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UNITED STATES Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003. |
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______. |
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Commission File Number 0-14147 |
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QUESTAR PIPELINE COMPANY |
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(Exact name of registrant as specified in its charter) |
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87-0307414 |
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P.O. Box 45360 |
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(801) 324-2400
(Registrant's telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) |
Yes [ ] |
No [X] |
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, 2003 |
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Common Stock, $1.00 par value |
6,550,843 shares |
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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. |
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PART I FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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QUESTAR PIPELINE COMPANY AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF INCOME |
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(Unaudited) |
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3 Months Ended |
6 Months Ended |
12 Months Ended |
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June 30, |
June 30, |
June 30, |
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2003 |
2002 |
2003 |
2002 |
2003 |
2002 |
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(In Thousands) |
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REVENUES |
$ 38,811 |
$ 33,234 |
$ 77,286 |
$ 66,721 |
$ 153,440 |
$ 129,667 |
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OPERATING EXPENSES |
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Operating and maintenance |
13,219 |
12,329 |
25,844 |
24,380 |
51,057 |
49,416 |
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Depreciation |
6,624 |
4,811 |
12,706 |
9,656 |
25,199 |
16,839 |
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Other taxes |
1,678 |
1,127 |
3,161 |
1,977 |
6,132 |
3,322 |
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TOTAL OPERATING EXPENSES |
21,521 |
18,267 |
41,711 |
36,013 |
82,388 |
69,577 |
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OPERATING INCOME |
17,290 |
14,967 |
35,575 |
30,708 |
71,052 |
60,090 |
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INTEREST AND OTHER INCOME (LOSS) |
108 |
1,154 |
224 |
2,235 |
(1,496) |
5,444 |
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INCOME FROM OPERATIONS OF |
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UNCONSOLIDATED AFFILIATES |
2,439 |
2,661 |
5,139 |
2,875 |
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DEBT EXPENSE |
(5,674) |
(5,954) |
(11,386) |
(11,631) |
(23,750) |
(20,224) |
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INCOME BEFORE INCOME TAXES |
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AND CUMULATIVE EFFECT |
11,724 |
12,606 |
24,413 |
23,973 |
50,945 |
48,185 |
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INCOME TAXES |
4,382 |
4,737 |
9,018 |
8,687 |
18,228 |
17,666 |
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INCOME BEFORE CUMULATIVE EFFECT |
7,342 |
7,869 |
15,395 |
15,286 |
32,717 |
30,519 |
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Cumulative effect of accounting change |
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for asset retirement obligations, net of |
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income taxes of $78 |
(133) |
(133) |
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NET INCOME |
$ 7,342 |
$ 7,869 |
$ 15,262 |
$ 15,286 |
$ 32,584 |
$ 30,519 |
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See notes accompanying the consolidated financial statements |
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QUESTAR PIPELINE COMPANY AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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June 30 |
December 31, |
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2003 |
2002 |
2002 |
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(Unaudited) |
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(In Thousands) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ 4,411 |
$ 5,165 |
$ 4,153 |
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Accounts receivable |
8,220 |
5,931 |
9,780 |
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Federal income taxes recoverable |
3,392 |
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Inventories - materials and supplies, at |
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lower of average cost or market |
4,050 |
2,242 |
2,153 |
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Prepaid expenses and other |
1,213 |
538 |
3,287 |
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Total current assets |
17,894 |
13,876 |
22,765 |
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Property, plant and equipment |
1,027,812 |
938,662 |
1,020,838 |
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Less accumulated depreciation |
325,873 |
258,764 |
316,433 |
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Net property, plant and equipment |
701,939 |
679,898 |
704,405 |
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Goodwill |
4,058 |
4,058 |
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Investment in unconsolidated affiliates |
120,592 |
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Regulatory and other assets |
15,368 |
17,175 |
19,384 |
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$ 739,259 |
$ 831,541 |
$ 750,612 |
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LIABILITIES AND SHAREHOLDER'S EQUITY |
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Current liabilities |
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Short-term debt |
$ 100,000 |
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Notes payable to Questar Corp. |
$ 60,300 |
78,400 |
$ 74,800 |
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Accounts payable and accrued expenses |
10,966 |
18,821 |
13,672 |
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Total current liabilities |
71,266 |
197,221 |
88,472 |
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Long-term debt |
310,068 |
310,038 |
310,058 |
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Deferred income taxes |
101,476 |
77,869 |
95,920 |
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Other liabilities |
952 |
4,177 |
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Common shareholder's equity |
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Common stock |
6,551 |
6,551 |
6,551 |
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Additional paid-in capital |
142,034 |
142,034 |
142,034 |
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Retained earnings |
106,912 |
97,828 |
103,400 |
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Total common shareholder's equity |
255,497 |
246,413 |
251,985 |
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$ 739,259 |
$ 831,541 |
$ 750,612 |
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See notes accompanying the consolidated financial statements |
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QUESTAR PIPELINE COMPANY AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(Unaudited) |
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6 Months Ended |
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June 30, |
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2003 |
2002 |
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(In Thousands) |
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OPERATING ACTIVITIES |
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Net income |
$ 15,262 |
$ 15,286 |
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Depreciation |
13,322 |
10,166 |
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Deferred income taxes |
5,634 |
4,647 |
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Income from unconsolidated affiliates, |
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net of cash distributions |
4,155 |
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Net (gain) loss from selling assets |
(182) |
138 |
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Cumulative effect of change in accounting |
133 |
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34,169 |
34,392 |
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Change in operating assets and liabilities |
2,973 |
(8,740) |
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NET CASH PROVIDED FROM OPERATING |
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ACTIVITIES |
37,142 |
25,652 |
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INVESTING ACTIVITIES |
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Capital expenditures |
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Purchase of property, plant and equipment |
(8,948) |
(62,744) |
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Investment in unconsolidated affiliates |
(3,648) |
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Total capital expenditures |
(8,948) |
(66,392) |
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Cost of disposition of assets |
(1,686) |
(2,965) |
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NET CASH USED IN INVESTING ACTIVITIES |
(10,634) |
(69,357) |
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FINANCING ACTIVITIES |
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Change in notes payable to Questar Corp. |
(14,500) |
60,100 |
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Payment of dividends |
(11,750) |
(11,750) |
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NET CASH PROVIDED FROM (USED IN) |
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FINANCING ACTIVITIES |
(26,250) |
48,350 |
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Change in cash and cash equivalents |
258 |
4,645 |
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Beginning cash and cash equivalents |
4,153 |
520 |
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Ending cash and cash equivalents |
$ 4,411 |
$ 5,165 |
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See notes accompanying the consolidated financial statements |
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QUESTAR PIPELINE COMPANY AND SUBSIDIARIES |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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June 30, 2003 |
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(Unaudited) |
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Note 1 - Basis of Presentation |
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The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three-, six- and twelve-month periods ended June 30, 2003, are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. The straight-fixed variable rate design, which allows for recovery of substantially all fixed costs in the demand or reservation charges, reduces the earnings impact of weather conditions on gas transportation and storage operations. For further information refer to the financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2002 filed by Questar Pipeline Company (Questar Pipeline or the Company). |
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Note 2 - New Accounting Standard |
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On January 1, 2003, Questar Pipeline adopted Statement of Financial Accounting Standards 143 (SFAS 143) "Accounting for Asset Retirement Obligations." As a result, the Company recorded a $133,000 after tax charge for the cumulative effect of this accounting change and a $238,000 long-term asset retirement obligation. SFAS 143 addresses the financial accounting and reporting of the fair value of legal obligations associated with the retirement of tangible long-lived assets. The new standard requires the Company to estimate a fair value of abandonment costs and to capitalize and depreciate those costs over the life of the related assets. The provisions of SFAS 143 did not apply to a majority of the Company's long-lived assets due to lack of a legal obligation to abandon the assets or to an indeterminate abandonment date. The new accounting rules allow deferral of an obligation until the abandonment date is known. |
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The asset retirement obligation (liability) is adjusted to its present value each period through an accretion process using a credit-adjusted risk-free interest rate. Both the accretion expense associated with the liability and the depreciation associated with the capitalized abandonment costs are non-cash expenses until the asset is retired. |
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Note 3 - Reclassifications |
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Certain reclassifications were made to the 2002 financial statements to conform with the 2003 presentation. |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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QUESTAR PIPELINE COMPANY AND SUBSIDIARIES |
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June 30, 2003 |
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(Unaudited) |
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Operating Results |
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Following is a summary of financial and operating information for the Company: |
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3 Months Ended |
6 Months Ended |
12 Months Ended |
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June 30, |
June 30, |
June 30, |
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2003 |
2002 |
2003 |
2002 |
2003 |
2002 |
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FINANCIAL RESULTS - (In Thousands) |
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Revenues |
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From unaffiliated customers |
$ 19,504 |
$ 14,338 |
$ 37,640 |
$ 26,840 |
$ 77,075 |
$ 53,148 |
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From affiliates |
19,307 |
18,896 |
39,646 |
39,881 |
76,365 |
76,519 |
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Total revenues |
$ 38,811 |
$ 33,234 |
$ 77,286 |
$ 66,721 |
$ 153,440 |
$ 129,667 |
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Operating income |
$ 17,290 |
$ 14,967 |
$ 35,575 |
$ 30,708 |
$ 71,052 |
$ 60,090 |
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Income before cumulative effect |
$ 7,342 |
$ 7,869 |
$ 15,395 |
$ 15,286 |
$ 32,717 |
$ 30,519 |
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Cumulative effect of accounting change |
(133) |
(133) |
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Net income |
$ 7,342 |
$ 7,869 |
$ 15,262 |
$ 15,286 |
$ 32,584 |
$ 30,519 |
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OPERATING STATISTICS |
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Natural gas transportation volumes (In MDth) |
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For unaffiliated customers |
61,880 |
55,794 |
127,396 |
108,246 |
264,269 |
213,850 |
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For Questar Gas |
26,188 |
25,922 |
65,720 |
77,267 |
100,145 |
123,094 |
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For other affiliated customers |
5,526 |
744 |
9,203 |
1,297 |
13,950 |
6,184 |
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Total transportation |
93,594 |
82,460 |
202,319 |
186,810 |
378,364 |
343,128 |
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Transportation revenue (per Dth) |
$ 0.27 |
$ 0.26 |
$ 0.25 |
$ 0.23 |
$ 0.26 |
$ 0.24 |
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Revenues |
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Revenues were higher in the 2003 periods compared with the 2002 periods due primarily to increased transportation capacity and accompanying contracted service. Questar Pipeline's total transportation volumes for the second quarter, first half and 12 months ended June 30, 2003 were higher than the volumes reported in the corresponding periods of 2002. Total firm daily demand was 1,518,000 Dth in the first half of 2003 compared with 1,385,000 Dth in the first half of 2002. Higher volumes were primarily the result of the startup of the eastern segment of the Questar Southern Trails pipeline mid-year 2002. The eastern segment of Southern Trails has a capacity of 80,000 Dth daily, which is full-contracted through 2006. The Company expanded its transportation service to the Kern River pipeline beginning in May 2003. Deliveries increased by an average of 155,000 Dth per day. Deliveries, transported on Overthrust pipeline, accounted for about 55% of the increase. Kern River pipeline is owned by MidAmerican Energy. |
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Other increases in 2003 revenues were the result of a new park and loan storage service started in 2002, increased gas gathering volumes, and higher selling prices for natural gas liquids extracted from the gas stream. |
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Expenses |
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The impact on earnings from higher revenues was offset by higher operating expenses. Questar Pipeline, in the second quarter and first half of 2003 compared with the 2002 periods, because of pipeline expansion, higher costs for employee benefits, less capitalization of labor because of reduced construction activity and increased insurance and pipeline inspection costs. Questar Pipeline, through its subsidiaries, has not yet realized the full benefit of consolidating Overthrust Pipeline because of a lag in revenues between the expiring old transportation contracts and the sale of replacement capacity. AFUDC, the capitalization of financing costs as a part of project costs, was significantly lower in 2003. AFUDC is a component of interest and other income on the income statement. The higher level of investment in pipeline projects of past years resulted in higher depreciation expenses and property taxes in the 2003 periods. |
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Lower debt and legal expenses in 2002 were primarily the result of the resolution of the TransColorado lawsuit and the sale of the company's 50% interest in TransColorado in the fourth quarter of 2002. |
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Other income, debt expense and income taxes |
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Interest and other income was lower in the 2003 periods due to less capitalization of financing costs (AFUDC) resulting from the commencement of service on the eastern segment of the Questar Southern Trails pipeline. A $3 million charge to reduce an asset to net realizable value is included in the 12 months ended June 30, 2003. Earnings from unconsolidated affiliates included the Company's proportionate shares of the TransColorado pipeline and the Overthrust pipeline. In the fourth quarter of 2002, TransColorado was sold and the Ovethrust Pipeline became wholly owned. Lower debt balances and lower variable interest rates resulted in decreased debt expenses in the three- and six-months ended June 30, 2003 compared with the same period of 2002. The effective income tax rate for the first half was 36.9% and 36.2% in 2003 and 2002, respectively. |
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Cumulative Effect of Change in Accounting Method |
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On January 1, 2003, the Company adopted a new accounting rule, SFAS 143, "Accounting for Asset Retirement Obligations" and recorded a cumulative effect that reduced net income by $133,000. The ongoing accretion and depreciation expenses associated with SFAS 143 are insignificant. |
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Liquidity and Capital Resources |
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Operating Activities |
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Net cash provided from operating activities of $37.1 million in the first half of 2003 was $11.5 million more than the amount reported for the same period of 2002 due to timing differences, primarily in accounts payable and accrued expenses. |
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Investing Activities |
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Capital expenditures were $8.9 million in the first half of 2003, which was $57.4 million less than was reported in the first half of 2002 because of the 2002 completion of pipeline projects. The forecast for 2003 is $41.5 million. |
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Financing Activities |
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Net cash flow provided from operating activities was used to fund first half capital expenditures, pay cash dividends and repay $14.5 million of debt. Forecasted capital expenditures for 2003 are expected to be financed with the proceeds from net cash provided from operating activities and debt from Questar. |
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OTHER INFORMATION |
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Western Segment of Questar Southern Trails Pipeline |
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The Company has thus far been unsuccessful in its efforts to secure long-term contracts required to place the western segment of the Southern Trails pipeline into service. The western segment extends from the California-Arizona border to Long Beach, California. In June 2003, the Company requested and received prompt FERC approval of an 18-month extension of its construction certificate for this pipeline. Questar Southern Trails Pipeline, a subsidiary of Questar Pipeline, is actively seeking customers willing to enter into long-term gas transportation contracts necessary to place the pipeline into service. The Company is also considering selling this pipeline, and has received non-binding offers from several interested parties. A decision to place in-service or sell the pipeline is expected by the end of 2003. Questar Southern Trails Pipeline's investment in the western segment is approximately $52 million. |
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FERC - Notice of Proposed Rulemaking (NOPR) |
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The FERC issued a NOPR on Quarterly Financial Reporting and Revision to the Annual Reports. The NOPR, among other issues, requires a new quarterly filing of financial statements matching the deadlines imposed by the SEC. The FERC has not previously required quarterly statements. |
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FERC - Rule on Affiliate Relations |
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The FERC is expected to issue final rules requiring pipelines to comply with certain "nondiscriminatory" standards when dealing with energy company affiliates including local distribution companies. At the current time, local distribution companies (LDCs) such as Questar Gas that do not engage in unregulated gas sales are exempt from the FERC's marketing affiliate regulations. Questar Pipeline believes that the current exemption should be continued, but the FERC has not yet made a decision on whether affiliate rules should be expanded to include gas LDCs such as Questar Gas. A FERC decision to extend energy affiliate rules to include LDCs could have adverse consequences for Questar. Questar Pipeline and Questar Gas realize significant cost savings by sharing the cost of administrative, engineering, gas control, technical, accounting, legal, and other regulatory services. |
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Forward-Looking Statements |
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This report includes "forward-looking statements" within the meaning of Section 27(A) of the Securities Act of 1933, as amended, and Section 21(E) of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "could," "expect," "intend," "project," "estimate," "anticipate," "believe," "forecast," or "continue" or the negative thereof or variations thereon or similar terminology. Although these statements are made in good faith and are reasonable representations of the Company's expected performance at the time, actual results may var y from management's stated expectations and projections due to a variety of factors. |
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Important assumptions and other significant factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include: |
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Changes in general economic conditions; Changes in rate-regulatory policies; Rate of inflation and interest rates; Assumptions used in business combinations; Weather and other natural phenomena; The effect of environmental regulation; Changes in customers' credit ratings, including energy merchants; Competition from other forms of energy, other pipelines and storage facilities; The effect of accounting policies issued periodically by accounting standard-setting bodies; Adverse repercussion from terrorist attacks or acts of war; Adverse changes in the business or financial condition of the company; and Lower credit ratings. |
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Item 4. Controls and Procedures |
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a. Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company, including its consolidated subsidiaries, required to be included in the Company's reports filed or submitted under the Exchange Act. |
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b. Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls. |
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Part II |
Item 4. Submission of Matters to a Vote of Security Holders. On May 20, 2002, Questar Pipeline Company (Questar Pipeline or the Company) held its annual meeting. The following individuals were elected to serve one-year terms as directors: Alan K. Allred, Teresa Beck, L. Richard Flury, Gary G. Michael, and Keith O. Rattie. Mr. Allred, who was elected to serve as the Company's President and Chief Executive Officer as of May 1, 2003, was elected to replace his predecessor, D. N. Rose, as a director. Mr. Flury, age 56, who retired December 31, 2001, as Chief Executive, Gas and Power for BP plc, was elected to replace U. E. Garrison, the retired Chairman of the Board of Thiokol Corporation, who had served as a director since May of 1991. Finally, R. D. Cash did not stand for reelection. |
Item 5. Other Information .
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Item 6. Exhibits and Reports on Form 8-K .a. The following exhibits are filed as part of this report. |
Exhibit No. |
Exhibit |
3. |
Bylaws (as amended effective August 12, 2003). |
31.1 |
Certification signed by A. K. Allred, Questar Pipeline Company's Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
Certification signed by S. E. Parks, Questar Pipeline Company's Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
b. Questar Pipeline did not file any Current Reports on Form 8-K during the second quarter of 2003. |
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Exhibit No. 3. |
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BYLAWS |
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of |
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QUESTAR PIPELINE COMPANY |
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A Utah Corporation |
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OFFICES |
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SECTION 1. The principal office shall be in the City of Salt Lake, County of Salt Lake, State of Utah. |
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The Corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the Corporation may require |
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SEAL |
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SECTION 2. The corporate seal shall have inscribed thereon the name of the Corporation, and the words "Corporate Seal," and "Utah." Said seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or reproduced, or otherwise |
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SHAREHOLDERS' MEETINGS |
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SECTION 3. The annual meeting of stockholders shall be held on the third Tuesday of May at such time and in such location as set by the Chairman of the Board, provided that advance notice of the time and location of such meeting shall be given to stockholders and directors. At the annual meeting, the stockholders shall elect directors by majority vote and transact such other business as may properly be brought before the meeting. |
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SECTION 4. The Board of Directors may direct the calling of special meetings of the shareholders at such time and place as the Board may deem necessary. |
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SECTION 5. Holders of a majority of the shares issued and outstanding, and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. If, however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting, from time to time, without notice other than announcement at the meeting, until such requisite amount of voting stock shall be present. At such adjourned meeting at which the requisite amount of voting stock shall be represented, business may be transacted which might have been transacted at the meeting as originally notified. |
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SECTION 6. The Secretary shall, but in case of his failure any other officer of the Corporation may, give written or printed notice to the shareholders stating the place, day and hour of each shareholders meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called. Such notice shall be given not less than ten (10) nor more than fifty (50) days before the date of the meeting. |
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SECTION 7. Notice may be given either personally or by mail, and if given by mail, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage prepaid thereon. |
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SECTION 8. At each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing, subscribed by such shareholder and bearing a date not more than three months prior to said meeting. Each shareholder shall have one vote for each share of stock registered in such shareholder's name on the books of the Corporation. The vote for directors and, upon the demand of any shareholder, the vote upon any question before any meeting of shareholders shall be by ballot. All elections shall be had and all questions decided by a plurality vote. |
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SECTION 9. A complete list of shareholders entitled to vote at any meeting of shareholders shall be prepared and be available for inspection by any shareholder beginning two business days after notice is given of the meeting for which the list was prepared and continuing throughout the meeting. The list shall be arranged by voting group and by class or series of shares within each voting group and be alphabetical within each voting group or class. The list shall indicate each shareholder's name, address, and number of voting shares. |
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A shareholder, directly or through an agent or attorney, has the right to inspect and copy, at his expense, the list of shareholders prepared for each meeting of shareholders. The shareholder must make a written request to examine the list and must examine it during the Corporation's regular business hours. |
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SECTION 10. Business transacted at all special meetings of the shareholders shall be confined to the objects stated in the call and notice. |
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SECTION 11. Unless otherwise provided in the Articles of Incorporation, any action that may be taken at any annual or special meeting of the shareholders may be taken without a meeting and without prior notice upon the receipt of a unanimous written consent. |
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DIRECTORS |
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SECTION 12. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The Board shall consist of at least three and not more than nine directors. A majority shall have the power to transact the business of the corporation in conformity with the powers conferred upon the Board of Directors by the Articles of Incorporation. Directors elected at any annual or special meeting of the shareholders shall hold office until the next annual meeting of the shareholders and until their successors shall be duly elected. One or more directors may be removed with or without cause by a vote of the majority of the shareholders at a meeting of shareholders called for that purpose. |
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SECTION 13. Unless the Articles of Incorporation provide otherwise, any acts required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if all the directors take the action, each director signs a written consent describing the action taken, and the consents are filed with the records of the Corporation. Action taken by consent is effective when the last director signs the consent, unless the consent specifies a different effective date. A signed consent has the effect of a meeting vote and may be described as such in any document. |
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SECTION 14. The directors may hold their meetings and have one or more offices and keep the books of the Corporation at such place as they may from time to time determine. |
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SECTION 15. In addition to the powers and authority by these Bylaws expressly conferred upon them, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute of the State of Utah, or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. |
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COMMITTEE |
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SECTION 16. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more Committees, each Committee to consist of two or more of the Directors of the Corporation and shall have and may exercise the powers conferred upon them by the Board of Directors. All Committees when so appointed shall have such name or names as may be determined from time to time by resolutions adopted by the Board of Directors. |
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SECTION 17. The Committees shall keep regular minutes for their proceedings and report the same to the Board of Directors when required. |
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COMPENSATION OF DIRECTORS |
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SECTION 18. Directors, as such, shall not receive any salary for their services, but the Board of Directors, by resolution, shall fix the fees to be allowed and paid to directors, as such, for their services and provide for the payment of the expenses of the directors incurred by them in performing their duties. Nothing herein contained, however, shall be considered to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. |
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SECTION 19. Fees to members of special or standing committees and expenses incurred by them in the performance of their duties, as such, shall also be fixed and allowed by resolution of the Board of Directors. |
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MEETINGS OF THE BOARD |
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SECTION 20. The Board of Directors may meet at Salt Lake City, Utah, or at such other place as may be determined by a majority of the members of the Board. |
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SECTION 21. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be determined by the Board. |
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SECTION 22. Special meetings of the Board may be called by the President on at least two days' notice to each director, either personally or by mail or telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors. |
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SECTION 23. At all meetings of the Board a majority of the Directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum, shall be the act of the Board of Directors. Directors may participate in a meeting and be counted in the quorum by means of conference telephone or similar communication equipment by which all directors participating in the meeting can hear each other. |
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SECTION 24. The officers of the Corporation shall be chosen by the Board of Directors and shall consist of: a Chairman of the Board, a President and Chief Executive Officer, a Vice President, a Secretary, and a Treasurer. The Board may also choose a Vice Chairman, additional Vice Presidents, Assistant Secretaries and Assistant Treasurers. |
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SECTION 25. The Board of Directors at its first meeting after each annual meeting shall choose a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer, and such Assistant Secretaries and Assistant Treasurers as the Board deems necessary or appropriate. None of the officers except the Chairman of the Board, Vice Chairman, and the President need be members of the Board. |
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SECTION 26. The Board may appoint such other officers and agents as it may deem necessary, who hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. |
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SECTION 27. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. |
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SECTION 28. The officers of the Corporation shall hold office until their successors are chosen and qualified in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board of Directors. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the affirmative vote of a majority of the whole Board of Directors. |
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CHAIRMAN OF THE BOARD |
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SECTION 29. The Chairman of the Board shall preside at the meetings of the shareholders and directors. In the Chairman's absence, the Vice Chairman (if one has been chosen) shall preside at the meetings of the shareholders and directors. |
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PRESIDENT |
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SECTION 30. The President shall be the Chief Executive Officer of the Corporation; in the absence of the Chairman of the Board and the Vice Chairman of the Board, shall preside at all meetings of the shareholders and directors; shall have general and active management of the Corporation; and shall see that all orders and resolutions of the Board are carried into effect. He shall have the general powers and duties of supervision and management usually vested in the office of president and chief executive officer of a corporation. He shall perform such other functions and duties as shall be prescribed by the Board of Directors. |
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VICE PRESIDENT |
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SECTION 31. The Vice Presidents shall perform the duties prescribed by the President or the Board of Directors. |
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SECRETARY AND ASSISTANT SECRETARIES |
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SECTION 32. (a) The Secretary: shall attend the meetings of the Board and the meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the Committees appointed by the Board when required; give or cause to be given notice of the meetings of the shareholders and of the Board of Directors; and perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision the Secretary shall keep in safe custody the seal of the Corporation and affix the same to any instrument requiring it. |
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(b) The Assistant Secretary, senior in time of service, in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary and shall perform such other duties as shall be prescribed by the President or the Board of Directors. |
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TREASURER AND ASSISTANT TREASURERS |
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SECTION 33. The Treasurer and Assistant Treasurers shall perform such duties as shall be prescribed by the President or the Board. |
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VACANCIES |
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SECTION 34. If the office of any director or directors becomes vacant by reason of the death, resignation, disqualification, removal from office, or otherwise, the remaining directors, not less than a quorum, shall choose a person or persons to fill the vacancy or vacancies who shall hold office until the successor or successors shall have been duly appointed or elected. |
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CERTIFICATES OF STOCK |
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SECTION 35. The certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. |
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FISCAL YEAR |
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SECTION 36. The fiscal year shall begin the first day of January in each year. |
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RECORDS AND INSPECTION RIGHTS |
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SECTION 37. The Corporation shall maintain permanent records of the minutes of all meetings of its shareholders and Board of Directors; all actions taken by the shareholders or Board of Directors without a meeting; and all actions taken by a Committee of the Board of Directors on behalf of the Corporation. The Corporation shall also maintain appropriate accounting records. The Corporation shall keep such records at its office in Salt Lake City, and at any other location designated by the Board of Directors. |
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A shareholder of the Corporation, directly or through an agent or attorney, shall have the limited rights to inspect and copy the Corporation's records as provided under applicable state law and by complying with the procedures specified under such law. |
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BANK ACCOUNTS |
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SECTION 38. All checks, demands for money, or other transactions involving the Corporation's bank accounts shall be signed by such officers or other responsible employees as the Board of Directors may designate. No third party is allowed access to the Corporation's bank accounts without express written authorization by the Board of Directors. |
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AMENDMENTS |
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SECTION 39. The Corporation's Board of Directors may amend or repeat the Corporation's Bylaws unless the Corporation's Articles of Incorporation or Utah's Revised Business Corporation Act reserve this power exclusively to the shareholders in whole or part; unless the shareholders, in adopting, amending, or repealing a particular Bylaw, provide expressly that the Board of Directors may not amend or repeal that Bylaw; or unless the Bylaw either establishes, amends or deletes a supermajority shareholder quorum or voting requirement. The Corporation's shareholders may amend or repeal the Corporation's Bylaws even though the Bylaws may also be amended or repealed by the Board of Directors. |
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INDEMNIFICATION AND LIABILITY INSURANCE |
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SECTION 40. (a) Voluntary Indemnification. Unless otherwise provided in the Articles of Incorporation, the Corporation shall indemnify any individual made a party to a proceeding because he is or was a director of the Corporation, against liability incurred in the proceeding, but only if the Corporation has authorized the payment in accordance with the applicable statutory provisions [Sections 16-10a-902 and 16-10a-904 of Utah's Revised Business Corporation Act] and a determination has been made in accordance with the procedures set forth in such provision that the director conducted himself in good faith; that he reasonably believed that his conduct, if in his official capacity with the Corporation, was in its best interests and that his conduct, in all other cases, was at least not opposed to the Corporation's best interests; and that he had no reasonable cause to believe his conduct was unlawful in the case of any criminal proceedin g. |
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(b) The Corporation may not voluntarily indemnify a director in connection with a proceeding by or in the right of the Corporation in which the director was adjudged liable to the Corporation or in connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him. |
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(c) Indemnification permitted under Paragraph (a) in connection with a proceeding by or in the right of the Corporation is limited to reasonable expenses incurred in connection with the proceeding. |
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(d) If a determination is made, using the procedures set forth in the applicable statutory provision, that the director has satisfied the requirements listed herein and if an authorization of payment is made, using the procedures and standards set forth in the applicable statutory provision, then, unless otherwise provided in the Corporation's Articles of Incorporation, the Corporation shall pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of the final disposition of the proceeding if the director furnishes the Corporation a written affirmation of his good faith belief that he has satisfied the standard of conduct described in this Section, furnishes the Corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did n ot meet the standard of conduct (which undertaking must be an unlimited general obligation of the director, but need not be secured and may be accepted without reference to financial ability to make repayment); and if a determination is made that the facts then known of those making the determination would not preclude indemnification under this Section. |
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(e) Mandatory Indemnification. Unless otherwise provided in the Corporation's Articles of Incorporation, the Corporation shall indemnify a director or officer of the Corporation who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director or officer of the Corporation against reasonable expenses incurred by him in connection with the proceeding. |
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(f) Court-Ordered Indemnification. Unless otherwise provided in the Corporation's Articles of Incorporation, a director or officer of the Corporation who is or was a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. The court may order indemnification if it determines that the director or officer is entitled to mandatory indemnification as provided in this Section and applicable law, in which case the court shall also order the Corporation to pay the reasonable expenses incurred by the director or officer to obtain court-ordered indemnification. The court may also order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director or offic er met the applicable standard of conduct set forth in this Section and applicable law. Any indemnification with respect to any proceeding in which liability has been adjudged in the circumstances described in Paragraph (b) above is limited to reasonable expenses. |
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(g) Indemnification of Others. Unless otherwise provided in the Corporation's Articles of Incorporation, an officer, employee, or agent of the Corporation shall have the same indemnification rights provided to a director by this Section. The Board of Directors may also indemnify and advance expenses to any officer, employee, or agent of the Corporation, to any extent consistent with public policy as determined by the general or specific purpose of the Board of Directors. |
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(h) Insurance. The Corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary, or agent or the Corporation, or who, while serving as a director, officer, employee, fiduciary, or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, fiduciary or agent of another foreign or domestic corporation, other person, of an employee benefit plan, or incurred by him in that capacity or arising from his status as a director, officer, employee, fiduciary, or agent, whether or not the Corporation has the power to indemnify him against the same liability under applicable law. |
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LIMITATION ON LIABILITY |
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SECTION 41. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any action taken or any failure to take any action, as a director, except liability for (a) the amount of a financial benefit received by a director to which he is not entitled; (b) an intentional infliction of harm on the Corporation or the shareholders; (c) any action that would result in liability of the director under the applicable statutory provision concerning unlawful distributions [Section 16-10-842 of Utah's Revised Business Corporation Act]; or (d) an intentional violation of criminal law. This provision shall not limit the liability of a director for any act or omission occurring prior to August 11, 1992. Any repeal or modification of this provision by the stockholders shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation f or acts or omissions occurring prior to the effective date of such repeal or modification. |
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Exhibit No. 31.1 |
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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |
I, A. K. Allred, certify that: |
1. |
I have reviewed this quarterly report on Form 10-Q of Questar Pipeline Company; |
2. |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a) |
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) |
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
c) |
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
a) |
all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; |
6. |
The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
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August 13, 2003 |
By: /s/A. K. Allred |
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Date |
A. K. Allred |
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Exhibit 31.2. |
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 |
I, S. E. Parks, certify that: |
1. |
I have reviewed this quarterly report on Form 10-Q of Questar Pipeline Company; |
2. |
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a) |
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) |
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
c) |
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
a) |
all significant deficiencies in the design or operation of internal controls that could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; |
6. |
The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
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August 13, 2003 |
By: /s/S. E. Parks |
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Date |
S. E. Parks |
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