-----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, M1Q8kxqt0g2cy1g3X2jLOU+D8tjyOToitutrOX1+nz8LEFiJDI2b8rTdqqr6Urio rpZA4PNU0Eup9UUeVhj44Q== 0000764044-96-000006.txt : 19960515 0000764044-96-000006.hdr.sgml : 19960515 ACCESSION NUMBER: 0000764044-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR PIPELINE CO CENTRAL INDEX KEY: 0000764044 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 870307414 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14147 FILM NUMBER: 96562729 BUSINESS ADDRESS: STREET 1: 79 S STATE ST STREET 2: P O BOX 11450 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 BUSINESS PHONE: 8015302400 MAIL ADDRESS: STREET 1: 79 SOUTH STATE STREET STREET 2: P O BOX 11150 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 FORMER COMPANY: FORMER CONFORMED NAME: MOUNTAIN FUEL RESOURCES INC DATE OF NAME CHANGE: 19880331 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. 0-14147 QUESTAR PIPELINE COMPANY (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0307414 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 11450, 79 South State Street, Salt Lake City, Utah 84147 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 530-2400 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, $1.00 par value 6,550,843 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. QUESTAR PIPELINE COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
3 Months Ended 12 Months Ended March 31, March 31, 1996 1995 1996 1995 (In Thousands) REVENUES $31,768 $29,565 $119,558 $117,423 OPERATING EXPENSES Operating and maintenance 13,156 11,364 46,426 42,863 Depreciation 4,282 4,114 16,782 15,893 Other taxes 1,259 1,234 4,195 4,599 TOTAL OPERATING EXPENSES 18,697 16,712 67,403 63,355 OPERATING INCOME 13,071 12,853 52,155 54,068 INTEREST AND OTHER INCOME (EXPENSE) 100 (44) (1,742) (1,394) INCOME FROM UNCONSOLIDATED AFFILIATES 432 85 1,881 245 DEBT EXPENSE (3,394) (3,406) (13,460) (13,310) INCOME BEFORE INCOME TAXES 10,209 9,488 38,834 39,609 INCOME TAXES 3,819 3,214 14,070 13,014 NET INCOME $6,390 $6,274 $24,764 $26,595
QUESTAR PIPELINE COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1996 1995 1995 (In Thousands) ASSETS Current assets Cash and short-term investments $1,386 $1,677 Accounts receivable 13,858 $18,837 13,845 Inventories 2,880 2,569 2,858 Other current assets 2,278 2,523 2,552 Total current assets 20,402 23,929 20,932 Property, plant and equipment 633,828 618,240 632,393 Less allowances for depreciation 216,311 207,407 212,898 Net property, plant and equipment 417,517 410,833 419,495 Investment in unconsolidated affiliates 11,230 8,208 11,010 Other assets 12,221 11,024 11,913 $461,370 $453,994 $463,350 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $2,652 Notes payable to Questar Corporation $1,800 7,800 $15,200 Accounts payable and accrued expenses 24,326 14,751 13,025 Total current liabilities 26,126 25,203 28,225 Long-term debt 134,530 134,511 134,525 Deferred credits 4,920 4,812 5,346 Deferred income taxes 69,799 68,987 70,649 Common shareholder's equity Common stock 6,551 6,551 6,551 Additional paid-in capital 82,034 82,034 82,034 Retained earnings 137,410 131,896 136,020 Total common shareholder's equity 225,995 220,481 224,605 $461,370 $453,994 $463,350
QUESTAR PIPELINE COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
3 Months Ended March 31, 1996 1995 (In Thousands) OPERATING ACTIVITIES Net income $6,390 $6,274 Depreciation 4,743 4,523 Deferred income taxes (850) 173 Income from unconsolidated affiliates (432) (85) 9,851 10,885 Change in operating assets and liabilities 11,023 (249) NET CASH PROVIDED FROM OPERATING ACTIVITIES 20,874 10,636 INVESTING ACTIVITIES Capital expenditures Purchase of property, plant and equipment (2,537) (3,036) Other investments (135) Total capital expenditures (2,537) (3,171) Costs of deposition of property, plant and equipment (228) (15) CASH USED IN INVESTING ACTIVITIES (2,765) (3,186) FINANCING ACTIVITIES Decrease in notes payable to Questar Corporation (13,400) (6,800) Checks outstanding in excess of cash balances 2,652 Payment of dividends (5,000) (4,750) NET CASH USED IN FINANCING ACTIVITIES (18,400) (8,898) DECREASE IN CASH AND SHORT-TERM INVESTMENTS ($291) ($1,448) QUESTAR PIPELINE COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 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. 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 financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1995. Note B - Gathering Division Spin Down 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 Federal Energy Regulatory Commission February 28, 1996, and was effective March 1, 1996. The financial statements of Questar Pipeline and Questar Gas Management have been consolidated for reporting purposes. All significant intercompany accounts and transactions have been eliminated in consolidation. Questar Corporation, 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 PIPELINE COMPANY MANAGEMENT'S ANALYSIS March 31, 1996 Operating Results -- Following is a summary of financial and operating information for the Company:
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 customers 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 customers 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. Operating and maintenance expenses increased 16% in the first quarter of 1996 and 8% in the 12-month period ended March 31, 1996 when compared with the same periods of 1995 primarily because of higher costs of doing business and some one-time costs associated with the spin down of Questar Gas Management Company and settlement issues in the pending rate case. Depreciation expense was higher in the 1996 periods as a result of increased investment in property, plant and equipment. Interest and other income (expense) increased in the first quarter of 1996 because of higher interest income. The increase in other expense reported for the 12 months ended March 31, 1996 reflects project costs that were expensed in 1995. The increase in earnings from unconsolidated affiliated companies in the first quarter of 1996 resulted primarily from operations of Blacks Fork Processing Company, which began operations in June of 1995. The Company's 50% interest in the Blacks Fork Processing Company will be transferred to the market resources group as a part of Questar Gas Management Company. The increase in earnings from unconsolidated affiliates for the 12 months ended March 31, 1996 includes the proceeds received by Overthrust Pipeline Company from a buyout of a shipper's transportation contract. The effective income tax rate for the first quarter was 37.4% in 1996 compared with 33.9% in 1995. Income tax expense was reduced for a revision of estimated income taxes in the 1995 period. Questar Corporation (Questar) announced plans to become more of an energy-services company that can operate effectively in the new energy market place. Questar Pipeline and affiliated company, Mountain Fuel, 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 transmission, distribution and storage, both foreign and domestic. Liquidity and Capital Resources -- Operating Activities: Net cash provided from operating activities was $20,874,000 for the first three months of 1996 compared with $10,636,000 for the same period of 1995. An increase in cash flow from changes in operating assets and liabilities was due primarily to the collection of construction costs receivable from the Blacks Fork Processing Company and collection of rates subject to refund. Investing Activities: Capital expenditures were $2,537,000 in the first three months of 1996, compared with $3,171,000 in the corresponding 1995 period. Capital expenditures for calendar year 1996 are estimated at $40,900,000. Financing Activities: The Company has a short-term line-of-credit arrangement with a bank totaling $200,000. In addition, Questar, its parent company, loans funds to the Company under a short-term arrangement. As of March 31, amounts borrowed from Questar were $1,800,000 in 1996 and $7,800,000 in 1995. No amounts were borrowed under the short-term line-of-credit arrangement at March 31, 1996. First quarter financing activities in 1996 and 1995 included payment of dividends and a partial repayment of the Company's notes payable to Questar. 1996 capital expenditures are expected to be financed from net cash flow provided from operations and borrowings from Questar. PART II OTHER INFORMATION Item 5. Other Information. a. Effective March 1, 1996, John B. Carricaburu resigned his position as Vice President, Marketing and Transportation, of Questar Pipeline Company (Questar Pipeline or the Company) to accept a new position as Vice President and General Manager of Questar Gas Management Company (Questar Gas Management). The Company transferred its gathering assets and activities to Questar Gas Management, a wholly owned subsidiary, as of the same date. Approximately 115 employees were also transferred from Questar Pipeline to Questar Gas Management. See Questar Pipeline's 1995 Annual Report on Form 10-K, Items 1 and 2, Business and Properties, "Gathering." b. Questar Pipeline currently intends to transfer ownership of Questar Gas Management by mid-1996. Questar Gas Management's operations will be included in Questar Corporation's business segment described as nonregulated or market resources. 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 PIPELINE COMPANY (Registrant) May 13, 1996 /s/ A. J. Marushack (Date) A. J. Marushack 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 Pipeline Company Consolidated Statements of Income and Consolidated Balance Sheet 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 1,386 0 13,858 0 2,880 20,402 633,828 216,311 461,370 26,126 134,530 0 0 6,551 219,444 461,370 0 31,768 0 13,156 5,541 0 3,394 10,209 3,819 6,390 0 0 0 6,390 0 0
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