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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission File Number 1-7584
 TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    74-1079400(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2800 Post Oak BoulevardP. O. Box 1396Houston, Texas
    
    77251(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (713) 215-2000
 None
(Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
 Yes þ No o
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule 12b-2).
 Yes o No þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes o No þ
 The number of shares of Common Stock, par value $1.00 per share, outstanding as of October
31, 2005 was 100.
 REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H (1)(a) AND (b) OF FORM 10-Q
AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.




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1




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PagePART I. FINANCIAL INFORMATION:Item 1. Financial Statements -Condensed Consolidated Statement of Income for the three and nine months
ended September 30, 2005 and 2004
    
    
    3Condensed Consolidated Balance Sheet as of September 30, 2005 and
December 31, 2004
    
    
    4Condensed Consolidated Statement of Cash Flows for the nine
months ended September 30, 2005 and 2004
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    25Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATION
    
    
    31Item 1. Legal Proceedings
    
    
    31Item 6. Exhibits
    
    
    31Certification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Principal Executive Officer & Principal Financial Officer Pursuant to Section 906
    2




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PART 1  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements.
  
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Operating Revenues:Natural gas sales
    
    $
    50,650
    
    
    $
    83,698
    
    
    $
    211,814
    
    
    $
    302,843Natural gas transportation
    
    
    188,159
    
    
    
    187,276
    
    
    
    572,158
    
    
    
    586,630Natural gas storage
    
    
    30,508
    
    
    
    30,527
    
    
    
    91,643
    
    
    
    92,376Other
    
    
    1,574
    
    
    
    1,923
    
    
    
    8,023
    
    
    
    7,471Total operating revenues
    
    
    270,891
    
    
    
    303,424
    
    
    
    883,638
    
    
    
    989,320Operating Costs and Expenses:Cost of natural gas sales
    
    
    50,669
    
    
    
    83,698
    
    
    
    211,787
    
    
    
    301,294Cost of natural gas transportation
    
    
    (13,504
    )
    
    
    744
    
    
    
    (8,513
    )
    
    
    13,456Operation and maintenance
    
    
    49,936
    
    
    
    46,840
    
    
    
    145,948
    
    
    
    140,995Administrative and general
    
    
    30,733
    
    
    
    30,637
    
    
    
    78,892
    
    
    
    89,512Depreciation and amortization
    
    
    49,034
    
    
    
    47,815
    
    
    
    147,041
    
    
    
    148,460Taxes  other than income taxes
    
    
    11,337
    
    
    
    10,013
    
    
    
    34,917
    
    
    
    33,780Other, net
    
    
    420
    
    
    
    190
    
    
    
    1,044
    
    
    
    359Total operating costs and expenses
    
    
    178,625
    
    
    
    219,937
    
    
    
    611,116
    
    
    
    727,856Operating Income
    
    
    92,266
    
    
    
    83,487
    
    
    
    272,522
    
    
    
    261,464Other (Income) and Other Deductions:Interest expense
    
    
    19,782
    
    
    
    22,302
    
    
    
    59,574
    
    
    
    66,632Interest income  affiliates
    
    
    (2,306
    )
    
    
    (3,253
    )
    
    
    (7,462
    )
    
    
    (7,693
    )Allowance for equity and borrowed funds used during construction
(AFUDC)
    
    
    (3,059
    )
    
    
    (2,525
    )
    
    
    (6,994
    )
    
    
    (5,870
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,916
    )
    
    
    (1,787
    )
    
    
    (5,366
    )
    
    
    (5,306
    )Miscellaneous other (income) deductions, net
    
    
    (1,946
    )
    
    
    (1,999
    )
    
    
    (4,617
    )
    
    
    (3,773
    )Total other (income) and other deductions
    
    
    10,555
    
    
    
    12,738
    
    
    
    35,135
    
    
    
    43,990Income before Income Taxes
    
    
    81,711
    
    
    
    70,749
    
    
    
    237,387
    
    
    
    217,474Provision for Income Taxes
    
    
    31,273
    
    
    
    26,743
    
    
    
    89,967
    
    
    
    82,893Net Income
    
    $
    50,438
    
    
    $
    44,006
    
    
    $
    147,420
    
    
    $
    134,581
  3




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September 30,
    
    
    December 31,2005
    
    
    2004(Restated)ASSETSCurrent Assets:Cash
    
    $
    521
    
    
    $
    176Receivables:Affiliates
    
    
    6,324
    
    
    
    1,947Advances to affiliates
    
    
    85,131
    
    
    
    302,765Others, less allowance of $511 ($778 in 2004)
    
    
    100,787
    
    
    
    113,333Transportation and exchange gas receivables
    
    
    7,485
    
    
    
    5,810Inventories
    
    
    133,179
    
    
    
    105,379Deferred income taxes
    
    
    16,805
    
    
    
    17,592Other
    
    
    19,299
    
    
    
    13,543Total current assets
    
    
    369,531
    
    
    
    560,545Investments, at cost plus equity in undistributed earnings
    
    
    43,711
    
    
    
    43,592Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,019,141
    
    
    
    5,866,977Less-Accumulated depreciation and amortization
    
    
    1,722,602
    
    
    
    1,594,231Total property, plant and equipment, net
    
    
    4,296,539
    
    
    
    4,272,746Other Assets
    
    
    227,170
    
    
    
    249,291Total assets
    
    $
    4,936,951
    
    
    $
    5,126,174
  4




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September 30,
    
    
    December 31,2005
    
    
    2004(Restated)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    41,151
    
    
    $
    43,063Other
    
    
    35,674
    
    
    
    63,203Transportation and exchange gas payables
    
    
    30,583
    
    
    
    21,559Accrued liabilities
    
    
    107,792
    
    
    
    151,285Reserve for rate refunds
    
    
    4,917
    
    
    
    8,919Current maturities of long-term debt
    
    
    
    
    
    
    199,991Total current liabilities
    
    
    220,117
    
    
    
    488,020Long-Term Debt
    
    
    1,000,423
    
    
    
    999,858Other Long-Term Liabilities:Deferred income taxes
    
    
    979,189
    
    
    
    965,107Other
    
    
    154,657
    
    
    
    158,453Total other long-term liabilities
    
    
    1,133,846
    
    
    
    1,123,560Contingent liabilities and commitments (Note 3)Common Stockholders Equity:Common stock $1.00 par value:100 shares authorized, issued and outstanding
    
    
    
    
    
    
    Premium on capital stock and other paid-in capital
    
    
    1,652,430
    
    
    
    1,652,430Retained earnings
    
    
    930,646
    
    
    
    863,226Accumulated other comprehensive loss
    
    
    (511
    )
    
    
    (920
    )Total common stockholders equity
    
    
    2,582,565
    
    
    
    2,514,736Total liabilities and stockholders equity
    
    $
    4,936,951
    
    
    $
    5,126,174
  5




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Nine Months EndedSeptember 30,2005
    
    
    2004(Restated)Cash flows from operating activities:Net income
    
    $
    147,420
    
    
    $
    134,581Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    147,264
    
    
    
    150,018Deferred income taxes
    
    
    17,895
    
    
    
    43,547Allowance for equity funds used during construction (Equity AFUDC)
    
    
    (4,825
    )
    
    
    (4,170
    )Changes in operating assets and liabilities:Receivables
    
    
    8,169
    
    
    
    43,684Transportation and exchange gas receivables
    
    
    (1,675
    )
    
    
    3,455Inventories
    
    
    (27,800
    )
    
    
    1,536Payables
    
    
    (15,667
    )
    
    
    (47,244
    )Transportation and exchange gas payables
    
    
    9,024
    
    
    
    5,005Accrued liabilities
    
    
    (46,756
    )
    
    
    (11,191
    )Reserve for rate refunds
    
    
    (4,002
    )
    
    
    (1,941
    )Other, net
    
    
    12,720
    
    
    
    12,455Net cash provided by operating activities
    
    
    241,767
    
    
    
    329,735Cash flows from financing activities:Retirement of long-term debt
    
    
    (200,000
    )
    
    
    Debt issue costs
    
    
    (255
    )
    
    
    Change in cash overdrafts
    
    
    (8,378
    )
    
    
    (13,195
    )Common stock dividends paid
    
    
    (80,000
    )
    
    
    (75,000
    )Net cash used in financing activities
    
    
    (288,633
    )
    
    
    (88,195
    )Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (169,020
    )
    
    
    (100,035
    )Changes in accounts payable
    
    
    (5,396
    )
    
    
    (9,514
    )Advances to affiliates, net
    
    
    217,634
    
    
    
    (133,477
    )Other, net
    
    
    3,993
    
    
    
    1,307Net cash provided by (used in) investing activities
    
    
    47,211
    
    
    
    (241,719
    )Net increase (decrease) in cash
    
    
    345
    
    
    
    (179
    )Cash at beginning of period
    
    
    176
    
    
    
    300Cash at end of period
    
    $
    521
    
    
    $
    121
  6




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TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
        7




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Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Net income
    
    $
    50,438
    
    
    $
    44,006
    
    
    $
    147,420
    
    
    $
    134,581Equity interest in
unrealized gain/(loss) on
interest rate hedge
    
    
    240
    
    
    
    (287
    )
    
    
    409
    
    
    
    69Total comprehensive income
    
    $
    50,678
    
    
    $
    43,719
    
    
    $
    147,829
    
    
    $
    134,650
 Recent Accounting Developments
    8




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FERC Accounting Guidance
 9




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2. RESTATEMENT
         10




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11




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Three Months Ended September 30, 2004(As Reported)
    
    
    Adjustments
    
    
    (As Restated)Operating Revenues:Natural gas sales
    
    $
    83,698
    
    
    $
    
    
    
    $
    83,698Natural gas transportation
    
    
    187,276
    
    
    
    
    
    
    
    187,276Natural gas storage
    
    
    30,527
    
    
    
    
    
    
    
    30,527Other
    
    
    1,923
    
    
    
    
    
    
    
    1,923Total operating revenues
    
    
    303,424
    
    
    
    
    
    
    
    303,424Operating Costs and Expenses:Cost of natural gas sales
    
    
    83,698
    
    
    
    
    
    
    
    83,698Cost of natural gas transportation
    
    
    2,090
    
    
    
    (1,346
    )
    
    
    744Operation and maintenance
    
    
    46,840
    
    
    
    
    
    
    
    46,840Administrative and general
    
    
    32,362
    
    
    
    (1,725
    )
    
    
    30,637Depreciation and amortization
    
    
    47,815
    
    
    
    
    
    
    
    47,815Taxes  other than income taxes
    
    
    10,013
    
    
    
    
    
    
    
    10,013Other (income) expense, net
    
    
    190
    
    
    
    
    
    
    
    190Total operating costs and expenses
    
    
    223,008
    
    
    
    (3,071
    )
    
    
    219,937Operating Income
    
    
    80,416
    
    
    
    3,071
    
    
    
    83,487Other (Income) and Other Deductions:Interest expense
    
    
    22,302
    
    
    
    
    
    
    
    22,302Interest income  affiliates
    
    
    (3,253
    )
    
    
    
    
    
    
    (3,253
    )Allowance for equity and borrowed funds used during construction (AFUDC)
    
    
    (2,525
    )
    
    
    
    
    
    
    (2,525
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,787
    )
    
    
    
    
    
    
    (1,787
    )Miscellaneous other (income) deductions, net
    
    
    (1,999
    )
    
    
    
    
    
    
    (1,999
    )Total other (income) and other deductions
    
    
    12,738
    
    
    
    
    
    
    
    12,738Income before Income Taxes
    
    
    67,678
    
    
    
    3,071
    
    
    
    70,749Provision for Income Taxes
    
    
    25,582
    
    
    
    1,161
    
    
    
    26,743Net Income
    
    $
    42,096
    
    
    $
    1,910
    
    
    $
    44,006
  12




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Nine Months Ended September 30, 2004(As Reported)
    
    
    Adjustments
    
    
    (As Restated)Operating Revenues:Natural gas sales
    
    $
    302,843
    
    
    $
    
    
    
    $
    302,843Natural gas transportation
    
    
    586,630
    
    
    
    
    
    
    
    586,630Natural gas storage
    
    
    92,376
    
    
    
    
    
    
    
    92,376Other
    
    
    7,471
    
    
    
    
    
    
    
    7,471Total operating revenues
    
    
    989,320
    
    
    
    
    
    
    
    989,320Operating Costs and Expenses:Cost of natural gas sales
    
    
    301,294
    
    
    
    
    
    
    
    301,294Cost of natural gas transportation
    
    
    15,999
    
    
    
    (2,543
    )
    
    
    13,456Operation and maintenance
    
    
    142,295
    
    
    
    (1,300
    )
    
    
    140,995Administrative and general
    
    
    94,806
    
    
    
    (5,294
    )
    
    
    89,512Depreciation and amortization
    
    
    144,436
    
    
    
    4,024
    
    
    
    148,460Taxes  other than income taxes
    
    
    34,786
    
    
    
    (1,006
    )
    
    
    33,780Other (income) expense, net
    
    
    359
    
    
    
    
    
    
    
    359Total operating costs and expenses
    
    
    733,975
    
    
    
    (6,119
    )
    
    
    727,856Operating Income
    
    
    255,345
    
    
    
    6,119
    
    
    
    261,464Other (Income) and Other Deductions:Interest expense
    
    
    66,632
    
    
    
    
    
    
    
    66,632Interest income  affiliates
    
    
    (7,693
    )
    
    
    
    
    
    
    (7,693
    )Allowance for equity and borrowed funds used during construction (AFUDC)
    
    
    (5,870
    )
    
    
    
    
    
    
    (5,870
    )Equity in earnings of unconsolidated affiliates
    
    
    (5,306
    )
    
    
    
    
    
    
    (5,306
    )Miscellaneous other (income) deductions, net
    
    
    (3,773
    )
    
    
    
    
    
    
    (3,773
    )Total other (income) and other deductions
    
    
    43,990
    
    
    
    
    
    
    
    43,990Income before Income Taxes
    
    
    211,355
    
    
    
    6,119
    
    
    
    217,474Provision for Income Taxes
    
    
    80,579
    
    
    
    2,314
    
    
    
    82,893Net Income
    
    $
    130,776
    
    
    $
    3,805
    
    
    $
    134,581
  13




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As of December 31, 2004(As Reported)
    
    
    Adjustments
    
    
    (As Restated)ASSETSCurrent Assets:Cash
    
    $
    176
    
    
    $
    
    
    
    $
    176Receivables:Affiliates
    
    
    1,947
    
    
    
    
    
    
    
    1,947Advances to affiliates
    
    
    302,765
    
    
    
    
    
    
    
    302,765Others, less allowance of $1,724 as reported, $778 as restated
    
    
    112,387
    
    
    
    946
    
    
    
    113,333Transportation and exchange gas receivables
    
    
    5,810
    
    
    
    
    
    
    
    5,810Inventories
    
    
    105,379
    
    
    
    
    
    
    
    105,379Deferred income taxes
    
    
    20,494
    
    
    
    (2,902
    )
    
    
    17,592Other
    
    
    13,543
    
    
    
    
    
    
    
    13,543Total current assets
    
    
    562,501
    
    
    
    (1,956
    )
    
    
    560,545Investments, at cost plus equity in undistributed earnings
    
    
    43,592
    
    
    
    
    
    
    
    43,592Property, Plant and Equipment:Natural gas transmission plant
    
    
    5,879,814
    
    
    
    (12,837
    )
    
    
    5,866,977Less-Accumulated depreciation and amortization
    
    
    1,594,177
    
    
    
    54
    
    
    
    1,594,231Total property, plant and equipment, net
    
    
    4,285,637
    
    
    
    (12,891
    )
    
    
    4,272,746Other Assets
    
    
    232,147
    
    
    
    17,144
    
    
    
    249,291Total Assets
    
    $
    5,123,877
    
    
    $
    2,297
    
    
    $
    5,126,174
  14




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As of December 31, 2004(As Reported)
    
    
    Adjustments
    
    
    (As Restated)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    43,063
    
    
    $
    
    
    
    $
    43,063Other
    
    
    66,195
    
    
    
    (2,992
    )
    
    
    63,203Transportation and exchange gas payables
    
    
    23,131
    
    
    
    (1,572
    )
    
    
    21,559Accrued liabilities
    
    
    164,528
    
    
    
    (13,243
    )
    
    
    151,285Reserve for rate refunds
    
    
    8,919
    
    
    
    
    
    
    
    8,919Current maturities of long-term debt
    
    
    199,991
    
    
    
    
    
    
    
    199,991Total current liabilities
    
    
    505,827
    
    
    
    (17,807
    )
    
    
    488,020Long-Term Debt
    
    
    999,858
    
    
    
    
    
    
    
    999,858Other Long-Term Liabilities:Deferred income taxes
    
    
    962,987
    
    
    
    2,120
    
    
    
    965,107Other
    
    
    154,714
    
    
    
    3,739
    
    
    
    158,453Total other long-term liabilities
    
    
    1,117,701
    
    
    
    5,859
    
    
    
    1,123,560Contingent liabilities and commitments (Note 3)Common Stockholders Equity:Common Stock $1.00 par value:100 shares authorized, issued and outstanding
    
    
    
    
    
    
    
    
    
    
    Premium on capital stock and other paid-in capital
    
    
    1,652,430
    
    
    
    
    
    
    
    1,652,430Retained earnings
    
    
    848,981
    
    
    
    14,245
    
    
    
    863,226Accumulated other comprehensive loss
    
    
    (920
    )
    
    
    
    
    
    
    (920
    )Total common stockholders equity
    
    
    2,500,491
    
    
    
    14,245
    
    
    
    2,514,736Total liabilities and stockholders equity
    
    $
    5,123,877
    
    
    $
    2,297
    
    
    $
    5,126,174
  15




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Nine Months Ended September 30, 2004(As Reported)
    
    
    Adjustments
    
    
    (As Restated)Cash flows from operating activities:Net income
    
    $
    130,776
    
    
    $
    3,805
    
    
    $
    134,581Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    145,974
    
    
    
    4,044
    
    
    
    150,018Deferred income taxes
    
    
    41,233
    
    
    
    2,314
    
    
    
    43,547Allowance for equity funds used during construction
(Equity AFUDC)
    
    
    (4,170
    )
    
    
    
    
    
    
    (4,170
    )Changes in operating assets and liabilities:Receivables
    
    
    43,684
    
    
    
    
    
    
    
    43,684Transportation and exchange gas receivables
    
    
    3,455
    
    
    
    
    
    
    
    3,455Inventories
    
    
    1,536
    
    
    
    
    
    
    
    1,536Payables
    
    
    (47,240
    )
    
    
    (4
    )
    
    
    (47,244
    )Transportation and exchange gas payables
    
    
    1,439
    
    
    
    3,566
    
    
    
    5,005Accrued liabilities
    
    
    (5,084
    )
    
    
    (6,107
    )
    
    
    (11,191
    )Reserve for rate refunds
    
    
    (1,941
    )
    
    
    
    
    
    
    (1,941
    )Other, net
    
    
    19,483
    
    
    
    (7,028
    )
    
    
    12,455Net cash provided by operating activities
    
    
    329,145
    
    
    
    590
    
    
    
    329,735Cash flows from financing activities:Retirement of long-term debt
    
    
    
    
    
    
    
    
    
    
    Debt issue costs
    
    
    
    
    
    
    
    
    
    
    Change in cash overdrafts
    
    
    (13,195
    )
    
    
    
    
    
    
    (13,195
    )Common stock dividends paid
    
    
    (75,000
    )
    
    
    
    
    
    
    (75,000
    )Net cash used in financing activities
    
    
    (88,195
    )
    
    
    
    
    
    
    (88,195
    )Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (99,445
    )
    
    
    (590
    )
    
    
    (100,035
    )Changes in accounts payable
    
    
    (9,514
    )
    
    
    
    
    
    
    (9,514
    )Advances to affiliates, net
    
    
    (133,477
    )
    
    
    
    
    
    
    (133,477
    )Other, net
    
    
    1,307
    
    
    
    
    
    
    
    1,307Net cash used in investing activities
    
    
    (241,129
    )
    
    
    (590
    )
    
    
    (241,719
    )Net decrease in cash
    
    
    (179
    )
    
    
    
    
    
    
    (179
    )Cash at beginning of period
    
    
    300
    
    
    
    
    
    
    
    300Cash at end of period
    
    $
    121
    
    
    $
    
    
    
    $
    121
  16




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##### Table of Contents



3. CONTINGENT LIABILITIES AND COMMITMENTS
 Rate and Regulatory Matters
 General rate case (Docket No. RP01-245)
     17




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##### Table of Contents



Gathering facilities spin-down order (Docket Nos. CP96-206-000 and CP96-207-000)
  North Padre Island/Central Texas Systems Spin-down Proceeding (Docket Nos. CP01-32 and
CP01-34)
 18




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##### Table of Contents



North High Island/West Cameron Systems and Central Louisiana System Spin-down Proceedings
(Docket Nos. CP01-103 and CP01-104, and CP01-368 and CP01-369)
 19




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##### Table of Contents



South Texas Pipeline Facilities Abandonment Proceeding
 1999 Fuel Tracker (Docket No. TM99-6-29)
  20




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##### Table of Contents



Other
 Legal Proceedings.
 Royalty claims and litigation
 th
  21




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Environmental Matters
    22




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##### Table of Contents



Safety Matters
 Pipeline Integrity Regulations
 23




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##### Table of Contents



Summary
  Other Commitments
 Commitments for construction
 4. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facilities
  
    
    added Williams Partners L.P. as a borrower for up to $75 million;
    
    provided Williams guarantee for the obligations of Williams Partners L.P. under
this agreement;
    
    released certain Williams midstream assets held as collateral and replaced them
with our common stock; and
    
    reduced commitment fees and margins.
 Retirements
  24




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##### Table of Contents



5. STOCK-BASED COMPENSATION
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Net income
    
    $
    50,438
    
    
    $
    44,006
    
    
    $
    147,420
    
    
    $
    134,581Add: Stock-based
employee compensation
included in the
Condensed Consolidated
Statement of Income,
net of related tax
effects
    
    
    201
    
    
    
    111
    
    
    
    747
    
    
    
    295Deduct: Stock-based
employee compensation
expense determined
under fair value based
method for all awards,
net of related tax
effects
    
    
    (493
    )
    
    
    (1,090
    )
    
    
    (1,579
    )
    
    
    (2,440
    )Pro forma net income
    
    $
    50,146
    
    
    $
    43,027
    
    
    $
    146,588
    
    
    $
    132,436
  
 ITEM 2. Managements Narrative Analysis of the Results of Operations.
 General
  Restatement of Financial Results
   25




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##### Table of Contents



RESULTS OF OPERATIONS
 Operating Income and Net Income
  Transportation Revenues
   Nine MonthsEnded September 30,Transco System Deliveries (TBtu)
    
    2005
    
    
    2004Market-area deliveries:Long-haul transportation
    
    
    577.2
    
    
    
    582.0Market-area transportation
    
    
    628.7
    
    
    
    609.2Total market-area deliveries
    
    
    1,205.9
    
    
    
    1,191.2Production-area transportation
    
    
    213.3
    
    
    
    246.6Total system deliveries
    
    
    1,419.2
    
    
    
    1,437.8Average Daily Transportation Volumes (Tbtu)
    
    
    5.2
    
    
    
    5.2Average Daily Firm Reserved Capacity (Tbtu)
    
    
    6.6
    
    
    
    6.6
 26




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##### Table of Contents



Sales Revenues
     Nine MonthsEnded September 30,Gas Sales Volumes (Tbtu)
    
    2005
    
    
    2004Long-term sales
    
    
    7.8
    
    
    
    25.0Short-term sales
    
    
    5.8
    
    
    
    10.6Total gas sales
    
    
    13.6
    
    
    
    35.6
 Storage Revenues
  27




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##### Table of Contents



Other Revenues
  Operating Costs and Expenses
  Other Income and Other Deductions
  Capital Expenditures
  Nine MonthsEnded September 30,Capital Expenditures
    
    2005
    
    
    2004(Restated)(In Millions)Market-area projects
    
    $
    16.9
    
    
    $
    11.3Supply-area projects
    
    
    8.1
    
    
    
    6.1Maintenance of existing facilities and other projects
    
    
    149.4
    
    
    
    92.1Total capital expenditures
    
    $
    174.4
    
    
    $
    109.5
 28




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##### Table of Contents



Central New Jersey Expansion Project
 Leidy to Long Island Expansion Project
 Potomac Expansion Project
 Sentinel Expansion Project
 29




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##### Table of Contents



ITEM 4. Controls and Procedures.
    30




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##### Table of Contents



See discussion in Note 3 of the Notes to Condensed Consolidated Financial Statements
included herein.
 
  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)
    
    Section 302 Certifications
 -
    
    
    1
    
    
    Certification of Principal Executive Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the
Securities Exchange Act of 1934, as amended, and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.-
    
    
    2
    
    
    Certification of Principal Financial Officer pursuant to
Rules 13a-14(a) and 15d-14(a) promulgated under the
Securities Exchange Act of 1934, as amended, and Item
601(b)(31) of Regulation S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
 (32)
    
    Section 906 Certification
 -
    
    Certification of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 31




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TRANSCONTINENTAL GAS PIPE LINE
CORPORATION (Registrant)Dated: November 4, 2005
    
    By /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController
(Principal Accounting Officer)
 32