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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) : APRIL 29, 2003
COMMISSION FILE NO. 1-10403
TEPPCO PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0291058
(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) 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 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS:
Exhibit
Number Description
------- -----------
99.1 Press release of TEPPCO Partners, L.P., dated April
29, 2003, reporting financial results for the three
months ended March 31, 2003.
ITEM 9. REGULATION FD DISCLOSURE
A press release issued by TEPPCO Partners, L.P. on April 29, 2003,
regarding financial results for the three months ended March 31, 2003, is
attached hereto as Exhibit 99.1, and is incorporated herein by reference. This
information is being furnished pursuant to Item 12 - Results of Operations and
Financial Condition, of Form 8-K in accordance with Release No. 33-8216 issued
by the Securities and Exchange Commission ("SEC") and is being presented under
Item 9 of Form 8-K in accordance with interim guidance issued by the SEC on
March 27, 2003. This information is not deemed to be "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 and is not incorporated by
reference into any Securities Act registration statements.
SIGNATURE
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.
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: April 30, 2003
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
99.1 Press release of TEPPCO Partners, L.P., dated April
29, 2003, reporting financial results for the three
months ended March 31, 2003.
EXHIBIT 99.1
April 29, 2003 CONTACTS: Investor Relations - Brenda J. Peters
Phone: 713/759-3954
Toll Free: 800/659-0059
Media Relations - Kathleen A. Sauve
Phone: 713/759-3635
24-Hour: 704/382-8333
TEPPCO PARTNERS, L.P. REPORTS FIRST QUARTER RESULTS
HOUSTON - TEPPCO Partners, L.P. (NYSE:TPP) today reported net income for first
quarter 2003 of $33.9 million, or $0.43 per unit, compared with net income of
$26.8 million, or $0.46 per unit for first quarter 2002. Net income per unit for
first quarter 2003 reflects 11.4 million units issued subsequent to first
quarter 2002. The number of units outstanding at March 31, 2003, was 57.8
million, compared with 46.3 million at March 31, 2002.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was
$87.0 million for first quarter 2003, compared with $58.8 million in the prior
year quarter. The 2003 results include the addition of the Val Verde Gas
Gathering System which was acquired in July 2002.
"We are pleased with our first quarter results, with solid performance across
each of our business segments," said Barry R. Pearl, president and chief
executive officer of the general partner of TEPPCO. "Our downstream segment had
a particularly strong quarter due to the cold winter weather in the Northeast
and Midwest, with LPG transportation revenue more than 30 percent greater than
in 2002. The incremental
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- 2 -
capacity from Centennial Pipeline allowed us to provide a high level of service
to our propane customers under difficult market conditions, without impacting
service levels to our refined products customers.
"Our upstream segment had a very good quarter despite turbulent supply and
market conditions caused by the Venezuelan petroleum industry strike. Our
midstream segment also performed very well, with substantial contributions from
both our Jonah and Val Verde gas gathering systems," continued Pearl.
"We remain confident in achieving our previously stated earnings per unit and
EBITDA ranges for 2003 of $1.40 to $1.65 per unit and $305 million to $325
million, respectively," added Pearl.
OPERATING RESULTS BY BUSINESS SEGMENT
UPSTREAM SEGMENT
The upstream segment includes crude oil transportation, storage, gathering and
marketing activities; and distribution of lubrication oils and specialty
chemicals.
Operating income for the upstream segment was $3.6 million for first quarter
2003, compared with $6.3 million for first quarter 2002. Increased marketing and
transportation volumes and related margin were more than offset by higher
environmental related expenses of $1.6 million and $1.7 million from the net
settlement of some customer crude oil imbalances.
Equity earnings from the investment in Seaway Crude Pipeline were $5 million,
compared with $4.4 million for first quarter 2002. The increase in equity
earnings was
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- 3 -
due to increased revenues at the Texas City, Texas, facility, and lower
operating expenses. Long-haul volume on Seaway averaged 150,000 barrels per day
in the 2003 quarter, compared with 169,000 barrels per day in the 2002 quarter,
reflecting lower Venezuelan crude being imported during the early part of 2003.
MIDSTREAM SEGMENT
The midstream segment includes natural gas gathering services, and storage,
transportation and fractionation of natural gas liquids (NGLs).
Operating income for the midstream segment was $18.4 million for first quarter
2003, compared with $7.7 million for first quarter 2002. The Val Verde Gathering
System, acquired June 30, 2002, and the Chaparral NGL System, acquired March 1,
2002, contributed an additional $7.4 million and $1.7 million, respectively, to
operating income during the 2003 quarter. Expansion of the Jonah system and the
related increase in throughput contributed a $3.4 million increase in operating
income compared to first quarter 2002.
DOWNSTREAM SEGMENT
The downstream segment includes the transportation and storage of refined
products, liquefied petroleum gases (LPGs) and petrochemicals.
Downstream operating income was $29.3 million for first quarter 2003, compared
with $23.6 million for first quarter 2002. The increase was due primarily to
higher propane demand resulting from colder winter weather, increased refined
products delivery capability attributable to the connection with Centennial
Pipeline, which became operational in second quarter 2002, and sales of product
inventory.
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- 4 -
The equity loss from unconsolidated investments totaled $1.3 million for first
quarter 2003, compared with a loss of $0.8 million for first quarter 2002. The
first quarter 2003 loss is comprised of a $3.2 million loss from our ownership
interest in Centennial Pipeline, partially offset by $1.9 million of equity
earnings from our interest in Mont Belvieu Storage Partners, L.P., a venture
with Louis Dreyfus Energy Services L.P., which was established effective Jan. 1,
2003. The increase in equity loss in Centennial resulted from higher operating
expenses, as well as TEPPCO's increase in ownership of Centennial to 50 percent,
which was effective Feb. 10, 2003.
FINANCING ACTIVITIES
TEPPCO completed an offering in January 2003 of senior unsecured notes for $200
million. Net proceeds totaled $197.3 million after offering costs and debt
discount. These proceeds were used to repay a portion of a bank credit facility.
Total debt outstanding was $1.35 billion at March 31, 2003, compared with $1.32
billion at Dec. 31, 2002.
First quarter 2003 interest expense was $21.9 million, compared with $16.8
million first quarter 2002 interest expense. The increase of $5.1 million was
primarily due to an increase in total debt outstanding of approximately $130
million at March 31, 2003, compared with March 31, 2002. Capitalized interest
was $0.6 million for first quarter 2003, compared with first quarter 2002
capitalized interest of $2.1 million. The decrease of $1.5 million was due to
lower capital expenditures in the 2003 period compared with the 2002 period.
NON-GAAP FINANCIAL MEASURES
The Financial Highlights table accompanying this earnings release and other
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disclosures herein include references to EBITDA, which may be viewed as a
non-GAAP (Generally Accepted Accounting Principles) measure under the rules of
the Securities and Exchange Commission (SEC). We define EBITDA as net income
plus interest expense - net, depreciation and amortization, and a pro rata
portion, based on our equity ownership, of the interest expense and depreciation
and amortization of each of our joint ventures. We have included EBITDA as a
supplemental disclosure because we believe EBITDA is used by our investors as a
supplemental financial measure in the evaluation of our business. A
reconciliation of EBITDA to net income is provided in the Financial Highlights
table.
We believe EBITDA provides useful information regarding the performance of our
assets without regard to financing methods, capital structures or historical
costs basis. EBITDA should not be considered as an alternative to net income as
an indicator of our operating performance or as a measure of liquidity,
including as an alternative to cash flows from operating activities or other
cash flow data calculated in accordance with GAAP. Our EBITDA may not be
comparable to EBITDA of other entities because other entities may not calculate
EBITDA in the same manner as we do.
Information in the accompanying Operating Data table includes margin of the
upstream segment, which may be viewed as a non-GAAP financial measure under the
rules of the SEC. Margin is calculated as revenues generated from the sale of
crude oil and lubrication oil, and transportation of crude oil, less the costs
of purchases of crude oil and lubrication oil. We believe margin is a more
meaningful measure of financial performance than operating revenues and
operating expenses due to the significant fluctuations in revenues and expenses
caused by variations in the level of marketing activity and prices for products
marketed. A reconciliation of margin to operating
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- 6 -
revenues and operating expenses is provided in the Operating Data table
accompanying this earnings release.
TEPPCO will host a conference call related to earnings performance at 8 a.m. CT
on Wednesday, April 30, 2003. Interested parties may listen via the Internet,
live or on a replay basis at www.teppco.com or by dialing 800/665-0430. The
confirmation code is 457160. Please call in five to 10 minutes prior to the
scheduled start time. A replay of the conference call will be available for
seven days by dialing 888/203-1112 with a confirmation code of 457160.
TEPPCO Partners, L.P. is a publicly traded master limited partnership, which
conducts business through various subsidiary operating companies. TEPPCO owns
and operates one of the largest common carrier pipelines of refined petroleum
products and liquefied petroleum gases in the United States; owns and operates
petrochemical and natural gas liquid pipelines; is engaged in crude oil
transportation, storage, gathering and marketing; owns and operates natural gas
gathering systems; and owns a 50-percent interest in Seaway Crude Pipeline
Company, a 50-percent interest in Centennial Pipeline LLC, and an undivided
ownership interest in the Basin Pipeline. Texas Eastern Products Pipeline
Company, LLC, an indirect wholly owned subsidiary of Duke Energy Field Services,
LLC, is the general partner of TEPPCO Partners, L.P. For more information, visit
TEPPCO's Web site at www.teppco.com.
###
TEPPCO PARTNERS, L. P.
FINANCIAL HIGHLIGHTS
(Unaudited - In Millions, Except Per Unit Amounts)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2003 2002 (1)
---------- --------
Operating Revenues:
Sales of petroleum products $ 976.0 $ 545.2
Transportation - Refined Products 26.9 25.1
Transportation - LPGs 30.8 23.4
Transportation - Crude oil 6.9 6.1
Transportation - NGLs 9.9 6.3
Gathering - Natural Gas 34.3 9.5
Mont Belvieu operations -- 4.5
Other 14.4 11.0
---------- --------
Total Operating Revenues 1,099.2 631.1
---------- --------
Costs and Expenses:
Purchases of petroleum products 962.8 533.0
Operating expenses - general and administrative 47.6 35.9
Operating fuel and power 10.2 8.6
Depreciation and amortization 27.3 16.0
---------- --------
Total Costs and Expenses 1,047.9 593.5
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Operating Income 51.3 37.6
---------- --------
Interest expense - net (21.3) (14.7)
Equity earnings (2) 3.7 3.6
Other income - net 0.2 0.3
---------- --------
Net Income $ 33.9 $ 26.8
========== ========
Net Income Allocation:
Limited Partner Unitholders $ 23.0 $ 18.6
General Partner 9.2 6.4
Class B Unitholder 1.7 1.8
---------- --------
Total Net Income Allocated $ 33.9 $ 26.8
========== ========
Basic and Diluted Net Income
Per Limited Partner and Class B Unit $ 0.43 $ 0.46
========== ========
Weighted Average Number of Limited Partner
and Class B Units 57.7 44.6
========== ========
(1) Certain 2002 amounts have been reclassified to conform to current 2003
presentation.
(2) EBITDA
Net Income $ 33.9 $ 26.8
Interest expense - net 21.3 14.7
Depreciation and amortization (D&A) 27.3 16.0
TEPPCO's pro-rata percentage of joint venture
interest expense and D&A 4.5 1.3
------ ------
Total EBITDA $ 87.0 $ 58.8
====== ======
TEPPCO PARTNERS, L.P.
BUSINESS SEGMENT DATA
(Unaudited - In Millions)
INTERSEGMENT
THREE MONTHS ENDED MARCH 31, 2003 DOWNSTREAM MIDSTREAM UPSTREAM ELIMINATIONS CONSOLIDATED
- --------------------------------- ---------- --------- -------- ------------ ------------
Operating revenues $ 67.9 $ 46.9 $ 985.4 $ (1.0) $ 1,099.2
Purchases of petroleum products -- -- 963.8 (1.0) 962.8
Operating expenses 31.5 11.4 14.9 -- 57.8
Depreciation and amortization 7.1 17.1 3.1 -- 27.3
------- ------- -------- ------- ----------
Operating Income $ 29.3 $ 18.4 $ 3.6 $ -- $ 51.3
======= ======= ======== ======= ==========
INTERSEGMENT
THREE MONTHS ENDED MARCH 31, 2002(1) DOWNSTREAM MIDSTREAM UPSTREAM ELIMINATIONS CONSOLIDATED
- ------------------------------------ ---------- --------- -------- ------------ ------------
Operating revenues $ 59.6 $ 18.3 $ 553.9 $ (0.7) $ 631.1
Purchases of petroleum products -- -- 533.7 (0.7) 533.0
Operating expenses 29.2 3.5 11.8 -- 44.5
Depreciation and amortization 6.8 7.1 2.1 -- 16.0
------- ------- -------- ------- -------
Operating Income $ 23.6 $ 7.7 $ 6.3 $ -- $ 37.6
======= ======= ======== ======= =======
(1) Certain 2002 amounts have been reclassified to conform to current 2003
presentation.
TEPPCO PARTNERS, L.P.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)(IN MILLIONS)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2003 2002
--------- ---------
Cash Flows from Operating Activities
Net income $ 33.9 $ 26.8
Depreciation, working capital and other 1.7 (3.2)
--------- ---------
Net Cash Provided by Operating Activities 35.6 23.6
--------- ---------
Cash Flows from Investing Activities:
Purchase of Jonah Gas Gathering Company -- (7.3)
Purchase of Chaparral and Quanah Pipelines -- (132.0)
Acquisition of additional interest in Centennial Pipeline LLC (20.0) --
Investments in Centennial Pipeline LLC (1.0) (3.4)
Capital expenditures (1) (15.4) (33.0)
--------- ---------
Net Cash Used in Investing Activities (36.4) (175.7)
--------- ---------
Cash Flows from Financing Activities:
Issuance of Senior Notes 198.6 497.8
Proceeds from term loan and revolving credit facility 40.0 172.0
Debt issuance costs (1.4) (4.1)
Payments on revolving credit facility (207.0) (540.7)
Proceeds from issuance of LP units, net -- 56.8
General Partner contributions -- 1.2
Distributions paid (46.5) (33.5)
--------- ---------
Net Cash Provided by (Used in) Financing Activities (16.3) 149.5
--------- ---------
Net Decrease in Cash and Cash Equivalents (17.1) (2.6)
Cash and Cash Equivalents -- beginning of period 31.0 25.5
--------- ---------
Cash and Cash Equivalents -- end of period $ 13.9 $ 22.9
========= =========
Supplemental Information:
Non-cash investing activities:
Net assets transferred to Mont Belvieu Storage Partnership $ 69.5 --
Interest paid (net of capitalized interest) $ 32.5 $ 16.8
========= =========
(1) Includes capital expenditures for maintaining existing operations of
$4.9 million in 2003, and $6.7 million in 2002.
TEPPCO PARTNERS, L. P.
CONDENSED BALANCE SHEETS (UNAUDITED)
(In Millions)
MARCH 31, DECEMBER 31,
2003 2002
---------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 13.9 $ 31.0
Other 416.4 329.6
---------- ----------
Total current assets 430.3 360.6
Property, plant and equipment - net 1,511.9 1,587.8
Intangible Assets (1) 453.9 465.4
Equity investments 377.8 284.7
Other assets 71.5 72.2
---------- ----------
Total assets $ 2,845.4 $ 2,770.7
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Other $ 434.3 $ 366.8
---------- ----------
Total current liabilities 434.3 366.8
Senior Notes (2) 1,142.2 945.7
Other long-term debt 265.0 432.0
Other non-current liabilities 15.9 31.0
Class B Units 102.7 103.4
Partners' capital
Accumulated other comprehensive income (14.6) (20.1)
General partner's interest 10.0 12.8
Limited partners' interests 889.9 899.1
---------- ----------
Total partners' capital 885.3 891.8
---------- ----------
Total liabilities and partners' capital $ 2,845.4 $ 2,770.7
========== ==========
(1) Includes the value of long-term service agreements between TEPPCO and
its customers.
(2) Includes $55.7 million and $57.9 million at March 31, 2003, and Dec.
31, 2002, respectively related to fair value hedges.
TEPPCO PARTNERS, L. P.
OPERATING DATA
(Unaudited - In Millions, Except as Noted)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2003 2002
--------- ---------
DOWNSTREAM SEGMENT:
Barrels Delivered
Refined Products 30.2 25.8
LPGs 13.7 12.0
--------- ---------
TOTAL 43.9 37.8
========= =========
Average Tariff Per Barrel
Refined Products $ 0.89 $ 0.98
LPGs 2.25 1.94
Average System Tariff Per Barrel $ 1.31 $ 1.28
UPSTREAM SEGMENT (1):
Margins:
Crude oil transportation $ 10.7 $ 9.1
Crude oil marketing 4.9 5.0
Crude oil terminaling 2.1 2.4
LSI 1.4 1.1
--------- ---------
Total Margin $ 19.1 $ 17.6
========= =========
Reconciliation of Margin to Operating
Revenue and Operating Expenses:
Sales of petroleum products $ 976.0 $ 545.2
Transportation - Crude oil 6.9 6.1
Purchases of petroleum products (963.8) (533.7)
--------- ---------
Total Margin $ 19.1 $ 17.6
========= =========
Total barrels
Crude oil transportation 22.6 21.1
Crude oil marketing 37.7 30.4
Crude oil terminaling 27.4 29.3
Lubrication oil volume (total gallons): 2.8 2.2
Margin per barrel:
Crude oil transportation $ 0.471 $ 0.430
Crude oil marketing 0.130 0.165
Crude oil terminaling 0.077 0.084
Lubrication oil margin (per gallon): $ 0.476 $ 0.517
MIDSTREAM SEGMENT (1):
Gathering - Natural Gas (2)
Bcf 116.0 50.2
Btu (in trillions) 117.2 55.7
Average fee per MMBtu $ 0.29 $ 0.17
Transportation - NGLs (3)
Total barrels 14.2 4.6
Margin per barrel $ 0.698 $ 0.554
Fractionation - NGLs
Total barrels 1.1 1.0
Margin per barrel $ 1.734 $ 1.813
Sales - Condensate
Total barrels (thousands) 30.8 32.4
Margin per barrel $ 32.84 $ 25.38
(1) Certain 2002 amounts have been reclassified to conform to current 2003
presentation.
(2) Operating data for Val Verde Gathering System acquired effective June
30, 2002.
(3) Operating data for Chaparral NGL System acquired March 1, 2002.
