UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: November 29 , 1999
Commission File Number 1-14323
ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0568219
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2727 North Loop West
Houston, Texas 77008
(Address of principal executive offices)
(Zip Code)
(713) 880-6500
(Registrant's telephone number, including area code)
This filing amends the Form 8-K Current Report filed by Enterprise Products
Partners L.P. on September 20, 1999.
Item 2. Acquisition or Disposition of Assets
Acquisition of Tejas Natural Gas Liquids, LLC
On September 17, 1999, Enterprise Products Partners L.P. (the "Company")
acquired Tejas Natural Gas Liquids, LLC ("TNGL") from a subsidiary of Tejas
Energy, LLC ("Tejas Energy"), an affiliate of Shell Oil Company ("Shell"). TNGL
engages in natural gas processing and NGL fractionation, transportation, storage
and marketing in Louisiana and Mississippi. TNGL's assets include a 20-year
natural gas processing agreement with Shell for the rights to process its
current and future natural gas production from the state and federal waters of
the Gulf of Mexico and varying interests in eleven natural gas processing plants
(including one under construction) with a combined gross capacity of 11.0
billion cubic feet per day (Bcfd) and a net capacity of 3.1 Bcfd; four NGL
fractionation facilities with a combined gross capacity of 281,000 barrels per
day (BPD) and net capacity of 131,500 BPD; four NGL storage facilities with
approximately 29.5 million barrels of gross capacity and 8.8 million barrels of
net capacity; and over 2,100 miles of NGL pipelines (including an 11.5% interest
in Dixie Pipeline).
In exchange for its NGL business, Tejas Energy received 14.5 million
non-distribution bearing, convertible Special Units in the Company and $166
million in cash. The 14.5 million non-distribution bearing, convertible Special
Units received by Tejas Energy represent an approximate 17.6% equity ownership
in the Company. These convertible Special Units do not accrue distributions and
are not entitled to cash distributions until their conversion into Common Units,
which occurs automatically with respect to 1.0 million Units on August 1, 2000
(or the day following the record date for determining Units entitled to receive
distributions in the second quarter of 2000), 5.0 million Units on August 1,
2001 and 8.5 million Units on August 1, 2002.
Tejas Energy has the opportunity to earn an additional 6 million
non-distribution bearing, convertible Contingency Units over the next two years
based on certain performance criteria (the "Performance Tests"). Tejas Energy
will earn 3 million convertible Contingency Units if at any point during
calendar year 2000 (or extensions thereto due to force majeure events), gas
production by Shell from its Offshore Gulf of Mexico producing properties and
leases is 950 million cubic feet per day for 180 not-necessarily-consecutive
days or 375 billion cubic feet on a cumulative basis. Tejas Energy will earn
another 3 million convertible Contingency Units if at any point during calendar
year 2001 (or extensions thereto due to force majuere events) such gas
production is 900 million cubic feet per day for 180 not-necessarily-consecutive
days or 350 billion cubic feet on a cumulative basis. If either or both of the
preceding performance tests is not met but Shell's Offshore Gulf of Mexico gas
production reaches 725 billion cubic feet on a cumulative basis in calendar
years 2000 and 2001 (or extensions thereto due to force majeure events), Tejas
Energy would still earn 6 million non-distribution bearing, convertible
Contingency Units. If all of the Contingency Units are earned, 1 million
Contingency Units would convert into Common Units on August 1, 2002, and 5
million Contingency Units would convert into Common Units on August 1, 2003. The
Contingency Units do not accrue distributions and are not entitled to cash
distributions until conversion into Common Units. Tejas Energy's ownership
interest in the Company would then increase to approximately 23.2%.
Under the rules of the New York Stock Exchange, conversion of the Special
Units into Common Units requires approval of the Company's Unitholders.
Enterprise Products GP, LLC (the "General Partner") has agreed to call a special
meeting of the Unitholders for the purpose of soliciting such approval. EPC
Partners II, Inc. ("EPC II"), which owns in excess of 81% of the outstanding
Common Units, has agreed to vote its Units in favor of such approval, which will
satisfy the approval requirement.
The $166 million cash portion of the purchase price was funded with
borrowings under the Company's existing credit facility led by The Chase
Manhattan Bank.
The consideration for the acquisition was determined by arms-length
negotiation among the parties.
Unitholder Rights Agreement
In connection with the transactions described above, Tejas Energy purchased
from EPC II a 30% membership interest in the General Partner, which serves as
the sole general partner of the Company, and entered into a Unitholder Rights
Agreement with the Company, the General Partner, Enterprise Products Operating
L.P. (the "Operating Partnership"), EPC II and Enterprise Products Company
("EPCO"). The Unitholder Rights Agreement provides that as long as Tejas Energy
owns more than a 20% interest in the General Partner, it will be entitled to
designate one-third of the General Partner's board of directors, and that as
long as it owns at least a 10% interest in the General Partner it will also be
entitled to designate two members of a newly created Executive Committee of the
General Partner. Tejas Energy's rights to board and committee representation
would decrease if their ownership interest decreases.
The Unitholder Rights Agreement provides that, without the consent of at
least one of the Tejas Energy designees on the Executive Committee, the General
Partner will not permit the Company, the Operating Partnership or the General
Partner to take certain actions, including, among other things, paying special
distributions not in accordance with the Company's current cash distribution
policy; material dispositions of assets; dispositions of assets that could
adversely affect production or delivery of gas by Shell or its affiliates in the
Gulf of Mexico; material acquisitions; mergers or similar transactions; issuing
partnership Units in private financing transactions; incurrence of indebtedness
in excess of certain limits; repurchases of partnership Units other than in
connection with employee benefit plans; entering into or modifying transactions
with affiliates; and submitting matters to a unitholder vote. The foregoing
limitations will terminate when the Special and Contingency Units (other than
any Contingency Units not issued as a result of a failure to meet the
Performance Tests) issued to Tejas Energy have been converted to Common Units
and the market price of the Common Units has exceeded $24 per unit for 120
consecutive calendar days (subject to certain extensions).
Pursuant to the Unitholder Rights Agreement, the board of directors of the
General Partner has been increased by three members to a total of nine, and
Tejas Energy has designated Charles R. Crisp, Curtis R. Frasier and Stephen H.
McVeigh as its board designees. Tejas Energy has designated Curtis R. Frasier
and Stephen H. McVeigh to serve on the Executive Committee, with the Company's
designees being Dan L. Duncan, O. S. Andras and Richard H. Bachmann. Mr. Crisp
is President and Chief Executive Officer of Coral Energy LLC, an affiliate of
Shell, Mr. Frasier is Chief Operating, Administrative and Legal Officer of Coral
Energy LLC, and Mr. McVeigh is Manager of Production and Surveillance (Gulf of
Mexico) for Shell Offshore Inc.
The Unitholder Rights Agreement grants EPC II certain rights to acquire
Tejas Energy's interest in the General Partner if Tejas Energy disposes of its
Special, Contingency, or Common Units, and to acquire Tejas Energy's Special,
Contingency, or Common Units if it wishes to dispose of them. Each of these
purchase rights would also apply in the event of specified change of control
events relating to Tejas Energy. The Unitholder Rights Agreement grants Tejas
Energy preemptive rights to acquire additional Units issued by the Company in
private equity financing transactions, and grants Tejas Energy the right to
acquire all of the partnership Units owned by EPC II, EPCO and their affiliates
if certain change of control events occur with respect to the Company.
The Unitholder Rights Agreement provides that if Tejas Energy sells any of
the Common Units it receives upon conversion of the Special or Contingency Units
in specified types of sale transactions for less than $18 per Unit within one
year after the applicable conversion date for the Special or Contingency Units
in question, then the Company will pay to Tejas Energy the difference between
the sales price and $18, either in cash or in additional Units at the Company's
option.
Other Agreements
In connection with the transactions described above, the Company entered
into a Registration Rights Agreement with Tejas Energy granting Tejas Energy
certain rights to require the Company to register for resale under the
Securities Act of 1933 all of the Common Units issuable upon conversion of the
Special or Contingency Units, and certain "piggy back" rights to require the
Company to include such Common Units in any registration begun by the Company.
Also, the partnership agreement of the Company and the limited liability
agreement of the General Partner were amended to give effect to the above
transactions, including the issuance of the Special or Contingency Units.
The foregoing summaries of the Contribution Agreement governing the
acquisition, the Unitholder Rights Agreement, the Registration Rights Agreement,
the amended partnership agreement of the Company and the amended limited
liability company agreement of the General Partner are qualified in their
entirety by reference to the complete documents.
Item 7 . Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
*1. Tejas Natural Gas Liquids, LLC and Subsidiaries -- Statement of Assets
Acquired and Liabilities Assumed and Statement of Revenues and Direct
Operating Expenses for the Years Ended December 31, 1998, December 31,
1997, and December 31, 1996, and Independent Auditor's Report ( Item 1
of Form 8-K/A-1 on October 27, 1999).
(b) Pro Forma Financial Information:
The pro forma condensed Statement of Operations of Enterprise Products
Partners, L.P. for the year ended December 31, 1998 and the nine
months ended September 30, 1999 giving effect to the acquisitions are
included in this report commencing on page PF-1.
Exhibits:
*3.4 Second Amended and Restated Agreement of Limited Partnership of
Enterprise dated as of September 17, 1999 (Exhibit 99.7 on Form 8-K
dated October 4, 1999).
*3.5 First Amended and Restated Limited Liability Company Agreement of the
General Partner dated as of September 17, 1999 (Exhibit 99.8 on Form
8-K/A-1 dated October 27, 1999).
*4.3 First Amendment to $200 million Credit Agreement dated July 28, 1999
among Enterprise Products Operating and certain banks (Exhibit 99.9 on
Form 8-K/A-1 dated October 27, 1999).
*4.4 $350 million Credit Agreement dated July 28, 1999 among Enterprise
Products Operating and certain banks (Exhibit 99.10 on Form 8-K/A-1
dated October 27, 1999).
*4.5 Unitholder Rights Agreement dated September 17, 1999 (Exhibit 99.5 on
Form 8-K dated October 4, 1999).
*99.1Contribution Agreement dated September 17, 1999 (Exhibit 99.4 on Form
8-K dated October 4, 1999).
*99.2Registration Rights Agreement dated September 17, 1999 (Exhibit 99.6
on Form 8-K dated October 4, 1999).
* Asterisk indicates exhibits incorporated by reference as indicated.
Unaudited Pro Forma Enterprise Products Partners L.P. Condensed Statements of
Combined Operations
The following unaudited pro forma Statement of Combined Operations has been
derived primarily from the historical Statement of Operations of the Company and
TNGL. The unaudited pro forma information gives effect to the acquisitions of
TNGL and Mont Belvieu Associates ("MBA") as if the business combinations (the
"Acquisitions") had occurred on January 1, 1998. This unaudited pro forma
information should be read in conjunction the Company's Form 10-Q ("Form 10-Q",
incorporated by reference herein) filed on November 15, 1999 for the fiscal
quarter ending September 30, 1999. The unaudited pro forma financial information
consists only of Statements of Combined Operations. The Consolidated Balance
Sheet dated September 30, 1999 in the Form 10-Q reflects the Acquisitions.
As noted above, the unaudited pro forma Statement of Combined Operations
for the year ended December 31, 1998 and for the nine months ended September 30,
1999 were prepared as if the Acquisitions had occurred on January 1, 1998. The
TNGL acquisition, effective August 1, 1999, was completed using a combination of
$166 million in cash and the issuance of 14.5 million non-distribution bearing,
convertible special partnership Units. The MBA acquisition, effective July 1,
1999, involved a cash payment of approximately $41 million and the assumption of
approximately $4 million in debt (which was immediately extinguished). The cash
and debt service payments made in both the TNGL and the MBA acquisitions were
funded by borrowings under the Company's new $350 million credit facility. The
total borrowings (including minor amounts of working capital) were $215 million.
The unaudited pro forma information is not necessarily indicative of the
financial results which would have occurred had the Acquisitions taken place on
the dates indicated nor is it necessarily indicative of future financial
results. The pro forma adjustments are based upon currently available
information and certain estimates and assumptions; therefore, the actual
adjustments may differ from the unaudited pro forma adjustments. However,
management believes that the assumptions provide a reasonable basis for
presenting the significant material effects of the Acquisitions as contemplated
and that the unaudited pro forma adjustments give appropriate effect to those
assumptions and are properly applied in the unaudited pro forma Statements of
Combined Operations.
Enterprise Products Partners L.P.
Pro Forma Condensed Statement of Combined Operations
For the Year Ended December 31, 1998
(Unaudited)
(Dollars in thousands, except per Unit amounts)
Pro Forma
--------------------------------
EPPLP TNGL MBA As
Historical Historical Historical Adjustment Adjusted
------------------------------------------------------------------------
REVENUES
Revenues from consolidated operations $ 738,902 $ 589,528 $ 31,254 $ (355) (a) $1,359,329
Equity income in unconsolidated affiliates 15,671 1,592 (5,213) (b) 12,050
---------------------------------------- -------------
Total 754,573 591,120 31,254 1,371,379
---------------------------------------- -------------
COSTS AND EXPENSES
Operating costs and expenses 686,160 578,177 18,943 3,269 (c) 1,286,549
Selling, general and administrative 18,216 807 (807) (d) 18,216
---------------------------------------- -------------
Total 704,376 578,177 19,750 1,304,765
---------------------------------------- -------------
OPERATING INCOME 50,197 12,943 11,504 66,614
---------------------------------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (14,696) (1,011) (14,792) (e) (30,499)
Interest income from unconsolidated affiliates 809 (159) (f) 650
Interest income - other 772 4,461 149 5,382
Other, net 273 273
---------------------------------------- -------------
Other income (expense) (12,842) 4,461 (862) (24,194)
---------------------------------------- -------------
INCOME BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST 37,355 17,404 10,642 42,420
Extraordinary charge on early extinguishment (27,176) (27,176)
---------------------------------------- -------------
INCOME BEFORE MINORITY INTEREST 10,179 17,404 10,642 15,244
MINORITY INTEREST (102) (52) (g) (154)
======================================== =============
NET INCOME $ 10,077 $ 17,404 $ 10,642 $ 15,090
======================================== =============
ALLOCATION OF NET INCOME TO:
Limited partners $ 9,976 $ 14,939
============= =============
General partner $ 101 $ 151
============= =============
Number of Units used in computing
Basic Earnings per Common Unit 60,124 60,124
============= =============
BASIC EARNINGS PER COMMON UNIT
Income before extraordinary item and
minority interest per Common Unit $ 0.62 $ 0.70
============= =============
Net Income per Common Unit $ 0.17 $ 0.25
============= =============
Number of Units used in computing
Diluted Earnings per Common Unit 60,124 14,500 (h) 74,624
============= =============
DILUTED EARNINGS PER COMMON UNIT
Income before extraordinary item and
minority interest per Common Unit $ 0.62 $ 0.56
============= =============
Net Income per Common Unit $ 0.17 $ 0.20
============= =============
The accompanying notes are an integral part of these unaudited pro forma
condensed financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF COMBINED
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
(a) Reflects the elimination of intercompany sales between the Company and TNGL
of approximately $0.4 million.
(b) Reflects the elimination of equity income from MBA due to acquisition of
the remaining 51% ownership interests in MBA from Kinder Morgan Energy
Partners, L.P. (50%) and Enterprise Products Company ("EPCO")(1%). As a
result of this acquisition, 100% of MBA's results of operations are
consolidated with the Company (as shown under the column labeled "MBA
Historical").
(c) Reflects additional amortization of intangible assets created by the TNGL
acquisition. The TNGL acquisition was accounted for under the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired and liabilities assumed based on their
estimated fair value at August 1, 1999 as follows:
Current Assets $ 127.5
Investments 97.7
Property, net 225.8
Intangible asset 71.1
Liabilities (145.7)
==========
Total purchase price $ 376.4
==========
The $71.1 million intangible asset is associated with a 20-year natural gas
processing agreement with Shell ("Shell Contract") and is being amortized
using the straight-line method over a period of 20 years, approximating the
life of the agreement. On a pro forma basis, the additional amortization
expense for the year ended December 31, 1998 would have been approximately
$3.6 million. Offsetting this increase in amortization are eliminations of
intercompany purchases between the Company and TNGL of approximately $0.4
million.
(d) Reflects the reduction in selling, general, and administrative charges to
the amount of the administrative fee paid to EPCO per the terms of the EPCO
agreement (as defined in the Registration Statement on Form S-1/A filed on
July 21, 1998, incorporated by reference herein).
(e) Reflects accrual for $14.8 million in interest on $215 million of assumed
borrowings under the $350 million bank credit facility at 6.88% per annum.
(f) Reflects elimination of interest income from unconsolidated affiliates
stemming from participation in the MBA note that was extinguished as a
result of the acquisition.
(g) Reflects additional minority interest associated with the pro forma
adjustments for the 1.0101% minority interest of the general partner of the
Company.
(h) Reflects addition of non-distribution bearing, convertible special
partnership Units granted to Tejas Energy, LLC as a result of the TNGL
acquisition. For earnings per share calculations, these Units are treated
as being dilutive.
Enterprise Products Partners, L.P.
Pro Forma Condensed Statement of Combined Operations
For the Nine Months Ended September 30, 1999
(Dollars in thousands, except per Unit amounts)
Pro Forma
-------------------------------
EPPLP TNGL MBA As
Historical Historical Historical Adjustment Adjusted
------------------------------------------------------------------------
REVENUES
Revenues from consolidated operations $ 763,793 $ 383,736 $ 12,328 $ (13,947) (a) $ 1,145,910
Equity income in unconsolidated affiliates 7,591 4,262 (4,068) (b) 7,785
----------------------------------------- --------------
Total 771,384 387,998 12,328 1,153,695
----------------------------------------- --------------
COSTS AND EXPENSES
Operating costs and expenses 688,250 362,539 9,105 (11,833) (c) 1,048,061
Selling, general and administrative 9,200 493 (493) (d) 9,200
----------------------------------------- --------------
Total 697,450 362,539 9,598 1,057,261
----------------------------------------- --------------
OPERATING INCOME 73,934 25,459 2,730 96,434
----------------------------------------- --------------
OTHER INCOME (EXPENSE)
Interest expense (7,995) (9,861) (e) (17,856)
Interest income from unconsolidated affiliates 1,096 (280) (f) 816
Interest income - other 1,114 1,114
Other, net (1,522) (13) (166) (1,701)
----------------------------------------- --------------
Other income (expense) (7,307) (13) (166) (17,627)
----------------------------------------- --------------
INCOME BEFORE MINORITY INTEREST 66,627 25,446 2,564 78,807
MINORITY INTEREST (672) (124) (g) (796)
========================================= ==============
ET INCOME $ 65,955 $ 25,446 $ 2,564 $ 78,011
========================================= ==============
ALLOCATION OF NET INCOME TO:
Limited partners $ 65,295 $ 77,231
============= ==============
General partner $ 660 $ 780
============= ==============
Number of Units used in computing
Basic Earnings per Common Unit
66,715 66,715
============= ==============
BASIC EARNINGS PER COMMON UNIT
Income before minority interest
per Common Unit $ 0.99 $ 1.17
============= ==============
Net Income per Common Unit $ 0.98 $ 1.16
============= ==============
Number of Units used in computing
Diluted Earnings per Common Unit 14,500 (h) 81,215
============= ==============
DILUTED EARNINGS PER COMMON UNIT
Income before minority interest
per Common Unit $ 0.99 $ 0.96
============= ==============
Net Income per Common Unit $ 0.98 $ 0.95
============= ==============
The accompanying notes are an integral part of these unaudited pro forma
condensed financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF COMBINED
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(a) Reflects the elimination of intercompany sales between the Company and TNGL
of approximately $13.9 million.
(b) Reflects the elimination of equity income from MBA in the amount of $1.3
million due to acquisition of the remaining 51% ownership interests in MBA
from Kinder Morgan Energy Partners, L.P. (50%) and Enterprise Products
Company ("EPCO")(1%). As a result of this acquisition, 100% of MBA's
results of operations are consolidated with the Company (as shown under the
column labeled "MBA Historical"). In addition, as a result of the TNGL
acquisition, the Company's and TNGL's ownership interests in Entell NGL
Services, LLC ("Entell") are a combined 100%. As a result, the operating
results of Entell are consolidated with the Company's pipeline revenues.
The amount of equity income from Entell being eliminated is $2.8 million.
(c) Reflects additional amortization of intangible assets created by the TNGL
acquisition. The TNGL acquisition was accounted for under the purchase
method of accounting and, accordingly, the purchase price has been
allocated to the assets acquired and liabilities assumed based on their
estimated fair value at August 1, 1999 as follows:
Current Assets $127.5
Investments 97.7
Property, net 225.8
Intangible asset 71.1
Liabilities (145.7)
==========
Total purchase price $ 376.4
==========
The $71.1 million intangible asset is associated with a 20-year natural gas
processing agreement with Shell ("Shell Contract") and is being amortized
using the straight-line method over a period of 20 years, approximating the
life of the agreement. On a pro forma basis, the additional amortization
expense for the nine months ended September 30, 1999 would have been
approximately $2.1 million. Offsetting this increase in amortization are
eliminations of intercompany purchases between the Company and TNGL of
approximately $13.9 million.
(d) Reflects the reduction in selling, general, and administrative charges to
the amount of the administrative fee paid to EPCO per the terms of the EPCO
agreement (as defined in the Registration Statement on Form S-1/A filed on
July 21, 1998, incorporated by reference herein).
(e) Reflects accrual for $9.9 million in interest on $215 million of assumed
borrowings under the $350 million bank credit facility at 6.88% per annum.
(f) Reflects elimination of interest income from unconsolidated affiliates
stemming from participation in the MBA note that was extinguished as a
result of the acquisition.
(g) Reflects additional minority interest associated with the pro forma
adjustments for the 1.0101% minority interest of the general partner of the
Company.
(h) Reflects addition of non-distribution bearing, convertible special
partnership Units granted to Tejas Energy, LLC as a result of the TNGL
acquisition. For earnings per share calculations, these Units are treated
as being dilutive.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENTERPRISE PRODUCTS PARTNERS L.P.
(A Delaware Limited Partnership)
By: Enterprise Products GP, LLC, as general partner
Date: November 29, 1999 By:/s/ Gary L. Miller
Gary L. Miller
Executive Vice President and Chief Financial Officer
of Enterprise Products GP, LLC