UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2005
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 001-13643
ONEOK, Inc.
(Exact name of registrant as specified in its charter)
| Oklahoma | 73-1520922 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer 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 ¨
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨.
On May 2, 2005, the Company had 101,983,630 shares of common stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
| Page No. | ||||
| Part I. |
Financial Information | |||
| Item 1. |
Financial Statements (Unaudited) | |||
| Consolidated Statements of Income - Three Months Ended March 31, 2005 and 2004 | 3 | |||
| Consolidated Balance Sheets - March 31, 2005 and December 31, 2004 | 4-5 | |||
| Consolidated Statements of Cash Flows - Three Months Ended March 31, 2005 and 2004 | 7 | |||
| Consolidated Statements of Shareholders’ Equity and Comprehensive Income - Three Months Ended March 31, 2005 | 8-9 | |||
| Notes to Consolidated Financial Statements | 10-18 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19-38 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 38-39 | ||
| Item 4. |
Controls and Procedures | 39 | ||
| Part II. |
Other Information | |||
| Item 1. |
Legal Proceedings | 40 | ||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 40-41 | ||
| Item 3. |
Defaults Upon Senior Securities | 41 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 41 | ||
| Item 5. |
Other Information | 41 | ||
| Item 6. |
Exhibits | 41 | ||
| 42 | ||||
As used in this Quarterly Report on Form 10-Q, the terms “we”, “our” or “us” mean ONEOK, Inc., an Oklahoma corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.
2
Part I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
ONEOK, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended March 31, | ||||||
| (Unaudited) |
2005 |
2004 | ||||
| (Thousands of dollars, except per share amounts) | ||||||
| Revenues |
||||||
| Operating revenues, excluding energy trading revenues |
$ | 2,743,671 | $ | 955,311 | ||
| Energy trading revenues, net |
9,192 | 75,264 | ||||
| Total Revenues |
2,752,863 | 1,030,575 | ||||
| Cost of sales and fuel |
2,353,298 | 637,817 | ||||
| Net Margin |
399,565 | 392,758 | ||||
| Operating Expenses |
||||||
| Operations and maintenance |
129,078 | 130,375 | ||||
| Depreciation, depletion and amortization |
51,496 | 46,740 | ||||
| General taxes |
19,400 | 20,535 | ||||
| Total Operating Expenses |
199,974 | 197,650 | ||||
| Operating Income |
199,591 | 195,108 | ||||
| Other income |
5,314 | 7,814 | ||||
| Other expense |
804 | 7,590 | ||||
| Interest expense |
29,802 | 23,688 | ||||
| Income before Income Taxes |
174,299 | 171,644 | ||||
| Income taxes |
66,635 | 66,491 | ||||
| Net Income |
$ | 107,664 | $ | 105,153 | ||
| Earnings Per Share of Common Stock (Note K) |
||||||
| Earnings per share, basic |
$ | 1.04 | $ | 1.06 | ||
| Earnings per share, diluted |
$ | 0.97 | $ | 1.04 | ||
| Average Shares of Common Stock (Thousands) |
||||||
| Basic |
103,666 | 99,116 | ||||
| Diluted |
111,001 | 101,298 | ||||
| Dividends Declared Per Share of Common Stock |
$ | 0.25 | $ | 0.19 | ||
See accompanying Notes to Consolidated Financial Statements.
3
CONSOLIDATED BALANCE SHEETS
| (Unaudited) |
March 31, 2005 |
December 31, 2004 | ||||
| (Thousands of dollars) | ||||||
| Assets |
||||||
| Current Assets |
||||||
| Cash and cash equivalents |
$ | 35,495 | $ | 9,458 | ||
| Trade accounts and notes receivable, net |
1,262,960 | 1,432,425 | ||||
| Materials and supplies |
22,937 | 22,475 | ||||
| Gas in storage |
300,440 | 593,028 | ||||
| Energy marketing and risk management assets (Note B) |
391,867 | 388,672 | ||||
| Deposits |
70,806 | 32,394 | ||||
| Deferred income taxes |
18,547 | — | ||||
| Other current assets |
78,194 | 40,365 | ||||
| Total Current Assets |
2,181,246 | 2,518,817 | ||||
| Property, Plant and Equipment |
||||||
| Production |
473,947 | 455,964 | ||||
| Gathering and Processing |
1,076,006 | 1,066,612 | ||||
| Transportation and Storage |
699,848 | 705,115 | ||||
| Distribution |
2,935,514 | 2,916,440 | ||||
| Energy Services |
128,147 | 128,120 | ||||
| Other |
134,322 | 134,199 | ||||
| Total Property, Plant and Equipment |
5,447,784 | 5,406,450 | ||||
| Accumulated depreciation, depletion and amortization |
1,655,737 | 1,619,629 | ||||
| Net Property, Plant and Equipment |
3,792,047 | 3,786,821 | ||||
| Deferred Charges and Other Assets |
||||||
| Regulatory assets, net (Note C) |
198,984 | 203,547 | ||||
| Goodwill (Note D) |
225,188 | 225,188 | ||||
| Energy marketing and risk management assets (Note B) |
69,321 | 71,310 | ||||
| Prepaid pensions |
125,079 | 127,649 | ||||
| Investments and other |
258,054 | 259,317 | ||||
| Total Deferred Charges and Other Assets |
876,626 | 887,011 | ||||
| Total Assets |
$ | 6,849,919 | $ | 7,192,649 | ||
See accompanying Notes to Consolidated Financial Statements.
4
ONEOK, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
| (Unaudited) |
March 31, 2005 |
December 31, 2004 |
||||||
| (Thousands of dollars) | ||||||||
| Liabilities and Shareholders’ Equity |
||||||||
| Current Liabilities |
||||||||
| Current maturities of long-term debt |
$ | 6,535 | $ | 341,532 | ||||
| Notes payable |
688,500 | 644,000 | ||||||
| Accounts payable |
1,088,831 | 1,185,351 | ||||||
| Accrued taxes |
90,057 | 36,346 | ||||||
| Accrued interest |
25,639 | 32,807 | ||||||
| Customers’ deposits |
39,831 | 39,478 | ||||||
| Unrecovered purchased gas costs |
60,705 | 64,322 | ||||||
| Energy marketing and risk management liabilities (Note B) |
509,946 | 409,633 | ||||||
| Deferred income taxes |
— | 16,861 | ||||||
| Other |
127,458 | 144,465 | ||||||
| Total Current Liabilities |
2,637,502 | 2,914,795 | ||||||
| Long-term Debt, excluding current maturities |
1,528,708 | 1,543,202 | ||||||
| Deferred Credits and Other Liabilities |
||||||||
| Deferred income taxes |
656,588 | 644,512 | ||||||
| Energy marketing and risk management liabilities (Note B) |
89,467 | 102,865 | ||||||
| Lease obligation |
83,449 | 86,817 | ||||||
| Other deferred credits |
282,072 | 294,754 | ||||||
| Total Deferred Credits and Other Liabilities |
1,111,576 | 1,128,948 | ||||||
| Total Liabilities |
5,277,786 | 5,586,945 | ||||||
| Commitments and Contingencies (Note H) |
||||||||
| Shareholders’ Equity |
||||||||
| Common stock, $0.01 par value: authorized 300,000,000 shares; issued 107,437,255 shares and outstanding 102,238,676 shares at March 31, 2005; issued 107,143,722 shares and outstanding 104,106,285 shares at December 31, 2004 |
1,074 | 1,071 | ||||||
| Paid in capital |
1,024,699 | 1,017,603 | ||||||
| Unearned compensation |
(1,054 | ) | (1,413 | ) | ||||
| Accumulated other comprehensive loss (Note E) |
(67,031 | ) | (9,591 | ) | ||||
| Retained earnings |
730,933 | 649,240 | ||||||
| Treasury stock, at cost: 5,198,579 shares at March 31, 2005 and 3,037,437 shares at December 31, 2004 |
(116,488 | ) | (51,206 | ) | ||||
| Total Shareholders’ Equity |
1,572,133 | 1,605,704 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 6,849,919 | $ | 7,192,649 | ||||
See accompanying Notes to Consolidated Financial Statements.
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6
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, |
||||||||
| (Unaudited) |
2005 |
2004 |
||||||
| (Thousands of Dollars) | ||||||||
| Operating Activities |
||||||||
| Net income |
$ | 107,664 | $ | 105,153 | ||||
| Depreciation, depletion, and amortization |
51,496 | 46,740 | ||||||
| Gain on sale of assets |
(54 | ) | (6,964 | ) | ||||
| Income from equity investments |
(2,815 | ) | (324 | ) | ||||
| Deferred income taxes |
13,545 | 19,305 | ||||||
| Stock based compensation expense |
2,633 | 3,044 | ||||||
| Allowance for doubtful accounts |
6,040 | 8,297 | ||||||
| Changes in assets and liabilities (net of acquisition effects): |
||||||||
| Accounts and notes receivable |
163,425 | 17,503 | ||||||
| Inventories |
292,126 | 241,912 | ||||||
| Unrecovered purchased gas costs |
(3,617 | ) | (1,683 | ) | ||||
| Deposits |
(38,412 | ) | 16,064 | |||||
| Regulatory assets |
(4,898 | ) | 1,798 | |||||
| Accounts payable and accrued liabilities |
(36,213 | ) | 18,336 | |||||
| Energy marketing and risk management assets and liabilities |
375 | (4,860 | ) | |||||
| Other assets and liabilities |
(34,881 | ) | (14,539 | ) | ||||
| Cash Provided by Operating Activities |
516,414 | 449,782 | ||||||
| Investing Activities |
||||||||
| Changes in other investments, net |
(20,623 | ) | (82 | ) | ||||
| Capital expenditures |
(58,312 | ) | (48,902 | ) | ||||
| Proceeds from sale of property |
57 | 13,073 | ||||||
| Other investing activities |
(624 | ) | (4,663 | ) | ||||
| Cash Used in Investing Activities |
(79,502 | ) | (40,574 | ) | ||||
| Financing Activities |
||||||||
| Borrowing (payments) of notes payable, net |
44,500 | (600,000 | ) | |||||
| Termination of interest rate swaps |
(20,212 | ) | 82,915 | |||||
| Payment of debt |
(335,324 | ) | (270 | ) | ||||
| Purchase of common stock |
(65,282 | ) | (800 | ) | ||||
| Issuance of common stock |
4,875 | 160,720 | ||||||
| Dividends paid |
||||||||