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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, 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
    
    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 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
April 30, 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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##### 



TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 PagePART I. FINANCIAL INFORMATION:Item 1. Financial Statements Condensed Consolidated Statement of Income for the three months
ended March 31, 2007 and 2006
    
    
    4Condensed Consolidated Balance Sheet as of March 31, 2007 and
December 31, 2006
    
    
    5Condensed Consolidated Statement of Cash Flows for the three
months ended March 31, 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 - Section 302Certification of Principal Financial Officer - Section 302Certification Pursuant to Section 906
    
    
    Amounts and nature of future capital expenditures;
    
    Expansion and growth of our business and operations;
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
    
    Business strategy;
    
    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 EndedMarch 31,2007
    
    
    2006Operating Revenues:Natural gas sales
    
    $
    31,287
    
    
    $
    27,932Natural gas transportation
    
    
    201,733
    
    
    
    195,197Natural gas storage
    
    
    32,690
    
    
    
    30,155Other
    
    
    7,428
    
    
    
    6,307Total operating revenues
    
    
    273,138
    
    
    
    259,591Operating Costs and Expenses:Cost of natural gas sales
    
    
    31,220
    
    
    
    27,927Cost of natural gas transportation
    
    
    4,203
    
    
    
    3,803Operation and maintenance
    
    
    55,292
    
    
    
    52,725Administrative and general
    
    
    40,241
    
    
    
    31,912Depreciation and amortization
    
    
    53,570
    
    
    
    50,899Taxes  other than income taxes
    
    
    14,197
    
    
    
    13,947Other (income) expense, net
    
    
    346
    
    
    
    (1,477
    )Total operating costs and expenses
    
    
    199,069
    
    
    
    179,736Operating Income
    
    
    74,069
    
    
    
    79,855Other (Income) and Other Deductions:Interest expense
    
    
    23,193
    
    
    
    15,073Interest income  affiliates
    
    
    (3,658
    )
    
    
    (1,944
    )Allowance for equity and borrowed funds used during construction (AFUDC)
    
    
    (1,731
    )
    
    
    (2,460
    )Equity in earnings of unconsolidated affiliates
    
    
    (1,674
    )
    
    
    (1,784
    )Miscellaneous other (income) deductions, net
    
    
    (2,582
    )
    
    
    (2,327
    )Total other (income) and other deductions
    
    
    13,548
    
    
    
    6,558Income before Income Taxes
    
    
    60,521
    
    
    
    73,297Provision for Income Taxes
    
    
    22,897
    
    
    
    27,585Net Income
    
    $
    37,624
    
    
    $
    45,712
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March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent Assets:Cash
    
    $
    148
    
    
    $
    315Receivables:Affiliates
    
    
    9,439
    
    
    
    7,814Advances to affiliates
    
    
    177,111
    
    
    
    190,399Others, less allowance of $502 ($503 in 2006)
    
    
    102,018
    
    
    
    84,445Transportation and exchange gas receivables
    
    
    9,681
    
    
    
    7,075Inventories
    
    
    64,395
    
    
    
    64,821Deferred income taxes
    
    
    21,021
    
    
    
    17,414Other
    
    
    58,696
    
    
    
    28,557Total current assets
    
    
    442,509
    
    
    
    400,840Investments, at cost plus equity in undistributed earnings
    
    
    44,710
    
    
    
    44,820Property, Plant and Equipment:Natural gas transmission plant
    
    
    6,529,582
    
    
    
    6,475,172Less-Accumulated depreciation and amortization
    
    
    1,986,957
    
    
    
    1,939,430Total property, plant and equipment, net
    
    
    4,542,625
    
    
    
    4,535,742Other Assets
    
    
    252,613
    
    
    
    300,587Total assets
    
    $
    5,282,457
    
    
    $
    5,281,989
  5




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March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Payables:Affiliates
    
    $
    38,801
    
    
    $
    23,007Other
    
    
    103,414
    
    
    
    113,418Transportation and exchange gas payables
    
    
    11,667
    
    
    
    14,693Accrued liabilities
    
    
    111,365
    
    
    
    112,062Current maturities of long-term debt
    
    
    99,944
    
    
    
    Total current liabilities
    
    
    365,191
    
    
    
    263,180Long-Term Debt
    
    
    1,101,734
    
    
    
    1,201,458Other Long-Term Liabilities:Deferred income taxes
    
    
    1,028,363
    
    
    
    1,013,282Other
    
    
    230,877
    
    
    
    265,633Total other long-term liabilities
    
    
    1,259,240
    
    
    
    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
    
    
    932,476
    
    
    
    914,851Accumulated other comprehensive loss
    
    
    (28,614
    )
    
    
    (28,845
    )Total common stockholders equity
    
    
    2,556,292
    
    
    
    2,538,436Total liabilities and stockholders equity
    
    $
    5,282,457
    
    
    $
    5,281,989
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Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    37,624
    
    
    $
    45,712Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    53,878
    
    
    
    49,431Deferred income taxes
    
    
    11,330
    
    
    
    4,633Allowance for equity funds used during construction (Equity AFUDC)
    
    
    (1,274
    )
    
    
    (1,799
    )Changes in current assets and liabilities:Receivables - affiliates
    
    
    (1,625
    )
    
    
    1,741- others
    
    
    (18,247
    )
    
    
    (15,662
    )Transportation and exchange gas receivables
    
    
    (2,606
    )
    
    
    2,718Inventories
    
    
    426
    
    
    
    (23,752
    )Payables - affiliates
    
    
    15,794
    
    
    
    22,334- others
    
    
    12,605
    
    
    
    43,351Transportation and exchange gas payables
    
    
    (3,026
    )
    
    
    (18,351
    )Accrued liabilities
    
    
    (697
    )
    
    
    (41,323
    )Other, net
    
    
    (16,971
    )
    
    
    (40,919
    )Net cash provided by operating activities
    
    
    87,211
    
    
    
    28,114Cash flows from financing activities:Debt issue costs
    
    
    (5
    )
    
    
    (5
    )Change in cash overdrafts
    
    
    (17,444
    )
    
    
    (19,959
    )Common stock dividends paid
    
    
    (20,000
    )
    
    
    (40,000
    )Net cash used in financing activities
    
    
    (37,449
    )
    
    
    (59,964
    )Cash flows from investing activities:Property, plant and equipment:Additions, net of equity AFUDC
    
    
    (56,096
    )
    
    
    (45,021
    )Changes in accounts payable
    
    
    (5,165
    )
    
    
    (17,150
    )Advances to affiliates, net
    
    
    13,288
    
    
    
    94,429Advances to others, net
    
    
    250
    
    
    
    138Other, net
    
    
    (2,206
    )
    
    
    886Net cash provided by (used in) investing activities
    
    
    (49,929
    )
    
    
    33,282Net increase (decrease) in cash
    
    
    (167
    )
    
    
    1,432Cash at beginning of period
    
    
    315
    
    
    
    362Cash at end of period
    
    $
    148
    
    
    $
    1,794
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TRANSCONTINENTAL GAS PIPE LINE CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
        8




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Three MonthsEnded March 31,2007
    
    
    2006Net income
    
    $
    37,624
    
    
    $
    45,712Equity interest in unrealized
gain/(loss) on interest rate hedge,
net of tax
    
    
    (11
    )
    
    
    164Pension benefits, net of taxAmortization of prior service credit
    
    
    (256
    )
    
    
    Amortization of net actuarial loss
    
    
    498
    
    
    
    Total comprehensive income
    
    $
    37,855
    
    
    $
    45,876
     9




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FERC Accounting and Reporting Guidance
  2. RATE AND REGULATORY MATTERS
   3. CONTINGENT LIABILITIES AND COMMITMENTS
 Legal Proceedings
   10




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Environmental Matters
    11




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Safety Matters
 Pipeline Integrity Regulations
 Other Matters
  Summary
  12




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Other Commitments
 Commitments for construction and gas purchases
 Guarantees
  4. DEBT AND FINANCING ARRANGEMENTS
 Revolving Credit and Letter of Credit Facilities
  Current Maturities of Long-Term Debt
 1 4
 5. TRANSACTIONS WITH AFFILIATES
  13




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ITEM 2. Managements Narrative Analysis of Results of Operations.
 General
  RESULTS OF OPERATIONS
 Operating Income and Net Income
  14




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Transportation Revenues
    Three monthsEnded March 31,Transco System Deliveries (TBtu)
    
    2007
    
    
    2006Market-area deliveries:Long-haul transportation
    
    
    217.3
    
    
    
    197.5Market-area transportation
    
    
    260.5
    
    
    
    245.9Total market-area deliveries
    
    
    477.8
    
    
    
    443.4Production-area transportation
    
    
    47.4
    
    
    
    59.4Total system deliveries
    
    
    525.2
    
    
    
    502.8Average Daily Transportation Volumes (Tbtu)
    
    
    5.8
    
    
    
    5.6Average Daily Firm Reserved Capacity (Tbtu)
    
    
    6.8
    
    
    
    7.0
 Sales Revenues
  15




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Storage Revenues
  Other Revenues
  Operating Costs and Expenses
  Other Income and Other Deductions
  16




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Capital Expenditures
  Leidy to Long Island Expansion Project
 Potomac Expansion Project
 Sentinel Expansion Project
 17




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ITEM 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  18




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-
    
    
    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 LINECORPORATION (Registrant)Dated: May 4, 2007
    
    By /s/ Jeffrey P. HeinrichsJeffrey P. HeinrichsController(Principal Accounting Officer)
 20