-----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, FVq2tinghSZsWPZn+t+ehVLP1IWEsZE96aiMCnChiQ6N39S8lqO5NSFI2a/BFAxF cPWRVFtU4jzEqbkP4XpA4A== 0000912057-01-515507.txt : 20010516 0000912057-01-515507.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-515507 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR GAS CO CENTRAL INDEX KEY: 0000068589 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 870407509 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-55866 FILM NUMBER: 1634393 BUSINESS ADDRESS: STREET 1: 180 E FIRST SOUTH ST STREET 2: PO BOX 45433 CITY: SALT LAKE CITY STATE: UT ZIP: 84145-0433 BUSINESS PHONE: 8013245555 MAIL ADDRESS: STREET 1: 180 EAST FIRST SOUTH ST STREET 2: P O BOX 11150 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 FORMER COMPANY: FORMER CONFORMED NAME: MOUNTAIN FUEL SUPPLY CO DATE OF NAME CHANGE: 19920703 10-Q 1 a2049337z10-q.txt 10-Q 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 MARCH 31, 2001. 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 QUESTAR GAS 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 100 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 April 30, 2001 - ----------------------------- -------------------------------- Common Stock, $2.50 par value 9,189,626 shares Registrant meets the conditions set forth in General Instruction H(a)(1) and (b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure format. PART I FINANCIAL INFORMATION Item 1. Financial Statements QUESTAR GAS COMPANY STATEMENTS OF INCOME (Unaudited)
3 Months Ended 12 Months Ended March 31, March 31, 2001 2000 2001 2000 ------------------------------------------------------ (In Thousands) REVENUES $ 310,129 $ 200,520 $ 646,371 $ 478,155 OPERATING EXPENSES Cost of natural gas sold 230,154 122,430 441,917 280,973 Operating and maintenance 25,089 26,171 100,404 104,598 Depreciation 8,761 9,181 34,030 36,941 Other taxes 2,798 3,989 9,022 9,388 ------------------------------------------------------ TOTAL OPERATING EXPENSES 266,802 161,771 585,373 431,900 ------------------------------------------------------ OPERATING INCOME 43,327 38,749 60,998 46,255 INTEREST AND OTHER INCOME 1,408 429 2,652 2,904 DEBT EXPENSE (5,883) (5,177) (21,747) (20,134) ------------------------------------------------------ INCOME BEFORE INCOME TAXES 38,852 34,001 41,903 29,025 INCOME TAXES 15,132 13,286 14,735 9,349 ------------------------------------------------------ NET INCOME $ 23,720 $ 20,715 $ 27,168 $ 19,676 ======================================================
See note to financial statements 2 QUESTAR GAS COMPANY CONDENSED BALANCE SHEETS
March 31, December 31, 2001 2000 2000 (Unaudited) ----------------------------------------- (In Thousands) ASSETS Current assets Cash and cash equivalents $ 882 Accounts receivable $ 146,799 $ 94,086 120,120 Inventories, at lower of average cost or market Gas stored underground 24,280 7,450 22,444 Materials and supplies 5,196 3,239 3,542 Purchased-gas adjustments 48,178 35,565 Prepaid expenses and other 521 2,533 773 ----------------------------------------- Total current assets 224,974 107,308 183,326 Property, plant and equipment 1,076,569 1,023,075 1,067,362 Less accumulated depreciation 456,039 430,474 447,496 ----------------------------------------- Net property, plant and equipment 620,530 592,601 619,866 Other assets 27,051 19,326 27,134 ----------------------------------------- $ 872,555 $ 719,235 $ 830,326 ========================================= LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $ 2,759 $ 2,456 Notes payable to Questar Corporation 151,200 39,700 $ 105,600 Accounts payable and accrued expenses 108,638 78,943 136,183 Deferred income taxes - current 18,308 13,515 Purchased-gas adjustments 15,065 ----------------------------------------- Total current liabilities 280,905 136,164 255,298 Long-term debt 225,000 225,000 225,000 Other liabilities 464 1,314 507 Deferred income taxes and investment tax credits 84,410 78,524 85,465 Common shareholder's equity Common stock 22,974 22,974 22,974 Additional paid-in capital 81,875 81,875 81,875 Retained earnings 176,927 173,384 159,207 ----------------------------------------- Total common shareholder's equity 281,776 278,233 264,056 ----------------------------------------- $ 872,555 $ 719,235 $ 830,326 =========================================
See note to financial statements 3 QUESTAR GAS COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
3 Months Ended March 31, 2001 2000 ---------------------------- (In Thousands) OPERATING ACTIVITIES Net income $ 23,720 $ 20,715 Depreciation 9,564 10,024 Deferred income taxes and investment tax credits 3,738 (6,819) ---------------------------- 37,022 23,920 Change in operating assets and liabilities (70,035) 27,528 ---------------------------- NET CASH (USED IN) PROVIDED FROM OPERATING ACTIVITIES (33,013) 51,448 INVESTING ACTIVITIES Capital expenditures (12,765) (10,167) Proceeds from disposition of property, plant and equipment 2,537 30 ---------------------------- NET CASH USED IN INVESTING ACTIVITIES (10,228) (10,137) FINANCING ACTIVITIES Checks outstanding in excess of cash balance 2,759 2,456 Change in notes payable to Questar Corp. 45,600 (39,600) Payment of dividends (6,000) (5,875) ---------------------------- NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES 42,359 (43,019) ---------------------------- Change in cash and cash equivalents (882) (1,708) Beginning cash and cash equivalents 882 1,708 ---------------------------- Ending cash and cash equivalents $ - $ - ============================
See note to financial statements 4 QUESTAR GAS COMPANY NOTE TO FINANCIAL STATEMENTS March 31, 2001 (Unaudited) Note 1 - Basis of Presentation The interim financial statements 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-month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. 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, 2000. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations QUESTAR GAS COMPANY March 31, 2001 (Unaudited) Operating Results Following is a summary of financial and operating information for the Company:
3 Months Ended 12 Months Ended March 31, March 31, 2001 2000 2001 2000 ------------------------------------------------------ FINANCIAL RESULTS - (dollars in thousands) Revenues From unaffiliated customers $ 308,939 $ 199,527 $ 641,400 $ 475,040 From affiliates 1,190 993 4,971 3,115 ------------------------------------------------------ Total revenues 310,129 200,520 646,371 478,155 Cost of natural gas sold 230,154 122,430 441,917 280,973 ------------------------------------------------------ Margin $ 79,975 $ 78,090 $ 204,454 $ 197,182 ====================================================== Operating income $ 43,327 $ 38,749 $ 60,998 $ 46,255 Net income 23,720 20,715 27,168 19,676 OPERATING STATISTICS Natural gas volumes (in thousands of decatherms) Residential and commercial sales 36,704 33,908 86,169 83,684 Industrial sales 3,267 3,204 10,377 10,087 Transportation for industrial customers 14,714 14,017 55,533 52,309 ------------------------------------------------------ Total deliveries 54,685 51,129 152,079 146,080 ====================================================== Natural gas revenue (per decatherm) Residential and commercial $ 7.73 $ 5.41 $ 6.58 $ 5.05 Industrial sales 5.64 3.27 4.52 3.03 Transportation for industrial customers $ 0.13 $ 0.13 $ 0.13 $ 0.13 Heating degree days Colder (warmer) than normal 1% (14)% 1% (7)% Number of customers at March 31, Residential and commercial 704,424 687,985 Industrial 1,323 1,363 -------------------------- Total 705,747 689,348 ==========================
The margin increased 2% in the first quarter of 2001 and 4% in the twelve months ended March 31, 2001 compared with the same periods of 2000. The higher margin resulted primarily from a 3.9% Utah general rate increase which went into effect August 11, 2000 and higher volumes delivered to new customers. Usage per customer fell by 3 decatherm (Dth) or 5.5% in the first quarter of 2001. Volumes delivered were 7% higher in the first quarter and were 4% higher for the 6 twelve-month periods of 2001 compared with the same periods in 2000. Weather was colder than normal in the 2001 periods presented. Questar Gas' cost of natural gas sold increased 88% in the first quarter and 57% for the twelve-month periods of 2001 compared with the 2000 periods due to higher gas costs. Gas costs in rates for the three-month period of 2001 were $4.67 per Dth compared to $2.23 per Dth in 2000. Effective January 1, 2001, the PSCU approved on an interim basis a $167 million pass-through filing that increased Utah natural gas rates 29%. Also effective January 1, 2001, the Wyoming Public Service Commission approved a $7 million pass-through filing for Wyoming natural gas rates. The Company files for adjustment of purchased-gas costs with the Utah and Wyoming Public Service Commissions on a semiannual basis. Operating and maintenance (O & M) expenses decreased 4% in the first quarter of 2001 compared with the prior year primarily from early retirement cost savings of $1.3 million. The cost savings were partially offset by higher costs from adding new customers and increased bad debt expenses. Bad debt expenses increased by $700,000 over the first quarter of 2000 because of the effect of higher selling prices on customer collections. O & M expenses decreased 4% for the twelve months of 2001 compared with 2000 due to the early retirement, lower information technology costs and decreased legal expenses. Depreciation expenses were 5% lower in the three-month period of 2001 compared with the 2000 period as a result of computer equipment and software being fully depreciated. Other taxes decreased 30% in the first quarter comparisons because of an adjustment of prior year taxes. Interest and other income was 228% higher in the first quarter of 2001 compared with the prior year as a result of interest earned on the purchased-gas adjustment balance and gas stored underground. The effective income tax rate for the three-month period was 38.9% in 2001 and 39.1% in 2000. The Company realized $463,000 of tight-sands gas-production credits in the 2001 period and $467,000 in the 2000 period. Liquidity and Capital Resources Operating Activities Operating activities in the first three months of 2001 resulted in a $33.0 million use of funds compared to a $51.4 million source of funds in the same period of 2000. The decrease in cash flows resulted primarily from the timing of collection and payment of operating assets and liabilities between the quarters. In 2001, higher gas costs charged by suppliers were not yet recovered from customers resulting in increases in unrecovered purchased-gas costs and customer receivables. In addition, accounts payable were paid down and inventory costs increased. Investing Activities Capital expenditures were $12.8 million for the first quarter of 2001. Capital expenditures for calendar year 2001 are estimated at $76.1 million. Financing Activities The Company borrowed $45.6 million from Questar to fund operating and investing activities. Loan balances owed to Questar as of March 31, amounted to $151.2 million in 2001 and $39.7 million in 2000. Capital expenditures for the remainder of 2001 are expected to be financed with net cash flow provided from operating activities and borrowings from Questar. 7 Regulatory Matters Effective January 1, 2001, the PSCU approved on an interim basis a $167 million increase in its Utah natural gas rates that resulted in a 29 percent increase for the typical residential Utah customer. The increase was based on recent significant increases in natural gas prices at the wellhead and was part of Questar Gas' gas-cost-adjustment or "pass-through" filings. Such filings enable the company to adjust rates at least twice each year to reflect changes in gas-supply costs. These costs are passed on to the customer on a dollar-for-dollar basis with no markup. The impact of the gas cost increase on customers was lessened by the fact that approximately 50% of the Company's annual supply comes from its own wells and is priced to customers at cost of service prices rather than market prices. Also, effective January 1, 2001, the Wyoming Public Service Commission approved a $7 million pass-through filing for Wyoming natural gas rates. Forward-Looking Statements This report includes "forward-looking statements" within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "could", "expect", "intend", "project", "estimate", "anticipate", "believe", "forecast", or "continue" or the negative thereof or variations thereon or similar terminology. Although these statements are made in good faith and are reasonable representations of the Company's expected performance at the time, actual results may vary from management's stated expectations and projections due to a variety of factors. Important assumptions and other significant factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include changes in general economic conditions, gas and oil prices and supplies, competition, rate-regulatory issues and other factors beyond the control of the Company. These other factors include the rate of inflation, quoted prices of securities available for sale, the weather and other natural phenomena, the effect of accounting policies issued periodically by accounting standard-setting bodies, and adverse changes in the business or financial condition of the Company. 8 Part II Other Information ITEM 1. LEGAL PROCEEDINGS. a. The Public Service Commission of Wyoming (the "PSCW"), at an open meeting held on April 13, 2001, determined that it was appropriate to issue a final order concerning the most recent pass-on application filed by Questar Gas Company ("Questar Gas" or the "Company"). The Company's application requested permission to reflect $19,529,523 in annualized gas costs in its rates for Wyoming customers effective January 1, 2001. Questar Gas was previously authorized to reflect the costs in its rates as of January 1, 2001, subject to refund. b. The Public Service Commission of Utah (the PSCU") has scheduled a public hearing for May 14, 2001, in conjunction with the Company's Utah pass-through application. Questar Gas has been reflecting annualized gas costs of $504,865,533, in its Utah rates as of January 1, 2001, subject to refund. Two state agencies involved with utility regulation--the Division of Public Utilities and the Committee of Consumer Services--have not opposed the pass-through application or challenged the prudence of the Company's gas purchases. Consequently, Questar Gas does not have any reason to believe that the PSCU will not issue a final order approving the pass-through application. Questar Gas, the Division of Public Utilities, and the Committee of Consumer Services have signed a stipulation concerning means to provide more price stability to sales customers and will request that the PSCU approve the stipulation in conjunction with the current pass-through application. The stipulation expressly recognizes that price stability, reliability and cost are three factors to consider when obtaining gas supplies, that costs associated with hedging activities can be included in the Company's balancing account for pass-through treatment, and that rules promulgated by the Financial Accounting Standards Board for the accounting treatment of derivatives (specifically SFAS No. 133, as amended) should not apply to Questar Gas's purchased gas portfolio since the costs and benefits are passed through to customers. The stipulation further provides that if any entries are required by SFAS No. 133, as amended, they should be made in the balancing account in a manner that does not affect customer rates or the Company's net income. 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. QUESTAR GAS COMPANY (Registrant) May 11, 2001 /s/ D. N. Rose - -------------------- ------------------------------------- D. N. Rose President and Chief Executive Officer May 11, 2001 /s/ S. E. Parks - -------------------- ------------------------------------- S. E. Parks Vice President, Treasurer, and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----