Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - NORTHWEST PIPELINE LLC | Financial_Report.xls |
| EX-31.2 - EX-31.2 - NORTHWEST PIPELINE LLC | nwp_20150331xex31b.htm |
| EX-31.1 - EX-31.1 - NORTHWEST PIPELINE LLC | nwp_20150331xex31a.htm |
| EX-32 - EX-32 - NORTHWEST PIPELINE LLC | nwp_20150331xex32a.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2015
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 LLC
(Exact name of registrant as specified in its charter)
DELAWARE | 26-1157701 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
295 Chipeta Way Salt Lake City, Utah | 84108 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (801) 583-8800
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | þ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
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.
NORTHWEST PIPELINE LLC
FORM 10-Q
INDEX
Page | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Forward-Looking Statements
Certain matters contained in this report include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions, and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, included in this report that address activities, events, or developments that we expect, believe, or anticipate will exist or may occur in the future are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “assumes,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “guidance,” “outlook,” “in service date,” or other similar expressions. These statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:
• | Amounts and nature of future capital expenditures; |
• | Expansion and growth of our business and operations; |
• | Financial condition and liquidity; |
• | Business strategy; |
• | Cash flow from operations or results of operations; |
• | Rate case filings; |
• | Natural gas prices, supply, and demand; and |
• | Demand for our services. |
Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:
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• | Availability of supplies, market demand, and volatility of prices; |
• | Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers); |
• | The strength and financial resources of our competitors and the effects of competition; |
• | Whether we are able to successfully identify, evaluate, and execute investment opportunities; |
• | Development of alternative energy sources; |
• | The impact of operational and development hazards and unforeseen interruptions; |
• | Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation, and rate proceedings; |
• | Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates; |
• | Changes in maintenance and construction costs; |
• | Changes in the current geopolitical situation; |
• | Our exposure to the credit risks of our customers and counterparties; |
• | Risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings, and the availability and cost of capital; |
• | Risks associated with weather and natural phenomenon, including climate conditions; |
• | Acts of terrorism, including cybersecurity threats and related disruptions; and |
• | Additional risks described in our filings with the Securities and Exchange Commission (SEC). |
Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly any revisions to any of the forward-looking statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
NORTHWEST PIPELINE LLC
STATEMENT OF COMPREHENSIVE INCOME
(Thousands of Dollars)
(Unaudited)
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
OPERATING REVENUES | $ | 119,264 | $ | 119,085 | ||||
OPERATING EXPENSES: | ||||||||
General and administrative | 14,923 | 15,602 | ||||||
Operation and maintenance | 17,149 | 16,526 | ||||||
Depreciation | 25,081 | 24,614 | ||||||
Regulatory debits | 598 | 381 | ||||||
Taxes, other than income taxes | 4,361 | 4,937 | ||||||
Total operating expenses | 62,112 | 62,060 | ||||||
OPERATING INCOME | 57,152 | 57,025 | ||||||
OTHER (INCOME) AND OTHER EXPENSES: | ||||||||
Interest expense | 11,508 | 11,530 | ||||||
Allowance for equity and borrowed funds used during construction | (139 | ) | (75 | ) | ||||
Miscellaneous other (income) expenses, net | (625 | ) | 87 | |||||
Total other (income) and other expenses | 10,744 | 11,542 | ||||||
NET INCOME | 46,408 | 45,483 | ||||||
CASH FLOW HEDGES: | ||||||||
Amortization of cash flow hedges into Interest expense | (15 | ) | (15 | ) | ||||
COMPREHENSIVE INCOME | $ | 46,393 | $ | 45,468 | ||||
See accompanying notes.
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NORTHWEST PIPELINE LLC
BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
March 31, 2015 | December 31, 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 579 | $ | 154 | ||||
Receivables: | ||||||||
Trade | 41,529 | 42,759 | ||||||
Affiliated companies | 1,377 | 2,039 | ||||||
Advances to affiliate | 152,120 | 135,054 | ||||||
Other | 504 | 1,249 | ||||||
Materials and supplies | 10,126 | 10,066 | ||||||
Exchange gas due from others | 2,398 | 4,184 | ||||||
Prepayments and other | 5,082 | 4,881 | ||||||
Total current assets | 213,715 | 200,386 | ||||||
PROPERTY, PLANT AND EQUIPMENT, at cost | 3,279,009 | 3,269,617 | ||||||
Less-Accumulated depreciation | 1,310,878 | 1,288,530 | ||||||
Total property, plant and equipment, net | 1,968,131 | 1,981,087 | ||||||
OTHER ASSETS: | ||||||||
Deferred charges | 4,401 | 4,700 | ||||||
Regulatory assets | 47,483 | 49,923 | ||||||
Total other assets | 51,884 | 54,623 | ||||||
Total assets | $ | 2,233,730 | $ | 2,236,096 | ||||
See accompanying notes.
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NORTHWEST PIPELINE LLC
BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
March 31, 2015 | December 31, 2014 | |||||||
LIABILITIES AND OWNER’S EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Payables: | ||||||||
Trade | $ | 11,010 | $ | 12,709 | ||||
Affiliated companies | 10,206 | 13,143 | ||||||
Accrued liabilities: | ||||||||
Taxes, other than income taxes | 14,458 | 11,246 | ||||||
Interest | 15,155 | 4,045 | ||||||
Exchange gas due to others | 4,167 | 6,406 | ||||||
Exchange gas offset | 2,732 | 3,941 | ||||||
Customer advances | 2,555 | 2,363 | ||||||
Other | 1,797 | 1,799 | ||||||
Total current liabilities | 62,080 | 55,652 | ||||||
LONG-TERM DEBT | 694,470 | 694,420 | ||||||
OTHER NONCURRENT LIABILITIES: | ||||||||
Asset retirement obligations | 96,310 | 94,678 | ||||||
Regulatory liabilities | 24,236 | 23,375 | ||||||
Other | 8,287 | 8,017 | ||||||
Total other noncurrent liabilities | 128,833 | 126,070 | ||||||
CONTINGENT LIABILITIES AND COMMITMENTS (Note 2) | ||||||||
OWNER’S EQUITY: | ||||||||
Owner’s capital | 1,073,892 | 1,073,892 | ||||||
Retained earnings | 274,380 | 285,972 | ||||||
Accumulated other comprehensive income | 75 | 90 | ||||||
Total owner’s equity | 1,348,347 | 1,359,954 | ||||||
Total liabilities and owner’s equity | $ | 2,233,730 | $ | 2,236,096 | ||||
See accompanying notes.
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NORTHWEST PIPELINE LLC
STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 46,408 | $ | 45,483 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 25,081 | 24,614 | ||||||
Regulatory debits | 598 | 381 | ||||||
Amortization of deferred charges and credits | 336 | 677 | ||||||
Allowance for equity funds used during construction | (95 | ) | (51 | ) | ||||
Changes in current assets and liabilities: | ||||||||
Trade and other accounts receivable | 1,975 | 1,755 | ||||||
Affiliated receivables | 662 | 26,206 | ||||||
Exchange gas due from others | 1,786 | (5,180 | ) | |||||
Materials and supplies | (60 | ) | 161 | |||||
Other current assets | (201 | ) | 939 | |||||
Trade accounts payable | (1,693 | ) | (7,082 | ) | ||||
Affiliated payables | (2,937 | ) | (884 | ) | ||||
Exchange gas due to others | (1,772 | ) | 5,180 | |||||
Other accrued liabilities | 14,269 | 13,379 | ||||||
Changes in noncurrent assets and liabilities: | ||||||||
Deferred charges | (495 | ) | (858 | ) | ||||
Noncurrent liabilities | 2,883 | 2,102 | ||||||
Net cash provided by operating activities | 86,745 | 106,822 | ||||||
FINANCING ACTIVITIES: | ||||||||
Cash distributions to parent | (58,000 | ) | (52,000 | ) | ||||
Other | (1,097 | ) | (264 | ) | ||||
Net cash used in financing activities | (59,097 | ) | (52,264 | ) | ||||
INVESTING ACTIVITIES: | ||||||||
Property, plant and equipment: | ||||||||
Capital expenditures, net of equity AFUDC* | (10,360 | ) | (6,426 | ) | ||||
Contributions and advances for construction costs | 751 | — | ||||||
Disposal of property, plant and equipment, net | (548 | ) | (206 | ) | ||||
Advances to affiliates, net | (17,066 | ) | (47,959 | ) | ||||
Net cash used in investing activities | (27,223 | ) | (54,591 | ) | ||||
NET INCREASE (DECREASE) IN CASH | 425 | (33 | ) | |||||
CASH AT BEGINNING OF PERIOD | 154 | 133 | ||||||
CASH AT END OF PERIOD | $ | 579 | $ | 100 | ||||
____________________________________ | ||||||||
* Increases to property, plant and equipment | $ | (11,045 | ) | $ | (4,459 | ) | ||
Changes in related accounts payable and accrued liabilities | 685 | (1,967 | ) | |||||
Capital expenditures, net of equity AFUDC | $ | (10,360 | ) | $ | (6,426 | ) | ||
See accompanying notes.
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1. BASIS OF PRESENTATION
Northwest Pipeline LLC (Northwest) is indirectly owned by Williams Partners L.P. (WPZ), a publicly traded Delaware limited partnership, which is consolidated by The Williams Companies, Inc. (Williams). On February 2, 2015, WPZ was merged into Access Midstream Partners, L.P. (ACMP), another publicly traded limited partnership consolidated by Williams. ACMP was the surviving partnership and was subsequently renamed Williams Partners L.P. At March 31, 2015, Williams holds an approximate 60 percent interest in WPZ, comprised of an approximate 58 percent limited partner interest and all of WPZ’s 2 percent general partner interest.
In this report, Northwest is at times referred to in the first person as “we,” “us,” or “our.”
General
The accompanying interim financial statements do not include all the notes in our annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto in our 2014 Annual Report on Form 10-K. The accompanying unaudited financial statements include all adjustments both normal recurring and others which, in the opinion of our management, are necessary to present fairly our interim financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Accounting Standards Issued But Not Yet Adopted
The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-2 "Amendments to the Consolidation Analysis" (ASU 2015-2). ASU 2015-2 alters the models used to determine consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures. The ASU is effective for financial statements issued for reporting periods beginning after December 15, 2015 and interim periods within the reporting periods with either retrospective or modified retrospective presentation allowed. We will adopt the standard in the first quarter of 2016. We are currently evaluating the impact of the new standard on our financial statements.
In April 2015, the FASB issued ASU 2015-3 "Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs" (ASU 2015-3). ASU 2015-3 simplifies the presentation of debt issuance costs by requiring such costs be presented as a deduction from the corresponding debt liability. The guidance is effective for financial statements issued for reporting periods beginning after December 15, 2015 and interim periods within the reporting periods and requires retrospective presentation. We will adopt the standard in the first quarter of 2016. We are evaluating the impact of the new standard.
In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" (ASC 606). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures. The standard is effective for annual reporting periods beginning after December 15, 2016, and interim periods within the reporting period. The FASB has recently proposed delaying the effective date of ASC 606 to annual and interim periods beginning after December 15, 2017. Accordingly, if the FASB chooses to delay the effective date to December 15, 2017, we would plan to adopt this standard in the first quarter of 2018. ASC 606 allows either full retrospective or modified retrospective transition and early adoption is not permitted. We continue to evaluate both the impact of this new standard on our financial statements and the transition method we will utilize for adoption.
2. CONTINGENT LIABILITIES AND COMMITMENTS
Environmental Matters
We are subject to the National Environmental Policy Act and other federal and state legislation regulating the environmental aspects of our business. Except as discussed below, our management believes that we are in substantial compliance with existing environmental requirements. Environmental expenditures are expensed or capitalized depending on their future economic benefit and potential for rate recovery. We believe that, with respect to any expenditures required to meet applicable standards and
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regulations, the Federal Energy Regulatory Commission (FERC) would grant the requisite rate relief so that substantially all of such expenditures would be permitted to be recovered through rates. As a result, we believe that compliance with applicable environmental requirements is not likely to have a material adverse effect upon our financial position or results of operations.
Beginning in the mid-1980s, we evaluated many of our facilities for the presence of toxic and hazardous substances to determine to what extent, if any, remediation might be necessary. We identified polychlorinated biphenyl (PCB) contamination in air compressor systems, soils, and related properties at certain compressor station sites. Similarly, we identified hydrocarbon impacts at these facilities due to the former use of earthen pits, lubricating oil leaks or spills, and excess pipe coating released to the environment. In addition, heavy metals have been identified at these sites due to the former use of mercury containing meters and paint and welding rods containing lead, cadmium, and arsenic. The PCBs were remediated pursuant to a Consent Decree with the U.S. Environmental Protection Agency (EPA) in the late 1980s, and we conducted a voluntary clean-up of the hydrocarbon and mercury impacts in the early 1990s. In 2005, the Washington Department of Ecology required us to re-evaluate our previous clean-ups in Washington. As of March 31, 2015, all of our meter stations have been remediated to Washington's current environmental standards. In addition, assessments have been completed at all thirteen compressor stations in Washington. Remediation has been completed at nine of these compressor stations. On the basis of the findings to date, we estimate that environmental assessment and remediation costs will total approximately $7.8 million, measured on an undiscounted basis, and are expected to be incurred through 2020. At March 31, 2015 and December 31, 2014, we had accrued liabilities totaling approximately $7.8 million in each period for these costs. We are conducting environmental assessments and implementing a variety of remedial measures that may result in increases or decreases in the total estimated costs.
In March 2008, the EPA promulgated a new, lower National Ambient Air Quality Standard (NAAQS) for ground-level ozone. In May 2012, the EPA completed designation of new eight-hour ozone non-attainment areas. Based on the published designations, no Northwest facilities are located within the non-attainment areas. At this time, it is unknown whether future state regulatory actions associated with implementation of the 2008 ozone standard will impact our operations and increase the cost of additions to property, plant and equipment. Until any additional state regulatory actions are proposed, we are unable to estimate the cost of additions that may be required to meet any such new regulation.
In December 2014, the EPA proposed to further reduce the ground-level ozone NAAQS from the March 2008 levels. The EPA is anticipated to finalize any revisions in late 2015. Revisions to the ozone NAAQS will result in additional federal and state regulatory actions that may impact our operations. As a result, the cost of additions to property, plant, and equipment is expected to increase. We are unable at this time to estimate with any certainty the cost of additions that may be required to meet new regulations.
On January 22, 2010, the EPA set a new one-hour nitrogen dioxide (NO2) NAAQS. The effective date of the new NO2 standard was April 12, 2010. On January 20, 2012, the EPA determined pursuant to available information that no area in the country is violating the 2010 NO2 NAAQS, and thus, designated all areas of the country as “unclassifiable/attainment.” Also, at that time, the EPA noted its plan to deploy an expanded NO2 monitoring network beginning in 2013. However, on October 5, 2012, the EPA proposed a graduated implementation of the monitoring network between January 1, 2014 and January 1, 2017. Once three years of data is collected from the new monitoring network, the EPA will reassess attainment status with the one-hour NO2 NAAQS. Until that time, the EPA or states may require ambient air quality modeling on a case by case basis to demonstrate compliance with the NO2 standard. Because we are unable to predict the outcome of the EPA’s or states’ future assessment using the new monitoring network, we are unable to estimate the cost of additions that may be required to meet this regulation.
Other Matters
Various other proceedings are pending against us and are considered incidental to our operations.
Summary
We estimate that for all matters for which we are able to reasonably estimate a range of loss, including those noted above and others that are not individually significant, our aggregate reasonably possible losses beyond amounts accrued for all of our contingent liabilities are immaterial to our expected future annual results of operations, liquidity and financial position. These calculations have been made without consideration of any potential recovery from third-parties. We have disclosed all significant matters for which we are unable to reasonably estimate a range of possible loss.
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3. DEBT AND FINANCING ARRANGEMENT
Credit Facility
On February 2, 2015, the previous credit facility to which we were a party was terminated in connection with the merger of the former Williams Partners L.P. with and into ACMP. Simultaneously, we, along with WPZ and Transcontinental Gas Pipe Line Company, LLC (Transco), as co-borrowers, entered into a new $3.5 billion credit facility. Total letter of credit capacity available to WPZ under the credit facility is $1.125 billion. We may borrow up to $500 million under this credit facility to the extent not otherwise utilized by WPZ and Transco. At March 31, 2015, $2.3 million of letters of credit have been issued and no loans are outstanding under the credit facility.
WPZ participates in a commercial paper program, and WPZ management considers amounts outstanding under this program to be a reduction of available capacity under the credit facility. The program allows a maximum outstanding amount at any time of $3 billion of unsecured commercial paper notes. At March 31, 2015, WPZ had no outstanding commercial paper.
4. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and advances to affiliate—The carrying amounts approximate fair value because of the short-term nature of these instruments.
Long-term debt—The disclosed fair value of our long-term debt, which we consider as a level 2 measurement, is determined by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The carrying amount and estimated fair value of our long-term debt, including current maturities, were $694.5 million and $768.2 million, respectively, at March 31, 2015, and $694.4 million and $766.5 million, respectively, at December 31, 2014.
5. TRANSACTIONS WITH AFFILIATES
We are a participant in WPZ’s cash management program. At March 31, 2015 and December 31, 2014, the advances due to us by WPZ totaled approximately $152.1 million and $135.1 million, respectively. These advances are represented by demand notes and are classified as Current Assets in the accompanying Balance Sheet. The interest rate on these intercompany demand notes is based upon the daily overnight investment rate paid on WPZ’s excess cash at the end of each month, which was approximately 0.01 percent at March 31, 2015. The interest income from these advances was minimal during the three months ended March 31, 2015 and March 31, 2014. Such interest income is included in Other (Income) and Other Expenses – Miscellaneous other (income) expenses, net on the accompanying Statement of Comprehensive Income.
We have no employees. Services necessary to operate our business are provided to us by Williams and certain affiliates of Williams. We reimburse Williams and its affiliates for all direct and indirect expenses incurred or payments made (including salary, bonus, incentive compensation, and benefits) in connection with these services. Employees of Williams also provide general administrative and management services to us, and we are charged for certain administrative expenses incurred by Williams. These charges are either directly identifiable or allocated to our assets. Direct charges are for goods and services provided by Williams at our request. Allocated charges are based on a three-factor formula, which considers revenues; property, plant, and equipment; and payroll. In management’s estimation, the allocation methodologies used are reasonable and result in a reasonable allocation to us of our costs of doing business incurred by Williams. We were billed $25.3 million and $25.4 million in the three months ended March 31, 2015 and 2014, respectively, for these services. Such expenses are primarily included in General and administrative and Operation and maintenance expenses on the accompanying Statement of Comprehensive Income.
During the three months ended March 31, 2015 and 2014, we declared and paid cash distributions to our parent of $58.0 million and $52.0 million, respectively. During April 2015, we declared and paid cash distributions of $30.0 million to our parent.
We have entered into various other transactions with certain related parties, the amounts of which were not significant. These transactions and the above-described transactions are made on the basis of commercial relationships and prevailing market prices or general industry practices.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
GENERAL
The following discussion should be read in conjunction with the Management’s Discussion and Analysis, Financial Statements, and Notes contained in Items 7 and 8 of our 2014 Annual Report on Form 10-K and with the Financial Statements and Notes contained in this Form 10-Q.
RESULTS OF OPERATIONS
Analysis of Financial Results
This analysis discusses financial results of our operations for the three-month periods ended March 31, 2015 and 2014. Variances due to changes in natural gas prices and transportation volumes have little impact on revenues, because under our rate design methodology, the majority of overall cost of service is recovered through firm capacity reservation charges in our transportation rates.
Our operating revenues in the first three months of 2015 remained consistent with the first three months of 2014. Transportation service and gas storage service accounted for 98 percent and 2 percent, respectively, of our operating revenues for the periods ended March 31, 2015 and March 31, 2014.
Operating expenses in the first three months of 2015 were consistent with the first three months of 2014. Increases in depreciation of $0.5 million, resulting from property additions, and labor related expenses of $0.4 million were offset by decreases in property tax expenses of $0.5 million and charges from affiliates of $0.5 million.
Capital Expenditures
Our capital expenditures were $10.4 million and $6.4 million for the three months ended March 31, 2015 and 2014, respectively. Our capital expenditures estimate for 2015 is discussed in our 2014 Annual Report on Form 10-K.
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Item 4. Controls and Procedures
Our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Senior Vice President—West and our Vice President and Chief Accounting Officer. Based upon that evaluation, our Senior Vice President—West and our Vice President and Chief Accounting Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes during the first quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information called for by this item is provided in Note 2. Contingent Liabilities and Commitments, included in the Notes to Financial Statements included under Part 1, Item 1. Financial Statements of this Form 10-Q, which information is incorporated by reference into this item.
Item 6. Exhibits
The following instruments are included as exhibits to this report.
Exhibit | Description | |
2 | Certificate of Conversion of Northwest Pipeline GP (Exhibit 2.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
3.1 | Certificate of Formation of Northwest Pipeline LLC (Exhibit 2.2 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
3.2 | Operating Agreement of Northwest Pipeline LLC (Exhibit 3.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
10 | Second Amended and Restated Credit Agreement, dated as of February 2, 2015, between Williams Partners L.P. (formerly known as Access Midstream Partners, L.P.), Northwest Pipeline LLC, and Transcontinental Gas Pipeline Company, LLC, as co-borrowers, the lenders named therein, and Citibank, N.A., as Administrative Agent (Exhibit 10.1 to Williams Partners L.P.'s report on Form 8-K, filed on February 3, 2015 (File No. 001-34831)) and incorporated herein by reference. | |
31.1* | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |
32** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | XBRL Instance Document. | |
101.SCH* | XBRL Taxonomy Extension Schema. | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF* | XBRL Taxonomy Definition Linkbase. | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase. | |
* | Filed herewith. |
** | Furnished herewith. |
10
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 LLC | |||
Registrant | |||
By: | /s/ Jeffrey P. Heinrichs | ||
Jeffrey P. Heinrichs Controller (Duly Authorized Officer and Principal Accounting Officer) | |||
Date: April 30, 2015
EXHIBIT INDEX
Exhibit | Description | |
2 | Certificate of Conversion of Northwest Pipeline GP (Exhibit 2.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
3.1 | Certificate of Formation of Northwest Pipeline LLC (Exhibit 2.2 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
3.2 | Operating Agreement of Northwest Pipeline LLC (Exhibit 3.1 to our report on Form 8-K, filed July 3, 2013 (File No. 001-07414)) and incorporated herein by reference. | |
10 | Second Amended and Restated Credit Agreement, dated as of February 2, 2015, between Williams Partners L.P. (formerly known as Access Midstream Partners, L.P.), Northwest Pipeline LLC, and Transcontinental Gas Pipeline Company, LLC, as co-borrowers, the lenders named therein, and Citibank, N.A., as Administrative Agent (Exhibit 10.1 to Williams Partners L.P.'s report on Form 8-K, filed on February 3, 2015 (File No. 001-34831)) and incorporated herein by reference. | |
31.1* | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |
32** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | XBRL Instance Document. | |
101.SCH* | XBRL Taxonomy Extension Schema. | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF* | XBRL Taxonomy Definition Linkbase. | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase. | |
* | Filed herewith. |
** | Furnished herewith. |