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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     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 combine us with a
wholly-owned subsidiary of Enterprise. See Part II, Other Information, Item 4.
Submission of Matters to a Vote of Security Holders, for the results of the
unitholder vote. We expect the completion of the merger to occur in the third
quarter of 2004, although it remains subject to review by the FTC and the
satisfaction of other conditions to close.
 
  MERGER-RELATED COSTS
 
     As a result of the pending merger with Enterprise, we determined that it
was in our and our unitholders' best interest to offer selected employees of El
Paso Corporation incentives to continue to focus on the business of the
partnership during the merger process. We have accounted for these incentives
under the provisions of SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. In March 2004, we recorded a liability and a related
deferred charge of $4.3 million, which was reflected in other current
liabilities and other current assets on our balance sheets. Our liability was
estimated based upon the number of employees accepting the offer and the
discounted amount they are expected to be paid. We are amortizing the deferred
charge to expense ratably over the expected period of the services required in
order to qualify for receiving the payments. We expect to amortize the entire
expense by merger close. During the quarter and six months ended June 30, 2004,
we amortized $2.2 million and $2.8 million to expense. As of June 30, 2004, the
remaining deferred charge was $1.5 million. If our expectations of future
amounts to be paid or the period of service to be rendered change, we will
adjust our liability.
 
     Additionally, during the first quarter of 2004, we recognized an expense of
$3.5 million associated with a fairness opinion we received on our pending
merger with Enterprise. During the quarter and six months ended June 30, 2004,
we recognized expenses for legal and audit fees totaling $1.4 million and $1.5
million associated with our pending merger with Enterprise. We expect to incur
additional merger-related costs prior to the actual date of the merger including
incremental legal, audit and advisory fees. All of our merger-related costs are
included in operation and maintenance expenses on our statements of income and
are allocated across all of our operating segments.
 
     Under the merger agreement with Enterprise, we are obligated to repurchase,
at reasonable prices, before the effective time of the merger, all outstanding
employee and director unit options that have not been exercised or otherwise
canceled. Approximately 1,000,000 common unit options were outstanding at June
30, 2004, held by 28 current and former employees and directors. Since we do not
have the right under our option plan to force our option holders to sell their
options, we were required to negotiate a separate option purchase agreement
individually with each option holder. The governance and compensation committee
of our general partner's board of directors engaged an independent financial
advisor to assist in the determination of the appropriate repurchase prices for
the outstanding options. Subsequent to June 30, 2004, we entered into option
purchase agreements with all the option holders under which we have agreed to
purchase for cash and/or common units, and the option holders have agreed to
sell, any options that remain outstanding on the merger closing date for a
negotiated price. Each option purchase agreement permits the option holder to
exercise any or all of his or her options at any time and from time to time
prior to the merger closing. Based on information provided by the financial
advisor engaged by the governance and compensation committee, we estimate that
the value, in the aggregate, of the outstanding options to be repurchased is
approximately $13 million.
 
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