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 September 30, 1994
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 1-4169
TEXAS GAS TRANSMISSION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 61-0405152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3800 Frederica Street, Owensboro, Kentucky 42301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 926-8686
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_
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 1,000 shares as of
November 14, 1994
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a)
and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
TEXAS GAS TRANSMISSION CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Balance Sheets -
September 30, 1994 and December 31, 1993 4-5
Condensed Statements of Income -
Three and Nine Months Ended September 30, 1994
and 1993 6
Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 7
Notes to Condensed Financial Statements 8-10
Item 2. Management's Narrative Analysis of
the Results of Operations 11-16
PART II. OTHER INFORMATION
Item 5. Other Events 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Company or group of companies for which report is filed:
TEXAS GAS TRANSMISSION CORPORATION
The condensed financial statements included herein have been prepared by
Texas Gas Transmission Corporation (the Company), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of the Company's management,
however, all adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the financial position
as of the date and results of operations for the periods included herein
have been made and the disclosures contained herein are adequate to make
the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements,
notes thereto and management's discussion contained in the Company's 1993
Annual Report on Form 10-K and the Company's 1994 First and Second Quarter
Reports on Form 10-Q.
<PAGE>
<TABLE>
TEXAS GAS TRANSMISSION CORPORATION
CONDENSED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, December 31,
1994 1993
ASSETS
<S> <C> <C>
Current Assets:
Cash and temporary cash
investments $ 1,119 $ 292
Receivables:
Trade 10,036 16,441
Affiliates 13,522 4,761
Other 1,407 1,934
Advances to affiliates 51,986 65,667
Transportation and exchange gas
receivable 12,110 25,112
Costs recoverable from customers:
Gas purchase 159 5,590
Gas supply realignment 37,885 19,231
Other 21,170 3,886
Inventories 15,071 14,724
Deferred income tax benefits 11,203 17,680
Other 2,754 2,932
Total current assets 178,422 178,250
Advances to Affiliates 128,000 137,000
Investments, at Cost 2,583 2,635
Property, Plant and Equipment,
at cost:
Natural gas transmission plant 865,563 835,044
Less - Accumulated depreciation
and amortization 208,131 173,201
Property, plant and
equipment, net 657,432 661,843
Other Assets:
Gas stored underground 89,939 92,103
Other 37,397 60,515
Total other assets 127,336 152,618
Total Assets $1,093,773 $ 1,132,346
The accompanying condensed notes are an integral part of these condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
TEXAS GAS TRANSMISSION CORPORATION
CONDENSED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
September 30, December 31,
1994 1993
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ - $ 150,000
Payables:
Trade 10,284 13,821
Affiliates 3,643 13,274
Other 21,322 30,714
Advances from affiliates 1,652 1,576
Transportation and exchange gas payable 5,683 17,109
Accrued liabilities 45,824 44,134
Accrued gas supply realignment costs 1,250 24,750
Costs refundable to customers:
Transportation cost adjustment 7,152 4,643
Income taxes 676 676
Upstream producer settlement costs - 1,525
Reserve for regulatory and rate matters 53,294 23,063
Total current liabilities 150,780 325,285
Long-Term Debt 246,279 98,678
Other Liabilities and Deferred Credits:
Income taxes refundable to customers 6,735 7,243
Deferred income taxes 37,532 35,348
Upstream producer settlement costs - 16,145
Other 43,209 42,411
Total other liabilities and
deferred credits 87,476 101,147
Stockholder's Equity:
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding 1 1
Premium on capital stock and other
paid-in-capital 584,712 584,712
Retained earnings 24,525 22,523
Total stockholder's equity 609,238 607,236
Total Liabilities and Stockholder's
Equity $1,093,773 $1,132,346
The accompanying condensed notes are an integral part of these condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
TEXAS GAS TRANSMISSION CORPORATION
CONDENSED STATEMENTS OF INCOME
(Thousands of Dollars)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues:
Gas sales $ 21,045 $ 46,347 $ 94,434 $204,585
Gas transportation 54,556 46,973 208,755 142,364
Other 322 (1,058) 1,449 1,724
Total operating revenues 75,923 92,262 304,638 348,673
Operating Costs and Expenses:
Cost of gas sold 20,970 21,381 92,800 125,286
Cost of transportation of gas
by others 9,925 14,576 38,201 37,951
Operation and maintenance 14,930 11,420 42,780 38,855
Administrative and general 11,760 16,640 43,939 45,884
Depreciation and amortization 10,250 9,687 31,129 28,735
Taxes other than income taxes 2,653 3,118 10,015 9,661
Total operating costs and expenses 70,488 76,822 258,864 286,372
Operating Income 5,435 15,440 45,774 62,301
Other (Income) Deductions:
Interest expense 6,976 6,373 20,582 19,062
Interest income (3,363) (2,426) (8,737) (8,242)
Miscellaneous other deductions 279 335 1,210 2,196
Total other (income) deductions 3,892 4,282 13,055 13,016
Income Before Income Taxes 1,543 11,158 32,719 49,285
Provision for Income Taxes 773 5,175 13,227 20,058
Net Income $ 770 $ 5,983 $ 19,492 $ 29,227
The accompanying condensed notes are an integral part of these condensed
financial statements.
</TABLE>
<PAGE>
<TABLE>
TEXAS GAS TRANSMISSION CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,492 $ 29,227
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 32,461 29,986
Deferred income taxes 8,661 7,682
Decrease (increase) in:
Receivables 1,438 12,652
Transportation and exchange gas
receivable 13,002 22,912
Inventories (347) (13,279)
Deferred gas costs 5,431 (6,673)
Other current assets (24,885) 2,396
Increase (decrease) in:
Payables (25,732) (18,923)
Transportation and exchange gas
payable (11,426) (11,740)
Accrued liabilities (39,480) (21,569)
Reserve for regulatory and rate
matters 27,095 4,311
Other current liabilities 2,509 -
Other, net 13,941 (10,456)
Net cash from operating
activities 22,160 26,526
Cash flows from financing activities:
Advances from affiliates, net 77 102
Long-term debt - repayment (150,000) -
- borrowing, net 146,619 -
Dividends on common stock (17,490) (26,925)
Net cash from financing
activities (20,794) (26,823)
Cash flows from investing activities:
Property, plant and equipment, net of
equity AFUDC (32,749) (22,325)
Advances to affiliates, net 22,681 17,142
Other, net 9,529 5,715
Net cash from investing
activities (539) 532
Net increase (decrease) in cash and
cash equivalents 827 235
Cash and cash equivalents at beginning
of period 292 560
Cash and cash equivalents at end
of period $ 1,119 $ 795
__________________________________________________________________________
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 17,361 $ 20,658
Income taxes, net 21,190 5,523
The accompanying condensed notes are an integral part of these condensed
financial statements.
</TABLE>
<PAGE>
TEXAS GAS TRANSMISSION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. CORPORATE STRUCTURE AND CONTROL
AND BASIS OF PRESENTATION
Corporate Structure and Control
Texas Gas Transmission Corporation (the Company) is a wholly owned
subsidiary of Transco Gas Company (TGC), which is a wholly owned
subsidiary of Transco Energy Company (Transco). As used herein, the term
Transco refers to Transco Energy Company and its wholly owned subsidiary
companies; the term TGMC refers to Transco Gas Marketing Company, a wholly
owned subsidiary of Transco, and its wholly owned subsidiary companies;
and the term TGPL refers to Transcontinental Gas Pipe Line Corporation, a
wholly owned subsidiary of TGC, unless the context otherwise requires.
The condensed financial statements have been prepared from the books and
records of the Company 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 financial statements should be read
in conjunction with the financial statements, notes thereto and
management's discussion contained in the Company's 1993 Annual Report on
Form 10-K and the Company's 1994 First and Second Quarter Reports on Form
10-Q. Certain reclassifications have been made in the 1993 financial
statements to conform to the 1994 presentation.
B. REGULATORY AND RATE MATTERS
There have been no new developments from those described in the Company's
1993 Annual Report on Form 10-K and the Company's 1994 First and Second
Quarter Reports on Form 10-Q other than described below.
FERC Order 636
As discussed in the Company's 1993 Annual Report on Form 10-K, effective
November 1, 1993, the Company restructured its business to implement the
provisions of FERC Order 636. The Company's transition costs under FERC
Order 636 are primarily related to Gas Supply Realignment (GSR) contract
termination costs, GSR pricing differential costs incurred pursuant to the
Company's monthly auction process and unrecovered purchased gas costs.
Through September 30, 1994, the Company had paid or committed to pay a
total of $44.4 million for GSR costs, primarily as a result of certain GSR
contract terminations. The Company continues to make quarterly filings to
recover its GSR costs as such costs are paid. As of September 30, 1994,
the Company had recovered $7.6 million of such costs. Pursuant to the
provisions of FERC Order 636, the Company expects that any transition
costs incurred will be fully recovered from its customers.
<PAGE>
Pursuant to FERC Order 636, the Company terminated its Purchased Gas
Adjustment (PGA) clause on November 1, 1993. The Company's right to file
for future recovery, via additional direct billings, of pre-November 1,
1993 adjustments to purchased gas costs, expired on July 31, 1994. The
Company filed for an extension of the July 31, 1994 deadline to permit
recovery of amounts not yet resolved under certain contracts in litigation
or pending settlements. On August 26, 1994 the FERC issued an order
granting an extension of the deadline to October 31, 1995 or 90 days after
the final nonappealable resolution of any litigation, arbitration, or
administrative proceeding.
General Rate Issues
On April 29, 1993, the Company filed a general rate case (Docket No. RP93-
106), which became effective November 1, 1993, subject to refund. A
settlement agreement regarding the general rate case was filed on June 14,
1994. On September 21, 1994, the FERC issued an "Order Approving
Settlement" accepting the settlement as filed with no significant
modifications, which became final October 21, 1994. The Company has
provided a reserve which it believes is adequate for refunds, including
interest, that will be required. As of September 30, 1994, such refunds,
which are currently expected to be made in December 1994, were estimated
to be approximately $40 million, including interest. Interest will
continue to accrue until all refunds are made.
On September 30, 1994, the Company filed a general rate case (Docket No.
RP94-423) which, pursuant to a FERC suspension order issued October 28,
1994, will be effective April 1, 1995, subject to refund. This rate
change reflects a requested annual revenue increase of approximately $66.9
million, based on the filed rates. The increase is primarily attributable
to increases in the utility rate base, operating expenses, and rate of
return and related taxes.
On July 29, 1994, and in rehearing on September 16, 1994, the FERC issued
an order accepting the June 30, 1994 filing made by the Company to resolve
its transportation and exchange imbalances pre-dating the implementation
of FERC Order 636. The order approved the timetable proposed in the
filing whereby such imbalances must be reconciled by December 31, 1994.
Following the parties' agreement as to the allocations, reconciled
imbalances will be repaid in cash, or through receipt or delivery of gas,
as permitted by operating conditions, by the end of 1995.
FERC Orders 500 and 528
On August 4, 1994, the FERC issued an order approving the settlement
agreements of the Company and its upstream pipelines in the Company's
pending FERC Order 528 flowthrough proceedings. Pursuant to the
settlements, on September 30, 1994, the Company flowed through to its
former sales customers $39.9 million, which the Company had received from
upstream pipelines. This order resolves all the Company's issues related
to the flowthrough of upstream pipelines' take-or-pay costs.
<PAGE>
FERC Order 94-A
As discussed in the Company's 1993 Annual Report on Form 10-K, on January
12, 1994, the FERC issued its "Order Granting Rehearing" which found that
the FERC had committed a legal error in allowing the direct bill of FERC
Order 94-A costs to certain customers. The effect of this order, as
issued, would be to require the Company to make refunds to certain
customers of $13.5 million, recover $2.7 million through direct billing of
other customers, recover $5.4 million as part of the direct billing of its
unrecovered purchase gas costs and absorb the remaining $5.4 million. The
Company filed for rehearing of this order and received an extension
staying the effectiveness of this order until 30 days after the FERC rules
on rehearing. On October 18, 1994, the FERC issued its "Order Denying
Rehearing" which affirmed its January 12, 1994 Order. The Company intends
to assert all available legal rights and remedies to stay the Order's
requirement to make refunds by November 17, 1994. The Company continues
to believe that it is entitled to full recovery of these FERC ordered
costs and is considering appropriate appellate action.
Reserve for Regulatory and Rate Matters
The Company has established reserves for its outstanding regulatory and
rate matters which it believes are adequate to provide for any costs
incurred or refunds to be made in regard to the resolution of its
regulatory and rate issues. Although no assurances can be given, the
Company believes that the resolution of these matters will not have a
material adverse effect on its financial position or results of
operations.
C. Royalty Claims and Legal Proceedings
There have been no new developments from those described in the Company's
1993 Annual Report on Form 10-K with regard to royalty claims and legal
proceedings.
D. Financing
As discussed in the Company's 1993 Annual Report on Form 10-K, certain of
Transco's credit facilities prohibit the Company from, among other things,
incurring or guaranteeing any additional indebtedness (except for
indebtedness incurred to refinance existing indebtedness), issuing
preferred stock or advancing cash to affiliates other than Transco.
Further, these credit facilities and Transco's indentures contain
restrictive covenants which could limit Transco's ability to make
additional borrowings and, therefore, under certain circumstances, its
ability to repay advances or make capital contributions to the Company.
<PAGE>
Item 2. Management's Narrative Analysis of the Results of
Operations (Filed Pursuant to General Instruction H)
Financial Analysis of Operations
Nine Months Ended September 30, 1994 Compared to
Nine Months Ended September 30, 1993
The following discussion should be read in conjunction with the condensed
financial statements, notes and management's discussion contained in the
Company's 1993 Annual Report on Form 10-K and in the Company's 1994 First
and Second Quarter Reports on Form 10-Q and with the condensed financial
statements and notes contained in this report.
On November 1, 1993, the Company implemented FERC Order 636, which
required pipelines to "unbundle" services and offer transportation and
storage services separately from the sale of gas. As a result, the
Company's gas sales result primarily from requirements to meet its
remaining gas purchase commitments. The Company's monthly gas purchases
under non-market-responsive commitments are sold at auction with any
underrecovery of such costs deferred as a regulatory asset for future
recovery as a transition cost. All other gas purchase and sales
commitments are being managed by the Company's marketing affiliate, TGMC,
as agent for the Company. The Company's gas sales currently have no
impact on its results of operations.
The Company's implementation of FERC Order 636 included a change in its
rate design method from Modified Fixed Variable (MFV) to Straight Fixed
Variable (SFV). Under the MFV method, all fixed costs, with the exception
of equity return and income taxes, were included in the demand component
of the charge to customers; the equity return and income tax components of
cost of service were included as part of the volumetric charge to
customers. Under the SFV method, all fixed costs, including equity return
and income taxes, are included in the demand charge to customers.
Accordingly, under SFV, overall throughput has a less significant impact
on the Company's results of operations.
There are various factors which may affect the Company's actual operating
results, including, but not limited to, competition from other pipelines,
its rate design structure, cost management, and, to a lesser extent,
fluctuations in its throughput which may result from a number of factors,
including weather. The Company's interim operating results are impacted
by customers' ability to reserve firm transportation levels on a seasonal
basis; which, combined with SFV rate design, results in lower operating
income in the second and third quarters than in the first and fourth
quarters. While the use of SFV rate design limits the Company's
opportunity to earn incremental revenues through increased throughput, it
also minimizes the Company's fluctuations in revenue due to variations in
throughput. The Company believes that under FERC Order 636, with SFV
rates and its anticipated transition cost recovery, its rate structure
will remain competitive.
<PAGE>
Operating and Net Income
Operating income was $17 million lower for the nine months ended September
30, 1994 than for the nine months ended September 30, 1993. The decrease
in operating income was primarily due to lower interruptible
transportation revenues resulting from the implementation of FERC Order
636, seasonal demand revenues that are lower in the second and third
quarters than in the first and fourth quarters, and reserving for a stated
pre-tax rate of return under the Company's RP93-106 general rate case,
which is lower than that included in the Company's previous rates. Net
income was $10 million lower than 1993 for the same reasons that resulted
in lower operating income, including the related income tax effects.
As a result of reduced interruptible transportation revenues due to the
implementation of FERC Order 636 and the lower stated pre-tax rate of
return under the Company's recently settled general rate case, the
Company's 1994 annual operating income will be lower than the prior year.
Operating Revenues
Operating revenues were $44 million lower for the nine months ended
September 30, 1994 than for the nine months ended September 30, 1993. The
decrease in revenues was primarily a result of lower gas sales revenues
due to implementation of FERC Order 636, which ended the Company's bundled
sales service. As previously discussed, effective November 1, 1993,
substantially all of the Company's unbundled gas sales are managed by its
marketing affiliate, TGMC, as agent for the Company.
The increase in gas transportation revenues was primarily due to higher
firm transportation demand revenues as a result of the conversion of
customers' firm sales service to firm transportation service due to the
implementation of FERC Order 636. Although long-haul transportation
volumes increased, the decrease in average commodity transportation rates,
which resulted from the implementation of FERC Order 636, SFV rate design
and reduced interruptible transportation revenues, more than offset the
effect on transportation revenues of the higher transportation volumes.
Operating Costs and Expenses
Cost of gas sold was $32 million lower for the nine months ended September
30, 1994 than for the nine months ended September 30, 1993. This decrease
was primarily due to the implementation of FERC Order 636 and the
resultant decrease in gas sales volumes. The Company's operation and
maintenance expenses increased $4 million, due primarily to a third
quarter 1993 adjustment for income taxes refundable to customers as a
result of an increase in federal tax rates. Administrative and general
expenses decreased $2 million due primarily to a reduction in the
Company's reserve for uncollectible accounts, partially offset by higher
costs of post-retirement benefits other than pensions, which are included
in rates, and to agency fees paid to TGMC for management of unbundled gas
sales.
<PAGE>
System Deliveries
As shown in the table below, the Company's total mainline deliveries for
the nine months ended September 30, 1994 increased 37.6 Bcf, or 9.2%, as
compared to the nine months ended September 30, 1993, primarily due to
increased service to other interstate natural gas pipelines and slightly
colder weather on a degree-day basis during the first quarter of 1994 in
the Company's primary market area. While presently not adding
significantly to the Company's operating income, this increase shows the
strength of the Company's franchise.
Nine Months
Ended September 30,
System Deliveries (Bcf): 1994 1993
Sales - 47.1
Long-haul transportation 447.9 363.2
Total mainline deliveries 447.9 410.3
Short-haul transportation 145.5 156.2
Total system deliveries 593.4 566.5
The Company's facilities are divided into five rate zones. Generally, gas
delivered in the northern four zones is classified as long-haul
transportation. Gas delivered in the remaining southernmost zone is
classified as short-haul transportation. The Company's sales under the
FERC Order 636 environment are generally made in the southernmost zone;
however, the sales are made off system and, therefore, do not constitute
system deliveries.
Capital Resources and Liquidity
Introduction
The Company is an indirect, wholly owned subsidiary of Transco, and as
such, may be affected by the financial position and performance of Transco
and its other subsidiaries.
Over the past two years, Transco has made significant progress in
improving its results of operations and financial flexibility. Transco
remains committed to deleveraging its balance sheet, further eliminating
or mitigating the potentially adverse impact from the resolution of
remaining litigation and contingencies and further improving financial
results.
Accordingly, as one of the options to achieve these goals, Transco, on
November 10, 1994, announced its plans to file with the FERC to transfer
the assets of the Company to a partnership. The partnership structure, if
approved, will provide financing flexibility to the Company and
flexibility to Transco if Transco chooses to monetize a part of its
ownership in the Company. It is Transco's intention to retain operational
control of the Company to preserve the synergies between the Company and
TGPL and maintain the high-quality services the Company's customers enjoy.
It is anticipated that this filing will be made during the fourth quarter
of 1994.
<PAGE>
Financing
As discussed in Note D of the Notes to Condensed Financial Statements,
certain of Transco's credit facilities prohibit the Company, from among
other things, incurring or guaranteeing any additional indebtedness
(except for indebtedness incurred to refinance existing indebtedness),
issuing preferred stock or advancing cash to affiliates other than
Transco. Further, these credit facilities and Transco's indentures
contain restrictive covenants which could limit Transco's ability to make
additional borrowings, and, therefore, under certain circumstances, its
ability to repay advances or make capital contributions to the Company.
Cash Flows and Capitalization
Net cash inflows from operating activities for the nine months ended
September 30, 1994 were $4 million below the nine months ended September
30, 1993, primarily as a result of a lower reduction in receivables,
higher reduction in payables, reduced net income and payments for GSR
costs and to former sales customers in resolution of FERC Order 528
flowthrough proceedings, partially offset by the 1994 collection of
amounts reserved for RP93-106 rate refunds and the 1993 payment of RP90-
104 rate refunds.
Net cash outflows from financing activities for the nine months ended
September 30, 1994 were $6 million below the nine months ended September
30, 1993, primarily due to decreased dividends paid to Transco, partially
offset by the net effects of the Company's debt repayment and proceeds
from its April 1994 debt issue.
Net cash flows from investing activities for the nine months ended
September 30, 1994 were approximately $1 million lower than the nine
months ended September 30, 1993, primarily due to increased capital
expenditures partially offset by higher net repayments by Transco of cash
advanced to Transco under Transco's cash management program.
The Company's capital expenditures for the first nine months of 1994 were
$33 million, including $28 million for maintenance of existing facilities
and $5 million for market expansion projects. Capital expenditures for
the first nine months of 1993 were $22 million, including $18 million for
maintenance of existing facilities and $4 million for market expansion
projects.
The Company's debt as a percentage of total capitalization was 29% at
September 30, 1994. Due to the maturity of the Company's 10% Debentures
in 1994, debt, net of current maturities, was 14% of total capitalization
at December 31, 1993.
Transition Cost Recoveries
The Company continues to make quarterly filings to recover its GSR costs
as such costs are paid. As of September 30, 1994, the Company had paid or
committed to pay $44.4 million for GSR costs and had recovered $7.6
million of such costs.
<PAGE>
Pursuant to FERC Order 636, the Company terminated its PGA clause on
November 1, 1993. The Company's right to file for future recovery, via
additional direct billings, of pre-November 1, 1993 adjustments to
purchased gas costs, expired on July 31, 1994. The Company filed for an
extension of the July 31, 1994 deadline to permit recovery of amounts not
yet resolved under certain contracts in litigation or pending settlements.
On August 26, 1994 the FERC issued an order granting an extension of the
deadline to October 31, 1995 or 90 days after the final nonappealable
resolution of any litigation, arbitration, or administrative proceeding.
Other Future Capital Requirements and Contingencies
The Company's future capital requirements and contingencies are discussed
in the Company's 1993 Annual Report on Form 10-K. Other than described in
Note B of the Notes to Condensed Financial Statements and below, there
have been no new developments from those described in the Company's 1993
Annual Report on Form 10-K or the Company's 1994 First and Second Quarter
Reports on Form 10-Q, with regard to other future capital requirements and
contingencies.
Rate Matters
On September 21, 1994, the FERC issued an "Order Approving Settlement"
accepting the settlement as filed with no significant modifications, which
became final October 21, 1994. The Company has provided a reserve which
it believes is adequate for refunds, including interest, that will be
required. As of September 30, 1994, such refunds, which are currently
expected to be made in December 1994, were estimated to be approximately
$40 million, including interest. Interest will continue to accrue until
all refunds are made.
On September 30, 1994, the Company filed a general rate case (Docket No.
RP94-423) which, pursuant to a FERC suspension order issued October 28,
1994, will be effective April 1, 1995, subject to refund. This rate
change reflects a requested annual revenue increase of approximately $66.9
million, based on the filed rate. The increase is primarily attributable
to increase in the utility rate base, operating expenses, and rate of
return and related taxes.
Under FERC Order 94-A, on October 18, 1994, the FERC issued its "Order
Denying Rehearing" which affirmed its January 12, 1994 Order. The Company
intends to assert all available legal rights and remedies to stay the
Order's requirement to make refunds by November 17, 1994 of $13.5 million,
plus interest. The Company continues to believe that it is entitled to
full recovery of these FERC ordered costs and is considering appropriate
appellate action. The Company has established reserves which it believes
are adequate to provide for any costs that may be incurred or refunds that
may be required.
<PAGE>
Conclusion
Although no assurances can be given, the Company currently believes that
the aggregate of cash flows from operating activities supplemented, when
necessary, by repayments of funds advanced to Transco, will provide the
Company with sufficient liquidity to meet its capital requirements.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Events
(1) On November 10, 1994, Transco announced its
plan to file with the FERC to transfer the assets of the
Company to a partnership. The partnership structure, if
approved, will provide financing flexibility to the
Company and flexibility to Transco if Transco chooses to
monetize a part of its ownership in the Company. It is
Transco's intention to retain operational control of the
Company to preserve the synergies between the Company
and TGPL and maintain the high-quality services that the
Company's customers enjoy. It is anticipated that this
filing will be made within the next several weeks.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
<PAGE>
S I G N A T U R E S
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.
TEXAS GAS TRANSMISSION CORPORATION
DATE: November 14, 1994 BY: /s/ G. D. Lauderdale
G. D. Lauderdale
Senior Vice President
Rates and Finance/
Treasurer
DATE: November 14, 1994 BY: /s/ E. J. Ralph
E. J. Ralph
Vice President and Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from condensed
Statement of Income and Balance Sheet from the third quarter 1994 10-Q of Texas
Gas Transmission Corporation and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000097452
<NAME> TEXAS GAS TRANSMISSION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,119
<SECURITIES> 0
<RECEIVABLES> 10,036
<ALLOWANCES> 0
<INVENTORY> 15,071
<CURRENT-ASSETS> 178,422
<PP&E> 865,563
<DEPRECIATION> 208,131
<TOTAL-ASSETS> 1,093,773
<CURRENT-LIABILITIES> 150,780
<BONDS> 246,279<F1>
<COMMON> 1
0
0
<OTHER-SE> 609,237
<TOTAL-LIABILITY-AND-EQUITY> 1,093,773
<SALES> 94,434
<TOTAL-REVENUES> 304,638
<CGS> 92,800
<TOTAL-COSTS> 214,925
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,582
<INCOME-PRETAX> 32,719
<INCOME-TAX> 13,227
<INCOME-CONTINUING> 19,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,492
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Net of unamortized discount.
</FN>
</TABLE>
