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"), 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, 2000. On June 18, 1997, PanEnergy Corp and Duke Power
Company completed a previously announced merger. At closing, the combined
companies became Duke Energy Corporation (Duke Energy). The Company, previously
a wholly-owned subsidiary of PanEnergy Corp, became an indirect wholly-owned
subsidiary of Duke Energy on the date of the merger.
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 June 30, 1997, and the results of operations and cash flows
for the periods presented. The results of operations for the six months ended
June 30, 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 June 30, 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 6). The general
partner was allocated 6.72% and 5.15% of net income for the six months ended
June 30, 1997 and 1996, respectively.
NOTE 2. ACCOUNTING POLICY CHANGE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share."
This statement establishes standards for computing and presenting net income
per Unit and requires, among other things, dual presentation of basic and
diluted net income per Unit on the face of the consolidated statements of
income. This statement is effective for financial statements for periods ending
after December 15, 1997. The Partnership will adopt SFAS 128 by December 31,
1997, and does not expect the adoption to have a material impact on its
calculation of net income per Unit.
NOTE 3. 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 and cash equivalents. At June
30, 1997, short-term investments included $10.2 million of investment-grade
medium-term corporate debt securities, which mature within one year. All
short-term investments are stated at amortized cost, which approximates the
aggregate fair value at June 30, 1997, and are classified as held-to-maturity