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, 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 April 30, 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.
QUESTAR PIPELINE COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1994 1993 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
REVENUES $27,750 $78,151 $121,227 $210,893
OPERATING EXPENSES
Natural gas purchases 45,169 10,853 96,796
Operating and maintenance 11,279 13,745 45,890 48,447
Depreciation 3,674 3,456 14,302 13,705
Other taxes 1,134 1,043 4,006 3,832
TOTAL OPERATING EXPENSES 16,087 63,413 75,051 162,780
OPERATING INCOME 11,663 14,738 46,176 48,113
INTEREST AND OTHER INCOME 226 85 2 912
INCOME FROM UNCONSOLIDATED
AFFILIATES 69 18 179 34
DEBT EXPENSE (3,203) (3,314) (13,003) (13,779)
INCOME BEFORE INCOME TAXES 8,755 11,527 33,354 35,280
INCOME TAXES 3,247 4,145 11,953 12,431
NET INCOME $5,508 $7,382 $21,401 $22,849
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993 1993
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $2,004 $1,341
Notes receivable from parent company $16,300
Accounts receivable 11,221 41,365 11,191
Inventories 2,730 9,517 2,394
Other current assets 1,989 2,164 2,268
Total current assets 17,944 69,346 17,194
Property, plant and equipment 566,191 513,885 561,108
Less allowances for depreciation 193,365 178,898 189,279
Net property, plant and equipment 372,826 334,987 371,829
Investment in unconsolidated
affiliates 7,214 6,824 7,145
Other assets 10,127 6,867 9,726
$408,111 $418,024 $405,894
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Checks outstanding in excess of
cash balances $3,031
Notes payable to affiliates $300 $3,000
Accounts payable and accrued
expenses 17,224 19,462 12,668
Purchased gas adjustments 12,390
Total current liabilities 17,524 34,883 15,668
Long-term debt 134,492 134,473 134,487
Deferred credits 1,485 782 2,276
Deferred income taxes 67,474 65,651 67,335
Common shareholder's equity
Common stock 6,551 6,551 6,551
Additional paid-in capital 57,034 57,034 57,034
Retained earnings 123,551 118,650 122,543
Total common shareholder's equity 187,136 182,235 186,128
$408,111 $418,024 $405,894
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1994 1993
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $5,508 $7,382
Depreciation 4,091 3,912
Deferred income taxes 139 2,045
Income from unconsolidated
affiliates (69) (18)
9,669 13,321
Change in operating assets and
liabilities 3,282 12,909
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 12,951 26,230
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and
equipment (5,089) (2,290)
Other investments (153)
Total capital expenditures (5,089) (2,443)
Proceeds (uses) from disposition of
property, plant and equipment 1 (73)
CASH USED IN INVESTING
ACTIVITIES (5,088) (2,516)
FINANCING ACTIVITIES
Decrease in notes payable to parent
company (2,700) (7,500)
Increase in notes receivable from
parent company (16,300)
Payment of dividends (4,500) (4,000)
CASH USED IN FINANCING
ACTIVITIES (7,200) (27,800)
CHANGE IN CASH AND SHORT-TERM
INVESTMENTS, AND CHECKS
OUTSTANDING IN EXCESS OF
CASH BALANCES $663 ($4,086)
</TABLE>
<PAGE>
QUESTAR PIPELINE COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 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-month period ended March 31, 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.
QUESTAR PIPELINE COMPANY
MANAGEMENT'S ANALYSIS
March 31, 1994
Operating Results --
Following is a summary of operating information for the Company:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Natural gas volumes (in thousands of
decatherms)
Transportation
For Mountain Fuel 36,860 13,259 88,662 35,432
For other customers 31,203 38,871 141,520 168,153
Total transportation 68,063 52,130 230,182 203,585
Sales for resale to Mountain Fuel 21,039 3,298 42,285
Total system throughput 68,063 73,169 233,480 245,870
Gathering
For Mountain Fuel 12,065 20,989 35,508 44,252
For other customers 11,783 7,590 52,529 31,020
Total gathering 23,848 28,579 88,037 75,272
Natural gas revenues (per decatherm)
Transportation $0.23 $0.23 $0.24 $0.22
Sales for resale 2.70 7.57 3.22
Gathering 0.23 0.22 0.22 0.24
</TABLE>
Questar Pipeline began operating under Federal Energy Regulatory Commission
(FERC) Order 636 effective September 1, 1993. At that time Questar Pipeline
unbundled its transportation, gathering and storage services and eliminated
its sales-for-resale function. Under the Order 636 operating environment,
firm transportation and gathering volumes do not have a significant impact
on current operating results since 94% of the cost of service is recovered
in the demand component of rates using the straight fixed-variable rate
design. Since this demand component is collected equally each month of the
year, revenues collected using the straight fixed-variable rate design in
the high-volume first quarter are less than those collected under the rate
design in effect during the first quarter of 1993. The straight
fixed-variable rate design should result in increased revenues during the
second and third quarters of 1994, compared to the same quarters of 1993.
Deliveries to Mountain Fuel (including transportation and sales for resale)
were higher in the periods ended March 31, 1994, due to gas transported to
storage reservoirs. Transportation for other customers was lower in the
1994 periods because Order 636 rate design changes reduced volumes for
interruptible customers.
Gathering volumes for Mountain Fuel decreased in the first quarter of 1994;
however, gathering for other customers increased. In April 1994, the FERC
approved a gathering agreement between Questar Pipeline and Mountain Fuel,
which will allocate 60% of the gathering cost of service to the demand
component of rates and 40% to the commodity component. Gathering revenues
will be increased in the second quarter of 1994, retroactive to September 1,
1993.
Operating and maintenance expenses were lower in the periods ended March 31,
1994, because of the transfer of activities to Mountain Fuel associated with
the gas-purchase function and lower variable costs from the reduced system
throughput. Depreciation expense was higher in the periods ended March 31,
1994, because of capital spending, primarily for storage and gathering
activities.
The effective income tax rate of 37.1% in the first quarter of 1994 was
higher than the 36.0% in the first quarter of 1993 because of an increase in
the federal income tax rate to 35%.
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 --
Net cash provided from operating activities was $12,951,000 for the first
quarter of 1994 compared with $26,230,000 for the same period of 1993. The
decrease was due to lower net income, and reduced sources from deferred
taxes and working capital. In the Order 636 operating environment, Questar
Pipeline does not have the same seasonal changes in working capital as it
did in the first quarter of 1993.
Capital expenditures were $5,089,000 in the first quarter of 1994, compared
with $2,443,000 in the corresponding 1993 period. Capital expenditures for
the calendar year 1994 are estimated at $70,900,000. These capital
expenditures will be financed with funds from operations and borrowings from
banks or the parent corporation.
The Company had a short-term line-of-credit arrangement with a bank totaling
$200,000. As of March 31, 1994, Questar Pipeline had borrowed $300,000 from
Questar Corporation.
PART II
OTHER INFORMATION
Questar Pipeline 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.
QUESTAR PIPELINE COMPANY
(Registrant)
May 11, 1994 /s/ A. J. Marushack
A. J. Marushack
President and Chief
Executive Officer
May 11, 1994 /s/ W. F. Edwards
W. F. Edwards
Vice President and Chief
Financial Officer
