(Date of report) | October 29, 2018 |
(Date of earliest event reported) | October 29, 2018 |
Oklahoma | 001-36108 | 46-3561936 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
Item 2.02 | Results of Operations and Financial Condition | |
On October 29, 2018, we announced our results of operations for the third quarter ended September 30, 2018. The news release is furnished as Exhibit 99.1 and is incorporated by reference herein. | ||
Item 7.01 | Regulation FD Disclosure | |
On October 29, 2018, we announced our results of operations for the third quarter ended September 30, 2018, affirmed our 2018 financial guidance and our board of directors declared a cash dividend of 46 cents per share of common stock. The news release is furnished as Exhibit 99.1 and is incorporated by reference herein. | ||
Item 8.01 | Other Events | |
On October 29, 2018, our board of directors declared a cash dividend of 46 cents per share of common stock, payable December 3, 2018, to shareholders of record at the close of business November 13, 2018. | ||
Item 9.01 | Financial Statements and Exhibits | |
(d) | Exhibits | |
Exhibit Number | Description | |
99.1 |
ONE Gas, Inc. | |||
Date: | October 29, 2018 | By: | /s/ Curtis L. Dinan |
Curtis L. Dinan Senior Vice President and Chief Financial Officer |
October 29, 2018 | Analyst Contact: | Brandon Lohse 918-947-7472 | |
Media Contact: | Jennifer Rector 918-947-7571 |
• | Third-quarter 2018 net income was $16.3 million, or $0.31 per diluted share, compared with $18.8 million, or $0.36 per diluted share, in the third quarter 2017; |
• | Year-to-date 2018 net income was $127.5 million, or $2.41 per diluted share, compared with $115.9 million, or $2.19 per diluted share, in the same period last year; and |
• | The board of directors declared a quarterly dividend of $0.46 cents per share, or $1.84 per share on an annualized basis, payable on Dec. 3, 2018, to shareholders of record at the close of business on Nov. 13, 2018. |
• | A $6.0 million decrease related to the deferral of potential refund obligations associated with the Tax Cuts and Jobs Act of 2017 and related rate adjustments; offset by |
• | A $3.8 million increase from new rates in Texas and Kansas; and |
• | A $1.0 million increase attributed to net residential customer growth in Oklahoma and Texas. |
• | A $2.8 million increase in employee-related expenses; and |
• | A $1.7 million increase in bad debt expense. |
• | Residential natural gas sales volumes delivered were 7.5 billion cubic feet (Bcf) in the third quarter 2018, down 3 percent compared with the same period last year; |
• | Total natural gas sales volumes delivered were 11.6 Bcf in the third quarter 2018, down 2 percent compared with the same period last year; |
• | Natural gas transportation volumes delivered were 45.9 Bcf in the third quarter 2018, down 1 percent compared with the same period last year; and |
• | Total natural gas volumes delivered were 57.5 Bcf in the third quarter 2018, down 1 percent compared with the same period last year. |
• | A $12.7 million increase from new rates in Texas and Kansas; |
• | A $4.5 million increase due to higher sales volumes, net of weather normalization, primarily from colder weather in 2018 compared with 2017; |
• | A $4.4 million increase due primarily to higher transportation volumes; |
• | A $3.4 million increase attributed to net residential customer growth in Oklahoma and Texas; |
• | A $1.2 million increase in rider and surcharge recoveries due to a higher ad-valorem surcharge in Kansas, which is offset by higher regulatory amortization expense; and |
• | A $0.9 million increase due to the benefit of the retroactive 2017 compressed natural gas federal excise tax credit that was enacted in February 2018; offset by |
• | A $27.5 million decrease related to the deferral of potential refund obligations associated with the Tax Cuts and Jobs Act of 2017 and related rate adjustments. |
• | A $10.7 million increase in employee-related expenses; and |
• | A $2.3 million increase in bad debt expense; offset by |
• | A $2.3 million decrease in outside services costs as certain pipeline maintenance activities were completed with internal resources. |
• | our ability to recover operating costs and amounts equivalent to income taxes, costs of property, plant and equipment and regulatory assets in our regulated rates; |
• | our ability to manage our operations and maintenance costs; |
• | changes in regulation of natural gas distribution services, particularly those in Oklahoma, Kansas and Texas; |
• | the economic climate and, particularly, its effect on the natural gas requirements of our residential and |
• | competition from alternative forms of energy, including, but not limited to, electricity, solar power, wind power, geothermal energy and biofuels; |
• | conservation and energy storage efforts of our customers; |
• | variations in weather, including seasonal effects on demand, the occurrence of storms and disasters, and climate change; |
• | indebtedness could make us more vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds and/or place us at competitive disadvantage compared with competitors; |
• | our ability to secure reliable, competitively priced and flexible natural gas transportation and supply, including decisions by natural gas producers to reduce production or shut-in producing natural gas wells and expiration of existing supply, and transportation and storage arrangements that are not replaced with contracts with similar terms and pricing; |
• | the mechanical integrity of facilities operated; |
• | operational hazards and unforeseen operational interruptions; |
• | adverse labor relations; |
• | the effectiveness of our strategies to reduce earnings lag, margin protection strategies and risk mitigation strategies, which may be affected by risks beyond our control such as commodity price volatility and counterparty creditworthiness; |
• | our ability to generate sufficient cash flows to meet all our liquidity needs; |
• | changes in the financial markets during the periods covered by the forward-looking statements, particularly those affecting the availability of capital and our ability to refinance existing debt and fund investments and acquisitions; |
• | actions of rating agencies, including the ratings of debt, general corporate ratings and changes in the rating agencies’ ratings criteria; |
• | changes in inflation and interest rates; |
• | our ability to recover the costs of natural gas purchased for our customers; |
• | impact of potential impairment charges; |
• | volatility and changes in markets for natural gas; |
• | possible loss of local distribution company franchises or other adverse effects caused by the actions of municipalities; |
• | payment and performance by counterparties and customers as contracted and when due; |
• | changes in existing or the addition of new environmental, safety, tax and other laws to which we and our subsidiaries are subject; |
• | the uncertainty of estimates, including accruals and costs of environmental remediation; |
• | advances in technology; |
• | population growth rates and changes in the demographic patterns of the markets we serve; |
• | acts of nature and the potential effects of threatened or actual terrorism and war; |
• | cyber attacks or breaches of technology systems that could disrupt our operations or result in the loss or exposure of confidential or sensitive customer, employee or company information; |
• | the sufficiency of insurance coverage to cover losses; |
• | the effects of our strategies to reduce tax payments; |
• | the effects of litigation and regulatory investigations, proceedings, including our rate cases, or inquiries and the requirements of our regulators as a result of the Tax Cuts and Jobs Act of 2017; |
• | changes in accounting standards; |
• | changes in corporate governance standards; |
• | discovery of material weaknesses in our internal controls; |
• | our ability to comply with all covenants in our indentures and the ONE Gas Credit Agreement, a violation of which, if not cured in a timely manner, could trigger a default of our obligations; |
• | our ability to attract and retain talented employees, management and directors; |
• | declines in the discount rates on, declines in the market value of the debt and equity securities of, and increases in funding requirements for, our defined benefit plans; |
• | the ability to successfully complete merger, acquisition or divestiture plans, regulatory or other limitations imposed as a result of a merger, acquisition or divestiture, and the success of the business following a merger, acquisition or divestiture; |
• | the final resolutions or outcomes with respect to our contingent and other corporate liabilities related to the natural gas distribution business and any related actions for indemnification made pursuant to the Separation and Distribution Agreement with ONEOK; and |
• | the costs associated with increased regulation and enhanced disclosure and corporate governance requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. |
ONE Gas, Inc. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
(Thousands of dollars, except per share amounts) | ||||||||||||||||
Revenues | ||||||||||||||||
Revenues from contracts with customers | $ | 235,757 | $ | 244,402 | $ | 1,162,162 | $ | 1,054,595 | ||||||||
Other revenues | 2,523 | 2,740 | 7,103 | 22,644 | ||||||||||||
Total revenues | 238,280 | 247,142 | 1,169,265 | 1,077,239 | ||||||||||||
Cost of natural gas | 51,256 | 58,769 | 495,834 | 404,495 | ||||||||||||
Net margin | 187,024 | 188,373 | 673,431 | 672,744 | ||||||||||||
Operating expenses | ||||||||||||||||
Operations and maintenance | 96,443 | 91,058 | 302,103 | 293,030 | ||||||||||||
Depreciation and amortization | 40,344 | 38,423 | 118,991 | 113,293 | ||||||||||||
General taxes | 13,996 | 13,799 | 44,763 | 43,518 | ||||||||||||
Total operating expenses | 150,783 | 143,280 | 465,857 | 449,841 | ||||||||||||
Operating income | 36,241 | 45,093 | 207,574 | 222,903 | ||||||||||||
Other expense, net | (1,929 | ) | (3,715 | ) | (6,287 | ) | (11,022 | ) | ||||||||
Interest expense, net | (12,365 | ) | (11,495 | ) | (36,720 | ) | (34,281 | ) | ||||||||
Income before income taxes | 21,947 | 29,883 | 164,567 | 177,600 | ||||||||||||
Income taxes | (5,671 | ) | (11,086 | ) | (37,037 | ) | (61,724 | ) | ||||||||
Net income | $ | 16,276 | $ | 18,797 | $ | 127,530 | $ | 115,876 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.36 | $ | 2.42 | $ | 2.21 | ||||||||
Diluted | $ | 0.31 | $ | 0.36 | $ | 2.41 | $ | 2.19 | ||||||||
Average shares (thousands) | ||||||||||||||||
Basic | 52,736 | 52,488 | 52,678 | 52,539 | ||||||||||||
Diluted | 53,112 | 52,926 | 52,969 | 52,984 | ||||||||||||
Dividends declared per share of stock | $ | 0.46 | $ | 0.42 | $ | 1.38 | $ | 1.26 |
ONE Gas, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
September 30, | December 31, | |||||||
(Unaudited) | 2018 | 2017 | ||||||
Assets | (Thousands of dollars) | |||||||
Property, plant and equipment | ||||||||
Property, plant and equipment | $ | 5,964,287 | $ | 5,713,912 | ||||
Accumulated depreciation and amortization | 1,768,381 | 1,706,327 | ||||||
Net property, plant and equipment | 4,195,906 | 4,007,585 | ||||||
Current assets | ||||||||
Cash and cash equivalents | 12,430 | 14,413 | ||||||
Accounts receivable, net | 132,436 | 298,768 | ||||||
Materials and supplies | 40,363 | 39,672 | ||||||
Natural gas in storage | 126,481 | 130,154 | ||||||
Regulatory assets | 49,039 | 88,180 | ||||||
Other current assets | 13,762 | 17,807 | ||||||
Total current assets | 374,511 | 588,994 | ||||||
Goodwill and other assets | ||||||||
Regulatory assets | 375,059 | 405,189 | ||||||
Goodwill | 157,953 | 157,953 | ||||||
Other assets | 49,528 | 47,157 | ||||||
Total goodwill and other assets | 582,540 | 610,299 | ||||||
Total assets | $ | 5,152,957 | $ | 5,206,878 |
ONE Gas, Inc. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Continued) | ||||||||
September 30, | December 31, | |||||||
(Unaudited) | 2018 | 2017 | ||||||
Equity and Liabilities | (Thousands of dollars) | |||||||
Equity and long-term debt | ||||||||
Common stock, $0.01 par value: authorized 250,000,000 shares; issued 52,598,005 shares and outstanding 52,526,346 shares at September 30, 2018; issued 52,598,005 and outstanding 52,312,516 shares at December 31, 2017 | $ | 526 | $ | 526 | ||||
Paid-in capital | 1,725,361 | 1,737,551 | ||||||
Retained earnings | 300,547 | 246,121 | ||||||
Accumulated other comprehensive income (loss) | (5,167 | ) | (5,493 | ) | ||||
Treasury stock, at cost: 71,659 shares at September 30, 2018 and 285,489 shares at December 31, 2017 | (4,643 | ) | (18,496 | ) | ||||
Total equity | 2,016,624 | 1,960,209 | ||||||
Long-term debt, excluding current maturities, and net of issuance costs of $7,402 and $8,033, respectively | 893,880 | 1,193,257 | ||||||
Total equity and long-term debt | 2,910,504 | 3,153,466 | ||||||
Current liabilities | ||||||||
Current maturities of long-term debt | 300,008 | 8 | ||||||
Notes payable | 276,000 | 357,215 | ||||||
Accounts payable | 68,332 | 143,681 | ||||||
Accrued interest | 7,867 | 18,776 | ||||||
Accrued taxes other than income | 48,760 | 41,324 | ||||||
Accrued liabilities | 23,968 | 30,058 | ||||||
Regulatory liabilities | 41,665 | 9,438 | ||||||
Customer deposits | 61,569 | 60,811 | ||||||
Other current liabilities | 7,858 | 12,019 | ||||||
Total current liabilities | 836,027 | 673,330 | ||||||
Deferred credits and other liabilities | ||||||||
Deferred income taxes | 634,650 | 599,945 | ||||||
Regulatory liabilities | 521,717 | 519,421 | ||||||
Employee benefit obligations | 155,443 | 172,938 | ||||||
Other deferred credits | 94,616 | 87,778 | ||||||
Total deferred credits and other liabilities | 1,406,426 | 1,380,082 | ||||||
Commitments and contingencies | ||||||||
Total liabilities and equity | $ | 5,152,957 | $ | 5,206,878 |
ONE Gas, Inc. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
(Unaudited) | 2018 | 2017 | ||||||
(Thousands of dollars) | ||||||||
Operating activities | ||||||||
Net income | $ | 127,530 | $ | 115,876 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 118,991 | 113,293 | ||||||
Deferred income taxes | 36,637 | 61,329 | ||||||
Share-based compensation expense | 6,195 | 6,930 | ||||||
Provision for doubtful accounts | 6,758 | 4,508 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 159,574 | 158,747 | ||||||
Materials and supplies | (691 | ) | (4,705 | ) | ||||
Natural gas in storage | 3,673 | (32,209 | ) | |||||
Asset removal costs | (39,195 | ) | (37,928 | ) | ||||
Accounts payable | (63,857 | ) | (65,983 | ) | ||||
Accrued interest | (10,909 | ) | (11,112 | ) | ||||
Accrued taxes other than income | 7,436 | 2,087 | ||||||
Accrued liabilities | (6,090 | ) | (4,396 | ) | ||||
Customer deposits | 758 | (1,566 | ) | |||||
Regulatory assets and liabilities | 100,268 | 11,448 | ||||||
Other assets and liabilities | (10,310 | ) | (13,915 | ) | ||||
Cash provided by operating activities | 436,768 | 302,404 | ||||||
Investing activities | ||||||||
Capital expenditures | (279,346 | ) | (249,057 | ) | ||||
Other | — | 617 | ||||||
Cash used in investing activities | (279,346 | ) | (248,440 | ) | ||||
Financing activities | ||||||||
Repayments of notes payable, net | (81,215 | ) | 29,000 | |||||
Repurchase of common stock | — | (17,512 | ) | |||||
Issuance of common stock | 2,390 | 2,208 | ||||||
Dividends paid | (72,432 | ) | (65,996 | ) | ||||
Tax withholdings related to net share settlements of stock compensation | (8,148 | ) | (9,455 | ) | ||||
Cash used in financing activities | (159,405 | ) | (61,755 | ) | ||||
Change in cash and cash equivalents | (1,983 | ) | (7,791 | ) | ||||
Cash and cash equivalents at beginning of period | 14,413 | 14,663 | ||||||
Cash and cash equivalents at end of period | $ | 12,430 | $ | 6,872 |
ONE Gas, Inc. | |||||||||||||||
INFORMATION AT A GLANCE | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(Unaudited) | 2018 | 2017 | 2018 | 2017 | |||||||||||
(Millions of dollars, except as noted) | |||||||||||||||
Financial | |||||||||||||||
Net margin | $ | 187.0 | $ | 188.3 | $ | 673.4 | $ | 672.7 | |||||||
Operating costs | $ | 110.5 | $ | 104.8 | $ | 346.8 | $ | 336.5 | |||||||
Depreciation and amortization | $ | 40.3 | $ | 38.4 | $ | 119.0 | $ | 113.3 | |||||||
Operating income | $ | 36.2 | $ | 45.1 | $ | 207.6 | $ | 222.9 | |||||||
Capital expenditures | $ | 103.5 | $ | 94.4 | $ | 279.3 | $ | 249.1 | |||||||
Net margin on natural gas sales | $ | 158.1 | $ | 159.9 | $ | 569.7 | $ | 577.4 | |||||||
Transportation revenues | $ | 21.9 | $ | 21.5 | $ | 79.5 | $ | 73.1 | |||||||
Net margin, excluding other revenues | $ | 180.0 | $ | 181.4 | $ | 649.2 | $ | 650.5 | |||||||
Volumes (Bcf) | |||||||||||||||
Natural gas sales | |||||||||||||||
Residential | 7.5 | 7.7 | 84.1 | 63.6 | |||||||||||
Commercial and industrial | 3.9 | 3.9 | 27.8 | 21.7 | |||||||||||
Wholesale and public authority | 0.3 | 0.2 | 1.5 | 1.2 | |||||||||||
Total sales volumes delivered | 11.6 | 11.8 | 113.3 | 86.5 | |||||||||||
Transportation | 45.9 | 46.4 | 162.6 | 156.6 | |||||||||||
Total volumes delivered | 57.5 | 58.2 | 275.9 | 243.1 | |||||||||||
Average number of customers (in thousands) | |||||||||||||||
Residential | 1,992 | 1,983 | 2,005 | 1,995 | |||||||||||
Commercial and industrial | 156 | 156 | 159 | 158 | |||||||||||
Wholesale and public authority | 3 | 3 | 3 | 3 | |||||||||||
Transportation | 12 | 12 | 12 | 12 | |||||||||||
Total customers | 2,163 | 2,154 | 2,179 | 2,168 | |||||||||||
Heating Degree Days | |||||||||||||||
Actual degree days | 44 | 17 | 6,164 | 4,580 | |||||||||||
Normal degree days | 60 | 61 | 6,035 | 6,011 | |||||||||||
Percent colder (warmer) than normal weather | (27 | )% | (72 | )% | 2 | % | (24 | )% | |||||||
Statistics by State | |||||||||||||||
Oklahoma | |||||||||||||||
Average number of customers (in thousands) | 868 | 865 | 876 | 872 | |||||||||||
Actual degree days | 11 | 3 | 2,218 | 1,577 | |||||||||||
Normal degree days | 1 | 2 | 1,967 | 1,968 | |||||||||||
Percent colder (warmer) than normal weather | * | * | 13 | % | (20 | )% | |||||||||
Kansas | |||||||||||||||
Average number of customers (in thousands) | 634 | 633 | 641 | 639 | |||||||||||
Actual degree days | 33 | 13 | 3,008 | 2,344 | |||||||||||
Normal degree days | 58 | 58 | 3,005 | 2,980 | |||||||||||
Percent colder (warmer) than normal weather | * | * | — | % | (21 | )% | |||||||||
Texas | |||||||||||||||
Average number of customers (in thousands) | 661 | 656 | 662 | 657 | |||||||||||
Actual degree days | 0 | 1 | 938 | 659 | |||||||||||
Normal degree days | 1 | 1 | 1,063 | 1,063 | |||||||||||
Percent colder (warmer) than normal weather | * | * | (12 | )% | (38 | )% |
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