UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| Commission File No. 1-10403 |
| Delaware (State of Incorporation or Organization) |
76-0291058 (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) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Limited Partner Units outstanding as of July 29, 2003: 57,751,447
TEPPCO PARTNERS, L.P.
TABLE OF CONTENTS
| Page | |||||
PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements |
|||||
Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002 |
1 | ||||
Consolidated Statements of Income for the three months and six months ended June 30, 2003
and 2002 (unaudited) |
2 | ||||
Consolidated Statements of Cash Flows for the six months ended June 30, 2003
and 2002 (unaudited) |
3 | ||||
Consolidated Statement of Partners’ Capital for the six months ended June 30, 2003 (unaudited) |
4 | ||||
Notes to the Consolidated Financial Statements (unaudited) |
5 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 | ||||
Forward-Looking Statements |
46 | ||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
46 | ||||
Item 4. Controls and Procedures |
48 | ||||
PART II. OTHER INFORMATION |
|||||
Item 1. Legal Proceedings |
48 | ||||
Item 6. Exhibits and Reports on Form 8-K |
48 | ||||
Signatures |
54 | ||||
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEPPCO PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
| June 30, | December 31, | |||||||||||
| 2003 | 2002 | |||||||||||
| (Unaudited) | ||||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 30,824 | $ | 30,968 | ||||||||
Accounts receivable, trade (net of allowance for
doubtful accounts of
$5,395 and $4,537) |
344,255 | 276,163 | ||||||||||
Accounts receivable, related parties |
3,153 | 4,313 | ||||||||||
Inventories |
20,225 | 17,166 | ||||||||||
Other |
28,722 | 31,670 | ||||||||||
Total current assets |
427,179 | 360,280 | ||||||||||
Property, plant and equipment, at cost (net of accumulated
depreciation and amortization of $315,231 and $338,746) |
1,526,153 | 1,587,824 | ||||||||||
Equity investments |
375,863 | 284,705 | ||||||||||
Intangible assets |
445,633 | 465,374 | ||||||||||
Goodwill |
16,944 | 16,944 | ||||||||||
Other assets |
59,782 | 55,228 | ||||||||||
Total assets |
$ | 2,851,554 | $ | 2,770,355 | ||||||||
LIABILITIES AND PARTNERS’ CAPITAL |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable and accrued liabilities |
$ | 336,001 | $ | 261,080 | ||||||||
Accounts payable, related parties |
14,619 | 6,619 | ||||||||||
Accrued interest |
34,957 | 29,726 | ||||||||||
Other accrued taxes |
11,801 | 11,260 | ||||||||||
Other |
55,110 | 57,811 | ||||||||||
Total current liabilities |
452,488 | 366,496 | ||||||||||
Senior Notes |
1,144,094 | 945,692 | ||||||||||
Other long-term debt |
263,000 | 432,000 | ||||||||||
Other liabilities and deferred credits |
15,524 | 30,962 | ||||||||||
Redeemable Class B Units held by related party |
— | 103,363 | ||||||||||
Commitments and contingencies |
||||||||||||
Partners’ capital: |
||||||||||||
Accumulated other comprehensive loss |
(11,351 | ) | (20,055 | ) | ||||||||
General partner’s interest |
5,849 | 12,770 | ||||||||||
Limited partners’ interests |
981,950 | 899,127 | ||||||||||
Total partners’ capital |
976,448 | 891,842 | ||||||||||
Total liabilities and partners’ capital |
$ | 2,851,554 | $ | 2,770,355 | ||||||||
See accompanying Notes to Consolidated Financial Statements.
1
TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per Unit amounts)
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Operating revenues: |
||||||||||||||||||
Sales of petroleum products |
$ | 927,232 | $ | 800,107 | $ | 1,903,192 | $ | 1,345,315 | ||||||||||
Transportation – Refined products |
37,802 | 31,803 | 64,696 | 56,947 | ||||||||||||||
Transportation – LPGs |
13,357 | 10,813 | 44,178 | 34,173 | ||||||||||||||
Transportation – Crude oil |
7,059 | 7,095 | 13,964 | 13,223 | ||||||||||||||
Transportation – NGLs |
9,440 | 10,544 | 19,339 | 16,850 | ||||||||||||||
Gathering – Natural gas |
32,264 | 11,454 | 66,546 | 20,974 | ||||||||||||||
Mont Belvieu operations |
— | 2,889 | — | 7,395 | ||||||||||||||
Other |
13,646 | 13,624 | 28,124 | 24,589 | ||||||||||||||
Total operating revenues |
1,040,800 | 888,329 | 2,140,039 | 1,519,466 | ||||||||||||||
Costs and expenses: |
||||||||||||||||||
Purchases of petroleum products |
912,344 | 787,574 | 1,875,188 | 1,320,545 | ||||||||||||||
Operating, general and administrative |
46,390 | 35,083 | 89,025 | 66,528 | ||||||||||||||
Operating fuel and power |
9,970 | 7,243 | 20,147 | 15,832 | ||||||||||||||
Depreciation and amortization |
23,487 | 17,599 | 50,800 | 33,640 | ||||||||||||||
Taxes – other than income taxes |
4,571 | 3,474 | 9,499 | 7,979 | ||||||||||||||
Gain on sale of assets |
(3,948 | ) | — | (3,948 | ) | — | ||||||||||||
Total costs and expenses |
992,814 | 850,973 | 2,040,711 | 1,444,524 | ||||||||||||||
Operating income |
47,986 | 37,356 | 99,328 | 74,942 | ||||||||||||||
Interest expense |
(23,513 | ) | (16,829 | ) | (45,420 | ) | (33,616 | ) | ||||||||||
Interest capitalized |
963 | 1,029 | 1,559 | 3,138 | ||||||||||||||
Equity earnings |
8,250 | 2,414 | 11,960 | 5,986 | ||||||||||||||
Other income – net |
258 | 407 | 442 | 735 | ||||||||||||||
Net income |
$ | 33,944 | $ | 24,377 | $ | 67,869 | $ | 51,185 | ||||||||||
Net Income Allocation: |
||||||||||||||||||
Limited Partner Unitholders |
$ | 24,654 | $ | 16,467 | $ | 47,741 | $ | 35,061 | ||||||||||
Class B Unitholder |
126 | 1,441 | 1,806 | 3,234 | ||||||||||||||
General Partner |
9,164 | 6,469 | 18,322 | 12,890 | ||||||||||||||
Total net income allocated |
$ | 33,944 | $ | 24,377 | $ | 67,869 | $ | 51,185 | ||||||||||
Basic and diluted net income per Limited
Partner and Class B Unit |
$ | 0.43 | $ | 0.39 | $ | 0.86 | $ | 0.84 | ||||||||||
Weighted average Limited Partner and Class B
Units outstanding |
57,749 | 46,346 | 57,739 | 45,457 | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
2
TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
| Six Months Ended | ||||||||||||
| June 30, | ||||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 67,869 | $ | 51,185 | ||||||||
Adjustments to reconcile net income to cash provided by
operating activities: |
||||||||||||
Depreciation and amortization |
50,800 | 33,640 | ||||||||||
Earnings in equity investments, net of distributions |
(1,220 | ) | 7,444 | |||||||||
Gain on sale of assets |
(3,948 | ) | — | |||||||||
Non-cash portion of interest expense |
3,075 | 2,284 | ||||||||||
Increase in accounts receivable |
(68,092 | ) | (56,270 | ) | ||||||||
(Increase) decrease in inventories |
(3,059 | ) | 3,568 | |||||||||
(Increase) decrease in other current assets |
2,948 | (11,557 | ) | |||||||||
Increase in accounts payable and accrued expenses |
80,174 | 74,716 | ||||||||||
Other |
3,994 | (7,552 | ) | |||||||||
Net cash provided by operating activities |
132,541 | 97,458 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Acquisition of additional interest in Centennial Pipeline LLC |
(20,000 | ) | — | |||||||||
Acquisition of crude oil assets |
(5,459 | ) | — | |||||||||
Proceeds from the sale of assets |
8,531 | 3,380 | ||||||||||
Purchase of Val Verde Gas Gathering System |
— | (444,150 | ) | |||||||||
Purchase of Chaparral NGL System |
— | (132,140 | ) | |||||||||
Purchase of Jonah Gas Gathering Company |
— | (7,315 | ) | |||||||||
Investment in Centennial Pipeline LLC |
(1,000 | ) | (7,726 | ) | ||||||||
Capital expenditures |
(45,919 | ) | (63,560 | ) | ||||||||
Net cash used in investing activities |
(63,847 | ) | (651,511 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from term and revolving credit facilities |
335,000 | 642,000 | ||||||||||
Repayments on term and revolving credit facilities |
(504,000 | ) | (570,660 | ) | ||||||||
Issuance of Senior Notes |
198,570 | 497,805 | ||||||||||
Debt issuance costs |
(3,079 | ) | (7,043 | ) | ||||||||
Issuance of Limited Partner Units, net |
114,457 | 59,234 | ||||||||||
Repurchase and retirement of Class B Units |
(113,814 | ) | — | |||||||||
General Partner’s contributions |
2 | 1,217 | ||||||||||
Distributions paid |
(95,974 | ) | (68,575 | ) | ||||||||
Net cash provided by (used in) financing activities |
(68,838 | ) | 553,978 | |||||||||
Net decrease in cash and cash equivalents |
(144 | ) | (75 | ) | ||||||||
Cash and cash equivalents at beginning of period |
30,968 | 25,479 | ||||||||||
Cash and cash equivalents at end of period |
$ | 30,824 | $ | 25,404 | ||||||||
Non-cash investing activities: |
||||||||||||
Net assets transferred to Mont Belvieu Storage Partners, L.P. |
$ | 69,459 | $ | — | ||||||||
Supplemental disclosure of cash flows: |
||||||||||||
Cash paid for interest (net of amounts capitalized) |
$ | 39,567 | $ | 19,499 | ||||||||
See accompanying Notes to Consolidated Financial Statements.
3
TEPPCO PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(Unaudited)
(in thousands, except Unit amounts)
| Outstanding | Accumulated | ||||||||||||||||||||
| Limited | General | Limited | Other | ||||||||||||||||||
| Partner | Partner’s | Partners’ | Comprehensive | ||||||||||||||||||
| Units | Interest | Interests | Loss | Total | |||||||||||||||||
Partners’ capital at December 31, 2002 |
53,809,597 | $ | 12,770 | $ | 899,127 | $ | (20,055 | ) | $ | 891,842 | |||||||||||
Issuance of Limited Partner Units, net |
3,938,750 | — | 114,422 | — | 114,422 | ||||||||||||||||
Retirement of Class B Units |
— | — | (10,993 | ) | — | (10,993 | ) | ||||||||||||||
Net gain on cash flow hedges |
— | — | 8,704 | 8,704 | |||||||||||||||||
Net income allocation |
— | 18,322 | 47,741 | — | 66,063 | ||||||||||||||||
Cash distributions |
— | (25,245 | ) | (68,382 | ) | — | (93,627 | ) | |||||||||||||
Issuance of Limited Partner Units
upon exercise of options |
3,100 | 2 | 35 | — | 37 | ||||||||||||||||
Partners’ capital at June 30, 2003 |
57,751,447 | $ | 5,849 | </ | |||||||||||||||||