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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
____________________
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2004 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 Commission File No. 1-13603
____________________ TE Products Pipeline Company, Limited Partnership (Exact name of Registrant as specified in its charter)
 Delaware
(State of Incorporation
or Organization)
    
    76-0329620
(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




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP TABLE OF CONTENTS  
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003
    
    
    1Consolidated Statements of Income for the three months ended March 31, 2004
and 2003 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the three months ended March 31, 2004
and 2003 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Forward-Looking Statements
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 6. Exhibits and Reports on Form 8-K
    
    
    24Signatures
    
    
    29Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
 i




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP 
 CONSOLIDATED BALANCE SHEETS
(in thousands) March 31,
    
    December 31,2004
    
    2003(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    43
    
    
    $
    188Accounts receivable, trade (net of allowance for doubtful accounts of
$374)
    
    
    18,584
    
    
    
    25,377Accounts receivable, related parties
    
    
    4,587
    
    
    
    154Inventories
    
    
    10,171
    
    
    
    11,186Other
    
    
    6,529
    
    
    
    10,230Total current assets
    
    
    39,914
    
    
    
    47,135Property, plant and equipment, at cost (net of accumulated
depreciation and amortization of $287,422 and $279,395)
    
    
    680,762
    
    
    
    682,385Equity investments
    
    
    156,124
    
    
    
    155,861Other assets
    
    
    26,701
    
    
    
    15,267Total assets
    
    $
    903,501
    
    
    $
    900,648LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    11,946
    
    
    $
    11,518Accounts payable, related parties
    
    
    15,427
    
    
    
    12,277Accrued interest
    
    
    7,714
    
    
    
    15,877Other accrued taxes
    
    
    3,893
    
    
    
    5,732Other
    
    
    8,087
    
    
    
    13,983Total current liabilities
    
    
    47,067
    
    
    
    59,387Senior Notes
    
    
    398,734
    
    
    
    392,164Note Payable, Parent Partnership
    
    
    231,815
    
    
    
    211,314Other liabilities and deferred credits
    
    
    14,782
    
    
    
    14,995Commitments and contingenciesPartners capital:General partners interest
    
    
    2
    
    
    
    2Limited partners interest
    
    
    211,101
    
    
    
    222,786Total partners capital
    
    
    211,103
    
    
    
    222,788Total liabilities and partners capital
    
    $
    903,501
    
    
    $
    900,648
 See accompanying Notes to Consolidated Financial Statements. 1




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP 
 CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands) Three Months EndedMarch 31,2004
    
    2003Operating revenues:Transportation  Refined products
    
    $
    30,971
    
    
    $
    26,894Transportation  LPGs
    
    
    28,780
    
    
    
    30,821Other
    
    
    13,911
    
    
    
    9,254Total operating revenues
    
    
    73,662
    
    
    
    66,969Costs and expenses:Operating, general and administrative
    
    
    29,048
    
    
    
    20,501Operating fuel and power
    
    
    8,049
    
    
    
    8,178Depreciation and amortization
    
    
    8,638
    
    
    
    7,008Taxes  other than income taxes
    
    
    2,843
    
    
    
    2,648Total costs and expenses
    
    
    48,578
    
    
    
    38,335Operating income
    
    
    25,084
    
    
    
    28,634Interest expense  net
    
    
    (6,909
    )
    
    
    (6,802
    )Equity losses
    
    
    (1,238
    )
    
    
    (1,259
    )Other income  net
    
    
    272
    
    
    
    (6
    )Net income
    
    $
    17,209
    
    
    $
    20,567
 See accompanying Notes to Consolidated Financial Statements. 2




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands) Three Months EndedMarch 31,2004
    
    2003Cash flows from operating activities:Net income
    
    $
    17,209
    
    
    $
    20,567Adjustments to reconcile net income to cash provided by
operating activities:Depreciation and amortization
    
    
    8,638
    
    
    
    7,008Losses in equity investments, net of distributions
    
    
    1,238
    
    
    
    1,259Non-cash portion of interest expense
    
    
    7
    
    
    
    8Decrease in accounts receivable
    
    
    6,793
    

    
    
    4,965Decrease (increase) in inventories
    
    
    1,015
    
    
    
    (2,095
    )Decrease in other current assets
    
    
    3,700
    
    
    
    3,910Decrease in accounts payable and accrued expenses
    
    
    (13,332
    )
    
    
    (11,413
    )Other
    
    
    (8,200
    )
    
    
    2,914Net cash provided by operating activities
    
    
    17,068
    
    
    
    27,123Cash flows from investing activities:Acquisition of additional interest in Centennial Pipeline LLC
    
    
    
    
    
    
    (20,000
    )Investment in Centennial Pipeline LLC
    
    
    (1,000
    )
    
    
    (1,000
    )Capital expenditures
    
    
    (7,820
    )
    
    
    (11,404
    )Net cash used in investing activities
    
    
    (8,820
    )
    
    
    (32,404
    )Cash flows from financing activities:Proceeds from term loan
    
    
    35,474
    
    
    
    35,356Repayments of term loan
    
    
    (14,973
    )
    
    
    (5,500
    )Equity contribution  Parent Partnership
    
    
    
    
    
    
    36Distributions paid
    
    
    (28,894
    )
    
    
    (24,829
    )Net cash (used in) provided by financing activities
    
    
    (8,393
    )
    
    
    5,063Net decrease in cash and cash equivalents
    
    
    (145
    )
    
    
    (218
    )Cash and cash equivalents at beginning of period
    
    
    188
    
    
    
    485Cash and cash equivalents at end of period
    
    $
    43
    
    
    $
    267Non-cash investing activities:Net assets transferred to Mont Belvieu Storage Partners, L.P.
    
    $
    
    
    
    $
    61,042Supplemental disclosure of cash flows:Cash paid for interest (net of amounts capitalized)
    
    $
    12,610
    
    
    $
    13,789
 See accompanying Notes to Consolidated Financial Statements. 3




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION TE Products Pipeline Company, Limited Partnership (the Partnership), a
Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P.
(the Parent Partnership) owns a 99.999% interest in us as the sole limited
partner. TEPPCO GP, Inc. (TEPPCO GP or General Partner), a subsidiary of
the Parent Partnership, holds a 0.001% General Partner interest in us. Texas
Eastern Products Pipeline Company, LLC (the Company), a Delaware limited
liability company, serves as the general partner of our Parent Partnership.
The Company is a wholly owned subsidiary of Duke Energy Field Services, LLC
(DEFS), a joint venture between Duke Energy Corporation (Duke Energy) and
ConocoPhillips. Duke Energy holds an interest of approximately 70% in DEFS,
and ConocoPhillips holds the remaining interest of approximately 30%. TEPPCO
GP, as general partner, performs all of the management and operating functions
required for us in accordance with the Agreement of Limited Partnership of TE
Products Pipeline Company, Limited Partnership (the Partnership Agreement).
We reimburse our General Partner and the Company for all reasonable direct and
indirect expenses that they incur in managing us. As used in this Report, we, us, and our means TE Products Pipeline
Company, Limited Partnership. The accompanying unaudited consolidated financial statements reflect all
adjustments that are, in the opinion of our management, of a normal and
recurring nature and necessary for a fair statement of our financial position
as of March 31, 2004, and the results of our operations and cash flows for the
periods presented. The results of operations for the three months ended March
31, 2004, are not necessarily indicative of results of our operations for the
full year 2004. You should read these interim financial statements in
conjunction with our consolidated financial statements and notes thereto
presented in the TE Products Pipeline Company, Limited Partnership Annual
Report on Form 10-K for the year ended December 31, 2003. We have reclassified
certain amounts from prior periods to conform with the current presentation. We operate and report in one business segment: transportation and storage
of refined products, liquefied petroleum gases (LPGs) and petrochemicals.
Our interstate transportation operations, including rates charged to customers,
are subject to regulations prescribed by the Federal Energy Regulatory
Commission (FERC). We refer to refined products, LPGs and petrochemicals in
this Report, collectively, as petroleum products or products. At March 31, 2004, and December 31, 2003, we had working capital deficits
of $7.2 million and $12.3 million, respectively. Cash generated from
operations and from our Parent Partnerships credit facilities and debt and
equity offerings are our primary sources of liquidity. Working capital
deficits can occur primarily due to the timing of operating cash receipts from
customers, payment of cash distributions and the payment of normal operating
expenses and capital expenditures. Our Parent Partnership has historically
made capital contributions, loans or otherwise provided liquidity to us as
needed, but the Parent Partnership has no contractual obligation to do so. At
March 31, 2004, our Parent Partnership had $323.5 million in available
borrowing capacity under its revolving credit facility and agreed to cover any
working capital needs, if required. New Accounting Pronouncements In December 2003, the Financial Accounting Standards Board (FASB)
revised FASB Interpretation No. 46, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51(FIN 46). FIN 46, issued by the
FASB in January 2003, requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity investors
in the entity do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. The revised statement, FASB Interpretation No. 46(R), Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51(FIN 46(R)),
clarifies some of the requirements of FIN 46, eases some implementation
problems that companies experienced implementing FIN 46, adds new scope
exceptions and makes the probability more likely for many companies that
potential variable interest entities will be identified and 4




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) consolidated. We adopted the new requirements detailed in FIN 46(R) as of
March 31, 2004. In connection with our adoption of FIN 46(R), we evaluated our
investments in Centennial Pipeline LLC and Mont Belvieu Storage Partners, L.P.
and determined that these entities are not materially affected by our adoption
of FIN 46(R), and thus we have accounted for them as equity method investments
(see Note 5. Equity Investments). The adoption of FIN 46(R) did not have an
effect on our financial position, results of operations or cash flows. On December 8, 2003, President Bush signed into a law a bill that expands
Medicare, primarily adding a prescription drug benefit for Medicare-eligible
retirees starting in 2006. We anticipate that the benefits our Parent
Partnership pays after 2006 could be lower as a result of the new Medicare
provisions; however, at this time the retiree medical obligations and costs
reported do not reflect any changes as a result of this legislation. Deferring
the recognition of the new Medicare provisions impact is permitted by FASB
Staff Position 106-1, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003, due to
open questions about some of the new Medicare provisions and a lack of
authoritative accounting guidance about certain matters. The final accounting
guidance could require changes to previously reported information. We do not
believe that this regulation will have a material adverse effect on our
financial position, results of operations or cash flows. In December 2003, the FASB issued a revision to Statement of Financial
Accounting Standards (SFAS) No. 132, Employers Disclosures about Pensions
and Other Post-Retirement Benefits. This revision required that companies
provide more details about their plan assets, benefit obligations, cash flows,
benefit costs and other relevant information. A description of investment
policies and strategies and target allocation percentages, or target ranges,
for these asset categories also are required in financial statements. Cash
flows will include projections of future benefit payments and an estimate of
contributions to be made in the next year to fund pension and other
postretirement benefit plans. In addition to expanded annual disclosures, the
FASB is requiring companies to report the various elements of pension and other
postretirement benefit costs on a quarterly basis. The guidance is effective
for fiscal years ending after December 15, 2003, and for quarters beginning
after December 15, 2003. We adopted the provisions of the revised SFAS 132
effective December 31, 2003, and certain provisions regarding disclosure of
information about estimated future benefit payments in the first quarter of
2004. NOTE 2. INTANGIBLE ASSETS We account for our intangible assets under SFAS No. 142, Goodwill and
Other Intangible Assets, which was issued by the FASB in July 2001. SFAS 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives, and instead should be tested for impairment at least annually.
SFAS 142 requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives. If an intangible asset
has a finite useful life, but the precise length of that life is not known,
that intangible asset shall be amortized over the best estimate of its useful
life. At a minimum, we will assess the useful lives and residual values of all
intangible assets on an annual basis to determine if adjustments are required. The following table reflects the components of amortized intangible
assets, included in other assets on the consolidated balance sheets at March
31, 2004, and December 31, 2003 (in thousands): March 31, 2004
    
    December 31, 2003Gross Carrying
    
    Accumulated
    
    Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Transportation agreements
    
    $
    1,328
    
    
    $
    (211
    )
    
    $
    1,328
    
    
    $
    (194
    )
 5




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) At March 31, 2004, we had $33.4 million of excess investment in our equity
investment in Centennial Pipeline LLC, which was created upon formation of the
company (see Note 5. Equity Investments). The excess investment is included
in our equity investments account at March 31, 2004. This excess investment is
accounted for as an intangible asset with an indefinite life. We assess the
intangible asset for impairment on an annual basis. Amortization expense on intangible assets was $16,603 for each of the
three month periods ended March 31, 2004 and 2003. Estimated amortization expense on intangible assets will be $0.1 million
for each of the years ending December 31, 2004 through 2008. NOTE 3. INTEREST RATE SWAP On October 4, 2001, we entered into an interest rate swap agreement to
hedge our exposure to changes in the fair value of our fixed rate 7.51% Senior
Notes due 2028. We designated this swap agreement as a fair value hedge. The
swap agreement has a notional amount of $210.0 million and matures in January
2028 to match the principal and maturity of the 7.51% Senior Notes. Under the
swap agreement, we pay a floating rate of interest based on a three-month U.S.
Dollar LIBOR rate, plus a spread, and receive a fixed rate of interest of
7.51%. During the three months ended March 31, 2004, and 2003, we recognized
reductions in interest expense of $2.6 million and $2.4 million, respectively,
related to the difference between the fixed rate and the floating rate of
interest on the interest rate swap. During the quarter ended March 31, 2004,
we measured the hedge effectiveness of this interest rate swap and noted that
no gain or loss from ineffectiveness was required to be recognized. The fair
value of this interest rate swap was a gain of approximately $8.9 million at
March 31, 2004, and a gain of approximately $2.3 million at December 31, 2003. NOTE 4. INVENTORIES Inventories are valued at the lower of cost (based on weighted average
cost method) or market. The costs of inventories did not exceed market values
at March 31, 2004, and December 31, 2003. The major components of inventories
were as follows (in thousands): March 31,
    
    December 31,2004
    
    2003Refined products
    
    $
    5,119
    
    
    $
    6,632LPGs
    
    
    418
    
    
    
    517Materials and supplies
    
    
    4,634
    
    
    
    4,037Total
    
    $
    10,171
    
    
    $
    11,186
 NOTE 5. EQUITY INVESTMENTS In August 2000, we entered into agreements with Panhandle Eastern Pipeline
Company (PEPL), a former subsidiary of CMS Energy Corporation, and Marathon
Ashland Petroleum LLC (Marathon) to form Centennial Pipeline LLC
(Centennial). Centennial owns an interstate refined petroleum products
pipeline extending from the upper Texas Gulf Coast to central Illinois.
Through February 9, 2003, each participant owned a one-third interest in
Centennial. On February 10, 2003, we and Marathon each acquired an additional
interest in Centennial from PEPL for $20.0 million each, increasing our
ownership percentages in Centennial to 50% each. During the three months 6




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) ended March 31, 2004, we invested $1.0 million in Centennial, which is
included in the equity investment balance at March 31, 2004. As of January 1, 2003, we and Louis Dreyfus Energy Services, L.P. (Louis
Dreyfus) formed Mont Belvieu Storage Partners, L.P. (MB Storage). We and
Louis Dreyfus each own a 50% ownership interest in MB Storage. The purpose of
MB Storage is to expand services to the upper Texas Gulf Coast energy
marketplace by increasing pipeline throughput and the mix of products handled
through the existing system and establishing new receipt and delivery
connections. MB Storage is a service-oriented, fee-based venture with no
commodity trading activity. We operate the facilities for MB Storage.
Effective January 1, 2003, we contributed property, plant and equipment with a
net book value of $67.1 million to MB Storage. Additionally, as of the
contribution date, Louis Dreyfus had invested $6.1 million for expansion
projects for MB Storage that we were required to reimburse if the original
joint development and marketing agreement was terminated by either party. This
deferred liability was also contributed and converted to the capital account of
Louis Dreyfus in MB Storage. We receive the first $1.8 million per quarter (or $7.15 million on an
annual basis) of MB Storages income before depreciation expense less mandatory
capital expenditures, as defined in the operating agreement. Any amount of MB
Storages annual income before depreciation expense less mandatory capital
expenditures in excess of $7.15 million is allocated evenly between Louis
Dreyfus and us. Depreciation expense on assets each originally contributed to
MB Storage is allocated between us and Louis Dreyfus based on the net book
value of the assets contributed. Depreciation expense on assets constructed or
acquired by MB Storage subsequent to formation is allocated evenly between us
and Louis Dreyfus. For the three months ended March 31, 2004, our sharing
ratio in the earnings of MB Storage was approximately 66.4%. We use the equity method of accounting to account for our investments in
Centennial and MB Storage. Summarized combined financial information for
Centennial and MB Storage for the three months ended March 31, 2004 and 2003,
is presented below (in thousands): Three Months EndedMarch 31,2004
    
    2003Revenues
    
    $
    12,151
    
    
    $
    9,043Net loss
    
    
    (996
    )
    
    
    (3,189
    )
 Summarized combined balance sheet data for Centennial and MB Storage as of
March 31, 2004, and December 31, 2003, is presented below (in thousands): March 31,
    
    December 31,2004
    
    2003Current assets
    
    $
    53,881
    
    
    $
    26,771Noncurrent assets
    
    
    348,513
    
    
    
    351,241Current liabilities
    
    
    40,909
    
    
    
    35,032Long-term debt
    
    
    140,000
    
    
    
    140,000Noncurrent liabilities
    
    
    13,292
    
    
    
    13,182Partners capital
    
    
    208,193
    
    
    
    189,798
 Our investment in Centennial includes an excess net investment amount of
$33.4 million (see Note 2. Intangible Assets). Excess investment is the
amount by which our investment balance exceeds our proportionate share of the
net assets of the investment. 7




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) NOTE 6. DEBT Senior Notes On January 27, 1998, we completed the issuance of $180.0 million principal
amount of 6.45% Senior Notes due 2008, and $210.0 million principal amount of
7.51% Senior Notes due 2028 (collectively the Senior Notes). The 6.45%
Senior Notes were issued at a discount of $0.3 million and are being accreted
to their face value over the term of the notes. The 6.45% Senior Notes due
2008 are not subject to redemption prior to January 15, 2008. The 7.51% Senior
Notes due 2028, issued at par, may be redeemed at any time after January 15,
2008, at our option in whole or in part, at a premium. The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year. The Senior Notes are unsecured obligations and rank on a parity
with all of our other unsecured and unsubordinated indebtedness. The indenture
governing the Senior Notes contains covenants, including, but not limited to,
covenants limiting the creation of liens securing indebtedness and sale and
leaseback transactions. However, the indenture does not limit our ability to
incur additional indebtedness. As of March 31, 2004, we were in compliance
with the covenants of the Senior Notes. We have entered into an interest rate swap agreement to hedge our exposure
to changes in the fair value on a portion of the Senior Notes discussed above.
See Note 3. Interest Rate Swap. At March 31, 2004, the estimated fair values of the 6.45% Senior Notes and
7.51% Senior Notes were approximately $198.5 million and $238.2 million,
respectively. Market prices for recent transactions and rates currently
available to us for debt with similar terms and maturities were used to
estimate fair value. Other Long Term Debt and Credit Facilities We currently utilize debt financing available from our Parent Partnership
through intercompany notes. The terms of the intercompany notes generally match
the principal and interest payment dates under the Parent Partnerships credit
agreements. The interest rates charged by the Parent Partnership include the
stated interest rate of the Parent Partnership, plus a premium to cover debt
issuance costs. The interest rate is also decreased or increased to cover
gains and losses, respectively, on any interest rate swaps that the Parent
Partnership may have in place on its respective credit agreements. These
credit facilities of the Parent Partnership are described below. On April 6, 2001, our Parent Partnership entered into a $500.0 million
revolving credit facility including the issuance of letters of credit of up to
$20.0 million (Three Year Facility). The interest rate was based, at our
Parent Partnerships option, on either the lenders base rate plus a spread, or
LIBOR plus a spread in effect at the time of the borrowings. The credit
agreement for the Three Year Facility contained certain restrictive financial
covenant ratios. During the first quarter of 2003, our Parent Partnership
repaid $182.0 million of the outstanding balance of the Three Year Facility
with proceeds from the issuance of its 6.125% Senior Notes on January 30, 2003.
On June 27, 2003, our Parent Partnership repaid the outstanding balance under
the Three Year Facility with borrowings under a new credit facility, and
canceled the Three Year Facility. On February 20, 2002, our Parent Partnership issued $500.0 million
principal amount of 7.625% Senior Notes due 2012. The 7.625% Senior Notes were
issued at a discount of $2.2 million and are being accreted to their face value
over the term of the notes. The Senior Notes may be redeemed at any time at
our Parent Partnerships option with the payment of accrued interest and a
make-whole premium determined by discounting remaining interest and principal
payments using a discount rate equal to the rate of the United States Treasury
securities of comparable remaining maturity plus 35 basis points. The
indenture governing these 7.625% Senior Notes contains covenants, including,
but not limited to, covenants limiting the creation of liens securing
indebtedness and sale and 8




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) leaseback transactions. However, the indenture does not limit our Parent
Partnerships ability to incur additional indebtedness. On January 30, 2003, our Parent Partnership issued $200.0 million
principal amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were
issued at a discount of $1.4 million and are being accreted to their face value
over the term of the notes. The Parent Partnership used $182.0 million of the
proceeds from the offering to reduce the outstanding principal on the Three
Year Facility to $250.0 million. The balance of the net proceeds received was
used for general Parent Partnership purposes. The Senior Notes may be redeemed
at any time at our Parent Partnerships option with the payment of accrued
interest and a make-whole premium determined by discounting remaining interest
and principal payments using a discount rate equal to the rate of the United
States Treasury securities of comparable remaining maturity plus 35 basis
points. The indenture governing the 6.125% Senior Notes contains covenants,
including, but not limited to, covenants limiting the creation of liens
securing indebtedness and sale and leaseback transactions. However, the
indenture does not limit the Parent Partnerships ability to incur additional
indebtedness. On June 27, 2003, our Parent Partnership entered into a $550.0 million
revolving credit facility with a three year term, including the issuance of
letters of credit of up to $20.0 million (Revolving Credit Facility). The
interest rate is based, at our Parent Partnerships option, on either the
lenders base rate plus a spread, or LIBOR plus a spread in effect at the time
of the borrowings. The credit agreement for the Revolving Credit Facility
contains certain restrictive financial covenant ratios. Our Parent Partnership
borrowed $263.0 million under the Revolving Credit Facility and repaid the
outstanding balance of the Three Year Facility. At March 31, 2004, $226.5
million was outstanding under the Revolving Credit Facility. As of March 31, 2004, and December 31, 2003, we had an intercompany note
payable to our Parent Partnership of $231.8 million and $211.3 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
weighted average interest rate on the note payable to the Parent Partnership at
March 31, 2004, was 5.2%. At March 31, 2004, accrued interest includes $2.0
million due to the Parent Partnership. For the three months ended March 31,
2004 and 2003, interest costs incurred on the note payable to the Parent
Partnership totaled $2.9 million and $2.7 million, respectively. Short Term Credit Facilities On April 6, 2001, our Parent Partnership entered into a 364-day, $200.0
million revolving credit agreement (Short-term Revolver). The interest rate
was based, at our Parent Partnerships option, on either the lenders base rate
plus a spread, or LIBOR plus a spread in effect at the time of the borrowings.
The credit agreement contained certain restrictive financial covenant ratios.
On March 28, 2002, the Short-term Revolver was extended for an additional
period of 364 days, ending in March 2003. The Short-term Revolver expired on
March 27, 2003. NOTE 7. QUARTERLY
DISTRIBUTIONS OF AVAILABLE CASH We make quarterly cash distributions of all of our Available Cash,
generally defined as consolidated cash receipts less consolidated cash
disbursements and cash reserves established by the General Partner in its sole
discretion. We pay distributions of 99.999% to the Parent Partnership and
0.001% to the General Partner. During the three months ended March 31, 2004 and 2003, we paid cash
distributions to our Parent Partnership totaling $28.9 million and $24.8
million, respectively. On May 7, 2004, we will pay a cash distribution to our
Parent Partnership of $29.7 million for the quarter ended March 31, 2004. 9




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) NOTE 8. EMPLOYEE BENEFIT PLANS Retirement Plans The Parent Partnership has adopted the TEPPCO Retirement Cash Balance Plan
(TEPPCO RCBP), which is a noncontributory, trustee-administered pension plan.
In addition, certain executive officers participate in the TEPPCO Supplemental
Benefit Plan (TEPPCO SBP), which is a noncontributory, nonqualified, defined
benefit retirement plan. The TEPPCO SBP was established to restore benefit
reductions caused by the maximum benefit limitations that apply to qualified
plans. The benefit formula for all eligible employees is a cash balance
formula. Under a cash balance formula, a plan participant accumulates a
retirement benefit based upon pay credits and current interest credits. The
pay credits are based on a participants salary, age and service. The Parent
Partnership uses a December 31 measurement date for these plans. The components of net pension benefits costs allocated to us for the
TEPPCO RCBP and the TEPPCO SBP for the three months ended March 31, 2004 and
2003, were as follows (in thousands): Three Months EndedMarch 31,2004
    
    2003Service cost benefit earned during the period
    
    $
    635
    
    
    $
    540Interest cost on projected benefit obligation
    
    
    120
    
    
    
    87Expected return on plan assets
    
    
    (157
    )
    
    
    (108
    )Amortization of prior service cost
    
    
    2
    
    
    
    2Recognized net actuarial loss
    
    
    3
    
    
    
    4Net pension benefits costs
    
    $
    603
    
    
    $
    525
 Other Postretirement Benefits Effective January 1, 2001, the Parent Partnership provides certain health
care and life insurance benefits for retired employees on a contributory and
non-contributory basis (TEPPCO OPB). Employees become eligible for these
benefits if they meet certain age and service requirements at retirement, as
defined in the plans. The Parent Partnership provides a fixed dollar
contribution, which does not increase from year to year, towards retired
employee medical costs. The retiree pays all health care cost increases due to
medical inflation. The Parent Partnership uses a December 31 measurement date
for this plan. The components of net postretirement benefits cost allocated to us for the
TEPPCO OPB for the three months ended March 31, 2004 and 2003, were as follows
(in thousands): Three Months EndedMarch 31,2004
    
    2003Service cost benefit earned during the period
    
    $
    29
    
    
    $
    23Interest cost on accumulated postretirement benefit obligation
    
    
    33
    
    
    
    29Amortization of prior service cost
    
    
    28
    
    
    
    28Net postretirement benefits costs
    
    $
    90
    
    
    $
    80
 10




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) Estimated Future Benefit Contributions The Parent Partnership expects to contribute approximately $3.0 million to
the retirement plans and other postretirement benefit plans in 2004. We expect
to be allocated a share of these contributions. NOTE 9. COMMITMENTS AND CONTINGENCIES In the fall of 1999 and on December 1, 2000, the Company and the Parent
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, styled Ryan E. McCleery and Marcia S.
McCleery, et al. v. Texas Eastern Corporation, et al.(including the Company
and the Parent Partnership) and Gilbert Richards and Jean Richards v. Texas
Eastern Corporation, et al.(including the Company and the Parent Partnership).
In both cases, the plaintiffs contend, among other things, that we 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. We have
filed an answer to both complaints, denying the allegations, as well as various
other motions. In April 2004, the court granted a partial motion for summary
judgment in favor of the defendants, dismissing two of the plaintiffs personal
injury claims in their entirety. It is anticipated that the plaintiffs will
appeal this ruling. These cases are not covered by insurance. Discovery is
ongoing, and we are defending ourselves vigorously against the lawsuits. The
plaintiffs have not stipulated the amount of damages that they are seeking in
the suits. We cannot estimate the loss, if any, associated with these pending
lawsuits. On December 21, 2001, we were named as a defendant in a lawsuit in the
10th Judicial District, Natchitoches Parish, Louisiana, styled Rebecca L.
Grisham et al. v. TE Products Pipeline Company, Limited Partnership. In this
case, the plaintiffs contend that our pipeline, which crosses the plaintiffs
property, leaked toxic products onto their property and consequently caused
damages to them. We have filed an answer to the plaintiffs petition denying
the allegations and are defending ourselves vigorously against the lawsuit.
The plaintiffs have not stipulated the amount of damages they are seeking in
the suit; however, this case is covered by insurance. We do not believe that
the outcome of this lawsuit will have a material adverse effect on our
financial position, results of operations or cash flows. In May 2003, the Company was named as a defendant in a lawsuit styled John
R. James, et al. v. J Graves Insulation Company, et al.as filed in the first
Judicial District Court, Caddo Parish, Louisiana. There are numerous
plaintiffs identified in the action that are alleged to have suffered damages
as the result of alleged exposure to asbestos-containing products and
materials. According to the petition and as a result of a preliminary
investigation, the Company believes that the only claim asserted against it
results from one individual for the period from July 1971 through June 1972,
who is alleged to have worked on a facility owned by the Companys predecessor.
This period represents a small portion of the total alleged exposure period
from January 1964 through December 2001 for this individual. The individuals
claims involve numerous employers and alleged job sites. The Company has been
unable to confirm involvement by the Company or its predecessors with the
alleged location, and it is uncertain at this time whether this case is covered
by insurance. Discovery is planned, and the Company intends to defend itself
vigorously against this lawsuit. The plaintiffs have not stipulated the amount
of damages that they are seeking in this suit. We are obligated to reimburse
the Company for any costs it incurs related to this lawsuit. We cannot
estimate the loss, if any, associated with this pending lawsuit. We do not
believe that the outcome of this lawsuit will have a material adverse effect on
our financial position, results of operations or cash flows. On April 2, 2003, Centennial was served with a petition in a matter styled
Adams, et al. v. Centennial Pipeline Company LLC, et al. This matter involves
approximately 2,000 plaintiffs who allege that over 200 11




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) defendants, including Centennial, generated, transported, and/or disposed
of hazardous and toxic waste at two sites in Bayou Sorrell, Louisiana, an
underground injection well and a landfill. The plaintiffs allege personal
injuries, allergies, birth defects, cancer and death. The underground
injection well has been in operation since May 1976. Based upon current
information, Centennial appears to be a de minimiscontributor, having used the
disposal site during the two month time period of December 2001 to January
2002. Marathon has been handling this matter for Centennial under its
operating agreement with Centennial. We have a 50% ownership interest in
Centennial. Based upon Centennials limited involvement with the disposal
site, we do not believe that the outcome of this matter will have a material
adverse effect on our financial position, results of operations or cash flows. On December 16, 2003, Centennial, the Company, the Parent Partnership and
other Parent Partnership entities were named as defendants in a lawsuit in the
128th District Court of Orange County, Texas, styled Elwood Karr et al. v.
Centennial Pipeline, LLC et al. In this case, the plaintiffs contend that our
pipeline leaked toxic substances on their property, causing them property
damage. We have filed an answer to the plaintiffs petition, denying the
allegations and are defending ourselves vigorously against this lawsuit. This
case is covered by insurance. We do not believe that the outcome of this
lawsuit will have a material adverse effect on our financial position, results
of operations or cash flows. In addition to the litigation discussed above, we have been, in the
ordinary course of business, a defendant in various lawsuits and a party to
various other legal proceedings, some of which are covered in whole or in part
by insurance. We believe that the outcome of these lawsuits and other
proceedings will not individually or in the aggregate have a future material
adverse effect on our consolidated financial position, results of operations or
cash flows. Our operations are subject to federal, state and local laws and
regulations governing the discharge of materials into the environment. Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil and criminal penalties, imposition of injunctions
delaying or prohibiting certain activities and the need to perform
investigatory and remedial activities. Although we believe our operations are
in material compliance with applicable environmental laws and regulations,
risks of significant costs and liabilities are inherent in pipeline operations,
and we cannot assure you that significant costs and liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly strict environmental laws and regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from our
operations, could result in substantial costs and liabilities to us. We

believe that changes in environmental laws and regulations will not have a
material adverse effect on our financial position, results of operations or
cash flows in the near term. On March 26, 2004, an initial decision in ARCO Products Co., et al. v.
SFPP, Docket OR96-2-000, et al. (SFPP) was issued by the FERC, which made
several significant determinations with respect to finding changed
circumstances under the Energy Policy Act of 1992 (EP Act). The decision
lists factors that will be considered by the FERC, which include showing a
substantial change in economic circumstances, the time factor that will be
reviewed, what will be considered the basis of the rate and a pipelines
documentary requirements. The decision largely clarifies, but does not fully
quantify, the standard required for a complainant to demonstrate that an oil
pipelines rates are no longer subject to the rate protection of the EP Act by
demonstrating that a substantial change in circumstances has occurred since
1992 with respect to the basis of the rates being challenged. In the SFPP
decision, the FERC found that a limited number of rate elements will
significantly affect the economic basis for a pipeline companys rates. The
elements identified in the decision are volume changes, allowed total return
and total cost of service (including major cost elements of rate base such as
tax rates and tax allowances, among others). The FERC did reject, however, the
use of changes in tax rate and income tax allowances as standalone factors.
The FERC further found that if a complainant can show that a pipelines volumes
and overall cost of service collectively reflect a significant increase in net
earnings between the establishment of the challenged rate pre-1992 and the time
of the complaint, based primarily on the combined impact of changes in volumes
and changes in overall cost of service, the complainant has met its burden
relative to establishing changed circumstances. It appears very likely 12




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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
(Unaudited) that the decision will be appealed. We have not yet determined the
impact, if any, that the decision could have on our rates if they were reviewed
under the criteria of the SFPP decision. In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. In 1999, our Arcadia facility and adjacent terminals were directed
by the Remediation Services Division of the LDEQ to pursue remediation of this
contamination. Effective in March 2004, we executed an access agreement with
an adjacent industrial landowner who is located upgradient of the Arcadia
facility. This agreement enables the landowner to proceed with remediation
activities at our Arcadia facility for which they have accepted shared
responsibility. At March 31, 2004, we have an accrued liability of $0.3
million for remediation costs at our Arcadia facility. We do not expect that
the completion of the remediation program proposed to the LDEQ will have a
future material adverse effect on our financial position, results of operations
or cash flows. On March 17, 2003, we experienced a release of 511 barrels of jet fuel
from a storage tank at our Blue Island terminal located in Cook County,
Illinois. As a result of the release, we have entered into an Agreed Order
with the State of Illinois. The Agreed Order requires us, in part, to complete
a site investigation plan to delineate the scope of any potential contamination
resulting from the release and to remediate any contamination present above
regulatory standards. This site investigation plan has been completed and
submitted to the State of Illinois. The Agreed Order does not contain any
provision for any fines or penalties; however, it does not preclude the State
of Illinois from assessing these at a later date. We do not expect that the
completion of the Agreed Order will have a future material adverse effect on
our financial position, results of operations or cash flows. We regularly review our long-lived assets for impairment in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. At March 31, 2004, we have identified certain assets that we are
monitoring for possible impairment. We are unable to reasonably estimate the
probabilities associated with the performance of an impairment test. We are
continuing to monitor the circumstances surrounding the assets and will test
the assets for impairment as more information becomes available. We do not
believe that the resolution of the matter will have a material effect on our
financial condition, results of operations or cash flows. Centennial entered into credit facilities totaling $150.0 million and, as
of March 31, 2004, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of Centennials pipeline system. We and Marathon have each guaranteed one-half
of Centennials debt, up to a maximum amount of $75.0 million each. 13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations General You should read the following review of our financial position and results
of operations in conjunction with our Consolidated Financial Statements.
Material period-to-period variances in the consolidated statements of income
are discussed under Results of Operations. The Financial Condition and
Liquidity section analyzes our cash flows and financial position. Other
Considerations addresses trends, future plans and contingencies that are
reasonably likely to materially affect future liquidity or earnings. The
Consolidated Financial Statements should be read in conjunction with the
financial statements and related notes, together with our discussion and
analysis of financial position and results of operations included in our Annual
Report on Form 10-K for the year ended December 31, 2003. Critical Accounting Policies and Estimates A summary of the significant accounting policies we have adopted and
followed in the preparation of our consolidated financial statements is
detailed in our consolidated financial statements for the year ended December
31, 2003, included in our Annual Report on Form 10-K. Certain of these
accounting policies require the use of estimates. The following estimates, in
our opinion, are subjective in nature, require the exercise of judgment and
involve complex analysis: revenue and expense accruals, including power costs,
property taxes, environmental costs and property, plant and equipment. These
estimates are based on our knowledge and understanding of current conditions
and actions we may take in the future. Changes in these estimates will occur
as a result of the passage of time and the occurrence of future events.
Subsequent changes in these estimates may have a significant impact on our
financial condition and results of operations. Management Overview of the Quarter Ended March 31, 2004 We reported net income of $17.2 million for the three months ended March
31, 2004, compared with net income of $20.6 million for the three months ended
March 31, 2003. Our results were impacted by higher pipeline integrity costs,
which were partially offset by strong revenues from both our refined products
and propane businesses. We anticipate that our pipeline integrity costs for
the remainder of 2004 will be higher than our 2003 costs as we continue to
perform pipeline maintenance under our integrity management program. We are focused on opportunities, challenges and risks that are inherent in
our business. These include the safe, reliable and efficient operation of the
pipelines and facilities that we own or operate while meeting increased
regulations that govern the operation of our assets and the costs associated
with such regulations. We are also focused on our continued growth through
expansion of the assets that we own and through acquisition of assets that
complement the business in which we operate. We remain confident that our current strategy and focus will provide
continued growth in earnings and cash distributions. These growth
opportunities include:  
    
    Continued development of refined products and propane market opportunities.
    
    Construction of a new truck loading facility in Bossier City, Louisiana. We are continuing to pursue a plan to make system changes to allow for
bi-directional flow and deliveries into the Shreveport market area. We have
completed feasibility studies, and are in discussions with potential customers
regarding the transportation of volumes through the pipeline system in this
area. Engineering design work and property acquisition for the terminal site
in Bossier City, Louisiana, are currently under way along with engineering
efforts to reverse the flow of the pipeline segment from Shreveport to El
Dorado, Arkansas. The project is scheduled to be completed by the end of 2004. We have begun a Phase II project to further expand our delivery capacity
of liquefied petroleum gases (LPGs) to the Northeast by 8,000 to 10,000
barrels per day. In 2003, we increased the delivery capability between
Todhunter, Ohio, and Coshocton, Ohio, by 8,000 to 10,000 barrels per day and
increased storage and improved 14




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##### Table of Contents



loading capability at Oneonta, New York. The Phase II expansion includes
the construction of three pump stations between Coshocton and Greensburg,
Pennsylvania, and two stations from Greensburg to Watkins Glen, New York.
Additional work on the pipeline segment between Greensburg and Philadelphia,
Pennsylvania, will increase delivery rates to the Philadelphia area.
Improvements will also be made at our Dubois, Pennsylvania, and Eagle,
Pennsylvania, terminals. The project is scheduled for completion in October
2004. Our Business TE Products Pipeline Company, Limited Partnership, a Delaware limited
partnership, was formed in March 1990. TEPPCO Partners, L.P. (Parent
Partnership) owns a 99.999% interest in us as the sole limited partner.
TEPPCO GP, Inc. (TEPPCO GP or General Partner), a subsidiary of the Parent
Partnership, holds a 0.001% General Partner interest in us. Texas Eastern
Products Pipeline Company, LLC (the Company), a Delaware limited liability
company, serves as the general partner of our Parent Partnership. The Company
is a wholly owned subsidiary of Duke Energy Field Services, LLC (DEFS), a
joint venture between Duke Energy Corporation (Duke Energy) and
ConocoPhillips. Duke Energy holds an interest of approximately 70% in DEFS,
and ConocoPhillips holds the remaining interest of approximately 30%. TEPPCO
GP, as general partner, performs all of our management and operating functions
required in accordance with the Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership. We reimburse our General Partner and
the Company for all reasonable direct and indirect expenses that they incur in
managing us. We operate and report in one business segment: transportation and storage
of refined products, LPGs and petrochemicals. Revenues are earned from
transportation and storage of refined products and LPGs, intrastate
transportation of petrochemicals, sales of product inventory and other
ancillary services. Our two largest operating expense items are labor and
electric power. We generally realize higher revenues during the first and
fourth quarters of each year since our operations are somewhat seasonal.
Refined products volumes are generally higher during the second and third
quarters because of greater demand for gasolines during the spring and summer
driving seasons. LPGs volumes are generally higher from November through March
due to higher demand in the Northeast for propane, a major fuel for residential
heating. Our results also include our equity investments in Centennial
Pipeline LLC (Centennial) and Mont Belvieu Storage Partners, L.P. (MB
Storage) (see Note 5. Equity Investments). We are one of three operating subsidiaries of our Parent Partnership. Our
Parent Partnership is managed by its general partner, the Company, which has
approximately 1,000 employees dedicated to the operations and management of the
operating subsidiaries. Our Parent Partnership allocates operating, general
and administrative expenses to us for legal, insurance, financial,
communication and other administrative services based upon the estimated level
of effort devoted to our various operations. We believe that the method for
allocating corporate operating, general and administrative expenses to us is
reasonable. Results of Operations The following table presents volumes delivered in barrels and average
tariff per barrel for the three months ended March 31, 2004 and 2003: Three Months EndedMarch 31,
    
    PercentageIncrease2004
    
    2003
    
    (Decrease)(in thousands, except tariffinformation)Volumes DeliveredRefined products
    
    
    32,522
    
    
    
    30,232
    
    
    
    8
    %LPGs
    
    
    13,208
    
    
    
    13,700
    
    
    
    (4
    %)Total
    
    
    45,730
    
    
    
    43,932
    
    
    
    4
    %Average Tariff per BarrelRefined products
    
    $
    0.95
    
    
    $
    0.89
    
    
    
    7
    %LPGs
    
    
    2.18
    
    
    
    2.25
    
    
    
    (3
    %)Average system tariff per barrel
    
    $
    1.31
    
    
    $
    1.31
    
    
    
    
 15




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We reported net income of $17.2 million for the three months ended March
31, 2004, compared with net income of $20.6 million for the three months ended
March 31, 2003. Net income decreased $3.4 million primarily due to an increase
of $10.3 million in costs and expenses and an increase of $0.1 million in
interest expense  net, partially offset by an increase of $6.7 million in
operating revenues and an increase of $0.3 million in other income  net. We
discuss the factors influencing our operating performance below. Revenues from refined products transportation increased $4.1 million for
the three months ended March 31, 2004, compared with the three months ended
March 31, 2003, due to an overall increase of 8% in the refined products
volumes delivered. This increase was primarily due to deliveries of products
received into our pipeline from Centennial at Creal Springs, Illinois.
Centennial has provided our system with additional pipeline capacity for
products originating in the U.S. Gulf Coast area. Prior to the construction of
Centennial, deliveries on our pipeline system were limited by our pipeline
capacity, and transportation services for our customers were allocated in
accordance with a proration policy. With this incremental pipeline capacity,
our previously constrained system has expanded deliveries in markets both south
and north of Creal Springs. In February 2003, we entered into a lease
agreement with Centennial that increased our flexibility to deliver refined
products to our market areas. Volume increases were due to increased demand
and market share for products supplied from the U.S. Gulf Coast into Midwest
markets. The refined products average rate per barrel increased 7% from the
prior year period primarily due to higher market-based tariff rates which went
into effect in July 2003, partially offset by the impact of the Midwest origin
point for barrels received from Centennial, which resulted in an increase in
short-haul barrels transported on our system. Revenues from LPGs transportation decreased $2.0 million for the three
months ended March 31, 2004, compared with the three months ended March 31,
2003, primarily due to lower deliveries of propane in the upper Midwest and
Northeast market areas attributable to warmer weather during the first quarter
of 2004. Additionally, in late February 2004, the Mont Belvieu propane price
spiked, which resulted in our sourced propane being less competitive than
propane from other source points. This decrease was partially offset by
increased deliveries of isobutane to Chicago area refineries. The LPGs average
rate per barrel decreased 3% from the prior year period as a result of a
decreased percentage of long-haul deliveries during the three months ended
March 31, 2004, partially offset by an increase in LPG tariff rates, which went
into effect in July 2003. Other operating revenues increased $4.6 million for the three months ended
March 31, 2004, compared with the three months ended March 31, 2003, primarily
due to higher propane inventory fees, higher propane deliveries at our
Providence, Rhode Island, import facility and higher refined product loading
fees. These increases were partially offset by lower margins on product
inventory sales. Costs and expenses increased $10.3 million for the three months ended
March 31, 2004, compared with the three months ended March 31, 2003. The
increase was made up of an $8.6 million increase in operating, general and
administrative expenses, a $1.6 million increase in depreciation and
amortization expense and a $0.2 million increase in taxes  other than income
taxes. These increases were partially offset by a $0.1 million decrease in
operating fuel and power. Operating, general and administrative expenses
increased primarily due to higher pipeline maintenance expenses due to pipeline
rehabilitation expenses associated with our integrity management program,
increased consulting and contract services primarily related to compliance with
the Sarbanes-Oxley Act of 2002, increased labor costs primarily due to an
increase in the number of employees between years, increased rental expense
from the Centennial pipeline capacity lease agreement that we entered into in
February 2003 and increased general and administrative supplies expense.
Depreciation expense increased from the prior year period because of assets
placed in service during 2003, partially offset by an increase in the estimated
remaining life of a section of our pipeline system in the Northeast, as a
result of pipeline improvements made as part of our integrity management
program. Taxes  other than income taxes increased as a result of actual
property taxes being slightly higher than previously estimated. Operating fuel
and power expense decreased slightly as a result of a more efficient use of our
transportation assets, partially offset by increased mainline throughput. 16




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Net losses from equity investments remained virtually unchanged for the
three months ended March 31, 2004, compared with the three months ended March
31, 2003, as shown below (in thousands): Three Months EndedMarch 31,
    
    Increase2004
    
    2003
    
    (Decrease)Centennial
    
    $
    (3,856
    )
    
    $
    (3,178
    )
    
    $
    (678
    )MB Storage
    
    
    2,629
    
    
    
    1,945
    
    
    
    684Other
    
    
    (11
    )
    
    
    (26
    )
    
    
    15Total equity losses
    
    $
    (1,238
    )
    
    $
    (1,259
    )
    
    $
    21
 Equity losses in Centennial increased primarily due to the acquisition of
an additional 16.7% interest in Centennial on February 10, 2003, bringing our
ownership interest to 50%, and higher pipeline cleaning expenses, partially
offset by an increase in transportation volumes on Centennial. The
losses from Centennial are partially offset by increased earnings of $0.7
million from our 50% ownership interest in MB Storage. Equity earnings in MB
Storage increased between periods due to increased storage revenue and receipt
revenue, lower general and administrative expenses and lower pipeline
rehabilitation expenses on the MB Storage system. Interest expense increased $0.3 million for the three months ended March
31, 2004, compared with the three months ended March 31, 2003, as a result of
higher outstanding debt balances under the note payable with our Parent
Partnership. Interest capitalized increased $0.2 million for the three months
ended March 31, 2004, compared with the three months ended March 31, 2003, as a
result of increased balances of construction work-in-progress. Other income  net increased $0.3 million for the three months ended March
31, 2004, compared with the three months ended March 31, 2003, primarily due to
higher interest income earned on cash investments and other investing
activities. Financial Condition and Liquidity Cash flows for the three months ended March 31, 2004 and 2003, were as
follows (in thousands): Three Months EndedMarch 31,2004
    
    2003Cash provided by (used in):Operating activities
    
    $
    17,068
    
    
    $
    27,123Investing activities
    
    
    (8,820
    )
    
    
    (32,404
    )Financing activities
    
    
    (8,393
    )
    
    
    5,063
 17




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##### Table of Contents



Operating Activities Net cash from operating activities for the three months ended March 31,
2004 and 2003, were comprised of the following (in thousands): Three Months EndedMarch 31,2004
    
    2003Net income
    
    $
    17,209
    
    
    $
    20,567Depreciation and amortization
    
    
    8,638
    
    
    
    7,008Losses in equity investments
    
    
    1,238
    
    
    
    1,259Non-cash portion of interest expense
    
    
    7
    
    
    
    8Cash used in working capital and other
    
    
    (10,024
    )
    
    
    (1,719
    )Net cash from operating activities
    
    $
    17,068
    
    
    $
    27,123
 Cash provided by operating activities decreased for the quarter ended
March 31, 2004, compared with the quarter ended March 31, 2003, primarily due
to lower net income and changes in working capital components resulting from
the timing of cash receipts and cash disbursements. We believe that we will continue to have adequate liquidity to fund future
recurring operating and investing activities. Our primary cash requirements
consist of normal operating expenses, capital expenditures to sustain existing
operations and revenue generating expenditures, interest payments on our Senior
Notes and on borrowings under our Parent Partnerships credit facilities and
distributions to our Parent Partnership. Short-term cash requirements, such as
operating expenses, capital expenditures to sustain existing operations and
quarterly distributions to our Parent Partnership, are expected to be funded
through operating cash flows. Long-term cash requirements for expansion
projects are expected to be funded by several sources, including cash flows
from operating activities, borrowings under our Parent Partnerships credit
facilities and the issuance by our Parent Partnership of additional equity and
debt securities. The timing of any debt or offerings by our Parent Partnership
will depend on various factors, including prevailing market conditions,
interest rates and our Parent Partnerships financial condition and credit
rating at the time. At March 31, 2004 and December 31, 2003, we had working capital deficits
of $7.2 million and $12.3 million, respectively. Cash generated from
operations and from our Parent Partnerships credit facilities and debt and
equity offerings are our primary sources of liquidity. Working capital
deficits can occur primarily due to the timing of operating cash receipts from
customers, payment of cash distributions and the payment of normal operating
expenses and capital expenditures. We are a wholly owned subsidiary of the
Parent Partnership. We expect that our Parent Partnership will make capital
contributions, loans or otherwise provide liquidity to us as needed, but the
Parent Partnership has no contractual obligation to do so. We anticipate that
the Parent Partnership will provide the necessary liquidity to protect its
investment in us. At March 31, 2004, our Parent Partnership had $323.5 million
in available borrowing capacity under its revolving credit facility to cover
any working capital needs, and expects that cash flows from operating
activities, the sale of additional debt or equity offerings will provide
necessary liquidity to us. Investing Activities Cash flows used in investing activities totaled $8.8 million for the three
months ended March 31, 2004, and were comprised of $7.8 million of capital
expenditures and $1.0 million of cash contributions for our ownership interest
in Centennial. Cash flows used in investing activities totaled $32.4 million
for the three months ended March 31, 2003, and were comprised of $11.4 million
of capital expenditures, $20.0 million for our acquisition of the additional
interest in Centennial on February 10, 2003, and $1.0 million of cash
contributions for our ownership interest in Centennial. 18




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##### Table of Contents



Financing Activities Cash flows used in financing activities totaled $8.4 million for the three
months ended March 31, 2004, and were comprised of $28.9 million of
distributions paid to our Parent Partnership and $15.0 million of repayments on
our term loan, partially offset by $35.5 million of proceeds from our term
loan. Cash flows provided by financing activities totaled $5.1 million for the
three months ended March 31, 2003, and were comprised of $35.4 million of
proceeds from our term loan, partially offset by $24.8 million of distributions
paid to our Parent Partnership and $5.5 million of repayments on our term loan. Centennial entered into credit facilities totaling $150.0 million and, as
of March 31, 2004, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of Centennials pipeline system. We and Marathon Ashland Petroleum LLC have
each guaranteed one-half of Centennials debt, up to a maximum of $75.0 million
each. Parent Partnership Credit Facilities We currently utilize debt financing available from our Parent Partnership
through intercompany notes. The terms of the intercompany notes generally match
the principal and interest payment dates under the Parent Partnerships credit
agreements. The interest rates charged by the Parent Partnership include the
stated interest rate of the Parent Partnership, plus a premium to cover debt
issuance costs. The interest rate is also decreased or increased to cover
gains and losses, respectively, on any interest rate swaps that the Parent
Partnership may have in place on its respective credit agreements. These
credit facilities of the Parent Partnership are described below. On April 6, 2001, our Parent Partnership entered into a $500.0 million
revolving credit facility including the issuance of letters of credit of up to
$20.0 million (Three Year Facility). The interest rate was based, at our
Parent Partnerships option, on either the lenders base rate plus a spread, or
LIBOR plus a spread in effect at the time of the borrowings. The credit
agreement for the Three Year Facility contained certain restrictive financial
covenant ratios. During the first quarter of 2003, our Parent Partnership
repaid $182.0 million of the outstanding balance of the Three Year Facility
with proceeds from the issuance of its 6.125% Senior Notes on January 30, 2003.
On June 27, 2003, our Parent Partnership repaid the outstanding balance under
the Three Year Facility with borrowings under a new credit facility and
canceled the Three Year Facility. On June 27, 2003, our Parent Partnership entered into a $550.0 million
revolving credit facility with a three year term, including the issuance of
letters of credit of up to $20.0 million (Revolving Credit Facility). The
interest rate is based, at our Parent Partnerships option, on either the
lenders base rate plus a spread, or LIBOR plus a spread in effect at the time
of the borrowings. The credit agreement for the Revolving Credit Facility
contains certain restrictive financial covenant ratios. Our Parent Partnership
borrowed $263.0 million under the Revolving Credit Facility and repaid the
outstanding balance of the Three Year Facility. At March 31, 2004, $226.5
million was outstanding under the Revolving Credit Facility. On February 20, 2002, our Parent Partnership issued $500.0 million
principal amount of 7.625% Senior Notes due 2012. The 7.625% Senior Notes were
issued at a discount of $2.2 million and are being accreted to their face value
over the term of the notes. The Senior Notes may be redeemed at any time at
our Parent Partnerships option with the payment of accrued interest and a
make-whole premium determined by discounting remaining interest and principal
payments using a discount rate equal to the rate of the United States Treasury
securities of comparable remaining maturity plus 35 basis points. The
indenture governing these 7.625% Senior Notes contains covenants, including,
but not limited to, covenants limiting the creation of liens securing
indebtedness and sale and leaseback transactions. However, the indenture does
not limit our Parent Partnerships ability to incur additional indebtedness. On January 30, 2003, our Parent Partnership issued $200.0 million
principal amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were
issued at a discount of $1.4 million and are being accreted to their face value
over the term of the notes. The Parent Partnership used $182.0 million of the
proceeds from the offering to reduce the outstanding principal on the Three
Year Facility to $250.0 million. The balance of the net proceeds 19




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##### Table of Contents



received was used for general Parent Partnership purposes. The Senior
Notes may be redeemed at any time at our Parent Partnerships option with the
payment of accrued interest and a make-whole premium determined by discounting
remaining interest and principal payments using a discount rate equal to the
rate of the United States Treasury securities of comparable remaining maturity
plus 35 basis points. The indenture governing the 6.125% Senior Notes contains
covenants, including, but not limited to, covenants limiting the creation of
liens securing indebtedness and sale and leaseback transactions. However, the
indenture does not limit the Parent Partnerships ability to incur additional
indebtedness. As of March 31, 2004, and December 31, 2003, we had an intercompany note
payable to our Parent Partnership of $231.8 million and $211.3 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
weighted average interest rate on the note payable to the Parent Partnership at
March 31, 2004, was 5.2%. At March 31, 2004, accrued interest includes $2.0
million due to the Parent Partnership. For the three months ended March 31,
2004 and 2003, interest costs incurred on the note payable to the Parent
Partnership totaled $2.9 million and $2.7 million, respectively. Senior Notes On January 27, 1998, we completed the issuance of $180.0 million principal
amount of 6.45% Senior Notes due 2008, and $210.0 million principal amount of
7.51% Senior Notes due 2028 (collectively the Senior Notes). The 6.45%
Senior Notes were issued at a discount of $0.3 million and are being accreted
to their face value over the term of the notes. The 6.45% Senior Notes due
2008 are not subject to redemption prior to January 15, 2008. The 7.51% Senior
Notes due 2028, issued at par, may be redeemed at any time after January 15,
2008, at our option in whole or in part, at a premium. The Senior Notes do not have sinking fund requirements. Interest on the
Senior Notes is payable semiannually in arrears on January 15 and July 15 of
each year. The Senior Notes are unsecured obligations and rank on a parity
with all of our other unsecured and unsubordinated indebtedness. The indenture
governing the Senior Notes contains covenants, including, but not limited to,
covenants limiting the creation of liens securing indebtedness and sale and
leaseback transactions. However, the indenture does not limit our ability to
incur additional indebtedness. As of March 31, 2004, we were in compliance
with the covenants of the Senior Notes. We have entered into an interest rate swap agreement to hedge our exposure
to changes in the fair value on a portion of the Senior Notes, as more fully
described in Item 3. Quantitative and Qualitative Disclosures About Market
Risk. Cash Distributions During the three months ended March 31, 2004 and 2003, we paid cash
distributions to our Parent Partnership totaling $28.9 million and $24.8
million, respectively. On May 7, 2004, we will pay a cash distribution to our
Parent Partnership of $29.7 million for the quarter ended March 31, 2004. Future Capital Needs and Commitments We estimate that capital expenditures, excluding acquisitions, for 2004
will be approximately $70.2 million (which includes $2.0 million of capitalized
interest). We expect to spend approximately $45.9 million for revenue
generating projects and facility improvements that will include the expansion
of our pipelines extending from Seymour to Indianapolis, Indiana, further
expansions of our Northeast pipeline system and construction of a new truck
loading terminal in Bossier City, Louisiana. We expect to spend approximately
$22.3 million of capital costs to sustain existing operations, including
life-cycle replacements for equipment at various facilities and pipeline and
tank replacements. We continually review and evaluate potential capital
improvements and expansions that would be complementary to our present system.
These expenditures can vary greatly depending on the magnitude of our
transactions. We may finance capital expenditures through internally generated
funds, debt, capital contributions from our Parent Partnership or any
combination thereof. 20




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##### Table of Contents



Our debt repayment obligations consist of payments for principal and
interest on (i) our $231.8 million principal amount due to the Parent
Partnership related to our share of the Parent Partnerships Revolving Credit
Facility due in June 2006, 7.625% Senior Notes due in February 2012 and 6.125%
Senior Notes due in February 2013, (ii) our $210.0 million 7.51% Senior Notes
due January 15, 2028, and (iii) our $180.0 million 6.45% Senior Notes due January
15, 2008. We are also contingently liable as guarantor for the lesser of one-half or
$75.0 million principal amount (plus interest) of Centennials borrowings. In
January 2003, we entered into a pipeline capacity lease agreement with
Centennial for a period of five years that contains a minimum throughput
requirement. During the year ended December 31, 2003, we exceeded the minimum
throughput requirements on the lease agreements. We are also contingently
liable as guarantor for $500.0 million principal amount of 7.625% Senior Notes
due 2012 issued in February 2002 and for $200.0 million principal amount of
6.125% Senior Notes due 2013 issued in January 2003 by our Parent Partnership. During the three months ended March 31, 2004, we contributed $1.0 million
to Centennial to cover operating needs and capital expenditures. On April
1, 2004, we contributed $16.5 million to MB Storage for its acquisition of
storage assets. During the remainder of 2004, we may be required to contribute
cash to both Centennial and MB Storage to cover capital expenditures,
acquisitions or other operating needs. Off-Balance Sheet Arrangements We do not rely on off-balance sheet borrowings to fund our acquisitions.
We have no off-balance sheet commitments for indebtedness other than the
limited guaranty of the Centennial debt, the Parent Partnership debt and leases
covering assets utilized in several areas of our operations. Contractual Obligations The following table summarizes our debt repayment obligations and material
contractual commitments as of March 31, 2004 (in millions): Amount of Commitment Expiration Per PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsNote payable, Parent Partnership
    
    $
    231.8
    
    
    $
    
    
    
    $
    231.8
    
    
    $
    
    
    
    $
    6.45% Senior Notes due 2008 (1)
    
    
    180.0
    
    
    
    
    
    
    
    
    
    
    
    180.0
    
    
    
    7.51% Senior Notes due 2028 (1)
    
    
    210.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210.0Debt subtotal
    
    
    621.8
    
    
    
    
    
    
    
    231.8
    
    
    
    180.0
    
    
    
    210.0Operating leases
    
    
    55.5
    
    
    
    11.5
    
    
    
    22.4
    
    
    
    11.4
    
    
    
    10.2Total
    
    $
    677.3
    
    
    $
    11.5
    
    
    $
    254.2
    
    
    $
    191.4
    
    
    $
    220.2
   (1)
    
    We entered into an interest rate swap agreement to hedge our
exposure to changes in the fair value of our 7.51% Senior Notes due
2028. At March 31, 2004, the 7.51% Senior Notes include an adjustment
to increase the fair value of the debt by $8.9 million related to this
interest rate swap agreement. At March 31, 2004, our 6.45% Senior
Notes include $0.1 million of unamortized debt discount. The fair
value adjustment and unamortized debt discount are excluded from this
table. We expect to repay the long-term, senior unsecured obligations and note
payable to our Parent Partnership through the issuance of additional long-term
senior unsecured debt at the time the 2008 and 2028 debts mature, with proceeds
from the dispositions of assets, cash flows from operations, contributions from
our Parent Partnership or any combination of the above items. 21




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##### Table of Contents



Sources of Future Capital We expect that our cash flow from operating activities will be adequate to
fund cash distributions and capital additions necessary to sustain existing
operations. However, expansionary capital projects and acquisitions may
require additional capital contributions from our Parent Partnership. The
Parent Partnership has funded its capital commitments from operating cash flow,
borrowings under bank credit facilities, the issuance of long term debt in
capital markets and the public offering of Limited Partner Units. We expect
future capital needs will be similarly funded. Our Parent Partnerships senior unsecured debt is rated BBB by Standard
and Poors (S&P) and Baa3 by Moodys Investors Service (Moodys). Our
senior unsecured debt is also rated BBB by S&P and Baa3 by Moodys. Both
ratings are stable. A rating reflects only the view of a rating agency and is
not a recommendation to buy, sell or hold any indebtedness. Any rating can be
revised upward or downward or withdrawn at any time by a rating agency if it
determines that the circumstances warrant such a change. Other Considerations Our operations are subject to federal, state and local laws and
regulations governing the discharge of materials into the environment. Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil and criminal penalties, imposition of injunctions
delaying or prohibiting certain activities and the need to perform
investigatory and remedial activities. Although we believe our operations are
in material compliance with applicable environmental laws and regulations,
risks of significant costs and liabilities are inherent in pipeline operations,
and we cannot assure you that significant costs and liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly strict environmental laws and regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from our
operations, could result in substantial costs and liabilities to us. We
believe that changes in environmental laws and regulations will not have a
material adverse effect on our financial position, results of operations or
cash flows in the near term. In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. In 1999, our Arcadia facility and adjacent terminals were directed
by the Remediation Services Division of the LDEQ to pursue remediation of this
contamination. Effective in March 2004, we executed an access agreement with
an adjacent industrial landowner who is located upgradient of the Arcadia
facility. This agreement enables the landowner to proceed with remediation
activities at our Arcadia facility for which they have accepted shared
responsibility. At March 31, 2004, we have an accrued liability of $0.3
million for remediation costs at our Arcadia facility. We do not expect that
the completion of the remediation program proposed to the LDEQ will have a
future material adverse effect on our financial position, results of operations
or cash flows. On March 17, 2003, we experienced a release of 511 barrels of jet fuel
from a storage tank at our Blue Island terminal located in Cook County,
Illinois. As a result of the release, we have entered into an Agreed Order
with the State of Illinois. The Agreed Order requires us, in part, to complete
a site investigation plan to delineate the scope of any potential contamination
resulting from the release and to remediate any contamination present above
regulatory standards. This site investigation plan has been completed and
submitted to the State of Illinois. The Agreed Order does not contain any
provision for any fines or penalties; however, it does not preclude the State
of Illinois from assessing these at a later date. We do not expect that the
completion of the Agreed Order will have a future material adverse effect on
our financial position, results of operations or cash flows. We regularly review our long-lived assets for impairment in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. At March 31, 2004, we have identified certain assets that we are
monitoring for possible impairment. We are unable to reasonably estimate the
probabilities associated with the performance of an impairment test. We are
continuing to monitor the circumstances surrounding the assets and will test
the assets for impairment as more information becomes available. We do not
believe that the resolution of the matter will have a material effect on our
financial condition, results of operations or cash flows. 22




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##### Table of Contents



Recent Accounting Pronouncements See discussion of new accounting pronouncements in Note 1. Organization
and Basis of Presentation  New Accounting Pronouncements in the accompanying
consolidated financial statements. 
 Forward-Looking Statements The matters discussed herein include forward-looking statements within
the meaning of various provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this document that address activities, events or
developments that we expect or anticipate will or may occur in the future,
including such things as estimated future capital expenditures (including the
amount and nature thereof), business strategy and measures to implement
strategy, competitive strengths, goals, expansion and growth of our business
and operations, plans, references to future success, references to intentions
as to future matters and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate under the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties, including general economic, market or
business conditions, the opportunities (or lack thereof) that may be presented
to and pursued by us, competitive actions by other pipeline companies, changes
in laws or regulations, and other factors, many of which are beyond our
control. Consequently, all of the forward-looking statements made in this
document are qualified by these cautionary statements and we cannot assure you
that actual results or developments that we anticipate will be realized or,
even if substantially realized, that they will have the expected consequences
to or effect on us or our business or operations. For additional discussion of
such risks and uncertainties, see our Annual Report on Form 10-K for the year
ended December 31, 2003, and other filings we have made with the Securities and
Exchange Commission. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk We may be exposed to market risk through changes in commodity prices and
interest rates. We do not have foreign exchange risks. Our Risk Management
Committee has established policies to monitor and control these market risks.
The Risk Management Committee is comprised, in part, of senior executives of
the Company. We have utilized and expect to continue to utilize interest rate swap
agreements to hedge a portion of our fair value risks. Interest rate swap
agreements are used to manage the fixed interest rate mix of our debt portfolio
and overall cost of borrowing. The interest rate swap related to our fair
value risk is intended to reduce our exposure to changes in the fair value of
our fixed rate Senior Notes. The interest rate swap agreement involves the
periodic exchange of payments without the exchange of the notional amount upon
which the payments are based. The related amount payable to or receivable from
counterparties is included as an adjustment to accrued interest. At March 31, 2004, we had outstanding $180.0 million principal amount of
6.45% Senior Notes due 2008 and $210.0 million principal amount of 7.51% Senior
Notes due 2028. At March 31, 2004, the estimated fair values of the 6.45%
Senior Notes and 7.51% Senior Notes were approximately $198.5 million and
$238.2 million, respectively. As of March 31, 2004, we had an interest rate swap agreement in place to
hedge our exposure to changes in the fair value of our fixed rate 7.51% Senior
Notes due 2028. We designated this swap agreement as a fair value hedge. The
swap agreement has a notional amount of $210.0 million and matures in January
2028 to match the principal and maturity of the Senior Notes. Under the swap
agreement, we pay a floating rate of interest based on a three-month U.S.
Dollar LIBOR rate, plus a spread, and receive a fixed rate of interest of
7.51%. During the three months ended March 31, 2004 and 2003, we recognized
reductions in interest expense of $2.6 million and $2.4 million, respectively,
related to the difference between the fixed rate and the floating rate of
interest on the interest rate swap. During the three months ended March 31,
2004, we measured the hedge effectiveness of this interest rate swap and noted
that no gain or loss from ineffectiveness was required to be recognized. The
fair value of this 23




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##### Table of Contents



interest rate swap was a gain of approximately $8.9 million at March 31,
2004, and a gain of approximately $2.3 million at December 31, 2003. Utilizing
the balance of the 7.51% Senior Notes outstanding at March 31, 2004, and
including the effects of hedging activities, assuming market interest
rates increase 100 basis points, the potential annual increase in interest
expense is $2.1 million. As of March 31, 2004, and December 31, 2003, we had an intercompany note
payable to our Parent Partnership of $231.8 million and $211.3 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
weighted average interest rate on the note payable to the Parent Partnership at
March 31, 2004, was 5.2%. At March 31, 2004, accrued interest includes $2.0
million due to the Parent Partnership. For the three months ended March 31,
2004 and 2003, interest costs incurred on the note payable to the Parent
Partnership totaled $2.9 million and $2.7 million, respectively. 
 Item 4. Controls and Procedures The principal executive officer and principal financial officer of the
Company, after evaluating the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
March 31, 2004, have concluded that, as of such date, our disclosure controls
and procedures are adequate and effective to ensure that material information
relating to us and our consolidated subsidiaries would be made known to them by
others within those entities. During the first quarter of 2004, there have been no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, those internal controls subsequent to
the date of the evaluation. As a result, no corrective actions were required
or undertaken. 
 PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings We have been, in the ordinary course of business, a defendant in various
lawsuits and a party to various other legal proceedings, some of which are
covered in whole or in part by insurance. We believe that the outcome of these
lawsuits and other proceedings will not individually or in the aggregate have a
material adverse effect on our consolidated financial position, results of
operations or cash flows. See discussion of legal proceedings in Note 9.
Commitments and Contingencies in the accompanying consolidated financial
statements. 
 Item 6. Exhibits and Reports on Form 8-K.  (a)
    
    Exhibits: ExhibitNumber
    
    Description3.1
    
    Second Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership, effective
September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001, and incorporated herein by reference).4.1
    
    Form of Indenture between TE Products Pipeline Company,
Limited Partnership and The Bank of New York, as Trustee, dated as
of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnerships Registration Statement on Form S-3
(Commission File No. 333-38473) and incorporated herein by
reference).
 24




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##### Table of Contents



4.2
    
    Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as
of February 20, 2002 and incorporated herein by reference).4.3
    
    First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).4.4
    
    Second Supplemental Indenture, dated as of June 27, 2002,
among TEPPCO Partners, L.P., as issuer, TE Products Pipeline
Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream
Companies, L.P., and Jonah Gas Gathering Company, as Initial
Subsidiary Guarantors, and Val Verde Gas Gathering Company, L.P., as
New Subsidiary Guarantor, and Wachovia Bank, National Association,
formerly known as First Union National Bank, as trustee (Filed as
Exhibit 4.6 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 2002 and incorporated
herein by reference).4.5
    
    Third Supplemental Indenture among TEPPCO Partners, L.P. as
issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P., Jonah Gas Gathering Company
and Val Verde Gas Gathering Company, L.P. as Subsidiary Guarantors,
and Wachovia Bank, National Association, as trustee, dated as of
January 30, 2003 (Filed as Exhibit 4.7 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002, and incorporated herein by reference).10.1+
    
    Duke Energy Corporation Executive Savings Plan (Filed as
Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1999 and incorporated
herein by reference).10.2+
    
    Duke Energy Corporation Executive Cash Balance Plan (Filed
as Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).10.3+
    
    Duke Energy Corporation Retirement Benefit Equalization Plan
(Filed as Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1999
and incorporated herein by reference).10.4+
    
    Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan executed on March 8, 1994 (Filed as Exhibit 10.1 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended March 31, 1994 and incorporated herein by
reference).10.5+
    
    Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan, Amendment 1, effective January 16, 1995 (Filed as
Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 1999 and incorporated
herein by reference).10.6+
    
    Texas Eastern Products Pipeline Company Non-employee
Directors Unit Accumulation Plan, effective April 1, 1999 (Filed as
Exhibit 10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).10.7+
    
    Texas Eastern Products Pipeline Company Non-employee
Directors Deferred Compensation Plan, effective November 1, 1999
(Filed as Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended September 30,
1999 and incorporated herein by reference).10.8+
    
    Texas Eastern Products Pipeline Company Phantom Unit
Retention Plan, effective August 25, 1999 (Filed as Exhibit 10.32 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 1999 and incorporated herein by
reference).
 25




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##### Table of Contents



10.9+
    
    Form of Employment Agreement between the Company and Thomas
R. Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1998 and incorporated herein by
reference).10.10+
    
    Employment Agreement with Barry R. Pearl (Filed as Exhibit 10.30
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 2001 and incorporated herein by
reference).10.11
    
    Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by reference).10.12
    
    Call Option Agreement, dated February 9, 1999 (Filed as
Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and incorporated
herein by reference).10.13+
    
    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Amendment and Restatement, effective January 1, 2000
(Filed as Exhibit 10.28 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2000
and incorporated herein by reference).10.14+
    
    TEPPCO Supplemental Benefit Plan, effective April 1, 2000 (Filed
as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 2000 and
incorporated herein by reference).10.15
    
    Contribution, Assignment and Amendment Agreement among
TEPPCO Partners, L.P., TE Products Pipeline Company, Limited
Partnership, TCTM, L.P., Texas Eastern Products Pipeline Company,
LLC, and TEPPCO GP, Inc., dated July 26, 2001 (Filed as Exhibit 3.6
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 2001 and incorporated herein by
reference).10.16
    
    Certificate of Formation of TEPPCO Colorado, LLC (Filed as
Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).10.17
    
    Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank as Administrative Agent and LC
Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.31 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2001 and incorporated herein by reference).10.18
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).10.19
    
    Amendment 1, dated as of September 28, 2001, to the Amended
and Restated Credit Agreement among TEPPCO Partners, L.P. as
Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank,
and Certain Lenders, dated as of April 6, 2001 ($500,000,000
Revolving Facility) (Filed as Exhibit 10.33 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).10.20
    
    Amendment 1, dated as of September 28, 2001, to the Credit
Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as
Administrative Agent, and Certain Lenders, dated as of April 6, 2001
($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).
 26




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##### Table of Contents



10.21
    
    Amendment and Restatement, dated as of November 13, 2001, to
the Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.35 to Form 10-K of TEPPCO Partners, L.P (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).10.22
    
    Second Amendment and Restatement, dated as of November 13,
2001, to the Amended and Restated Credit Agreement amount TEPPCO
Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent
and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.36 to Form
10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the
year ended December 31, 2001 and incorporated herein by reference).10.23
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).10.24
    
    Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).10.25
    
    Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit Facility) (Filed
as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) dated as of July 2, 2002 and incorporated herein
by reference).10.26
    
    Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).10.27+
    
    Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002 (Filed as Exhibit 10.49 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002, and incorporated herein by
reference).10.28+
    
    Amended and Restated TEPPCO Supplemental Benefit Plan, effective
November 1, 2002 (Filed as Exhibit 10.44 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002, and incorporated herein by reference).10.29+
    
    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Second Amendment and Restatement, effective January
1, 2003 (Filed as Exhibit 10.45 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
2002, and incorporated herein by reference).10.30+
    
    Amended and Restated Texas Eastern Products Pipeline Company, LLC
Management Incentive Compensation Plan, effective January 1, 2003
(Filed as Exhibit 10.46 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2002,
and incorporated herein by reference).10.31+
    
    Amended and Restated TEPPCO Retirement Cash Balance Plan,
effective January 1, 2002 (Filed as Exhibit 10.47 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 2002, and incorporated herein by reference).10.32
    
    Formation Agreement between Panhandle Eastern Pipe Line
Company and Marathon Ashland Petroleum LLC and TE Products Pipeline
Company, Limited Partnership, dated as of August 10, 2000 (Filed as
Exhibit 10.48 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002, and incorporated
herein by reference).
 27




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##### Table of Contents



10.33
    
    Amended and Restated Limited Liability Company Agreement of
Centennial Pipeline LLC dated as of August 10, 2000 (Filed as
Exhibit 10.49 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002, and incorporated
herein by reference).10.34
    
    Guaranty Agreement, dated as of September 27, 2002, between
TE Products Pipeline Company, Limited Partnership and Marathon
Ashland Petroleum LLC for Note
Agreements of Centennial Pipeline LLC (Filed as Exhibit 10.50
to Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 2002, and
incorporated herein by reference).10.35
    
    LLC Membership Interest Purchase Agreement By and Between
CMS Panhandle Holdings, LLC, As Seller and Marathon Ashland
Petroleum LLC and TE Products Pipeline Company, Limited Partnership,
Severally as Buyers, dated February 10, 2003 (Filed as Exhibit 10.51
to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 2002, and incorporated herein by
reference).10.36
    
    Joint Development Agreement between TE Products Pipeline
Company, Limited Partnership and Louis Dreyfus Plastics Corporation
dated February 10, 2000 (Filed as Exhibit 10.52 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 2003, and incorporated herein by reference).10.37
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and LC Issuing Bank and The
Lenders Party Hereto, as Lenders, dated as of June 27, 2003
($550,000,000 Revolving Facility) (Filed as Exhibit 10.52 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2003, and incorporated herein by reference).10.38
    
    Agreement of Limited Partnership of Mont Belvieu Storage
Partners, L.P. dated effective January 21, 2003. (Filed as Exhibit
10.53 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2003, and incorporated
herein by reference).10.39
    
    Letter of Agreement Clarifying Rights and Obligations of the
Parties Under the Mont Belvieu Storage Partners, L.P., Partnership
Agreement and the Mont Belvieu Venture, LLC, LLC Agreement, dated
October 13, 2003. (Filed as Exhibit 10.54 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2003, and incorporated herein by reference).31.1*
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
   *
    
    Filed herewith.**
    
    Furnished herewith pursuant to Item 601(b)-(32) of Regulation
S-K.+
    
    A management contract or compensation plan or arrangement.  (b)
    
    Reports on Form 8-K filed with or furnished to the Securities and
Exchange Commission during the quarter ended March 31, 2004:  No reports were filed or furnished on Form 8-K during the quarter ended
March 31, 2004. 28




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##### Table of Contents



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 thereunto duly authorized. TE Products Pipeline Company, Limited Partnership(Registrant)(A Delaware Limited Partnership)By:
    
    TEPPCO GP, Inc.,as General PartnerBy:
    
    /s/ BARRY R. PEARLBarry R. Pearl,President, Chief ExecutiveOfficer and DirectorBy:
    
    /s/ CHARLES H. LEONARDCharles H. Leonard,Senior Vice President, Chief FinancialOfficer and DirectorDate: April 29, 2004
 29




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##### Table of Contents



Index to Exhibit ExhibitNumber
    
    Description3.1
    
    Second Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership, effective
September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001, and incorporated herein by reference).4.1
    
    Form of Indenture between TE Products Pipeline Company,
Limited Partnership and The Bank of New York, as Trustee, dated as
of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnerships Registration Statement on Form S-3
(Commission File No. 333-38473) and incorporated herein by
reference).4.2
    
    Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as
of February 20, 2002 and incorporated herein by reference).4.3
    
    First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).4.4
    
    Second Supplemental Indenture, dated as of June 27, 2002,
among TEPPCO Partners, L.P., as issuer, TE Products Pipeline
Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream
Companies, L.P., and Jonah Gas Gathering Company, as Initial
Subsidiary Guarantors, and Val Verde Gas Gathering Company, L.P., as
New Subsidiary Guarantor, and Wachovia Bank, National Association,
formerly known as First Union National Bank, as trustee (Filed as
Exhibit 4.6 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 2002 and incorporated
herein by reference).4.5
    
    Third Supplemental Indenture among TEPPCO Partners, L.P. as
issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P., Jonah Gas Gathering Company
and Val Verde Gas Gathering Company, L.P. as Subsidiary Guarantors,
and Wachovia Bank, National Association, as trustee, dated as of
January 30, 2003 (Filed as Exhibit 4.7 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002, and incorporated herein by reference).10.1+
    
    Duke Energy Corporation Executive Savings Plan (Filed as
Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1999 and incorporated
herein by reference).10.2+
    
    Duke Energy Corporation Executive Cash Balance Plan (Filed
as Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).10.3+
    
    Duke Energy Corporation Retirement Benefit Equalization Plan
(Filed as Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1999
and incorporated herein by reference).10.4+
    
    Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan executed on March 8, 1994 (Filed as Exhibit 10.1 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended March 31, 1994 and incorporated herein by
reference).10.5+
    
    Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan, Amendment 1, effective January 16, 1995 (Filed as
Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 1999 and incorporated
herein by reference).




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##### Table of Contents



10.6+
    
    Texas Eastern Products Pipeline Company Non-employee
Directors Unit Accumulation Plan, effective April 1, 1999 (Filed as
Exhibit 10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).10.7+
    
    Texas Eastern Products Pipeline Company Non-employee
Directors Deferred Compensation Plan, effective November 1, 1999
(Filed as Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the quarter ended September 30,
1999 and incorporated herein by reference).10.8+
    
    Texas Eastern Products Pipeline Company Phantom Unit
Retention Plan, effective August 25, 1999 (Filed as Exhibit 10.32 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 1999 and incorporated herein by
reference).10.9+
    
    Form of Employment Agreement between the Company and Thomas
R. Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
year ended December 31, 1998 and incorporated herein by
reference).10.10+
    
    Employment Agreement with Barry R. Pearl (Filed as Exhibit 10.30
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 2001 and incorporated herein by
reference).10.11
    
    Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by reference).10.12
    
    Call Option Agreement, dated February 9, 1999 (Filed as
Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and incorporated
herein by reference).10.13+
    
    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Amendment and Restatement, effective January 1, 2000
(Filed as Exhibit 10.28 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2000
and incorporated herein by reference).10.14+
    
    TEPPCO Supplemental Benefit Plan, effective April 1, 2000 (Filed
as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 2000 and
incorporated herein by reference).10.15
    
    Contribution, Assignment and Amendment Agreement among
TEPPCO Partners, L.P., TE Products Pipeline Company, Limited
Partnership, TCTM, L.P., Texas Eastern Products Pipeline Company,
LLC, and TEPPCO GP, Inc., dated July 26, 2001 (Filed as Exhibit 3.6
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 2001 and incorporated herein by
reference).10.16
    
    Certificate of Formation of TEPPCO Colorado, LLC (Filed as
Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).10.17
    
    Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank as Administrative Agent and LC
Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.31 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2001 and incorporated herein by reference).10.18
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).




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##### Table of Contents



10.19
    
    Amendment 1, dated as of September 28, 2001, to the Amended
and Restated Credit Agreement among TEPPCO Partners, L.P. as
Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank,
and Certain Lenders, dated as of April 6, 2001 ($500,000,000
Revolving Facility) (Filed as Exhibit 10.33 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).10.20
    
    Amendment 1, dated as of September 28, 2001, to the Credit
Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as
Administrative Agent, and Certain Lenders, dated as of April 6, 2001
($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).10.21
    
    Amendment and Restatement, dated as of November 13, 2001, to
the Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.35 to Form 10-K of TEPPCO Partners, L.P (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).10.22
    
    Second Amendment and Restatement, dated as of November 13,
2001, to the Amended and Restated Credit Agreement amount TEPPCO
Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent
and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.36 to Form
10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the
year ended December 31, 2001 and incorporated herein by reference).10.23
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).10.24
    
    Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).10.25
    
    Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit Facility) (Filed
as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) dated as of July 2, 2002 and incorporated herein
by reference).10.26
    
    Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).10.27+
    
    Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002 (Filed as Exhibit 10.49 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002, and incorporated herein by
reference).10.28+
    
    Amended and Restated TEPPCO Supplemental Benefit Plan, effective
November 1, 2002 (Filed as Exhibit 10.44 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002, and incorporated herein by reference).10.29+
    
    Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Second Amendment and Restatement, effective January
1, 2003 (Filed as Exhibit 10.45 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
2002, and incorporated herein by reference).




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##### Table of Contents



10.30+
    
    Amended and Restated Texas Eastern Products Pipeline Company, LLC
Management Incentive Compensation Plan, effective January 1, 2003
(Filed as Exhibit 10.46 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2002,
and incorporated herein by reference).10.31+
    
    Amended and Restated TEPPCO Retirement Cash Balance Plan,
effective January 1, 2002 (Filed as Exhibit 10.47 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 2002, and incorporated herein by reference).10.32
    
    Formation Agreement between Panhandle Eastern Pipe Line
Company and Marathon Ashland Petroleum LLC and TE Products Pipeline
Company, Limited Partnership, dated as of August 10, 2000 (Filed as
Exhibit 10.48 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002, and incorporated
herein by reference).10.33
    
    Amended and Restated Limited Liability Company Agreement of
Centennial Pipeline LLC dated as of August 10, 2000 (Filed as
Exhibit 10.49 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002, and incorporated
herein by reference).10.34
    
    Guaranty Agreement, dated as of September 27, 2002, between
TE Products Pipeline Company, Limited Partnership and Marathon
Ashland Petroleum LLC for Note
Agreements of Centennial Pipeline LLC (Filed as Exhibit 10.50
to Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 2002, and
incorporated herein by reference).10.35
    
    LLC Membership Interest Purchase Agreement By and Between
CMS Panhandle Holdings, LLC, As Seller and Marathon Ashland
Petroleum LLC and TE Products Pipeline Company, Limited Partnership,
Severally as Buyers, dated February 10, 2003 (Filed as Exhibit 10.51
to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the year ended December 31, 2002, and incorporated herein by
reference).10.36
    
    Joint Development Agreement between TE Products Pipeline
Company, Limited Partnership and Louis Dreyfus Plastics Corporation
dated February 10, 2000 (Filed as Exhibit 10.52 to Form 10-Q of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter
ended March 31, 2003, and incorporated herein by reference).10.37
    
    Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and LC Issuing Bank and The
Lenders Party Hereto, as Lenders, dated as of June 27, 2003
($550,000,000 Revolving Facility) (Filed as Exhibit 10.52 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2003, and incorporated herein by reference).10.38
    
    Agreement of Limited Partnership of Mont Belvieu Storage
Partners, L.P. dated effective January 21, 2003. (Filed as Exhibit
10.53 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2003, and incorporated
herein by reference).10.39
    
    Letter of Agreement Clarifying Rights and Obligations of the
Parties Under the Mont Belvieu Storage Partners, L.P., Partnership
Agreement and the Mont Belvieu Venture, LLC, LLC Agreement, dated
October 13, 2003. (Filed as Exhibit 10.54 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2003, and incorporated herein by reference).




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##### Table of Contents



31.1*
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
   *
    
    Filed herewith.**
    
    Furnished herewith pursuant to Item 601(b)-(32) of Regulation
S-K.+
    
    A management contract or compensation plan or arrangement.