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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 June 30, 2007
 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
(State or other jurisdiction of 
incorporation or organization)
    
    74-1079400
(I.R.S. Employer
Identification No.)2800 Post Oak Boulevard 
P. O. Box 1396
Houston, Texas
(Address of principal executive offices)
    
    77251
(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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act.
 Large accelerated filer o Accelerated filer o Non-accelerated filer 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 July
31, 2007 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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PagePART I. FINANCIAL INFORMATION:Item 1. Financial Statements -Condensed Consolidated Statements of Income for the three and six months
ended June 30, 2007 and 2006
    
    
    4Condensed Consolidated Balance Sheets as of June 30, 2007 and
December 31, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2007 and 2006
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    14Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 6. Exhibits
    
    
    19Certification of Principal Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906
    
    
    Amounts and nature of future capital expenditures;
    
    Expansion and growth of our business and operations;
    
    Business strategy;
 2




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
    
    Cash flow from operations;
    
    Power and natural gas prices and demand.
  
    
    Availability of supplies (including the uncertainties inherent in assessing and
estimating future natural gas reserves), market demand, volatility of prices, and
increased costs of capital;
    
    Inflation, interest rates and general economic conditions;
    
    The strength and financial resources of our competitors;
    
    Development of alternative energy sources;
    
    The impact of operational and development hazards;
    
    Costs of, changes in, or the results of laws, government regulations including
proposed climate change legislation, environmental liabilities, litigation, and rate
proceedings;
    
    Changes in the current geopolitical situation;
    
    Risks related to strategy and financing, including restrictions stemming from our
debt agreements and our lack of investment grade credit ratings; and
    
    Risk associated with future weather conditions and acts of terrorism.
    3




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PART 1  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements.
  
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating Revenues:Natural gas sales
    
    $
    59,952
    
    
    $
    39,951
    
    
    $
    91,239
    
    
    $
    67,883Natural gas transportation
    
    
    210,453
    
    
    
    187,605
    
    
    
    412,186
    
    
    
    382,802Natural gas storage
    
    
    35,676
    
    
    
    29,861
    
    
    
    68,366
    
    
    
    60,016Other
    
    
    9,071
    
    
    
    3,395
    
    
    
    16,499
    
    
    
    9,702Total operating revenues
    
    
    315,152
    
    
    
    260,812
    
    
    
    588,290
    
    
    
    520,403Operating Costs and Expenses:Cost of natural gas sales
    
    
    59,948
    
    
    
    39,954
    
    
    
    91,168
    
    
    
    67,881Cost of natural gas transportation
    
    
    1,238
    
    
    
    2,771
    
    
    
    5,441
    
    
    
    6,574Operation and maintenance
    
    
    56,104
    
    
    
    53,106
    
    
    
    111,396
    
    
    
    105,831Administrative and general
    
    
    37,451
    
    
    
    36,005
    
    
    
    77,692
    
    
    
    67,917Depreciation and amortization
    
    
    57,602
    
    
    
    51,688
    
    
    
    111,172
    
    
    
    102,587Taxes  other than income taxes
    
    
    14,381
    
    
    
    12,725
    
    
    
    28,578
    
    
    
    26,672Other, net
    
    
    3,979
    
    
    
    (3,336
    )
    
    
    4,325
    
    
    
    (4,813
    )Total operating costs and expenses
    
    
    230,703
    
    
    
    192,913
    
    
    
    429,772
    
    
    
    372,649Operating Income
    
    
    84,449
    
    
    
    67,899
    
    
    
    158,518
    
    
    
    147,754Other (Income) and Other Deductions:Interest expense
    
    
    23,431
    
    
    
    22,941
    
    
    
    46,624
    
    
    
    38,014Interest income  affiliates
    
    
    (4,267
    )
    
    
    (4,613
    )
    
    
    (7,925
    )
    
    
    (6,557
    )Allowance for equity and borrowed funds used
during construction (AFUDC)
    
    
    (2,982
    )
    
    
    (2,909
    )
    
    
    (4,713
    )
    
    
    (5,369
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,723
    )
    
    
    (1,962
    )
    
    
    (3,397
    )
    
    
    (3,746
    )Miscellaneous other (income) deductions, net
    
    
    (1,938
    )
    
    
    (787
    )
    
    
    (4,520
    )
    
    
    (3,114
    )Total other (income) and other deductions
    
    
    12,521
    
    
    
    12,670
    
    
    
    26,069
    
    
    
    19,228Income before Income Taxes
    
    
    71,928
    
    
    
    55,229
    
    
    
    132,449
    
    
    
    128,526Provision for Income Taxes
    
    
    27,808
    
    
    
    21,104
    
    
    
    50,705
    
    
    
    48,689Net Income
    
    $
    44,120
    
    
    $
    34,125
    
    
    $
    81,744
    
    
    $
    79,837
  4




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June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent Assets:Cash
    
    $
    120
    
    
    $
    315Receivables:Affiliates
    
    
    5,530
    
    
    
    7,814Advances to affiliates
    
    
    176,295
    
    
    
    190,399Others, less allowance of $503 ($503 in 2006)
    
    
    118,830
    
    
    
    84,445Transportation and exchange gas receivables
    
    
    18,523
    
    
    
    7,075Inventories
    
    
    55,681
    
    
    
    64,821Deferred income taxes
    
    
    24,880
    
    
    
    17,414Other
    
    
    51,005
    
    
    
    28,557Total current assets
    
    
    450,864
    
    
    
    400,840Investments, at cost plus equity in undistributed earnings
    
    
    45,933
    
    
    
    44,820Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,653,268
    
    
    
    6,475,172Less-Accumulated depreciation and amortization
    
    
    2,018,967
    
    
    
    1,939,430Total property, plant and equipment, net
    
    
    4,634,301
    
    
    
    4,535,742Other Assets
    
    
    248,786
    
    
    
    300,587Total assets
    
    $
    5,379,884
    
    
    $
    5,281,989
  5




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June 30,
    
    
    December 31,2007
    
    
    2006LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    28,106
    
    
    $
    23,007Other
    
    
    113,243
    
    
    
    113,418Transportation and exchange gas payables
    
    
    8,716
    
    
    
    14,693Accrued liabilities
    
    
    166,367
    
    
    
    112,062Current maturities of long-term debt
    
    
    174,962
    
    
    
    Total current liabilities
    
    
    491,394
    
    
    
    263,180Long-Term Debt
    
    
    1,026,942
    
    
    
    1,201,458Other Long-Term Liabilities:Deferred income taxes
    
    
    1,034,014
    
    
    
    1,013,282Other
    
    
    246,593
    
    
    
    265,633Total other long-term liabilities
    
    
    1,280,607
    
    
    
    1,278,915Contingent 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
    
    
    956,596
    
    
    
    914,851Accumulated other comprehensive loss
    
    
    (28,085
    )
    
    
    (28,845
    )Total common stockholders equity
    
    
    2,580,941
    
    
    
    2,538,436Total liabilities and stockholders equity
    
    $
    5,379,884
    
    
    $
    5,281,989
  6




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Six Months EndedJune 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    81,744
    
    
    $
    79,837Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    111,894
    
    
    
    101,099Deferred income taxes
    
    
    12,788
    
    
    
    29,213Allowance for equity funds used during construction (Equity AFUDC)
    
    
    (3,444
    )
    
    
    (3,996
    )Changes in operating assets and liabilities:Receivables  affiliates
    
    
    2,284
    
    
    
    279 others
    
    
    (35,059
    )
    
    
    (1,040
    )Transportation and exchange gas receivables
    
    
    (11,448
    )
    
    
    256Inventories
    
    
    9,140
    
    
    
    (36,746
    )Payables  affiliates
    
    
    5,099
    
    
    
    19,324 others
    
    
    (8,985
    )
    
    
    34,527Transportation and exchange gas payables
    
    
    (5,977
    )
    
    
    (25,726
    )Accrued liabilities
    
    
    54,305
    
    
    
    (20,592
    )Other, net
    
    
    238
    
    
    
    (28,555
    )Net cash provided by operating activities
    
    
    212,579
    
    
    
    147,880Cash flows from financing activities:Additions of long-term debt
    
    
    
    
    
    
    200,000Debt issue costs
    
    
    (10
    )
    
    
    (3,120
    )Change in cash overdrafts
    
    
    (13,951
    )
    
    
    (23,007
    )Common stock dividends paid
    
    
    (40,000
    )
    
    
    (80,000
    )Net cash provided by (used in) financing activities
    
    
    (53,961
    )
    
    
    93,873Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (182,323
    )
    
    
    (151,712
    )Changes in accounts payable
    
    
    22,761
    
    
    
    (12,945
    )Advances to affiliates, net
    
    
    14,104
    
    
    
    (80,373
    )Advances to others, net
    
    
    516
    
    
    
    355Other, net
    
    
    (13,871
    )
    
    
    2,746Net cash used in investing activities
    
    
    (158,813
    )
    
    
    (241,929
    )Net decrease in cash
    
    
    (195
    )
    
    
    (176
    )Cash at beginning of period
    
    
    315
    
    
    
    362Cash at end of period
    
    $
    120
    
    
    $
    186
  7




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TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. BASIS OF PRESENTATION
       8
    Table of Contents      Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    44,120
    
    
    $
    34,125
    
    
    $
    81,744
    
    
    $
    79,837Equity interest in unrealized gain on interest rate
hedge, net of tax
    
    
    125
    
    
    
    120
    
    
    
    114
    
    
    
    284Pension benefits, net of taxAmortization of prior service credit
    
    
    (255
    )
    
    
    
    
    
    
    (511
    )
    
    
    Amortization of net actuarial loss
    
    
    659
    
    
    
    
    
    
    
    1,157
    
    
    
    Total comprehensive income
    
    $
    44,649
    
    
    $
    34,245
    
    
    $
    82,504
    
    
    $
    80,121
     9




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FERC Accounting and Reporting Guidance
  Subsequent Event
   2. RATE AND REGULATORY MATTERS
   10




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3. CONTINGENT LIABILITIES AND COMMITMENTS
 Legal Proceedings
   Environmental Matters
  11
    Table of Contents       Safety Matters
 Pipeline Integrity Regulations 12
    Table of Contents    Other Matters
  Summary
  Other Commitments
 Commitments for construction and gas purchases
 Guarantees
  4. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facilities
  13




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Current Maturities of Long-Term Debt
 1 4
 5. TRANSACTIONS WITH AFFILIATES
       
 ITEM 2. Managements Narrative Analysis of Results of Operations.
 General
  14




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RESULTS OF OPERATIONS
 Operating Income and Net Income
  Transportation Revenues
    Six monthsEnded June 30,Transco System Deliveries (TBtu)
    
    2007
    
    
    2006Market-area deliveries:Long-haul transportation
    
    
    422.2
    
    
    
    394.7Market-area transportation
    
    
    432.9
    
    
    
    408.0Total market-area deliveries
    
    
    855.1
    
    
    
    802.7Production-area transportation
    
    
    97.7
    
    
    
    127.1Total system deliveries
    
    
    952.8
    
    
    
    929.8Average Daily Transportation Volumes (TBtu)
    
    
    5.3
    
    
    
    5.1Average Daily Firm Reserved Capacity (TBtu)
    
    
    6.6
    
    
    
    6.7
 15




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Sales Revenues
   
 Storage Revenues
  Other Revenues
  Operating Costs and Expenses
  16




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Other Income and Other Deductions
  Capital Expenditures
  Leidy to Long Island Expansion Project
 Potomac Expansion Project
 17




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Sentinel Expansion Project
 
 ITEM 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Second Quarter 2007 Changes in Internal Control over Financial Reporting
  18




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1
    
    Amendment Agreement, dated May 9, 2007, among The Williams
Companies, Inc., Williams Partners L.P., Northwest Pipeline Corporation,
Transcontinental Gas Pipe Line Corporation, certain banks, financial
institutions and other institutional lenders and Citibank, N.A., as
administrative agent (filed as Exhibit 10.1 to The Williams Companies, Inc.s
current report on Form 8-K (File No. 001-04174) filed with the SEC on May 15,
2007 and incorporated by reference as Exhibit 10.1 to our Form 8-K filed May
15, 2007).
  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.
  
   
    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.
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TRANSCONTINENTAL GAS PIPE LINE
CORPORATION (Registrant)Dated:  August 7, 2007
    By /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController
(Principal Accounting Officer) 20