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, 1994
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 October 31, 1994
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.
<PAGE>
QUESTAR PIPELINE COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
REVENUES $27,948 $29,317 $85,117 $142,517 $114,228 $209,892
OPERATING EXPENSES
Natural gas purchases 2,984 56,022 90,718
Operating and maintenance 10,253 11,491 32,102 37,560 42,898 50,395
Depreciation 3,920 3,540 11,322 10,495 14,911 13,701
Other taxes 1,046 961 3,417 2,983 4,349 3,908
TOTAL OPERATING EXPENSES 15,219 18,976 46,841 107,060 62,158 158,722
OPERATING INCOME 12,729 10,341 38,276 35,457 52,070 51,170
INTEREST AND OTHER
INCOME (EXPENSE) 185 369 663 743 (219) 916
INCOME FROM UNCONSOLIDATED
AFFILIATES 58 22 187 61 254 15
DEBT EXPENSE (3,263) (3,292) (9,739) (9,870) (12,983) (13,337)
INCOME BEFORE INCOME TAXES 9,709 7,440 29,387 26,391 39,122 38,764
INCOME TAXES 3,612 2,981 10,913 9,772 13,992 13,984
NET INCOME $6,097 $4,459 $18,474 $16,619 $25,130 $24,780
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993 1993
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $249 $1,196 $1,341
Notes receivable from
parent company 4,600
Accounts receivable 14,281 24,018 11,191
Inventories 2,745 6,203 2,394
Other current assets 1,979 1,852 2,268
Total current assets 23,854 33,269 17,194
Property, plant and equipment 602,129 537,457 561,108
Less allowances for depreciation 201,255 186,956 189,279
Net property, plant
and equipment 400,874 350,501 371,829
Investment in
unconsolidated affiliates 7,729 6,978 7,145
Other assets 11,363 9,473 9,726
$443,820 $400,221 $405,894
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Notes payable to parent company $1,400 $3,000
Accounts payable and
accrued expenses $21,249 13,173 12,668
Total current liabilities 21,249 14,573 15,668
Long-term debt 134,501 134,482 134,487
Deferred credits 4,689 792 2,276
Deferred income taxes 67,281 66,903 67,335
Common shareholder's equity
Common stock 6,551 6,551 6,551
Additional paid-in capital 82,032 57,034 57,034
Retained earnings 127,517 119,886 122,543
Total common
shareholder's equity 216,100 183,471 186,128
$443,820 $400,221 $405,894
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
9 Months Ended
September 30,
1994 1993
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $18,474 $16,619
Depreciation 12,539 11,910
Deferred income taxes (54) 3,297
Income from
unconsolidated affiliates (187) (61)
30,772 31,765
Change in operating assets
and liabilities 6,217 12,615
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 36,989 44,380
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant
and equipment (41,668) (25,730)
Other investments (397) (264)
Total capital expenditures (42,065) (25,994)
Disposition of property,
plant and equipment 84 (145)
CASH USED IN INVESTING ACTIVITIES (41,981) (26,139)
FINANCING ACTIVITIES
Capital contribution 25,000
Decrease notes payable to
parent company (3,000) (6,100)
Increase in notes receivable
from parent company (4,600)
Payment of dividends (13,500) (12,000)
CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES 3,900 (18,100)
INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS ($1,092) $141
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 1994
(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, 1994, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1994. 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, 1993.
Note B - Accounting for Postemployment Benefits
Effective January 1, 1994, the Company recorded a liability for
postemployment disability and health care benefits in compliance with
the Statement of Financial Accounting Standards No. 112. This did not
have an effect on net income since the $1,256,000 liability was offset
with a regulatory asset because the Company expects to include these
costs in future rates.
Note C - Financing
On July 1, 1994, Questar Pipeline received a $25,000,000 capital
contribution from its parent company. Proceeds from the capital
contribution were used to fund capital expenditures, to repay short-term
debt and for other corporate purposes.
<PAGE>
QUESTAR PIPELINE COMPANY
MANAGEMENT'S ANALYSIS
September 30, 1994
Operating Results --
Following is a summary of operating information for the Company:
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1994 1993 1994 1993 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $12,251 $9,221 $30,452 $29,067 $42,739 $45,043
From affiliates 15,697 20,096 54,665 113,450 71,489 164,849
Total revenues $27,948 $29,317 $85,117 $142,517 $114,228 $209,892
Operating income $12,729 $10,341 $38,276 $35,457 $52,070 $51,170
Net income 6,097 4,459 18,474 16,619 25,130 24,780
OPERATING STATISTICS
Natural gas volumes (in thousands
of decatherms)
Transportation
For Mountain Fuel 10,369 10,557 62,433 33,594 93,900 47,105
For other customers 49,287 37,538 119,219 117,945 150,462 163,685
Total transportation 59,656 48,095 181,652 151,539 244,362 210,790
Sales for resale to
Mountain Fuel 24,337 39,235
Total system throughput 59,656 48,095 181,652 175,876 244,362 250,025
Gathering
For Mountain Fuel 3,514 5,329 19,716 32,599 31,549 50,643
For other customers 13,577 14,260 42,484 33,659 57,161 42,860
Total gathering 17,091 19,589 62,200 66,258 88,710 93,503
Natural gas revenues
(per decatherm)
Transportation $0.28 $0.26 $0.26 $0.24 $0.25 $0.22
Sales for resale 3.36 3.24
Gathering 0.28 0.22 0.28 0.22 0.26 0.22
</TABLE>
Questar Pipeline began operating under Federal Energy Regulatory
Commission (FERC) Order 636 effective September 1, 1993. As of that
date Questar Pipeline unbundled its transportation, gathering and
storage services and eliminated its sales-for-resale function. Under
the Order 636 operating environment, firm-transportation volumes do not
have a significant impact on current operating results since 96% of the
cost of service is recovered in the reservation component of rates
equally each month using the straight fixed-variable rate design. As a
result of Order 636, no sales-for-resales revenues were collected during
the 9- and 12- month periods of 1994.
Substantially all of Questar Pipeline's transportation capacity has been
reserved by firm-transportation customers. Roughly 98% of
firm-transportation contracts have remaining terms of at least five
years. Mountain Fuel has reserved transportation capacity from Questar
Pipeline of approximately 800,000 decatherms per day, or about 85% of
total reserved daily transportation capacity.
Transportation for other customers was higher in the 3- and 9-month
periods of 1994 reflecting transportation of volumes under capacity
release arrangements.
In April 1994, the FERC approved a gathering agreement between Questar
Pipeline and Mountain Fuel retroactive to September 1, 1993, which
allocates 60% of gathering costs to the reservation component of rates
and 40% to the usage component. Gathering revenues were increased
$1,335,000 in the second quarter of 1994, to retroactively reflect the
FERC approved gathering agreement. Gathering for Mountain Fuel
represented 73% of the revenues from gathering gas in the first nine
months of 1994.
Questar Pipeline expanded firm storage service at Clay Basin from 31 to
41.8 Bcf working gas capacity in mid-May 1994, which added quarterly
revenues of about $1,500,000. After additional investment in cushion
gas, storage capacity will be increased to 46.3 Bcf by the 1995-96
heating season.
Operating and maintenance expenses were lower in the periods ended
September 30, 1994, because of lower variable transmission costs and
lower field gathering costs. Depreciation expense was higher in the
periods ended September 30, 1994, because of capital spending, primarily
for storage and gathering activities.
The effective income tax rate was 37.1% in the first nine months of 1994
compared with 37.0% in the first nine months of 1993.
Effective January 1, 1994, the Company recorded a liability for
postemployment disability and health care benefits in compliance with
the Statement of Financial Accounting Standards No. 112. This did not
have an effect on net income since the $1,256,000 liability was offset
with a regulatory asset because the Company expects to include these
costs in future rates.
Liquidity and Capital Resources --
Operating Activities:
Net cash provided from operating activities was $36,989,000 for the
first nine months of 1994 compared with $44,380,000 for the same period
of 1993. The decrease was due to reduced sources from deferred income
taxes and working capital. In the Order 636 operating environment,
Questar Pipeline eliminated the purchased-gas adjustments account and
all but 3 Bcf of working gas capacity. As a result, the Company no
longer experiences the large seasonal changes in working capital as it
did prior to Order 636 regulation.
Investing Activities:
Capital expenditures were $42,065,000 in the first nine months of 1994,
compared with $25,994,000 in the corresponding 1993 period as the
Company continues expanding a major gas storage reservoir. Capital
expenditures for calendar year 1994 are estimated at $57,000,000.
Financing Activities:
On July 1, 1994, Questar Pipeline received a $25,000,000 capital
contribution from its parent company. Proceeds from the capital
contribution were used to fund capital expenditures, to repay short-term
debt and for other corporate purposes.
The Company has a short-term line-of-credit arrangement with a bank
totaling $200,000. In addition, its parent company loans funds to the
Company under a short-term arrangement. As of September 30, 1994,
Questar Pipeline had no loans payable to Questar Corporation.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
On October 24, 1994, the Federal Energy Regulatory
Commission (the FERC) approved an offer of settlement that
Questar Pipeline Company (Questar Pipeline) filed as operator of
the Overthrust Pipeline Company (Overthrust). The settlement
offer approved by the FERC established new rates for Overthrust
and was a pretax return of 10.2 percent. Overthrust is a
partnership that owns and operates an 88-mile line that extends
from Whitney Canyon in southwestern Wyoming to the vicinity of
Rock Springs, Wyoming. Questar Pipeline has an 18-percent
ownership interest in Overthrust; its partners are CIG Overthrust
Inc., Columbia Gulf Transmission Company, Enron Overthrust
Pipeline Company, NGPL - Overthrust Inc., and Tennessee
Overthrust Gas Company.
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)
November 10, 1994 /s/ A. J. Marushack
(Date) A. J. Marushack
President and Chief
Executive Officer
November 10, 1994 /s/ W. F. Edwards
(Date) W. F. Edwards
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summarized financial information extracted from the
Questar Pipeline Company Statements of Income and Balance Sheet for the
period ended September 30, 1994, and is qualified in its entirety by
references to such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 249
<SECURITIES> 0
<RECEIVABLES> 18,881
<ALLOWANCES> 0
<INVENTORY> 2,745
<CURRENT-ASSETS> 23,854
<PP&E> 602,129
<DEPRECIATION> 201,255
<TOTAL-ASSETS> 443,820
<CURRENT-LIABILITIES> 21,249
<BONDS> 134,501
<COMMON> 6,551
0
0
<OTHER-SE> 209,549
<TOTAL-LIABILITY-AND-EQUITY> 443,820
<SALES> 0
<TOTAL-REVENUES> 85,117
<CGS> 0
<TOTAL-COSTS> 32,102
<OTHER-EXPENSES> 14,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,739
<INCOME-PRETAX> 29,387
<INCOME-TAX> 10,913
<INCOME-CONTINUING> 18,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,474
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
