UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1995 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to ____________.
Commission file number: 1-3368
THE EMPIRE DISTRICT ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Kansas 44-0236370
(State of Incorporation) (I.R.S. Employer
Identification No.)
602 Joplin Street, Joplin, Missouri 64801
(Address of principal executive offices) (zip code)
Registrant's telephone number: (417) 625-5100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on
which registered
Common Stock ($1 par value) New York Stock Exchange
5% Cumulative Preferred Stock ($10 New York Stock Exchange
par value)
4-3/4% Cumulative Preferred Stock New York Stock Exchange
($10 par value)
Preference Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 1, 1996, 15,226,566 shares of common stock were outstanding.
Based upon the closing price on the New York Stock Exchange on March 1,
1996, the aggregate market value of the common stock of the Company held by
nonaffiliates was approximately $281,691,471.
The following documents have been incorporated by reference into the parts
of the Form 10-K as indicated:
The Company's proxy Part of Item 10 of Part III
statement, filed pursuant
to Regulation 14A under the All of Item 11 of Part III
Securities Exchange
Act of 1934, for its 1995 Part of Item 12 of Part III
Annual Meeting of
Stockholders to be held on All of Item 13 of Part III
April 25, 1996.
TABLE OF CONTENTS
Page
PART I
ITEM 1. BUSINESS 3
General 3
Electric Generating Facilities and Capacity 3
Construction Program 4
Fuel 5
Employees 6
Electric Operating Statistics 7
Executive Officers and Other Officers of the Registrant 8
Regulation 8
General 8
Rates 8
Fuel Adjustment Clauses 8
Environmental Matters 9
Conditions Respecting Financing 10
ITEM 2. PROPERTIES 10
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 12
ITEM 6. SELECTED FINANCIAL DATA 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 34
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 35
ITEM 11. EXECUTIVE COMPENSATION 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 35
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 36
SIGNATURES 39
PART I
ITEM 1. BUSINESS
General
The Empire District Electric Company (the "Company"), a Kansas
corporation organized in 1909, is an operating public utility engaged in
the generation, purchase, transmission, distribution and sale of
electricity in parts of Missouri, Kansas, Oklahoma and Arkansas. The
Company also provides water service to three towns in Missouri. In 1995,
99.5% of the Company's gross operating revenues were provided from the sale
of electricity and 0.5% from the sale of water.
The territory served by the Company's electric operations embraces an
area of about 10,000 square miles with a population of over 330,000. The
service territory is located principally in the Southwestern Missouri and
also includes smaller areas in Southeastern Kansas, Northeastern Oklahoma
and Northwestern Arkansas. The principal activities of these areas are
industry, agriculture and tourism. Of the Company's total 1995 retail
electric revenues, approximately 87% came from Missouri customers, 7% from
Kansas customers, 3% from Oklahoma customers and 3% from Arkansas
customers.
The Company supplies electric service at retail to 120 incorporated
communities and to various unincorporated areas and at wholesale to four
municipally-owned distribution systems and two rural electric cooperatives.
The largest urban area served by the Company is the city of Joplin,
Missouri, and its immediate vicinity, with a population of approximately
135,000. The Company operates under franchises having original terms of
twenty years or longer in virtually all of the incorporated communities.
Approximately 39% of the Company's electric operating revenues in 1995 were
derived from incorporated communities with franchises having at least ten
years remaining and approximately 25% were derived from incorporated
communities in which the Company's franchises have remaining terms of ten
years or less. Although the Company's franchises contain no renewal
provisions, in recent years the Company has obtained renewals of all its
expiring franchises prior to the expiration dates.
The Company's electric operating revenues in 1995 were derived as
follows: residential 42%, commercial 30%, industrial 17%, wholesale 6% and
other 5%. Producers of food and kindred products accounted for
approximately 4% of electric revenues in 1995. The Company's largest single
on-system wholesale customer is the city of Monett, Missouri, which in 1995
accounted for approximately 3% of electric revenues. No single retail
customer accounted for more than 1% of electric revenues in 1995.
Electric Generating Facilities and Capacity
At December 31, 1995, the Company's generating plants consisted of the
Asbury Plant (aggregate generating capacity of 211 megawatts), the Riverton
Plant (aggregate generating capacity of 136 megawatts), the Empire Energy
Center (aggregate generating capacity of 193 megawatts), the State Line
Power Plant (aggregate generating capacity of 101 megawatts) and the Ozark
Beach Hydroelectric Plant (aggregate generating capacity of 16 megawatts).
The Company also has a 12% ownership interest (80 megawatt capacity) in
Unit No. 1 at the Iatan Generating Station. See Item 2, "Properties -
Electric Facilities" for further information about these plants and another
plant under construction.
The Company and the ten other power suppliers in Kansas and Western
Missouri who comprise the MOKAN Power Pool have agreed to share reserve
capacity and provide emergency standby services for fellow members. Pool
members participate in studies for long-range generation and transmission
facilities requirements. Pursuant to the MOKAN agreement, the Company is
obligated annually to maintain a capacity margin of not less than 15.3%.
The Company is also a member of the Southwest Power Pool, a regional
division of the North American Electric Reliability Council, and the
Western Systems Power Pool, a marketing pool which facilitates the purchase
and sale of power among members.
The Company currently supplements its on-system generating capacity
with purchases of capacity and energy from neighboring utilities in order
to meet the demands of its customers and the capacity margins applicable to
it under the MOKAN agreement. The Company has entered into agreements for
such purchases with Associated Electric Cooperative, Inc. ("AEC"), Kansas
Gas & Electric ("KG&E"), Public Service Company of Oklahoma ("PSO"),
Southwestern Electric Power Company ("SWEPCO") and
Southwestern Public Service Company ("SPS") for periods into the year 2000.
In addition, on January 16, 1995, the Company entered into an agreement
with Western Resources ("WR") for the purchase of capacity and energy
through May 31, 2010. The amount of capacity purchased under these
contracts reflects the Company's on-system capacity, its current
expectation of the future power needs of its service territory and its
current plans to construct an additional generating unit as indicated under
"Construction Program" below. The following chart sets forth the Company's
purchase commitments and anticipated owned capacity (in megawatts) during
the indicated contract years (which run from June 1 to May 31 of the
following year).
Purchased Anticipated
Contract Power Owned
Year Commitment Capacity Total
1993 220 657 877
1994 267 657 924
1995 225 737 962
1996 290 724 1014
1997 210 825 1035
1998 230 825 1055
1999 255 825 1080
2000 287 825 1112
The charges for capacity purchases under the contracts referred to above
during calendar year 1995 amounted to approximately $10.5 million. Minimum
charges for capacity purchases under such contracts total approximately
$84.6 million for the period June 1, 1996, through May 31, 2001.
Based on its expectation of growth in demand, the Company believes
that in the year 2001 it will likely need capacity in addition to that
described above. The Company is currently reviewing alternatives to meet
such increase in demand.
The maximum hourly demand on the Company's system reached a new record
high of 815 megawatts on August 18, 1995. The Company's previous record
peak of 741 megawatts was established in July 1994. The maximum hourly
winter demand during 1995 was 701 megawatts which occurred during the month
of January.
Construction Program
Total gross property additions (including construction work in
progress) for the three years ended December 31, 1995, amounted to $163.5
million, and retirements during the same period amounted to $11.9 million.
The Company's total construction-related expenditures, including
allowance for funds used during construction ("AFUDC"), were $50.8 million
in 1995 and for the next three years are estimated for planning purposes to
be as follows:
Estimated Construction
Expenditures
(amounts in millions)
1996 1997 1998 Total
New generating facilities $15.7 $5.9 $0.0 $21.6
Additions to existing
generating facilities 7.4 3.6 6.2 17.2
Transmission facilities 13.8 8.8 4.5 27.1
Distribution system
additions 21.7 23.9 23.7 69.3
General and other
additions 2.1 2.4 2.3 6.8
Total $60.7 $44.6 $36.7 $142.0
The Company's projected construction plan for the years 1996 and 1997
includes expenditures for an additional 101 megawatt gas-fired combustion
turbine unit to be placed in service during mid-1997 at the Company's State
Line Power Plant, west of Joplin, Missouri. Additions to the Company's
transmission and distribution systems to meet projected increases in
customer demand constitute the majority of the remainder of the projected
construction expenditures for the three-year period.
The Company's estimated construction expenditures are reviewed and
adjusted for, among other things, revised estimates of future capacity
needs, the cost of funds necessary for construction and the availability
and cost of alternative power. Actual construction expenditures may vary
significantly from the estimates due to a number of factors including
changes in equipment delivery schedules, changes in customer requirements,
construction delays, ability to raise capital, environmental matters, the
extent to which the Company receives timely and adequate rate increases,
the extent of competition from independent power producers and co-
generators, other changes in business conditions and changes in legislation
and regulation, including regulations governing the wheeling of power. See
Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Competition" and "- Regulation" below.
Fuel
Coal supplied approximately 93.1% of the Company's total fuel
requirements in 1995 based on kilowatt-hours generated. The remainder was
supplied by natural gas (6.8%) and oil (0.1%).
The Company's Asbury Plant is fueled entirely by coal except for
startup fuel. The Company is currently using a blend consisting of
approximately 86% Western coal and 14% local coal on an mmbtu basis. Under
normal conditions, the Company attempts to keep approximately a 45-day
supply on hand. As of December 31, 1995, the Company had sufficient coal on
hand to supply anticipated requirements at Asbury for 40 days.
The Riverton Plant's fuel requirements are primarily met by coal with
the remainder supplied by natural gas and oil. During 1995, a blend of
approximately 68% Western coal and 32% local coal on an mmbtu basis was
burned at the Plant. Under normal conditions, the Company attempts to keep
approximately a 45-day supply on hand. As of December 31, 1995, the Company
had coal supplies on hand at Riverton to meet anticipated requirements for
53 days.
The Company has a long-term contract, expiring in 2004, with a
subsidiary of Peabody Holding Company, Inc., for the supply of low sulfur
Western coal to meet its requirements for such coal at the Asbury and
Riverton Plants during the term of the contract. This Peabody coal is
supplied from the Rochelle Mine in Campbell County, Wyoming, and is shipped
from there to the Asbury Plant by rail, a distance of approximately 800
miles. The coal is delivered under a transportation contract with Western
Railroad Properties, Inc., Union Pacific Railroad Company and The Kansas
City Southern Railway Company. The Company owns one unit train which
delivers Peabody coal to the Asbury Plant and leases rail cars on an as
needed basis to supplement inventory. The Company currently has a train
leased through the end of the first quarter of 1996 and has entered into an
agreement to lease another train from May 1996 to May 1997. The Peabody
coal is transported from Asbury to Riverton via truck. Transportation costs
account for over half of the cost of the Peabody Coal. Anticipated
requirements for local coal at both Plants are supplied under a coal supply
agreement with the Mackie-Clemens Fuel Company which expires on December
31, 1999.
Both units at the Empire Energy Center were converted in 1995 to burn
natural gas as a primary fuel, with light oil as a backup fuel. The State
Line Power Plant also burns natural gas as a primary fuel, with light oil
as a backup fuel. The Company attempts to maintain a supply of oil at these
facilities which would support full load operation for approximately three
days. Based on current fuel prices, it is expected that these facilities
will continue to be operated primarily on natural gas.
The Company has entered into a firm agreement with Williams Natural
Gas Company for the transportation of natural gas to the Empire Energy
Center, the State Line Power Plant or the Riverton Plant, as elected by the
Company. The effective date of the agreement will be the earlier of June 1,
1997, or the date of initial delivery under the agreement. As of December
31, 1995, no such initial delivery had occurred. The Company also has the
right under the agreement to purchase a portion of the pipeline from
Williams Natural Gas Company prior to June 1, 1997, in which event, the
agreement would be terminated. The Company expects that its remaining gas
transportation requirements, as well as the majority of its gas supply
requirements, will be met by spot purchases.
Unit No.1 at the Iatan Plant is a coal-fired generating unit which is
jointly-owned by Kansas City Power & Light ("KCPL") (70%), St. Joseph Light
& Power Company ("SJLP") (18%) and the Company (12%). Low sulfur Western
coal in quantities sufficient to meet substantially all of Iatan's
requirements is supplied under a long-term contract expiring on December
31, 2003, between the joint owners and the Arco Coal Company, a division of
the Atlantic Richfield Company. The coal is transported by rail under a
contract expiring on December 31, 2000, with Burlington Northern, Kansas
City Southern Railway Company and the MO-KAN-TEX railroads. The remainder
of Iatan Unit No. 1's requirements for coal are met with spot purchases.
The following table sets forth a comparison of the cost, including
transportation costs, per million btu of various types of fuels used in the
Company's facilities:
1995 1994 1993
Coal - Iatan $0.822 $0.888 $0.940
Coal - Asbury 1.061 1.040 1.017
Coal - Riverton 1.211 1.173 1.173
Natural Gas 1.607 1.820 2.299
Oil 3.338 4.006 3.560
The Company's weighted cost of fuel burned per kilowatt-hour generated
was 1.255 cents in 1995, 1.194 cents in 1994 and 1.252 cents in 1993.
Employees
At December 31, 1995, the Company had 584 full-time employees, of whom
314 were members of Local 1474 of The International Brotherhood of
Electrical Workers ("IBEW"). On December 30, 1993, the Company signed a
labor agreement with the IBEW expiring on October 31, 1996. Negotiations
with respect to extending or renewing the labor agreement are expected to
commence sometime during the first or second quarters of 1996. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for discussion of the voluntary early retirement plan and
restructuring of the Company's organizational structure which were
implemented in 1995.
ELECTRIC OPERATING STATISTICS (1)
1995 1994 1993 1992 1991
Electric Operating
Revenues (000s):
Residential (2) $81,331 $71,977 $68,477 $59,645 $62,682
Commercial (2) 58,430 54,052 50,264 45,264 43,841
Industrial (2) 32,637 31,317 28,880 26,596 26,289
Public authorities 3,745 3,509 3,419 3,177 3,069
Wholesale on-system 8,360 8,173 8,038 6,837 6,745
Miscellaneous 3,345 2,393 2,302 1,975 2,052
Total system 187,848 171,421 161,380 143,494 144,678
Wholesale off-system 4,000 5,391 6,244 5,997 4,938
Total electric
operating revenues $191,848 $176,812 $167,624 $149,491 $149,616
Electricity generated and
purchased (000s of Kwh):
Steam 2,374,021 2,495,055 2,322,749 2,307,854 2,243,083
Hydro 71,302 83,556 102,673 77,644 79,865
Combustion turbine 170,479 51,358 39,532 5,048 63,387
Total generated 2,615,802 2,629,969 2,464,954 2,390,546 2,386,335
Purchased 1,540,816 1,394,470 1,443,410 1,119,025 1,096,056
Total generated and
purchased 4,156,618 4,024,439 3,908,364 3,509,571 3,482,391
Interchange (net) (5,851) 630 11,266 2,657 (2,917)
Total system input 4,150,767 4,025,069 3,919,630 3,512,228 3,479,474
Maximum hourly system
demand (Kw) 815,000 741,000 739,000 680,000 678,000
Owned capacity (end of
period) (Kw) 737,000 656,500 657,300 657,300 657,300
Annual load factor (%) 55.15 57.32 54.88 52.77 54.02
Electric sales (000s of
Kwh):
Residential 1,350,340 1,264,721 1,248,482 1,068,595 1,142,752
Commercial 1,086,894 1,018,052 950,906 850,829 826,774
Industrial 859,017 827,067 760,737 695,271 689,377
Public authorities 90,543 86,463 83,239 78,050 77,068
Wholesale on-system 243,869 234,228 232,815 220,916 227,087
Total system 3,630,663 3,430,531 3,276,179 2,913,661 2,963,058
Wholesale off-system 213,590 304,554 366,729 360,251 270,920
Total electric sales 3,844,253 3,735,085 3,642,908 3,273,912 3,233,978
Company use (000s of Kwh) 9,559 9,260 9,117 8,924 9,222
Lost and unaccounted for
(000s of Kwh) 296,955 280,724 267,605 229,392 236,274
Total system input 4,150,767 4,025,069 3,919,630 3,512,228 3,479,474
Customers (average number
of monthly bills rendered):
Residential 112,605 109,032 105,079 101,943 99,916
Commercial 20,098 19,175 18,447 17,796 17,276
Industrial 339 318 283 267 264
Public authorities 1,637 1,558 1,517 1,467 1,427
Wholesale on-system 7 7 7 7 7
Total system 134,686 130,090 125,333 121,480 118,890
Wholesale off-system 6 6 5 5 4
Total 134,692 130,096 125,338 121,485 118,894
Average annual sales per
residential customer (Kwh) 11,992 11,600 11,881 10,482 11,437
Average annual revenue per
residential customer $722.27 $660.14 $651.67 $585.08 $627.34
Average residential
revenue per Kwh $0.0602 $0.0569 $0.0548 $0.0558 $0.0549
Average commercial revenue
per Kwh $0.0538 $0.0531 $0.0529 $0.0532 $0.0530
Average industrial revenue
per Kwh $0.0380 $0.0379 $0.0380 $0.0383 $0.0381
<footnote>
(1) See Item 6 - Selected Financial Data for additional financial
information regarding the Company.
(2) In connection with the Missouri electric rate proceeding described
under Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's rate structure was changed in
1994 to more accurately reflect the cost of providing service, resulting in
a greater rate increase for residential customers than for commercial and
industrial customers.
Executive Officers and Other Officers of the Registrant
The names of the officers of the Company, their ages and years of
service with the Company as of December 31, 1995, positions held and
effective date of such positions are presented below. Each of the executive
officers of the Company has held executive officer or management positions
within the Company for at least the last five years.
Age at With the Officer
Name 12/31/95 Positions with the Company Company since
since
R.L. 63 President (1982), Director (1978) 1955 1974
Lamb
M.W. 51 Executive Vice President - Commercial 1967 1982
McKinney Operations (1995), Executive Vice
President (1994), Vice President -
Customer Services (1982), Director
(1991)
V.E. 54 Vice President - Energy Supply 1962 1975
Brill (1995), Vice President - Finance
(1983), Director (1989)
R.B. 55 Vice President - Finance (1995), Vice 1972 1984
Fancher President - Corporate Services
(1984)
C.A. 51 Vice President - General Services 1980 1995
Stark (1995), Director of Corporate
Planning (1988)
D.W. 49 Director of Financial Services and 1979 1991
Gibson Assistant Secretary (1991), Director
of Financial and Regulatory
Accounting Services (1987)
G.A. 44 Controller and Assistant Treasurer 1978 1983
Knapp (1983)
J.S. 43 Secretary-Treasurer (1995), 1994 1995
Watson Accounting Staff Specialist (1994)
Regulation
General. The Company, as a public utility, is subject to the
jurisdiction of the Missouri Public Service Commission ("Missouri
Commission"), the State Corporation Commission of the State of Kansas
("Kansas Commission"), the Corporation Commission of Oklahoma ("Oklahoma
Commission") and the Arkansas Public Service Commission ("Arkansas
Commission") with respect to services and facilities, rates and charges,
accounting, valuation of property, depreciation and various other matters.
Each such Commission has jurisdiction over the creation of liens on
property located in its state to secure bonds or other securities. Because
the Company is a Kansas corporation, the Kansas Commission also has
jurisdiction over the issuance of securities by the Company. The Company's
transmission and sale at wholesale of electric energy in interstate
commerce and its facilities are subject to the jurisdiction of the Federal
Energy Regulatory Commission ("FERC") under the Federal Power Act. FERC
jurisdiction extends to, among other things, rates and charges in
connection with such transmission and sale; the sale, lease or other
disposition of such facilities and accounting matters.
The Company's Ozark Beach Hydroelectric Plant is operated under a
license from FERC. See Item 2, "Properties - Electric Facilities." The
Company is disputing a Headwater Benefits Determination Report it received
from FERC on September 9, 1991. The report calculates an assessment to the
Company for headwater benefits received at the Ozark Beach Hydroelectric
Plant for the period 1973 through 1990 in the amount of $705,724, and
calculates an annual assessment thereafter of $42,914 for the years 1991
through 2011. The Company believes that the methodology used in making the
assessment was incorrect and is contesting the determination. As of
December 31, 1995, FERC had not responded to the comments filed by the
Company on July 31, 1992.
During 1995, approximately 94% of the Company's electric operating
revenues were received from retail customers. Approximately 87%, 7%, 3% and
3% of such retail revenues were derived from sales in Missouri, Kansas,
Oklahoma and Arkansas, respectively. Sales subject to FERC jurisdiction
represented approximately 6% of the Company's electric operating revenues
during 1995.
Rates. See Item 7 for information concerning recent electric rate
proceedings.
Fuel Adjustment Clauses. Fuel adjustment clauses permit changes in
fuel costs to be passed along to customers without the need for a rate
proceeding. Fuel adjustment clauses are not permitted under Missouri law.
Pursuant to an agreement with the Kansas Commission, entered into in
connection with a 1989 rate proceeding, a fuel adjustment clause is not
applicable to the Company's retail electric sales in Kansas. Automatic fuel
adjustment clauses are presently applicable to retail electric sales in
Arkansas, Oklahoma and system wholesale kilowatt-hour sales under FERC
jurisdiction. Significant increases in fuel costs may be recovered in
Missouri and Kansas only through rate filings made with the appropriate
Commissions.
Environmental Matters
The Company is subject to various federal, state, and local laws and
regulations with respect to environmental matters. Items regulated include:
air, hazardous waste, asbestos, PCBs and solid waste. The Company believes
that its operations are in compliance with present laws and regulations.
The 1990 Amendments to the Clean Air Act ("1990 Amendments") affect
the Asbury, Riverton and Iatan Power Plants. The Asbury and Iatan Plants
are Phase I facilities that became affected units on January 1, 1995. The
Riverton Plant is classified as a Phase II facility and will become an
affected unit on January 1, 2000.
Under the 1990 Amendments, the amount of sulfur dioxide an affected
unit can emit is regulated. Each affected unit has been awarded a specific
number of emission allowances, each of which allows the holder to emit one
ton of sulfur dioxide. Utilities covered by the 1990 Amendments must have
emission allowances equal to the number of tons of sulfur dioxide emitted
during a given year by each of their affected units. Allowances may be
traded between plants, utilities or "banked" for future use. A market for
the trading of emission allowances exists on the Chicago Board of Trade.
The Environmental Protection Agency (the "EPA"), is
withholding annually a percentage of the emission allowances awarded to
each affected unit and selling those emission allowances through a direct
auction. The Company receives compensation from the EPA for the allowances
so withheld.
In 1995, the Asbury Plant used approximately half of its available
emission allowances. In the year 2000, the number of emission allowances
that the Asbury Plant will receive each year is expected to decline by
approximately one-half (before EPA withholding) and the Company anticipates
based on current operations that the Plant will use slightly more
allowances than the number available each year.
Because of above normal generation, Iatan Unit No. 1 used
approximately 130% of its available emission allowances in 1995. The
Company made up its 12% share of the shortfall by transferring emission
allowances from the Asbury Plant. It is not expected that the number of
emission allowances awarded to Iatan Unit No. 1 will change materially in
the year 2000.
The Riverton Plant's level of emissions will require significantly
more allowances than the number awarded to the Plant when the facility
becomes an affected unit under the 1990 Amendments in the year 2000. The
Company is evaluating various methods to achieve compliance with the Phase
II requirements applicable to the Riverton Plant. These include using
sulfur dioxide allowances from the Company's other plants, purchasing
allowances from other sources, modifying certain equipment to permit the
use of greater percentages of low sulfur coal, increasing the use of
natural gas as a fuel at the Plant and purchasing additional power. As a
result, the cost of achieving such compliance cannot be estimated at this
time.
The 1990 Amendments also contain limits on the rate of nitrogen
oxide ("NOx") the Company's Iatan and Riverton Plants may emit. As
currently operated, the Iatan Plant is in compliance with the NOx limits
applicable to it under the 1990 Amendments. The Riverton Plant's current
operation would not permit such compliance. The Company is reviewing
several options to enable that facility to meet such limits. NOx limits
have also been proposed for units similar to the Company's Asbury Plant. No
assurance can be given that that Plant will meet any such limits if
adopted. In addition, the 1990 Amendments require the EPA to complete
additional studies on several issues such as low NOx burners and all air
toxics, including hazardous air pollutants. Depending on the outcome of
these studies, the Company could have additional compliance issues to address.
The Company operates under the Kansas and Missouri Water Pollution
Plans that were implemented in response to the Federal Water Pollution
Control Act Amendments of 1972. The Asbury, Iatan, Riverton, Energy Center
and State Line facilities are in compliance with applicable regulations and
have received discharge permits and subsequent renewals as required.
Renewal of the Iatan and Riverton Power Plant permits will take place in
1996.
The current temporary storage of ash resulting from the burning of
coal at the Company's power plants is in compliance with applicable
regulations. In anticipation of permanent ash storage regulations, an ash
management study will be conducted in 1996 for the Company's Asbury and
Riverton Plants where ash ponds are currently operated.
Under Title 5 of the 1990 Amendments, the Company must obtain site
operating permits for each of its plants from state authorities in the
state in which each plant is located. These permits, which are valid for
five years, regulate the plant site's total emissions, including emissions
from stacks, individual pieces of equipment, road dust, coal dust and steam
leaks. The Company anticipates submitting applications for these permits in
late 1996 and early 1997 in accordance with the 1990 Amendments.
Conditions Respecting Financing
The Company's Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1944, as amended and supplemented (the "Mortgage"), and its
Restated Articles of Incorporation (the "Restated Articles"), specify
earnings coverage and other conditions which must be complied with in
connection with the issuance of additional first mortgage bonds or
cumulative preferred stock, or the incurrence of unsecured indebtedness.
The Mortgage generally permits the issuance of additional bonds only if net
earnings (as defined) for a specified twelve-month period are at least
twice the annual interest requirements on all bonds at the time
outstanding, including the additional issue and all indebtedness of prior
rank. Under this test, on December 31, 1995, the Company could have issued
under the Mortgage approximately $109.0 million principal amount of
additional bonds (at an assumed interest rate of 8.0%). In addition to the
interest coverage requirement, the Mortgage provides that new bonds must be
issued against, among other things, retired bonds or 60% of net property
additions. At December 31, 1995, the Company had retired bonds and net
property additions which would enable the issuance of at least $81.3
million principal amount of bonds.
Under the Restated Articles, (a) additional cumulative preferred stock
may be issued only if net income of the Company available for interest and
dividends (as defined) for a specified twelve-month period is at least 1-
1/2 times the sum of the annual interest requirements on all indebtedness
and the annual dividend requirements on all cumulative preferred stock, to
be outstanding immediately after the issuance of such additional shares,
and (b) the amount of unsecured indebtedness outstanding may not exceed 20%
of the sum of the outstanding secured indebtedness plus the capital and
surplus of the Company. Under these restrictions, based on the twelve
months ended December 31, 1995, the Company could issue shares of
cumulative preferred stock with an aggregate par value of approximately
$86.3 million (8-1/8% dividend rate assumed) and at December 31, 1995, the
Company could incur maximum unsecured indebtedness of approximately $84.1
million .
ITEM 2. PROPERTIES
Electric Facilities
At December 31, 1995, the Company owned generating facilities
(including its interest in Iatan Unit No. 1) with an aggregate generating
capacity of 737 megawatts.
The principal electric generating plant of the Company is the Asbury
Plant with 211 megawatts of generating capacity. The Plant, located near
Asbury, Missouri, is a coal-fired generating station with two steam turbine
generating units. The Plant presently accounts for approximately 29% of the
Company's owned generating capacity and in 1995 accounted for approximately
50% of the energy generated by the Company and 32% of the total energy sold
by the Company. Routine plant maintenance, during which the entire Plant is
taken out of service, is scheduled twice each year, normally for
approximately three weeks in the spring and one week in the fall. Every
fifth year the spring outage is scheduled to be extended to a total of six
weeks to permit inspection of the Unit No. 1 turbine. The next such
extended outage will occur in 1996. When the Plant is out of service, the
Company typically experiences increased purchased power and fuel costs
associated with replacement energy.
The Company's generating plant located at Riverton, Kansas, has two
steam-electric generating units with an aggregate generating capacity of 92
megawatts and three gas-fired combustion turbine units with an aggregate
generating capacity of 44 megawatts. The steam-electric generating units
burn coal as a primary fuel and have the capability of burning natural gas.
During 1995 a 20 megawatt steam-electric unit was retired.
The Company owns a 12% undivided interest in the 670 megawatt coal-
fired Unit No. 1 at the Iatan Generating Station located 35 miles northwest
of Kansas City, Missouri, as well as a 3% interest in the site and a 12%
interest in certain common facilities. The Company is entitled to 12% of
the unit's available capacity and is obligated to pay for that percentage
of the operating costs of the Unit. KCPL and SJLP own 70% and 18%,
respectively, of the Unit. KCPL operates the unit for the joint owners. See
Note 9 of "Notes to Financial Statements" under Item 8.
The Company also has two combustion turbine peaking units at the
Empire Energy Center in Jasper County, Missouri, with an aggregate
generating capacity of 193 megawatts. During 1995 the Company converted
these peaking units to operate on natural gas as well as oil as a source of
fuel. Based on current fuel prices, it is expected that these units will be
operated primarily on natural gas.
The Company's State Line Power Plant, which is located west of Joplin,
Missouri, currently consists of one 101 megawatt combustion turbine unit.
This unit, which was placed in service in mid-1995, burns natural gas as a
primary fuel and has the capability of burning oil. The Company is
constructing a second 101 megawatt combustion turbine unit at this site
which is scheduled to be placed in service in mid-1997.
The Company's hydroelectric generating plant, located on the White
River at Ozark Beach, Missouri, has a generating capacity of 16 megawatts,
subject to river flow. The Company has a long-term license from FERC to
operate this plant which forms Lake Taneycomo in Southwestern Missouri.
During 1995, certain of the Company's generating units were re-rated,
resulting in changes in previously reported capacities.
At December 31, 1995, the Company's transmission system consisted of
approximately 22 miles of 345 kV lines, 397 miles of 161 kV lines, 740
miles of 69 kV lines and 82 miles of 34.5 kV lines. Its distribution system
consisted of approximately 5,787 miles of line.
The electric generation stations owned by the Company are located on
land owned in fee. The Company owns a 3% undivided interest as tenant in
common with KCPL and SJLP in the land for the Iatan Generating Station.
Substantially all the electric transmission and distribution facilities of
the Company are located either (1) on property leased or owned in fee; (2)
over streets, alleys, highways and other public places, under franchises or
other rights; or (3) over private property by virtue of easements obtained
from the record holders of title. Substantially all property, plant and
equipment of the Company are subject to the Mortgage.
Water Facilities
The Company also owns and operates water pumping facilities and
distribution systems consisting of a total of approximately 71 miles of
water mains in three communities in Missouri.
ITEM 3. LEGAL PROCEEDINGS
No legal proceedings required to be disclosed by this Item are
pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York Stock Exchange.
On March 1, 1996, there were 10,707 record holders of its common stock. The
high and low sales prices for its common stock reported in The Wall Street
Journal as New York Stock Exchange composite transactions, and the amount
per share of quarterly dividends declared and paid on the common stock for
each quarter of 1995 and 1994 were as follows:
Price of Common Stock Dividends Paid
1995 1994 Per Share
High Low High Low 1995 1994
First Quarter $17-5/8 $16 $20-1/2 $18-5/8 $0.32 $0.32
Second Quarter 18 16 20 16-1/8 0.32 0.32
Third Quarter 18-5/8 16-7/8 17-1/2 16-1/4 0.32 0.32
Fourth Quarter 19-3/4 17-1/2 17 15 0.32 0.32
Holders of the Company's common stock are entitled to dividends if,
as, and when declared by the Board of Directors of the Company, out of
funds legally available therefor, subject to the prior rights of holders of
the Company's outstanding cumulative preferred stock and any preference
stock.
The Mortgage and the Restated Articles contain certain dividend
restrictions. The most restrictive of these is contained in the Mortgage,
which provides that the Company may not declare or pay any dividends (other
than dividends payable in shares of its common stock) or make any other
distribution on, or purchase (other than with the proceeds of additional
common stock financing) any shares of, its common stock if the cumulative
aggregate amount thereof after August 31, 1944, (exclusive of the first
quarterly dividend of $98,000 paid after said date) would exceed the earned
surplus (as defined) accumulated subsequent to August 31, 1944, or the date
of succession in the event that another corporation succeeds to the rights
and liabilities of the Company by a merger or consolidation. As of December
31, 1995, said dividend restriction did not affect any of the retained
earnings of the Company.
The Company's Dividend Reinvestment and Stock Purchase Plan (the
"Reinvestment Plan") allows common and preferred stockholders to reinvest
dividends of the Company into newly issued shares of the Company's common
stock at 95% of a market price average calculated pursuant to the
Reinvestment Plan. Stockholders may also purchase, for cash and within
specified limits, additional stock at 100% of such market price average.
The Company may elect to make shares purchased in the open market rather
than newly issued shares available for purchase under the Reinvestment
Plan. If the Company so elects, the purchase price to be paid by
Reinvestment Plan participants will be 100% of the cost to the Company of
such shares. Participants in the Reinvestment Plan do not pay commissions
or service charges in connection with purchases under the Reinvestment
Plan.
The Company has a shareholders rights plan under which each of its
common stockholders has one-half a Preference Stock Purchase Right
("Right") for each share of common stock owned. One Right enables the
holder to acquire one one-hundredth of a share of Series A Participating
Preference Stock (or, under certain circumstances, other securities) at a
price of $75 per one-hundredth of a share, subject to adjustment. The
rights (other than those held by an acquiring person or group ("Acquiring
Person")), which expire July 25, 2000, will be exercisable only if an
Acquiring Person acquires 10% or more of the Company's common stock or if
certain other events occur. See Note 4 of "Notes to Financial Statements"
under Item 8 for further information.
The By-laws of the Company provide that K.S.A. Sections 17-1286
through 17-1298, the Kansas Control Share Acquisitions Act, will not apply
to control share acquisitions of the Company's capital stock.
See Note 3 of "Notes to Financial Statements" under Item 8 for
additional information regarding the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
1995 1994 1993 1992 1991
Operating revenues $192,838 $177,757 $168,439 $150,302 $150,442
Operating income $33,151 $32,005 $29,291 $30,090 $31,761
Total allowance for
funds used during
construction $2,239 $1,715 $229 $119 $275
Net income $19,798(1) $19,683 $15,936 $16,905 $18,768
Earnings applicable to
common stock $17,381(1) $18,120 $15,551 $16,513 $18,328
Weighted average number
of common
shares outstanding (2) 14,730,902 13,734,231 13,415,539 13,119,515 12,812,166
Earnings per share of
common stock (2) $1.18(1) $1.32 $1.16 $1.26 $1.43
Cash dividends per
common share (2) $1.28 $1.28 $1.28 $1.26 $1.22
Common dividends paid
as a percentage of
earnings applicable
to common stock 108.9% 97.0% 110.4% 99.9% 85.3%
Allowance for funds
used during construction
as a percentage of
earnings applicable to
common stock 12.9% 9.5% 1.5% 0.7% 1.5%
Book value per common
share outstanding
at end of year (2) $12.67 $12.42 $12.33 $12.26 $12.06
Capitalization:
Common equity $193,137 $173,780 $167,861 $163,293 $156,910
Preferred stock
without mandatory
redemption
provisions $32,902 $32,902 $7,902 $7,902 $7,902
Preferred stock with
mandatory
redemption provisions $- $- $- $- $200
First mortgage bonds $194,705 $184,977 $165,227 $143,619 $142,214
Ratio of earnings to 2.90 3.16 2.73 2.91 3.13
fixed charges
Ratio of earnings to
combined fixed charges
and preferred stock
dividend requirements 2.36 2.70 2.63 2.80 2.99
Total assets $557,368 $520,213 $463,617 $406,731 $387,363
Utility plant in
service at original
cost $682,609 $611,360 $576,083 $543,323 $515,119
Utility plant
expenditures during the
year $49,217 $71,649 $42,648 $29,500 $21,991
<FOOTNOTE>
(1) Reflects a pre-tax charge of $4,583,000 for certain one-time costs
associated with the Company's voluntary early retirement program.
(2) Amounts shown for 1991 have been restated to reflect the two-for-one
stock split effective January 29, 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating Revenues and Kilowatt-Hour Sales
Of the Company's total electric operating revenues during 1995,
approximately 42% were from residential customers, 30% from commercial, 17%
from industrial and 4% from wholesale on-system customers. The remainder of
such revenues was derived from miscellaneous sources. The percentage
changes from the prior year in kilowatt-hour ("Kwh") sales and revenue by
major customer class were as follows:
Kwh Sales Revenues
1995 1994 1995 1994
Residential 6.8% 1.3% 13.0% 5.1%
Commercial 6.8 7.1 8.1 7.5
Industrial 3.9 8.7 4.2 8.4
Wholesale On-System 4.1 0.6 2.3 1.7
Residential Kwh sales and revenue increased during 1995, due primarily
to the effect of significantly warmer summer temperatures experienced
during 1995 compared to the mild summer weather in 1994. A return to more
normal winter temperatures during December 1995, after extremely mild
weather experienced during December 1994, also contributed to increased
residential sales and revenue during the year. An increase of 3.3% in the
average number of residential customers served compared to the year-ago
period further contributed to the increased sales and revenues experienced
during 1995. Residential revenues were also positively affected by the 1994
Missouri rate case described below.
Commercial Kwh sales and revenue increased during 1995 reflecting
primarily warmer than normal summer temperatures, a return to normal winter
temperatures during December 1995, and an increase of 4.8% in the average
number of commercial customers. During 1995, both commercial and industrial
Kwh sales and related revenues were positively impacted by continuing
increases in business activity throughout the Company's service territory.
Commercial and industrial revenues were also positively affected by the
1994 Missouri rate case discussed below.
The Company's residential, commercial and industrial revenues all
increased by a greater percentage than the increase in Kwh sales would
indicate due mainly to the effect of electric rate increases. In addition,
a restructuring of the Company's rates in connection with the 1994 Missouri
electric rate case resulted in a greater overall rate increase for the
Company's residential customers than for its commercial and industrial
customers, and in the shifting of revenue from winter billing periods to
summer billing periods.
On-system wholesale Kwh sales were up during 1995 due primarily to the
weather conditions discussed above. Revenues associated with these Kwh
sales increased at a lower relative amount due to the operation of the fuel
adjustment clause applicable to such FERC regulated sales.
Kwh sales to, and related revenues from, the Company's residential
customers were up during 1994, due primarily to an increase in the average
number of customers served. The level of customer growth more than offset
the effect of mild summer weather experienced during 1994. Commercial and
industrial Kwh sales and revenue for that year were positively impacted by
continuing increases in business activity throughout the Company's service
territory, particularly in the Branson, Missouri area. Revenues from on-
system wholesale Kwh sales were up slightly during 1994 due primarily to
the operation of the FERC fuel adjustment clause.
The following table sets forth information regarding electric rate
increases affecting the revenue comparisons discussed above:
Percent
Date Increase Date Increase Increase
Jurisdiction Requested Requested Effective Granted Granted
Missouri 03-17-95 $8,543,910 11-15-95 $1,400,000 0.9%
Missouri 12-01-93 7,968,879 08-15-94 7,350,000 5.2
Oklahoma 08-12-94 563,387 10-21-94 399,370 6.9
Kansas 03-16-94 717,529 09-12-94 512,000 4.6
The Company's future revenues from the sale of electricity will
continue to be affected by economic conditions, business activities,
competition, weather, regulation, changes in electric rate levels and
changing patterns of electric energy use by customers. Inflation affects
the Company's operations in that historical costs rather than current
replacement costs are recovered in the Company's rates.
Off-System Transactions
In addition to sales to its own customers, the Company also sells
power to other utilities as available and also provides transmission
service through its system for transactions between other energy suppliers.
During 1995, income from such off-system transactions exceeded related
expenses by approximately $1.8 million, compared with approximately $1.4
million during both 1994 and 1993. The increase in income from off-system
transactions during 1995 was due primarily to an increase in revenue from
transmission service transactions through the Western Systems Power Pool.
Operating Revenue Deductions
During 1995, total operating and maintenance expenses increased
approximately $12.1 million (11.4%) ($7.5 million, or 7.1%, exclusive of
the one-time charge discussed below relating to the Company's voluntary
early retirement program) compared to 1994 levels. Total fuel costs were up
approximately $1.5 million (5.0%) during 1995 compared to the prior year.
During 1995, the Company substantially increased its generation from its
higher-cost, gas-fired combustion turbine units following completion of the
conversion of the Company's Energy Center to utilize gas as a primary fuel,
as well as the commercial availability of the Company's new State Line
Power Plant. Partially offsetting such increases were more favorable prices
experienced by the Company during 1995 for both natural gas and Iatan coal.
Purchased power costs were up approximately $1.5 million (4.3%) during
1995. The Company supplements its own generating capacity with purchases of
capacity and energy from neighboring utilities in order to meet the demands
of its customers and the capacity margins applicable to it under the MOKAN
Power Pool agreement. During 1995, such purchases were higher due to
increased customer demand.
Other operating expenses increased approximately $7.1 million (23.1%)
during 1995 compared to 1994 levels, due primarily to higher general and
administrative costs. During the third quarter of 1995, the Company
incurred a one-time pre-tax charge of approximately $4.6 million related to
the implementation and acceptance by qualifying employees of an enhanced
voluntary early retirement program. Costs associated with the proceedings
relating to the proposed purchase of energy from Ahlstrom Development
Corporation and the Competitive Positioning Process ("CPP") (other than the
voluntary early retirement program), discussed further under "Competition"
below, totaled approximately $2.0 million during the year. The remainder of
the increase in other operating expenses was due to additional costs
related to implementation of FAS 106, increased work on the Company's
distribution system and increased customer accounts expenses.
Maintenance and repair expense increased approximately $2.0 million
(18.6%) during 1995 compared to prior year levels, due primarily to
increased maintenance performed on the Company's Riverton and Asbury
generating units as well as increased maintenance on the Company's
distribution system resulting in part from the system's growing size. In
addition, the Company's Riverton Unit No. 7 underwent an extended outage to
remove cracks in the turbine rotor shaft during the second quarter of 1995.
The total cost of the repair and the related inspection was approximately
$0.4 million. Further, more maintenance was performed during the scheduled
spring maintenance outage at the Company's Asbury Plant during the second
quarter of 1995 than was performed during the 1994 spring outage.
Depreciation and amortization expense increased approximately $1.5
million (8.2%) during the year due to increased levels of plant and
equipment placed in service, particularly at the Company's State Line Power
Plant. Total income taxes decreased slightly during 1995 due primarily to
lower taxable income during the current period. See Note 8 of "Notes to
Financial Statements" for additional information regarding income taxes.
Other taxes were up approximately $0.6 million (5.6%) during the year
reflecting increased property tax rates, higher levels of plant-in-service
and increased franchise taxes relating to higher revenues.
During 1994 total operating and maintenance expenses were higher
compared to 1993 levels primarily due to increased purchased power costs,
which were up due to an increase of 47 megawatts in capacity purchases
during the year. Fuel costs were up during 1994 compared to the prior year
primarily due to increased fuel-generated Kwhs to meet greater customer
demand. Fuel costs did not increase at the same rate as Kwhs generated,
primarily because of a 33.3% increase in generation at the jointly-owned
Iatan Plant, one of the Company's lowest-cost generating units. This
increase more than offset the effects of a slight decrease in generation at
the Asbury Plant and higher fuel costs incurred during increased usage of
higher-cost units. Other operating and maintenance expenses were virtually
level with prior year amounts. Depreciation and amortization expense
increased due to the additional plant and equipment placed in service.
Total income taxes increased due primarily to higher taxable income, while
other taxes were up reflecting increased property tax rates, higher levels
of plant-in-service and increased franchise taxes relating to higher
revenues.
Nonoperating Items
Total allowance for funds used during construction ("AFUDC") amounted
to approximately 12.9% of earnings applicable to common stock during 1995,
9.5% during 1994 and 1.5% during 1993. The significantly increased level of
AFUDC during 1995 and 1994 over prior year levels reflects a higher level
of construction work in progress, particularly due to construction of the
State Line Power Plant, as well as higher rates for AFUDC determined in
accordance with formulas prescribed by the FERC. See Note 1 of "Notes to
Financial Statements" for more discussion of AFUDC.
Interest income increased during 1995 compared to prior year levels
reflecting higher rates of interest earned on investments and the temporary
investment of the proceeds from the Company's issuance of a new series of
first mortgage bonds prior to the redemption of another series of first
mortgage bonds. Interest charges on first mortgage bonds increased compared
to the prior year due to additional issuances of the Company's First
Mortgage Bonds. Other interest charges were down during the year due to
decreased levels of short-term borrowing.
Competition
Federal regulation, such as The National Energy Policy Act of 1992
(the "Energy Act") and that proposed by FERC's March 1995 Notice of
Proposed Rulemaking ("NOPR") are expected to promote competition in the
electric utility industry.
The Energy Act, among other things, eases restrictions on independent
power producers, delegates authority to the FERC to order wholesale
wheeling and grants individual states the power to order retail wheeling.
At this time, none of the states in which the Company operates has taken
any such action. The rules proposed in the NOPR, if adopted, would require
utilities providing transmission service under FERC jurisdiction to:
establish nondiscriminatory open access transmission tariffs and make them
available to all wholesale buyers and sellers; offer transmission service
comparable to service they provide themselves; and take transmission
service under the same tariffs offered to other buyers and sellers. The
FERC has stated that it intends to allow utilities to recover their
investment in transmission facilities.
In addition, under the Public Utility Regulatory Policy Act of 1978,
the Company is required to purchase energy from a qualifying facility
("QF") if the QF can sell the energy at a price equal to or less than the
Company's avoided cost (as reasonably determined by the Company) of
generating the energy or acquiring it elsewhere. By Report and Order issued
November 8, 1995, effective November 29, 1995, the Missouri Commission
dismissed a complaint by Ahlstrom Development Corporation and Cottonwood
Energy Partners, L.P., (collectively "Ahlstrom") which was filed with the
Missouri Commission on August 1, 1994. That complaint had requested that
the Missouri Commission require the Company to purchase 160 megawatts of
power from Ahlstrom's proposed Jayhawk Energy Center waste-coal project,
which Ahlstrom claimed to be a QF, beginning in the year 2000. On December
7, 1995, the Kansas Corporation Commission dismissed a similar complaint
filed by Ahlstrom. The Company's analysis indicated that more economical
sources of power are available, such as the Western Resources agreement.
Several factors exist which may enhance the Company's ability to
compete as deregulation occurs. The Company is able to generate and
purchase power relatively cheaply; during 1995, the Company's retail rates
were approximately 26% less than the electric industry average. In
addition, only 4% of the Company's electric operating revenues are derived
from sales to on-system wholesale customers, the type of customer for which
FERC is already requiring wheeling. At the same time, the Company could
face increased competitive pressure as a result of its reliance on
relatively large amounts of purchased power and its extensive
interconnections with neighboring utilities.
In response to the changing competitive environment that it now faces,
the Company in 1995 initiated and completed the CPP, to maximize efficiency
and effectiveness in providing service. As part of the CPP, the Company has
redesigned its organizational structure. Further, the Company has reduced
planned construction expenditures and entered into an agreement with
Western Resources for purchased power to reduce the uncertainty of owning
new plants. In addition, the Company implemented an enhanced voluntary
early retirement program which was accepted by 49 of 52 eligible employees
and resulted in a pre-tax charge of approximately $4.6 million.
Earnings
Earnings per share of common stock were $1.18 during 1995 compared to
$1.32 in 1994. Increased revenues resulting from weather conditions
conducive to increased Kwh sales, continued customer growth and the rate
increases received in Missouri, Kansas and Oklahoma were largely offset by
increased operating expenses and the one-time charge related to the
enhanced voluntary early retirement program discussed above (which reduced
earnings by approximately $0.19 per share). Earnings per share also reflect
increased first mortgage bond interest, resulting from greater levels of
first mortgage bonds outstanding, increased preferred stock dividend
requirements resulting from the Company's issuance of preferred stock in a
public offering in June 1994 and the Company's issuance of 900,000 shares
of common stock in April 1995.
Earnings per share of common stock were $1.32 during 1994 compared to
$1.16 in 1993. The increase in earnings reflects rate increases received in
Missouri, Kansas and Oklahoma combined with the effect of continued
customer growth. These increases were offset in part by increased fuel and
purchased power costs, and by increased preferred stock dividend
requirements resulting from the Company's issuance of preferred stock in a
public offering in June 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's construction-related expenditures totaled approximately
$50.8 million, $71.6 million, and $44.4 million in 1995, 1994 and 1993,
respectively. Approximately $8.1 million of construction expenditures
during 1995 were related to the construction of Unit No. 1 at the State
Line Power Plant, which was placed in service on May 30, 1995. Initial
expenditures for the construction of a second 101 megawatt combustion
turbine unit at that site totaled approximately $3.5 million during 1995.
Unit No. 2 is scheduled for completion in mid-1997, at a total projected
cost of approximately $28 million. Additions to the Company's transmission
and distribution systems to meet projected increases in customer demand
constituted the majority of the remainder of construction expenditures
during 1995. Approximately one-half of construction expenditures and other
funds requirements for 1995 were satisfied internally from operations; the
remainder was provided from public offerings of the Company's Common Stock
and First Mortgage Bonds, the issuance of commercial paper, and from the
sale of common stock through the Company's Dividend Reinvestment Plan and
Employee Stock Purchase Plan.
The Company estimates that its construction expenditures will total
approximately $60.7 million in 1996, $44.6 million in 1997 and $36.7
million in 1998. Of these amounts, the Company anticipates that it will
spend $21.7 million, $23.9 million and $23.7 million in 1996, 1997 and
1998, respectively, for additions to the Company's distribution system to
meet projected increases in customer demand. Also included are expenditures
of $15.7 million and $5.9 million anticipated in 1996 and 1997,
respectively, for new generating facilities.
The Company estimates that internally generated funds will provide
approximately one-half of the funds required between 1996 and 1998 for
estimated construction expenditures. As in the past, the Company intends to
utilize short-term debt to finance the additional amounts needed for such
construction and repay such borrowings with the proceeds of sales of public
offerings of long-term debt or equity securities, including the sale of the
Company's common stock pursuant to its Dividend Reinvestment Plan and
Employee Stock Purchase Plan and from internally-generated funds. Subject
to market and other conditions, the Company currently plans to issue common
stock during the second quarter of 1996 and may issue First Mortgage Bonds
later in the year. The Company will continue to utilize short-term debt as
needed to support normal operations or other temporary requirements. See
Note 5 of "Notes to Financial Statements" regarding the Company's line of
credit.
At December 31, 1995, the Company's ratings for its first mortgage
bonds, preferred stock and commercial paper were as follows:
Phoenix Standard &
Duff & Phelps Moody's Poor's
First Mortgage Bonds A+ A2 A-
Preferred Stock A a3 BBB+
Commercial Paper D-1 P-1 A-2
On December 1, 1995, Moody's Investors Service reduced its ratings of
the Company's First Mortgage Bonds and preferred stock. According to
Moody's, the downgrade reflected the Company's reduction in financial
flexibility resulting from its ongoing substantial construction program and
the Missouri Commission's recent electric rate case ruling.
The Company currently has on file with the Securities and Exchange
Commission ("SEC") a shelf registration statement under which it may sell
up to an additional $25 million aggregate principal amount of first
mortgage bonds and/or par value of cumulative preferred stock from time to
time, each in one or more series. The Company also has on file with the SEC
a shelf registration statement covering the sale to the public, from time
to time, of up to an additional 900,000 shares of its common stock.
On April 27, 1995, the Company sold to the public in separate
underwritten offerings $10 million aggregate principal amount of its First
Mortgage Bonds, 7.60% Series due 2005, and 900,000 shares of its common
stock. The combined net proceeds of both offerings of approximately $25
million were added to the Company's general funds and used to repay short-
term indebtedness or for expenses incurred in connection with its
construction program.
On June 7, 1995, the Company sold to the public in an underwritten
offering $30 million aggregate principal amount of its First Mortgage
Bonds, 7-3/4% Series due 2025, the proceeds of which were added to the
Company's general funds and used to redeem on July 3, 1995, its First
Mortgage Bonds, 9% Series due 2019 ($30 million aggregate principal amount)
at a redemption price of 105.00% of the principal amount thereof plus
accrued interest to July 3, 1995. See Note 5 of "Notes to Financial
Statements" for additional information regarding the Company's long-term
debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Empire District Electric Company
In our opinion, the accompanying balance sheet and the related statements
of income, common stockholders' equity and cash flows present fairly, in
all material respects, the financial position of The Empire District
Electric Company at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
January 18, 1996
Balance Sheet
December 31,
1995 1994
Assets
Utility plant, at original cost:
Electric $677,583,831 $606,519,616
Water 5,073,019 4,863,228
Construction work in progress 16,303,408 45,317,772
698,960,258 656,700,616
Accumulated depreciation 223,268,355 210,858,722
475,691,903 445,841,894
Current assets:
Cash and cash equivalents 3,816,776 3,362,653
Accounts receivable - trade, net 12,512,800 10,653,580
Accrued unbilled revenues 6,579,858 5,041,575
Accounts receivable - other 1,745,999 2,878,122
Fuel, materials and supplies 14,511,898 12,970,376
Prepaid expenses 682,413 708,253
39,849,744 35,614,559
Deferred charges:
Regulatory asset 25,589,864 23,657,498
Unamortized debt expenses 14,546,428 13,166,603
Other 1,690,334 1,932,798
41,826,626 38,756,899
Total Assets $557,368,273 $520,213,352
Capitalization and Liabilities
Common stock, $1 par value,
15,215,933 and 13,941,531
shares issued and outstanding,
respectively $15,215,933 $13,941,531
Capital in excess of par value 125,690,842 106,055,389
Retained earnings 52,230,584 53,783,342
Total common stockholders' equity 193,137,359 173,780,262
Preferred stock 32,901,800 32,901,800
Long-term debt 194,704,814 184,976,950
420,743,973 391,659,012
Current liabilities:
Accounts payable and accrued
liabilities 14,308,497 11,459,243
Commercial paper 14,000,000 16,000,000
Customer deposits 2,516,903 2,385,182
Interest accrued 3,354,668 3,413,850
Taxes accrued, including income
taxes 1,486,304 1,557,744
35,666,372 34,816,019
Commitments and Contingencies (Note 10)
Noncurrent liabilities and deferred
credits:
Regulatory liability 19,680,363 20,683,409
Deferred income taxes 60,495,301 56,229,391
Unamortized investment tax credits 10,141,000 10,741,000
Postretirement benefits other than
pensions 4,343,938 4,083,626
Other 6,297,326 2,000,895
100,957,928 93,738,321
Total Capitalization and
Liabilities $557,368,273 $520,213,352
<FOOTNOTE>
See accompanying Notes to Financial Statements.
Statement of Income
Year Ended December 31,
1995 1994 1993
Operating revenues:
Electric $191,847,760 $176,811,882 $167,624,489
Water 990,300 945,077 814,435
192,838,060 177,756,959 168,438,924
Operating revenue deductions:
Operating expenses:
Fuel 31,925,193 30,401,171 29,579,342
Purchased power 36,116,177 34,610,643 33,451,206
Other 33,201,879 30,702,085 30,710,926
Voluntary early retirement
program 4,583,188 - -
105,826,437 95,713,899 93,741,474
Maintenance and repairs 12,785,489 10,784,130 10,632,335
Depreciation and amortization 19,850,699 18,339,180 17,407,978
Provision for income taxes 10,420,000 10,679,000 7,666,000
Other taxes 10,804,852 10,236,194 9,700,408
159,687,477 145,752,403 139,148,195
Operating income 33,150,583 32,004,556 29,290,729
Other income and deductions:
Allowance for equity funds used
during construction 1,069,779 730,359 -
Interest income 251,492 91,685 101,111
Other - net (200,950) (220,578) (267,274)
1,120,321 601,466 (166,163)
Income before interest charges 34,270,904 32,606,022 29,124,566
Interest charges:
Long-term debt 14,858,664 12,956,643 12,907,344
Allowance for borrowed funds
used during construction (1,168,806) (984,546) (229,028)
Other 783,220 950,826 510,266
14,473,078 12,922,923 13,188,582
Net income 19,797,826 19,683,099 15,935,984
Preferred stock dividend
requirements 2,416,340 1,563,028 385,090
Net income applicable to common
stock $17,381,486 $18,120,071 $15,550,894
Weighted average number of
common shares outstanding 14,730,902 13,734,231 13,415,539
Earnings per weighted average
share of common stock $1.18 $1.32 $1.16
Dividends per share of common stock $1.28 $1.28 $1.28
<FOOTNOTE>
See accompanying Notes to Financial Statements.
Statement of Common Stockholders' Equity
Year Ended December 31,
1995 1994 1993
Common stock, $1 par value:
Balance, beginning of year $13,941,531 $13,571,186 $13,284,980
Stock issued through:
Public offering 900,000 - -
Dividend reinvestment and stock
purchase plan 273,168 290,342 220,084
Employee benefit plans 101,234 80,003 66,122
Balance, end of year $15,215,933 $13,941,531 $13,571,186
Capital in excess of par value:
Balance, beginning of year $106,055,389 $101,223,637 $95,325,910
Excess of net proceeds over par
value of stock issued:
Public offering 14,625,000
Stock plans 5,957,370 5,687,298 5,823,913
Expenses related to common stock
issuance (788,287) - -
Expenses related to preferred
stock issuance - (914,902) -
Installments received on common
stock/stock (158,630) 59,356 73,814
purchase, net
Balance, end of year $125,690,842 $106,055,389 $101,223,637
Retained earnings:
Balance, beginning of year $53,783,342 $53,066,108 $54,682,098
Net income 19,797,826 19,683,099 15,935,984
73,581,168 72,749,207 70,618,082
Less dividends paid:
8-1/8% preferred stock 2,031,250 1,008,667 -
5% preferred stock 195,090 195,090 195,090
4-3/4% preferred stock 190,000 190,000 190,000
Common stock 18,934,244 17,572,108 17,166,884
21,350,584 18,965,865 17,551,974
Balance, end of year $52,230,584 $53,783,342 $53,066,108
<FOOTNOTE>
See accompanying Notes to Financial Statements.
Statement of Cash Flows
Year Ended December 31,
1995 1994 1993
Operating activities
Net income $19,797,826 $19,683,099 $15,935,984
Adjustments to reconcile net
income to cash flows:
Depreciation and amortization 20,968,734 19,336,048 18,247,883
Loss on early retirement program 4,583,188 - -
Deferred income taxes, net 990,000 1,440,000 4,050,000
Investment tax credit, net (600,000) (606,000) (610,000)
Allowance for equity funds used
during construction (1,069,779) (730,359) -
Issuance of common stock for
401(k) plan 680,891 661,937 636,842
Other 142,902 1,252,201 2,189,668
Cash flows impacted by changes
in:
Accounts receivable and accrued
unbilled revenues (2,265,380) (377,527) (2,314,867)
Fuel, materials and supplies (1,541,522) (1,342,855) (445,048)
Prepaid expenses and deferred
charges 1,427,622 (870,280) (5,571,943)
Accounts payable and accrued
liabilities 2,849,254 (295,626) 4,162,234
Customer deposits, interest and
taxes accrued 1,099 1,548,822 (1,003,744)
Other liabilities and other
deferred credits (201,364) 310,717 40,053
Net cash provided by operating
activities 45,763,471 40,010,177 35,317,062
Investing activities
Construction expenditures (50,818,744) (71,621,134) (44,360,120)
Allowance for equity funds used
during construction 1,069,779 730,359 -
Net cash used in investing
activities (49,748,965) (70,890,775) (44,360,120)
Financing activities
Proceeds from issuance of first
mortgage bonds 40,000,000 20,000,000 94,295,350
Proceeds from issuance of
preferred stock - 25,000,000 -
Proceeds from issuance of common
stock 20,228,964 4,540,159 5,547,091
Dividends (21,350,584) (18,965,865) (17,551,974)
Repayment of first mortgage
bonds (30,288,000) (134,000) (74,050,000)
Premium paid on extinguished
debt (1,500,000) - -
Net proceeds (repayments) from
short-term borrowings (2,000,000) 1,000,000 -
Payment of debt issue costs (650,763) - -
Net cash provided by financing
activities 4,439,617 31,440,294 8,240,467
Net increase (decrease) in cash
and cash equivalents 454,123 559,696 (802,591)
Cash and cash equivalents,
beginning of year 3,362,653 2,802,957 3,605,548
Cash and cash equivalents, end of
year $3,816,776 $3,362,653 $2,802,957
<FOOTNOTE>
Cash and cash equivalents include cash on hand and temporary investments
purchased with an initial maturity of three months or less. Interest paid
was $14,832,000, $12,766,000 and $13,303,000 for the years ended December
31, 1995, 1994 and 1993, respectively. Income taxes paid were $10,289,000,
$8,763,000 and $5,293,000, for the years ended December 31, 1995, 1994 and
1993, respectively.
See accompanying Notes to Financial Statements.
1. Summary of Accounting Policies
The Company is subject to regulations of the Missouri Public Service
Commission (MoPSC), the State Corporation Commission of the State of
Kansas, the Corporation Commission of Oklahoma, the Arkansas Public
Service Commission and the Federal Energy Regulatory Commission
(FERC). The accounting policies of the Company are in accordance with
the rate-making practices of the regulatory authorities and, as such,
conform to generally accepted accounting principles as applied to
regulated public utilities. The Company's electric revenues in 1995
were derived as follows: residential 42%, commercial 31%, industrial
17%, wholesale 6% and other 4%. Following is a description of the
Company's significant accounting policies:
Property and plant
The costs of additions to property and plant and replacements for
retired property units are capitalized. Costs include labor, material
and an allocation of general and administrative costs plus an
allowance for funds used during construction. Maintenance expenditures
and the renewal of items not considered units of property are charged
to income as incurred. The cost of units retired is charged to
accumulated depreciation, which is credited with salvage and charged
with removal costs.
Depreciation
Provisions for depreciation are computed at straight-line rates as
approved by regulatory authorities. Such provisions approximated 3.1%,
3.2% and 3.2% of depreciable property for 1995, 1994 and 1993,
respectively.
Allowance for funds used during construction
As provided in the regulatory Uniform System of Accounts, utility
plant is recorded at original cost, including an allowance for funds
used during construction (AFUDC) when first placed in service. The
AFUDC is a utility industry accounting practice whereby the cost of
borrowed funds and the cost of equity funds (preferred and common
stockholders' equity) applicable to the Company's construction program
are capitalized as a cost of construction. This accounting practice
offsets the effect on earnings of the cost of financing current
construction, and treats such financing costs in the same manner as
construction charges for labor and materials.
AFUDC does not represent current cash income. Recognition of this item
as a cost of utility plant is in accordance with regulatory rate
practice under which such plant costs are permitted as a component of
rate base and the provision for depreciation.
In accordance with the methodology prescribed by FERC, the Company
utilized aggregate rates of 8.6% for 1995, 7.03% for 1994 and 3.3% for
1993 (on a before-tax basis) compounded semiannually. In 1993, average
short-term debt outstanding exceeded average construction work in
progress. Under such circumstances, FERC rules prescribe the
assumption that all construction work in progress is financed by short-
term debt. Accordingly, all AFUDC for 1993 was considered attributable
to borrowed funds and was credited to interest expense.
Income taxes
Deferred tax assets and liabilities are recognized for the tax
consequences of transactions that have been treated differently for
financial reporting and tax return purposes, measured using statutory
tax rates.
Investment tax credits utilized in prior years were deferred and are
being amortized over the useful lives of the properties to which they
relate.
Unamortized debt discount, premium and expense
Discount, premium and expense associated with long-term debt are
amortized over the lives of the related issues. Costs, including gains
and losses, related to refunded long-term debt are amortized over the
lives of the related new debt issues.
Accrued unbilled revenue
The Company accrues on its books estimated, but unbilled, revenue and
also a liability for the related taxes.
Accumulated provision for uncollectible accounts
The accumulated provision for uncollectible accounts was $258,000 at
December 31, 1995 and $248,000 at December 31, 1994.
Franchise taxes
Operating revenues include franchise taxes of $3,565,396, $3,276,352
and $3,097,161 for each of the years ended December 31, 1995, 1994 and
1993, respectively.
Liability insurance
The Company carries excess liability insurance for workers'
compensation and public liability claims. In order to provide for the
cost of losses not covered by insurance, an allowance for injuries and
damages is maintained based on loss experience of the Company.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Estimates also affect the reported
amounts of revenues and expenses during the report period. Actual
amounts could differ from those estimates.
2. Regulatory Matters
During the three years ending December 31, 1995 the following rate
changes were effective:
Missouri
The MoPSC approved a stipulated agreement which authorized the Company
to file revised rate schedules designed to produce an increase in
overall Missouri jurisdictional gross annual electric revenues in the
amount of $1,400,000, or 0.9%, effective November 15, 1995. The
Company's original request, filed March 17, 1995, was for an increase
of $8,543,910 or 5.3%.
Effective August 15, 1994, the MoPSC approved a stipulated agreement
which authorized the Company to file revised rate schedules designed
to produce an increase in overall Missouri jurisdictional gross annual
electric revenues in the amount of $7,350,000, or 5.2%. The Company's
original request was for an increase of $7,969,000 or 5.7%. A
provision of the Missouri agreement authorized the Company to recover
the cost associated with Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," (SFAS 106) in Missouri jurisdictional rates subsequent to
August 15, 1994 and to reflect pension cost under Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions," (SFAS 87) on an accrual basis with modifications to certain
calculations. See further discussion in Note 7 - Retirement Benefits.
On January 24, 1994, the MoPSC approved an increase in rates for the
Company's water customers in the amount of $124,931, or 14.3%
effective February 13, 1994. The Company had originally filed its
request on August 30, 1993, for a $165,829, or 20.4% increase.
Kansas
On September 7, 1994, the Kansas Corporation Commission approved a
stipulated agreement between the Company and the Commission Staff
authorizing the Company to file revised rate schedules designed to
produce an increase in overall Kansas jurisdictional gross electric
revenues in the amount of $512,000, or 4.6% effective September 12,
1994. The Company's original request was for an increase of $717,529,
or 6.7%.
Oklahoma
On October 19, 1994, the Oklahoma Corporation Commission approved a
stipulated agreement between the Company and the Commission Staff
authorizing the Company to file revised rate schedules designed to
produce an increase in overall Oklahoma jurisdictional gross annual
electric revenues in the amount of $399,370, or 6.9%, effective
October 21, 1994. The Company's original request, as amended on August
12, 1994, was for an increase of $563,387, or 9.7%.
Arkansas
On November 8, 1994, the Company filed a notice withdrawing the
request for rate relief it filed with the Arkansas Public Service
Commission on June 20, 1994, after comparing actual data with
projected data included in the original request. The Company
originally requested an increase of $274,824, or 4.5% in annual
revenues.
Effects of regulation
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS 71), the Company's financial statements reflect ratemaking
policies prescribed by the regulatory commissions having jurisdiction
over the Company (the MoPSC, the State Corporation Commission of the
State of Kansas, the Corporation Commission of Oklahoma, the Arkansas
Public Service Commission and the FERC).
Certain expenses and credits, normally reflected in income as
incurred, are recognized when included in rates and recovered from or
refunded to customers. As such, the Company has recorded the following
regulatory assets which are expected to result in future revenues as
these costs are recovered through the ratemaking process.
Historically, all costs of this nature which are determined by the
Company's regulators to have been prudently incurred have been
recoverable through rates in the course of normal ratemaking
procedures and the Company believes that the items detailed below will
be afforded similar treatment.
The Company had recorded the following regulatory assets and
regulatory liability:
December 31,
1995 1994
Regulatory Assets
Income taxes $24,632,136 $22,359,272
Unamortized loss on
reacquired debt 11,115,047 8,995,704
Other postretirement benefits 465,394 641,760
Deferred 1993 flood losses 256,246 341,682
Incremental purchased power
- 1993 flood 236,088 314,784
Total Regulatory Assets $36,704,911 $32,653,202
Regulatory Liability
Income Taxes $19,680,363 $20,683,409
The Company continually assesses the recoverablilty of its regulatory
assets. Under current accounting standards, regulatory assets are
eliminated through a charge to earnings if and when it is probable
that such amounts will not be recovered through future revenues.
3. Common Stock
On April 27, 1995, the Company issued and sold 900,000 shares of its
common stock to the public with aggregate proceeds, net of expenses
and fees, of $14,850,000. The proceeds from the offering were used to
repay short-term indebtedness or for expenses incurred in connection
with the Company's construction program.
The Dividend Reinvestment and Stock Purchase Plan (the Reinvestment
Plan) allows common and preferred stockholders to reinvest dividends
paid by the Company into newly issued shares of the Company's common
stock at 95% of the market price average. Stockholders may also
purchase, for cash and within specified limits, additional stock at
100% of the market price average. The Company may elect to make shares
purchased in the open market rather than newly issued shares available
for purchase under the Reinvestment Plan. If the Company so elects,
the purchase price to be paid by Reinvestment Plan participants will
be 100% of the cost to the Company of such shares. Participants in the
Reinvestment Plan do not pay commissions or service charges in
connection with purchases under the Reinvestment Plan.
The Employee Stock Purchase Plan, which terminates May 31, 2000,
permits the grant to eligible employees of options to purchase common
stock at 90% of the lower of market value at date of grant or at date
of exercise. Contingent employee stock purchase subscriptions
outstanding and the maximum prices per share were 55,674 shares at
$15.42, 68,505 shares at $15.30 and 45,750 shares at $20.03, at
December 31, 1995, 1994 and 1993, respectively. Shares were issued at
$15.30 per share in 1995, $15.53 per share in 1994 and $19.13 per
share in 1993.
The Company's 1986 Stock Incentive Plan (the 1986 Incentive Plan)
provided for the grant of shares of common stock through January 22,
1996. At the annual meeting on April 26, 1995, the Company's
stockholders adopted the 1996 Stock Incentive Plan (the 1996 Incentive
Plan), the terms of which are substantially the same as the 1986
Incentive Plan. The 1996 Incentive Plan provides for the grant of up
to 650,000 shares of common stock through January 2006. Awards made
prior to 1996 were made under the 1986 Incentive Plan; awards made on
or after January 1, 1996 are made under the 1996 Incentive Plan. The
terms and conditions of any option or stock grant are determined by
the Board of Directors' compensation committee, within the provisions
of the applicable Incentive Plan. The Plans permit grants of stock
options and restricted stock to qualified employees and permits
Directors to receive common stock in lieu of cash compensation for
service as a Director.
During January 1995, 1994 and 1993, grants for 1,575, 633 and 2,119
shares, respectively, of restricted stock were made to qualified
employees under the 1986 Incentive Plan. For grants made to date, the
restrictions typically lapse and the shares are issuable to employees
who continue service with the Company three years from the date of
grant. For employees whose service is terminated by death, retirement,
disability, or under certain circumstances following a change in
control of the Company prior to the restrictions lapsing, the shares
are issuable immediately. For other terminations, the grant is
forfeited. During 1995, 1994 and 1993, 4,387, 3,198 and 766 shares,
respectively, were issued under the 1986 Incentive Plan. No options
have been granted under either Incentive Plan.
The Company's Employee 401(k) Retirement Plan (the 401(k) Plan) allows
participating employees to defer up to 15% of their annual
compensation up to a specified limit. The Company matches 50% of each
employee's deferrals by contributing shares of the Company's common
stock, such matching contributions not to exceed 3% of the employee's
annual compensation. The Company contributed 39,548, 36,479 and 27,992
shares of common stock in 1995, 1994 and 1993, respectively, valued at
market prices on the dates of contributions. The stock issuances to
effect the contributions were not cash transactions and are not
reflected as a source of cash in the Statement of Cash Flows.
At December 31, 1995, 2,525,425 shares remain available for issuance
under the foregoing plans (exclusive of shares authorized under the
1986 Incentive Plan which will not be awarded).
4. Preferred Stock
The Company has 5,000,000 shares of $10.00 par value cumulative
preferred stock authorized. At December 31, 1995 and 1994, these
shares were designated as follows:
Shares
1995 1994
Series without mandatory
redemption provisions 3,300,000 3,300,000
Undesignated 1,700,000 1,700,000
In the event of involuntary liquidation, holders of all outstanding
series of preferred stock will be entitled to be paid the $10.00 par
value of their shares plus accumulated and unpaid dividends before any
distribution of assets to holders of common stock.
The Company also has 2,500,000 shares of preference stock authorized,
including 500,000 shares of Series A Participating Preference Stock,
none of which have been issued.
Preferred stock without mandatory redemption provisions
Preferred stock without mandatory redemption provisions issued and
outstanding at December 31, 1995 and 1994 is as follows:
Shares
1995 1994
5% cumulative (400,000
shares authorized) 390,180 390,180
4-3/4% cumulative (400,000
shares authorized) 400,000 400,000
8-1/8% cumulative
(2,500,000 shares authorized) 2,500,000 2,500,000
3,290,180 3,290,180
In the event of voluntary liquidation or redemption of the 5% and 4-
3/4% series of cumulative preferred stock, holders will be entitled to
the following amounts per share plus accumulated and unpaid dividends:
5% cumulative - $10.50 (aggregate amount $4,096,890); and 4-3/4%
cumulative - $10.20 (aggregate amount $4,080,000).
Preference Stock Purchase Rights
The Company had 7,607,967 and 6,970,766 Preference Stock Purchase
Rights (Rights) outstanding at December 31, 1995 and 1994,
respectively. Each Right enables the holder to acquire one one-
hundredth of a share of Series A Participating Preference Stock (or,
under certain circumstances, other securities) at a price of $75 per
one one-hundredth share, subject to adjustment. Each share of common
stock currently has one-half of one Right. The Rights (other than
those held by an acquiring person or group (Acquiring Person)), which
expire July 25, 2000, will be exercisable only if an Acquiring Person
acquires 10% or more of the Company's common stock or announces an
intention to make a tender offer or exchange offer which would result
in the Acquiring Person owning 10% or more of the common stock. The
Rights may be redeemed by the Company in whole, but not in part, for
$0.01 per Right, prior to 10 days after the first public announcement
of the acquisition of 10% or more of the Company's common stock by an
Acquiring Person.
In addition, upon the occurrence of a merger or other business
combination, or an event of the type described in the preceding
paragraph, holders of the Rights, other than an Acquiring Person, will
be entitled, upon exercise of a Right, to receive either common stock
of the Company or common stock of the Acquiring Person having a value
equal to two times the exercise price of the Right. Any time after an
Acquiring Person acquires 10% or more (but less than 50%) of the
Company's outstanding common stock, the Board of Directors may, at its
option, exchange part or all of the Rights (other than Rights held by
the Acquiring Person) for common stock of the Company on a one-for-two
basis.
5. Long-term Debt
The principal amount of all series of first mortgage bonds outstanding
at any one time is limited by terms of the mortgage to $1,000,000,000.
Substantially all property, plant and equipment is subject to the lien
of the mortgage. At December 31 the long-term debt outstanding was as
follows:
1995 1994
First mortgage bonds:
5.70% Series due 1998 $23,000,000 $23,000,000
7-1/2% Series due 2002 37,500,000 37,500,000
7.60% Series due 2005 10,000,000 -
8-1/8% Series due 2009 (1) 20,000,000 20,000,000
9% Series due 2019 - 30,000,000
9-3/4% Series due 2020 2,250,000 2,250,000
7% Series due 2023 45,000,000 45,000,000
7-3/4% Series due 2025 30,000,000 -
7-1/4% Series due 2028 14,078,000 14,366,000
5.3% Pollution Control Series
due 2013 8,000,000 8,000,000
5.2% Pollution Control Series
due 2013 5,200,000 5,200,000
195,028,000 185,316,000
Less unamortized net discount 323,186 339,050
$194,704,814 $184,976,950
<FOOTNOTE>
(1) Holders of this series have the right to require the Company to
repurchase all or any portion of the bonds at a price of 100% of the
principal amount plus accrued interest, if any, on November 1, 2001.
The carrying amount of the Company's long-term debt was $195,028,000
and $185,316,000 at December 31, 1995 and 1994, respectively, and its
fair market value was estimated to be approximately $202,315,000 and
$167,751,000, respectively. This estimate was based on the quoted
market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturation. The
estimated fair market value may not represent the actual value that
could have been realized as of year-end or that will be realizable in
the future.
At December 31, 1995, the Company had a $15,000,000 unsecured line of
credit. Borrowings are at the bank's prime commercial rate and are due
370 days from the date of each loan. In connection with the Company's
line of credit there is an informal compensating balance arrangement
under which the Company maintains deposits averaging 5% of the line of
credit. This arrangement does not serve to legally restrict the use of
the Company's cash. The line of credit is also utilized to support the
Company's issuance of commercial paper although it is not assigned
specifically to such support. There were no outstanding borrowings
under this agreement at December 31, 1995 or 1994.
On April 27, 1995, the Company sold to the public in an underwritten
offering $10 million aggregate principal amount of its First Mortgage
Bonds, 7.60% Series due 2005. On June 7, 1995, the Company sold to the
public in an underwritten offering $30,000,000 aggregate principal
amount of its First Mortgage Bonds, 7-3/4% Series due 2025, the
proceeds of which were added to the Company's general funds and used
to redeem on July 3, 1995, its First Mortgage Bonds, 9% Series due
2019 ($30,000,000 aggregate principal amount) at a redemption price of
105.00% of the principal amount thereof plus accrued interest to July
3, 1995.
6. Short-Term Borrowings
Short-term commercial paper outstanding and notes payable averaged
$8,078,000 and $16,319,000 daily during 1995 and 1994, respectively,
with the highest month-end balances being $19,000,000 and $29,000,000.
respectively. The weighted daily average interest rates during 1995,
1994 and 1993 were 6.2%, 4.3% and 3.3%, respectively. The weighted
average interest rates of borrowings outstanding at December 31, 1995,
1994 and 1993 were 6.1%, 6.3% and 3.4%, respectively.
7. Retirement Benefits
Pensions
The Company's noncontributory defined benefit pension plan includes
all employees meeting minimum age and service requirements. The
benefits are based on years of service and the employee's average
annual basic earnings. Annual contributions to the plan are at least
equal to the minimum funding requirements of ERISA. Plan assets
consist of common stocks, United States government obligations,
federal agency bonds, corporate bonds and commingled trust funds.
Net pension cost for 1995, 1994 and 1993 is comprised of the following
components:
1995 1994 1993
Service cost - benefits
earned during the period $1,540,289 $1,610,855 $1,474,218
Interest cost on projected
benefit obligation 4,194,328 3,920,751 3,654,127
Actual return on plan assets (15,735,342) (514,240) (5,897,665)
Net amortization and deferral 9,748,753 (5,094,972) 751,892
Other - (58,275) 17,428
Net pension benefit $(251,972) $(135,881) $-
For years prior to 1994 the MoPSC recognized funded amounts for
ratemaking and the Company charged these amounts to expense as paid.
As discussed in Note 2, effective August 15, 1994, the MoPSC adopted
SFAS 87 for ratemaking purposes although it modified certain
calculations. Effective on that date, the Company commenced charging
pension cost calculated under the provisions of SFAS 87 to expense.
Such change had no material impact on the Company's financial
position, results of operations or cash flows.
Assumptions used in calculating the projected benefit obligation for
1995 and 1994 include the following:
1995 1994
Weighted average discount rate 7-1/4% 8-1/4%
Rate of increase in compensation
levels 5% 5%
Expected long-term rate of return
on plan assets 9% 9%
The following table sets forth the plan's funded status at December
31, 1995 and 1994:
1995 1994
Actuarial present value of
benefit obligations:
Vested benefits $53,416,146 $39,266,745
Nonvested benefits 61,651 265,744
Accumulated benefit obligation 53,477,797 39,532,489
Effect of projected future
compensation levels 13,605,325 11,696,628
Projected benefit obligation for
service rendered to date 67,083,122 51,229,117
Plan assets at fair value 69,225,616 56,773,077
Plan assets in excess of
projected benefit obligation 2,142,494 5,543,960
Unrecognized net assets at
January 1, 1986 being
amortized over 17 years (3,438,088) (3,929,243)
Unrecognized prior service cost 5,079,419 5,645,694
Unrecognized net gain (8,386,884) (7,854,724)
Accrued pension cost $(4,603,059) $(594,313)
Other Postretirement Benefits
The Company provides certain healthcare and life insurance benefits to
eligible retired employees, their dependents and survivors.
Participants generally become eligible for retiree healthcare benefits
after reaching age 55 with 5 years of service.
Effective January 1, 1993, the Company adopted SFAS 106, which
requires recognition of these benefits on an accrual basis during the
active service period of the employees. The Company elected to
amortize its transition obligation (approximately $21.7 million)
related to SFAS 106 over a twenty year period. Prior to adoption of
SFAS 106, the Company recognized the cost of such postretirement
benefits on a pay-as-you-go (i.e., cash) basis. Adoption of this
Standard had an adverse effect on earnings in 1994 and 1993 of
approximately $682,000 and $1 million (net of income taxes),
respectively, representing the Missouri jurisdictional portion of
costs that were not deemed recoverable under ratemaking procedures.
However, the MoPSC authorized the inclusion of SFAS 106 costs in rates
effective August 15, 1994, as discussed in Note 2, Rate Matters. In
addition, the states of Kansas and Oklahoma approved recovery of the
SFAS 106 costs in the rate orders received by the Company in 1994. In
the fourth quarter of 1995, the Company decided not to pursue filing a
rate order with the FERC and the FERC has not allowed deferral beyond
three years. Thus, approximately $224,000 of deferred costs relating
to the FERC jurisdiction were written off. The Company is deferring
SFAS 106 costs relating to the Arkansas jurisdictions as management
believes that such amounts are probable of recovery. At December 31,
1995, $465,000 of costs were deferred for future recovery.
In accordance with the above rate orders, the Company established two
separate trusts in 1994, one for those retirees who were subject to a
collectively bargained agreement and the other for all other retirees,
to fund retiree healthcare and life insurance benefits. The Company's
funding policy is to contribute annually an amount at least equal to
the revenues collected for the amount of postretirement benefits costs
allowed in rates. Assets in these trusts amounted to approximately
$2,877,000 at December 31, 1995 and $867,000 at December 31, 1994.
Postretirement benefits, a portion of which have been capitalized
and/or deferred, for 1995, 1994 and 1993 included the following
components:
Year Ended December 31,
1995 1994 1993
Service cost on benefits
earned during the year $478,214 $490,964 $506,510
Interest cost on projected
benefit obligation 1,830,602 1,732,866 1,739,114
Return on assets (41,425) - -
Amortization of unrecognized
transition obligation 1,084,017 1,084,017 1,084,017
Unrecognized net (gain)/loss (307,308) - -
Other (46,163) - -
Net periodic postretirement
benefit cost $2,997,937 $3,307,847 $3,329,641
The estimated funded status of the Company's obligations under SFAS
106 at December 31, 1995 and 1994 using a weighted average discount
rate of 7-1/4% and 8-1/4%, respectively, is as follows:
Year Ended December 31,
1995 1994
Accumulated postretirement
benefit obligation:
Retirees $13,849,134 $9,979,495
Other fully eligible plan
participants 2,753,455 5,236,065
Other active plan
participants 6,613,209 6,174,315
Total benefit obligation 23,215,798 21,389,875
Plan assets at fair value 2,963,556 867,033
Accumulated postretirement
obligation in excess of plan
assets (20,252,242) (20,522,842)
Unrecognized transition
obligation 18,428,276 19,512,293
Unrecognized net gain (2,519,972) (3,073,077)
Accrued postretirement
benefit cost $(4,343,938) $(4,083,626)
The assumed 1996 cost trend rate used to measure the expected cost of
healthcare benefits is 8.5%. The trend rate decreases through 2026 to
an ultimate rate of 6% for 2027 and subsequent years. The effect of a
1% increase in each future year's assumed healthcare cost trend rate
would increase the current service and interest cost from $2.2 million
to $2.8 million and the accumulated postretirement benefit obligation
from $21.4 million to $25.9 million.
8. Income Taxes
The provision for income taxes is different from the amount of income
tax determined by applying the statutory income tax rate to income
before income taxes as a result of the following differences:
1995 1994 1993
Computed "expected"
federal provision $10,650,000 $10,593,000 $8,246,000
State taxes, net of
federal effect 1,077,000 939,000 308,000
Adjustment to taxes
resulting from:
Investment tax credit
amortization (600,000) (606,000) (610,000)
Other (497,000) (342,000) (314,000)
Actual provision $10,630,000 $10,584,000 $7,630,000
Income tax expense components for the years shown are as follows:
1995 1994 1993
Taxes currently payable
Included in operating
revenue deductions:
Federal $8,790,000 $8,420,000 $3,762,000
State 1,240,000 1,425,000 464,000
Included in "other - net" 210,000 (95,000) (36,000)
Deferred taxes
Depreciation and
amortization differences 2,670,000 2,035,000 2,265,000
Loss on reacquired debt 819,000 (185,000) 2,385,000
Postretirement benefits (75,000) (318,000) (550,000)
Voluntary early
retirement program (1,675,000) - -
Other (749,000) (92,000) (50,000)
Deferred investment tax
credits, net (600,000) (606,000) (610,000)
Total income tax expense $10,630,000 $10,584,000 $7,630,000
Empire began normalizing the effect of deferred state income taxes and
other federal tax items in 1994 in conjunction with the 1994 MoPSC
electric rate agreement discussed in Note 2 above. The impact of these
changes was not material to the financial position, results of
operations or cash flows of the Company.
Effective January 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" (FAS 109). Prior to 1993, in accordance with
accepted ratemaking practice, deferred income taxes were not provided
for certain temporary differences flowed through to customers and the
equity component of AFUDC. FAS 109 requires recognition of the income
tax effect of such temporary differences. Accordingly, a regulatory
asset, representing the probable recovery from customers of future
income taxes which is expected to occur when the temporary differences
reverse, has been recorded along with a corresponding deferred tax
liability. Also, a regulatory liability recognizing the lower expected
revenue resulting from reduced income taxes associated with amortizing
accumulated deferred investment tax credits, has been recorded.
Under FAS 109, temporary differences gave rise to deferred tax assets
and deferred tax liabilities at year-end 1995 and 1994 as follows:
Balances as of December 31,
1995 1994
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Noncurrent:
Depreciation and other
property related $13,272,176 $78,468,354 $13,193,240 $73,903,229
Unamortized
investment tax credit 6,743,942 - 6,823,000 -
Miscellaneous
book/tax recognition
differences 3,778,402 5,821,467 1,961,429 4,259,831
Change in statutory
tax rate - - 547,000 591,000
Total deferred taxes $23,794,520 $84,289,821 $22,524,669 $78,754,060
9. Iatan Plant
The Company owns a 12% undivided interest in a coal-fired 670 megawatt
generating unit near Weston, Missouri. The Company is entitled to 12%
of the available capacity and is obligated for that percentage of
costs which are included in corresponding operating expense
classifications in the Statement of Income. At December 31, 1995 and
1994, the Company's property, plant and equipment accounts include the
cost of its ownership interest in the unit of $43,629,000 and
$44,576,000 and accumulated depreciation of $20,466,000 and
$21,303,000, respectively
10. Commitments and Contingencies
The 1996 construction budget is $60,730,000. The three year
construction program for 1996 through 1998 is estimated to be
$141,985,000.
The Company has entered into long-term agreements to purchase capacity
and energy, to obtain supplies of coal and to provide natural gas
transportation. Under such contracts, the Company incurred purchased
power and fuel costs of approximately $52,000,000, $48,000,000 and
$45,000,000 in 1995, 1994 and 1993, respectively. Certain of these
contracts provide for minimum and maximum annual amounts to be
purchased and further provide, in part, for cash settlements to be
made when minimum amounts are not purchased. In the event that no
purchases of coal, energy and transportation services are made, an
event considered unlikely by management, minimum annual cash
settlements approximate $25,000,000 in 1996, $30,000,000 in 1997,
$22,000,000 in 1998, $24,000,000 in 1999 and $31,000,000 in 2000 and
reducing to lesser amounts thereafter through 2010.
11. Voluntary Early Retirement Program
During 1995, the Company offered qualifying employees an enhanced
voluntary early retirement program. Of the 52 eligible employees, 49
accepted the program. This program included enhanced pension benefits
as well as postemployment medical and life insurance benefits. As a
result of the postemployment benefits provided in connection with the
enhanced voluntary early retirement program, the Company incurred
$4,583,000 in certain one-time costs computed in accordance with SFAS
No. 88, "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits" and SFAS
No. 106.
12. Selected Quarterly Information (Unaudited)
A summary of operations for the quarterly periods of 1995 and 1994 is
as follows:
Quarters
First Second Third Fourth
(dollars in thousands except per share
amounts)
1995: (a)
Operating revenues $42,396 $42,465 $62,789 $45,188
Operating income 7,447 7,035 12,144 6,525
Net income 4,566 3,732 8,523 2,977
Net income applicable to
common stock 3,962 3,128 7,919 2,373
Earnings per average share
of common stock $.28 $.21 $.53 $.16
1994:
Operating revenues $41,673 $41,595 $52,339 $42,150
Operating income 6,993 6,433 11,353 7,226
Net income 3,743 3,406 8,350 4,185
Net income applicable to
common stock 3,647 3,147 7,746 3,580
Earnings per average share
of common stock $.27 $.23 $.56 $.26
<FOOTNOTE>
(a) Operating income for the third quarter of 1995 was reduced by
a pre-tax charge of $4,583,000 for certain one-time costs
associated with the Company's voluntary early retirement program.
This charge reduced earnings by $0.19 per share during the quarter
(Note 11).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors and
directorships may be found in the Company's proxy statement for its Annual
Meeting of Stockholders to be held April 25, 1996, which is incorporated
herein by reference.
Pursuant to instruction 3 of paragraph (b) of Item 401 of Regulation S-
K, the information required by this Item with respect to executive officers
is set forth in Item 1 of Part I of this Form 10-K under "Executive
Officers and Other Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation may be found in the
Company's proxy statement for its Annual Meeting of Stockholders to be held
April 25, 1996, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Company, no person is the beneficial owner of
5% or more of any class of the Company's voting securities, and there are
no arrangements the operation of which may at a subsequent date result in a
change in control of the Company.
Information regarding the number of shares of the Company's equity
securities beneficially owned by the directors and certain executive
officers of the Company and by the directors and executive officers as a
group may be found in the Company's proxy statement for its Annual Meeting
of Stockholders to be held April 25, 1996, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item with respect to certain
relationships and related transactions may be found in the Company's proxy
statement for its Annual Meeting of Stockholders to be held April 25, 1996,
which is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Index to Financial Statements and Financial Statement Schedule Covered by
Report of Independent Auditors
Balance sheets at December 31, 1995 and 1994 20
Statements of income for each of the three years in the period ended
December 31, 1995 21
Statements of common stockholders' equity for each of the three
years in the period ended December 31, 1995 22
Statements of cash flows for each of the three years in the period
ended December 31, 1995 23
Notes to financial statements 24
Schedule for the years ended December 31, 1995, 1994 and 1993:
Schedule II - Valuation and qualifying accounts 38
All other schedules are omitted as the required information is either not
present, is not present in sufficient amounts, or the information required
therein is included in the financial statements or notes thereto.
List of Exhibits
(3) (a) -The Restated Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 4(a) to Form S-3, File
No. 33-54539).
(b) -By-laws of Company as amended January 23, 1992 (Incorporated by
reference to Exhibit 3(f) to Annual Report Form 10-K for year
ended December 31, 1991, File No. 1-3368).
(4) (a) -Indenture of Mortgage and Deed of Trust dated as of September 1,
1944 and First Supplemental Indenture thereto (Incorporated by
reference to Exhibits B(1) and B(2) to Form 10, File No. 1-
3368).
(b) -Third Supplemental Indenture to Indenture of Mortgage and Deed
of Trust (Incorporated by reference to Exhibit 2(c) to Form S-
7, File No. 2-59924).
(c) -Sixth through Eighth Supplemental Indentures to Indenture of
Mortgage and Deed of Trust (Incorporated by reference to
Exhibit 2(c) to Form S-7, File No. 2-59924).
(d) -Fourteenth Supplemental Indenture to Indenture of Mortgage and
Deed of Trust (Incorporated by reference to Exhibit 4(f) to
Form S-3, File No. 33-56635).
(e) -Sixteenth Supplemental Indenture dated as of November 1, 1989 to
Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4 to Annual Report on Form 10-K for year
ended December 31, 1989, File No. 1-3368).
(f) -Seventeenth Supplemental Indenture dated as of December 1, 1990
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4(j) to Annual Report on Form 10-K for
year ended December 31, 1990, File No. 1-3368).
(g) -Eighteenth Supplemental Indenture dated as of July 1, 1992 to
Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4 to Form 10-Q for quarter ended June 30,
1992, File No. 1-3368).
(h) -Nineteenth Supplemental Indenture dated as of May 1, 1993 to
Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit (l) to Form S-3, File No. 33-66748).
(i) -Twentieth Supplemental Indenture dated as of June 1, 1993 to
Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit (m) to Form S-3, File No. 33-66748).
(j) -Twenty-First Supplemental Indenture dated as of October 1, 1993
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4 to Form 10-Q for quarter ended September
30, 1993, File No.1-3368).
(k) -Twenty-Second Supplemental Indenture dated as of November 1,
1993 to Indenture of Mortgage and Deed of Trust (Incorporated
by reference to Exhibit 4(k) to Annual Report on Form 10-K for
year ended December 31, 1993, File No. 1-3368).
(l) -Twenty-Third Supplemental Indenture dated as of November 1, 1993
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4(l) to Annual Report on Form 10-K for
year ended December 31, 1993, File No. 1-3368).
(m) -Twenty-Fourth Supplemental Indenture dated as of March 1, 1994
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4(m) to Annual Report on Form 10-K for
year ended December 31, 1993, File No. 1-3368).
(n) -Twenty-Fifth Supplemental Indenture dated as of November 1, 1994
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4(p) to Form S-3, File No. 33-56635).
(o) -Twenty-Sixth Supplemental Indenture dated as of April 1, 1995 to
Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4 to Form 10-Q for quarter ended March 31,
1995, File No. 1-3368).
(p) -Twenty-Seventh Supplemental Indenture dated as of June 1, 1995
to Indenture of Mortgage and Deed of Trust (Incorporated by
reference to Exhibit 4 to Form 10-Q for quarter ended June 30,
1995, File No. 1-3368).
(q) -Rights Agreement dated July 26, 1990 (Incorporated by reference
to Exhibit 4(a) to Form 8-K, dated July 26, 1990, File No. 1-
3368).
(r) -Amendment to Rights Agreement dated July 26, 1990 between the
Company and Chemical Bank (successor to Manufacturers Hanover
Trust Company), as Rights Agent (Incorporated by reference to
Exhibit 4 to Form 10-Q for quarter ended September 30, 1991,
File No. 1-3368).
(10) (a) -1986 Stock Incentive Plan as amended July 23, 1992 (Incorporated
by reference to Exhibit 10 to Form 10-Q for quarter ended June
30, 1992, File No. 1-3368).**
(b) -1996 Stock Incentive Plan (Incorporated by reference to Exhibit
4.1 to Form S-8, File No. 33-64639).**
(c) -Management Incentive Plan (A description of this Plan is
incorporated by reference to page 5 of the Company's Proxy
Statement for its Annual Meeting of Stockholders held April 27,
1989).**
(d) -Deferred Compensation Plan for Directors (Incorporated by
reference to Exhibit 10(d) to Annual Report on Form 10-K for
year ended December 31, 1990, File No. 1-3368).**
(e) -The Empire District Electric Company Change in Control Severance
Pay Plan and Forms of Agreement (Incorporated by reference to
Exhibit 10 to Form 10-Q for quarter ended September 30, 1991,
File No. 1-3368).**
(f) -The Empire District Electric Company Supplemental Executive
Retirement Plan. (Incorporated by reference to Exhibit 10(e) to
Annual Report on Form 10-K for year ended December 31, 1994,
File No. 1-3368).**
(12) -Computation of Ratios of Earnings to Fixed Charges and Earnings
to Combined Fixed Charges and Preferred Stock Dividend
Requirements.*
(23) -Consent of Price Waterhouse.*
(24) -Powers of Attorney.*
(27) -Financial Data Schedule for December 31, 1995.
** This exhibit is a compensatory plan or arrangement as contemplated by Item
14(a)(3) of Form 10-K.
* Filed herewith.
Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
SCHEDULE II
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
Balance Additions Deductions from reserve Balance
at Charged to Other Accounts at
beginning Charged close of
of period to income Description Amount Description Amount period
Year ended December 31, 1995:
Reserve deducted from assets: Recovery of
Accumulated provision for amounts previously Accounts
uncollectible accounts $248,452 $409,600 written off $267,528 written off $667,719 $257,861
Reserve not shown separately
in balance sheet: Property, plant &
Injuries and damages equipment and Claims and
reserve (Note A) $1,068,607 $640,941 clearing accounts $627,970 expenses $1,074,468 $1,263,050
Year ended December 31, 1994:
Reserve deducted from assets: Recovery of
Accumulated provision for amounts previously Accounts
uncollectible accounts $248,238 $325,100 written off $255,578 written off $580,464 $248,452
Reserve not shown separately
in balance sheet: Property, plant &
Injuries and damages equipment and Claims and
reserve (Note A) $924,378 $477,347 clearing accounts $449,657 expenses $782,775 $1,068,607
Year ended December 31, 1993:
Reserve deducted from assets: Recovery of
Accumulated provision for amounts previously Accounts
uncollectible accounts $248,035 $226,800 written off $216,130 written off $442,727 $248,238
Reserve not shown separately
in balance sheet: Property, plant &
Injuries and damages equipment and Claims and
reserve (Note A) $878,998 $424,807 clearing accounts $404,416 expenses $783,843 $924,378
<FOOTNOTE>
NOTE A: This reserve is provided for workers' compensation and
public liability damages. The Company at December 31, 1995 carried
insurance for workers' compensation claims in excess of $250,000 and
for public liability claims in excess of $250,000. The injuries and
damages reserve is included on the Balance Sheet in the section
"Noncurrent liabilities and deferred credits" in the category "Other".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE EMPIRE DISTRICT ELECTRIC COMPANY
R. L. LAMB
By......................................
R. L. Lamb, President
Date: March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date
R. L. LAMB )
................................. )
R. L. Lamb, President and Director )
(Principal Executive Officer) )
)
)
R. B. FANCHER )
................................. )
R. B. Fancher, Vice President-Finance )
(Principal Financial Officer) )
)
)
G. A. KNAPP )
................................. )
G. A. Knapp, Controller and Assistant Treasurer )
(Principal Accounting Officer) )
)
)
V. E. BRILL.* )
................................. )
V. E. Brill, Vice President-Energy Supply and Director )
)
)
M. F. CHUBB, JR.* )
................................. )
M. F. Chubb, Jr., Director )
)
)
R. D. HAMMONS* )
................................. )
R. D. Hammons, Director )
)
)
R. C. HARTLEY* )
................................. )
R. C. Hartley, Director )
)
)---- March 15, 1996
J. R. HERSCHEND* )
................................. )
J. R. Herschend, Director )
)
)
F. E. JEFFRIES* )
................................. )
F. E. Jeffries, Director )
)
)
R. E. MAYES* )
................................. )
R. E. Mayes, Director )
)
)
M. W. McKINNEY* )
................................. )
M. W. McKinney, Executive Vice President- )
Commercial Operations and Director )
)
)
M. M. POSNER* )
................................. )
M. M. Posner, Director )
)
)
R. B. FANCHER )
................................. )
*By (R. B. Fancher, As attorney in fact for )
each of the persons indicated) )