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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2003

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                                                                 
|                                             |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME         
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                             |                                                                                               | NOTES TO CONSOLIDATED 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 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                  
|Exhibit Index                               
|Certification of CEO Pursuant to Section 906
|Certification of CFO Pursuant to Section 906

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

TABLE OF CONTENTS

|                                                                                              |                                                                                                      |  |      |    | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                              |                                                                                                      |  | Page
|                                                                                              |                                                                                                      |  |     
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                      |  |      |   
|Item 1. Financial Statements                                                                  |                                                                                                      |  |      |   
|                                                                                              | Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002                   |  |      | 1  | 
|                                                                                              | Consolidated Statements of Income for the three months ended March 31, 2003
and 2002 (unaudited)     |  |      | 2  | 
|                                                                                              | Consolidated Statements of Cash Flows for the three months ended March 31, 2003
and 2002 (unaudited) |  |      | 3  | 
|                                                                                              | Notes to the Consolidated Financial Statements (unaudited)                                           |  |      | 4  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                      |  | 13   |   
|                                                                                              | Forward-Looking Statements                                                                           |  |      | 20 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                      |  | 21   |   
|Item 4. Controls and Procedures                                                               |                                                                                                      |  | 22   |   
|PART II. OTHER INFORMATION                                                                    |                                                                                                      |  |      |   
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                      |  | 22   |   





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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                   |                                          |                                         |         |             |         |              |         |         |         | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------- | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                                                                                   |                                          |                                         |         | March 31,   |         | December 31,
|                                                                                                                   |                                          |                                         |         | 2003        |         | 2002        
|                                                                                                                   |                                          |                                         |         |             |         |             
|                                                                                                                   |                                          |                                         |         | (Unaudited) |         |              |         |        
|ASSETS                                                                                                             |                                          |                                         |         |             |         |              |         |        
|Current assets:                                                                                                    |                                          |                                         |         |             |         |              |         |        
|                                                                                                                   | Cash and cash equivalents                |                                         | $       | 267         |         |              | $       | 485     |        
|                                                                                                                   | Accounts receivable, trade               |                                         |         | 21,252      |         |              |         | 26,217  |        
|                                                                                                                   | Accounts receivable, related party       |                                         |         | 11,501      |         |              |         | 5,125   |        
|                                                                                                                   | Inventories                              |                                         |         | 15,895      |         |              |         | 13,800  |        
|                                                                                                                   | Other                                    |                                         |         | 8,029       |         |              |         | 11,939  |        
|                                                                                                                   |                                          |                                         |         |             |         |              |         |         |        
|                                                                                                                   |                                          | Total current assets                    |         |             | 56,944  |              |         |         | 57,566  | 
|                                                                                                                   |                                          |                                         |         |             |         |              |         |         |        
|Property, plant and equipment, at cost (net of accumulated
depreciation and amortization of $272,272 and $284,458) |                                          |                                         | 649,874 |             |         |              | 722,848 |        
|Equity investments                                                                                                 |                                          |                                         | 161,531 |             |         |              | 73,476  |        
|Other assets                                                                                                       |                                          |                                         | 27,903  |             |         |              | 29,560  |        
|                                                                                                                   |                                          |                                         |         |             |         |              |         |         |        
|                                                                                                                   |                                          | Total assets                            |         | $           | 896,252 |              |         | $       | 883,450 | 
|                                                                                                                   |                                          |                                         |         |             |         |              |         |        
|LIABILITIES AND PARTNERS CAPITAL                                                                                  |                                          |                                         |         |             |         |              |         |        
|Current liabilities:                                                                                               |                                          |                                         |         |             |         |              |         |        
|                                                                                                                   | Accounts payable and accrued liabilities |                                         | $       | 14,653      |         |              | $       | 18,999  |        
|                                                                                                                   | Accounts payable, related party          |                                         |         | 14,333      |         |              |         | 5,685   |        
|                                                                                                                   | Accrued interest                         |                                         |         | 7,199       |         |              |         | 11,536  |        
|                                                                                                                   | Other accrued taxes                      |                                         |         | 5,392       |         |              |         | 6,732   |        
|                                                                                                                   | Other                                    |                                         |         | 14,617      |         |              |         | 16,008  |        
|                                                                                                                   |                                          |                                         |         |             |         |              |         |        
|                                                                                                                   |                                          | Total current liabilities               |         |             | 56,194  |              |         |         | 58,960  | 
|                                                                                                                   |                                          |                                         |         |             |         |              |         |        
|Senior Notes                                                                                                       |                                          |                                         | 402,152 |             |         |              | 403,428 |        
|Note Payable, Parent Partnership                                                                                   |                                          |                                         | 183,949 |             |         |              | 154,093 |        
|Other liabilities and deferred credits                                                                             |                                          |                                         | 15,443  |             |         |              | 24,230  |        
|Commitments and contingencies                                                                                      |                                          |                                         |         |             |         |              |         |        
|Partners capital:                                                                                                 |                                          |                                         |         |             |         |              |         |        
|                                                                                                                   | General partners interest               |                                         |         | 2           |         |              |         | 2       |        
|                                                                                                                   | Limited partners interest               |                                         |         | 238,512     |         |              |         | 242,737 |        
|                                                                                                                   |                                          |                                         |         |             |         |              |         |         |        
|                                                                                                                   |                                          | Total partners capital                 |         |             | 238,514 |              |         |         | 242,739 | 
|                                                                                                                   |                                          |                                         |         |             |         |              |         |        
|                                                                                                                   |                                          | Total liabilities and partners capital |         | $           | 896,252 |              |         | $       | 883,450 | 
|                                                                                                                   |                                          |                                         |         |             |         |              |         |        

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
|                                    |                                       |                                       |        | March 31,         
|                                    |                                       |                                       |        |                   
|                                    |                                       |                                       |        | 2003               |        | 2002
|                                    |                                       |                                       |        |                    |        |     
|Operating revenues:                 |                                       |                                       |        |                    |        |      |        |       
|                                    | Transportation  Refined products     |                                       | $      | 26,894             |        |      | $      | 25,144 |       
|                                    | Transportation  LPGs                 |                                       |        | 30,821             |        |      |        | 23,360 |       
|                                    | Mont Belvieu operations               |                                       |        |                   |        |      |        | 4,506  |       
|                                    | Other                                 |                                       |        | 9,254              |        |      |        | 6,576  |       
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|                                    |                                       | Total operating revenues              |        |                    | 66,969 |      |        |        | 59,586 | 
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|Costs and expenses:                 |                                       |                                       |        |                    |        |      |        |       
|                                    | Operating, general and administrative |                                       |        | 20,501             |        |      |        | 18,985 |       
|                                    | Operating fuel and power              |                                       |        | 8,178              |        |      |        | 7,111  |       
|                                    | Depreciation and amortization         |                                       |        | 7,008              |        |      |        | 6,831  |       
|                                    | Taxes  other than income taxes       |                                       |        | 2,648              |        |      |        | 3,010  |       
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|                                    |                                       | Total costs and expenses              |        |                    | 38,335 |      |        |        | 35,937 | 
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|                                    |                                       | Operating income                      |        |                    | 28,634 |      |        |        | 23,649 | 
|Interest expense                    |                                       |                                       | (7,193 | )                  |        |      | (6,739 | )     
|Interest capitalized                |                                       |                                       | 391    |                    |        |      | 1,693  |       
|Equity earnings                     |                                       |                                       | (1,259 | )                  |        |      | (796   | )     
|Other income  net                  |                                       |                                       | (6     | )                  |        |      | 122    |       
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|                                    |                                       | Income before discontinued operations |        |                    | 20,567 |      |        |        | 17,929 | 
|Income from discontinued operations |                                       |                                       |       |                    |        |      | 402    |       
|                                    |                                       |                                       |        |                    |        |      |        |        |       
|                                    |                                       | Net income                            |        | $                  | 20,567 |      |        | $      | 18,331 | 
|                                    |                                       |                                       |        |                    |        |      |        |       

See accompanying Notes to Consolidated Financial Statements.

2



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |          |        |         |  
|---------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------------------------------- | ------- | ------------------ | ------- | ----- | -------- | ------ | ------- | -
|                                                     |                                                                                                          |                                                   |                                              |         | Three Months Ended
|                                                     |                                                                                                          |                                                   |                                              |         | March 31,         
|                                                     |                                                                                                          |                                                   |                                              |         |                   
|                                                     |                                                                                                          |                                                   |                                              |         | 2003               |         | 2002 
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |      
|Cash flows from operating activities:                |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     | Net income from continuing operations                                                                    |                                                   | $                                            | 20,567  |                    |         | $     | 17,929   |       
|                                                     | Adjustments to reconcile net income from continuing operations
to cash provided by operating activities: |                                                   |                                              |         |                    |         |       |          |       
|                                                     |                                                                                                          | Depreciation and amortization                     |                                              |         | 7,008              |         |       |          | 6,831  |        
|                                                     |                                                                                                          | Equity in loss of affiliate                       |                                              |         | 1,259              |         |       |          | 796    |        
|                                                     |                                                                                                          | Non-cash portion of interest expense              |                                              |         | 8                  |         |       |          | 8      |        
|                                                     |                                                                                                          | Decrease in accounts receivable                   |                                              |         | 4,965              |         |       |          | 4,873  |        
|                                                     |                                                                                                          | Increase in inventories                           |                                              |         | (2,095             | )       |       |          | (732   | )      
|                                                     |                                                                                                          | Decrease (increase) in other current assets       |                                              |         | 3,910              |         |       |          | (2,371 | )      
|                                                     |                                                                                                          | Decrease in accounts payable and accrued expenses |                                              |         | (11,413            | )       |       |          | (6,638 | )      
|                                                     |                                                                                                          | Other                                             |                                              |         | 1,024              |         |       |          | (3,578 | )      
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     |                                                                                                          |                                                   | Net cash provided by continuing operations   |         |                    | 25,233  |       |          |        | 17,118  |  
|                                                     |                                                                                                          |                                                   | Net cash provided by discontinued operations |         |                    |        |       |          |        | (110    | )
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     |                                                                                                          |                                                   | Net cash provided by operating activities    |         |                    | 25,233  |       |          |        | 17,008  |  
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Cash flows from investing activities:                |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     | Acquisition of additional interest in Centennial Pipeline LLC                                            |                                                   |                                              | (20,000 | )                  |         |       |         |       
|                                                     | Investment in Centennial Pipeline LLC                                                                    |                                                   |                                              | (1,000  | )                  |         |       | (3,334   | )     
|                                                     | Capital expenditures                                                                                     |                                                   |                                              | (9,514  | )                  |         |       | (18,088  | )     
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     |                                                                                                          |                                                   | Net cash used in investing activities        |         |                    | (30,514 | )     |          |        | (21,422 | )
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Cash flows from financing activities:                |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     | Proceeds from term loan                                                                                  |                                                   |                                              | 35,356  |                    |         |       | 161,099  |       
|                                                     | Repayments of term loan                                                                                  |                                                   |                                              | (5,500  | )                  |         |       | (132,860 | )     
|                                                     | Equity contribution  Parent Partnership                                                                 |                                                   |                                              | 36      |                    |         |       |         |       
|                                                     | Distributions                                                                                            |                                                   |                                              | (24,829 | )                  |         |       | (22,925  | )     
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     |                                                                                                          |                                                   | Net cash provided by financing activities    |         |                    | 5,063   |       |          |        | 5,314   |  
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Net increase (decrease) in cash and cash equivalents |                                                                                                          |                                                   | (218                                         | )       |                    |         | 900   |         
|Cash and cash equivalents at beginning of period     |                                                                                                          |                                                   | 485                                          |         |                    |         | 3,654 |         
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Cash and cash equivalents at end of period           |                                                                                                          | $                                                 | 267                                          |         |                    | $       | 4,554 |         
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Non-cash investing activities:                       |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     | Net assets transferred to Mont Belvieu partnership                                                       |                                                   | $                                            | 69,459  |                    |         | $     |         |       
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|Supplemental disclosure of cash flows:               |                                                                                                          |                                                   |                                              |         |                    |         |       |         
|                                                     | Interest paid during the period (net of capitalized interest)                                            |                                                   | $                                            | 13,789  |                    |         | $     | 11,268   |       
|                                                     |                                                                                                          |                                                   |                                              |         |                    |         |       |         

See accompanying Notes to Consolidated Financial Statements.

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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 March 31, 2003, and the results of our operations and cash flows
for the periods presented. The results of operations for the three months
ended March 31, 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 if 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 11. Discontinued Operations). We have
reclassified prior periods presented to reflect the current presentation.

NOTE 2. 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. The adoption of
SFAS 148 did not affect our financial position, results of operations or cash
flows.

4



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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 are 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 our investments in these entities as equity
method investments (see Note 7. Equity Investments). The adoption of FIN 46
did not have an effect on our financial position, results of operations or cash
flows.

NOTE 3. 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 a 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 determine the fair value of the asset retirement obligations for
our trunk and interstate pipelines and our surface facilities as they cannot be
reasonably estimated, since future dismantlement and removal dates are
indeterminate. It is impossible to predict when demand for transportation of
the related products will cease. Our rights-of-way agreements allow us to
renew the rights-of-way rather than remove the pipe while we evaluate our trunk
pipelines for alternative uses, which can be and have been found, should the
need arise.

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
impact on our financial position, results of operations or cash flows.

NOTE 4. INTANGIBLE ASSETS

We account for our intangible assets under SFAS No. 142, Goodwill and
Other Intangible Assets,which was issued by the FASB in July 2001. SFAS 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives, but instead should be tested for impairment at least annually.
SFAS 142 requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives. We will assess the
useful lives and residual values of all intangible assets on an annual basis to
determine if adjustments are required.

5



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TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

The following table reflects the components of amortized intangible
assets, included in other assets on the consolidated balance sheet (in
thousands):

|                             |                           |  |                |       |                          |  |        |      |                |  |             |       |  |  |   |      |  
|---------------------------- | ------------------------- |  | -------------- | ----- | ------------------------ |  | ------ | ---- | -------------- |  | ----------- | ----- |  |  | - | ---- | -
|                             |                           |  | March 31, 2003 |       | December 31, 2002       
|                             |                           |  |                |       |                         
|                             |                           |  | Gross Carrying |       |                          |  |        |      | Gross Carrying |  | Accumulated
|                             |                           |  | Amount         |       | Accumulated Amortization |  | Amount |      | Amortization  
|                             |                           |  |                |       |                          |  |        |      |               
|Amortized intangible assets: |                           |  |                |       |                          |  |        |      |                |  |             |       |  |  |   |     
|                             | Transportation agreements |  | $              | 1,328 |                          |  | $      | (144 | )              |  | $           | 1,328 |  |  | $ | (127 | )

Amortization expense on intangible assets was $16,603 and $12,500 for the
three months ended March 31, 2003 and 2002, respectively.

The following table sets forth the estimated amortization expense on
intangible assets for the years ending December 31 (in thousands):

|     |  |   |    | 
|---- |  | - | -- | 
|2003 |  | $ | 66 | 
|2004 |  |   | 66 | 
|2005 |  |   | 66 | 
|2006 |  |   | 66 | 
|2007 |  |   | 66 | 

NOTE 5. 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 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 Senior Notes. Under
the swap agreement, we pay a floating rate based on a three month U.S. Dollar
LIBOR rate, plus a spread, and receive a fixed rate of interest of 7.51%.
During the three months ended March 31, 2003, and 2002, we recognized
reductions in interest expense of $2.4 million and $1.7 million, respectively,
related to the difference between the fixed rate and the floating rate of
interest on the interest rate swap. During the three months ended March 31,
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 agreement was a gain of approximately
$12.3 million and $13.6 million at March 31, 2003, and December 31, 2002,
respectively.

6



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

NOTE 6. 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):

|                       |       |   |           |        |              |   |       |        | 
|---------------------- | ----- | - | --------- | ------ | ------------ | - | ----- | ------ | 
|                       |       |   | March 31, |        | December 31,
|                       |       |   | 2003      |        | 2002        
|                       |       |   |           |        |             
|Gasolines              |       | $ | 4,580     |        |              | $ | 4,700 |       
|Butanes                |       |   | 3,415     |        |              |   | 1,991 |       
|Transmix               |       |   | 1,934     |        |              |   | 2,526 |       
|Other products         |       |   | 1,571     |        |              |   | 845   |       
|Materials and supplies |       |   | 4,395     |        |              |   | 3,738 |       
|                       |       |   |           |        |              |   |       |       
|                       | Total |   | $         | 15,895 |              |   | $     | 13,800 | 
|                       |       |   |           |        |              |   |       |       

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

NOTE 7. EQUITY INVESTMENTS

In August 2000, we entered into agreements with Panhandle Eastern Pipeline
Company (PEPL), a 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 three months ended March 31, 2003, excluding the amount paid
for the acquisition of the additional ownership interest, we contributed
approximately $1.0 million for our investment in Centennial, which is included
in the equity investment balance at March 31, 2003.

As of January 1, 2003, we and Louis Dreyfus Energy Services, L.P. (Louis
Dreyfus) formed Mont Belvieu Storage Partners, L.P. (MB
Storage). We and Louis Dreyfus each own a 50% ownership interest in MB
Storage. The purpose of MB Storage is to expand services to the upper Texas
Gulf Coast energy marketplace by increasing pipeline throughput and the mix of
products handled through the existing system and establishing new receipt and
delivery connections. MB Storage is a service-oriented, fee-based venture with
no commodity trading activity. We continue to operate the facilities for MB
Storage. Effective January 1, 2003, we contributed property and equipment with
a net book value of $75.5 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 of Louis
Dreyfus in MB Storage.

We use the equity method of accounting for to account for our investment
in Centennial and MB Storage. Summarized combined financial information for
Centennial for the three months ended March 31, 2003 and 2002, and for the
three months ended March 31, 2003, for MB Storage, is presented below (in
thousands):

|         |  |                    |        |      |  |   |        |  
|-------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|         |  | Three Months Ended
|         |  | March 31,         
|         |  |                   
|         |  | 2003               |        | 2002
|         |  |                    |        |     
|Revenues |  | $                  | 9,043  |      |  | $ |       |  
|Net loss |  |                    | (3,189 | )    |  |   | (3,147 | )

7



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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

|                       |  |           |         |              |  |   |         | 
|---------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                       |  | March 31, |         | December 31,
|                       |  | 2003      |         | 2002        
|                       |  |           |         |             
|Current assets         |  | $         | 12,758  |              |  | $ | 8,184   | 
|Noncurrent assets      |  |           | 358,648 |              |  |   | 285,885 | 
|Current liabilities    |  |           | 25,248  |              |  |   | 19,949  | 
|Long-term debt         |  |           | 140,000 |              |  |   | 140,000 | 
|Noncurrent liabilities |  |           | 13,758  |              |  |   | 14,875  | 
|Partners capital      |  |           | 192,400 |              |  |   | 119,245 | 

Our investment in Centennial at March 31, 2003, and December 31, 2002,
includes an excess net investment amount of $33.1 million. Excess investment
is the amount by which our investment balance exceeds our proportionate share
of the net assets of the investment.

NOTE 8. 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 March 31, 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 5. 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 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 is based, at the

8



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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 contains certain restrictive
financial covenant ratios. During 2002, the 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. During 2002, the Parent Partnership made
repayments on the Three Year Facility with proceeds from the issuance of the
Parent Partnerships 7.625% Senior Notes, proceeds from the issuance of our
Parent Partnerships units representing limited partnership interests
(Limited Partner Units) and proceeds from the termination of interest rate
swaps. During the first quarter of 2003, the 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. At March 31,
2003, $265.0 million was outstanding under the Three Year Facility.

On April 6, 2001, the Parent Partnership entered into a 364-day, $200.0
million revolving credit agreement (Short-term Revolver). The interest rate
was based, at the 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, the 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 the 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 the Parent Partnerships ability to incur additional indebtedness.

On January 30, 2003, the 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 purposes. The 6.125% Senior Notes may be redeemed at any time
at the Parent Partnerships option with the payment of accrued interest and a
make-whole premium determined by discounting remaining interest and principal
payments using a discount rate equal to the rate of the United States Treasury
securities of comparable remaining maturity plus 35 basis points. The
indenture governing the 6.125% Senior Notes contains covenants, including, but
not limited to, covenants limiting the creation of liens securing indebtedness
and sale and leaseback transactions. However, the indenture does not limit the
Parent Partnerships ability to incur additional indebtedness.

As of March 31, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $183.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships Three
Year Facility, 7.625% Senior Notes and 6.125% Senior Notes. The interest rate
on the note payable to the Parent Partnership at March 31, 2003, was 2.1%. At
March 31, 2003, accrued interest includes $3.9 million due to the Parent
Partnership. For the three months ended March 31, 2003, interest costs
incurred on the note payable to the Parent Partnership totaled $2.7 million.

9



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

NOTE 9. QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH

We make quarterly cash distributions of all of our available cash,
generally defined as consolidated cash receipts less consolidated cash
disbursements and cash reserves established by the General Partner in its sole
discretion. We pay distributions of 99.999% to the Parent Partnership and
0.001% to the General Partner.

During the three months ended March 31, 2003 and 2002, we paid cash
distributions totaling $24.8 million and $22.9 million, respectively. The
distribution increase reflects our success in improving cash flow levels. On
May 9, 2003, we will pay a cash distribution of $26.4 million for the three
months ended March 31, 2003.

NOTE 10. 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 suit. 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 the defendants pipeline, which crosses the
plaintiffs property, leaked toxic products onto the plaintiffs property. The
plaintiffs further contend that this leak caused damages to the plaintiffs. We
have filed an answer to the plaintiffs 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.

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.

10



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

In 1994, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which includes our proposed remediation program. In March
2003, the IDEM issued a Record of Decision formally approving the remediation
program. As the Record of Decision has been issued, we will enter into an
Agreed Order for the continued operation and maintenance of the remediation
program. We have an accrued liability of $0.3 million at March 31, 2003, for
future remediation costs at the Seymour terminal. We do not expect that the
completion of the remediation program will have a material adverse effect on
our financial position, results of operations or cash flows.

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
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 March
31, 2003, we have an accrued liability of $0.2 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.

Centennial entered into credit facilities totaling $150.0 million, and as
of March 31, 2003, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. Each of the participants in Centennial, including us,
originally guaranteed one-third of Centennials debt up to a maximum amount of
$50.0 million. During the third quarter of 2002, PEPL, one of the participants
in Centennial, was downgraded by Moodys and Standard & Poors to below
investment grade, which resulted in PEPL being in default under its portion of
the Centennial guaranty. Effective September 27, 2002, we and Marathon
increased our guaranteed amounts to one-half of the debt of Centennial, up to a
maximum amount of $75.0 million each, to avoid a default on the Centennial
debt. As compensation to us and Marathon for providing our additional
guarantees, PEPL was required to pay interest at a rate of 4% per annum to each
of us and Marathon on the portion of the additional guaranty that we had
provided for PEPL. In connection with the acquisition of the additional
interest in Centennial on February 10, 2003, the guaranty agreement between us,
Marathon and PEPL was terminated. Our guaranty of up to a maximum of $75.0
million of Centennials debt remains in effect.

NOTE 11. 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 Assetsrequires 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.

11



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##### 



TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued
(Unaudited)

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. Condensed statements of income are shown
below for TEPPCO Colorado for the three months ended March 31, 2002 (in
thousands):

|                                      |                  |   |                    |       | 
|------------------------------------- | ---------------- | - | ------------------ | ----- | 
|                                      |                  |   | Three Months Ended
|                                      |                  |   | March 31,         
|                                      |                  |   | 2002              
|                                      |                  |   |                   
|Revenues                              |                  | $ | 1,834              |      
|Operating, general and administrative |                  |   | 218                |      
|Depreciation and amortization         |                  |   | 504                |      
|                                      |                  |   |                    |      
|                                      | Operating income |   |                    | 1,112 | 
|Interest expense                      |                  |   | (721               | )    
|Other income  net                    |                  |   | 11                 |      
|                                      |                  |   |                    |      
|                                      | Net income       |   | $                  | 402   | 
|                                      |                  |   |                    |      

Assets and liabilities from discontinued operations at December 31, 2001,
are presented in the table below (in thousands):

|                                                               |                   |   |              |        | 
|-------------------------------------------------------------- | ----------------- | - | ------------ | ------ | 
|                                                               |                   |   | December 31,
|                                                               |                   |   | 2001        
|                                                               |                   |   |             
|Cash                                                           |                   | $ | 3,073        |       
|Accounts receivable, trade                                     |                   |   | 1            |       
|Property, plant and equipment, net                             |                   |   | 1,625        |       
|Intangible assets                                              |                   |   | 31,099       |       
|                                                               |                   |   |              |       
|                                                               | Total assets      |   | $            | 35,798 | 
|                                                               |                   |   |              |       
|Accounts payable, Texas Eastern Products Pipeline Company, LLC |                   | $ | 11           |       
|Other current liabilities                                      |                   |   | 1,473        |       
|Note payable, Parent Partnership                               |                   |   | 31,882       |       
|                                                               |                   |   |              |       
|                                                               | Total liabilities |   | $            | 33,366 | 
|                                                               |                   |   |              |       
|                                                               | Net assets        |   | $            | 2,432  | 
|                                                               |                   |   |              |       

12



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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 and 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 7. Equity Investments).

Results of Operations

The following table presents volumes delivered in barrels and average
tariff per barrel for the three months ended March 31, 2003 and 2002:

|                          |                  |  |                                  |        |                                           |        |            |        |            |        |  |    |    |    |  
|------------------------- | ---------------- |  | -------------------------------- | ------ | ----------------------------------------- | ------ | ---------- | ------ | ---------- | ------ |  | -- | -- | -- | -
|                          |                  |  |                                  |        | Three Months Ended                        |        |            |        |           
|                          |                  |  |                                  |        | March 31,                                 |        | Percentage
|                          |                  |  |                                  |        |                                           |        | Increase  
|                          |                  |  |                                  |        | 2003                                      |        | 2002       |        | (Decrease)
|                          |                  |  |                                  |        |                                           |        |            |        |           
|                          |                  |  |                                  |        | (in thousands, except tariff information)
|Volumes Delivered         |                  |  |                                  |        |                                           |        |            |        |            |        |  |   
|                          | Refined products |  |                                  | 30,232 |                                           |        |            | 25,765 |            |        |  | 17 | % 
|                          | LPGs             |  |                                  | 13,700 |                                           |        |            | 12,035 |            |        |  | 14 | % 
|                          |                  |  |                                  |        |                                           |        |            |        |            |        |  |    |    |   
|                          |                  |  | Total                            |        |                                           | 43,932 |            |        |            | 37,800 |  |    |    | 16 | %
|                          |                  |  |                                  |        |                                           |        |            |        |            |        |  |   
|Average Tariff per Barrel |                  |  |                                  |        |                                           |        |            |        |            |        |  |   
|                          | Refined products |  | $                                | 0.89   |                                           |        | $          | 0.98   |            |        |  | (9 | %)
|                          | LPGs             |  |                                  | 2.25   |                                           |        |            | 1.94   |            |        |  | 16 | % 
|                          |                  |  | Average system tariff per barrel |        | $                                         | 1.31   |            |        | $          | 1.28   |  |    |    | 2  | %
|                          |                  |  |                                  |        |                                           |        |            |        |            |        |  |   

We reported net income of $20.6 million for the three months ended March
31, 2003, compared to net income of $18.3 million for the three months ended
March 31, 2002. Net income increased $2.3 million primarily due to an increase
of $7.4 million in operating revenues, partially offset by an increase of $2.4
million in costs and expenses, increased losses of $0.5 million from equity
investments, an increase of $0.5 million in interest expense, a decrease of
$1.3 million in interest capitalized and a decrease of $0.4 million in income
from discontinued operations. We discuss the factors influencing these
variances below.

Revenues from refined products transportation increased $1.8 million for
the three months ended March 31, 2003, compared with the three months ended
March 31, 2002, due to an overall increase of 17% in the refined products
volumes delivered. This increase was primarily due to deliveries of product
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 an additional source of supply for product
originating in the U.S. Gulf Coast area. With this incremental supply source,
our previously constrained system has expanded services in markets both south

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and north of Creal Springs. The 17% increase in our overall refined
product delivery was composed of a 17% increase in motor fuel delivery, a 26%
increase in distillate volume delivery and a 3% increase in jet fuel delivery
from the prior year period. Volume increases were due to increased demand for
product supplied by the U.S. Gulf Coast into Midwest markets resulting from
cold weather during the first quarter of 2003, which both increased demand and
caused higher natural gas prices. As a result of high natural gas prices,
utilities use distillates as a substitute for natural gas for their facilities.
The refined products average rate per barrel decreased 9% from the prior year
period primarily due to the impact of the Midwest origin point for volumes
received from Centennial, which resulted in an increase in short-haul volumes
transported on our system.

Revenues from LPGs transportation increased $7.5 million for the three
months ended March 31, 2003, compared with the three months ended March 31,
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. Butane deliveries also increased in the Midwest as a
result of declining future prices for gasoline which resulted in increased
demand for butane for gasoline blending. The LPGs average rate per barrel
increased 16% from the prior year period as a result of an increased percentage
of long-haul deliveries during the three months ended March 31, 2003.

Effective January 1, 2003, our 50% ownership interest in MB Storage is
accounted for as an equity investment. See discussion regarding changes in
equity earnings/losses below. Revenues generated from Mont Belvieu operations
decreased $4.5 million during the three months ended March 31, 2003, compared
with the three months ended March 31, 2002, as a result of the formation of 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.

Other operating revenues increased $2.6 million during the three months
ended March 31, 2003, compared with the three months ended March 31, 2002,
primarily due to higher margins on product inventory sales, higher propane
deliveries at our Providence, Rhode Island import facility and higher refined
product rental charges. These increases were partially offset by lower
revenues from product location exchanges which are used to position product in
the Midwest market area.

Costs and expenses increased $2.4 million for the three months ended March
31, 2003, compared with the three months ended March 31, 2002. The increase
was made up of an increase of $1.5 million in operating, general and
administrative expenses, an increase of $1.1 million in operating fuel and
power and an increase of $0.2 million in depreciation and amortization
expense. These increases were partially offset by a decrease of $0.4 million
in taxes  other than income taxes. Operating, general and administrative
expenses increased primarily due to higher pipeline maintenance expenses,
increased consulting and contract services and increased labor costs and
general and administrative supplies expense. Depreciation expense
increased from the prior year period because of assets placed in service during
2002. Operating fuel and power expense increased as a result of increased
mainline throughput and higher power costs. Taxes  other than income taxes
decreased as a result of actual property taxes being lower than previously
estimated.

Net losses from equity investments increased by $0.5 million during the
three months ended March 31, 2003, compared with the three months ended March
31, 2002. Centennial, which commenced operations in April 2002, accounted for
$2.4 million of the equity losses. 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
$1.9 million for our 50% ownership interest in MB Storage, which was formed
effective January 1, 2003. Amounts in the prior year period recorded to
revenues and costs and expenses are now being recorded to equity earnings based
upon our ownership interest in MB Storage, effective with its formation on
January 1, 2003.

Interest expense increased $0.5 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001, as a
result of higher outstanding debt balances under the Note Payable, Parent
Partnership.

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Interest capitalized decreased $1.3 million during the three months ended
March 31, 2002, compared with the corresponding prior year period, as a result
of decreased balances of construction work-in-progress primarily related to
Centennial.

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 11. 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. A condensed
statement of income is shown below for TEPPCO Colorado for the three months
ended March 31, 2002 (in thousands):

|                                      |                  |   |                    |       | 
|------------------------------------- | ---------------- | - | ------------------ | ----- | 
|                                      |                  |   | Three Months Ended
|                                      |                  |   | March 31,         
|                                      |                  |   | 2002              
|                                      |                  |   |                   
|Revenues                              |                  | $ | 1,834              |      
|Operating, general and administrative |                  |   | 218                |      
|Depreciation and amortization         |                  |   | 504                |      
|                                      |                  |   |                    |      
|                                      | Operating income |   |                    | 1,112 | 
|Interest expense                      |                  |   | (721               | )    
|Other income  net                    |                  |   | 11                 |      
|                                      |                  |   |                    |      
|                                      | Net income       |   | $                  | 402   | 
|                                      |                  |   |                    |      

The following table presents volume and average rate information for
TEPPCO Colorado for the three months ended March 31, 2002:

|                      |                         |  |   |       | 
|--------------------- | ----------------------- |  | - | ----- | 
|Fractionation  NGLs: |                         |  |   |      
|                      | Thousand barrels        |  |   | 1,012 | 
|                      | Average rate per barrel |  | $ | 1.813 | 

Financial Condition and Liquidity

Net cash from operating activities totaled $25.2 million for the three
months ended March 31, 2003. This cash was made up of $27.6 million of income
before charges for depreciation and amortization, partially offset by $2.4
million of cash used for working capital. Net cash from operating activities
for the three months ended March 31, 2002, totaled $17.0 million, comprised of
$24.8 million of income before charges for depreciation and amortization,
partially offset by $7.7 million of cash used for working capital and $0.1
million of cash used by discontinued operations. Net cash from operations for
the three months ended March 31, 2003 and 2002, included interest payments of
$13.8 million and $11.3 million, respectively.

Cash flows used in investing activities totaled $30.5 million during the
three months ended March 31, 2003, and was comprised of $9.5 million of capital
expenditures, $20.0 million for our acquisition of the additional

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interest in Centennial on February 10, 2003, and $1.0 million of cash
contributions for our ownership interest in Centennial. Cash flows used in
investing activities totaled $21.4 million for the three months ended March 31,
2002, and were comprised of $18.1 million of capital expenditures and $3.3
million of cash contributions for our ownership interest in Centennial.

Cash flows provided by financing activities totaled $5.1 million during
the three months ended March 31, 2003, and were comprised of $35.4 million of
proceeds for our term loan, partially offset by $24.8 million of distributions
paid to our Parent Partnership and $5.5 million of repayments on our term loan.
Cash flows provided by financing activities during the three months ended
March 31, 2002, totaled $5.3 million, and were comprised of $161.1 million of
proceeds from our term loan, partially offset by $132.9 million of repayments
on our term loan and $22.9 million of distributions paid to our Parent
Partnership.

Centennial has entered into credit facilities totaling $150.0 million, and
as of March 31, 2003, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. Each of the participants in Centennial, including us,
originally guaranteed one-third of Centennials debt, up to a maximum amount of
$50.0 million. During the third quarter of 2002, Panhandle Eastern Pipeline
Company (PEPL), one of the participants in Centennial, was downgraded by
Moodys and Standard & Poors to below investment grade, which resulted in PEPL
being in default under its portion of the Centennial guaranty. Effective
September 27, 2002, we and Marathon Ashland Petroleum LLC (Marathon)
increased our guaranteed amounts to one-half of the debt of Centennial, up to a
maximum amount of $75.0 million each, to avoid a default on the Centennial
debt. As compensation to us and Marathon for providing our additional
guarantees, PEPL was required to pay interest at a rate of 4% per annum to each
of us and Marathon on the portion of the additional guaranty that we had
provided for PEPL. In connection with the acquisition of the additional
interest in Centennial on February 10, 2003, the guaranty agreement between
Marathon, PEPL and us was terminated. Our guaranty of up to a maximum of $75.0
million of Centennials debt remains in effect.

On February 20, 2002, the 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, the Parent Partnership acquired the
Val Verde Gathering System (Val Verde) through its subsidiary, Val Verde Gas
Gathering Company, L.P., which also issued an unconditional guaranty of the
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 the Parent Partnerships credit facilities.

On January 30, 2003, the Parent Partnership issued $200.0 million
principal amount of 6.125% Senior Notes due 2013. We and the 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 the 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 is based, at the
Parent Partnerships option, on either the lenders base rate plus a spread, or
LIBOR plus a spread in effect at the

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time of the borrowings. The credit agreement for the Three Year Facility
contains restrictive financial covenant ratios. During 2002, the 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. During 2002, the Parent Partnership made repayments on the
Three Year Facility with proceeds from the issuance of the Parent Partnerships
7.625% Senior Notes, proceeds from the issuance of our Parent Partnerships
units representing limited partnership interests (Limited Partner Units) and
proceeds from the termination of interest rate swaps. During the first quarter
of 2003, the 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. At March 31, 2003, $265.0 million was
outstanding under the Three Year Facility.

On April 6, 2001, the Parent Partnership entered into a 364-day, $200.0
million revolving credit agreement (Short-term Revolver). The interest rate
was based, at the 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.

As of March 31, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $183.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships Three
Year Facility, 7.625% Senior Notes and 6.125% Senior Notes. The interest rate
on the note payable, Parent Partnership at March 31, 2003, was 2.1%. At March
31, 2003, accrued interest includes $3.9 million due to the Parent Partnership.
For the three months ended March 31, 2003, interest costs incurred on the note
payable to the Parent Partnership totaled $2.7 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 March 31, 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, as more fully
described in Item 3. Quantitative and Qualitative Disclosures About Market
Risk.

Cash Distributions

During the three months ended March 31, 2003 and 2002, we paid cash
distributions of $24.8 million and $22.9 million, respectively. The
distribution increase reflects our success in improving cash flow levels. On
May 9, 2003, we will pay a cash distribution of $26.4 million for the three
months ended March 31, 2003.

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Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2003
will be approximately $44.6 million (which includes $1.9 million of capitalized
interest). We expect to use approximately $9.8 million for revenue generating
projects which will include approximately $7.5 million for the expansion of our
pumping capacity for LPGs into the Northeast markets and approximately $2.3
million for expansion of deliverability capacity at various locations
throughout the system. We expect to spend approximately $26.0 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 $8.9 million will be expended on other replacements and system
upgrade projects, including the replacement of a portion of our 20 inch
pipeline crossing the Mississippi River for approximately $4.0 million. We
continually review and evaluate potential capital improvements and expansions
that would be complementary to our present system. These expenditures can vary
greatly depending on the magnitude of our transactions. We may finance capital
expenditures through internally generated funds, debt 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)
$210.0 million 7.51% Senior Notes due January 15, 2028, and (iii) $183.9
million principal amount due to the Parent Partnership related to our share of
the Parent Partnerships Three Year Facility, 7.625% Senior Notes and 6.125%
Senior Notes, due in April 2004, February 2012 and February 2013, respectively.
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 debt matures, proceeds from dispositions of assets or any combination of
the above items.

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.
We expect to contribute an additional $10.0 million to Centennial in 2003 to
provide for its working capital needs. In January 2003, we entered into a
pipeline capacity lease agreement with Centennial for a period of five years.
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, the Parent Partnership 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 March 31, 2003 (in millions):

|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |       | 
|-------------------------------- | -------------------------------- | - | ------------------------------------------ | ----- | ---------------- | - | --------- | ---- | --------- | - | ------------- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                 |                                  |   | Amount of Commitment Expiration Per Period
|                                 |                                  |   |                                           
|                                 |                                  |   | Total                                      |       | Less than 1 Year |   | 1-3 Years |      | 4-5 Years |   | After 5 Years
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |              
|Note payable, Parent Partnership |                                  | $ | 183.9                                      |       |                  | $ |          |      |           | $ | 183.9         |       |  | $ |      |       |  | $ |      |      
|6.45% Senior Notes due 2008      |                                  |   | 180.0                                      |       |                  |   |          |      |           |   |              |       |  |   | 180.0 |       |  |   |      |      
|7.51% Senior Notes due 2028 (1)  |                                  |   | 210.0                                      |       |                  |   |          |      |           |   |              |       |  |   |      |       |  |   | 210.0 |      
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                 | Debt subtotal                    |   |                                            | 573.9 |                  |   |           |     |           |   |               | 183.9 |  |   |       | 180.0 |  |   |       | 210.0 | 
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|Centennial cash contributions    |                                  |   | 10.0                                       |       |                  |   | 10.0      |      |           |   |              |       |  |   |      |       |  |   |      |      
|Operating leases                 |                                  |   | 20.2                                       |       |                  |   | 5.9       |      |           |   | 10.4          |       |  |   | 3.7   |       |  |   | 0.2   |      
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                 | Contractual commitments subtotal |   |                                            | 30.2  |                  |   |           | 15.9 |           |   |               | 10.4  |  |   |       | 3.7   |  |   |       | 0.2   | 
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                 | Total                            |   | $                                          | 604.1 |                  |   | $         | 15.9 |           |   | $             | 194.3 |  |   | $     | 183.7 |  |   | $     | 210.2 | 
|                                 |                                  |   |                                            |       |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      

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---

|(1) |  | We entered into an interest rate swap agreement to hedge our
exposure to changes in the fair value of our 7.51% Senior Notes due
2028. At March 31, 2003, the 7.51% Senior Notes include an adjustment
to increase the fair value of the debt by $12.3 million related to this
interest rate swap agreement. At March 31, 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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sources of Future Capital

We expect that our cash flow from operating activities will be adequate to
fund cash distributions and capital additions necessary to sustain existing
operations. However, expansionary capital projects and acquisitions may
require additional capital contributions from our Parent Partnership. The
Parent Partnership has funded its capital commitments from operating cash flow,
borrowings under bank credit facilities, the issuance of long term debt in
capital markets and the public offering of Limited Partner Units. We expect
future capital needs 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 February 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, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which includes our proposed remediation program. In March
2003, the IDEM issued a Record of Decision formally approving the remediation
program. As the Record of Decision has been issued, we will enter into an
Agreed Order for the continued operation and maintenance of the remediation
program. We have an accrued liability of $0.3 million at March 31, 2003, for
future remediation costs at the Seymour terminal. 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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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
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 March
31, 2003, we have an accrued liability of $0.2 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.

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. The adoption of
SFAS 148 did not affect 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 are required to apply FIN 46 on July 1, 2003. In
connection with the adoption of FIN 46, we evaluated our investments in
Centennial and MB Storage and determined that these entities are not variable
interest entities as defined by FIN 46, and thus we have accounted for our
investments in these entities as equity method investments (see Note 7. Equity
Investments). The adoption of FIN 46 did not have an effect on our financial
position, results of operations or cash flows.

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

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##### 



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 swaps related to our fair
value risks are intended to reduce our exposure to changes in the fair value of
our fixed rate Senior Notes. The interest rate swap agreements involve 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.

As of March 31, 2003, and December 31, 2002, we had an intercompany note
payable to our Parent Partnership of $183.9 million and $154.1 million,
respectively, which represented borrowings under the Parent Partnerships Three
Year Facility, 7.625% Senior Notes and 6.125% Senior Notes. The interest rate
on the note payable, Parent Partnership at March 31, 2003, was 2.1%. At March
31, 2003, accrued interest includes $3.9 million due to the Parent Partnership.
For the three months ended March 31, 2003, interest costs incurred on the note
payable to the Parent Partnership totaled $2.7 million.

As of March 31, 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 based on a three month U.S.
Dollar LIBOR rate, plus a spread, and receive a fixed rate of interest of
7.51%. During the three months ended March 31, 2003, and 2002, we recognized
reductions in interest expense of $2.4 million and $1.7 million, respectively,
related to the difference between the fixed rate and the floating rate of
interest on the interest rate swap. During the three months ended March 31,
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 agreement was a gain of approximately
$12.3 million and $13.6 million at March 31, 2003, and December 31, 2002,
respectively. Utilizing the balance of the 7.51% Senior Notes outstanding at
December 31, 2002, 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.

At March 31, 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 March 31, 2002, the estimated fair value of the Senior
Notes was approximately $403.9 million.

21



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##### 






Item 4. Controls and Procedures

Included in its recent Release No. 34-46427, effective August 29, 2002,
the Securities and Exchange Commission adopted rules requiring reporting
companies to maintain disclosure controls and procedures to provide reasonable
assurance that a registrant is able to record, process, summarize and report
the information required in the registrants quarterly and annual reports under
the Securities Exchange Act of 1934 (the Exchange Act). While we believe
that our existing disclosure controls and procedures have been effective to
accomplish these objectives, we intend to continue to examine, refine and
formalize our disclosure controls and procedures and to monitor ongoing
developments in this area.

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-14(c) and Rule 15d-14(c))
as of a date within 90 days before the filing date of this Report, 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 significantly affect those internal controls subsequent
to the date of the evaluation, nor were there any significant deficiencies or
material weaknesses in our internal controls. As a result, no corrective
actions were required or undertaken.




PART II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits:

| |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | --- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 3.1 |  |  | 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.

22



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##### 



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | ------ |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |        |  |  | (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).                                                                                                                                                                                                                                                   
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | 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).                                                                                                                          

23



---



##### 



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | ------ |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 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).                                                         
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | 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).                                                                                          

24



---



##### 



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | ------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 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).                                                        
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 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                                                                                                                                                                                                                                                        

25



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##### 



| |  |  |       |  |  |                                                                                                                                                                    
| |  |  | ----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |       |  |  | Exhibit 10.52 to Form 10-Q of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the three months ended
March 31, 2003, and incorporated herein by reference).
| |  |  |       |  |  |                                                                                                                                                                    
| |  |  | 99.1* |  |  | Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                
| |  |  |       |  |  |                                                                                                                                                                    
| |  |  | 99.2* |  |  | 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 during the quarter ended March 31, 2003:

| |  |                                                                                                
| |  | -----------------------------------------------------------------------------------------------
| |  | A Report on Form 8-K was filed with the Securities and Exchange Commission on
January 20, 2003.

26



---



##### 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.

|                  |  |                                                   |  |                                  |  |                                                                                 | 
|----------------- |  | ------------------------------------------------- |  | -------------------------------- |  | ------------------------------------------------------------------------------- | 
|                  |  | TE Products Pipeline Company, Limited Partnership
|                  |  |                                                   |  | (Registrant)                    
|                  |  |                                                   |  | (A Delaware Limited Partnership)
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  | By:                              |  | TEPPCO GP, Inc.,
as General Partner                                             | 
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  | By:                              |  | /s/ BARRY R. PEARL                                                              | 
|                  |  |                                                   |  |                                  |  | Barry R. Pearl,
President, Chief Executive
Officer and Director                 | 
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  |                                  |  |                                                                                 | 
|                  |  |                                                   |  | By:                              |  | /s/ CHARLES H. LEONARD                                                          | 
|                  |  |                                                   |  |                                  |  | Charles H. Leonard,
Senior Vice President, Chief Financial
Officer and Director | 
|Date: May 5, 2003 |  |                                                   |  |                                  |  |                                                                                 | 

27



---



##### 



CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, BARRY R. PEARL, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of TE Products
Pipeline Company, Limited Partnership;                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      |  | 
|------------------------------------- |  | 
|May 5, 2003                           |  | 
|                                      |  | 
|Date                                  |  | 
|                                      |  | 
|                                      |  | 
|/s/ BARRY R. PEARL                    |  | 
|                                      |  | 
|Barry R. Pearl                        |  | 
|President and Chief Executive Officer |  | 
|TEPPCO GP, Inc., General Partner      |  | 

28



---



##### 



CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, CHARLES H. LEONARD, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of TE Products
Pipeline Company, Limited Partnership;                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |  | 
|------------------------------------------------- |  | 
|May 5, 2003                                       |  | 
|                                                  |  | 
|Date                                              |  | 
|                                                  |  | 
|                                                  |  | 
|/s/ CHARLES H. LEONARD                            |  | 
|                                                  |  | 
|Charles H. Leonard                                |  | 
|Senior Vice President and Chief Financial Officer |  | 
|TEPPCO GP, Inc., General Partner                  |  | 

29



---



##### 






Exhibit Index

|               |  |                                                                                                    
|-------------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                        
|               |  |                                                                                                    
|99.1*          |  | Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
|               |  |                                                                                                    
|99.2*          |  | Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

30