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EX-31.2 - EXHIBIT 31.2 - QUESTAR GAS COstr63015ex312.htm
EX-31.5 - EXHIBIT 31.5 - QUESTAR GAS COstr63015ex315.htm
EX-31.3 - EXHIBIT 31.3 - QUESTAR GAS COstr63015ex313.htm
EX-31.4 - EXHIBIT 31.4 - QUESTAR GAS COstr63015ex314.htm
EX-31.1 - EXHIBIT 31.1 - QUESTAR GAS COstr63015ex311.htm
EX-32.2 - EXHIBIT 32.2 - QUESTAR GAS COstr63015ex322.htm
EX-31.6 - EXHIBIT 31.6 - QUESTAR GAS COstr63015ex316.htm
EX-32.3 - EXHIBIT 32.3 - QUESTAR GAS COstr63015ex323.htm
EX-32.1 - EXHIBIT 32.1 - QUESTAR GAS COstr63015ex321.htm


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 June 30, 2015
 
 
[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___
(Exact name of registrant as specified in its charter)
Commission File Number:
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer
Identification No.)
Questar Corporation
001-08796
Utah
87-0407509
Questar Gas Company
333-69210
Utah
87-0155877
Questar Pipeline Company
000-14147
Utah
87-0307414
333 South State Street, P.O. Box 45433, Salt Lake City, Utah 84145-0433
(Address of principal executive offices)
Registrants' telephone number, including area code (801) 324-5900
Web site http://www.questar.com

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.
Questar Corporation
Yes [X]   No [   ]
Questar Gas Company
Yes [X]   No [   ]
Questar Pipeline Company
Yes [X]   No [   ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Questar Corporation
Yes [X]   No [   ]
Questar Gas Company
Yes [X]   No [   ]
Questar Pipeline Company
Yes [X]   No [   ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Do not check non-accelerated filer if a smaller reporting company (Check one).
Questar Corporation
Large accelerated filer
[X]
Accelerated filer
[   ]
Non-accelerated filer
[   ]
Smaller reporting company [   ]
Questar Gas Company
Large accelerated filer
[   ]
Accelerated filer
[   ]
Non-accelerated filer
[X]
Smaller reporting company [   ]
Questar Pipeline Company
Large accelerated filer
[   ]
Accelerated filer
[   ]
Non-accelerated filer
[X]
Smaller reporting company [   ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Questar Corporation
Yes [   ]   No [X]
Questar Gas Company
Yes [   ]   No [X]
Questar Pipeline Company
Yes [   ]   No [X]


Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of June 30, 2015.
Questar Corporation
without par value
175,738,477
Questar Gas Company
$2.50 per share par value
9,189,626
Questar Pipeline Company
$1.00 per share par value
6,550,843

Questar Gas Company and Questar Pipeline Company, as wholly-owned subsidiaries of a reporting company, meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format.




QUESTAR CORPORATION
QUESTAR GAS COMPANY
QUESTAR PIPELINE COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2015

TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FILING FORMAT
This Quarterly Report on Form 10-Q is a combined report being filed by three separate registrants: Questar Corporation (Questar or the Company), Questar Gas Company and Questar Pipeline Company. Questar Gas Company and Questar Pipeline Company are wholly-owned subsidiaries of Questar. Separate financial statements for Wexpro Company have not been included since Wexpro is not a registrant. See Note 8 to the accompanying financial statements for a summary of operations by line of business. Information contained herein related to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

Item 1 of Part I of this Quarterly Report on Form 10-Q includes separate financial statements (i.e. statements of income, statements of comprehensive income, balance sheets and statements of cash flows, as applicable) for Questar Corporation, Questar Gas Company and Questar Pipeline Company. The notes accompanying the financial statements are presented on a combined basis for all three registrants. Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 2 of Part I is presented by line of business.

Questar 2015 Form 10-Q
2
 



PART I—FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

QUESTAR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions, except per-share amounts)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Questar Gas
$
141.7

 
$
145.0

 
$
516.5

 
$
541.3

 
$
936.1

 
$
968.1

Wexpro
10.1

 
7.8

 
16.4

 
20.1

 
31.9

 
46.4

Questar Pipeline
46.5

 
48.1

 
93.3

 
96.1

 
187.4

 
190.3

Other
1.0

 
0.4

 
1.7

 
0.7

 
3.6

 
0.9

Total Revenues
199.3

 
201.3

 
627.9

 
658.2

 
1,159.0

 
1,205.7

 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Cost of sales (excluding operating expenses shown separately)
(9.0
)
 
(24.3
)
 
122.8

 
123.9

 
185.2

 
217.4

Operating and maintenance
40.5

 
42.5

 
92.8

 
99.4

 
187.6

 
190.3

General and administrative
27.4

 
29.2

 
56.8

 
59.5

 
120.0

 
112.3

Production and other taxes
12.8

 
18.7

 
26.6

 
36.6

 
56.2

 
64.0

Depreciation, depletion and amortization
53.6

 
56.8

 
107.9

 
112.1

 
209.5

 
210.9

Abandonment and impairment
0.1

 
2.0

 
0.1

 
2.0

 
0.1

 
82.6

Total Operating Expenses
125.4

 
124.9

 
407.0

 
433.5

 
758.6

 
877.5

Net gain (loss) from asset sales
1.4

 
0.1

 
1.4

 
0.1

 
2.5

 
(0.2
)
OPERATING INCOME
75.3

 
76.5

 
222.3

 
224.8

 
402.9

 
328.0

Interest and other income
1.5

 
1.2

 
2.9

 
3.0

 
6.5

 
6.8

Income from unconsolidated affiliate
1.0

 
0.9

 
1.9

 
1.8

 
3.6

 
3.6

Interest expense
(15.8
)
 
(15.8
)
 
(31.7
)
 
(31.6
)
 
(63.2
)
 
(59.7
)
INCOME BEFORE INCOME TAXES
62.0

 
62.8

 
195.4

 
198.0

 
349.8

 
278.7

Income taxes
(21.4
)
 
(22.5
)
 
(70.2
)
 
(72.6
)
 
(123.5
)
 
(104.4
)
NET INCOME
$
40.6

 
$
40.3

 
$
125.2

 
$
125.4

 
$
226.3

 
$
174.3

 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.23

 
$
0.23

 
$
0.71

 
$
0.71

 
$
1.29

 
$
0.99

Diluted
0.23

 
0.23

 
0.71

 
0.71

 
1.28

 
0.99

Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
 
 
 
Used in basic calculation
176.4

 
175.8

 
176.3

 
175.7

 
176.1

 
175.7

Used in diluted calculation
176.6

 
176.1

 
176.5

 
176.1

 
176.4

 
176.1

Dividends per common share
$
0.21

 
$
0.19

 
$
0.42

 
$
0.37

 
$
0.80

 
$
0.73


See notes accompanying the financial statements

Questar 2015 Form 10-Q
3
 



QUESTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
Net income
$
40.6

 
$
40.3

 
$
125.2

 
$
125.4

 
$
226.3

 
$
174.3

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
6.0

 
4.5

 
12.0

 
8.8

 
(93.7
)
 
161.9

Interest rate cash flow hedge amortization
0.2

 
0.1

 
0.4

 
0.3

 
0.6

 
0.5

Commodity cash flow hedge
(0.3
)
 

 
(0.3
)
 

 
(0.3
)
 

Income taxes
(2.2
)
 
(1.8
)
 
(4.6
)
 
(3.6
)
 
35.9

 
(62.3
)
Net other comprehensive income (loss)
3.7

 
2.8

 
7.5

 
5.5

 
(57.5
)
 
100.1

COMPREHENSIVE INCOME
$
44.3

 
$
43.1

 
$
132.7

 
$
130.9

 
$
168.8

 
$
274.4


See notes accompanying the financial statements

Questar 2015 Form 10-Q
4
 



QUESTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30, 2015
 
June 30, 2014
 
Dec. 31, 2014
 
(in millions)
ASSETS
 
 
 
 
 
Current Assets
 
 
 
 
 
Cash and cash equivalents
$

 
$

 
$
32.0

Accounts receivable, net
53.3

 
72.5

 
118.1

Unbilled gas accounts receivable
11.6

 
15.4

 
93.7

Gas stored underground
30.6

 
29.6

 
43.7

Materials and supplies
30.7

 
24.6

 
30.4

Current regulatory assets
57.1

 
59.0

 
79.6

Prepaid expenses and other
10.2

 
9.6

 
11.2

Deferred income taxes - current
8.3

 
14.5

 
5.8

Total Current Assets
201.8

 
225.2

 
414.5

Property, Plant and Equipment
6,057.2

 
5,789.9

 
5,961.5

Accumulated depreciation, depletion and amortization
(2,272.5
)
 
(2,158.4
)
 
(2,226.0
)
Net Property, Plant and Equipment
3,784.7

 
3,631.5

 
3,735.5

Investment in unconsolidated affiliate
24.3

 
25.0

 
24.7

Noncurrent regulatory assets
23.7

 
18.5

 
25.0

Other noncurrent assets
50.4

 
51.0

 
50.0

TOTAL ASSETS
$
4,084.9

 
$
3,951.2

 
$
4,249.7

 

 

 

LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
 
 
 
 
 
Current Liabilities
 
 
 
 
 
Checks outstanding in excess of cash balances
$
2.5

 
$
0.9

 
$

Short-term debt
228.0

 
177.0

 
347.0

Accounts payable, accrued expenses and other
201.0

 
208.5

 
234.9

Current regulatory liabilities
2.6

 
13.6

 
13.4

Current portion of long-term debt and capital lease obligation
277.3

 
0.9

 
26.1

Total Current Liabilities
711.4

 
400.9

 
621.4

Long-term debt and capital lease obligation, less current portion
1,004.8

 
1,284.0

 
1,257.5

Deferred income taxes
715.6

 
711.0

 
715.6

Asset retirement obligations
70.6

 
69.4

 
69.3

Defined benefit pension plan and other postretirement benefits
125.1

 
78.5

 
185.7

Noncurrent regulatory liabilities
74.9

 
65.7

 
69.9

Customer contributions in aid of construction
27.4

 
30.1

 
29.2

Other noncurrent liabilities
46.3

 
42.1

 
54.9

 
 
 
 
 
 
COMMON SHAREHOLDERS' EQUITY
 
 
 
 
 
Common stock
480.8

 
469.4

 
476.8

Retained earnings
1,021.8

 
936.4

 
970.7

Accumulated other comprehensive (loss)
(193.8
)
 
(136.3
)
 
(201.3
)
Total Common Shareholders' Equity
1,308.8

 
1,269.5

 
1,246.2

TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
$
4,084.9

 
$
3,951.2

 
$
4,249.7

See notes accompanying the financial statements

Questar 2015 Form 10-Q
5
 



QUESTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
6 Months Ended June 30,
 
2015
 
2014
 
(in millions)
OPERATING ACTIVITIES
 
 
 
Net income
$
125.2

 
$
125.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
111.3

 
116.4

Deferred income taxes
(7.2
)
 
(4.6
)
Abandonment and impairment
0.1

 
2.0

Share-based compensation
6.3

 
6.0

Net (gain) from asset sales
(1.4
)
 
(0.1
)
(Income) from unconsolidated affiliate
(1.9
)
 
(1.8
)
Distributions from unconsolidated affiliate and other
2.6

 
2.9

Changes in operating assets and liabilities
66.2

 
37.6

NET CASH PROVIDED BY OPERATING ACTIVITIES
301.2

 
283.8

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Property, plant and equipment
(127.3
)
 
(134.4
)
Questar Gas acquisition of gas distribution system
(11.4
)
 

Cash used in disposition of assets
(1.8
)
 
(1.7
)
Proceeds from disposition of assets
1.1

 
0.8

NET CASH USED IN INVESTING ACTIVITIES
(139.4
)
 
(135.3
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Common stock issued
1.5

 
1.0

Common stock repurchased
(4.1
)
 
(2.9
)
Change in short-term debt
(119.0
)
 
(99.0
)
Checks outstanding in excess of cash balances
2.5

 
0.9

Capital lease obligation repaid
(0.6
)
 
(0.5
)
Dividends paid
(74.1
)
 
(65.0
)
Tax benefits from share-based compensation

 
1.0

NET CASH USED IN FINANCING ACTIVITIES
(193.8
)
 
(164.5
)
Change in cash and cash equivalents
(32.0
)
 
(16.0
)
Beginning cash and cash equivalents
32.0

 
16.0

Ending cash and cash equivalents
$

 
$


See notes accompanying the financial statements

Questar 2015 Form 10-Q
6
 




QUESTAR GAS COMPANY
STATEMENTS OF INCOME
(Unaudited)
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,

2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
From unaffiliated customers
$
141.7

 
$
145.0

 
$
516.5

 
$
541.3

 
$
936.1

 
$
968.1

From affiliated company

 

 

 

 

 
0.2

Total Revenues
141.7

 
145.0

 
516.5

 
541.3

 
936.1

 
968.3

 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Cost of natural gas sold (excluding operating expenses shown separately)
84.0

 
87.2

 
317.6

 
341.8

 
580.6

 
618.3

Operating and maintenance
24.8

 
26.3

 
57.9

 
66.1

 
114.3

 
122.0

General and administrative
12.8

 
12.9

 
26.2

 
26.7

 
52.3

 
52.8

Depreciation and amortization
13.6

 
13.6

 
27.1

 
26.8

 
53.9

 
52.0

Other taxes
5.1

 
4.8

 
9.7

 
9.9

 
17.6

 
17.8

Total Operating Expenses
140.3

 
144.8

 
438.5

 
471.3

 
818.7

 
862.9

Net gain from asset sales

 
0.1

 

 
0.1

 

 
0.1

OPERATING INCOME
1.4

 
0.3

 
78.0

 
70.1

 
117.4

 
105.5

Interest and other income
1.2

 
1.3

 
2.3

 
2.6

 
5.6

 
5.2

Interest expense
(7.1
)
 
(7.0
)
 
(14.2
)
 
(14.1
)
 
(28.3
)
 
(25.0
)
INCOME (LOSS) BEFORE INCOME TAXES
(4.5
)
 
(5.4
)
 
66.1

 
58.6

 
94.7

 
85.7

Income taxes
1.7

 
2.1

 
(25.1
)
 
(22.3
)
 
(34.8
)
 
(32.4
)
NET INCOME (LOSS)
$
(2.8
)
 
$
(3.3
)
 
$
41.0

 
$
36.3

 
$
59.9

 
$
53.3


See notes accompanying the financial statements



Questar 2015 Form 10-Q
7
 



QUESTAR GAS COMPANY 
CONDENSED BALANCE SHEETS 
(Unaudited)
 
June 30, 2015
 
June 30, 2014
 
Dec. 31, 2014
 
(in millions)
ASSETS 
 
 
 
 
 
Current Assets 
 
 
 
 
 
Cash and cash equivalents 
$

 
$

 
$
19.8

Notes receivable from Questar

 
3.0

 

Accounts receivable, net 
29.6

 
45.5

 
66.4

Unbilled gas accounts receivable 
11.6

 
15.4

 
93.7

Accounts receivable from affiliates 
68.3

 
43.6

 
45.2

Gas stored underground 
26.1

 
27.8

 
40.3

Materials and supplies 
18.7

 
13.1

 
19.2

Current regulatory assets 
56.3

 
55.1

 
78.3

Prepaid expenses and other 
3.8

 
4.8

 
3.5

Deferred income taxes - current 

 
2.9

 

Total Current Assets 
214.4

 
211.2

 
366.4

Property, Plant and Equipment 
2,455.4

 
2,269.0

 
2,352.3

Accumulated depreciation and amortization 
(799.9
)
 
(761.4
)
 
(780.3
)
Net Property, Plant and Equipment 
1,655.5

 
1,507.6

 
1,572.0

Noncurrent regulatory assets 
19.8

 
15.0

 
21.3

Other noncurrent assets 
9.2

 
9.6

 
9.3

TOTAL ASSETS 
$
1,898.9

 
$
1,743.4

 
$
1,969.0

 

 

 

LIABILITIES AND COMMON SHAREHOLDER'S EQUITY 
 
 
 
 
 
Current Liabilities 
 
 
 
 
 
Checks outstanding in excess of cash balances
$
4.1

 
$
4.8

 
$

Notes payable to Questar
59.7

 

 
119.3

Accounts payable and accrued expenses 
106.7

 
91.1

 
111.9

Accounts payable to affiliates 
77.8

 
65.1

 
78.7

Dividends payable to Questar

 

 
9.0

Customer advances 
18.0

 
9.2

 
29.4

Current regulatory liabilities 
1.0

 
12.8

 
12.5

Deferred income taxes - current 
3.9

 

 
6.3

Total Current Liabilities 
271.2

 
183.0

 
367.1

Long-term debt
534.5

 
534.5

 
534.5

Deferred income taxes 
378.1

 
340.5

 
377.5

Noncurrent regulatory liabilities
65.5

 
57.1

 
60.9

Customer contributions in aid of construction
27.4

 
30.1

 
29.2

Other noncurrent liabilities 
2.5

 
3.0

 
2.8

COMMON SHAREHOLDER'S EQUITY 
 
 
 
 
 
Common stock 
23.0

 
23.0

 
23.0

Additional paid-in capital 
266.1

 
264.5

 
265.4

Retained earnings 
330.6

 
307.7

 
308.6

Total Common Shareholder's Equity 
619.7

 
595.2

 
597.0

TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY 
$
1,898.9

 
$
1,743.4

 
$
1,969.0


See notes accompanying the financial statements

Questar 2015 Form 10-Q
8
 



QUESTAR GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
6 Months Ended June 30,
 
2015
 
2014
 
(in millions)
OPERATING ACTIVITIES
 
 
 
Net income
$
41.0

 
$
36.3

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29.9

 
29.4

Deferred income taxes
(1.8
)
 
(0.2
)
Share-based compensation
0.7

 
0.6

Net (gain) from asset sales

 
(0.1
)
Changes in operating assets and liabilities
95.0

 
47.9

NET CASH PROVIDED BY OPERATING ACTIVITIES
164.8

 
113.9

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Property, plant and equipment
(88.3
)
 
(87.8
)
Acquisition of gas distribution system
(11.4
)
 

Cash used in disposition of assets
(1.4
)
 
(1.4
)
Proceeds from disposition of assets
0.1

 
0.4

Affiliated-company property, plant and equipment transfers
(0.1
)
 

NET CASH USED IN INVESTING ACTIVITIES
(101.1
)
 
(88.8
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Change in notes receivable from Questar

 
(3.0
)
Change in notes payable to Questar
(59.6
)
 
(17.7
)
Checks outstanding in excess of cash balances
4.1

 
4.8

Dividends paid to Questar
(28.0
)
 
(18.0
)
NET CASH USED IN FINANCING ACTIVITIES
(83.5
)
 
(33.9
)
Change in cash and cash equivalents
(19.8
)
 
(8.8
)
Beginning cash and cash equivalents
19.8

 
8.8

Ending cash and cash equivalents
$

 
$


See notes accompanying the financial statements


Questar 2015 Form 10-Q
9
 




QUESTAR PIPELINE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
From unaffiliated customers
$
46.5

 
$
48.1

 
$
93.3

 
$
96.1

 
$
187.4

 
$
190.3

From affiliated companies
17.8

 
17.7

 
37.2

 
37.0

 
73.9

 
76.5

Total Revenues
64.3

 
65.8

 
130.5

 
133.1

 
261.3

 
266.8

 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Operating and maintenance
8.9

 
9.2

 
19.0

 
18.5

 
39.8

 
39.0

General and administrative
10.5

 
9.5

 
21.0

 
19.8

 
40.1

 
39.6

Depreciation and amortization
13.7

 
13.6

 
27.7

 
27.2

 
55.0

 
54.5

Asset impairment

 

 

 

 

 
80.6

Other taxes
2.1

 
2.4

 
4.4

 
4.7

 
8.8

 
9.1

Cost of sales (excluding operating expenses shown separately)
(0.2
)
 
0.7

 
1.7

 
2.4

 
3.3

 
6.3

Total Operating Expenses
35.0

 
35.4

 
73.8

 
72.6

 
147.0

 
229.1

Net (loss) from asset sales

 

 

 

 
(0.5
)
 

OPERATING INCOME
29.3

 
30.4

 
56.7

 
60.5

 
113.8

 
37.7

Interest and other income
0.2

 
0.1

 
0.4

 
0.4

 
1.2

 
1.6

Income from unconsolidated affiliate
1.0

 
0.9

 
1.9

 
1.8

 
3.6

 
3.6

Interest expense
(6.5
)
 
(6.6
)
 
(13.1
)
 
(13.1
)
 
(26.1
)
 
(25.9
)
INCOME BEFORE INCOME TAXES
24.0

 
24.8

 
45.9

 
49.6

 
92.5

 
17.0

Income taxes
(8.8
)
 
(9.1
)
 
(16.8
)
 
(18.2
)
 
(34.2
)
 
(7.7
)
NET INCOME
$
15.2

 
$
15.7

 
$
29.1

 
$
31.4

 
$
58.3

 
$
9.3


See notes accompanying the financial statements


Questar 2015 Form 10-Q
10
 



QUESTAR PIPELINE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
Net income
$
15.2

 
$
15.7

 
$
29.1

 
$
31.4

 
$
58.3

 
$
9.3

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
Interest rate cash flow hedge amortization
0.2

 
0.1

 
0.4

 
0.3

 
0.6

 
0.5

Commodity cash flow hedge

(0.3
)
 

 
(0.3
)
 

 
(0.3
)
 

Income taxes

 

 
(0.1
)
 
(0.1
)
 
(0.1
)
 
(0.2
)
Net other comprehensive income (loss)
(0.1
)
 
0.1

 

 
0.2

 
0.2

 
0.3

COMPREHENSIVE INCOME
$
15.1

 
$
15.8

 
$
29.1

 
$
31.6

 
$
58.5

 
$
9.6


See notes accompanying the financial statements


Questar 2015 Form 10-Q
11
 



QUESTAR PIPELINE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30, 2015
 
June 30, 2014
 
Dec. 31, 2014
 
(in millions)
ASSETS
 
 
 
 
 
Current Assets
 
 
 
 
 
Cash and cash equivalents
$
1.0

 
$
6.3

 
$
7.4

Notes receivable from Questar
34.0

 
53.8

 
40.1

Accounts receivable, net
17.0

 
17.5

 
17.9

Accounts receivable from affiliates
47.1

 
37.3

 
39.2

Gas stored underground, at lower of average cost or market
4.5

 
1.8

 
3.4

Materials and supplies, at lower of average cost or market
7.4

 
7.2

 
6.9

Current regulatory assets
0.8

 
3.9

 
1.3

Prepaid expenses and other
2.8

 
2.9

 
4.3

Deferred income taxes - current
2.1

 
1.8

 
1.9

Total Current Assets
116.7

 
132.5

 
122.4

Property, Plant and Equipment
1,843.6

 
1,801.2

 
1,827.7

Accumulated depreciation and amortization
(697.8
)
 
(651.3
)
 
(673.9
)
Net Property, Plant and Equipment
1,145.8

 
1,149.9

 
1,153.8

Investment in unconsolidated affiliate
24.3

 
25.0

 
24.7

Noncurrent regulatory and other assets
10.7

 
10.9

 
10.8

TOTAL ASSETS
$
1,297.5

 
$
1,318.3

 
$
1,311.7

 

 

 

LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
 
 
 
 
 
Current Liabilities
 
 
 
 
 
Accounts payable, accrued expenses and other
$
21.8

 
$
36.7

 
$
21.7

Accounts payable to affiliates
9.1

 
24.7

 
5.8

Dividends payable to Questar

 

 
16.0

Current regulatory liabilities
1.6

 
0.8

 
0.9

Current portion of long-term debt
25.1

 

 
25.1

Total Current Liabilities
57.6

 
62.2

 
69.5

Long-term debt, less current portion
433.6

 
458.8

 
433.7

Deferred income taxes
240.7

 
228.2

 
241.4

Noncurrent regulatory and other liabilities
16.0

 
16.2

 
15.9

 
 
 
 
 
 
COMMON SHAREHOLDER'S EQUITY
 
 
 
 
 
Common stock
6.6

 
6.6

 
6.6

Additional paid-in capital
352.7

 
350.5

 
351.4

Retained earnings
212.8

 
218.5

 
215.7

Accumulated other comprehensive (loss)
(22.5
)
 
(22.7
)
 
(22.5
)
Total Common Shareholder's Equity
549.6

 
552.9

 
551.2

TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
$
1,297.5

 
$
1,318.3

 
$
1,311.7


See notes accompanying the financial statements

Questar 2015 Form 10-Q
12
 



QUESTAR PIPELINE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

6 Months Ended June 30,
 
2015
 
2014
 
(in millions)
OPERATING ACTIVITIES
 
 
 
Net income
$
29.1

 
$
31.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
28.9

 
28.4

Deferred income taxes
(1.1
)
 
(0.5
)
Share-based compensation
1.3

 
1.0

(Income) from unconsolidated affiliate
(1.9
)
 
(1.8
)
Distributions from unconsolidated affiliate and other
2.4

 
2.7

Changes in operating assets and liabilities
(5.9
)
 
16.2

NET CASH PROVIDED BY OPERATING ACTIVITIES
52.8

 
77.4

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Property, plant and equipment
(17.1
)
 
(17.2
)
Cash used in disposition of assets
(0.4
)
 
(0.3
)
Proceeds from disposition of assets
0.1

 
0.1

Affiliated-company property, plant and equipment transfers
0.1

 

NET CASH USED IN INVESTING ACTIVITIES
(17.3
)
 
(17.4
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Change in notes receivable from Questar
6.1

 
(24.4
)
Dividends paid to Questar
(48.0
)
 
(32.0
)
NET CASH USED IN FINANCING ACTIVITIES
(41.9
)
 
(56.4
)
Change in cash and cash equivalents
(6.4
)
 
3.6

Beginning cash and cash equivalents
7.4

 
2.7

Ending cash and cash equivalents
$
1.0

 
$
6.3


See notes accompanying the financial statements


Questar 2015 Form 10-Q
13
 



QUESTAR CORPORATION
QUESTAR GAS COMPANY
QUESTAR PIPELINE COMPANY
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS
(Unaudited)

The notes accompanying the financial statements apply to Questar Corporation, Questar Gas Company and Questar Pipeline Company unless otherwise noted.

Note 1 - Nature of Business

Questar Corporation is a Rockies-based integrated natural gas company with three principal complementary and wholly-owned lines of business:

Questar Gas Company (Questar Gas) provides retail natural gas distribution in Utah, Wyoming and Idaho.
Wexpro Company (Wexpro) develops and produces natural gas from cost-of-service reserves for Questar Gas customers.
Questar Pipeline Company (Questar Pipeline) operates interstate natural gas pipelines and storage facilities in the western United States and provides other energy services.

Questar is headquartered in Salt Lake City, Utah. Shares of Questar common stock trade on the New York Stock Exchange (NYSE:STR).

Note 2 - Basis of Presentation of Interim Financial Statements

The interim financial statements contain the accounts of Questar and its wholly-owned subsidiaries. The financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP), the instructions for Quarterly Reports on Form 10-Q and SEC Regulations S-X and S-K. All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements reflect all normal, recurring adjustments and accruals that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim financial statements do not include all of the information and notes required by GAAP for audited annual financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

The preparation of financial statements and notes in conformity with GAAP requires that management make estimates and assumptions that affect the amounts of revenues, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. Actual results could differ from estimates. The results of operations for the three, six and 12 months ended June 30, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Certain reclassifications were made to prior year information to conform to the current year presentation.

Questar and Questar Pipeline use the equity method to account for an investment in an unconsolidated affiliate where they do not have control, but have significant influence. The investment in the unconsolidated affiliate on the Condensed Consolidated Balance Sheets equals Questar Pipeline's proportionate share of equity reported by the unconsolidated affiliate. The investment is assessed for possible impairment when events indicate that the fair value of the investment may be below Questar Pipeline's carrying value. When such a condition is deemed to be other-than-temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in the determination of net income. White River Hub, LLC, a limited liability company and FERC-regulated transporter of natural gas, is the sole unconsolidated affiliate. Questar Pipeline owns 50% of White River Hub, LLC, and is the operator.

In March 2015, Questar Gas purchased Eagle Mountain City's municipal natural gas system for $11.4 million. The city has over 6,500 natural gas customers.

Questar Gas obtains the majority of its gas supply from Wexpro's cost-of-service production and pays Wexpro an operator service fee based on the terms of the Wexpro Agreement and the Wexpro II Agreement (Wexpro agreements). Questar Gas also obtains transportation and storage services from Questar Pipeline. These intercompany revenues and expenses are eliminated in the Questar Consolidated Statements of Income by reducing revenues and cost of sales. The underlying costs of Wexpro's production and Questar Pipeline's transportation and storage services are disclosed in other categories in the Consolidated

Questar 2015 Form 10-Q
14
 



Statements of Income, including operating and maintenance expense and depreciation, depletion and amortization expense. During the second and third quarters of the year, a significant portion of the natural gas from Wexpro production is injected into underground storage. This gas is withdrawn from storage as needed during the heating season in the first and fourth quarters. The cost of natural gas sold is credited with the value of natural gas as it is injected into storage and debited as it is withdrawn from storage. The reported balance in consolidated cost of sales may be a negative amount during the second and third quarters because of the entries to record injection of gas into storage and the elimination of intercompany transactions. The details of Questar's consolidated cost of sales are as follows:
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
Questar Gas
 
 
 
 
 
 
 
 
 
 
 
Gas purchases
$
2.2

 
$
3.9

 
$
43.2

 
$
96.6

 
$
83.1

 
$
169.6

Operator service fee
75.5

 
94.4

 
160.3

 
183.5

 
326.5

 
331.1

Transportation and storage
18.1

 
18.6

 
40.3

 
40.7

 
79.2

 
80.7

Gathering
5.6

 
4.8

 
11.0

 
9.7

 
22.3

 
19.4

Royalties
6.9

 
18.3

 
18.8

 
35.6

 
43.3

 
58.5

Storage (injection) withdrawal, net
(16.7
)
 
(21.6
)
 
14.2

 
11.4

 
1.7

 
(8.6
)
Purchased-gas account adjustment
(8.9
)
 
(32.5
)
 
27.3

 
(38.1
)
 
19.6

 
(37.1
)
Other
1.3

 
1.3

 
2.5

 
2.4

 
4.9

 
4.7

Total Questar Gas cost of natural gas sold
84.0

 
87.2

 
317.6

 
341.8

 
580.6

 
618.3

Elimination of Questar Gas cost of natural gas sold - affiliated companies
(93.2
)
 
(112.5
)
 
(197.2
)
 
(220.7
)
 
(399.9
)
 
(407.7
)
Total Questar Gas cost of natural gas sold - unaffiliated parties
(9.2
)
 
(25.3
)
 
120.4

 
121.1

 
180.7

 
210.6

Questar Pipeline
 
 
 
 
 
 
 
 
 
 
 
Total Questar Pipeline cost of sales
(0.2
)
 
0.7

 
1.7

 
2.4

 
3.3

 
6.3

Other cost of sales
0.4

 
0.3

 
0.7

 
0.4

 
1.2

 
0.5

Total cost of sales
$
(9.0
)
 
$
(24.3
)
 
$
122.8

 
$
123.9

 
$
185.2

 
$
217.4


Note 3 - Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period, which includes vested undistributed restricted stock units (RSUs) and vested undistributed deferred RSUs. Diluted EPS includes the potential increase in the number of outstanding shares that could result from the exercise of in-the-money stock options, the vesting of RSUs with forfeitable dividend equivalents and the distribution of performance shares that are part of the Company's Long-Term Stock Incentive Plan (LTSIP), less shares repurchased under the treasury stock method. Restricted shares and RSUs with nonforfeitable dividends or dividend equivalents are participating securities for the computation of basic EPS under the two-class method. The application of the two-class method has an insignificant impact on the calculation of Questar's basic and diluted EPS. A reconciliation of the components of basic and diluted shares used in the EPS calculation follows:
 
3 Months Ended
 
6 Months Ended
 
12 Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
(in millions)
Weighted-average basic common shares outstanding
176.4

 
175.8

 
176.3

 
175.7

 
176.1

 
175.7

Potential number of shares issuable under the Company's LTSIP
0.2

 
0.3

 
0.2

 
0.4

 
0.3

 
0.4

Weighted-average diluted common shares outstanding
176.6

 
176.1

 
176.5

 
176.1

 
176.4

 
176.1



Questar 2015 Form 10-Q
15
 




Note 4 - Accumulated Other Comprehensive Income

Comprehensive income, as reported in Questar's Condensed Consolidated Statements of Comprehensive Income, is the sum of net income as reported in the Questar Consolidated Statements of Income and net other comprehensive income (loss) (OCI). OCI includes recognition of the under-funded position of pension and other postretirement benefit plans, interest rate and commodity-based cash flow hedges, changes in the fair value of long-term investment, and the related income taxes. Income or loss is recognized when the pension and other postretirement benefit (OPB) costs are accrued, as the Company records interest expense for hedged interest payments, as the Company reaches settlement of commodity-based hedges and when the long-term investment is sold.

Details of the changes in the components of consolidated accumulated other comprehensive income (loss) (AOCI), net of income taxes, as reported in Questar's Condensed Consolidated Balance Sheets, are shown in the tables below. The tables also disclose details of income taxes related to each component of OCI.

 
Pension and OPB
 
Interest rate cash flow hedges
 
Commodity cash flow hedges
 
Long-term investment
 
Total
3 Months Ended June 30, 2015
 
(in millions)
AOCI at beginning of period
$
(175.2
)
 
$
(22.4
)
 
$

 
$
0.1

 
$
(197.5
)
OCI before reclassifications

 

 
(0.3
)
 

 
(0.3
)
Reclassified from AOCI(1)
6.0

 
0.2

 

 

 
6.2

Income taxes
 
 
 
 
 
 
 
 
 
OCI before reclassifications

 

 
0.1

 

 
0.1

Reclassified from AOCI(2)
(2.2
)
 
(0.1
)
 

 

 
(2.3
)
Total income taxes
(2.2
)