ONEOK Inc. (NYSE:OKE)

The financial data for current and deferred income tax expenses over the five-year period reveals significant fluctuations and notable trends.

Current Tax Expense

The current tax expense demonstrates considerable volatility. It starts at a positive value of 1,893 thousand US dollars in 2018, then drops to a negative figure of -315 thousand US dollars in 2019, indicating a tax benefit or refund situation during that year. In 2020, the current tax expense rises to 2,777 thousand US dollars and markedly increases in 2021 to 12,441 thousand US dollars. This upward trend continues sharply into 2022, reaching 64,005 thousand US dollars. This recent sharp increase suggests either higher taxable income or changes in tax policy impacting current tax liabilities.

Deferred Tax Expense

The deferred tax expense maintains consistently high values throughout the period, albeit with some fluctuations. It begins at 361,010 thousand US dollars in 2018 and slightly increases to 372,729 thousand US dollars in 2019. A decrease is observed in 2020, with the expense falling to 186,730 thousand US dollars, indicating possible realizations of deferred tax liabilities or adjustments in deferred tax assets. In 2021, the deferred tax expense surges to a peak of 472,057 thousand US dollars, only to slightly decline to 463,419 thousand US dollars in 2022. Overall, deferred tax expenses remain a substantial component of the total income tax provision.

Provision for Income Taxes

The provision for income taxes, representing the aggregate of current and deferred tax expenses, reflects the observed movements in its components. It remains stable between 2018 and 2019, with values around 362,903 and 372,414 thousand US dollars, respectively. A significant decline occurs in 2020, where the provision drops to 189,507 thousand US dollars, coinciding with the decrease in deferred taxes that year. Subsequently, the provision sharply increases to 484,498 thousand US dollars in 2021 and further to 527,424 thousand US dollars in 2022, reaching the highest level in the five-year span. This pattern indicates an overall increasing tax burden, heavily influenced by large deferred tax expenses, especially in the last two years.

Federal statutory income tax rate

The federal statutory income tax rate remained constant at 21% throughout the observed period from 2018 to 2022.

Effective income tax rate

The effective income tax rate exhibited some variability across the years under review. Starting at 23.96% in 2018, it decreased to 22.56% in 2019, followed by an increase to 23.62% in 2020. The rate continued to rise to a peak of 24.42% in 2021 but decreased again to 23.44% in 2022. Despite fluctuations, the effective tax rate consistently remained above the federal statutory rate.

Employee benefits and other accrued liabilities

The balance shows a relatively stable trend from 2018 through 2021, hovering around $91.6 million to $96.7 million. In 2022, there is a noticeable decrease to $82.2 million, indicating a potential reduction in accrued liabilities or employee benefit obligations.

Federal net operating loss

There is a significant upward trend from $420.3 million in 2018 to a peak of approximately $1.47 billion in 2020. Following this peak, the amount declines to $1.34 billion in 2021 and further to $1.10 billion in 2022, suggesting some utilization or expiration of net operating losses.

State net operating loss and benefits

This item increases steadily from $108.0 million in 2018 to a high of $258.9 million in 2020, followed by a decline in subsequent years to $216.2 million in 2021 and $196.4 million in 2022, mirroring the federal net operating loss trend but on a smaller scale.

Derivative instruments

The value rises sharply from $22.1 million in 2018 to a high of $134.5 million in 2020, then decreases to $118.1 million in 2021 and drops significantly to $18.8 million in 2022. This pattern suggests increased derivative activity peaking in 2020, with a substantial reduction in exposure or valuation in the last reported year.

Other

This category remains relatively flat near $13 million from 2018 to 2020 but falls sharply to $4.9 million in 2021 before rebounding significantly to $30.0 million in 2022. This fluctuation indicates volatility in miscellaneous assets or liabilities classified under this heading.

Deferred tax assets

The deferred tax assets show a robust increase from $655.4 million in 2018 to $1.98 billion in 2020, followed by a decline to $1.77 billion in 2021 and further down to $1.43 billion in 2022. The initial growth aligns with increases in net operating losses and other deferred tax attributes, while the later decrease may reflect utilization or revaluation.

Carryforward expected to expire prior to utilization / Valuation allowance for state net operating loss and tax credits

Both related items display negative balances increasing in magnitude from approximately -$73.8 million in 2018 to a peak negative of -$121.2 million in 2020, then decreasing in negativity to around -$75.0 million by 2022. This trend indicates adjustments reflecting expected expiration and valuation allowances for deferred tax assets, possibly correlating with changes in state net operating loss values.

Net deferred tax assets

Reflecting gross deferred tax assets adjusted for valuation allowances, this figure increases markedly from $581.6 million in 2018 to nearly $1.85 billion in 2020 before declining to $1.69 billion in 2021 and $1.36 billion in 2022, consistent with the broader trend seen in deferred tax assets.

Excess of tax over book depreciation

This liability consistently increases in magnitude (more negative) from -$73.1 million in 2018 to -$94.8 million in 2022, showing increasing deferred tax liabilities attributable to timing differences between tax and book depreciation.

Investment in partnerships

The deferred tax liability related to partnerships grows significantly in magnitude from -$728.2 million in 2018 to -$3.00 billion in 2022, indicating increasing deferred tax obligations related to partnership investments over time.

Deferred tax liabilities

This category exhibits substantial growth in negative balances from -$801.3 million in 2018 to -$3.10 billion in 2022, reflecting increasing deferred tax obligations, possibly due to timing differences and investments.

Net deferred tax assets (liabilities)

The overall position transitions from a modest net liability of -$219.7 million in 2018 to a significantly larger net liability of -$1.74 billion in 2022. The growing negative balance indicates that deferred tax liabilities increasingly exceed deferred tax assets, suggesting greater future tax obligations or timing differences leading to expected tax payments.

Deferred Tax Liabilities

Over the five-year period from 2018 to 2022, there is a clear and significant upward trend in deferred tax liabilities. Beginning at $219,731 thousand in 2018, the liabilities increased markedly each year, reaching $1,738,525 thousand by the end of 2022.

Specifically, the deferred tax liabilities more than doubled between 2018 and 2019, rising from approximately $220 million to over $536 million. This growth continued steadily through 2020 and 2021, reaching nearly $1.17 billion by the end of 2021. The largest increase occurred between 2021 and 2022, with liabilities expanding by more than $600 million during that year alone.

The consistent and substantial rise in deferred tax liabilities suggests increasing temporary differences between accounting income and taxable income or changes in tax rates or tax laws impacting the company's tax position. This considerable growth in deferred tax liabilities might impact future tax payments and could reflect changes in the company’s asset base, investment activities, or tax planning strategies.

The data reveals notable trends and adjustments in the financial position and profitability over the five-year period.

Total liabilities (reported vs. adjusted)

Reported total liabilities show a consistent increase from approximately 11.65 billion USD in 2018 to about 17.89 billion USD in 2022, indicating growing obligations. Adjusted total liabilities also increase but at a moderated pace, rising from around 11.43 billion USD in 2018 to approximately 16.15 billion USD in 2022. The gap between reported and adjusted figures widens initially but narrows by 2022, potentially reflecting changes in deferred income tax accounting and its impact on liability recognition.

Shareholders’ equity (reported vs. adjusted)

Reported shareholders’ equity declines slightly from about 6.58 billion USD in 2018 to just over 6.49 billion USD in 2022, with a dip observed through 2021. Conversely, adjusted shareholders’ equity trends upward, increasing steadily from around 6.80 billion USD in 2018 to more than 8.23 billion USD in 2022. This divergence suggests that adjustments, possibly related to deferred income taxes, improve the equity position when factored in, indicating a stronger financial foundation under adjusted measures.

Net income attributable to ONEOK (reported vs. adjusted)

Reported net income exhibits volatility: it rises from approximately 1.15 billion USD in 2018 to a peak of about 1.72 billion USD in 2022 but experiences a significant decline to roughly 613 million USD in 2020. Adjusted net income mirrors this pattern but at consistently higher values, starting near 1.51 billion USD in 2018, dipping to approximately 800 million USD in 2020, and reaching nearly 2.19 billion USD in 2022. The adjustments enhance reported profitability in all years, indicating that deferred tax considerations materially affect the income performance portrayal.

Overall, when deferred income tax adjustments are incorporated, the company’s financial position appears stronger with higher equity and net income and moderately lower liabilities. The reported figures exhibit more pronounced fluctuations, especially in net income, while adjusted numbers provide a smoother and generally improved financial outlook. This highlights the significant impact of tax-related adjustments on the company’s reported financial results.

The financial data indicates various trends across the analyzed periods, reflecting the company's profitability, leverage, and returns, both in reported and adjusted terms.

Net Profit Margin

The reported net profit margin shows an initial increase from 9.15% in 2018 to 12.58% in 2019, followed by a decline to 7.17% in 2020. It then moderately recovers to 9.07% in 2021, before settling lower at 7.69% in 2022. The adjusted net profit margin follows a similar pattern but consistently remains higher than the reported figures, peaking at 16.25% in 2019 and experiencing a notable drop to 9.36% in 2020. It recovers to nearly 12% in 2021 and then decreases to 9.76% in 2022. This suggests that adjustments for deferred taxes and other factors have a meaningful impact on reported profitability, and the overall margin has been somewhat volatile but lower in the latest year compared to the peak.

Financial Leverage

Reported financial leverage steadily increased from 2.77 in 2018 to 3.93 in 2021, indicating a rising reliance on debt or other liabilities relative to equity, then slightly declined to 3.75 in 2022. The adjusted financial leverage follows a similar but less steep trajectory, rising to 3.44 in 2020, peaking at 3.29 in 2021, and subsequently decreasing to 2.96 in 2022. Overall, leverage peaked around 2020-2021 and softened slightly in the latest period, suggesting some deleveraging or equity improvements after a period of increased financial risk.

Return on Equity (ROE)

The reported ROE shows growth from 17.5% in 2018 to 20.54% in 2019, dropping sharply to 10.14% in 2020. It then rebounds strongly to 24.93% in 2021 and climbs further to 26.52% in 2022. Adjusted ROE follows the same pattern but with higher values, advancing from 22.25% in 2018 to a peak of 24.42% in 2019, dipping to 11.91% in 2020, and recovering to 27.45% in 2021 before slightly declining to 26.55% in 2022. These trends highlight significant volatility with a pronounced dip in 2020, likely due to extraordinary factors, followed by strong recovery and improved shareholder returns in recent years.

Return on Assets (ROA)

Reported ROA declines from 6.32% in 2018 to 5.86% in 2019 and then sharply falls to 2.66% in 2020, recovering to 6.35% in 2021 and increasing further to 7.06% in 2022. The adjusted ROA mirrors this pattern but remains consistently higher, moving from 8.3% in 2018 to 7.57% in 2019, dipping to 3.46% in 2020, then increasing to 8.35% in 2021 and 8.97% in 2022. The data suggests improved asset efficiency and utilization after a significant dip in 2020, with the adjusted metrics indicating stronger underlying asset returns after removing specific accounting effects.

Reported Net Income Attributable to ONEOK

The reported net income increased from approximately 1.15 billion US dollars in 2018 to nearly 1.28 billion in 2019, showing positive growth. However, it declined significantly in 2020 to around 613 million, likely reflecting adverse conditions or specific challenges during that year. The reported net income rebounded strongly in 2021, reaching nearly 1.5 billion US dollars, and continued to increase, albeit more moderately, to approximately 1.72 billion in 2022.

Adjusted Net Income Attributable to ONEOK

Adjusted net income followed a broadly similar pattern to reported net income but at higher levels throughout the period. It rose from approximately 1.51 billion US dollars in 2018 to about 1.65 billion in 2019, then dropped significantly to around 800 million in 2020, paralleling the trough seen in reported figures. Recovery was strong in the following years, with adjusted net income reaching nearly 2 billion in 2021 and peaking at approximately 2.19 billion in 2022, surpassing previous highs and indicating underlying operational improvements after adjustments.

Reported Net Profit Margin

The reported net profit margin exhibited considerable variability, rising from 9.15% in 2018 to a peak of 12.58% in 2019. It then saw a sharp drop to 7.17% in 2020, reflecting reduced profitability possibly due to external factors. While there was some recovery to 9.07% in 2021, the margin decreased again to 7.69% in 2022, suggesting fluctuating efficiency or cost pressures impacting the bottom line despite higher absolute net income.

Adjusted Net Profit Margin

The adjusted net profit margin consistently exceeded the reported margin each year, highlighting the impact of adjustments on profitability metrics. It climbed from 12.01% in 2018 to a high of 16.25% in 2019, then dropped markedly to 9.36% in 2020, mirroring reported margin trends but at a higher level. The margin rebounded to 11.92% in 2021 before declining to 9.76% in 2022. This pattern suggests that while operational efficiency improved after adjustments, profit margin volatility persisted.

Overall Trends and Insights

The data reveals a clear pattern of strong financial results in the years 2018 and 2019, a significant downturn in 2020, and recovery during 2021 and 2022. The magnitude of decline in both reported and adjusted figures during 2020 indicates a pronounced impact from that period's challenges. Adjusted income and margins provide a consistently more favorable view of profitability, suggesting that non-operational factors or one-time events likely influenced the reported metrics. Despite recovery in absolute net income figures in recent years, net profit margins show a degree of inconsistency and downward pressure in 2022, implying ongoing challenges in sustaining profitability at prior peak levels.

Shareholders’ Equity Trends

The reported total shareholders’ equity exhibited a declining trend from 6,579,543 thousand USD at the end of 2018 to 6,015,163 thousand USD by the end of 2021, followed by a recovery to 6,493,885 thousand USD in 2022. In contrast, the adjusted total shareholders’ equity showed a consistent upward trajectory throughout the period, increasing from 6,799,274 thousand USD in 2018 to 8,232,410 thousand USD by the end of 2022. This divergence suggests that adjustments related to deferred income taxes have a material positive impact on the equity base, particularly noticeable in the latter years.

Financial Leverage Patterns

The reported financial leverage ratio increased steadily from 2.77 in 2018 to a peak of 3.93 in 2021, indicating a growing reliance on debt relative to equity during this timeframe. However, the ratio decreased to 3.75 in 2022, signaling some deleveraging or equity growth relative to debt. The adjusted financial leverage similarly rose from 2.68 in 2018 to 3.44 in 2020 but then decreased more markedly to 2.96 by 2022. The adjusted data reflect lower leverage levels across all periods compared to reported figures, consistent with the higher adjusted equity values, implying that the inclusion of deferred tax adjustments results in a more conservative leverage assessment.

Overall Insights

The analysis indicates that the adjusted financial measures provide a more favorable view of the company's capital structure and financial health. While reported equity declined for most of the observed period, adjusted equity consistently improved, leading to more moderate leverage ratios. The company's leverage peak around 2020-2021 aligns with lower equity levels in reported terms but less pronounced in adjusted terms, suggesting that deferral and tax-related adjustments have significant effects on the interpretation of the company’s financial risk and capital adequacy over time.

Net Income Trends

Reported net income attributable to the company fluctuated over the five-year period. It increased from approximately $1.15 billion in 2018 to about $1.28 billion in 2019, then dropped significantly to around $613 million in 2020. Following this decline, net income rebounded sharply to roughly $1.50 billion in 2021 and further increased to $1.72 billion in 2022. The adjusted net income shows a similar pattern but with consistently higher values than the reported figures, indicating the impact of adjusting for annual reported and deferred income taxes. Adjusted net income rose from about $1.51 billion in 2018 to over $2.18 billion in 2022, reflecting strong recovery and growth post-2020.

Shareholders’ Equity Trends

Reported total shareholders’ equity experienced a moderate downward trend from approximately $6.58 billion in 2018 to $6.02 billion in 2021, before increasing to around $6.49 billion in 2022. In contrast, the adjusted total shareholders' equity displayed a consistent upward trajectory across the same timeframe, growing from about $6.80 billion in 2018 to over $8.23 billion in 2022. This upward trend in adjusted equity suggests a strengthening financial position when considering tax adjustments, in contrast to the more volatile reported figures.

Return on Equity (ROE) Analysis

The reported ROE mirrored the fluctuations seen in net income, starting at 17.5% in 2018, rising to 20.54% in 2019, dropping to 10.14% in 2020, and then substantially increasing to 24.93% in 2021 and 26.52% in 2022. Adjusted ROE values were consistently higher, starting at 22.25% in 2018 and reaching a peak of 27.45% in 2021, before slightly declining to 26.55% in 2022. This indicates that adjustments for income taxes have a positive influence on the perceived profitability and efficiency of equity use, with the company demonstrating strong return performance particularly from 2021 onward.

Overall Insights

The data reveals that the company experienced a notable dip in profitability and equity in 2020, likely reflective of broader economic challenges during that period. However, the subsequent recovery is robust, with both net income and equity metrics improving significantly by 2022. Adjusted figures generally show stronger performance and more positive growth trends than reported figures, emphasizing the importance of tax adjustments in financial analysis. The improvement in ROE metrics post-2020 suggests enhanced operational efficiency and profitability for shareholders in recent years.

Reported Net Income Attributable to ONEOK

The reported net income shows a generally increasing trend over the five-year period. Starting at approximately $1.15 billion in 2018, it increased to about $1.28 billion in 2019. There is a noticeable decline in 2020, dropping to approximately $613 million, likely reflecting adverse conditions during that year. Subsequently, the net income experienced a strong recovery, reaching nearly $1.50 billion in 2021 and further increasing to around $1.72 billion in 2022.

Adjusted Net Income Attributable to ONEOK

The adjusted net income follows a similar pattern to the reported net income but exhibits higher values at each point in time. Beginning near $1.51 billion in 2018, it rose to about $1.65 billion in 2019 before declining to approximately $800 million in 2020. The adjustment allows for recognition of factors impacting comparability, as indicated by the larger values compared to reported net income. The adjusted net income then rebounds strongly, increasing to roughly $1.97 billion in 2021 and reaching about $2.19 billion in 2022, indicating an overall recovery and growth trajectory stronger than the reported figures suggest.

Reported Return on Assets (ROA)

The reported ROA percentage decreased from 6.32% in 2018 to 5.86% in 2019, then declined sharply to 2.66% in 2020, reflecting reduced profitability relative to assets during that year. Following this low point, the ROA recovered substantially to 6.35% in 2021, slightly surpassing the 2018 level, and further improved to 7.06% in 2022, indicating enhanced efficiency and profitability in asset utilization over the most recent periods.

Adjusted Return on Assets (ROA)

The adjusted ROA consistently exceeds the reported ROA across all years, indicating improved profitability when adjustments are made. Starting at 8.3% in 2018, the adjusted ROA declined to 7.57% in 2019 and more significantly to 3.46% in 2020, mirroring the trend observed in the reported ROA but maintaining a more favorable level. A strong rebound follows, with the adjusted ROA rising to 8.35% in 2021 and then to 8.97% in 2022, reflecting robust asset performance and consistent improvement beyond the reported figures.

Overall Trends and Insights

The data reveals a notable dip in financial performance in 2020, likely attributable to extraordinary circumstances impacting the business environment that year. Both reported and adjusted net income and ROA metrics demonstrate recovery and growth in the subsequent years. The adjusted income and ROA figures indicate that after accounting for non-recurring items or deferred tax adjustments, the company’s profitability and asset efficiency are consistently stronger than the reported figures alone suggest. This adjustment underscores the importance of considering these factors for a complete understanding of financial health and operational performance.