0000068589-95-000013.txt : 19950815 0000068589-95-000013.hdr.sgml : 19950815 ACCESSION NUMBER: 0000068589-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOUNTAIN FUEL SUPPLY CO CENTRAL INDEX KEY: 0000068589 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 870155877 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-55866 FILM NUMBER: 95562418 BUSINESS ADDRESS: STREET 1: 180 E FIRST SOUTH STREET 2: PO BOX 11368 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 BUSINESS PHONE: 8015345555 MAIL ADDRESS: STREET 1: 180 EAST FIRST SOUTH ST STREET 2: P O BOX 11150 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 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 No. 1-935 MOUNTAIN FUEL SUPPLY COMPANY (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0155877 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 45360, 180 East First South, Salt Lake City, Utah 84145-0360 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(801) 534-5555 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 as of July 31, 1995 Common Stock, $2.50 par value 9,189,626 shares MOUNTAIN FUEL SUPPLY COMPANY STATEMENTS OF INCOME (Unaudited)
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1995 1994 1995 1994 1995 1994 (In Thousands) REVENUES $67,296 $54,885 $208,111 $203,900 $382,471 $357,231 OPERATING EXPENSES Natural gas purchases 33,930 26,550 115,275 114,579 211,203 197,762 Operating and maintenance 23,807 23,985 48,570 47,726 94,938 94,556 Depreciation 5,924 6,168 12,797 12,127 25,419 24,458 Other taxes 2,821 3,177 6,178 6,687 9,080 10,339 TOTAL OPERATING EXPENSES 66,482 59,880 182,820 181,119 340,640 327,115 OPERATING INCOME (LOSS) 814 (4,995) 25,291 22,781 41,831 30,116 INTEREST AND OTHER INCOME 1,019 643 1,720 1,276 8,264 2,467 DEBT EXPENSE (3,992) (3,732) (8,159) (7,953) (16,092) (15,658) INCOME (LOSS) BEFORE INCOME TAXES (2,159) (8,084) 18,852 16,104 34,003 16,925 INCOME TAXES (CREDIT) (2,311) (4,235) 5,639 4,855 8,687 3,222 NET INCOME (LOSS) $152 ($3,849) $13,213 $11,249 $25,316 $13,703
MOUNTAIN FUEL SUPPLY COMPANY CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31, 1995 1994 1994 (In Thousands) ASSETS Current assets Cash and short-term investments $1,347 $2,529 Accounts receivable $40,315 38,622 74,220 Inventories 19,590 18,249 24,941 Other current assets 5,026 4,734 4,279 Total current assets 64,931 62,952 105,969 Property, plant and equipment 755,633 727,672 739,945 Less allowances for depreciation 293,512 278,793 280,162 Net property, plant and equipment 462,121 448,879 459,783 Other assets 22,375 25,211 24,523 $549,427 $537,042 $590,275 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $2,406 Notes payable to Questar Corporation 8,400 $16,900 $53,500 Accounts payable and accrued expenses 38,052 42,833 49,070 Purchased-gas adjustments 32,372 26,106 17,071 Total current liabilities 81,230 85,839 119,641 Long-term debt 175,000 175,000 175,000 Other liabilities and deferred credits 21,126 27,110 21,283 Deferred income taxes and investment tax credits 57,436 58,178 62,566 Redeemable cumulative preferred stock 6,218 7,524 6,324 Common shareholder's equity Common stock 22,974 22,974 22,974 Additional paid-in capital 41,875 21,875 41,875 Retained earnings 143,568 138,542 140,612 Total common shareholder's equity 208,417 183,391 205,461 $549,427 $537,042 $590,275
MOUNTAIN FUEL SUPPLY COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
6 Months Ended June 30, 1995 1994 (In Thousands) OPERATING ACTIVITIES Net income $13,213 $11,249 Depreciation 14,132 13,323 Deferred income taxes and investment tax credits (5,130) 314 22,215 24,886 Change in operating assets and liabilities 44,783 27,524 NET CASH PROVIDED FROM OPERATING ACTIVITIES 66,998 52,410 INVESTING ACTIVITIES Capital expenditures (16,952) (19,075) Proceeds from (costs of) the deposition of property, plant and equipment 482 (341) CASH USED IN INVESTING ACTIVITIES (16,470) (19,416) FINANCING ACTIVITIES Issuance of long-term debt 17,000 Redemption of preferred stock (106) (1) Decrease in notes payable to Questar Corporation (45,100) (40,900) Checks outstanding in excess of cash balances 2,406 Payment of dividends (10,257) (10,058) CASH USED IN FINANCING ACTIVITIES (53,057) (33,959) DECREASE IN CASH AND SHORT-TERM INVESTMENTS ($2,529) ($965)
MOUNTAIN FUEL SUPPLY COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS June 30, 1995 (Unaudited) Note A - Basis of Presentation The interim financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Due to the seasonal nature of the business, the results of operations for the three-and six-month periods ended June 30, 1995, are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. MOUNTAIN FUEL SUPPLY COMPANY MANAGEMENT'S ANALYSIS June 30, 1995 Operating Results -- Following is a summary of operating information for the Company:
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1995 1994 1995 1994 1995 1994 Natural gas volumes (in thousands of decatherms) Residential and commercial sales 13,935 9,768 43,513 39,906 77,840 68,840 Industrial sales 2,068 1,692 5,253 3,909 10,226 7,321 Transportation for industrial customers 13,952 10,020 31,561 23,291 59,652 47,558 Total deliveries 29,955 21,480 80,327 67,106 147,718 123,719 Natural gas revenue (per decatherm) Residential and commercial $3.97 $4.55 $4.20 $4.54 $4.25 $4.55 Industrial sales 2.49 2.65 2.55 2.98 2.56 3.01 Transportation for industrial customers 0.10 0.12 0.10 0.12 0.10 0.11 Heating degree days Actual 895 523 3,112 2,830 5,272 4,786 Normal 741 741 3,484 3,484 5,801 5,282 Colder (warmer) than normal 21% (29%) (11%) (19%) (4%) (9%) Number of customers at end of period 575,450 553,350
Revenues were higher in the 1995 periods when compared with the 1994 periods because of colder temperatures, a 4% increase in the number of customers, and increased sales and transportation to industrial customers. The colder temperatures, although warmer than normal for the 6- and 12-month periods ended June 30, 1995, caused an increase in the volumes of gas sold to residential and commercial customers, primarily for space heating purposes. Volumes delivered to industrial customers increased 35% in the first half of 1995 compared with the same period of 1994 resulting in $2,019,000 more revenues. Natural gas demand was higher for customers in the metals, chemical and electric generation industries. Margins from gas delivered to industrial customers are substantially lower than from gas sold to residential and commercial customers. Mountain Fuel's natural gas purchases were higher in the 1995 periods when compared to the 1994 periods because increased volumes sold more than offset the effect of lower gas prices. Operating and maintenance expenses were 1% lower in the second quarter of 1995 compared to the second quarter of 1994 primarily due to lower labor costs as a result of an early retirement program. Operating and maintenance expenses were 2% higher in the first half of 1995 compared to the same period in 1994 because of the costs of serving more customers and inflation more than offset lower labor cost savings from the early retirement program, which occurred April 30, 1995. Depreciation expense was 4% lower in the second quarter of 1995 because lower production of cost-of-service gas reserves reduced depreciation expense enough to offset the added depreciation from increased capital spending. Depreciation expense was higher in the 6- and 12-month periods of 1995 when compared to the same periods in the prior year as a result of increased production of cost-of-service gas reserves and capital spending. Interest and other income increased in the 3- and 6-month periods of 1995 as a result of a carrying charge earned on an increasing volume of stored gas. Interest and other income for the 12-month period ended June 30, 1995 includes a $5,589,000 one-time reduction of gas costs recorded in the fourth quarter of 1994. The effective income tax rate was 29.9% for the first half of 1995, compared with 30.1% for the first half of 1994. The effective income tax rate was lower than the statutory income tax rate because of income tax credits. The Company recognized $2,258,000 of tight-sands gas-production credits in the first half of 1995 and $2,049,000 in the first half of 1994. On August 11, 1995, the Public Service Commission of Utah approved a settlement of Mountain Fuel's general rate case subject to issuance of a final order. Mountain Fuel originally requested a $9.6 million increase in rates. The settlement, which is scheduled to be in effect September 1, will allow the Company to implement a weather normalization adjustment and will provide about $3.7 million in additional revenue through a new-premise fee and changes in the way capacity release revenues are recorded. The settlement does not specify an authorized return on equity, but increases Mountain Fuel's allowed return on rate base from 10.08% to between 10.22% and 10.34%. Mountain Fuel continues to consolidate and restructure operations. Of the 169 eligible employees, 109 accepted the Company's offer of an early retirement effective April 30, 1995. The labor savings are to expected to average $400,000 per month. Mountain Fuel is proceeding with plans to close four regional offices and reduce functions at six other offices. The Company predicts that its investment in customer information system technology will enable it to increase efficiency in serving customers with fewer employees and offices. Liquidity and Capital Resources - Operating Activities: Net cash provided from operating activities was $66,998,000 in the first half of 1995 compared with $52,410,000 for the same period of 1994. The increase was due to the effect of lower gas costs on the purchased gas cost adjustment account and higher net income. Investing Activities: Capital expenditures were $16,952,000 in the first half of 1995, compared with $19,075,000 in the corresponding 1994 period. Capital expenditures for calendar year 1995 are estimated at $50,000,000. Financing Activities: Primary financing activities in the first half of both 1995 and 1994 were the repayment of loans to Questar Corporation from net cash provided from operations. 1995 capital expenditures will be financed from cash flow from operations and borrowings from Questar Corporation. During the second quarter of 1994 Mountain Fuel borrowed $17,000,000 of 30-year notes. The Company has a short-term line-of-credit arrangement with a bank totaling $500,000. No amounts were borrowed under the short-term line-of-credit arrangement at June 30, 1995. In addition, its parent company loans funds to the Company under a short-term borrowing arrangement. PART II OTHER INFORMATION Item 5. Other Information. a. On June 1, 1995, Mountain Fuel Supply Company (Mountain Fuel or the Company) filed a semi-annual application with the Public Service Commission of Wyoming (the PSCW) under the purchased gas adjustment provisions of the Company's Wyoming tariff. In the application, the Company requested authorization to reflect $7,983,790 of costs in its Wyoming rates, reflecting an annualized revenue decrease of approximately 528,000 to core customers. Mountain Fuel cited a decrease in the cost of field-purchased gas and an increase in the level of Company-owned production as the two factors responsible for the overall decrease. The PSCW authorized Mountain Fuel to reflect the decreased costs in its rates to core customers as of July 1, 1995. The Company was also authorized to remove a negative surcharge from its rates and to make an appropriate credit or refund of overcollections in its gas cost balancing account in its year-end purchased gas adjustment filing. b. The Company filed a comparable application with the Public Service Commission of Utah (the PSCU) on June 16, 1995. In this application, Mountain Fuel requested authorization to reflect $188,688,007 of costs in its Utah rates, reflecting an annualized revenue decrease of approximately $10,778,000. The Company also requested approval to terminate the gas cost credit reflected in customers' current rates and proposed, on a preliminary basis, to return the credit to customers directly (rather than through a annual amortization procedure). Finally, Mountain Fuel requested regulatory approval to reflect specified litigation expenses in its gas cost balancing account. Under the terms of an interim order issued by the PSCU, the Company was authorized to reflect the requested decrease in its rates effective July 1, 1995. A public hearing has been set for September 6, 1995, to consider some issues raised in the case. Neither the Division of Public Utilities nor the Committee of Consumer Services--two state agencies involved in Mountain Fuel's rate cases--has raised any objections about Mountain Fuel's proposals. c. On August 11, 1995, the PSCU approved, subject to a final order, a settlement agreement to resolve the issues raised in Mountain Fuel's general rate case. Under the terms of the settlement agreement, which is expected to be effective September 1, 1995, the Company's annualized revenue deficiency is $3.7 million. Approximately $2 million of the $3.7 million will be collected through new premise charges, with the remaining $1.7 million attributable to a change in the method for crediting revenues collected when the Company "releases" pipeline capacity. The settlement agreement also permits Mountain Fuel to incorporate a weather normalization adjustment mechanism on a phased-in basis. (The Company estimates that approximately one-half of its general service load will be subject to the weather normalization adjustment during the 1994-95 heating season.) The settlement agreement does not specify an authorized return on equity, but increases Mountain Fuel's allowed return on rate base from 10.08 percent to a range of 10.22 to 10.34 percent. The Company is pleased that the settlement agreement addresses two major problems--the impact of weather variations on its revenues and resulting net income and the costs associated with adding new customers--and also provides for an increase in allowed return. SIGNATURES 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. MOUNTAIN FUEL SUPPLY COMPANY (Registrant) August 11, 1995 /s/D. N. Rose (Date) D. N. Rose President and Chief Executive Officer August 11, 1995 /s/W. F. Edwards (Date) W. F. Edwards Vice President and Chief Financial Officer EX-27 2
5 The following schedule contains summarized financial information extracted from the Mountain Fuel Supply Company Statement of Income and Balance Sheet for the period ended June 30, 1995, and is qualified in its entirety by reference to such unaudited financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 0 0 40,315 0 19,590 64,931 755,633 293,512 549,427 81,230 175,000 22,974 6,218 0 185,443 549,427 0 208,111 0 163,845 18,975 0 8,159 18,852 5,639 0 0 0 0 13,213 0 0