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1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | Our Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014, consist of the results of ONE Gas for the three and eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014. |
• | Our Statement of Cash Flows for the nine months ended September 30, 2014, consists of the results of ONE Gas for the eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014. |
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2. | REGULATORY ASSETS AND LIABILITIES |
September 30, 2015 | ||||||||||||||
Current | Noncurrent | Total | ||||||||||||
(Thousands of dollars) | ||||||||||||||
Under-recovered purchased-gas costs | $ | 10,354 | $ | — | $ | 10,354 | ||||||||
Pension and postretirement benefit costs (see Note 8) | 19,445 | 429,346 | 448,791 | |||||||||||
Reacquired debt costs | 812 | 9,122 | 9,934 | |||||||||||
Other | 1,092 | 1,844 | 2,936 | |||||||||||
Total regulatory assets, net of amortization | 31,703 | 440,312 | 472,015 | |||||||||||
Accumulated removal costs (a) | — | (11,846 | ) | (11,846 | ) | |||||||||
Weather normalization | (5,821 | ) | — | (5,821 | ) | |||||||||
Over-recovered purchased-gas costs | (33,363 | ) | — | (33,363 | ) | |||||||||
Ad valorem tax | (2,153 | ) | — | (2,153 | ) | |||||||||
Total regulatory liabilities | (41,337 | ) | (11,846 | ) | (53,183 | ) | ||||||||
Net regulatory assets (liabilities) | $ | (9,634 | ) | $ | 428,466 | $ | 418,832 |
December 31, 2014 | ||||||||||||||
Current | Noncurrent | Total | ||||||||||||
(Thousands of dollars) | ||||||||||||||
Under-recovered purchased-gas costs | $ | 28,712 | $ | — | $ | 28,712 | ||||||||
Pension and postretirement benefit costs | 18,108 | 466,684 | 484,792 | |||||||||||
Reacquired debt costs | 812 | 9,730 | 10,542 | |||||||||||
Other | 2,561 | 2,309 | 4,870 | |||||||||||
Total regulatory assets, net of amortization | 50,193 | 478,723 | 528,916 | |||||||||||
Accumulated removal costs (a) | — | (15,451 | ) | (15,451 | ) | |||||||||
Weather normalization | (16,516 | ) | — | (16,516 | ) | |||||||||
Over-recovered purchased-gas costs | (13,055 | ) | — | (13,055 | ) | |||||||||
Ad valorem tax | (2,896 | ) | — | (2,896 | ) | |||||||||
Total regulatory liabilities | (32,467 | ) | (15,451 | ) | (47,918 | ) | ||||||||
Net regulatory assets (liabilities) | $ | 17,726 | $ | 463,272 | $ | 480,998 |
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3. | CREDIT FACILITY AND SHORT-TERM NOTES PAYABLE |
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4. | LONG-TERM DEBT |
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5. | EQUITY |
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6. | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
Three Months Ended | Nine Months Ended | |||||||||||||||
Details about Accumulated Other Comprehensive | September 30, | September 30, | Affected Line Item in the | |||||||||||||
Income (Loss) Components | 2015 | 2014 | 2015 | 2014 | Statements of Income | |||||||||||
(Thousands of dollars) | ||||||||||||||||
Pension and other postretirement benefit plan obligations (a) | ||||||||||||||||
Amortization of net loss | $ | 12,564 | $ | 8,542 | $ | 37,694 | $ | 25,625 | ||||||||
Amortization of unrecognized prior service cost | (374 | ) | (303 | ) | (1,120 | ) | (909 | ) | ||||||||
12,190 | 8,239 | 36,574 | 24,716 | |||||||||||||
Regulatory adjustments (b) | (11,961 | ) | (8,366 | ) | (35,887 | ) | (24,970 | ) | ||||||||
229 | (127 | ) | 687 | (254 | ) | Income before income taxes | ||||||||||
(88 | ) | 49 | (264 | ) | 98 | Income tax expense | ||||||||||
Total reclassifications for the period | $ | 141 | $ | (78 | ) | $ | 423 | $ | (156 | ) | Net income |
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7. | EARNINGS PER SHARE |
Three Months Ended September 30, 2015 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 7,371 | 52,408 | $ | 0.14 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 664 | ||||||||
Net income available for common stock and common stock equivalents | $ | 7,371 | 53,072 | $ | 0.14 |
Three Months Ended September 30, 2014 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 4,653 | 52,361 | $ | 0.09 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 653 | ||||||||
Net income available for common stock and common stock equivalents | $ | 4,653 | 53,014 | $ | 0.09 |
Nine Months Ended September 30, 2015 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 79,828 | 52,627 | $ | 1.52 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 688 | ||||||||
Net income available for common stock and common stock equivalents | $ | 79,828 | 53,315 | $ | 1.50 |
Nine Months Ended September 30, 2014 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 73,183 | 52,353 | $ | 1.40 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 495 | ||||||||
Net income available for common stock and common stock equivalents | $ | 73,183 | 52,848 | $ | 1.38 |
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8. | EMPLOYEE BENEFIT PLANS |
Pension Benefits | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Thousands of dollars) | |||||||||||||
Components of net periodic benefit cost | |||||||||||||
Service cost | $ | 3,497 | $ | 3,554 | $ | 10,518 | $ | 9,227 | |||||
Interest cost | 10,652 | 10,948 | 31,956 | 32,844 | |||||||||
Expected return on assets | (15,363 | ) | (14,965 | ) | (46,087 | ) | (44,895 | ) | |||||
Amortization of unrecognized prior service cost | 66 | 137 | 200 | 411 | |||||||||
Amortization of net loss | 11,054 | 7,550 | 33,164 | 22,649 | |||||||||
Net periodic benefit cost | $ | 9,906 | $ | 7,224 | $ | 29,751 | $ | 20,236 |
Other Postretirement Benefits | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Thousands of dollars) | |||||||||||||
Components of net periodic benefit cost | |||||||||||||
Service cost | $ | 849 | $ | 867 | $ | 2,547 | $ | 2,908 | |||||
Interest cost | 2,665 | 2,901 | 7,997 | 8,703 | |||||||||
Expected return on assets | (2,908 | ) | (2,848 | ) | (8,724 | ) | (8,544 | ) | |||||
Amortization of unrecognized prior service cost | (440 | ) | (440 | ) | (1,320 | ) | (1,320 | ) | |||||
Amortization of net loss | 1,510 | 992 | 4,530 | 2,976 | |||||||||
Net periodic benefit cost | $ | 1,676 | $ | 1,472 | $ | 5,030 | $ | 4,723 |
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9. | COMMITMENTS AND CONTINGENCIES |
• | an evaluation of whether natural gas pipeline integrity-management requirements should be expanded beyond current high-consequence areas; |
• | a verification of records for pipelines in class 3 and 4 locations and high-consequence areas to confirm maximum allowable operating pressures; and |
• | a requirement to test previously untested pipelines operating above 30 percent yield strength in high-consequence areas. |
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10. | DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS |
Recognition and Measurement | ||||
Accounting Treatment | Balance Sheet | Income Statement | ||
Normal purchases and normal sales | - | Recorded at historical cost | - | Change in fair value not recognized in earnings |
Mark-to-market | - | Recorded at fair value | - | Change in fair value recognized in, and recoverable through, the purchased-gas cost adjustment mechanisms |
• | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; |
• | Level 2 - Significant observable pricing inputs other than quoted prices included within Level 1 that are, either directly or indirectly, observable as of the reporting date. Essentially, this represents inputs that are derived principally from or corroborated by observable market data; and |
• | Level 3 - May include one or more unobservable inputs that are significant in establishing a fair value estimate. These unobservable inputs are developed based on the best information available and may include our own internal data. |
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• | Our Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2014, consist of the results of ONE Gas for the three and eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014. |
• | Our Statement of Cash Flows for the nine months ended September 30, 2014, consists of the results of ONE Gas for the eight months ended September 30, 2014, and the results of ONE Gas Predecessor for the one month ended January 31, 2014. |
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Recognition and Measurement | ||||
Accounting Treatment | Balance Sheet | Income Statement | ||
Normal purchases and normal sales | - | Recorded at historical cost | - | Change in fair value not recognized in earnings |
Mark-to-market | - | Recorded at fair value | - | Change in fair value recognized in, and recoverable through, the purchased-gas cost adjustment mechanisms |
• | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; |
• | Level 2 - Significant observable pricing inputs other than quoted prices included within Level 1 that are, either directly or indirectly, observable as of the reporting date. Essentially, this represents inputs that are derived principally from or corroborated by observable market data; and |
• | Level 3 - May include one or more unobservable inputs that are significant in establishing a fair value estimate. These unobservable inputs are developed based on the best information available and may include our own internal data. |
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September 30, 2015 | ||||||||||||||
Current | Noncurrent | Total | ||||||||||||
(Thousands of dollars) | ||||||||||||||
Under-recovered purchased-gas costs | $ | 10,354 | $ | — | $ | 10,354 | ||||||||
Pension and postretirement benefit costs (see Note 8) | 19,445 | 429,346 | 448,791 | |||||||||||
Reacquired debt costs | 812 | 9,122 | 9,934 | |||||||||||
Other | 1,092 | 1,844 | 2,936 | |||||||||||
Total regulatory assets, net of amortization | 31,703 | 440,312 | 472,015 | |||||||||||
Accumulated removal costs (a) | — | (11,846 | ) | (11,846 | ) | |||||||||
Weather normalization | (5,821 | ) | — | (5,821 | ) | |||||||||
Over-recovered purchased-gas costs | (33,363 | ) | — | (33,363 | ) | |||||||||
Ad valorem tax | (2,153 | ) | — | (2,153 | ) | |||||||||
Total regulatory liabilities | (41,337 | ) | (11,846 | ) | (53,183 | ) | ||||||||
Net regulatory assets (liabilities) | $ | (9,634 | ) | $ | 428,466 | $ | 418,832 |
December 31, 2014 | ||||||||||||||
Current | Noncurrent | Total | ||||||||||||
(Thousands of dollars) | ||||||||||||||
Under-recovered purchased-gas costs | $ | 28,712 | $ | — | $ | 28,712 | ||||||||
Pension and postretirement benefit costs | 18,108 | 466,684 | 484,792 | |||||||||||
Reacquired debt costs | 812 | 9,730 | 10,542 | |||||||||||
Other | 2,561 | 2,309 | 4,870 | |||||||||||
Total regulatory assets, net of amortization | 50,193 | 478,723 | 528,916 | |||||||||||
Accumulated removal costs (a) | — | (15,451 | ) | (15,451 | ) | |||||||||
Weather normalization | (16,516 | ) | — | (16,516 | ) | |||||||||
Over-recovered purchased-gas costs | (13,055 | ) | — | (13,055 | ) | |||||||||
Ad valorem tax | (2,896 | ) | — | (2,896 | ) | |||||||||
Total regulatory liabilities | (32,467 | ) | (15,451 | ) | (47,918 | ) | ||||||||
Net regulatory assets (liabilities) | $ | 17,726 | $ | 463,272 | $ | 480,998 |
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Three Months Ended | Nine Months Ended | |||||||||||||||
Details about Accumulated Other Comprehensive | September 30, | September 30, | Affected Line Item in the | |||||||||||||
Income (Loss) Components | 2015 | 2014 | 2015 | 2014 | Statements of Income | |||||||||||
(Thousands of dollars) | ||||||||||||||||
Pension and other postretirement benefit plan obligations (a) | ||||||||||||||||
Amortization of net loss | $ | 12,564 | $ | 8,542 | $ | 37,694 | $ | 25,625 | ||||||||
Amortization of unrecognized prior service cost | (374 | ) | (303 | ) | (1,120 | ) | (909 | ) | ||||||||
12,190 | 8,239 | 36,574 | 24,716 | |||||||||||||
Regulatory adjustments (b) | (11,961 | ) | (8,366 | ) | (35,887 | ) | (24,970 | ) | ||||||||
229 | (127 | ) | 687 | (254 | ) | Income before income taxes | ||||||||||
(88 | ) | 49 | (264 | ) | 98 | Income tax expense | ||||||||||
Total reclassifications for the period | $ | 141 | $ | (78 | ) | $ | 423 | $ | (156 | ) | Net income |
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Three Months Ended September 30, 2015 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 7,371 | 52,408 | $ | 0.14 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 664 | ||||||||
Net income available for common stock and common stock equivalents | $ | 7,371 | 53,072 | $ | 0.14 |
Three Months Ended September 30, 2014 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 4,653 | 52,361 | $ | 0.09 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 653 | ||||||||
Net income available for common stock and common stock equivalents | $ | 4,653 | 53,014 | $ | 0.09 |
Nine Months Ended September 30, 2015 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 79,828 | 52,627 | $ | 1.52 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 688 | ||||||||
Net income available for common stock and common stock equivalents | $ | 79,828 | 53,315 | $ | 1.50 |
Nine Months Ended September 30, 2014 | ||||||||||
Income | Shares | Per Share Amount | ||||||||
(Thousands, except per share amounts) | ||||||||||
Basic EPS Calculation | ||||||||||
Net income available for common stock | $ | 73,183 | 52,353 | $ | 1.40 | |||||
Diluted EPS Calculation | ||||||||||
Effect of dilutive securities | — | 495 | ||||||||
Net income available for common stock and common stock equivalents | $ | 73,183 | 52,848 | $ | 1.38 |
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Pension Benefits | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Thousands of dollars) | |||||||||||||
Components of net periodic benefit cost | |||||||||||||
Service cost | $ | 3,497 | $ | 3,554 | $ | 10,518 | $ | 9,227 | |||||
Interest cost | 10,652 | 10,948 | 31,956 | 32,844 | |||||||||
Expected return on assets | (15,363 | ) | (14,965 | ) | (46,087 | ) | (44,895 | ) | |||||
Amortization of unrecognized prior service cost | 66 | 137 | 200 | 411 | |||||||||
Amortization of net loss | 11,054 | 7,550 | 33,164 | 22,649 | |||||||||
Net periodic benefit cost | $ | 9,906 | $ | 7,224 | $ | 29,751 | $ | 20,236 |
Other Postretirement Benefits | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Thousands of dollars) | |||||||||||||
Components of net periodic benefit cost | |||||||||||||
Service cost | $ | 849 | $ | 867 | $ | 2,547 | $ | 2,908 | |||||
Interest cost | 2,665 | 2,901 | 7,997 | 8,703 | |||||||||
Expected return on assets | (2,908 | ) | (2,848 | ) | (8,724 | ) | (8,544 | ) | |||||
Amortization of unrecognized prior service cost | (440 | ) | (440 | ) | (1,320 | ) | (1,320 | ) | |||||
Amortization of net loss | 1,510 | 992 | 4,530 | 2,976 | |||||||||
Net periodic benefit cost | $ | 1,676 | $ | 1,472 | $ | 5,030 | $ | 4,723 |
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