Print Page | Close Window
SEC Filings
SOUTHERN UNION CO filed this Form 10-Q on 11/07/2013
Entire Document
 << Previous Page | Next Page >>

Incremental depreciation and amortization expense has been recognized in the successor periods subsequent to March 25, 2012 as a result of the application of the new basis of accounting.

The application of “push-down” accounting also resulted in the Company’s long-term debt being recorded at fair value, which impacted the amount of amortization recorded in interest expense.  This change in the amount of amortization resulted in a net reduction within interest expense of approximately $10 million per quarter subsequent to March 25, 2012.

In addition to the impact of the amortization of the debt fair value adjustments, interest expense was lower during the nine months ended September 30, 2013 due to repayments of long-term debt in 2012 and 2013. Additionally, interest expense for the nine months ended September 30, 2013 included a $10 million gain from the change in fair value of the interest rate swaps related to the Junior Subordinated Notes, for which hedge accounting treatment was discontinued in March 2012.
The Company’s consolidated net income was also impacted by changes in income taxes that were driven by the ETE Merger; those impacts were described in the “Federal and State Income Taxes” section below.
Income from discontinued operations reflected the results from the LDC Disposal Group. The nine months ended September 30, 2013 also included a gain of $3 million on the sale of MGE.
The “Supplemental Pro Forma Information” section, which follows the “Business Segment Results” section, provides additional analysis of the Company’s consolidated net income on a year-to-date basis, assuming the ETE Merger had been completed on January 1, 2012.
Federal and State Income Taxes
The following table sets forth the Company’s income taxes from continuing operations:
Nine Months Ended
September 30, 2013
Period from Acquisition (March 26, 2012) to September 30, 2012
Period from January 1, 2012 to March 25, 2012
Income tax expense



Effective tax rate
The Company’s effective income tax rate for the nine months ended September 30, 2013 was higher than the federal statutory rate of 35% primarily due to state income taxes. The state effective rate changed due to apportionment shifts resulting from the SUGS Contribution, completion of the sale of MGE and other internal restructuring activities. The effective income tax rate for the period from March 26, 2012 to September 30, 2012 was higher 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


 << Previous Page | Next Page >>