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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




FORM 10-Q

x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2003ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES 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 x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x No o



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TABLE OF CONTENTS



|                                             |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION               
|                                             | Item 1. Financial Statements                                                                 
|                                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                             | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                  
|                                             | Item 1. Legal Proceedings                                                                    
|                                             | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                  
|Certification of CEO Pursuant to Section 302
|Certification of CFO Pursuant to Section 302
|Certification of CEO Pursuant to Section 906
|Certification of CFO Pursuant to Section 906

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
    
    PageItem 1. Financial StatementsConsolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002
    
    
    1Consolidated Statements of Income for the three months and nine months ended September 30,
2003 and 2002 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the nine months ended September 30, 2003
and 2002 (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 INFORMATION
    
    
    24Item 1. Legal Proceedings
    
    
    24Item 6. Exhibits and Reports on Form 8-K
    
    
    24Signatures
    
    
    29






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PART I. FINANCIAL INFORMATION







Item 1. Financial Statements

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30,
    
    December 31,2003
    
    2002(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    48
    
    
    $
    485Accounts receivable, trade (net of allowance for doubtful accounts of
$1,075 and $287)
    
    
    26,424
    
    
    
    25,930Accounts receivable, related parties
    
    
    229
    
    
    
    5,125Inventories
    
    
    14,204
    
    
    
    13,800Other
    
    
    6,561
    
    
    
    11,939Total current assets
    
    
    47,466
    
    
    
    57,279Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $271,096 and $284,458)
    
    
    669,211
    
    
    
    722,848Equity investments
    
    
    157,529
    
    
    
    73,476Other assets
    
    
    23,438
    
    
    
    29,560Total assets
    
    $
    897,644
    
    
    $
    883,163LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    15,471
    
    
    $
    18,999Accounts payable, related parties
    
    
    5,037
    
    
    
    5,685Accrued interest
    
    
    6,049
    
    
    
    11,536Other accrued taxes
    
    
    7,385
    
    
    
    6,732Other
    
    
    11,825
    
    
    
    15,721Total current liabilities
    
    
    45,767
    
    
    
    58,673Senior Notes
    
    
    397,203
    
    
    
    403,428Note Payable, Parent Partnership
    
    
    197,917
    
    
    
    154,093Other liabilities and deferred credits
    
    
    16,373
    
    
    
    24,230Commitments and contingenciesPartners capital:General partners interest
    
    
    2
    
    
    
    2Limited partners interest
    
    
    240,382
    
    
    
    242,737Total partners capital
    
    
    240,384
    
    
    
    242,739Total liabilities and partners capital
    
    $
    897,644
    
    
    $
    883,163


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 Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2003
    
    2002
    
    2003
    
    2002Operating revenues:Transportation  Refined products
    
    $
    37,992
    
    
    $
    35,271
    
    
    $
    102,688
    
    
    $
    92,218Transportation  LPGs
    
    
    18,498
    
    
    
    12,515
    
    
    
    62,676
    
    
    
    46,688Mont Belvieu operations
    
    
    
    
    
    
    3,726
    
    
    
    
    
    
    
    11,121Other
    
    
    7,251
    
    
    
    7,242
    
    
    
    24,151
    
    
    
    22,969Total operating revenues
    
    
    63,741
    
    
    
    58,754
    
    
    
    189,515
    
    
    
    172,996Costs and expenses:Operating, general and administrative
    
    
    29,949
    
    
    
    21,256
    
    
    
    76,275
    
    
    
    60,618Operating fuel and power
    
    
    7,762
    
    
    
    7,563
    
    
    
    23,664
    
    
    
    20,202Depreciation and amortization
    
    
    6,988
    
    
    
    7,496
    
    
    
    20,925
    
    
    
    21,692Taxes  other than income taxes
    
    
    2,417
    
    
    
    2,711
    
    
    
    7,493
    
    
    
    8,532Total costs and expenses
    
    
    47,116
    
    
    
    39,026
    
    
    
    128,357
    
    
    
    111,044Operating income
    
    
    16,625
    
    
    
    19,728
    
    
    
    61,158
    
    
    
    61,952Interest expense
    
    
    (7,276
    )
    
    
    (6,698
    )
    
    
    (22,213
    )
    
    
    (20,639
    )Interest capitalized
    
    
    814
    
    
    
    709
    
    
    
    1,704
    
    
    
    2,900Equity losses
    
    
    (1,437
    )
    
    
    (2,019
    )
    
    
    (2,632
    )
    
    
    (5,005
    )Other income  net
    
    
    70
    
    
    
    77
    
    
    
    119
    
    
    
    271Income before discontinued operations
    
    
    8,796
    
    
    
    11,797
    
    
    
    38,136
    
    
    
    39,479Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    912Net income
    
    $
    8,796
    
    
    $
    11,797
    
    
    $
    38,136
    
    
    $
    40,391


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)

Nine Months EndedSeptember 30,2003
    
    2002Cash flows from operating activities:Net income from continuing operations
    
    $
    38,136
    
    
    $
    39,479Adjustments to reconcile net income from continuing operations
to cash provided by operating activities:Depreciation and amortization
    
    
    20,925
    
    
    
    21,692Equity in loss of affiliate
    
    
    2,632
    
    
    
    5,005Non-cash portion of interest expense
    
    
    23
    
    
    
    23(Increase) decrease in accounts receivable
    
    
    (495
    )
    
    
    3,177Increase in inventories
    
    
    (404
    )
    
    
    (603
    )Decrease in other current assets
    
    
    5,378
    
    
    
    1,799Decrease in accounts payable and accrued expenses
    
    
    (13,621
    )
    
    
    (3,546
    )Other
    
    
    21,237
    
    
    
    24,002Net cash provided by continuing operations
    
    
    73,811
    
    
    
    91,028Net cash provided by discontinued operations
    
    
    
    
    
    
    1,178Net cash provided by operating activities
    
    
    73,811
    
    
    
    92,206Cash flows from investing activities:Proceeds from sale of assets
    
    
    
    
    
    
    3,380Proceeds from sale of TEPPCO Colorado, LLC
    
    
    
    
    
    
    4,095Acquisition of additional interest in Centennial Pipeline LLC
    
    
    (20,000
    )
    
    
    Investment in Centennial Pipeline LLC
    
    
    (3,000
    )
    
    
    (7,721
    )Investment in Mont Belvieu Storage Partners, L.P.
    
    
    (250
    )
    
    
    Capital expenditures
    
    
    (37,727
    )
    
    
    (47,423
    )Net cash used in investing activities
    
    
    (60,977
    )
    
    
    (47,669
    )Cash flows from financing activities:Proceeds from term loan
    
    
    80,856
    
    
    
    176,099Repayments of term loan
    
    
    (53,638
    )
    
    
    (147,667
    )Equity contribution  Parent Partnership
    
    
    37,082
    
    
    
    2,447Distributions paid
    
    
    (77,571
    )
    
    
    (70,399
    )Net cash used in financing activities
    
    
    (13,271
    )
    
    
    (39,520
    )Net increase (decrease) in cash and cash equivalents
    
    
    (437
    )
    
    
    5,017Cash and cash equivalents at beginning of period
    
    
    485
    
    
    
    3,654Cash and cash equivalents at end of period
    
    $
    48
    
    
    $
    8,671Non-cash investing activities:Net assets transferred to Mont Belvieu Storage Partners, L.P.
    
    $
    61,408
    
    
    $
    Supplemental disclosure of cash flows:Cash paid for interest (net of amounts capitalized)
    
    $
    30,928
    
    
    $
    24,996


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 approximate 70% interest in DEFS and
ConocoPhillips holds the remaining 30%. TEPPCO GP, as general partner,
performs all of our management and operating functions required according to
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, which are, in the opinion of the management of the Company, of a
normal and recurring nature and necessary for a fair statement of our financial
position as of September 30, 2003, and the results of our operations and cash
flows for the periods presented. The results of operations for the three
months and nine months ended September 30, 2003, are not necessarily indicative
of results of our operations for the full year 2003. You should read the
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, as amended, for the year ended
December 31, 2002. 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.

Effective January 1, 2002, our Parent Partnership realigned its business
segments to reflect its entry into the natural gas gathering business and the
expanded scope of its natural gas liquids (NGLs) operations. As part of this
realignment, on May 31, 2002, we transferred our investment in TEPPCO Colorado,
LLC (TEPPCO Colorado), which fractionates NGLs, to TEPPCO Midstream
Companies, L.P. (TEPPCO Midstream). As a result of the transfer, the results
of operations of TEPPCO Colorado for the periods presented are reflected as
discontinued operations (see Note 10. Discontinued Operations). We have
reclassified prior periods presented to reflect the current presentation.

New Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. The provisions of SFAS 148 are effective for financial
statements for fiscal years ending after December 15, 2002. Our Parent
Partnership has not granted options for any periods presented. For options
outstanding under our 1994 Long Term Incentive Plan, the Parent Partnership
followed the intrinsic value method of accounting for recognizing stock-based
compensation expense.

4



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

Under this method, the Parent Partnership records no compensation expense
for unit options granted when the exercise price of the options granted is
equal to, or greater than, the market price of the Parent Partnerships limited
partner units on the date of the grant. Assuming the Parent Partnership had
used the fair value method of accounting for its unit option plan, our pro
forma net income for the nine months ended September 30, 2002, would be lower
than reported net income by an immaterial amount. Pro forma net income would
equal reported net income for the three months ended September 30, 2003, and
2002, and for the nine months ended September 30, 2003. The adoption of SFAS
148 did not have an effect on our financial position, results of operations or
cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51(FIN 46). FIN
46 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. We are required
to apply FIN 46 to all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, we were required to apply FIN 46 on July 1, 2003. In
connection with the adoption of FIN 46, we evaluated our investments in
Centennial Pipeline LLC and Mont Belvieu Storage Partners, L.P. and determined
that these entities are not variable interest entities as defined by FIN 46,
and thus we have accounted for them as equity method investments (see Note 6.
Equity Investments). The adoption of FIN 46 did not have an effect on our
financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 amends SFAS 133 to
conform and incorporate derivative implementation issues and subsequently
issued accounting guidance. SFAS 149 clarifies under what circumstances a
contract with an initial net investment meets the characteristics of a
derivative, clarifies when a derivative contains a financing component, amends
the definition of an underlying to conform it to language used in FASB
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Othersand amends
certain other existing pronouncements. SFAS 149 is effective for contracts
entered into or modified after June 30, 2003, and should be applied
prospectively. However, certain SFAS 133 implementation issues that were
effective for all fiscal quarters prior to June 15, 2003, should continue to be
applied in accordance with their respective effective dates. We adopted SFAS
149 effective July 1, 2003. The adoption of SFAS 149 did not have a material
effect on our financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS 150 establishes standards for how an issuer classifies and measures
certain freestanding financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires that an issuer classify a financial
instrument that is within its scope as a liability (or asset in some
circumstances). We adopted SFAS 150 effective July 1, 2003. The adoption of
SFAS 150 did not have a material effect on our financial position, results of
operations or cash flows.

In May 2003, the Emerging Issues Task Force (EITF) reached consensus in
EITF 03-04, Accounting for Cash Balance Pension Plans, to specifically
address the accounting for certain cash balance pension plans. The consensus
reached in EITF 03-04 requires certain cash balance pension plans to be
accounted for as defined benefit plans. For cash balance plans described in
the consensus, the consensus also requires the use of the traditional unit
credit method for purposes of measuring benefit obligations and annual cost of
benefits earned as opposed to the projected unit credit method. We have
historically accounted for our cash balance plans as defined benefit plans;
however, we are required to adopt the measurement provisions of EITF 03-04 in
our cash balance plans next measurement date of December 31, 2003. Any
differences in the measurement of the obligation as a result of applying the
consensus will be reported as a component of actuarial gain or loss. We do not
believe that the adoption of EITF 03-04 will have a material effect on our
financial position, results of operations or cash flows.

5



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

In May 2003, the EITF reached consensus in EITF 01-08, Determining Whether
an Arrangement Contains a Lease, to clarify the requirements of identifying
whether an arrangement should be accounted for as a lease at its inception.
The guidance in the consensus is designed to mandate reporting revenue as
rental or leasing income that otherwise would be reported as part of product
sales or service revenue. EITF 01-08 requires both parties in an arrangement
to determine whether a service contract or similar arrangement is or includes a
lease within the scope of SFAS No. 13, Accounting For Leases. We have
historically leased storage capacity to outside parties and entered into
pipeline capacity lease agreements both as the lessee and as the lessor. Upon
application of EITF 01-08, the accounting requirements under the consensus
could affect the timing of revenue and expense recognition, and revenues
reported as transportation and storage services might have to be reported as
rental or leasing income. Should capital-lease treatment be necessary,
purchasers of transportation and storage services in the arrangements would
have to recognize new assets on their balance sheets. The consensus is to be
applied prospectively to arrangements agreed to, modified, or acquired in
business combinations in fiscal periods beginning after May 28, 2003. Previous
arrangements that would be leases or would contain a lease according to the
consensus will continue to be accounted for as transportation and storage
purchases or sales arrangements. The adoption of EITF 01-08 did not have a
material effect on our financial position, results of operations or cash flows.

In July 2003, the EITF reached consensus in EITF 03-11, Reporting Gains
and Losses on Derivative Instruments That Are Subject to FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, and Not Held
for Trading Purposes. In a 2002 Issue, the EITF reached a consensus that all
gains and losses (realized and unrealized) on derivative instruments within the
scope of SFAS 133 should be shown net in the income statement, whether or not
settled physically, if the derivative instruments are held for trading
purposes. However, the EITF recognized that there may be contracts within the
scope of SFAS 133 considered not held for trading purposes that warrant further
consideration as to the appropriate income statement classification of the
gains and losses. In EITF 03-11, the EITF clarified certain criteria to use in
determining whether gains and losses related to non-trading derivative
instruments should be shown net in the income statement. The adoption of EITF
03-11 did not have a material effect on our financial position, results of
operations or cash flows.

NOTE 2. ASSET RETIREMENT OBLIGATIONS

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS 143 requires us to record the fair value of an
asset retirement obligation as a liability in the period in which we incur a
legal obligation for the retirement of tangible long-lived assets. A
corresponding asset is also recorded and depreciated over the life of the
asset. After the initial measurement of the asset retirement obligation, the
liability will be adjusted at the end of each reporting period to reflect
changes in the estimated future cash flows underlying the obligation.
Determination of any amounts recognized upon adoption is based upon numerous
estimates and assumptions, including future retirement costs, future inflation
rates and the credit-adjusted risk-free interest rates.

Our assets consist of an interstate trunk pipeline system and a series of
storage facilities that originate along the upper Texas Gulf Coast and extend
through the Midwest and northeastern United States. We transport refined
products, LPGs and petrochemicals through the pipeline system. These products
are primarily received in the south end of the system and stored and/or
transported to various points along the system per customer nominations.

We have completed our assessment of SFAS 143, and we have determined that
we are obligated by contractual or regulatory requirements to remove facilities
or perform other remediation upon retirement of our assets. However, we are
not able to reasonably determine the fair value of the asset retirement
obligations for our trunk and interstate pipelines and our surface facilities,
since future dismantlement and removal dates are indeterminate. It is
impossible to predict when demand for transportation of the related products
will cease. Our right-of-way agreements allow us to maintain the right-of-way
rather than remove the pipe. In addition, we can evaluate our trunk pipelines
for alternative uses, which can be and have been found.

6



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

We will record such asset retirement obligations in the period in which
more information becomes available for us to reasonably estimate the settlement
dates of the retirement obligations. The adoption of SFAS 143 did not have an
effect on our financial position, results of operations or cash flows.

NOTE 3. INTANGIBLE ASSETS

We account for our intangible assets under SFAS No. 142, Goodwill and
Other Intangible Assetswhich was issued by the FASB in July 2001. SFAS 142
prohibits amortization of goodwill and intangible assets with indefinite useful
lives, but instead requires testing for impairment at least annually. SFAS 142
requires that intangible assets with finite 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 should 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
September 30, 2003, and December 31, 2002 (in thousands):

September 30, 2003
    
    December 31, 2002Gross Carrying
    
    Accumulated
    
    Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Transportation agreements
    
    $
    1,328
    
    
    $
    (177
    )
    
    $
    1,328
    
    
    $
    (127
    )


At September 30, 2003, 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 6. Equity Investments). The excess investment is
included in our equity investments account at September 30, 2003. This excess
investment is accounted for as an intangible asset with an indefinite life. We
will assess the intangible asset for impairment on an annual basis.

Amortization expense on intangible assets was $16,603 and $12,500 for the
three months ended September 30, 2003 and 2002, respectively, and $49,808 and
$37,500 for the nine months ended September 30, 2003 and 2002, respectively.

Estimated amortization expense on intangible assets will be $0.1 million
for each of the years ending December 31, 2003 through 2007.

NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS

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 nine months ended September 30, 2003, and 2002, we
recognized reductions in interest expense of $7.4 million and $5.4 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 September
30, 2003, 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 $7.3
million and $13.6 million at September 30, 2003, and December 31, 2002,
respectively.

7



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

NOTE 5. INVENTORIES

Inventories are carried at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows
(in thousands):

September 30,
    
    December 31,2003
    
    2002Gasolines
    
    $
    557
    
    
    $
    4,700Butanes
    
    
    4,222
    
    
    
    1,991Transmix
    
    
    2,632
    
    
    
    2,526Other products
    
    
    
    
    
    
    845Materials and supplies
    
    
    6,793
    
    
    
    3,738Total
    
    $
    14,204
    
    
    $
    13,800


The costs of inventories did not exceed market values at September 30,
2003, and December 31, 2002.

NOTE 6. 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 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 percentage
ownerships in Centennial to 50% each. During the nine months ended September
30, 2003, excluding the amount paid for the acquisition of the additional
ownership interest, we contributed approximately $3.0 million to Centennial,
which is included in the equity investment balance at September 30, 2003.

As of January 1, 2003, we and Louis Dreyfus Energy Services, L.P. (Louis
Dreyfus) effectively 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 continue to operate the facilities for MB
Storage. Effective January 1, 2003, we contributed property and equipment with
a net book value of $67.4 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 $7.2 million on an annual basis) of MB Storages earnings before interest,
taxes, depreciation and amortization, as defined in the operating agreement.
Any amount of MB Storages earnings before interest, taxes, depreciation and
amortization in excess of the $7.2 million is allocated evenly between Louis
Dreyfus and us. For the nine months ended September 30, 2003, our sharing
ratio in the earnings of MB Storage was approximately 74%.

We use the equity method of accounting to account for our investment in
Centennial and MB Storage. Summarized combined financial information for
Centennial and MB Storage for the nine months ended September 30, 2003, and
Centennial for the nine months ended September 30, 2002, is presented below (in
thousands):

8



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

Nine Months EndedSeptember 30,2003
    
    2002Revenues
    
    $
    37,971
    
    
    $
    10,652Net loss
    
    
    (3,246
    )
    
    
    (14,384
    )


Summarized combined balance sheet data for Centennial and MB Storage as of
September 30, 2003, and for Centennial as of December 31, 2002, is presented
below (in thousands):

September 30,
    
    December 31,2003
    
    2002Current assets
    
    $
    24,886
    
    
    $
    8,184Noncurrent assets
    
    
    350,677
    
    
    
    285,885Current liabilities
    
    
    31,384
    
    
    
    19,949Long-term debt
    
    
    140,000
    
    
    
    140,000Noncurrent liabilities
    
    
    14,234
    
    
    
    14,875Partners capital
    
    
    189,945
    
    
    
    119,245


Our investment in Centennial includes an excess net investment amount of
$33.4 million (see Note 3. Intangible Assets). Excess investment is the
amount by which our investment balance exceeds our proportionate share of the
net assets of the investment.

NOTE 7. LONG TERM 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 September 30, 2003, 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 4. Derivative Financial Instruments.

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

9



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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 2002, our Parent Partnerships borrowings under the
Three Year Facility were used to finance the acquisitions of the Chaparral NGL
system on March 1, 2002, and Val Verde Gas Gathering Company (Val Verde) on
June 30, 2002, and for general Parent Partnership purposes. During 2002, our Parent
Partnership made repayments on the Three Year Facility with proceeds from the
issuance of its 7.625% Senior Notes, proceeds from the
issuance of its units representing limited partnership
interests (Limited Partner Units) and proceeds from the termination of
interest rate swaps. 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. The Parent Partnership
borrowed $263.0 million under the Revolving Credit Facility and repaid the
outstanding balance of the Three Year Facility. On September 30, 2003, $225.0
million was outstanding under the Revolving Credit Facility.

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. During 2002, the Parent
Partnerships borrowings under the Short-term Revolver were used to finance the
acquisition of the Val Verde assets and for other purposes. During 2002, the
Parent Partnership repaid the existing amounts outstanding under the Short-term
Revolver with proceeds it received from the issuance of Limited Partner Units
in 2002. The Short-term Revolver expired on March 27, 2003.

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 Parent Partnership used the proceeds from the
offering to reduce a portion of the outstanding balances of its credit
facilities. The 7.625% 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 received was
used for general Parent Partnership purposes. The 6.125% Senior Notes may be redeemed
at any time at our

10



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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.

At September 30, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $197.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
interest rate on the note payable to the Parent Partnership at September 30,
2003, was 6.1%. At September 30, 2003, accrued interest includes $0.5 million
due to our Parent Partnership. For the nine months ended September 30, 2003,
interest costs incurred on the note payable to our Parent Partnership totaled
$8.8 million.

NOTE 8. 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 nine months ended September 30, 2003 and 2002, we paid cash
distributions totaling $77.6 million and $70.4 million, respectively. The
distribution increase reflects our success in improving cash flow levels. On
November 7, 2003, we will pay a cash distribution of approximately $28.0
million for the quarter ended September 30, 2003.

NOTE 9. COMMITMENTS AND CONTINGENCIES

In the fall of 1999 and on December 1, 2000, the Company and the
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, in Ryan E. McCleery and Marcia S.
McCleery, et al. v. Texas Eastern Corporation, et al.(including the Company
and Partnership) and Gilbert Richards and Jean Richards v. Texas Eastern
Corporation, et al.(including the Company and Partnership).In both cases,
the plaintiffs contend, among other things, that 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. 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, in 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 the plaintiffs property. The plaintiffs
further contend that this leak caused damages to the plaintiffs. We have filed
an answer to the plaintiffs petition denying the allegations. The plaintiffs
have not stipulated the amount of damages they are seeking in the suit. We are
defending ourselves vigorously against the lawsuit. We cannot estimate the
damages, if any, associated with this pending lawsuit; however, this case is
covered by insurance.

11



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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 of 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. Currently, the
Company has been unable to confirm involvement by the Company or its
predecessors with the alleged location and it is currently uncertain 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 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 ranging from headaches
and allergies to 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. The
plaintiffs have made a global settlement offer of $198.5 million. The
defendants have rejected this offer and are preparing to make a global
settlement counteroffer. Marathon is 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.

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 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.

In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. This contamination may be attributable to our operations, as well as
to adjacent petroleum terminals operated by other companies. In 1999, our
Arcadia facility and adjacent terminals were directed by the Remediation
Services Division of the LDEQ to pursue remediation of this containment phase.
At September 30, 2003, 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 that we have proposed will have a future
material adverse effect on our financial position, results of operations or
cash flows.

12



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

On March 17, 2003, we experienced a release of 511 barrels of jet fuel
from a tank at our Blue Island terminal located in Cook County, Illinois. As a
result of the release, we have entered into an Agreed Preliminary Injunction
and Order (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. 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 remediation program will have a future material adverse effect on our
financial position, results of operations or cash flows.

Centennial entered into credit facilities totaling $150.0 million, and as
of September 30, 2003, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. We and Marathon have each guaranteed one-half of
Centennials debt, up to a maximum amount of $75.0 million each.

NOTE 10. DISCONTINUED OPERATIONS

Effective January 1, 2002, our Parent Partnership realigned its business
segments to reflect its entry into the natural gas gathering business and the
expanded scope of its NGLs operations. As part of this realignment, on May 31,
2002, we entered into an Assignment and Assumption Agreement with TEPPCO
Midstream to transfer our investment in TEPPCO Colorado to TEPPCO Midstream at
the book value of TEPPCO Colorados net assets. SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, requires that long-lived
assets to be disposed of should be recorded at the lower of their carrying
amount or fair value less costs to sell. As a result, in the quarter ended
June 30, 2002, we compared the fair value of TEPPCO Colorado to its carrying
value and noted no indication of impairment.

The transfer of TEPPCO Colorado to TEPPCO Midstream was recorded at the
book value of TEPPCO Colorados net assets, which was $4.1 million. In
connection with the transfer, we received $4.1 million in cash from TEPPCO
Midstream. TEPPCO Midstream assumed the outstanding debt of TEPPCO Colorado of
$32.0 million as part of the transaction. As a result of the transfer, our
financial position and results of operations have been reclassified to reflect
revenue, expenses, assets and liabilities of TEPPCO Colorado as discontinued
operations for the periods presented. A condensed statement of income is shown
below for TEPPCO Colorado for the nine months ended September 30, 2002 (in
thousands):

Nine Months EndedSeptember 30,2002Revenues
    
    $
    3,115Operating, general and administrative
expense
    
    
    369Depreciation and amortization expense
    
    
    840Operating income
    
    
    1,906Interest expense
    
    
    (1,015
    )Other income  net
    
    
    21Net income
    
    $
    912


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 the 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 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, as amended, for the year ended December 31, 2002.

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, sale 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 6. Equity Investments).

Results of Operations

The following table presents volumes delivered in barrels and average
tariff per barrel for the three months and nine months ended September 30,
2003, and 2002:

Three Months Ended
    
    
    
    Nine Months EndedSeptember 30,
    
    PercentageIncrease
    
    September 30,
    
    PercentageIncrease2003
    
    2002
    
    (Decrease)
    
    2003
    
    2002
    
    (Decrease)(In thousands, except tariff
information)Volumes DeliveredRefined products
    
    
    42,476
    
    
    
    40,065
    
    
    
    6
    %
    
    
    114,964
    
    
    
    101,174
    
    
    
    14
    %LPGs
    
    
    9,146
    
    
    
    8,689
    
    
    
    5
    %
    
    
    29,678
    
    
    
    27,780
    
    
    
    7
    %Total
    
    
    51,622
    
    
    
    48,754
    
    
    
    6
    %
    
    
    144,642
    
    
    
    128,954
    
    
    
    12
    %Average Tariff per BarrelRefined products
    
    $
    0.89
    
    
    $
    0.88
    
    
    
    1
    %
    
    $
    0.89
    
    
    $
    0.91
    
    
    
    (2
    %)LPGs
    
    
    2.02
    
    
    
    1.44
    
    
    
    40
    %
    
    
    2.11
    
    
    
    1.68
    
    
    
    26
    %Average system tariff per barrel
    
    $
    1.09
    
    
    $
    0.98
    
    
    
    11
    %
    
    $
    1.14
    
    
    $
    1.08
    
    
    
    6
    %


Three Months Ended September 30, 2003 Compared with Three Months Ended
September 30, 2002

We reported net income of $8.8 million for the three months ended
September 30, 2003, compared with net income of $11.8 million for the three
months ended September 30, 2002. Net income decreased $3.0 million primarily
due to an increase of $8.1 million in costs and expenses and an increase of
$0.6 million in interest expense, partially offset by an increase of $5.0
million in operating revenues, increased income of $0.6 million from equity
investments, and an increase of $0.1 million in interest capitalized. We
discuss the factors influencing our operating performance below.

Revenues from refined products transportation increased $2.7 million for
the three months ended September 30, 2003, compared with the three months ended
September 30, 2002, due to an overall increase of 6% 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, which commenced refined products deliveries to us

14



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##### 



in April 2002, has provided our system with additional pipeline capacity for
products originating in the U.S. Gulf Coast area. With this incremental
pipeline capacity, our previously constrained system has expanded deliveries in
markets both south and north of Creal Springs. 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 1% 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 increased $6.0 million for the three
months ended September 30, 2003, compared with the three months ended September
30, 2002, primarily due to the impact of lower propane inventories at competing
supply locations in the mid-continent. Lower mid-continent propane inventory
resulted in increased foreign propane imports into the U.S. Gulf Coast at Mont
Belvieu, Texas, and resulted in increased transportation to the mid-continent
through our previously constrained system. Additional pipeline capacity for
expanded propane movements was available due to a shift of refined product
volumes to Centennial. The increase in total volumes of LPGs delivered was due
to increased long-haul delivery of propane to the Midwest and Northeast. The
LPGs average rate per barrel increased 40% from the prior year period as a
result of an increased percentage of long-haul deliveries during the three
months ended September 30, 2003, and higher LPG tariff rates, which went into
effect in July 2003.

Effective January 1, 2003, our 50% ownership interest in MB Storage is
accounted for as an equity investment. Revenues generated from Mont Belvieu
operations totaled $3.7 million during the three months ended September 30,
2002. As a result of the formation of MB Storage, revenues and expenses
related to Mont Belvieu operations are now recorded within equity earnings.
See discussion regarding changes in equity earnings/losses below. 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.

Costs and expenses increased $8.1 million for the three months ended
September 30, 2003, compared with the three months ended September 30, 2002.
The increase was made up of a $8.7 million increase in operating, general and
administrative expenses and a $0.2 million increase in operating fuel and
power, partially offset by a $0.5 million decrease in depreciation and
amortization expense and a $0.3 million decrease in taxes  other than income
taxes. Operating, general and administrative expenses increased primarily due
to higher pipeline maintenance expenses, due in part to higher than planned
pipeline rehabilitation expenses associated with our Integrity Management
program, increased consulting and contract services, increased labor costs,
increased general and administrative supplies expense, increased insurance
expense and expense from the Centennial pipeline capacity lease agreement that
we entered into in 2003. Operating fuel and power expense increased as a
result of increased mainline throughput and higher power costs due to an
increase in the price of natural gas. Depreciation expense decreased from the
prior year period primarily due to the transfer of assets to MB Storage. Taxes
 other than income taxes decreased as a result of actual property taxes being
lower than previously estimated and due to the transfer of assets to MB
Storage.

Net losses from equity investments decreased $0.6 million for the three
months ended September 30, 2003, compared with the three months ended September
30, 2002. Centennial, which commenced operations in April 2002, accounted for
$3.0 million of the equity losses during the three months ended September 30,
2003, resulting in an increase in equity losses of $1.0 million from Centennial
during the period. On February 10, 2003, we acquired an additional 16.7%
interest in Centennial, bringing our ownership interest to 50%. The losses
from Centennial were partially offset by equity earnings of $1.6 million from
our 50% ownership interest in MB Storage, which was formed effective January 1,
2003. Amounts in the prior year period related to Mont Belvieu operations
which were recorded to revenues and costs and expenses are now being recorded
within equity earnings based upon our 50% ownership interest in MB Storage,
effective with its formation on January 1, 2003. If the 2002 revenues and
costs and expenses from the Mont Belvieu operations had been accounted for
under the same method as in 2003, equity earnings from MB Storage would have
decreased $0.1 million in 2003, compared with the prior year, due to a slight
increase in depreciation expense on MB Storage assets.

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Interest expense increased $0.6 million for the three months ended
September 30, 2003, compared with the three months ended September 30, 2002, as
a result of higher outstanding debt balances under the Note Payable with our
Parent Partnership, and an increased percentage of fixed-rate debt in 2003 by
the Parent Partnership.

Interest capitalized decreased $0.1 million for the three months ended
September 30, 2003, compared with the three months ended September 30, 2002, as
a result of decreased construction work-in-progress balances during the third
quarter of 2003.

Nine Months Ended September 30, 2003 Compared with Nine Months Ended
September 30, 2002

We reported net income of $ 38.1 million for the nine months ended
September 30, 2003, compared with net income of $40.4 million for the nine
months ended September 30, 2002. Net income decreased $2.3 million primarily
due to an increase of $17.3 million in costs and expenses, an increase of $1.6
million in interest expense, a decrease of $1.2 million in interest
capitalized, a decrease of $0.2 million in other income  net and a decrease of
$0.9 million in income from discontinued operations, partially offset by an
increase of $16.5 million in operating revenues and increased income of $2.4
million from equity investments. We discuss the factors influencing our
operating performance below.

Revenues from refined products transportation increased $10.5 million for
the nine months ended September 30, 2003, compared with the nine months ended
September 30, 2002, due to an overall increase of 14% 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, which commenced refined products deliveries to us in April 2002,
has provided our system with additional pipeline capacity for products
originating in the U.S. Gulf Coast area. With this incremental pipeline
capacity, our previously constrained system has expanded deliveries in markets
both south and north of Creal Springs. 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 decreased 2%
from the prior year period primarily due to 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, partially offset by higher
market-based tariff rates, which went into effect in July 2003.

Revenues from LPGs transportation increased $16.0 million for the nine
months ended September 30, 2003, compared with the nine months ended September
30, 2002, primarily due to increased deliveries of propane in the upper Midwest
and Northeast market areas attributable to colder than normal weather during
the first quarter of 2003 and due to low inventories at competing supply
locations during the second and third quarters of 2003. Lower mid-continent
propane inventory resulted in increased foreign propane imports into the U.S.
Gulf Coast at Mont Belvieu and resulted in increased transportation to the
mid-continent through our previously constrained system. Additional pipeline
capacity for expanded propane movements was available due to a shift of refined
product volumes to Centennial. Butane deliveries also increased due to the
increased demand by refineries for normal butane for use in gasoline blending
and increased isobutane deliveries to Chicago area refineries. The LPGs
average rate per barrel increased 26% from the prior year period as a result of
an increased percentage of long-haul deliveries during the nine months ended
September 30, 2003, and an increase in LPG tariff rates, which went into effect
in July 2003.

Effective January 1, 2003, our 50% ownership interest in MB Storage is
accounted for as an equity investment. Revenues generated from Mont Belvieu
operations totaled $11.1 million during the nine months ended September 30,
2002. As a result of the formation of MB Storage, revenues and expenses
related to Mont Belvieu operations are now recorded within equity earnings.
See discussion regarding changes in equity earnings/losses below.

Other operating revenues increased $1.1 million for the nine months ended
September 30, 2003, compared with the nine months ended September 30, 2002,
primarily due to higher propane deliveries at our Providence, Rhode Island
import facility, higher refined product rental charges and loading fees and
higher revenues from product loans. These increases were partially offset by
lower revenues from product location exchanges which are used to position
product in the Midwest market area and lower volume of product inventory sales.

16



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Costs and expenses increased $17.3 million for the nine months ended
September 30, 2003, compared with the nine months ended September 30, 2002.
The increase was made up of a $15.7 million increase in operating, general and
administrative expenses and a $3.4 million increase in operating fuel and
power, partially offset by a $1.0 million decrease in taxes  other than income
taxes and a $0.8 million decrease in depreciation and amortization expense.
Operating, general and administrative expenses increased primarily due to
higher pipeline maintenance expenses, due in part to higher than planned
pipeline rehabilitation expenses associated with our Integrity Management
program, increased consulting and contract services, increased labor costs,
increased general and administrative supplies expense, increased insurance
expense, expense from the Centennial pipeline capacity lease agreement that we
entered into in 2003 and the write-off of receivables of $0.4 million related
to customer bankruptcies. Operating fuel and power expense increased as a
result of increased mainline throughput and higher power costs due to an
increase in the price of natural gas. Taxes  other than income taxes
decreased as a result of actual property taxes being lower than previously
estimated and the transfer of assets to MB Storage. Depreciation expense
decreased from the prior year period because of assets retired during the nine
months ended September 30, 2003, which reduced the asset base, and due to the
transfer of assets to MB Storage.

Net losses from equity investments decreased $2.4 million for the nine
months ended September 30, 2003, compared with the nine months ended September
30, 2002. Centennial, which commenced operations in April 2002, accounted for
$8.0 million of the equity losses during the nine months ended September 30,
2003, resulting in an increase of $3.0 million in equity losses during the
period. On February 10, 2003, we acquired an additional 16.7% interest in
Centennial, bringing our ownership interest to 50%. The losses from Centennial
are partially offset by equity earnings of $5.4 million from our 50% ownership
interest in MB Storage, which was formed effective January 1, 2003. Amounts in
the prior year period related to Mont Belvieu operations which were recorded to
revenues and costs and expenses are now being recorded within equity earnings
based upon our 50% ownership interest in MB Storage, effective with its
formation on January 1, 2003. If the 2002 revenues and costs and expenses from
the Mont Belvieu operations had been accounted for under the same method as in
2003, equity earnings from MB Storage would have decreased $0.2 million in
2003, compared with the prior year, due to an increase in depreciation expense
on MB Storage assets, partially offset by increased shuttle deliveries and
increased storage revenue.

Interest expense increased $1.6 million for the nine months ended
September 30, 2003, compared with the nine months ended September 30, 2002, as
a result of higher outstanding debt balances under the Note Payable with our
Parent Partnership, an increased percentage of fixed-rate debt in 2003 by the
Parent Partnership, the write-off of debt issuance costs by the Parent
Partnership in June 2003, related to the refinancing of its revolving credit
facility, and expense related to the discounted portion of a cash flow hedge.

Interest capitalized decreased $1.2 million for the nine months ended
September 30, 2003, compared with the nine months ended September 30, 2002, as
a result of decreased work-in-progress balances during 2003 and interest
capitalized on our investment in Centennial during the first quarter of 2002.

Discontinued Operations

Effective January 1, 2002, our Parent Partnership realigned its business
segments to reflect its entry into the natural gas gathering business and the
expanded scope of its NGLs operations. As part of this realignment, on May 31,
2002, we entered into an Assignment and Assumption Agreement with TEPPCO
Midstream to transfer our investment in TEPPCO Colorado, which fractionates
NGLs, to TEPPCO Midstream at the book value of TEPPCO Colorados net assets
(see Note 10. Discontinued Operations). SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, requires that long-lived assets to
be disposed of should be recorded at the lower of their carrying amount or fair
value less costs to sell. As a result, in the quarter ended June 30, 2002, we
compared the fair value of TEPPCO Colorado to its carrying value and noted no
indication of impairment.

As a result of the transfer, our financial position and results of
operations have been reclassified to reflect revenue, expenses, assets and
liabilities of TEPPCO Colorado as discontinued operations for the periods
presented. A condensed statement of income is shown below for TEPPCO Colorado
for the nine months ended September 30, 2002 (in thousands):

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Nine Months EndedSeptember 30,2002Revenues
    
    $
    3,115Operating, general and administrative
expense
    
    
    369Depreciation and amortization expense
    
    
    840Operating income
    
    
    1,906Interest expense
    
    
    (1,015
    )Other income  net
    
    
    21Net income
    
    $
    912


The following table presents volume and average rate information for
TEPPCO Colorado for the nine months ended September 30, 2002:

Nine Months EndedSeptember 30,2002Fractionation  NGLs:Thousand barrels
    
    
    2,043Average rate per barrel
    
    $
    1.827


Financial Condition and Liquidity

Net cash from operating activities totaled $73.8 million for the nine
months ended September 30, 2003. This cash was made up of $59.1 million of
income before charges for depreciation and amortization and $14.7 million of
cash provided by working capital. This compares with net cash from operating
activities of $92.2 million for the nine months ended September 30, 2002,
comprised of $61.2 million of income before charges for depreciation and
amortization, $29.8 million of cash provided by working capital and $1.2
million of cash provided by discontinued operations. Net cash from operating
activities for the nine months ended September 30, 2003, and 2002, included
interest payments of $30.9 million and $25.0 million, respectively.

Cash flows used in investing activities totaled $61.0 million for the nine
months ended September 30, 2003, and were comprised of $37.7 million of capital
expenditures, $20.0 million for our acquisition of the additional interest in
Centennial on February 10, 2003, $3.0 million of cash contributions for our
ownership interest in Centennial, and $0.3 million of cash contributions for
our ownership interest in MB Storage. Cash flows used in investing activities
totaled $47.7 million for the nine months ended September 30, 2002, and were
comprised of $47.5 million of capital expenditures and $7.7 million of cash
contributions for our ownership interest in Centennial, partially offset by
$3.4 million of cash proceeds from the sale of assets and $4.1 million of cash
proceeds from the sale of TEPPCO Colorado.

Cash flows used in financing activities totaled $13.3 million for the nine
months ended September 30, 2003, and were comprised of $77.6 million of
distributions paid to our Parent Partnership and $53.6 million of repayments on
our term loan, partially offset by $80.9 million of proceeds for our term loan
and $37.0 million in contributions from our Parent Partnership. Cash flows
provided by financing activities for the nine months ended September 30, 2002,
totaled $39.5 million, and were comprised of $70.4 million of distributions
paid to our Parent Partnership and $147.7 million of repayments on our term
loan, partially offset by $176.1 million of proceeds from our term loan and
$2.5 million of contributions from our Parent Partnership.

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Centennial entered into credit facilities totaling $150.0 million, and as
of September 30, 2003, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. We and Marathon have each guaranteed one-half of
Centennials debt, up to a maximum amount of $75.0 million each.

On February 20, 2002, our Parent Partnership issued $500.0 million
principal amount of 7.625% Senior Notes due 2012. We and the Parent
Partnerships other significant operating subsidiaries, which include TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, issued
guarantees of this debt. On June 30, 2002, our Parent Partnership acquired the
Val Verde Gas Gathering System (Val Verde) through its subsidiary, Val Verde
Gas Gathering Company, L.P., which also issued an unconditional guaranty of our
Parent Partnerships debt securities. The guarantees are full, unconditional
and joint and several. The proceeds from the offering of the $500.0 million
principal amount of 7.625% Senior Notes were used to reduce the outstanding
balances of our Parent Partnerships credit facilities.

On January 30, 2003, our Parent Partnership issued $200.0 million
principal amount of 6.125% Senior Notes due 2013. We and our Parent
Partnerships other significant operating subsidiaries issued guarantees of
this debt. The guarantees are full, unconditional and joint and several. The
proceeds from the offering of the $200.0 million principal amount of 6.125%
Senior Notes were used to reduce the outstanding principal of our Parent
Partnerships credit facilities.

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 2002, our Parent Partnerships borrowings under the
Three Year Facility were used to finance the acquisitions of the Chaparral NGL
system on March 1, 2002, and Val Verde on June 30, 2002, and for general Parent Partnership purposes. During 2002, our Parent Partnership made repayments on
the Three Year Facility with proceeds from the issuance of its 7.625% Senior Notes, proceeds from the issuance of its units representing limited partnership interests (Limited
Partner Units) and proceeds from the termination of interest rate swaps.
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. The Parent Partnership
borrowed $263.0 million under the Revolving Credit Facility and repaid the
outstanding balance of the Three Year Facility. At September 30, 2003, $225.0
million was outstanding under the Revolving Credit Facility.

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

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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. During 2002, the
Parent Partnerships borrowings under the Short-term Revolver were used to
finance the acquisition of the Val Verde assets and for other purposes. During
2002, the Parent Partnership repaid the existing amounts outstanding under the
Short-term Revolver with proceeds it received from the issuance of Limited
Partner Units in 2002. The Short-term Revolver expired on March 27, 2003.

At September 30, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $197.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
interest rate on the note payable to the Parent Partnership at September 30,
2003, was 6.1%. At September 30, 2003, accrued interest includes $0.5 million
due to our Parent Partnership. For the nine months ended September 30, 2003,
interest costs incurred on the note payable to our Parent Partnership totaled
$8.8 million.

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 indebtedness. As of September 30, 2003, 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 our Senior Notes. This agreement
is more fully described in Item 3. Quantitative and Qualitative Disclosures
About Market Risk.

Cash Distributions

During the nine months ended September 30, 2003 and 2002, we paid cash
distributions of $77.6 million and $70.4 million, respectively. The
distribution increase reflects our success in improving cash flow levels. On
November 7, 2003, we will pay a cash distribution of $28.0 million for the
three months ended September 30, 2003.

Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2003
will be approximately $50.7 million (which includes $1.6 million of capitalized
interest). We expect to use approximately $26.2 million for revenue generating
projects, which will include the expansion of our pumping capacity for LPGs
into the Northeast markets, expansion of our North Houston terminal facility,
increased capacity at Princeton, Indiana, and expansion of deliverability
capacity at various locations throughout the system. We expect to spend
approximately $15.2 million to sustain existing operations, including the
replacement of storage tanks and pipeline rehabilitation projects to comply
with regulations enacted by the United States Department of Transportation
Office of Pipeline Safety. An additional $7.7 million will be expended on
other replacements and system upgrade projects. We continually review and
evaluate potential capital improvements and expansions that would be
complementary to our present system.

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These expenditures can vary greatly depending on the magnitude of our
transactions. We may finance capital expenditures through internally generated
funds, debt or capital contributions from our Parent Partnership or any
combination thereof.

Our debt repayment obligations consist of payments for principal and
interest on (i) $180.0 million 6.45% Senior Notes due January 15, 2008, (ii)
$197.9 million principal amount due to our Parent Partnership related to our
share of our Parent Partnerships Revolving Credit Facility, 7.625% Senior
Notes and 6.125% Senior Notes, due in April 2004, February 2012 and February
2013, respectively, and (iii) $210.0 million 7.51% Senior Notes due January 15,
2028.

We are also contingently liable as guarantor for the lesser of one-half or
$75.0 million principal amount (plus interest) of the borrowings of Centennial.
In January 2003, we entered into a pipeline capacity lease agreement with
Centennial for a period of five years that contains a minimum capacity
requirement. On February 10, 2003, we acquired an additional 16.7% interest in
Centennial, bringing our ownership percentage to 50%. 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.

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, our Parent Partnerships debt and
leases covering assets utilized in several areas of our operations.

The following table summarizes our debt repayment obligations and material
contractual commitments as of September 30, 2003 (in millions):

Amount of Commitment Expiration Per PeriodLess thanTotal
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    After 5 YearsNote payable, Parent Partnership
    
    $
    197.9
    
    
    $
    
    
    
    $
    197.9
    
    
    $
    
    
    
    $
    6.45% Senior Notes due 2008 (1)
    
    
    180.0
    
    
    
    
    
    
    
    
    
    
    
    180.0
    
    
    
    7.51% Senior Notes due 2028 (1)
    
    
    210.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210.0Debt subtotal
    
    
    587.9
    
    
    
    
    
    
    
    197.9
    
    
    
    180.0
    
    
    
    210.0Operating leases
    
    
    43.0
    
    
    
    11.3
    
    
    
    20.7
    
    
    
    10.9
    
    
    
    0.1Total
    
    $
    630.9
    
    
    $
    11.3
    
    
    $
    218.6
    
    
    $
    190.9
    
    
    $
    210.1




---

|(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 September 30, 2003, the 7.51% Senior Notes include an
adjustment to increase the fair value of the debt by $7.3 million
related to this interest rate swap agreement. At September 30, 2003,
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 through the
issuance of additional long-term senior unsecured debt at the time the 2008 and
2028 debts mature, proceeds from dispositions of assets or any combination of
the above items.

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

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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 would be similarly funded.

On May 29, 2002, Moodys Investors Service downgraded our Parent
Partnerships senior unsecured debt rating to Baa3 from Baa2. We were also
included in this downgrade. These ratings were given with stable outlooks and
followed our Parent Partnerships announcement of the acquisition of Val Verde.
The downgrades reflect Moodys concern that the Parent Partnership has a high
level of debt relative to many of its peers and that its debt may be
continually higher than its long-term targets if the Parent Partnership
continues to make a series of acquisitions of increasingly larger size.
Because of its high distribution rate, the Parent Partnership is particularly
reliant on external financing to finance its acquisitions. Moodys indicated
that the Parent Partnerships cash flows are becoming less predictable as a
result of its acquisitions and expansion into the crude oil and natural gas
gathering businesses. Further reductions in the Parent Partnerships and our
credit ratings could increase the debt financing costs or possibly reduce the
availability of financing. Generally, a subsidiarys credit rating will not be
higher than its parent. 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
decides that the circumstances warrant such a change. In October 2003, Moodys
reaffirmed the Baa3 ratings on us and our Parent Partnership.

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. This contamination may be attributable to our operations, as well as
to adjacent petroleum terminals operated by other companies. In 1999, our
Arcadia facility and adjacent terminals were directed by the Remediation
Services Division of the LDEQ to pursue remediation of this containment phase.
At September 30, 2003, 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 that we have proposed 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 tank at our Blue Island terminal located in Cook County, Illinois. As a
result of the release, we have entered into an Agreed Preliminary Injunction
and Order (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. 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 remediation program will have a future material adverse effect on our
financial position, results of operations or cash flows.

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New 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, as amended,
for the year ended December 31, 2002, 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 September 30, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $197.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships
Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The
interest rate on the note payable to the Parent Partnership at September 30,
2003, was 6.1%. At September 30, 2003, accrued interest includes $0.5 million
due to the Parent Partnership. For the nine months ended September 30, 2003,
interest costs incurred on the note payable to the Parent Partnership totaled
$8.8 million.

At September 30, 2003, 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 September 30, 2003, the estimated fair value of the
Senior Notes was approximately $414.7 million.

23



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##### 



As of September 30, 2003, 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 have 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 nine months ended September 30, 2003, and 2002,
we recognized reductions in interest expense of $7.4 million and $5.4 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 September
30, 2003, 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 $7.3
million and $13.6 million at September 30, 2003, and December 31, 2002,
respectively. Utilizing the balance of the 7.51% Senior Notes outstanding at
September 30, 2003, 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.







Item 4. Controls and Procedures

The principal executive officer and principal financial officer of our
General Partner, 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 September 30, 2003, 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.

There have been no changes in our internal controls or in other factors
known to us that could materially affect, 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



---



##### 



ExhibitNumber
    
    Description4.2
    
    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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##### 



ExhibitNumber
    
    Description10.9
    
    Asset Purchase Agreement between Duke Energy Field Services,
Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
Exhibit 10.14 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).10.10+
    
    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).10.11+
    
    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).10.12
    
    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).10.13
    
    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).10.14+
    
    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).10.15+
    
    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).10.16
    
    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).10.17
    
    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).10.18
    
    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).10.19
    
    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).10.20
    
    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).10.21
    
    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



---



##### 



ExhibitNumber
    
    Description10.22
    
    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).10.23
    
    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).10.24
    
    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).10.25
    
    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).10.26
    
    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).10.27
    
    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).10.28+
    
    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).10.29+
    
    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).10.30+
    
    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).10.31+
    
    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).10.32+
    
    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).10.33
    
    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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##### 



ExhibitNumber
    
    Description10.34
    
    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).10.35
    
    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).10.36
    
    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).10.37
    
    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).10.38
    
    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).10.39
    
    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).10.40
    
    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.                                           
|- |  | ----------------------------------------------------------
| 
|+ |  | 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 September 30, 2003:

A Report on Form 8-K was filed on July 15, 2003, including as
an exhibit the audited balance sheet of Texas Eastern
Products Pipeline Company, LLC, as of December 31, 2002.

28



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##### 









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 and 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 Executive
Officer and Director
(Principal Executive Officer)By: /s/ CHARLES H. LEONARDCharles H. Leonard,
Senior Vice President, Chief Financial
Officer and Director
(Principal Financial and Accounting Officer)Date:
    
    October 30, 2003






---



##### 



INDEX TO 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).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).






---



##### 



ExhibitNumber
    
    Description10.7+
    
    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
    
    Asset Purchase Agreement between Duke Energy Field Services,
Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
Exhibit 10.14 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).10.10+
    
    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).10.11+
    
    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).10.12
    
    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).10.13
    
    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).10.14+
    
    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).10.15+
    
    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).10.16
    
    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).10.17
    
    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).10.18
    
    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).10.19
    
    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).






---



##### 



ExhibitNumber
    
    Description10.20
    
    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).10.21
    
    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).10.22
    
    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).10.23
    
    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).10.24
    
    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).10.25
    
    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).10.26
    
    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).10.27
    
    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).10.28+
    
    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).10.29+
    
    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).10.30+
    
    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).10.31+
    
    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).






---



##### 



ExhibitNumber
    
    Description10.32+
    
    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).10.33
    
    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).10.34
    
    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).10.35
    
    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).10.36
    
    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).10.37
    
    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).10.38
    
    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).10.39
    
    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).10.40
    
    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.                                           
|- |  | ----------------------------------------------------------
| 
|+ |  | A management contract or compensation plan or arrangement.