-----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, OjL4kh0lHtrwOXD3gZvfB6O3WQI8gS7RtW+J2ntBFV4byoIgYTGohgDJffysEmyM i5RTaZDHz4dnISW/tiB45g== 0000751652-96-000030.txt : 19960515 0000751652-96-000030.hdr.sgml : 19960515 ACCESSION NUMBER: 0000751652-96-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR CORP CENTRAL INDEX KEY: 0000751652 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: 1934 Act SEC FILE NUMBER: 001-08796 FILM NUMBER: 96563308 BUSINESS ADDRESS: STREET 1: 180 E FIRST SOUTH ST STREET 2: PO BOX 45433 CITY: SALT LAKE CITY STATE: UT ZIP: 84145 BUSINESS PHONE: 8015345000 MAIL ADDRESS: STREET 1: 180 E FIRST SOUTH ST STREET 2: P O BOX 45433 CITY: SALT LAKE CITY STATE: UT ZIP: 84145 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 MARCH 31, 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. 1-8796 QUESTAR CORPORATION (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0407509 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 45433, 180 East First South, Salt Lake City, Utah 84145-0433 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 534-5000 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, 1996 Common Stock, without par value 40,780,674 shares QUESTAR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
3 Months Ended 12 Months Ended March 31, March 31, 1996 1995 1996 1995 (In Thousands, Except Per Share Amounts) REVENUES $225,723 $215,932 $659,078 $662,941 OPERATING EXPENSES Natural gas purchases 80,468 85,588 194,299 204,332 Operating and maintenance 49,178 46,344 182,559 178,489 Depreciation and amortization 25,721 24,449 97,564 95,611 Other taxes 9,295 9,199 31,921 34,974 TOTAL OPERATING EXPENSES 164,662 165,580 506,343 513,406 OPERATING INCOME 61,061 50,352 152,735 149,535 INTEREST AND OTHER INCOME 4,036 1,715 19,635 5,093 WRITE-DOWN OF INVESTMENT IN NEXTEL COMMUNICATIONS (61,743) DEBT EXPENSE (11,125) (11,257) (42,683) (42,098) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 53,972 40,810 129,687 50,787 INCOME TAXES 19,376 13,737 38,378 5,390 INCOME FROM CONTINUING OPERATIONS 34,596 27,073 91,309 45,397 GAIN FROM SALE OF DISCONTINUED OPERATIONS 38,126 NET INCOME $34,596 $27,073 $91,309 $83,523 EARNINGS PER COMMON SHARE Income from continuing operations $0.85 $0.67 $2.23 $1.11 Gain from sale of discontinued operations 0.95 Net income $0.85 $0.67 $2.23 $2.06 Dividends per common share $0.295 $0.285 $1.17 $1.14 Average common shares outstanding 40,721 40,455 40,645 40,379
QUESTAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1996 1995 1995 (In Thousands) ASSETS Current assets Cash and short-term investments $5,122 Accounts receivable $144,049 $127,960 126,528 Inventories 11,867 26,532 28,110 Other current assets 10,296 12,129 10,965 Total current assets 166,212 166,621 170,725 Property, plant and equipment 2,341,157 2,277,711 2,330,900 Less allowances for depreciation and amortization 1,045,206 980,466 1,020,779 Net property, plant and equipment 1,295,951 1,297,245 1,310,121 Securities available for resale, approximates fair value 63,910 52,810 52,745 Other assets 49,927 44,825 50,962 $1,576,000 $1,561,501 $1,584,553 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Checks outstanding in excess of cash balances $5,267 $5,562 Short-term loans 27,200 31,700 $77,200 Accounts payable and accrued expenses 114,230 108,365 117,240 Purchased-gas adjustments 21,792 37,082 9,182 Current portion of long-term debt 19,004 19,004 Total current liabilities 187,493 182,709 222,626 Long-term debt, less current portion 411,700 486,688 421,695 Other liabilities and deferred credits 38,410 41,116 34,700 Deferred income taxes and investment tax credits 187,445 163,563 187,900 Redeemable cumulative preferred stock 4,957 6,324 4,957 Common shareholders' equity Common stock 285,292 278,639 283,776 Retained earnings 460,865 417,106 438,284 Note receivable from ESOP (20,550) (24,050) (21,238) Unrealized gain on securities available for resale, net of income taxes 20,388 9,406 11,853 Total common shareholders' equity 745,995 681,101 712,675 $1,576,000 $1,561,501 $1,584,553
QUESTAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
3 Months Ended March 31, 1996 1995 (In Thousands) OPERATING ACTIVITIES Net income $34,596 $27,073 Depreciation and amortization 26,948 25,577 Deferred income taxes and investment tax credits (5,742) (6,804) Gain from sales of securities (1,765) 54,037 45,846 Change in operating assets and liabilities 13,853 36,831 NET CASH PROVIDED FROM OPERATING ACTIVITIES 67,890 82,677 INVESTING ACTIVITIES Capital expenditures Purchase of property, plant and equipment (12,983) (17,178) Other investments (158) (437) Total capital expenditures (13,141) (17,615) Proceeds from disposition of property, plant and equipment 246 1,990 Proceeds from the sales of securities 4,422 NET CASH USED IN INVESTING ACTIVITIES (8,473) (15,625) FINANCING ACTIVITIES Issuance of common stock 2,255 2,375 Common stock repurchased (739) (291) Issuance of long-term debt 2,000 Repayment of long-term debt (9,995) (9,996) Increase (decrease) in short-term loans (50,000) (63,200) Checks outstanding in excess of cash bal 5,267 5,562 Payment of dividends (12,114) (11,661) Other 787 610 NET CASH USED IN FINANCING ACTIVITIES (64,539) (74,601) DECREASE IN CASH AND SHORT-TERM INVESTMENTS ($5,122) ($7,549)
QUESTAR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1996 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-month period ended March 31, 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 consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. QUESTAR CORPORATION AND SUBSIDIARIES MANAGEMENT'S ANALYSIS March 31, 1996 Market Resources Operations - Celsius Energy, Universal Resources and Wexpro (market resources group) conduct the Company's exploration, production and energy marketing operations. Following is a summary of financial results and operating information.
3 Months Ended 12 Months Ended March 31, March 31, 1996 1995 1996 1995 (Dollars in Thousands) FINANCIAL RESULTS Revenues From unaffiliated customers $71,123 $64,588 $251,799 $253,091 From affiliates 17,603 16,580 65,225 74,085 Total revenues $88,726 $81,168 $317,024 $327,176 Operating income $13,071 $11,810 $45,586 $56,023 Net income 8,117 7,852 32,180 37,591 OPERATING STATISTICS Production volumes - Natural gas (in million cubic feet) 9,145 8,924 32,884 38,725 Oil and natural gas liquids (in thousands of barrels) 572 620 2,388 2,550 Production revenues Natural gas (per thousand cubic feet) $1.58 $1.49 $1.36 $1.65 Oil and natural gas liquids (per barrel) $16.45 $15.52 $16.19 $15.33 Gas marketing volumes (in thousands of decatherms) 29,675 23,928 115,121 91,130
Revenues were 9% higher in the first quarter of 1996 when compared with the same period of 1995, but were 3% lower in the 12-month period of 1996 when compared with the prior year period. Revenues from sales of natural gas increased 9% in the first quarter of 1996, but were 30% lower in the 12-month period ended March 31, 1996 when compared with the year earlier periods. Both production and selling prices of natural gas were higher in the first quarter of 1996. Gas production and revenues were lower for the 12 months ended March 31, 1996 when compared with the prior year period. Celsius Energy shut in a portion of its gas production in the second half of 1995 in response to extremely low gas prices. Most of this gas was producing during the first quarter of 1996. Revenues from sales of oil and natural gas liquids were lower in the 3- and 12-month periods of 1996 when compared with the same periods of 1995. The decrease in revenues was the result of lower production volumes that more than offset the effects of higher average selling prices. Gas marketing volumes increased 24% in the first quarter and 26% in the 12 months period ended March 31, 1996. In other hedging activities, about 40% of equity gas production and equity oil production is being sold under hedged or fixed-price contracts. The contracts for oil production terminate at the end of 1996. Revenues for cost-of-service operation of Mountain Fuel's gas wells were 6% higher in the 3- and 12-month periods ended March 31, 1996 primarily due to the settlement of a Minerals Management Service royalty valuation issue. Regulated Services Operations - Mountain Fuel and Questar Pipeline conduct the Company's regulated services of natural gas distribution, transmission and storage. Natural Gas Distribution -- Mountain Fuel conducts the Company's natural gas distribution operations. Following is a summary of financial results and operating information.
3 Months Ended 12 Months Ended March 31, March 31, 1996 1995 1996 1995 (Dollars in Thousands) FINANCIAL RESULTS Revenues From unaffiliated customers $144,567 $139,823 $363,502 $365,745 From affiliates 336 992 3,355 4,315 Total revenues $144,903 $140,815 $366,857 $370,060 Operating income $33,797 $24,477 $53,042 $36,022 Net income 18,851 13,061 29,458 21,315 OPERATING STATISTICS Natural gas volumes (in thousands of decatherms) Residential and commercial sales 34,417 29,578 78,789 73,673 Industrial sales 2,494 3,185 8,519 9,850 Transportation for industrial customers 13,729 17,609 55,689 55,720 Total deliveries 50,640 50,372 142,997 139,243 Natural gas revenues (per decatherm) $3.93 $4.31 $4.11 $4.35 Residential and commercial 2.14 2.59 2.30 2.59 Industrial sales Transportation for industria 0.11 0.10 0.11 0.10 customers Heating degree days Actual 2,596 2,217 5,426 5,200 Normal 2,743 2,743 5,801 5,801 Warmer than normal 5% 19% 6% 10% Number of customers at end of period 597,234 575,424
Revenues, net of gas costs, increased $9,968,000 or 17% in the first quarter and $15,894,000 or 10% in the 12 months ended March 31, 1996 when compared with the same periods in 1995. The increases resulted from colder temperatures, the benefits of a rate case settlement reached in the third quarter of 1995 and a 3.8% customer growth rate. Temperatures in the first quarter of 1996 were 5% warmer than normal but 17% colder than was reported in the first quarter of 1995. Temperatures were 4% colder in the 12-month period ended March 31, 1996 when compared with the same period in the prior year. The effect of the warmer-than-normal weather in 1996 was partially offset by a weather-normalization adjustment. In addition, the rate case settlement could add about $3.7 million in annual revenues from a new-premises fee and the sharing of capacity-release credits. Mountain Fuel's allowed return on rate base increased from 10.08% to between 10.22% and 10.34%. Volumes delivered to industrial customers decreased 22% in the first quarter of 1996 when compared with the same quarter of 1995 due to an 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. Natural Gas Transmission Operations -- Questar Pipeline conducts the Company's natural gas transmission, gathering and storage operations. Following is a summary of financial results and operating information.
3 Months Ended 12 Months Ended March 31, March 31, 1996 1995 1996 1995 (Dollars in Thousands) FINANCIAL RESULTS Revenues From unaffiliated customers $9,673 $10,859 $42,130 $42,684 From affiliates 22,095 18,706 77,428 74,739 Total revenues $31,768 $29,565 $119,558 $117,423 Operating income $13,071 $12,853 $52,155 $54,068 Net income 6,390 6,274 24,764 26,595 OPERATING STATISTICS Natural gas volumes (in thousands of decatherms) Transportation For unaffiliated customers 36,873 38,569 150,247 143,281 For Mountain Fuel 37,156 29,199 87,829 70,630 For other affiliated custo 4,598 6,226 37,211 42,304 Total transportation 78,627 73,994 275,287 256,215 Gathering For unaffiliated customers 10,834 9,621 40,241 39,222 For Mountain Fuel 9,818 9,390 32,119 30,924 For other affiliated custo 1,916 1,280 6,585 10,280 Total gathering 22,568 20,291 78,945 80,426 Natural gas revenues (per decatherm) Transportation $0.21 $0.21 $0.23 $0.24 Gathering 0.24 0.28 0.27 0.29
Revenues were higher in the 1996 periods presented due to a rate increase for transportation and storage activities. Questar Pipeline filed for a rate increase July 31, 1995 that became effective on February 1, 1996, subject to refund pending approval by the Federal Energy Regulatory Commission (FERC). The proposed settlement includes a stated return on equity of 11.75% and, could if approved, add about $6 million to annual revenues. The Company has fully reserved for the differences between the filed rates and the settlement rates. In addition, the Company reported higher revenues from its expanded firm gas-storage activities. Volumes from gathering, now conducted by nonregulated subsidiary Questar Gas Management Company, increased 11% in the first quarter of 1996 over the year earlier period. Revenues in the 1996 periods were less than was reported in the prior year periods because of lower reservation charges on Mountain Fuel's firm-gathering contract. Questar Pipeline transferred approximately $55 million of gas-gathering assets to Questar Gas Management Company, a wholly owned subsidiary. The transfer was approved by the FERC February 28, 1996, and was effective March 1, 1996. Questar Corporation (Questar), in its continuing efforts to realign its operations into the two primary functions of regulated services and nonregulated market resources, plans to transfer Questar Gas Management Company to its market resources group. Questar Pipeline currently intends to complete the transfer by mid-1996. Questar announced plans of becoming more of an energy-services company that can operate effectively in the new energy market place. Mountain Fuel and Questar Pipeline make up the regulated services group of Questar. To improve efficiency and coordination, various financial, technical, administrative and other support functions of these two companies will be consolidated. The regulated services group also is creating a new planning and business development area to focus on new business opportunities in gas distribution, transmission and storage, both foreign and domestic. Consolidated Results of Operations -- Consolidated revenues increased in the first quarter of 1996 when compared with the first quarter of 1995 due to increases in gas marketing volumes sold and deliveries of gas to residential and commercial customers for heating purposes, the benefits of a rate case settlement by Mountain Fuel in the third quarter of 1995, and higher gas production prices and quantities. Revenues were lower in the 12-month period ended March 31, 1996, when compared with the prior year because of lower selling prices for gas produced and lower gas distribution deliveries. Natural gas purchases were lower in the 3- and 12-month periods of 1996 when compared with the same periods of 1995 primarily because of lower natural gas purchase prices. Operating and maintenance expenses were 6% higher in the first quarter of 1996 and 2% higher in the 12 months ended March 31, 1996, when compared with the same periods in the prior year. The increases resulted from inflation, some one-time expenses from gas transmission operations related to the gathering division spin down and rate case, and an increase in the number of distribution customers. Depreciation and amortization increased in the periods ended March 31, 1996, because of increased investment in property, plant and equipment by all lines of business and the effect of reserve adjustments on depreciation expenses for some cost-of-service gas properties. The first quarter full cost amortization rate was $.78 per equivalent Mcf in 1996, down from $.80 in the prior year period. Other taxes were lower in the 12-months ended March 31, 1996 as a result of shutting in gas production for half of 1995. Interest and other income was higher in the first quarter of 1996 because of a $1,765,000 pretax gain from the sales of securities and a $340,000 pretax gain from selling real estate. The increase in interest and other income for the 12-months ended March 31, 1996 was due primarily to gains from selling Nextel and other securities, settlement of gas contracts and equity earnings of unconsolidated affililates. In the third quarter of 1994, Questar Corporation sold Questar Telecom to Nextel Communications in exchange for 3.9 million shares of Nextel common stock and reported a $38,126,000 after-tax gain from the sale. At year end 1994, the Company wrote down its investment in Nextel Communications by $61,743,000. This amounted to $38,126,000, or $.95 per share, after income taxes. The effective income tax rate for the first quarter was 35.9 % in 1996 and 33.7% in 1995. The Company recognized $2,106,000 of tight-sands gas production tax credits in the 1996 period and $2,155,000 in the 1995 period. Liquidity and Capital Resources -- Operating Activities: Net cash provided from operating activities was $67,890,000 for the first quarter of 1996, compared with $82,677,000 for the same period of 1995. A refund of gas costs in the first quarter of 1996 and lower gas purchase costs collected in rates from gas distribution customers resulted in a decrease in net cash flow from operating activities. Investing Activities: Capital expenditures were $13,141,000 in the first three months of 1996, compared with $17,615,000 in the same period a year ago. Proceeds from the sales of securities of $4,422,000 primarily resulted from selling shares of Nextel Communications. A comparison of capital expenditures for the first three months of 1996 and 1995 plus an estimate for the calendar year 1996 are as follows:
Estimate Actual 12 Months Three Months Ended Ended March 31, Dec. 31, 1996 1995 1996 (In Thousands) Exploration and production $3,343 $6,781 $88,700 Natural gas distribution 3,837 6,843 55,000 Natural gas transmission 2,537 3,171 40,900 Other operations 3,424 820 50,200 $13,141 $17,615 $234,800
Financing Activities: Net cash used in financing activities was $64,539,000 in the first quarter of 1996 and $74,601,000 in the same period of 1995. Net cash flow from operating activities provided for repayment of short-term and long-term debt and payment of dividends. Commercial paper borrowings were $17,200,000 and short-term debt was $10,000,000 at March 31, 1996. The Company had the capacity at March 31, 1996, to borrow an additional $117,800,000 under commercial paper agreements. That capacity declined to $82,800,000 at April 1, 1996, to match seasonal cash flow requirements. Questar and its affiliated companies had the capacity to borrow an additional $10,700,000 through short-term credit lines and $84,000,000 under long-term credit lines with banks. Questar plans to finance 1996 capital expenditures with cash flow from operations, bank borrowings, and proceeds from its dividend reinvestment plan. In addition, Questar plans to sell up to one third of its investment in Nextel common stock to fund capital expenditures. PART II OTHER INFORMATION Item 5. Other Information. Questar Corporation (Questar or the Company) has announced additional details of its reorganization into two primary lines of business regulated services and market resources. The Company's regulated services segment, which is under the direction of D. N. Rose, Executive Vice President, includes Mountain Fuel Supply Company (retail distribution) and Questar Pipeline Company (interstate transmission and storage). Some administrative functions will be integrated between these two regulated entities. Questar's second segment market resources is under the leadership of G. L. Nordloh, Executive Vice President. It includes the Company's three exploration and production companies and new entities to handle energy trading and nonregulated energy services. The market resources group will also include Questar Gas Management Company, currently a wholly-owned subsidiary of Questar Pipeline that is engaged in gathering and field service activities. 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 CORPORATION (Registrant) May 13, 1996 /s/ R. D. Cash (Date) R. D. Cash Chairman of the Board, President and Chief Executive Officer May 13, 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 Questar Corporation Statements of Income and Balance Sheets for the period ended March 31, 1996, and is qualified in its entirety by reference to such unaudited financial statements. 1,000 3-MOS DEC-31-1995 MAR-31-1996 0 0 144,049 0 11,867 166,212 2,341,157 1,045,206 1,576,000 187,493 411,700 4,957 0 285,292 460,703 1,576,000 0 225,723 0 129,646 35,016 0 11,125 53,972 19,376 34,596 0 0 0 34,596 .85 .85
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