Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - COLORADO INTERSTATE GAS COMPANY, L.L.C. | Financial_Report.xls |
| EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - COLORADO INTERSTATE GAS COMPANY, L.L.C. | cig-2012930xex321.htm |
| EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - COLORADO INTERSTATE GAS COMPANY, L.L.C. | cig-2012930xex322.htm |
| EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - COLORADO INTERSTATE GAS COMPANY, L.L.C. | cig-2012930xex312.htm |
| EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - COLORADO INTERSTATE GAS COMPANY, L.L.C. | cig-2012930xex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-Q
____________________________________________________
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2012
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: 1-4874
____________________________________________________
COLORADO INTERSTATE GAS COMPANY, L.L.C.
(Exact Name of Registrant as Specified in Its Charter)
____________________________________________________
Delaware | 84-0173305 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
500 Dallas Street, Suite 1000, Houston, Texas 77002
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: 713-369-9000
____________________________________________________
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
COLORADO INTERSTATE GAS COMPANY, L.L.C. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) TO FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT.
COLORADO INTERSTATE GAS COMPANY, L.L.C.
TABLE OF CONTENTS
Page Number | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
COLORADO INTERSTATE GAS COMPANY, L.L.C.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In Millions)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues | $ | 89 | $ | 92 | $ | 291 | $ | 308 | |||||||
Operating Costs, Expenses and Other | |||||||||||||||
Operation and maintenance | 26 | 34 | 93 | 108 | |||||||||||
Depreciation and amortization | 11 | 11 | 33 | 34 | |||||||||||
Taxes, other than income taxes | 3 | 6 | 15 | 18 | |||||||||||
Total Operating Costs, Expenses and Other | 40 | 51 | 141 | 160 | |||||||||||
Operating Income | 49 | 41 | 150 | 148 | |||||||||||
Other Income (Expense) | |||||||||||||||
Other income, net | 1 | 1 | 2 | 2 | |||||||||||
Interest expense, net | (16 | ) | (15 | ) | (47 | ) | (46 | ) | |||||||
Affiliated interest income, net | — | 1 | 1 | 1 | |||||||||||
Total Other Expense | (15 | ) | (13 | ) | (44 | ) | (43 | ) | |||||||
Net Income | 34 | 28 | 106 | 105 | |||||||||||
Other Comprehensive Income | |||||||||||||||
Adjustments to postretirement benefit plan liabilities | — | 9 | — | 9 | |||||||||||
Comprehensive Income | $ | 34 | $ | 37 | $ | 106 | $ | 114 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
COLORADO INTERSTATE GAS COMPANY, L.L.C.
CONSOLIDATED BALANCE SHEETS
(In Millions)
September 30, 2012 | December 31, 2011 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 2 | $ | 2 | |||
Accounts and note receivable, net | 33 | 23 | |||||
Materials and supplies | 8 | 8 | |||||
Regulatory assets | 6 | 3 | |||||
Other current assets | 3 | 4 | |||||
Total current assets | 52 | 40 | |||||
Property, plant and equipment, net | 1,391 | 1,408 | |||||
Note receivable from affiliate | 31 | 61 | |||||
Other | 45 | 46 | |||||
Total Assets | $ | 1,519 | $ | 1,555 | |||
LIABILITIES AND MEMBERS’ EQUITY | |||||||
Current liabilities | |||||||
Current portion of debt | $ | 5 | $ | 5 | |||
Accounts payable | 11 | 33 | |||||
Accrued interest | 11 | 4 | |||||
Accrued taxes | 14 | 17 | |||||
Regulatory liabilities | 10 | 9 | |||||
Contractual deposits | 3 | 8 | |||||
Accrued other current liabilities | 3 | 5 | |||||
Total current liabilities | 57 | 81 | |||||
Long-term liabilities and deferred credits | |||||||
Long-term debt | 644 | 647 | |||||
Other long-term liabilities and deferred credits | 11 | 18 | |||||
Total long-term liabilities and deferred credits | 655 | 665 | |||||
Total Liabilities | 712 | 746 | |||||
Commitments and contingencies (Note 5) | |||||||
Members’ equity | 798 | 800 | |||||
Accumulated other comprehensive income | 9 | 9 | |||||
Total Members’ Equity | 807 | 809 | |||||
Total Liabilities and Members’ Equity | $ | 1,519 | $ | 1,555 | |||
The accompanying notes are an integral part of these consolidated financial statements.
2
COLORADO INTERSTATE GAS COMPANY, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Nine Months Ended September 30, | |||||||
2012 | 2011 | ||||||
Cash Flows From Operating Activities | |||||||
Net income | $ | 106 | $ | 105 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 33 | 34 | |||||
Other non-cash income items | 4 | 16 | |||||
Changes in components of working capital: | |||||||
Accounts receivable | (16 | ) | 2 | ||||
Accounts payable | (18 | ) | (1 | ) | |||
Accrued interest | 7 | 7 | |||||
Accrued taxes | (3 | ) | — | ||||
Regulatory liabilities | (2 | ) | (14 | ) | |||
Other, net | (7 | ) | — | ||||
Other long-term assets and liabilities | (10 | ) | (6 | ) | |||
Net Cash Provided by Operating Activities | 94 | 143 | |||||
Cash Flows From Investing Activities | |||||||
Capital expenditures | (19 | ) | (47 | ) | |||
Net change in note receivable from affiliate | 36 | 9 | |||||
Other | — | (2 | ) | ||||
Net Cash Provided by (Used in) Investing Activities | 17 | (40 | ) | ||||
Cash Flows From Financing Activities | |||||||
Payments of debt, including other financing obligations | (3 | ) | (3 | ) | |||
Distributions to members/partners | (121 | ) | (126 | ) | |||
Contributions from members/partners | 13 | 32 | |||||
Net Cash Used in Financing Activities | (111 | ) | (97 | ) | |||
Net Increase in Cash and Cash Equivalents | — | 6 | |||||
Cash and Cash Equivalents, beginning of period | 2 | 1 | |||||
Cash and Cash Equivalents, end of period | $ | 2 | $ | 7 | |||
The accompanying notes are an integral part of these consolidated financial statements.
3
COLORADO INTERSTATE GAS COMPANY, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Organization
We are a Delaware limited liability company, originally formed in 1927 as a corporation and unless the context requires otherwise, references to “us,” “we,” “our,” “ours,” or “CIG,” are intended to mean Colorado Interstate Gas Company, L.L.C. and its consolidated subsidiaries. On May 24, 2012, El Paso Pipeline Partners, L.P. (EPB) acquired the remaining 14 percent interest in us from a wholly owned subsidiary of El Paso LLC (formerly El Paso Corporation) (El Paso), and we became an indirect wholly owned subsidiary of EPB.
Basis of Presentation
We have prepared our accompanying unaudited consolidated financial statements under the rules and regulations of the United States Securities and Exchange Commission. These rules and regulations conform to the accounting principles contained in the Financial Accounting Standards Board’s Accounting Standards Codification, the single source of generally accepted accounting principles in the United States and referred to in this report as the Codification. Under such rules and regulations, we have condensed or omitted certain information and notes normally included in financial statements prepared in conformity with the Codification. We believe, however, that our disclosures are adequate to make the information presented not misleading.
In addition, our accompanying consolidated financial statements reflect normal adjustments, and also recurring adjustments that are, in the opinion of our management, necessary for a fair presentation of our financial results for the interim periods, and certain amounts from prior periods have been reclassified to conform to the current presentation. Interim results are not necessarily indicative of results for a full year; accordingly, you should read these consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2011, which we refer to in this report as our 2011 Form 10-K.
El Paso’s Merger with Kinder Morgan, Inc. (KMI)
El Paso’s and KMI’s merger became effective on May 25, 2012. Through September 30, 2012, we incurred merger-related expenses of $10 million, primarily related to allocated severance costs which are included in Operation and maintenance expense in our Consolidated Statements of Income and Comprehensive Income. We do not have employees. We have an omnibus agreement with El Paso and its affiliates under which we reimburse El Paso for the provision of various general and administrative services for our benefit and for direct expenses incurred by El Paso on our behalf.
Out of Period Adjustment
During the second quarter of 2012, we determined that certain accrued environmental liabilities established in periods prior to 2008 were overstated by approximately $6 million. We corrected this error in June 2012 by reducing accrued liabilities by approximately $6 million, with an offsetting reduction in operating expenses.
We evaluated the impact of the error and determined that it was not material to our previously reported consolidated financial statements. Additionally, we determined that the correction of the error was not material to our 2012 consolidated financial statements based on our forecasted earnings projections for the entire year.
2. Fair Value
The following table reflects the carrying amount and estimated fair value of our financial instruments measured on a recurring basis (in millions):
September 30, 2012 | December 31, 2011 | ||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||
Total debt | $ | 649 | $ | 731 | $ | 652 | $ | 702 | |||||||
As of September 30, 2012 and December 31, 2011, the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable represent their fair values based on the short-term nature of these instruments. The carrying amount of our affiliate note receivable approximates its fair value based on an analysis of the nature of the interest rate and our assessment of the ability to recover this amount.
4
At September 30, 2012 and December 31, 2011, our financial instruments measured at fair value on a recurring basis consist of our long-term debt and other financing obligations. We separate the fair values of our financial instruments into levels based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the estimated fair value. We estimated the fair values of our long-term debt and other financing obligations primarily based on quoted market prices for the same or similar issues, a Level 2 fair value measurement. Our assessment and classification of an instrument within a level can change over time based on the maturity or liquidity of the instrument and this change would be reflected at the end of the period in which the change occurs. During the nine months ended September 30, 2012, there were no changes to the inputs and valuation techniques used to measure fair value, the types of instruments, or the levels in which they are classified.
3. Related Party Transactions
Note Receivable
We participate in EPB’s cash management program which matches the short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. EPB uses the cash management program to settle intercompany transactions between participating affiliates. At September 30, 2012 and December 31, 2011, we had a note receivable from EPB of approximately $31 million and $67 million, respectively. The interest rate on this note is variable and was 2.2% and 2.3% at September 30, 2012 and December 31, 2011, respectively.
Accounts Receivable and Payable
We had accounts receivable with our affiliates of $2 million at December 31, 2011 included in Accounts and note receivable, net in our Consolidated Balance Sheets. This receivable consisted primarily of amounts due to natural gas imbalance activity.
At September 30, 2012 and December 31, 2011, we had accounts payable with our affiliates of $7 million and $19 million, respectively, included in Accounts payable in our Consolidated Balance Sheets. At each balance sheet date, these payables consisted primarily of amounts related to our operational service agreements with the following affiliates (in millions):
September 30, 2012 | December 31, 2011 | ||||||
El Paso Energy Service Company | $ | — | $ | 5 | |||
CIG Pipeline Services Company, L.L.C. | — | 4 | |||||
Tennessee Gas Pipeline Company, L.L.C. | — | 4 | |||||
WYCO Development L.L.C. (WYCO) | 6 | 5 | |||||
Other(1) | 1 | 1 | |||||
Total | $ | 7 | $ | 19 | |||
_____________________
(1) | Includes various affiliates with insignificant balances. |
Contractual Deposits
At December 31, 2011, we had contractual deposits from our affiliates of $7 million, included in Contractual deposits in our Consolidated Balance Sheet.
Financing Obligations
We have financing obligations payable to WYCO related to the Totem storage facility and the High Plains pipeline. At September 30, 2012 and December 31, 2011, these financing obligations were $173 million and $177 million, respectively. For a further discussion of our financing obligations, see our 2011 Form 10-K.
Distributions and Contributions
We are required to make distributions to our owners as defined in our limited liability company agreement on a quarterly basis. During the nine months ended September 30, 2012 and 2011, we paid cash distributions of approximately $121 million and $126 million, respectively. During the nine months ended September 30, 2012 and 2011, we received cash contributions of approximately $13 million and $32 million, respectively from our owners to fund our expansion projects.
5
Affiliate Revenues and Expenses
We enter into transactions with our affiliates within the ordinary course of business. For a further discussion of our affiliated transactions, see our 2011 Form 10-K. The following table shows revenues , expenses and reimbursements from our affiliates (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues | $ | 1 | $ | 3 | $ | 5 | $ | 9 | |||||||
Operation and maintenance expenses | 17 | 23 | 71 | 70 | |||||||||||
Reimbursements of operating expenses | 3 | 3 | 8 | 7 | |||||||||||
4. Accounts Receivable Sales Program
We participated in an accounts receivable sales program where we sold receivables in their entirety to a third-party financial institution (through a wholly owned special purpose entity). On June 20, 2012, we terminated the accounts receivable sales program and paid $19 million to the third-party financial institution, which consisted of sales proceeds received up front and servicing fees. We did not sell any receivables during June 2012. The sale of these accounts receivable (which were short-term assets that generally settled within 60 days) qualified for sale accounting. The third-party financial institution involved in our accounts receivable sales program acquired interests in various financial assets and issued commercial paper to fund those acquisitions. We did not consolidate the third-party financial institution because we did not have the power to control, direct or exert significant influence over its overall activities since our receivables did not comprise a significant portion of its operations.
In connection with our accounts receivable sales, we received a portion of the sales proceeds up front and received an additional amount upon the collection of the underlying receivables (which we refer to as a deferred purchase price). Our ability to recover the deferred purchase price was based solely on the collection of the underlying receivables. The tables below contain information related to our accounts receivable sales program (in millions).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2011 | (2) | 2012 | 2011 | |||||||||
Accounts receivable sold to the third-party financial institution(1) | $ | 93 | $ | 168 | $ | 308 | ||||||
Cash received for accounts receivable sold under the program | 55 | 102 | 167 | |||||||||
Deferred purchase price related to accounts receivable sold | 38 | 66 | 141 | |||||||||
Cash received related to the deferred purchase price | 43 | 68 | 144 | |||||||||
____________________
(1) | Losses recognized on the sale of accounts receivable were immaterial for the periods presented. |
(2) | Because the accounts receivable sales program was terminated in June 2012, there was no activity in the three months ended September 30, 2012. |
December 31, 2011 | (4 | ) | |||
Accounts receivable sold and held by third-party financial institution | $ | 36 | |||
Uncollected deferred purchase price related to accounts receivable sold (3) | 14 | ||||
____________________
(3) | Initially recorded at an amount which approximates its fair value using observable inputs other than quoted prices in active markets (Level 2 fair value measurement). |
(4) | There were no balances outstanding as of September 30, 2012 since all balances were settled in June 2012 when the accounts receivable sales program was terminated. |
The deferred purchase price related to the accounts receivable sold was reflected as Accounts and note receivable, net in our Consolidated Balance Sheet at December 31, 2011. Because the cash received up front and the deferred purchase price related to the sale or ultimate collection of the underlying receivables, and were not subject to significant other risks given their short term nature, we reflected all cash flows under the accounts receivable sales program as Operating cash flows in our Consolidated Statements of Cash Flows. Under the accounts receivable sales program, we serviced the underlying receivables for a fee.
6
5. Litigation, Environmental and Other Contingencies
Legal Proceedings
We and our affiliates are named defendants in numerous legal proceedings and claims that arise in the ordinary course of our business. For each of these matters, we evaluate the merits of the case or claim, our exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If we determine that an unfavorable outcome is probable and can be estimated, we establish the necessary accruals. While the outcome of these matters cannot be predicted with certainty, and there are still uncertainties related to the costs we may incur, based upon our evaluation and experience to date, we had no accruals for our outstanding legal proceedings at September 30, 2012. It is possible however, that new information or future developments could require us to reassess our potential exposure related to these matters and establish accruals accordingly, and these adjustments could be material.
Environmental Matters
We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us to remove or remedy the effect of the disposal or release of specified substances at current and former operating sites. At September 30, 2012, our accrual for environmental matters was approximately $3 million. Our accrual includes amounts for expected remediation costs and associated onsite, offsite and groundwater technical studies and related legal costs. Our accrual includes $1 million for environmental contingencies related to properties we previously owned.
For the remainder of 2012, we estimate that our total remediation expenditures will be approximately $2 million, most of which will be expended under government directed clean-up plans. In addition, we expect to make capital expenditures for environmental matters of approximately $4 million in the aggregate for the remainder of 2012 through 2016, including capital expenditures associated with the impact of the United States Environmental Protection Agency’s (EPA) rule on emissions of hazardous air pollutants from reciprocating internal combustion engines which are subject to regulations with which we have to be in compliance by October 2013.
Our recorded liabilities reflect our current estimates of amounts we will spend on remediation projects in various stages of completion. However, depending on the stage of completion or assessment, the ultimate extent of contamination or remediation required may not be known. As additional assessments occur or remediation efforts continue, we may incur additional liabilities.
Clean Air Act Emission Regulation. On April 17, 2012, the EPA issued regulations pursuant to the federal Clean Air Act to reduce various air pollutants from the oil and natural gas industry. These regulations will limit emissions from certain equipment including compressors, storage vessels and natural gas processing plants. Based on our evaluation of the regulations and their impact on our operations and our financial results, we do not anticipate a material impact on our operations or financial results.
It is possible that new information or future developments could require us to reassess our potential exposure related to environmental matters. We may incur significant costs and liabilities in order to comply with existing environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws, regulations and orders of regulatory agencies, as well as claims for damages to property and the environment or injuries to other persons resulting from our current or past operations, could result in substantial costs and liabilities in the future. As this information becomes available, or other relevant developments occur, we will adjust our accrual amounts accordingly. While there are still uncertainties related to the ultimate costs we may incur, based upon our evaluation and experience to date, we believe our reserves are adequate.
Other Commitments
For further discussion of our other commitments, see our 2011 Form 10-K.
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General and Basis of Presentation
The following information should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes (included elsewhere in this report), (ii) our consolidated financial statements and related notes included in our 2011 Form 10-K, and (iii) our management’s discussion and analysis of financial condition and results of operations included in our 2011 Form 10-K. We prepared our consolidated financial statements in accordance with United States generally accepted accounting principles. The information required by this Item is presented in a reduced disclosure format pursuant to General Instruction H to Form 10-Q.
On May 24, 2012, El Paso Pipeline Partners, L.P. (EPB) acquired the remaining 14 percent interest in us from a wholly owned subsidiary of El Paso LLC (formerly El Paso Corporation) (El Paso), and we became an indirect wholly owned subsidiary of EPB. El Paso’s and Kinder Morgan, Inc.’s (KMI) merger became effective on May 25, 2012.
Results of Operations
We previously reported earnings before interest expense and income taxes as our performance measure. As a result of El Paso’s and KMI’s merger, management now assesses our performance based on our earnings before depreciation and amortization (EBDA), which excludes depreciation and amortization, general and administrative expenses and interest expense, net. Our management uses EBDA as a measure to assess the operating results and effectiveness of our assets. We believe providing EBDA to our investors is useful because it is the same measure used by management to evaluate our performance and allows investors to evaluate our operating results without regard to our financing methods. EBDA may not be comparable to measures used by other companies. Additionally, EBDA should be considered in conjunction with net income and other performance measures such as operating income or operating cash flows.
Below is a reconciliation of our EBDA to net income for the nine months ended September 30, 2012 compared with the same period in 2011 (in millions).
Nine Months Ended September 30, | |||||||
2012 | 2011 | ||||||
EBDA(a) | $ | 219 | $ | 214 | |||
Depreciation and amortization expense | (33 | ) | (34 | ) | |||
General and administrative expenses(b) | (34 | ) | (30 | ) | |||
Interest expense, net | (46 | ) | (45 | ) | |||
Net income | $ | 106 | $ | 105 | |||
____________________
(a) | The 2012 period includes a $4 million charge to operating expenses which was associated with a canceled software implementation project and a $6 million reduction to operating expenses for an out of period correction of an error. For additional information related to the correction of the accounting error, see Part I, Item 1, Note 1. |
(b) | Certain general and administrative expenses have been excluded from EBDA such as employee benefits, legal, information technology and other costs that are not controllable by operating management and thus are not included in the measure of performance for which they are accountable. |
Below are the components of EBDA, our throughput volumes and an analysis of our operating results for the nine months ended September 30, 2012 as compared to the same periods in 2011 (in millions, except operating statistics).
Nine Months Ended September 30, | |||||||
2012 | 2011 | ||||||
Revenues | $ | 291 | $ | 308 | |||
Operating expenses | (74 | ) | (96 | ) | |||
Other, net | 2 | 2 | |||||
EBDA | $ | 219 | $ | 214 | |||
Throughput volumes (Billion British thermal units per day) | 2,124 | 2,117 | |||||
8
EBDA
The items described in footnote (a) above increased our EBDA by $2 million for the nine months ended September 30, 2012 compared to the same period in 2011. After adjusting for these items, EBDA increased by $3 million for the nine months ended September 30, 2012 compared to the same period in 2011 primarily due to the following items:
In the nine months ended September 30, 2012 compared to the same period in 2011, we benefited from favorable property tax adjustments of $3 million during 2012 and higher contractor, labor and supply costs of approximately $8 million due in part to increased pipeline repair costs during 2011. Partially offsetting these favorable impacts were lower transportation revenues of approximately $8 million primarily due to the renewal of certain contracts at lower volumes or discounted rates and reduced throughput resulting from milder winter weather along the Front Range of the Rockies.
General and Administrative Expense
During the nine months ended September 30, 2012 as compared to the same period in 2011, our general and administrative expenses were higher by $4 million primarily due to allocated severance costs of approximately $10 million recorded in 2012 related to El Paso’s and KMI’s merger. These costs were offset by lower employee benefit costs in 2012 resulting from merger-related headcount reductions.
9
Information Regarding Forward-Looking Statements
This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” or the negative of those terms or other variations of them or comparable terminology. In particular, statements, expressed or implied, concerning future actions, conditions or events, future operating results or the ability to generate sales, income or cash flow or to make distributions are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. See Part I, Item 1A “Risk Factors” of our 2011 Form 10-K and Part II, Item 1A “Risk Factors” in this report for a more detailed description of factors that may affect the forward-looking statements. When considering forward-looking statements, one should keep in mind the risk factors described in our 2011 Form 10-K and in this report. The risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. We disclaim any obligation, other than as required by applicable law, to update any forward-looking statements to reflect future events or developments after the date of this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.
Item 4. Controls and Procedures.
As of September 30, 2012, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control
Subsequent to El Paso’s and KMI’s merger in May 2012, our internal controls over financial reporting were impacted by changes made to conform our entity-level controls, monitoring activities and disclosure controls and procedures to the existing controls, activities and procedures of KMI. Additional changes are expected to occur in future periods. None of these changes are in response to any identified deficiency or weakness in our internal control over financial reporting.
There were no other changes in internal controls over financial reporting that have materially affected, or are reasonably likely to affect our internal controls over financial reporting.
10
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
See Part I, Item 1, Note 5 to our consolidated financial statements entitled “Litigation, Environmental and Other Contingencies,” which is incorporated herein by reference.
Item 1A. Risk Factors.
Except as set forth below, there have been no material changes in or additions to the risk factors disclosed in Part I, Item 1A in our 2011 Form 10-K. The information contained in Item 1A updates, and should be read in conjunction with, related information set forth in Part I, Item 1A in our 2011 Form 10-K, in addition to the unaudited interim consolidated financial statements, accompanying notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations presented in Part I, Items 1 and 2 of this Form 10-Q.
We are controlled by EPB, which is in turn controlled by its general partner, which is indirectly owned by KMI. KMI also indirectly owns the common stock of the general partner of Kinder Morgan Energy Partners, L.P. (KMP), which may result in conflicts of interest.
KMI owns EPB’s general partner and as a result controls EPB and us. KMI also owns the common stock of the general partner of KMP, a publicly traded partnership with which we and EPB compete in the natural gas gathering, processing and transportation business. The directors and officers of EPB’s general partner and its affiliates have fiduciary duties to manage EPB’s general partner in a manner that is beneficial to KMI, its ultimate parent corporation. At the same time, EPB’s general partner has fiduciary duties to manage EPB in a manner that is beneficial to EPB’s unitholders. Therefore, EPB’s general partner’s duties to EPB and us may conflict with the duties of its officers and directors to KMI. As a result of these conflicts of interest, EPB’s general partner may favor its own interest or those of KMI, KMP, or their owners or affiliates over the interest of EPB’s unitholders or us.
Our business, financial condition and operating results may be affected adversely by increased costs of capital or a reduction in the availability of credit.
Adverse changes to the availability, terms and cost of capital, interest rates or our credit ratings could cause our cost of doing business to increase by limiting our access to capital, limiting our ability to pursue acquisition opportunities and reducing our cash flows. Our credit ratings may be impacted by our leverage, liquidity, credit profile and potential transactions. Also, continuing disruptions and volatility in the global financial markets may lead to an increase in interest rates or a contraction in credit availability impacting our ability to finance our operations on favorable terms. A significant reduction in the availability of credit could materially and adversely affect our business, financial condition and results of operations.
In addition, due to our relationship with KMI, our credit ratings, and thus our ability to access the capital markets and the terms and pricing we receive therein, may be adversely affected by any impairments to KMI’s financial condition or adverse changes in its credit ratings. Although the ratings from credit agencies are not recommendations to buy, sell or hold our securities, our credit ratings will generally affect the market value of our debt instruments.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.
Item 3. Defaults Upon Senior Securities.
Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Each exhibit identified below is filed as a part of this Report. Exhibits filed with this Report are designated by “*”. All exhibits not so designated are incorporated herein by reference to a prior filing as indicated.
Exhibit Number | Description | |
3.B | Second Amended and Restated Limited Liability Company Agreement of Colorado Interstate Gas Company, L.L.C. dated May 24, 2012 (incorporated by reference to Exhibit 10.2 to El Paso Pipeline Partners, L.P.’s Current Report on Form 8-K (File No. 001-33825) filed with the SEC on May 24, 2012). | |
*31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
*31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
*32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
*32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
*101 | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) our Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2012 and 2011; (ii) our Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011; (iii) our Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (iv) the notes to our Consolidated Financial Statements. | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COLORADO INTERSTATE GAS COMPANY, L.L.C. Registrant (A Delaware limited liability company) | ||
Date: November 5, 2012
By: /s/ Kimberly A. Dang | ||
Kimberly A. Dang | ||
Chief Financial Officer | ||
(principal financial officer) | ||
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