S-1 1 ds1.htm FORM S-1 Form S-1
Table of Contents

As filed with the Securities and Exchange Commission on September 29, 2006

Registration No. 333-            


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


 

Boardwalk Pipeline Partners, LP

Boardwalk Pipelines, LP

(Exact name of Registrant as Specified in Its Charter)

 


 

Delaware   4922   20-3265614
Delaware   4922   20-3265614

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

3800 Frederica Street

Owensboro, Kentucky 42301

(270) 926-8686

(Address, Including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

W. Douglas Field

3800 Frederica Street

Owensboro, Kentucky 42301

(270) 926-8686

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 


 

Copies to:

 

Michael Swidler   William J. Cooper
Vinson & Elkins L.L.P.   Andrews Kurth LLP
666 Fifth Avenue   1350 I Street, NW
26th Floor   Suite 1100
New York, New York 10103   Washington, DC 20005
(212) 237-0000   (202) 662-2700

 


 

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

 


 

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities To Be Offered                            

  

Proposed Maximum
Aggregate
Offering Price

  

Fee

Senior Notes of Boardwalk Pipelines, LP

   $250,000,000    $26,750

Guarantees of Senior Notes (1)

   $250,000,000    $        (1)

(1) Boardwalk Pipeline Partners, LP will fully, irrevocably and unconditionally guarantee on an unsecured basis the debt securities of Boardwalk Pipelines, LP. Pursuant to Rule 457(n) no separate fee is payable with respect to the guarantees of the debt securities being registered.

 


 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 



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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated September 29, 2006

 

PROSPECTUS

 

LOGO

 

$250,000,000

 

BOARDWALK PIPELINES, LP

 

            % Senior Notes due

 


 

This is an offering by Boardwalk Pipelines, LP of $250,000,000 of     % senior notes due                     . Interest on the notes is payable on              and              of each year, beginning on                     , 2007. Interest on the notes will accrue from             . The notes will mature on             .

 

We may redeem all or part of the notes at any time at a make-whole price described herein plus accrued and unpaid interest to the date of redemption.

 

The notes will be our senior unsecured obligations and will rank equally with all of our existing and future senior unsecured indebtedness. The notes will be fully and unconditionally guaranteed by our parent, Boardwalk Pipeline Partners, LP. The guarantee will rank equally with all of the existing and future senior unsecured indebtedness of the guarantor. The notes and the guarantee will be effectively subordinated to all of our subsidiaries’ existing and future indebtedness and to all of our and the guarantor’s future secured indebtedness to the extent of the value of the assets securing such indebtedness.

 

Investing in our notes involves risks. See “ Risk Factors” beginning on page 13 and the other risk factors incorporated by reference herein.

 

     Per Note

   Total

Public offering price

   $                 $             

Underwriting discount

   $      $  

Proceeds, before expenses, to Boardwalk Pipelines, LP

   $      $  

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The notes will not be listed on any national securities exchange. Currently, there is no public market for the notes.

 

It is expected that delivery of the notes will be made to investors in registered book-entry form through the facilities of The Depository Trust Company on or about             , 2006.

 


 

The date of this prospectus is             , 2006.


Table of Contents

LOGO


Table of Contents

TABLE OF CONTENTS

 

SUMMARY

   1

RISK FACTORS

   13

USE OF PROCEEDS

   18

CAPITALIZATION

   19

DESCRIPTION OF OTHER INDEBTEDNESS

   20

DESCRIPTION OF THE NOTES

   22

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   31

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   32

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

   33

UNDERWRITING

   37

LEGAL

   39

EXPERTS

   39

WHERE YOU CAN FIND MORE INFORMATION

   40

INFORMATION WE INCORPORATE BY REFERENCE

   40

FORWARD-LOOKING STATEMENTS

   42

INDEX TO FINANCIAL STATEMENTS

   F-1

APPENDIX A

   A-1

 

You should rely only on the information contained in this prospectus, any free writing prospectus relating to this offering and the documents incorporated by reference into this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different or additional information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should not assume that the information contained in this prospectus, any free writing prospectus relating to this offering or the information the master partnership has previously filed with the Securities and Exchange Commission that is incorporated by reference herein is accurate as of any date other than its respective date. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

References in this prospectus to “Boardwalk Pipelines,” “we,” “our,” “us” or similar terms, when used in the present tense or for historical periods, refer to Boardwalk Pipelines, LP together, unless the context otherwise requires, with our operating subsidiaries. References in this prospectus to our “general partner” refer to Boardwalk Operating GP, LLC. References in this prospectus to the “master partnership,” “our parent,” “the guarantor” or “Boardwalk Pipeline Partners” refer to Boardwalk Pipeline Partners, LP. References to “Loews” refer to Loews Corporation, the ultimate parent company of the master partnership’s general partner. We include a glossary of some of the terms used in this prospectus as Appendix A. We are the wholly owned subsidiary of the master partnership and the master partnership has no operations other than through us.


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SUMMARY

 

This summary highlights information contained elsewhere in this prospectus, including information incorporated herein by reference. It does not contain all of the information that you should consider before investing in the notes. You should read the entire prospectus carefully, including the historical financial statements, the notes to those financial statements, and the other documents incorporated herein by reference as described under “Incorporation of Certain Documents by Reference.” You should read “Risk Factors” and the documents referred to therein for information about important risks that you should consider before buying the notes.

 

Boardwalk Pipelines, LP

 

We are a wholly owned subsidiary of Boardwalk Pipeline Partners, LP.

 

We own and operate two interstate natural gas pipeline systems, with approximately 13,470 miles of pipeline, directly serving customers in eleven states and indirectly serving customers throughout the northeastern and southeastern United States through numerous interconnections with unaffiliated pipelines. In 2005, our pipeline systems transported approximately 1,350 billion cubic feet (Bcf) of gas. Average daily throughput on our pipeline systems during 2005 was approximately 3.7 Bcf. Our natural gas storage facilities are comprised of eleven underground storage fields located in four states with aggregate certificated working gas capacity of approximately 146 Bcf.

 

We conduct all of our operations through two subsidiaries, operating as one reportable segment:

 

    Texas Gas Transmission, LLC (or Texas Gas) operates approximately 5,900 miles of natural gas pipeline located in Louisiana, Texas, Arkansas, Mississippi, Tennessee, Kentucky, Indiana, Ohio, and Illinois having a peak-day delivery capacity of approximately 2.8 Bcf, and nine underground natural gas storage fields located in Indiana and Kentucky with aggregate certificated working gas capacity of approximately 63 Bcf.

 

    Gulf South Pipeline Company, LP (or Gulf South) operates approximately 7,570 miles of natural gas pipeline, including approximately 870 miles of gathering pipeline, located in Texas, Louisiana, Mississippi, Alabama and Florida having a peak-day delivery capacity of approximately 3.5 Bcf, and two underground natural gas storage fields located in Louisiana and Mississippi with aggregate certificated working gas capacity of approximately 83 Bcf.

 

We serve a broad mix of customers, including local distribution companies, municipalities, interstate and intrastate pipelines, direct industrial users, electric power generation plants, and various marketers and producers. Our transportation and storage rates are established by, and subject to review and revision by, the Federal Energy Regulatory Commission (or FERC). These rates are designed to allow us the opportunity to recover the full cost of operating our pipelines and earn a reasonable return on equity. Gulf South is permitted to charge market-based storage rates pursuant to authority granted by FERC.

 

We provide a significant portion of our pipeline transportation and storage services through firm contracts under which our customers pay monthly capacity reservation charges (which are charges owed regardless of actual pipeline or storage capacity utilization) as well as other charges based on actual utilization. For the twelve months ended June 30, 2006, approximately 61% of our revenues were derived from capacity reservation charges under firm contracts, approximately 20% of our revenues were derived from other charges based on actual utilization under firm contracts, and approximately 19% of our revenues were derived from interruptible transportation and storage services and other services. Please read “—Summary Historical Financial and Operating Data” for information regarding our financial and operating results.

 

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Business Strategy

 

Our objective is to increase distributable cash flow to the master partnership. The key elements of our business strategy are as follows:

 

    Develop organic pipeline expansion projects which increase our capacity to serve end-use markets and extend our system to access prolific supply regions such as the Fort Worth Barnett Shale area. According to the Energy Information Administration (or EIA), gas production from the Fort Worth Barnett Shale area is expected to increase by 10.3% per year over the next five years, from 407 Bcf in 2005 to 663 Bcf by 2010. We are pursuing expansion projects to enhance our existing systems or to build new pipelines which access this growing source of supply or serve growing end-use markets in the Northeast and Southeast United States, both on our pipeline systems and off our systems through our many interstate and intrastate pipeline interconnects.

 

    Expand our gas storage business through incremental expansions of existing facilities and development of new storage fields. We believe that the recent wide spreads in the forward markets for natural gas are increasing the demand for natural gas storage capacity. In order to address the growing demand for additional storage capacity, we are pursuing expansions of capacity on our current storage facilities and evaluating opportunities to develop new storage facilities.

 

    Integrate our pipeline systems with existing and proposed liquefied natural gas (or LNG) terminals along the Gulf Coast. We believe that existing and proposed LNG terminals along the U.S. Gulf Coast will become significant sources of natural gas supply for the U.S. over the next decade. Our extensive web-like pipeline network located along the Gulf Coast provides us with the opportunity to connect to existing and proposed LNG terminal sites. We have been pursuing opportunities to provide our shippers with transportation access from such terminals to end-markets both on and off our pipeline systems.

 

    Continue to explore synergies between our Texas Gas and Gulf South pipeline systems. We are continuing to evaluate operational synergies between our Texas Gas and Gulf South systems that will enable us to better serve our customers. Our systems provide for operational efficiencies such as adding additional interconnects to facilitate gas movement across both systems.

 

    Expand our existing asset base through accretive acquisitions of complementary assets. We will seek to expand our existing natural gas transportation and storage businesses by pursuing acquisitions that we believe will be accretive to distributable cash flow.

 

Competitive Strengths

 

We believe we are well positioned to execute our business strategy because:

 

    Our assets are strategically located to transport natural gas from prolific supply regions to high demand markets. Our pipeline systems are among the few that can access virtually every major producing area in the Gulf Coast region, including East Texas. Our ability to transport gas from the significant supply regions to high demand markets positions us to provide flexible transportation options to our shippers.

 

    Our cash flow is relatively stable due to the monthly capacity reservation charges received on our firm transportation and storage contracts and the fee-based nature of our business. We provide a significant portion of our pipeline transportation and storage services under firm fee-based contracts where customers pay for service regardless of usage. Terms range up to 17 years, with a weighted average remaining contract life of approximately 3.9 years. For the twelve months ended June 30, 2006, approximately 61% of our revenues were derived from monthly capacity reservation charges for firm transportation and/or storage services.

 

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    We have significant financial strength. Our senior unsecured debt has an investment grade rating from Standard & Poor’s Rating Services and Moody’s Investors Services. Furthermore, we have a $400 million revolving credit facility with $340 million of available borrowing capacity as of September 28, 2006. We believe our available capacity under this facility combined with our ability to access capital markets will provide us with a flexible financial structure that facilitates our expansion and acquisition strategy.

 

    Our management team has on average more than 20 years of experience in the natural gas pipeline and storage business. The members of our management team have significant experience operating in the interstate natural gas pipeline and storage business over the past twenty years.

 

    Our relationship with Loews provides us with access to additional strategic guidance and financial expertise. Loews is the indirect owner of the master partnership’s general partner and, after giving effect to the master partnership’s proposed offering of common units, will own approximately an 80% limited partner interest in the master partnership. We expect the master partnership’s relationship with Loews to be of significant assistance in developing the strategic direction of our pipeline assets and associated operations.

 

Offering of Common Units

 

In addition to our offering of senior notes, the master partnership has filed a registration statement related to an offering of 5,000,000 of its common units (and an additional 750,000 common units if the underwriters exercise their option to purchase additional common units in full). Please read “Use of Proceeds” and “Capitalization.”

 

Recent Developments

 

Second Quarter Operating Results

 

On July 31, 2006, the master partnership reported its unaudited financial results for the second quarter of 2006.

 

Income before income taxes was $32.1 million for the quarter ended June 30, 2006 and $101.9 million for the six months then ended, a 41% and 19% increase, respectively, from $22.8 million and $85.6 million in the comparable 2005 periods. Operating revenues were $128.7 million for the quarter ended June 30, 2006 and $303.1 million for the six months then ended, a 9% and 13% increase, respectively, from $118.3 million and $268.6 million in the comparable 2005 periods. Earnings before interest, taxes, depreciation and amortization (or EBITDA) were $65.4 million for the quarter ended June 30, 2006 and $168.9 million for the six months then ended, a 20% and 14% increase, respectively, from $54.6 million and $148.7 million in the comparable 2005 periods. EBITDA is a non-GAAP financial measure which we and the master partnership use in our business. This measure is not calculated or presented in accordance with generally accepted accounting principles (or GAAP). We explain this measure below and reconcile it to its most directly comparable financial measures calculated and presented in accordance with GAAP in “—Non-GAAP Financial Measure” below.

 

Expansion Projects

 

East Texas and Mississippi Pipeline Expansion. On September 1, 2006, Gulf South filed a certificate application with FERC to construct 242 miles of 42 inch pipeline from DeSoto Parish in western Louisiana to the Jackson, Mississippi area. To support this project, Gulf South is also proposing to add approximately 110,000 horsepower of new compression to its system. The natural gas to be transported on this expansion project will originate primarily from the Fort Worth Barnett Shale and Bossier Sands producing regions of East Texas. The expansion project will transport natural gas to new interstate pipeline interconnects in the Perryville, Louisiana area and existing pipeline interconnects with other pipelines. Currently there are capacity constraints which limit the amount of natural gas that can be transported out of Texas to markets east of the Mississippi river. As a result of these constraints, the basis differentials between East Texas production and the Henry Hub, which serves as

 

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the dedicated delivery point for natural gas futures contracts traded on the New York Mercantile Exchange, are at historically high levels. This project will help reduce those capacity constraints by adding up to 1.7 Bcf per day of new transmission capacity to our Gulf South pipeline system.

 

This expansion project is supported by binding precedent agreements with customers who have contracted, on a long-term firm basis (with a weighted average life of 7 years), for 1.3 Bcf of the 1.7 Bcf per day capacity. These customers include mostly large independent producers, as well as marketers and end-users. We have ordered the critical materials needed to construct this project. We expect this expansion project to cost approximately $800 million and to be in service during the second half of 2007.

 

Western Kentucky Storage Expansion. On April 15, 2006, Texas Gas filed a certificate application with FERC seeking authority to expand the working gas capacity in Texas Gas’ western Kentucky storage complex by approximately 9 Bcf. This project is supported by binding commitments from customers to contract on a long-term firm basis for incremental no-notice service and firm storage service created by this project for the full capacity at Texas Gas’ maximum applicable rate. We expect this expansion project to cost approximately $36 million. The proposed in-service date for the storage expansion is November 1, 2007.

 

Other. We are also considering other pipeline and storage expansion projects. We may pursue these projects with partners or on a stand-alone basis. The completion of these projects and the projects described above, as well as the cost, timing and performance of any completed projects, are subject to risks and uncertainties including market conditions, signing of definitive agreements with customers and potential partners, obtaining appropriate regulatory approvals, obtaining the necessary financing for the projects, inflation, ordering backlogs and other factors beyond our control.

 

Cost Reduction Project

 

Texas Gas is implementing a program intended to reduce normal, recurring annual costs by approximately $15 to $20 million. The components of the program include changes to postretirement benefits other than pensions, an early retirement incentive program, a reduction in the annual cash incentive program and the elimination of its 2006 broad-based merit increase pool.

 

Amendment of Credit Facility

 

In June 2006, our revolving credit facility was amended and restated from a $200 million facility to a $400 million facility. Under the amended and restated facility, which the master partnership has guaranteed, we, Texas Gas and Gulf South may each borrow funds up to applicable sub-limits. Interest on amounts drawn under the credit facility is payable at a floating rate equal to an applicable spread per annum over the London Interbank Offered Rate (or LIBOR) or a base rate defined as the greater of the prime rate or the Federal funds rate plus 50 basis points. Under the terms of the agreement, each of the borrowers must maintain a minimum ratio, as of the last day of each fiscal quarter, of consolidated total debt to consolidated EBITDA (as defined in the agreement), measured for the preceding twelve months, of not more than five to one. As of September 28, 2006, we had $60 million outstanding under this facility.

 

Partnership Structure

 

We are a Delaware limited partnership wholly owned by Boardwalk Pipeline Partners, LP.

 

Management and Ownership

 

We are a wholly owned subsidiary of the master partnership. We conduct the master partnership’s operations and own its operating assets. Our general partner is managed by the master partnership as its sole member. In turn, the master partnership is managed by its general partner, Boardwalk GP, LP, a Delaware limited partnership (or Boardwalk GP). As a limited partnership, Boardwalk GP does not have a board of

 

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directors and is managed by its general partner, Boardwalk GP, LLC, a Delaware limited liability company (or BGL). BGL has a board of directors. Loews indirectly owns 100% of the equity interests in BGL and Boardwalk GP. For information about the executive officers and directors of BGL, please read the information described under “Information We Incorporate By Reference.” Our general partner and its affiliates are entitled to be reimbursed for all direct and indirect expenses incurred on our behalf, including overhead allocated to us by Loews consistent with accounting and cost allocation methodologies generally permitted by FERC for rate-making purposes and past business practices.

 

Principal Executive Offices and Internet Address

 

The master partnership’s principal executive offices are located at 3800 Frederica Street, Owensboro, Kentucky, 42301, and its phone number is (270) 926-8686. The master partnership’s website is located at http://www.boardwalkpipelines.com. The master partnership makes its periodic reports and other information filed with or furnished to the Securities and Exchange Commission (or the SEC) available, free of charge, through its website, as soon as reasonably practicable. Information on its website or any other website, other than its SEC filings specifically listed under “Information We Incorporate By Reference,” is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.

 

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Organizational Chart

 

The following chart depicts the organization and ownership of us and the master partnership. Percentages and unit numbers in the table and chart do not reflect the proposed offering of common units by the master partnership.

 

Ownership of Boardwalk Pipeline Partners, LP  
   

Public Common Units

   14.5 %

Interest of Loews and subsidiaries:

      

Common Units

   51.5 %

Subordinated Units

   32.0 %

General Partner Interest

   2.0 %
    

     100.0 %
    

 

LOGO

 

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The Notes Offering

 

Issuer

Boardwalk Pipelines, LP

 

Notes Offered

$250.0 million aggregate principal amount of             % senior notes due                     , or the notes.

 

Maturity Date

The notes will mature on                     .

 

Interest Payment Dates

             and              of each year, commencing on     , 2007.

 

Interest Rate

            %.

 

Optional Redemption

We may redeem some or all of the notes by paying a “make-whole” price plus accrued and unpaid interest to the date of redemption. See “Description of the Notes—Optional Redemption.”

 

Ranking

The notes will be:

 

    our, but not our subsidiaries’, senior unsecured obligations;

 

    effectively subordinated in right of payment to any future secured debt to the extent of such security;

 

    effectively subordinated in right of payment to all existing and future debt and other liabilities, including trade payables, of our subsidiaries, including the $250.0 million aggregate principal amount of 4.60% notes due 2015 and $100.0 million aggregate principal amount of 7.25% notes due 2027 of Texas Gas, the $275.0 million aggregate principal amount of 5.05% notes due 2015 of Gulf South and Gulf South’s $60 million of borrowings under our credit facility;

 

    equal in right of payment to all of our, but not our subsidiaries’, existing and future senior unsecured debt, including the $300.0 million aggregate principal amount of our 5.50% notes due 2017 and $185.0 million aggregate principal amount of our 5.20% notes due 2018; and

 

    senior in right of payment to any of our, but not our subsidiaries’, future subordinated debt.

 

 

The indenture governing the notes will permit us to incur additional debt, all of which may be senior debt and, subject to specified limitations, secured.

 

Guarantee

The notes will be fully and unconditionally guaranteed by the master partnership on a senior unsecured basis. The master partnership’s guarantee of the notes will rank equally with all its existing and future senior unsecured debt, including its guarantee of indebtedness under our revolving credit facility.

 

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Risk Factors

You should carefully consider the information set forth in the section entitled “Risk Factors” and the other information included or incorporated by reference in this prospectus in deciding whether to invest in the notes.

 

Further Issues

We may from time to time, without notice to or the consent of the holders of the notes, create and issue additional debt securities under the indenture governing the notes having the same terms as, and ranking equally with, the notes in all respects (except for the offering price, issue date and interest payment dates), as described more fully in “Description of the Notes.”

 

Trustee, Registrar and Paying Agent

The Bank of New York.

 

Ratings

We have obtained the following ratings on the notes:

 

 

A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold the notes. Any rating can be revised upward or downward or withdrawn at any time by a rating agency if the rating agency decides that the circumstances warrant a revision.

 

Use of Proceeds

We intend to use the estimated net proceeds of approximately $247.4 million from this offering (after deducting underwriter discounts and estimated offering expenses) to fund a portion of the cost of our expansion projects and, if not previously repaid with the proceeds of the master partnership’s proposed offering of common units, to repay all of the borrowings outstanding under our revolving credit facility.

 

 

If the master partnership consummates its offering of common units, it intends to use the expected proceeds from the common unit offering of approximately $134.0 million (after deducting underwriting discounts and estimated offering expenses) to fund a portion of the cost of our expansion projects and, if not previously repaid with the proceeds of this offering of notes, to repay all of the borrowings outstanding under our revolving credit facility.

 

 

Our offering of senior notes is not conditioned upon the consummation of the master partnership’s proposed offering of common units.

 

Governing Law

The notes and the guarantee will be governed by New York law.

 

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Summary Historical Financial and Operating Data

 

The table below presents summary historical financial and operating data for the master partnership, us, and our predecessor, Texas Gas, as of the dates and for the periods indicated. In connection with the consummation of the master partnership’s initial public offering (or the IPO), Boardwalk Pipelines Holding Corp. (or BPHC) contributed all of the equity interests in us to the master partnership. This contribution was accounted for as a transfer of assets between entities under common control in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. Therefore, our results prior to November 15, 2005 have been combined with results of the master partnership subsequent to November 15, 2005, as the master partnership’s consolidated results. We were formed in April 2003 to acquire all of the outstanding capital stock of Texas Gas, the acquisition of which was completed on May 16, 2003 (or the TG-Acquisition). Because we had no assets or operations prior to the TG-Acquisition, we refer to Texas Gas as our predecessor. The summary historical financial and operating data is derived from our historical consolidated financial statements and those of the master partnership and Texas Gas included elsewhere in this prospectus or incorporated by reference herein.

 

The TG-Acquisition was accounted for using the purchase method of accounting and, accordingly, the post-acquisition financial information included below reflects the allocation of the purchase price resulting from the acquisition. As a result, the financial statements of Texas Gas for the periods prior to May 16, 2003 are not directly comparable to the master partnership’s and our financial statements subsequent to that date. The consolidated financial and operating data have been separated by a bold black line separating our predecessor’s financial data from ours and those of the master partnership.

 

Our acquisition of Gulf South in December 2004 (or the GS-Acquisition) was also accounted for using the purchase method of accounting. Accordingly, the post-acquisition financial information included below reflects the purchase. As a result, our results of operations for the year ended December 31, 2004 are not readily comparable with the master partnership’s results of operations for the year ended December 31, 2005.

 

Prior to converting to a limited partnership on November 15, 2005, our taxable income was included in the consolidated federal income tax return of Loews and we recorded a charge-in-lieu of income taxes pursuant to a tax sharing agreement with Loews. The tax sharing agreement required us to remit to Loews on a quarterly basis any federal income taxes as if we were filing a separate return. We were also included in the state franchise tax filings of BPHC. The franchise taxes were charged to, and recorded by, us pursuant to our tax sharing policy. Following the IPO, we no longer record a charge-in-lieu of income taxes or certain state franchise taxes incurred by BPHC and no longer participate in a tax sharing agreement with Loews or tax sharing policy with BPHC. One of our subsidiaries directly incurs some income-based state taxes which are accrued as Income Taxes and Charge-In-Lieu of Income Taxes on the Statements of Income.

 

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The following table presents a non-GAAP financial measure, EBITDA, which we use in our business. As used herein, EBITDA means earnings before interest, income taxes, and depreciation and amortization. This measure is not calculated or presented in accordance with GAAP. We explain this measure below and reconcile it to its most directly comparable financial measure calculated and presented in accordance with GAAP in “—Non-GAAP Financial Measure” below. You should read the information below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplementary Data” included in the master partnership’s Annual Report on Form 10-K for the year ended December 31, 2005 and the master partnership’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, each of which is incorporated by reference in this prospectus.

 

    Texas Gas

    Boardwalk Pipeline Partners

 
    Year Ended
December 31,


    Period from
January 1,
2003 –
May 16,
2003


    Period from
May 17,
2003 –
December 31,
2003


    Year Ended
December 31,


    Six Months Ended
June 30,


 
    2001

    2002

        2004

    2005

    2005

    2006

 
    (in thousands, except ratio and per unit data)  

Statements of Income Data:

                                                               

Operating Revenues:

                                                               

Gas Transportation

  $ 243,282     $ 247,458     $ 108,040     $ 132,830     $ 245,306     $ 505,148     $ 236,772     $ 256,402  

Parking and Lending

    842       13,204       3,582       5,863       8,182       21,426       13,076       22,931  

Gas Storage

    2,674       2,317       814       2,435       7,289       21,667       10,232       16,814  

Other

    4,787       3,695       1,011       1,732       2,844       12,225       8,564       6,961  
   


 


 


 


 


 


 


 


Total operating revenues

    251,585       266,674       113,447       142,860       263,621       560,466       268,644       303,108  
   


 


 


 


 


 


 


 


Operating costs and expenses:

                                                               

Operation and maintenance

    53,479       51,389       16,097       25,430       48,336       174,641       67,628       75,160  

Administrative and general

    46,746       52,989       13,642       29,646       52,535       78,752       37,979       50,232  

Depreciation and amortization

    45,821       37,806       16,092       20,544       33,977       72,078       35,059       37,410  

Taxes other than income taxes

    11,712       16,033