-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UvLy/P92RQ8BpTrC0R3oK5WMYFThBKuoHXyGbv538bkUHWv2Nuh74MEwenxs4YVj He5ZXYODukEVqfzVWP4iJw== 0000950134-95-002780.txt : 19951119 0000950134-95-002780.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950134-95-002780 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST PIPELINE CORP CENTRAL INDEX KEY: 0000110019 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 870269236 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07414 FILM NUMBER: 95589314 BUSINESS ADDRESS: STREET 1: 295 CHIPETA WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84158-0900 BUSINESS PHONE: 8015838800 MAIL ADDRESS: STREET 1: 295 CHIPETA WAY CITY: SALT LAKE STATE: UT ZIP: 84158 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1995 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q _________________ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Period Ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 1-7414 NORTHWEST PIPELINE CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 87-0269236 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 295 Chipeta Way Salt Lake City, Utah 84158-0900 --------------------------------------------------------- (Address of principal executive offices and Zip Code) (801) 583-8800 ----------------------------------------------------------------- (Registrant's telephone number, including area code) No Change - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 10, 1995 - ---------------------------------------- -------------------------------- Common stock, $1 par value 1,000 shares The registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format. 2 NORTHWEST PIPELINE CORPORATION TABLE OF CONTENTS
Page ---- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements - Statement of Income, three and nine months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 1 Balance Sheet as of September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statement of Cash Flows, nine months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . 4 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 8 PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements NORTHWEST PIPELINE CORPORATION STATEMENT OF INCOME (Unaudited)
======================================================================================================================= Three Months Ended Nine Months Ended September 30, September 30, --------------------------- -------------------------- 1995 1994 1995 1994 ---------- ---------- ----------- ---------- (Thousands) OPERATING REVENUES . . . . . . . . . . . . . $ 75,638 $ 57,022 $ 193,763 $ 179,524 ---------- ---------- ----------- ---------- OPERATING EXPENSES: Amortization of contract reformation costs - - - 4,053 Operation . . . . . . . . . . . . . . . . 17,979 18,987 56,502 55,812 Maintenance . . . . . . . . . . . . . . . 3,385 3,283 7,269 6,544 Depreciation and amortization . . . . . . 7,527 7,427 22,822 21,965 Taxes, other than income taxes . . . . . . 3,424 3,215 10,143 9,892 ---------- ---------- ----------- ---------- 32,315 32,912 96,736 98,266 ---------- ---------- ----------- ---------- Operating income . . . . . . . . . . . 43,323 24,110 97,027 81,258 ---------- ---------- ----------- ---------- OTHER INCOME (EXPENSES) - net . . . . . . . . (3,829) 619 (2,087) 2,284 ---------- ---------- ----------- ---------- INTEREST CHARGES: Interest on long-term debt . . . . . . . . 7,094 7,333 21,655 22,466 Other interest . . . . . . . . . . . . . . (342) 1,180 2,546 4,971 Allowance for borrowed funds used during construction . . . . . . . . . . (932) (356) (2,034) (879) ---------- ---------- ----------- ---------- 5,820 8,157 22,167 26,558 ---------- ---------- ----------- ---------- INCOME BEFORE INCOME TAXES . . . . . . . . . 33,674 16,572 72,773 56,984 PROVISION FOR INCOME TAXES . . . . . . . . . 9,330 6,355 20,252 21,591 ---------- ---------- ----------- ---------- NET INCOME . . . . . . . . . . . . . . . . . $ 24,344 $ 10,217 $ 52,521 $ 35,393 ========== ========== ========== ========== CASH DIVIDEND ON COMMON STOCK . . . . . . . . $ - $ - $ - $ 30,000 ========== ========== ========== ==========
_____________________________________ See accompanying notes. - 1 - 4 NORTHWEST PIPELINE CORPORATION BALANCE SHEET (Unaudited) ================================================================================ ASSETS ------
September 30, December 31, 1995 1994 ------------- ------------ (Thousands) PROPERTY, PLANT AND EQUIPMENT, at cost . . . . . . . . . . . . . . . $1,282,742 $ 1,264,539 Less - Accumulated depreciation and amortization . . . . . . . . 512,847 497,075 ---------- ----------- 769,895 767,464 Construction work in progress . . . . . . . . . . . . . . . . . . 105,804 43,429 ---------- ----------- 875,699 810,893 ---------- ----------- CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . 2,306 1,818 Advances to parent . . . . . . . . . . . . . . . . . . . . . . . - 11,909 Accounts receivable - Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,656 35,578 Affiliated companies . . . . . . . . . . . . . . . . . . . . . 1,537 2,055 Gas stored underground (principally at average cost) . . . . . . - 8,354 Materials and supplies (principally at average cost) . . . . . . 10,886 10,826 Exchange gas due from others . . . . . . . . . . . . . . . . . . 9,339 6,821 Costs recoverable through rate adjustments . . . . . . . . . . . 6,082 2,148 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 27,597 2,368 Prepayments and other . . . . . . . . . . . . . . . . . . . . . . 6,078 2,795 ---------- ----------- 92,481 84,672 ---------- ----------- OTHER ASSETS: Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . 29,026 23,207 ---------- ----------- $ 997,206 $ 918,772 ========== ===========
_______________________________________ See accompanying notes. - 2 - 5 NORTHWEST PIPELINE CORPORATION BALANCE SHEET (Unaudited) ================================================================================ LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------
September 30, December 31, 1995 1994 ------------- ------------ (Thousands) CAPITALIZATION: Common stockholder's equity - Common stock, par value $1 per share, authorized and outstanding, 1,000 shares . . . . . . . . . $ 1 $ 1 Additional paid-in capital . . . . . . . . . . . . . . . . . 262,440 262,440 Retained earnings . . . . . . . . . . . . . . . . . . . . . 211,516 164,536 ---------- ---------- 473,957 426,977 Long-term debt, less current maturities . . . . . . . . . . . 287,219 297,705 ---------- ---------- 761,176 724,682 ---------- ---------- CURRENT LIABILITIES: Current maturities of long-term debt . . . . . . . . . . . . . 8,591 8,591 Notes payable to banks . . . . . . . . . . . . . . . . . . . . 1,600 - Accounts payable - Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,679 15,301 Affiliated companies . . . . . . . . . . . . . . . . . . . . 1,463 371 Accrued liabilities - Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 10,471 1,779 Taxes, other than income taxes . . . . . . . . . . . . . . . 9,063 6,724 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 12,755 11,890 Employee costs . . . . . . . . . . . . . . . . . . . . . . . 6,869 6,950 Exchange gas due to others . . . . . . . . . . . . . . . . . 18,639 11,007 Reserves for estimated rate refunds . . . . . . . . . . . . 38,809 39,998 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 906 2,704 ---------- ---------- 122,845 105,315 ---------- ---------- DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . 101,020 78,183 ---------- ---------- OTHER DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . . . . 12,165 10,592 ---------- ---------- CONTINGENT LIABILITIES AND COMMITMENTS . . . . . . . . . . . . . . ---------- ---------- $ 997,206 $ 918,772 ========== ==========
_____________________________ See accompanying notes. - 3 - 6 NORTHWEST PIPELINE CORPORATION STATEMENT OF CASH FLOWS (Unaudited) ================================================================================
Nine Months Ended September 30, ------------------------------- 1995 1994 --------- --------- (Thousands) OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,521 $ 35,393 Adjustments to reconcile to cash provided from operations - Depreciation and amortization . . . . . . . . . . . . . . . . 22,822 21,965 Provision for deferred income taxes . . . . . . . . . . . . . 268 1,237 Amortization of deferred charges and credits . . . . . . . . . 716 1,010 Allowance for equity funds used during construction . . . . . (2,445) (1,090) Increase (decrease) from changes in: Accounts receivable . . . . . . . . . . . . . . . . . . . . 4,922 4,438 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 2,594 5,247 Other current assets . . . . . . . . . . . . . . . . . . . . (7,217) 5,275 Other assets and deferred charges . . . . . . . . . . . . . (7,408) (1,443) Accounts payable . . . . . . . . . . . . . . . . . . . . . . 8,988 (8,473) Other current liabilities . . . . . . . . . . . . . . . . . 8,828 14,375 Other deferred credits . . . . . . . . . . . . . . . . . . . (185) - Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88) 9 --------- --------- Net cash provided by operating activities . . . . . . . . . . . . 84,316 77,943 --------- --------- INVESTING ACTIVITIES: Property, plant and equipment - Capital expenditures . . . . . . . . . . . . . . . . . . . . . (84,745) (38,232) Asset removal cost . . . . . . . . . . . . . . . . . . . . . . (191) (1,485) Changes in accounts payable . . . . . . . . . . . . . . . . . (1,886) (1,657) Advances to parent . . . . . . . . . . . . . . . . . . . . . . . 11,909 (17,634) --------- --------- Net cash used by investing activities . . . . . . . . . . . . . . (74,913) (59,008) --------- --------- FINANCING ACTIVITIES: Principal payments on long-term debt . . . . . . . . . . . . . . (10,515) (13,015) Proceeds from notes payable to Bank . . . . . . . . . . . . . . . 12,750 - Payments on notes payable to Bank . . . . . . . . . . . . . . . . (11,150) - Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . - (30,000) --------- --------- Net cash used by financing activities . . . . . . . . . . . . . . (8,915) (43,015) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . 488 (24,080) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 24,675 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . $ 2,306 $ 595 ========= =========
_________________________________ See accompanying notes. - 4 - 7 NORTHWEST PIPELINE CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) ================================================================================ (1) GENERAL The accompanying, unaudited interim financial statements of Northwest Pipeline Corporation ("Pipeline"), included herein, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, Pipeline believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of Pipeline, all adjustments, which include only normal operating adjustments, have been made to present fairly the financial position of Pipeline as of September 30, 1995 and December 31, 1994, the results of operations for the three and nine months ended September 30, 1995 and 1994, and cash flows for the nine months ended September 30, 1995 and 1994. The results of operations for the periods presented are not necessarily indicative of the results for the respective complete years. It is suggested that these condensed financial statements be read in conjunction with the statements and the notes thereto included in Pipeline's 1994 Annual Report on Form 10-K. Cash payments for interest were $20.0 million and $21.7 million, net of $2.0 million and $.9 million of interest capitalized, in the nine month periods ended September 30, 1995 and 1994, respectively. Net cash payments made to The Williams Companies, Inc. ("Williams") for income taxes were $11.3 million and $16.2 million in the nine month periods ended September 30, 1995 and 1994, respectively. (2) RETAINED EARNINGS Noncash Dividends On May 1, 1995, Pipeline transferred an aircraft, net of associated deferred income tax liabilities, to Williams by dividend. This asset, which is not included in the accompanying balance sheet as of September 30, 1995, had a net book value of $5.5 million. (3) LONG-TERM DEBT AND BANKING ARRANGEMENTS On May 31, 1995, Pipeline called $1.9 million of its outstanding 9.25% Series C Debentures, due 2006 under terms of the optional prepayment provisions in the debenture agreement. No early redemption premium was required. The prepayment was in addition to the scheduled May 31, 1995 sinking fund payments of $5 million for the 9% Series B and $1.9 million for the 9.25% Series C. Pipeline shares in an $800 million Revolving Credit Agreement with Williams and four affiliated companies. Pipeline's maximum borrowing availability, subject to prior borrowing by other affiliated companies, is $400 million, none of which was used by Pipeline at September 30, 1995. Interest rates vary with current market conditions. The agreement contains restrictions which limit, under certain circumstances, the issuance of additional debt, the attachment of liens on any assets and any change of ownership of Pipeline. Any borrowings by Pipeline using this agreement are not guaranteed by Williams and are based on Pipeline's financial need and credit worthiness. Pipeline has also arranged various uncommitted lines-of-credit at market interest rates. Pipeline's credit facilities are subject to Pipeline's continued credit worthiness. - 5 - 8 NORTHWEST PIPELINE CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) ================================================================================ (4) CONTINGENT LIABILITIES AND COMMITMENTS Pending Rate Cases On April 1, 1993, Pipeline began collecting new rates, subject to refund, under the provisions of its rate case filed October 1, 1992. On May 31, 1995, Pipeline received a favorable order from the Federal Energy Regulatory Commission ("FERC") on this rate case. A number of parties have sought rehearing on the rate of return on equity and various other issues. On November 1, 1994, Pipeline began collecting new rates, subject to refund, under the provisions of its rate case filed April 29, 1994. This filing seeks a revenue increase for a projected deficiency caused by increased costs and the impact of a transportation contract terminated subsequent to the rate case filed on October 1, 1992. Pipeline intends to file a settlement proposal with the FERC in November 1995, supported or not opposed by substantially all customers and the FERC Staff. The settlement would resolve all or substantially all the issues in this rate case. Pipeline has not adjusted its reserve accruals in the accompanying financial statements to reflect the proposed settlement. On August 1, 1995, Pipeline filed with the FERC for a general rate increase to be effective February 1, 1996. The filing seeks a revenue increase for increases in rate base related primarily to the current mainline expansion projects, increased operating costs primarily associated with an increase in headquarters office rent and increased depreciation expense. Significant Litigation In October 1995, Pipeline received a judge's order following a non-jury trial involving claims arising from a transportation agreement of a former customer. In the decision, it was held that Pipeline was liable to the former customer in the amount of $6.4 million. Although Pipeline recorded an accrued liability in the third quarter 1995, Pipeline plans to file an appeal. Other Legal and Regulatory Matters In addition to the foregoing, various other proceedings are pending against Pipeline incidental to its operations. Summary of Contingent Liabilities A review by Pipeline of the rehearing requests in the FERC proceedings and other issues impacting reserve accruals has resulted in a net reversal to income in the third quarter 1995 of a portion of these accruals, including amounts previously accrued for estimated rate refunds, based on management's assessment of the possible outcome of such issues. Reserve additions, including the significant litigation discussed above, amounted to $8.2 million and reserve reversals amounted to $18.6 million for a net increase to income before income taxes of $10.4 million. The impact to reported results of prior and current periods is reflected below: - 6 - 9 NORTHWEST PIPELINE CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) ================================================================================
Increase (Decrease) Year Income Before Income Taxes ---- -------------------------- (Millions of Dollars) 1993 $ 8.4 1994 10.2 1995 (third quarter) (8.2) ------ $ 10.4 ======
Management believes that the ultimate resolution of the foregoing matters, after consideration of amounts accrued, insurance coverage and other indemnification arrangements, will not have a materially adverse effect upon Pipeline's future financial position, results of operations, and future cash flow requirements. - 7 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This analysis discusses financial results of Pipeline's operations for the quarters and nine month periods ended September 30, 1995 and 1994. RESULTS OF OPERATIONS Quarter Ended September 30, 1995 vs. Quarter Ended September 30, 1994 Operating revenues increased $18.6 million, or 33%, due primarily to the reversal of certain reserve accruals aggregating $16.3 million, including amounts for estimated rate refunds, and partially to increased rates put into effect on November 1, 1994. The reserve reversals included approximately $8.4 million that related to full year 1993, $8.7 million related to full year 1994, and $.8 million of new reserves in 1995. Reserve reversals applicable to third quarter 1993 and 1994, were $2.9 million and $2.1 million, respectively. Variances due to changes in price and volume no longer have a significant impact on revenues, because under its straight-fixed-variable rate design methodology, the majority of Pipeline's overall cost of service is recovered through fixed demand charges in its transportation rates. Pipeline's transportation service accounted for 92% and 94% of operating revenues for the quarter ended September 30, 1995 and 1994, respectively. Of those amounts, Pipeline's firm transportation service accounted for 99% and 97% of 1995 and 1994, respectively. The remaining 1% and 3% of each period, respectively, represented interruptible transportation service. Additionally, 4% and 5% of operating revenues represented gas storage services for the quarter ended September 30, 1995 and 1994, respectively. Operation expenses decreased $.6 million, or 2%, due in general to the timing of operation and maintenance costs incurred in the current year versus the prior year. Other expenses increased $4.4 million, primarily due to a reserve accrual of $6.4 million related to the initial judge's order in a non-jury trial involving claims arising from a transportation agreement of a former customer, partially offset by $1.5 million of increases in investing and other income. Operating income increased $19.2 million, or 80%, primarily due to the reversal of reserve accruals discussed above and partially to increased rates put into effect on November 1, 1994 along with decreased operation expenses. Interest on long-term debt decreased $.2 million, or 3%, due to scheduled debt repayments and certain optional prepayments. Other interest expense decreased $1.5 million resulting in a credit amount of $.3 million primarily due to the reversal of interest on the revenues subject to rate refund which were previously reserved. The allowance for borrowed funds used during construction increased $.6 million reflecting the continued progress of a mainline expansion project. Nine Months Ended September 30, 1995 vs. Nine Months Ended September 30, 1994 Operating revenues increased $14.2 million, or 8%, due primarily to the reversal of reserve accruals associated with estimated rate refunds aggregating $16.3 million and to increased rates put into effect on November 1, 1994, partially offset by decreased storage revenues and the absence of contract reformation surcharges that were completed April 1, 1994. Reserve reversals applicable to the first nine months of 1993 and 1994 were $5.8 million and $8 million, respectively. - 8 - 11 Pipeline's transportation service accounted for 93% and 94% of operating revenues for the nine month periods ended September 30, 1995 and 1994, respectively. Of those amounts, Pipeline's firm transportation service accounted for 97% and 99%, respectively. The remaining 3% and 1% for each period, respectively, represented interruptible transportation service. Additionally, 4% and 5% of operating revenues represented gas storage service for the nine month periods ended September 30, 1995 and 1994, respectively. Operating expenses decreased $1.5 million, or nearly 2%, due primarily to the absence of amortization of contract reformation costs. This was partially offset by higher operation and maintenance expenses aggregating $1.4 million and increased depreciation of $.9 million resulting from previous capital additions. Operating income increased $15.8 million, or 19%, primarily due to the reversal of reserve accruals, increased rates put into effect November 1, 1994 and the absence of contract reformation amortization expense, partially offset by higher operation and maintenance expenses and increased depreciation expense. Other expenses increased $4.4 million primarily due to a reserve accrual of $6.4 million related to the initial judge's order in a non-jury trial involving claims arising from a transportation agreement of a former customer, partially offset by $2.2 million of increases in investing and other income. Interest on long-term debt decreased $.8 million, or nearly 4%, due to scheduled debt repayments and certain optional prepayments. Other interest expense decreased $2.4 million, or 49%, primarily due to the absence of deferred carrying costs on contract reformation and the reversal of interest on revenues subject to rate refund which were previously reserved. The allowance for borrowed funds used during construction increased $1.2 million reflecting the continued progress of a mainline expansion project. The following table summarizes year-to-date volumes and average daily volumes for the periods indicated:
Nine Months Ended September 30, ------------------------------- 1995 1994 ---------- ---------- Total Gas volumes throughput (TBtu) 579 479 Average Daily Transportation Volumes (TBtu) 2.1 1.8 Average Daily Firm Reserved Capacity (TBtu) 2.4 2.4
FINANCIAL CONDITION AND LIQUIDITY Pipeline anticipates 1995 capital expenditures will total approximately $169.7 million, of which $84.7 million has been expended through September 30, 1995. Funds necessary to complete capital projects are expected to come from several sources, including Pipeline's operations and available cash. In addition, Pipeline expects to be able to obtain financing, when necessary, on reasonable terms. To allow flexibility in the timing of issuance of long-term securities, financing may be provided on an interim basis with bank debt and from sources discussed below. In September 1995 Pipeline filed a shelf registration statement with the Securities and Exchange Commission for the issuance of up to $150 million of debt securities. Pipeline expects to draw upon a portion of such availability as the timing of its capital expenditure program dictates. - 9 - 12 Pipeline believes that strong economies in the Pacific Northwest and the growing preference for natural gas in response to environmental concerns support expansions of its mainline capacity. Pipeline is currently undertaking expansions of its system for 144 MMcf of gas per day of increased system capacity. On April 19, 1995, FERC issued the certificates of public convenience and necessity authorizing construction and operation of these expansion projects which are estimated to cost approximately $106 million and are expected to be in service during December 1995. On May 31, 1995, Pipeline called $1.9 million of its outstanding 9.25% Series C Debentures, due 2006 under terms of the optional prepayment provisions in the debenture agreement. No early redemption premium was required. The prepayment was in addition to the scheduled May 31, 1995 sinking fund payments of $5 million for the 9% Series B and $1.9 million for the 9.25% Series C. Pipeline shares in an $800 million Revolving Credit Agreement with Williams and four affiliated companies. Pipeline's maximum borrowing availability, subject to prior borrowing by other affiliated companies, is $400 million, none of which was used by Pipeline at September 30, 1995. Interest rates vary with current market conditions. The agreement contains restrictions which limit, under certain circumstances, the issuance of additional debt, the attachment of liens on any assets and any change of ownership of Pipeline. Any borrowings by Pipeline using this agreement are not guaranteed by Williams and are based on Pipeline's financial need and credit worthiness. Pipeline has also arranged various uncommitted lines-of-credit at market interest rates. Pipeline's credit facilities are subject to Pipeline's continued credit worthiness. OTHER Pipeline owns and operates an interstate natural gas pipeline system, including facilities for mainline transmission and gas storage. Pipeline's transmission and storage activities are subject to regulation by the FERC under the Natural Gas Act of 1938 and under the Natural Gas Policy Act of 1978, and, as such, its rates and charges for the transportation of natural gas in interstate commerce, the extension, enlargement or abandonment of its jurisdictional facilities, and its accounting, among other things, are subject to regulation. Pipeline is subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of its business. Management believes that Pipeline is in substantial compliance with existing environmental requirements. Pipeline believes that, with respect to any capital expenditures required to meet applicable standards and regulations, FERC would grant the requisite rate relief so that, for the most part, such expenditures and a return thereon would be permitted to be recovered. Pipeline believes that compliance with applicable environmental requirements is not likely to have a material effect upon Pipeline's earnings or competitive position. In November 1995, Pipeline and Transwestern entered into an agreement for the sale by Pipeline to Transwestern of a 77.7% undivided ownership interest in the south end of Pipeline's line from Ignacio, Colorado to Blanco, New Mexico. Transwestern will pay Pipeline at closing 77.7% of the net book value of the South End facilities estimated to be $21 million plus 77.7% of the cost of certain modifications necessary to separate the operation of the South End from Pipeline's mainline estimated to be $4.9 million. The parties executed a letter of intent as of September 22, 1995, and hope to close the sale when each has received appropriate board approvals and FERC certificates. Closing may occur as early as August of 1996. - 10 - 13 On April 1, 1993, Pipeline began collecting new rates, subject to refund, under the provisions of its rate case filed October 1, 1992. On May 31, 1995, Pipeline received a favorable order from the FERC on this rate case. A number of parties have sought rehearing on the rate of return on equity and various other issues. On November 1, 1994, Pipeline began collecting new rates, subject to refund, under the provisions of its rate case filed April 29, 1994. This filing seeks a revenue increase for a projected deficiency caused by increased costs and the impact of a transportation contract terminated subsequent to the rate case filed on October 1, 1992. Pipeline intends to file a settlement proposal with the FERC in November 1995, supported or not opposed by substantially all customers and the FERC Staff. The settlement would resolve all or substantially all the issues in this rate case. Pipeline has not adjusted its reserve accruals in the accompanying financial statements to reflect the proposed settlement. On August 1, 1995, Pipeline filed with the FERC for a general rate increase to be effective February 1, 1996. The filing seeks a revenue increase for increases in rate base related primarily to the current mainline expansion projects, increased operating costs primarily associated with an increase in headquarters office rent and increased depreciation expense. As discussed above, a review by Pipeline of the rehearing requests and other issues impacting reserve accruals has resulted in reversal to income in the third quarter 1995 of a portion of these accruals, including amounts for estimated rate refunds aggregating approximately $10.4 million based on management's assessment of the possible outcome of such issues. - 11 - 14 PART II. OTHER INFORMATION The information required by items in Part II is omitted because the items are inapplicable, the answer is negative or substantially the same information is included elsewhere in this report or has been previously reported by the Registrant. - 12 - 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTHWEST PIPELINE CORPORATION ------------------------------ Registrant By: /s/ Curtis C. Kennedy ------------------------------ Curtis C. Kennedy Controller (Duly Authorized Officer and Chief Accounting Officer) Date: November 10, 1995 - 13 - 16 INDEX TO EXHIBITS Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 2,306 0 30,193 0 10,886 92,481 1,282,742 512,847 997,206 122,846 287,219 1 0 0 473,956 997,207 0 193,763 0 96,736 0 0 22,167 72,773 20,252 52,521 0 0 0 52,521 0 0
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