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, 1998
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 45360, 180 East First South, Salt Lake City, Utah8445-0360
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(801) 324-2400
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 March 31, 1998
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.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
QUESTAR PIPELINE COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1998 1997 1998 1997
(In Thousands)
<S> <C> <C> <C> <C>
REVENUES $27,249 $26,721 $105,965 $104,823
OPERATING EXPENSES
Operating and maintenance 9,927 8,908 38,353 38,606
Depreciation 3,843 3,597 15,043 14,425
Other taxes 673 751 2,738 2,228
TOTAL OPERATING EXPENSES 14,443 13,256 56,134 55,259
OPERATING INCOME 12,806 13,465 49,831 49,564
INTEREST AND OTHER INCOME (EXPENSE) (86) 5 1,232 1,259
INCOME (LOSS) FROM UNCONSOLIDATED
AFFILIATES 407 (68) 5,104 77
DEBT EXPENSE (3,434) (3,351) (13,619) (13,373)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 9,693 10,051 42,548 37,527
INCOME TAXES 3,139 3,729 15,748 13,813
INCOME FROM CONTINUING
OPERATIONS 6,554 6,322 26,800 23,714
DISCONTINUED OPERATIONS -
QUESTAR GAS MANAGEMENT
COMPANY 356
NET INCOME $6,554 $6,322 $26,800 $24,070
</TABLE>
See note to financial statements
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 1997
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $7,075
Accounts receivable $10,406 $11,523 10,851
Inventories 2,092 2,373 2,303
Other current assets 1,877 1,953 2,035
Total current assets 14,375 15,849 22,264
Property, plant and equipment 581,877 561,025 580,603
Less allowances for depreciation 207,154 197,763 202,427
Net property, plant and equipment 374,723 363,262 378,176
Investment in unconsolidated affiliates 29,884 14,279 26,977
Other assets 11,039 10,843 10,147
$430,021 $404,233 $437,564
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Checks outstanding in excess of
cash balances $879 $752
Notes payable to Questar Corporation 19,100 4,000 $25,800
Accounts payable and accrued
expenses 18,581 17,033 20,069
Total current liabilities 38,560 21,785 45,869
Long-term debt 134,568 134,549 134,563
Other liabilities 3,359 4,197 4,523
Deferred income taxes 61,919 58,637 62,298
Common shareholder's equity
Common stock 6,551 6,551 6,551
Additional paid-in capital 82,034 82,034 82,034
Retained earnings 103,030 96,480 101,726
Total common shareholder's equity 191,615 185,065 190,311
$430,021 $404,233 $437,564
</TABLE>
See note to financial statements
<PAGE>
QUESTAR PIPELINE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
1998 1997
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $6,554 $6,322
Depreciation 4,502 3,891
Deferred income taxes (379) (131)
(Income) loss from unconsolidated
affiliates (407) 68
10,270 10,150
Change in operating assets and
liabilities (2,725) (1,064)
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 7,545 9,086
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant
and equipment (2,584) (3,270)
Other investments (2,500)
Total capital expenditures (5,084) (3,270)
Proceeds from disposition of property,
plant and equipment 1,535 4,432
NET CASH (USED IN) PROVIDED FROM
INVESTING ACTIVITIES (3,549) 1,162
FINANCING ACTIVITIES
Checks outstanding in excess
of cash balances 879 752
Decrease in notes payable
to Questar Corporation (6,700) (7,800)
Payment of dividends (5,250) (5,750)
NET CASH USED IN FINANCING
ACTIVITIES (11,071) (12,798)
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS ($7,075) ($2,550)
</TABLE>
See note to financial statements
<PAGE>
QUESTAR PIPELINE COMPANY
NOTE TO CONDENSED FINANCIAL STATEMENTS
March 31, 1998
(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. The
results of operations for the three-month period ended March 31,
1998, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. 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, 1997.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
QUESTAR PIPELINE COMPANY
March 31, 1998
(Unaudited)
Operating Results
Following is a summary of financial and operating information
for the Company:
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
1998 1997 1998 1997
(Dollars In Thousands)
<S> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $9,065 $9,131 $36,277 $39,881
From affiliates 18,184 17,590 69,688 64,942
Total revenues $27,249 $26,721 $105,965 $104,823
Operating income $12,806 $13,465 $49,831 $49,564
Income from continuing operations 6,554 6,322 26,800 23,714
OPERATING STATISTICS
Natural gas transportation volumes (in
thousands of decatherms)
For unaffiliated customers 32,778 33,303 115,690 128,325
For Questar Gas 38,331 42,264 106,378 105,269
For other affiliated customers 4,858 6,816 35,839 46,545
Total transportation 75,967 82,383 257,907 280,139
Transportation revenue (per decatherm) $0.24 $0.21 $0.27 $0.24
</TABLE>
Revenues were higher in the 3- and 12-month periods of 1998 due
primarily to increased firm-transportation reservation charges.
Questar Pipeline is expanding working gas capacity at Clay Basin
in 1998 by 5 Bcf at an estimated cost of $4 million. In an open
season sign-up conducted in January 1998, all potential new
capacity was pledged under long-term commitments. The expansion
is expected to add about $3 million in annual storage revenues
beginning in the second quarter of 1998.
Operating and maintenance (O & M) expenses were 11% higher in
the first quarter 1998 when compared to the same period of 1997
due primarily to a timing difference in billings from a
technology supplier. O & M expenses were lower in the 12 months
ended March 31, 1998 due primarily to cost efficiencies
resulting from sharing services with an affiliated company.
Questar Gas Company and Questar Pipeline share the costs of
certain administrative, marketing, accounting, technical and
related services under Questar Regulated Services Co.
Depreciation expense was higher in the 1998 periods as a result
of increased investment in property, plant and equipment. Other
taxes were lower in the first quarter of 1998 and in the
12-months ended March 31, 1997 as a result of receiving property
tax refunds in the first quarter of 1998 and the third quarter
of 1996.
Income from unconsolidated affiliates in the 1998 periods
includes the Company's share of earnings reported by
TransColorado Gas Transmission Co. The earnings reflect
capitalization of interest and equity costs (AFUDC) associated
with the construction of the TransColorado pipeline amounting to
$318,000 in the 3 months ended March 31, 1998 and $4,774,000 in
the 12 months ended March 31, 1998.
The effective income tax rate was 32.4% in the first quarter of
1998 compared with 37.1% in the first quarter of 1997 due to
adjustments that reduced 1998 tax expenses.
A regulatory proceeding involving Questar Pipeline, Federal
Energy Regulatory Commission (FERC) Docket No. IN97-1, has been
resolved by an order issued March 2, 1998. The FERC found that
Questar Pipeline was not liable for any refunds related to
charges made to Questar Gas for rendering gathering services.
Liquidity and Capital Resources
Operating Activities
Net cash provided from operating activities of $7,545,000 in the
first quarter of 1998 was 17% below the $9,086,000 reported for
the same period in 1997 due primarily to changes in operating
assets and liabilities.
Investing Activities
Capital expenditures were $5,084,000 in the first quarter of
1998 compared with $3,270,000 in the corresponding 1997 period.
Capital expenditures for calendar year 1998 are estimated to be
$76,100,000, which includes $27,700,000 for the Company's share
of equity investments in unconsolidated affiliates.
Financing Activities
The Company has a short-term line-of-credit arrangement with a
bank totaling $200,000. No amounts were borrowed under this
arrangement at March 31, 1998. In addition, Questar Corporation
loans funds to the Company under a short-term arrangement. As
of March 31, amounts borrowed from Questar were $19,100,000 in
1998 and $4,000,000 in 1997. First quarter financing
activities focused on payment of dividends and a partial
repayment of the Company's notes payable to Questar. Capital
expenditures for 1998 are expected to be financed from net cash
flow provided from operations and short- and long-term debt
including borrowings from Questar.
Forward Looking Statements
This 10-Q contains forward-looking statements about the future
operations and expectations of Questar Pipeline. According to
management, 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.
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 13, 1998 /s/ D. N. Rose
D. N. Rose
President and Chief Executive
Officer
May 13, 1998 /s/S. E. Parks
(Date) S. E. Parks
Vice President, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following schedule contains summarized financial information extracted
from the Questar Pipeline Company Statements of Income and Balance Sheets
for the period ended March 31, 1998, and is qualified in its entirety,
by reference to such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 10,406
<ALLOWANCES> 0
<INVENTORY> 2,092
<CURRENT-ASSETS> 14,375
<PP&E> 581,877
<DEPRECIATION> 207,154
<TOTAL-ASSETS> 430,021
<CURRENT-LIABILITIES> 38,560
<BONDS> 134,568
0
0
<COMMON> 6,551
<OTHER-SE> 185,064
<TOTAL-LIABILITY-AND-EQUITY> 430,021
<SALES> 0
<TOTAL-REVENUES> 27,249
<CGS> 0
<TOTAL-COSTS> 9,927
<OTHER-EXPENSES> 4,516
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,434
<INCOME-PRETAX> 9,693
<INCOME-TAX> 3,139
<INCOME-CONTINUING> 6,554
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,554
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
