01—Abstract
Summary
Summary of the 10-K filed March 26, 2001. Cited figures are marked; the original filing is the authoritative source.
ONEOK, Inc. (NYSE: OKE) reported a transformational fiscal 2000 (year ended December 31, 2000), driven by roughly $600 milliona of acquisitions from Kinder Morgan (April 2000) and Dynegy (March 2000).
Operating revenues rose to $6.64 billionb from $1.84 billion in the prior fiscal year, reflecting the sharp increase in natural gas prices and a much larger Marketing and Trading business. Operating income rose to $333.9 million from $215.7 million, and net income increased to $145.6 million from $106.4 million. Diluted EPS was $2.96 versus $2.06.
Results also benefited from a $26.7 millionc gain on the sale of the Indian Basin plant, partly offset by $13.7 million of charges tied to the terminated Southwest Gas merger. The balance sheet expanded sharply. Total assets grew to $7.37 billion from $3.24 billion, largely due to $1.8 billion of price risk management assets and a $1.0 billion increase in receivables.
Long-term debt reached $1.35 billiond and commercial paper/notes payable reached $824 million. Operating cash flow was negative at $(95) million in 2000, as working capital absorbed cash, while investing outflows were $746 million. The company's fiscal year changed from August to December in 1999, so the comparison periods are not directly comparable.
Key risks for investors include significant litigation: Southern Union and Southwest Gas suits tied to the terminated merger (with claims of $750 million or more), shareholder derivative suits, and class actions over the January 2001 Hutchinson, Kansas gas explosions. Management says it believes these will not have a material adverse effect, but the outcomes are uncertain. The filing also flags a planned two-for-one stock split approved for June 2001, a 300 MW power plant due in June 2001, and the dividend of $1.24 annualized, unchanged for several years.
02—Key points
Key Highlights
- Operating revenues of $6.64 billion in 2000 versus $1.84 billion in fiscal 1999, driven by acquisitions and higher gas prices
- Net income of $145.6 million and diluted EPS of $2.96, up from $106.4 million and $2.06
- Acquired Kinder Morgan and Dynegy gathering/processing and transport assets for about $414 million in cash, adding 1.6 Bcf/d of processing capacity and roughly 19,000 miles of pipeline
- Total assets nearly doubled to $7.37 billion; price risk management assets of $1.8 billion reflect the EITF 98-10 mark-to-market adoption
- Operating cash flow was negative $(95) million, with $1.26 billion of receivables growth tied to trading volumes
- Significant litigation exposure from the terminated Southwest Gas merger, including Southern Union RICO and fraud claims seeking $750 million or more, plus Hutchinson, Kansas explosion class actions
- Dividend held at $0.31 quarterly ($1.24 annualized); a two-for-one stock split was declared, subject to shareholder approval
03—Questions
Frequently Asked Questions
What drove the large increase in revenue and assets in 2000?
The increase came mainly from the April 2000 Kinder Morgan and March 2000 Dynegy acquisitions, which expanded gathering, processing and marketing operations, along with much higher natural gas and NGL prices. Marketing and Trading revenues rose to about $4.66 billion, and the balance sheet grew with $1.8 billion of price risk management assets and $1.0 billion more in receivables.
Is the company generating cash from operations?
Not in 2000. Operating cash flow was negative $95.2 million, mainly because of working capital growth in receivables and other assets tied to trading activity. The company funded its $495 million of acquisitions and $311 million of capital spending largely through debt, including $590 million of new notes and $362 million of net commercial paper borrowing.
How significant is the litigation related to the Southwest Gas merger?
It is potentially significant. Southern Union seeks at least $750 million, trebled for RICO violations, plus $750 million of compensatory damages, and Southwest seeks damages above $75,000. Shareholder derivative suits are also pending. Management says it is defending the cases vigorously and that the outcomes are not expected to have a material adverse effect, but the filing acknowledges substantial damages could harm operations and financial position.
Is the dividend safe, and what changed in the capital structure?
The quarterly dividend stayed at $0.31 ($1.24 annually), and management expects comparable dividends to continue. About $186 million of retained earnings was available for dividends at year-end. The board also declared a two-for-one stock split for shareholders of record on May 23, 2001, subject to shareholder approval.
04—Continue