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
 
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  Inventory
 
     In June 2004, we purchased pipeline inventory, consisting of parts and
materials, from El Paso Natural Gas Company (EPNG); see Note 8, Related Party
Transactions, for further discussion. This inventory is included on our balance
sheet as of June 30, 2004, in other current assets. We use the average cost
method to account for our inventory and we value our inventory at the lower of
its cost or market value.
 
  Consolidation of Variable Interest Entities
 
     During the first quarter of 2004, we adopted the provisions of Financial
Accounting Standards Board Interpretation (FIN) No. 46, Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
(ARB) No. 51, as replaced by FIN No. 46-R. This interpretation defines a
variable interest entity (VIE) as a legal entity whose equity owners do not have
sufficient equity at risk and/or a controlling financial interest in the entity
and excludes certain joint ventures of other entities that meet the
characteristics of a business. Our adoption of FIN No. 46 had no effect on our
reported results or financial position.
 
  Two-Class Method of Computing Earnings per Common Unit
 
     During the second quarter of 2004, we adopted the provisions of Emerging
Issues Task Force (EITF) 03-6, Participating Securities and the Two-Class Method
under SFAS No. 128. EITF 03-6 requires the use of the two-class method of
determining basic earnings per unit. Under the two-class method, distributions
to equity owners are subtracted from earnings, and any remaining earnings would
be allocated to the various classes of owners in proportion to their right to
receive distributions as if those earnings had been distributed. The total of
distributions to each class of owner plus the amount allocated to each class
would be used to compute earnings per unit for that class. Because our
distributions to owners exceeded earnings during the periods presented, as has
historically been the case, the two-class method did not produce any change in
result from the way we have traditionally computed earnings per unit. As a
result, the adoption of this standard had no effect on our earnings per unit
calculation for the quarters and six months ended June 30, 2004 and 2003.
 
2. MERGER WITH ENTERPRISE
 
     On December 15, 2003, we, along with Enterprise and El Paso Corporation,
announced that we had executed definitive agreements to merge Enterprise and
GulfTerra to form one of the largest publicly traded MLPs.
 
     In April 2004, Enterprise and El Paso Corporation amended their agreement
with respect to the ownership of Enterprise's general partner interest upon the
completion of our merger with Enterprise.
 
     As originally envisioned in the merger agreement, El Paso Corporation was
to contribute its 50-percent ownership interest in our general partner to
Enterprise's general partner, in exchange for a 50-percent ownership interest in
Enterprise's general partner. Under the amended transaction, El Paso Corporation
will still contribute its 50-percent ownership interest in our general partner
to Enterprise's general partner, but in exchange, El Paso Corporation will
receive a 9.9 percent ownership interest in Enterprise's general partner and
$370 million in cash. The remaining 90.1 percent ownership interest in
Enterprise's general partner will continue to be owned by affiliates of
privately-held Enterprise Products Company.
 
     The remaining transactions with respect to our merger with Enterprise are
unchanged. These include:
 
     - the payment of $500 million in cash from Enterprise to El Paso
       Corporation for approximately 13.8 million units, which include 2.9
       million of our common units and all of our Series C units owned by El
       Paso Corporation; and
 
     - the exchange of 1.81 Enterprise common units for each GulfTerra common
       unit owned by GulfTerra's unitholders, including the remaining
       approximately 7.5 million GulfTerra common units owned by El Paso
       Corporation.
 
     On June 22, 2004, Enterprise's registration statement on Form S-4 was
declared effective by the SEC. On July 29, 2004, our common and Series C
unitholders approved the adoption of the merger agreement to
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