<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ 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 Number 1-12426
AQUILA GAS PIPELINE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0731171
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 N.E. Loop 410, Suite 1000, San Antonio, Texas
78216-4754
(Address of principal executive offices)
(Zip Code)
(210) 342-0685
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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 on May 1, 1996
----- --------------------------
Common stock, $0.01 par value 29,400,000
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995
----------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,557 $ 8,666
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,428 77,203
Inventories and exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . 3,322 4,394
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,821 6,147
---------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 98,128 96,410
---------- ------------
PIPELINE, PROPERTY, PLANT AND EQUIPMENT, at cost:
Natural gas pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,779 400,984
Plants and processing equipment . . . . . . . . . . . . . . . . . . . . . . . 67,051 63,933
---------- ------------
476,830 464,917
Less -- Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . (79,974) (74,921)
---------- ------------
396,856 389,996
---------- ------------
INTANGIBLE ASSETS, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,298 18,916
---------- ------------
OTHER, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233 1,316
---------- ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 514,515 $ 506,638
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . $ 12,830 $ 12,796
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,726 75,309
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,275 5,750
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,815 2,754
Income taxes payable to UtiliCorp United Inc. . . . . . . . . . . . . . . . . 3,332 828
Intercompany payable due to Aquila Energy Corporation . . . . . . . . . . . . 3,354 1,557
---------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,332 98,994
---------- ------------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,803 179,900
---------- ------------
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,721 58,480
---------- ------------
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 591
---------- ------------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized, none outstanding -- --
Common stock, $.01 par value, 50,000,000 shares authorized, 29,400,000
shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . 294 294
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 90,297 90,297
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,488 78,082
---------- ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,079 168,673
---------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . $ 514,515 $ 506,638
========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
------------- -----------
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . $ 164,917 $ 101,508
------------ -----------
COSTS AND EXPENSES:
Cost of sales . . . . . . . . . . . . . . . . 130,831 78,459
Operating . . . . . . . . . . . . . . . . . . 5,855 5,069
General and administrative . . . . . . . . . 5,629 3,930
Depreciation and amortization . . . . . . . . 5,719 5,110
------------ -----------
Total costs and expenses . . . . . . . . . 148,034 92,568
------------ -----------
INCOME FROM OPERATIONS . . . . . . . . . . . . . 16,883 8,940
INTEREST AND DEBT EXPENSES, net . . . . . . . . . 4,366 2,734
------------ -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . 12,517 6,206
PROVISION IN LIEU OF INCOME TAX EXPENSE . . . . . 4,744 2,352
------------ -----------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 7,773 $ 3,854
============ ===========
EARNINGS PER SHARE . . . . . . . . . . . . . . . $ .26 $ .13
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . 29,400,000 29,400,000
============ ===========
CASH DIVIDENDS PER SHARE OF COMMON STOCK . . . . $ .0125 $ .0125
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,773 $ 3,854
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 5,719 5,110
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,241 1,111
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 90
Changes in operating assets and liabilities, net of the effect of acquisition:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,775 375
Inventories and exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . 1,072 (35)
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 1,329
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,583) (5,683)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,525 (535)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 (1,695)
Income taxes payable to UtiliCorp United Inc. . . . . . . . . . . . . . . . . 2,504 1,242
Intercompany payable due to Aquila Energy Corporation . . . . . . . . . . . . 1,797 663
------------ ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 18,282 5,826
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . -- (13,478)
Additions to pipeline, property, plant and equipment . . . . . . . . . . . . . . . . . (11,950) (14,300)
----------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . (11,950) (27,778)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements, net . . . . . . . . . . . . . . . . . . . 1,000 23,900
Principal payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63) (594)
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (367) (367)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 354
------------ ---------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . 559 23,293
------------ ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6,891 1,341
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . . . . . . . . . . . . . 8,666 6,631
------------ ---------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,557 $ 7,972
============ =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Aquila Gas
Pipeline Corporation and subsidiaries (the Company) have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. All adjustments of a normal recurring nature have
been made which the Company believes are necessary for a fair presentation of
the Company's financial position and results of operations for such interim
periods. These interim results are not necessarily indicative of the results
for a full year. Certain information and note disclosures related to the
unaudited interim periods ended March 31, 1996 and 1995, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations although the Company believes the disclosures are adequate to make
the interim period information presented herein not misleading. Certain
reclassifications have been made to the 1995 amounts to conform to the 1996
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. No changes in accounting principles have occurred since
this date.
2. STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information for the three months ended
March 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Cash paid during the period
for interest, net of amount
capitalized . . . . . . . . . . . $ 4,425 $ 4,354
Cash paid during the period
for income and franchise taxes . $ 106 $ 1
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
LETTERS OF CREDIT
The Company has issued irrevocable standby letters of credit totalling
$13,087 at March 31, 1996. The standby letters of credit, which generally have
terms from one to three months, collateralize obligations to third parties for
the purchase of gas. The standby letters of credit are issued pursuant to a
line of credit maintained by the Company.
5
<PAGE> 6
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
In 1987, HECI Exploration, Inc. (HECI) instituted a suit in the 155th
Judicial District Court, Fayette County, Texas, against the Company
alleging various breaches of a take-or-pay contract and seeking
approximately $3,000 in damages. The Company's motion for summary judgment
was granted by the lower court. A Texas appellate court, however, has
remanded the case for trial.
In the purchase and sale agreement executed in connection with the 1987
acquisition of Clajon Gas Company by a predecessor of the Company, Clayton
Williams, Jr., individually, and certain selling entities agreed to jointly
and severally indemnify the purchaser from liabilities related to the
conduct of the acquired business or arising out of any assigned contracts
prior to the closing date of the acquisition, subject to certain
limitations. Thus, certain claims and litigation, including the HECI
litigation described above, involving the acquired business and contracts
assigned to the Company are subject to these indemnification provisions.
The indemnity provision limits Mr. Williams' personal liability to $3,000
in the aggregate.
In August 1995, Mr. Charles Menke instituted suit against the Company
in the 155th Judicial District Court, Waller County, Texas, alleging the
Company has constructed and was operating a pipeline on property owned by
Mr. Menke. Mr. Menke alleges the Company is a trespasser on his property
and seeks unspecified damages for such trespass including punitive damages.
Mr. Menke additionally seeks an injunction requiring the Company to cease
operation of its pipeline and to remove such line from his property. In
October 1995, the Court denied Mr. Menke's request for a temporary
injunction and set this matter for trial in January 1996. By consent of
all parties the January 1996 trial date was postponed and no new trial date
has been set. The Company believes Mr. Menke's claims for injunctive
relief are without merit, and believes it has meritorious defenses to the
damage claims. The Company has filed a denial of all claims and is
actively pursuing its defense of this litigation.
TAXES
The Internal Revenue Service (IRS) has examined and proposed
adjustments to UtiliCorp United Inc.'s (UtiliCorp) consolidated Federal
income tax returns for 1988 through 1991. The proposed adjustment
affecting the Company is to lengthen the depreciable life of certain
pipeline assets owned by the Company. At the present, no final resolution
of the proposed adjustment has been reached with the IRS. The Company
intends to vigorously contest the proposed adjustment and believes there is
a reasonable possibility it will prevail. It is expected that additional
assessments for the years 1992 through the present would be made on the
same issue. Under the provisions of the tax sharing agreement with Aquila
Energy Corporation (Aquila Energy) and UtiliCorp, the Company would be
liable to UtiliCorp for additional taxes of approximately $4,300 for the
audit period and through the present plus potential interest of
approximately $150. The additional taxes would result in an adjustment to
the deferred tax liability with no effect on net earnings, while any
payment of interest would affect net earnings. The Company expects that
the ultimate resolution of this matter will not have a material adverse
effect on its financial position.
The Company is also a party to additional claims and is involved in various
other litigation and administrative proceedings arising in the normal course of
business. The Company believes it is unlikely that the final outcome of any of
the claims, litigation or proceedings discussed above to which the Company is a
party would have a material adverse effect on the Company's financial position
or results of operations. However, due to the inherent uncertainty of
litigation, there can be no assurance that the resolution of any particular
claim or proceeding would not have an adverse effect on the Company's results of
operations for the fiscal period in which such resolution occurred.
6
<PAGE> 7
AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis relates to the condensed consolidated
financial position and results of operations of Aquila Gas Pipeline Corporation
and subsidiaries (the Company) for the three months ended March 31, 1996 and
1995. Reference should be made to the Condensed Consolidated Financial
Statements and the Notes thereto. In 1996, a full quarter of operations for
Tristar Gas Company (Tristar) has been recorded while in 1995 Tristar
operations have been included since its acquisition in January 1995.
<TABLE>
<CAPTION>
Three Months Ended Period 1995
March 31, to 1996 Change
------------------------ -----------------------
1996 1995 (a) Amount Percent
--------- ---------- ---------- ---------
(Dollars in millions, except price data)
<S> <C> <C> <C> <C>
FINANCIAL DATA:
Natural gas revenues $ 143.2 $ 86.0 $ 57.2 67 %
Natural gas liquids (NGLs) revenues 21.7 15.5 6.2 40 %
-------- ------- --------
Total operating revenues 164.9 101.5 63.4 62 %
-------- ------- --------
Cost of sales 130.8 78.5 52.3 67 %
-------- ------- --------
Gross margin 34.1 23.0 11.1 48 %
Operating expenses 5.8 5.1 .7 14 %
General and administrative expenses 5.6 3.9 1.7 44 %
Depreciation and amortization 5.7 5.1 .6 12 %
Interest and debt expenses, net 4.4 2.7 1.7 63 %
Provision in lieu of income tax expense 4.8 2.3 2.5 109 %
-------- ------- --------
Net income $ 7.8 $ 3.9 $ 3.9 100 %
======== ======= ========
OPERATING DATA (MMCF/D):
Natural Gas:
Throughput sold 368 360 8 2 %
Throughput transported 137 89 48 54 %
-------- ------- - -------
Total throughput 505 449 56 12 %
Marketed 359 371 (12) (3)%
-------- ------- --------
Total throughput and marketed 864 820 44 5 %
======== ======= ========
OTHER DATA:
Gross NGLs production (MBbls/d) 40 29 11 38 %
Average natural gas price ($/Mcf ) $ 2.15 $ 1.47 $ .68 46 %
Average NGLs price ($/gal) $ .31 $ .30 $ .01 3 %
</TABLE>
___________________________
(a) In 1995, the volumes for Tristar have been included at their average daily
rate since its acquisition in January 1995.
7
<PAGE> 8
RESULTS OF OPERATIONS
The Company's results of operations are determined by the volume of gas
purchased, processed and resold in its gas gathering systems and natural gas
processing plants, as well as its off-system marketing activities.
Fluctuations in the price levels of natural gas and NGLs also affect results of
operations since the Company generally receives a portion of the natural gas
and NGLs revenue from natural gas throughput. Most of the Company's operating
costs do not vary directly with volume on existing systems; thus, increases or
decreases in volumes on existing systems generally have a direct effect on net
income.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1995
Total operating revenues increased 62% to $164.9 million in 1996 compared
to $101.5 million in 1995. Natural gas revenues increased 67% to $143.2
million in 1996 compared to $86.0 million in 1995. The increase in natural gas
revenues is due largely to a 46% increase in the average natural gas price to
$2.15 per Mcf in 1996 from $1.47 per Mcf in 1995 and a full quarter of
operations for Tristar. Partially offsetting the increase is a slight decrease
in natural gas sold and marketed to 727 MMcf/d in 1996 from 731 MMcf/d in 1995.
Natural gas throughput sold increased 2% to 368 MMcf/d in 1996 from 360 MMcf/d
in 1995 primarily as a result of additional wells connected to the Southeast
Texas Pipeline System (SETPS), the Company's principal gathering system.
NGLs revenues increased 40% to $21.7 million in 1996 compared to $15.5
million in 1995 as the result of a 38% increase in gross NGLs production to
40,000 Bbls/d in 1996 compared to 29,000 Bbls/d in 1995 and a 3% increase in
the average NGLs price to $.31 per gallon from $.30 per gallon. Natural gas
processed at the Exxon Company U.S.A.'s natural gas processing plant at Katy,
Texas, as a result of the Company's 1995 construction of the Katy pipeline,
primarily accounted for the increased NGLs production.
Cost of sales was $130.8 million or 79% of operating revenues in 1996
compared to $78.5 million or 77% of operating revenues in 1995. Cost of sales
increased as the result of an increase in average natural gas price and a full
quarter of operations for Tristar.
Gross margin (operating revenues less cost of sales, which includes only
the direct cost of gas sold and does not include any related operating
expenses) was $34.1 million, or 21% of operating revenues, in 1996 compared to
$23.0 million, or 23% of operating revenues, in 1995. The decrease in
percentage is due to a higher cost of gas supply for the pipeline systems. The
gross margin increased due to an increase in average natural gas and NGLs
prices of 46% and 3%, respectively, an increase in NGLs production and a full
quarter of operations for Tristar. Partially offsetting these factors was the
reduction in the natural gas sold and marketed noted above and reduced heating
value and NGLs content in the natural gas delivered to the Company from the
wellhead.
Operating expenses increased 14% to $5.8 million in 1996 compared to $5.1
million in 1995 primarily as a result of expanded gathering systems and plant
operations and a full quarter of operations for Tristar.
General and administrative expenses increased 44% to $5.6 million in 1996
compared to $3.9 million in 1995 due to increased employee costs, incentive
programs and a full quarter of operations for Tristar.
Depreciation and amortization increased 12% to $5.7 million in 1996
compared to $5.1 million in 1995 primarily as the result of new pipeline,
property, plant and equipment additions on the SETPS.
Interest and debt expenses increased 63% to $4.4 million in 1996 compared
to $2.7 million in the 1995 period primarily as a result of increased interest
rates and debt balances incurred for capital expenditures and the recording of
interest associated with certain agreed-upon tax issues with the Internal
Revenue Service (IRS) resulting from the IRS examination of certain UtiliCorp
United Inc. (UtiliCorp) Federal income tax returns.
Provision in lieu of income tax expense increased 109% to $4.8 million in
1996 compared to $2.3 million in 1995 due to an increase in income before
income taxes in 1996 compared to 1995. As a result of the agreed-upon issues
with the IRS, discussed in the previous paragraph, the Company is liable to
UtiliCorp for approximately $2.9 million, under the provisions of the tax
sharing agreement, once the IRS assesses UtiliCorp for the agreed-upon issues.
The payment of the income taxes associated with the agreed-upon issues will
have no effect on net earnings, as it will be an adjustment to the deferred tax
liability, upon assessment by the IRS. Also, see Note 3 to the Condensed
Consolidated Financial Statements relating to other tax matters.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company generates significant cash from operations and expects such
cash and borrowing to be its primary source of liquidity. The Company's
primary uses of cash consist of capital expenditures, acquisitions, working
capital requirements, dividends and debt repayment. The Company's historical
additions to pipeline, property, plant and equipment were $12.0 million and
$76.2 million for the three months ended March 31, 1996 and the year ended
December 31, 1995, respectively. Capital expenditures are expected to be
approximately $44.0 million in 1996 excluding business acquisitions, if any.
The Company maintains revolving credit agreements (the Revolvers) of $100.0
million with Aquila Energy Corporation (Aquila Energy) to provide funds for
general corporate purposes. There was $55.0 million and $54.0 million
outstanding on the Revolvers at March 31, 1996 and December 31, 1995,
respectively. The total amount available to borrow on the Revolvers was $45.0
million at March 31, 1996.
The Company also has a Loan Agreement (the Loan) with Aquila Energy for an
amount of $50.0 million to provide funds for general corporate purposes. The
Loan requires the Company to meet and maintain certain financial covenants as
well as limits the activities of the Company in other ways. At March 31, 1996,
the Company was in compliance with such covenants.
The 8.29% Senior Notes issued by Aquila Southwest Energy Corporation
(Aquila Southwest), a wholly-owned subsidiary of the Company, in 1992 require
principal payments of $12.5 million annually. Such principal payments are
expected to be made from cash flows from operations and borrowing. The 8.29%
Senior Note purchase agreement has numerous covenants which affect the Company
and Aquila Southwest. These covenants limit the ability to make dividend
payments and incur debt, require maintenance of certain financial ratios and
limit the activities of Aquila Southwest in other ways. Failure to maintain
the required ratios may ultimately result in an acceleration of payments due.
The Company was in compliance with such covenants at March 31, 1996.
The Company believes that cash generated from operations and borrowing
under the Revolvers will be adequate to fund working capital requirements, debt
service payments and planned capital expenditures.
NEW ACCOUNTING STANDARD
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation". SFAS 123 is required to be adopted by the Company in 1996.
SFAS 123 provides for alternative methods for recording stock-based
compensation and requires additional disclosure regardless of which method is
utilized to record stock-based compensation. The Company has not determined
the effects, if any, that SFAS 123 may have on the Company's future operations.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None. Also, see Note 3 to the Condensed Consolidated Financial
Statements for a description of legal proceedings.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits.
Incorporated herein by reference to Index to Exhibit.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1996.
10
<PAGE> 11
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.
AQUILA GAS PIPELINE CORPORATION
(Registrant)
/s/ Craig F. Strehl
--------------------------------
Date: May 10, 1996 By: Craig F. Strehl
President and Chief
Operating Officer
/s/ Damon C. Button
--------------------------------
Date: May 10, 1996 By: Damon C. Button
Vice President, Treasurer
and Chief Financial Officer
11
<PAGE> 12
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements for the quarter ended March 31, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,557
<SECURITIES> 0
<RECEIVABLES> 73,428
<ALLOWANCES> 0
<INVENTORY> 3,322
<CURRENT-ASSETS> 98,128
<PP&E> 476,830
<DEPRECIATION> (79,974)
<TOTAL-ASSETS> 514,515
<CURRENT-LIABILITIES> 96,332
<BONDS> 180,803
<COMMON> 294
0
0
<OTHER-SE> 175,785
<TOTAL-LIABILITY-AND-EQUITY> 514,515
<SALES> 164,917
<TOTAL-REVENUES> 164,917
<CGS> 130,831
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,203
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,366
<INCOME-PRETAX> 12,517
<INCOME-TAX> 4,744
<INCOME-CONTINUING> 7,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,773
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
