<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-1097
OKLAHOMA GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Oklahoma 73-0382390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 North Robinson
P. O. Box 321
Oklahoma City, Oklahoma 73101-0321
(Address of principal executive offices)
(Zip Code)
405-272-3000
(Registrant's telephone number, including area code)
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
-----
There were 40,346,477 Shares of Common Stock, par value $2.50 per share,
outstanding as of April 29, 1994.
<PAGE> 1
<TABLE>
OKLAHOMA GAS AND ELECTRIC COMPANY
PART I. FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
3 Months Ended
March 31
1994 1993
-------- --------
(dollars in thousands
except per share data)
<S> <C> <C>
OPERATING REVENUES:
Electric utility . . . . . . . . . . . . . . $238,864 $264,065
Non-utility subsidiary . . . . . . . . . . . 45,120 39,357
-------- --------
Total operating revenues . . . . . . . . . . 283,984 303,422
-------- --------
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . 62,217 83,368
Purchased Power . . . . . . . . . . . . . . . 54,960 53,956
Gas purchased for resale . . . . . . . . . . 37,312 30,926
Other operation . . . . . . . . . . . . . . . 49,239 48,796
Maintenance . . . . . . . . . . . . . . . . . 18,061 16,883
Depreciation and amortization . . . . . . . . 30,660 29,233
Current income taxes . . . . . . . . . . . . (15,585) 1,843
Deferred income taxes, net . . . . . . . . . 16,729 3,217
Deferred investment tax credits, net . . . . (1,287) (1,287)
Taxes other than income . . . . . . . . . . . 10,994 11,266
-------- --------
Total operating expenses . . . . . . . . . . 263,300 278,201
-------- --------
OPERATING INCOME . . . . . . . . . . . . . . . 20,684 25,221
-------- --------
OTHER INCOME AND DEDUCTIONS:
Interest income . . . . . . . . . . . . . . . 327 186
Other . . . . . . . . . . . . . . . . . . . . (587) (341)
-------- --------
Net other income and deductions . . . . . . (260) (155)
-------- --------
INTEREST CHARGES:
Interest on long-term debt . . . . . . . . . 17,583 17,704
Allowance for borrowed funds used
during construction . . . . . . . . . . . . (209) (187)
Other . . . . . . . . . . . . . . . . . . . . 1,550 859
-------- --------
Total interest charges, net . . . . . . . . 18,924 18,376
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . . 1,500 6,690
PREFERRED DIVIDEND REQUIREMENTS . . . . . . . . 579 579
-------- --------
EARNINGS AVAILABLE FOR COMMON . . . . . . . . . $ 921 $ 6,111
======== ========
AVERAGE COMMON SHARES OUTSTANDING (thousands) . 40,346 40,328
EARNINGS PER AVERAGE COMMON SHARE . . . . . . . $ .02 $ .15
======== ========
DIVIDENDS DECLARED PER SHARE . . . . . . . . . $ 0.665 $ 0.665
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part hereof.
</TABLE>
<PAGE> 2
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31 December 31
1994 1993
---------- ----------
(dollars in thousands)
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
In service . . . . . . . . . . . . . . . $3,684,289 $3,656,113
Construction work in progress . . . . . . 30,388 33,970
---------- ----------
Total property, plant and equipment . . 3,714,677 3,690,083
Less accumulated depreciation . . . . 1,398,950 1,370,227
---------- ----------
Net property, plant and equipment . . . . 2,315,727 2,319,856
---------- ----------
OTHER PROPERTY AND INVESTMENTS, at cost . . 7,128 6,920
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . 6,182 6,593
Accounts receivable-customers, net . . . 77,566 126,997
Accrued unbilled revenues . . . . . . . . 32,800 45,100
Accounts receivable-other . . . . . . . . 6,308 6,269
Fuel inventories, at LIFO cost . . . . . 34,776 27,127
Materials and supplies, at average cost . 27,932 26,813
Prepayments and other . . . . . . . . . . 48,259 28,648
Accumulated deferred tax assets . . . . . 9,494 24,088
---------- ----------
Total current assets . . . . . . . . . 243,317 291,635
---------- ----------
DEFERRED CHARGES:
Advance payments for gas . . . . . . . . 21,165 21,165
Income taxes recoverable through
future rates . . . . . . . . . . . . . 47,445 47,593
Other . . . . . . . . . . . . . . . . . . 53,510 44,255
---------- ----------
Total deferred charges . . . . . . . . 122,120 113,013
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . $2,688,292 $2,731,424
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock and retained earnings . . . $1,094,274 $1,120,183
Cumulative preferred stock . . . . . . . 49,973 49,973
Treasury stock . . . . . . . . . . . . . (213,379) (213,379)
Long-term debt . . . . . . . . . . . . . 813,399 838,660
---------- ----------
Total capitalization . . . . . . . . . 1,744,267 1,795,437
---------- ----------
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . 111,450 47,000
Accounts payable . . . . . . . . . . . . 77,215 100,285
Dividends payable . . . . . . . . . . . . 27,410 27,410
Customers' deposits . . . . . . . . . . . 19,597 19,353
Accrued taxes . . . . . . . . . . . . . . 11,060 24,717
Accrued interest . . . . . . . . . . . . 15,263 26,712
Long-term debt due within one year . . . 25,350 350
Provision for rate refund . . . . . . . . 2,673 39,117
Other . . . . . . . . . . . . . . . . . . 50,512 48,666
---------- ----------
Total current liabilities . . . . . . . 340,530 333,610
---------- ----------
DEFERRED CREDITS AND OTHER
LIABILITIES:
Accrued pension and benefit obligation . 20,239 16,210
Accumulated deferred income taxes . . . . 485,692 484,003
Accumulated deferred investment
tax credits . . . . . . . . . . . . . . 92,190 93,478
Other . . . . . . . . . . . . . . . . . . 5,374 8,686
---------- ----------
Total deferred credits and other
liabilities . . . . . . . . . . . . . 603,495 602,377
---------- ----------
COMMITMENTS AND CONTINGENCIES . . . . . . . - -
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES . . . $2,688,292 $2,731,424
========== ==========
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part hereof.
</TABLE>
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
<CAPTION>
3 Months Ended
March 31
1994 1993
-------- --------
(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . $ 1,500 $ 6,690
Adjustments to Reconcile Net Income to Net Cash
Provided From (Used In) Operating Activities:
Depreciation and amortization . . . . . . . . . . . 30,660 29,233
Deferred income taxes and investment tax
credits, net . . . . . . . . . . . . . . . . . . . 15,442 1,929
Provision for rate refund . . . . . . . . . . . . . 2,200 -
Change in Certain Current Assets and Liabilities:
Accounts receivable - customers . . . . . . . . . 49,431 4,447
Accrued unbilled revenues . . . . . . . . . . . . 12,300 3,300
Fuel, materials and supplies inventories . . . . (8,768) (3,220)
Accumulated deferred tax assets . . . . . . . . . 14,594 -
Other current assets . . . . . . . . . . . . . . (19,650) 415
Accounts payable . . . . . . . . . . . . . . . . (24,732) (13,311)
Accrued taxes . . . . . . . . . . . . . . . . . . (13,657) (10,083)
Accrued interest . . . . . . . . . . . . . . . . (11,449) (11,787)
Accumulated provision for rate refund . . . . . . (36,444) -
Other current liabilities . . . . . . . . . . . . 2,090 (1,174)
Other operating activities . . . . . . . . . . . . (24,808) 2,035
-------- --------
Net cash (used in) provided from
operating activities . . . . . . . . . . . . (11,291) 8,474
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . (25,811) (26,174)
-------- --------
Net cash used in investing activities . . . . . (25,811) (26,174)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt . . . . . . . . . . . (350) (15,300)
Short-term debt, net . . . . . . . . . . . . . . . 64,450 53,700
Cash dividends declared on preferred stock . . . . (579) (579)
Cash dividends declared on common stock . . . . . . (26,830) (26,818)
-------- --------
Net cash provided from financing activities . . 36,691 11,003
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . (411) (6,697)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . 6,593 11,316
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . $ 6,182 $ 4,619
======== ========
- - --------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest (net of amount capitalized) . . . . . . . $ 29,316 $ 28,974
Income taxes . . . . . . . . . . . . . . . . . . . $ 3,550 $ 4,600
- - --------------------------------------------------------------------------------------
<FN>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of these statements, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. These investments are carried at cost which approximates market.
The accompanying Notes to Consolidated Financial Statements are an integral
part hereof.
</TABLE>
<PAGE> 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the
disclosures are adequate to make the information presented not
misleading. In the opinion of the Company, all adjustments
necessary to present fairly the financial position of Oklahoma
Gas and Electric Company and its subsidiaries as of March 31,
1994, and December 31, 1993, and the results of operations and
the changes in cash flows for the periods ended March 31,
1994, and March 31, 1993, have been included and are of a
normal recurring nature (excluding a $2.2 million provision
for rate refund recorded in 1994 - see Item 2 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" for related discussion).
The results of operations for such interim periods are not
necessarily indicative of the results for the full year. It
is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company's Form 10-K for the year ended December 31, 1993.
2. On January 1, 1994, Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits," and SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," became
effective. These requirements do not have a material impact
on the Company's consolidated financial position or results of
operations.
<PAGE> 5
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis presents factors which
affected the results of operations for the three months ended March
31, 1994 (the "current period"), and the financial position as of
March 31, 1994, of Oklahoma Gas and Electric Company ("OG&E") and
its wholly-owned non-utility subsidiary, Enogex Inc. and its
subsidiaries ("Enogex") (collectively, the "Company"). Unless
indicated otherwise, all comparisons are with the corresponding
period of the prior year.
As reported in the Company's Form 10-K for the year ended
December 31, 1993, the Oklahoma Corporation Commission ("Oklahoma
Commission") issued an order on February 25, 1994 directing OG&E to
reduce its electric rates to its Oklahoma retail customers
prospectively by approximately $14 million annually (based on a
test year ended June 30, 1991) and to refund approximately $41.3
million. The $14 million annual reduction in rates is expected to
lower OG&E's rates to its Oklahoma customers by approximately $17
million in 1994. With respect to the $41.3 million refund, $2.2
million (including interest) was recorded in the current period,
while the remaining impact of the rate refund was reflected in
prior periods. The majority of the $41.3 million was refunded to
customers in March 1994.
Enogex transports natural gas to OG&E for use at its gas-fired
generating units and performs related gas gathering activities for
OG&E. The entire $41.3 million refund related to the Oklahoma
Commission's disallowance of a portion of the fees paid by OG&E to
Enogex for such services in the past. Of the approximately $17
million annual rate reduction, approximately $9.9 million reflects
the Oklahoma Commission's reduction of the amount to be recovered
by OG&E from its Oklahoma customers for the future performance of
such services by Enogex.
Due to the rate order and the ever-increasing competition in
the utility industry, OG&E announced in March 1994 that it had
commenced a complete review and redesign of its operations that
could result in downsizing or other cost-cutting measures. OG&E
also froze salaries and hiring in February. These actions are
expected to offset some of the impact of the recent rate order and
to make OG&E more competitive in the years ahead.
On April 28, 1994, OG&E's Board of Directors approved a
voluntary early retirement package for employees and a proposed
organizational change, effective July 31 and August 1,
respectively. The early retirement program will be offered only to
OG&E members who are at least 50 years old and have five or more
years of service as of July 31, 1994. The impact of the early
retirement costs on this year's earnings have not yet been
determined, but savings from labor and associated benefit costs
will be realized in the future and are expected to offset the cost
of the early retirement program. See Item 5 "Other Information,"
for further discussion of the organizational change.
<PAGE> 6
REVENUES
Total operating revenues decreased $19.4 million or 6.4
percent during the current period. Kilowatt-hour sales to OG&E
customers ("system sales") were slightly higher, but revenues from
system sales were lower due to the recovery of lower fuel costs and
the impact of the Oklahoma Commission's order. The order required
a $1.6 million refund (excluding interest) and a reduction in
electric rates, including reduced recoveries of gas transmission
fees paid by OG&E to Enogex (see related discussion in "Overview").
The decrease in utility revenues was partially offset by increased
Enogex revenues due to higher prices on natural gas sales to third
parties.
System sales increased by 1.8 percent which was offset by a
31.7 percent decrease in sales to other utilities; causing total
kilowatt-hour sales to be down by 1.6 percent. However, sales to
other utilities are at much lower prices per kilowatt-hour and have
less impact on operating revenues and income than system sales.
EXPENSES
Total operating expenses decreased $14.9 million or 5.4
percent primarily due to reduced fuel expense, which was partially
offset by the increased price Enogex paid for gas purchased for
resale to third parties. The decrease in operating expenses, which
included a slight decrease in income taxes, was also partially
offset by slight increases in other operating, maintenance and
depreciation expenses.
The decrease in fuel expense reflects lower prices due to
renegotiated coal and transportation contracts and lower natural
gas usage. Variances in the actual cost of fuel used in electric
generation and certain purchased power costs, as compared to that
component in cost-of-service for ratemaking, are passed through to
OG&E's electric customers through automatic fuel adjustment
clauses. The automatic fuel adjustment clauses are subject to
periodic review by the Oklahoma Commission, the Arkansas Public
Service Commission ("APSC") and the Federal Energy Regulatory
Commission ("FERC"). As indicated above, Enogex Inc. owns and
operates a pipeline business that delivers natural gas to the
generating stations of OG&E. The Oklahoma Commission, the APSC and
the FERC have authority to examine the appropriateness of any gas
transportation charges or other fees OG&E pays Enogex, which OG&E
seeks to recover through the fuel adjustment clause or other
tariffs. As indicated above, the Oklahoma Commission in its rate
order of February 25, 1994, disallowed $41.3 million previously
recovered by OG&E through its fuel adjustment clause for amounts
Enogex has charged OG&E for transporting natural gas to OG&E's
generating stations and reduced OG&E's future recovery of such
charges by approximately $9.9 million annually.
<PAGE> 7
Enogex's gas purchased for resale increased $6.4 million or
20.6 percent, due to higher gas prices.
Increases in other operation and maintenance were primarily
due to miscellaneous Enogex expenses and power plant overhauls.
Depreciation and amortization increased primarily due to higher
levels of depreciable plant. Income taxes in the current period
decreased primarily due to lower pre-tax earnings.
The increase in other interest expense includes $0.6 million
related to the 1994 portion of the rate refund.
As compared to 1993, OG&E will realize decreases in certain
operating expenses due to: increased use of coal as boiler fuel;
renegotiated coal and transportation contracts; utilizing a new gas
storage facility; and reduced labor costs resulting from the early
retirement program. However, these decreases will be partially
offset by certain other operating expenses associated with the
early retirement program and other redesign costs.
EARNINGS
Net income decreased $5.2 million or 77.6 percent during the
current period. Of the decrease, $2.9 million can be attributed to
lower Enogex earnings which resulted primarily from reduced gas
transmission fees from OG&E. The resulting decrease in earnings
per share reflects the effects of the revenue and expense items as
discussed above.
LIQUIDITY AND CAPITAL REQUIREMENTS
The Company meets its cash needs through internally generated
funds, permanent financing and short-term borrowings. Internally
generated funds and short-term borrowings are expected to meet
virtually all of the Company's capital requirements through the
remainder of 1994. Short-term borrowings will continue to be used
to meet temporary cash requirements.
Like any business, the Company is subject to numerous
contingencies, many of which are beyond its control. For
discussion of significant contingencies that could affect the
Company, reference is made to Part II, Item 1 "Legal Proceedings"
of this Form 10-Q and to "Management's Discussion and Analysis" and
Notes 9 and 10 of Notes to Consolidated Financial Statements in the
Company's 1993 Form 10-K.
<PAGE> 8
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Reference is made to Item 3 of the Company's 1993 Form 10-K
for a description of certain legal proceedings presently pending.
Except as set forth below, there are no new significant cases to
report against Oklahoma Gas and Electric Company or its subsidiary,
Enogex Inc., and there have been no significant changes in the
previously reported proceedings.
Reference is made to paragraph No. 3 under Item 3 "Legal
Proceedings" of the Company's 1993 Form 10-K regarding OG&E as a
Potentially Responsible Party in an Environmental Protection Agency
administrative action involving the facility in Holden, Missouri,
of Martha C. Rose Chemicals, Inc. A settlement agreement has been
executed between OG&E and its primary liability insurer.
Management still believes that further costs, if any, required for
cleanup of this site will not have a material adverse effect on
OG&E's financial position or its results of operations.
Item 5 OTHER INFORMATION
On April 28, 1994, OG&E's Board of Directors approved a
proposed organizational change that will take effect on August 1.
The change places all company activities into seven operational and
administrative groups headquartered in Oklahoma City.
Officers named to lead the newly structured organization are
James G. Harlow Jr., Chairman, President and CEO; Patrick J. Ryan,
Vice Chairman; Al M. Strecker, Senior Vice President of Finance and
Administration; Steven E. Moore, Senior Vice President of Law and
Public Affairs; Melvin D. Bowen Jr., Vice President of Power
Delivery; Jack T. Coffman, Vice President of Power Supply; Mike G.
Davis, Vice President of Marketing and Customer Service; Irma B.
Elliott, Corporate Secretary; and Jim O. Edwards Jr., President of
Enogex.
This new organizational structure is designed to shape OG&E
along clearer lines of responsibility and enable the Company to
respond more quickly to future competitive challenges.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K.
A Form 8-K Current Report under Item 5, dated February 28,
1994, reported on the rate order issued by the Oklahoma Corporation
Commission.
A Form 8-K Current Report under Item 5, dated April 29, 1994,
reported on results of a special Board of Directors meeting held on
April 28, 1994.
<PAGE> 9
SIGNATURES
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.
OKLAHOMA GAS AND ELECTRIC COMPANY
(Registrant)
By /s/ B G Bunce
-----------------------------
B G Bunce
SENIOR VICE PRESIDENT
ACCOUNTING AND ADMINISTRATION
(On behalf of the registrant and in
his capacity as Chief Accounting Officer)
May 13, 1994
