-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ExK9pag7mH3fEfGC35EjnRdO2jpKV9cgotYEl7GyVXkCIGeW16TxIVTRttLM4CuJ eBYbq8IMC30QZ+SINILC5Q== 0000099250-96-000005.txt : 19960816 0000099250-96-000005.hdr.sgml : 19960816 ACCESSION NUMBER: 0000099250-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSCONTINENTAL GAS PIPE LINE CORP CENTRAL INDEX KEY: 0000099250 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 741079400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07584 FILM NUMBER: 96612779 BUSINESS ADDRESS: STREET 1: 2800 POST OAK BLVD STREET 2: P O BOX 1396 CITY: HOUSTON STATE: TX ZIP: 77251 BUSINESS PHONE: 7134392000 MAIL ADDRESS: STREET 1: 2800 POST OAK BLVD STREET 2: P O BOX 1396 CITY: HOUSTON STATE: TX ZIP: 77251 10-Q 1 TGPL 2ND QUARTER 1996 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ......... TO .......... COMMISSION FILE NUMBER 1-7584 TRANSCONTINENTAL GAS PIPE LINE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 74-1079400 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2800 POST OAK BOULEVARD P. O. BOX 1396 HOUSTON, TEXAS 77251 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (713) 215-2000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NONE (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) 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 / / THE NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OUTSTANDING AS OF JUNE 30, 1996 WAS 100. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED: TRANSCONTINENTAL GAS PIPE LINE CORPORATION AND SUBSIDIARIES (TRANSCO) The accompanying interim condensed consolidated financial statements of Transco do not include all notes in annual financial statements and therefore should be read in conjunction with the financial statements and notes thereto in Transco's 1995 Annual Report on Form 10-K and 1996 First Quarter Report on Form 10-Q. The accompanying unaudited financial statements have not been audited by independent auditors but include all adjustments both normal recurring and others which, in the opinion of Transco's management, are necessary to present fairly its financial position at June 30, 1996, and results of operations for the three months and six months ended June 30, 1996 and 1995, and cash flows for the six months ended June 30, 1996 and 1995. TRANSCONTINENTAL GAS PIPE LINE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Thousands of Dollars) (Unaudited)
June 30, December 31, 1996 1995 ------------ ------------ ASSETS Current Assets: Cash $ 2,199 $ 2,557 Deposits 4,023 6,426 Receivables: Affiliates 1,445 2,848 Others 41,967 49,481 Advances to affiliates 27,963 104,499 Transportation and exchange gas receivables: Affiliates 39,492 28,309 Others 77,974 113,310 Inventories 70,367 56,827 Deferred income tax benefits 75,154 37,640 Other 19,025 22,170 ------------ ------------ Total current assets 359,609 424,067 ------------ ------------ Investments 5,230 11,256 ------------ ------------ Property, Plant and Equipment: Natural gas transmission plant 3,535,169 3,455,154 Less-Accumulated depreciation and amortization 252,114 170,417 ------------ ------------ Property, plant and equipment, net 3,283,055 3,284,737 ------------ ------------ Other Assets 215,264 201,728 ------------ ------------ $ 3,863,158 $ 3,921,788 ============ ============ The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Thousands of Dollars) (Unaudited)
June 30, December 31, 1996 1995 ------------ -------------- LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Current maturities of long-term debt $ 250,044 $ 277,126 Payables: Affiliates 47,351 84,590 Others 78,360 128,757 Transportation and exchange gas payables: Affiliates 182 841 Other 44,391 76,459 Accrued liabilities 119,015 154,236 Reserve for rate refunds 135,905 55,123 Other - 91 ------------ -------------- Total current liabilities 675,248 777,223 ------------ -------------- Long-Term Debt, less current maturities 381,743 382,045 ------------ -------------- Other Liabilities: Deferred income taxes 836,425 840,189 Other 195,085 185,500 ------------ -------------- Total other liabilities 1,031,510 1,025,689 ------------ -------------- Commitments and contingencies (Note C) Common Stockholder's Equity: Common stock $1.00 par value: 100 shares authorized, issued and outstanding - - Premium on capital stock and other paid-in capital 1,652,430 1,652,430 Retained earnings 122,227 84,401 ------------ -------------- Total common stockholder's equity 1,774,657 1,736,831 ------------ -------------- $ 3,863,158 $ 3,921,788 ============ ============== The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Thousands of Dollars) (Unaudited)
For the Three For the Three Months Ended Months Ended June 30, 1996 June 30, 1995 --------------- -------------- Operating Revenues: Natural gas sales $ 190,984 $ 141,881 Natural gas transportation 163,097 174,533 Natural gas storage 36,148 38,033 Other 1,347 1,795 --------------- -------------- Total operating revenues 391,576 356,242 --------------- -------------- Operating Costs and Expenses: Cost of natural gas sales 191,050 141,742 Cost of natural gas transportation 19,861 31,200 Operation and maintenance 50,502 50,629 Administrative and general 33,837 34,595 Depreciation and amortization 42,718 39,006 Taxes - other than income taxes 9,076 8,578 Other 298 155 --------------- --------------- Total operating costs and expenses 347,342 305,905 --------------- --------------- Operating Income 44,234 50,337 --------------- --------------- Other (Income) and Other Deductions: Interest expense - affiliates - 177 - other 16,510 14,071 Interest income - affiliates (1,069) (359) - other (202) (450) Allowance for equity and borrowed funds used during construction (AFUDC) (1,519) 1,666) Miscellaneous other deductions, net 961 496 --------------- -------------- Total other (income) and other deductions 14,681 12,269 --------------- -------------- Income Before Income Taxes 29,553 38,068 Provision for Income Taxes 11,510 14,171 --------------- -------------- Net Income 18,043 23,897 Dividends on Preferred Stock - - --------------- -------------- Common Stock Equity in Net Income $ 18,043 $ 23,897 =============== ============== The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
The acquisition of Transco Energy Company and subsidiaries, including Transco, by The Williams Companies was accounted for using the purchase method of accounting. Accordingly, the purchase price was "pushed down" and recorded in the accompanying consolidated financial statements which affects the comparability of the post-acquisition and pre-acquisition results of operations and cash flows. TRANSCONTINENTAL GAS PIPE LINE CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Thousands of Dollars) (Unaudited)
Post-Acquisition Pre-Acquisition --------------------------------- ---------------- For the Period | For the Period For the Six January 18, 1995 | January 1, 1995 Months Ended to | to June 30, 1996 June 30, 1995 | January 17, 1995 ------------- ------------- | ---------------- | Operating Revenues: | Natural gas sales $ 455,061 $ 260,841 | $ 31,701 Natural gas transportation 339,785 317,360 | 32,775 Natural gas storage 72,920 70,884 | 7,452 Other 3,037 2,816 | 133 ------------- ------------- | ---------------- Total operating revenues 870,803 651,901 | 72,061 ------------- ------------- | ---------------- | Operating Costs and Expenses: | Cost of natural gas sales 455,060 260,694 | 31,691 Cost of natural gas transportation 44,052 57,272 | 6,279 Operation and maintenance 96,022 86,931 | 8,722 Administrative and general 68,499 64,759 | 7,063 Provision for executive severance benefits - - | 16,048 Depreciation and amortization 86,250 69,655 | 5,560 Taxes - other than income taxes 18,325 15,556 | 1,558 Other 514 693 | 53 ------------- ------------- | ---------------- Total operating costs and expenses 768,722 555,560 | 76,974 ------------- ------------- | ---------------- | Operating Income (Loss) 102,081 96,341 | (4,913) ------------- ------------- | ---------------- Other (Income) and Other Deductions: | Interest expense - affiliates - 305 | 2 - other 29,656 26,791 | 2,678 Interest income - affiliates (2,200) (663) | (207) - other (256) (529) | (12) Allowance for equity and borrowed funds used during | construction (AFUDC) (2,558) (2,612) | (234) Miscellaneous other deductions, net 1,938 738 | 213 ------------- ------------- | --------------- Total other (income) and other deductions 26,580 24,030 | 2,440 ------------- ------------- | --------------- | Income (Loss) before Income Taxes 75,501 72,311 | (7,353) | Provision for Income Taxes 29,329 27,407 | 2,309 ------------- ------------- | --------------- | Net Income (Loss) 46,172 44,904 | (9,662) | Dividends on Preferred Stock - 722 | 194 ------------- ------------- | --------------- | Common Stock Equity in Net Income (Loss) $ 46,172 $ 44,182 | $ (9,856) ============= ============= | =============== The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
The acquisition of Transco Energy Company and subsidiaries, including Transco, by The Williams Companies was accounted for using the purchase method of accounting. Accordingly, the purchase price was "pushed down" and recorded in the accompanying consolidated financial statements which affects the comparability of the post-acquisition and pre-acquisition results of operations and cash flows. TRANSCONTINENTAL GAS PIPE LINE CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Thousands of Dollars) (Unaudited)
Post-Acquisition Pre-Acquisition --------------------------------- ---------------- For the Period | For the Period For the Six January 18, 1995 | January 1, 1995 Months Ended to | to June 30, 1996 June 30, 1995 | January 17, 1995 ------------- ------------- | ---------------- | Cash flows from operating activities: | Net income (loss) $ 46,172 $ 44,904 | $ (9,662) Adjustments to reconcile net income to net cash provided | by (used in) operating activities: | Depreciation and amortization 92,726 75,957 | 6,083 Deferred income taxes (40,673) (9,032) | 5,348 Provision for (payment of) executive severance benefits (401) (13,396) | 16,048 Allowance for equity funds used during construction (AFUDC) (1,739) (2,182) | (190) Changes in operating assets and liabilities: | Receivables 8,917 2,834 | (7,114) Transportation and exchange gas receivables 24,153 (40,662) | (5,701) Inventories (13,541) 5,300 | (2,647) Payables (84,400) 36,829 | (8,059) Transportation and exchange gas payables (32,727) 29,583 | 4,934 Accrued liabilities (37,797) 10,164 | (4,755) Reserve for rate refunds 60,462 (14,780) | (26,846) Other, net 21,665 (22,261) | 153 ------------- ------------ | ---------------- Net cash provided by (used in) operating activities 42,817 103,258 | (32,408) ------------- ------------ | ---------------- | Cash flows from financing activities: | Capital contribution by parent - 5,539 | - Additions to long-term debt 100,000 50,000 | - Retirement of long-term debt (125,000) (20,000) | - Retirement of preferred stock - (49,744) | - Advances from affiliates, net - (8,195) | 8,195 Dividends on preferred stock - (1,647) | - ------------- ------------ | ---------------- Net cash provided by (used in) financing activities (25,000) (24,047) | 8,195 ------------- ------------ | ---------------- | Cash flows from investing activities: | Property, plant and equipment (PP&E), net of equity AFUDC (89,717) (101,121) | (3,797) Changes in accounts payable and accrued liabilities - PP&E (3,235) (2,446) | (1,099) Sale of assets - 15,829 | - Advances to affiliates, net 76,536 (24,494) | 63,599 Other, net (1,759) 973 | (24) ------------- ------------ | ---------------- Net cash provided by (used in) investing activities (18,175) (111,259) | 58,679 ------------- ------------ | ---------------- | Net increase (decrease) in cash and cash equivalents (358) (32,048) | 34,466 Cash and cash equivalents at beginning of period 2,557 36,094 | 1,628 ------------- ------------ | ---------------- Cash and cash equivalents at end of period $ 2,199 $ 4,046 | $ 36,094 ============= ============ | ================ | | Supplemental disclosures of cash flow information: | Cash paid (refunded) during the year for : | Interest (net of amount capitalized) $ 27,842 $ 24,029 | $ 5,552 Income taxes paid 8,616 25,147 | 19,427 Income tax refunds received (417) (1,486) | - The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. CORPORATE STRUCTURE AND CONTROL Prior to May 1, 1995, Transcontinental Gas Pipe Line Corporation (Transco) was a wholly-owned subsidiary of Transco Gas Company (TGC). TGC is a wholly-owned subsidiary of Transco Energy Company (TEC). As discussed in Transco's 1995 Annual Report on Form 10-K, TEC and The Williams Companies, Inc. (Williams) entered into a merger agreement (Merger) pursuant to which Williams acquired TEC and its wholly-owned subsidiaries. On the May 1, 1995 effective date of the Merger, TEC declared and paid as dividends to Williams all of TEC's interests in Transco. B. BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of Transco and its majority-owned subsidiaries. Companies in which Transco and its subsidiaries own 20 percent to 50 percent of the voting common stock are accounted for under the equity method. The condensed consolidated financial statements have been prepared from the books and records of Transco without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in Transco's 1995 Annual Report on Form 10-K and included in Transco's First Quarter Report on Form 10-Q. The acquisition of TEC and its subsidiaries, including Transco, by Williams has been accounted for using the purchase method of accounting. Accordingly, an allocation of the purchase price was assigned to the assets and liabilities of Transco based on their estimated fair values. The accompanying post-acquisition consolidated financial statements reflect Transco's share of the purchase price. The purchase price allocation to Transco primarily consisted of a $1.5 billion allocation to property, plant and equipment, which is being amortized on a straight-line basis, and adjustments to deferred taxes based upon the book basis of the net assets recorded as a result of the acquisition. Current Federal Energy Regulatory Commission (FERC) policy does not permit Transco to recover through rates amounts in excess of original cost. Further, as a result of the change in control of Transco on January 18, 1995 and the effects of the allocation of the purchase price, Transco's Condensed Consolidated Statement of Income and Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 1995 have been segregated into a pre-acquisition period ending January 17, 1995 and a post-acquisition period beginning January 18, 1995. Through an agency agreement, Williams Energy Services Company (WESCO), an affiliate of Transco, manages all jurisdictional merchant gas sales of Transco, receives all margins associated with such business and, as Transco's agent, assumes all market and credit risk associated with Transco's jurisdictional merchant gas sales. Consequently, Transco's merchant gas sales service has no impact on its operating income or results of operations. Certain reclassifications have been made in the 1995 financial statements to conform to the 1996 presentation. C. CONTINGENT LIABILITIES AND COMMITMENTS There have been no new developments from those described in Transco's 1995 Annual Report on Form 10-K or 1996 First Quarter Report on Form 10-Q other than as described below. RATE AND REGULATORY MATTERS GENERAL RATE CASE (DOCKET NO. RP95-197) Transco, FERC's staff and nearly all active parties have agreed to settle many of the issues scheduled for hearing in September, 1996. On June 19, 1996, an offer of settlement encompassing all issues regarding cost of service and throughput (except rate of return and capital structure), as well as several cost allocation issues, was submitted to the Administrative Law Judge (ALJ) for certification to the FERC. With the exception of one party that filed comments opposing the settlement and one party that took no position on the merits of the settlement, all active parties and FERC's staff either support the settlement or do not oppose it. On July 31, 1996 the ALJ certified the settlement to the FERC for its consideration. GENERAL RATE CASE (DOCKET NO. RP92-137) On April 10, 1996, the FERC issued its order on remand and adopted Transco's capital structure as the appropriate capital structure for ratemaking purposes, reversing its previous orders adopting a hypothetical capital structure. The FERC made no adjustment to Transco's rate of return on equity, adopting a 14.45% rate of return on equity. The FERC directed Transco to make refunds in accordance with the April 10, 1996 order. Certain parties filed for rehearing of the April 10 order and, on July 23, 1996, the FERC denied the rehearing requests. Transco previously provided a reserve which it believes is sufficient for refunds required under the order. ORDER 636 On July 3, 1996, the FERC issued an order on review of an ALJ's initial decision concerning, among other things, Transco's production area rate design. The FERC rejected the ALJ's recommendations that Transco divide its costs between its production area and market area, and permit its customers to renominate their firm entitlements. The FERC also concluded that Transco may offer firm service on its supply laterals through an open season and eliminate its IT feeder service in favor of an interruptible service option that does not afford shippers feeding firm transportation on Transco's production area mainline a priority over other interruptible transportation. On July 16, 1996, the U.S. Court of Appeals for the D.C. Circuit issued an order which in part affirmed and in part remanded Order 636. However, the court stated that Order 636 would remain in effect until the FERC issued a final order on remand after considering the remanded issues. With the issuance of this decision, the stay on the appeals of individual pipeline's restructuring cases will be lifted. LEGAL PROCEEDINGS DAKOTA GASIFICATION LITIGATION By order dated July 17, 1996, the FERC set this case for oral argument before the FERC to take place on September 25, 1996. ROYALTY CLAIMS On July 18, 1996, an individual filed a lawsuit in the United States District Court for the District of Columbia against 70 natural gas pipelines and other gas purchasers or former gas purchasers. Transco is named as a defendant in the lawsuit. The plaintiff claims, on behalf of the United States under the False Claims Act, that the pipelines have incorrectly measured the heating value or volume of gas purchased by the defendants. The plaintiff claims that the United States has lost royalty payments as a result of these practices. Transco intends to vigorously defend against these claims. The Texaco lawsuit is scheduled to go to trial in November 1996. Some producers that have indemnification arrangements with Transco covering certain types of royalty claims have received additional claims for royalties. Some of these claims may be covered by such indemnification. SUMMARY While no assurances may be given, Transco does not believe that the ultimate resolution of the foregoing matters, taken as a whole and after consideration of amounts accrued, recovery from customers, insurance coverage or other indemnification arrangements, will have a materially adverse effect upon Transco's future financial position, results of operations and cash flow requirements. D. DEBT AND FINANCING ARRANGEMENTS LONG-TERM DEBT Williams and certain of its subsidiaries, including Transco, are parties to an $800 million credit agreement (Credit Agreement), under which Transco can borrow up to $400 million. Interest rates vary with current market conditions. As of June 30, 1996, Transco had outstanding borrowings of $100 million under this agreement. On May 15, 1996, Transco redeemed $125 million of its adjustable rate notes primarily through the use of the Credit Agreement. On July 15, 1996, Transco issued $200 million of debentures (the "Debentures"), which pay interest at 7.08% per annum on January 15 and July 15 of each year, beginning January 15, 1997. The Debentures mature on July 15, 2026, but are subject to redemption, at any time after July 15, 2001, at Transco's option, in whole or part, at a specified redemption price. The holder of each Debenture may elect between May 15, 2001 and June 15, 2001 to have such Debenture repaid on July 15, 2001 at 100% of the principal amount. The Debentures have no sinking fund provisions. SHORT-TERM DEBT In May 1996, Transco canceled one of its short-term money market facilities, which decreased the amount Transco can borrow under such facilities to an aggregate of $95 million from $135 million. As of June 30, 1996, Transco had no outstanding borrowings under these facilities. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the financial statements, notes and management's discussion contained in Items 7 and 8 of Transco's 1995 Annual Report on Form 10-K and in Transco's First Quarter Report on Form 10-Q and with the condensed financial statements and notes contained in this report. CAPITAL RESOURCES AND LIQUIDITY METHOD OF FINANCING Transco funds its capital requirements with cash flows from operating activities, including the sale of trade receivables, repayments of funds advanced to Williams, borrowings under the Credit Agreement and short-term money market facilities and, if required, advances from Williams. In late 1996 or early 1997, Transco also expects to access capital markets to refinance current maturities of existing long-term debt. As discussed in Note D of the Notes to the Condensed Consolidated Financial Statements, during May 1996, Transco redeemed $125 million of adjustable rate notes and, during July 1996, Transco issued $200 million of Debentures. At June 30, 1996 there were outstanding borrowings of $100 million under the Credit Agreement, which were repaid on July 17, 1996, from the proceeds of the Debentures, and no outstanding borrowings under the short-term money market facilities. Advances due Transco by Williams, which at June 30, 1996, totaled $28 million, increased to $127 million on July 31, 1996, primarily due to the proceeds of the Debentures. CAPITALIZATION AND CASH FLOWS As shown in the following table, at June 30, 1996, the percentage of total debt to total invested capital was 26.3%, compared to 27.5% at December 31, 1995.
June 30, 1996 December 31, 1995 ------------- ----------------- (In Millions) Common Stockholder's Equity $ 1,774.7 $ 1,736.8 Preferred Stock - - Long-term Debt, Less Current Maturities 381.7 382.0 --------- --------- Total Capitalization 2,156.4 2,118.8 Current Maturities of Long-term Debt 250.0 277.1 --------- --------- Total Invested Capital $ 2,406.4 $ 2,395.9 ========= ========= Long-term Debt, Less Current Maturities, as a Percentage of Total Capitalization 17.7% 18.0% Common Stockholder's Equity as a Percentage of Total Capitalization 82.3% 82.0% Total Debt as a Percentage of Total Invested Capital 26.3% 27.5% For purposes of the discussion of variances between the six months ended June 30, 1996 and the six months ended June 30, 1995, the pre-acquisition and post-acquisition periods presented in the accompanying consolidated financial statements for the six months ended June 30, 1995 have been combined for a pro forma presentation of cash flows for the first six months of 1995. Six Months Ended June 30, ----------------------- 1996 1995 ---------- ---------- (In Millions) Cash Flows Provided by Operating Activities $ 42.8 $ 70.9 ========== ========== Net cash flows provided by operating activities for the six months ended June 30, 1996 were $28 million lower than for the six months ended June 30, 1995, primarily due to the timing of disbursements for payables and payments of federal income taxes to Williams in 1996 compared to 1995, partially offset by the collection of revenues in 1996 subject to refund under the RP95-197 general rate case and amounts refunded to customers in 1995 under the RP92-137 general rate case.
Six Months Ended June 30, ----------------------- 1996 1995 ---------- ---------- (In Millions) Cash Flows Used in Financing Activities $ 25.0 $ 15.9 ========== ========== Net cash flows used in financing activities for the six months ended June 30, 1996 included cash outflows for the retirement of $125 million of long-term debt by Transco, partly offset by borrowings of $100 million by Transco under the Credit Agreement. Net cash flows used in financing activities for the six months ended June 30, 1995 included cash outflows for the retirement of $50 million of preferred stock by Transco, partly offset by net borrowings of $30 million by Transco under the Credit Agreement and a capital contribution from Williams of $5 million.
Six Months Ended June 30, ----------------------- 1996 1995 ---------- ---------- (In Millions) Cash Flows Used in Investing Activities $ 18.2 $ 52.6 ========== ==========
For the six months ended June 30, 1996, net cash flows used in investing activities primarily consisted of $93 million for capital expenditures for property, plant and equipment as shown in the following table. This amount was substantially offset by the net repayment by Williams of advances by Transco of $77 million. For the six months ended June 30, 1995, net cash flows used in investing activities primarily consisted of $108 million for capital expenditures for property, plant and equipment as shown in the following table. This amount was partly offset by the net repayment of advances to affiliates of $39 million and proceeds of $16 million from the sale of assets of which $12 million is from the sale of an interest in the Mobile Bay Lateral.
Six Months Ended June 30, ----------------------- Capital Expenditures 1996 1995 - -------------------- ---------- ---------- (In Millions) Market-Area Projects $ 14.7 $ 33.3 Maintenance of Existing Facilities and Other Projects 78.3 75.2 ---------- ---------- Total Capital Expenditures $ 93.0 $ 108.5 ========== ==========
OTHER CAPITAL REQUIREMENTS AND CONTINGENCIES Transco's capital requirements and contingencies are discussed in its 1995 Annual Report on Form 10-K. Other than described in Note C of the Notes to Condensed Consolidated Financial Statements in Transco's First Quarter Report on Form 10-Q and in this report, there have been no new developments from those described in Transco's 1995 Annual Report on Form 10-K with regard to other capital requirements and contingencies. CONCLUSION Although no assurances can be given, Transco currently believes that the aggregate of cash flows from operating activities, supplemented, when necessary, by repayments of funds advanced to Williams, advances or capital contributions from Williams and borrowings under the Credit Agreement or short-term money market facilities, will provide Transco with sufficient liquidity to meet its capital requirements. When necessary, Transco also expects to be able to access public and private markets to finance its capital requirements. RESULTS OF OPERATIONS As a result of the change in control of Transco on January 18, 1995 and the effects of the allocation of the purchase price, Transco's Condensed Consolidated Statement of Income for the six months ended June 30, 1995 has been segregated into a pre-acquisition period ending January 17, 1995 and a post-acquisition period beginning January 18, 1995. For purposes of the discussion of variances between the six months ended June 30, 1996 and the six months ended June 30, 1995, the pre-acquisition and post-acquisition periods for the six months ended June 30, 1995 have been combined for a pro forma presentation of results of operations for the first six months of 1995. COMMON STOCK EQUITY IN NET INCOME AND OPERATING INCOME Transco's common stock equity in net income for the three months and six months ended June 30, 1996 was $18.0 million and $46.2 million, respectively, compared with common stock equity in net income of $23.9 million and $34.3 million for the three months and six months ended June 30, 1995 , respectively. The results for the six months ended June 30, 1995 include an after-tax charge of $15.3 million, to provide for executive severance and termination benefits, substantially all of which were not deductible for federal income tax purposes. Excluding this charge, Transco's common stock equity in net income for the six months ended June 30, 1995 would have been $49.6 million. The lower common stock equity in net income of $5.9 million for the three months ended June 30, 1996 was primarily due to higher operating expenses (excluding the cost of sales and transportation), slightly lower revenues, net of the related cost of sales and transportation, and higher net interest expense. Excluding the 1995 charge for executive severance and termination benefits, the lower common stock equity in net income of $3.4 million for the six months ended June 30, 1996 was primarily due to higher operating expenses (excluding the cost of sales and transportation), partially offset by slightly higher revenues, net of the related cost of sales and transportation, and lower dividends on preferred stock. Operating income for the three months ended June 30, 1996 was $44.2 million compared to $50.3 million for the three months ended June 30, 1995 and for the six months ended June 30, 1996 was $102.1 million compared to $107.5 million (excluding the pre-tax charge of $16.0 million for executive severance and termination benefits) for the six months ended June 30, 1995. The lower operating income was primarily due to the same reasons discussed above for the lower common stock equity in net income, excluding net interest expense and dividends on preferred stock. Because of its rate structure and historical maintenance schedule, Transco typically experiences lower operating profit in the second and third quarters as compared to the first and fourth quarters of the year. OPERATING EXPENSES Excluding the pre-tax effects of the charge for executive severance and termination benefits in 1995 and the cost of sales and transportation of $210.9 million and $499.1 million for the three and six months ended June 30, 1996, respectively, and $172.9 million and $355.9 million, respectively, for the comparable periods in 1995, Transco's operating expenses for the three and six months ended June 30, 1996, were approximately $3.5 million and $9.1 million higher, respectively, than the comparable periods in 1995. Increases in operation and maintenance expenses (excluding the effects of the lower underground storage costs discussed below), depreciation and amortization and taxes-other than income taxes were partially offset by lower administrative and general expenses. Operation and maintenance expenses increased $2.1 million and $5.5 million in the respective three-month and six-month periods (excluding the effects of the lower underground storage costs) primarily due to higher contract services to perform scheduled maintenance earlier in the year in order to capture market opportunities during higher demand periods. The increase in depreciation and amortization of $3.7 million and $11.0 million, respectively, was primarily due to greater amortization of amounts allocated to Transco's property, plant and equipment from the Williams purchase price of $0.6 million and $5.5 million, respectively, and an increase in the regulated depreciation expense of $3.1 million and $5.5 million, respectively, resulting from an increase in property, plant and equipment and rates included in Transco's RP95-197 rate case. Taxes - other than income taxes increased $0.5 million and $1.2 million, respectively, primarily due to higher state franchise taxes. Administrative and general expenses decreased $0.8 million and $3.3 million, respectively, primarily due to a decrease in office building rent. TRANSPORTATION SERVICES Transco's operating revenues related to its transportation services for the three months and six months ended June 30, 1996 were $163 million and $340 million, respectively, compared to $175 million and $350 million for the three months and six months ended June 30, 1995. The lower revenues for both periods were primarily due to lower gas transportation costs charged to Transco by others that are recovered in Transco's rates, slightly offset by the benefits of phase one of the 1995/1996 Southeast Expansion Project placed in service in late 1995. As shown in the table below, Transco's total market-area deliveries for the three months and six months ended June 30, 1996 increased 13.7 TBtu and 46.7 TBtu, respectively, or 5% and 7%, respectively, when compared to the same periods in 1995. The increased deliveries were mainly due to phase one of the 1995/1996 Southeast Expansion Project being placed into service in late 1995 and, for the six-month period, prolonged cold weather in the market area during the first quarter of 1996. The production-area deliveries for the three months and six months ended June 30, of 1996, increased 7.5 TBtu and 26.3 TBtu, respectively, or 18% and 33%, respectively, when compared to the same periods in 1995. The increased deliveries were due primarily to gas being transported for injection into storage and, for the six-month period, prolonged cold weather during the first quarter of 1996. As a result of a straight fixed-variable (SFV) rate design, the increase in total system deliveries had no significant impact on operating income.
Three Months Six Months Ended June 30, Ended June 30, ----------------- ------------------ Transco System Deliveries (TBtu) 1996 1995 1996 1995 - -------------------------------- ---- ---- ---- ---- Market-area deliveries: Long-haul transportation 227.0 202.6 488.8 426.9 Market-area transportation 84.9 95.6 224.4 239.6 ----- ----- ----- ----- Total market-area deliveries 311.9 298.2 713.2 666.5 Production-area transportation 49.1 41.6 107.0 80.7 ----- ----- ----- ----- Total system deliveries 361.0 339.8 820.2 747.2 ===== ===== ===== ===== Average Daily Transportation Volumes (TBtu) 4.0 3.7 4.5 4.1 Average Daily Firm Reserved Capacity (TBtu) 5.2 5.2 5.0 5.1
Transco's facilities are divided into seven rate zones. Four are located in the production area and three are located in the market area. Long-haul transportation is gas that is received in one of the production-area zones and delivered in a market-area zone. Market-area transportation is gas that is both received and delivered within market-area zones. Production-area transportation is gas that is both received and delivered within production-area zones. See Note C of the Notes to Condensed Consolidated Financial Statements for a discussion of Transco's rate and regulatory matters. SALES SERVICES Transco makes jurisdictional merchant gas sales to customers pursuant to a blanket sales certificate issued by the FERC, with most of those sales being made through a Firm Sales (FS) program which gives customers the option to purchase daily quantities of gas from Transco at market-responsive prices in exchange for a demand charge payment. Through an agency agreement, WESCO manages all jurisdictional merchant gas sales of Transco, receives all margins associated with such business and, as Transco's agent, assumes all market and credit risk associated with Transco's jurisdictional merchant gas sales. Consequently, Transco's merchant gas sales service has no impact on its operating income or results of operations. Transco's operating revenues for the three and six months ended June 30, 1996 related to its sales services increased $49 million and $163 million to $191 million and $455 million, respectively, when compared to the same periods in 1995. The increases were primarily due to higher gas prices in Transco's jurisdictional merchant sales services. However, this increase in revenues had no effect on Transco's operating or net income variances when compared to the prior year since the increase in revenues was offset by a corresponding increase in the cost of sales.
Three Months Six Months Ended June 30, Ended June 30, ----------------- ---------------- Gas Sales Volumes (TBtu) 1996 1995 1996 1995 - ------------------------ ---- ---- ---- ---- Long-term sales 56.4 50.5 120.8 106.1 Short-term sales 12.0 19.5 28.6 48.1 ---- ---- ----- ----- Total gas sales 68.4 70.0 149.4 154.2 ==== ==== ===== =====
STORAGE SERVICES Transco's operating revenues for the three and six months ended June 30, 1996 related to its storage services decreased $1.9 million and $5.4 million, respectively, when compared to the three and six months ended June 30, 1995. The decreases in revenues were offset by a corresponding decrease in underground storage costs included in operation and maintenance expenses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. See discussion of legal proceedings in Note C of the Notes to Condensed Consolidated Financial Statements included herein. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. None SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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. TRANSCONTINENTAL GAS PIPE LINE CORPORATION (Registrant) Dated: August 13, 1996 By /s/ Nick A. Bacile ---------------------------------- Nick A. Bacile Vice President and Controller (Principal Financial Officer) EX-27 2 TGPL 2ND QTR 1996 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996, CONTAINED IN TRANSCONTINENTAL GAS PIPE LINE CORPORATION'S 1996 SECOND QUARTER REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JUN-30-1996 2,199 0 35,694 0 70,367 359,609 3,535,169 252,114 3,863,158 675,248 381,743 0 0 0 1,774,657 3,863,158 455,061 870,803 455,060 699,709 0 0 29,656 75,501 29,329 46,172 0 0 0 46,172 0 0
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