-----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, L0wLyGmQKDsxg14U6P9mEbU/lkyrrcUpSWxyD+Q07pozKRP309SjBsF6cuu9mp6f 1+QFGR/k+wjZl9yHwKKN2w== 0000764044-99-000009.txt : 19990816 0000764044-99-000009.hdr.sgml : 19990816 ACCESSION NUMBER: 0000764044-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUESTAR PIPELINE CO CENTRAL INDEX KEY: 0000764044 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 870307414 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14147 FILM NUMBER: 99688615 BUSINESS ADDRESS: STREET 1: 180 E 100 SOUTH STREET STREET 2: P O BOX 45360 CITY: SALT LAKE CITY STATE: UT ZIP: 84145 BUSINESS PHONE: 8013242400 MAIL ADDRESS: STREET 1: 180 EAST 100 SOUTH STREET STREET 2: P O BOX 45360 CITY: SALT LAKE CITY STATE: UT ZIP: 84145 FORMER COMPANY: FORMER CONFORMED NAME: MOUNTAIN FUEL RESOURCES INC DATE OF NAME CHANGE: 19880331 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. 0-14147 QUESTAR PIPELINE COMPANY (Exact name of registrant as specified in its charter) STATE OF UTAH 87-0307414 (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, Utah 84145-0360 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 324-2400 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, $1.00 par value 6,550,843 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 PIPELINE COMPANY AND SUBSIDIARIES CONSOLIDATED 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 $ 27,036 $ 26,599 $ 54,202 $ 53,848 $ 108,911 $106,657 OPERATING EXPENSES Operating and maintenance 8,331 9,566 17,720 19,493 37,059 38,282 Depreciation 4,098 2,472 8,074 6,315 15,686 13,901 Other taxes 699 515 1,436 1,188 2,848 2,589 TOTAL OPERATING EXPENSES 13,128 12,553 27,230 26,996 55,593 54,772 OPERATING INCOME 13,908 14,046 26,972 26,852 53,318 51,885 INTEREST AND OTHER INCOME (EXPENSE) 2,441 10 3,250 (76) 3,404 1,151 EARNINGS (LOSS) FROM UNCONSOLIDATED AFFILIATES (1,555) 743 (64) 1,150 2,797 5,853 DEBT EXPENSE (4,038) (3,500) (8,215) (6,934) (15,737) (13,805) INCOME BEFORE INCOME TAXES 10,756 11,299 21,943 20,992 43,782 45,084 INCOME TAXES 3,724 4,239 7,949 7,378 15,511 16,684 NET INCOME $ 7,032 $ 7,060 $ 13,994 $ 13,614 $ 28,271 $ 28,400
See notes to consolidated financial statements QUESTAR PIPELINE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1999 1998 1998 (Unaudited) (In Thousands) ASSETS Current assets Cash and short-term investments $ 9,990 Accounts receivable $ 10,740 $ 17,284 21,304 Inventories 3,245 1,958 2,203 Other current assets 1,431 1,720 1,714 Total current assets 15,416 20,962 35,211 Property, plant and equipment 682,157 591,487 670,456 Less allowances for depreciation 224,039 209,610 215,589 Net property, plant and equipment 458,118 381,877 454,867 Investment in unconsolidated affiliates 58,013 40,426 54,712 Other assets 11,954 12,484 12,506 $543,501 $455,749 $ 557,296 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Checks outstanding in excess of cash balances $ 893 $ 1,304 Notes payable to Questar Corporation 53,400 63,300 $ 38,000 Accounts payable and accrued expenses 18,334 17,117 51,047 Total current liabilities 72,627 81,721 89,047 Long-term debt 202,992 114,573 202,991 Other liabilities 1,610 3,046 4,546 Deferred income taxes 65,826 62,984 63,510 Common shareholder's equity Common stock 6,551 6,551 6,551 Additional paid-in capital 82,034 82,034 82,034 Retained earnings 111,861 104,840 108,617 Total common shareholder's equity 200,446 193,425 197,202 $543,501 $455,749 $ 557,296
See notes to consolidated financial statements QUESTAR PIPELINE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
6 Months Ended June 30, 1999 1998 (In Thousands) OPERATING ACTIVITIES Net income $ 13,994 $ 13,614 Depreciation 8,472 7,128 Deferred income taxes 2,316 686 (Earnings) losses from unconsolidated affiliates, net of cash distributions 713 (1,150) 25,495 20,278 Change in operating assets and liabilities (25,291) (12,529) NET CASH PROVIDED FROM OPERATING ACTIVITIES 204 7,749 INVESTING ACTIVITIES Capital expenditures Purchase of property, plant and equipment (12,647) (8,462) Investment in unconsolidated affiliates (4,014) (12,299) Total capital expenditures (16,661) (20,761) Proceeds from (costs of) disposition of property, plant and equipment 924 (2,367) NET CASH USED IN INVESTING ACTIVITIES (15,737) (23,128) FINANCING ACTIVITIES Checks outstanding in excess of cash balances 893 1,304 Increase in notes payable to Questar Corporation 15,400 37,500 Decrease in long-term debt (20,000) Payment of dividends (10,750) (10,500) NET CASH PROVIDED FROM FINANCING ACTIVITIES 5,543 8,304 DECREASE IN CASH AND SHORT- TERM INVESTMENTS $ (9,990) $ (7,075)
See notes to consolidated financial statements QUESTAR PIPELINE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED 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. 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 - Investment in Unconsolidated Affiliates Questar Pipeline has interests in partnerships accounted for on an equity basis. Transportation of natural gas is the primary business activity of these partnerships. Summarized operating results of the partnerships are listed below. Income before income taxes includes capitalized financing charges called allowance for funds used during construction (AFUDC). 6 Months Ended June 30, 1999 1998 (In Thousands) Revenues $ 4,757 $ 2,360 Operating income (loss) (634) 778 Income (loss) before income taxes (1,066) 2,237 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations QUESTAR PIPELINE COMPANY AND SUBSIDIARIES 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 $ 9,754 $ 9,088 $ 18,775 $ 18,153 $ 37,778 $ 36,633 From affiliates 17,282 17,511 35,427 35,695 71,133 70,024 Total revenues $ 27,036 $ 26,599 $ 54,202 $ 53,848 $ 108,911 $106,657 Operating income $ 13,908 $ 14,046 $ 26,972 $ 26,852 $ 53,318 $ 51,885 Net income 7,032 7,060 13,994 13,614 28,271 28,400 OPERATING STATISTICS Natural gas transportation volumes (in thousands of decatherms) For unaffiliated customers 34,765 31,289 60,711 64,067 117,391 119,346 For Questar Gas 26,084 27,051 61,719 65,382 103,838 107,418 For other affiliated customers 5,078 7,549 8,458 12,407 22,929 32,395 Total transportation 65,927 65,889 130,888 141,856 244,158 259,159 Transportation revenue (per decatherm) $ 0.26 $ 0.26 $ 0.27 $ 0.25 $ 0.29 $ 0.27
Revenues were 2% higher in the second quarter of 1999 and 1% higher in the first half of 1999 due primarily to increased firm-storage revenues. Billings from an expansion of the Clay Basin storage complex began in May of 1998. However, the full impact of higher storage revenues was partially offset by lower firm-transportation revenues. Average daily demand in the first half of 1999 was 88,000 decatherms or 8% lower as a result of the expiration of several firm-transportation contracts. Operating and maintenance expenses were lower in the 1999 periods presented when compared with the 1998 periods due primarily to the effects of an early retirement program effective August 1998 and the Company's policy of capitalizing a portion of administrative and general expense in connection with construction projects. Labor-cost savings amounted to $1.4 million in the first half of 1999. Increased spending for information technology has partially offset the expense reductions discussed. Increased investments in capital projects have resulted in higher depreciation charges in the first half of 1999. Depreciation expense in the 1998 periods was affected by a $1.3 million downward adjustment. Other taxes were higher in the first half of 1999 when compared with the same period of 1998 as a result of higher property taxes. Generally, property taxes have been increasing in conjunction with the expansion of investment in plant assets. Interest and other income in the first half of 1999 includes a reversal of a $2.5 million contingency reserve related to completion of the TransColorado Pipeline and $.8 million of AFUDC (capitalzed financing costs) from Questar Pipeline's capital projects. Debt expense was higher in the first half of 1999 as a result of borrowing $88.4 million in the fourth quarter of 1998. The medium-term notes have a weighted average coupon rate of 6.14% and a weighted average life of 12.6 years. Earnings from unconsolidated affiliates includes the Company's share of earnings reported by TransColorado Gas Transmission Co. and Overthrust Pipeline Co. Phase II of the TransColorado Pipeline was placed into service March 31, 1999. Earnings prior to the second quarter of 1999 were attributable primarily to AFUDC. The TransColorado Pipeline is generating operating losses of about $700,000 a month, representing Questar Pipeline's interest. Phase II of the pipeline has flowed as much as 80 MDth per day, but at a discounted rate. The cost of the pipeline, including Phase I, has recently been revised upward to about $308 million. Questar Pipeline has guaranteed $100 million or 50% of a TransColorado Gas Transmission Co. bank loan used to finance construction of the pipeline. The effective income tax rate was 36.2% in the first half of 1999 compared with 35.1% for the same period in 1998. Liquidity and Capital Resources Operating Activities Net cash provided from operating activities was $204,000 in the first half of 1999 compared with $7,749,000 for the same period in 1998. The decrease was due primarily to changes in operating assets and liabilities caused by timing differences in paying costs of construction projects. Investing Activities Capital expenditures were $16,661,000 in the first half of 1999 compared with $20,761,000 in the corresponding 1998 period. Capital expenditures for calendar year 1999 are estimated to be $76.1 million. Financing Activities Questar Corporation loans funds to the Company under a short-term arrangement. As of June 30, Questar Pipeline had borrowed from Questar $53.4 million in 1999 and $63.3 million in 1998. Remaining 1999 capital expenditures are expected to be financed with net cash provided from operating activities and short- and long-term debt including borrowings on an active medium-term note program and from Questar. 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. Subsequent to submitting the first quarter 1999 10-Q, four applications software projects were deemed insignificant and removed from the list and an infrastructure project was added. Questar estimates that Y2K remediation will cost $5.1 million. Questar Pipeline's share of the cost is estimated to be $1.0 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. The complete text of Questar Pipeline's Y2K disclosure 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 Pipeline. 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. Questar Pipeline Company (Questar Pipeline or the Company) 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. b. Questar Pipeline is also involved in another action filed by Mr. Grynberg against several Questar affiliates. This case, which was filed in Wyoming's federal district court in February of 1997, includes allegations of fraud, antitrust violations, and gas purchase contract breaches. It has been stayed pending the resolution of an appeal to the Tenth Circuit Court of Appeals in another case that involves Mr. Grynberg and an affiliate of the Company. Item 6. Exhibits and Reports on Form 8-K a. The following exhibits have 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. 12. Ratio of earnings to fixed charges. 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 PIPELINE 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. 12. Ratio of earnings to fixed charges. 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-12 3 Exhibit No. 12. Questar Pipeline Company and Subsidiaries Ratio of Earnings to Fixed Charges
12 months ended June 30, 1998 1999 (Dollars in Thousands) Earnings Income before income taxes $45,084 $43,782 Plus debt expense 13,805 15,737 Plus allowance for borrowed funds used during construction 317 1,821 Plus interest portion of rental expense 275 285 $59,481 $61,625 Fixed Charges Debt expense $13,805 $15,737 Plus allowance for borrowed funds used during construction 317 1,821 Plus interest portion of rental expense 275 285 $14,397 $17,843 Ratio of Earnings to Fixed Charges 4.13 3.45
EX-27 4
5 The following schedule contains summarized financial information extracted from the Questar Pipeline Company Consolidated Income Statements 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 10,740 0 3,245 15,416 682,157 224,039 543,501 72,627 202,992 0 0 6,551 193,895 543,501 0 54,202 0 17,720 9,510 0 8,215 21,943 7,949 13,994 0 0 0 13,994 0 0
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