{\rtf1\deflang1033\deflangfe1033\margl720\margr720\margt360\margb360{\stylesheet{\fs20\lang1033\snext0 Normal;} {\s1\sb240\keepn{\*\pn \pnlvl1\pndec\pnprev1\pnstart1\pnsp144}\b\f0\fs30\lang1033 \sbasedon0\snext0 heading 1;} {\s2\sb200\keepn{\*\pn \pnlvl2\pndec\pnprev1\pnstart1\pnsp144{\pntxtb.}}\b\f0\fs26\lang1033 \sbasedon0\snext0 heading 2;} {\s3\sb180\keepn{\*\pn \pnlvl3\pndec\pnprev1\pnstart1\pnsp144{\pntxtb.}}\b\f0\fs22\lang1033 \sbasedon0\snext0 heading 3;} {\s4\sb160\keepn{\*\pn \pnlvl4\pnucltr\pnprev1\pnstart1\pnsp144{\pntxtb.}}\b\f0\fs22\lang1033 \sbasedon0\snext0 heading 4;} {\s5\sb140\keepn{\*\pn \pnlvl5\pncltr\pnprev1\pnstart1\pnsp144}\b\f0\fs20\lang1033 \sbasedon0\snext0 heading 5;} {\s6\tqc\lang1033\sbasedon0\snext6 footer;} {\*\cs16 \additive\super\sbasedon10 footnote reference;} {\*\cs18 \additive\sbasedon10 page number;}} {\fonttbl{\f0\fnil Times New Roman;}{\f1\fnil Courier New}{\f2005\fnil Courier New;}{\f2010\fnil Wingdings;}{\f2020\fnil Webdings;}{\f2\fnil Arial;}{\f3\fnil Arial;}{\f4\fnil LucidaHandwriting;}{\f5\fnil Symbol;}{\f6\fnil Symbol;}{\f7\fnil Ferdsch;}{\f30\fnil Myriad Cn Semibold;}{\f31\fnil Myriad Roman;}{\f50\fnil Courier New;}{\f51\fnil Times New Roman;}{\f52\fnil Arial;}{\f53\fnil Symbol;}{\f54\fnil Wingdings;}{\f55\fnil Wingdings 2;}{\f56\fnil Wingdings 3;}{\f57\fnil Webdings;}{\f58\fnil Arial Narrow;}{\f59\fnil Arial Unicode MS;}{\f60\fnil Cyberbit;}{\f61\fnil Morningstar 1U Light;}{\f62\fnil Calibri;}} {\colortbl;\red0\green0\blue0;\red127\green0\blue0;\red0\green0\blue255;\red127\green127\blue127;\red0\green51\blue153;\red255\green204\blue0;\red255\green255\blue255;\red246\green244\blue236;\red0\green0\blue0;} {\*\bkmkstart filing_1}{\*\bkmkend filing_1}{\*\bkmkstart doc_1_1}{\*\bkmkend doc_1_1} \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql SECURITIES AND EXCHANGE COMMISSION \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Washington, D.C. 20549 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql FORM 10-Q \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Mark One) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql ENDED SEPTEMBER 30, 1994 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OR \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql FROM _____ TO _____ \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Commission File No. 1-935 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Exact name of registrant as specified in its charter) \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql STATE OF UTAH 87-0155877 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (State or other jurisdiction of (I.R.S. Employer \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql incorporation or organization) Identification No.) \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql P.O. Box 45360, 180 East First South, Salt Lake City, Utah 84145-0360 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Address of principal executive offices) (Zip Code) \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Registrant's telephone number, including area code: (801) 534-5555 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Indicate by check mark whether the registrant (1) has filed all \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql reports required to be filed by Section 13 or 15(d) of the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Securities Exchange Act of 1934 during the preceding 12 months \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (or for such shorter period that the registrant was required to \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql file such reports), and (2) has been subject to such filing \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql requirements for the past 90 days. Yes X No \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Indicate the number of shares outstanding of each of the issuer's \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql classes of common stock, as of the latest practicable date. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Class Outstanding as of October 31, 1994 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Common Stock, $2.50 par value 9,189,626 shares \par\pard\plain\fs16 \par\pard\plain\fs16 \page \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql STATEMENTS OF INCOME \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Unaudited) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 3 Months Ended 9 Months Ended 12 Months Ended \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, September 30, September 30, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 1993 1994 1993 1994 1993 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (In Thousands) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql REVENUES $39,866 $40,440 $243,766 $289,500 $356,657 $397,915 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OPERATING EXPENSES \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Natural gas purchases 17,816 18,314 132,395 165,270 197,264 229,630 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Operating and maintenance 23,124 23,159 70,850 68,815 94,521 87,895 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Depreciation 6,064 5,300 18,191 16,213 25,222 22,464 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Other taxes 2,752 2,607 9,439 8,968 10,484 10,153 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql TOTAL OPERATING EXPENSES 49,756 49,380 230,875 259,266 327,491 350,142 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OPERATING INCOME (LOSS) (9,890) (8,940) 12,891 30,234 29,166 47,773 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql INTEREST AND OTHER INCOME 757 125 2,033 626 3,099 1,365 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql DEBT EXPENSE (3,781) (3,808) (11,734) (11,526) (15,631) (15,171) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql INCOME (LOSS) BEFORE \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql INCOME TAXES (12,914) (12,623) 3,190 19,334 16,634 33,967 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql INCOME TAXES (CREDITS) (7,166) (5,737) (2,311) 3,605 1,793 6,957 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql NET INCOME (LOSS) ($5,748) ($6,886) $5,501 $15,729 $14,841 $27,010 \par\pard\plain\fs16 \page \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql CONDENSED BALANCE SHEETS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Unaudited) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, December 31, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 1993 1993 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (In Thousands) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql ASSETS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Current assets \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Cash and short-term investments $624 $1,522 $2,312 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Federal income taxes receivable 10,343 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Accounts receivable 22,389 19,085 81,668 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Inventories 27,489 19,497 23,972 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Other current assets 5,170 5,831 4,739 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Total current assets 66,015 45,935 112,691 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Property, plant and equipment 722,467 687,976 710,100 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Less allowances for depreciation 276,567 261,744 267,314 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Net property, plant \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql and equipment 445,900 426,232 442,786 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Other assets 25,593 25,812 25,550 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql $537,508 $497,979 $581,027 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql LIABILITIES AND SHAREHOLDER'S EQUITY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Current liabilities \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Notes payable to parent company $18,000 $12,500 $57,800 \par\pard\plain\fs16\par\pard\plain\f0\fs16\par\pard\plain\cf1\f50\fs16\ql Accounts payable and \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql accrued expenses 44,635 57,048 64,748 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Purchased-gas adjustments 6,262 25,592 25,727 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Total current liabilities 68,897 95,140 148,275 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Long-term debt 175,000 158,000 158,000 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Other liabilities and \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql deferred credits 27,116 166 27,163 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Deferred income taxes and \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql investment tax credits 66,358 58,433 57,864 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Redeemable cumulative \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql preferred stock 7,524 8,725 7,525 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Common shareholder's equity \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Common stock 22,974 22,974 22,974 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Additional paid-in capital 41,875 21,875 21,875 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Retained earnings 127,764 132,666 137,351 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Total common \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql shareholder's equity 192,613 177,515 182,200 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql $537,508 $497,979 $581,027 \par\pard\plain\fs16 \page \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql CONDENSED STATEMENTS OF CASH FLOWS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Unaudited) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 9 Months Ended \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 1993 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (In Thousands) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OPERATING ACTIVITIES \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Net income $5,501 $15,729 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Depreciation 20,073 17,862 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Deferred income taxes \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql and investment tax credits 8,494 (1,749) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 34,068 31,842 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Change in operating assets \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql and liabilities 5,320 19,768 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql NET CASH PROVIDED FROM \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OPERATING ACTIVITIES 39,388 51,610 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql INVESTING ACTIVITIES \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Capital expenditures (33,072) (25,944) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Proceeds from disposition of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql property, plant and equipment 9,885 461 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql CASH USED IN INVESTING ACTIVITIES (23,187) (25,483) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql FINANCING ACTIVITIES \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Capital contribution 20,000 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Issuance of long-term debt 17,000 91,000 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Repayment of long-term debt (99,126) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Redemption of preferred stock (1) (1) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Decrease in notes payable \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql to parent company (39,800) (6,400) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Payment of dividends (15,088) (14,040) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql CASH USED IN FINANCING ACTIVITIES (17,889) (28,567) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql DECREASE IN CASH AND \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql SHORT-TERM INVESTMENTS ($1,688) ($2,440) \par\pard\plain\fs16 \page \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql NOTES TO CONDENSED FINANCIAL STATEMENTS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, 1994 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Unaudited) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Note A - Basis of Presentation \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql The interim financial statements furnished reflect all adjustments which \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql are, in the opinion of management, necessary for a fair presentation of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the results for the interim periods presented. All such adjustments are \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of a normal recurring nature. Due to the seasonal nature of the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql business, the results of operations for the three-and nine-month periods \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql ended September 30, 1994, are not necessarily indicative of the results \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql that may be expected for the year ending December 31, 1994. For further \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql information refer to the financial statements and footnotes thereto \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql included in the Company's annual report on Form 10-K for the year ended \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql December 31, 1993. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Note B - Accounting for Postemployment Benefits \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Effective January 1, 1994, the Company recorded a liability for \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql postemployment disability and health care benefits in compliance with \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the Statement of Financial Accounting Standards No. 112. This did not \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql have an effect on net income since the $1,538,000 liability was offset \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql with a regulatory asset because the Company expects to include these \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql costs in future rates. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Note C - Financing \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql During the second quarter of 1994, Mountain Fuel borrowed $17,000,000 of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 30-year notes with an interest rate of 8.12%. On July 1, 1994, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel received a $20,000,000 capital contribution from its \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql parent company. The Company used the proceeds to fund capital \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql expenditures and repay short-term debt borrowed from its parent company. \par\pard\plain\fs16 \page \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MANAGEMENT'S ANALYSIS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, 1994 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Operating Results -- \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Following is a summary of operating information for the Company: \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 3 Months Ended 9 Months Ended 12 Months Ended \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, September 30, September 30, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 1993 1994 1993 1994 1993 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Dollars in Thousands) \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql FINANCIAL RESULTS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Revenues \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql From unaffiliated customers $38,594 $40,284 $240,294 $288,042 $352,477 $394,440 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql From affiliates 1,272 156 3,472 1,458 4,180 3,475 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Total revenues $39,866 $40,440 $243,766 $289,500 $356,657 $397,915 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Operating income (loss) ($9,890) ($8,940) $12,891 $30,234 $29,166 $47,773 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Net income (loss) (5,748) (6,886) 5,501 15,729 14,841 27,010 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OPERATING STATISTICS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Natural gas volumes (in thousands \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of decatherms) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Residential and commercial \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql sales 5,969 6,478 45,875 56,913 68,331 77,588 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Industrial sales 1,743 1,320 5,652 4,422 7,744 6,055 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Transportation for industrial \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql customers 12,031 10,132 35,322 38,970 49,457 53,499 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Total deliveries 19,743 17,930 86,849 100,305 125,532 137,142 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Natural gas revenue (per \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql decatherm) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Residential and commercial $4.92 $4.96 $4.59 $4.57 $4.55 $4.59 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Industrial sales 2.56 3.00 2.85 3.45 2.91 3.44 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Transportation for industrial \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql customers 0.12 0.11 0.12 0.11 0.12 0.11 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Heating degree days \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Actual 24 90 2,854 4,207 4,720 6,078 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Normal 110 62 3,594 4,065 5,332 5,803 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Actual as a percentage \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of normal 22% 145% 79% 103% 89% 105% \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Customer count at end of period 558,734 537,174 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Natural gas volumes sold to residential and commercial customers \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql decreased in the 3-, 9- and 12-month periods of 1994 as a result of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql unseasonably warm weather and a change in the method of recording \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql revenues from the retail sale of natural gas. These two factors were \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql also largely responsible for the significantly lower earnings reported \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql in the first nine months of 1994. Temperatures in the first nine months \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of 1994 were 21% warmer than normal compared with 3% colder than normal \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql weather in the same period of 1993. The effects of warmer weather and \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the change in recording revenues was partially offset by a 4.0% increase \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql in the number of customers. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel's allowed return on equity for Utah operations was reduced \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql from 12.1% to 11% effective January 1, 1994, by the Public Service \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Commission of Utah (PSCU) in a general rate case order. Also as a \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql result of actions taken by the PSCU, the Company changed the way that \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql revenues for residential and commercial customers are recorded from an \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql "as-billed" to an "as-delivered" basis. This had the effect of shifting \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql approximately $5 million of net income from the first half of 1994 to \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the fourth quarter. The PSCU has not issued an order with respect to \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the issues raised by Mountain Fuel on rehearing of the 11% rate of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql return and the proper handling of unbilled revenues for ratemaking \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql purposes. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Volumes delivered to industrial customers decreased 6% in the first nine \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql months of 1994 compared with the same period of 1993. Natural gas usage \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql by several major metal and chemical customers was lower during 1994. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel's natural gas purchases were lower in the 3-, 9- and \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 12-month periods of 1994 compared with the same periods of 1993 due to \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql reduced volumes sold to residential and commercial customers. Operating \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql and maintenance expenses were higher in the 9- and 12-month periods of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 because of additional customers and expanded service territory. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Interest and other income was higher in the 1994 periods largely due to \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql a working-gas carrying charge earned by the Company as allowed by the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql PSCU. Debt expense was lower in the third quarter of 1994 compared with \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the same period in 1993 because of a lower balances in the purchased-gas \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql adjustments account. Debt expense was higher in the 9- and 12- month \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql periods ended September 30, 1994, because of increasing short-term \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql interest rates and increasing short- and long-term debt balances. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Income taxes resulted in a credit amount for the nine months ended \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql September 30, 1994, because of the combined effect of low pretax income \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql and tights sands income tax credits. Tight sands income tax credits \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql amounted to $4,224,000 in 1994 compared with $4,411,000 in 1993. \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Credits attributable to prior years' production totaled $1,742,000 in \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994 and $1,117,000 in 1993. The effective income tax rate for the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql nine-month period of 1993 was 18.6% \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Effective January 1, 1994, the Company recorded a liability for \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql postemployment disability and health care benefits in compliance with \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql the Statement of Financial Accounting Standards No. 112. This did not \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql have an effect on net income since the $1,538,000 liability was offset \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql with a regulatory asset because the Company expects to include these \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql costs in future rates. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Liquidity and Capital Resources - \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Operating Activities: \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Net cash provided from operating activities was $39,388,000 in the first \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql nine months of 1994 compared with $51,610,000 for the same period of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1993. The decrease was due to lower net income and a $19,465,000 change \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql in the purchased-gas adjustments account. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Investing Activities: \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Capital expenditures were $33,072,000 in the first nine months of 1994, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql compared with $25,944,000 in the corresponding 1993 period. Capital \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql expenditures for calendar year 1994 are estimated at $51,000,000. \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel transferred a building with a net book value of $8,915,000 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql to an affiliate in the third quarter of 1994. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Financing Activities: \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql During the second quarter of 1994, Mountain Fuel borrowed $17,000,000 of \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 30-year notes with an interest rate of 8.12%. On July 1, 1994, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel received a $20,000,000 capital contribution from its \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql parent company. The Company used the proceeds to fund capital \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql expenditures and repay short-term debt borrowed from its parent company. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql The Company has short-term line-of-credit arrangements with banks \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql totaling $500,000. In addition, its parent company loans funds to the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Company under a short-term borrowing arrangement. As of September 30, \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1994, Mountain Fuel had loans outstanding of $18,000,000 payable to its \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql parent company. \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16{\*\bkmkstart part_1_2_1}{\*\bkmkend part_1_2_1}\pard\plain\cf1\f50\fs16\ql PART II \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql OTHER INFORMATION \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16{\*\bkmkstart item_1_3_1}{\*\bkmkend item_1_3_1}\pard\plain\cf1\f50\fs16\ql Item 1. Legal Proceedings. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql As of the date of this report, the Public Service Commission \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of Utah (the PSCU) has not issued an order with respect to the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql issues that were raised by Mountain Fuel Supply Company (Mountain \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Fuel or the Company) on rehearing of the PSCU's decision in the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Company's 1993 general rate case. The issues under review by the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql PSCU are the 11.0 percent return on equity authorized for \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel and the proper handling of unbilled revenues for \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql ratemaking purposes. \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16{\*\bkmkstart part_1_2_2}{\*\bkmkend part_1_2_2}\pard\plain\cf1\f50\fs16\ql SIGNATURES \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Pursuant to the requirements of the Securities Exchange Act \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql of 1934, the registrant has duly caused this report to be signed \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql on its behalf by the undersigned thereunto duly authorized. \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql MOUNTAIN FUEL SUPPLY COMPANY \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Registrant) \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql November 10, 1994 /s/ D. N. Rose \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Date) D. N. Rose \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql President and Chief \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Executive Officer \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql November 10, 1994 /s/ W. F. Edwards \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (Date) W. F. Edwards \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Vice President and Chief \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Financial Officer \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16 \page{\*\bkmkstart doc_1_2}{\*\bkmkend doc_1_2} \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql
5 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql The schedule contains summarized financial information extracted from the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql Mountain Fuel Supply Company Statement of Income and Balance Sheet for the \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql period ended September 30, 1994, and is qualified in its entirety by \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql references to such unaudited financial statements. \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 1,000 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 9-MOS \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql DEC-31-1994 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql SEP-30-1994 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 624 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 32,732 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 27,489 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 66,015 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 276,567 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 537,508 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 68,897 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 175,000 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 22,974 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 7,524 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 169,639 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 537,508 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 243,766 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 203,245 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 27,630 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 11,734 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 3,190 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql (2,311) \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 5,501 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 5,501 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16\pard\plain\cf1\f50\fs16\ql 0 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16 \par\pard\plain\fs16}