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
MARCH 31, 2000.
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 April 30, 2000
Common Stock, without par value 79,997,847 shares
QUESTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES $ 336,702 $ 277,814 $ 983,107 $ 883,987
OPERATING EXPENSES
Natural gas and other
product purchases 144,502 116,005 370,626 339,131
Cost of goods sold 4,865 746 14,544 3,357
Operating and maintenance 57,036 51,659 226,656 210,504
Depreciation and amortization 35,882 33,632 139,994 128,717
Write-down of oil and
gas properties 34,000
Other taxes 12,277 8,410 36,591 35,191
TOTAL OPERATING EXPENSES 254,562 210,452 788,411 750,900
OPERATING INCOME 82,140 67,362 194,696 133,087
INTEREST AND OTHER INCOME 12,212 12,068 74,844 23,942
OPERATIONS OF UNCONSOLIDATED
AFFILIATES
Income (loss) 1,219 1,460 (4,597) 4,025
Write-down of investment
in partnership (49,700)
1,219 1,460 (54,297) 4,025
DEBT EXPENSE (15,560) (12,971) (56,533) (49,428)
INCOME BEFORE INCOME TAXES 80,011 67,919 158,710 111,626
INCOME TAXES 29,781 24,555 53,014 32,245
NET INCOME $ 50,230 $ 43,364 $ 105,696 $ 79,381
EARNINGS PER COMMON SHARE
Basic $ 0.62 $ 0.52 $ 1.30 $ 0.95
Diluted $ 0.62 $ 0.52 $ 1.29 $ 0.95
Average common shares outstanding
Basic 80,782 82,655 81,655 82,605
Diluted 80,782 82,772 81,755 82,921
Dividends per common share $ 0.17 $ 0.165 $ 0.675 $ 0.66
</TABLE>
See notes to consolidated financial statements
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 1999
(Unaudited)
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments $ 3,857 $ 3,240 $ 8,291
Accounts receivable 186,913 148,409 181,274
Inventories 20,823 21,649 37,614
Purchased-gas adjustments 432
Other current assets 11,727 10,097 11,249
Total current assets 223,320 183,395 238,860
Property, plant and equipment 3,367,394 3,121,559 3,258,773
Less allowances for depreciation and
amortization 1,507,540 1,390,608 1,471,859
Net property, plant and equipment 1,859,854 1,730,951 1,786,914
Securities available for sale,
approximates fair value 111,808 75,392 94,945
Investment in unconsolidated
affiliates 33,437 61,880 25,269
Other assets 92,040 45,058 92,009
$2,320,459 $2,096,676 $2,237,997
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term loans $ 137,000 $ 127,000 $ 144,115
Accounts payable and accrued
expenses 192,583 181,124 179,673
Purchased-gas adjustments 15,065 12,598
Current portion of long-term debt 7 6,006 7
Total current liabilities 344,655 326,728 323,795
Long-term debt, less current portion 763,226 614,168 735,043
Other liabilities 34,963 27,666 36,554
Deferred income taxes and investment
tax credits 223,333 205,562 216,760
Common shareholders' equity
Common stock 258,862 300,508 278,437
Retained earnings 644,989 594,705 608,498
Other comprehensive income 50,431 31,294 38,910
Note receivable from ESOP (3,955)
Total common shareholders' equity 954,282 922,552 925,845
$2,320,459 $2,096,676 $2,237,997
</TABLE>
See notes to consolidated financial statements
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
March 31,
2000 1999
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 50,230 $ 43,364
Depreciation and amortization 37,249 34,958
Deferred income taxes and
investment tax credits (5,733) (5,955)
Income from unconsolidated affiliates,
net of cash distributions (1,124) (557)
Gain from sales of securities (9,044) (9,391)
71,578 62,419
Changes in operating assets and liabilities 36,749 39,437
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 108,327 101,856
INVESTING ACTIVITIES
Capital expenditures
Property, plant and equipment (98,594) (22,258)
Other investments (7,024) (3,707)
Total capital expenditures (105,618) (25,965)
Proceeds from (costs of) disposition of
property, plant and equipment (371) 4,793
Proceeds from the sales of securities 11,573 13,569
NET CASH USED IN INVESTING
ACTIVITIES (94,416) (7,603)
FINANCING ACTIVITIES
Issuance of common stock 589 1,847
Common stock repurchased (20,164) (227)
Issuance of long-term debt 33,402 3,640
Repayment of long-term debt (4,997) (5,986)
Decrease in short-term loans (12,506) (94,100)
Payment of dividends (13,739) (13,636)
Other (583) 19
NET CASH USED IN FINANCING
ACTIVITIES (17,998) (108,443)
Foreign currency translation
adjustment (347) (59)
DECREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (4,434) $ (14,249)
</TABLE>
See notes to consolidated financial statements
<PAGE>
QUESTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
Note 1 - Basis of Presentation
The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented.
All such adjustments are of a normal recurring nature. Due to
the seasonal nature of the business, the results of operations
for the three month period ended March 31, 2000, are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2000. 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, 1999.
Note 2 - Purchase of Gas and Oil Company
On January 26, 2000, Questar Market Resources, a subsidiary of
Questar, acquired 100% of the outstanding shares of Canor
Energy Ltd from NI Canada ULC, a subsidiary of Northwest
Natural Gas Co. The cost of the cash transaction was $US 61
million and was accounted for as a purchase. Canor owns
and/or operates more than 800 wells located in Alberta, British
Columbia and Saskatchewan provinces of Canada. Canor's proven
gas and oil reserves are estimated at 61.1 billion cubic feet
equivalent.
Note 3 - Debt Offering
On April 12, 2000, Questar Market Resources filed a
registration statement with the Securities and Exchange
Commission (SEC) for a public debt offering. Upon acceptance
by the SEC, Questar Market Resources intends to issue $150
million of senior notes. The proceeds will be used to repay a
portion of the outstanding debt of Questar Market Resources.
Note 4 - Comprehensive Income
Comprehensive income is defined as any nonowner change in
common equity. Generally, comprehensive income includes
earnings reported on the income statement plus changes in
common equity formerly reported on the balance sheet only.
Questar's other comprehensive income, which are noncash
transactions, includes changes in the market value of the
investments in securities available for sale and foreign
currency translation adjustments.
<TABLE>
<CAPTION>
3 Months Ended
March 31,
2000 1999
(In thousands)
<S> <C> <C>
Comprehensive Income:
Net income $ 50,230 $ 43,364
Other comprehensive income
Unrealized gain on securities available for sal 18,162 21,636
Foreign currency translation adjustment (520) (76)
Other comprehensive income before
income taxes 17,642 21,560
Income taxes on other comprehensive income 6,121 8,240
Net other comprehensive income 11,521 13,320
Total comprehensive income $ 61,751 $ 56,684
</TABLE>
Note 5 - Operations by Line of Business
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
2000 1999 2000 1999
(In Thousands)
<S> <C> <C> <C> <C>
REVENUES FROM UNAFFILIATED CUSTOMERS
Questar Market Resources $ 119,471 $ 94,643 $ 443,431 $379,308
Questar Regulated Services
Natural gas distribution 199,527 172,093 475,040 456,058
Natural gas transmission 9,596 9,021 37,497 37,112
Other 625 549 2,336 2,468
Total Regulated Services 209,748 181,663 514,873 495,638
Corporate and other operations 7,483 1,508 24,803 9,041
$ 336,702 $ 277,814 $ 983,107 $883,987
REVENUES FROM AFFILIATES
Questar Market Resources $ 22,290 $ 21,203 $ 80,795 $ 81,658
Questar Regulated Services
Natural gas distribution 993 209 3,115 1,278
Natural gas transmission 20,262 18,145 77,355 71,362
Other 68 28 236 107
Corporate and other operations 9,304 12,435 35,720 41,581
$ 52,917 $ 52,020 $ 197,221 $195,986
OPERATING INCOME (LOSS)
Questar Market Resources $ 25,675 $ 14,343 $ 88,110 $ 21,517
Questar Regulated Services
Natural gas distribution 38,749 37,807 46,255 57,046
Natural gas transmission 15,035 13,064 56,366 53,456
Other (46) (68) (34) (933)
Total Regulated Services 53,738 50,803 102,587 109,569
Corporate and other operations 2,727 2,216 3,999 2,001
OPERATING INCOME $ 82,140 $ 67,362 $ 194,696 $133,087
NET INCOME (LOSS)
Questar Market Resources $ 15,049 $ 8,253 $ 52,662 $ 11,971
Questar Regulated Services
Natural gas distribution 20,715 20,258 19,676 26,952
Natural gas transmission 7,124 6,962 (8,229) 28,299
Other 59 310 (376)
Total Regulated Services 27,898 27,220 11,757 54,875
Corporate and other operations 7,283 7,891 41,277 12,535
NET INCOME $ 50,230 $ 43,364 $ 105,696 $ 79,381
</TABLE>
Note 6 - Reclassifications
Certain reclassifications were made to the 1999 financial
statements to conform with the 2000 presentation.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
QUESTAR CORPORATION AND SUBSIDIARIES
March 31, 2000
(Unaudited)
Results of Operations
Questar Market Resources
Questar Exploration and Production, Wexpro, Questar Gas
Management and Questar Energy Trading, collectively, (Market
Resources) conduct the Company's exploration and production,
gas gathering and processing, and energy marketing operations.
Following is a summary of Market Resources' financial results
and operating information.
<TABLE>
<CAPTION>
3 Months Ended 12 Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
FINANCIAL RESULTS - (dollars in thousands)
Revenues
From unaffiliated customers $ 119,471 $ 94,643 $ 443,431 $ 379,308
From affiliates 22,290 21,203 80,795 81,658
Total revenues $ 141,761 $ 115,846 $ 524,226 $ 460,966
Operating income $ 25,675 $ 14,343 $ 88,110 $ 21,517
Net income 15,049 8,253 52,662 11,971
OPERATING STATISTICS
Production volumes
Natural gas (in million cubic feet 16,950 15,048 64,614 54,263
Oil and natural gas liquids
(in thousands of barrels) 682 747 2,801 2,987
Production revenue
Natural gas (per thousand
cubic feet) $ 2.17 $ 1.86 $ 2.08 $ 1.89
Oil and natural gas liquids
(per barrel) $ 22.28 $ 10.65 $ 17.41 $ 11.78
Marketing volumes in energy
equivalent decatherms (in
thousands of decatherms) 27,025 34,159 105,848 119,329
Natural gas gathering volumes (in
thousands of decatherms)
For unaffiliated customers 21,778 20,291 86,448 74,676
For Questar Gas 9,853 8,237 33,666 29,579
For other affiliated customers 5,164 4,559 20,264 18,010
Total gathering 36,795 33,087 140,378 122,265
Gathering revenue (per decatherm) $ 0.14 $ 0.16 $ 0.15 $ 0.16
</TABLE>
Market Resource's net income rose 82% in the first quarter of
2000 when compared with the first quarter of 1999 due primarily
to increased production of natural gas and higher prices
received for gas, oil and natural gas liquids (NGL).
Revenues increased 22% for the first quarter of 2000 and 14%
for the 12 months of 2000 when compared with the corresponding
periods of the prior year. First quarter revenues from selling
natural gas increased $8.8 million as a result of a 17%
increase in price and a 13% increase in volumes of gas
produced. Production benefited from a successful development
drilling program and acquisition of Canadian producing
properties in the first quarter of 2000. Canadian gas
production grew 94% to 1.6 billion cubic feet (Bcf), while U.S.
production increased 8% to 15.4 Bcf. Market Resources recently
announced another successful well in our Pinedale, Wyoming
tight-sands play. The Mesa No. 6 well produced during initial
testing at the rate of 11 million cubic feet of gas and almost
100 barrels of oil per day. Market Resources owns an average
60% working interest at Pinedale, based on an 80-acre spacing.
A 109% increase in the average price of oil and NGL more than
offset the effect of lower production to result in a 91%
increase in first quarter revenues. Production of oil and NGL
decreased in the first quarter as a result of selling
nonstrategic properties in the fourth-quarter of 1999. Higher
prices also benefited the operations of liquids-extraction
plants that experienced improved results for the first quarter
of 2000.
Volumes of gas gathered increased 11% in the first quarter
reflecting more production in the areas served by the Questar
Gas Management. Excess transportation capacity and settlement
of gas imbalances by the energy-trading activities caused an
$841,000 after-tax loss in the first quarter of 2000.
Net income for Wexpro increased $.7 million to $5.8 million in
the first quarter of 2000. Wexpro expanded its investment in
development-drilling projects in response to higher regional
demand. Wexpro develops gas reserves on behalf of an
affiliated company, Questar Gas, which is a rate-regulated
distributor of natural gas. At year-end 1999, Wexpro earned an
average 18.9% after-tax return on investment in those
properties.
Market Resources employs hedging strategies to fix commodity
prices on a portion of its gas and oil production. Beginning
April 2000, about 40% of natural gas production through the end
of 2001 is hedged at an average price of $2.15 per Mcf, net
back to the well. Beginning April 2000 and extending through
2001, approximately 80% of oil excluding Wexpro production, is
hedged at an average price of $17.22 per barrel, net back to
the well.
Questar 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 12 Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
FINANCIAL RESULTS - (dollars in thousands)
Revenues
From unaffiliated customers $ 199,527 $ 172,093 $ 475,040 $ 456,058
From affiliates 993 209 3,115 1,278
Total revenues 200,520 172,302 478,155 457,336
Natural gas purchases 122,430 98,722 280,973 261,628
Margin $ 78,090 $ 73,580 $ 197,182 $ 195,708
Operating income $ 38,749 $ 37,807 $ 46,255 $ 57,046
Net income $ 20,715 $ 20,258 $ 19,676 $ 26,952
OPERATING STATISTICS
Natural gas volumes (in thousands of
decatherms)
Residential and commercial sales 33,908 32,425 83,684 81,342
Industrial sales 3,204 2,940 10,087 9,791
Transportation for industrial
customers 14,017 13,351 52,309 53,980
Total deliveries 51,129 48,716 146,080 145,113
Natural gas revenue (per decatherm)
Residential and commercial $ 5.41 $ 4.87 $ 5.05 $ 4.98
Industrial sales 3.27 3.01 3.03 3.02
Transportation for industrial
customers $ 0.13 $ 0.13 $ 0.13 $ 0.13
Heating degree days
Actual 2,353 2,296 5,374 5,366
Normal 2,743 2,743 5,801 5,801
Warmer than normal 14% 16% 7% 7%
Number of customers at March 31,
Residential and commercial 687,985 666,301
Industrial 1,363 1,329
Total 689,348 667,630
</TABLE>
Questar Gas' margin increased 6% in the first quarter and 1% in
the twelve months ended March 31, 2000 compared with the same
periods of 1999 resulting primarily from interim rate relief
received January 1, 2000 and gas volumes delivered to new
customers. The increase was partially offset by a 2% decline
in gas usage per customer.
The Public Service Commission of Utah (PSCU) granted Questar
Gas' request for $7.1 million of interim rate relief, subject
to refund, pending outcome of the Company's request for a
general rate increase. The Company is seeking approximately
$22 million of rate relief to offset higher costs. The PSCU
must rule on the Company's general rate filing by August 14,
2000. The number of customers served by Questar Gas grew by
21,718 or 3.3% from a year ago to 689,348. Questar Gas expect
to add between 20,000 to 21,000 new customers in 2000.
Temperature adjusted usage per customer was approximately one
decatherm or 2% lower in the first quarter of 2000 compared
with the same period in 1999. Temperatures were warmer than
normal for all periods presented.
Volumes delivered to industrial customers increased by 6% in
the 3-month period ended March 31, 2000. Industrial deliveries
were 2% lower in the twelve months ended March 31, 2000 because
a major steel-producing customer reduced operations. The margin
earned from gas delivered to industrial customers is
substantially lower than from gas delivered to residential and
commercial customers.
Questar Gas' natural gas purchase costs increased in the
three-and twelve-month periods of 2000 when compared with the
1999 periods due to an increase in the volumes of gas sold and
higher commodity costs. Questar Gas files for adjustment of
purchased-gas costs with the Utah and Wyoming Public Service
Commissions on a semiannual basis.
Questar Gas filed a general rate case December 17, 1999
requesting approximately $22 million of general rate relief and
also asked for $7.1 million of interim rate relief. Higher
costs of serving customers, inclusion of charges for the
removal of carbon dioxide from part of the gas supply and lower
gas usage per customer were cited among the reasons for
requesting rate relief. The PSCU granted $7.1 million of
interim rate relief, subject to refund, effective January 1,
2000. The Division of Public Utilities and the Committee of
Consumer Services, state regulatory agencies, filed direct
testimony on April 19, 2000 recommending annual revenue
increases, including the interim relief, of $10.3 million and
$1.8 million, respectively. Questar Gas is preparing rebuttal
testimony, which is due May 24, 2000. Hearings have been
scheduled to begin June 5, 2000. The PSCU's final order on the
rate case must be issued by August 14, 2000.
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 12 Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
FINANCIAL RESULTS - (dollars in thousands)
Revenues
From unaffiliated customers $ 9,596 $ 9,021 $ 37,497 $ 37,112
From affiliates 20,262 18,145 77,355 71,362
Total revenues $ 29,858 $ 27,166 $ 114,852 $ 108,474
Operating income $ 15,035 $ 13,064 $ 56,366 $ 53,456
Net income (loss) 7,124 6,962 (8,229) 28,299
OPERATING STATISTICS
Natural gas transportation volumes (in
thousands of decatherms)
For unaffiliated customers 29,095 25,946 139,035 113,915
For Questar Gas 36,315 35,635 106,179 104,805
For other affiliated customers 1,325 3,380 10,098 25,400
Total transportation 66,735 64,961 255,312 244,120
Transportation revenue
(per decatherm) $ 0.27 $ 0.27 $ 0.28 $ 0.29
</TABLE>
Revenues were higher in the 3-and 12-month periods of 2000
compared with the 1999 periods due primarily to the addition of
gas-processing operations. A subsidiary of Questar Pipeline,
Questar Transportation Services, began operations at mid-year
1999 to remove carbon dioxide from certain gas supplies to make
them suitable for Questar Gas' system. Transportaion revenues
increased 4% in the 2000 quarter compared with 1999 from the
addition of several firm-transportation contracts.
Transportation revenues were flat in the twelve month periods.
Earnings from unconsolidated affiliates were lower in the 2000
periods compared with the 1999 periods. Capitalized financing
costs (AFUDC) of $1,265,000 associated with the TransColorado
pipeline was recorded in the first quarter 1999, with no
comparable amounts recorded in the 2000 quarter. The decline in
earnings for the twelve months was due mainly to lower AFUDC
from TransColorado and a 1999 pretax operating loss from a
TransColorado of $8.2 million, representing the Company's
share.
Consolidated Results of Operations
Improved prices for natural gas, oil and natural gas liquids
(NGL) and an increase in natural gas production were the
primary drivers of higher consolidated revenues in the 3- and
12-month periods of 2000 when compared with the same periods in
1999. In addition, higher natural gas prices translated into
an increase in gas-distribution revenues in the 2000 periods
presented, since the cost of natural gas is recovered from
customers.
Natural gas and other product purchases increased in the 2000
periods presented because of higher prices paid for natural
gas, primarily reflected in distribution activities.
Cost of goods sold includes the costs of computer equipment for
resale by Questar MetroNet Services. Questar MetroNet Services
is a new operation beginning in the last half of 1999, that, in
addition to providing secure data processing centers, also
configures and sells hardware and software for networks.
Questar MetroNet Services is a subsidiary of Questar InfoComm.
Operating and maintenance (O & M) expenses increased 10% in the
first quarter and 8% in the 12-months ended March 31, 2000 when
compared with the same periods in 1999. Increased activities
due to adding gas and oil properties and gas-distribution
customers were the primary causes of higher O & M expenses.
Depreciation and amortization expense was higher in the 2000
periods when compared to the 1999 periods primarily due to
increased investment in property, plant and equipment and
increased gas production. The full-cost amortization rate for
combined U.S. and Canadian operations was $.80 per equivalent
Mcf for the first quarter of 2000, down from $.83 in the first
quarter of 1999. Other taxes increased in the 2000 periods
because of higher revenues from gas and oil produced. In
addition, other taxes increased in the first quarter comparison
because of an adjustment of prior year taxes by
gas-distribution operations.
Pretax gains from selling securities available for sale were
largely unchanged in the first quarter of 2000 when compared
with the same period of 1999. However, pretax gains from
selling securities available for sale were responsible for the
increase in interest and other income in the comparison of the
12-months ended March 31, 2000 with the same period of 1999.
The unconsolidated affiliates reported operating losses for the
12-months ended March 31, 2000 primarily due to TransColorado
Pipeline losses. The Company's share of operating losses
reported by TransColorado Pipeline was $8.2 million before
taxes in 1999.
Debt expense was higher in the 2000 periods as a result of
increased borrowings to fund capital projects.
The effective income tax rate for the first quarter was 37.2%
in 2000 and 36.2% in 1999. The Company recognized $1,604,000
of production-related tax credits in the 2000 period and
$1,810,000 in the 1999 period.
Liquidity and Capital Resources
Operating Activities
Net cash provided from operating activities for the first
quarter of 2000 was 6% more than was generated in the same
period of 1999. The increase in cash flow resulted primarily
from higher net income.
Investing Activities
A comparison of capital expenditures for the first quarter of
2000 and 1999 plus an estimate for calendar year 2000 is
presented below. The Company acquired a Canadian company,
Canor Energy LTD, in 2000 in a cash transaction for $US 61
million.
<TABLE>
<CAPTION>
Forecast
Actual 12 Months
3 Months Ended Ended
March 31, Dec. 31,
2000 1999 2000
(In Thousands)
<S> <C> <C> <C>
Questar Market Resources $74,945 $14,113 $165,500
Questar Regulated Services
Natural gas distribution 10,167 5,109 63,300
Natural gas transmission 17,616 4,880 68,300
Other 13 39 10,100
Total Questar Regulated Serv 27,796 10,028 141,700
Corporate and other operations 2,877 1,824 31,900
$105,618 $25,965 $339,100
</TABLE>
Financing Activities
The Company used cash flow generated from operations, from the
sale of investments and from a net increase in long-term debt
to fund capital expenditures, reduce short-term borrowings,
repurchase shares of its common stock and pay dividends to
holders of common stock. The Company intends to finance 2000
capital expenditures through net cash provided from operating
activities, bank borrowings and issuing long-term debt.
The Company announced that it had reached its goal of
repurchasing up to $50 million worth of its shares and would
seek to purchase another $25 million worth over the next 12
months. In the first four months of 2000, Questar repurchased
approximately 1.5 million of its shares for $23 million. Since
its inception in April of 1999, the Company has repurchased 3.1
million shares of its common stock for $51.2 million. The
Company has used proceeds from the sales of Nextel shares to
fund a portion of these repurchases.
Short-term borrowings amounted to $137 million of commercial
paper at March 31, 2000 compared with $127 million of
commercial paper a year earlier. The Company has bank lines of
credit, which serve as backup to borrowings made under the
commercial paper program. Market Resources filed a
registration statement with the Securities and Exchange
Commission (SEC) on April 12, 2000 for a public debt offering.
Upon acceptance by the SEC, Market Resources intends to borrow
$150 million of senior notes and use the proceeds to repay a
portion of its existing debt.
Revenue Recognition Guideline Issued by the Securities and
Exchange Commission
In December 1999, the SEC issued Staff Accounting Bulletin
(SAB) 101, "Revenue Recognition in Financial Statements." The
issue is the timing of recording revenues given that sales
transactions may contain some conditions allowing customers to
return products or receive refunds. The effect of adopting
this accounting guideline is not known at this time because the
Company has not completed its evaluation. For the Company, the
guidelines of SAB 101 are effective in the second quarter of
2000.
Forward-Looking Statements
This 10-Q contains forward-looking statements about future
operations, capital spending, regulatory matters and
expectations of Questar. 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 and oil prices and supplies,
competition, regulatory issues, weather conditions,
availability of gas and oil properties for sale and other
factors beyond the control of the Company. These other factors
include the rate of inflation, quoted price of securities
available for sale 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
Questar Corporation has nothing to disclose in this section of
the report.
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)
May 12, 2000 /s/R. D. Cash
(Date) R. D. Cash
Chairman of the Board, President and
Chief Executive Officer
May 12, 2000 /s/ S. E. Parks
(Date) S. E. Parks
Vice President, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following summarized schedule contains information extracted from the
Questar Corporation Consolidated Income Statements and Balance Sheets for
the periods ended March 31, 2000 and 1999, and is qualified in its entirety
by reference to such unaudited financial information.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 3,857 3,240
<SECURITIES> 0 0
<RECEIVABLES> 187,155 148,409
<ALLOWANCES> 0 0
<INVENTORY> 20,823 21,649
<CURRENT-ASSETS> 223,562 183,395
<PP&E> 3,367,394 3,121,559
<DEPRECIATION> 1,507,540 1,390,608
<TOTAL-ASSETS> 2,320,701 2,096,676
<CURRENT-LIABILITIES> 344,897 326,728
<BONDS> 763,226 326,728
0 0
0 0
<COMMON> 258,862 300,508
<OTHER-SE> 695,420 622,044
<TOTAL-LIABILITY-AND-EQUITY> 2,320,701 2,096,676
<SALES> 0 0
<TOTAL-REVENUES> 336,702 277,814
<CGS> 4,865 746
<TOTAL-COSTS> 201,538 167,664
<OTHER-EXPENSES> 48,159 42,042
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,560 12,971
<INCOME-PRETAX> 80,011 67,919
<INCOME-TAX> 29,781 24,555
<INCOME-CONTINUING> 50,230 43,364
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 50,230 43,364
<EPS-BASIC> .62 .52
<EPS-DILUTED> .62 .52
</TABLE>
