TEPPCO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. CASH DISTRIBUTIONS
The Partnership makes quarterly cash distributions of all of its
Available Cash, generally defined as consolidated cash receipts less
consolidated cash disbursements and cash reserves established by the general
partner in its sole discretion or as required by the terms of the First Mortgage
On August 8, 1997, the Partnership paid the second quarter cash
distribution of $0.80 per Unit to Unitholders of record on July 31, 1997.
Additionally, on October 17, 1997, the Partnership declared a cash distribution
of $0.80 per Unit for the quarter ended September 30, 1997. The third quarter
distribution was paid on November 7, 1997, to Unitholders of record on October
The Company receives incremental incentive distributions of 15%, 25%
and 50% on quarterly distributions of Available Cash that exceed $0.55, $0.65
and $0.90 per Unit, respectively. During the nine months ended September 30,
1997 and 1996, incentive distributions paid to the Company totaled $2.3 million
and $1.6 million, respectively.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Partnership is involved in various claims and legal proceedings
incidental to its business. In the opinion of management, these claims and legal
proceedings will not have a material adverse effect on the Partnership's
consolidated financial position or results of operations.
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
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, operations or cash flows in the near term.
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 groundwater contamination
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. In November 1997, IDEM
approved the final remedial investigation report for the Seymour terminal. The
Partnership is currently negotiating with IDEM the clean-up levels to be
attained at 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
Substantially all of the petroleum products transported and stored by
the Partnership are owned by the Partnership's customers. At September 30, 1997,
The Partnership had approximately 20.8 million barrels of products in its
custody owned by customers. The Partnership is obligated for the transportation,
storage and delivery of such products on behalf of its customers. The
Partnership maintains insurance adequate to cover product losses through
circumstances beyond its control.