-----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, KsxRyajAWPMqWSpfTb0xIqRHKsB6b+bq+e27BwFn5G3RBqXO/pM9bfkk2sGxhCnk Q2+LaUmtyEEVtUV39DKD1w== 0000950134-96-000046.txt : 19960111 0000950134-96-000046.hdr.sgml : 19960111 ACCESSION NUMBER: 0000950134-96-000046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960109 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: 96501890 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 QUARTER ENDED NOVEMBER 30, 1995 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 November 30, 1995. 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 November 30, 1995, the Company had 27,043,489 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 - First Quarter Ended November 30, 1995 and 1994 3 Consolidated Condensed Balance Sheets - As of November 30, 1995, and August 31, 1995 4 - 5 Consolidated Condensed Statements of Cash Flows - First Quarter Ended November 30, 1995 and 1994 6 Notes to Consolidated Condensed Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 13 PART II - OTHER INFORMATION 14 - 15
2 3 PART I - FINANCIAL INFORMATION ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
- ------------------------------------------------------------------------------------------ First Quarter Ended November 30, 1995 1994 - ------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Revenues Distribution and transmission $ 104,858 $ 126,025 Exploration and production 4,890 5,151 Gas processing 14,147 23,655 Gas marketing 113,600 10,182 Other 965 767 - ------------------------------------------------------------------------------------------ Total Operating Revenues 238,460 165,780 - ------------------------------------------------------------------------------------------ Operating Expenses Cost of gas 151,282 81,413 Operations 44,316 43,958 Maintenance 1,821 1,757 Depreciation, depletion, and amortization 13,451 11,850 General taxes 4,775 4,895 Income taxes 5,276 4,835 - ------------------------------------------------------------------------------------------ Total Operating Expenses 220,921 148,708 - ------------------------------------------------------------------------------------------ Operating Income 17,539 17,072 Interest 9,116 9,284 - ------------------------------------------------------------------------------------------ Net Income 8,423 7,788 Preferred Stock Dividends 107 107 - ------------------------------------------------------------------------------------------ Income Available for Common Stock $ 8,316 $ 7,681 ========================================================================================== Earnings Per Share of Common Stock $.31 $.29 ========================================================================================== Dividends Per Share of Common Stock $.29 $.28 ========================================================================================== Average Shares of Common Stock Outstanding (Thousands) 27,023 26,690 ==========================================================================================
See accompanying notes to consolidated condensed financial statements. 3 4 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- ------------------------------------------------------------------------------------------ NOVEMBER 30, August 31, 1995 1995 - ------------------------------------------------------------------------------------------ (Thousands of Dollars) Assets Property $ 1,286,056 $ 1,275,743 Accumulated depreciation, depletion, and amortization 521,752 509,833 - ------------------------------------------------------------------------------------------ Net Property 764,304 765,910 - ------------------------------------------------------------------------------------------ Current Assets Cash and cash equivalents 6,644 12,499 Accounts receivable 105,613 81,768 Inventories 102,624 82,123 Other current assets 13,031 18,760 - ------------------------------------------------------------------------------------------ Total Current Assets 227,912 195,150 - ------------------------------------------------------------------------------------------ Deferred Charges and Other Assets Regulatory assets, net 163,885 168,889 Other 41,061 39,516 - ------------------------------------------------------------------------------------------ Total Deferred Charges and Other Assets 204,946 208,405 - ------------------------------------------------------------------------------------------ Total Assets $ 1,197,162 $1,169,465 ==========================================================================================
See accompanying notes to consolidated condensed financial statements. 4 5 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------------------- NOVEMBER 30, August 31, 1995 1995 - --------------------------------------------------------------------------------------------- (Thousands of Dollars) Liabilities and Shareholders' Equity Common Shareholders' Equity Common stock without par value: authorized 60,000,000 shares; issued and outstanding 27,043,489 shares at November 30, 1995 and 27,020,004 shares at August 31, 1995 $ 201,955 $ 201,404 Retained earnings 187,705 187,225 - --------------------------------------------------------------------------------------------- Total Common Shareholders' Equity 389,660 388,629 Preferred stock: $50 par and involuntary liquidation value; $53 voluntary liquidation value; Series A and B, 4 3/4% (cumulative); authorized 340,000 shares; issued 180,000 shares of Series A at November 30, 1995, and August 31, 1995 9,000 9,000 - --------------------------------------------------------------------------------------------- Total Shareholders' Equity 398,660 397,629 - --------------------------------------------------------------------------------------------- Long-Term Debt 350,821 350,821 - --------------------------------------------------------------------------------------------- Current Liabilities Long-term debt 13,291 13,325 Notes payable 70,000 55,000 Accounts payable 56,587 58,174 Accrued income taxes 9,453 5,031 Accrued general taxes 11,173 8,780 Accrued interest 13,072 7,922 Purchased gas cost adjustment 3,238 2,706 Other 23,384 17,015 - --------------------------------------------------------------------------------------------- Total Current Liabilities 200,198 167,953 - --------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities Deferred income taxes 185,351 189,330 Customers' advances for construction and other deferred credits 62,132 63,732 - --------------------------------------------------------------------------------------------- Total Deferred Credits and Other Liabilities 247,483 253,062 - --------------------------------------------------------------------------------------------- Commitments and Contingencies - --------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $1,197,162 1,169,465 - ---------------------------------------------------------------------------------------------
5 6 ONEOK INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ------------------------------------------------------------------------------------------ First Quarter Ended November 30, 1995 1994 - ------------------------------------------------------------------------------------------ (Thousands of Dollars) Operating Activities Net income $ 8,423 $ 7,788 Depreciation, depletion, and amortization 13,451 11,853 Net losses of equity investees 207 463 Deferred income taxes (984) (1,461) Other (39) 119 Changes in assets and liabilities (22,778) (29,877) - ------------------------------------------------------------------------------------------ Cash Used in Operating Activities (1,720) (11,115) - ------------------------------------------------------------------------------------------ Investing Activities Advances to equity investees (98) - Decrease in other investments, net 233 17 Capital expenditures, net of salvage (11,806) (30,197) - ------------------------------------------------------------------------------------------ Cash Used in Investing Activities (11,671) (30,180) - ------------------------------------------------------------------------------------------ Financing Activities Issuance of notes payable, net 15,000 50,000 Payments of debt (34) - Dividends paid (7,392) (7,580) - ------------------------------------------------------------------------------------------ Cash Provided by Financing Activities 7,574 42,420 - ------------------------------------------------------------------------------------------ Change in Cash and Cash Equivalents (5,817) 1,125 Cash and Cash Equivalents at Beginning of Year 12,461 4,545 - ------------------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 6,644 $ 5,670 ==========================================================================================
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 first quarter ended November 30, 1995, 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 November 1994 consolidated condensed financial statements have been reclassified to conform with the November 1995 presentation. (B) REGULATORY ASSETS The following table is a summary of regulatory assets, net of amortization, outstanding at November 30, 1995, and August 31, 1995.
-------------------------------------------------------------------------------------- NOVEMBER 30, August 31, 1995 1995 -------------------------------------------------------------------------------------- (Thousands of Dollars) Recoupable take-or-pay settlements $ 105,070 $ 106,122 Pension costs 37,559 40,302 Postretirement costs other than pensions 9,529 10,603 Postemployment benefit costs 2,975 2,975 Income tax rate changes 8,752 8,887 -------------------------------------------------------------------------------------- Regulatory Assets, Net $ 163,885 $ 168,889 ======================================================================================
(C) INVESTMENTS Through a subsidiary, the Company is a 25 percent partner in a natural gas transmission system, Red River Pipeline (Red River), which operates in Texas. It is the Company's intent to withdraw from the partnership during this fiscal year. (D) SUPPLEMENTAL CASH FLOW INFORMATION The following table is supplemental information relative to the Company's cash flows for the first quarter ended November 30, 1995 and 1994.
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Cash Paid During the Period: Interest (including amount capitalized) $ 4,521 $ 13,782 Income taxes $ 2,523 $ 1 Noncash Transactions: Gas received as payment in kind $ 745 $ 24,055 Common stock issued under Dividend Reinvestment Program $ 551 $ - --------------------------------------------------------------------------------------
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. A second division, Energy Companies of ONEOK, processes and sells natural gas liquids, markets natural gas to customers primarily outside of Oklahoma, and explores for and produces natural gas and oil. CONSOLIDATED OPERATIONS NET INCOME
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Distribution and transmission $ 6,291 $ 7,600 Exploration and production 246 (341) Gas processing 1,786 883 Gas marketing 502 (40) Other operations (402) (314) -------------------------------------------------------------------------------------- Net income $ 8,423 $ 7,788 ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates consolidated earnings per share for the first quarter ended November 30, 1994 and 1995 of $.29 and $.31 respectively. Consolidated earnings improved as a result of enhanced Energy Companies' operations from increased volumes and margins which were partially offset by a decline in the distribution and transmission segment's pipeline capacity lease margins. 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
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Gas sales $ 92,203 $ 101,386 Cost of gas 42,054 65,016 -------------------------------------------------------------------------------------- Gross margins on gas sales 50,149 36,370 Pipeline capacity lease margins and transportation 9,238 23,125 Other revenues 3,785 1,537 -------------------------------------------------------------------------------------- Net revenues 63,172 61,032 Operating expenses 43,511 39,113 Maintenance 1,379 1,205 Income taxes 3,928 4,717 -------------------------------------------------------------------------------------- Operating income 14,354 15,997 Interest expense 8,063 8,397 -------------------------------------------------------------------------------------- Net income $ 6,291 $ 7,600 ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates distribution and transmission's earnings per share for the first quarter ended November 30, 1994 and 1995 of $.28 and $.23 respectively. Gross margins increased during the first quarter of 1996 primarily as a result of increases in the base revenue provided by rate orders granted in November 1994 and June 1995. Pipeline capacity lease (PCL) margins are affected by through-put, spot-market gas prices, and the conversion rate for gas received as payment-in-kind (PIK). In recent years, the Company has been under 8 9 increased competitive pressure to reduce costs to its large industrial customers. In response to this demand, the Company requested and received approval from the OCC to restructure its rates for all customer classes. The June 1995 rate order had the effect of reducing PCL margins through lower rates and limiting the PIK gas conversion rate in order to preserve the Company's competitive position in this area. The resulting reduction in PCL margins was partially offset by increased revenue from the core customers under a tariff rider. PCL margins were significantly higher for the quarter ending November 30, 1994 as a result of favorable conversion rates for PIK gas received. Prior to the latest rate orders, the Company was deferring a significant portion of its net periodic pension and postretirement benefit costs pending regulatory approval allowing recovery of these costs. The OCC approved recovery of these costs on an accrual basis and provided for the recovery of these previously deferred costs. The increase in operating expenses in the first quarter of 1996 is mainly the result of recognizing these expenses. 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. NET INCOME
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 6,050 $ 5,422 Operating expenses 5,109 5,529 Income taxes 155 (215) -------------------------------------------------------------------------------------- Operating income 786 108 Interest expense 540 449 -------------------------------------------------------------------------------------- Net income (loss) $ 246 $ (341) ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates exploration and production's earnings per share for the first quarter ended November 30, 1994 and 1995 of $(.01) and $.01 respectively. OIL PRODUCTION FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates oil production for the exploration and production segment for the first quarter ended November 30, 1994 and 1995 of 106,147 barrels and 137,958 respectively, and related prices of $15.78 per barrel and $16.50 per barrel for the same time periods. GAS PRODUCTION FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates gas production for the exploration and production segment for the first quarter ended November 30, 1994 and 1995 of 2,161 Mmcf and 2,151 Mmcf respectively, and related prices of $1.54 per Mcf and $1.40 per Mcf for the same time periods. LIQUIDS PRODUCTION FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates liquids production for the exploration and production segment for the first quarter ended November 30, 1994 and 1995 of 1,205 Mgal and 2,375 Mgal respectively, and related prices of $.24 per gallon and $.27 per gallon for the same time periods. Revenues for the 1996 first quarter increased due to higher crude oil and liquid production and related prices. The increases were offset by lower natural gas production and market prices. Operating expenses decreased due to reduced dry hole costs and other operating expenses. 9 10 GAS PROCESSING ONEOK Products Company extracts and sells natural gas liquids and buys and sells natural gas. NET INCOME
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Gas sales $ 2,119 $ 6,753 Cost of gas 1,281 6,486 -------------------------------------------------------------------------------------- Gross margins on gas sales 838 267 Liquids, residue, and other revenues 14,607 16,902 -------------------------------------------------------------------------------------- Net revenues 15,445 17,169 Operating expenses 11,882 14,938 Maintenance 438 552 Income taxes 1,127 557 -------------------------------------------------------------------------------------- Operating income 1,998 1,122 Interest expense 212 239 -------------------------------------------------------------------------------------- Net income $ 1,786 $ 883 ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates gas processing's earnings per share for the first quarter ended November 30, 1994 and 1995 of $.03 and $.07 respectively. GAS SALES FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates gas sales for the gas processing segment for the first quarter ended November 30, 1994 and 1995 of 4,175 Mmcf and 638 Mmcf respectively, and related prices of $1.62 per Mcf and $3.32 per Mcf for the same time periods. LIQUIDS SALES FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates liquid sales for the gas processing segment for the first quarter ended November 30, 1994 and 1995 of 52,876 gallons and 44,933 gallons respectively, and related prices of $.27 per gallon and $.27 per gallon for the same time periods. RESIDUE GAS SALES FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates residue gas sales for the gas processing segment for the first quarter ended November 30, 1994 and 1995 of 1,877 Mmcf and 1,809 Mmcf respectively, and related prices of $1.48 per Mcf and $1.43 per Mcf for the same time periods. Gas sales are significantly lower in the first quarter of 1996 as compared to the first quarter of 1995 due to the expiration of a large spot-market priced delivery contract in the current year. Lower liquids and residue gas volumes are attributable to the sale of one of the Company's processing plants in August 1995. Sales prices for liquids were comparable, in the aggregate. Reductions in operating expenses are the result of reduced shrinkage and fuel costs. 10 11 GAS MARKETING ONEOK Gas Marketing Company buys and sells natural gas on the open market. NET INCOME
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 115,820 $ 26,753 Cost of gas 113,906 26,544 -------------------------------------------------------------------------------------- Gross margins 1,914 209 Operating expenses 1,011 241 Income taxes 317 (25) -------------------------------------------------------------------------------------- Operating income (loss) 586 (7) Interest expense 84 33 -------------------------------------------------------------------------------------- Net income (loss) $ 502 $ (40) ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates gas marketing's earnings per share for the first quarter ended November 30, 1994 and 1995 of $.00 and $.02 respectively. In October 1992, the Company entered the gas marketing business by acquiring a 50 percent interest in an entity established in that line of business. The results of operations attributable to the 50 percent interest are included in operating expenses for the quarter ended November 30, 1994. In February 1995, the Company acquired the remaining interest in the entity. Changes initiated in the fourth quarter of fiscal 1995 contributed to the increase in average volumes from approximately 790,561 Mcf per day for that quarter to approximately 879,314 Mcf per day in the first quarter of fiscal 1996. The overall improvement in the gross margin is attributable to weather related demand and seasonal storage injections which contributed to increases in the weighted average sales price of gas. Revenues in the first quarter of fiscal 1994 reflects only minimal trading volume with an affiliate. OTHER OPERATIONS Other operations include the Company's leasing and parking and corporate operations. ONEOK Leasing Company and ONEOK Parking Company operate the headquarters office building and a parking garage in downtown Tulsa, leasing space in excess of the Company's requirements in the Tulsa commercial market. The Company has an outstanding tender offer made in an attempt to ultimately acquire ownership of the building. Leasing and parking revenues have remained relatively stable between periods. NET INCOME
-------------------------------------------------------------------------------------- FIRST QUARTER ENDED NOVEMBER 30, 1995 1994 -------------------------------------------------------------------------------------- (Thousands of Dollars) Revenues $ 2,296 $ 2,236 Operating expenses 2,726 2,584 Maintenance 4 - Income taxes (250) (199) -------------------------------------------------------------------------------------- Operating income (loss) (184) (149) Interest expense 218 165 -------------------------------------------------------------------------------------- Net income (loss) $ (402) $ (314) ======================================================================================
EARNINGS PER SHARE FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates other operation's earnings per share for the first quarter ended November 30, 1994 and 1995 of $(.01) and $(.02) respectively. 11 12 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 November 30, 1995, the equity component was 48 percent, an improvement from 44 percent at November 30, 1994. Debt ratings are A3 by Moody's Investors Service and A- by Standard & Poor's Corporation. The Company's long-term debt represents 47 percent of total capital at November 30, 1995. SOURCES OF CASH
---------------------------------------------------------------------- (ESTIMATED) 1996 ---------------------------------------------------------------------- (Millions of Dollars) Operating activities $ 99.9 Short-term debt - Long-term debt - Other - ---------------------------------------------------------------------- Total sources of cash $ 99.9 ======================================================================
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 accesses funds through a short-term credit agreement and, if necessary, through long-term borrowings. OPERATING CASH FLOWS Operating cash flows for the first quarter of fiscal 1996 as compared to the first quarter of fiscal 1995 improved as a result of working capital changes, recovery of regulatory assets, and improvement in consolidated earnings. INVESTING CASH FLOWS Capital expenditures for the 1996 first quarter compared with last year's first quarter are as follows. CAPITAL EXPENDITURES FIRST QUARTER ENDED NOVEMBER 30 [GRAPH] This graph illustrates capital expenditures for the first quarter ended November 30, 1994 and 1995 of $31.8 and $15.6 respectively.
- ----------------------------------------------------- 1994 1995 - ----------------------------------------------------- Distribution and Transmission $12.8 $11.0 - ----------------------------------------------------- Exploration and Production 18.5 0.6 - ----------------------------------------------------- Gas Processing 0.4 3.6 - ----------------------------------------------------- Gas Marketing 0.0 0.1 - ----------------------------------------------------- Other 0.1 0.3 - -----------------------------------------------------
Last year's capital expenditures for the exploration and production segment included approximately $17.6 million for an acquisition of Louisiana properties. 12 13 FINANCING CASH FLOW At November 30, 1995, $364 million of long-term debt was outstanding. As of that date, the Company could have issued approximately $263 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, would have a materially adverse effect on the Company's financial condition. The Company has successfully competed in large part with such innovative methods as its Pipeline Capacity Lease Program, Special Industrial Sales Program, and Payment-in-Kind Program. These programs were all designed to provide competitive alternatives for Oklahoma industry. Rate restructuring achieved in the June 1995 rate order further reduced the Company's risk in serving its large industrial customers. The Company's position improved significantly as a result of regulatory actions in the previous three years. On January 6, 1994, the Oklahoma Corporation Commission approved recovery of deferred take-or-pay costs. On November 22, 1994, the OCC made permanent and increased an interim rate increase and approved amortization of deferred pension costs. On June 19, 1995, the OCC authorized a general rate increase, restructured large industrial customer rates by shifting costs to the Company's core customers, changed gas purchasing practices with a net reduced cost to those core customers, initiated a temperature adjustment clause, approved funding of Other Postretirement Benefit costs in the rates, and approved recovery of additional deferred costs. OTHER 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 November 30, 1995, the net deferred loss on these contracts was approximately $872 thousand. 13 14 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 plaintiffs have filed a motion to set aside the stay which has been set for hearing on January 26, 1996. LARUE V. ONEOK INC., No. CJ-95-6324, District Court, Oklahoma County, now Case No. CIV-95-1556C, U.S. District Court for the Western District of Oklahoma. On October 30, 1995, the Plaintiff in the state action (LaRue) filed a motion to remand the case back to the state court. Briefs have been filed but no decision has been made. The case is in the discovery stage. The companion Federal case (ONEOK v. LaRue) is also in the discovery stage. 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. On November 30, 1995, Terra Resources filed a motion to move the hearing from the Administrative Law Judge (ALJ) to the Commission En Banc. The motion was argued before the ALJ on December 7, 1995, and was denied. The Commission on its own motion has ordered that the matter be heard before the Commission En Banc on February 21 through 23, 1996. 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 CUSTOMERS' POINTS OF CONSUMPTION OF GAS, Cause PUD No. 95-000223, Oklahoma Corporation Commission. On November 20, 1995, Fent filed for a Writ of Prohibition with the Oklahoma Supreme Court to prevent the Commission from proceeding with the Application. On November 29, 1995, Fent filed a Motion to Stay the Commission Proceedings until after the Oklahoma Supreme Court rules on his Writ of Prohibition. The hearing on the Writ of Prohibition was heard on December 28, 1995 before a referee. The hearing on the Application before the Commission is still set for January 10, 1996. 14 15 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 8th day of January, 1996. ONEOK Inc. Registrant By: J. D. NEAL ----------------------------------- J. D. Neal Vice President, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer) 15 16 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 NOVEMBER 30, 1995, AND THE CONSOLIDATED BALANCE SHEET AT NOVEMBER 30, 1995, FOR ONEOK INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS AUG-31-1996 SEP-01-1995 NOV-30-1995 6,644 0 105,613 0 102,624 227,912 1,286,056 521,752 1,197,162 200,198 0 201,955 0 9,000 187,705 1,197,162 0 238,460 0 215,645 0 0 9,116 13,699 5,276 8,423 0 0 0 8,423 .31 .31
-----END PRIVACY-ENHANCED MESSAGE-----