OG&E 2014 Annual Report Download - page 28

52 OGE Energy Corp. OGE Energy Corp. 53
Earnings Per Share
Basic earnings per share is calculated by dividing net income
attributable to OGE Energy by the weighted average number of the
Company’s common shares outstanding during the period. In the
calculation of diluted earnings per share, weighted average shares
outstanding are increased for additional shares that would be
outstanding if potentially dilutive securities were converted to common
stock. Potentially dilutive securities for the Company consist of
performance units. Basic and diluted earnings per share for the
Company were calculated as follows:
(In millions) 2014 2013 2012
Net Income Attributable to OGE Energy $395.8 $387.6 $355.0
Average Common Shares Outstanding
Basic average common shares outstanding 199.2 198.2 197.1
Effect of dilutive securities:
Contingently issuable shares
(performance and
restricted stock units) 0.7 1.2 1.0
Diluted average common
shares outstanding 199.9 199.4 198.1
Basic Earnings Per Average
Common Share Attributable to
OGE Energy Common Shareholders $ 1.99 $ 1.96 $ 1.80
Diluted Earnings Per Average
Common Share Attributable to
OGE Energy Common Shareholders $ 1.98 $ 1.94 $ 1.79
Dividend Restrictions
The Company’s Certificate of Incorporation place restrictions on the
amount of common stock dividends it can pay when preferred stock is
outstanding. As there is no preferred stock outstanding, that restriction
did not place any effective limit on the Company’s ability to pay
dividends to its shareholders. Pursuant to the leverage restriction in the
Company’s revolving credit agreement, the Company must maintain a
percentage of debt to total capitalization at a level that does not exceed
65 percent. The payment of cash dividends indirectly results in an
increase in the percentage of debt to total capitalization, which results
in the restriction of approximately $452.6 million of the Company’s
retained earnings from being paid out in dividends. Accordingly,
approximately $1.7 billion of the Company’s retained earnings as of
December 31, 2014 are unrestricted for the payment of dividends.
The Company depends on receipts from its equity investment in
Enable and dividends from OG&E to pay dividends to its shareholders.
Enable’s partnership agreement requires that it distribute all “available
cash”, as defined as cash on hand at the end of a quarter after the
payment of expenses and the establishment of cash reserves, and
cash on hand resulting from working capital borrowings made after
the end of the quarter. Pursuant to the Federal Power Act, OG&E is
restricted from paying dividends from its capital accounts. Dividends
are paid from retained earnings. Pursuant to the leverage restriction
in OG&E’s revolving credit agreement, OG&E must also maintain a
percentage of debt to total capitalization at a level that does not exceed
65 percent. The payment of cash dividends indirectly results in an
increase in the percentage of debt to total capitalization, which results
in the restriction of approximately $412.2 million of OG&E’s retained
earnings from being paid out in dividends. Accordingly, approximately
$1.6 billion of OG&E’s retained earnings as of December 31, 2014 are
unrestricted for the payment of dividends.
10. Long-Term Debt
A summary of the Company’s long-term debt is included in the
Consolidated Statements of Capitalization. At December 31, 2014,
the Company was in compliance with all of its debt agreements.
OG&E Industrial Authority Bonds
OG&E has tax-exempt pollution control bonds with optional redemption
provisions that allow the holders to request repayment of the bonds on
any business day. The bonds, which can be tendered at the option of
the holder during the next 12 months, are as follows:
Amount
Series Date Due (In millions)
0.07% - 0.20% Garfield Industrial Authority, January 1, 2025 $ 47.0
0.07% - 0.18% Muskogee Industrial Authority, January 1, 2025 32.4
0.04% - 0.15% Muskogee Industrial Authority, June 1, 2027 56.0
Total (redeemable during next 12 months) $135.4
All of these bonds are subject to an optional tender at the request
of the holders, at 100 percent of the principal amount, together with
accrued and unpaid interest to the date of purchase. The bond holders,
on any business day, can request repayment of the bond by delivering
an irrevocable notice to the tender agent stating the principal amount
of the bond, payment instructions for the purchase price and the
business day the bond is to be purchased. The repayment option may
only be exercised by the holder of a bond for the principal amount.
When a tender notice has been received by the trustee, a third party
remarketing agent for the bonds will attempt to remarket any bonds
tendered for purchase. This process occurs once per week. Since the
original issuance of these series of bonds in 1995 and 1997, the
remarketing agent has successfully remarketed all tendered bonds. If
the remarketing agent is unable to remarket any such bonds, OG&E is
obligated to repurchase such unremarketed bonds. As OG&E has both
the intent and ability to refinance the bonds on a long-term basis and
such ability is supported by an ability to consummate the refinancing,
the bonds are classified as long-term debt in the Company’s
Consolidated Financial Statements. OG&E believes that it has
sufficient liquidity to meet these obligations.
Issuance of Long-Term Debt
On March 25, 2014, OG&E completed the issuance of $250 million of
4.55 percent senior notes due March 15, 2044. The proceeds from the
issuance were added to OG&E’s general funds and were used to repay
debt, fund capital expenditures and general corporate expenses, and
utilized for working capital purposes.
On November 19, 2014, the Company completed the issuance of
$100 million of in aggregate principal of its Floating Rate Senior Notes,
Series due November 24, 2017. The proceeds from the issuance were
used to refinance its $100 million of 5.00 percent Senior Notes due
November 15, 2014.
On December 11, 2014, OG&E completed the issuance of
$250 million of 4.00 percent Senior Notes, Series due December 15,
2044. The proceeds from the issuance were added to OG&E’s
general funds and were used to repay short-term debt, fund capital
expenditures and general corporate expenses, and utilized for working
capital purposes.
Redemption of Long-Term Debt
On August 1, 2014, OG&E redeemed all $140 million principal amount
outstanding of its 6.50 percent senior notes due August 1, 2034 at
103.25 percent of their principal amount, plus accrued interest. The
redemption premium of $4.6 million was deferred and will be amortized
through March 2044 to match the expected regulatory treatment.
Long-Term Debt Maturities
Maturities of the Company’s long-term debt during the next five years
consist of $0.2 million, $110.2 million, $225.1 million, $250.1 million
and $250.1 million in years 2015, 2016, 2017, 2018 and 2019,
respectively.
The Company has previously incurred costs related to debt
refinancings. Unamortized loss on reacquired debt is classified as a
Non-Current Regulatory Asset, unamortized debt expense is classified
as Deferred Charges and Other Assets and the unamortized premium
and discount on long-term debt is classified as Long-Term Debt,
respectively, in the Consolidated Balance Sheets and are being
amortized over the life of the respective debt.
11. Short-Term Debt and Credit Facilities
The Company borrows on a short-term basis, as necessary, by the
issuance of commercial paper and by borrowings under its revolving
credit agreements. The short-term debt balance was $98.0 million and
$439.6 million at December 31, 2014 and 2013, respectively, at a
weighted-average interest rate of 0.41 percent and 0.43 percent,
respectively. The following table provides information regarding the
Company’s revolving credit agreements and available cash at
December 31, 2014.
Weighted-
Aggregate Amount Average
Entity Commitment Outstanding(A) Interest Rate Maturity
(In millions)
OGE Energy (B) $ 750.0 $ 98.0 0.41%(D) 12/13/18(E)
OG&E (C) 400.0 2.0 0.95%(D) 12/1318(E)
Total $1,150.0 $100.0 0.42%
(A) Includes direct borrowings under the revolving credit agreements, commercial paper
borrowings and letters of credit at December 31, 2014.
(B) This bank facility is available to back up OGE Energy’s commercial paper borrowings
and to provide revolving credit borrowings. This bank facility can also be used as a
letter of credit facility.
(C)
This bank facility is available to back up OG&E’s commercial paper borrowings and to
provide revolving credit borrowings. This bank facility can also be used as a letter of
credit facility.
(D) Represents the weighted-average interest rate for the outstanding borrowings under
the revolving credit agreements, commercial paper borrowings and letters of credit.
(E) In December 2011, the Company and OG&E entered into unsecured five-year
revolving credit agreements to total in the aggregate $1,150.0 million ($750.0 million
for the Company and $400.0 million for OG&E). Each of the credit facilities contained
an option, which could be exercised up to two times, to extend the term for an
additional year. In the third quarter of 2013, the Company and OG&E utilized one of
these one-year extensions, and received consent from all of the lenders, to extend the
maturity of their credit agreements from December 13, 2016 to December 13, 2017. In
the second quarter of 2014, the Company and OG&E utilized their second extension
to extend the maturity of their respective credit facility from December 13, 2017 to
December 13, 2018. As of December 31, 2014, commitments of a single existing
lender with respect to approximately $16.3 million and $8.7 million of the Company’s
and OG&E’s credit facilities, respectively, however, were not extended and, unless the
non-extending lender is replaced in accordance with the terms of the credit facility,
such commitments will expire December 13, 2017.
The Company’s ability to access the commercial paper market could
be adversely impacted by a credit ratings downgrade or major market
disruptions. Pricing grids associated with the Company’s credit facilities
could cause annual fees and borrowing rates to increase if an adverse
rating impact occurs. The impact of any future downgrade could include
an increase in the costs of the Company’s short-term borrowings,
but a reduction in the Company’s credit ratings would not result in
any defaults or accelerations. Any future downgrade could also lead
to higher long-term borrowing costs and, if below investment grade,
would require the Company to post collateral or letters of credit.
OG&E must obtain regulatory approval from the FERC in order to
borrow on a short-term basis. OG&E has the necessary regulatory
approvals to incur up to $800 million in short-term borrowings at any
one time for a two-year period beginning January 1, 2015 and ending
December 31, 2016.
12. Retirement Plans and Postretirement Benefit Plans
Pension Plan and Restoration of Retirement Income Plan
It is the Company’s policy to fund the Pension Plan on a current basis
based on the net periodic pension expense as determined by the
Company’s actuarial consultants. During 2013, OGE Energy made
contributions to its Pension Plan of $35 million to help ensure that the
Pension Plan maintains an adequate funded status. Such contributions
are intended to provide not only for benefits attributed to service to
date, but also for those expected to be earned in the future. During
2014, OGE Energy did not make any contributions to its Pension Plan.
OGE Energy has not yet determined whether it will need to make any
contributions to the Pension Plan in 2015. Any contribution to the
Pension Plan during 2015 would be a discretionary contribution,
anticipated to be in the form of cash, and is not required to satisfy the
minimum regulatory funding requirement specified by the Employee
Retirement Income Security Act of 1974, as amended. OGE Energy
could be required to make additional contributions if the value of its
pension trust and postretirement benefit plan trust assets are adversely
impacted by a major market disruption in the future.
As discussed in Note 3, CenterPoint, OGE Energy and Enable
agreed to continue the secondment to Enable of 192 OGE Energy
employees that participate in OGE Energy’s defined benefit and
retirement plans beyond December 31, 2014, while 277 OGE Energy
employees that participated in the Retirement Plan and 59 employees
entitled to life insurance benefits only were terminated. As a result, the
Company incurred a curtailment, that reduced the pension expense
charge to Enable by $0.2 million for the year ended December 31, 2014.
In accordance with ASC Topic 715, “Compensation - Retirement
Benefits,” a one-time settlement charge is required to be recorded by
an organization when lump sum payments or other settlements that
relieve the organization from the responsibility for the pension benefit
obligation during a plan year exceed the service cost and interest cost
components of the organization’s net periodic pension cost. During
2013, the Company experienced an increase in both the number of
employees electing to retire and the amount of lump sum payments to
be paid to such employees upon retirement. As a result, and based in
part on the Company’s historical experience regarding eligible
employees who elect to retire in the last quarter of a particular year,
the Company recorded pension settlement charges of $22.4 million in
the fourth quarter of 2013, of which $17.0 million related to OG&E’s
Oklahoma jurisdiction and has been included in the pension tracker.
The pension settlement charge did not require a cash outlay by the