-----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, M1XbIuKlpfpcB0pTV2NSS5tjKQGIGz/ycsg5wtz/irI02Ele2JTXa92l7BrWh1yR Np05nAORzk8mLxlH6l2hRQ== 0000068589-96-000010.txt : 19961115 0000068589-96-000010.hdr.sgml : 19961115 ACCESSION NUMBER: 0000068589-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96660249 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 SEPTEMBER 30, 1996 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) 324-5555 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 September 30, 1996 Common Stock, $2.50 par value 9,189,626 shares MOUNTAIN FUEL SUPPLY COMPANY STATEMENTS OF INCOME (Unaudited)
3 Months Ended 9 Months Ended 12 Months Ended September 30, September 30, September 30, 1996 1995 1996 1995 1996 1995 (In Thousands) REVENUES $42,197 $39,831 $245,027 $247,942 $359,854 $382,436 OPERATING EXPENSES Natural gas purchases 16,559 16,524 117,168 131,799 175,975 209,911 Operating and maintenance 22,600 22,763 71,767 71,333 93,818 94,577 Depreciation 6,445 5,847 20,388 18,644 27,213 25,202 Other taxes 1,434 2,191 7,285 8,369 8,504 8,519 TOTAL OPERATING EXPENSES 47,038 47,325 216,608 230,145 305,510 338,209 OPERATING INCOME (LOSS) (4,841) (7,494) 28,419 17,797 54,344 44,227 INTEREST AND OTHER INCOME 608 1,853 3,207 3,573 3,866 9,360 DEBT EXPENSE (4,087) (3,998) (12,260) (12,157) (16,683) (16,309) INCOME (LOSS) BEFORE INCOME TAXES (8,320) (9,639) 19,366 9,213 41,527 37,278 INCOME TAXES (CREDITS) (3,873) (4,714) 5,579 925 12,360 11,139 NET INCOME (LOSS) ($4,447) ($4,925) $13,787 $8,288 $29,167 $26,139
See note to the financial statements. MOUNTAIN FUEL SUPPLY COMPANY CONDENSED BALANCE SHEETS (Unaudited) September 30, December 31, 1996 1995 1995 (In Thousands) ASSETS Current assets Cash and short-term investments $295 $1,466 Accounts receivable $21,880 28,339 67,642 Inventories 17,898 24,698 20,915 Purchased-gas adjustments 13,206 Other current assets 3,889 4,662 3,843 Total current assets 56,873 57,994 93,866 Property, plant and equipment 806,363 769,398 784,466 Less allowances for depreciation 319,183 300,028 302,619 Net property, plant and equipment 487,180 469,370 481,847 Other assets 21,126 23,982 24,548 $565,179 $551,346 $600,261 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $606 Notes payable to Questar Corporation 54,300 $32,700 $56,100 Accounts payable and accrued expenses 30,737 36,686 61,800 Purchased-gas adjustments 16,537 9,182 Total current liabilities 85,643 85,923 127,082 Long-term debt 175,000 175,000 175,000 Other liabilities and deferred credits 16,072 21,169 16,029 Deferred income taxes and investment tax credits 77,237 64,678 68,548 Redeemable cumulative preferred stock 4,840 6,211 4,957 Common shareholder's equity Common stock 22,974 22,974 22,974 Additional paid-in capital 41,875 41,875 41,875 Retained earnings 141,538 133,516 143,796 Total common shareholder's equity 206,387 198,365 208,645 $565,179 $551,346 $600,261
See note to the financial statements. MOUNTAIN FUEL SUPPLY COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
9 Months Ended September 30, 1996 1995 (In Thousands) OPERATING ACTIVITIES Net income $13,787 $8,288 Depreciation 22,507 20,709 Deferred income taxes and investment tax credits 8,689 2,112 44,983 31,109 Changes in operating assets and liabilities (1,253) 33,249 NET CASH PROVIDED FROM OPERATING ACTIVITIES 43,730 64,358 INVESTING ACTIVITIES Capital expenditures (30,908) (30,505) Proceeds from disposition of property, plant and equipment 3,068 209 NET CASH USED IN INVESTING ACTIVITIES (27,840) (30,296) FINANCING ACTIVITIES Decrease in notes payable to Questar Corporation (1,800) (20,800) Checks outstanding in excess of cash balances 606 Redemption of preferred stock (117) (113) Dividends paid (16,045) (15,383) NET CASH USED IN FINANCING ACTIVITIES (17,356) (36,296) DECREASE IN CASH AND SHORT-TERM INVESTMENTS ($1,466) ($2,234)
See note to the financial statements. MOUNTAIN FUEL SUPPLY COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS September 30, 1996 (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 nine-month periods ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 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, 1995. MOUNTAIN FUEL SUPPLY COMPANY MANAGEMENT'S ANALYSIS September 30, 1996 (Unaudited) Operating Results -- Following is a summary of financial and operating information for the Company:
3 Months Ended 9 Months Ended 12 Months Ended September 30, September 30, September 30, 1996 1995 1996 1995 1996 1995 (Dollars in Thousands) FINANCIAL RESULTS Revenues From unaffiliated customers $41,451 $38,842 $243,082 $244,649 $357,191 $378,595 From affiliates 746 989 1,945 3,293 2,663 3,841 Total revenues 42,197 39,831 245,027 247,942 359,854 382,436 Natural gas purchases 16,559 16,524 117,168 131,799 175,975 209,911 Revenues less natural gas purchases $25,638 $23,307 $127,859 $116,143 $183,879 $172,525 Operating income (loss) ($4,841) ($7,494) $28,419 $17,797 $54,344 $44,227 Net income (loss) (4,447) (4,925) 13,787 8,288 29,167 26,139 OPERATING STATISTICS Natural gas volumes (in thousands of decatherms) Residential and commercial sales 7,575 6,826 53,983 50,339 77,594 78,697 Industrial sales 1,569 1,736 5,921 6,989 8,142 10,219 Transportation for industrial customers 12,391 13,585 37,166 45,146 51,589 61,206 Total deliveries 21,535 22,147 97,070 102,474 137,325 150,122 Natural gas revenue (per decatherm) Residential and commercial $4.29 $4.57 $3.98 $4.25 $4.08 $4.20 Industrial sales 2.14 2.27 2.14 2.48 2.19 2.50 Transportation for industrial customers 0.12 0.10 0.12 0.10 0.11 0.10 Heating degree days Actual 144 77 3,357 3,189 5,215 5,625 Normal 110 110 3,594 3,594 5,801 5,801 Colder (warmer) than normal 31% (30%) (7%) (11%) (10%) (3%) Number of customers at end of period 603,647 579,352
Revenues less natural gas purchases were higher for the 1996 periods presented when compared with the same periods of 1995 due to colder weather, an increase in the number of customers served and a favorable late 1995 rate case settlement. With the exception of the third quarter of 1996, temperatures were warmer than normal in the periods presented. The number of customers served by the Company grew 4.2% since September 30, 1995. The provisions of the 1995 rate case settlement with the Public Service Commission of Utah provide for a weather-normalization adjustment, a new customer connection fee and sharing of transportation capacity release credits. The weather-normalization adjustment results in an adjustment in revenues for weather variations above or below normal temperatures. Under the provisions of the Utah rate settlement, the weather-normalization adjustment will be extended to all residential and commercial volumes beginning October 1, 1996. Utah residential customers could choose to be exempt from this adjustment by notifying the Company prior to October 1. However, less than 1 percent of the Company's residential customers chose this exemption. The Company received approval from the Public Service Commission of Wyoming to implement a weather-normalization adjustment for all residential and commercial customers beginning September 1, 1996. The other terms of the settlement of the Utah rate case are expected to add about $3.7 million in annual revenues and authorized an increase in Mountain Fuel's allowed return on rate base from 10.08% to between 10.22% and 10.34%. Volumes delivered to industrial customers were 9% less in the third quarter of 1996 and 17% less in the first nine months of 1996 when compared with the same periods of 1995 due to a continued abundance of low-cost hydroelectric power. Margins from gas delivered to industrial customers are substantially lower than from gas sold to residential and commercial customers. Mountain Fuel's natural gas purchase expenses were lower for the 9-and 12-month periods of 1996 primarily due to lower natural gas purchase costs allowed in rates. The lower gas purchase prices were reflected in semi-annual gas cost adjustments filed in August of each year, which included gas costs of $1.08 per decatherm in 1996 compared with $1.31 in 1995. The purchased gas cost adjustment account changed from a $16,537,000 liability at September 30, 1995 to a $13,206,000 receivable at Sepetmber 30, 1996 as a result of the lower allowed gas costs. Natural gas purchase expenses were slightly higher for the third quarter of 1996 when compared with the third quarter of 1995 due primarily to an increase in sales volumes. Operating and maintenance expenses were 1% higher in the first nine months of 1996 when compared with the same period of 1995 because of the costs of serving more customers and inflation partially offset the benefits of consolidation of operations and early retirement program. Operating and maintenance expenses decreased by 1% for the 3- and 12-month periods of 1996 compared with the same period in 1995. A successful third quarter 1996 settlement of issues related to state property tax assessments spanning 1988 through 1992 resulted in a $900,000 reduction of expense reported in other taxes. Depreciation expenses were higher in the 1996 periods as a result of increased investment in property, plant and equipment. Interest and other income for the 12 months ended September 30, 1995 includes an addition to income of $5,589,000 for a one-time reduction in gas costs associated with unbilled revenues from December 1994. The effective income tax rate was 28.8% for the first nine months of 1996 compared with 10% for the first nine months of 1995. A lower income before income taxes combined with higher tight-sands gas-production credits caused the lower effective tax rate for 1995. The Company recognized $2,456,000 of tight-sands gas-production credits in the 1996 period and $3,227,000 in the 1995 period. Mountain Fuel and an affiliated company, Questar Pipeline, continue work to consolidate various financial, technical, administrative and other support functions in an ongoing effort to improve efficiency and coordination. Questar Pipeline and Mountain Fuel comprise the Regulated Services group of Questar Corporation. Liquidity and Capital Resources - Operating Activities: Net cash provided from operating activities was $43,730,000 for the first nine months of 1996 compared with $64,358,000 for the same period of 1995. Lower gas cost collected in rates and a first quarter refund of gas costs were the primary reasons for a reduction in net cash flow from operating activities in 1996. Investing Activities: Capital expenditures were $30,908,000 in the first nine months of 1996 compared with $30,505,000 in the corresponding 1995 period. Capital expenditures for calendar year 1996 are estimated at $55,000,000. Financing Activities: The Company has short-term line-of-credit arrangements with banks totaling $500,000. In addition, its parent company, Questar Corporation, loans funds to the Company under a short-term borrowing arrangement. At September 30, Mountain Fuel had loans outstanding of $54,300,000 in 1996 and $32,700,000 in 1995 payable to Questar. No amounts were borrowed under the short-term line-of-credit arrangements at September 30, 1996. Mountain Fuel's net cash provided from operating activities for the first nine months of 1996 and 1995 funded capital expenditures, cash dividends and repayment of debt. Funding of 1996 capital expenditures is expected to be supplied from net cash flow provided from operations and borrowings from Questar Corporation. >PAGE> PART II OTHER INFORMATION Mountain Fuel Supply Company has nothing to disclose in this section of the report. 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) November 12, 1996 /s/D. N. Rose (Date) D. N. Rose President and Chief Executive Officer November 12, 1996 /s/S. E. Parks (Date) S. E. Parks Vice President, Treasurer and Chief Financial Officer EX-27 2
5 The following schedule contains summarized financial information extracted from the Mountain Fuel Supply Co. Statement of Income and Balance Sheet for the period ended September 30, 1996, and is qualified in its entirety by reference to such unaudited financial statements. 1,000 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 0 0 21,880 0 17,898 56,873 806,363 319,183 565,179 85,643 175,000 4,840 0 22,974 183,413 565,179 0 245,027 0 188,935 27,673 0 12,260 19,366 5,579 13,787 0 0 0 13,787 0 0
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