<PAGE> 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.
<PAGE> 2
ONEOK Inc.
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
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
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ONEOK INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
First Quarter Ended November 30, 1995 1994
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)
<S> <C> <C>
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
==========================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 4
ONEOK INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
NOVEMBER 30, August 31,
1995 1995
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)
<S> <C> <C>
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
==========================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 5
ONEOK INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NOVEMBER 30, August 31,
1995 1995
- ---------------------------------------------------------------------------------------------
(Thousands of Dollars)
<S> <C> <C>
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
- ---------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
ONEOK INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
First Quarter Ended November 30, 1995 1994
- ------------------------------------------------------------------------------------------
(Thousands of Dollars)
<S> <C> <C>
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
==========================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE> 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.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
NOVEMBER 30, August 31,
1995 1995
--------------------------------------------------------------------------------------
<S> <C> <C>
(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
======================================================================================
</TABLE>
(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.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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 $ -
--------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 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
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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
======================================================================================
</TABLE>
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
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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
======================================================================================
</TABLE>
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
<PAGE> 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
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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)
======================================================================================
</TABLE>
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
<PAGE> 10
GAS PROCESSING
ONEOK Products Company extracts and sells natural gas liquids and buys and
sells natural gas.
NET INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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
======================================================================================
</TABLE>
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
<PAGE> 11
GAS MARKETING
ONEOK Gas Marketing Company buys and sells natural gas on the open market.
NET INCOME
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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)
======================================================================================
</TABLE>
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
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
FIRST QUARTER ENDED NOVEMBER 30, 1995 1994
--------------------------------------------------------------------------------------
<S> <C> <C>
(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)
======================================================================================
</TABLE>
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
<PAGE> 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
<TABLE>
<CAPTION>
----------------------------------------------------------------------
(ESTIMATED)
1996
----------------------------------------------------------------------
<S> <C>
(Millions of Dollars)
Operating activities $ 99.9
Short-term debt -
Long-term debt -
Other -
----------------------------------------------------------------------
Total sources of cash $ 99.9
======================================================================
</TABLE>
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------
1994 1995
- -----------------------------------------------------
<S> <C> <C>
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
- -----------------------------------------------------
</TABLE>
Last year's capital expenditures for the exploration and production segment
included approximately $17.6 million for an acquisition of Louisiana
properties.
12
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 6,644
<SECURITIES> 0
<RECEIVABLES> 105,613
<ALLOWANCES> 0
<INVENTORY> 102,624
<CURRENT-ASSETS> 227,912
<PP&E> 1,286,056
<DEPRECIATION> 521,752
<TOTAL-ASSETS> 1,197,162
<CURRENT-LIABILITIES> 200,198
<BONDS> 0
<COMMON> 201,955
0
9,000
<OTHER-SE> 187,705
<TOTAL-LIABILITY-AND-EQUITY> 1,197,162
<SALES> 0
<TOTAL-REVENUES> 238,460
<CGS> 0
<TOTAL-COSTS> 215,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,116
<INCOME-PRETAX> 13,699
<INCOME-TAX> 5,276
<INCOME-CONTINUING> 8,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,423
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
