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 quarterly period ended MARCH 31, 2002
Commission File Number 1-12202
NORTHERN BORDER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 93-1120873
- ----------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1111 South 103rd St.
Omaha, Nebraska 68124-1000
- ----------------------------------- -------------------------------
(Address of principal executive (Zip code)
offices)
(402) 398-7700
----------------------------------------------------
(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 [ ]
1 OF 21
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Income -
Three Months Ended March 31, 2002 and 2001 3
Consolidated Statement of Comprehensive Income -
Three Months Ended March 31, 2002 and 2001 3
Consolidated Balance Sheet - March 31, 2002
and December 31, 2001 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 2002 and 2001 5
Consolidated Statement of Changes in Partners'
Equity - Three Months Ended March 31, 2002 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 19
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 20
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
-------- -------
OPERATING REVENUES, NET $118,007 $87,960
-------- -------
OPERATING EXPENSES
Product purchases 12,507 --
Operations and maintenance 23,111 16,017
Depreciation and amortization 18,433 15,694
Taxes other than income 7,471 4,093
-------- -------
Operating expenses 61,522 35,804
-------- -------
OPERATING INCOME 56,485 52,156
-------- -------
INTEREST EXPENSE 21,038 21,696
-------- -------
OTHER INCOME (EXPENSE)
Equity earnings (losses) of
unconsolidated affiliates 3,220 (217)
Other income (expense) 603 (1,503)
-------- -------
Total other income (expense) 3,823 (1,720)
-------- -------
MINORITY INTERESTS IN NET INCOME 11,301 10,767
-------- -------
NET INCOME TO PARTNERS $ 27,969 $17,973
======== =======
NET INCOME PER UNIT $ .62 $ .54
======== =======
NUMBER OF UNITS USED IN COMPUTATION 41,623 31,565
======== =======
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
-------- -------
Net income to partners $27,969 $17,973
Other comprehensive income:
Transition adjustment from adoption
of SFAS No. 133 -- 22,183
Change associated with current period
hedging transactions (4,074) (3,015)
Change associated with
current period foreign
currency translation (23) --
-------- -------
Total comprehensive income $23,872 $37,141
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
3
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
ASSETS 2002 2001
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 23,466 $ 16,755
Accounts receivable 48,943 49,740
Materials and supplies, at cost 5,354 5,584
Prepaid expenses and other 6,967 6,572
---------- ----------
Total current assets 84,730 78,651
---------- ----------
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 2,843,251 2,829,691
Less: Accumulated provision for
depreciation and amortization 802,525 789,592
---------- ----------
Property, plant and equipment, net 2,040,726 2,040,099
---------- ----------
INVESTMENTS AND OTHER ASSETS
Investment in unconsolidated affiliates 241,815 239,729
Goodwill 295,402 295,402
Assets from price risk management activities 7,954 9,635
Other 24,159 23,839
---------- ----------
Total investments and other assets 569,330 568,605
---------- ----------
Total assets $2,694,786 $2,687,355
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 121,851 $ 352,395
Accounts payable 36,592 39,246
Accrued taxes other than income 28,027 28,730
Accrued interest 21,083 20,550
Liabilities from price risk management activities 3,172 --
---------- ----------
Total current liabilities 210,725 440,921
---------- ----------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 1,316,402 1,070,832
---------- ----------
MINORITY INTERESTS IN PARTNERS' EQUITY 249,999 250,078
---------- ----------
RESERVES AND DEFERRED CREDITS 14,630 10,566
---------- ----------
PARTNERS' EQUITY
Partner's capital 886,598 894,429
Accumulated other comprehensive income 16,432 20,529
---------- ----------
Total partners' equity 903,030 914,958
---------- ----------
Total liabilities and partners' equity $2,694,786 $2,687,355
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income to partners $ 27,969 $ 17,973
-------- --------
Adjustments to reconcile net income to partners
to net cash provided by operating activities:
Depreciation and amortization 18,524 15,785
Minority interests in net income 11,301 10,767
Provision for rate refunds -- 2,036
Rate refunds paid -- (6,762)
Changes in components of working capital,
net of the affect of the acquired businesses (992) (152)
Non-cash gains from risk management activities (1,487) --
Other 1,301 (421)
-------- --------
Total adjustments 28,647 21,253
-------- --------
Net cash provided by operating activities 56,616 39,226
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated affiliates (1,718) (3,161)
Acquisitions of businesses (1,115) (198,659)
Capital expenditures for property, plant
and equipment (18,848) (25,391)
-------- --------
Net cash used in investing activities (21,681) (227,211)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to Unitholders and
General Partners (35,800) (22,969)
Distributions to Minority Interests (11,753) (9,420)
Issuance of long-term debt 47,000 335,703
Retirement of long-term debt (27,594) (58,132)
Decrease in bank overdraft -- (22,437)
Issuance of partnership interests, net -- 3,735
Payments on termination of derivatives -- (4,346)
Long-term debt financing costs (77) (2,440)
-------- --------
Net cash provided by (used in)
financing activities (28,224) 219,694
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 6,711 31,709
Cash and cash equivalents-beginning of period 16,755 35,363
-------- --------
Cash and cash equivalents-end of period $ 23,466 $ 67,072
======== ========
- --------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest (net of amount capitalized) $ 20,751 $ 24,898
======== ========
Changes in components of working capital:
Accounts receivable $ 797 $ 5,388
Materials and supplies, prepaid expenses and other (165) 364
Accounts payable (1,454) (1,214)
Accrued taxes other than income (703) (2,046)
Accrued interest 533 (2,644)
-------- --------
Total $ (992) $ (152)
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
ACCUMULATED
OTHER TOTAL
GENERAL COMMON COMPREHENSIVE PARTNERS'
PARTNERS UNITS INCOME EQUITY
------ -------- ------- --------
Balance at December 31, 2001 $17,889 $876,540 $20,529 $914,958
Net income to partners 2,344 25,625 -- 27,969
Change associated with current
period hedging transactions -- -- (4,074) (4,074)
Change associated with current
period foreign currency translation -- -- (23) (23)
Distributions to partners (2,501) (33,299) -- (35,800)
------ -------- ------- --------
Balance at March 31, 2002 $17,732 $868,866 $16,432 $903,030
======= ======== ======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
6
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by Northern Border Partners, L.P. (the "Partnership") without audit pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial results for the
interim periods. Certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. However, the Partnership believes that the disclosures
are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 2001.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The Partnership owns a 70% general partner interest in Northern Border
Pipeline Company. Crestone Energy Ventures, L.L.C.; Bear Paw Energy, L.L.C.;
Border Midstream Services, Ltd.; Midwestern Gas Transmission Company; and Black
Mesa Pipeline, Inc. are wholly-owned subsidiaries of the Partnership. The
Partnership also owns a 49% common membership interest and a 100% class A share
interest in Bighorn Gas Gathering, L.L.C.; a 33% interest in Fort Union Gas
Gathering, L.L.C.; a 35% interest in Lost Creek Gathering, L.L.C.; and a 36%
interest in the Gregg Lake/Obed Pipeline.
2. GOODWILL
In the third quarter of 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill
and Other Intangible Assets." SFAS No. 142 modifies the accounting and reporting
of goodwill and intangible assets. It requires entities to discontinue the
amortization of goodwill, reallocate goodwill among its reporting segments and
perform impairment tests by applying a fair-value-based analysis on the goodwill
in each reporting segment. At December 31, 2001, the Partnership's balance sheet
included goodwill of approximately $475 million. The Partnership adopted SFAS
No. 142 effective January 1, 2002. The Partnership is evaluating the impact of
adopting SFAS No. 142, including whether any transitional impairment losses will
be required to be recognized as the cumulative effect of a change in accounting
principle. Beginning January 1, 2002, the Partnership is no longer recording
amortization expense related to goodwill. The following information discloses
the effect of goodwill amortization on the Partnership's net income to partners
and net income per unit.
7
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months
(Amounts in thousands, ended March 31,
except per unit amounts) 2002 2001
-------------------------------- ------- -------
Reported net income to partners $27,969 $17,973
Add back: goodwill amortization -- 1,817
------- -------
Adjusted net income to partners $27,969 $19,790
======= =======
Reported net income per unit $ .62 $ .54
Add back: goodwill amortization -- .06
------- -------
Adjusted net income per unit $ .62 $ .60
======= =======
3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Partnership uses financial instruments in the management of its
interest rate and commodity price exposure. A control environment has been
established which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of financial instrument activities.
In 2001, the Partnership adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended by SFAS No.
137 and SFAS No. 138. All derivative instruments are recorded on the balance
sheet as either assets or liabilities measured at fair value. Any change in the
derivative's fair value is recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying cash flow
hedges allows a derivative's gains and losses to be recorded in accumulated
other comprehensive income. The Partnership is reflecting in consolidated
accumulated other comprehensive income its 70% share of Northern Border
Pipeline's accumulated other comprehensive income. The remaining 30% is
reflected as an adjustment to minority interests in partners' equity.
The Partnership records in accumulated other comprehensive income amounts
related to terminated interest rate swap agreements for cash flow hedges. During
the three months ended March 31, 2002, the Partnership amortized approximately
$0.5 million related to the terminated interest rate swap agreements, as a
reduction to interest expense from accumulated other comprehensive income and
expects to amortize comparable amounts in each of the remaining quarters of
2002.
During the third quarter of 2001, the Partnership entered into interest
rate swaps with notional amounts totaling $225 million. Under the interest rate
swap agreements, the Partnership makes payments to counterparties at variable
rates based on the London Interbank Offered Rate and in return receives payments
based on a fixed rate. At March 31, 2002, the average effective interest rate on
the interest rate swaps was 3.22%. The swaps have been designated as fair value
hedges as they were entered into to hedge the fluctuations in the market value
of the Partnership's senior notes issued in 2001. The Partnership is reflecting
a non-cash gain of approximately $3.1 million in assets from price risk
management activities and a non-cash loss of approximately $1.1 million in other
reserves and deferred credits, with a corresponding offset of $2.0 million in
long-term debt on the accompanying consolidated balance sheet at March 31, 2002.
8
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 2001, Northern Border Pipeline entered into forward starting
interest rate swaps with notional amounts totaling $150 million related to the
planned issuance of senior notes. The swaps were designated as cash flow hedges
as they were entered into to hedge the fluctuations in Treasury rates and
spreads between the execution date of the swaps and the issuance date of the
senior notes, which occurred in the second quarter of 2002 (see Note 8). At
March 31, 2002, the Partnership reflected approximately $4.9 million in assets
from price risk management activities on the accompanying consolidated balance
sheet with corresponding offsets of $3.4 million in accumulated other
comprehensive income and $1.5 million in minority interests in partners' equity.
Bear Paw Energy periodically enters into commodity derivatives contracts
and fixed-price physical contracts. Bear Paw Energy primarily utilizes price
swaps and collars, which have been designated as cash flow hedges, to hedge its
exposure to gas and natural gas liquid price volatility. During the first
quarter of 2002, Bear Paw Energy recognized gains of $0.1 million from the
settlement of derivative contracts. At March 31, 2002, Bear Paw Energy reflected
a non-cash loss of approximately $3.2 million in liabilities from price risk
management activities with corresponding offsets of $3.1 million in accumulated
other comprehensive income and $0.1 million as a reduction in operating
revenues, which represents the ineffective portion of the cash flow hedge.
At September 30, 2001, Bear Paw Energy had outstanding commodity price
swap contracts with Enron North America Corp. ("ENA"), a subsidiary of Enron
Corp., which had been accounted for as cash flow hedges, and resulted in Bear
Paw Energy recording a non-cash gain of approximately $6.7 million in
accumulated other comprehensive income. As a result of ENA's filing for Chapter
11 bankruptcy protection during the fourth quarter of 2001, Bear Paw Energy
terminated the contracts and ceased to account for these derivatives as hedges
when it determined the hedges were no longer effective. The gain previously
recorded in accumulated other comprehensive income is being recorded into
earnings in the same periods during which the hedged forecasted transactions
will affect earnings. During the first quarter of 2002, the Partnership
amortized approximately $1.6 million into earnings from accumulated other
comprehensive income and expects to amortize approximately $4.6 million for
the year 2002.
4. CREDIT FACILITIES AND LONG-TERM DEBT
The Partnership's $200 million three-year revolving credit agreement
(Partnership Credit Agreement) requires the maintenance of a ratio of
consolidated EBITDA (consolidated net income, excluding not more than $10
million of non-cash gains or losses, plus minority interests in net income,
consolidated interest expense, income taxes and depreciation and amortization)
to consolidated interest expense to be greater than 3 to 1. The Partnership
Credit Agreement also requires the maintenance of the ratio of consolidated
funded debt to adjusted consolidated EBITDA (EBITDA adjusted for pro forma
operating results of acquisitions made during the year) of no more than 4.5 to
1. At March 31, 2002, the Partnership was in compliance with these covenants.
9
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. BUSINESS SEGMENT INFORMATION
The Partnership's reportable segments are strategic business units that
offer different services. The Partnership evaluates performance based on EBITDA
(net income before minority interests; interest expense; income taxes; and
depreciation and amortization).
Natural
Interstate Gas
Natural Gathering
Gas and
Pipelines Processing Coal
(In thousands) (a) (b) Slurry Other(c) Total
---------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 2002
-----------------
Revenues from
external customers $82,197 $30,590 $5,220 $ -- $118,007
EBITDA 67,883 11,649 821 (1,392) 78,961
THREE MONTHS ENDED
MARCH 31, 2001
-----------------
Revenues from
external customers $77,040 $ 5,499 $5,421 $ -- $ 87,960
EBITDA 65,215 2,580 2,258 (2,388) 67,665
Total assets by segment are as follows:
March 31, December 31,
(In thousands) 2002 2001
---------------------------------------------------------------------------------------------
Interstate Natural Gas Pipelines $1,849,155 $1,858,902
Natural Gas Gathering and Processing 809,454 792,249
Coal Slurry 21,782 22,009
Other (c) 14,395 14,195
---------- ----------
Total Assets $2,694,786 $2,687,355
========== ==========
- ----------
(a) Interstate natural gas pipeline operating results for 2002 include results
of Midwestern Gas Transmission, which was acquired by the Partnership
effective May 2001.
(b) Natural gas gathering and processing operating results for 2002 include
results of Bear Paw Energy and Border Midstream, which were acquired by
the Partnership effective late March 2001 and April 2001, respectively.
(c) Includes other items not allocable to segments.
6. NET INCOME PER UNIT
Net income per unit is computed by dividing net income, after deduction of
the general partners' allocation, by the weighted average number of outstanding
common units. The general partners' allocation is equal to an amount based upon
their collective 2% general partner interest adjusted for incentive
distributions. The distribution to partners amount shown on the accompanying
consolidated statement of changes in partners' equity includes incentive
distributions to the general partners of approximately $1.8 million.
10
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS - (CONCLUDED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On April 18, 2002, the Partnership declared a cash distribution of $0.80
per unit ($3.20 per unit on an annualized basis) for the quarter ended March 31,
2002. The distribution is payable May 15, 2002, to unitholders of record at
April 30, 2002.
7. ACCOUNTING PRONOUNCEMENTS
In the third quarter of 2001, the Financial Accounting Standards Board
issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS No. 144 establishes one accounting model to be used for long-lived
assets to be disposed of by sale and broadens the presentation of discontinued
operations to include more disposal transactions. SFAS No. 144 supersedes both
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," and the accounting and reporting
provisions of APB Opinion No. 30. This standard is effective for fiscal years
beginning after December 15, 2001. Effective January 1, 2002, the Partnership
adopted SFAS No. 144, which did not have a material impact on its financial
position or results of operations.
Also in 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity capitalizes a cost by increasing the carrying
amount of the related long-lived asset. Over time, the liability is accreted to
its present value and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with earlier
application encouraged. The Partnership is in the process of evaluating the
application of this pronouncement.
8. SUBSEQUENT EVENTS
In April 2002, Northern Border Pipeline completed a private offering of
$225 million of 6.25% Senior Notes due 2007 ("2002 Pipeline Senior Notes").
Northern Border Pipeline also entered into a registration rights agreement with
the initial purchasers in the private offering in which Northern Border Pipeline
agreed, among other things, to use its reasonable best efforts to exchange the
2002 Pipeline Senior Notes for notes registered under the Securities Act of 1933
with substantially identical terms. The indenture under which the 2002 Pipeline
Senior Notes was issued does not limit the amount of unsecured debt Northern
Border Pipeline may incur, but it does contain material financial covenants,
including restrictions on incurrence of secured indebtedness. The proceeds from
the 2002 Pipeline Senior Notes of approximately $223.5 million were used to
reduce indebtedness outstanding. Upon issuance of the 2002 Pipeline Senior
Notes, Northern Border Pipeline terminated the forward starting interest rate
swaps and received approximately $2.4 million, which will be recognized as a
reduction in interest expense over the life of the 2002 Pipeline Senior Notes.
11
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
Management's discussion and analysis of financial condition and results of
operations is based on the Consolidated Financial Statements of Northern Border
Partners, L.P. (the "Partnership"). The Consolidated Financial Statements are
prepared in accordance with accounting principles generally accepted in the
United States of America. You should read the following discussion and analysis
in conjunction with the Consolidated Financial Statements included elsewhere in
this report.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain amounts included in or affecting the Partnership's Consolidated
Financial Statements and related disclosures must be estimated, requiring it to
make certain assumptions with respect to values or conditions that cannot be
known with certainty at the time the financial statements are prepared. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Any effects on the Partnership's business, financial position or results of
operations resulting from revisions to these estimates are recorded in the
period in which the facts that give rise to the revision become known.
The Partnership's significant accounting policies are summarized in Note 2
- - Notes to Consolidated Financial Statements included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2001. Certain of the
Partnership's accounting policies are of more significance in its financial
statement preparation process than others. Northern Border Pipeline's accounting
policies conform to Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation." Accordingly,
certain assets that result from the regulated ratemaking process are recorded
that would not be recorded under generally accepted accounting principles for
nonregulated entities. The Partnership's long-lived assets are stated at
original cost. The Partnership must use estimates in determining the economic
useful lives of those assets. For utility property, no retirement gain or loss
is included in income except in the case of extraordinary retirements or sales.
The original cost of utility property retired is charged to accumulated
depreciation and amortization, net of salvage and cost of removal. With respect
to the Partnership's acquisitions, the excess of the purchase price over the
fair value of the net assets acquired or goodwill was being amortized over 30
years prior to 2002. Effective January 1, 2002, the Partnership is no longer
amortizing goodwill due to its adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets." Finally, the Partnership's accounting for financial
instruments follows SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended.
RESULTS OF OPERATIONS
The Partnership owns a 70% general partner interest in Northern Border
Pipeline Company. Crestone Energy Ventures, L.L.C.; Bear Paw Energy, L.L.C.;
Border Midstream Services, Ltd.; Midwestern Gas Transmission Company; and Black
Mesa Pipeline, Inc. are wholly-owned subsidiaries of the Partnership. The
Partnership also owns a 49% common membership interest and a 100% class A share
12
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
interest in Bighorn Gas Gathering, L.L.C.; a 33% interest in Fort Union Gas
Gathering, L.L.C.; a 35% interest in Lost Creek Gathering, L.L.C.; and a 36%
interest in the Gregg Lake/Obed Pipeline.
During 2001, the following acquisitions were made by the Partnership: Bear
Paw Energy in late March; the Mazeppa and Gladys gas processing plants, gas
gathering systems and a minority interest in the Gregg Lake/Obed Pipeline in
early April, which are included in the operating results of Border Midstream;
and Midwestern Gas Transmission in late April.
FIRST QUARTER 2002 COMPARED WITH FIRST QUARTER 2001
The Partnership's operating results for 2002 were significantly influenced
by the acquisitions made beginning in late March 2001. The Partnership's net
income increased $10.0 million (56%) for the first quarter of 2002, as compared
to the same period in 2001. Net income from the natural gas gathering and
processing segment increased approximately $8.3 million, primarily due to the
businesses acquired in 2001. Net income from the interstate natural gas pipeline
segment increased approximately $3.3 million, which included results from
Midwestern Gas Transmission totaling approximately $2.0 million in the first
quarter of 2002. Primarily as a result of borrowings made to fund its
acquisitions, the Partnership's interest expense increased approximately $1.5
million in 2002 as compared to 2001. As a result of adopting SFAS No. 142, the
Partnership is no longer amortizing goodwill (see Note 2 - Notes to Consolidated
Financial Statements). The 2001 operating results included $1.8 million of
goodwill amortization or $0.06 per unit.
Operating revenues, net increased $30.0 million (34%) for the first
quarter of 2002, as compared to the same period in 2001. Operating revenues from
the natural gas gathering and processing segment increased $25.1 million
primarily due to the acquisitions made beginning in late March 2001. Operating
revenues from the interstate natural gas pipelines increased $5.2 million due
primarily to $4.1 million of revenues from Midwestern Gas Transmission and a
$1.1 million increase in Northern Border Pipeline's revenues. Northern Border
Pipeline reflected additional revenues of approximately $3.4 million related to
a pipeline expansion and extension project completed in October 2001 ("Project
2000"). The impact of the additional revenues associated with Project 2000 was
partially offset by uncollected revenues associated with the transportation
capacity held by Enron North America Corp. ("ENA"), which filed for Chapter 11
bankruptcy protection in December 2001 (see "Update On The Impact Of Enron's
Chapter 11 Filing On The Partnership's Business"). For the first quarter of
2002, the revenues lost on this capacity totaled approximately $1.5 million.
Product purchases of $12.5 million recorded in 2002 represent amounts
incurred by Bear Paw Energy. In conjunction with its gathering and processing
activities, Bear Paw Energy receives the natural gas stream from producers. Upon
sale of the natural gas liquids and residue that it processes in its facilities,
Bear Paw Energy pays the producers based upon a percentage of the gross
proceeds.
13
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
Operations and maintenance expense increased $7.1 million (44%) for the
first quarter of 2002, as compared to the same period in 2001. Operations and
maintenance expense for the natural gas gathering and processing segment
increased $5.0 million, primarily due to the businesses acquired in 2001.
Operations and maintenance expense from the interstate natural gas pipelines
decreased $0.2 million due primarily to a decrease in Northern Border Pipeline's
expense by $1.3 million (16%) partially offset by $1.1 million of expense from
Midwestern Gas Transmission. Northern Border Pipeline's operations and
maintenance expense decreased due primarily to a decrease in employee benefits
and administrative expenses. Operations and maintenance expense for Black Mesa
Pipeline increased $1.2 million (39%) primarily due to costs associated with
several unplanned coal slurry discharges.
Depreciation and amortization expense increased $2.7 million (17%) for the
first quarter of 2002, as compared to the same period in 2001. Depreciation and
amortization expense for the natural gas gathering and processing segment
increased by $2.5 million, due primarily to the acquisitions made in 2001.
Depreciation and amortization expense from the interstate natural gas pipelines
increased $0.6 million due primarily to expense from Midwestern Gas
Transmission. Depreciation and amortization expense in the first quarter of 2001
includes goodwill amortization of $0.2 million, which is not being recorded in
2002 (see Note 2 - Notes to Consolidated Financial Statements).
Taxes other than income increased $3.4 million (83%) for the first quarter
of 2002, as compared to the same period in 2001. The 2001 results included
Northern Border Pipeline's reductions to previous estimates of ad valorem taxes,
which caused 2001 expense to be approximately $2.8 million lower than 2002.
Consolidated interest expense decreased $0.7 million (3%) for the first
quarter of 2002, as compared to the same period in 2001. Interest expense
attributable to Northern Border Pipeline decreased $2.0 million (14%) for the
first quarter of 2002, as compared to the same period in 2001, due to a decrease
in Northern Border Pipeline's average interest rate. Interest expense for the
Partnership increased approximately $1.5 million (24%) for the first quarter of
2002, as compared to the same period in 2001, due to additional borrowings
partially offset by a decrease in the Partnership's average interest rate.
Other income (expense) increased $5.5 million for first quarter of 2002,
as compared to the same period in 2001. Equity earnings (losses) of
unconsolidated affiliates increased $3.4 million to $3.2 million for 2002 as
compared to 2001. The 2001 amount included goodwill amortization of
approximately $1.6 million, which is not being recorded in 2002 (see Note 2 -
Notes to Consolidated Financial Statements). Another $1.6 million of the
increase in equity earnings between years is due to improved operating results
for Bighorn, Fort Union and Lost Creek. Other income (expense) for 2001 included
non-recurring charges of $2.4 million, primarily related to a loss on a forward
purchase of Canadian dollars to fund the acquisition of Border Midstream's
gathering and processing assets.
14
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
DEBT AND CREDIT FACILITIES
The Partnership's debt and credit facilities outstanding at March 31,
2002, are as follows:
Payments Due by Period
-------------------------------
Current Portion
(Less Than Long-Term
Total 1 Year) Portion
---------- ---------- ----------
(In Thousands)
Northern Border Pipeline
Pipeline Credit
Agreement, average 2.08% $ 265,000 $ 41,456 $ 223,544
1992 Series C and D
Senior Notes, average 8.53% 143,000 78,000 65,000
7.75% Senior Notes due 2009 200,000 -- 200,000
7.50% Senior Notes due 2021 250,000 -- 250,000
Northern Border Partners, L.P.
8 7/8% Senior Notes due 2010 250,000 -- 250,000
7.10% Senior Notes due 2011 225,000 -- 225,000
$200 million Partnership Credit
Agreement, average 2.73%,
due 2004 91,000 -- 91,000
---------- ---------- ----------
Total $1,424,000 $ 119,456 $1,304,544
========== ========== ==========
Northern Border Pipeline had previously entered into a 1997 credit
agreement ("Pipeline Credit Agreement") with certain financial institutions,
which is comprised of a $100 million five-year revolving credit facility and a
$245 million term loan, both maturing in June 2002. At March 31, 2002, $20
million was outstanding under the five-year revolving credit facility. As
discussed below, the Pipeline Credit Agreement was partially repaid in April
2002. Northern Border Pipeline anticipates refinancing the Pipeline Credit
Agreement with a $175 million revolving credit facility in the second quarter of
2002.
At March 31, 2002, Northern Border Pipeline had outstanding $143 million
of senior notes issued in a $250 million private placement under a July 1992
note purchase agreement. The Series C Notes, with a principal amount of $78
million, mature in August 2002. The Series D Notes will mature in August 2003.
Northern Border Pipeline anticipates borrowing under the refinanced Pipeline
Credit Agreement to repay the Series C Notes.
In November 2001, Northern Border Pipeline entered into forward starting
interest rate swaps with notional amounts totaling $150 million related to the
issuance of senior notes discussed below. The swaps were entered into to hedge
the fluctuations in Treasury rates and spreads between the execution date of the
swaps and the issuance date of the senior notes.
In April 2002, Northern Border Pipeline completed a private offering of
$225 million of 6.25% Senior Notes due 2007 ("2002 Pipeline Senior Notes"). The
indenture under which the 2002 Pipeline Senior Notes was issued does not limit
the amount of unsecured debt Northern Border Pipeline may incur, but it does
contain material financial covenants, including restrictions on incurrence of
15
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
secured indebtedness. The proceeds from the 2002 Pipeline Senior Notes of
approximately $223.5 million were used to reduce indebtedness outstanding under
the Pipeline Credit Agreement. Upon issuance of the 2002 Pipeline Senior Notes,
Northern Border Pipeline terminated the forward starting interest rate swaps and
received approximately $2.4 million.
The indentures under which the Partnership's 8 7/8% Senior Notes and the
7.10% Senior Notes (collectively "Partnership Senior Notes") were issued do not
limit the amount of unsecured debt the Partnership may incur, but they do
contain material financial covenants, including restrictions on incurrence of
secured indebtedness. The indentures also contain provisions that would require
the Partnership to offer to repurchase the Partnership Senior Notes, if either
Standard & Poor's Rating Services or Moodys' Investor Services, Inc. ("Moody's")
rate the notes as below investment grade. In April 2002, Moody's downgraded the
Partnership's senior unsecured debt to a rating of Baa2 and affirmed the A3
rating of Northern Border Pipeline's senior unsecured debt, both with a negative
rating outlook. Northern Border Pipeline's and the Partnership's credit ratings
remain above investment grade.
Short-term liquidity needs will be met by operating cash flows, the
Partnership Credit Agreement and the refinanced Pipeline Credit Agreement.
Long-term capital needs may be met through the ability to issue long-term
indebtedness as well as additional limited partner interests of the Partnership.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows provided by operating activities increased $17.4 million to
$56.6 million for the first quarter of 2002, as compared to the same period in
2001. Net income to partners before depreciation and amortization increased
$12.7 million primarily due to the natural gas gathering and processing
businesses acquired in 2001. The 2001 results included net cash outflows of
approximately $4.7 million related to Northern Border Pipeline's rate case.
During the first quarter of 2001, Northern Border Pipeline made refunds to its
shippers totaling $6.8 million, which included approximately $2.1 million
collected in the first quarter of 2001 with the remainder collected previously.
CASH FLOWS FROM INVESTING ACTIVITIES
The investment in unconsolidated affiliates of $1.7 million and $3.2
million for the first quarter of 2002 and 2001, respectively, primarily reflects
capital contributions to Bighorn.
Acquisitions of businesses decreased $197.5 million to $1.1 million for
the first quarter of 2002 as compared to the same period in 2001. The 2001
amount represents the cash portion of the purchase price of Bear Paw Energy in
March 2001. The purchase also involved the issuance of 5.7 million common units
valued at $183.0 million, for a total purchase price of $381.7 million.
Capital expenditures of $18.8 million for the first quarter of 2002
included $15.6 million for the natural gas gathering and processing segment and
$2.8 million for the interstate natural gas pipelines segment. For the same
period in 2001, capital expenditures were $25.4 million, which included $3.8
million for Northern Border Pipeline's Project 2000 and $20.7 million for
natural gas gathering facilities for Crestone Energy Ventures.
16
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
Total capital expenditures and investments in unconsolidated affiliates
for 2002 are estimated to be $86 million, which includes $22 million expended
through the first quarter of 2002. Capital expenditures for the interstate
natural gas pipelines are estimated to be $21 million, including approximately
$10 million for Northern Border Pipeline. Northern Border Pipeline currently
anticipates funding its 2002 capital expenditures primarily by borrowing on debt
facilities and using operating cash flows. Capital expenditures for natural gas
gathering and processing facilities are estimated to be $53 million and
additional investments in unconsolidated affiliates are estimated to be $11
million for 2002. Funds required to meet the capital requirements for 2002 are
anticipated to be provided from debt borrowings, issuance of additional limited
partner interests in the Partnership and operating cash flows. The estimated
capital expenditures and investments do not include any amounts for
acquisitions. If any such acquisitions are made, the Partnership's estimated
capital requirements would be increased, which the Partnership would anticipate
funding from debt borrowings and the issuance of additional limited partner
interests in the Partnership.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows used in financing activities was $28.2 million for the first
quarter of 2002 as compared to cash flows provided by financing activities of
$219.7 million for the first quarter of 2001. Cash distributions to the
unitholders and the general partners increased $12.8 million to $35.8 million.
The increase is due to both an increase in the number of common units
outstanding and an increase in the distribution rate. The distribution paid in
the first quarter of 2002 was $0.80 per unit as compared to $0.70 per unit paid
in the first quarter of 2001.
For the first quarter of 2002, borrowings under the Partnership Credit
Agreement totaled $27.0 million as compared to borrowings of $73.0 million in
the first quarter of 2001. The net proceeds in the first quarter of 2001 from
the private offering of the 7.10% Senior Notes totaled approximately $223.2
million. The proceeds from the 7.10% Senior Notes and the Partnership Credit
Agreement were primarily used to fund the acquisition of Bear Paw Energy
discussed previously and to repay $47.3 million of indebtedness outstanding on a
prior credit facility.
For the first quarter of 2001, Northern Border Pipeline recognized a
decrease in bank overdraft of $22.4 million. At December 31, 2000, Northern
Border Pipeline reflected the bank overdraft primarily due to rate refund checks
outstanding.
In March 2001, the Partnership paid approximately $4.3 million to
terminate interest rate swap agreements. Financing activities for 2001 reflect
$3.7 million in capital contributions by the Partnership's general partners to
maintain their 2% general partner interest after common units were issued for
the acquisition of Bear Paw Energy.
UPDATE ON THE IMPACT OF ENRON'S CHAPTER 11 FILING ON THE PARTNERSHIP'S BUSINESS
As more fully discussed in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2001, on December 2, 2001, Enron Corp. filed a
voluntary petition for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code. Certain wholly owned Enron subsidiaries, including ENA,
17
PART I. FINANCIAL INFORMATION - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
have also filed for Chapter 11 bankruptcy protection. ENA is a party to shipper
contracts obligating ENA to pay demand charges for approximately 3.5% of
Northern Border Pipeline's capacity. ENA has neither assumed nor rejected these
contracts, but its ability to use the capacity has been suspended until it
provides adequate assurance of credit support. Northern Border Pipeline has
filed with the bankruptcy court a motion to compel ENA to either assume or
reject these contracts. Northern Border Pipeline has estimated its financial
exposure for 2002 to be approximately $9 million of revenues under the firm
transportation contracts with ENA. The Partnership believes that failure by ENA
to perform its obligations under the firm transportation contracts will not have
a material adverse impact on the Partnership's financial condition.
On May 3, 2002, Enron presented to the creditor's committee a proposal
under which certain of Enron's core energy assets would be separated from
Enron's bankruptcy estate and operated prospectively as a new integrated power
and pipeline company. Northern Plains Natural Gas Company and Pan Border Gas
Company, general partners of the Partnership, are proposed to be included in
this company. If the creditor's committee endorses this proposal, it must then
be presented to the Bankruptcy Court for approval. The Partnership plans to
continue to monitor developments at Enron, to continue to assess the impact on
the Partnership of its existing agreements and relationships with Enron and to
take appropriate action to protect the interests of the Partnership.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
The statements in this Quarterly Report that are not historical
information are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements are identified as any statement that does
not relate strictly to historical or current facts. Forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions. The future results of the Partnership's operations may differ
materially from those expressed in these forward-looking statements. Such
forward-looking statements include the discussions in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" regarding Northern Border Pipeline's plans to refinance its
credit agreement and the Partnership's estimated capital expenditures and equity
investments in 2002. Although the Partnership believes that its expectations
regarding future events are based on reasonable assumptions within the bounds of
its knowledge of its business, it can give no assurance that its goals will be
achieved or that its expectations regarding future developments will be
realized. Important factors that could cause actual results to differ materially
from those in the forward-looking statements herein include the December 2, 2001
filing by Enron of a voluntary petition for bankruptcy protection under Chapter
11 of the United States Bankruptcy Code, industry results, future demand for
natural gas, availability of supplies of Canadian natural gas, political and
regulatory developments that impact FERC proceedings involving the interstate
natural gas pipelines, the interstate natural gas pipelines' success in
sustaining their positions in such proceedings or the success of intervenors in
opposing their positions, competitive developments by Canadian and U.S. natural
gas transmission peers, political and regulatory developments in Canada, and
conditions of the capital markets and equity markets.
18
PART I. FINANCIAL INFORMATION - (CONCLUDED)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
The Partnership may be exposed to market risk through changes in commodity
prices, exchange rates, and interest rates as discussed below. A control
environment has been established which includes policies and procedures for risk
assessment and the approval, reporting and monitoring of financial instrument
activities.
The Partnership has utilized and expects to continue to utilize financial
instruments in the management of interest rate risks and natural gas and natural
gas liquids marketing activities to achieve a more predictable cash flow by
reducing its exposure to interest rate and price fluctuations.
There have not been any material changes in market risk exposures that
would affect the quantitative and qualitative disclosures presented as of
December 31, 2001, in Item 7a of the Partnership's Annual Report on Form 10-K.
For more information on risk management activities, see Note 3 to the
Partnership's consolidated financial statements included elsewhere in this
report.
19
PART II. OTHER INFORMATION
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1 Indenture dated April 29, 2002, between Northern Border Pipeline and Bank
One Trust Company, NA, as trustee (Exhibit 4.1 to Northern Border Pipeline
Company Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2002).
4.2 Registration Rights Agreement dated April 29, 2002, among Northern Border
Pipeline and Salomon Smith Barney Inc., Banc One Capital Markets, Inc.,
and BMO Nesbitt Burns Corp., as initial purchasers (Exhibit 4.2 to
Northern Border Pipeline Company Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2002).
10.1 Employment Agreement between Northern Plains Natural Gas Company and Jerry
L. Peters effective April 1, 2002 (Exhibit 10.1 to Northern Border
Pipeline Company Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2002).
(b) Reports on Form 8-K.
1) The Partnership filed a Current Report on Form 8-K, dated February 11,
2002, reporting Arthur Andersen LLP had resigned as auditors of the Partnership
effective February 5, 2002, and the subsequent appointment of KPMG LLP as its
independent auditor.
2) The Partnership filed a Current Report on Form 8-K/A, dated February
11, 2002, reporting a letter from Arthur Andersen LLP to the Office of the Chief
Accountant of the Securities and Exchange Commission.
3) The Partnership filed a Current Report on Form 8-K, dated February 22,
2002, reporting a subpoena issued to Enron Corp. on February 15, 2002 by the
Committee on Governmental Affairs of the Senate of The United States.
4) The Partnership filed a Current Report on Form 8-K, dated March 11,
2002, reporting the Partnership's press release to revise its 2001 earnings.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHERN BORDER PARTNERS, L.P.
(A Delaware Limited Partnership)
Date: May 13, 2002 By: /s/ Jerry L. Peters
--------------------------------
Jerry L. Peters
Chief Financial and Accounting
Officer
21