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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 22, 1997
COMMISSION FILE NO. 1-10403
TEPPCO Partners, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0291058
(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)
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ITEM 5. OTHER EVENTS
The Consolidated Statement of Financial Position of Texas Eastern
Products Pipeline Company, at September 30, 1997 and December 31, 1996 has been
prepared and is included as Exhibit 99.1 to this Form 8-K. Texas Eastern
Products Pipeline Company is the general partner of TEPPCO Partners, L.P. and
TE Products Pipeline Company, Limited Partnership.
ITEM 7. STATEMENTS AND EXHIBITS
(c) EXHIBITS:
Exhibit
Number Description
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99.1 Consolidated Statement of Financial Position of
Texas Eastern Products Pipeline Company at
September 30, 1997 and December 31, 1996,
together with Independent Auditors' Report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEPPCO Partners, L.P.
(Registrant)
By: Texas Eastern Products Pipeline
Company, General Partner
/s/ CHARLES H. LEONARD
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Charles H. Leonard
Sr. Vice President,
Chief Financial Officer and Treasurer
Date: December 22, 1997
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
99.1 Consolidated Statement of Financial Position of Texas Eastern
Products Pipeline Company at September 30, 1997 and December 31,
1996, together with Independent Auditors' Report.
</TABLE>
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EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Texas Eastern Products Pipeline Company:
We have audited the accompanying consolidated balance sheet of Texas Eastern
Products Pipeline Company and Subsidiary Companies (collectively the
"Company"), an indirect wholly owned subsidiary of Duke Energy Corporation, as
of December 31, 1996. This consolidated financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this consolidated financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test basis, evidence
supporting the amounts and disclosures in that balance sheet. An audit of a
balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Texas Eastern
Products Pipeline Company as of December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
December 19,1997
Houston, Texas
F-1
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TEXAS EASTERN PRODUCTS PIPELINE COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31
1997 1996
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(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Accounts receivable, TE Products Pipeline Company,
Limited Partnership $ 3,418 $ 3,007
Accounts receivable, related party 210 119
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Total current assets 3,628 3,126
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Notes receivable, related party 125,000 125,000
Investment in Partnership 27,813 26,558
Other assets -- 11
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Total assets $ 156,441 $ 154,695
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 88 $ 138
Accounts payable, related parties 2,659 4,346
Accrued income taxes 9,662 10,257
Other 390 137
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Total current liabilities 12,799 14,878
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Deferred income taxes 50,226 55,087
Stockholder's equity:
Common stock 1 1
Additional paid-in capital 329,510 329,510
Accumulated deficit (236,095) (244,781)
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Total stockholder's equity 93,416 84,730
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Total liabilities and stockholder's equity $ 156,441 $ 154,695
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</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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TEXAS EASTERN PRODUCTS PIPELINE COMPANY
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION FOR SEPTEMBER 30, 1997 IS UNAUDITED
NOTE 1. BASIS OF PRESENTATION
The accompanying balance sheets include the assets and liabilities of
Texas Eastern Products Pipeline Company and its wholly owned subsidiaries,
TEPPCO Holdings, Inc. and TEPPCO Investments, Inc. (collectively the "Company").
On June 18, 1997, PanEnergy Corp and Duke Power Company completed a
previously announced merger. At closing, the combined companies became Duke
Energy Corporation ("Duke Energy"). The Company, previously a wholly owned
subsidiary of PanEnergy Corp, became an indirect wholly-owned subsidiary
of Duke Energy on the date of the merger.
The Company is the general partner of TEPPCO Partners, L.P. and TE
Products Pipeline Company, Limited Partnership (collectively the "Partnership")
and holds a limited partner interest in TEPPCO Partners, L.P. As general
partner, the Company performs all management and operating functions required
for the Partnership and is reimbursed by the Partnership for all reasonable
direct and indirect expenses incurred in managing the Partnership.
These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto presented in the TEPPCO
Partners, L.P. Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheets include the accounts of the Company.
Significant intercompany items have been eliminated in consolidation. The
Company's investments in the Partnership are accounted for using the equity
method.
CASH AND CASH EQUIVALENTS
Cash equivalents are defined as all highly marketable securities with a
maturity of three months or less when purchased. The Company generally does not
maintain cash balances. Cash transactions are generally settled through
intercompany accounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities.
INCOME TAXES
The Company follows the asset and liability method of accounting for
income tax. Under this method, deferred income taxes reflect the impact of
temporary differences between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and regulations.
These deferred income taxes are measured by applying enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to effect taxable income. Under this method, the effect of a change in
tax rates on deferred tax assets and liabilities is recognized in income in the
period the rate change is enacted (see Note 6). Duke Energy and its
subsidiaries file a consolidated federal income tax return. Under an agreement
with Duke Energy, the Company and its consolidated subsidiaries compute taxes
as if they were filing a separate consolidated tax return and pay such tax, if
any, to Duke Energy in lieu of taxes otherwise payable to the government.
INTERIM FINANCIAL STATEMENTS
The accompanying interim unaudited consolidated balance sheet reflects
all adjustments, which are, in the opinion of management, of a normal and
recurring nature and necessary for a fair statement of financial position of
the Company as of September 30, 1997.
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TEXAS EASTERN PRODUCTS PIPELINE COMPANY
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AT SEPTEMBER 30, 1997 IS UNAUDITED
NOTE 3. RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Agreements, the Company is entitled to
reimbursement of all direct and indirect expenses related to business activities
of the Partnership (see Note 1). For the year ended December 31, 1996 and the
nine months ended September 30, 1997, direct expenses incurred by the Company in
the amount of $36.0 million and $28.3 million, respectively, were charged to the
Partnership. Substantially all such costs related to payroll and payroll related
expenses. For the year ended December 31, 1996 and the nine months ended
September 30, 1997, expenses for administrative service and overhead allocated
to the Partnership by the Company amounted to $2.6 million and $2.3 million,
respectively. Such costs included general and administrative costs related to
business activities of the Partnership.
At September 30, 1997 and December 31, 1996 the balance of the
receivable due from TE Products Pipeline Company, Limited Partnership related to
reimbursement of expenses for the above services. The balances at September 30,
1997 and December 31, 1996 of accounts payable, related party, relate primarily
to payroll and administrative services allocated to the Company.
NOTE 4. NOTE RECEIVABLE
The Company has a $125 million demand note receivable due from
PanEnergy Corp. Interest is payable quarterly. The rate on the note fluctuates
quarterly based on the one-month Libor rate, plus 50 basis points, as of the
last day of the preceding calendar quarter. Under the terms of the note,
PanEnergy Corp may prepay the note, in whole or in part, without premium or
penalty. The Company is of the opinion that the amount included in the
consolidated balance sheet for the note receivable materially represents fair
value at September 30, 1997 and December 31, 1996, as the underlying interest
rate is based on market rates.
NOTE 5. INVESTMENTS
On March 7, 1990, in conjunction with the formation of the Partnership,
the Company contributed cash and conveyed all assets and liabilities (other than
certain intercompany and tax related items) to the Partnership in return for a
1.0101% general partner interest in TE Products Pipeline Company, Limited
Partnership and a 1% general partner interest in the TEPPCO Partners, L.P.
In conjunction with the formation of the Partnership, the Company also
received 1,250,000 Deferred Participation Interests (DPIs) in the Partnership,
which were valued at $17.25 million. The DPIs represent an effective 8.45%
limited partner interest in the Partnership. Effective April 1, 1994 the DPIs
began participating in distributions of cash and allocations of profit and loss
of the Partnership. As of December 31, 1996, 94% of the DPIs have been converted
into an equal number of Limited Partner Interests (Units) of the Partnership,
and the balance of such DPIs may be converted immediately prior to the sale of
the DPIs by the Company. As of December 31, 1996, no such Units had been sold by
the Company. The assets and liabilities of the Partnership are summarized below
(in thousands):
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TEXAS EASTERN PRODUCTS PIPELINE COMPANY
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AT SEPTEMBER 30, 1997 IS UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Current assets $ 76,197 $ 98,743
Property, plant and equipment, net 565,339 561,068
Other assets 13,689 11,430
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$ 655,225 $ 671,241
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Current liabilities $ 42,441 $ 47,553
First Mortgage Notes 309,512 326,512
Other liabilities and deferred credits 3,597 3,902
Minority interest 3,028 2,963
Partners' capital 296,647 290,311
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$ 655,225 $ 671,241
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</TABLE>
NOTE 6. INCOME TAXES
Accrued income taxes payable at September 30, 1997 were comprised of
$8.8 million and $0.9 million of federal and state income taxes, respectively.
At December 31, 1996 accrued income taxes payable were comprised of $9.2 million
and $1.0 million for federal and state income taxes, respectively.
Net deferred income tax liabilities of $50.2 million and $55.1 million
at September 30, 1997, and December 31, 1996, respectively, were comprised of
deferred tax liabilities that have arisen as a result of the gain deferral, for
income tax purposes, on the transfer of the net assets to the Partnership.
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