SOUTHERN STAR CENTRAL CORP - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X

]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the QUARTERLY PERIOD ended June 30, 2004

[

]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ____________________ to ____________________

Commission file number 333-110979

SOUTHERN STAR CENTRAL CORP.

(Exact name of registrant as specified in its charter)

Delaware	04-3712210
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

599 Lexington Avenue, 25^th Floor New York, New York	10022
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (646) 735-0550

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 X

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes

No X

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 79.367 shares as of August 6, 2004.

TABLE OF CONTENTS

SOUTHERN STAR CENTRAL CORP.

Page

PART I – Financial Information

Item 1.

Consolidated Financial Statements and Supplementary Data (Unaudited)

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Condensed Notes to the Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II – Other Information

Item 1.

Legal Proceedings

Item 2.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Item 3.

Defaults Upon Senior Securities

Item 4.

Submission of Matters to a Vote of Security Holders

Item 5.

Other Information

Item 6.

Exhibits and Reports on Form 8-K

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements and Supplementary Data

SOUTHERN STAR CENTRAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

		June 30, 2004			December 31, 2003
		(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	42,799		$	65,887
Receivables:
Trade		12,401			13,747
Kansas Ad Valorem tax reimbursement		14,396			42,391
Income taxes		177			163
Affiliates		-			250
Transportation and exchange gas		4,884			1,295
Other		2,213			2,436
Inventories		5,525			5,444
Deferred income taxes		2,328			205
Costs recoverable from customers		3,231			1,557
Prepaid expenses		3,728			4,461
Other		673			669
Total current assets		92,355			138,505

Property, Plant and Equipment, at cost:
Natural gas transmission plant		532,607			510,676
Other natural gas plant		25,812			30,225
		558,419			540,901
Less – Accumulated depreciation and amortization		(38,487	)		( 26,752	)
Property, plant and equipment, net		519,932			514,149

Other Assets:
Goodwill		35,915			35,915
Costs recoverable from customers		43,738			45,832
Prepaid expenses		1,937			2,026
Derivative hedging instruments		96			-
Other deferred and noncurrent assets		11,438			11,212
Total other assets		93,124			94,985
Total Assets	$	705,411		$	747,639

The accompanying Condensed Notes to the Consolidated Financial Statements are an integral part of these statements.

SOUTHERN STAR CENTRAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

		June 30, 2004		December 31, 2003
		(In thousands)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Payables:
Trade	$	2,447	$	1,653
Affiliates		-		127
Transportation and exchange gas		4,884		1,295
Dividends		-		12,500
Other		2,320		4,467
Accrued other taxes		4,553		4,592
Accrued Kansas Ad Valorem tax reimbursement		16,153		45,165
Accrued interest		8,470		7,790
Accrued payroll and employee benefits		12,689		16,035
Contract reformation		-		1,995
Costs refundable to customers		-		441
Other accrued liabilities		7,755		6,696
Total current liabilities		59,271		102,756

Long-Term Debt:
Capitalized lease obligation		9,000		-
Other long-term debt		404,781		404,740
Total long-term debt		413,781		404,740

Other Liabilities and Deferred Credits:
Deferred income taxes		11,890		5,278
Postretirement benefits other than pensions		8,113		14,061
Mandatorily redeemable preferred stock		49,708		48,265
Costs refundable to customers		1,288		1,864
Environmental remediation		4,949		5,549
Accrued pension		20,501		20,339
Derivative hedging instruments		-		524
Other		1,395		3,004
Total other liabilities and deferred credits		97,844		98,884

Stockholder’s Equity:
Common stock, $.01 par value, 101.587 shares issued,
79.367 shares outstanding, June 30, 2004 and December 31, 2003		-		-
Premium on capital stock and other paid-in capital		131,501		141,001
Accumulated other comprehensive income (loss)		58		(319)
Retained earnings		2,956		577
Total stockholder’s equity		134,515		141,259
Total Liabilities and Stockholder’s Equity	$	705,411	$	747,639

The accompanying Condensed Notes to the Consolidated Financial Statements are an integral part of these statements.

SOUTHERN STAR CENTRAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Three Months Ended
		June 30, 2004			June 30, 2003

		(In thousands)
Operating Revenues:
Transportation	$	35,957		$	35,712
Storage		3,709			3,662
Other revenue		151			97
Total operating revenues		39,817			39,471

Operating Costs and Expenses:
Operations and maintenance		9,723			8,516
Administrative and general		9,407			9,494
Depreciation and amortization		7,096			7,758
Taxes, other than income taxes		2,589			3,469
Total operating costs and expenses		28,815			29,237

Operating Income		11,002			10,234

Other (Income) Deductions:
Interest expense		10,075			11,239
Interest income		(153	)		(115	)
Miscellaneous other income, net		(1,950	)		(76	)
Total other deductions		7,972			11,048

Income (Loss) Before Income Taxes		3,030			(814	)

Provision for Income Taxes		1,982			487

Net Income (Loss)	$	1,048		$	(1,301	)

Reconciliation of net income (loss) to total comprehensive income (loss):

	June 30, 2004			June 30, 2003
Net income (loss)	$	1,048		$	(1,301	)
Change in value of interest rate swap		1,181			-
Related tax effect		(461	)		-
Total comprehensive income (loss)	$	1,768		$	(1,301	)

The accompanying Condensed Notes to the Consolidated Financial Statements are an integral part of these statements.

SOUTHERN STAR CENTRAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Six Months Ended
		June 30, 2004			June 30, 2003

		(In thousands)
Operating Revenues:
Transportation	$	73,601		$	72,216
Storage		6,951			6,555
Other revenue		291			243
Total operating revenues		80,843			79,014

Operating Costs and Expenses:
Operations and maintenance		18,335			16,199
Administrative and general		18,111			21,665
Depreciation and amortization		14,480			15,381
Taxes, other than income taxes		5,329			6,904
Total operating costs and expenses		56,255			60,149

Operating Income		24,588			18,865

Other (Income) Deductions:
Interest expense		20,354			20,034
Interest income		(332	)		(260	)
Miscellaneous other income, net		(2,070	)		(235	)
Total other deductions		17,952			19,539

Income (Loss) Before Income Taxes		6,636			(674	)

Provision for Income Taxes		4,257			1,177

Net Income (Loss)	$	2,379		$	(1,851	)

Reconciliation of net income (loss) to total comprehensive income (loss):

June 30,

2004

June 30,

2003

Net income (loss)

2,379