SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
for transition period from ______________ to ______________
Commission File Number: 33-11721
A. Full title of the plan and the address of the plan if different
from that of the issuer named below: Transco Energy Company
Tran$tock Employee Stock Ownership Plan.
B. Name of issuer of the securities held pursuant to the plan and the
address of its principle executive office: Transco Energy Company,
2800 Post Oak Boulevard, P. O. Box 1396, Houston, Texas 77251.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Transco Energy Company Tran$tock
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for
plan benefits of the Transco Energy Company Tran$tock Employee Stock
Ownership Plan as of December 31, 1994 and 1993, and the related statement
of changes in net assets available for plan benefits for the year ended
December 31, 1994. These financial statements and schedules referred
to below are the responsibility of the Plan administrator. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the Plan administrator, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of
the Transco Energy Company Tran$tock Employee Stock Ownership Plan as of
December 31, 1994 and 1993, and the changes in net assets available for
plan benefits for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedules
of assets held for investment purposes at December 31, 1994, included as
Schedule I, and reportable transactions for the year ended December 31,
1994, included as Schedule II, are presented for the purpose of additional
analysis and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974. The supplemental schedules have been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as
a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Houston, Texas
May 1, 1995
<PAGE>
TRANSCO ENERGY COMPANY
______________________
TRAN$TOCK EMPLOYEE STOCK OWNERSHIP PLAN
_______________________________________
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
____________________________________________________
<TABLE>
<CAPTION>
As of December 31
_________________________________
1994 1993
_____________ _____________
<S> <C> <C>
ASSETS:
Common stock of Transco Energy Company,
3,888,467 shares and 3,902,782 shares,
respectively, at quoted market price $ 64,645,764 $ 55,126,796
Temporary cash investments 19,653 19,964
_____________ _____________
Total assets 64,665,417 55,146,760
LESS:
Liabilities, 7.39% note due 1994 to Transco
Energy Company 0 9,383,340
_____________ _____________
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 64,665,417 $ 45,763,420
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY
______________________
TRAN$TOCK EMPLOYEE STOCK OWNERSHIP PLAN
_______________________________________
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
_______________________________________________________________
FOR THE YEAR ENDED DECEMBER 31, 1994
____________________________________
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Cash dividends, Transco Energy Company common stock $ 2,338,476
Interest income on temporary cash investments 1,636
_____________
Total investment income 2,340,112
_____________
REALIZED GAIN ON SALE AND DISTRIBUTIONS OF TRANSCO ENERGY
COMPANY COMMON STOCK:
Proceeds 184,673
Basis 177,525
_____________
Net realized gain 7,148
_____________
UNREALIZED APPRECIATION OF TRANSCO ENERGY COMPANY
COMMON STOCK 9,721,168
_____________
EMPLOYER CONTRIBUTIONS 7,465,600
_____________
WITHDRAWALS AND DISTRIBUTIONS:
Cash (125,357)
Securities (85,343)
_____________
Total withdrawals and distributions (210,700)
_____________
INTEREST EXPENSE ON LONG-TERM DEBT (421,331)
_____________
INCREASE IN NET ASSETS AVAILABLE FOR PLAN BENEFITS 18,901,997
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 45,763,420
_____________
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $64,665,417
_____________
_____________
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
TRANSCO ENERGY COMPANY
______________________
TRAN$TOCK EMPLOYEE STOCK OWNERSHIP PLAN
_______________________________________
NOTES TO FINANCIAL STATEMENTS
_____________________________
1. DESCRIPTION OF THE PLAN:
________________________
General
_______
The Transco Energy Company Tran$tock Employee Stock Ownership Plan (the
Plan) was established on January 1, 1987, and approved by the board of
directors of Transco Energy Company (the Company) on January 28, 1987.
The Plan subsequently purchased approximately 3.97 million shares of the
Company's newly issued common stock. The Plan was funded with the
proceeds of a $180 million loan (the Loan) to the Plan by the Company
which was subsequently reduced by the transfer of approximately $120
million of excess assets from the terminated Transco Energy Company
Retirement Plan for Retired and Terminated Vested Employees (the Retire-
ment Plan). The purposes of the Plan are (a) to promote and encourage
employees to remain as employees of the Company, (b) to enable such
employees who participate in the Plan to become stockholders of the
Company and (c) to provide benefits for their future through a stock
ownership program.
Each participant's interest in the Plan is maintained in two separate
accounts, a savings account and an incentive account. The savings account
is intended to increase a participant's ownership of the Company's stock.
The savings account will receive an allocation of stock for each year in
which the employee is a participant in the Plan until all shares in the
Plan have been allocated. The value of these stock allocations to the
savings account may be up to, but not exceeding, 8 percent of the
participant's annual base compensation. If the allocation exceeds
8 percent of the participant's annual base compensation, such excess
amount is allocated to the participant's incentive account. The incentive
account is intended to provide a participant with additional benefits for
retirement. All shares are being allocated over an eight-year period,
beginning in 1987. As of December 31, 1994, all of the shares in the Plan
have been allocated to participants. As the eight-year allocation period
has been completed, no more allocations will be made to participants,
except to the extent current participants terminate and thus forfeit their
shares. Also, if the Plan experiences forfeitures, new participants could
participate in the Plan.
A suspense account holds the Plan's shares of the Company's stock which
have not been allocated to the participants' savings and incentive
accounts.
Participation and Vesting
_________________________
Participation in the Plan is available to each employee of the Company who
(a) has completed at least one year of service, (b) is not a member of or
represented by a collective bargaining unit, unless eligibility is
required by the terms of any collective bargaining agreement and (c) is
not a nonresident alien.
A participant becomes vested in the savings account at a rate of
20 percent per year of service. A participant's prior Company service is
credited toward vesting in this account. A participant's incentive
account will become 100 percent vested upon the completion of five years
of service with the Company after December 31, 1986, or upon completion of
20 years of service and attainment of age 55. In the event of the
participant's death or total and permanent disability or upon reaching age
65, the participant will become 100 percent vested in both his incentive
and savings accounts regardless of years of service. Pursuant to Plan
amendments, certain terminating participants also became 100 percent
vested in both their incentive and savings accounts. Nonvested Company
contributions are forfeited five years after the employee's termination
date. Forfeited shares are held in the suspense account and allocated to
participants.
Administration
______________
The Plan is administered by an administrative committee (the Committee) of
not less than three employees of the Company who may, but need not, be
participants in the Plan. The members of the Committee are appointed by
and may be removed by the Company's board of directors. The members of
the Committee and their alternates receive no compensation for their
services, as such, but are paid by the Company as its employees.
All administrative expenses of the Plan and the related trust are paid by
the Company. Except for such right of The Bank of New York (the Plan
Trustee), no person has or may create a lien on any funds, securities or
other property held under the Plan.
Brokerage fees and transfer taxes resulting from the sales and withdrawal
of securities are charged to the accounts of the participants requesting
the transactions.
Contributions and Funding
_________________________
The Company made contributions in cash and/or in shares. The Company made
additional contributions in such amounts and at such times as needed to
provide the funds to pay any principal and interest payments under the
Loan which were not satisfied by dividends paid on common stock
held by the Plan. No participants were required or permitted to make
contributions under the Plan.
Distributions and Withdrawals
_____________________________
Upon the death, disability or retirement at age 65 of a participant, the
total current balance of the participant's accounts as of the last day of
such termination of employment will be distributed in a lump sum to the
participant or the participant's beneficiary.
Upon termination for any reason other than those specified above,
distribution of the vested portion of the current balance of the
participant's accounts will be made as of the end of the Plan year
coinciding with or immediately following the participant's termination
date unless the participant elects to defer distribution to a later date.
The distribution will be made in five equal annual payments unless the
participant elects in writing prior to the commencement of the annual
payments to receive a lump-sum payment.
If there are no loans outstanding with respect to the Plan, a participant
who has completed five or more years of participation in the Plan may
voluntarily withdraw all or any part of the vested portion of his savings
account, but he will be suspended from participation for the following
six-month period. Only one such withdrawal may be made during any 12-
month period. A participant with less than five years of participation in
the Plan may only withdraw the vested portion of his savings account which
the Plan has held for at least two years. As of January 1, 1995, all
active participants became fully vested as there were no outstanding loan
balances. No withdrawal is permitted from the incentive account prior to
a participant's termination of employment with the Company. At
December 31, 1994, there were no amounts requested for withdrawal which
were not withdrawn until 1995.
Voting Rights
_____________
All shares credited to a participant's account are voted in confidence by
the Plan Trustee in accordance with the participant's written
instructions. In the absence of such instructions at least five business
days prior to the date of the meeting at which the vote is to be taken,
the Plan Trustee will vote such shares and the shares in the suspense
account in the same proportion as the participant's directions that are
timely received.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
______________________
Basis of Accounting
___________________
The financial statements of the Plan are presented on the accrual basis of
accounting. Two separate accounts, a savings account and an incentive
account, which reflect the balance of common stock of the Company credited
thereto, are maintained for each participant.
Asset Valuation
_______________
The assets of the Plan are recorded at cost in the participants' accounts
and adjusted to market value for financial statement presentation.
Pursuant to Department of Labor regulations, the realized gain on the sale
of the Company's common stock withdrawals of securities in-kind and
unrealized depreciation of the Company's common stock are based on the
value of those assets at the beginning of the Plan year or at the time of
purchase, if acquired during the year.
Reclassifications
_________________
Certain reclassifications have been made in the 1993 financial statements
to conform to the 1994 presentation.
Allocation of Shares
____________________
The allocation of stock for each Plan year is made to participants at the
beginning of the subsequent Plan year. The Plan allocated 206,795 shares
for the 1994 Plan year, and 194,839 shares for the 1993 Plan year.
The following tables set forth the number of shares allocated to the
participants' savings and incentive accounts for the Plan years ended
December 31, 1994 and 1993, and the number of allocated and unallocated
shares and their corresponding market value held by the Plan at
December 31, 1994 and 1993:
Shares Allocated
For the
Year Ended
December 31
_______________________
1994 1993
__________ __________
Savings account 445,512 477,327
Incentive account 29,106 25,982
<TABLE>
<CAPTION>
Balance at December 31
_________________________________________________________________
1994 1993
______________________________ ______________________________
Shares Amount Shares Amount
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Allocated 3,888,467 $ 64,645,764 3,695,987 $ 52,205,817
Unallocated 0 0 206,795 2,920,979
</TABLE>
3. ACQUISITION OF TRANSCO:
On December 12, 1994, Transco and the Williams Companies, Inc. (Williams)
announced that they had entered into a merger agreement pursuant to which
Williams agreed to commence a cash tender offer to acquire up to 24.6
million shares, or approximately 60 percent, of the outstanding shares of
Transco's common stock for $17.50 per share as a first step in acquiring
the entire equity interest of Transco. The conversion of the remaining
outstanding shares of Transco's common stock to 0.625 shares of Williams'
common stock took place on May 1, 1995, the effective date of the merger.
As a result of the merger, in January 1995, Williams accepted for payment
approximately 2.4 million shares of the Transco common stock held by the
Plan for $17.50 per share. The conversion of the Plan's remaining shares
of Transco's common stock to Williams' common stock took place on May 1,
1995. Any cash from the Williams' payment that was not withdrawn by
participants by May 5, 1995, was used by the Trustee to purchase shares of
Williams' common stock on behalf of the participants. Any interest earned
on the cash received from Williams from the receipt date to May 5, 1995,
will be allocated to participants on a pro-rata basis.
4. FEDERAL INCOME TAXES:
_____________________
The Plan obtained its latest determination letter on July 2, 1990, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the Plan administrator and the Plan's tax counsel believe that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was tax-exempt
as of December 31, 1994 and 1993.
5. LONG-TERM DEBT:
_______________
The Plan was initially funded by a $180 million loan from the Company at
an interest rate of 7.39 percent due in 1994. In 1987, the Company
contributed approximately $120 million to the Plan as a direct transfer
from the trustee of the excess assets from the terminated Retirement Plan.
The Plan subsequently used these funds to reduce the outstanding Loan
balance. Interest and principal on the remaining Loan balance was
serviced by the cash dividends from the shares held by the Plan over the
eight-year term of the Loan. The Company was required to make additional
contributions in such amounts and at such times as necessary to provide
the funds to pay any principal and interest payments under the Loan which
were not satisfied by dividends paid on common stock held by the Plan.
The outstanding Loan was collateralized by unallocated shares held in the
suspense account.
During Plan years 1994 and 1993, $2,338,476 and $2,345,916, respectively,
of cash dividends were used to pay a portion of the outstanding principal
and interest due on the Loan. The Company made additional contributions
of $7,465,600 and $7,581,775 in these years, respectively, to pay the
remaining principal and interest on the Loan. As of December 31, 1994,
the Plan has repaid the entire principal amount of the loan and all
related interest.
6. AMENDMENT AND TERMINATION:
__________________________
The Company has reserved the right to amend or terminate the Plan and the
related trust at any time or discontinue its liability to make
contributions to the Plan. No amendment, change or modification of the
Plan or trust agreement may be made which will reduce participants'
accrued benefits under the Plan or give the Company any rights in funds
contributed or in assets held by the Plan Trustee, without the consent of
the participants, or which will alter the duties or liabilities of the
Plan Trustee without its consent. Currently, Transco and Williams are
evaluating several alternatives for the future of the Plan, which could
include a consolidation or merger of the Plan with or into a Williams'
plan or the development of a new plan for Transco. No definitive plans
have been made by Transco or Williams at this time.
<PAGE>
SCHEDULE I
TRANSCO ENERGY COMPANY
______________________
TRAN$TOCK EMPLOYEE STOCK OWNERSHIP PLAN
_______________________________________
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
________________________________________________
AS OF DECEMBER 31, 1994
________________________
<TABLE>
<CAPTION>
Identity of Number of
Issuer Description Shares Cost Current Value
_______________ ____________________________ ___________ _____________ _____________
<S> <C> <C> <C>
Transco Energy
Company * Common stock 3,888,467 $177,637,938 $ 64,645,764
Bank of
New York * Temporary cash investments 19,653 19,653
_____________
Total assets held for
investment purposes $ 64,665,417
_____________
_____________
* Party-in-interest investment
The accompanying financial statements are an integral part of this schedule.
</TABLE>
<PAGE>
SCHEDULE II
TRANSCO ENERGY COMPANY
______________________
TRAN$TOCK EMPLOYEE STOCK OWNERSHIP PLAN
_______________________________________
SCHEDULE OF REPORTABLE TRANSACTIONS
___________________________________
FOR THE YEAR ENDED DECEMBER 31, 1994
____________________________________
<TABLE>
<CAPTION>
Identity of Number of Purchase Selling Cost of Net
___________________
Party Involved Description Purchases Sales Price Price** Asset Sold Gain (Loss)
_____________________________ _________ _______ ____________ ____________ ____________ ___________
<S> <C> <C> <C> <C> <C> <C>
Bank of Temporary Cash
New York * Investments 47 23 $ 4,271,016 $ 4,271,327 $ 4,271,327 $ 0
* Party-in-interest transaction
** Selling price equals the current value of asset on applicable transaction date
The accompanying financial statements are an integral part of this schedule.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the Plan) have duly caused
this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
TRANSCO ENERGY COMPANY
TRAN$TOCK
EMPLOYEE STOCK OWNERSHIP PLAN
______________________________
(Name of Plan)
Date: June 29, 1995 By: /s/ John C. Fischer
______________________ ________________________
John C. Fischer, Chairman
Administrative Committee
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated May 1, 1995 included in this Form 11-K, into the
Transco Energy Company Tran$tock Employee Stock Ownership Plan's
previously filed Form S-8 Registration Statement (File No. 33-11721).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Houston, Texas
June 29, 1995
