TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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
September 30, 1997, short-term investments included $8.2 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 September 30, 1997, and are classified
as held-to-maturity securities.
At September 30, 1997, the Partnership had $8.7 million invested in
investment-grade medium-term corporate debt securities, which have varying
maturities from 1999 through 2001. These securities are classified as
held-to-maturity securities and are stated at amortized cost. At September 30,
1997, the aggregate fair value and unrealized gain for these securities was $8.8
million and $0.1 million, respectively. Such investments included a $0.9 million
investment in Duke Power Company corporate notes as of September 30, 1997.
NOTE 4. 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 "First Mortgage
Notes"). The First Mortgage 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 First
Mortgage Notes. On March 7, 1997, the Partnership paid $13.0 million for current
maturities due on the First Mortgage Notes. At September 30, 1997, the current
maturities of the First Mortgage Notes were $17.0 million, which are payable on
March 6, 1998.
The agreements relating to the First Mortgage Notes contain certain
covenant restrictions, including limitations on cash distributions and on the
amount of future indebtedness, none of which is expected to have a material
adverse effect on the Partnership's operations.
NOTE 5. INVENTORIES
Inventories are carried at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows (in
SEPTEMBER 30, DECEMBER 31,
<S> <C> <C>
Gasolines $ 614 $ 3,232
Propane 6,689 6,550
Butanes 4,397 4,023
Fuel oils 463 --
Other products 2,920 2,021
Materials and supplies 3,906 3,088
Total $ 18,989 $ 18,914
The costs of inventories were lower than market at September 30, 1997,
and December 31, 1996.