OG&E 2010 Annual Report Download - page 38

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Ÿ an increase of $4.8 million due to increased spending on vegetation management related to system hardening, which
expenses are being recovered through a rider;
Ÿ an increase of $3.4 million in injuries and damages expense primarily due to increased reserves on claims in 2010;
Ÿ an increase of $2.1 million in overtime expense due to the storms in January and May 2010; and
Ÿ an increase of $1.7 million in temporary labor expense.
These increases in other operation and maintenance expenses were partially offset by a decrease of $3.9 million in incentive
compensation expense primarily due to lower accruals in 2010.
Depreciation and amortization expense was $208.7 million in 2010 as compared to $187.7 million in 2009, an increase of
$21.0 million, or 11.2 percent, primarily due to additional assets being placed into service, including OU Spirit that was placed into
service in November and December 2009 and Windspeed that was placed into service on March 31, 2010.
Additional Information
Allowance for Equity Funds Used During Construction. AEFUDC was $11.4 million in 2010 as compared to $15.1 million
in 2009, a decrease of $3.7 million, or 24.5 percent, primarily due to the completion of OU Spirit in November and December 2009
and Windspeed on March 31, 2010.
Other Income. Other income was $6.5 million in 2010 as compared to $20.4 million in 2009, a decrease of $13.9 million, or
68.1 percent. The decrease in other income was primarily due to:
Ÿ a decrease of $10.0 million due to a decreased level of gains recognized in the GFB program in 2010 from higher
than expected usage resulting from warmer weather in addition to more customers participating in the GFB program
in 2010; and
Ÿ a decrease of $2.6 million related to the benefit associated with the tax gross-up of AEFUDC.
Other Expense. Other expense was $1.6 million in 2010 as compared to $6.7 million in 2009, a decrease of $5.1 million or
76.1 percent, primarily due to a decrease in charitable contributions in 2010.
Interest Expense. Interest expense was $103.4 million in 2010 as compared to $93.6 million in 2009, an increase of $9.8
million, or 10.5 percent. The increase in interest expense was primarily due to:
Ÿ an $8.2 million increase related to the issuance of $250 million of long-term debt in June 2010; and
Ÿ a $2.8 million increase due to a lower allowance for borrowed funds used during construction in 2010 as compared
to 2009.
Income Tax Expense. Income tax expense was $111.0 million in 2010 as compared to $90.0 million in 2009, an increase of
$21.0 million, or 23.3 percent, primarily due to:
Ÿ higher pre-tax income in 2010 as compared to 2009;
Ÿ an adjustment for the elimination of the tax deduction for the Medicare Part D subsidy (discussed in Note 7 of Notes
to Financial Statements); and
Ÿ the write-off of previously recognized Oklahoma investment tax credits primarily due to expenditures no longer
eligible for the Oklahoma investment tax credit related to the change in the tax method of accounting for
capitalization of repair expenditures.
These increases in income tax expense were partially offset by an increase in Federal renewable energy credits in 2010 as
compared to 2009.
2009 compared to 2008. The Company’s operating income increased $75.8 million, or 27.2 percent, in 2009 as compared
to 2008 primarily due to a higher gross margin partially offset by higher depreciation and amortization expense and higher taxes other
than income as discussed below.
Gross Margin
Gross margin was $954.9 million in 2009 as compared to $844.6 million in 2008, an increase of $110.3 million, or 13.1
percent. The gross margin increased primarily due to:
31