1
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, 2003
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, LLC
(Exact name of registrant as specified in its charter)
Delaware 06-1687421
(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: (270) 926-8686
--------------
Texas Gas Transmission Corporation
(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_
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes __ No X
-
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Not applicable
- ---------------
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.
TEXAS GAS TRANSMISSION, LLC
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Statement of Financial Position - Assets........................... 3
Statement of Financial Position - Liabilities and Member's Equity... 4
Statement of Operations....................................... 5 & 6
Statement of Cash Flows............................................ 7
Statement of Member's Equity....................................... 8
Condensed Notes to Financial Statements..............................9
Item 2. Management's Narrative Analysis of the Results of Operations........17
Item 4. Disclosure Controls and Procedures..................................21
Part II. Other Information
Item 1. Legal Proceedings.................................................. 22
Item 6. Exhibits and Reports filed on Form 8-K ....................... 22
2
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF FINANCIAL POSITION
(Thousands of Dollars)
(Unaudited)
Post -Acquisition Pre -Acquisition
----------------- -----------------
ASSETS June 30, 2003 | December 31, 2002
Current Assets: |
Cash and cash equivalents 38,668 | 277
Receivables: |
Trade 13,266 | 25,705
Affiliates - | 2,386
Other 9,178 | 3,843
Gas Receivables: |
Transportation and exchange 2,423 | 1,392
Storage 21,639 | 6,601
Advances to affiliates 93,058 | 63,143
Inventories 13,710 | 13,580
Deferred income taxes - | 14,724
Costs recoverable from customers - | 2,853
Gas stored underground 3,922 | 3,922
Prepaid and other expenses 4,615 | 3,407
---------- | ----------
Total current assets 200,479 | 141,833
---------- | ----------
|
Property, Plant and Equipment: |
Natural gas transmission plant 507,134 | 1,113,648
Other natural gas plant 155,426 | 154,141
----------- | -----------
662,560 | 1,267,789
|
Less--Accumulated depreciation |
and amortization 4,430 | 209,821
----------- | ------------
Property, plant and equipment, net 658,130 | 1,057,968
----------- | ------------
|
|
|
Other Assets: |
Gas stored underground 91,187 | 110,458
Costs recoverable from customers 40,050 | 37,951
Prepaid pension - | 28,411
Goodwill 280,496 | -
Other 16,067 | 7,969
---------------- | ------------
Total other assets 427,800 | 184,789
---------------- | ------------
|
Total Assets 1,286,409 | 1,384,590
================ | =============
The accompanying notes are an integral part of these financial statements.
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF FINANCIAL POSITION
(Thousands of Dollars,
except for share data)
(Unaudited)
Post -Acquisition | Pre -Acquisition
------------------- | -----------------
LIABILITIES AND EQUITY June 30, 2003 | December 31, 2002
Current Liabilities: |
Payables: |
Trade 286 | 2,017
Affiliates 405 | 9,936
Other 6,209 | 6,961
Gas Payables: |
Transportation and exchange 1,629 | 1,312
Storage 17,394 | 24,214
|
Long-term debt due within one year 17,261 | -
Accrued income taxes due affiliate - | 16,210
Accrued charge-in-lieu of income taxes 1,879 | -
Accrued taxes other 8,187 | 12,817
Accrued interest 1,157 | 6,557
Accrued payroll and employee benefits 20,240 | 27,025
Other accrued liabilities 9,665 | 11,765
-------------- | ---------------
Total current liabilities 84,312 | 118,814
-------------- | ---------------
|
Long -Term Debt 347,543 | 249,781
|
Other Liabilities and Deferred Credits: |
Deferred income taxes - | 206,039
Postretirement benefits other |
than pensions 24,647 | 26,432
Pension plan costs 3,423 | 28,411
Other 20,731 | 23,434
-------------- | ---------------
Total other liabilities and |
deferred credits 48,801 | 284,316
-------------- | ---------------
|
Stockholder's Equity: |
Common stock, $1.00 par value, 1,000 shares |
authorized, issued and outstanding - | 1
Premium on capital stock and other paid-in |
capital - | 630,608
Retained earnings - | 101,070
--------------- | ---------------
Total stockholder's equity - | 731,679
|
Member's Equity: |
Paid-in capital 802,813 | -
Retained earnings 2,940 | -
---------------- | ---------------
Total member's equity 805,753 | -
---------------- | ---------------
|
Total Liabilities and Equity 1,286,409 | 1,384,590
================ | ===============
The accompanying notes are an integral part of these financial statements.
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Post-Acquisition Pre-Acquisition
-----------------------------------------------------
For the Period For the Period For the Three
May 17, 2003 April 1, 2003 to Months Ended
to June 30, 2003 May 16, 2003 June 30, 2002
------------------- | ----------------- --------------
Operating Revenues: |
Gas transportation 22,300 | 28,733 50,286
Gas storage 315 | 257 493
Other 352 | 316 1,048
----------- | ------------- -----------
Total operating revenues 22,967 | 29,306 51,827
----------- | ------------- -----------
Operating Costs and Expenses: |
Operation and maintenance 4,144 | 5,644 12,932
Administrative and general 5,311 | 5,855 12,156
Depreciation and amortization 3,987 | 5,381 11,736
Taxes other than income taxes 2,388 | 2,193 3,738
------------ | ------------- -------------
Total operating costs and expens 15,830 | 19,073 40,562
------------ | ------------- -------------
|
Operating Income 7,137 | 10,233 11,265
------------ | ------------- -------------
|
|
Other (Income) Deductions: |
Interest expense 2,845 | 2,510 5,318
Interest income from affiliates (417) | (797) (277)
Miscellaneous other income (110) | (241) (325)
------------- | -------------- ------------
Total other deductions 2,318 | 1,472 4,716
------------- | -------------- ------------
|
Income before income taxes 4,819 | 8,761 6,549
Provision for income taxes - | 3,297 2,613
Charge-in-lieu of income taxes 1,879 | - -
--------------| --------------- ------------
|
Net Income 2,940 | 5,464 3,936
==============| ================ ============
The accompanying notes are an integral part of these financial statements.
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
------------------|--------------------------------
For the Period | For the Period For the Six
May 17, 2003 | January 1, 2003 Months Ended
to June 30, 2003 | to May 16, 2003 June 30, 2002
----------------- | ---------------- -------------
|
Operating Revenues: |
Gas transportation 22,300 | 111,622 128,742
Gas storage 315 | 814 1,268
Other 352 | 1,011 2,022
----------- | --------- -----------
Total operating revenues 22,967 | 113,447 132,032
----------- | --------- -----------
|
|
Operating Costs and Expenses: |
Operation and maintenance 4,144 | 16,097 23,301
Administrative and general 5,311 | 13,642 24,706
Depreciation and amortization 3,987 | 16,092 22,956
Taxes other than income taxes 2,388 | 6,077 8,299
----------- | ---------- -----------
|
Total operating costs and |
expense 15,830 | 51,908 79,262
------------ | ---------- -----------
|
|
Operating Income 7,137 | 61,539 52,770
------------ | ---------- ------------
|
|
Other (Income) Deductions: |
Interest expense 2,845 | 7,392 10,496
Interest income from affiliates (417) | (1,965) (547)
Gain on sale of equipment - | (30) (1,323)
Miscellaneous other income (110) | (719) (1,036)
------------ | ---------- ------------
Total other deductions 2,318 | 4,678 7,590
------------ | ---------- ------------
|
Income before income taxes 4,819 | 56,861 45,180
|
Provision for income taxes - | 22,387 17,992
Charge-in-lieu of income taxes 1,879 | - -
------------- | ----------- ------------
Net Income 2,940 | 34,474 27,188
============= | =========== ===============
The accompanying notes are an integral part of these financial statements.
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Post-Acquisition| Pre-Acquisition
------------------|---------------------------------
For the period | For the Period For the Six
May 17, 2003 | January 1, 2003 to Months Ended
to June 30, 2003| May 16, 2003 June 30, 20
--------------- | --------------- -------------
|
OPERATING ACTIVITIES: |
Net income 2,940 | 34,474 27,188
Adjustments to reconcile to |
cash providedfrom (used in) |
operations: |
Depreciation and amortization 3,987 | 16,092 22,956
Provision for deferred income taxes - | - 15,741
Gain on sale of equipment | (30) (1,323)
Changes in operating assets and |
liabilities: |
Receivables 6,505 | (13,450) (764)
Receivable - TGT Enterprises, Inc. - | - 5,934
Inventories (108)| (22) (244)
Affiliates 405 | 14,532 (25,552)
Other current assets (3,649)| 5,212 (4,577)
Accrued income taxes due affiliate - | (5,813) (11,488)
Accrued charge-in-lieu of income |
taxes 1,879 | - -
Payables and accrued liabilities 15,549 | (40,462) (3,154)
Other, including changes in |
noncurrent assets and liabilitie (12,280)| 27,197 (910)
--------| --------- ---------
Net cash provided by operating |
activities 15,228 | 37,730 23,807
--------| --------- ---------
INVESTING ACTIVITIES: |
Capital expenditures, net of allowance |
for funds used during construction |
Proceeds from sales and salvage |
values, net of costs of removal (2,239)| (222) (30,662)
Advances to affiliates, net 3,403 | 179 188
Net cash used in investing |
activities (93,058)| (37,964) 16,613
---------| ---------- ---------
(91,894)| (38,007) (13,861)
---------| ---------- ---------
FINANCING ACTIVITIES: |
Proceeds from long-term debt |
Payment of long-term debt 248,049 | - -
Dividends (132,715)| - -
Net cash used in (provided by) - | - (10,000)
financing activities ---------| ----------- ---------
115,334 | - (10,000)
---------| ----------- ---------
|
|
Increase (decrease) in cash |
and cash equivalents 38,668 | (277) (54)
|
Cash and cash equivalents at |
beginning of period - | 277 86
---------| ------------ ---------
Cash and cash equivalents |
at end of period 38,668 | - 32
=========| ============ =========
The accompanying notes are an integral part of these financial statements.
The Acquisition of Texas Gas by TGT Pipeline was accounted for using the
purchase method of accounting. Accordingly, the purchase price was "pushed down"
and recorded in the accompanying financial statements which affects the
comparability of the post-Acquisition and pre-Acquisition financial position,
results of operations and cash flows.
TEXAS GAS TRANSMISSION, LLC
STATEMENT OF MEMBER'S EQUITY,
COMMON STOCK AND PAID-IN CAPITAL
(Thousands of Dollars
except for share data)
(Unaudited)
Retained Common Paid-in
Earnings Stock Capital
Balance, December 31, 2002 101,070 1 630,608
Pre-Acquisition
Add (deduct):
Net income 34,474 - -
Non-cash dividend (29,022) - -
-------------- ---------------- ------------
Balance, Stockholder's Equity, 106,522 1 630,608
May 16, 2003
============== ================ ============
-----------------------------------------------------------------------------
Post-Acquisition
Beginning Balance, Member's
Equity,
May 16, 2003
- - 802,813
Add (deduct):
Net income 2,940 - -
--------------- ---------------- ------------
Balance, Member's Equity, 2,940 - 802,813
June 30, 2003
=============== ================ ============
The accompanying notes are an integral part of these financial statements.
TEXAS GAS TRANSMISSION, LLC
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. CORPORATE STRUCTURE AND CONTROL
AND BASIS OF PRESENTATION
Structure and Presentation
Prior to May 16, 2003, Texas Gas Transmission Corporation (Texas Gas)
was an indirect wholly owned subsidiary of The Williams Companies, Inc.
(Williams). On May 16, 2003, TGT Pipeline, LLC (TGT Pipeline), a wholly owned
indirect subsidiary of Loews Corporation (Loews), completed the acquisition of
all of the outstanding capital stock of Texas Gas from Williams for $803 million
in cash, including transaction costs and closing adjustments, subject to final
adjustment (Acquisition).
Immediately following consummation of the Acquisition, Texas Gas was
converted from a corporation into a limited liability company, with TGT Pipeline
as its sole member, pursuant to Section 266 of the Delaware General Corporation
Law, and accordingly changed its name to "Texas Gas Transmission, LLC". On May
16, 2003, Texas Gas borrowed $275 million (Interim Loan) at 2.6% per annum and
advanced the proceeds to TGT Pipeline under an interest-bearing promissory note.
The Interim Loan was retired on May 28, 2003 from the debt offering by TGT
Pipeline and Texas Gas, as described in Note 3 of these condensed notes to the
financial statements.
The accompanying condensed financial statements were prepared in
accordance with Securities and Exchange Commission guidelines. As a result of
the change in control of Texas Gas, the financial statements presented for the
period after the acquisition reflect a new basis of accounting. Accordingly, the
Statement of Financial Position and the Statements of Operations and Cash Flows
for the three months and six months ended June 30, 2003, have been separated by
a bold vertical line into a pre-Acquisition period and a post-Acquisition
period. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in Texas Gas' 2002 Annual Report on Form 10-K.
The accompanying post-acquisition financial statements reflect the
pushdown of 100% of the estimated purchase price. A preliminary allocation of
the purchase price was assigned to the assets and liabilities of Texas Gas,
based on their estimated fair values in accordance with generally accepted
accounting principles. As Texas Gas' rates are regulated by the FERC, and the
FERC does not allow recovery in rates of amounts in excess of original cost,
Texas Gas' historical net book value of regulatory related assets and
liabilities are considered to be the fair value of those respective assets and
liabilities. The excess purchase price above the historical net book value was
allocated to goodwill. The accounting for the effects of the Acquisition
included recognizing unfunded benefit obligations related to postretirement
benefits other than pensions and pension benefits with a corresponding offset to
regulatory assets, due to the probable future rate recovery of these costs.
The Acquisition was treated as an acquisition of assets for income tax
purposes and, accordingly, Texas Gas will have tax basis in its assets and
liabilities approximately equal to the acquisition price. In connection with the
terms of this election, temporary differences that existed prior to the
Acquisition no longer exist and differences, if any, between the new
allocated purchase price for book and income tax are established as part of
the purchase price allocation. Accordingly, deferred tax asset and liability
balances existing prior to the Acquisition have been eliminated. Texas Gas
has engaged a third-party consultant to assist in the appraisal of the assets
and liabilities for income tax purposes and anticipates that this allocation
will be completed prior to year end. When this allocation is completed,
Texas Gas will adjust its purchase price allocation to reflect the
appropriate amounts of deferred tax assets and liabilities, if any.
The following unaudited pro forma financial information is presented as
if Texas Gas had been acquired as of the beginning of each period presented. The
pro forma amounts include certain adjustments, including a reduction of
depreciation expense based on the preliminary allocation of purchase price to
property, plant and equipment; adjustment of interest expense to reflect the
issuance of debt by Texas Gas and TGT Pipeline, and redemption of $132.7 million
principal amount of Texas Gas' existing notes; and the related tax effect of the
separation of Texas Gas from Williams for certain administrative functions now
covered by a continuing services agreement with Williams.
For the Six Months Ended For the Six Months Ended
June 30, 2003 June 30, 2002
Operating revenue $136,414 $132,032
Income before charge-in-lieu
of taxes 66,559 50,275
Net income 41,212 30,290
Results of operations for the second quarter and the first half of each
of the years reported herein is not necessarily indicative of results of
operations for that entire year. Based on the current rate structure and higher
throughput, Texas Gas experiences higher operating income in the first and
fourth quarters as compared to the second and third quarters. Additionally,
depreciation and amortization expense is higher through the Acquisition date due
to amounts in excess of the original cost of the regulated facilities being
capitalized. Certain reclassifications have been made in the 2002 financial
statements to conform to the 2003 presentation.
Items Relating to Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Estimates and assumptions which, in the opinion of management,
are significant to the underlying amounts included in the financial statements
and for which it would be reasonably possible that future events or information
could change those estimates include: 1) revenues subject to refund; 2)
litigation-related contingencies; 3) environmental remediation obligations; and
4) impairment assessments of long-lived assets.
Effective January 1, 2003, Texas Gas adopted Statement of Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations." The Statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made, and that the associated
asset retirement costs be capitalized as part of the carrying amount of the
long-lived asset. Texas Gas has not recorded liabilities for its pipeline
transmission assets since a reasonable estimate of the fair value of the
retirement obligations for these assets cannot be made, as the remaining life of
these assets is not currently determinable. Accordingly, the impact of adopting
the statement did not have a material effect on Texas Gas' financial position or
results of operations. Had the statement been adopted at the beginning of 2002,
the impact to Texas Gas' operating income and net income would have been
immaterial.
As previously discussed, Texas Gas was converted into a limited
liability company immediately following the Acquisition. The accompanying
financial statements reflect a Charge-In-Lieu of Income Taxes subsequent to the
Acquisition in recognition of the ratemaking allowed for such costs by Texas
Gas. Texas Gas includes an appropriate allowance for income taxes in its cost of
service and derivation of tariff rates and, accordingly, designs its rates to
recover such costs. The effective tax rate for the period subsequent to the
Acquisition, represented by Texas Gas' Charge-In-Lieu of Income Taxes, is
substantially equal to the statutory rate. The effective tax rate for the period
prior to the Acquisition was slightly higher than the statutory rate.
As part of the preliminary allocation of the purchase price, the excess
purchase price over the fair value of the assets and liabilities was allocated
to goodwill. SFAS 142 "Goodwill and Other Intangible Assets" (SFAS 142) requires
the evaluation of goodwill for impairment at least annually or more frequently
if events and circumstances indicate that the asset might be impaired. Texas Gas
does not amortize goodwill under the provision of SFAS No. 142.
2. CONTINGENT LIABILITIES AND COMMITMENTS
Rate and Regulatory Matters
Texas Gas is subject to regulation by the Federal Energy Regulatory
Commission (FERC) under the Natural Gas Act (NGA) of 1938 and under the Natural
Gas Policy Act of 1978, and as such, its rates and charges for the
transportation of natural gas in interstate commerce, the extension, enlargement
or abandonment of jurisdictional facilities, and its accounting, among other
things, are subject to regulation. Texas Gas holds certificates of public
convenience and necessity issued by the FERC authorizing ownership and operation
of all pipelines, facilities and properties considered jurisdictional for which
certificates are required under the NGA.
Texas Gas is also subject to the Natural Gas Pipeline Safety Act of
1968, as amended by Title I of the Pipeline Safety Act of 1979, which regulates
safety requirements in the design, construction, operation and maintenance of
interstate natural gas pipelines.
FERC Order No. 637
On February 9, 2000, the FERC issued a final rule, Order No. 637, in
which the FERC adopted certain policies it finds are necessary to adjust its
current regulatory model to the needs of the evolving markets, but determined
that any fundamental changes to its regulatory policy will be considered after
further study and evaluation of the evolving marketplace. In Order No. 637, the
FERC revised its regulatory framework to improve competition and efficiency
across the pipeline grid through new regulations on scheduling equality,
segmentation and flexible point rights, imbalance services, operational flow
orders (OFOs), and penalties. Pipelines, including Texas Gas, were directed to
conform their tariffs to the new regulations through a series of compliance
filings. Recently, the FERC issued an "Order on Compliance Filings" in which it
conditionally accepted Texas Gas' revised tariff sheets from its earlier
compliance filings, subject to Texas Gas making another compliance filing. That
order approved Texas Gas' new Hourly Overrun Transportation Service, but
required Texas Gas to further revise its tariff to eliminate restrictions on the
segmentation of capacity outside the primary path, to keep detailed records of
segmentation transactions for one year, and to restructure its overrun penalty
process. Texas Gas filed this latest compliance filing on June 2, 2003, and also
filed a "Request for Rehearing and Clarification" on June 23, 2003. The FERC has
not yet acted on either of these filings.
General Rate Case (Docket No. RP00-260)
On April 28, 2000, Texas Gas filed a general rate case (Docket No.
RP00-260) effective November 1, 2000, subject to refund. Texas Gas proposed in
this rate case to implement value-based term-differentiated seasonal rates for
short-term services effective November 1, 2000, as permitted by FERC Order 637.
On May 31, 2000, the FERC issued an "Order Accepting and Suspending Tariff
Sheets Subject to Refund, Rejecting Other Tariff Sheets, and Establishing
Hearing and Settlement Procedures." Thereafter the participants engaged in
informal settlement negotiations that ultimately resulted in a settlement with
all parties, except the Indicated Shippers. On March 4, 2002, the FERC issued an
order approving the settlement and severing the Indicated Shippers from the
settlement provisions. On June 17, 2002, the FERC issued an order denying the
Indicated Shippers' request for rehearing of the March 4, 2002 order. The
settlement became effective 31 days after that order when no party filed any
further requests for rehearing. Thus, the settlement's prospective rates went
into effect on August 1, 2002, and refunds of approximately $37.5 million were
made on September 16, 2002. Texas Gas had provided an adequate reserve for
amounts, including interest, refunded to customers. Additionally, on July 15,
2002, Texas Gas filed an offer of settlement with the Indicated Shippers to
resolve all remaining issues in the case. The FERC issued an order on October
10, 2002, approving the settlement. No additional refunds are due as a result of
the settlement with the Indicated Shippers. In the third quarter of 2002, as a
result of the settlement, Texas Gas recorded additional revenues of $0.3 million
and reduced its estimated reserve for rate refunds by an equal amount. Texas Gas
also recorded $10.2 million of revenues and reduced depreciation expense by $5.7
million in July of 2002 to implement provisions of the settlement.
FERC Compliance Plan
On March 13, 2003, Williams and certain subsidiaries entered into a
settlement agreement with the FERC resolving issues resulting from a FERC
investigation into the relationship between Transcontinental Gas Pipe Line
Corporation (Transco), an indirect subsidiary of Williams and former sister
company to Texas Gas, and Transco's marketing affiliates. Although Texas Gas was
not involved in the investigation and is not a party to the settlement
agreement, Williams agreed that certain of its interstate natural gas pipeline
subsidiaries, including Texas Gas, would be subject to the terms of a compliance
plan designed to ensure compliance with the terms of the settlement agreement
and the FERC's rules governing the relationship of interstate natural gas
pipelines and their marketing affiliates. Because Texas Gas is no longer
affiliated with Williams or Transco, Texas Gas will not be subject to this FERC
compliance plan.
Legal Proceedings
Litigation Retained by Williams
In the Acquisition purchase agreement Williams agreed to indemnify
Texas Gas and TGT Pipeline for any liabilities or obligations in connection with
certain litigation or potential litigation including, among others, these
previously disclosed matters:
o Litigation filed by Jack Grynberg alleging that approximately 300
energy companies, including Texas Gas, had violated the False Claims
Act in connection with the measurement, royalty valuation, and purchase
of hydrocarbons;
o A nationwide class action lawsuit against pipeline and gathering
companies, including Texas Gas, for alleged mismeasurement techniques
resulting in the underpayment of royalties; and
o A claim by certain parties for back rental associated with their
alleged ownership of a partial mineral interest in a tract of land in a
gas storage field owned by Texas Gas.
As a result, Williams is defending these actions on behalf of Texas Gas. Because
Williams has retained responsibility for these claims, they are not likely to
have a material affect upon Texas Gas' future financial condition and results of
operations. For a more detailed description of the above matters, refer to Texas
Gas' 2002 Annual Report on Form 10-K and 2003 First Quarter Report on Form 10-Q.
Other Legal Issues
On May 2, 2000, a flash fire occurred at Texas Gas' Greenville,
Mississippi compressor station injuring six contract employees and one Texas Gas
employee. One contract employee died while in the hospital. A lawsuit was filed
against Texas Gas on behalf of the deceased contract employee and several other
contract employees that were injured; however, damages were not specified. In
October, 2001, mediation was held involving Texas Gas, its insurance carriers
(through its contractor Bluewater Construction Inc.), and plaintiffs. Settlement
was reached with all named plaintiffs. One contract employee alleging injuries
from the same accident has separately sued Texas Gas. This plaintiff was
included in the original litigation, and then withdrew. This plaintiff's suit
has been dismissed for failure to prosecute. In management's opinion, any
further litigation arising out of the flash fire will not have a material
adverse affect upon Texas Gas' future financial condition and results of
operations.
Texas Gas is party to other on-going litigation as a normal part of its
business that, in management's opinion, is not likely to have a material impact
on Texas Gas financial condition and results of operations.
Environmental Matters
As of June 30, 2003, Texas Gas had an accrued liability of
approximately $1.1 million for estimated costs associated with environmental
assessment and remediation, including remediation associated with the historical
use of polychlorinated biphenyls and hydrocarbons. This estimate depends upon a
number of assumptions concerning the scope of remediation that will be required
at certain locations and the cost of remedial measures to be undertaken. Texas
Gas is continuing to conduct environmental assessments and is implementing a
variety of remedial measures that may result in increases or decreases in the
total estimated costs.
Texas Gas currently is either named as a potentially responsible party
or has received an information request regarding its potential involvement at
certain Superfund and state waste disposal sites. The anticipated remediation
costs, if any, associated with these sites have been included in the liability
discussed above.
Texas Gas is also subject to the federal Clean Air Act (CAA) and the
CAA Amendments of 1990 (Amendments) which added significant provisions to the
existing federal CAA. The Amendments require the Environmental Protection Agency
(EPA) to promulgate new regulations pertaining to mobile sources, air toxics,
areas of ozone non-attainment, and acid rain. Texas Gas operates one facility in
an area designated as non-attainment for the current ozone standard (one hour
standard) and is aware that during 2004 the EPA may designate additional areas
as non-attainment based on implementation of the revised ozone standard (eight
hour standard). Additional areas designated as non-attainment under the revised
standard may potentially impact Texas Gas' operations. Emission control
modifications of compression equipment located at facilities required to comply
with current federal CAA provisions, the Amendments, and State Implementation
Plans for nitrogen oxide reductions are estimated to cost in the range of $6
million to $14 million by 2005 and will be recorded as additions to property,
plant and equipment as the facilities are added. If the EPA designates
additional new non-attainment areas which impact Texas Gas' operations, the cost
of additions to property, plant and equipment is expected to increase; however,
Texas Gas is unable at this time to estimate with any certainty the cost of
additions that may be required. Additionally, the EPA is expected to promulgate
new rules regarding hazardous air pollutants (HAP) in 2003 and 2004, which may
impose controls in addition to the control described above. Texas Gas cannot
predict the costs with any certainty at this time resulting from the
installation of these controls. The effective compliance date for the HAP
regulations and installation of associated controls is anticipated to be during
2006.
Texas Gas considers environmental assessment, remediation costs, and
costs associated with compliance with environmental standards to be recoverable
through rates, as they are prudent costs incurred in the ordinary course of
business. The actual costs incurred will depend on the actual amount and extent
of contamination discovered, the final cleanup standards mandated by the EPA or
other governmental authorities, and other factors.
In January 2003, the U.S. Department of Transportation Office of Pipeline
Safety issued a Notice of Proposed Rulemaking entitled "Pipeline Integrity
Management in High Consequence Areas". The proposed rule incorporates the
requirements of the Pipeline Safety Improvement Act of 2002 that was enacted in
December 2002. It would require gas pipeline operators to develop integrity
management programs for transmission pipelines that could affect
high-consequence areas in the event of pipeline failure, including a baseline
assessment and periodic reassessments to be completed within specified
timeframes. The final rule is expected to be issued in late 2003. Texas Gas at
this time cannot predict the exact costs that would be required under the
proposed rule. The costs of the baseline assessment are anticipated to be
incurred over the next ten years. Texas Gas considers the costs associated with
compliance with the proposed rule to be prudent costs incurred in the ordinary
course of business and, therefore, recoverable through its rates.
Summary
Litigation, arbitration, regulatory matters and environmental matters are
subject to inherent uncertainties. Were an unfavorable ruling to occur, there
exists the possibility of a material adverse impact on the results of operations
of the period in which the ruling occurs. Management, including internal
counsel, currently believes that the ultimate resolution of the foregoing
matters, taken as a whole and after consideration of amounts accrued, insurance
coverage, recovery from customers or other indemnification arrangements, is not
likely to have a material adverse effect upon Texas Gas' future financial
condition and results of operations.
3. DEBT AND FINANCING ARRANGEMENTS
(Expressed in Thousands of Dollars)
As of June 30,2003 As of December 31, 2002
Debentures:
7.25% due 2027 $ 100,000 $100,000
Notes:
8.625% due 2004 17,261 150,000
4.6% due 2015 250,000 -
------- ---------
367,261 250,000
Unamortized debt discount (2,457) (219)
Current portion of long-term debt (17,261) -
-------- --------
Total long-term debt $ 347,543 $249,781
========= ========
Texas Gas' debentures and notes have restrictive covenants, which provide
that, with certain exceptions, neither Texas Gas nor any subsidiary may create,
assume or suffer to exist any lien upon any property to secure any indebtedness
unless the debentures and notes shall be equally and ratably secured.
In May 2003, Texas Gas completed an offering of $250 million principal
amount of notes issued at a discount, and its immediate parent company, TGT
Pipeline, completed a concurrent offering of $185 million principal amount of
its notes issued at a discount, each in an offering exempt from registration
under Rule 144A and Regulation S. The notes issued by Texas Gas bear interest at
a rate of 4.60% per annum and mature in 2015 with an effective rate of 4.77%.
The notes issued by TGT Pipeline bear interest at a rate of 5.20% per annum and
mature in 2018 with an effective rate of 5.39%. TGT Pipeline relies on
distributions from Texas Gas to fulfill its obligations.
Texas Gas and TGT Pipeline used approximately $275 million of the proceeds
from the sale of the notes to repay Texas Gas' previously described Interim
Loan. Texas Gas used the balance of the proceeds to purchase $132.7 million
principal amount of its outstanding $150 million in aggregate principal amount
of 8.625% notes due within one year, plus accrued interest and premium.
Texas Gas and TGT Pipeline have agreed to use their reasonable best
efforts to effect an exchange offer of these notes for substantially identical
notes which have been registered under the Securities Act of 1933 within 180
days following the original issuance of these notes.
4. RELATED PARTIES
Texas Gas and Loews are parties to a Services Agreement under which Loews
provides Texas Gas with certain financial, tax, technology and other corporate
services as needed by Texas Gas. In exchange for such services, Texas Gas
reimburses Loews for its direct costs, including direct payroll and benefit
costs of Loews employees providing the services, and an allocation of certain
other indirect costs of Loews such as corporate overhead. As a participant in
TGT Pipeline's cash management program, Texas Gas makes advances to TGT
Pipeline. At June 30, 2003, the advances due Texas Gas by TGT Pipeline totaled
$93.0 million.
As a subsidiary of Williams, Texas Gas engaged in transactions with
Williams and other Williams' subsidiaries characteristic of group operations.
Williams had a policy of charging subsidiary companies for management services
provided by the parent company and other affiliated companies. The amounts due
to/from Williams by Texas Gas was immaterial in the periods prior to the
Acquisition.
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
On May 16, 2003, TGT Pipeline, a wholly owned subsidiary of Loews,
completed the acquisition of all outstanding capital stock of Texas Gas from The
Williams Companies, Inc. Immediately following the Acquisition, Texas Gas was
converted from a corporation into a limited liability company, with TGT Pipeline
as its sole member, and changed its name to "Texas Gas Transmission LLC". A
preliminary allocation of the purchase price was assigned to the assets and
liabilities of TGT Pipeline, including the assets of Texas Gas, based on their
estimated fair values, which is consistent with the original cost of such assets
and liabilities and is in accordance with generally accepted accounting
principles. The accompanying financial statements reflect the pushdown of 100%
of the estimated purchase price. Texas Gas allocated the excess purchase price
above the fair value of assets and liabilities to Goodwill. The accounting for
the effects of the Acquisition included recognizing the difference between the
plan assets and the benefit obligations related to postretirement benefits other
than pensions and pension benefits. The recognition of these amounts was offset
by the recognition of regulatory assets or liabilities of equal amounts, due to
the expected future rate recovery of these costs. See Note 1 to the accompanying
Condensed Financial Statements.
RESULTS OF OPERATIONS
Management has based its narrative analysis of the results of operations
for the six-month period ended June 30, 2003 and June 30, 2002 on the combined
results of operations for the entire period. Material variances caused by the
different basis of accounting have been disclosed where applicable.
Operating income was $15.9 million higher for the six months ended June
30, 2003, than for the six months ended June 30, 2002. The increase in operating
income was due primarily to higher operating revenues and lower administrative
and general operating expenses.
Operating revenues increased by $4.4 million primarily attributable to
higher transportation revenues resulting from a colder winter and spring than
the comparable period in 2002 and more favorable market conditions. Total
deliveries were 357.6 Tbtu and 348.3 Tbtu for the first six months of 2003 and
2002, respectively.
Operating costs and expenses decreased $11.5 million primarily
attributable to lower labor and benefit costs resulting from a 2002 reduction in
workforce, lower transportation charges related to the expiration of
transportation contracts on third-party pipelines and lower administrative and
general expense of $5.8 million mainly due to lower Williams corporate costs.
There was also a decrease in depreciation and amortization expense of $2.9
million in 2003 primarily due to lower depreciation rates implemented in the
third quarter 2002 resulting from the settlement of a rate case and due to the
reduction in the carrying value of property, plant and equipment at the time of
the Acquisition by Loews.
CAPITAL RESOURCES AND LIQUIDITY
Texas Gas funds its operations and capital requirements with cash flows
from operating activities and repayments of funds advanced to TGT Pipeline.
As a participant in TGT Pipeline's cash management program, Texas Gas
makes advances to TGT Pipeline. At June 30, 2003, the advances due Texas Gas by
TGT Pipeline totaled $93.0 million. The advances are represented by demand
notes. The interest rate on intercompany demand notes is the London Interbank
Offered Rate on the first day of each three-month period plus one percent.
Texas Gas has an effective registration statement on file with the
Securities and Exchange Commission. At June 30, 2003, $100 million of shelf
availability remains under this registration statement, which may be used to
issue debt securities.
Prior to May 16, 2003, Texas Gas was a participant in Williams' cash
management program in which Texas Gas made advances to and received advances
from an affiliate of Williams. At December 31, 2002, the advances due Texas Gas
by affiliates totaled $63.1 million. This amount as well as other assets and
liabilities retained by Williams were dividended to Williams prior to the
Acquisition.
Capital Expenditures
Texas Gas' capital expenditures for the six months of 2003 and 2002 were
$2.4 million and $30.7 million, respectively. Capital expenditures for 2003 are
expected to approximate $23 million.
General Rate Issues
As discussed in Note 2 of the Condensed Notes to Financial Statements, in
February, 2000, the FERC issued Order No. 637, in which it revised its
regulatory framework to improve competition and efficiency across the pipeline
grid through new regulations on scheduling equality, segmentation and flexible
point rights, and imbalance services, OFOs, and penalties. Pipelines were
directed to conform their tariffs to the new regulations through a series of
compliance filings. Texas Gas has submitted its tariff modifications in Docket
No. RP00-495, et al.
In various orders on Texas Gas' compliance filings, the FERC has
approved the initiation of the new Hourly Overrun Transportation Service, has
denied Texas Gas' requested limits on the segmentation of capacity on its
mainline system, has requested descriptions of Texas Gas' market laterals in
Indiana and Kentucky, has required detailed record keeping of segmentation
transactions for one year, and has advised restructuring of Texas Gas' overrun
penalty process.
In its most recent order dated May 22, 2003, the FERC accepted most of
Texas Gas' proposed tariff sheets, while ordering minor modifications to others.
Texas Gas submitted its latest compliance filing under Order No. 637 on June 2,
2003, and awaits further FERC action.
On April 28, 2000, Texas Gas filed a general rate case (Docket No.
RP00-260) which became effective November 1, 2000, subject to refund. On March
4, 2002, the FERC issued an order approving the settlement and severing the
Indicated Shippers from the settlement provisions. On June 17, 2002, the FERC
issued an order denying the Indicated Shippers' request for rehearing of the
March 4, 2002 order. The settlement became effective 31 days after that order
when no party filed any further requests for rehearing. Thus, the settlement's
prospective rates went into effect on August 1, 2002, and refunds of
approximately $37.5 million were made on September 16, 2002. Texas Gas had
provided an adequate reserve for amounts refunded to customers, including
interest. On October 10, 2002, the FERC issued an order approving a settlement
with the Indicated Shippers that required no additional refunds.
Texas Gas submits annual filings to the FERC to adjust its Fuel
Retention Percentages, thereby allowing any under- or over-collections to be
corrected by an adjustment in fuel rates. On August 30, 2002, Texas Gas
submitted its Fuel Tracker Filing (Docket No. RP02-515) reflecting a slight
increase in fuel rates for the upcoming year, the majority of which is due to
under-collections during the most recent winter season. The FERC responded on
October 31, 2002, with an order accepting and suspending the tariff sheets,
subject to refund. The FERC also directed Texas Gas to submit detailed
information supporting its request for a rate adjustment within 20 days of the
order. Texas Gas filed its response on November 20, 2002, and followed up with
supplemental comments and explanations on December 6, 2002. In its July 11, 2003
order, the FERC found that Texas Gas had satisfactorily complied with the
conditions in the suspension order and concluded that no further proceedings
were necessary in this docket. The fuel rates were approved, subject to the
possibility that some party might seek rehearing. If no rehearing is filed, the
order will become final on August 12, 2003.
CRITICAL ACCOUNTING POLICIES
See Management's Narrative Analysis of Results of Operations (MD&A) in
Texas Gas' Annual Report on Form 10-K for the year ended December 31, 2002 for a
detailed discussion of Texas Gas' critical accounting policies. These policies
include Regulatory Accounting, Revenue Subject to Refund, Contingent
Liabilities, Impairment of Long-Lived Assets and Use of Estimates.
DISCLOSURE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this report
constitute "forward-looking" statements within the meaning of the federal
securities laws. Forward-looking statements include, without limitation, any
statement that may project, indicate or imply future results, events,
performance or achievements, and may contain the words "expect," "intend,"
"plan," "anticipate," "estimate," "believe," "will be," "will continue," "will
likely result," and similar expressions. Although Texas Gas believes these
forward-looking statements are based on reasonable assumptions, statements made
regarding future results are subject to a number of assumptions, uncertainties,
risks and other factors that could cause future results to be materially
different from the results stated or implied in this document. These factors
include, among others;
- - general economic and business conditions in the United States;
- - general industry trends;
- - future demand for natural gas;
- - availability of supplies of natural gas;
- - failure of Texas Gas' customers to perform their contractual obligations;
- - the existence of regulatory uncertainties with respect to natural gas
transportation and storage business - developments that impact the FERC
proceedings involving Texas Gas, including Texas Gas' success in
sustaining their positions in such proceedings, or the success of interveners
in opposing their positions;
- - governmental, statutory regulatory, or administrative developments
affecting Texas Gas or the natural gas industry;
- - the existence of competitors and developments in the natural gas
transportation and storage industry;
- - the existence of operating risks inherent in the natural gas transportation
and storage business;
- - acts of sabotage and terrorism for which insurance is not available at
commercially reasonable premiums and on commercially reasonable terms;
- - availability of qualified personnel;
- - price differentials between natural gas and alternative fuels;
- - Texas Gas' ability to replace their rate base as it is depreciated and
amortized; and
- - Williams does not fulfill its ongoing obligations to Texas Gas and TGT
Pipeline, including its indemnity obligations.
Developments in any of these areas could cause Texas Gas' results to
differ materially from results that have been or may be anticipated or projected
by them. These forward-looking statements speak only as of the date of this
report and Texas Gas expressly disclaims any obligation or undertaking to
release publicly or otherwise to notify investors of any updates or revisions to
any forward-looking statement contained herein to reflect any change in their
expectations with regard to thereto or any change in events, conditions or
circumstances on which any statement is based, other than as may be required
under the securities laws.
Item 4. DISCLOSURE CONTROLS AND PROCEDURES
Texas Gas maintains a system of disclosure controls and procedures which
is designed to ensure that information required to be disclosed in reports filed
or submitted under the federal securities laws, including this report, is
recorded, processed, summarized and reported on a timely basis. These disclosure
controls and procedures are designed to ensure that information required to be
disclosed under the federal securities laws is accumulated and communicated to
Texas Gas' management on a timely basis to allow assessment of required
disclosures.
Texas Gas' principal executive officer and principal financial officer
have conducted an evaluation of Texas Gas' disclosure controls and procedures as
of the end of the period covered by this report. Based on this evaluation, Texas
Gas' principal executive officer and principal financial officer have each
concluded that the disclosure controls and procedures of Texas Gas are adequate
for their intended purpose.
There was no change in Texas Gas' internal control over financial
reporting identified in connection with the foregoing evaluation that occurred
during the last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, Texas Gas' internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See discussion in Note 2 of the Notes to Condensed Financial
Statements included herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following instruments are included as exhibits to this
report. Those exhibits below incorporated by reference herein
are indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after
an exhibit, copies of the instrument have been included
herewith.
31.1 Certification by H. Dean Jones II, President of Texas
Gas Transmission, LLC pursuant to Rule 13a-14(a) and
Rule 15d-14(a)
31.2 Certification by Jamie L. Buskill, Vice President
and Chief Financial Officer of Texas Gas Transmission, LLC
pursuant to Rule 13a-14(a) and Rule 15d-14(a)
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002 by H. Dean Jones II, President of Texas Gas
Transmission, LLC
32.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002 by Jamie L. Buskill, Vice President and Chief
Financial Officer of Texas Gas Transmission, LLC
(b) Reports on Form 8-K.
Texas Gas filed Form 8-K, Current Report dated May 16, 2003,
stating changes in control of registrant from Williams to
Loews. It also reported in the same 8-K that Texas Gas is
replacing Ernst & Young LLP with Deloitte & Touche LLP as
independent public accountants.
Texas Gas filed Form 8-K dated May 28, 2003, stating that it
and TGT Pipeline has completed their previously announced
offerings of $250 million and $185 million principal amount
of notes.
Texas Gas filed Form 8-K dated June 19, 2003, announcing the
results of its tender offer for any and all $150 million in
aggregate principal amount of its outstanding notes due 2004.
22
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.
Texas Gas Transmission, LLC (Registrant)
Dated: August 11, 2003 By /s/ Jamie L. Buskill
-------------------------
Jamie L. Buskill
Vice President and Chief Financial Officer
EXHIBIT 31.1
I, H. Dean Jones II, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Texas Gas
Transmission LLC;
2) Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5) The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: August 11, 2003 /s/ H. Dean Jones II
-------------------------------------------
H. Dean Jones II
President
EXHIBIT 31.2
I, Jamie L. Buskill, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Texas Gas
Transmission LLC;
2) Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3) Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter
in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the egistrant's internal
control over financial reporting; and
5) The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: August 11, 2003 /s/ Jamie L. Buskill
-------------------------
Jamie L. Buskill
Vice President and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Texas Gas Transmission, LLC
(the "Company") on Form 10-Q for the period ending June 30, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, H.
Dean Jones II, President of the Company, certify, pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to
my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ H. Dean Jones II
- ---------------------------------------
H. Dean Jones II
President
(Principal Executive Officer)
August 11, 2003
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Texas Gas Transmission, LLC
(the "Company") on Form 10-Q for the period ending June 30, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Jamie L. Buskill, Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/ Jamie L. Buskill
- ---------------------------------------
Jamie L. Buskill
Vice President and Chief Financial Officer
(Principal Financial Officer)
August 11, 2003