<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, 1997
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 84108
-----------------------------------------------------
(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 12, 1997
- -------------------------- --------------------------------
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 -
Consolidated Statement of Income, three and nine months
ended September 30, 1997 and 1996 ......................................... 1
Consolidated Balance Sheet as of September 30, 1997 and
December 31, 1996 ......................................................... 2
Consolidated Statement of Cash Flows, nine
months ended September 30, 1997 and 1996 .................................. 4
Notes to Consolidated Financial Statements...................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ....................................... 9
PART II. OTHER INFORMATION.............................................................. 11
</TABLE>
Certain matters discussed in this report, excluding historical information,
include forward-looking statements. Although Northwest Pipeline Corporation
believes such forward-looking statements are based on reasonable assumptions, no
assurance can be given that every objective will be reached. Such statements are
made in reliance on the "safe harbor" protections provided under the Private
Securities Reform Act of 1995. Additional information about issues that could
lead to material changes in performance is contained in Northwest Pipeline
Corporation's annual report on Form 10-K.
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
==================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1997 1996 1997 1996
-------- --------- --------- ---------
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES ................. $ 71,197 $ 69,188 $ 204,453 $ 205,640
-------- --------- --------- ---------
OPERATING EXPENSES:
General and administrative ...... 10,262 11,208 34,501 35,662
Operation and maintenance ....... 9,178 10,739 26,080 30,781
Depreciation and amortization ... 13,222 9,043 38,490 26,768
Taxes, other than income taxes .. 2,966 2,229 10,641 9,644
-------- --------- --------- ---------
35,628 33,219 109,712 102,855
-------- --------- --------- ---------
Operating income ............. 35,569 35,969 94,741 102,785
-------- --------- --------- ---------
OTHER INCOME - net ................ 587 2,190 2,556 4,922
-------- --------- --------- ---------
INTEREST CHARGES:
Interest on long-term debt ...... 8,164 8,302 24,808 25,413
Other interest .................. 1,840 2,055 5,395 4,343
Allowance for borrowed
funds used during
construction .................. (168) (202) (493) (336)
-------- --------- --------- ---------
9,836 10,155 29,710 29,420
-------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ......... 26,320 28,004 67,587 78,287
PROVISION FOR INCOME TAXES ......... 7,794 8,604 23,207 28,162
-------- --------- --------- ---------
NET INCOME ......................... $ 18,526 $ 19,400 $ 44,380 $ 50,125
======== ========= ========= =========
CASH DIVIDEND ON COMMON STOCK ...... $ 21,400 $ 55,241 $ 51,837 $ 62,241
======== ========= ========= =========
</TABLE>
- -----------------
See accompanying notes.
- 1 -
<PAGE> 4
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
=====================================================================================
ASSETS
September 30, December 31,
1997 1996
---------- ----------
(Thousands)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at cost ........... $1,461,599 $1,452,181
Less - Accumulated depreciation and
amortization.................................. 563,688 550,104
---------- ----------
897,911 902,077
Construction work in progress ................ 21,259 24,040
---------- ----------
919,170 926,117
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents .................... 839 240
Advances to parent ........................... 43,813 16,676
Accounts receivable -
Trade ..................................... 22,641 31,189
Affiliated companies ...................... 246 1,229
Materials and supplies (principally
at average cost) ............................. 10,613 10,510
Exchange gas due from others ................. 7,335 8,264
Costs recoverable through rate adjustments ... 5,920 11,998
Income taxes receivable ...................... 2,657 --
Deferred income taxes ........................ 22,354 23,306
Prepayments and other......................... 5,472 5,051
---------- ----------
121,890 108,463
---------- ----------
OTHER ASSETS:
Deferred charges ............................. 48,172 22,607
---------- ----------
$1,089,232 $1,057,187
========== ==========
</TABLE>
- -----------------
See accompanying notes.
- 2 -
<PAGE> 5
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
=======================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
September 30, December 30,
1997 1996
---------- ----------
(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 .................. 262,844 262,844
Retained earnings ........................... 171,603 179,485
---------- ----------
434,448 442,330
Long-term debt, less current maturities
(Note 3)....................................... 167,395 361,424
---------- ----------
601,843 803,754
---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt ........... 11,091 8,591
Notes payable to banks (Note 3) ............. 207,000 --
Accounts payable -
Trade ....................................... 13,715 16,313
Affiliated companies ........................ 7,628 2,805
Accrued liabilities -
Income taxes ................................ -- 6,048
Taxes, other than income taxes .............. 5,875 3,890
Interest .................................... 16,278 14,676
Employee costs .............................. 8,183 7,763
Exchange gas due to others .................. 12,811 19,817
Reserves for estimated rate refunds ......... 66,402 46,795
Other ....................................... 7,046 7,821
---------- ----------
356,029 134,519
---------- ----------
DEFERRED INCOME TAXES .............................. 122,852 110,699
---------- ----------
OTHER DEFERRED CREDITS ............................. 8,508 8,215
---------- ----------
CONTINGENT LIABILITIES AND COMMITMENTS (Note 4) .... -- --
---------- ----------
$1,089,232 $1,057,187
========== ==========
</TABLE>
- -------------------
See accompanying notes.
- 3 -
<PAGE> 6
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
============================================================================================
Nine Months Ended
September 30,
------------------------
1997 1996
--------- --------
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .................................................. $ 44,380 $ 50,125
Adjustments to reconcile to cash provided by operations -
Depreciation and amortization ....................... 38,490 26,768
Provision for deferred income taxes ................. 13,105 5,572
Amortization of deferred charges and credits ........ (1,099) 212
Sale of receivables ................................. 8,000 --
Allowance for equity funds used during construction . (577) (516)
Increase (decrease) from changes in:
Accounts receivable ............................... (197) 11,168
Inventory ......................................... (103) 497
Other current assets .............................. 5,657 4,291
Other assets and deferred charges ................. (2,190) 765
Accounts payable .................................. 4,510 (9,079)
Other current liabilities ......................... 16,791 2,397
Other deferred credits ............................ 1,203 (909)
Other ............................................... (516) (95)
--------- --------
Net cash provided by operating activities ............... 127,454 91,196
--------- --------
INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures ................................ (31,241) (39,728)
Proceeds from sales ................................. 366 17,161
Asset removal cost .................................. -- (256)
Changes in accounts payable ......................... (9,291) (9,448)
Advances to parent ...................................... (27,137) 13,871
--------- --------
Net cash used by investing activities ................... (67,303) (18,400)
--------- --------
FINANCING ACTIVITIES:
Principal payments on long-term debt .................... (192,020) (10,515)
Premium on early retirement of long-term debt ........... (22,695) --
Proceeds from notes payable to bank ..................... 207,000 --
Cash dividends paid ..................................... (51,837) (62,241)
--------- --------
Net cash used by financing activities ................... (59,552) (72,756)
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................... 599 40
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ................................................. 240 570
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................. $ 839 $ 610
========= ========
</TABLE>
- -----------------
See accompanying notes.
- 4 -
<PAGE> 7
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED 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, 1997 and December 31, 1996,
the results of operations for the three and nine month periods ended September
30, 1997 and 1996, and cash flows for the nine month periods ended September 30,
1997 and 1996. 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 1996 Annual Report
on Form 10-K.
Effective May 1, 1997, Pipeline became a wholly-owned subsidiary of
Williams Interstate Natural Gas Systems, Inc., which is a wholly-owned
subsidiary of The Williams Companies, Inc. ("Williams"). Prior to May 1, 1997,
Pipeline was a wholly-owned subsidiary of Williams.
Cash payments for interest were $27.4 million and $24 million, net of $.5
million and $.3 million of interest capitalized, in the nine month periods ended
September 30, 1997 and 1996, respectively.
Net cash payments made to Williams for income taxes were $11.4 million and
$16.5 million in the nine month periods ended September 30, 1997 and 1996,
respectively.
(2) BASIS OF PRESENTATION
Financial position of Pipeline as of September 30, 1997, the results of
operations for the three and nine month periods ended September 30, 1997 and
cash flows for the nine month period ended September 30, 1997 include the
operating results of NWP Enterprises ("Enterprises"), a wholly owned subsidiary
of Pipeline, since its incorporation on January 2, 1997.
(3) LONG-TERM DEBT AND BANKING ARRANGEMENTS
During October 1997, Pipeline made negotiated prepayments of the remaining
$11.1 million of its 9.25% Series C Debentures, due 2006, with redemption
premiums totaling $1 million. The early redemption premiums and the unamortized
debt expense associated with the prepaid 9.25% Series C Debentures, totaling
$1.1 million, will be amortized over the life of the retired debt. Excess funds
previously advanced to Williams were used to fund the prepayment and premium.
On October 15, 1997, Pipeline made an optional prepayment with a redemption
premium of the remaining $7.5 million of its 9% Series B Debentures, due 2001.
The early redemption premium and the unamortized debt expense associated with
the 9% Series B Debentures, totaling $.2 million, will be amortized over the
life of the retired debt. Excess funds previously advanced to Williams were used
to fund the prepayment and premium.
On September 8, 1997, Pipeline filed a registration statement for issuance
of up to $350 million in public debt securities in conjunction with the
announcement of Williams' debt restructuring plan to reduce annual interest
expense. No securities had been issued at September 30, 1997.
- 5 -
<PAGE> 8
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
===============================================================================
Between September 8, 1997 and September 19, 1997, Pipeline purchased,
through a tender offer, $66 million of its 10.65% Debentures, due 2018, and $117
million of its 9% Debentures, due 2022, at premiums of $6.8 million and $15.9
million, respectively. The early redemption premiums and fees, the unamortized
debt expenses on both issues and the unamortized debt discount on the 9%
Debentures, totaling $7.3 million for the 10.65% Debentures and $17.6 million
for the 9% Debentures, are being amortized over the life of the retired debt.
The Revolving Credit Facility (see below) was used to fund the tender offer.
On May 31, 1997, Pipeline called $.5 million of its outstanding 9.25%
Series C Debentures, due 2006 under terms of the optional prepayment provisions
in the debenture agreement. The prepayment was in addition to the scheduled May
31, 1997 sinking fund payments of $5 million for the 9% Series B and $1.9
million for the 9.25% Series C.
Pipeline shares in a $1 billion Revolving Credit Agreement with Williams
and five affiliated companies. Pipeline's maximum borrowing availability,
subject to prior borrowing by other affiliated companies, is $400 million, $207
million of which was used by Pipeline at September 30, 1997. 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.
(4) CONTINGENT LIABILITIES AND COMMITMENTS
Pending Rate Cases
On April 1, 1993, Pipeline began collecting new rates, subject to refund,
under its rate case filed October 1, 1992 ("1993 Rate Case"). On May 31, 1995,
Pipeline received an order from the Federal Energy Regulatory Commission
("FERC") on this rate case, which among other issues, supported an equity rate
of return of 13.2 percent. In a further order issued on July 19, 1996, FERC
required an Administrative Law Judge ("ALJ") to reconsider the long-term growth
component of the equity rate of return formula, and upheld its May 31, 1995
decision on all other issues. On October 22, 1996, the ALJ issued an initial
decision which recommended an equity rate of return of 11.62 percent. Pipeline
took exception to this decision before the FERC. On June 11, 1997, the FERC
issued an order revising its approved equity rate of return to 12.59 percent
based on a new policy for industry-wide application that requires the use of
forecasts of growth in the gross domestic product as the long-term growth
component of the rate of return formula. On July 11, 1997, Pipeline and several
parties in the case sought rehearing of the June 11 rate of return on equity
decision, seeking to have the FERC reconsider several aspects of its new rate of
return on equity policy. On October 16, 1997, the FERC issued an opinion denying
rehearing and reaffirming its previous policy pronouncements concerning rate of
return on equity. Pipeline plans to seek judicial review of the FERC's order. In
addition, Pipeline expects the FERC to further scrutinize its new rate of return
on equity policy in rate proceedings of other pipelines or in a further
rulemaking proceeding.
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
sought a revenue increase for a projected deficiency caused by increased costs
and the impact of a transportation contract terminated subsequent to the 1993
Rate Case. On November 14, 1995, Pipeline filed an uncontested settlement
proposal with the FERC. The FERC approved the Settlement in a Letter Order dated
February 14, 1996 and no rehearing petitions were filed with respect to that
order. During the second quarter of 1996, Pipeline finalized and paid the
settlement refunds, the effects of which are reflected in the accompanying
balance sheet. The settlement resolved substantially all the issues in this rate
case except one regarding Pipeline's postage stamp rate design. A hearing was
conducted in July 1996; and subsequently, a decision upholding Pipeline's
position was issued by the ALJ. Pipeline is awaiting the FERC's approval of the
ALJ's decision. Any change in rate design pursuant to this decision would be
prospective only.
- 6 -
<PAGE> 9
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
===============================================================================
On February 1, 1996, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed August 1, 1995 ("1995 Rate
Case"). On October 18, 1996, the Commission issued an order approving a
settlement concerning certain liquid revenue credit issues relating to
Pipeline's agreement with an affiliate to have liquid hydrocarbon products
extracted from Pipeline's transportation stream at Ignacio, Colorado. The
litigation of all remaining issues took place in late 1996 and Pipeline is
awaiting the initial decision of the presiding ALJ. Pipeline's rate application
seeks a revenue increase for increases in rate base related primarily to the
Northwest Natural and Expansion II facilities placed into service December 1,
1995 and increased operating costs primarily associated with an increase in
headquarters office rent. As a result of the rate of return policy in Pipeline's
1993 Rate Case which was issued on June 11, 1997, the presiding ALJ on June 17,
1997, required submission of supplemental information on long-term growth for
his consideration. While Pipeline filed comments with the ALJ that such growth
information must not be used in deciding the rate of return on equity issues in
the 1995 Rate Case without additional hearing procedures, the required growth
information was submitted to the ALJ under a stipulation of the parties on July
11, 1997.
On March 1, 1997, Pipeline began collecting new rates, subject to refund,
under the provisions of its rate case filed August 30, 1996. The application
sought an increase in rates due to a proposed use of a higher depreciation rate
which also considers a net negative salvage value for Pipeline's facilities,
higher operating costs and a redesign of Pipeline's rates because of impacts
relating to the sale of Pipeline's south- end facilities in the third quarter of
1996. Pipeline filed a settlement on July 22, 1997, with the Commission which,
if approved, will resolve all issues in this rate case. Based on comments
submitted by one producer, the ALJ certified the settlement to the FERC with
respect to all but three parties which were severed for a separate hearing.
Issues concerning the ALJ's action in severing the three parties have been
certified to the FERC for separate review. Pipeline has reflected in its
financial statements adjustments as necessary to reflect the provisions of the
settlement.
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, which was amended in January 1996, it was held that
Pipeline was liable to the former customer in the amount of $5.3 million, plus
interest. Although Pipeline recorded charges to "other expenses" and "other
interest charges" in 1995, Pipeline is appealing the decision.
On July 18, 1996, an individual filed a lawsuit in the United States
District Court for the District of Columbia against 70 natural gas pipelines and
other gas purchasers or former gas purchasers. All of the Williams' natural gas
pipeline subsidiaries were named as defendants in the lawsuit. The plaintiff
claimed, on behalf of the United States under the False Claims Act, that the
pipelines had incorrectly measured the heating value or volume of gas purchased
by the defendants. The plaintiff claimed that the United States had lost royalty
payments as a result of these practices. The court dismissed the claims against
the pipelines and most of the other defendants.
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
Management believes that the ultimate resolution of the foregoing matters,
after consideration of amounts accrued, insurance coverage or other
indemnification arrangements, will not have a materially adverse effect upon
Pipeline's future financial position, results of operations, and future cash
flow requirements.
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<PAGE> 10
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
===============================================================================
Other Matters
In February 1997, Pipeline's subsidiary, Enterprises entered into a new
agreement for the sale, with limited recourse, of certain receivables of
Pipeline. Net proceeds to Enterprises are limited to $15 million of which $8
million was utilized at September 30, 1997. The Financial Accounting Standards
Board ("FAS") has issued an accounting standard, FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
effective for transactions occurring after December 31, 1996. The adoption of
this standard did not impact Pipeline's consolidated results of operations,
financial position or cash flows.
The FAS has issued two new accounting standards, FAS No. 130, "Reporting
Comprehensive Income," and FAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," effective for fiscal years beginning after
December 15, 1997. The adoption of this standard is not expected to impact
Pipeline's consolidated results of operations, financial position or cash flows.
- 8 -
<PAGE> 11
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, 1997 and 1996. Variances due
to changes in price and volume do not 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.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1997 vs Quarter Ended September 30, 1996
Operating revenues increased $2 million, or 3%, due primarily to new
transportation rates effective March 1, 1997, partially offset by the effect of
a $3.2 million favorable 1996 regulatory decision.
Pipeline's transportation service accounted for 94% of operating revenues
for each of the quarters ended September 30, 1997 and 1996, respectively.
Additionally, 4% of operating revenues represented gas storage service for each
of the quarters ended September 30, 1997 and 1996.
Operating expenses increased $2.4 million, or 7%, due primarily to
increased depreciation expenses associated with Pipeline's new rates effective
March 1, 1997, partially offset by decreases in the operation and maintenance
and general and administrative expenses.
Operating income decreased $.4 million, or 1%, primarily due to a 1996
favorable regulatory decision, partially offset by decreases in the operation
and maintenance and general and administrative expenses.
Nine Months Ended September 30, 1997 vs. Nine Months Ended September 30, 1996
Operating revenues decreased $1.2 million, or 1%, due primarily to
increases in rate reserves in 1997 and the 1996 recognition of the favorable
settlement of a previous rate case and a favorable regulatory decision,
partially offset by new transportation rates that became effective March 1,
1997.
Pipeline's transportation service accounted for 94% of operating revenues
for each of the nine month periods ended September 30, 1997 and 1996,
respectively. Additionally, 4% and 5% of operating revenues represented gas
storage service for the nine month periods ended September 30, 1997 and 1996,
respectively.
Operating expenses increased $6.9 million, or 7%, due primarily to
increased depreciation expenses associated with Pipeline's new rates effective
March 1, 1997, partially offset by decreased operation and maintenance expense.
Operating income decreased $8 million, or 8%, primarily due to increases in
rate reserves in 1997 and the 1996 recognition of the favorable settlement of a
previous rate case and a favorable regulatory decision, partially offset by
decreased operation and maintenance expense.
The following table summarizes year-to-date volumes and average daily
volumes for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Total Gas Volumes Throughput (TBtu) 521 631
Average Daily Transportation Volumes (TBtu) 1.9 2.3
Average Daily Firm Reserved Capacity (TBtu) 2.4 2.6
</TABLE>
- 9 -
<PAGE> 12
The decrease in gas volumes throughput is a result of the sale of
Pipeline's south end facilities in September 1996.
FINANCIAL CONDITION AND LIQUIDITY
Pipeline anticipates 1997 capital expenditures will total approximately
$41.6 million, of which $31.2 million has been expended through September 30,
1997. Funds necessary to complete capital projects are expected to come from
several sources, including Pipeline's operations and the return of funds
previously advanced to Williams. 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.
Pipeline shares in a $1 billion Revolving Credit Agreement with Williams
and five affiliated companies. Pipeline's maximum borrowing availability,
subject to prior borrowing by other affiliated companies, is $400 million, $207
million of which was used by Pipeline at September 30, 1997. 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, the extension,
enlargement or abandonment of its jurisdictional facilities, and its accounting,
among other things, are subject to regulation.
Pipeline is also 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, cash flow or
competitive position.
Reference is made to Note 4 of Notes to Consolidated Financial Statements
for information about regulatory, judicial and business developments which cause
operating and financial uncertainties.
- 10 -
<PAGE> 13
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.
- 11 -
<PAGE> 14
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 12, 1997
- 12 -
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 839
<SECURITIES> 0
<RECEIVABLES> 22,887
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0
0
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</TABLE>
