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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 March 31, 2008
 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,
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. (Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a 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 o No þ
 The number of shares of Common Stock, par value $1.00 per share, outstanding as of April 30,
2008 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 Statement of Income for the three months
ended March 31, 2008 and 2007
    
    
    5Condensed Consolidated Balance Sheet as of March 31, 2008 and
December 31, 2007
    
    
    6Condensed Consolidated Statement of Cash Flows for the three
months ended March 31, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Narrative Analysis of the Results of Operations
    
    
    16Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATION
    
    
    20Item 1. Legal Proceedings.
    
    
    20Item 1A. Risk Factors.
    
    
    20Item 6. Exhibits
    
    
    20Section 302 Certification - Principal Executive OfficerSection 302 Certification - Principal Financial OfficerSection 906 Certification
    
    
    Amounts and nature of future capital expenditures;
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
    
    Expansion and growth of our business and operations;
    
    Business strategy;
    
    Cash flow from operations or results of operations;
    
    Rate case filing; 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;
    
    Increasing maintenance and construction costs;
    
    Changes in the current geopolitical situation;
    
    Risks related to strategy and financing, including restrictions stemming from our
debt agreements and future changes in our credit ratings;
    
    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 EndedMarch 31,2008
    
    
    2007Operating Revenues:Natural gas sales
    
    $
    30,321
    
    
    $
    31,287Natural gas transportation
    
    
    235,857
    
    
    
    201,733Natural gas storage
    
    
    37,321
    
    
    
    32,690Other
    
    
    3,279
    
    
    
    7,428Total operating revenues
    
    
    306,778
    
    
    
    273,138Operating Costs and Expenses:Cost of natural gas sales
    
    
    30,394
    
    
    
    31,220Cost of natural gas transportation
    
    
    5,028
    
    
    
    4,203Operation and maintenance
    
    
    54,936
    
    
    
    55,292Administrative and general
    
    
    34,687
    
    
    
    40,241Depreciation and amortization
    
    
    55,147
    
    
    
    53,570Taxes  other than income taxes
    
    
    13,501
    
    
    
    14,197Other expense, net
    
    
    2,672
    
    
    
    346Total operating costs and expenses
    
    
    196,365
    
    
    
    199,069Operating Income
    
    
    110,413
    
    
    
    74,069Other (Income) and Other Deductions:Interest expense
    
    
    24,327
    
    
    
    23,193Interest income  affiliates
    
    
    (5,303
    )
    
    
    (3,658
    )Allowance for equity and borrowed funds used during construction (AFUDC)
    
    
    (1,328
    )
    
    
    (1,731
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,431
    )
    
    
    (1,674
    )Miscellaneous other income, net
    
    
    (2,109
    )
    
    
    (2,582
    )Total other (income) and other deductions
    
    
    14,156
    
    
    
    13,548Income before Income Taxes
    
    
    96,257
    
    
    
    60,521Provision for Income Taxes
    
    
    36,584
    
    
    
    22,897Net Income
    
    $
    59,673
    
    
    $
    37,624
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March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent Assets:Cash
    
    $
    165
    
    
    $
    119Receivables:Affiliates
    
    
    5,119
    
    
    
    6,307Advances to affiliates
    
    
    262,443
    
    
    
    223,657Others, less allowance of $450 ($462 in 2007)
    
    
    103,578
    
    
    
    115,003Transportation and exchange gas receivables
    
    
    14,033
    
    
    
    10,724Inventories
    
    
    64,900
    
    
    
    55,120Deferred income taxes
    
    
    28,378
    
    
    
    38,588Other
    
    
    58,504
    
    
    
    33,619Total current assets
    
    
    537,120
    
    
    
    483,137Investments, at cost plus equity in undistributed earnings
    
    
    44,261
    
    
    
    44,730Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,873,432
    
    
    
    6,840,377Less-Accumulated depreciation and amortization
    
    
    2,165,389
    
    
    
    2,113,561Total property, plant and equipment, net
    
    
    4,708,043
    
    
    
    4,726,816Other Assets
    
    
    251,691
    
    
    
    256,169Total assets
    
    $
    5,541,115
    
    
    $
    5,510,852
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March 31,
    
    
    December 31,2008
    
    
    2007LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    34,606
    
    
    $
    15,530Other
    
    
    98,651
    
    
    
    86,273Transportation and exchange gas payables
    
    
    7,716
    
    
    
    7,245Accrued liabilities
    
    
    155,866
    
    
    
    204,305Reserve for rate refunds
    
    
    126,006
    
    
    
    98,035Current maturities of long-term debt
    
    
    
    
    
    
    75,000Total current liabilities
    
    
    422,845
    
    
    
    486,388Long-Term Debt
    
    
    1,202,595
    
    
    
    1,127,370Other Long-Term Liabilities:Deferred income taxes
    
    
    1,021,234
    
    
    
    1,027,441Other
    
    
    270,218
    
    
    
    255,153Total other long-term liabilities
    
    
    1,291,452
    
    
    
    1,282,594Contingent 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
    
    
    987,107
    
    
    
    977,434Accumulated other comprehensive loss
    
    
    (15,314
    )
    
    
    (15,364
    )Total common stockholders equity
    
    
    2,624,223
    
    
    
    2,614,500Total liabilities and stockholders equity
    
    $
    5,541,115
    
    
    $
    5,510,852
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Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    59,673
    
    
    $
    37,624Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    55,409
    
    
    
    53,878Deferred income taxes
    
    
    4,256
    
    
    
    11,330Allowance for equity funds used during construction
(Equity AFUDC)
    
    
    (968
    )
    
    
    (1,274
    )Changes in current assets and liabilities:Receivables  affiliates
    
    
    1,188
    
    
    
    (1,625
    ) others
    
    
    11,425
    
    
    
    (18,247
    )Transportation and exchange gas receivables
    
    
    (3,309
    )
    
    
    (2,606
    )Inventories
    
    
    (9,780
    )
    
    
    426Payables  affiliates
    
    
    19,076
    
    
    
    15,794 others
    
    
    27,218
    
    
    
    7,605Transportation and exchange gas payables
    
    
    471
    
    
    
    (3,026
    )Accrued liabilities
    
    
    (53,366
    )
    
    
    (16,254
    )Reserve for rate refunds
    
    
    27,971
    
    
    
    15,557Other, net
    
    
    (12,511
    )
    
    
    (16,971
    )Net cash provided by operating activities
    
    
    126,753
    
    
    
    82,211Cash flows from financing activities:Additions to long-term debt
    
    
    100,000
    
    
    
    Retirement of long-term debt
    
    
    (100,000
    )
    
    
    Debt issue costs
    
    
    
    
    
    
    (5
    )Change in cash overdrafts
    
    
    (5,568
    )
    
    
    (17,444
    )Common stock dividends paid
    
    
    (50,000
    )
    
    
    (20,000
    )Net cash used in financing activities
    
    
    (55,568
    )
    
    
    (37,449
    )Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (29,340
    )
    
    
    (62,297
    )Changes in accounts payable
    
    
    (9,272
    )
    
    
    (165
    )Changes in accrued liabilities
    
    
    4,927
    
    
    
    6,201Advances to affiliates, net
    
    
    (38,786
    )
    
    
    13,288Advances to others, net
    
    
    (289
    )
    
    
    250Other, net
    
    
    1,621
    
    
    
    (2,206
    )Net cash used in investing activities
    
    
    (71,139
    )
    
    
    (44,929
    )Net increase (decrease) in cash
    
    
    46
    
    
    
    (167
    )Cash at beginning of period
    
    
    119
    
    
    
    315Cash at end of period
    
    $
    165
    
    
    $
    148
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TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   1. BASIS OF PRESENTATION
 General
        9




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Three MonthsEnded March 31,2008
    
    
    2007Net income
    
    $
    59,673
    
    
    $
    37,624Equity interest in unrealized
gain/(loss) on interest rate hedge,
net of tax
    
    
    (23
    )
    
    
    (11
    )Pension benefits, net of taxAmortization of prior service credit
    
    
    (122
    )
    
    
    (256
    )Amortization of net actuarial loss
    
    
    195
    
    
    
    498Total comprehensive income
    
    $
    59,723
    
    
    $
    37,855
 Recent Accounting Standards
  
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2. RATE AND REGULATORY MATTERS
   3. CONTINGENT LIABILITIES AND COMMITMENTS
 Legal Proceedings
  11




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Environmental Matters
     12




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Safety Matters
 Pipeline Integrity Regulations
 13




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Other Matters
  Summary
 
 Other Commitments
 Commitments for construction and gas purchases
 Guarantees
  4. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facility
  14




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Retirement of Long-Term Debt
   5. TRANSACTIONS WITH AFFILIATES
       15




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ITEM 2. Managements Narrative Analysis of Results of Operations.
 General
  RESULTS OF OPERATIONS
 Operating Income and Net Income
  Transportation Revenues
    16




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Three monthsEnded March 31,Transco System Deliveries (TBtu)
    
    2008
    
    2007Market-area deliveries:Long-haul transportation
    
    
    216.6
    
    
    
    217.3Market-area transportation
    
    
    276.8
    
    
    
    260.5Total market-area deliveries
    
    
    493.4
    
    
    
    477.8Production-area transportation
    
    
    43.1
    
    
    
    47.4Total system deliveries
    
    
    536.5
    
    
    
    525.2Average Daily Transportation Volumes (Tbtu)
    
    
    5.9
    
    
    
    5.8Average Daily Firm Reserved Capacity (Tbtu)
    
    
    7.0
    
    
    
    6.8
 Sales Revenues
     Storage Revenues
  17




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Other Revenues
  Operating Costs and Expenses
  
    
    Lower administrative and general expenses of $5.6 million due primarily to a decrease in
property insurance of $2.3 million resulting from lower premiums on offshore facilities, a
decrease in labor and related benefits of $1.2 million and a decrease in allocated corporate
expenses of $0.9 million.
 
    
    An increase in depreciation and amortization of $1.6 million, primarily due to higher
expense associated with negative salvage, partly offset by lower depreciation related to
transmission.
 
    
    Higher other operating costs and expenses of $2.3 million, primarily due to increased
expenses associated with our asset retirement obligations (ARO) due to the new rates in Docket
No. RP06-569, effective March 1, 2007, subject to refund (See Note 2). Prior to the
effective date of the new rates, the depreciation expense of the asset and the accretion
expense of the liability were being deferred into a regulatory asset. Effective March 1,
2007, with recovery of ARO costs in rates, the depreciation and accretion expense are no
longer being deferred, resulting in increased expenses of $1.0 million and $1.7 million,
respectively.
 Other Income and Other Deductions
  Capital Expenditures
  Sentinel Expansion Project
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Pascagoula Expansion Project
 Asset Retirement Obligation Funding Requirement
  
 ITEM 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   19




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First Quarter 2008 Changes in Internal Control over Financial Reporting
  
  
  See discussion in Note 3 of the Notes to Condensed Consolidated Financial Statements
included herein.
 
  There are no material changes to the Risk Factors previously disclosed in Part I, Item 1A.
Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007.
 
  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.
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TRANSCONTINENTAL GAS PIPE LINE
CORPORATION (Registrant)Dated:  May 5, 2008
    By
    /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController
(Principal Accounting Officer) 21