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
SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____ TO _____
Commission File No. 1-8796
QUESTAR CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF UTAH 87-0407509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 45433, 180 East 100 South, Salt Lake City, Utah 84145-0433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(801) 324-5000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [x] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of September 30, 1998
Common Stock, without par value 82,491,146 shares
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1998 1997 1998 1997 1998 1997
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
REVENUES $150,282 $138,632 $629,522 $648,463 $914,333 $935,284
OPERATING EXPENSES
Natural gas and other
product purchases 41,086 35,665 243,378 262,645 380,674 398,374
Operating and maintenance 50,951 48,025 155,382 153,452 206,764 206,235
Depreciation and amortization 31,863 28,292 90,272 87,810 126,499 117,791
Other taxes 8,209 6,308 30,177 28,844 35,640 35,047
TOTAL OPERATING EXPENSES 132,109 118,290 519,209 532,751 749,577 757,447
OPERATING INCOME 18,173 20,342 110,313 115,712 164,756 177,837
INTEREST AND OTHER INCOME 3,183 11,709 17,600 18,368 23,240 19,016
DEBT EXPENSE (12,214) (10,676) (34,674) (32,162) (46,278) (43,719)
INCOME BEFORE INCOME TAXES 9,142 21,375 93,239 101,918 141,718 153,134
INCOME TAXES 907 5,649 27,926 31,611 41,917 48,133
NET INCOME $8,235 $15,726 $65,313 $70,307 $99,801 $105,001
Earnings per common share
Basic $0.10 $0.19 $0.79 $0.85 $1.21 $1.28
Diluted 0.10 0.19 0.79 0.85 1.21 1.27
Average common shares outstanding
Basic 82,417 82,254 82,306 82,178 82,249 82,054
Diluted 82,661 82,838 82,792 82,647 82,763 82,554
Dividends per common share $0.165 $0.1575 $0.4875 $0.4625 $0.645 $0.615
</TABLE>
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1997
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $965 $1,723 $17,271
Accounts receivable 87,661 101,879 187,014
Inventories 37,277 28,673 29,068
Purchased-gas adjustments 25,257 59,487 37,251
Other current assets 11,277 13,390 14,420
Total current assets 162,437 205,152 285,024
Property, plant and equipment 3,006,587 2,678,787 2,741,937
Less allowances for depreciation and
amortization 1,291,179 1,186,013 1,210,717
Net property, plant and equipment 1,715,408 1,492,774 1,531,220
Securities available for resale,
approximates fair value 43,406 63,552 55,925
Investment in unconsolidated affiliates 70,367 28,863 29,952
Other assets 50,956 38,545 42,896
$2,042,574 $1,828,886 $1,945,017
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term loans $229,800 $70,700 $131,200
Accounts payable and accrued expenses 133,969 134,164 168,944
Current portion of long-term debt 6,824 6,068 6,068
Total current liabilities 370,593 210,932 306,212
Long-term debt, less current portion 554,402 526,727 541,986
Other liabilities 30,557 34,164 29,801
Deferred income taxes and investment
tax credits 215,336 227,649 221,240
Common shareholders' equity
Common stock 296,548 292,884 291,322
Retained earnings 566,967 520,044 541,663
Other comprehensive income 13,044 27,342 22,966
Note receivable from ESOP (4,873) (10,856) (10,173)
Total common shareholders' equity 871,686 829,414 845,778
$2,042,574 $1,828,886 $1,945,017
</TABLE>
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION> 9 Months Ended
September 30,
1998 1997
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $65,313 $70,307
Depreciation and amortization 91,891 91,218
Deferred income taxes and
investment tax credits 306 9,199
Gain from the sales of securities (4,747) (8,257)
Gain from the conversion of ownership
interest in Nextlink affiliate (5,727)
147,036 162,467
Changes in operating assets and
liabilities 66,039 7,399
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 213,075 169,866
INVESTING ACTIVITIES
Capital expenditures
Purchase of property, plant and
equipment (129,414) (114,706)
E & P acquisition (155,200)
Other investments (42,209) (7,719)
Total capital expenditures (326,823) (122,425)
Proceeds from disposition of property,
plant and equipment 4,818 4,894
Proceeds from the sales of securities 6,759 15,714
NET CASH USED IN INVESTING
ACTIVITIES (315,246) (101,817)
FINANCING ACTIVITIES
Issuance of common stock 5,849 8,818
Common stock repurchased (622) (8,547)
Redemption of preferred stock (4,876)
Issuance of long-term debt 61,800 42,000
Repayment of long-term debt (45,053) (69,419)
Increase (decrease) in short-term loans 98,600 (7,100)
Payment of dividends (40,128) (38,213)
Other 5,419 5,308
NET CASH PROVIDED FROM (USED IN)
FINANCING ACTIVITIES 85,865 (72,029)
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS ($16,306) ($3,980)
</TABLE>
See notes to consolidated financial statements
QUESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
Note 1 - Basis of Presentation
The interim financial statements furnished reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All
such adjustments are of a normal recurring nature. Due to the
seasonal nature of the business, the results of operations for the
three- and nine-month periods ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information refer to the
consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December
31, 1997.
Note 2 - Purchases of Gas and Oil Company and a Pipeline
A Questar subsidiary acquired 100 percent of the common stock of
HSRTW, Inc., a wholly owned subsidiary of HS Resources, Inc. for
$155.2 million, effective September 1, 1998. Universal Resources
obtained an estimated 150 billion cubic feet equivalent of proved oil
and gas reserves primarily in Oklahoma, as well as in Texas, Arkansas
and Louisiana as a result of the transaction. Approximately 80
percent of the reserves are natural gas. The Company financed the
purchase through short-term borrowings and an existing
production-based credit facility.
On June 25, 1998, the Company announced that it had reached an
agreement in principle with ARCO Pipe Line Company to acquire an oil
pipeline running from the Paradox producing basin of northwestern New
Mexico to Long Beach, California. The purchase price of the line is
$38 million. A subsidiary of Questar Pipeline expects to complete
the purchase in the fourth quarter of 1998. The Company intends to
convert this line to transport natural gas to customers in the Los
Angeles basin. At this time, conversion is expected to add
approximately $60 million to the total cost of the project and to be
completed in 18-24 months.
Note 3 - Common Stock Split
In June 1998, Questar's common stock was split two shares for each
share outstanding. Common stock disclosures, such as, earnings per
share, dividends per share and number of shares outstanding in the
prior period financial statements have been restated to reflect the
split.
Note 4 - Financing
Questar Pipeline filed a registration statement with the Securities
and Exchange Commission for the issuance of up to $175 million in
medium-term notes effective September 2, 1998. Questar Pipeline
issued $60.1 million of medium-term notes in October of 1998. The
notes have a weighted average coupon rate of 6.15% and a weighted
average maturity of 13 years. The net proceeds from the sale of
these notes will be used to finance a portion of capital expenditures
and repay a portion of short-term debt.
TransColorado Gas Transmission Co., a partnership in which Questar
Pipeline owns a 50% interest through a subsidiary, entered into a
$200 million, three-year revolving credit facility on October 14,
1998. Questar Pipeline and KN Energy guaranteed the repayment of
their 50% proportionate share of the loan. Proceeds from this debt
will be used to finance the construction of the TransColorado
pipeline. The partnership had borrowed $75 million under this
arrangement as of October 31, 1998.
Note 5 - Comprehensive Income
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130 "Reporting Comprehensive Income" beginning January 1,
1998. SFAS No. 130 established new rules for reporting comprehensive
income and its components. However, the adoption of this statement
had no impact on Questar's net income and its shareholders' equity.
Comprehensive income is defined as any nonowner changes in common
equity. SFAS No. 130 requires unrealized gains or losses on
available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive income. For
Questar, other comprehensive income transactions include changes in
the market value of the Company's investments in Nextel and Nextlink
and foreign currency translation adjustments of Canadian gas and oil
operations. Formerly, these transactions were reported separately in
shareholders' equity. Prior year amounts have been reclassified to
conform to the requirements of SFAS No. 130.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
1998 1997 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Comprehensive Income:
Net income $8,235 $15,726 $65,313 $70,307
Other comprehensive income
Unrealized gains (losses) on securities (12,247) 18,271 (16,233) 32,399
Foreign currency translation adjustments 101 156 164
Other comprehensive income (loss) before
income taxes (12,146) 18,271 (16,077) 32,563
Income taxes (credits) on other
comprehensive income (4,649) 6,989 (6,155) 12,450
Other comprehensive income (loss) (7,497) 11,282 (9,922) 20,113
Comprehensive income $738 $27,008 $55,391 $90,420
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
QUESTAR CORPORATION AND SUBSIDIARIES
September 30, 1998
(Unaudited)
Results of Operations
Market Resources
Celsius Energy (U.S. and Canada), Universal Resources, Wexpro,
Questar Gas Management, Questar Energy Trading, and Questar Energy
Services collectively,(Market Resources) conduct the Company's
exploration and production, gas gathering and processing, and energy
marketing operations. Celsius Energy Co. (U. S. only) and Universal
Resources Corp. will be combined January 1, 1999. The new
organization will be called Questar Exploration and Production
Company. Following is a summary of Market Resources' financial
results and operating information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30 September 30 September 30
1998 1997 1998 1997 1998 1997
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $91,303 $81,837 $284,667 $335,982 $397,450 $486,467
From affiliated companies 19,601 12,484 56,213 56,650 74,147 79,663
Total revenues $110,904 $94,321 $340,880 $392,632 $471,597 $566,130
Operating income $13,139 $13,049 $41,424 $42,521 $56,067 $64,341
Net income 8,026 8,947 27,180 28,951 39,292 42,894
OPERATING STATISTICS
Production volumes
Natural gas (in million cubic feet) 12,810 11,440 36,899 35,078 49,263 47,266
Oil and natural gas liquids
(in thousands of barrels) 724 750 2,095 2,264 2,769 3,002
Production revenue
Natural gas (per thousand
cubic feet) $1.84 $1.76 $1.92 $1.78 $1.99 $1.73
Oil and natural gas liquids
(per barrel) $12.02 $16.69 $13.08 $18.54 $14.14 $19.26
Energy-marketing volumes
Natural gas (in thousands
of decatherms) 22,313 21,185 69,556 86,750 108,349 134,124
Oil (in thousands of barrels) 565 399 1,666 1,266 2,078 1,601
Electricity (in thousands of
megawatt hours) 138 288 531 456 707
Natural gas gathering volumes (in
thousands of decatherms)
For unaffiliated customers 18,613 14,859 54,917 41,791 70,712 55,936
For Questar Gas 5,704 4,398 21,303 19,800 30,009 29,781
For other affiliated customers 4,387 4,009 13,171 13,354 17,496 15,716
Total gathering 28,704 23,266 89,391 74,945 118,217 101,433
Gathering revenue (per decatherm) $0.16 $0.22 $0.16 $0.22 $0.17 $0.22
</TABLE>
Revenues from Market Resource operations were higher in the third
quarter of 1998 when compared with the third quarter of 1997 due
primarily to increased natural gas marketing activities and higher
gas production and prices. Revenues were $51,752,000 or 13% lower in
the first nine months of 1998 when compared to the same period of
1997 primarily as a result of a 20% decrease in gas-marketing volumes
and lower selling prices and production of oil.
Oil and NGL revenues were $14,571,000 lower in the nine months
comparison due to a 29% decrease in prices and a 7% decline in
production. Gas production increased 5% and the average price
increased 8% in the first nine months of 1998 when compared with the
same period in 1997. The Company closed a $155.2 million acquisition
of gas and oil properties on September 1 and included one month's
production in the third quarter of 1998. September production from
the newly-acquired properties amounted to approximately 1 Bcf of gas
and 26,000 bbls of liquids.
Market Resources has hedged approximately 55% of its gas production
through June of 1999 with a price of about $2.10 per Mcf, net back to
the well. Roughly 26% of its oil production was hedged at
approximately $16.60 per bbl for the remainder of 1998.
Wexpro Co., which manages and develops cost-of-service gas reserves
for Questar Gas Co., reported a 30% increase in earnings in the third
quarter and a 10% increase for the first nine months of 1998. Wexpro
benefited from an increase in investment base in 1998. Revenues for
Questar Gas Management (QGM) decreased $8,863,000 or 31% for the
first nine months of 1998 compared with the same period in 1997 due
to a gathering contract revision, the sale of two processing plants
in 1997 and lower NGL prices. Net income reported by QGM was
$1,559,000 below last year's income as a result of these factors plus
lower earnings from a gas and NGL processing plant.
Universal Resources is a named defendant in two separate class
actions involving royalty payments in Oklahoma. One case,
Bridenstine vs. Kaiser-Francis Oil Company, alleges fraud claims as
well as contract claims and asserts damages against all defendants
for a 15-year period in excess of $35,000,000 plus punitive damages.
The plaintiffs' primary claim alleges that a transportation fee
charged against royalty payments was improper or excessive. The
claims involve wells connected to an unregulated pipeline system that
QGM presently owns and operates. Questar and several other
affiliates have also been named as defendants in addition to
non-related parties. Kaiser-Francis and Universal Resources are the
major working interest owners and operators of a majority of the
wells connected to the pipeline system.
The second class action, Greghol Limited Partnership vs. Universal
Resources Corporation, alleges that the defendant improperly deducted
post-production costs from royalty payments and claims unspecified
damages.
The Oklahoma Supreme Court recently denied appeals from trial court
decisions certifying class actions in both lawsuits. Both cases are
likely to be tried in 1999. At this point, Universal Resources
disputes all of the claims but cannot predict the outcome of the
cases or determine whether the claims will have a material adverse
effect.
Regulated Services
Questar Gas and Questar Pipeline conduct the Company's regulated
services of natural gas distribution, transmission and storage.
Natural Gas Distribution
Questar Gas conducts the Company's natural gas distribution
operations. Following is a summary of financial results and
operating information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1998 1997 1998 1997 1998 1997
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $47,941 $47,027 $313,998 $283,881 $475,801 $409,704
From affiliates 678 452 797 2,234 1,102 3,312
Total revenues 48,619 47,479 314,795 286,115 476,903 413,016
Natural gas purchases 22,615 21,716 182,678 148,596 283,015 213,828
Revenues less natural gas purchases $26,004 $25,763 $132,117 $137,519 $193,888 $199,188
Operating income (loss) ($8,636) ($6,614) $28,034 $31,345 $54,926 $58,964
Net income (loss) (7,095) (5,774) 11,238 13,932 26,320 29,133
OPERATING STATISTICS
Natural gas volumes (in thousands of
decatherms)
Residential and commercial sales 6,312 6,799 53,804 55,361 84,190 82,222
Industrial sales 1,806 1,743 6,903 6,749 9,677 9,412
Transportation for industrial
customers 13,935 12,390 41,882 36,967 56,228 49,300
Total deliveries 22,053 20,932 102,589 99,077 150,095 140,934
Natural gas revenue (per decatherm)
Residential and commercial $5.91 $5.24 $5.16 $4.53 $5.06 $4.44
Industrial sales 3.05 2.69 3.02 2.43 2.99 2.35
Transportation for industrial
customers 0.11 0.13 0.11 0.13 0.11 0.13
Heating degree days
Actual 0 82 3,291 3,215 5,541 5,165
Normal 110 110 3,594 3,594 5,801 5,801
Warmer than normal 25% 8% 11% 4% 11%
Number of customers at September 30,
Residential and commercial 647,078 625,499
Industrial 1,311 1,154
Total 648,389 626,653
</TABLE>
In the first nine months of 1998, lower usage per customer and a
lower margin on certain gas sales caused a $5,402,000 or 4% decline
in revenues, less gas purchases, when compared with the 1997 period.
Retail usage of gas per customer fell during the first half of 1998
after reaching an unusually high mark in the first half of 1997. This
reduced usage appears to be a reaction to rising gas costs included
in rates during the latter part of 1997 and first part of 1998.
Revenues, less natural gas purchases, were slightly higher in the
third quarter of 1998 when compared with the third quarter of 1997.
The improvement resulted primarily from a leveling of usage per
customer.
A rate surcharge, associated with constructing a distribution
pipeline into southern Utah, and in effect for the past 10 years, was
discontinued in September 1997. Also, some general-service customers, who
met higher load factor standards, shifted to firm commercial rates in
1998, which have a lower margin.
A strong growth rate in the number of customers partially offset the
effect of lower usage per customer and margins on some gas sales.
The number of customers served by Questar Gas grew by 3.5% from a
year ago to 648,389 at September 30, 1998.
Temperatures, as measured in degree days, were warmer than normal in
all periods presented. Questar Gas' rates include a
weather-normalization adjustment that reduces the revenue impact of
weather fluctuations. Almost all of Questar Gas' residential and
commercial volumes are subject to the weather-normalization
adjustment in the first nine months of both 1998 and 1997.
Volumes delivered to industrial customers increased 12% in the first
nine months of 1998 when compared with the same period of 1997 due to
additions of new customers as well as expanded operations with
several ongoing customers. Margins from gas delivered to industrial
customers are substantially lower than from gas delivered to
residential and commercial customers.
Natural Gas Transmission
Questar Pipeline conducts the Company's natural gas transmission and
storage operations. Following is a summary of financial results and
operating information.
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended 12 Months Ended
September 30, September 30, September 30,
1998 1997 1998 1997 1998 1997
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Revenues
From unaffiliated customers $9,578 $9,238 $27,731 $27,101 $36,973 $36,952
From affiliates 17,655 16,651 53,350 51,416 71,028 67,755
Total revenues $27,233 $25,889 $81,081 $78,517 $108,001 $104,707
Operating income $12,251 $12,445 $39,103 $37,902 $51,691 $49,502
Net income 5,971 8,562 19,585 20,344 25,809 26,081
OPERATING STATISTICS
Natural gas transportation volumes (in
thousands of decatherms)
For unaffiliated customers 33,052 30,912 97,119 91,848 121,486 120,210
For Questar Gas 15,001 13,217 80,383 81,492 109,202 114,036
For other affiliated customers 7,227 9,753 19,634 27,562 29,869 43,522
Total transportation 55,280 53,882 197,136 200,902 260,557 277,768
Transportation revenue
(per decatherm) $0.32 $0.32 $0.27 $0.25 $0.28 $0.24
</TABLE>
Revenues were higher in the 3-, 9- and 12-month periods of 1998 due
primarily to increased firm-transportation and firm-storage
reservation charges. Firm-transportation revenues were approximately
$400,000 higher in the third quarter of 1998 and $1.8 million higher
in the first nine months of 1998. The Company's firm-transportation
capacity has increased in the past year. Questar Pipeline's expanded
working gas capacity at Clay Basin was placed into service in the
second quarter of 1998. The expansion adds approximately $3 million
of revenues per year.
Income from unconsolidated affiliates in the 1998 periods include the
Company's share of earnings reported by TransColorado Gas
Transmission Co. The noncash earnings reflect capitalization of
interest and equity costs (AFUDC) associated with the construction of
the TransColorado pipeline amounting to $1,369,000 in the 9-month
period of 1998 compared with $4,042,000 in the corresponding 1997
period. An adjustment of a regulatory liability in the third quarter
of 1997 increased other income by $642,000 and net income by
approximately $400,000.
Consolidated Results of Operations
Consolidated revenues were 8% higher in the third quarter ended
September 30, 1998 when compared with the third quarter of 1997 due
to increased revenues from energy-marketing activities and selling
natural gas production. Consolidated revenues were lower in the 9-
and 12-month periods ended September 30, 1998 when compared with the
same periods of 1997 due primarily to decreased energy-marketing
activities and oil prices and oil production, which more than offset
higher gas-distribution revenues, gas prices and gas production.
Natural gas and other product purchases were 15% higher in the third
quarter ended of 1998 when compared with the same quarter of 1997 due
to primarily to increased costs and volumes of gas purchased for
energy-marketing activities. Natural gas and other product purchases
were lower in the 9- and 12-month periods of 1998 due primarily to a
decrease in the quantity of gas purchased for energy-marketing
activities. The result of this decrease more than offset higher
charges for natural gas included in distribution rates.
Operating and Maintenance (O & M) expenses were 6% higher in the
third quarter of 1998 when compared with the third quarter of 1997 as
a result of charges associated with compressor station maintenance
and increased volumes of gas and oil production. In addition, O & M
expenses were reduced in the 1997 quarter as a result of capitalizing
labor costs related to installing computer systems. Cost-containment
efforts and capitalizing labor costs associated with computer system
projects in 1998 and 1997 by the Regulated Services group reduced the
effect of higher data processing-related costs in the 9- and 12-month
periods of 1998.
Questar Gas Company and Questar Pipeline share the costs of certain
administrative, accounting, legal, engineering and related services
provided by Questar Regulated Services. The Regulated Services group
completed a voluntary early retirement program that was effective
July 31, 1998. The program reduced the regulated services work force
by more than 10% or 177 employees. The Regulated Services group
expects a $6 to $9 million per year reduction of O & M expenses as a
result of this program.
Depreciation expenses were higher in the 1998 periods presented when
compared to the 1997 periods because of increased investment in
property, plant and equipment and gas production which more than
offset the effects of a downward adjustment of depreciation expense
associated with gas transmission properties. The full-cost
amortization rate for combined U.S. and Canadian operations was $.84
per equivalent Mcf for the first nine months of 1998 and 1997.
Other taxes, primarily production and property taxes, were higher in
the 9- and 12-month periods of 1998 because of higher production
taxes on cost of service properties. The increase for these
production taxes is offset by higher revenues.
Interest and other income was $8,526,000 lower in the third quarter
of 1998 when compared with the third quarter of 1997 due primarily to
nonrecurring transactions in 1997. In the third quarter of 1998,
the pre-tax gain from selling Nextel shares amounted to $.7 million
compared with $5.2 million a year earlier. Questar sold 30,000
shares in the 1998 period, well below the 405,000 shares sold in the
1997 quarter. Also, the Company's portion of capitalized interest
and equity costs associated with the TransColorado pipeline recorded
in the third quarter of 1997 amounted to $4 million. The impact of
nonrecurring items was reduced in the nine-month comparison as a
result of a $5.7 million pre-tax gain on an exchange of an interest
in Nextlink and $1,386,000 of interest earned on a fiber-optics
communications project with Nextlink.
The effective income tax rate for the first nine months was 30% in
1998 and 31% in 1997. The Company recognized $6,318,000 of
production-related tax credits in the 1998 period and $7,313,000 in
the 1997 period.
Liquidity and Capital Resources
Operating Activities
Net cash provided from operating activities of $213,075,000 for the
first nine months of 1998 was $43,209,000 higher than was generated
in the same period of 1997. The increase in cash flow resulted
primarily from increased collection of gas costs incurred by natural
gas distribution operations, which were under-collected in the 1997
period and from the collection of receivables.
Investing Activities
Capital expenditures were $326,823,000 for the first nine months of
1998 compared with $122,425,000 reported for the same period a year
ago. Completion of a $155.2 million gas and oil property acquisition
and $37.5 million of construction costs associated with the
TransColorado pipeline represented a majority of the difference. A
comparison of capital expenditures for the first nine months of 1998
and 1997 plus an estimate for calendar year 1998 is below. The 1998
forecast includes the announced purchase of a pipeline for $38 million.
<TABLE>
<CAPTION>
Estimate
Actual 12 Months
Nine Months Ended Ended
September 30, Dec. 31,
1998 1997 1998
(In Thousands)
<S> <C> <C> <C>
Capital Expenditures:
Market Resources $216,958 $51,459 $243,300
Regulated Services
Natural gas distribution 42,233 39,473 64,600
Natural gas transmission 59,812 16,597 121,500
Other 409 1,400
Total Regulated Services 102,454 56,070 187,500
Other operations 7,411 14,896 39,700
$326,823 $122,425 $470,500
</TABLE>
Financing Activities
In the first nine months of 1998, short-term debt increased by $98.6
million and long-term debt increased by a net $16.7 million. The
additional debt plus net cash flow provided from operating activities
were used to finance capital expenditures. The Company intends to
finance the remainder of forecasted 1998 capital expenditures through
net cash provided from operating activities, bank borrowings and
issuing long-term debt. In October 1998, Questar Pipeline borrowed
$60.1 million through its medium-term note program that became
effective September 1998. The notes have a weighted average coupon
rate of 6.15% and a weighted average maturity of 13 years. The
proceeds will be used to reduce short-term debt and fund capital
expenditures. Also in October 1998, TransColorado Gas Transmission
Co., a partnership, secured a $200 million revolving-credit facility.
Future construction funding for the TransColorado pipeline, which is
50% owned by a subsidiary, should be provided by the revolving-credit
facility. The loan is guaranteed by Questar Pipeline and KN Energy.
Short-term borrowings amounted to $168.8 million of commercial paper
and $61 million of bank loans at September 30, 1998 and $70.7 million
of commercial paper at September 30, 1997. The Company has
short-term bank lines of credit, which serve as backup to borrowings
made under the commercial paper program. The Company's lines of
credit borrowing capacity has been expanded from a seasonal $130
million to $275 million to serve as interim financing to accommodate
capital spending until long-term financing can be arranged.
Year 2000 Issues
Introduction
Questar (the Company) 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 basic approach has been to provide corporate-wide management and
coordination combined with distributed compliance responsibility at
the various business units. The Y2K team is responsible for fostering
awareness, establishing corporate-level, corporate-wide, strategy;
coordinating Questar action items and information; and providing
periodic internal status reports. The composition of the team includes
representation from each major Questar business unit. The effort is
designed to be consistent with the prudent efforts of publicly traded
companies of similar size, business, and complexity.
Questar InfoComm, Inc. (an affiliate which provides information
technology services to other Questar affiliates) is responsible for
Y2K compatibility of all communications systems, networks (LANs and
WANs), corporate-wide applications and operating systems, mainframe
commercial off-the-shelf products, and for developing, implementing
and coordinating testing procedures.
General
Questar's Y2K team developed a written plan (the Plan) addressing
infrastructure, applications software (infrastructure and applications
software are sometimes collectively referred to as "IT systems"),
outside suppliers and customers, and process control and
instrumentation containing embedded chips (non-IT systems). The
Company's in-house programmers and systems analysts are primarily
responsible for the conversion and testing of certain non-compliant
application software code. In addition, the services of outside
consultants and programmers were engaged to assist program management
completion of coding for certain software programs. The general phases
common to all business units are: (1) an inventory of Y2K items (both
IT and non-IT systems); (2) assignment of priorities to identified
items; (3) assessment of the Y2K compliance of items determined to be
material to the company; (4) repair or replacement of material items
that are determined not to be Y2K compliant; (5) test material items;
and (6) design and implementation of contingency and business
continuation plans for each organization and company location.
Implementation of the Plan is generally proceeding on schedule.
Status
On September 30, 1998, the inventory and priority assessment phases
for each business unit had been completed, but they will continue to
be monitored. Material items are those the Company believes to
involve a risk to the safety of individuals; or may cause damage to
property or the environment; or affect the Company's ability to
provide gas production, transportation, and delivery.
The testing phases of the Plan are underway. The Company has
developed a testing procedure and guidelines to help system users
develop their own specific test procedures and to ensure consistency
in testing. The Company has assembled a test facility which
duplicates, in essential details, the production environment. The
test facility is now in operation and the first systems are being
tested. Responsible system users are now in the process of developing
their test plans and scheduling testing.
The infrastructure section of the Plan addresses hardware and systems
software other than applications software. This effort is on
schedule, and the Company estimates that approximately 50% of the
activities related to the section had been completed as of September
30, 1998. The testing phase has commenced and will be ongoing as
hardware or system software is remediated, upgraded or replaced.
Contingency planning for this section commenced in the third quarter
of 1998. All infrastructure activities are expected to be completed
by mid-1999.
The applications software section of the Plan addresses both the
conversion of applications software that is not Y2K compliant and,
where available from the supplier, the replacement of such software.
The Company estimates that the software conversion and replacement
phase was more than 70% complete on September 30, 1998, and the
remaining conversions and replacements are on schedule to be completed
by July 1, 1999. The testing phase of this section, is scheduled for
completion by the third quarter of 1999. The testing phase is conducted
as the software is remediated or replaced. Contingency planning for this
section began in the third quarter of 1998 and is scheduled to be
completed by mid-1999.
The outside vendors and customers section of the Plan includes the
process of identifying and prioritizing critical suppliers and
customers and communicating with them about their plans and progress
in addressing their Y2K problems. The various business units have
formed Project teams to begin the detailed evaluations of the most
critical third parties and to elicit the required information. The
process of evaluating these external agents commenced in the third
quarter of 1998 and is scheduled for completion by mid-1999, with
follow-up reviews scheduled through the remainder of 1999. This
procedure will include the development of contingency plans, scheduled
for the second quarter of 1999, with completion by late 1999. The
Company estimates that this section was behind schedule at September
30, 1998.
Inventory and assessment phases are in progress for non-IT systems.
This section of the Plan addresses the hardware, software and
associated embedded computer chips that are used in the operation of
all facilities operated by the Company. This section presents unique
problems in that it is often difficult to determine whether embedded
chips have a date function that will present a Y2K problem. It is
also difficult to take certain critical systems, such as compressors
and pipeline valves, off-line for testing. Despite these
difficulties, the Company believes the replacement, repair and testing
of non-IT systems equipment is on schedule to be completed by year-end
1999. Contingency planning for this section began in the third
quarter of 1998 and will be completed by year-end 1999.
Costs
The total cost associated with required modifications to become Y2K
compliant is not expected to be material to the Company's financial
position. The current expense estimate of the Year 2000 Project is
approximately $4.5 million, with $2.3 million attributable to Questar
Gas Company and $.8 million attributable to Questar Pipeline Company.
This estimate does not include Questar's potential share of Y2K costs
that may be incurred by partnerships and joint ventures in which the
Company participates but is not the operator. This expense estimate is
expected to change as the Project progresses. Funds for the Project
are included in existing operating budgets.
Risks
Failure to correct a material Y2K problem could result in an
interruption in, 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. Due to the general uncertainty inherent in the Y2K
problem, resulting in part from the uncertainty of the Y2K readiness
of outside suppliers and customers and the embedded chip problems, the
Company is unable to determine at this time whether the consequences
of Y2K failures will have a material impact on the Company's results
of operations, liquidity or financial condition. The Y2K Project has
reduced and is expected to continue to significantly reduce the
Company's level of uncertainty about the Y2K problem and, in
particular, about the Y2K compliance and readiness of its material
outside vendors and customers. The Company believes that the
possibility of significant interruptions of normal operations is not
great.
The 10-Q contains forward-looking statements about the future
operations and expectations of Questar Corporation. According to
management, these statements are made in good faith and are reasonable
representations of the Company's expected performance at the time.
Actual results may vary from management's stated expectations and
projections due to a variety of factors.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Universal Resources Corporation (URC), a subsidiary of Questar
Corporation (Questar or the Company), is a named defendant in two
separate class actions involving royalty payments in Oklahoma. One
case, Bridenstine vs. Kaiser-Francis Oil Company et. al., alleging
fraud claims as well as contract claims and asserting damages against
all defendants for a 15-year period in excess of $35,000,000 plus
punitive damages. The plaintiff's primary claim alleges that a
transportation fee charged against royalty payments was improper or
excessive. The claims involve wells connected to an unregulated
pipeline system that Questar Gas Management presently owns and
operates. Questar and several other affiliates have also been named
as defendants in addition to non-related parties. Kaiser-Francis and
URC are the major working interest owners and operators of a majority
of the wells connected to the pipeline system.
The second class action, Greghol Limited Partnership vs.
Universal Resources Corporation, alleges that defendant improperly
deducted post-production costs from royalty payments and claims
unspecified damages.
The Oklahoma Supreme Court recently denied appeals from trial
court decisions certifying class actions in both lawsuits. Both cases
are likely to be tried in 1999. At this point, Universal Resources
disputes all of the claims and cannot predict the outcome of the
cases or determine whether the claims will have a material adverse effect.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibit has been filed as part of this report:
Exhibit No.
10.10. Questar Corporation Stock Option Plan for Directors as
amended and restated effective October 29, 1998.
(b) The Company did not file a Current Report on Form 8-K during
the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
QUESTAR CORPORATION
(Registrant)
November 12, 1998 /s/R. D. Cash
(Date) R. D. Cash
Chairman of the Board, President
and Chief Executive Officer
November 12, 1998 /s/ S. E. Parks
(Date) S. E. Parks
Vice President, Treasurer and
Chief Financial Officer
QUESTAR CORPORATION
STOCK OPTION PLAN FOR DIRECTORS
(as amended and restated effective October 29, 1998)
1. Purpose of the Plan
The Questar Corporation Stock Option Plan for Directors ("Plan")
is intended to provide a method whereby the nonemployee voting
directors ("Directors") of Questar Corporation (the "Company"), who
are responsible for reviewing and monitoring the performance of the
Company and the performance of the Company's officers, may be
encouraged to acquire a larger stock ownership in the Company, thereby
promoting the interests of the Company and all its stockholders.
Accordingly, the Company, during the term of the Plan, will grant
options to Directors to purchase shares of the Company's common stock,
subject to the conditions hereinafter provided.
2. Administration of the Plan
The Plan shall be administered by the Company's Option Plan
Committee ("Committee"), a group appointed by the Company's President
and Chief Executive Officer that includes three or more officers of
the Company. The Committee shall hold meetings at such times and
places as it may determine. No member of the Committee shall be
eligible to receive options granted under the Plan.
3. Stock Subject to the Plan
(a) The stock to be issued upon exercise of options granted
under the Plan shall be the Company's common stock, without par value,
that shall be made available either from authorized but unissued
common stock or from common stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares
of common stock that may be issued under options shall not exceed
470,000 shares. The limitations established by the preceding sentence
shall be subject to adjustment as provided in Section 13 of the Plan.
(b) In the event that any outstanding option under the Plan for
any reason expires or is terminated, the shares of common stock
allocable to the unexercised portion of such option may again be made
subject to options under the Plan.
4. Type of Option
Only nonqualified stock options shall be granted under the terms
of the Plan. Nonqualified stock options granted under the terms of
the Plan are not to be treated as incentive stock options.
5. Option Price
The purchase price per share shall be 100 percent of the fair
market value of one share of the Company's common stock on the date
the option is granted.
The fair market value shall be deemed to be the closing price of
the Company's common stock as reported on the New York Stock Exchange
Composite Tape on the date the option is granted, or, if no sale of
common stock has been reported on that date, the fair market value
shall be determined by reference to such price for the next preceding
day on which a sale occurred.
The purchase price shall be subject to adjustment only as
provided in Section 13 of the Plan.
6. Eligibility of Optionees
(a) Options shall be granted only to Directors of the Company
who are not currently serving as employees of the Company or its
affiliates.
(b) Neither anything contained in the Plan or in any instrument
under the Plan nor the grant of any option hereunder shall confer upon
any optionee any right to continue as a Director of the Company.
7. Grant of Option
All Directors shall receive the first grant of options pursuant
to this Plan upon the date such Plan is initially approved by the
Company's stockholders. Thereafter, all Directors shall receive
options each year on the date of the first regular meeting of the
Board of Directors. Each Director shall receive, on an annual basis,
an option to purchase 3,200 shares of the Company's common stock.
Each Director who serves as the chairman of a committee of the Board
of Directors shall receive an option to purchase an additional 800
shares of the Company's common stock for each assignment as chairman
of a committee.
8. Transferability of Options
Directors may transfer options granted as of and after February
10, 1998, to family members or family trusts; provided that options
cannot be transferred until they have vested and provided, further,
that any transferred options are subject to the same rules applicable
to options retained by the Director with respect to forfeiture,
termination, duration and subject to rules approved by the Company's
Board of Directors with respect to transferred options. For purposes
of the Plan, the term family members includes spouse, children,
grandchildren, parents, siblings, nieces and nephews.
9. Term and Exercise of Options
(a) Each option granted under the Plan shall terminate ten years
after the date on which it was granted and shall vest six months from
the grant date.
(b) A Director electing to exercise an option shall give written
notice to the Company of such election and of the number of shares he
has elected to purchase, in such form as the Committee shall have
prescribed or approved, and shall at the time of exercise tender the
full purchase price of the shares he has elected to purchase. The
purchase price shall be paid in full in cash upon the exercise of the
option; provided, however, that in lieu of cash, an optionee may
exercise his option by tendering to the Company shares of common stock
owned by him and having a fair market value equal to the cash exercise
price applicable to his option, with the fair market value of such
stock to be determined in the manner provided in Section 5 of the
Plan. The optionee may also use a combination of cash and previously
acquired shares. An optionee may not use shares of common stock
obtained by exercising an option as consideration for additional
shares until such shares have been held for six months.
(c) An optionee shall have no rights as a stockholder with
respect to any shares covered by his option until the date the stock
certificate is issued evidencing ownership of the shares. No
adjustments shall be made for dividends (ordinary or extraordinary),
whether in cash, securities or other property, or distributions or
other rights, for which the record date is prior to the date such
stock certificate is issued, except as provided in Section 13.
(d) In the event of a Change of Control of the Company, all
options granted under the Plan shall vest immediately. A Change in
Control of the Company shall be deemed to have occurred if (i) any
"Acquiring Person" (as such term is defined in the Rights Agreement
dated as of February 13, 1996, between the Company 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 the Company
representing 25 percent or more of the combined voting power of the
Company; or (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, as of May 19, 1998, constitute the Company's Board of
Directors 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 the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at
least two-thirds of the directors then still in office who either were
directors on May 19, 1998, or whose appointment, election or
nomination for election was previously so approved or recommended; or
(iii) the Company's stockholders approve a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other corporation, other than a merger or consolidation that would
result in the voting securities of the Company 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 the Company 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 the Company (or similar transaction)
in which no person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25 percent or
more of the combined voting power of the Company's then outstanding
securities; or (iv) the Company'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 the Company of
all or substantially all of the Company's assets, other than a sale or
disposition by the Company 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 the Company in substantially the same proportions as
their ownership of the Company 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.
10. Termination of Status as Director
If an optionee is removed from his position as Director, any
options granted to him under the terms of the Plan shall terminate as
of the date of his removal or resignation. Options granted prior to
February of 1996 shall terminate on the date of the Director's death,
retirement, or resignation. Any unvested options granted after
February 13, 1996, shall vest upon the optionee's retirement as a
Director. If an optionee dies, retires, or resigns for some reason
other than to pursue a business opportunity that is or could be
perceived to be a business opportunity for the Company, he (or his
estate in the event of his death) or his transferee (if the option has
been transferred), shall have one year from the date of the Optionee's
death, retirement or resignation to exercise options that were granted
after February 13, 1996.
11. Period in Which Options May be Granted
Options may be granted pursuant to the Plan, as amended, after
such amendments are approved by the Company's stockholders and prior
to May 21, 2001.
12. Amendment or Termination of the Plan
The Company's Board of Directors may at any time terminate,
annul, modify or suspend the Plan subject to the following conditions:
(a) The Board of Directors cannot amend the Plan more often than
once per six-month period except for amendments to comply with changes
in federal tax laws.
(b) The Board of Directors cannot amend, modify, suspend, or
terminate the Plan in such a way that affects any options previously
granted under the Plan without the consent of the optionee.
(c) Without the approval of the stockholders of the Company, no
amendment or modification shall be made by the Board that:
(i) Increases the maximum number of shares as to which
options may be granted under the Plan;
(ii) Alters the method by which the option price is
determined;
(iii) Extends any option for a period longer than 10 years
after the date of grant;
(iv) Materially modifies the requirements as to eligibility
for participation in the Plan; or
(v) Provides for the administration of the Plan by a
Committee that is not composed entirely of officers of the Company who
are not eligible to participate in the Plan;
(vi) Alters this Section 12 so as to defeat its purpose.
13. Changes in Capitalization
(a) In the event that the shares of stock of the Company, as
presently constituted, shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the
Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up,
combination of shares or otherwise) or if the number of such shares of
stock shall be increased through the payment of a stock dividend,
then, subject to the provisions of Section 13(c) below, there shall be
substituted for or added to each share of stock of the Company that
was theretofore appropriated or that thereafter may become subject to
an option under the Plan, the number and kind of shares of stock or
other securities into which each outstanding share of the stock of the
Company shall be so changed or for which each such share shall be
exchanged or to which each such share shall be entitled, as the case
may be. Outstanding options shall also be appropriately amended as to
price and other terms, as may be necessary to reflect the foregoing
events.
(b) A dissolution or liquidation of the Company, or a merger or
consolidation in which the Company is not the surviving corporation,
shall cause each outstanding option to terminate, except to the extent
that another corporation may and does in the transaction assume and
continue the option or substitute its own options.
(c) Fractional shares resulting from any adjustment in options
pursuant to this Section 13 may be settled as the Committee shall
determine.
(d) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive. Notice of any adjustment shall be given by the
Company to each holder of an option which shall have been so adjusted.
(e) The grant of an option pursuant to the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganization or changes of its capital or
business structure, to merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any part of its business or
assets.
(f) In the case of an option exercised prior to the redemption
or other termination of Rights pursuant to the Rights Agreement, (i)
if such exercise occurs prior to the Distribution Date, the shares
received upon exercise shall be deemed to include the Rights to which
a holder of such shares on the Record Date would have been entitled,
and (ii) if such exercise occurs on or after the Distribution Date,
the holder of such option shall receive, upon exercise, in addition to
the shares of common stock subject to such option, the Rights to which
he would have been entitled had he been a holder of such shares on the
Distribution Date; provided, however, that the preceding clause (ii)
shall not apply if and to the extent that the Company shall have been
advised by counsel that application thereof would create a significant
risk of material adverse tax consequences to the Company or to such
holder, and provided further that, if the provisions of clause (i) or
(ii) hereof apply to an option with respect to a distribution of
Rights, no further adjustment shall be made to such option under this
Section 13 with regard to such distribution. The immediately
preceding sentence contains terms and concepts that are defined in the
Rights Agreement; the use of such terms and concepts is subject to the
definitions and restrictions contained in the Rights Agreement.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following schedule contains summarized financial information extracted
from the Questar Corporation consolidated Statements of Income and Balance
Sheet for the period ended September 30, 1998, and is qualified in its
entirety by reference to such unaudited financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 965
<SECURITIES> 0
<RECEIVABLES> 87,661
<ALLOWANCES> 0
<INVENTORY> 37,277
<CURRENT-ASSETS> 162,437
<PP&E> 3,006,587
<DEPRECIATION> 1,291,179
<TOTAL-ASSETS> 2,042,574
<CURRENT-LIABILITIES> 370,593
<BONDS> 554,402
0
0
<COMMON> 296,548
<OTHER-SE> 575,138
<TOTAL-LIABILITY-AND-EQUITY> 2,042,574
<SALES> 0
<TOTAL-REVENUES> 629,522
<CGS> 0
<TOTAL-COSTS> 398,760
<OTHER-EXPENSES> 120,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,674
<INCOME-PRETAX> 93,239
<INCOME-TAX> 27,926
<INCOME-CONTINUING> 65,313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,313
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
