SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____ TO _____
Commission File No. 1-8796
QUESTAR CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF UTAH 87-0407509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 45433, 180 East 100 South, Salt Lake City, Utah 84145-0433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(801) 324-5000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of June 30, 1998
Common Stock, without par value 82,373,534 shares
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
3 Months Ended 6 Months Ended 12 Months Ended
June 30, June 30, June 30,
1998 1997 1998 1997 1998 1997
(In Thousands, Except Per Share Amounts)
REVENUES $179,157 $151,453 $479,240 $509,831 $902,683 $953,121
OPERATING EXPENSES
Natural gas and other
product purchases 60,250 37,548 202,292 226,980 375,253 417,605
Operating and maintenance 53,529 51,349 104,431 105,427 203,838 204,602
Depreciation and amortization 28,337 29,674 58,409 59,518 122,928 114,532
Other taxes 11,957 9,434 21,968 22,536 33,739 35,619
TOTAL OPERATING EXPENSES 154,073 128,005 387,100 414,461 735,758 772,358
OPERATING INCOME 25,084 23,448 92,140 95,370 166,925 180,763
INTEREST AND OTHER INCOME 7,737 4,811 14,417 6,659 31,766 9,679
DEBT EXPENSE (10,946) (10,599) (22,460) (21,486) (44,740) (42,249)
INCOME BEFORE INCOME TAXES 21,875 17,660 84,097 80,543 153,951 148,193
INCOME TAXES 5,679 4,053 27,019 25,962 46,659 46,131
NET INCOME $16,196 $13,607 $57,078 $54,581 $107,292 $102,062
Earnings per common share
Basic $0.19 $0.16 $0.69 $0.66 $1.30 $1.24
Diluted 0.19 0.16 0.69 0.66 1.30 1.23
Average common shares outstanding
Basic 82,308 82,177 82,255 82,134 82,230 81,986
Diluted 82,864 82,634 82,863 82,544 82,830 82,444
Dividends per common share $0.165 $0.1525 $0.3225 $0.305 $0.6375 $0.605
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1998 1997 1997
(In Thousands)
ASSETS
Current assets
Cash and short-term investments $17,271
Accounts receivable $104,080 $108,729 187,014
Inventories 22,650 17,508 29,068
Purchased-gas adjustments 12,506 48,866 37,251
Other current assets 11,195 12,216 14,420
Total current assets 150,431 187,319 285,024
Property, plant and equipment 2,810,468 2,631,139 2,741,937
Less allowances for depreciation and
amortization 1,265,470 1,156,602 1,210,717
Net property, plant and equipment 1,544,998 1,474,537 1,531,220
Securities available for resale,
approximates fair value 55,949 49,350 55,925
Investment in unconsolidated affiliates 44,031 17,941 29,952
Other assets 47,702 34,848 42,896
$1,843,111 $1,763,995 $1,945,017
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Checks outstanding in excess of
cash balances $7,274 $174
Short-term loans 77,600 44,100 $131,200
Accounts payable and accrued expenses 132,477 123,602 168,944
Current portion of long-term debt 6,096 10,742 6,068
Total current liabilities 223,447 178,618 306,212
Long-term debt, less current portion 503,644 520,116 541,986
Other liabilities 27,960 35,340 29,801
Deferred income taxes and investment
tax credits 210,859 213,381 221,240
Redeemable cumulative preferred stock 4,808
Common shareholders' equity
Common stock 294,530 293,947 291,322
Retained earnings 572,303 517,281 541,663
Other comprehensive income 20,541 16,060 22,966
Note receivable from ESOP (10,173) (15,556) (10,173)
Total common shareholders' equity 877,201 811,732 845,778
$1,843,111 $1,763,995 $1,945,017
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
6 Months Ended
June 30,
1998 1997
(In Thousands)
OPERATING ACTIVITIES
Net income $57,078 $54,581
Depreciation and amortization 60,218 61,879
Deferred income taxes and
investment tax credits (11,047) 3,924
Gain from the sales of securities (4,083) (3,060)
Gain from the conversion of ownership
interest in Nextlink affiliate (3,536)
98,630 117,324
Changes in operating assets and liabilities 76,181 19,524
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 174,811 136,848
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and equipment (76,447) (62,755)
Other investments (17,074) (3,253)
Total capital expenditures (93,521) (66,008)
Proceeds from disposition of property,
plant and equipment 2,263 3,675
Proceeds from the sales of securities 5,800 6,449
NET CASH USED IN INVESTING
ACTIVITIES (85,458) (55,884)
FINANCING ACTIVITIES
Issuance of common stock 3,792 5,776
Common stock repurchased (584) (4,442)
Redemption of preferred stock (20)
Issuance of long-term debt 1,300 68,722
Repayment of long-term debt (38,368) (98,078)
Decrease in short-term loans (53,600) (33,700)
Checks outstanding in excess of cash balances 7,274 174
Payment of dividends (26,533) (25,244)
Other 95 145
NET CASH USED IN FINANCING
ACTIVITIES (106,624) (86,667)
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS ($17,271) ($5,703)
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Note 1 - Basis of Presentation
The interim financial statements furnished reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All
such adjustments are of a normal recurring nature. Due to the
seasonal nature of the business, the results of operations for the
three- and six-month periods ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1998. For further information refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1997.
Note 2 - Planned Purchases of Gas and Oil Company and a Pipeline
A Questar subsidiary announced its intention, July 27, 1998, to
acquire 100 percent of the common stock of HSRTW, Inc., a wholly
owned subsidiary of HS Resources, Inc. for $157.5 million, effective
September 1, 1998. In the cash transaction, Universal Resources will
obtain an estimated 150 billion cubic feet equivalent of proved oil
and gas reserves primarily in Oklahoma, as well as in Texas, Arkansas
and Louisiana. The purchase price includes $155 million for gas and
oil reserves and other assets and $2.5 million for working capital.
Approximately 80 percent of the reserves are natural gas. The Company
plans to finance the purchase through short-term borrowings and an
expansion of its existing production-based credit facility.
On June 25, 1998 in an unrelated transaction another Questar
subsidiary announced its intention to acquire 700 miles of oil
pipeline from ARCO Pipe line Company. The purchase price of the line
is $40 million with financial closing expected on or about September
30, 1998. The pipeline extends from northwestern New Mexico to Long
Beach, California. Questar Pipeline will operate the pipeline once
it is modified to carry natural gas. Reconditioning the pipe and
adding compression are scheduled to begin as soon as possible and
will continue for 18-24 months for an estimated total cost up to $60
million. The project will be financed through short-term borrowings
until long-term debt can be issued.
Note 3 - Common Stock Split
In June 1998, Questar's common stock was split two shares for each
share outstanding. Common stock disclosures, such as, earnings per
share, dividends per share and number of shares outstanding in the
prior period financial statements have been restated to reflect the
split.
Note 4 - Comprehensive Income
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130 "Reporting Comprehensive Income" beginning January 1,
1998. SFAS No. 130 establishes new rules for reporting comprehensive
income and its components. However, the adoption of this statement
had no impact on Questar's net income and its shareholders' equity.
SFAS No. 130 requires unrealized gains or losses on
available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive income. Formerly,
these transactions were reported separately in shareholders' equity.
Prior year amounts have been reclassified to conform to the
requirements of SFAS No. 130.
3 Months Ended 6 Months Ended
June 30, June 30,
1998 1997 1998 1997
(In thousands)
Comprehensive Income:
Net income $16,196 $13,607 $57,078 $54,581
Other comprehensive income
Unrealized gains (losses) on securities (15,960) 13,205 (3,986) 14,128
Foreign currency translation adjustments 71 55 164
Other comprehensive income (loss)
before income taxes (15,889) 13,205 (3,931) 14,292
Income taxes (credits) on other
comprehensive income (6,081) 5,050 (1,506) 5,461
Other comprehensive income (loss) (9,808) 8,155 (2,425) 8,831
Comprehensive income $6,388 $21,762 $54,653 $63,412
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
QUESTAR CORPORATION AND SUBSIDIARIES
June 30, 1998
(Unaudited)
Results of Operations
Market Resources
Celsius Energy (US and Canada), Universal Resources, Wexpro, Questar
Gas Management, Questar Energy Trading, and Questar Energy Services
(Market Resources) conduct the Company's exploration and production,
gas gathering and processing, and energy marketing operations.
Following is a summary of financial results and operating
information.
3 Months Ended 6 Months Ended 12 Months Ended
June 30 June 30 June 30
1998 1997 1998 1997 1998 1997
(Dollars in Thousands)
FINANCIAL RESULTS
Revenues
From unaffiliated customers $94,802 $79,607 $193,364 $254,145 $387,984 $509,526
From affiliated companies 19,744 16,392 36,612 44,166 67,030 82,760
Total revenues $114,546 $95,999 $229,976 $298,311 $455,014 $592,286
Operating income $14,166 $11,980 $28,285 $29,472 $55,977 $65,836
Net income 9,245 8,358 19,154 20,004 40,213 43,598
OPERATING STATISTICS
Production volumes
Natural gas (in million
cubic feet) 11,995 11,864 24,089 23,638 47,893 45,824
Oil and natural gas liquids
(in thousands of barrels) 717 748 1,371 1,514 2,795 2,877
Production revenue
Natural gas (per thousand
cubic feet) $1.97 $1.60 $1.97 $1.79 $1.98 $1.68
Oil and natural gas liquids
(per barrel) $12.87 $18.46 $13.65 $19.46 $15.38 $19.69
Energy-marketing volumes
Natural gas (in thousands
of decatherms) 22,435 26,369 47,244 65,565 107,222 150,758
Oil (in thousands of barrels) 547 394 1,102 867 1,913 1,619
Electricity (in thousands of
megawatt hours) 129 189 150 531 318 735
Natural gas gathering volumes (in
thousands of decatherms)
For unaffiliated customers 17,780 12,613 36,303 26,932 66,957 54,898
For Questar Gas 7,048 6,116 15,599 15,402 28,703 31,228
For other affiliated customers 4,515 5,172 8,784 9,345 17,118 13,738
Total gathering 29,343 23,901 60,686 51,679 112,778 99,864
Gathering revenue
(per decatherm) $0.17 $0.23 $0.16 $0.23 $0.17 $0.23
Revenues from Market Resource operations were higher in the second
quarter of 1998 when compared with the second quarter of 1997 due
primarily to increased energy-marketing activities, particularly gas,
and higher gas production and prices. Revenues were $68,335,000 or
23% lower in the first half of 1998 when compared to the prior year
period primarily the result of a 28% decrease in gas-marketing
volumes. Energy marketing activities reported $368,000 of net income
in the first half of 1998 compared with a $945,000 loss in the first
half of 1997.
Gas production increased 2% in the first half of 1998 when compared
with the first half of 1997 and the average price increased 10%. The
increase in production resulted from gas wells drilled in the Rocky
Mountain region in 1997.
Oil and NGL revenues were $10,755,000 lower in the first half
comparison due to a 30% drop in prices and a 9% decline in
production. The production decline was the result of the sale of
nonstrategic assets in 1997, normal production declines and a
temporary shutdown of the Brady processing plant due to a
construction project.
Market Resources hedged approximately 55% of its gas production
through June of 1999 with a price of about $2.10 per Mcf, net back to
the well. Roughly 26% of its oil production was hedged at
approximately $16.90 per bbl for the remainder of 1998. These
amounts include production volumes to be acquired from HS Resources.
Revenues for Questar Gas Management (QGM) decreased $8,335,000 or 39%
in the first half of 1998 compared with the same period in 1997 due
to a gathering contract revision and the sale of two processing
plants in 1997. Net income reported by QGM was $1,434,000 below last
year's income as a result of these factors and lower earnings from a
gas and NGL processing plant.
Regulated Services
Questar Gas and Questar Pipeline conduct the Company's regulated
services of natural gas distribution, transmission and storage.
Natural Gas Distribution
Questar Gas conducts the Company's natural gas distribution operations.
Following is a summary of financial results and operating information.
<CAPTON>
3 Months Ended 6 Months Ended 12 Months Ended
June 30, June 30, June 30,
1998 1997 1998 1997 1998 1997
(Dollars In Thousands)
FINANCIAL RESULTS
Revenues
From unaffiliated customers $74,268 $62,632 $266,057 $236,854 $474,887 $404,128
From affiliates 119 691 119 1,782 876 3,606
Total revenues 74,387 63,323 266,176 238,636 475,763 407,734
Natural gas purchases 41,965 29,669 160,063 126,880 282,116 208,671
Revenues less natural gas purch $32,422 $33,654 $106,113 $111,756 $193,647 $199,063
Operating income (loss) ($1,541) ($2,063) $36,670 $37,959 $56,948 $60,737
Net income (loss) (2,381) (2,603) 18,333 19,706 27,641 30,460
OPERATING STATISTICS
Natural gas volumes (in thousands of
decatherms)
Residential and commercial sales 13,178 12,157 47,492 48,562 84,677 82,998
Industrial sales 2,267 2,104 5,097 5,006 9,614 9,238
Transportation for industrial
customers 13,115 11,625 27,947 24,577 54,683 49,301
Total deliveries 28,560 25,886 80,536 78,145 148,974 141,537
Natural gas revenue (per decatherm)
Residential and commercial $4.70 $4.31 $5.06 $4.43 $5.02 $4.36
Industrial sales 2.90 2.30 3.01 2.34 2.92 2.25
Transportation for industrial
customers 0.11 0.12 0.11 0.13 0.12 0.12
Heating degree days
Actual 899 678 3,291 3,133 5,623 5,227
Normal 741 741 3,484 3,484 5,801 5,801
Colder (warmer) than normal 21% (9%) (6%) (10%) (3%) (10%)
Number of customers at June 30, 643,696 621,647
Revenues, less natural gas purchases, were $1,232,000 lower in the
second quarter of 1998 and $5,643,000 lower in the 6-month period
ended June 30, 1998 when compared with the same periods in 1997
because of several rate changes affecting the first half of 1998. A
rate surcharge, associated with construction of a distribution
pipeline into southern Utah and in effect for the past 10 years, was
discontinued in September 1997. Some general-service customers, who
met higher load factor standards, shifted to firm commercial rates,
which have a lower margin. Retail usage of gas per customer fell
during the first half of 1998 after reaching an unusually high mark
in the first half of 1997. This is in large part attributable to
reaction to rising gas costs included in rates during the latter part
of 1997 and first part of 1998.
Partially offsetting the rate changes and lower usage per customer
has been the effect of a strong growth rate in the number of
customers served by Questar Gas. The number of customers served grew
by 3.5% from a year ago to 643,696 at June 30, 1998.
Temperatures, as measured in degree days, were colder than normal in
the second quarter of 1998. However, the impact was slight because
temperatures are relatively mild during the second quarter in
comparison with the winter heating season that extends from November
through March. Also, Questar Gas' rates include a
weather-normalization adjustment that reduces the revenue impact of
weather fluctuations. Virtually all of Questar Gas' residential and
commercial volumes were covered under the weather-normalization
adjustment in the first half of both 1998 and 1997.
In March 1998, the Public Service Commission of Wyoming approved
Questar Gas' gas-merchant unbundling proposal that was filed in
Wyoming in 1997. Under this plan, a transportation service option
was extended to residential and commercial customers as well as
industrial customers. Customers choosing transportation service are
allowed to secure gas supplies directly from producers and marketers
and pay Questar Gas a fee for transportation services. Questar Gas
continues to offer a traditional bundled sales service as well. The
unbundling proposal called for an open enrollment period to be held
from March 1 through April 30. However, no suppliers signed up to
provide gas to Wyoming customers. Another open enrollment will be
held next year. Questar expects that the option of unbundled service
in Wyoming will not have a material effect on earnings.
Volumes delivered to industrial customers increased 12% in the first
half of 1998 when compared with the same period of 1997 due to
additions of new customers as well as expanded operations with
several ongoing customers. Margins from gas delivered to industrial
customers are substantially lower than from gas delivered to
residential and commercial customers.
Questar Gas, as a result of acquiring Questar Pipeline's gas purchase
contracts, is responsible for any judgment rendered against Questar
Pipeline in a lawsuit that was tried before a jury in 1994. In a
ruling issued June 2, 1998, the trial judge set aside all aspects of
the jury's verdict except for $.5 million in favor of a producer
related to certain contractual, take-or-pay issues. Other than on
these take-or-pay matters, a judgment was entered on all other issues
in favor of Questar Pipeline. A notice of appeal has been filed by
the producer.
Natural Gas Transmission
Questar Pipeline conducts the Company's natural gas transmission and
storage operations. Following is a summary of financial results and
operating information.
3 Months Ended 6 Months Ended 12 Months Ended
June 30, June 30, June 30,
1998 1997 1998 1997 1998 1997
(Dollars In Thousands)
FINANCIAL RESULTS
Revenues
From unaffiliated customers $9,088 $8,732 $18,153 $17,863 $36,633 $37,253
From affiliates 17,511 17,175 35,695 34,765 70,024 67,751
Total revenues $26,599 $25,907 $53,848 $52,628 $106,657 $105,004
Operating income $14,046 $11,992 $26,852 $25,457 $51,885 $49,480
Net income 7,060 5,460 13,614 11,782 28,400 23,639
OPERATING STATISTICS
Natural gas transportation volumes (in
thousands of decatherms)
For unaffiliated customers 31,289 27,633 64,067 60,936 119,346 119,800
For Questar Gas 27,051 26,011 65,382 68,275 107,418 114,854
For other affiliated customers 7,549 10,993 12,407 17,809 32,395 47,267
Total transportation 65,889 64,637 141,856 147,020 259,159 281,921
Transportation revenue (per
decatherm) $0.26 $0.26 $0.25 $0.23 $0.27 $0.23
Revenues were higher in the 3-, 6- and 12-month periods of 1998 due
primarily to increased firm-transportation and firm-storage
reservation charges. Questar Pipeline expanded working gas capacity
by 5 Bcf at Clay Basin for a capital investment of $4 million. The
expansion is expected to add about $3 million in annual storage
revenues. Service began in the second quarter of 1998 and all new
capacity was committed to long-term contracts.
Income from unconsolidated affiliates in the 1998 periods include the
Company's share of earnings reported by TransColorado Gas
Transmission Co. The noncash earnings reflect capitalization of
interest and equity costs (AFUDC) associated with the construction of
the TransColorado pipeline amounting to $405,000 in the 3-month
period, $723,000 in the 6-month period and $5,179,000 in the 12-month
period ended June 30, 1998.
Consolidated Results of Operations
Consolidated revenues were 18% higher in the second quarter ended
June 30, 1998 when compared with the second quarter of 1997 due to
increased revenues from energy-marketing and gas-distribution
activities. Consolidated revenues were lower in the 6- and 12-month
periods ended June 30, 1998 when compared with the same periods of
1997 due primarily to decreased energy-marketing activities, oil
prices and oil production, which more than offset higher
gas-distribution revenues, gas production and gas prices during these
same reporting periods.
Natural gas and other product purchases were 60% higher in the second
quarter ended June 30, 1998 when compared with the second quarter of
1997 due to the increased cost, primarily of gas, purchased for
energy-marketing activities and higher gas costs recovered in
distribution rates. Natural gas and other product purchases were
lower in the 6- and 12-month periods of 1998 due primarily to a
decrease in the quantity of gas purchased for energy-marketing
activities.
Increased labor-related costs for data processing caused a 4%
increase in operating and maintenance (O & M) expenses in the second
quarter of 1998 when compared with the same period in the prior year.
Cost-containment efforts, capitalizing labor costs associated with
construction projects and lower bad debt expenses in 1998 resulted in
lower O & M expenses in the 6- and 12-month periods of 1998. The
Company continues efforts to resolve Year 2000 issues and expects
that the expense of becoming Year 2000 compliant will not be
material. Depreciation expenses were lower in the 3- and 6- month
periods of 1998 when compared to the 1997 periods because of a lower
full-cost amortization rate and an adjustment associated with
transmission properties. The full-cost amortization rate for
combined US and Canadian operations was $.83 per equivalent Mcf for
the first half of 1998 down from $.85 for the 1997 period.
Depreciation Other taxes, primarily production and property taxes,
were lower in the 6- and 12-month periods of 1998 because of lower
oil prices and production, and refunds and lower assessments of state
property taxes.
Eligible employees in the Company's Regulated Services group and in
Questar Energy Services, Inc., were offered an early retirement
program that was effective July 31, 1998. Enhanced benefits will be
paid to 178 employees taking advantage of the offer. The regulated
services work force was reduced by more than 10% or 177 employees,
which will decrease future operating expenses. The Regulated
Services group will defer and amortize the costs associated with the
early retirement program over a five-year period in accordance with
past regulatory treatment. The deferred annual charge is expected to
be more than offset by lower labor-related costs.
Interest and other income was higher in the 3- and 6-month periods of
1998 due primarily to a $5,727,000 pretax gain on an exchange of an
interest in Nextlink and $829,000 of interest earned on a
fiber-optics communications project with Nextlink. In addition to
the items mentioned, higher pretax gains from selling Nextel shares
and increased earnings from unconsolidated affiliates resulted in an
increase in interest and other income reported in the 12-month period
ended June 30, 1998.
The effective income tax rate for the first six months was 32.1% in
1998 and 32.2% in 1997. The Company recognized $4,246,000 of
production-related tax credits in the 1998 period and $4,917,000 in
the 1997 period.
Liquidity and Capital Resources
Operating Activities
Net cash provided from operating activities of $174,811,000 for the
first half of 1998 was $37,963,000 higher than was generated in the
same period of 1997. The increase in cash flow resulted primarily
from collection of gas costs incurred by natural gas distribution
operations, which were under-collected in the first half of 1997.
Investing Activities
Capital expenditures were $93,521,000 for the first half of 1998, up
$27,513,000 from the $66,008,000 reported for the same period a year
ago. A comparison of capital expenditures by lines of business for
the first six months of 1998 and 1997 plus an estimate for calendar
year 1998 are below. The 1998 forecast includes announced purchases
of a gas and oil company for $157,500,000 and a pipeline for
$40,000,000. Both transactions are expected to be effective in the
third quarter of 1998.
Estimate
Actual 12 Months
Six Months Ended Ended
June 30, Dec. 31,
1998 1997 1998
(In Thousands)
Capital Expenditures:
Market Resources $41,038 $31,057 $243,800
Regulated Services
Natural gas distribution 25,292 20,985 66,000
Natural gas transmission 20,761 4,277 162,100
Total Regulated Services 46,053 25,262 228,100
Other operations 6,430 9,689 45,100
$93,521 $66,008 $517,000
Financing Activities
In the first half of 1998 net cash flow provided from operating
activities was used to reduce short-term debt by $53,600,000 and
long-term debt by $38,638,000 and to fund capital expenditures. The
Company intends to finance forecasted 1998 capital expenditures
through net cash provided from operating activities, bank borrowings
and issuing long-term debt.
Short-term borrowings, represented by commercial paper, amounted to
$77,600,000 at June 30, 1998 and $44,100,000 at June 30, 1997. The
Company has short-term bank lines of credit, which serve as backup to
borrowings made under the commercial paper program. The Company's
lines of credit borrowing capacity is $100 million April 1 through
September 30 to match seasonal-borrowing patterns. However, the
capacity is being expanded to $300 million for interim financing to
accommodate capital spending until long-term financing can be
arranged.
Forward Looking Statements
This 10-Q contains forward-looking statements about the future
operations and expectations of Questar Corporation. According to
management, these statements are made in good faith and are
reasonable representations of the Company's expected performance at
the time. Actual results may vary from management's stated
expectations and projections due to a variety of factors.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Questar Corporation (Questar or the Company) held its annual
meeting of shareholders on Tuesday, May 19, 1998. Four incumbent
directors--R. D. Cash, Gary G. Michael, Gary L. Nordloh, and Scott S.
Parker were elected to serve three year terms. The following chart
lists the name of each director nominated and elected, the number of
votes in favor of his election, the number of votes cast against his
election, and the number of abstaining votes:
Name Votes For Votes Against Abstentions
R. D. Cash 35,338,727 206,226 516,497
Gary G. Michael 35,385,572 158,981 516,497
Gary L. Nordloh 34,964,036 580,517 516,497
Scott S. Parker 35,320,415 224,138 516,497
The Company's other directors are Patrick J. Early, U. Edwin
Garrison, W. Whitley Hawkins, Robert E. Kadlec, Dixie L. Leavitt,
Marilyn S. Kite, D. N. Rose, and Harris H. Simmons. Mr. William N.
Jones reached the mandatory retirement age of 72 and resigned as a
director effective May 19, 1998, leaving a vacancy on the Board.
Questar's shareholders also approved an amendment to the
Company's Articles of Incorporation that increased the authorized
shares of common stock from 175,000,000 shares to 350,000,000 shares.
The Company's shareholders cast 27,521,912 votes in favor of the
proposed amendment and 8,294,903 votes against the proposed amendment;
in addition, there were 244,235 abstaining votes on the proposed
amendment.
(Since the Company's annual meeting was held before the
two-for-one stock split, all shares are reported on a pre-split basis.
Item 5. Other Information.
On August 11, 1998, Questar's Board of Directors unanimously
approved an amendment to the Company's Bylaws to provide that
shareholder proposals must be received at least 90 days prior to the
date of the Company's annual meeting in order for named proxies to
have notice of any item on which they will not have discretionary
voting at the annual meeting. Questar's 1999 annual meeting will be
held on May 18, 1999. Consequently, shareholders must provide proper
notice to the Company's Corporate Secretary by February 17, 1999 of
any matters to be brought before the annual meeting.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits have been filed as part of this
report:
Exhibit No.
3.1. Restated Articles of Incorporation as amended effective
May 19, 1998.
3.2. Bylaws as amended effective August 11, 1998.
10.1. Questar Corporation Annual Management Incentive Plan as
amended and restated effective May 19, 1998.
10.2. Questar Corporation Executive Incentive Retirement Plan
as amended and restated effective May 19, 1998.
10.3. Questar Corporation Executive Severance Compensation
Plan as amended and restated effective May 19, 1998.
10.4. Questar Corporation Long-Term Stock Incentive Plan as
amended and restated effective May 19, 1998.
10.5. Questar Corporation Deferred Compensation Plan for
Directors as amended and restated effective May 19,
1998.
10.6. Questar Corporation Supplemental Executive Retirement
Plan as amended and restated effective June 1, 1998.
10.7. Questar Corporation Deferred Share Plan as amended and
restated effective May 19, 1998.
10.8. Questar Corporation Deferred Share Make-Up Plan.
10.9. Questar Corporation Special Situation Retirement Plan.
10.10. Questar Corporation Deferred Compensation Plan as
amended and restated effective May 19, 1998.
(b) The Company did not file a Current Report on Form 8-K during
the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
QUESTAR CORPORATION
(Registrant)
August 14, 1998 /s/R. D. Cash
(Date) R. D. Cash
Chairman of the Board, President
and Chief Executive Officer
August 14, 1998 /s/ S. E. Parks
(Date) S. E. Parks
Vice President, Treasurer and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1. Restated Articles of Incorporation as amended effective May
19, 1998.
3.2. Bylaws as amended effective August 11, 1998.
10.1. Questar Corporation Annual Management Incentive Plan as
amended and restated effective May 19, 1998.
10.2. Questar Corporation Executive Incentive Retirement Plan as
amended and restated effective May 19, 1998.
10.3. Questar Corporation Executive Severance Compensation Plan as
amended and restated effective May 19, 1998.
10.4. Questar Corporation Long-Term Stock Incentive Plan as
amended and restated effective May 19, 1998.
10.5. Questar Corporation Deferred Compensation Plan for Directors
as amended and restated effective May 19, 1998.
10.6. Questar Corporation Supplemental Executive Retirement Plan
as amended and restated effective June 1, 1998.
10.7. Questar Corporation Deferred Share Plan as amended and
restated effective May 19, 1998.
10.8. Questar Corporation Deferred Share Make-Up Plan.
10.9. Questar Corporation Special Situation Retirement Plan.
10.10 Questar Corporation Deferred Compensation Plan as amended
and restated effective May 19, 1998.