TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
TEPPCO Partners, L.P. is a Delaware limited partnership which operates
through TE Products Pipeline Company, Limited Partnership, a Delaware limited
partnership (collectively the "Partnership"), in which TEPPCO Partners, L.P.
holds a 99% interest as the sole limited partner. Texas Eastern Products
Pipeline Company and Subsidiary Companies (the "Company"), a wholly owned
subsidiary of PanEnergy Corp (PanEnergy), is the general partner of the
Partnership and has agreed not to voluntarily withdraw as the general partner
of the Partnership, subject to certain limited exceptions, prior to January 1,
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, 1997, and the results of operations and cash flows
for the periods presented. The results of operations for the three months ended
March 31, 1997, are not necessarily indicative of results of operations for the
full year 1997. The interim financial statements should be read in conjunction
with the Partnership's 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.
Net income per Unit is computed by dividing net income, after deduction of
the general partner's interest, by the weighted average number of Units
outstanding (a total of 14,500,000 Units as of March 31, 1997). The general
partner's percentage interest in net income is based on its percentage of cash
distributions from Available Cash for each period (see Note 5). The general
partner was allocated 6.72% and 5.15% of net income for the three months ended
March 31, 1997 and 1996, respectively.
NOTE 2. INVESTMENTS
The Partnership routinely invests cash in liquid short-term investments as
part of its cash management program. Investments with maturities at date of
purchase of 90 days or less are considered cash equivalents. At March 31, 1997,
short-term investments included $16.1 million of investment-grade corporate
notes, which mature 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, 1997.
At March 31, 1997, the Partnership had $6.9 million invested in
investment-grade corporate notes, which have varying maturities from 1998
through 2001. 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, 1997.
NOTE 3. FIRST MORTGAGE NOTES
In connection with its formation, TE Products Pipeline Company, Limited
Partnership issued 9.60% Series A First Mortgage Notes, due 2000, and 10.20%
Series B First Mortgage Notes, due 2010 (collectively the "Notes"). The Notes,
which are secured by a mortgage on substantially all property, plant and
equipment of the Partnership, have mandatory annual prepayments at par through
March 7, 2010. Interest is payable semiannually on each March 7 and September 7
until retirement of the Notes. On March 7, 1997, the Partnership paid $13.0
million for current maturities due on the Notes. At March 31, 1997, the current
maturities of the Notes were $17.0 million, which are payable on March 6, 1998.