OG&E 2015 Annual Report Download - page 33

OGE Energy Corp. 63
฀ ฀ Natural฀Gas
2015฀ Electric฀ Midstream฀ Other
(In฀millions)฀ Utility฀ Operations฀ Operations฀ Eliminations฀ Total
Operating฀revenues฀ $2,196.9 $ — $ — $ — $2,196.9
Cost฀of฀sales฀ 865.0 — — — 865.0
Other฀operation฀and฀maintenance฀ 444.5 7.5 (0.4) — 451.6
Depreciation฀and฀amortization฀ 299.9 — 8.0 — 307.9
Taxes฀other฀than฀income฀ 87.1 — 4.1 — 91.2
฀ Operating฀income฀(loss)฀ 500.4 (7.5) (11.7) — 481.2
Equity฀in฀earnings฀of฀unconsolidated฀affiliates (A)฀— 15.5 — — 15.5
Other฀income฀(expense)฀ 20.0 0.4 0.9 (0.3) 21.0
Interest฀expense฀ 146.7 — 2.6 (0.3) 149.0
Income฀tax฀expense฀(benefit ฀ 104.8 (1.0) (6.4) — 97.4
฀ Net฀income฀(loss)฀ $ 268.9 $ 9.4 $ (7.0) $ — $ 271.3
Investment฀in฀unconsolidated฀affiliate ฀ $ — $1,194.4 $ — $ — $1,194.4
Total฀assets฀ $8,541.8 $1,439.5 $175.1 $(559.0) $9,597.4
Capital฀expenditures฀ $ 551.6 $ — $ (3.8) $ — $ 547.8
(A)฀฀
In฀September฀2015,฀the฀Company฀recorded฀a฀$108.4฀million฀pre-tax฀charge฀for฀its฀share฀of฀the฀goodwill฀impairment,฀as฀adjusted฀for฀the฀basis฀difference.฀See฀Note฀3฀for฀further฀
discussion฀of฀Enable’s฀goodwill฀impairment.
2014฀
(In฀millions)
Operating฀revenues฀ $2,453.1฀ $฀฀ ฀ ฀ ฀—฀ $฀ ฀ ฀—฀ $฀ ฀ ฀฀—฀ $2,453.1
Cost฀of฀sales฀ 1,106.6฀ —฀ —฀ —฀ 1,106.6
Other฀operation฀and฀maintenance฀ 453.2฀ 1.2฀ (14.8)฀ —฀ 439.6
Depreciation฀and฀amortization฀ 270.8฀ —฀ 10.6฀ —฀ 281.4
Taxes฀other฀than฀income฀ 84.5฀ —฀ 4.2฀ —฀ 88.7
฀ Operating฀income฀(loss)฀ 538.0฀ (1.2)฀ —฀ —฀ 536.8
Equity฀in฀earnings฀of฀unconsolidated฀affiliate ฀ —฀ 172.6฀ —฀ —฀ 172.6
Other฀income฀(expense)฀ 7.1฀ —฀ 0.7฀ (0.2)฀ 7.6
Interest฀expense฀ 141.5฀ —฀ 7.1฀ (0.2)฀ 148.4
Income฀tax฀expense฀(benefit ฀ 111.6฀ 69.1฀ (7.9)฀ —฀ 172.8
฀ Net฀income฀(loss)฀ $฀฀ 292.0฀ $฀฀ 102.3฀ $฀ ฀ 1.5฀ $฀ ฀ ฀฀—฀ $฀฀ 395.8
Investment฀in฀unconsolidated฀affiliate ฀ $ —฀ $1,318.2฀ $฀ ฀ ฀—฀ $฀ ฀ ฀฀—฀ $1,318.2
Total฀assets฀ $8,266.2฀ $1,461.2฀ $129.2฀ $(328.8)฀ $9,527.8
Capital฀expenditures฀ $฀฀ 565.4฀ $฀฀ ฀ ฀ ฀—฀ $฀ 10.8฀ $฀ ฀(6.9)฀ $฀฀ 569.3
2013
(In฀millions)฀ ฀
Operating฀revenues฀ $2,262.2฀ $ 630.4฀ $ —฀ $ (24.9)฀ $2,867.7
Cost฀of฀sales฀ 965.9฀ 489.0฀ —฀ (26.0)฀ 1,428.9
Other฀operation฀and฀maintenance฀ 438.8฀ 60.9฀ (10.5)฀ —฀ 489.2
Depreciation฀and฀amortization฀ 248.4฀ 36.8฀ 12.1฀ —฀ 297.3
Taxes฀other฀than฀income฀ 83.8฀ 10.5฀ 4.5฀ —฀ 98.8
฀ Operating฀income฀(loss)฀ 525.3฀ 33.2฀ (6.1)฀ 1.1฀ 553.5
Equity฀in฀earnings฀of฀unconsolidated฀affiliate ฀ —฀ 101.9฀ —฀ —฀ 101.9
Other฀income฀(expense)฀ 10.1฀ 8.9฀ (2.3)฀ (0.5)฀ 16.2
Interest฀expense฀ 129.3฀ 10.6฀ 8.1฀ (0.5)฀ 147.5
Income฀tax฀expense฀(benefit ฀ 113.5฀ 26.9฀ (10.6)฀ 0.5฀ 130.3
฀ Net฀income฀(loss)฀ 292.6฀ 106.5฀ (5.9)฀ 0.6฀ 393.8
฀ ฀ Less:฀Net฀income฀attributable฀to฀noncontrolling฀interests฀ —฀ 6.6฀ —฀ (0.4)฀ 6.2
Net฀income฀attributable฀to฀OGE฀Energy฀ $ 292.6฀ $ 99.9฀ $ (5.9)฀ $ 1.0฀ $ 387.6
Investment฀in฀unconsolidated฀affiliate ฀ $ —฀ $1,298.8฀ $ —฀ $ —฀ $1,298.8
Total฀assets฀ $7,694.9฀ $1,348.6฀ $216.2฀ $(125.0)฀ $9,134.7
Capital฀expenditures฀ $ 797.6฀ $ 181.5฀ $ 11.5฀ $ —฀ $ 990.6
Intersegment฀revenues฀are฀recorded฀at฀prices฀comparable฀to฀those฀
of฀unaffiliated฀customers฀and฀are฀af ected฀by฀regulatory฀considerations.
The฀following฀tables฀summarize฀the฀results฀of฀the฀Company’s฀
business฀segments฀for฀the฀years฀ended฀December฀31,฀2015,฀2014฀
and฀2013.
62 OGE Energy Corp.
401(k)฀Plan.฀The฀Company฀match฀contributions฀vest฀over฀a฀three-year฀
period.฀After฀two฀years฀of฀service,฀participants฀become฀20฀percent฀
vested฀in฀their฀Company฀contribution฀account฀and฀become฀fully฀vested฀
on฀completing฀three฀years฀of฀service.฀In฀addition,฀participants฀fully฀vest฀
when฀they฀are฀eligible฀for฀normal฀or฀early฀retirement฀under฀the฀Pension฀
Plan,฀in฀the฀event฀of฀their฀termination฀due฀to฀death฀or฀permanent฀
disability฀or฀upon฀attainment฀of฀age฀65฀while฀employed฀by฀the฀
Company฀or฀its฀affiliate .฀The฀Company฀contributed฀$11.6฀million,฀
$15.2฀million฀and฀$14.2฀million฀in฀2015,฀2014฀and฀2013,฀respectively,฀฀
to฀the฀401(k)฀Plan.฀
Deferred Compensation Plan
The฀Company฀provides฀a฀nonqualified฀de erred฀compensation฀plan฀
which฀is฀intended฀to฀be฀an฀unfunded฀plan.฀The฀plan’s฀primary฀purpose฀
is฀to฀provide฀a฀tax-deferred฀capital฀accumulation฀vehicle฀for฀a฀select฀
group฀of฀management,฀highly฀compensated฀employees฀and฀non-
employee฀members฀of฀the฀Board฀of฀Directors฀of฀the฀Company฀and฀to฀
supplement฀such฀employees’฀401(k)฀Plan฀contributions฀as฀well฀as฀
offering฀this฀plan฀to฀be฀competitive฀in฀the฀marketplace.฀
Eligible฀employees฀who฀enroll฀in฀the฀plan฀have฀the฀following฀deferral฀
options:฀(i)฀eligible฀employees฀may฀elect฀to฀defer฀up฀to฀a฀maximum฀of฀
70฀percent฀of฀base฀salary฀and฀100฀percent฀of฀annual฀bonus฀awards฀or฀
(ii)฀eligible฀employees฀may฀elect฀a฀deferral฀percentage฀of฀base฀salary฀
and฀bonus฀awards฀based฀on฀the฀deferral฀percentage฀elected฀for฀a฀year฀
under฀the฀401(k)฀Plan฀with฀such฀deferrals฀to฀start฀when฀maximum฀
deferrals฀to฀the฀qualified฀401(k)฀Plan฀h ve฀been฀made฀because฀of฀
limitations฀in฀that฀plan.฀Eligible฀directors฀who฀enroll฀in฀the฀plan฀may฀
elect฀to฀defer฀up฀to฀a฀maximum฀of฀100฀percent฀of฀directors’฀meeting฀
fees฀and฀annual฀retainers.฀The฀Company฀matches฀employee฀(but฀not฀
non-employee฀director)฀deferrals฀to฀make฀up฀for฀any฀match฀lost฀in฀the฀
401(k)฀Plan฀because฀of฀deferrals฀to฀the฀deferred฀compensation฀plan,฀
and฀to฀allow฀for฀a฀match฀that฀would฀have฀been฀made฀under฀the฀401(k)฀
Plan฀on฀that฀portion฀of฀either฀the฀first฀six฀percent฀of฀total฀compensation
or the first five฀percent฀of฀total฀compensation,฀depending฀on฀prior฀
participant฀elections,฀deferred฀that฀exceeds฀the฀limits฀allowed฀in฀the฀
401(k)฀Plan.฀Matching฀credits฀vest฀based฀on฀years฀of฀service,฀with฀full฀
vesting฀after฀three฀years฀or,฀if฀earlier,฀on฀retirement,฀disability,฀death,฀a฀
change฀in฀control฀of฀the฀Company฀or฀termination฀of฀the฀plan.฀Deferrals,฀
plus฀any฀Company฀match,฀are฀credited฀to฀a฀recordkeeping฀account฀in฀
the฀participant’s฀name.฀Earnings฀on฀the฀deferrals฀are฀indexed฀to฀the฀
assumed฀investment฀funds฀selected฀by฀the฀participant.฀In฀2015,฀those฀
investment฀options฀included฀a฀Company฀Common฀Stock฀fund,฀whose฀
value฀was฀determined฀based฀on฀the฀stock฀price฀of฀the฀Company’s฀
Common฀Stock.฀The฀Company฀accounts฀for฀the฀contributions฀related฀฀
to฀the฀Company’s฀executive฀officers฀in฀this฀plan฀as฀Acc ued฀Benefit
Obligations฀and฀the฀Company฀accounts฀for฀the฀contributions฀related฀฀
to฀the฀Company’s฀directors฀in฀this฀plan฀as฀Other฀Deferred฀Credits฀and฀
Other฀Liabilities฀in฀the฀Consolidated฀Balance฀Sheets.฀The฀investment฀
associated฀with฀these฀contributions฀is฀accounted฀for฀as฀Other฀Property฀
and฀Investments฀in฀the฀Consolidated฀Balance฀Sheets.฀The฀appreciation฀
of฀these฀investments฀is฀accounted฀for฀as฀Other฀Income฀and฀the฀
increase฀in฀the฀liability฀under฀the฀plan฀is฀accounted฀for฀as฀Other฀
Expense฀in฀the฀Consolidated฀Statements฀of฀Income.
Supplemental Executive Retirement Plan
The฀Company฀provides฀a฀supplemental฀executive฀retirement฀plan฀in฀
order฀to฀attract฀and฀retain฀executives฀designated฀by฀the฀Compensation฀
Committee฀of฀the฀Company’s฀Board฀of฀Directors฀who฀may฀not฀
otherwise฀qualify฀for฀a฀sufficient฀l vel฀of฀benefits฀under฀the฀Compa y’s฀
Pension฀Plan฀and฀Restoration฀of฀Retirement฀Income฀Plan.฀The฀
supplemental฀executive฀retirement฀plan฀is฀intended฀to฀be฀an฀unfunded฀
plan฀and฀not฀subject฀to฀the฀benefit฀limitations฀of฀the฀Cod .฀As฀of฀
December฀31,฀2015,฀there฀are฀no฀employees฀participating฀in฀the฀
supplemental฀executive฀retirement฀plan.฀
13. Report of Business Segments
The฀Company฀reports฀its฀operations฀in฀two฀business฀segments:฀฀
(i)฀the฀electric฀utility฀segment,฀which฀is฀engaged฀in฀the฀generation,฀
transmission,฀distribution฀and฀sale฀of฀electric฀energy,฀and฀(ii)฀natural฀
gas฀midstream฀operations฀segment.
As฀discussed฀in฀Note฀3,฀in฀connection฀with฀the฀formation฀of฀Enable,฀
effective฀May฀1,฀2013,฀OGE฀Energy฀deconsolidated฀its฀interest฀in฀
Enogex฀Holdings฀and฀began฀accounting฀for฀its฀interest฀in฀Enable฀using฀
the฀equity฀method฀of฀accounting.฀Accordingly,฀for฀periods฀through฀
April฀30,฀2013,฀amounts฀reported฀for฀the฀natural฀gas฀midstream฀
operations฀segment฀reflect฀the฀ope ating฀results฀of฀Enogex฀Holdings.฀
Equity฀in฀earnings฀of฀unconsolidated฀affiliates฀in฀the฀natu al฀gas฀
midstream฀operations฀segment฀reflects฀OGE฀Energy s฀equity฀interest฀฀
in฀Enable฀since฀May฀1,฀2013.฀Investment฀in฀unconsolidated฀affiliates฀
in฀the฀natural฀gas฀midstream฀operations฀segment฀represents฀OGE฀
Energy’s฀investment฀in฀Enable.
Other฀Operations฀primarily฀includes฀the฀operations฀of฀the฀holding฀
company.