<PAGE> 1
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 Period Ended September 30, 1995
OR
[ ] 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 1-7414
NORTHWEST PIPELINE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 87-0269236
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
295 Chipeta Way
Salt Lake City, Utah 84158-0900
---------------------------------------------------------
(Address of principal executive offices and Zip Code)
(801) 583-8800
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- -------------------------------------------------------------------------------
(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 X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 10, 1995
- ---------------------------------------- --------------------------------
Common stock, $1 par value 1,000 shares
The registrant meets the conditions set forth in General Instruction (H)(1)(a)
and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
<PAGE> 2
NORTHWEST PIPELINE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements -
Statement of Income, three and nine months
ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 1
Balance Sheet as of September 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Cash Flows, nine
months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWEST PIPELINE CORPORATION
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
=======================================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . $ 75,638 $ 57,022 $ 193,763 $ 179,524
---------- ---------- ----------- ----------
OPERATING EXPENSES:
Amortization of contract reformation costs - - - 4,053
Operation . . . . . . . . . . . . . . . . 17,979 18,987 56,502 55,812
Maintenance . . . . . . . . . . . . . . . 3,385 3,283 7,269 6,544
Depreciation and amortization . . . . . . 7,527 7,427 22,822 21,965
Taxes, other than income taxes . . . . . . 3,424 3,215 10,143 9,892
---------- ---------- ----------- ----------
32,315 32,912 96,736 98,266
---------- ---------- ----------- ----------
Operating income . . . . . . . . . . . 43,323 24,110 97,027 81,258
---------- ---------- ----------- ----------
OTHER INCOME (EXPENSES) - net . . . . . . . . (3,829) 619 (2,087) 2,284
---------- ---------- ----------- ----------
INTEREST CHARGES:
Interest on long-term debt . . . . . . . . 7,094 7,333 21,655 22,466
Other interest . . . . . . . . . . . . . . (342) 1,180 2,546 4,971
Allowance for borrowed funds used
during construction . . . . . . . . . . (932) (356) (2,034) (879)
---------- ---------- ----------- ----------
5,820 8,157 22,167 26,558
---------- ---------- ----------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . 33,674 16,572 72,773 56,984
PROVISION FOR INCOME TAXES . . . . . . . . . 9,330 6,355 20,252 21,591
---------- ---------- ----------- ----------
NET INCOME . . . . . . . . . . . . . . . . . $ 24,344 $ 10,217 $ 52,521 $ 35,393
========== ========== ========== ==========
CASH DIVIDEND ON COMMON STOCK . . . . . . . . $ - $ - $ - $ 30,000
========== ========== ========== ==========
</TABLE>
_____________________________________
See accompanying notes.
- 1 -
<PAGE> 4
NORTHWEST PIPELINE CORPORATION
BALANCE SHEET
(Unaudited)
================================================================================
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Thousands)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at cost . . . . . . . . . . . . . . . $1,282,742 $ 1,264,539
Less - Accumulated depreciation and amortization . . . . . . . . 512,847 497,075
---------- -----------
769,895 767,464
Construction work in progress . . . . . . . . . . . . . . . . . . 105,804 43,429
---------- -----------
875,699 810,893
---------- -----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . 2,306 1,818
Advances to parent . . . . . . . . . . . . . . . . . . . . . . . - 11,909
Accounts receivable -
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,656 35,578
Affiliated companies . . . . . . . . . . . . . . . . . . . . . 1,537 2,055
Gas stored underground (principally at average cost) . . . . . . - 8,354
Materials and supplies (principally at average cost) . . . . . . 10,886 10,826
Exchange gas due from others . . . . . . . . . . . . . . . . . . 9,339 6,821
Costs recoverable through rate adjustments . . . . . . . . . . . 6,082 2,148
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 27,597 2,368
Prepayments and other . . . . . . . . . . . . . . . . . . . . . . 6,078 2,795
---------- -----------
92,481 84,672
---------- -----------
OTHER ASSETS:
Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . 29,026 23,207
---------- -----------
$ 997,206 $ 918,772
========== ===========
</TABLE>
_______________________________________
See accompanying notes.
- 2 -
<PAGE> 5
NORTHWEST PIPELINE CORPORATION
BALANCE SHEET
(Unaudited)
================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Thousands)
<S> <C> <C>
CAPITALIZATION:
Common stockholder's equity -
Common stock, par value $1 per share,
authorized and outstanding, 1,000 shares . . . . . . . . . $ 1 $ 1
Additional paid-in capital . . . . . . . . . . . . . . . . . 262,440 262,440
Retained earnings . . . . . . . . . . . . . . . . . . . . . 211,516 164,536
---------- ----------
473,957 426,977
Long-term debt, less current maturities . . . . . . . . . . . 287,219 297,705
---------- ----------
761,176 724,682
---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . 8,591 8,591
Notes payable to banks . . . . . . . . . . . . . . . . . . . . 1,600 -
Accounts payable -
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,679 15,301
Affiliated companies . . . . . . . . . . . . . . . . . . . . 1,463 371
Accrued liabilities -
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 10,471 1,779
Taxes, other than income taxes . . . . . . . . . . . . . . . 9,063 6,724
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 12,755 11,890
Employee costs . . . . . . . . . . . . . . . . . . . . . . . 6,869 6,950
Exchange gas due to others . . . . . . . . . . . . . . . . . 18,639 11,007
Reserves for estimated rate refunds . . . . . . . . . . . . 38,809 39,998
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 906 2,704
---------- ----------
122,845 105,315
---------- ----------
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . 101,020 78,183
---------- ----------
OTHER DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . . . . 12,165 10,592
---------- ----------
CONTINGENT LIABILITIES AND COMMITMENTS . . . . . . . . . . . . . .
---------- ----------
$ 997,206 $ 918,772
========== ==========
</TABLE>
_____________________________
See accompanying notes.
- 3 -
<PAGE> 6
NORTHWEST PIPELINE CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1995 1994
--------- ---------
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,521 $ 35,393
Adjustments to reconcile to cash provided from operations -
Depreciation and amortization . . . . . . . . . . . . . . . . 22,822 21,965
Provision for deferred income taxes . . . . . . . . . . . . . 268 1,237
Amortization of deferred charges and credits . . . . . . . . . 716 1,010
Allowance for equity funds used during construction . . . . . (2,445) (1,090)
Increase (decrease) from changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . 4,922 4,438
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 2,594 5,247
Other current assets . . . . . . . . . . . . . . . . . . . . (7,217) 5,275
Other assets and deferred charges . . . . . . . . . . . . . (7,408) (1,443)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 8,988 (8,473)
Other current liabilities . . . . . . . . . . . . . . . . . 8,828 14,375
Other deferred credits . . . . . . . . . . . . . . . . . . . (185) -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88) 9
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . . 84,316 77,943
--------- ---------
INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (84,745) (38,232)
Asset removal cost . . . . . . . . . . . . . . . . . . . . . . (191) (1,485)
Changes in accounts payable . . . . . . . . . . . . . . . . . (1,886) (1,657)
Advances to parent . . . . . . . . . . . . . . . . . . . . . . . 11,909 (17,634)
--------- ---------
Net cash used by investing activities . . . . . . . . . . . . . . (74,913) (59,008)
--------- ---------
FINANCING ACTIVITIES:
Principal payments on long-term debt . . . . . . . . . . . . . . (10,515) (13,015)
Proceeds from notes payable to Bank . . . . . . . . . . . . . . . 12,750 -
Payments on notes payable to Bank . . . . . . . . . . . . . . . . (11,150) -
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . - (30,000)
--------- ---------
Net cash used by financing activities . . . . . . . . . . . . . . (8,915) (43,015)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . 488 (24,080)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 24,675
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . $ 2,306 $ 595
========= =========
</TABLE>
_________________________________
See accompanying notes.
- 4 -
<PAGE> 7
NORTHWEST PIPELINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
(1) GENERAL
The accompanying, unaudited interim financial statements of Northwest
Pipeline Corporation ("Pipeline"), included herein, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations; however,
Pipeline believes that the disclosures made are adequate to make the
information presented not misleading. In the opinion of Pipeline, all
adjustments, which include only normal operating adjustments, have been made to
present fairly the financial position of Pipeline as of September 30, 1995 and
December 31, 1994, the results of operations for the three and nine months
ended September 30, 1995 and 1994, and cash flows for the nine months ended
September 30, 1995 and 1994. The results of operations for the periods
presented are not necessarily indicative of the results for the respective
complete years. It is suggested that these condensed financial statements be
read in conjunction with the statements and the notes thereto included in
Pipeline's 1994 Annual Report on Form 10-K.
Cash payments for interest were $20.0 million and $21.7 million, net of
$2.0 million and $.9 million of interest capitalized, in the nine month periods
ended September 30, 1995 and 1994, respectively.
Net cash payments made to The Williams Companies, Inc. ("Williams") for
income taxes were $11.3 million and $16.2 million in the nine month periods
ended September 30, 1995 and 1994, respectively.
(2) RETAINED EARNINGS
Noncash Dividends
On May 1, 1995, Pipeline transferred an aircraft, net of associated
deferred income tax liabilities, to Williams by dividend. This asset, which is
not included in the accompanying balance sheet as of September 30, 1995, had a
net book value of $5.5 million.
(3) LONG-TERM DEBT AND BANKING ARRANGEMENTS
On May 31, 1995, Pipeline called $1.9 million of its outstanding 9.25%
Series C Debentures, due 2006 under terms of the optional prepayment provisions
in the debenture agreement. No early redemption premium was required. The
prepayment was in addition to the scheduled May 31, 1995 sinking fund payments
of $5 million for the 9% Series B and $1.9 million for the 9.25% Series C.
Pipeline shares in an $800 million Revolving Credit Agreement with
Williams and four affiliated companies. Pipeline's maximum borrowing
availability, subject to prior borrowing by other affiliated companies, is $400
million, none of which was used by Pipeline at September 30, 1995. Interest
rates vary with current market conditions. The agreement contains restrictions
which limit, under certain circumstances, the issuance of additional debt, the
attachment of liens on any assets and any change of ownership of Pipeline. Any
borrowings by Pipeline using this agreement are not guaranteed by Williams and
are based on Pipeline's financial need and credit worthiness.
Pipeline has also arranged various uncommitted lines-of-credit at market
interest rates. Pipeline's credit facilities are subject to Pipeline's
continued credit worthiness.
- 5 -
<PAGE> 8
NORTHWEST PIPELINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
(4) CONTINGENT LIABILITIES AND COMMITMENTS
Pending Rate Cases
On April 1, 1993, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed October 1, 1992. On May
31, 1995, Pipeline received a favorable order from the Federal Energy
Regulatory Commission ("FERC") on this rate case. A number of parties have
sought rehearing on the rate of return on equity and various other issues.
On November 1, 1994, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed April 29, 1994. This
filing seeks a revenue increase for a projected deficiency caused by increased
costs and the impact of a transportation contract terminated subsequent to the
rate case filed on October 1, 1992. Pipeline intends to file a settlement
proposal with the FERC in November 1995, supported or not opposed by
substantially all customers and the FERC Staff. The settlement would resolve
all or substantially all the issues in this rate case. Pipeline has not
adjusted its reserve accruals in the accompanying financial statements to
reflect the proposed settlement.
On August 1, 1995, Pipeline filed with the FERC for a general rate
increase to be effective February 1, 1996. The filing seeks a revenue increase
for increases in rate base related primarily to the current mainline expansion
projects, increased operating costs primarily associated with an increase in
headquarters office rent and increased depreciation expense.
Significant Litigation
In October 1995, Pipeline received a judge's order following a non-jury
trial involving claims arising from a transportation agreement of a former
customer. In the decision, it was held that Pipeline was liable to the former
customer in the amount of $6.4 million. Although Pipeline recorded an accrued
liability in the third quarter 1995, Pipeline plans to file an appeal.
Other Legal and Regulatory Matters
In addition to the foregoing, various other proceedings are pending
against Pipeline incidental to its operations.
Summary of Contingent Liabilities
A review by Pipeline of the rehearing requests in the FERC proceedings
and other issues impacting reserve accruals has resulted in a net reversal to
income in the third quarter 1995 of a portion of these accruals, including
amounts previously accrued for estimated rate refunds, based on management's
assessment of the possible outcome of such issues. Reserve additions,
including the significant litigation discussed above, amounted to $8.2 million
and reserve reversals amounted to $18.6 million for a net increase to income
before income taxes of $10.4 million. The impact to reported results of prior
and current periods is reflected below:
- 6 -
<PAGE> 9
NORTHWEST PIPELINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Increase (Decrease)
Year Income Before Income Taxes
---- --------------------------
(Millions of Dollars)
<S> <C>
1993 $ 8.4
1994 10.2
1995 (third quarter) (8.2)
------
$ 10.4
======
</TABLE>
Management believes that the ultimate resolution of the foregoing
matters, after consideration of amounts accrued, insurance coverage and other
indemnification arrangements, will not have a materially adverse effect upon
Pipeline's future financial position, results of operations, and future cash
flow requirements.
- 7 -
<PAGE> 10
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations
This analysis discusses financial results of Pipeline's operations for
the quarters and nine month periods ended September 30, 1995 and 1994.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1995 vs. Quarter Ended September 30, 1994
Operating revenues increased $18.6 million, or 33%, due primarily to the
reversal of certain reserve accruals aggregating $16.3 million, including
amounts for estimated rate refunds, and partially to increased rates put into
effect on November 1, 1994. The reserve reversals included approximately $8.4
million that related to full year 1993, $8.7 million related to full year 1994,
and $.8 million of new reserves in 1995. Reserve reversals applicable to third
quarter 1993 and 1994, were $2.9 million and $2.1 million, respectively.
Variances due to changes in price and volume no longer have a significant
impact on revenues, because under its straight-fixed-variable rate design
methodology, the majority of Pipeline's overall cost of service is recovered
through fixed demand charges in its transportation rates.
Pipeline's transportation service accounted for 92% and 94% of operating
revenues for the quarter ended September 30, 1995 and 1994, respectively. Of
those amounts, Pipeline's firm transportation service accounted for 99% and 97%
of 1995 and 1994, respectively. The remaining 1% and 3% of each period,
respectively, represented interruptible transportation service. Additionally,
4% and 5% of operating revenues represented gas storage services for the
quarter ended September 30, 1995 and 1994, respectively.
Operation expenses decreased $.6 million, or 2%, due in general to the
timing of operation and maintenance costs incurred in the current year versus
the prior year.
Other expenses increased $4.4 million, primarily due to a reserve
accrual of $6.4 million related to the initial judge's order in a non-jury
trial involving claims arising from a transportation agreement of a former
customer, partially offset by $1.5 million of increases in investing and other
income.
Operating income increased $19.2 million, or 80%, primarily due to the
reversal of reserve accruals discussed above and partially to increased rates
put into effect on November 1, 1994 along with decreased operation expenses.
Interest on long-term debt decreased $.2 million, or 3%, due to
scheduled debt repayments and certain optional prepayments. Other interest
expense decreased $1.5 million resulting in a credit amount of $.3 million
primarily due to the reversal of interest on the revenues subject to rate
refund which were previously reserved. The allowance for borrowed funds used
during construction increased $.6 million reflecting the continued progress of
a mainline expansion project.
Nine Months Ended September 30, 1995 vs. Nine Months Ended September 30, 1994
Operating revenues increased $14.2 million, or 8%, due primarily to the
reversal of reserve accruals associated with estimated rate refunds aggregating
$16.3 million and to increased rates put into effect on November 1, 1994,
partially offset by decreased storage revenues and the absence of contract
reformation surcharges that were completed April 1, 1994. Reserve reversals
applicable to the first nine months of 1993 and 1994 were $5.8 million and $8
million, respectively.
- 8 -
<PAGE> 11
Pipeline's transportation service accounted for 93% and 94% of operating
revenues for the nine month periods ended September 30, 1995 and 1994,
respectively. Of those amounts, Pipeline's firm transportation service
accounted for 97% and 99%, respectively. The remaining 3% and 1% for each
period, respectively, represented interruptible transportation service.
Additionally, 4% and 5% of operating revenues represented gas storage service
for the nine month periods ended September 30, 1995 and 1994, respectively.
Operating expenses decreased $1.5 million, or nearly 2%, due primarily
to the absence of amortization of contract reformation costs. This was
partially offset by higher operation and maintenance expenses aggregating $1.4
million and increased depreciation of $.9 million resulting from previous
capital additions.
Operating income increased $15.8 million, or 19%, primarily due to the
reversal of reserve accruals, increased rates put into effect November 1, 1994
and the absence of contract reformation amortization expense, partially offset
by higher operation and maintenance expenses and increased depreciation
expense.
Other expenses increased $4.4 million primarily due to a reserve accrual
of $6.4 million related to the initial judge's order in a non-jury trial
involving claims arising from a transportation agreement of a former customer,
partially offset by $2.2 million of increases in investing and other income.
Interest on long-term debt decreased $.8 million, or nearly 4%, due to
scheduled debt repayments and certain optional prepayments. Other interest
expense decreased $2.4 million, or 49%, primarily due to the absence of
deferred carrying costs on contract reformation and the reversal of interest on
revenues subject to rate refund which were previously reserved. The allowance
for borrowed funds used during construction increased $1.2 million reflecting
the continued progress of a mainline expansion project.
The following table summarizes year-to-date volumes and average daily
volumes for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
---------- ----------
<S> <C <C>
Total Gas volumes throughput (TBtu) 579 479
Average Daily Transportation Volumes (TBtu) 2.1 1.8
Average Daily Firm Reserved Capacity (TBtu) 2.4 2.4
</TABLE>
FINANCIAL CONDITION AND LIQUIDITY
Pipeline anticipates 1995 capital expenditures will total approximately
$169.7 million, of which $84.7 million has been expended through September 30,
1995. Funds necessary to complete capital projects are expected to come from
several sources, including Pipeline's operations and available cash. In
addition, Pipeline expects to be able to obtain financing, when necessary, on
reasonable terms. To allow flexibility in the timing of issuance of long-term
securities, financing may be provided on an interim basis with bank debt and
from sources discussed below.
In September 1995 Pipeline filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to $150 million of
debt securities. Pipeline expects to draw upon a portion of such availability
as the timing of its capital expenditure program dictates.
- 9 -
<PAGE> 12
Pipeline believes that strong economies in the Pacific Northwest and the
growing preference for natural gas in response to environmental concerns
support expansions of its mainline capacity. Pipeline is currently undertaking
expansions of its system for 144 MMcf of gas per day of increased system
capacity. On April 19, 1995, FERC issued the certificates of public
convenience and necessity authorizing construction and operation of these
expansion projects which are estimated to cost approximately $106 million and
are expected to be in service during December 1995.
On May 31, 1995, Pipeline called $1.9 million of its outstanding 9.25%
Series C Debentures, due 2006 under terms of the optional prepayment provisions
in the debenture agreement. No early redemption premium was required. The
prepayment was in addition to the scheduled May 31, 1995 sinking fund payments
of $5 million for the 9% Series B and $1.9 million for the 9.25% Series C.
Pipeline shares in an $800 million Revolving Credit Agreement with
Williams and four affiliated companies. Pipeline's maximum borrowing
availability, subject to prior borrowing by other affiliated companies, is $400
million, none of which was used by Pipeline at September 30, 1995. Interest
rates vary with current market conditions. The agreement contains restrictions
which limit, under certain circumstances, the issuance of additional debt, the
attachment of liens on any assets and any change of ownership of Pipeline. Any
borrowings by Pipeline using this agreement are not guaranteed by Williams and
are based on Pipeline's financial need and credit worthiness.
Pipeline has also arranged various uncommitted lines-of-credit at market
interest rates. Pipeline's credit facilities are subject to Pipeline's
continued credit worthiness.
OTHER
Pipeline owns and operates an interstate natural gas pipeline system,
including facilities for mainline transmission and gas storage. Pipeline's
transmission and storage activities are subject to regulation by the FERC under
the Natural Gas Act of 1938 and under the Natural Gas Policy Act of 1978, and,
as such, its rates and charges for the transportation of natural gas in
interstate commerce, the extension, enlargement or abandonment of its
jurisdictional facilities, and its accounting, among other things, are subject
to regulation.
Pipeline is subject to the National Environmental Policy Act and other
federal and state legislation regulating the environmental aspects of its
business. Management believes that Pipeline is in substantial compliance with
existing environmental requirements. Pipeline believes that, with respect to
any capital expenditures required to meet applicable standards and regulations,
FERC would grant the requisite rate relief so that, for the most part, such
expenditures and a return thereon would be permitted to be recovered. Pipeline
believes that compliance with applicable environmental requirements is not
likely to have a material effect upon Pipeline's earnings or competitive
position.
In November 1995, Pipeline and Transwestern entered into an agreement
for the sale by Pipeline to Transwestern of a 77.7% undivided ownership
interest in the south end of Pipeline's line from Ignacio, Colorado to Blanco,
New Mexico. Transwestern will pay Pipeline at closing 77.7% of the net book
value of the South End facilities estimated to be $21 million plus 77.7% of the
cost of certain modifications necessary to separate the operation of the South
End from Pipeline's mainline estimated to be $4.9 million. The parties
executed a letter of intent as of September 22, 1995, and hope to close the
sale when each has received appropriate board approvals and FERC certificates.
Closing may occur as early as August of 1996.
- 10 -
<PAGE> 13
On April 1, 1993, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed October 1, 1992. On May
31, 1995, Pipeline received a favorable order from the FERC on this rate case.
A number of parties have sought rehearing on the rate of return on equity and
various other issues.
On November 1, 1994, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed April 29, 1994. This
filing seeks a revenue increase for a projected deficiency caused by increased
costs and the impact of a transportation contract terminated subsequent to the
rate case filed on October 1, 1992. Pipeline intends to file a settlement
proposal with the FERC in November 1995, supported or not opposed by
substantially all customers and the FERC Staff. The settlement would resolve
all or substantially all the issues in this rate case. Pipeline has not
adjusted its reserve accruals in the accompanying financial statements to
reflect the proposed settlement.
On August 1, 1995, Pipeline filed with the FERC for a general rate
increase to be effective February 1, 1996. The filing seeks a revenue increase
for increases in rate base related primarily to the current mainline expansion
projects, increased operating costs primarily associated with an increase in
headquarters office rent and increased depreciation expense.
As discussed above, a review by Pipeline of the rehearing requests and
other issues impacting reserve accruals has resulted in reversal to income in
the third quarter 1995 of a portion of these accruals, including amounts for
estimated rate refunds aggregating approximately $10.4 million based on
management's assessment of the possible outcome of such issues.
- 11 -
<PAGE> 14
PART II. OTHER INFORMATION
The information required by items in Part II is omitted because the
items are inapplicable, the answer is negative or substantially the same
information is included elsewhere in this report or has been previously
reported by the Registrant.
- 12 -
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NORTHWEST PIPELINE CORPORATION
------------------------------
Registrant
By: /s/ Curtis C. Kennedy
------------------------------
Curtis C. Kennedy
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
Date: November 10, 1995
- 13 -
<PAGE> 16
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,306
<SECURITIES> 0
<RECEIVABLES> 30,193
<ALLOWANCES> 0
<INVENTORY> 10,886
<CURRENT-ASSETS> 92,481
<PP&E> 1,282,742
<DEPRECIATION> 512,847
<TOTAL-ASSETS> 997,206
<CURRENT-LIABILITIES> 122,846
<BONDS> 287,219
<COMMON> 1
0
0
<OTHER-SE> 473,956
<TOTAL-LIABILITY-AND-EQUITY> 997,207
<SALES> 0
<TOTAL-REVENUES> 193,763
<CGS> 0
<TOTAL-COSTS> 96,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,167
<INCOME-PRETAX> 72,773
<INCOME-TAX> 20,252
<INCOME-CONTINUING> 52,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,521
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
