Financial Statements
and Schedules
Questar Corporation
Employee Stock Purchase Plan
Years ended December 31, 1993 and 1992
with Report of Independent Auditors
Questar Corporation Employee Stock Purchase Plan
Financial Statements
and Schedules
Years ended December 31, 1993 and 1992
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statements of Net Assets Available for Plan Benefits 2
Statements of Changes in Net Assets Available for Plan
Benefits 3
Notes to Financial Statements 4
Schedules
Assets Held for Investment 10
Transactions or Series of Transactions in Excess of 5%
of the Current Value of Plan Assets 11
Report of Independent Auditors
Participants in Questar Corporation
Employee Stock Purchase Plan
We have audited the accompanying statements of net assets
available for plan benefits of Questar Corporation Employee
Stock Purchase Plan as of December 31, 1993 and 1992, and
the related statements of changes in net assets available
for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for plan benefits of the Plan at December 31, 1993
and 1992, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion
on the financial statements taken as a whole. The
accompanying supplemental schedules of assets held for
investment as of December 31, 1993, and transactions or
series of transactions in excess of 5% of the current value
of plan assets for the year then ended, are presented for
purposes of complying with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974, and are not
a required part of the financial statements. The
supplemental schedules have been subjected to the auditing
procedures applied in our audit of the 1993 financial
statements and, in our opinion, are fairly stated in all
material respects in relation to the 1993 financial
statements taken as a whole.
ERNST & YOUNG
Salt Lake City, Utah
March 9, 1994
Questar Corporation
Employee Stock Purchase Plan
Statements of Net Assets Available for Plan Benefits
December 31,
1993 1992
Assets
Investments in Common Stock of Questar
Corporaation at market (Notes 3 and 4):
Allocated $92,874,697 $71,900,329
Unallocated 41,404,982 36,663,701
134,279,679 108,564,030
Cash and short-term investments 22,283 24,227
Contribution receivable from Questar
Corporation 889,874 1,003,652
135,191,836 109,591,909
Liabilities
Unallocated contributions and dividends 18,285 18,664
Interest payable 868,220 975,033
Security acquisition loans (Note 3) 26,802,023 28,419,158
27,688,528 29,412,855
Net assets available for plan benefits $107,503,308 $80,179,054
See accompanying notes.
Questar Corporation
Employee Stock Purchase Plan
Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31
1993 1992
Additions
Dividend income $4,359,506 $4,215,379
Interest income 17,082 23,128
Contributions:
Employees 4,650,379 4,352,556
Employer 2,290,461 3,019,435
6,940,840 7,371,991
11,317,428 11,610,498
Deductions
Withdrawals-at market 8,246,376 5,712,785
Distribution of dividends to participants 269,672 267,576
Trustee fees and commissions 25,257 69,342
Interest expense 2,336,708 2,492,372
10,878,013 8,542,075
Net realized and unrealized appreciation
in the fair value of investments 26,884,839 19,674,402
Net additions 27,324,254 22,742,825
Net assets available for plan benefits at
beginning of year 80,179,054 57,436,229
Net assets available for plan benefits at end
of year $107,503,308 $80,179,054
See accompanying notes.
Questar Corporation
Employee Stock Purchase Plan
Notes To Financial Statements
December 31, 1993
1. Accounting Policies
Investments
Investments are recorded at market value. Common Stock of
Questar Corporation (Questar) is valued at the closing market
price on the last business day of the year on the New York Stock
Exchange. Short-term investments consist primarily of
investments in a money market portfolio fund.
Dividends
Questar has a Dividend Reinvestment and Stock Purchase Plan
whereby participants may reinvest dividends to purchase
additional shares of Common Stock at market value. Questar
distributes cash dividends directly to participants who do not
elect dividend reinvestment with respect to shares purchased with
employee contributions. Dividends on shares purchased with
employer contributions must be reinvested. Dividends paid on
leveraged shares are applied to the principal and interest
payments on the two notes issued by Questar.
Withdrawals
Withdrawals are recorded based on market prices at the date
withdrawn. The differences between cost and market at the time
of withdrawal are included in the financial statements as
realized gains or losses.
Administrative Expenses
All administrative expenses except commissions and a portion of
the trustee fees have been paid by Questar Corporation.
Income Taxes
The Questar Corporation Employee Stock Purchase Plan (Plan) is a
qualified employee benefit plan under the Internal Revenue Code
(Code) and is exempt from federal income tax. Participants are
not subject to income tax on employer contributions (including
401(k) salary reductions) or income credited to their individual
accounts until such time as these amounts are distributed. A
complete description of the income tax consequences to employees
is included in the Summary Plan Description of the Plan, which
has been provided to all participants.
2. Description of the Plan
The Plan is an employee benefit plan for employees of Questar and its
subsidiaries, excluding Questar Telecom, Inc. The Plan is an employee stock
ownership plan (ESOP), as defined in Section 4975(e)(7) of the Code.
The Plan provides that participant contributions may be made, at the
election of the participant, on a pre-tax basis pursuant to salary reduction
arrangements which will qualify the contributions under Section 401(k) of the
Code, or on an after-tax basis, or a combination of the two.
Employees are eligible to participate in the Plan after completing one year of
service and to make after-tax contributions after completing two years of
service. An employee is credited with one year of service for each year in
which he works or is paid for 1,000 hours by Questar or an affiliate. During
1993, participants could elect to contribute from 1% to 6% of annual
compensation to the Plan.
Effective January 1, 1993, the Plan was amended to allow participants to
change their contribution elections 15 days before the first day of the
calendar month in which the change is to become effective. The Plan was
also amended to provide for the direct rollover of taxable shares withdrawn
from the Plan to the Trustee of the participant's Individual Retirement
Account or other qualified plan, if the participant so elects. Eligible
distributions made in cash that are not directly rolled over are subject to a
mandatory 20% withholding for taxes. However, if a distribution is made all
in stock, or in stock with cash for fractional shares only, the 20%
withholding does not apply.
The Plan is subject to the diversification requirements imposed on ESOP's by
the Tax Reform Act of 1986 and meets these requirements by allowing qualified
participants to receive distributions of shares of stock. Beginning
January 1, 1989, dividends payable with respect to stock purchased with
employee after-tax and 401(k) contributions were distributed directly
to participants unless they elected to have such dividends retained in the
Plan. During 1989, the Plan was amended to allow the Trustee to enter into
one or more exempt loans described in Section 4975(d)(3) of the Code.
2. Description of the Plan (continued)
On June 12, 1989, the Plan acquired 1,992,884 shares of Questar Common Stock
(leveraged shares) with the proceeds of a loan from Questar (see Note 3).
These shares are held in a separate suspense account established under the
Trust and are released as the loan is repaid. Employee contributions are
matched with employer contributions in the form of leveraged shares
released from the suspense account, at the following percentages: 100% of
the first 2% of employee contributions, 75% of the next 2% and 50% of the
next 2% contributed by the employee. Leveraged shares in excess of those
needed to make matching allocations at these percentages may also be released
from the suspense account in certain years, depending upon the fair market
value of Questar Common Stock. These excess shares will be allocated
to: (i) participants who are employed on the last day of the year, (ii)
participants who are on leave under the federal Family and Medical Leave Act
of 1993 on the last day of such Plan year, and (iii) to former participants
(or their beneficiaries) who became disabled, retired, or died during the
year in which the excess leveraged shares are released from the suspense
account. The Plan also provides an additional $200 annual employer
contribution in the form of shares of Questar stock to each employee eligible
to participate in the Plan and employed on both the first and last day of
the Plan year. Employees are always fully vested in all shares allocated
to their individual accounts. Should the Plan terminate a some future time,
all shares allocated to the employees' accounts would be distributed to them.
The rules for in-service withdrawals of shares allocated to participants'
accounts and for distributions of such shares upon termination of employment,
disability or death are set forth in the Summary Plan Description of the Plan.
Effective January 1, 1994, the Questar Corporation Employee Savings Plan was
merged into the Questar Corporation Employee Stock Purchase Plan. As part of
this merger the Stock Purchase Plan was redesignated as the Questar
Corporation Employee Investment Plan. Notwithstanding the merger, the
Investment Plan continues to be an employee stock ownership plan as
defined in Code Section 4975(e)(7).
In addition to Questar Common Stock, employees will be able to direct the
investment of their plan account in the following funds: 1) Fixed Income,
which invests in guaranteed investment contracts and money market funds;
2) Fidelity Magellan, which invests primarily in common stocks; and
3) Fidelity Puritan, which invests primarily in both common stocks
and bonds. Whether the employee contributes to the stock fund or any of the
other investment funds, the employees will receive employer matching
contributions in the form of leveraged Questar shares on the first 6% of
contributions in the percentages previously described. Employees are
eligible to participate in the Plan after completing one year of
service, and non-highly compensated employees can elect to contribute from 1%
to 16% of annual compensation to the Plan on either a pre-tax basis pursuant
to salary reduction arrangements or on an after-tax basis, or a combination
of the two. "Highly Compensated Employees" are limited to contributing from
1% to 6% of annual compensation to the Plan.
3. Security Acquisition Loans
In June 12, 1989, the Plan issued two separate notes payable to Questar
totaling $35,000,000 and used the proceeds to purchase 1,992,884 shares
(leveraged shares) of Questar Common Stock at $17.5625 per share, the market
price at that date. These shares are held in trust and will be allocated to
eligible participants as the notes are repaid over a ten year period.
Payments on the notes are made with contributions from Questar and its
participating subsidiaries and dividends and earnings received on the
remaining allocated and unallocated leveraged shares. These contributions,
when combined with dividends and earnings received on such shares, will be
sufficient to meet the semi-annual principal and interest payments on the
notes. The notes are collateralized by the unallocated leveraged shares.
The detail of these notes payable is as follows:
December 31
1993 1992
8.32% Senior ESOP Notes-Series
A, due July 1, 1996 $10,802,023 $12,419,158
8.36% Senior ESOP Notes-Series
B, due July 1, 1999 16,000,000 16,000,000
$26,802,023 $28,419,158
Under the terms of the notes, the Plan is obligated to make principal
payments semi-annually, which, in aggregate, must meet or exceed cumulative
minimum principal payments as of each payment date. Cumulative actual
payments may exceed the cumulative minimum payments as a result of the
number of shares which are required to be allocated to participants for the
period. At year-end 1993, a special distribution of shares was allocated
to the accounts of the eligible participants who contributed to the Plan
during the year. Depending on the market price of Questar stock, there
could be further special distributions of shares in order to meet cumulative
minimum payment requirements.
The minimum principal payment requirements for the five years following
December 31, 1993, are as follows:
1994 $2,752,000
1995 3,500,000
1996 4,550,000
1997 4,700,000
1998 5,300,000
4. Investments
First Security Bank of Utah, N.A., is the Plan Trustee. Investments
in Common Stock of Questar at cost for the two years ended December
31, 1993 were as follows:
Allocated Unallocated
Shares Cost Shares Cost
Balance at December 31, 1991 2,546,192 $41,522,919 1,567,059 $27,521,469
Purchases 292,337 6,681,688
Allocation of shares 170,347 3,844,500 (170,347) (2,991,707)
Withdrawals (269,816) (4,379,548)
Balances at December 31, 1992 2,739,060 47,669,559 1,396,712 24,529,762
Purchases 215,174 7,077,186
Allocation of shares 142,016 4,692,575 (142,016) (2,494,155)
Withdrawals (281,865) (4,761,567)
Balances at December 31, 1993 2,814,385 $54,677,753 1,254,696 $22,035,607
Average cost per share of allocated stock at December 31 was $19.43
and $17.40 for 1993 and 1992, respectively.
Market value per share of stock, allocated and unallocated, at
December 31 was $33.00 and $26.25 for 1993 and 1992, respectively.
The cost of allocated shares is based on the average market purchase
price for shares for each quarter, whereas the cost of unallocated
shares is shown as the original purchase price of the shares on June
12, 1989, which was $17.5625 per share.
Questar Corporation
Employee Stock Purchase Plan
Assets Held for Investment
December 31, 1993
Assets Held in Trust by First Security Bank of Utah, N.A.
Description of Investments Cost Fair Value
Questar Corporation Common Stock
Allocated (2,814,385 shares) $54,677,753 $92,874,697
Unallocated Stock (1,254,696 shares) 22,035,607 41,404,982
Cash and short-term investments 22,283 22,283
$76,735,643 $134,301,962
Questar Corporation
Employee Stock Purchase Plan
Transactions or Series of Transactions in Excess of 5% of
the Current Value of Plan Assets
Year Ended December 31, 1993
Identity Purchase Gain From
of Description Cost of Asset Withdrawal
Issuer of Asset Assets Withdrawals of Assets
Category (i) - Single Transaction in Excess of 5% of Plan Assets
None
Category (ii) - Series of Transactions (Other than Securities
Transactions) with the Same Person Aggregating 5% of Plan
Assets
None
Category (iii) - A Series of Transactions in a Security Issue
Aggregating 5% of Plan Assets
Questar Common Stock -
Corporation
573 Purchases $7,077,264
Questar Common Stock -
Corporation
78 Withdrawal $4,761,567 $8,246,376 $3,484,809
Fidelity Fidelity Institutional
Investments Cash Portfolio
35 Purchases $4,133,925
Fidelity Fidelity Institutional
Investments Cash Portfolio
127 Sales $4,154,020 $4,154,020
Category (iv) - Transactions in Securities with a Person if
Any Single Transaction with that Person was in Excess of 5% of
Plan Assets
None
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-4436) pertaining to
the Questar Corporation Employee Stock Purchase Plan of our
report dated March 9, 1994, with respect to the financial
statements and schedules of the Questar Corporation Employee
Stock Purchase Plan included in this Annual Report (Form 11-
K) for the year ended December 31, 1993.
ERNST & YOUNG
Salt Lake City, Utah
March 24, 1994