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