01—Abstract
Summary
Summary of the 8-K filed February 22, 2024. Cited figures are marked; the original filing is the authoritative source.
ONEOK Inc. (OKE) filed an 8-K on February 21, 2024, detailing adjustments made to its Annual Officer Incentive Plan (the 'Plan') for fiscal year 2023.
These modifications were implemented to neutralize the financial impact of its significant acquisition of Magellan Midstream Partners, L.P. (Magellan). The primary adjustments focused on the calculation of Earnings Per Share (EPS) and Return on Invested Capital (ROIC) for the legacy ONEOK business.
Specifically, EPS and ROIC calculations for incentive purposes will now be based on legacy ONEOK business performance, excluding the full year's impact of the Magellan acquisition. The adjusted metrics also exclude transaction costs associated with the Magellan deal, such as advisory fees and severance, and account for the borrowing costs and any related interest income from the cash portion of the purchase price. The company's Board of Directors finalized and approved incentive payouts under this modified framework on February 20 and 21, 2024, ensuring that executive compensation aligns with the performance of the core ONEOK operations, separate from the acquisition's immediate financial effects.
02—Key points
Key Highlights
- ONEOK modified its 2023 Annual Officer Incentive Plan to isolate the financial impact of the Magellan Midstream Partners acquisition.
- Adjustments were made to the calculation of Earnings Per Share (EPS) and Return on Invested Capital (ROIC) for incentive payout purposes.
- EPS and ROIC metrics now focus on the performance of the legacy ONEOK business, excluding post-acquisition full-year financial results.
- Transaction costs related to the Magellan acquisition, including advisory fees and severance, have been excluded from incentive calculations.
- The impact of financing the Magellan acquisition, both interest expense and income, has been adjusted for in the incentive metrics.
- Safety and environmental performance measures (Total Recordable Incident Rate and Agency Reportable Environmental Event Rate) remained unchanged.
- The Board of Directors approved the final incentive payouts under these modified metrics on February 20-21, 2024.
03—Questions
Frequently Asked Questions
Why did ONEOK modify its incentive plan metrics?
ONEOK modified its incentive plan metrics to neutralize the financial impact of its acquisition of Magellan Midstream Partners, L.P. This ensures that executive incentive payouts are based on the performance of the legacy ONEOK business, rather than being distorted by the significant costs and financial complexities of the acquisition.
How will EPS and ROIC be calculated for incentive purposes?
For incentive purposes, EPS and ROIC will be calculated based on the earnings and invested capital of the legacy ONEOK business for the full year. These calculations will exclude the financial impact of the Magellan acquisition from September 25, 2023 onwards, as well as exclude transaction costs and adjust for the impact of financing the acquisition.
Are the safety and environmental performance metrics still the same?
Yes, the Total Recordable Incident Rate and Agency Reportable Environmental Event Rate, which are operational performance measures under the incentive plan, were not modified and remain unchanged.
When were the incentive payouts finalized?
The ONEOK Board of Directors finalized and approved the incentive payouts under the modified plan on February 20 and 21, 2024.
04—Continue