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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) : JUNE 30, 2002
COMMISSION FILE NO. 1-10403
TEPPCO PARTNERS, L.P. DELAWARE
TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP DELAWARE
TCTM, L.P. DELAWARE
TEPPCO MIDSTREAM COMPANIES, L.P. DELAWARE
JONAH GAS GATHERING COMPANY WYOMING
VAL VERDE GAS GATHERING COMPANY, L.P. DELAWARE
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (STATE OF INCORPORATION
OR ORGANIZATION)
76-0291058
76-0329620
76-0595522
76-0692243
83-0317360
48-1260551
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(713) 759-3636
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 5. OTHER EVENTS
FINANCIAL INFORMATION FOR THE GENERAL PARTNER OF TEPPCO PARTNERS, L.P.
We are filing the consolidated balance sheet of Texas Eastern Products
Pipeline Company, LLC and subsidiary as of June 30, 2002 (unaudited), and
December 31, 2001, which are incorporated herein by reference to Exhibit 99.1.
Texas Eastern Products Pipeline Company, LLC is the General Partner of TEPPCO
Partners, L.P.
Additionally, we have included as an exhibit an auditors' consent to
the incorporation by reference of this report in previously filed registration
statements.
ITEM 7. STATEMENTS AND EXHIBITS
(c) EXHIBITS:
Exhibit
Number Description
------- -----------
23.1 Consent of KPMG LLP.
99.1 Consolidated Balance Sheets of Texas Eastern Products
Pipeline Company, LLC and subsidiary as of June 30,
2002 (unaudited) and December 31, 2001.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
TEPPCO Partners, L.P.
(Registrant)
By: Texas Eastern Products Pipeline Company, LLC
General Partner
/s/ CHARLES H. LEONARD
----------------------
Charles H. Leonard
Senior Vice President and Chief Financial Officer
Date: October 9, 2002
3
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.1 Consent of KPMG LLP.
99.1 Consolidated Balance Sheets of Texas Eastern Products
Pipeline Company, LLC and subsidiary as of June 30,
2002 (unaudited) and December 31, 2001.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To the Partners of TEPPCO Partners, L.P.:
We consent to the incorporation by reference in the registration statement (No.
33-81976) on Form S-3 and the registration statement (No. 333-82892) on Form S-8
of TEPPCO Partners, L.P. of our report dated April 9, 2002, with respect to the
consolidated balance sheet of Texas Eastern Products Pipeline Company, LLC and
subsidiary as of December 31, 2001, which report appears in the Current Report
on Form 8-K of TEPPCO Partners, L.P. filed October 9, 2002.
KPMG LLP
Houston, Texas
October 9, 2002
EXHIBIT 99.1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Texas Eastern Products Pipeline Company, LLC
PAGE
----
Independent Auditors' Report......................................................................... F-2
Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001.................... F-3
Notes to Consolidated Balance Sheets................................................................. F-4
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Texas Eastern Products Pipeline Company, LLC:
We have audited the accompanying consolidated balance sheet of Texas Eastern
Products Pipeline Company, LLC and subsidiary as of December 31, 2001. This
consolidated financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit of a balance sheet includes
examining, on a test basis, evidence supporting the amounts and disclosures in
that balance sheet. An audit of a balance sheet also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Texas Eastern
Products Pipeline Company, LLC and subsidiary as of December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
KPMG LLP
April 9, 2002
Houston, Texas
F-2
TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC
AND SUBSIDIARY
Consolidated Balance Sheets
As of June 30, 2002 (unaudited) and December 31, 2001
(In thousands)
June 30, December 31,
2002 2001
---------- ------------
ASSETS (unaudited)
Current assets:
Accounts receivable, related parties $ 38,445 $ 23,312
Advances to Duke Energy Field Services, L.P. 1,136 1,017
Investment in TEPPCO Partners, L.P. 10,870 13,190
---------- ------------
Total assets $ 50,451 $ 37,519
========== ============
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Accrued income taxes $ 370 $ 120
Deferred income taxes 1,095 1,095
Member's equity:
Member's equity 58,986 46,304
Note receivable, Duke Energy Field Services, L.P. (10,000) (10,000)
---------- ------------
Total member's equity 48,986 36,304
Commitments and contingencies
---------- ------------
Total liabilities and member's equity $ 50,451 $ 37,519
========== ============
See accompanying notes to consolidated balance sheets.
F-3
TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC
AND SUBSIDIARY
Notes to Consolidated Balance Sheets
As of June 30, 2002 (unaudited) and December 31, 2001
(1) BASIS OF PRESENTATION
The accompanying consolidated balance sheets as of June 30, 2002 and
December 31, 2001 include the accounts of Texas Eastern Products
Pipeline Company, LLC and its wholly owned subsidiary TEPPCO Investments,
LLC (collectively, the Company). On March 31, 2000, Texas Eastern
Products Pipeline Company and TEPPCO Investments, Inc. were converted to
limited liability companies, with a resulting name change for both
companies to Texas Eastern Products Pipeline Company, LLC and TEPPCO
Investments, LLC, respectively. Additionally on March 31, 2000, Texas
Eastern Products Pipeline Company, LLC (the LLC) distributed its
ownership of a wholly owned subsidiary, TEPPCO Holdings, Inc. to Duke
Energy Corporation (Duke Energy), the Company's ultimate parent. The LLC
also distributed to, and Duke Energy assumed, all assets and liabilities
of the LLC, except those relating to the performance of its duties as
general partner of TEPPCO Partners, L.P., TE Products Pipeline Company,
Limited Partnership, and TCTM, L.P., and $10 million of the demand note
receivable due from Duke Energy Field Services, L.P. (DEFS), a joint
venture formed between Duke Energy and ConocoPhillips Petroleum
Corporation. Also on March 31, 2000, Duke Energy indirectly contributed
its remaining investment in the LLC to DEFS.
The Company is the general partner of TEPPCO Partners, L.P. (the
Partnership). The Company, as general partner, performs all management
and operating functions required for the Partnership pursuant to the
Agreement of Limited Partnership of TEPPCO Partners, L.P. (the
Partnership Agreement). The general partner is reimbursed by the
Partnership for all reasonable direct and indirect expenses incurred in
managing the Partnership.
On July 26, 2001, the Company restructured its general partner ownership
of TE Products Pipeline Company, Limited Partnership and TCTM, L.P.
(collectively the Operating Partnerships) to cause them to be indirectly
wholly owned by the Partnership. TEPPCO GP, Inc., a subsidiary of the
Partnership, succeeded the Company as general partner of the Operating
Partnerships. All remaining partner interests in the Operating
Partnerships not already owned by the Partnership were transferred to the
Partnership. In exchange for this contribution, the Company's interest as
general partner of the Partnership was increased to 2%. The increased
percentage is the economic equivalent of the aggregate interest the
Company had prior to the restructuring through its combined interests in
the Partnership and the Operating Partnerships. This reorganization was
undertaken to simplify required financial reporting by the Operating
Partnerships when guarantees of Partnership debt are issued by the
Operating Partnerships.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated balance sheets include the accounts of the
Company. Significant intercompany items have been eliminated in
consolidation. The Company's investments in the Partnership and
the Operating Partnerships are accounted for using the equity
method.
(b) CASH AND CASH EQUIVALENTS
Cash equivalents are defined as all highly marketable securities
with a maturity of three months or less when purchased. The
Company generally does not maintain cash balances. Cash
transactions are generally settled through intercompany accounts
(see note 3, Related Party Transactions).
F-4
TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC
AND SUBSIDIARY
Notes to Consolidated Balance Sheets
As of June 30, 2002 (unaudited) and December 31, 2001
(c) FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounts receivable and accounts payable approximate fair value
due to the short-term maturity of these financial instruments. The
fair value of the Company's note receivable is more fully
described in note 4, Note Receivable.
(d) USE OF ESTIMATES
The preparation of the consolidated balance sheets in conformity
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities. Actual results
could differ from these estimates.
(e) INCOME TAXES
As discussed in note 1, Basis of Presentation, on March 31, 2000,
Texas Eastern Products Pipeline Company and TEPPCO Investments,
Inc. were converted to limited liability companies, and the
Company's ownership of TEPPCO Holdings, Inc. was distributed to
Duke Energy. As such, the Company became a nontaxable entity for
federal income tax purposes as of March 31, 2000, but remains a
taxable entity for state franchise taxes.
Prior to March 31, 2000, the Company followed the asset and
liability method of accounting for federal income tax. Under this
method, deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities for
financial reporting purposes, and such amounts as measured by tax
laws and regulations. These deferred income taxes are measured by
applying enacted tax laws and statutory tax rates applicable to
the period in which the differences are expected to affect taxable
income. Also prior to March 31, 2000, under an agreement with Duke
Energy, the Company computed federal taxes as if it was filing a
separate consolidated tax return and paid such tax, if any, to
Duke Energy in lieu of federal taxes otherwise payable to the
government. The Company continues to follow the asset and
liability method of accounting for state franchise taxes.
(3) RELATED PARTY TRANSACTIONS
The Company generally does not maintain cash balances. Cash transactions
are generally settled through intercompany accounts. Accounts receivable,
related parties, on the consolidated balance sheets at June 30, 2002 and
December 31, 2001 represent unpaid amounts charged to the Partnership
related to business activities of the Partnership and cash advances to
DEFS.
F-5
TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC
AND SUBSIDIARY
Notes to Consolidated Balance Sheets
As of June 30, 2002 (unaudited) and December 31, 2001
(4) NOTE RECEIVABLE
As of June 30, 2002 and December 31, 2001, the Company held a $10 million
demand note receivable due from DEFS. Interest is payable quarterly. The
rate on the note fluctuates quarterly based on the one-month LIBOR rate,
plus 50 basis points, as of the last day of the preceding calendar
quarter. Under the terms of the note, DEFS may prepay the note, in whole
or in part, without premium or penalty. The Company believes that the
amounts included in the consolidated balance sheets for the note
receivable materially represent fair value at June 30, 2002 and December
31, 2001, as the underlying interest rate is based on market rates. The
note receivable due from DEFS is classified as contra-equity on the
consolidated balance sheets as of June 30, 2002 and December 31, 2001. On
March 31, 2000, the LLC distributed $115 million of the note receivable
to Duke Energy (see note 1, Basis of Presentation) reducing the note
receivable balance from $125 million to $10 million.
(5) INVESTMENTS
On March 7, 1990, in conjunction with the formation of the Partnership,
the Company contributed cash and conveyed all assets and liabilities
(other than certain intercompany and tax-related items) to the
Partnership in return for a 1.0101% general partner interest in TE
Products Pipeline Company, Limited Partnership and a 1% general partner
interest in TEPPCO Partners, L.P. On July 26, 2001, the Company
restructured its general partner ownership of the Operating Partnerships
(see note 1, Basis of Presentation). The assets and liabilities of the
Partnership are summarized below (in thousands):
JUNE 30, DECEMBER 31,
2002 2001
---------- ------------
(Unaudited)
Current assets $ 349,908 $ 283,480
Property, plant, and equipment, net 1,531,349 1,180,461
Equity investments 292,506 292,224
Intangible assets 502,033 253,413
Other assets 62,850 55,770
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$2,738,646 $ 2,065,348
========== ============
Current liabilities $ 542,783 $ 668,842
Long-term debt 1,474,320 730,472
Other liabilities and deferred credits 29,336 17,223
Redeemable Class B Units held by related party 104,360 105,630
Partners' capital 587,847 543,181
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$2,738,646 $ 2,065,348
========== ============
F-6
TEXAS EASTERN PRODUCTS PIPELINE COMPANY, LLC
AND SUBSIDIARY
Notes to Consolidated Balance Sheets
As of June 30, 2002 (unaudited) and December 31, 2001
(6) INCOME TAXES
As discussed in note 1, Basis of Presentation, as of March 31, 2000,
Texas Eastern Products Pipeline Company and TEPPCO Investments, Inc. were
converted to limited liability companies, and the Company's ownership of
TEPPCO Holdings, Inc. was distributed to Duke Energy. As such, the
Company became a nontaxable entity for federal income tax purposes as of
March 31, 2000. In connection with the conversion to limited liability
companies, the federal deferred tax liability balance of $39.2 million at
March 31, 2000 was recorded as a tax benefit in earnings. Also discussed
in note 1, Basis of Presentation, in connection with the contribution of
the LLC to DEFS on March 31, 2000, accrued income taxes of $15.7 million
and deferred taxes of $2.2 million of the Company were assumed by Duke
Energy.
At June 30, 2002 and December 31, 2001, accrued income taxes payable was
comprised of $370,000 and $120,000 of state franchise taxes,
respectively.
As of June 30, 2002 and December 31, 2001, the difference between the
financial statement carrying value and related tax basis of existing
assets and liabilities, primarily the Company's equity investment in the
Partnership, resulted in a deferred tax liability for state franchise
taxes of $1,095,000.
(7) COMMITMENTS AND CONTINGENCIES
In the fall of 1999 and on December 1, 2000, the Company and the
Partnership were named as defendants in two separate lawsuits in Jackson
County Circuit Court, Jackson County, Indiana, in Ryan E. McCleery and
Marcia S. McCleery, et. al. v. Texas Eastern Corporation, et. al.
(including the Company and Partnership) and Gilbert Richards and Jean
Richards v. Texas Eastern Corporation, et. al. (including the Company and
Partnership). In both cases, the plaintiffs contend, among other things,
that the Company and other defendants stored and disposed of toxic and
hazardous substances and hazardous wastes in a manner that caused the
materials to be released into the air, soil, and water. They further
contend that the release caused damages to the plaintiffs. In their
complaints, the plaintiffs allege strict liability for both personal
injury and property damage together with gross negligence, continuing
nuisance, trespass, criminal mischief, and loss of consortium. The
plaintiffs are seeking compensatory, punitive, and treble damages. The
Company has filed an answer to both complaints, denying the allegations,
as well as various other motions. These cases are in the early stages of
discovery and are not covered by insurance. The Company is defending
itself vigorously against the lawsuits. The plaintiffs have not
stipulated the amount of damages that they are seeking in the suit. The
Company cannot estimate the loss, if any, associated with these pending
lawsuits. The Partnership would be responsible for the liability for any
settlements and judgments associated with these lawsuits.
F-7
