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
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