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SEC Filings
10-Q
SOUTHERN UNION CO filed this Form 10-Q on 08/08/2013
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Federal and State Income Taxes
The following table sets forth the Company’s income taxes from continuing operations:
 
 
Successor
 
 
Predecessor
 
 
Three Months Ended
June 30, 2013
 
Three Months Ended
June 30, 2012
 
Six Months Ended
June 30, 2013
 
Period from Acquisition (March 26, 2012) to June 30, 2012
 
 
Period from January 1, 2012 to March 25, 2012
Income tax expense (benefit)
 
$
75

 
$
6

 
$
85

 
$
(6
)
 
 
$
12

Effective tax rate
 
71
%
 
60
%
 
65
%
 
14
%
 
 
27
%
The Company’s effective income tax rate for the three and six months ended June 30, 2013 was higher than the federal statutory rate of 35% primarily due to state income taxes resulting from the SUGS Contribution and other internal restructuring activities. The effective income tax rate for the period from March 26, 2012 to June 30, 2012 was lower than the federal statutory rate primarily due to the Company’s pre-tax loss as a result of merger-related expenses coupled with non-deductible executive compensation included in the merger-related expenses. The effective income tax rate for the period from January 1, 2012 to March 25, 2012 was lower than the federal statutory rate primarily due to the dividend received reduction for the anticipated receipt of dividends associated with the earnings from the Company’s prior unconsolidated investment in Citrus.
Business Segment Results
Transportation and Storage Segment
The Transportation and Storage segment is primarily engaged in the interstate transportation and storage of natural gas in the Midwest, Gulf Coast and Midcontinent United States, and LNG terminalling and regasification services.  The Transportation and Storage segment’s operations are regulated as to rates and other matters by the FERC. Demand for natural gas transmission services on Panhandle’s pipeline system is seasonal, with the highest throughput and a higher portion of annual total operating revenues and Segment Adjusted EBITDA occurring in the traditional winter heating season, which occurs during the first and fourth calendar quarters.
The Company’s business within the Transportation and Storage segment is conducted through both short- and long-term contracts with customers.  Short-term and long-term contracts are affected by changes in market conditions and competition with other pipelines, changing supply sources and volatility in natural gas prices and basis differentials.  Since the majority of the revenues within the Transportation and Storage segment are related to firm capacity reservation charges, which customers pay whether they utilize their contracted capacity or not, volumes transported do not have as significant an impact on revenues over the short-term.  However, longer-term demand for capacity may be affected by changes in the customers’ actual and anticipated utilization of their contracted capacity and other factors.
The Company’s regulated transportation and storage businesses can file (or be required to file) for changes in their rates, which are subject to approval by the FERC.  Although a significant portion of the Company’s contracts are discounted or negotiated rate contracts, changes in rates and other tariff provisions resulting from regulatory proceedings have the potential to impact negatively the Company’s results of operations and financial condition.


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