Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity - (Continued)
The Partnership paid cash distributions of $23.6 million during the six
months ended June 30, 1997. Additionally, on July 14, 1997, the Partnership
declared a cash distribution of $0.80 per Unit for the three months ended June
30, 1997, increasing the annualized distribution to $3.20 per Unit from $3.00
per Unit. The second quarter cash distribution is payable on August 8, 1997 to
Unitholders of record on July 31, 1997.
The Notes, which are secured by a mortgage on substantially all
property, plant and equipment of the Partnership, require annual principal
payments through March 2010. Interest is payable semi-annually on March 7 and
September 7. Cash and cash equivalents were reduced by the $13.0 million
principal payment related to the Notes on March 7, 1997. At June 30, 1997, the
current maturities of the Notes were $17.0 million. The note agreement relating
to the Notes limits the amount of cash distributions that can be made by TE
Products Pipeline Company, Limited Partnership to TEPPCO Partners, L.P. Such
restriction is not anticipated to preclude the Partnership from making
quarterly distributions to Unitholders of at least $0.80 per Unit during the
remainder of 1997.
The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the pipeline system are in material
compliance with applicable environmental regulations, risks of significant
costs and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred.
Moreover, it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
pipeline system could result in substantial costs and liabilities to the
The Partnership and the Indiana Department of Environmental Management
(IDEM) have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site environmental problems
attributable to the Partnership's operations at the Seymour, Indiana, terminal.
As part of the Agreed Order, the Partnership has completed the remedial
investigation sampling for groundwater contamination and has submitted to IDEM
the final remedial investigation report for the Seymour terminal. In the
opinion of the general partner, the completion of the remediation program to be
proposed by the Partnership, if such program is approved by IDEM, will not have
a material adverse impact on the Partnership
During June 1997, the Partnership filed rate increases on selective
refined products tariffs and LPGs tariffs, averaging 1.7%. These rate increases
became effective July 1, 1997 without suspension or refund obligation.
The matters discussed herein include forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 based on current management expectations that
involve risk and uncertainties which could cause actual results to differ
materially from those anticipated. For additional discussion of such risks and
uncertainties, see the Partnership's 1996 Annual Report on Form 10-K.