<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 Quarterly Period Ended June 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 August 13, 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 six months
ended June 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheet as of June 30, 1997 and
December 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Cash Flows, six
months ended June 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 . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 10
</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 Six Months Ended
June 30, June 30,
------------------ -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . $ 66,050 $ 68,868 $133,256 $136,452
-------- -------- -------- --------
OPERATING EXPENSES:
General and administrative . . . . . . . . . . 11,821 12,308 24,239 24,454
Operation and maintenance . . . . . . . . . . . 7,962 9,855 16,902 20,042
Depreciation and amortization . . . . . . . . . 13,279 8,956 25,268 17,725
Taxes, other than income taxes . . . . . . . . 3,257 3,421 7,675 7,415
-------- -------- -------- --------
36,319 34,540 74,084 69,636
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . 29,731 34,328 59,172 66,816
-------- -------- -------- --------
OTHER INCOME - net . . . . . . . . . . . . . . . 1,186 1,949 1,969 2,732
-------- -------- -------- --------
INTEREST CHARGES:
Interest on long-term debt . . . . . . . . . . 8,275 8,503 16,644 17,111
Other interest . . . . . . . . . . . . . . . . 2,270 1,422 3,555 2,288
Allowance for borrowed funds used during
construction . . . . . . . . . . . . . . . . (110) (111) (325) (134)
-------- -------- -------- --------
10,435 9,814 19,874 19,265
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . 20,482 26,463 41,267 50,283
PROVISION FOR INCOME TAXES . . . . . . . . . . . 9,121 10,916 15,413 19,558
-------- -------- -------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 11,361 $ 15,547 $ 25,854 $ 30,725
======== ======== ========= ========
CASH DIVIDENDS ON COMMON STOCK . . . . . . . . . $ 21,674 $ - $ 30,437 $ 7,000
======== ======== ========= ========
</TABLE>
- ----------------------------------------------------------
See accompanying notes.
- 1 -
<PAGE> 4
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
(Thousands)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at cost . . . . . . . . . . $1,474,818 $1,452,181
Less - Accumulated depreciation and amortization . . . . 567,273 550,104
---------- ----------
907,545 902,077
Construction work in progress . . . . . . . . . . . . . . 15,940 24,040
---------- ----------
923,485 926,117
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . 361 240
Advances to parent . . . . . . . . . . . . . . . . . . . 42,137 16,676
Accounts receivable -
Trade . . . . . . . . . . . . . . . . . . . . . . . . 20,110 31,189
Affiliated companies . . . . . . . . . . . . . . . . . 406 1,229
Materials and supplies (principally at average cost) . . 10,588 10,510
Exchange gas due from others . . . . . . . . . . . . . . 7,080 8,264
Costs recoverable through rate adjustments . . . . . . . 1,807 11,998
Deferred income taxes . . . . . . . . . . . . . . . . . . 20,782 23,306
Prepayments and other . . . . . . . . . . . . . . . . . . 5,579 5,051
---------- ----------
108,850 108,463
---------- ----------
OTHER ASSETS:
Deferred charges . . . . . . . . . . . . . . . . . . . . 24,741 22,607
---------- ----------
$1,057,076 $ 1,057,187
========== ===========
</TABLE>
- ----------------------------
See accompanying notes.
- 2 -
<PAGE> 5
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
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 . . . . . . . . . . . . . . . . . . . . 174,477 179,485
---------- ----------
437,322 442,330
Long-term debt, less current maturities (Note 3) . . . . . . . 352,379 361,424
---------- ----------
789,701 803,754
---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . 8,591 8,591
Accounts payable -
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . 14,178 16,313
Affiliated companies . . . . . . . . . . . . . . . . . . . 7,482 2,805
Accrued liabilities -
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 6,048 6,048
Taxes, other than income taxes . . . . . . . . . . . . . . 5,594 3,890
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 17,612 14,676
Employee costs . . . . . . . . . . . . . . . . . . . . . . 9,040 7,763
Exchange gas due to others . . . . . . . . . . . . . . . . 8,443 19,817
Reserves for estimated rate refunds . . . . . . . . . . . 62,222 46,795
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 7,109 7,821
---------- ----------
146,319 134,519
---------- ----------
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 112,153 110,699
---------- ----------
OTHER DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . . . 8,903 8,215
---------- ----------
CONTINGENT LIABILITIES AND COMMITMENTS (Note 4) . . . . . . . . .
---------- ----------
$1,057,076 $1,057,187
========== ==========
</TABLE>
- ----------------------------
See accompanying notes.
- 3 -
<PAGE> 6
NORTHWEST PIPELINE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1997 1996
---------- ----------
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,854 $ 30,725
Adjustments to reconcile to cash provided by operations -
Depreciation and amortization . . . . . . . . . . . . . . . . 25,268 17,725
Provision for deferred income taxes . . . . . . . . . . . . . 3,978 6,517
Amortization of deferred charges and credits . . . . . . . . (747) 167
Sale of receivables . . . . . . . . . . . . . . . . . . . . . 8,000 -
Allowance for equity funds used during construction . . . . . (349) (205)
Increase (decrease) from changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . 5,086 12,768
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . (78) (290)
Other current assets . . . . . . . . . . . . . . . . . . . 9,663 4,713
Other assets and deferred charges . . . . . . . . . . . . . (1,988) 99
Accounts payable . . . . . . . . . . . . . . . . . . . . . 804 (13,209)
Other current liabilities . . . . . . . . . . . . . . . . . 20,632 (11,218)
Other deferred credits . . . . . . . . . . . . . . . . . . 1,314 (714)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (479) (21)
---------- ----------
Net cash provided by operating activities . . . . . . . . . . . 96,958 47,057
---------- ----------
INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures . . . . . . . . . . . . . . . . . . . . (23,055) (25,390)
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . 822 -
Asset removal cost . . . . . . . . . . . . . . . . . . . . . - (355)
Changes in accounts payable . . . . . . . . . . . . . . . . . (9,636) (9,532)
Advances to parent . . . . . . . . . . . . . . . . . . . . . . (25,461) 5,691
---------- ----------
Net cash used by investing activities . . . . . . . . . . . . . (57,330) (29,586)
---------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term debt . . . . . . . . . . . . . (9,070) (10,516)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . (30,437) (7,000)
---------- ----------
Net cash used by financing activities . . . . . . . . . . . . . (39,507) (17,516)
---------- ----------
NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . (45)
121
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . 240 570
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . $ 361 $ 525
========== ==========
</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 June 30, 1997 and
December 31, 1996, the results of operations for the three and six month
periods ended June 30, 1997 and 1996, and cash flows for the six month periods
ended June 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 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 $16.4 million and $17 million, net of
$.3 million and $.1 million of interest capitalized, in the six month periods
ended June 30, 1997 and 1996 respectively.
Net cash payments made to Williams for income taxes were $11.4 million
and $11.8 million in the six month periods ended June 30, 1997 and 1996,
respectively.
(2) BASIS OF PRESENTATION
Financial position of Pipeline as of June 30, 1997, the results of
operations for the three and six month periods ended June 30, 1997 and cash
flows for the six month period ended June 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
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, none
of which was used by Pipeline at June 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.
- 5 -
<PAGE> 8
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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 Commission reconsider several
aspects of its new rate of return on equity policy. In addition, Pipeline
expects the Commission to further scrutinize its new rate of return on equity
policy in rate proceedings of other pipelines or in a further rulemaking
proceeding. A further decision on rehearing is not expected until late 1997.
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.
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. While comments have not yet been filed, Pipeline believes that
all of its customers either support or do not oppose approval of the
settlement. Pipeline has reflected in its financial statements adjustments as
necessary to reflect all provisions of the settlement.
- 6 -
<PAGE> 9
NORTHWEST PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 are 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 recently
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.
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 June 30, 1997. The Financial Accounting Standards
Board ("FAS") has issued a new 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 is not expected to impact Pipeline's consolidated
results of operations, financial position or cash flows.
- 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 six month periods ended June 30, 1997 and 1996. 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.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1997 vs. Quarter Ended June 30, 1996
Operating revenues decreased $2.8 million, or 4%, due primarily to
increases in rate reserves in 1997 and the reversal in 1996 of reserves for
potential fuel refunds, partially offset by new transportation rates effective
March 1, 1997.
Pipeline's transportation service accounted for 94% and 95% of operating
revenues for the quarters ended June 30, 1997 and 1996, respectively.
Additionally, 5% of operating revenues represented gas storage service for
each of the quarters ended June 30, 1997 and 1996.
Operating expenses increased $1.8 million, or 5%, 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 $4.6 million, or 13%, primarily due to
adjustments to rate refund accruals in 1997 and the reversal in 1996 of
reserves for potential fuel refunds, partially offset by decreases in the
operation and maintenance and general and administrative expenses.
Six Months Ended June 30, 1997 vs. Six Months Ended June 30, 1996
Operating revenues decreased $3.2 million, or 2%, due primarily to
increases in rate reserves in 1997 and the recognition in 1996 of the favorable
settlement of a previous rate case, partially offset by new transportation
rates that became effective March 1, 1997.
Pipeline's transportation service accounted for 94% and 93% of operating
revenues for the six month periods ended June 30, 1997 and 1996, respectively.
Additionally, 4% and 6% of operating revenues represented gas storage service
for the six month periods ended June 30, 1997 and 1996, respectively.
Operating expenses increased $4.4 million, or 6%, 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 $7.6 million, or 11%, primarily due to
adjustments to rate refund accruals partially offset by decreases in operation
and maintenance and general and administrative expenses.
The following table summarizes year-to-date volumes and average daily
volumes for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Total Gas volumes throughput (Tbtu) 374 439
Average Daily Transportation Volumes (TBtu) 2.1 2.4
Average Daily Firm Reserved Capacity (TBtu) 2.4 2.6
</TABLE>
- 8 -
<PAGE> 11
FINANCIAL CONDITION AND LIQUIDITY
Pipeline anticipates 1997 capital expenditures will total approximately
$44 million, of which $23.1 million has been expended through June 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 believes that strong economies in the Pacific Northwest and the
growing preference for natural gas in response to environmental concerns
support future expansions of its mainline capacity, although no significant
expansions are in the development stage at the present time.
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, none of which was used by Pipeline at June 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.
- 9 -
<PAGE> 12
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.
- 10 -
<PAGE> 13
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: August 13, 1997
- 11 -
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 361
<SECURITIES> 0
<RECEIVABLES> 20,516
<ALLOWANCES> 0
<INVENTORY> 10,588
<CURRENT-ASSETS> 108,850
<PP&E> 1,490,758
<DEPRECIATION> 567,273
<TOTAL-ASSETS> 1,057,076
<CURRENT-LIABILITIES> 146,319
<BONDS> 352,379
0
0
<COMMON> 1
<OTHER-SE> 437,321
<TOTAL-LIABILITY-AND-EQUITY> 1,057,076
<SALES> 0
<TOTAL-REVENUES> 133,256
<CGS> 0
<TOTAL-COSTS> 74,084
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,874
<INCOME-PRETAX> 41,267
<INCOME-TAX> 15,413
<INCOME-CONTINUING> 25,854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,854
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
