Enterprise Products Partners L.P.

SEC Filings

10-Q
GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/09/2004
Entire Document
 
<PAGE>
 
  Revenue Recognition and Cost of Natural Gas and Other Products
 
     Typhoon Oil Pipeline, a wholly owned subsidiary, has transportation
agreements with BHP and ChevronTexaco which provide that Typhoon Oil purchase
the oil produced at the inlet of its pipeline for an index price less an amount
that compensates Typhoon Oil for transportation services. At the outlet of its
pipeline, Typhoon Oil resells this oil back to these producers at the same index
price. As disclosed in our 2003 Annual Report on Form 10-K, as amended, we now
record revenue from these buy/sell transactions upon delivery of the oil based
on the net amount billed to the producers. For the quarter and six months ended
June 30, 2003, we reduced by $73.1 million and $121.9 million our revenues and
cost of natural gas and other products to conform to the current period
presentation. This revision had no effect on operating income, net income or
partners' capital.
 
  Accounting for Stock-Based Compensation
 
     We use the intrinsic value method established in Accounting Principles
Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, to value
unit options issued to individuals who are on our general partner's current
board of directors and for those grants made prior to El Paso Corporation's
acquisition of our general partner in August 1998 under our Omnibus Plan and
Director Plan. For the quarters and six months ended June 30, 2004 and 2003, the
cost of this stock-based compensation had no impact on our net income, as all
options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant. We use the provisions of Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to account for all of our other stock-based compensation programs.
Compensation expense for the quarter and six months ended June 30, 2004 and 2003
is reflected in the table below for our stock-based compensation programs
accounted for under the provisions of SFAS No. 123.
 
     If compensation expense had been determined by applying the fair value
method in SFAS No. 123 to all of our grants, our net income allocated to common
unitholders and net income per common unit would have approximated the pro forma
amounts below:
 

<Table>
<Caption>
                                                   QUARTER ENDED        SIX MONTHS ENDED
                                                     JUNE 30,               JUNE 30,
                                                -------------------   --------------------
                                                  2004       2003       2004        2003
                                                --------   --------   ---------   --------
                                                 (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S>                                             <C>        <C>        <C>         <C>
Net income as reported........................  $47,477    $49,297    $103,043    $91,512
Add: Stock-based employee compensation expense
  included in reported net income.............      133        366         267        679
Less: Stock-based employee compensation
  expense determined under fair value based
  method......................................     (159)      (406)       (300)      (720)
                                                -------    -------    --------    -------
Pro forma net income..........................  $47,451    $49,257    $103,010    $91,471
                                                =======    =======    ========    =======
Pro forma net income allocated to common
  unitholders.................................  $21,996    $24,120    $ 51,054    $42,913
                                                =======    =======    ========    =======
Earnings per common unit:
  Basic and diluted, as reported and pro
     forma....................................  $  0.37    $  0.50    $   0.86    $  0.93
                                                =======    =======    ========    =======
</Table>

 
     The effects of applying the provisions of SFAS No. 123 in this pro forma
disclosure for all of our stock-based compensation programs may not be
indicative of future amounts.
 
     Our remaining accounting policies are consistent with those discussed in
our 2003 Annual Report on Form 10-K, as amended, except as discussed below.
 
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