-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, l9X/gYJJfBf9V1IQbPkTlLdGaCJNHpQTwK9MRoiR1Fzk6S+7OrGXZ1jbEcNT3YPp deEKndffO0ctxDTh5mdatw== 0000074154-94-000016.txt : 19940713 0000074154-94-000016.hdr.sgml : 19940713 ACCESSION NUMBER: 0000074154-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940706 FILED AS OF DATE: 19940707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONEOK INC CENTRAL INDEX KEY: 0000074154 STANDARD INDUSTRIAL CLASSIFICATION: 4923 IRS NUMBER: 730383100 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02572 FILM NUMBER: 94537952 BUSINESS ADDRESS: STREET 1: 100 W FIFTH ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185887000 FORMER COMPANY: FORMER CONFORMED NAME: OKLAHOMA NATURAL GAS CO DATE OF NAME CHANGE: 19810111 10-Q 1 QUARTERLY REPORT ENDING 05/31/94 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended Commission File No. May 31, 1994 1-2572 ONEOK Inc. (Exact name of registrant as specified in its charter) Delaware 73-0383100 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 100 West Fifth Street, Tulsa, OK 74103 (Address, including zip code, of principal executive offices) Registrant's telephone number, including area code: (918) 588-7000 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 registrant's classes of common stock, as of the latest practicable date. Class Outstanding at May 31, 1994 Common stock, without par value 26,690,004 Page 1 of 18 ONEOK Inc. TABLE OF CONTENTS FORM 10-Q FOR THE QUARTER ENDED MAY 31, 1994 PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Condensed Statements of Earnings - Three Months and Nine Months Ended May 31, 1994 and 1993 3 Consolidated Condensed Balance Sheets - May 31, 1994, and August 31, 1993 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended May 31, 1994 and 1993 5 Notes to Consolidated Condensed Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15-16 Item 2. Changes in the Rights of the Company's Security Holders 16 Item 3. Defaults by the Company on its Senior Securities 16 Item 4. Results of Votes of Security Holders 16-17 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 ONEOK Inc. CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (STATED IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) 3 Months Ended 9 Months Ended May 31, May 31, 1994 1993 1994 1993 OPERATING REVENUES Utility revenues $142,803 $145,706 $526,300 $531,122 Oil and gas production 5,101 5,588 18,000 17,524 Natural gas liquids and residue gas sales 15,329 18,326 46,851 55,218 Other gas sales 24,657 14,177 57,917 43,449 Other operating revenues 2,590 3,741 14,047 13,559 Total operating revenues 190,480 187,538 663,115 660,872 OPERATING EXPENSES Utility gas purchased exp. 84,411 90,113 320,207 331,574 Other gas purchased exp. 24,059 13,763 55,379 41,990 Operations and maintenance 48,095 52,186 144,871 147,353 Depreciation, depletion, and amortization 12,494 11,927 38,546 35,921 Income taxes 2,456 1,415 23,768 21,124 Other taxes 4,815 4,936 14,220 14,105 Total operating expense 176,330 174,340 596,991 592,067 Operating income 14,150 13,198 66,124 68,805 Net interest 8,458 10,448 26,233 28,828 Net income 5,692 2,750 39,891 39,977 Preferred stock dividend 107 107 321 321 Balance for common stock $ 5,585 $ 2,643 $ 39,570 $ 39,656 Earnings per common share $.21 $.10 $1.48 $1.49 Dividends per common share $.28 $.27 $.83 $.79 Average common shares outstanding 26,690 26,634 26,668 26,631 See accompanying notes to consolidated condensed financial statements. ONEOK Inc. CONSOLIDATED CONDENSED BALANCE SHEETS (STATED IN THOUSANDS) (UNAUDITED) May 31, Aug. 31, 1994 1993 ASSETS Property, plant, and equipment, at cost $1,207,314 $1,196,433 Less accumulated depreciation, depletion, and amortization 475,005 474,685 Net property, plant, and equipment 732,309 721,748 Current assets: Cash and cash equivalents - 9,667 Accounts receivable 71,723 51,545 Inventories 53,988 92,907 Other current assets 10,626 13,966 Total current assets 136,337 168,085 Deferred debits and other assets: Take-or-pay 108,262 109,682 Other assets 118,579 104,953 Total deferred debits and other assets 226,841 214,635 $1,095,487 $1,104,468 CAPITALIZATION AND LIABILITIES Common shareholders' equity: Common stock $ 195,568 $ 194,365 Retained earnings 186,217 168,784 Total common shareholders' equity 381,785 363,149 Preferred stock 9,000 9,000 Long-term debt, excluding current maturities 362,897 375,897 753,682 748,046 Current liabilities: Current maturities of long-term debt 14,050 16,050 Accounts and notes payable 51,562 60,782 Accrued liabilities 30,099 42,760 Customers' deposits 6,663 6,091 Total current liabilities 102,374 125,683 Deferred credits 239,431 230,739 $1,095,487 $1,104,468 See accompanying notes to consolidated condensed financial statements. ONEOK Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (STATED IN THOUSANDS) (UNAUDITED) 9 Months Ended May 31, 1994 1993 OPERATING ACTIVITIES Net income $ 39,891 $ 39,977 Depreciation, depletion, and amortization 38,546 35,921 Deferred income taxes 1,284 (7,215) Nonproductive well drilling 800 520 Net losses of equity investees 186 1,098 Net gain on sale of property (1,693) - Changes in assets and liabilities 1,837 42,286 Net cash provided by operating activities 80,851 112,587 INVESTING ACTIVITIES Increase in investments, net (2,846) (3,243) Capital expenditures (55,969) (59,656) Proceeds from sale of property 7,861 - Salvage, net of removal costs (106) (1,358) Cash used in investing activities (51,060) (64,257) FINANCING ACTIVITIES Repayment of long-term debt (15,000) (82,925) Issuance of long-term debt - 77,000 Dividends paid (22,458) (21,359) Debt issuance cost - (229) Decrease in notes payable (net) (2,000) (5,000) Cash used in financing activities (39,458) (32,513) Change in cash and cash equivalents $ (9,667) $ 15,817 SUPPLEMENTAL DISCLOSURES Cash paid during the period for: Income taxes $13,333 $16,980 Interest $30,990 $33,546 Noncash transactions: Gas received as payment-in-kind $53,269 $57,425 Stock Performance Plan $ 1,203 $ - Decrease in take-or-pay deferrals reflected by decrease in take-or-pay liabilities $ - $20,000 See accompanying notes to consolidated condensed financial statements. ONEOK Inc. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1. The interim consolidated condensed 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- and nine-month periods ended May 31, 1994, are not necessarily indicative of the results that may be expected for the year ended August 31, 1994. 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 August 31, 1993. Note 2. The Company provides certain health care and life insurance benefits for retired employees and adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," on September 1, 1993. SFAS No. 106 requires companies to actuarially determine a present liability, the accumulated postretirement benefit obligation (APBO), for future postretirement benefits on the basis that those benefits are earned during the employees' active service years. The Company has elected to defer its initial APBO of $72.2 million and amortize it over 20 years as a component of net periodic postretirement benefit cost as permitted by SFAS No. 106. The estimated amount of net periodic postretirement benefit costs, as determined by an independent actuary, for the year ended August 31, 1994, includes the following: Service cost $ 1,942,000 Interest cost 5,114,000 Amortization of initial APBO 3,609,000 Estimated net periodic postretirement benefit cost computed in accordance with SFAS No. 106 $10,665,000 During fiscal 1994 approximately 95 percent of the estimated net periodic postretirement benefit cost in excess of the cost recognized for benefits actually paid will be deferred in accordance with recommendations made by the Oklahoma Corporation Commission (OCC) staff until the OCC issues a final order providing for recovery of such costs. The Company estimates that it will pay approximately $3.2 million in postretirement benefits during fiscal 1994 resulting in a deferral of postretirement benefit costs for regulatory purposes of approximately $6.8 million. A one percent increase in the medical trend rate on the service and interest cost components of the net periodic postretirement benefit cost results in increases of 19.8 and 9.8 percent, respectively. Note 3. Rate Proceedings: Hearings on the Company's pending application for a rate increase commenced on October 25, 1993, and concluded on January 12, 1994. Deliberations began April 1, 1994, and concluded June 29, 1994. Decisions reached by the three commissioners indicate a rate increase of approximately $5.5 million in addition to the interim annual rate increase of $18.2 million authorized in March 1992. This amount is subject to review and approval in a final order, which is expected in August 1994. Upon issuance of a final rate order, the Company will begin amortizing certain previously deferred expenses which will more than offset the $5.5 million additional rate increase. The interim rate increase is included in both the 3-month and 9-month utility revenues. Note 4. Other Assets: Included in other assets are the Company's 25 percent investments in two natural gas transmission systems, Ozark Gas Transmission System (Ozark) and Red River Pipeline (Red River) of $11.5 million and $14.3 million, respectively. Ozark has negotiated a tentative contract exit fee from Columbia Gas Transmission Corporation and is pursuing its options, including sale of the pipeline. Columbia Gas Transmission Corporation, one of Ozark's two firm shippers, previously commenced a voluntary case under the Federal Bankruptcy laws. The Company is attempting to improve the performance of Red River, which continues to be unprofitable and continues to require cash calls from the partners. If the results of these pursuits are not successful, the Company may not be able to recover all of its investments. Note 5. Sale of Subsidiary: Effective May 1, 1994, the Company sold ONEOK Drilling Company, its contract drilling subsidiary, for approximately $5.8 million. A pretax loss of $357,000 and a net tax benefit of $335,000, including revisions of prior year's estimates to actual, were recorded in May 1994. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL ONEOK Inc. and its subsidiaries, hereinafter referred to as the Company, engage in several aspects of the energy business. The Company purchases, gathers, compresses, transports, and stores natural gas for distribution to consumers. It transports gas for others, leases pipeline capacity to others for their use in transporting gas, and is a partner in a gas marketing business and two natural gas transmission systems that transport gas for others. The Company explores for and produces oil and gas and extracts and sells natural gas liquids. In addition, it leases and operates a headquarters office building (leasing excess space to others) and owns and operates a related parking facility. The assets of the subsidiary engaged in the contract drilling of oil and gas wells were sold on May 1, 1994 for approximately $5.8 million. The following is a discussion of selected changes in financial condition from the end of the 1993 fiscal year to the end of the third quarter of the 1994 fiscal year and results of operations with respect to the three months and nine months ended May 31, 1994 and 1993. LIQUIDITY AND CAPITAL RESOURCES The estimated sources of funds (cash) for the 1994 fiscal year are as follows: Source of Funds (Millions of $) Proceeds from: Issuance of short-term debt $ 16.0 Issuance of long-term debt - Sale of property 6.2 Cash provided by operating activities 100.8 Total $123.0 The Company had $20 million in short-term debt outstanding on May 31, 1994, and $10 million outstanding on June 23, 1994. The Company has $77 million in notes outstanding under its $150 million medium-term note facility. On May 31, 1994, the Company could have issued approximately $263 million of additional long-term debt under the most restrictive of the provisions contained in its various lending agreements. The Company invests available funds on a short-term basis. There were no short-term investments on May 31, 1994, and $10 million on June 23, 1994. Included in other assets are the Company's 25 percent investments in two natural gas transmission systems, Ozark Gas Transmission System (Ozark) and Red River Pipeline (Red River) of $11.5 million and $14.3 million, respectively. Ozark has negotiated a tentative contract exit fee from Columbia Gas Transmission Corporation and is pursuing its options, including sale of the pipeline. Columbia Gas Transmission Corporation, one of Ozark's two firm shippers, previously commenced a voluntary case under the Federal Bankruptcy laws. The Company is attempting to improve the performance of Red River, which continues to be unprofitable and continues to require cash calls from the partners. If the results of these pursuits are not successful, the Company may not be able to recover all of its investments. FUNDS GENERATED FROM OPERATIONS RATE PROCEEDINGS Hearings on the Company's pending application for a rate increase commenced on October 25, 1993, and concluded on January 12, 1994. Deliberations began April 1, 1994, and concluded June 29, 1994. Decisions reached by the three commissioners indicate a rate increase of approximately $5.5 million in addition to the interim annual rate increase of $18.2 million authorized in March 1992. This amount is subject to review and approval in a final order, which is expected in August 1994. Upon issuance of a final rate order, the Company will begin amortizing certain previously deferred expenses which will more than offset the $5.5 million additional rate increase. The interim rate increase is included in both the 3-month and 9-month utility revenues. CAPITAL EXPENDITURES Capital expenditures budgeted for the 1994 fiscal year, compared with actual expenditures for the 1993 and 1992 fiscal years, are as follows: Est. Actuals Capital Expenditures (Millions of $) 1994 1993 1992 Natural gas distribution $44.3 $45.8 $42.4 Natural gas transmission 15.3 13.0 14.9 Exploration and production 10.0 24.9 (1) 10.6 Other operations 3.6 2.5 1.8 $73.2 $86.2 $69.7 (1) Includes the April 1993 acquisition of the North Frisco City Field in Monroe County, Alabama, at a cost of approximately $16.7 million. RESULTS OF OPERATIONS A summary of consolidated earnings is as follows: 3 Months Ended 9 Months Ended (Stated in Thousands, May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Net income $5,692 $2,750 $39,891 $39,977 Earnings per common share $.21 $.10 $1.48 $1.49 The consolidated effective income tax rate was 30.1 percent for the third quarter of 1994, and 37.3 percent for the fiscal year to date, compared with 34.0 percent and 34.6 percent, respectively, for the same periods last year. The 1994 effective tax rate for the third quarter was down because of adjustments due to the sale of ONEOK Drilling Company and revisions of prior year estimates. The effective tax rate for the fiscal year to date increased because of the recently enacted one percent federal tax rate increase and adjustments made in the first quarter of 1993 to revise prior tax estimates. Consolidated net interest expense decreased due to lower interest rates on long-term debt and because of early call premium payments on the refunding of long-term debt paid in April 1993. Following is a summary of financial results and operating information for the various operating segments of the Company: UTILITY OPERATIONS 3 Months Ended 9 Months Ended May 31, May 31, 1994 1993 1994 1993 FINANCIAL RESULTS (Thousands of dollars, except per share amounts) Utility revenues: From unaffiliated cust. $142,803 $145,706 $526,300 $531,122 Intersegment sales 500 531 1,564 1,629 Total 143,303 146,237 527,864 532,751 Other nonutility revenues - 865 3,121 4,478 Total revenues 143,303 147,102 530,985 537,229 Gas purchased expense 84,411 90,113 320,207 331,574 Operating expenses 41,916 45,050 125,211 125,267 Operating income before income taxes 16,976 11,939 85,567 80,388 Income taxes 2,980 787 23,213 19,076 Net interest 7,666 9,438 23,535 26,193 Net income $ 6,330 $ 1,714 $ 38,819 $35,119 Earnings per share $.23 $.06 $1.44 $1.31 OPERATING STATISTICS Revenues (thousands of dollars): Utility gas sales: Residential and commercial $ 93,775 $101,930 $369,948 $375,404 Industrial 26,778 25,234 85,853 88,749 Wholesale 777 473 4,399 5,630 Total utility sales 121,330 127,637 460,200 469,783 PCL\SISP margins 5,026 4,121 15,532 16,581 Pipeline cap. leases 12,767 11,624 39,407 35,964 Transportation 1,321 635 5,341 4,341 Other utility revenues 2,859 2,220 7,384 6,082 Total utility rev. 143,303 146,237 527,864 532,751 Less utility gas purchases 84,411 90,113 320,207 331,574 Net utility revenues $ 58,892 $ 56,124 $207,657 $201,177 Volumes (MMcf): Utility gas sales: Residential and commercial 17,793 21,755 79,505 81,862 Industrial 11,900 12,217 37,743 42,313 Wholesale 334 251 1,687 2,108 Total utility sales 30,027 34,223 118,935 126,283 Pipeline cap. leases 29,719 29,409 90,788 81,772 Transportation 12,892 4,197 40,093 29,642 Total volumes 72,638 67,829 249,816 237,697 UTILITY OPERATIONS 3 Months Ended 9 Months Ended May 31, May 31, 1994 1993 1994 1993 Average cost of gas purchased (per Mcf): General system $2.92 $2.71 $2.92 $2.80 SISP $2.08 $1.83 $2.04 $1.84 Degree days: Actual 635 843 3,857 3,967 Normal 650 690 3,616 3,596 Number of customers at end of period 722,665 715,044 Revenue for residential and commercial gas sales decreased during the current fiscal quarter because of weather which was warmer by 25 percent than last year's third quarter. For the fiscal year to date, weather was 3 percent warmer than the previous year, and revenues decreased for those customers. Volumes sold to industrial customers or delivered under pipeline capacity leases (PCLs) are as follows: 3 Months Ended 9 Months Ended May 31, May 31, INDUSTRIAL DELIVERIES 1994 1993 1994 1993 Volumes (MMcf): Sales 11,900 12,217 37,743 42,313 PCLs 28,489 26,995 91,750 75,011 Total 40,389 39,212 129,493 117,324 Amount (000's of $): Sales $26,778 $25,234 $ 85,853 $88,749 PCL's 12,045 11,416 39,478 34,267 Total $38,823 $36,650 $125,331 $123,016 Total revenues from industrial customers increased for both periods because of increased PCL volumes. Margins began declining in October 1992 but have remained relatively flat since November 1993. Under the Company's payment- in-kind (PIK) program, a portion of gas transported for pipeline capacity lease customers is retained in lieu of cash payment for transportation charges. Certain contracts using the PIK program include price equivalent caps, which reduce the volumes of gas retained by the Company as the price of PIK gas purchased escalates. PIK gas is priced to utility customers at the weighted average cost of gas purchased from all sources. Revenues received under the PIK program decline as spot market prices increase, reducing both the spread and the volumes of gas retained. Utility gas purchased expense decreased due to lower sales volumes because of warmer weather during the current periods and because of increased customers' utilization of the PCL program. Operating expenses decreased during the quarter and fiscal year mainly because of lower legal costs and the prior year's accrual of an employee incentive plan. Depreciation expense increased due to additional utility property in service. GAS PROCESSING 3 Months Ended 9 Months Ended (Stated in Thousands May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Natural gas liquids and gas sales: To unaffiliated cust. $26,460 $32,503 $79,098 $98,667 Intersegment sales 21 10,084 668 29,057 Total sales 26,481 42,587 79,766 127,724 Other revenues 63 - 2,230 - Total revenues 26,544 42,587 81,996 127,724 Operating expenses 26,256 39,857 76,908 118,871 Operating income before income taxes 288 2,730 5,088 8,853 Income taxes (102) 976 1,592 2,862 Net interest 192 144 612 636 Net income $ 198 $ 1,610 $ 2,884 $ 5,355 Earnings per share $.01 $.06 $.11 $.20 OPERATING STATISTICS Natural gas liquids sales: Volumes (Mgals.) 49,409 50,090 144,431 146,492 Average price (per gal.) $.24 $.30 $.25 $.31 Margin (per gal.) $ - $.06 $.01 $.06 Residue gas sales: Volumes (MMcf) 1,769 1,846 5,393 5,525 Average price (per Mcf) $2.04 $1.96 $2.07 $2.07 Other gas sales: Volumes (MMcf) 4,876 11,859 13,795 34,466 Average price (per Mcf) $2.28 $2.00 $2.34 $2.04 Margin (per Mcf) $.12 $.04 $.18 $.04 Volumes of natural gas liquids sold were down due to reduced recovery of ethane because of decreased margins. Margins are down because of decreasing crude prices. Average product prices were down, resulting in revenues of $11.7 million for the current three-month period, down 23 percent from the prior year's third quarter, and $36.4 million for the fiscal year to date, a decrease of 20 percent from the prior year. Other gas sales margins increased because of lower-cost supplies of gas obtained at an earlier date and held for sale. Included in the current fiscal year to date is a gain of $2.1 million on the sale of a gas gathering system, which was included in other revenues during the first quarter. EXPLORATION AND PRODUCTION 3 Months Ended 9 Months Ended (Stated in Thousands, May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Oil and gas production sales: To unaffiliated cust. $5,101 $5,588 $18,000 $17,524 Intersegment sales 391 357 1,129 727 Total sales 5,492 5,945 19,129 18,251 Other revenues 127 - 323 - Total revenues 5,619 5,945 19,452 18,251 Operating expenses 5,297 5,551 17,942 16,204 Operating income (loss) before income taxes 322 394 1,510 2,047 Income taxes (67) 4 46 494 Net interest 385 384 1,284 1,047 Net income (loss) $ 4 $ 6 $ 180 $ 506 Earnings (loss) per share $ .00 $.00 $.01 $.02 OPERATING STATISTICS Oil production: Volumes (bbls.) 138,112 101,683 442,245 292,943 Average price (per bbl.) $12.58 $18.88 $13.75 $19.42 Gas production: Volumes (MMcf) 1,781 2,115 6,330 6,278 Average price (per Mcf) $2.11 $1.88 $2.06 $2.01 Revenue from oil production decreased 10 percent for the quarter because of decreased prices and increased 7 percent for the fiscal year to date because of increased sales volumes, primarily production from the North Frisco City Field acquired in April 1993. Decreased dry hole costs were primarily responsible for decreased operating expenses for the quarter, and increased depreciation and depletion expenses were the primary cause of increased operating expenses for the fiscal year. GAS MARKETING 3 Months Ended 9 Months Ended (Stated in Thousands, May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Gas sales: To the partnership $13,525 $ - $25,670 $ - Intersegment sales 28,268 2,054 67,278 2,054 Total sales 41,793 2,054 92,948 2,054 Other revenues 171 - 284 - Equity in net income of partnership 368 182 513 649 Total revenues 42,332 2,236 93,745 2,703 Operating expenses 41,994 2,114 93,397 2,222 Operating income before income taxes 338 122 348 481 Income taxes 109 45 83 180 Net interest 57 3 133 4 Net income (loss) $ 172 $ 74 $ 132 $ 297 Earnings per share $.01 $.00 $.00 $.01 ONEOK Gas Marketing supplies natural gas to the gas marketing partnership and to other affiliates at cost. ONEOK Gas Marketing Company began partnership operations with Ward Gas Services in October 1992 and began marketing gas in March 1993. CONTRACT DRILLING 3 Months Ended 9 Months Ended (Stated in Thousands, May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Revenues $ 1,197 $1,603 $ 5,291 $5,632 Operating expenses 2,225 2,191 7,105 7,096 Operating loss before income taxes (1,028) (588) (1,814) (1,464) Income taxes (630) (249) (977) (566) Net interest 32 71 144 199 Net loss $ (430) $ (410) $ (981) $(1,097) Loss per share $(.02) $(.01) $(.04) $(.04) OPERATING STATISTICS Rig utilization rate N/A 28% N/A 38% ONEOK Drilling Company was sold effective May 1, 1994, for approximately $5.8 million. A pretax loss of $357,000 and a net tax benefit of $335,000, including revisions of prior year estimates to actual, were recorded in May 1994. BUILDINGS 3 Months Ended 9 Months Ended (Stated in Thousands, May 31, May 31, Except Per Share Data) 1994 1993 1994 1993 Revenues: From unaffiliated cust. $ 686 $ 780 $ 2,063 $2,304 Intersegment sales 1,620 1,621 4,863 4,852 Total revenues 2,306 2,401 6,926 7,156 Operating expenses 2,654 2,697 8,031 8,027 Operating income (loss) before income taxes (348) (296) (1,105) (871) Income taxes 164 (148) (189) (921) Net interest 70 96 227 253 Net income (loss) $ (582) $ (244) $(1,143) $ (203) Earnings (loss) per share $(.02) $(.01) $(.04) $(.01) Buildings operations remained flat. The decrease in net income for the current year's third quarter and fiscal year to date were mainly caused by lower income tax benefits. ACCOUNTING PRONOUNCEMENTS In November 1992, the Financial Accounting Standards Board issued its Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." The Company is required to adopt SFAS No. 112 on September 1, 1994. The amount of the obligation is currently being studied by the Company's actuaries. The Company is currently recovering such costs on a pay-as-you-go basis through the ratemaking process. PART II. OTHER INFORMATION Item 1. Legal Proceedings AGRICULTURAL MINERALS, LIMITED PARTNERSHIP V. ONEOK INC., ET AL., No. CJ-94-93, District Court, Rogers County. The Company has filed a motion to dismiss and a motion to stay the proceedings and briefs in support of such motions. The plaintiff has served its first discovery request, and the parties have agreed to a delay in the response thereto until such time as the Court rules on the pending motions. CARMEN FIELD LIMITED PARTNERSHIP V. ONEOK INC., ET AL., No. C-89-77, District Court, Woods County. The scheduling order has been stricken, and settlement discussions are pending. HILL RESOURCES, ET AL. V. ONEOK INC., ET AL., No. C-89-143, District Court, Alfalfa County. The parties entered into a settlement agreement and have filed Motions for Dismissal with Prejudice formally closing the case. MUSTANG FUEL CORP. OF OKLAHOMA, ET AL. V. ONEOK EXPLORATION COMPANY AND ONEOK RESOURCES COMPANY, No. CJ-94-4293-63, in the District Court of Oklahoma County. In this action, the plaintiffs seek a declaratory judgment interpreting the provisions of an Asset Purchase Agreement dated November 4, 1988 (the Agreement), between ONEOK Exploration Company and ONEOK Resources Company (collectively "ONEOK") and Mustang Fuel Corp. of Oklahoma and Mustang Energy Corp. (collectively "Mustang"), concerning the sale of oil and gas properties by ONEOK to Mustang in 1988. Specifically, Mustang seeks an interpretation of the Agreement with respect to who bears the responsibility for making cash-balancing payments on certain gas wells that had been overproduced by ONEOK but which were not scheduled under the Agreement. In addition, Mustang seeks a judgment against ONEOK in the amount of $549,655.50 which it is alleged represent the amount that ONEOK should have paid to Mustang for the overproduction on the gas wells which were not scheduled under the Agreement. Mustang also seeks to recover interest, costs, and attorney's fees. PAYNE, ET AL. V. MUSTANG FUEL CORPORATION AND ONEOK RESOURCES COMPANY, No. CJ-94-53, District Court, Grady County. The Company has filed a motion to dismiss or for summary judgment, and the plaintiff has filed a motion for summary judgment as to liability. A hearing on the motions was held April 28, 1994, and the judge has taken the matter under advisement. IN THE MATTER OF THE APPLICATION OF OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK INC., FOR A REVIEW AND DETERMINATION CONCERNING ITS RATES AND EARNINGS IN COMPLIANCE WITH THE REQUIREMENTS OF 17 O.S. SUPP. 1990, SECTION 263, AND FOR OTHER APPROPRIATE RELIEF, Cause PUD No. 910001190, Oklahoma Corporation Commission. Deliberations by the Commission, en banc, began April 1, 1994, and are continuing. Based on preliminary calculations, taking into account Commission action on numerous accoun and financial issues in the case to date, the Commission staff has estimated that the Company will receive a $23.7 million permanent rate increase, which is a $5.5 million increase over the interim rate increase authorized in March 1992. Final action is subject to a resolution of all remaining issues, review of a proposed order, and vote by the Commission. Item 2. Changes in the Rights of the Company's Security Holders (a) None (b) None Item 3. Defaults by the Company on its Senior Securities (a) None (b) None Item 4. Results of Votes of Security Holders (a) Matters Submitted to a Vote of Security Holders No matters were submitted to a vote of the security holders during the third quarter of the 1994 fiscal year. (b) Executive Officers of the Registrant Larry W. Brummett is Chairman of the Board of Directors, President, and Chief Executive officer - ONEOK Inc. He was born in Tulsa, Oklahoma, and received B.S. and M.S. degrees in civil engineering from the University of Oklahoma in 1974 and 1984, respectively. He joined Oklahoma Natural Gas in 1974 as an engineer trainee and subsequently served in positions of increasing responsibility. He was promoted to Executive Vice President of Oklahoma Natural Gas on May 17, 1990, to Executive Vice President - ONEOK Inc. on January 21, 1993, and to President and Chief Executive Officer of ONEOK Inc. on February 17, 1994. He was elected to the position of Chairman of the Board of Directors effective June 1, 1994. Mr. Brummett is 43. J. D. Scott retired as President and Chief Executive Officer of ONEOK Inc. on February 17, 1994, and as Chairman of the Board of Directors on June 1, 1994. D. L. Kyle, currently Executive Vice President - Oklahoma Natural Gas Company and ONG Transmission Company, will become President and Chief Operating Officer of Oklahoma Natural Gas Company and ONG Transmission Company effective September 1, 1994. He was born in Wichita, Kansas, and reared in Oklahoma City, Oklahoma. He received a B.S. degree in industrial engineering and management from Oklahoma State University in 1974 and an MBA degree in 1987 from the University of Tulsa. He joined Oklahoma Natural Gas in 1974 as an engineer trainee and subsequently served in positions of increasing responsibility. He was elected to Vice President of Gas Supply in 1986 and Executive Vice President of Oklahoma Natural Gas in 1990. Mr. Kyle is 41. E. H. Kamphaus will retire as President of Oklahoma Natural Gas Company and ONG Transmission Company effective September 1, 1994. J. R. Mosteller retired as Executive Vice President - ONEOK Inc. effective May 1, 1994. F. W. Schemm is Vice President of Business Development - ONEOK Inc. He was born in South Dakota and reared in Hutchinson, Kansas. He received a B.S. degree in engineering from Kansas State University in 1960 and went to work at Oklahoma Natural Gas Company as an engineer trainee. He has served in various management positions, including Manager of Pipeline Systems Design and district operating management positions. He was promoted to Vice President of Enid district in 1990 and to his current position in April 1994. Mr. Schemm is 59. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None SIGNATURE 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, on this 6th day of July, 1994. ONEOK Inc. (Registrant) By: (J. D. NEAL) J. D. Neal Vice President, Chief Financial Officer, and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----