Enterprise Products Partners L.P.

SEC Filings

10-K405
TEPPCO PARTNERS LP filed this Form 10-K405 on 03/03/1998
Entire Document
 
<PAGE>   44
                              TEPPCO PARTNERS, L.P.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


sale and leaseback transactions. However, the indenture does not limit the
Partnership's ability to incur additional indebtedness.

NOTE 8. CONCENTRATIONS OF CREDIT RISK

         The Partnership's primary market areas are located in the Northeast,
Midwest and Southwest regions of the United States. The Partnership has a
concentration of trade receivable balances due from major integrated oil
companies, independent oil companies and other pipelines and wholesalers. These
concentrations of customers may affect the Partnership's overall credit risk in
that the customers may be similarly affected by changes in economic, regulatory
or other factors. Trade receivables are generally not collateralized; however,
the Partnership's customers' historical and future credit positions are
thoroughly analyzed prior to extending credit (see Note 2).

NOTE 9. QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH

         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 Notes.
Generally, distributions are made 98% to the Unitholders pro rata and 2% to the
general partner until there has been distributed with respect to each Unit an
amount equal to the Minimum Quarterly Distribution ($0.55 per Unit) for each
quarter. 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 1997, 1996 and 1995, incentive
distributions paid to the Company totaled $3.2 million, $2.3 million and $1.1
million, respectively.

         For the year ended December 31, 1997, cash distributions totaled $49.0
million, resulting from cash distributions of $0.75 per Unit in February and
May, and $0.80 per Unit in August and November. On February 6, 1998, the
Partnership paid the fourth quarter 1997 distribution of $0.85 per Unit. The
distribution increases in August 1997 and February 1998 reflect the
Partnership's success in improving income and cash flow levels.

         For the year ended December 31, 1996, cash distributions totaled $45.2
million, resulting from cash distributions of $0.70 per Unit in February and
May, and $0.75 per Unit in August and November. During 1995, the Partnership
paid cash distributions of $40.3 million, resulting from quarterly distributions
of $0.65 per Unit in February, May and August, and $0.70 per Unit in November.

NOTE 10. UNIT OPTION PLAN

         During 1994, the Company adopted the Texas Eastern Products Pipeline
Company 1994 Long Term Incentive Plan ("1994 LTIP"). The 1994 LTIP provides key
employees with an incentive award whereby a participant is granted an option to
purchase Units together with a stipulated number of Performance Units. Under the
provisions of the 1994 LTIP, no more than one million options and two million
Performance Units may be granted. Each Performance Unit creates a credit to a
participant's Performance Unit account when earnings exceed a threshold, which
was $2.00, $2.50 and $3.75 per Limited Partner Unit for the awards granted in
1994, 1995 and 1997, respectively. Performance Units grants were 40,000, 35,000
and 5,500 Performance Units during 1994, 1995 and 1997, respectively. No
Performance Units were granted during 1996. When earnings for a calendar year
(exclusive of certain special items) exceed the threshold, the excess amount is
credited to the participant's Performance Unit account. The balance in the
account may be used to exercise Unit options granted in connection with the
Performance Units or may be withdrawn two years after the underlying options
expire, usually 10 years from the date of grant. Under the agreement for such
Unit options, the options become exercisable in equal installments over periods
of one, two, and three years from the date of the grant. Options may also be
exercised by 


                                      F-13