in the upper Midwest due to
favorable Gulf Coast differentials and lower production at competing Midwest
refineries. Additionally, jet fuel volumes delivered increased as a result of
continued strong
11
<PAGE> 12
RESULTS OF OPERATIONS - (CONTINUED)
demand for air travel in the Midwest. The increase in the refined products
average tariff per barrel was primarily attributable to a higher percentage of
longer-haul volumes delivered in the upper Midwest market areas, partially
offset by the 1.83% general tariff reduction pursuant to the Producer Price
Index for finished goods less 1% ("PPI Index"), effective July 1, 1999. The
Partnership deferred recognition of approximately $0.4 million of revenue during
the first quarter of 2000 with respect to potential refund obligations for rates
charged in excess of the PPI Index. See further discussion regarding Market
Based Rates included in "Other Matters."
LPGs transportation revenues decreased $3.5 million for the quarter
ended March 31, 2000, compared with the first quarter of 1999, due primarily to
lower propane volumes delivered. Propane deliveries in Midwest and Northeast
market areas decreased 26% and 10%, respectively, from the prior year as a
result of warmer winter weather during the first quarter of 2000. These
decreases were partially offset by a 12% increase in propane deliveries along
the upper Texas Gulf Coast as a result of increased petrochemical demand. The
decrease in the LPGs average tariff per barrel reflects the decreased percentage
of longer-haul transportation volumes delivered during the first quarter of
2000.
Revenues generated from Mont Belvieu operations increased $1.6 million
during the quarter ended March 31, 2000, compared with the first quarter of
1999, as a result of increased contract storage revenue. Other operating
revenues increased $2.1 million during the quarter ended March 31, 2000,
compared with the prior year quarter, due primarily to higher gains on the sale
of product inventory.
Costs and expenses increased $2.5 million for the quarter ended March
31, 2000, compared with the first quarter of 1999, due primarily to a $2.0
million increase in operating, general and administrative expenses and a $0.7
million increase in operating fuel and power expense, partially offset by a $0.2
million decrease in taxes - other than income taxes. The increase in operating,
general and administrative expenses was due primarily to $0.9 million of expense
to write-off project evaluation costs; a $0.4 million accrual related to
environmental remediation at the Partnership's Seymour, Indiana, terminal;
increased labor and benefits expenses; and increased contract labor and
consulting services. The write-off of project evaluation costs resulted from the
announcement in March 2000 of the Partnership's abandonment of its plan to
construct a pipeline from Beaumont, Texas, to Little Rock, Arkansas, in favor of
participation in the Centennial Pipeline ("Centennial") joint venture with CMS
Energy Corporation and Marathon Ashland Petroleum LLC. Each partner in the
Centennial joint venture will own a one-third interest in a 790-mile pipeline
system from the Texas Gulf Cost to the Midwest. The increase in operating fuel
and power expense resulted from increased refined products transportation
volumes delivered, which generally require more power to transport than LPGs
volumes. The decrease in taxes - other than income resulted from revisions to
previous years' estimated property tax accruals.
Interest expense increased $0.8 million during the first quarter of
2000, compared with the first quarter of 1999, due to interest expense on the
term loan to finance construction of the pipelines between Mont Belvieu and Port
Arthur, Texas. At March 31, 2000, $45 million has been borrowed on the term
loan. Capitalized interest increased $0.9 million during the first quarter 2000,
compared with the first quarter of 1999, as a result of higher balances
associated with construction-in-progress of the new pipelines between Mont
Belvieu and Port Arthur.
Other income - net increased during the first quarter of 2000, compared
with the prior year, as a result of increased interest income earned on cash
investments, coupled with increased earnings recognized on equity investments.
FINANCIAL CONDITION AND LIQUIDITY
Net cash from operations for the quarter ended March 31, 2000, totaled
$26.1 million, comprised of $28.4 million of income before charges for
depreciation and amortization, partially offset by $2.3 million of cash used for
working capital changes. This compares with cash flows from operations of $15.4
million for the first quarter of 1999, which was comprised of $28.0 million of
income before charges for depreciation and amortization, partially
12
<PAGE> 13
FINANCIAL CONDITION AND LIQUIDITY - (CONTINUED)
offset by $12.6 million of cash used for working capital changes. The decrease
in cash used for working capital changes during the first quarter of 2000, as
compared with the first quarter of 1999, resulted primarily from timing of
accounts receivable payments and product inventory sales. Net cash from
operations for the quarters ended March 31, 2000 and 1999, included interest
payments related to the Senior Notes and term loans of $14.8 million and $14.3
million, respectively.
Cash flows used in investing activities during the first quarter of
2000 was comprised of $14.8 million of capital expenditures. Cash flows used in
investing activities during the first quarter of 1999 included $11.1 million of
capital expenditures and $1.2 million of additional cash investments, partially
offset by $3.0 million of proceeds from maturities of cash investments. During
the first quarter of 2000 and 1999, capital expenditures included $10.4 million
and $7.1 million, respectively, for construction of three new pipelines between
the Partnership's terminal in Mont Belvieu, Texas and Port Arthur, Texas. The
project includes three 12-inch diameter common-carrier pipelines and associated
facilities. Each pipeline will be approximately 70 miles in length. Upon
completion, the new pipelines will transport ethylene, propylene and natural
gasoline. The anticipated completion date is the fourth quarter of 2000. The
Partnership has entered into an agreement for turnkey construction of the
pipelines and related facilities and has separately entered into agreements for
guaranteed throughput commitments. The cost of this project is expected to total
approximately $74.5 million.
The Partnership estimates that capital expenditures for 2000 will total
approximately $59 million (which includes $4 million of capitalized interest).
Approximately $31 million is expected to be used to complete construction of the
three new pipelines between Mont Belvieu and Port Arthur and approximately $8
million will be used to replace six pipelines under the Houston Ship Channel as
required by the United States Army Corp of Engineers for the deepening of the
channel. Substantially all remaining expenditures are expected to be used for
life-cycle replacements and upgrading current facilities.
On February 4, 2000, the Partnership paid a cash distribution of $16.1
million for the fourth quarter of 1999. Additionally, on April 14, 2000, the
Partnership declared a cash distribution of $17.6 million for the quarter ended
March 31, 2000. The distribution was paid on May 5, 2000. The distribution
increase reflects the Partnership's success in improving cash flow levels.
OTHER MATTERS
The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the Pipeline System are in material
compliance with applicable environmental regulations, risks of significant costs
and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred. Moreover,
it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
Pipeline System, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, operations or cash flows in the near term.
The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site groundwater contamination
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
A Feasibility Study, which includes the Partnership's proposed remediation
program, has been approved by IDEM. IDEM is expected to issue a Record of
Decision formally approving the remediation program. After the Record of
Decision has been issued, the Partnership will enter into an Agreed Order for
the continued operation and maintenance of the program. The Partnership has
accrued $1.2 million at March 31, 2000 for future costs of the remediation
program for the Seymour terminal. In the opinion of the Company, the completion
of the remediation program will not have a material adverse impact on the
Partnership's financial condition, results of operations or liquidity.
13
<PAGE> 14
OTHER MATTERS - (CONTINUED)
Tariff rates of interstate oil pipeline companies are currently
regulated by the FERC, primarily through an index methodology, whereby a
pipeline company is allowed to change its rates based on the change from year to
year in the Producer Price Index for finished goods less 1% ("PPI Index"). In
the alternative, interstate oil pipeline companies may elect to support rate
filings by using a cost-of-service methodology, competitive market showings
("Market Based Rates") or agreements between shippers and the oil pipeline
company that the rate is acceptable ("Settlement Rates").
In May 1999, the Partnership filed an application with the FERC to
charge Market Based Rates for substantially all refined products transportation
tariffs. Such application is currently under review by the FERC. The FERC
approved a request of the Partnership waiving the requirement to adjust refined
products transportation tariffs pursuant to the PPI Index while its Market Based
Rates application is under review. Under the PPI Index, refined products
transportation rates in effect on June 30, 1999 would have been reduced by
approximately 1.83% effective July 1, 1999. If any portion of the Market Based
Rates application is denied by the FERC, the Partnership has agreed to refund,
with interest, amounts collected after June 30, 1999, under the tariff rates in
excess of the PPI Index. As a result of the refund obligation potential, the
Partnership has deferred all revenue recognition of rates charged in excess of
the PPI Index. At March 31, 2000, the amount deferred for possible rate refunds,
including interest, totaled approximately $1.2 million.
In July 1999, certain shippers filed protests with the FERC on the
Partnership's application for Market Based Rates in four destination markets.
The Partnership believes it will prevail in a competitive market determination
in those destination markets under protest.
Effective July 1, 1999, the Partnership established Settlement Rates
with certain shippers of LPGs under which the rates in effect on June 30, 1999,
would not be adjusted for a period of either two or three years. Other LPGs
transportation tariff rates were reduced pursuant to the PPI Index
(approximately 1.83%), effective July 1, 1999. Effective July 1, 1999, the
Partnership canceled its tariff for deliveries of MTBE into the Chicago market
area reflecting reduced demand for transportation of MTBE into such area. The
MTBE tariffs were canceled with the consent of MTBE shippers and resulted in
increased pipeline capacity and tankage available for other products.
In February 2000, the Partnership and Louis Dreyfus Plastics
Corporation ("Louis Dreyfus") announced a joint development alliance whereby the
Partnership's Mont Belvieu petroleum liquids storage and transportation shuttle
system services will be marketed by Louis Dreyfus. The alliance will expand
services to the upper Texas Gulf Coast energy marketplace. The alliance is a
service-oriented, fee-based venture with no commodity trading.
In March 2000, the Partnership, CMS Energy Corporation and Marathon
Ashland Petroleum LLC announced an agreement to form a limited liability company
that will own and operate an interstate refined petroleum products pipeline
extending from the upper Texas Gulf Coast to Illinois. Each of the companies
will own a one-third interest in the limited liability company. The
Partnership's participation in this joint venture is in lieu of its previously
announced expansion plan to construct a new pipeline from Beaumont, Texas, to
Little Rock, Arkansas. The Partnership recognized $0.9 million of expense in
March 2000 to write-off project evaluation costs related to the abandoned
construction plan.
The limited liability company will build a 70-mile, 24-inch diameter
pipeline connecting the Partnership's facility in Beaumont, Texas, with the
start of an existing 720-mile, 26-inch diameter pipeline extending from
Longville, Louisiana, to Bourbon, Illinois. The pipeline, which has been named
Centennial Pipeline, will pass through portions of Texas, Louisiana, Arkansas,
Mississippi, Tennessee, Kentucky and Illinois. CMS Panhandle Pipe Line
Companies, which owns the existing 720-mile pipeline, has made a filing with the
FERC to take the line out of natural gas service as part of the regulatory
process. Conversion of the pipeline to refined products service is expected to
be completed by the end of 2001. The Centennial Pipeline will intersect the
Partnership's existing mainline near Lick Creek, Illinois, where a new two
million barrel refined petroleum products storage terminal will be built.
14
<PAGE> 15
OTHER MATTERS - (CONTINUED)
In May 2000, the Company signed a definitive agreement to acquire
certain assets of ARCO Pipe Line Company ("ARCO"), a wholly owned subsidiary of
Atlantic Richfield Company, for $318.5 million. The purchase includes ARCO's
interest in a crude oil transportation pipeline from the Texas Gulf Coast to
Cushing, Oklahoma, Mid-continent crude distribution services, and crude oil
terminal facilities. This purchase agreement replaced a previously announced
definitive agreement signed in March 2000 to acquire the stock of ARCO for $355
million, which included ARCO's interest in a refined products transportation
pipeline from the Texas Gulf Coast to Cushing. The transaction is expected to
be accounted for under the purchase method for accounting purposes. The
purchase is expected to close during the second quarter of 2000, however, it is
contingent upon the satisfaction of regulatory requirements. The Company is
currently evaluating financing alternatives of the purchase, including external
borrowing and the issuance of additional limited partner Units.
Under the proposed transaction, the Company will acquire ARCO's
50-percent ownership interest in Seaway Pipeline Company's ("Seaway") 500-mile,
30-inch diameter pipeline that carries mostly imported crude oil from a marine
terminal at Freeport, Texas, to Cushing. The line has a capacity of 350,000
barrels per day. The Partnership will assume ARCO's role as operator of Seaway.
The Company will also acquire: (i) ARCO's crude oil terminal facilities in
Cushing and Midland, Texas, including the line transfer and pumpover business
at each location; (ii) an undivided ownership interest in both the Rancho
Pipeline, a 400-mile, 24-inch diameter, crude oil pipeline from West Texas to
Houston, and the Basin Pipeline, a 416-mile, crude oil pipeline running from
Jal, New Mexico, through Midland to Cushing, both of which will be operated by
another joint owner; and (iii) the receipt and delivery pipelines known as the
West Texas Trunk System, which is located around the Midland terminal.
The matters discussed herein include "forward-looking statements"
within the meaning of various provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this document that address activities, events or
developments that the Partnership expects or anticipates will or may occur in
the future, including such things as estimated future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Partnership's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Partnership in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate under the
circumstances. However, whether actual results and developments will conform
with the Partnership's expectations and predictions is subject to a number of
risks and uncertainties, including general economic, market or business
conditions, the opportunities (or lack thereof) that may be presented to and
pursued by the Partnership, competitive actions by other pipeline companies,
changes in laws or regulations, and other factors, many of which are beyond the
control of the Partnership. Consequently, all of the forward-looking statements
made in this document are qualified by these cautionary statements and there can
be no assurance that actual results or developments anticipated by the
Partnership will be realized or, even if substantially realized, that they will
have the expected consequences to or effect on the Partnership or its business
or operations. For additional discussion of such risks and uncertainties, see TE
Products Pipeline Company, Limited Partnership's 1999 Annual Report on Form
10-K.
15
<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Partnership may be exposed to market risk through changes in
interest rates and commodity prices as discussed below. The Partnership has no
foreign exchange risks.
At March 31, 2000, the Partnership had outstanding $180 million
principal amount of 6.45% Senior Notes due 2008, and $210 million principal
amount of 7.51% Senior Notes due 2028 (collectively the "Senior Notes").
Additionally, the Partnership had a $38 million bank loan outstanding from
SunTrust. The SunTrust loan bears interest at a fixed rate of 6.53% and is
payable in full in April 2001. At March 31, 2000, the estimated fair value of
the Senior Notes and the SunTrust loan was approximately $338.5 million and
$37.5 million, respectively.
At March 31, 2000, the Partnership had $45 million outstanding under a
variable interest rate term loan. The interest rate for this credit facility is
based on the Partnership's option of either SunTrust Bank's prime rate, the
federal funds rate or LIBOR rate in effect at the time of the borrowings and is
adjusted monthly, bimonthly, quarterly or semi-annually. Utilizing the balances
of variable interest rate debt outstanding at March 31, 2000, and assuming
market interest rates increase 100 basis points, the potential annual increase
in interest expense is approximately $0.5 million.
The Partnership periodically enters into futures contracts to hedge its
exposure to price risk on product inventory transactions. For derivative
contracts to qualify as a hedge, the price movements in the commodity derivative
must be highly correlated with the underlying hedged commodity. Contracts that
qualify as hedges and held for non-trading purposes are accounted for using the
deferral method of accounting. Under this method, gains and losses are not
recognized until the underlying physical transaction occurs. Deferred gains and
losses related to such instruments are reported in the consolidated balance
sheet as current assets or current liabilities. At March 31, 2000, there were no
outstanding futures contracts.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit
Number Description
------ -----------
2.1 Amended and Restated Purchase Agreement by and
between Atlantic Richfield Company and Texas Eastern
Products Pipeline Company, LLC with respect to the
sale of ARCO Pipe Line Company dated as of May 10,
2000 (Filed as Exhibit 2.1 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2000 and incorporated herein
by reference).
3.1 Certificate of Formation of TEPPCO Colorado, LLC
(Filed as Exhibit 3.2 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1998 and incorporated herein
by reference).
3.2 Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership,
effective July 21, 1998 (Filed as Exhibit 3.2 to Form
8-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) dated July 21, 1998 and incorporated herein
by reference).
4.1 Form of Indenture between TE Products Pipeline
Company, Limited Partnership and The Bank of New
York, as Trustee, dated as of January 27, 1998 (Filed
as Exhibit 4.3 to TE Products Pipeline Company,
Limited Partnership's Registration Statement on Form
S-3 (Commission File No. 333-38473) and incorporated
herein by reference).
10.1 Assignment and Assumption Agreement, dated March 24,
1988, between Texas Eastern Transmission Corporation
and the Company (Filed as Exhibit 10.8 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
10.2 Texas Eastern Products Pipeline Company 1997 Employee
Incentive Compensation Plan executed on July 14, 1997
(Filed as Exhibit 10 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended September 30, 1997 and incorporated herein by
reference).
10.3 Agreement Regarding Environmental Indemnities and
Certain Assets (Filed as Exhibit 10.5 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 1990 and incorporated
herein by reference).
10.4 Texas Eastern Products Pipeline Company Management
Incentive Compensation Plan executed on January 30,
1992 (Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1992 and incorporated herein
by reference).
10.5 Texas Eastern Products Pipeline Company Long-Term
Incentive Compensation Plan executed on October 31,
1990 (Filed as Exhibit 10.9 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1990 and incorporated herein
by reference).
10.6 Form of Amendment to Texas Eastern Products Pipeline
Company Long-Term Incentive Compensation Plan (Filed
as Exhibit 10.7 to the Partnership's Form 10-K
(Commission File No. 1-10403) for the year ended
December 31, 1995 and incorporated herein by
reference).
10.7 Duke Energy Corporation Executive Savings Plan (Filed
as Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended
December 31, 1999 and incorporated herein by
reference).
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
10.8 Duke Energy Corporation Executive Cash Balance Plan
(Filed as Exhibit 10.8 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1999 and incorporated herein
by reference).
10.9 Duke Energy Corporation Retirement Benefit
Equalization Plan (Filed as Exhibit 10.9 to Form 10-K
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).
10.10 Employment Agreement with William L. Thacker, Jr.
(Filed as Exhibit 10 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended September 30, 1992 and incorporated herein by
reference).
10.11 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan executed on March 8, 1994 (Filed
as Exhibit 10.1 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
March 31, 1994 and incorporated herein by reference).
10.12 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan, Amendment 1, effective January
16, 1995 (Filed as Exhibit 10.12 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 1999 and incorporated
herein by reference).
10.13 Asset Purchase Agreement between Duke Energy Field
Services, Inc. and TEPPCO Colorado, LLC, dated March
31, 1998 (Filed as Exhibit 10.14 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 1998 and incorporated
herein by reference).
10.14 Credit Agreement between TEPPCO Colorado, LLC,
SunTrust Bank, Atlanta, and Certain Lenders, dated
April 21, 1998 (Filed as Exhibit 10.15 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 1998 and
incorporated herein by reference).
10.15 First Amendment to Credit Agreement between TEPPCO
Colorado, LLC, SunTrust Bank, Atlanta, and Certain
Lenders, effective June 29, 1998 (Filed as Exhibit
10.15 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1998 and incorporated herein by reference).
10.16 Form of Employment Agreement between the Company and
Ernest P. Hagan, Thomas R. Harper, David L. Langley,
Charles H. Leonard and James C. Ruth, dated December
1, 1998 (Filed as Exhibit 10.20 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 1998 and incorporated
herein by reference).
10.17 Agreement Between Owner and Contractor between TE
Products Pipeline Company, Limited Partnership and
Eagleton Engineering Company, dated February 4, 1999
(Filed as Exhibit 10.21 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein
by reference).
10.18 Services and Transportation Agreement between TE
Products Pipeline Company, Limited Partnership and
Fina Oil and Chemical Company, BASF Corporation and
BASF Fina Petrochemical Limited Partnership, dated
February 9, 1999 (Filed as Exhibit 10.22 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 1999 and
incorporated herein by reference).
10.19 Call Option Agreement, dated February 9, 1999 (Filed
as Exhibit 10.23 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 1999 and incorporated herein by
reference).
10.20 Credit Agreement between TE Products Pipeline
Company, Limited Partnership, SunTrust Bank, Atlanta,
and Certain Lenders, dated May 17, 1999 (Filed as
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit 10.26 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1999 and incorporated herein by reference).
10.21 Second Amendment to Credit Agreement between TEPPCO
Colorado, LLC, SunTrust Bank, Atlanta, and Certain
Lenders, effective May 17, 1999 (Filed as Exhibit
10.28 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1999 and incorporated herein by reference).
10.22 Texas Eastern Products Pipeline Company Nonemployee
Directors Unit Accumulation Plan, effective April 1,
1999 (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1999 and incorporated
herein by reference).
10.23 Texas Eastern Products Pipeline Company Nonemployee
Directors Deferred Compensation Plan, effective
November 1, 1999 (Filed as Exhibit 10.31 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).
10.24 Texas Eastern Products Pipeline Company Phantom Unit
Retention Plan, effective August 25, 1999 (Filed as
Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
September 30, 1999 and incorporated herein by
reference).
27* Financial Data Schedule as of and for the three
months ended March 31, 2000.
----------------------
* Filed herewith.
(b) Reports on Form 8-K filed during the quarter ended March 31,
2000: None.
Items 1, 2, 3, 4 and 5 of Part II were not applicable and have been omitted.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.
TE Products Pipeline Company, Limited Partnership
(Registrant)
By: Texas Eastern Products Pipeline Company,
General Partner
/s/ CHARLES H. LEONARD
--------------------------------------
Charles H. Leonard
Senior Vice President, Chief Financial
Officer and Treasurer
Date: May 15, 2000
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Amended and Restated Purchase Agreement by and
between Atlantic Richfield Company and Texas Eastern
Products Pipeline Company, LLC with respect to the
sale of ARCO Pipe Line Company dated as of May 10,
2000 (Filed as Exhibit 2.1 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2000 and incorporated herein
by reference).
3.1 Certificate of Formation of TEPPCO Colorado, LLC
(Filed as Exhibit 3.2 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1998 and incorporated herein
by reference).
3.2 Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership,
effective July 21, 1998 (Filed as Exhibit 3.2 to Form
8-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) dated July 21, 1998 and incorporated herein
by reference).
4.1 Form of Indenture between TE Products Pipeline
Company, Limited Partnership and The Bank of New
York, as Trustee, dated as of January 27, 1998 (Filed
as Exhibit 4.3 to TE Products Pipeline Company,
Limited Partnership's Registration Statement on Form
S-3 (Commission File No. 333-38473) and incorporated
herein by reference).
10.1 Assignment and Assumption Agreement, dated March 24,
1988, between Texas Eastern Transmission Corporation
and the Company (Filed as Exhibit 10.8 to the
Registration Statement of TEPPCO Partners, L.P.
(Commission File No. 33-32203) and incorporated
herein by reference).
10.2 Texas Eastern Products Pipeline Company 1997 Employee
Incentive Compensation Plan executed on July 14, 1997
(Filed as Exhibit 10 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended September 30, 1997 and incorporated herein by
reference).
10.3 Agreement Regarding Environmental Indemnities and
Certain Assets (Filed as Exhibit 10.5 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 1990 and incorporated
herein by reference).
10.4 Texas Eastern Products Pipeline Company Management
Incentive Compensation Plan executed on January 30,
1992 (Filed as Exhibit 10 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1992 and incorporated herein
by reference).
10.5 Texas Eastern Products Pipeline Company Long-Term
Incentive Compensation Plan executed on October 31,
1990 (Filed as Exhibit 10.9 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1990 and incorporated herein
by reference).
10.6 Form of Amendment to Texas Eastern Products Pipeline
Company Long-Term Incentive Compensation Plan (Filed
as Exhibit 10.7 to the Partnership's Form 10-K
(Commission File No. 1-10403) for the year ended
December 31, 1995 and incorporated herein by
reference).
10.7 Duke Energy Corporation Executive Savings Plan (Filed
as Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended
December 31, 1999 and incorporated herein by
reference).
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
10.8 Duke Energy Corporation Executive Cash Balance Plan
(Filed as Exhibit 10.8 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1999 and incorporated herein
by reference).
10.9 Duke Energy Corporation Retirement Benefit
Equalization Plan (Filed as Exhibit 10.9 to Form 10-K
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).
10.10 Employment Agreement with William L. Thacker, Jr.
(Filed as Exhibit 10 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended September 30, 1992 and incorporated herein by
reference).
10.11 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan executed on March 8, 1994 (Filed
as Exhibit 10.1 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
March 31, 1994 and incorporated herein by reference).
10.12 Texas Eastern Products Pipeline Company 1994 Long
Term Incentive Plan, Amendment 1, effective January
16, 1995 (Filed as Exhibit 10.12 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 1999 and incorporated
herein by reference).
10.13 Asset Purchase Agreement between Duke Energy Field
Services, Inc. and TEPPCO Colorado, LLC, dated March
31, 1998 (Filed as Exhibit 10.14 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 1998 and incorporated
herein by reference).
10.14 Credit Agreement between TEPPCO Colorado, LLC,
SunTrust Bank, Atlanta, and Certain Lenders, dated
April 21, 1998 (Filed as Exhibit 10.15 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 1998 and
incorporated herein by reference).
10.15 First Amendment to Credit Agreement between TEPPCO
Colorado, LLC, SunTrust Bank, Atlanta, and Certain
Lenders, effective June 29, 1998 (Filed as Exhibit
10.15 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1998 and incorporated herein by reference).
10.16 Form of Employment Agreement between the Company and
Ernest P. Hagan, Thomas R. Harper, David L. Langley,
Charles H. Leonard and James C. Ruth, dated December
1, 1998 (Filed as Exhibit 10.20 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 1998 and incorporated
herein by reference).
10.17 Agreement Between Owner and Contractor between TE
Products Pipeline Company, Limited Partnership and
Eagleton Engineering Company, dated February 4, 1999
(Filed as Exhibit 10.21 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein
by reference).
10.18 Services and Transportation Agreement between TE
Products Pipeline Company, Limited Partnership and
Fina Oil and Chemical Company, BASF Corporation and
BASF Fina Petrochemical Limited Partnership, dated
February 9, 1999 (Filed as Exhibit 10.22 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 1999 and
incorporated herein by reference).
10.19 Call Option Agreement, dated February 9, 1999 (Filed
as Exhibit 10.23 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 1999 and incorporated herein by
reference).
10.20 Credit Agreement between TE Products Pipeline
Company, Limited Partnership, SunTrust Bank, Atlanta,
and Certain Lenders, dated May 17, 1999 (Filed as
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
Exhibit 10.26 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1999 and incorporated herein by reference).
10.21 Second Amendment to Credit Agreement between TEPPCO
Colorado, LLC, SunTrust Bank, Atlanta, and Certain
Lenders, effective May 17, 1999 (Filed as Exhibit
10.28 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
June 30, 1999 and incorporated herein by reference).
10.22 Texas Eastern Products Pipeline Company Nonemployee
Directors Unit Accumulation Plan, effective April 1,
1999 (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1999 and incorporated
herein by reference).
10.23 Texas Eastern Products Pipeline Company Nonemployee
Directors Deferred Compensation Plan, effective
November 1, 1999 (Filed as Exhibit 10.31 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).
10.24 Texas Eastern Products Pipeline Company Phantom Unit
Retention Plan, effective August 25, 1999 (Filed as
Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended
September 30, 1999 and incorporated herein by
reference).
27* Financial Data Schedule as of and for the three
months ended March 31, 2000.
</TABLE>
----------------------
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 38,412
<SECURITIES> 1,475
<RECEIVABLES> 15,949
<ALLOWANCES> 0
<INVENTORY> 5,862
<CURRENT-ASSETS> 66,232
<PP&E> 840,280
<DEPRECIATION> 220,101
<TOTAL-ASSETS> 739,465
<CURRENT-LIABILITIES> 30,197
<BONDS> 389,761
0
0
<COMMON> 0
<OTHER-SE> 233,593
<TOTAL-LIABILITY-AND-EQUITY> 739,465
<SALES> 0
<TOTAL-REVENUES> 63,778
<CGS> 0
<TOTAL-COSTS> 35,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,320
<INCOME-PRETAX> 21,640
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,640
<EPS-BASIC> 0
<EPS-DILUTED> 0
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