-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L2pkkDFXrt9BprwjxOIgkQFQh8lVJbCIyajOrPDIR+tlUFPY2Z5UfIJQszuwyq7u G1qDt6COlY/sh8nKIbp2pQ== 0000950134-96-001207.txt : 19960404 0000950134-96-001207.hdr.sgml : 19960404 ACCESSION NUMBER: 0000950134-96-001207 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960403 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONEOK INC CENTRAL INDEX KEY: 0000074154 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [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: 96543945 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 FORM 10-Q FOR PERIOD ENDED FEBRUARY 29, 1996 1 UNITED STATES 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 February 29, 1996. 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 number 1-2572 ONEOK INC. (Exact name of registrant as specified in its charter) DELAWARE 73-0383100 (State or other jurisdiction of ( I.R.S. Employer incorporation or organization) Identification No.) 100 WEST FIFTH STREET, TULSA, OK 74103 (Address of principal executive offices) (Zip Code) 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 ----- ----- On February 29, 1996, the Company had 27,154,347 shares of common stock outstanding. 2 ONEOK INC. QUARTERLY REPORT ON FORM 10-Q PART I - FINANCIAL INFORMATION PAGE NO. Consolidated Condensed Statements of Income - 3 Three and Six Months Ended February 29, 1996 and Consolidated Condensed Balance Sheets - 4 - 5 February 29, 1996, and August 31, 1995 Consolidated Condensed Statements of Cash Flows - 6 Six Months Ended February 29, 1996 and February 28, 1995 Notes to Consolidated Condensed Financial Statements 7 Management's Discussion and Analysis of 8 - 16 Financial Condition and Results of Operations PART II - OTHER INFORMATION 16 - 18 3 PART I - FINANCIAL INFORMATION ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------ Three Months Ended Six Months Ended FEBRUARY 29, February 28, FEBRUARY 29, February 28, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Revenues Distribution and transmission $ 227,539 $ 244,687 $ 332,397 $ 370,712 Exploration and production 4,846 6,601 9,736 11,752 Gas processing 22,376 32,381 36,523 56,036 Gas marketing 208,978 2,128 322,578 12,310 Other 1,001 703 1,966 1,470 - ------------------------------------------------------------------------------------------------------------ Total Operating Revenues 464,740 286,500 703,200 452,280 - ------------------------------------------------------------------------------------------------------------ Operating Expenses Cost of gas 323,814 163,033 475,096 244,446 Operations 48,526 47,333 92,842 91,291 Maintenance 1,913 1,782 3,734 3,539 Depreciation, depletion, and amortization 13,176 12,857 26,627 24,707 General taxes 5,804 5,558 10,579 10,453 Income taxes 23,840 17,810 29,116 22,645 - ------------------------------------------------------------------------------------------------------------ Total Operating Expenses 417,073 248,373 637,994 397,081 - ------------------------------------------------------------------------------------------------------------ Operating Income 47,667 38,127 65,206 55,199 Interest 9,124 9,840 18,240 19,124 - ------------------------------------------------------------------------------------------------------------ Net Income 38,543 28,287 46,966 36,075 Preferred Stock Dividends 107 107 214 214 - ------------------------------------------------------------------------------------------------------------ Income Available for Common Stock $ 38,436 $ 28,180 $ 46,752 $ 35,861 ============================================================================================================ Earnings Per Share of Common Stock $1.42 $1.05 $1.73 $1.34 ============================================================================================================ Dividends Per Share of Common Stock $.29 $.28 $.58 $.56 ============================================================================================================ Average Shares of Common Stock Outstanding (Thousands) 27,100 26,712 27,062 26,701 ============================================================================================================
See accompanying notes to consolidated condensed financial statements. 3 4 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------ FEBRUARY 29, August 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Assets Property $1,294,740 $1,275,743 Accumulated depreciation, depletion, and amortization 521,000 509,833 - ------------------------------------------------------------------------------------------------------------ Net Property 773,740 765,910 - ------------------------------------------------------------------------------------------------------------ Current Assets Cash and cash equivalents 3,410 12,499 Accounts receivable 208,958 81,768 Inventories 53,322 82,123 Other current assets 24,976 18,760 - ------------------------------------------------------------------------------------------------------------ Total Current Assets 290,666 195,150 - ------------------------------------------------------------------------------------------------------------ Deferred Charges and Other Assets - ------------------------------------------------------------------------------------------------------------ Regulatory assets, net 160,857 168,889 Other 34,254 39,516 - ------------------------------------------------------------------------------------------------------------ Total Deferred Charges and Other Assets 195,111 208,405 - ------------------------------------------------------------------------------------------------------------ Total Assets $1,259,517 $1,169,465 ============================================================================================================
See accompanying notes to consolidated condensed financial statements. 4 5 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------ FEBRUARY 29, August 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Liabilities and Shareholders' Equity Common Shareholders' Equity Common stock without par value: authorized 60,000,000 shares; issued and outstanding 27,154,347 shares at February 29, 1996 and 27,020,004 shares at August 31, 1995 $204,422 $201,404 Retained earnings 218,281 187,225 - ------------------------------------------------------------------------------------------------------------ Total Common Shareholders' Equity 422,703 388,629 Preferred stock: authorized 340,000 shares; issued and outstanding 180,000 shares at February 29, 1996, and August 31, 1995; $50 par and involuntary liquidation value; $53 voluntary liquidation value; Series A, 4 3/4% (cumulative); 9,000 9,000 - ------------------------------------------------------------------------------------------------------------ Total Shareholders' Equity 431,703 397,629 - ------------------------------------------------------------------------------------------------------------ Long-Term Debt 350,821 350,821 - ------------------------------------------------------------------------------------------------------------ Current Liabilities Current portion, long-term debt 13,284 13,325 Notes payable 50,000 55,000 Accounts payable 111,121 58,174 Accrued income taxes 27,346 5,031 Accrued general taxes 5,411 8,780 Accrued interest 7,851 7,922 Purchased gas cost adjustment - 2,706 Other 12,323 17,015 - ------------------------------------------------------------------------------------------------------------ Total Current Liabilities 227,336 167,953 - ------------------------------------------------------------------------------------------------------------ Deferred Credits and Other Liabilities Deferred income taxes 187,966 189,330 Customers' advances for construction and other deferred credits 61,691 63,732 - ------------------------------------------------------------------------------------------------------------ Total Deferred Credits and Other Liabilities 249,657 253,062 - ------------------------------------------------------------------------------------------------------------ Commitments and Contingencies - ------------------------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $1,259,517 $1,169,465 ============================================================================================================
5 6 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------ Six Months Ended FEBRUARY 29, February 28, 1996 1995 - ------------------------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities Net income $ 46,966 $ 36,075 Depreciation, depletion, and amortization 26,627 24,707 Net losses of equity investees 1,290 746 Deferred income taxes 2,604 (2,886) Changes in assets and liabilities (46,580) (13,420) - ------------------------------------------------------------------------------------------------------------ Cash Provided by Operating Activities 30,907 45,222 - ------------------------------------------------------------------------------------------------------------ Investing Activities Changes in other investments, net (2,231) 337 Capital expenditures, net of salvage (19,832) (44,964) - ------------------------------------------------------------------------------------------------------------ Cash Used in Investing Activities (22,063) (44,627) - ------------------------------------------------------------------------------------------------------------ Financing Activities Issuance (payment) of notes payable, net (5,000) 25,000 Payments of debt (41) (48) Issuance of common stock 1,144 - Dividends paid (14,036) (15,159) - ------------------------------------------------------------------------------------------------------------ Cash Provided by (Used in) Financing Activities (17,933) 9,793 - ------------------------------------------------------------------------------------------------------------ Change in Cash and Cash Equivalents (9,089) 10,388 Cash and Cash Equivalents at Beginning of Year 12,499 4,545 - ------------------------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 3,410 $ 14,933 ============================================================================================================
See accompanying notes to consolidated condensed financial statements. 6 7 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INTERIM REPORTING. The interim consolidated condensed financial statements reflect all adjustments which, in the opinion of management, are 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 months ended February 29, 1996, are not necessarily indicative of the results that may be expected for the year ended August 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended August 31, 1995. RECLASSIFICATION. Certain amounts in the February 1995 consolidated condensed financial statements have been reclassified to conform with the February 1996 presentation. (B) REGULATORY ASSETS The following table is a summary of regulatory assets, net of amortization, outstanding at February 29, 1996, and August 31, 1995.
- ---------------------------------------------------------------------- FEBRUARY 29, August 31, 1996 1995 - ---------------------------------------------------------------------- (Thousands of Dollars) Recoupable take-or-pay settlements $ 102,554 $ 106,122 Pension costs 35,516 40,302 Postretirement costs other than pensions 9,661 10,603 Postemployment benefit costs 2,975 2,975 Income tax rate changes 8,620 8,887 Unamortized gas storage costs 1,531 - - ---------------------------------------------------------------------- Regulatory Assets, Net $ 160,857 $ 168,889 - ----------------------------------------------------------------------
(C) INVESTMENTS Through its subsidiary, TransTex Pipeline Company (TransTex), the Company owned a 25 percent limited partner interest in Red River Pipeline (Red River). Effective January 1, 1996, TransTex withdrew as a limited partner and received as a distribution a portion of the assets of the partnership. Such assets were then leased back to Red River under a long-term lease. (D) SUPPLEMENTAL CASH FLOW INFORMATION The following table is supplemental information relative to the Company's cash flows for the six months ended February 29, 1996 and February 28, 1995.
- ---------------------------------------------------------------------- FEBRUARY 29, February 28, 1996 1995 - ---------------------------------------------------------------------- (Thousands of Dollars) Cash Paid During the Period Interest $ 23,310 $ 18,231 Income taxes 8,132 12,482 Noncash Transactions: Gas received as payment in kind 1,698 52,130 Common stock issued under Dividend Reinvestment Program 1,874 - Issuance of common stock - 5,836 Distribution of net assets from partnership 14,625 - - ----------------------------------------------------------------------
7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A. RESULTS OF OPERATIONS ONEOK Inc. provides natural gas energy and related products and services to its customers. One of the Company's divisions, Oklahoma Natural Gas, provides natural gas distribution and transmission for about 75 percent of Oklahoma. The Energy Companies of ONEOK are involved In the exploration, production, processing, and marketing of natural gas and natural gas liquids. CONSOLIDATED OPERATIONS NET INCOME
- ------------------------------------------------------------------------------------ Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------ (Thousands of Dollars) Distribution and transmission $ 32,750 $ 27,011 $ 39,041 $ 34,611 Exploration and production 811 335 1,057 (6) Gas processing 2,565 1,485 4,351 2,368 Gas marketing 2,443 (289) 2,945 (329) Other operations (26) (255) (428) (569) - ------------------------------------------------------------------------------------ Net income $ 38,543 $ 28,287 $ 46,966 $ 36,075 - ------------------------------------------------------------------------------------
EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates consolidated earnings per share for three months ended February 28, 1995 and February 29, 1996 of $1.05 and $1.42 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates consolidated earnings per share for six months ended February 28, 1995 and February 29, 1996 of $1.34 and $1.73 respectively. 8 9 DISTRIBUTION AND TRANSMISSION ONEOK's distribution and transmission segment is primarily involved in natural gas services to commercial, residential, and large industrial customers and is subject to regulatory oversight by the Oklahoma Corporation Commission (OCC). NET INCOME
- ------------------------------------------------------------------------------------- Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ------------------------------------------------------------------------------------- (Thousands of Dollars) Gas sales $ 214,533 $ 212,026 $ 306,736 $ 313,412 Cost of gas 119,466 147,300 161,520 212,316 - ------------------------------------------------------------------------------------- Gross margins on gas sales 95,067 64,726 145,216 101,096 Pipeline capacity lease margins and transporation 12,434 29,690 21,672 52,815 Other revenues 1,356 3,279 5,141 4,816 - ------------------------------------------------------------------------------------- Net revenues 108,857 97,695 172,029 158,727 Operating expenses 45,990 43,693 89,501 82,806 Maintenance 1,504 1,274 2,883 2,479 Income taxes 20,593 17,006 24,521 21,723 - ------------------------------------------------------------------------------------- Operating income 40,770 35,722 55,124 51,719 Interest expense 8,020 8,711 16,083 17,108 - ------------------------------------------------------------------------------------- Net income $ 32,750 $ 27,011 $ 39,041 $ 34,611 - -------------------------------------------------------------------------------------
EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates distribution and transmission's earnings per share for the three months ended February 28, 1995 and February 29, 1996 of $1.00 and $1.21 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates distribution and transmission's earnings per share for the six months ended February 28, 1995 and February 29, 1996 of $1.28 and $1.44 respectively. Gross margins increased primarily due to an increase in the number of customers and the impact of rate orders granted in November 1994 and June 1995. These rate orders included temperature normalization, a pipeline capacity lease (PCL)tariff rider and general rate increases. The June 1995 rate order granted temperature normalization during the heating season which extends from November through April. The decline in PCL revenues is largely offset by a tariff rider added as a result of rate restructuring in June 1995. The increase in operating expenses reflects the inclusion of current net periodic pension and postretirement benefit costs as well as the amortization of such previously deferred costs. 9 10 EXPLORATION AND PRODUCTION ONEOK's exploration and production segment is engaged in the acquisition, exploration, and production of crude oil, natural gas, and related liquid products. The present strategy is to concentrate oil and gas operations in Oklahoma through the acquisition of oil and gas properties in Oklahoma and the disposal of properties located outside of Oklahoma. NET INCOME
- ----------------------------------------------------------------------------------- Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 6,646 $ 6,812 $ 12,696 $ 12,234 Operating expenses 4,839 5,698 9,948 11,227 Income taxes 512 211 667 (4) - ----------------------------------------------------------------------------------- Operating income 1,295 903 2,081 1,011 Interest expense 484 568 1,024 1,017 - ----------------------------------------------------------------------------------- Net income (loss) $ 811 $ 335 $ 1,057 $ (6) ===================================================================================
EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates exploration and production's earnings per share for the three months ended February 28, 1995 and February 29, 1996 of $.01 and $.03 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates exploration and production's earnings per share for the six months ended February 28, 1995 and February 29, 1996 of $.00 and $.04 respectively. GAS PRODUCTION SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas production for the exploration and production segment for the six months ended February 28, 1995 and February 29, 1996 of 4,652 Mmcf and 4,121 Mmcf respectively, and related prices of $1.58 per Mcf and $1.63 per Mcf for the same time periods. LIQUIDS PRODUCTION SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates liquids production for the exploration and production segment for the six months ended February 28, 1995 and February 29, 1996 of 4,102 Mgal. and 4,620 Mgal. respectively, and related prices of $.27 per gallon and $.27 per gallon for the same time periods. 10 11 Revenues for the six months ended February 29, 1996 increased slightly due to higher crude oil and liquid production and related prices. The increases were offset by lower natural gas production. Operating expenses decreased due to reduced dry hole costs and other operating expenses. OIL PRODUCTION SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates oil production for the exploration and production segment for the six months ended February 28, 1995 and February 29, 1996 of 215,508 barrels and 271,906 barrels respectively, and related prices of $15.75 per barrel and $17.00 per barrel for the same time periods. GAS PROCESSING ONEOK Products Company extracts and sells natural gas liquids and buys and sells natural gas. NET INCOME
- ----------------------------------------------------------------------------------- Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------- (Thousands of Dollars) Gas sales $ 8,292 $ 15,641 $ 10,411 $ 22,394 Cost of gas 5,650 13,551 6,931 20,037 - ----------------------------------------------------------------------------------- Gross margins on gas sales 2,642 2,090 3,480 2,357 Liquids, residue, and other revenues 17,406 16,740 32,013 33,642 - ----------------------------------------------------------------------------------- Net revenues 20,048 18,830 35,493 35,999 Operating expenses 15,243 15,641 27,125 30,579 Maintenance 402 508 840 1,060 Income taxes 1,618 937 2,745 1,494 - ----------------------------------------------------------------------------------- Operating income 2,785 1,744 4,783 2,866 Interest expense 220 259 432 498 Net income $ 2,565 $ 1,485 $ 4,351 $ 2,368 ===================================================================================
EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas processing's earnings per share for the three months ended February 28, 1995 and February 29, 1996 of $.06 and $.09 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas processing's earnings per share for the six months ended February 28, 1995 and February 29, 1996 of $.09 and $.16 respectively. 11 12 GAS SALES SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas sales for the gas processing segment for the six months ended February 28, 1995 and February 29, 1996 of 11,186 Mmcf and 3,324 Mmcf respectively, and related prices of $2.00 per Mcf and $3.13 per Mcf for the same time periods. LIQUID SALES SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates liquid sales for the gas processing segment for the six months ended February 28, 1995 and February 29, 1996 of 103,252 Mgal and 94,509 Mgal respectively, and related prices of $.27 per gallon and $.28 per gallon for the same time periods. RESIDUE GAS SALES SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates residue gas sales for the gas processing segment for the six months ended February 28, 1995 and February 29, 1996 of 3,723 Mmcf and 3,575 Mmcf respectively, and related prices of $1.54 per Mcf and $1.65 per Mcf for the same time periods. Gas sales are significantly lower in 1996 as compared to 1995 due to the expiration of a large spot-market priced delivery contract in the current year. Lower liquids and residue gas volumes for the six months ended February 29, 1996 are attributable to the sale of one of the Company's processing plants in August 1995. Sales prices for liquids were relatively unchanged. Reductions in operating expenses are the result of reduced shrinkage and fuel costs. GAS MARKETING ONEOK Gas Marketing Company buys and sells natural gas on the open market. NET INCOME
- ----------------------------------------------------------------------------------- Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 216,279 $ 22,949 $ 332,099 $ 49,702 Cost of gas 211,121 23,013 325,027 49,557 - ----------------------------------------------------------------------------------- Gross margins 5,158 (64) 7,072 145 Operating expenses 1,015 311 2,026 552 Income taxes 1,540 (183) 1,857 (208) - ----------------------------------------------------------------------------------- Operating income (loss) 2,603 (192) 3,189 (199) Interest expense 160 97 244 130 - ----------------------------------------------------------------------------------- Net income (loss) $ 2,443 $ (289) $ 2,945 $ (329) ===================================================================================
12 13 EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas marketing's earnings per share for the three months ended February 28, 1995 and February 29, 1996 of $(.01) and $.09 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates gas marketing's earnings per share for the six months ended February 28, 1995 and February 29, 1996 of $(.01) and $.11 respectively. In October 1992, the Company entered the gas marketing business by acquiring a 50 percent interest in a joint venture with an entity established in that line of business. In February 1995, the Company acquired the remaining interest in the joint venture. The operating results attributable to the joint venture were included in operating expenses through February 1995. Average volumes increased from approximately 790,561 Mcf per day in the fourth quarter of 1995 to approximately 882,268 Mcf per day in fiscal 1996. The overall improvement in the gross margin is attributable to weather related demand which contributed to increases in the weighted average sales price of gas. Revenues for the six months ended Feburary 28, 1995 reflect minimal trading volume with an affiliate. OTHER OPERATIONS Other operations include the Company's leasing and parking and corporate operations. NET INCOME
- ----------------------------------------------------------------------------------- Three Months Ended Six Months Ended FEB. 29, Feb. 28, FEB. 29, Feb. 28, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 2,327 $ 2,313 $ 4,623 $ 4,549 Operating expenses 2,531 2,523 5,257 5,107 Maintenance 7 - 11 - Income taxes (423) (160) (673) (359) - ----------------------------------------------------------------------------------- Operating income (loss) 212 (50) 28 (199) Interest expense 238 205 456 370 - ----------------------------------------------------------------------------------- Net (loss) $ (26) $ (255) $ (428) $ (569) ===================================================================================
13 14 EARNINGS PER SHARE THREE MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates other operations' earnings per share for the three months ended February 28, 1995 and February 29, 1996 of $(.01) and $.00 respectively. EARNINGS PER SHARE SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates other operations' earnings per share for the six months ended February 28, 1995 and February 29, 1996 of $(.02) and $(.02) respectively. ONEOK Leasing Company and ONEOK Parking Company operate the headquarters office building and a parking garage in downtown Tulsa. The Company leases space in excess of its requirements. The Company has an outstanding tender offer which has been extended to April 30, 1996 made in an attempt to ultimately acquire ownership of the building. Leasing and parking revenues have remained relatively stable between periods. FINANCIAL FLEXIBILITY AND LIQUIDITY With the current mix and relative sizes of ONEOK's business segments, the Company's goals are to achieve an equity to capital ratio, including short-term debt, of approximately 50 percent and to preserve or improve its current debt ratings. At February 29, 1996, the equity component was 51 percent, an improvement from 47 percent at February 28, 1995. Debt ratings are A3 by Moody's Investors Service and A- by Standard & Poor's Corporation. The Company's long- term debt represents 43 percent of total capital at February 29, 1996. Cash provided by operating activities is projected to remain strong and continues as the primary source for meeting cash requirements. However, due to seasonal fluctuations and additional capital requirements, the Company periodically accesses funds through a short-term credit agreement and, if necessary, through long-term borrowings. 14 15 OPERATING CASH FLOWS Operating cash flows for fiscal 1996 as compared to fiscal 1995 are lower as a result of working capital changes. INVESTING CASH FLOWS Capital expenditures for the six months ended February 29, 1996 and February 28, 1995 are as follows. CAPITAL EXPENDITURES SIX MONTHS ENDED FEBRUARY [GRAPH] This graph illustrates capital expenditures for the six months ended February 28, 1995 and February 29, 1996 of $48.8 and $26.8 respectively.
- ------------------------------------------------------------------------- Six Months Ended February 28, FEBRUARY 29, 1995 1996 - ------------------------------------------------------------------------- Distribution and Transmission $26.9 $21.2 - ------------------------------------------------------------------------- Exploration and Production 20.3 1.5 - ------------------------------------------------------------------------- Gas Processing 0.9 4.0 - ------------------------------------------------------------------------- Gas Marketing 0.6 0.1 - ------------------------------------------------------------------------- Other 0.1 0.0 - -------------------------------------------------------------------------
Capital expenditures for the exploration and production segment included approximately $17.6 million for an acquisition of properties in Louisiana during the six months ended February 28, 1995. FINANCING CASH FLOW At February 29, 1996, $364 million of long-term debt was outstanding. As of that date, the Company could have issued approximately $288 million of additional long-term debt under the most restrictive provisions contained in its various borrowing agreements. The Company believes that internally generated funds and access to financial markets will be sufficient to meet its debt service, dividend requirements, and capital expenditures. However, if certain events occur, such as significant acquisitions, additional debt or equity financing may be required. LIQUIDITY The distribution and transmission segment continues to face competitive pressure to serve the substantial market represented by its large industrial customers. The loss of a substantial portion of its industrial load, without recoupment of the revenues from that loss, could have a materially adverse effect on the Company's financial condition. However, rate restructuring achieved in the June 1995 rate order further reduced the Company's risk in serving its large industrial customers. OTHER Through its subsidiary, TransTex Pipeline Company (TransTex), the Company owned a 25 percent limited partner interest in Red River Pipeline (Red River). Effective January 1, 1996, TransTex withdrew as a limited partner and received as a distribution a portion of the assets of the partnership. Such assets were then leased back to Red River under a long- term lease. 15 16 PRICE RISK MANAGEMENT. Commodity futures contracts and swaps are periodically used in the exploration and production, gas processing, and marketing operations to hedge the impact of natural gas price fluctuations. Natural gas futures contracts require the Company to buy or sell natural gas at a fixed price. Under swap agreements, the Company receives or makes payments based on the differential between a specified price and the actual price of natural gas. The Company's exploration and production operation periodically uses commodity futures contracts and swaps to hedge the impact of oil and natural gas price fluctuations. The Company's gas processing operation uses futures to hedge the price of gas used in the natural gas liquid extraction process. The gas marketing operation uses futures and swaps to lock in margins on preexisting purchase or sale commitments for physical quantities of natural gas. The Company adheres to policies and procedures which limit its exposure to market risk from open positions and monitors daily its exposure to market risk. Gains and losses on commodity futures contracts and swaps are recognized when the related physical gas purchases or sales transactions are recognized. At February 29, 1996, the net deferred loss on these contracts was approximately $1.5 million. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS FENT, ET UX V. OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK INC., ET AL., No. CJ-88-10148, District Court, Oklahoma County. The motion to lift the stay was granted by the Court, enabling the case to proceed with discovery on the issue of whether claims should be certified as a class action and plaintiffs allowed to act as class representatives. The case is now in the discovery stage. APPLICATION OF OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK INC., FOR A DETERMINATION THAT UNDER THE COMMISSION'S EXISTING NATURAL GAS UTILITY RULES AND REGULATIONS, AND OKLAHOMA NATURAL'S EXISTING SERVICE RULES AND REGULATIONS, THE GAS UTILITY CUSTOMERS OF OKLAHOMA NATURAL GAS COMPANY, EXCEPT JERRY R. FENT AND MARGARET B. FENT, ARE RESPONSIBLE FOR INSTALLING AND MAINTAINING ALL PIPING BETWEEN CUSTOMER'S PROPERTY OR CURB LINES, AND SUCH CUSTOMER'S POINTS OF CONSUMPTION OF GAS, Cause PUD No. 95-000223, Oklahoma Corporation Commission. On January 8, 1996, the Supreme Court granted a motion to stay the Commission proceedings pending a ruling in the Supreme Court proceeding. A response was filed by the Company to the Supreme Court's request for briefs on whether the category of excepted parties in the Commission proceedings should be broadened to include potential parties in the District Court action (Fent I). On March 6, 1996, the Supreme Court denied the Petition for a Writ of Prohibition, so the proceeding before the Commission will now go forward. IN THE MATTER OF THE APPLICATION OF OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK INC., FOR EXAMINATION OF STANDBY SERVICE, Cause CD No. 598, Oklahoma Corporation Commission. The matter was heard by the Commission en banc on February 21 through 23, 1996. A status hearing is scheduled for March 14, 1996, to determine the status of completion of the transcript. After such completion, the parties will be given the opportunity to file proposed findings of fact and conclusions of law and additional briefs on the legal issues and a date will be set for oral argument. IN THE MATTER OF COMMISSIONER BOB ANTHONY'S INSPECTION OF THE BOOKS AND RECORDS OF ANY PUBLIC SERVICE CORPORATION AND EXAMINATION, UNDER OATH, ANY OFFICER, AGENT, OR EMPLOYEE OF SUCH, IN RELATION TO THE BUSINESS AND AFFAIRS OF ARKANSAS LOUISIANA GAS COMPANY, A DIVISION OF NORAM ENERGY CORP. AND OKLAHOMA NATURAL GAS COMPANY, A DIVISION OF ONEOK INC. PURSUANT TO OKLAHOMA CONSTITUTION ARTICLE 9 SECTIONS 18, 28 AND 34, Cause No. PUD 960000039, Oklahoma Corporation Commission. Commissioner Anthony filed notice in this proceeding that he intends to conduct an inspection of the books and records of public service corporations and examine, under oath, any officer, agent, or employee of such, with information, in order to review the transactions and relationships involving Oklahoma Natural Gas Company, a division of ONEOK Inc. (hereinafter 16 17 "ONG") and/or its affiliates; Arkansas Louisiana Gas company, a division of Noram Energy Corp., (hereinafter "ARKLA") and/or its affiliates; Gage Corporation; Creek Systems; Dynamic Energy Resources; or any affiliates of same; or any other jurisdictional entities engaged in transactions or activities with ONG or ARKLA, including data requests, interrogatories and depositions. The Notice was filed after Commissioner Anthony failed to secure an Order from the full Commission authorizing such a course of action. On March 15, 1996, Commissioner Anthony filed a statement relating to the transcript in Case No. CJ-95-1948, LINDA PRICE V. EUGENE LUM, ET AL. (INCLUDING DYNAMIC ENERGY RESOURCES, INC.), DISTRICT COURT, Tulsa County (ONG is not a party). In the statement, he characterized as "shocking" the testimony concerning the Creek Systems/Dynamics transaction and stated it was his constitutional duty as a Commissioner to examine the negotiations and financial transactions involving the matter. The Company will challenge Commissioner Anthony's power, as an individual Commissioner, to start such an investigation. The gas purchase contract resulting from the settlement involving Creek Systems and Dynamics was the subject of audit review during the last two major rate cases and two additional audits by the Commission Staff, the last one in November of 1995. IN THE MATTER OF A RULEMAKING BY THE OKLAHOMA CORPORATION COMMISSION AMENDING CERTAIN RULES OF PRACTICE, Cause No. RM 960000010, Oklahoma Corporation Commission. (This is a proceeding related to Cause No. PUD 960000039 above). This is a rulemaking proceeding which includes a proposed new rule which would allow a Commissioner acting alone, without authorization of the full Commission, to issue an administrative subpoena duces tecum to a public utility as part of an investigation by a Commissioner (such as is proposed in the Notice under the above-captioned Cause No. PUD 960000039. The proposed rule on issuance of administrative subpoenas was withdrawn prior to the hearing on the proposed rules held on March 27, 1996. 17 18 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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 1st day of April, 1996. ONEOK Inc. Registrant By: J. D. NEAL ------------------------------------- J. D. Neal Vice President, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer) 18 19 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE 1996 FISCAL YEAR'S ENDED FEBRUARY 29. 1996, AND THE CONSOLIDATED BALANCE SHEET AT FEBRUARY 29, 1996, FOR ONEOK INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS AUG-31-1996 DEC-01-1995 FEB-29-1996 3,410 0 208,958 0 53,322 290,666 1,294,740 521,000 1,259,517 227,336 0 204,422 0 9,000 218,281 1,259,517 0 464,740 0 417,073 0 0 9,124 71,507 23,840 38,543 0 0 0 38,543 1.42 1.42
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