ONEOK INC /NEW/ - FORM 8-K - EX-99.3 - ONE GAS PRO FORMA FINANCIAL EX 99.3 - February 5, 2014

Attached files

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8-K - ONE GAS SEPARATION - ONEOK INC /NEW/onegasseparation.htm
EX-99.2 - ONE GAS CALL OF NOTES EX 99.2 - ONEOK INC /NEW/onegascallofnotesex992.htm
EX-99.1 - ONE GAS COMPLETION OF DISTRIBUTION EX 99.1 - ONEOK INC /NEW/onegascompletionofdistribu.htm

Exhibit 99.3


Introduction to the Unaudited Pro Forma Condensed Consolidated Financial Statements

On January 31, 2014, ONEOK, Inc. (ONEOK) (NYSE: OKE) completed the tax-free separation of ONE Gas, Inc. (ONE Gas) (NYSE: OGS) to our shareholders. ONE Gas was formed on August 30, 2013, as a wholly owned subsidiary of ONEOK. The assets and liabilities of our former Natural Gas Distribution segment were transferred to ONE Gas on January 27, 2014. The separation was completed by means of a special stock dividend, which consisted of a distribution of one share of ONE Gas common stock for every four shares of our common stock.

The unaudited pro forma condensed consolidated financial statements of ONEOK have been derived from our historical consolidated financial statements and should be read together with the historical audited and unaudited consolidated financial statements and the related notes in our Form 10-K for the year ended December 31, 2012, and Form 10-Q for the nine months ended September 30, 2013. The unaudited pro forma condensed consolidated financial statements are being presented to give effect to the separation of ONE Gas. Effective with the filing of our Form 10-Q for the three months ended March 31, 2014, ONE Gas will be reported as discontinued operations.

The following unaudited pro forma condensed consolidated balance sheet gives effect to the separation as if it had occurred on September 30, 2013. The unaudited pro forma statements of income give effect to the separation described above as if it had occurred on January 1, 2010. The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and do not reflect what our financial position and results of operations would have been had the separation occurred on the dates indicated and are not necessarily indicative of our future financial position and future results of operations.

The pro forma adjustments are based upon currently available information and certain estimates and assumptions which management believes are factually supportable, and for income statement purposes, recurring in nature. The adjustments to reflect the separation of ONE Gas include:
•
ONE Gas' issuance of $1.2 billion of debt securities and subsequent cash payment to ONEOK of approximately $1.13 billion from the net proceeds.
•
Repayment of approximately $1.15 billion of commercial paper outstanding and long-term debt and related loss on early extinguishment, which occurred or is expected to occur in the first quarter 2014, and elimination of interest and other financing costs.
•
Separation of ONE Gas through a distribution to ONEOK shareholders of all of the ONE Gas shares of common stock.
•
Reclassification of natural gas sales and transportation and storage services provided by ONEOK and its affiliates to ONE Gas, previously eliminated in consolidation, as third-party transactions since such services will continue after the separation.
•
Adjustments for one-time costs incurred in the separation.
•
Reclassification of affiliate receivable balances as non-affiliate.
•
Adjustment of tax balances to reflect the separation.

The actual adjustments that would have been made had the separation occurred on the dates described above may have differed from the pro forma adjustments. However, management believes the adjustments provide a reasonable basis for presenting the significant effects of the transactions as contemplated, give appropriate effect to the assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.

All significant pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma financial statements which should be read in conjunction with such unaudited pro forma financial information.



ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
 
 
 
 
Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
 
(Thousands of dollars, except per share amounts)
Revenues
$
10,462,606

 
$
(1,167,266
)
 
$
186,348

(d)
$
9,481,688

Cost of sales and fuel
8,824,577

 
(577,912
)
 
186,348

(d)
8,433,013

Net margin
1,638,029

 
(589,354
)
 
—

 
1,048,675

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
635,915

 
(274,740
)
 
(2,706
)
(e)
358,469

Depreciation and amortization
276,343

 
(100,118
)
 
 
 
176,225

General taxes
94,000

 
(41,627
)
 
 
 
52,373

Total operating expenses
1,006,258

 
(416,485
)
 
(2,706
)
 
587,067

Gain (loss) on sale of assets
342

 
—

 
 
 
342

Operating income
632,113

 
(172,869
)
 
2,706

 
461,950

Equity earnings from investments
79,744

 
—

 
 
 
79,744

Allowance for equity funds used during construction
21,172

 
—

 
 
 
21,172

Other income
16,652

 
(3,909
)
 
 
 
12,743

Other expense
(4,479
)
 
1,980

 
 
 
(2,499
)
Interest expense
(244,076
)
 
82

 
22,800

(b)
(221,194
)
Income before income taxes
501,126

 
(174,716
)
 
25,506

 
351,916

Income taxes
(108,228
)
 
66,999

 
(8,459
)
(g)
(49,688
)
Net income from continuing operations
392,898

 
(107,717
)
 
17,047

 
302,228

Less: Net income attributable to noncontrolling interests
217,102

 
—

 
 
 
217,102

Net income from continuing operations attributable to ONEOK
$
175,796

 
$
(107,717
)
 
$
17,047

 
$
85,126

Net income from continuing operations attributable to ONEOK per share:
 
 

 
 

 
 

Basic
$
0.85

 
 
 
 
 
$
0.41

Diluted
$
0.84

 
 
 
 
 
$
0.41

Average shares (thousands)
 

 
 

 
 

 
 

Basic
205,952

 
 
 
 
 
205,952

Diluted
209,408

 
 
 
 
 
209,408

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


2

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
 
 
 
 
Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
 
(Thousands of dollars, except per share amounts)
Revenues
$
8,972,635

 
$
(943,879
)
 
$
102,842

(d)
$
8,131,598

Cost of sales and fuel
7,226,114

 
(398,056
)
 
102,842

(d)
6,930,900

Net margin
1,746,521

 
(545,823
)
 
—

 
1,200,698

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
603,055

 
(265,300
)
 
 
 
337,755

Depreciation and amortization
249,429

 
(97,481
)
 
 
 
151,948

Goodwill impairment
10,255

 
—

 
 
 
10,255

General taxes
81,471

 
(35,986
)
 
 
 
45,485

Total operating expenses
944,210

 
(398,767
)
 
—

 
545,443

Gain (loss) on sale of assets
603

 
—

 
 
 
603

Operating income
802,914

 
(147,056
)
 
—

 
655,858

Equity earnings from investments
92,380

 
—

 
 
 
92,380

Allowance for equity funds used during construction
6,126

 
—

 
 
 
6,126

Other income
11,495

 
(3,239
)
 
 
 
8,256

Other expense
(3,990
)
 
1,821

 
 
 
(2,169
)
Interest expense
(218,714
)
 
102

 
22,819

(b)
(195,793
)
Income before income taxes
690,211

 
(148,372
)
 
22,819

 
564,658

Income taxes
(156,835
)
 
56,826

 
(8,466
)
(g)
(108,475
)
Net income from continuing operations
533,376

 
(91,546
)
 
14,353

 
456,183

Less: Net income attributable to noncontrolling interests
298,578

 
—

 
 
 
298,578

Net income from continuing operations attributable to ONEOK
$
234,798

 
$
(91,546
)
 
$
14,353

 
$
157,605

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 
 
 
Basic
$
1.14

 


 


 
$
0.76

Diluted
$
1.11

 


 


 
$
0.75

Average shares (thousands)
 

 
 

 
 

 
 

Basic
206,638

 
 
 
 
 
206,638

Diluted
211,198

 
 
 
 
 
211,198

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.



3

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
 
 
 
 
Year Ended December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
 
(Thousands of dollars, except per share amounts)
Revenues
$
12,632,559

 
$
(1,376,649
)
 
$
135,650

(d)
$
11,391,560

Cost of sales and fuel
10,281,718

 
(620,260
)
 
135,650

(d)
9,797,108

Net margin
2,350,841

 
(756,389
)
 
—

 
1,594,452

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
806,087

 
(352,473
)
 
 
 
453,614

Depreciation and amortization
335,844

 
(130,150
)
 
 
 
205,694

Goodwill impairment
10,255

 
—

 
 
 
10,255

General taxes
102,891

 
(47,405
)
 
 
 
55,486

Total operating expenses
1,255,077

 
(530,028
)
 
—

 
725,049

Gain (loss) on sale of assets
6,736

 
—

 
 
 
6,736

Operating income
1,102,500

 
(226,361
)
 
—

 
876,139

Equity earnings from investments
123,024

 
—

 
 
 
123,024

Allowance for equity funds used during construction
13,648

 
—

 
 
 
13,648

Other income
12,504

 
(3,664
)
 
 
 
8,840

Other expense
(4,925
)
 
2,225

 
 
 
(2,700
)
Interest expense
(302,305
)
 
134

 
30,492

(b)
(271,679
)
Income before income taxes
944,446

 
(227,666
)
 
30,492

 
747,272

Income taxes
(215,195
)
 
87,304

 
(11,313
)
(g)
(139,204
)
Net income from continuing operations
729,251

 
(140,362
)
 
19,179

 
608,068

Less: Net income attributable to noncontrolling interests
382,911

 
—

 
 
 
382,911

Net income from continuing operations attributable to ONEOK
$
346,340

 
$
(140,362
)
 
$
19,179

 
$
225,157

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 
 
 
Basic
$
1.68

 
 
 
 
 
$
1.09

Diluted
$
1.64

 
 
 
 
 
$
1.07

Average shares (thousands)
 

 
 

 
 

 
 

Basic
206,140

 
 
 
 
 
206,140

Diluted
210,710

 
 
 
 
 
210,710

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.



4

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
 
 
 
 
Year Ended December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
 
(Thousands of dollars, except per share amounts)
Revenues
$
14,805,794

 
$
(1,621,334
)
 
$
203,585

(d)
$
13,388,045

Cost of sales and fuel
12,425,435

 
(869,499
)
 
203,585

(d)
11,759,521

Net margin
2,380,359

 
(751,835
)
 
—

 
1,628,524

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
813,666

 
(360,881
)
 
 
 
452,785

Depreciation and amortization
312,160

 
(132,212
)
 
 
 
179,948

General taxes
94,657

 
(46,452
)
 
 
 
48,205

Total operating expenses
1,220,483

 
(539,545
)
 
—

 
680,938

Gain (loss) on sale of assets
(963
)
 
—

 
 
 
(963
)
Operating income
1,158,913

 
(212,290
)
 
—

 
946,623

Equity earnings from investments
127,246

 
—

 
 
 
127,246

Allowance for equity funds used during construction
2,335

 
—

 
 
 
2,335

Other income
1,410

 
(140
)
 
 
 
1,270

Other expense
(9,336
)
 
2,919

 
 
 
(6,417
)
Interest expense
(297,006
)
 
157

 
30,191

(b)
(266,658
)
Income before income taxes
983,562

 
(209,354
)
 
30,191

 
804,399

Income taxes
(226,048
)
 
81,641

 
(11,201
)
(g)
(155,608
)
Net income from continuing operations
757,514

 
(127,713
)
 
18,990

 
648,791

Less: Net income attributable to noncontrolling interests
399,150

 
—

 
 
 
399,150

Net income from continuing operations attributable to ONEOK
$
358,364

 
$
(127,713
)
 
$
18,990

 
$
249,641

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 
 
 
Basic
$
1.71

 
 
 
 
 
$
1.19

Diluted
$
1.67

 
 
 
 
 
$
1.16

Average shares (thousands)
 

 
 

 
 

 
 

Basic
209,344

 
 
 
 
 
209,344

Diluted
214,498

 
 
 
 
 
214,498

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


5

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Income Statement
 
 
 
 
 
 
Year Ended December 31, 2010
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
 
(Thousands of dollars, except per share amounts)
Revenues
$
12,678,791

 
$
(1,817,402
)
 
$
326,632

(d)
$
11,188,021

Cost of sales and fuel
10,616,621

 
(1,062,485
)
 
326,632

(d)
9,880,768

Net margin
2,062,170

 
(754,917
)
 
—

 
1,307,253

Operating expenses
 
 
 
 
 
 
 
Operations and maintenance
740,881

 
(344,286
)
 
 
 
396,595

Depreciation and amortization
307,224

 
(130,968
)
 
 
 
176,256

General taxes
90,032

 
(43,942
)
 
 
 
46,090

Total operating expenses
1,138,137

 
(519,196
)
 
—

 
618,941

Gain (loss) on sale of assets
18,619

 
—

 
 
 
18,619

Operating income
942,652

 
(235,721
)
 
—

 
706,931

Equity earnings from investments
101,880

 
—

 
 
 
101,880

Allowance for equity funds used during construction
1,018

 
—

 
 
 
1,018

Other income
11,527

 
(4,037
)
 
 
 
7,490

Other expense
(11,067
)
 
3,804

 
 
 
(7,263
)
Interest expense
(292,232
)
 
178

 
30,896

(b)
(261,158
)
Income before income taxes
753,778

 
(235,776
)
 
30,896

 
548,898

Income taxes
(213,720
)
 
91,068

 
(11,462
)
(g)
(134,114
)
Net income from continuing operations
540,058

 
(144,708
)
 
19,434

 
414,784

Less: Net income attributable to noncontrolling interests
206,698

 
—

 
 
 
206,698

Net income from continuing operations attributable to ONEOK
$
333,360

 
$
(144,708
)
 
$
19,434

 
$
208,086

Net income from continuing operations attributable to ONEOK per share:
 
 
 
 
 
 
Basic
$
1.57

 
 
 
 
 
$
0.98

Diluted
$
1.55

 
 
 
 
 
$
0.97

Average shares (thousands)
 

 
 

 
 

 
 

Basic
212,736

 
 
 
 
 
212,736

Diluted
215,570

 
 
 
 
 
215,570

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


6

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
 
 
 
 
 
 
 
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
ONE Gas
Notes
Offering (a)
 
ONEOK
Debt
Retirement (b)
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
Assets
(Thousands of dollars)
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
779,524

 
$
1,189,217

 
$
(1,090,318
)
 
$
(62,682
)
 
$
—

 
$
815,741

Accounts receivable, net
1,166,994

 
 
 
 
 
(124,393
)
 
20,947

(f)
1,063,548

Gas and natural gas liquids in storage
664,213

 
 
 
 
 
(199,371
)
 
 
 
464,842

Commodity imbalances
94,404

 
 
 
 
 
(697
)
 
 
 
93,707

Energy marketing and risk-management
assets
16,437

 
 
 
 
 
—

 
 
 
16,437

Other current assets
160,452

 
 
 
8,964

 
(36,162
)
 
(7,771
)
(g)
125,483

Total current assets
2,882,024

 
1,189,217

 
(1,081,354
)
 
(423,305
)
 
13,176

 
2,579,758

Property, plant and equipment
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment
14,944,162

 
 
 
 
 
(4,447,285
)
 
 
 
10,496,877

Accumulated depreciation and
amortization
3,173,366

 
 
 
 
 
(1,476,832
)
 
 
 
1,696,534

Net property, plant and equipment
11,770,796

 
—

 
—

 
(2,970,453
)
 
—

 
8,800,343

Investments and other assets
 
 
 
 
 
 
 
 
 
 
 
Investments in unconsolidated affiliates
1,201,873

 
 
 
 
 
—

 
 
 
1,201,873

Goodwill and intangible assets
990,456

 
 
 
 
 
(157,953
)
 
 
 
832,503

Other assets
765,194

 
10,777

 
(1,563
)
 
(481,258
)
 
(10,200
)
(e)
282,950

Total investments and other assets
2,957,523

 
10,777

 
(1,563
)
 
(639,211
)
 
(10,200
)
 
2,317,326

Total assets
$
17,610,343

 
$
1,199,994

 
$
(1,082,917
)
 
$
(4,032,969
)
 
$
2,976

 
$
13,697,427

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


7

ONEOK, Inc. and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
 
 
 
 
 
 
 
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
(Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
ONEOK
Historical
 
ONE Gas
Notes
Offering (a)
 
ONEOK
Debt
Retirement (b)
 
Separation of
ONE Gas (c)
 
Pro Forma
Adjustments
 
ONEOK
Pro Forma
Liabilities and equity
(Thousands of dollars)
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
$
10,656

 
$
—

 
$
—

 
$
(6
)
 
$
—

 
$
10,650

Notes payable
562,329

 
 
 
(515,329
)
 
—

 
 
 
47,000

Accounts payable
1,382,785

 
 
 
 
 
(75,072
)
 
7,296

(e)
1,315,009

Commodity imbalances
227,355

 
 
 
 
 
—

 
 
 
227,355

Energy marketing and risk-management
liabilities
5,530

 
 
 
 
 
—

 
 
 
5,530

Other current liabilities
433,055

 
 
 
 
 
(127,973
)
 
 
 
305,082

Total current liabilities
2,621,710

 
—

 
(515,329
)
 
(203,051
)
 
7,296

 
1,910,626

Long-term debt, excluding current
maturities
7,757,159

 
1,199,994

 
(552,485
)
 
(1,201,457
)
 
 
 
7,203,211

Deferred credits and other liabilities
 
 
 
 
 
 
 
 
 
 


Deferred income taxes
1,776,949

 
 
 
 
 
(733,135
)
 
 
 
1,043,814

Other deferred credits
763,879

 
 
 
 
 
(383,968
)
 
 
 
379,911

Total deferred credits and other liabilities
2,540,828

 
—

 
—

 
(1,117,103
)
 
—

 
1,423,725

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
ONEOK shareholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
Common stock, $0.01 par value:
authorized 600,000,000 shares; issued
245,811,180 shares and outstanding
206,273,200 shares at September 30,
2013
2,458

 
 
 
 
 
—

 
 
 
2,458

Paid-in capital
1,404,086

 
 
 
 
 
—

 
 
 
1,404,086

Accumulated other comprehensive loss
(219,492
)
 
 
 
94

 
4,016

 
 
 
(215,382
)
Retained earnings
2,008,471

 
 
 
(15,197
)
 
(1,515,374
)
 
(17,496
)
(e)
473,580

 
 
 
 
 
 
 
 
 
20,947

(f)
 
 
 
 
 
 
 
 
 
 
(7,771
)
(g)
 
Treasury stock, at cost: 39,537,980 shares at September 30, 2013
(1,005,829
)
 
 
 
 
 
—

 
 
 
(1,005,829
)
Total ONEOK shareholders’ equity
2,189,694

 
—

 
(15,103
)
 
(1,511,358
)
 
(4,320
)
 
658,913

Noncontrolling interests in consolidated
subsidiaries
2,500,952

 
 
 
 
 
 
 
 
 
2,500,952

Total equity
4,690,646

 
—

 
(15,103
)
 
(1,511,358
)
 
(4,320
)
 
3,159,865

Total liabilities and equity
$
17,610,343

 
$
1,199,994

 
$
(1,082,917
)
 
$
(4,032,969
)
 
$
2,976

 
$
13,697,427

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.


8

ONEOK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Financing Adjustments

(a)
In January 2014, ONE Gas completed the issuance of $1.2 billion of senior unsecured notes. ONE Gas received approximately $1.19 billion from the offering net of issuance costs. ONE Gas made a cash payment to ONEOK of approximately $1.13 billion from the proceeds of the offering.

(b) Represents the elimination of interest expense and other financing costs related to approximately $515 million of commercial paper outstanding at September 30, 2013 and $550 million of long-term debt retired in the first quarter 2014. Proceeds from the cash payment received from ONE Gas were used for the debt retirement.
 
 
September 30,
 
December 31,
 
 
2013
 
2012
 
2012
 
2011
 
2010
 
 
(Thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Weighted-average interest rate on short-term borrowings repaid
 
0.28
%
 
0.47
%
 
0.47
%
 
0.39
%
 
0.31
%
Weighted-average interest rate on long-term debt repaid
 
5.13
%
 
5.13
%
 
5.13
%
 
5.13
%
 
5.13
%
 
 
 
 
 
 
 
 
 
 
 
Interest expense on short-term borrowings repaid
 
$
1,557

 
$
1,576

 
$
2,166

 
$
1,865

 
$
2,570

Interest expense on long-term debt repaid
 
21,243

 
21,243

 
28,326

 
28,326

 
28,326

Total interest expense on debt repaid
 
$
22,800

 
$
22,819

 
$
30,492

 
$
30,191

 
$
30,896


We repaid our commercial paper outstanding of $600.5 million. In January 2014, we commenced a cash tender offer to purchase our outstanding 4.25 percent notes due 2022 up to a maximum of $150 million, excluding accrued and unpaid interest. The tender offer is expected to close in February 2014. On February 3, 2014, we made an irrevocable election to exercise the make-whole call on our $400 million 5.2 percent notes due in 2015. We will settle the make-whole call with the bond holders on March 5, 2014.

Distribution Adjustments

(c)
On January 31, 2014, we completed the tax-free separation of our 100 percent interest in ONE Gas through a distribution of all of the outstanding shares of ONE Gas to the ONEOK shareholders. Amounts presented are the adjustments to remove the historical balances and results of operations for our natural gas distribution business from our consolidated financial statements.

Other Pro Forma Adjustments

(d) Represents the reclassification of revenues from natural gas sales and storage and transportation services provided by ONEOK and its affiliates and the related cost of sales and fuel previously eliminated in consolidation as third-party transactions.

(e) Reflects adjustments for one-time costs incurred in the separation. These costs have been eliminated from the income statement as the charges are nonrecurring. Charges incurred have been included as an adjustment in the balance sheet and include the write-off of regulatory assets and legal and other general and administrative costs. We expect to incur additional charges after the separation; however, such amounts have not been included as pro forma adjustments as the amounts are either not objectively determinable or not factually supportable.

(f) Reclassification of affiliate receivable balances as non-affiliate.

(g) Represents the tax effect of the pro forma adjustments to income using a blended statutory rate of 37.1 percent for all periods.


9

In connection with the separation, we entered into the Separation and Distribution Agreement and several other agreements with ONE Gas to effect the separation and provide a framework for our relationships with ONE Gas after the distribution. These other agreements include:

•
Transition Services Agreement;
•
Tax Matters Agreement; and
•
Employee Matters Agreement.

No adjustments have been made related to these agreements as any such adjustments would be considered not objectively determinable or, for income statement purposes, nonrecurring in nature.



10

ONEOK INC /NEW/ Reports