-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ru8Xgy+WObTIewBNjhpHRgYzFlEAq1Tp0oOrgeDpMaw95de+S7rSNkkUpe3OwYjJ tN0qskrycS9p02HEz/07Bw== 0000068589-99-000006.txt : 19990817 0000068589-99-000006.hdr.sgml : 19990817 ACCESSION NUMBER: 0000068589-99-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR GAS CO CENTRAL INDEX KEY: 0000068589 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 870407509 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-55866 FILM NUMBER: 99689912 BUSINESS ADDRESS: STREET 1: 180 E FIRST SOUTH ST STREET 2: PO BOX 45433 CITY: SALT LAKE CITY STATE: UT ZIP: 84145-0433 BUSINESS PHONE: 8015345555 MAIL ADDRESS: STREET 1: 180 EAST FIRST SOUTH ST STREET 2: P O BOX 11150 CITY: SALT LAKE CITY STATE: UT ZIP: 84147 FORMER COMPANY: FORMER CONFORMED NAME: MOUNTAIN FUEL SUPPLY CO DATE OF NAME CHANGE: 19920703 10-Q 1 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, 1999 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. 1-935 QUESTAR GAS COMPANY (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0155877 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 45360, 180 East 100 South, Salt Lake City, Utah84145-0360 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(801) 324-5555 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 July 31, 1999 Common Stock, $2.50 par value 9,189,626 shares Registrant meets the conditions set forth in General Instruction H(a)(1) and (b) of Form 10-Q and is filing this Form 10-Q with the reduced disclosure format. PART I FINANCIAL INFORMATION Item 1. Financial Statements QUESTAR GAS COMPANY STATEMENTS OF INCOME (Unaudited)
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1999 1998 1999 1998 1999 1998 (In Thousands) REVENUES $ 70,174 $ 74,387 $ 242,476 $266,176 $ 453,123 $ 475,763 OPERATING EXPENSES Natural gas purchases 36,741 41,965 135,463 160,063 256,404 282,116 Operating and maintenance 25,131 23,735 50,012 49,012 97,923 97,525 Depreciation 8,619 7,697 17,285 15,528 35,018 31,386 Other taxes 2,153 2,531 4,379 4,903 7,661 7,788 TOTAL OPERATING EXPENSES 72,644 75,928 207,139 229,506 397,006 418,815 OPERATING INCOME (LOSS) (2,470) (1,541) 35,337 36,670 56,117 56,948 INTEREST AND OTHER INCOME 1,466 1,296 1,971 2,028 3,509 3,677 DEBT EXPENSE (4,743) (4,570) (9,848) (9,696) (19,944) (20,008) INCOME (LOSS) BEFORE INCOME TAXES (5,747) (4,815) 27,460 29,002 39,682 40,617 INCOME TAXES (CREDITS) (2,911) (2,434) 10,038 10,669 13,185 12,976 NET INCOME (LOSS) $ (2,836) $ (2,381) $ 17,422 $ 18,333 $ 26,497 $ 27,641
See notes to financial statements QUESTAR GAS COMPANY CONDENSED BALANCE SHEETS
June 30, December 31, 1999 1998 1998 (Unaudited) (In Thousands) ASSETS Current assets Cash and short-term investments $ 3,326 Accounts receivable $ 29,117 $ 36,871 80,512 Inventories 13,357 13,233 22,296 Purchased-gas adjustments 12,506 2,067 Other current assets 1,593 2,929 2,838 Total current assets 44,067 65,539 111,039 Property, plant and equipment 965,535 900,082 948,280 Less allowances for depreciation 401,343 365,909 382,657 Net property, plant and equipment 564,192 534,173 565,623 Other assets 20,833 23,089 23,853 $629,092 $622,801 $ 700,515 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $ 2,398 $ 5,259 Notes payable to Questar Corporation 5,600 25,000 $ 96,700 Accounts payable and accrued expenses 42,259 55,515 71,288 Purchased-gas adjustments 1,453 Total current liabilities 51,710 85,774 167,988 Long-term debt 225,000 225,000 225,000 Other liabilities 1,582 5,568 330 Deferred income taxes and investment tax credits 77,704 77,110 80,023 Common shareholder's equity Common stock 22,974 22,974 22,974 Additional paid-in capital 81,875 41,875 41,875 Retained earnings 168,247 164,500 162,325 Total common shareholder's equity 273,096 229,349 227,174 $629,092 $622,801 $ 700,515
See notes to financial statements QUESTAR GAS COMPANY CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
6 Months Ended June 30, 1999 1998 (In Thousands) OPERATING ACTIVITIES Net income $ 17,422 $ 18,333 Depreciation 18,646 16,668 Deferred income taxes and investment tax credits (2,319) (9,999) 33,749 25,002 Change in operating assets and liabilities 40,342 71,908 NET CASH PROVIDED FROM OPERATING ACTIVITIES 74,091 96,910 INVESTING ACTIVITIES Capital expenditures (19,960) (24,974) Proceeds from disposition of property, plant and equipment 2,745 2,308 NET CASH USED IN INVESTING ACTIVITIES (17,215) (22,666) FINANCING ACTIVITIES Checks outstanding in excess of cash balances 2,398 5,259 Decrease in notes payable to Questar Corporation (91,100) (75,000) Capital contribution 40,000 Payment of dividends (11,500) (11,250) NET CASH USED IN FINANCING ACTIVITIES (60,202) (80,991) DECREASE IN CASH AND SHORT-TERM INVESTMENTS $ (3,326) $ (6,747)
See notes to financial statements QUESTAR GAS COMPANY NOTES TO FINANCIAL STATEMENTS June 30, 1999 (Unaudited) Note 1 - Basis of Presentation The interim financial statements 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, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. Note 2 - Receipt of Contribution of Capital On June 30, 1999, Questar Gas received a $40 million contribution of capital from its parent company that was used to repay short-term debt owed to Questar Corporation. Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations QUESTAR GAS COMPANY June 30, 1999 (Unaudited) Operating Results Following is a summary of financial and operating information for the Company:
3 Months Ended 6 Months Ended 12 Months Ended June 30, June 30, June 30, 1999 1998 1999 1998 1999 1998 (Dollars In Thousands) FINANCIAL RESULTS Revenues From unaffiliated customers $ 69,952 $ 74,268 $ 242,045 $266,057 $ 451,742 $ 474,887 From affiliates 222 119 431 119 1,381 876 Total revenues 70,174 74,387 242,476 266,176 453,123 475,763 Natural gas purchases 36,741 41,965 135,463 160,063 256,404 282,116 Revenues less natural gas purchases $ 33,433 $ 32,422 $ 107,013 $106,113 $ 196,719 $ 193,647 Operating income (loss) $ (2,470) $ (1,541) $ 35,337 $ 36,670 $ 56,117 $ 56,948 Net income (loss) (2,836) (2,381) 17,422 18,333 26,497 27,641 OPERATING STATISTICS Natural gas volumes (in thousands of decatherms) Residential and commercial sales 14,145 13,178 46,570 47,492 82,309 84,677 Industrial sales 2,282 2,267 5,222 5,097 9,806 9,614 Transportation for industrial customers 11,800 13,115 25,151 27,947 52,665 54,683 Total deliveries 28,227 28,560 76,943 80,536 144,780 148,974 Natural gas revenue (per decatherm) Residential and commercial $ 4.15 $ 4.70 $ 4.65 $ 5.06 $ 4.88 $ 5.02 Industrial sales 2.83 2.90 2.93 3.01 3.01 2.92 Transportation for industrial customers 0.13 0.11 0.13 0.11 0.13 0.12 Heating degree days Actual 946 899 3,242 3,291 5,413 5,623 Normal 741 741 3,484 3,484 5,801 5,801 Colder (warmer) than normal 28% 21% (7%) (6%) (7%) (3%) Number of customers at June 30, Residential and commercial 665,221 642,399 Industrial 1,356 1,297 Total 666,577 643,696
Revenues less natural gas purchases, or nongas-cost margin, increased 3% in the second quarter and 1% in the first half of 1999 compared with the same periods of 1998. The increase in the margin resulted primarily from gas volumes delivered to new customers and more than offset the effect of lower usage per customer. Temperature adjusted usage per customer was approximately 3 decatherms lower in the first half of 1999 compared with the prior year period. Temperatures, as measured in degree days, were warmer than normal in the 6-and 12-months periods and colder than normal in the second quarter. However, the impact on earnings of temperature variations from normal has been mitigated by a weather-normalization adjustment. The number of customers served by Questar Gas grew by 22,881 or 3.6% from a year ago to 666,577 as of June 30, 1999. The number of customer additions for the year ending December 31, 1999 is expected to be between 20,000 to 22,000. Volumes delivered to industrial customers decreased 8% in the first half of 1999 when compared with the same period of 1998 because a major steel-producing customer reduced operations. The margin earned from gas delivered to industrial customers is substantially lower than from gas delivered to residential and commercial customers. Questar Gas' natural gas purchases decreased in the 1999 periods when compared with the 1998 periods due to lower sales volumes and lower gas costs. Sales volumes were 2% lower in the first half of 1999 due to lower usage per customer. The commodity or gas costs in Utah rates decreased from $2.27 per Decatherm in the first half of 1998 to $1.72 per Decatherm in the first half of 1999. The reduction reflects lower prices paid to producers. The Company files for adjustment of purchased-gas costs with the Utah and Wyoming Public Service Commissions on a semiannual basis. Operating and maintenance expenses were 6% higher in the second quarter of 1999 and 2% higher in the first half of 1999. Higher information-technology costs more than offset the effect of labor-cost savings from an early retirement program effective August 1998. In 1999, the savings amounted to approximately $1.3 million per quarter. Information technology costs have been rising due to various projects, such as, enhanced communications, improvements in accounting and customer information systems, testing for Year 2000 contingencies and changes in billing procedures from its information-technology provider. Depreciation expense was higher in the 1999 periods presented when compared with the 1998 periods primarily as a result of continuing investment in property, plant and equipment, including data processing systems. Other taxes, which include payroll taxes, were lower in 1999 as a result of the early retirement program. The effective income tax rate was 36.6% in the first half of 1999 and 36.8% in the first half of 1998. The Company realized $939,000 of tight-sands gas-production credits in the 1999 period and $1,089,000 in the 1998 period. Liquidity and Capital Resources Operating Activities Net cash provided from operating activities in the first half of 1999 was $22,819,000 less than was generated in the first half of 1998. The decrease in cash flow resulted primarily from timing differences in the collection of purchased gas costs and payment on accounts to vendors. Investing Activities Capital expenditures were $19,960,000 in the first half of 1999 compared with $24,974,000 in the first half of 1998. Capital expenditures for calendar year 1999 are estimated at $62.5 million. Financing Activities On June 30, 1999, Questar Gas received a $40 million contribution of capital from its parent company. The proceeds of the capital contribution plus cash generated from operations allowed the Company to repay $91.1 million of short-term debt borrowed from Questar Corporation. Loan balances owed to Questar as of June 30, amounted to $5.6 million in 1999 after the contribution of capital and $25 million in 1998. Capital expenditures for the remainder of 1999 are expected to be financed with net cash flow provided from operating activities and borrowings from Questar. Regulatory and Other Matters Questar Gas filed an application on November 25, 1998 with the Public Service Commission of Utah (PSCU) to recover the costs associated with a contract for the removal of carbon dioxide from the gas stream. The contract covers the costs of a new plant being constructed and operated by an affiliate of Questar Gas. The Division of Public Utilities and the Committee of Consumer Services have filed testimony questioning the Company's decision to enter into the contract and opposing pass-through rate coverage for the costs under the contract. The Committee objected to any cost recovery in rates for the plant processing costs. Hearings were held on the issues June 22 and 23. Briefs are to be filed by August 27 and reply briefs are due September 13. The contract's annual cost of service ranges between $7.5 - $8.5 million. Declining usage of gas per customer and increasing operating costs may cause Questar Gas to file a general rate case. The last general rate case filed by the Company was in 1995. Cost savings from consolidating operations enabled Questar Gas to file on June 10, 1999 for a decrease in general rates in Wyoming. The decrease is in effect on an interim basis pending hearings and will reduce annualized revenues by $735,000. Questar Gas requested pass-through commodity cost increases in Utah and Wyoming in the second quarter of 1999. The Company was authorized to collect on an interim basis beginning in the third quarter of 1999, annualized revenues of $16,865,000 in Utah rates and $380,262 in Wyoming rates. Year 2000 Issues Questar Corporation established a team to address the issue of computer programs and embedded computer chips being unable to distinguish between the year 1900 and the year 2000 (Y2K). The team has identified 56 projects that are in varying stages of remediation and a scope that includes Questar and its affiliated companies. The projects fit into the general classifications of application software, infrastructure, non-information technology equipment and critical third-party associations. The estimated cost of the Y2K project is $5.1 million. Questar Gas' portion of Y2K costs are estimated to be $2.3 million. The Company expects to be Y2K ready before the end of 1999. Failure to correct a material Y2K problem could result in an interruption, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. The infrastructure section of the plan addresses hardware and systems software other than applications software. Currently, there are 20 projects identified: 0 in start-up, 4 in assessment, 3 in remediation, 1 in testing and 12 completed and deemed to be Y2K ready. The applications software section addresses either the conversion or replacement of applications software that is not Y2K compliant. Currently, there are 35 projects in this section: 4 in start-up, 1 in assessment, 3 in remediation, 3 in testing and 24 completed and deemed to be Y2K compliant. Non-information technology equipment is considered to be one project and addresses hardware, software and associated embedded computer chips used in the operation of all facilities operated by the Company. Because this section has unique characteristics and is large, the Company has employed the services of a consultant to assist in the effort. The project is currently scheduled to be completed by September 30, 1999. Inquiries of critical third parties have been taking place with more contacts scheduled. Contacting parties is scheduled to be completed by the end of the third quarter 1999. Contingency plans for dealing with third-party issues will be developed by the end of 1999. Additional information regarding Questar Gas' Y2K program can be viewed in Form 10-K for December 31, 1998, filed with the Securities and Exchange Commission or on Questar's website at www.questarcorp.com. Forward-Looking Statements This 10-Q contains forward-looking statements about future operations, capital spending, regulatory matters and expectations of Questar Gas. 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. Important assumptions and other significant factors that could cause actual results to differ materially from those discussed in forward-looking statements include changes in: general economic conditions, gas prices and availability of gas supplies, competition, regulatory issues, weather conditions and other factors beyond the control of the Company. These other factors include the rate of inflation, the adverse effects of failure to achieve Y2K compliance and adverse changes in the business or financial condition of the Company. These factors are not necessarily all of the important factors that could cause actual results to differ significantly from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have a significant adverse effect on future results. The Company does not undertake an obligation to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. PART II OTHER INFORMATION Item 1. Legal Proceedings. a. On June 7, 1999, the Public Service Commission of Utah (PSCU) denied a motion for summary judgment in the application filed by Questar Gas Company (Questar Gas or the Company) seeking pass-through treatment of processing costs incurred to remove carbon dioxide from gas volumes. The Division of Public Utilities and the Committee of Consumer Services filed the motion seeking a legal determination that such costs were not eligible for pass-through treatment. After holding hearings on June 22 and 23, 1999, the PSCU requested the Company and state agencies to file briefs on the merits of the issues. See the Company's Report on Form 10-Q for the quarter ended March 31, 1999, Item 1. Legal Proceedings. b. On June 11, 1999, the Company filed concurrent applications with the Public Service Commission of Wyoming (the PSCW), requesting a general rate decrease of $735,000 and a pass-through commodity cost increase of $380,262. The PSCW, at an open meeting held on July 29, 1999, authorized Questar Gas to reflect the overall decrease in its rates on an interim basis effective August 1, 1999. The PSCW has scheduled an audit of Questar Gas's records in conjunction with the rate case and will hold hearings after the audit is completed. The PSCW is monitoring the Company's case before the PSCU involving the appropriate treatment of costs incurred to remove carbon dioxide and has indicated that this issue will also be reviewed by it in conjunction with Questar Gas's pass-through and general rate cases. c. Questar Gas filed a semi-annual gas cost pass-through application with the PSCU on June 16, 1999. The Company's application, which reflects an increase of commodity costs, results in an annual revenue increase of $16,865,000. The PSCU, by an interim order, authorized Questar Gas to reflect the requested increase in rates effective July 1, 1999. d. The PSCU has scheduled public hearings for September 29, 1999, to consider the merits of a municipality's request that the Company be required to transport gas to it for resale to residents of the community. Although it previously ruled that it had the jurisdiction to determine whether Questar Gas could be required to offer such service, the PSCU has not determined whether "public interest" supports it. e. Questar Gas and several other affiliates of Questar Corporation are named defendants in an action filed by Jack J. Grynberg, an independent producer, in Colorado's federal district court and have officially been served copies of the complaint. The action was filed under the Federal False Claims Act in early 1998, but the complaint was sealed until the Department of Justice declined to prosecute it. The complaint is one of approximately 76 actions filed by the producer against pipelines and their affiliates. The district court granted the motion filed by the Questar defendants to stay the proceedings pending a determination of procedural issues relating to the consolidation of the cases. The producer's complaints allege mismeasurement of the heating content of natural gas volumes and understatement of the value of gas on which royalty payments are due the federal government. The complaint filed against the Questar defendants does not include a claim for specific monetary damages. f. Questar Gas is also involved in two other actions filed by Mr. Grynberg. One case is currently on appeal to the Tenth Circuit Court of Appeals, which has not yet scheduled a hearing date. As a result of acquiring gas purchase contracts from its affiliate, the Company is responsible for any judgment rendered in a lawsuit that was tried before a Wyoming district court jury in late 1994. The jury awarded several million dollars to Mr. Grynberg, but the presiding federal district court judge, in June of 1998, entered a judgment that overturned most provisions of the jury verdict. Mr. Grynberg is appealing the trial judge's action. Pending the resolution of the appeal by the Tenth Circuit, the same federal district court judge has stayed action in another case filed by Mr. Grynberg against Questar Gas and its affiliates alleging fraud and antitrust violations in addition to the same claims heard in the first case for a subsequent period of time. Item 6. Exhibits and Reports on Form 8-K a. The following exhibit has been filed as part of this report. Exhibit No. Exhibit 10.1. Joint Annual Management Incentive Plan adopted by Questar Gas Company, Questar Pipeline Company and Questar Regulated Services Company as amended and restated effective May 18, 1999. 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 GAS COMPANY (Registrant) August 13, 1999 /s/ D. N. Rose D. N. Rose President and Chief Executive Officer August 13, 1999 /s/ S. E. Parks S. E. Parks Vice President, Treasurer, and Chief Financial Officer EXHIBIT INDEX Exhibit Number Exhibit 10.1. Joint Annual Management Incentive Plan adopted by Questar Gas Company, Questar Pipeline Company and Questar Regulated Services Company as amended and restated effective May 18, 1999. EX-10.1 2 QUESTAR REGULATED SERVICES COMPANY, QUESTAR GAS COMPANY, AND QUESTAR PIPELINE COMPANY ANNUAL MANAGEMENT INCENTIVE PLAN (As Amended and Restated Effective May 18, 1999) Paragraph 1. Name. The name of this Plan is the Annual Management Incentive Plan (the Plan) for Questar Regulated Services Company, Questar Gas Company, and Questar Pipeline Company (collectively referred to as Regulated Services). Paragraph 2. Purpose. The purpose of the Plan is to provide an incentive to officers and key employees of Regulated Services for the accomplishment of major organizational and individual objectives designed to further the efficiency, profitability, and growth of Regulated Services. Paragraph 3. Administration. The Management Performance Committee (Committee) of the Board of Directors of Questar Corporation (Questar) shall have full power and authority to interpret and administer the Plan. Such Committee shall consist of no less than three disinterested members of the Board of Directors. Recommendations made by the Committee shall be reviewed by the Boards of Directors of participating employers. Paragraph 4. Participation. Within 60 days after the beginning of each year, the Committee shall nominate Participants from the officers and key employees for such year. The Committee shall also establish a target bonus for the year for each Participant expressed as a percentage of base salary or specified portion of base salary. Participants shall be notified of their selection and their target bonus as soon as practicable. Paragraph 5. Determination of Performance Objectives. Within 60 days after the beginning of each year, the Committee shall establish target, minimum, and maximum performance objectives for Regulated Services and for its affiliates and shall determine the manner in which the target bonus is allocated among the performance objectives. The Committee shall also recommend a dollar maximum for payments to Participants for any Plan year. The Board of Directors shall take action concerning the recommended dollar maximum within 60 days after the beginning of the Plan year. Participants shall be notified of the performance objectives as soon as practicable once such objectives have been established. Paragraph 6. Determination and Distribution of Awards. As soon as practicable, but in no event more than 90 days after the close of each year during which the Plan is in effect, the Committee shall compute incentive awards for eligible participants in such amounts as the members deem fair and equitable, giving consideration to the degree to which the Participant's performance has contributed to the performance of Regulated Services and its affiliated companies and using the target bonuses and performance objectives previously specified. Aggregate awards calculated under the Plan shall not exceed the maximum limits approved by the Board of Directors for the year involved. To be eligible to receive a payment, the Participant must be actively employed by Regulated Services or an affiliate as of the date of distribution except as provided in Paragraph 8. Amounts shall be paid (less appropriate withholding taxes and FICA deductions) according to the following schedule: Award Distribution Schedule Percent of Award Date Initial Award 75% As soon as possible after initial award is (First Year determined of Participation) 25 One year after initial award is determined 100% Subsequent Awards 50% As soon as possible after award is determined 25 One year after award is determined 25 Two years after award is determined 100% Paragraph 7. Restricted Stock in Lieu of Cash. Participants who have a target bonus of $10,000 or higher shall be paid all deferred portions of such bonus with restricted shares of Questar's common stock under Questar's Long-Term Stock Incentive Plan. Such stock shall be granted to the participant when the initial award is determined, but shall vest free of restrictions according to the schedule specified above in Paragraph 6. Paragraph 8. Termination of Employment. (a) In the event a Participant ceases to be an employee during a year by reason of death, disability or approved retirement, an award, or a reduction in force, if any, determined in accordance with Paragraph 6 for the year of such event, shall be reduced to reflect partial participation by multiplying the award by a fraction equal to the months of participation during the applicable year through the date of termination rounded up to whole months divided by 12. For the purpose of this Plan, approved retirement shall mean any termination of service on or after age 60, or, with approval of the Board of Directors, early retirement under Questar's qualified retirement plan. For the purpose of this Plan, disability shall mean any termination of service that results in payments under Questar's long-term disability plan. A reduction in force, for the purpose of this Plan, shall mean any involuntary termination of employment due to the Company's economic condition, sale of assets, shift in focus, or other reasons independent of the Participant's performance. The entire amount of any award that is determined after the death of a Participant shall be paid in accordance with the terms of Paragraph 11. In the event of termination of employment due to disability, approved retirement, or a reduction in force, a Participant shall be paid the undistributed portion of any prior awards in his final paycheck or in accordance with the terms of elections to voluntarily defer receipt of awards earned prior to February 12, 1991, or deferred under the terms of Questar's Deferred Compensation Plan. In the event of termination due to disability, approved retirement, or a reduction in force, any shares of common stock previously credited to a Participant shall be distributed free of restrictions during the last month of employment. The current market value (defined as the closing price for the stock on the New York Stock Exchange on the date in question) of such shares shall be included in the Participant's final paycheck. Such Participant shall be paid the full amount of any award (adjusted for partial participation) declared subsequent to the date of such termination within 30 days of the date of declaration. Any partial payments shall be made in cash. (b) In the event a Participant ceases to be an employee during a year by reason of a change in control, he shall be entitled to receive all amounts deferred by him prior to February 12, 1991, and all undistributed portions for prior Plan years. He shall also be entitled to an award for the year of such event as if he had been an employee throughout such year. The entire amount of any award for such year shall be paid in a lump sum within 60 days after the end of the year in question. Such amounts shall be paid in cash. For the purpose of this Plan, a "change in control" shall be deemed to have occurred if (i) any Acquiring Person (as that term is used in the Rights Agreement dated February 13, 1996, between Questar and ChaseMellon Shareholder Services, L.L.C. ("Rights Agreement")) is or becomes the beneficial owner (as such term is used in Rule 13d-3 under the Securities Exchange Act of 1934) of securities of Questar representing 25 percent or more of the combined voting power of Questar, or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving as directors of Questar: individuals who, as of May 19, 1998, constitute Questar's Board of Directors (Board) and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of Questar) whose appointment of election by the Board or nomination for election by Questar's stockholders was approved or recommended by a vote of at least two-thirds of the directors when still in office who either were directors on May 19, 1998, or who appointment, election or nomination for election was previously so approved or recommended; or (iii Questar stockholders approve a merger or consolidation of Questar or any direct of indirect subsidiary of Questar with any other corporation, other than a merger of consolidation that would result in the voting securities of Questar outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 60 percent of the combined voting power of the securities of Questar or such surviving entity or its parent outstanding immediately after such merger or consolidation, or a merger or consolidation effected to implement a recapitalization of Questar (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of Questar representing 25 percent or more of the combined voting power of Questar's then outstanding securities; or (iv) Questar's stockholders approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by Questar of all or substantially all of Questar's assets, other than a sale of disposition by Questar of all or substantially all of the Company's assets to an entity, at least 60 percent of the combined voting power of the voting securities of which are owned by stockholders of Questar in substantially the same proportion as their ownership of Questar immediately prior to such sale. A change in control, however, shall not be considered to have occurred until all conditions precedent to the transaction, including but not limited to, all required regulatory approvals have been obtained. Paragraph 9. Interest on Previously Deferred Amounts. Amounts voluntarily deferred prior to February 12, 1991, shall be credited with interest from the date the payment was first available in cash to the date of actual payment. Such interest shall be calculated at a monthly rate using the typical rates paid by major banks on new issues of negotiable Certificates of Deposit in the amounts of $1,000,000 or more for one year as quoted in The Wall Street Journal on the first day of the relevant calendar month or the next preceding business day if the first day of the month is a non-business day. Paragraph 10. Coordination with Deferred Compensation Plan. Some Participants are entitled to defer the receipt of their cash bonuses under the terms of Questar's Deferred Compensation Plan, which became effective November 1, 1993. Any cash bonuses deferred pursuant to the Deferred Compensation Plan shall be accounted for and distributed according to the terms of such plan and the choices made by the Participant. Paragraph 11. Death and Beneficiary Designation. In the event of the death of a Participant, any undistributed portions of prior awards shall become payable. Amounts previously deferred by the Participant, together with credited interest to the date of death, shall also become payable. Each Participant shall designate a beneficiary to receive any amounts that become payable after death under this Paragraph or Paragraph 8. In the event that no valid beneficiary designation exists at death, all amounts due shall be paid as a lump sum to the estate of the Participant. Any shares of restricted stock previously credited to the Participant shall be distributed to the Participant's beneficiary or, in the absence of a valid beneficiary designation, to the Participant's estate, at the same time any cash is paid. Paragraph 12. Amendment of Plan. The Boards of Directors for the participating employers, at any time, may amend, modify, suspend, or terminate the Plan, but such action shall not affect the awards and the payment of such awards for any prior years. The Boards of Directors for the participating employers cannot terminate the Plan in any year in which a change of control has occurred without the written consent of the Participants. The Plan shall be deemed suspended for any year for which the Board of Directors has not fixed a maximum dollar amount available for award. Paragraph 13. Nonassignability. No right or interest of any Participant under this Plan shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, and no right or interest of any Participant under the Plan shall be liable for, or subject to, any obligation or liability of such Participant. Any assignment, transfer, or other act in violation of this provision shall be void. Paragraph 14. Effective Date of the Plan. The Plan shall be effective with respect to the fiscal year beginning January 1, 1997, and shall remain in effect until it is suspended or terminated as provided by Paragraph 12. This Plan replaces the individual plans previously adopted by Questar Gas and Questar Pipeline that became effective January 1, 1984. Plan participants who previously received awards under predecessor plans or any other Annual Management Incentive Plan adopted by an affiliate shall be treated as ongoing participants for purposes of the distribution schedule in Paragraph 6. EX-27 3
5 The following schedule contains summarized financial information extracted from the Questar Gas Company Income Statement and Balance Sheet for the period ended June 30, 1999, and is qualified in its entirety by reference to such unaudited financial statements. 1,000 6-MOS DEC-31-1999 JUN-30-1999 0 0 29,117 0 13,357 44,067 965,535 401,343 629,092 51,710 225,000 0 0 22,974 250,122 629,092 0 242,476 0 185,475 21,664 0 9,848 27,460 10,038 17,422 0 0 0 17,422 0 0
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