<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, 1995
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)
405-553-3000
(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 40,354,387 Shares of Common Stock, par value $2.50 per share,
outstanding as of April 28, 1995.
<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
1995 1994
-------- --------
(dollars in thousands
except per share data)
<S> <C> <C>
OPERATING REVENUES:
Electric utility . . . . . . . . . . . . . . $214,876 $238,864
Non-utility subsidiary . . . . . . . . . . . 31,640 45,120
-------- --------
Total operating revenues . . . . . . . . . . 246,516 283,984
-------- --------
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . . 48,772 62,217
Purchased power . . . . . . . . . . . . . . . 53,583 54,960
Gas purchased for resale . . . . . . . . . . 20,091 37,312
Other operation . . . . . . . . . . . . . . . 55,591 49,239
Maintenance . . . . . . . . . . . . . . . . . 9,702 18,061
Depreciation and amortization . . . . . . . . 32,221 30,660
Current income taxes . . . . . . . . . . . . (1,833) (15,585)
Deferred income taxes, net . . . . . . . . . 63 16,729
Deferred investment tax credits, net . . . . (1,287) (1,287)
Taxes other than income . . . . . . . . . . . 11,205 10,994
-------- --------
Total operating expenses . . . . . . . . . . 228,108 263,300
-------- --------
OPERATING INCOME . . . . . . . . . . . . . . . 18,408 20,684
-------- --------
OTHER INCOME AND DEDUCTIONS:
Interest income . . . . . . . . . . . . . . . 1,587 327
Other . . . . . . . . . . . . . . . . . . . . (1,485) (587)
-------- --------
Net other income and deductions . . . . . . 102 (260)
-------- --------
INTEREST CHARGES:
Interest on long-term debt . . . . . . . . . 16,250 17,583
Allowance for borrowed funds used
during construction . . . . . . . . . . . . (464) (209)
Other . . . . . . . . . . . . . . . . . . . . 3,585 1,550
-------- --------
Total interest charges, net . . . . . . . . 19,371 18,924
-------- --------
NET (LOSS) INCOME . . . . . . . . . . . . . . . (861) 1,500
PREFERRED DIVIDEND REQUIREMENTS . . . . . . . . 579 579
-------- --------
(LOSS) EARNINGS AVAILABLE FOR COMMON . . . . . $ (1,440) $ 921
======== ========
AVERAGE COMMON SHARES OUTSTANDING (thousands) . 40,354 40,346
(LOSS) EARNINGS PER AVERAGE COMMON SHARE . . . $ (.04) $ .02
======== ========
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
1995 1994
---------- ----------
(dollars in thousands)
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
In service . . . . . . . . . . . . . . . $3,786,150 $3,770,247
Construction work in progress . . . . . . 49,636 43,943
---------- ----------
Total property, plant and equipment . . 3,835,786 3,814,190
Less accumulated depreciation . . . . 1,510,666 1,487,300
---------- ----------
Net property, plant and equipment . . . . 2,325,120 2,326,890
---------- ----------
OTHER PROPERTY AND INVESTMENTS, at cost . . 8,062 7,868
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . 6,332 2,455
Accounts receivable-customers, net . . . 94,611 118,318
Accrued unbilled revenues . . . . . . . . 35,800 36,800
Accounts receivable-other . . . . . . . . 8,679 8,601
Fuel inventories, at LIFO cost . . . . . 46,128 46,494
Materials and supplies, at average cost . 30,793 30,401
Prepayments and other . . . . . . . . . . 47,424 43,137
Accumulated deferred tax assets . . . . . 8,022 12,077
---------- ----------
Total current assets . . . . . . . . . 277,789 298,283
---------- ----------
DEFERRED CHARGES:
Advance payments for gas . . . . . . . . 10,000 10,000
Income taxes recoverable through
future rates . . . . . . . . . . . . . 45,832 47,246
Other . . . . . . . . . . . . . . . . . . 83,185 92,342
---------- ----------
Total deferred charges . . . . . . . . 139,017 149,588
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . $2,749,988 $2,782,629
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock and retained earnings . . . $ 892,901 $ 921,177
Cumulative preferred stock . . . . . . . 49,973 49,973
Long-term debt . . . . . . . . . . . . . 731,439 730,567
---------- ----------
Total capitalization . . . . . . . . . 1,674,313 1,701,717
---------- ----------
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . 231,200 182,750
Accounts payable . . . . . . . . . . . . 66,370 66,391
Dividends payable . . . . . . . . . . . . 27,415 27,415
Customers' deposits . . . . . . . . . . . 21,057 20,904
Accrued taxes . . . . . . . . . . . . . . 13,725 25,153
Accrued interest . . . . . . . . . . . . 14,090 23,873
Long-term debt due within one year . . . 500 25,350
Provision for rate refund . . . . . . . . 2,000 2,970
Other . . . . . . . . . . . . . . . . . . 36,952 41,321
---------- ----------
Total current liabilities . . . . . . . 413,309 416,127
---------- ----------
DEFERRED CREDITS AND OTHER
LIABILITIES:
Accrued pension and benefit obligation . 74,724 71,014
Accumulated deferred income taxes . . . . 491,321 497,056
Accumulated deferred investment
tax credits . . . . . . . . . . . . . . 87,040 88,328
Other . . . . . . . . . . . . . . . . . . 9,281 8,387
---------- ----------
Total deferred credits and other
liabilities . . . . . . . . . . . . . 662,366 664,785
---------- ----------
COMMITMENTS AND CONTINGENCIES . . . . . . . - -
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES . . . $2,749,988 $2,782,629
========== ==========
<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
1995 1994
-------- --------
(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income . . . . . . . . . . . . . . . . $ (861) $ 1,500
Adjustments to Reconcile Net (Loss) Income
to Net Cash Provided From (Used In)
Operating Activities:
Depreciation and amortization . . . . . . . . . 32,221 30,660
Deferred income taxes and investment tax
credits, net . . . . . . . . . . . . . . . . . (1,224) 15,442
Provision for rate refund . . . . . . . . . . . - 2,200
Change in Certain Current Assets and
Liabilities:
Accounts receivable - customers . . . . . . . 23,706 49,431
Accrued unbilled revenues . . . . . . . . . . 1,000 12,300
Fuel, materials and supplies inventories . . (26) (8,768)
Accumulated deferred tax assets . . . . . . . 4,054 14,594
Other current assets . . . . . . . . . . . . (4,364) (19,650)
Accounts payable . . . . . . . . . . . . . . 269 (24,732)
Accrued taxes . . . . . . . . . . . . . . . . (11,429) (13,657)
Accrued interest . . . . . . . . . . . . . . (9,783) (11,449)
Accumulated provision for rate refund . . . . (970) (36,444)
Other current liabilities . . . . . . . . . . (4,215) 2,090
Other operating activities . . . . . . . . . . 8,970 (24,808)
-------- --------
Net cash provided from (used in)
operating activities . . . . . . . . . . 37,348 (11,291)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . (28,656) (25,811)
-------- --------
Net cash used in investing activities . . . (28,656) (25,811)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt, net . . . . . . . . . . . . . . (25,850) (350)
Short-term debt, net . . . . . . . . . . . . . 48,450 64,450
Cash dividends declared on preferred stock . . (579) (579)
Cash dividends declared on common stock . . . . (26,836) (26,830)
-------- --------
Net cash (used in) provided from
financing activities . . . . . . . . . . . (4,815) 36,691
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,877 (411)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . 2,455 6,593
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . $ 6,332 $ 6,182
======== ========
--------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest (net of amount capitalized) . . . . . $ 26,488 $ 29,316
Income taxes . . . . . . . . . . . . . . . . . $ 3,835 $ 3,550
--------------------------------------------------------------------------
<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, 1995, and
December 31, 1994, and the results of operations and
the changes in cash flows for the periods ended March
31, 1995, and March 31, 1994, have been included and
are of a normal recurring nature (excluding
amortization of a regulatory asset relating to a
Voluntary Early Retirement Package ("VERP") and
severance package - 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, 1994.
2. In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." Adoption of SFAS No. 121 is required for
fiscal years beginning after December 15, 1995. The
Company will adopt this new standard effective January
1, 1996, and believes these costs will not have a
material impact on its 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, 1995 (the "current period"), and the
financial position as of March 31, 1995, 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, 1994, the Company restructured and
redesigned its operations to reduce costs in order to more
favorably position itself for the competitive electric
utility environment. As part of this process, the Company
implemented a Voluntary Early Retirement Package ("VERP")
and a severance package in 1994. These two packages reduced
the Company's workforce by approximately 900 employees.
Pursuant to an order by the Oklahoma Corporation
Commission ("OCC"), OG&E was permitted to amortize the
December 31, 1994, regulatory asset of $48.9 million over 26
months and reduce its electric rates by approximtaely $15
million annually, effective January 1995. At March 31,
1995, the unamortized regulatory asset was $43.3 million,
which is included on the Consolidated Balance Sheets as
Deferred Charges - Other. In 1995 and 1996, the labor
savings are expected to substantially offset the
amortization of the regulatory asset and the annual rate
reduction of $15 million.
REVENUES
Although total kilowatt-hour sales remained relatively
constant, electric utility revenues decreased $24 million
due to the recovery of lower fuel costs, milder weather and
the rate reduction which was effective in January 1995.
These reductions were partially offset by continued customer
growth. Enogex revenues decreased $13.5 million, or 29.9
percent, due to a decline in prices and slightly lower
volumes in gas marketing.
EXPENSES
Total operating expenses decreased $35.2 million or
13.4 percent primarily due to reduced fuel expense, less
maintenance expense, the workforce reduction and reduced
prices Enogex paid for gas purchased for resale to third
parties. These decreases were partially offset by increases
in other operation and depreciation.
<PAGE> 6
Fuel expense decreased $13.4 million in the current
period due to shifting the fuel mix to a higher percentage
of coal. 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 OCC, the Arkansas Public Service Commission ("APSC") and
the Federal Energy Regulatory Commission ("FERC"). Enogex
Inc. owns and operates a pipeline business that delivers
natural gas to the generating stations of OG&E. The OCC,
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.
Enogex's gas purchased for resale decreased $17.2
million or 46.2 percent, due to slightly lower volumes and
significantly lower purchase prices.
The increase in other operation resulted primarily from
amortizing approximately $5.6 million of the regulatory
asset associated with the workforce reduction to expense
during the current period. Depreciation and amortization
increased primarily due to higher oil and gas production
volumes (based on units of production depreciation method)
and amortization of a gas sales contract by Enogex.
Maintenance decreased due to the workforce reduction and
efficiencies created in maintaining the Company's power
plants. Income taxes in the current period decreased
primarily due to lower pre-tax earnings.
Factors increasing interest expense in the current
period include: 1) a one-time charge of $726,000 of
unamortized discount and debt issuance costs, resulting from
refinancing approximately $79 million of pollution control
bonds; and 2) increases in short-term interest rates. These
factors were partially offset by savings resulting from OG&E
refinancing $79 million of its pollution control revenue
bonds in January 1995 and Enogex temporarily refinancing its
$90 million of medium-term notes with short-term debt in
August of 1994. Enogex expects to issue long-term debt in
the second quarter, replacing the short-term debt. See
"Liquidity and Capital Requirements."
EARNINGS
The current period loss of $861,000 represents a
decrease of $2.4 million in net income. Enogex's net income
increased approximately $2.3 million in the current period
due to higher margins on natural gas sales, reductions in
other natural gas purchase expenses and increased tax
credits.
<PAGE> 7
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
1995. Short-term borrowings will continue to be used to
meet temporary cash requirements.
In August 1994, Enogex redeemed its $90 million of
outstanding medium-term notes, with interest rates ranging
from 9.88 percent to 10.11 percent. Enogex anticipates
issuing long-term debt in the second quarter of 1995 to
replace short-term borrowings in connection with such
redemption.
In January 1995, OG&E refinanced its obligations with
respect to $47,000,000 of 5 7/8 percent Pollution Control
Revenue Bonds due December 1, 2007 and $32,050,000 of 6 3/4
percent Pollution Control Revenue Bonds due March 1, 2006
through the issuance of two new series of pollution control
bonds bearing interest at variable, tax-exempt rates. These
refinancings are expected to result in lower long-term
interest rates during 1995.
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 the
Consolidated Financial Statements in the Company's 1994 Form
10-K.
<PAGE> 8
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Reference is made to Item 3 of the Company's 1994 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. 1 under Item 3
"Legal Proceedings" of the Company's 1994 Form 10-K
involving a breach of contract claim by Puritan Oil and Gas
Corporation against OG&E. On January 4, 1994, the United
States District Court for the Western District of Oklahoma
dismissed Count III of Plaintiffs' claim. Plaintiffs'
appeal of this order was denied on January 11, 1995 by the
10th Circuit Court of Appeals pursuant to a stipulation of
the parties. The remaining breach of contract claims have
been submitted to private binding arbitration. The first
phase of the arbitration has been concluded and the second
stage is expected to be completed by late May 1995.
Management believes the outcome of this proceeding will not
have a material adverse effect on the Company's consolidated
financial position or its results of operations for numerous
reasons, which include that the underlying dispute between
the parties is a contractual dispute under a gas purchase
contract. Management intends to vigorously pursue the
defense of this matter.
Item 5 OTHER INFORMATION
None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 - Financial Data Schedule.
(b) Reports on Form 8-K - None.
<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/ D. L. Young
------------------------------
D. L. Young
Controller
(On behalf of the registrant and in his
capacity as Chief Accounting Officer)
May 10, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Oklahoma Gas and Electric Company Consolidated Statements of Income, Balance
Sheets, and Statements of Cash Flows as reported on Form 10-Q as of March
31, 1995 and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,325,120
<OTHER-PROPERTY-AND-INVEST> 8,062
<TOTAL-CURRENT-ASSETS> 277,789
<TOTAL-DEFERRED-CHARGES> 139,017
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,749,988
<COMMON> 116,177
<CAPITAL-SURPLUS-PAID-IN> 395,040
<RETAINED-EARNINGS> 381,684
<TOTAL-COMMON-STOCKHOLDERS-EQ> 892,901
0
49,973
<LONG-TERM-DEBT-NET> 731,439
<SHORT-TERM-NOTES> 90,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 141,200
<LONG-TERM-DEBT-CURRENT-PORT> 500
0
<CAPITAL-LEASE-OBLIGATIONS> 3,208
<LEASES-CURRENT> 1,465
<OTHER-ITEMS-CAPITAL-AND-LIAB> 839,302
<TOT-CAPITALIZATION-AND-LIAB> 2,749,988
<GROSS-OPERATING-REVENUE> 246,516
<INCOME-TAX-EXPENSE> (3,057)
<OTHER-OPERATING-EXPENSES> 231,165
<TOTAL-OPERATING-EXPENSES> 228,108
<OPERATING-INCOME-LOSS> 18,408
<OTHER-INCOME-NET> 102
<INCOME-BEFORE-INTEREST-EXPEN> 18,510
<TOTAL-INTEREST-EXPENSE> 19,371
<NET-INCOME> (861)
579
<EARNINGS-AVAILABLE-FOR-COMM> (1,440)
<COMMON-STOCK-DIVIDENDS> 26,836
<TOTAL-INTEREST-ON-BONDS> 16,250
<CASH-FLOW-OPERATIONS> 37,348
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
