OG&E 2010 Annual Report Download - page 41

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should not be considered as an alternative to GAAP net income. Ongoing Earnings is not a presentation made in accordance with
GAAP and has important limitations as an analytical tool. It should not be considered in isolation or as a substitute for analysis of the
Company’s results as reported under GAAP. Because this non-GAAP financial measure excludes some, but not all, items that affect
net income and is defined differently by different companies in the Company’s industry, the Company’s definition of Ongoing
Earnings may not be comparable to a similarly titled measure of other companies.
To compensate for the limitations of this non-GAAP financial measure as an analytical tool, the Company believes it is
important to review the comparable GAAP measure and understand the differences between the measures.
Reconciliation of Ongoing Earnings to GAAP Net Income for the Years Ended December 31, 2010, 2009 and 2008
(In millions)
2010
Ongoing
Earnings
Medicare
Part D
Tax Subsidy
2010
GAAP
Net Income
2009
GAAP and
Ongoing Net
Income (A)
2008
GAAP and
Ongoing Net
Income (A)
The Company $ 222.7 $ (7.0) $ 215.7 $ 200.4 $ $ 143.0
(A) There were no one-time charges in 2009 or 2008; therefore, ongoing and GAAP net income are the same.
Financial Condition
The balance of Advances to Parent was $68.9 million and $125.9 million at December 31, 2010 and 2009, respectively, a
decrease of $57.0 million, or 45.3 percent, primarily due to payments for Crossroads, dividends and bond interest and other
operational needs.
The balance of Fuel Inventories was $134.9 million and $101.0 million at December 31, 2010 and 2009, respectively, an
increase of $33.9 million, or 33.6 percent, primarily due to higher coal balances due to higher volumes and higher average prices.
The balance of Construction Work in Progress was $328.1 million and $259.9 million at December 31, 2010 and 2009,
respectively, an increase of $68.2 million, or 26.2 percent, primarily due to increased spending on various distribution, transmission
and generation projects, including Crossroads, partially offset by the costs associated with Windspeed constructed by the Company
which was placed in service on March 31, 2010 being reclassified to Property, Plant and Equipment In Service.
The balance of Fuel Clause Over Recoveries was $29.9 million and $187.5 million at December 31, 2010 and 2009,
respectively, a decrease of $157.6 million, or 84.1 percent, primarily due to the fact that the amount billed to retail customers was
lower than the Company’s cost of fuel. The Company’s fuel recovery clauses are designed to smooth the impact of fuel price volatility
on customers’ bills. As a result, the Company under recovers fuel costs in periods of rising fuel prices above the baseline charge for
fuel and over recovers fuel costs when prices decline below the baseline charge for fuel. Provisions in the fuel clauses are intended to
allow the Company to amortize under and over recovery balances.
The balance of Other Current Liabilities was $40.3 million and $20.2 million at December 31, 2010 and 2009, respectively,
an increase of $20.1 million, or 99.5 percent, primarily due to the over recovery of various rate riders, including the Windspeed rider,
the OU Spirit rider and the Smart Grid rider, and an increase in legal accruals.
The balance of Long-Term Debt was $1,790.4 million and $1,541.8 million at December 31, 2010 and 2009, respectively,
an increase of $248.6 million or 16.1 percent, due to the issuance of $250 million of long-term debt in June 2010.
The balance of Deferred Income Taxes liability was $1,055.3 million and $931.2 million at December 31, 2010 and 2009,
respectively, an increase of $124.1 million, or 13.3 percent, primarily due to accelerated bonus tax depreciation which resulted in
higher Federal and state deferred tax accruals as discussed in Note 7 of Notes to Financial Statements.
The balance of Regulatory Liabilities was $193.1 million and $168.2 million at December 31, 2010 and 2009, respectively,
an increase of $24.9 million, or 14.8 percent, primarily due to increases related to the removal obligations and Oklahoma pension
regulatory liabilities.
Off-Balance Sheet Arrangement
Railcar Lease Agreement
The Company has a noncancellable operating lease with purchase options, covering 1,462 coal hopper railcars to transport
coal from Wyoming to the Company’s coal-fired generation units. Rental payments are charged to Fuel Expense and are recovered
through the Company’s tariffs and fuel adjustment clauses. On December 15, 2010, the Company renewed the lease agreement
34