<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, 2000
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 9, 2000
-------------------------- -----------------------------
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 -
Condensed Consolidated Statement of Income, three and six months
ended June 30, 2000 and 1999............................................................ 1
Condensed Consolidated Balance Sheet as of June 30, 2000 and
December 31, 1999....................................................................... 2
Condensed Consolidated Statement of Cash Flows, six
months ended June 30, 2000 and 1999..................................................... 4
Notes to Condensed Consolidated Financial Statements...................................... 5
Item 2. Management's Narrative Analysis of the 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 and 2000 first quarter report on Form
10-Q.
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHWEST PIPELINE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES .......................... $ 69,114 $ 77,276 $ 148,874 $ 147,417
---------- ---------- ---------- ----------
OPERATING EXPENSES:
General and administrative ............... 8,692 10,307 20,382 23,651
Operation and maintenance ................ 8,917 9,545 17,813 18,435
Depreciation ............................. 13,817 11,329 27,632 24,503
Taxes, other than income taxes ........... 3,498 3,625 7,455 8,377
---------- ---------- ---------- ----------
34,924 34,806 73,282 74,966
---------- ---------- ---------- ----------
Operating income ....................... 34,190 42,470 75,592 72,451
---------- ---------- ---------- ----------
OTHER INCOME - net .......................... 1,495 564 6,766 1,297
---------- ---------- ---------- ----------
INTEREST CHARGES:
Interest on long-term debt ............... 6,469 6,507 12,976 13,051
Other interest ........................... 1,574 (432) 3,125 1,404
Allowance for borrowed funds used during
Construction ............................ (56) (217) (204) (360)
---------- ---------- ---------- ----------
7,987 5,858 15,897 14,095
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES .................. 27,698 37,176 66,461 59,653
PROVISION FOR INCOME TAXES .................. 10,427 13,259 25,210 22,460
---------- ---------- ---------- ----------
NET INCOME .................................. $ 17,271 $ 23,917 $ 41,251 $ 37,193
========== ========== ========== ==========
CASH DIVIDENDS ON COMMON STOCK .............. $ 20,000 $ 18,000 $ 40,000 $ 36,000
========== ========== ========== ==========
</TABLE>
----------
See accompanying notes.
1
<PAGE> 4
NORTHWEST PIPELINE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(Thousands)
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at cost ...................... $1,616,777 $1,616,904
Less - Accumulated depreciation .......................... 729,726 701,127
---------- ----------
887,051 915,777
Construction work in progress ............................ 42,938 26,900
---------- ----------
929,989 942,677
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents ................................ 523 342
Advances to affiliates ................................... 43,409 30,842
Accounts receivable -
Trade .................................................. 26,023 17,748
Affiliated companies ................................... 2,151 2,027
Income taxes ............................................. 1,591 --
Materials and supplies (principally at lower of average
cost or market) ........................................ 10,687 10,734
Exchange gas due from others ............................. 6,060 1,389
Deferred income taxes .................................... 10,891 19,741
Prepayments and other .................................... 1,340 1,139
---------- ----------
102,675 83,962
---------- ----------
OTHER ASSETS:
Deferred charges ......................................... 47,674 47,594
---------- ----------
$1,080,338 $1,074,233
========== ==========
</TABLE>
----------
See accompanying notes.
2
<PAGE> 5
NORTHWEST PIPELINE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(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 ........................... 208,045 206,794
---------- ----------
470,890 469,639
Long-term debt, less current maturities ......... 369,136 370,793
---------- ----------
840,026 840,432
---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt ............ 1,667 1,667
Accounts payable -
Trade ....................................... 10,545 10,289
Affiliated companies ........................ 11,306 10,784
Accrued liabilities -
Taxes, other than income taxes .............. 3,754 2,400
Interest .................................... 13,567 12,030
Employee costs .............................. 8,671 11,413
Exchange gas due to others .................. 6,749 2,078
Reserves for estimated rate refunds ......... 29,029 29,059
Other ....................................... 1,754 2,001
---------- ----------
87,042 81,721
---------- ----------
DEFERRED INCOME TAXES .............................. 146,602 143,519
---------- ----------
OTHER DEFERRED CREDITS ............................. 6,668 8,561
---------- ----------
CONTINGENT LIABILITIES AND COMMITMENTS .............
---------- ----------
$1,080,338 $1,074,233
========== ==========
</TABLE>
----------
See accompanying notes.
3
<PAGE> 6
NORTHWEST PIPELINE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
---------- ----------
(Thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................. $ 41,251 $ 37,193
Adjustments to reconcile to cash provided by operations -
Depreciation ............................................ 27,632 24,503
Provision for deferred income taxes ..................... 11,933 5,219
Amortization of deferred charges and credits ............ 121 1,088
Allowance for equity funds used during construction ..... (375) (639)
Increase (decrease) from changes in:
Accounts receivable and exchange gas due from
others .............................................. (14,661) 32,886
Materials and supplies ................................ 47 9
Other current assets .................................. (201) (15,341)
Other assets and deferred charges ..................... (1,612) (3,462)
Accounts payable and exchange gas due to others ....... 9,330 (12,040)
Other accrued liabilities ............................. (128) (5,370)
Other deferred credits ................................ (472) (455)
Other ................................................... -- 1
---------- ----------
Net cash provided by operating activities .................. 72,865 63,592
---------- ----------
INVESTING ACTIVITIES:
Property, plant and equipment -
Capital expenditures .................................... (15,649) (25,288)
Proceeds from sales ..................................... 1,080 368
Changes in accounts payable ............................. (3,881) (2,191)
Advances to affiliates ..................................... (12,567) 391
---------- ----------
Net cash used by investing activities ...................... (31,017) (26,720)
---------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term debt ....................... (1,667) (1,667)
Dividends paid ............................................. (40,000) (36,000)
---------- ----------
Net cash used by financing activities ...................... (41,667) (37,667)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................ 181 (795)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD ..................................................... 342 1,164
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................... $ 523 $ 369
========== ==========
</TABLE>
----------
See accompanying notes.
4
<PAGE> 7
NORTHWEST PIPELINE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) General
The accompanying, unaudited interim condensed consolidated financial
statements of Northwest Pipeline Corporation ("Pipeline") 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, 2000, the results of operations
for the three and six month periods ended June 30, 2000 and 1999, and the cash
flows for the six month periods ended June 30, 2000 and 1999. 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
consolidated financial statements be read in conjunction with the statements,
the notes thereto and management's narrative analysis included in Pipeline's
1999 Annual Report on Form 10-K and 2000 first quarter report on Form 10-Q.
Pipeline is a wholly owned subsidiary of Williams Gas Pipeline Company
("WGP"). WGP is a wholly owned subsidiary of The Williams Companies, Inc.
("Williams").
Adoption of Accounting Standards
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This standard, as amended, will be effective for
Pipeline beginning January 1, 2001. This standard requires that all derivatives
be recognized as assets or liabilities in the balance sheet and that those
instruments be measured at fair value. The effect of this standard on Pipeline's
results of operations and financial position is being evaluated.
(2) Basis of Presentation
The condensed consolidated financial statements include the operating
results of NWP Enterprises ("Enterprises"), a wholly owned subsidiary of
Pipeline.
(3) Long-Term Debt and Banking Arrangements
At June 30, 2000, Pipeline was a participant in a $1 billion Revolving
Credit Facility with Williams and certain affiliated companies. Pipeline's
maximum borrowing availability, subject to prior borrowing by other affiliated
companies, was $400 million, none of which was used by Pipeline at June 30,
2000. Interest rates varied with current market conditions based on the base
rate of Citibank N.A., three-month certificates of deposit of major United
States money market banks, federal funds rate or the London Interbank Offered
Rate ("LIBOR"). The Facility contained restrictions, which limited, 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 under this Facility were not guaranteed by Williams and were based on
Pipeline's financial need and credit worthiness. Subsequent to June 30, 2000,
Williams' $1 billion revolving credit agreement was terminated and replaced with
a $700 million revolving credit agreement. The terms of this new agreement as
they relate to Pipeline are similar to the previous agreement.
Pipeline has also arranged various uncommitted lines-of-credit at market
interest rates that were unused by Pipeline at June 30, 2000. 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
5
<PAGE> 8
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, the 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 various 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, but
convened a conference on January 30, 1998 to consider, on an industry-wide
basis, issues with respect to pipeline rates of return. Pipeline made refunds to
customers in June 1998 totaling $27 million, including interest, reflecting the
FERC's resolution of all disputed matters in this case. Pipeline and other
parties sought judicial review of the FERC's decision concerning rate of return
on equity. One party sought judicial review of the inclusion of unpaid accruals
in rate base. In July 1998, the FERC issued orders concerning its rate of return
on equity policy in rate proceedings of other pipelines adopting a formula that
gives less weight to the long-term growth component. In April 1999, the Court of
Appeals for the D.C. Circuit remanded the 1993 Rate Case to the FERC for
application of its revised rate of return on equity policy. On July 14, 1999,
the FERC issued an order requiring Pipeline to: (a) submit a surcharge plan to
the FERC, (b) recalculate rates consistent with the new weighting formula
favoring short term growth, and (c) address in a remand hearing the appropriate
source for Gross Domestic Product ("GDP") growth data. The new weighting formula
generally results in a higher authorized rate of return on equity. Pipeline and
its customers resolved by settlement those issues relating to long term GDP
growth. In February 2000, the FERC approved the long-term growth settlement and
issued an order related to return on equity issues requiring Pipeline to
incorporate the effects of the settlement and to calculate its allowed rate of
return on equity consistent with the recently announced policy changes in other
proceedings. As a part of this recalculation of allowed return on equity, the
FERC provided that Pipeline must use the median instead of the midpoint of the
various results of Discounted Cash Flow ("DCF") analysis for a proxy group. This
results in a higher return on equity for Pipeline. On April 3, 2000, Pipeline
made the necessary compliance filings to implement the FERC's decision including
the establishment of surcharges in order to recollect moneys that shippers owe
Pipeline for these corrective actions. During the first quarter of 2000,
Pipeline recorded surcharges of $11.4 million, of which $7 million increased
revenues and $4.4 million, representing interest, increased other income. The
results of these adjustments are reflected in the accompanying statements. On
July 14, 2000, the FERC issued an order denying customer rehearing requests and
approving Pipeline's compliance filing. The order reaffirmed Pipeline's right to
use the median result from DCF proxy group analysis. The FERC's action will
result in Pipeline's booking $3.2 million of additional revenues and $2.6
million of interest income in the third quarter.
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. Pipeline's rate
application sought 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. During the first quarter of 1998, the
ALJ issued an Initial Decision. The ALJ found that the facts of this case
continue to support Pipeline's capital structure of 55% equity and 45% debt. The
ALJ also determined that Pipeline fits within the average risk range for
determining pipeline return on equity and allowed a return on equity of 11.2
percent. On June 1, 1999, the FERC issued its order affirming many aspects of
the ALJ's initial decision, but finding that the return on equity issue should
be resolved by using the FERC's new policy concerning rate of return
determinations. This resulted in an allowed return on equity of 12.22 percent.
During the second quarter of 1999, Pipeline reduced its rate refund liabilities
$9.9 million, of which $7.7 million increased revenues and $2.2 million reduced
interest expense, to reflect the FERC's action in this proceeding. Final action
on several issues is still pending before the FERC, based on various requests
for rehearing including Pipeline's.
On March 1, 1997, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed August 30, 1996 ("1996 Rate
Case"). The application sought an increase in rates due to a
6
<PAGE> 9
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. On July 22, 1997, Pipeline
filed a settlement to resolve all issues in this rate case. On November 25,
1997, the FERC, over the objection of one dissenting party, issued an order
approving all aspects of the settlement. The one dissenting party sought and was
denied rehearing of the FERC's order. That party sought judicial review of
certain aspects of the FERC's decision. Pipeline made refunds to customers in
August 1998 totaling $16.7 million, including interest, in this rate case. A
settlement in principle has been reached with the one dissenting party on issues
pending review in the proceeding and on other business related issues. Pipeline
is expecting withdrawal of any further judicial challenges in this matter by the
third quarter of 2000.
Significant Litigation
In 1998, the United States Department of Justice informed Williams that
Jack Grynberg, an individual, had filed claims in the United States District
Court for the District of Colorado under the False Claims Act against Williams
and certain of its wholly-owned subsidiaries including Pipeline. Mr. Grynberg
had also filed claims against approximately 300 other energy companies and
alleged that the defendants violated the False Claims Act in connection with the
measurement and purchase of hydrocarbons. The relief sought was an unspecified
amount of royalties allegedly not paid to the Federal government, treble
damages, a civil penalty, attorneys' fees and costs. On April 9, 1999, the
United States Department of Justice announced that it was declining to intervene
in any of the Grynberg qui tam cases; including the action filed against the
Williams entities in the United States District Court for the District of
Colorado. On October 21, 1999, the Panel on Multi-District Litigation
transferred all of the Grynberg qui tam cases, including the ones filed against
Williams to the United States District Court for the District of Wyoming for
pre-trial purposes. Motions to dismiss the complaint, filed by various
defendants including Williams, are pending.
Other Legal and Regulatory Matters
On February 9, 2000, the FERC issued a final rule, Order No. 637, in
response to the comments received on the Notice of Proposed Rulemaking ("NOPR")
and Notice of Inquiry ("NOI"). The FERC adopted in Order No. 637 certain
policies that it found are necessary to adjust its current regulatory model to
the needs of the evolving markets, but determined that any fundamental changes
to its regulatory policy, which changes were raised and commented on in the NOPR
and NOI, would be considered after further study and evaluation of the evolving
marketplace. Most significantly, in Order No. 637, the FERC (i) revised its
pricing policy to waive, for a two-year period, the maximum price ceilings for
short-term releases of capacity of less than one year, and (ii) permitted
pipelines to file proposals to implement seasonal rates for short-term services
and term-differentiated rates, subject to certain requirements including the
requirement that a pipeline be limited to recovering its annual revenue
requirement under those rates.
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 cash flow
requirements.
Other Matters
Enterprises participates in an agreement for the sale, with limited
recourse, of certain receivables of Pipeline. Net proceeds to Enterprises are
limited to $15 million of which $10 million was utilized at June 30, 2000.
7
<PAGE> 10
Item 2. Management's Narrative
Analysis of the
Results of Operations
This analysis discusses financial results of Pipeline's operations for
the six-month periods ended June 30, 2000 and 1999. Variances due to changes in
price and volume have little impact on revenues, because under Pipeline's rate
design methodology, the majority of overall cost of service is recovered through
firm capacity reservation charges in its transportation rates.
This analysis should be read in conjunction with the consolidated
financial statements, notes and management's narrative analysis of the results
of operations contained in Items 7 and 8 of Pipeline's 1999 Annual Report on
Form 10-K and in Pipeline's 2000 First Quarter Report on Form 10-Q and with the
condensed consolidated financial statements and notes contained in this report.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2000 vs. Six Months Ended June 30, 1999
Operating revenues increased $1.5 million, or 1%, due primarily to the
recognition of a $7 million surcharge resulting from a favorable FERC decision
on return on equity related to the 1993 rate case, a $2.1 million increase in
other revenues associated with the completion of the Columbia Gorge Project in
November 1999, and higher short-term firm and interruptible transportation
revenues, largely offset by a 1999 reduction to rate refund liabilities of $8.3
million associated with the 1995 rate case.
Pipeline's transportation service accounted for 94% and 97% of operating
revenues for the six-month periods ended June 30, 2000 and 1999, respectively.
Additionally, 3% and 2% of operating revenues represented gas storage service
for the six-month periods ended June 30, 2000 and 1999, respectively.
Operating expenses decreased $1.7 million, or 2%, due primarily to the
receipt of a $1.5 million environmental liability insurance settlement.
Operating income increased $3.1 million, or 4%, due to reasons
identified above.
Other income includes $4.4 million of interest on surcharges related to
the revenue associated with the 1993 rate case as discussed above in operating
revenues.
Other interest expense increased $1.7 million due to the 1999 reduction
to accrued interest liabilities of $2.2 million associated with the 1995 rate
case, partially offset by lower interest on revenues subject to refund as a
result of reductions to related rate refund liabilities as discussed above in
operating revenues.
The following table summarizes volumes and capacity for the periods
indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
<S> <C> <C>
Total Gas volumes throughput (TBtu) 371 366
Average Daily Transportation Volumes (TBtu) 2.0 2.0
Average Daily Firm Reserved Capacity (TBtu) 2.6 2.6
</TABLE>
FINANCIAL CONDITION AND LIQUIDITY
Pipeline anticipates 2000 capital expenditures will total approximately
$61.5 million, of which $15.6 million has been expended through June 30, 2000.
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
8
<PAGE> 11
issuance of long-term securities, financing may be provided on an interim basis
with bank debt and from sources discussed below.
As of December 31, 1999, Pipeline was a participant in Williams' cash
management program. The advances due Pipeline by Williams were represented by
demand notes. Effective February 1, 2000, Pipeline began participating in WGP's
cash management program. The advances due Pipeline by WGP are represented by
demand notes. The interest rate on intercompany demand notes is the London
Interbank Offered Rate ("LIBOR") on the first day of the month plus an
applicable margin based on the current Standard and Poor's Rating of the
Borrower.
Pipeline has an outstanding registration statement filed with the
Securities and Exchange Commission. At June 30, 2000, approximately $150 million
of shelf availability remains under this outstanding registration statement and
may be used to issue debt securities. Interest rates and market conditions will
affect amounts borrowed, if any, under this arrangement.
At June 30, 2000, Pipeline was a participant in a $1 billion Revolving
Credit Facility with Williams and certain affiliated companies. Pipeline's
maximum borrowing availability, subject to prior borrowing by other affiliated
companies, was $400 million, none of which was used by Pipeline at June 30,
2000. Interest rates varied with current market conditions based on the base
rate of Citibank N.A., three-month certificates of deposit of major United
States money market banks, federal funds rate or the London Interbank Offered
Rate ("LIBOR"). The Facility contained restrictions, which limited, 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 under this Facility were not guaranteed by Williams and were based on
Pipeline's financial need and credit worthiness. Subsequent to June 30, 2000,
Williams' $1 billion revolving credit agreement was terminated and replaced with
a $700 million revolving credit agreement. The terms of this new agreement as
they relate to Pipeline are similar to the previous agreement.
NWP Enterprises ("Enterprises"), a wholly-owned subsidiary of Pipeline,
participates in an agreement for the sale, with limited recourse, of certain
receivables of Pipeline. Net proceeds to Enterprises are limited to $15 million
of which $10 million was utilized at June 30, 2000.
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 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.
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/ JEFFREY R. VALENTINE
-----------------------------------
Jeffrey R. Valentine
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
Date: August 9, 2000
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
