-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VBjg5ECecWs73ylKLIgcn2K5lQU8Rs+tgeHJt/f2Hc3VzkTKXjx4wG1Rp2iIt+E7 Sr0XsS7gtFByOCmmcKbbjQ== 0000032689-96-000007.txt : 19960812 0000032689-96-000007.hdr.sgml : 19960812 ACCESSION NUMBER: 0000032689-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE DISTRICT ELECTRIC CO CENTRAL INDEX KEY: 0000032689 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 440236370 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03368 FILM NUMBER: 96606763 BUSINESS ADDRESS: STREET 1: 602 JOPLIN ST CITY: JOPLIN STATE: MO ZIP: 64801 BUSINESS PHONE: 4176255100 MAIL ADDRESS: STREET 1: P.O. BOX 127 CITY: JOPLIN STATE: MO ZIP: 64802 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 X For the quarterly period ended June 30, 1996 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 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 Common stock outstanding as of August 1, 1996: 16,303,571 shares. THE EMPIRE DISTRICT ELECTRIC COMPANY INDEX Page Number Part I - Financial Information: Item 1. Financial Statements: a. Statements of Income 3 b. Balance Sheets 6 c. Statements of Cash Flows 7 d. Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II Other Information: - - Item 1. Legal Proceedings - (none) Item 2. Changes in Securities - (none) Item 3. Defaults Upon Senior Securities - (none) Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
PART I. FINANCIAL INFORMATION Item 1. Financial Statements STATEMENTS OF INCOME (UNAUDITED) Three Months Ended June 30, 1996 1995 Operating revenues: Electric $47,347,988 $42,226,197 Water 258,315 238,752 47,606,303 42,464,949 Operating revenue deductions: Operating expenses: Fuel 7,270,682 6,814,283 Purchased power 12,694,375 8,339,702 Other 7,202,533 7,827,310 Total operating expenses 27,167,590 22,981,295 Maintenance and repairs 4,379,212 3,374,389 Depreciation and amortization 5,356,981 4,826,221 Provision for income taxes 1,498,050 1,803,790 Other taxes 2,821,125 2,475,626 41,222,958 35,461,321 Operating income 6,383,345 7,003,628 Other income and deductions: Allowance for equity funds used 162,653 336,502 during construction Interest income 46,862 140,047 Other - net (47,449) (91,125) 162,066 385,424 Income before interest charges 6,545,411 7,389,052 Interest charges: Long-term debt 3,695,737 3,873,631 Commercial paper 59,449 99,988 Allowance for borrowed funds used (143,518) (400,971) during construction Other 82,789 84,633 3,694,457 3,657,281 Net income 2,850,954 3,731,771 Preferred stock dividend requirements 604,085 604,085 Net income applicable to common stock $2,246,869 $3,127,686 Weighted average number of common 16,119,268 14,697,172 shares outstanding Earnings per weighted average share of $ 0.14 $ 0.21 common stock Dividends per share of common stock $ 0.32 $ 0.32
STATEMENTS OF INCOME (UNAUDITED) Six Months Ended June 30, 1996 1995 Operating revenues: Electric $94,730,538 $84,860,719 Water 515,828 472,861 95,246,366 84,860,580 Operating revenue deductions: Operating expenses: Fuel 15,910,399 14,205,348 Purchased power 23,796,300 16,238,250 Other 14,674,663 15,449,432 Total operating expenses 54,381,362 45,893,030 Maintenance and repairs 7,141,861 6,192,899 Depreciation and amortization 10,639,395 9,498,930 Provision for income taxes 3,493,660 3,820,545 Other taxes 5,822,142 5,004,243 81,478,420 70,409,647 Operating income 13,767,946 14,450,933 Other income and deductions: Allowance for equity funds used during 305,753 739,947 construction Interest income 73,712 169,192 Other - net (162,696) (40,665) 216,769 868,474 Income before interest charges 13,984,715 15,319,407 Interest charges: Long-term debt 7,391,474 7,466,347 Commercial paper 236,960 372,044 Allowance for borrowed funds used (285,948) (959,498) during construction Other 144,607 142,754 7,487,093 7,021,647 Net income 6,497,622 8,297,760 Preferred stock dividend requirements 1,208,170 1,208,170 Net income applicable to common stock $5,289,452 $7,089,590 Weighted average number of common 15,678,758 14,333,650 shares outstanding Earnings per weighted average share of $ 0.34 $ 0.49 common stock Dividends per share of common stock $ 0.64 $ 0.64
See accompanying Notes to Financial Statements.
STATEMENTS OF INCOME (UNAUDITED) Twelve Months Ended June 30, 1996 1995 Operating revenues: Electric $202,190,579 $178,380,726 Water 1,033,268 968,822 203,223,847 179,349,548 Operating revenue deductions: Operating expenses: Fuel 33,630,244 30,259,513 Purchased power 43,674,228 33,246,801 Other 32,427,109 31,270,066 Voluntary early retirement program 4,583,188 - Total operating expenses 114,314,769 94,776,380 Maintenance and repairs 13,734,452 12,183,558 Depreciation and amortization 20,991,164 18,714,344 Provision for income taxes 10,093,115 10,478,075 Other taxes 11,622,750 10,167,619 170,756,250 146,319,976 Operating income 32,467,597 33,029,572 Other income and deductions: Allowance for equity funds used during 635,584 1,146,432 construction Interest income 156,012 244,977 Other - net (322,981) (186,399) 468,615 1,205,010 Income before interest charges 32,936,212 34,234,582 Interest charges: Long-term debt 14,783,791 14,072,923 Commercial paper 367,639 725,086 Allowance for borrowed funds used (495,255) (1,656,722) during construction Other 282,350 260,995 14,938,525 13,402,282 Net income 17,997,687 20,832,300 Preferred stock dividend requirements 2,416,340 2,416,340 Net income applicable to common stock $15,581,347 $18,415,960 Weighted average number of common 15,398,696 14,080,338 shares outstanding Earnings per weighted average share of $ 1.01 $ 1.31 common stock Dividends per share of common stock $ 1.28 $ 1.28
See accompanying Notes to Financial Statements.
BALANCE SHEETS June 30, 1996 December 31, (Unaudited) 1995 ASSETS Utility plant, at original cost: Electric $699,297,837 $677,583,831 Water 5,180,059 5,073,019 Construction work in progress 15,647,634 16,303,408 720,125,530 698,960,258 Accumulated depreciation 232,907,238 223,268,355 487,218,292 475,691,903 Current assets: Cash and cash equivalents 3,911,109 3,816,776 Accounts receivable - trade, net 13,848,860 12,512,800 Accrued unbilled revenues 7,326,048 6,579,858 Accounts receivable - other 1,586,502 1,745,999 Fuel, materials and supplies 14,989,933 14,511,898 Prepaid expenses 763,047 682,413 42,425,499 39,849,744 Deferred charges: Regulatory asset 25,688,005 25,589,864 Unamortized debt expenses 14,121,850 14,546,428 Other 4,277,967 1,690,334 44,087,822 41,826,626 Total Assets $573,731,613 $557,368,273 CAPITALIZATION AND LIABILITIES: Common stock, $1 par value, 16,293,126 and 15,215,933 shares issued and outstanding, respectively $16,293,126 $15,215,933 Capital in excess of par value 142,536,113 125,690,842 Retained earnings (Note 2) 47,454,495 52,230,584 Total common stockholders' equity 206,283,734 193,137,359 Preferred stock 32,901,800 32,901,800 Long-term debt 194,712,746 194,704,814 433,898,280 420,743,973 Current liabilities: Accounts payable and accrued 13,373,762 14,308,497 liabilities Commercial paper 13,000,000 14,000,000 Customer deposits 2,633,726 2,516,903 Interest accrued 3,430,777 3,354,668 Taxes accrued, including income taxes 5,574,222 1,486,304 38,012,487 35,666,372 Noncurrent liabilities and deferred credits: Regulatory liability 19,158,375 19,680,363 Deferred income taxes 61,998,392 60,495,301 Unamortized investment tax credits 9,970,370 10,141,000 Postretirement benefits other than 4,359,879 4,343,938 pensions Other 6,333,830 6,297,326 101,820,846 100,957,928 Total Capitalization and Liabilities $573,731,613 $557,368,273
See accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 1996 1995* Operating activities: Net income $6,497,622 $8,297,760 Adjustments to reconcile net income to cash flows: Depreciation and amortization 11,204,183 10,056,015 Deferred income taxes - net 767,409 925,577 Investment tax credit - net (170,630) (196,720) Allowance for equity funds used during construction (305,753) (739,947) Issuance of common stock for 401(k) plan 319,578 332,584 Other 1,554,682 1,865,344 Cash flows impacted by changes in: Receivables and accrued unbilled revenues (1,922,753) 282,126 Fuel, materials and supplies (478,035) (1,681,657) Prepaid expenses and deferred charges (2,135,212) 63,921 Accounts payable and accrued liabilities (934,735) 601,341 Customer deposits, interest and taxes accrued 4,280,850 2,823,364 Other liabilities and deferred credits (1,487,229) (2,021,869) Net cash provided by operating activities 17,189,977 20,607,839 Investing activities: Construction expenditures (22,730,571) (28,301,277) Allowance for equity funds used during construction 305,753 739,947 Net cash used in investing activities (22,424,818) (27,561,330) Financing activities: Proceeds from issuance of first mortgage bonds - 40,000,000 Proceeds from issuance of common stock 17,602,886 17,574,438 Dividends (11,273,711) (10,470,821) Repayment of first mortgage bonds - (30,125,000) Premium paid on extinguished debt - (1,500,000) Payment of debt issue costs - (548,488) Net issuances from short-term borrowings (1,000,000) (8,000,000) Net cash provided by financing activities 5,329,175 6,930,129 Net increase (decrease) in cash and cash equivalents 94,334 (23,362) Cash and cash equivalents at beginning of period 3,816,775 3,362,653 Cash and cash equivalents at end of period $3,911,109 $3,339,291 *Certain reclassifications have been made to conform with current year reporting methodology.
See accompanying Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Summary of Significant Accounting Policies The accompanying interim financial statements do not include all disclosures included in the annual financial statements and therefore should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. The information furnished reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of the Company, necessary to present fairly the results for the interim periods presented.
Note 2 - Retained Earnings Balance at January 1, 1996 $52,230,584 Changes January 1 through March 31: Net Income 3,646,668 Quarterly cash dividends on common stock: $0.32 per share (4,872,395) Quarterly cash dividends on preferred stock: 8-1/8% cumulative - $0.203125 per share (507,813) 5% cumulative - $0.125 per share (48,772) 4-3/4% cumulative - $0.11875 per share (47,500) Total changes January 1 through March 31 (1,829,812) Balance April 1, 1996 50,400,772 Changes April 1 through June 30: Net Income 2,850,954 Quarterly cash dividends on common stock: $0.32 per share (5,193,146) Quarterly cash dividends on preferred stock: 8-1/8% cumulative - $0.203125 (507,812) 5% cumulative - $0.125 per share (48,773) 4-3/4% cumulative - $0.11875 per share (47,500) Total changes April 1 through June 30 (2,946,277) Balance June 30, 1996 $47,454,495
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS The following discussion analyzes significant changes in the results of operations for the three-month, six-month and twelve-month periods ended June 30, 1996, compared to the same periods ended June 30, 1995. Operating Revenues and Kilowatt-Hour Sales The Company's total electric operating revenues increased approximately $5.1 million (12.1%) during the second quarter of 1996 compared to the second quarter of 1995. Approximately 39% of total electric operating revenues during the second quarter of 1996 were from residential customers, 31% from commercial, 19% from industrial, 5% from wholesale on-system customers and 2% from wholesale off-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:
Operating Kwh Sales Revenues Six Twelve Six Twelve Second Months Months Second Months Months Quarter Ended Ended Quarter Ended Ended Residential 15.7% 16.5% 16.1% 14.1% 14.3% 17.0% Commercial 12.8 12.9 12.3 11.0 11.8 13.8 Industrial 7.2 6.2 5.1 8.9 7.6 7.8 Wholesale On- System 10.5 9.2 7.6 23.0 20.6 14.0 Total System 11.8 12.2 11.4 12.2 12.4 14.0
Residential Kwh sales and operating revenue increased substantially during the second quarter of 1996 compared to the same period of 1995, primarily due to weather conditions which were significantly warmer than those experienced during the second quarter of 1995, when temperatures were much cooler than average. An increase of 2.3% in the average number of residential customers served over the same period a year ago also contributed to the increase in Kwh sales and related revenue. Residential revenues were also positively affected by the increase in Missouri rates which became effective November 15, 1995. Commercial Kwh sales and operating revenue increased during the quarter reflecting the warmer temperatures and an increase of 3.6% in the average number of commercial customers served over the same period last year. Both commercial and industrial Kwh sales and related revenues were positively affected by continuing increases in business activity throughout the Company's service territory. The increase in industrial revenues was due in part to the November 1995 increase in Missouri rates. Residential and commercial Kwh sales increased more than the corresponding increases in revenues during the quarter and six-months ended June 30, 1996 due to the effect of changes in the Company's rate design as a result of its 1994 Missouri rate increase. This restructuring resulted in, among other things, the shifting of revenue from winter billing periods to summer billing periods. On-system wholesale Kwh sales were up during the period reflecting the weather conditions discussed above. The larger percentage increase in revenues associated with these FERC regulated sales resulted from the operation of the fuel adjustment clause applicable to such sales, which permits the pass through to customers of higher fuel and purchased power costs. For the six and twelve months ended June 30, 1996, Kwh sales to and operating revenues from the Company's on-system customers were up over the year earlier periods, primarily as a result of the warmer temperatures experienced during June 1996 compared to the cooler than normal weather during the second quarter of 1995, and also reflecting significantly colder weather during the first quarter of 1996, significant customer growth throughout the Company's service territory and the effect of electric rate increases in Missouri in 1994 and 1995. In addition to sales to its own customers, the Company also sells power to other utilities to the extent it is available, and provides transmission service through its system for transactions between other energy suppliers. For the second quarter of 1996, revenues from such transactions amounted to approximately $1.7 million, compared with approximately $1.6 million during the second quarter of 1995. For the six months ended June 30, 1996, revenues from such off- system transactions were approximately $3.1 million, compared with approximately $2.8 million during the six months ended June 30, 1995. For the twelve months ended June 30, 1996, revenues from such off-system transactions were approximately $6.5 million, compared with approximately $6.6 million during the twelve months ended June 30, 1995. The increase in revenue from off-system transactions during the three-month and six- month ended current periods was due primarily to an increase in transmission service transactions through the Western Systems Power Pool, of which the Company is a member. On August 1, 1996, the Company filed a request with the Missouri Public Service Commission for an interim increase in rates for its Missouri electric customers in the amount of $4,018,071, or 2.4% to allow the Company to recover higher expenses resulting from natural gas prices and purchased power prices in 1996 which have been significantly higher than the levels contemplated by the Company's existing rates. The Company cannot predict the extent of any increase which might be granted as a result of this filing. The Company currently anticipates filing for permanent rate relief in Missouri and in its other jurisdictions later in 1996. Operating Revenue Deductions During the second quarter of 1996, total operating and maintenance expenses increased approximately $5.2 million (19.7%) compared to the same period last year. Purchased power costs were up approximately $4.4 million (52.2%) during the second quarter of 1996. The amount of power the Company purchased during the second quarter of 1996 was significantly higher than that purchased during the same period last year, primarily due to increased purchases to meet the higher customer demand discussed above, particularly during an extended maintenance outage at the Company's Asbury Plant. The maintenance outage, which was a major five-year turbine inspection normally scheduled to last approximately six weeks, began on March 22 and was extended until June 1. During the inspection, extensive work was performed on the boiler, turbine and related equipment, including replacement of blading on the high pressure and intermediate pressure rotors. To avoid further extension of the outage, blade replacement on the low pressure rotor will be performed during scheduled spring maintenance in 1997. In addition, purchased power during the second quarter of 1996 was more expensive than in the same period last year. Reduced generation at the Company's Ozark Beach Hydro Plant during the second quarter compared to the same period last year due to low lake levels also contributed to the need for additional purchased energy. Total fuel costs were approximately $0.5 million (6.7%) higher during the second quarter of 1996, reflecting primarily the increased generation from higher-cost, gas-fired combustion turbine units at the Riverton, Energy Center and State Line Plants during periods of high customer demand during the Asbury outage. In addition, natural gas prices were considerably higher than in the same period last year. Other operating expenses decreased approximately $0.6 million (8.0%) during the second quarter, due primarily to lower general and administrative costs. Such amounts for the second quarter of 1995 were higher due to expenses in connection with the Company's 1995 Competitive Positioning Process ("CPP") and the proceedings relating to the proposed purchase of energy from Ahlstrom Development Corporation. Maintenance and repairs expense increased approximately $1.0 million (29.8%) during the period, primarily due to increased distribution system maintenance and increased expenses associated with the Asbury maintenance outage discussed above. Distribution system maintenance expenses were approximately $0.8 million (60.2%) higher during the period, primarily due to repairs associated with damage from a wind storm. On April 28, 1996 a major wind storm caused extensive damage throughout the Company's service territory, requiring maintenance expenses of approximately $0.7 million and capital expenditures of approximately $0.3 million to restore the Company's system. Costs related to the Asbury five-year turbine inspection were deferred and will be amortized over a five-year period. Depreciation and amortization expense increased approximately $0.5 million (11.0%) during the second quarter of 1996 due to increased levels of plant and equipment placed in service, particularly at the Company's State Line Power Plant. Total income taxes declined due primarily to lower taxable income during the current period. Other taxes were up approximately $0.3 million (14.0%) during the quarter reflecting increased property tax rates, higher levels of plant-in-service and increased franchise taxes relating to higher revenues. For the six months ended June 30, 1996, total operating and maintenance expenses were up approximately $9.4 million (18.1%) compared to the same period last year. Total purchased power costs increased $7.6 million (46.5%) during the period, due primarily to the reduced availability of the Company's Asbury Plant discussed above. In addition, periods of extremely cold weather during January and February of this year caused the Company's suppliers to curtail the delivery of natural gas to the Company and other utilities in the region, and also resulted in the decreased availability of low-cost nuclear and hydro-generated power from other utilities. These factors contributed to higher demand and a tight market for purchased energy and resulted in significantly higher prices during the period. Total fuel costs increased approximately $1.7 million (12.0%) during the six-month period, due primarily to the increased generation from higher-cost, gas- fired combustion turbine units at the Riverton, Energy Center and State Line Plants during periods of high customer demand during the Asbury outage Fuel costs were also impacted by the use of higher cost fuel oil at the Energy Center and Riverton Power Plant during periods of extremely cold weather when natural gas supplies were curtailed. In addition, natural gas prices were considerably higher during the second quarter of 1996 compared to the same period of 1995. Other operating expenses during the six months ended June 30, 1996 decreased approximately $0.8 million (5.0%) compared to the same period in 1995, due primarily to the lower general and administrative costs discussed above. Maintenance and repairs expense increased $0.9 million (15.3%), due primarily to the increased maintenance performed on the Company's distribution system and Asbury Plant, as discussed above. Total provision for income taxes decreased due to lower taxable income. Other taxes increased approximately $0.8 million (16.3%) during the period for the same reasons as discussed in the second quarter results. For the twelve months ended June 30, 1996, total operating and maintenance expenses increased approximately $21.1 million (19.7%) ($16.5 million, or 15.4% exclusive of the one-time charge relating to the Company's voluntary early retirement program) when compared to the same period ended June 30, 1995. Total purchased power costs were up approximately $10.4 million (31.4%). Purchased power costs were substantially higher due primarily to the factors discussed for the second quarter and six months ended June 30, 1996, along with increased purchases of higher-cost energy needed to meet increased customer demand resulting from the warm summer temperatures experienced during 1995. Fuel costs increased approximately $3.4 million (11.1%) during the twelve- month ending period, due primarily to the factors discussed for the second quarter and six months ended June 30, 1996, along with a substantial increase in generation from 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 State Line Power Plant. Other operating expenses during the twelve months ended June 30, 1996 increased approximately $5.7 million (18.4%) compared to the same period last year, due primarily to higher general and administrative costs associated with the CPP, the proceedings relating to the proposed purchase of energy from Ahlstrom Development Corporation, additional costs related to FAS 106 and increased customer accounts expense. 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. Maintenance and repair expense increased approximately $1.6 million (12.7%) during the period, due primarily to the same factors discussed for the second quarter and six months ended June 30, 1996. Depreciation and amortization expense increased due to the additional plant and equipment placed in service. Total provision for income taxes decreased during the period due to lower taxable income. Nonoperating Items Total allowance for funds used during construction ("AFUDC") decreased significantly during each of the periods presented compared to prior year levels, reflecting lower levels of construction work in progress, particularly due to completion of the Company's State Line Power Plant in May 1995. Interest income decreased during each of the periods ended June 30, 1996, primarily reflecting lower balances of cash available for investment. Interest charges on first mortgage bonds increased during the twelve-month period due to additional issuances of the Company's First Mortgage Bonds. Other interest charges were down during the periods due to decreased levels of short-term borrowing. Earnings Earnings per share of common stock for the second quarter of 1996 were $0.14 compared to $0.21 earned during the second quarter of 1995. Earnings per common share for the first six months of 1996 were $0.34 compared to $0.49 earned during the first six months of 1995. Increased revenues resulting from weather conditions favorable to increased Kwh sales, customer growth and the 1995 Missouri rate increase were more than offset by the increase in expenses discussed above, particularly increases in purchased power expenses, fuel costs and distribution system maintenance expenses, as well as decreased levels of AFUDC. Earnings per share also reflect the Company's issuance of 880,000 shares of common stock in April 1996. For the twelve months ending June 30, 1996, earnings per share of common stock were $1.01 compared to $1.31 earned during the twelve months ending June 30, 1995. For the twelve month period, earnings per share of common stock were down due to the factors discussed above with respect to the second quarter and first six months of 1996, along with the one-time pre-tax charge of approximately $4.6 million related to the enhanced voluntary early retirement program, increased interest requirements resulting from the issuance of first mortgage bonds and the issuance of 900,000 shares of the Company's Common Stock on April 27, 1995. Competition In accordance with FERC Orders No. 888 and 889, on July 9, 1996 the Company filed its open access transmission tariff with the FERC. This tariff, which is required to be filed by all electric utilities under FERC jurisdiction, makes the Company's transmission services available to all wholesale buyers and sellers under the same tariffs. The Company believes that the tariff will not have a material impact on its current operations. LIQUIDITY AND CAPITAL RESOURCES The Company's construction-related expenditures totaled $12.8 million during the second quarter of 1996, compared to $14.2 million for the same period in 1995. For the six months ended June 30, 1996, construction-related expenditures totaled $22.7 million compared to $28.3 million for the same period in 1995. Approximately one-fourth of construction expenditures for the first six months of 1996 were satisfied internally from operations; the remainder was provided from the sale to the public of the Company's common stock, the issuance of commercial paper and from the sale of common stock through the Company's Dividend Reinvestment Plan and Employee Stock Purchase Plan. On April 9, 1996, the Company sold to the public in an underwritten offering 880,000 shares of its Common Stock. The net proceeds of the offering of approximately $15.0 million were added to the Company's general funds which were used to repay short-term indebtedness and for expenses incurred in connection with the Company's construction program. The Company's construction expenditures are expected to total approximately $60.7 million in 1996, including approximately $21.7 million for additions to the Company's distribution system to meet projected increases in customer demand and approximately $15.7 million for new generating facilities. On August 5, 1996, the Company entered into an amendment to its existing agreement with Westinghouse to increase the aggregate megawatt capability of the second unit at the State Line Plant from 99 mw to 153 mw. The Company currently anticipates that this increase will add approximately $6.0 million to 1997 construction expenditures. This unit is currently scheduled for completion in May 1997. The Company estimates that internally generated funds will provide approximately one-half of the funds required for the remainder of its 1996 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 First Mortgage Bonds during the second half of 1996. The Company will continue to utilize short-term debt as needed to support normal operations or other temporary requirements. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The annual meeting of Common Stockholders was held on April 25, 1996. (b) The following persons were re-elected Directors of the Company to serve until the 1999 Annual Meeting of Stockholders: M. F. Chubb, Jr. (11,505,048 votes for; 188,110 withheld authority). R. L. Lamb (11,531,132 votes for; 162,026 withheld authority). R. E. Mayes (11,505,956 votes for; 187,202 withheld authority). The term of office as Director of the following other Directors continued after the meeting: V. E. Brill, R. D. Hammons, R. C. Hartley, J. R. Herschend, F. E. Jeffries, M. W. McKinney and M. M. Posner. Item 5. Other Information. At June 30, 1996, the ratio of earnings to fixed charges, and the ratio of earnings to fixed charges and preferred stock dividend requirements, were 2.80x and 2.26x, respectively. See Exhibit (12) hereto. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. (10) Amendment to The Empire District Electric Company Change in Control Severance Pay Plan and revised Forms of Agreement. (12) Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividend Requirements. (27) Financial Data Schedule. (b) No reports on Form 8-K were filed during the second quarter of 1996. SIGNATURES Pursuant to the requirements 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 Registrant By R. B. Fancher ----------------------------- R. B. Fancher Vice President - Finance By G. A. Knapp ------------------------------ G. A. Knapp Controller and Assistant Treasurer August 9, 1996 EX-12 2 EXHIBIT (12)
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS Twelve Months Ended June 30, 1996 Income before provision for income taxes and $43,595,990 fixed charges (Note A) Fixed charges: Interest on first mortgage bonds $13,919,058 Amortization of debt discount and expense less 864,733 premium Interest on short-term debt 372,139 Other interest 277,850 Rental expense representative of an interest 124,133 factor (Note B) Total fixed charges 15,557,913 Preferred stock dividend requirements: Preferred stock dividend requirements not 2,338,304 deductible for tax purposes Ratio of income before provision for incomes 1.558 taxes to net income Nondeductible dividend requirements 3,643,078 Deductible dividends 78,036 Total preferred stock dividend requirements 3,721,114 Total combined fixed charges and preferred stock $19,279,027 dividend requirements Ratio of earnings to fixed charges 2.80 Ratio of earnings to combined fixed charges and 2.26 preferred stock dividend requirements
NOTE A: For the purpose of determining earnings in the calculation of the ratio, net income has been increased by the provision for income taxes, non- operating income taxes and by the sum of fixed charges as shown above. NOTE B: One-third of rental expense (which approximates the interest factor). EX-27 3
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT JUNE 30, 1996 AND THE STATEMENT OF INCOME AND THE STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JUN-30-1996 PER-BOOK 487,218,292 0 42,425,499 44,087,822 0 573,731,613 16,293,126 142,536,113 47,454,495 206,283,734 0 32,901,800 194,712,746 0 0 13,000,000 0 0 0 0 126,833,333 573,731,613 95,246,366 3,493,660 77,984,760 81,478,420 13,767,946 216,769 13,984,715 7,487,093 6,497,622 1,208,170 5,289,452 10,065,541 7,391,474 17,189,977 0.34 0.34
EX-10 4 EXHIBIT (10) Page 1 of 4 FIRST AMENDMENT TO THE EMPIRE DISTRICT ELECTRIC COMPANY CHANGE IN CONTROL SEVERANCE PAY PLAN The Empire District Electric Company Change in Control Severance Pay Plan (the "Plan") is hereby amended, effective as of June 21, 1996, in the following respects: 1. The first sentence of Section 3.1 is amended to read in its entirety as follows: "In the event of the Involuntary Termination of any Employee who is a senior officer on the date on which the applicable Agreement is entered into (or amended), the Company shall pay such officer an amount equal to 36 months of Compensation." 2. The last sentence of Section 3.1 is amended to read in its entirety as follows: "In the case of an Employee entitled to the benefit described in this Section 3.1, the "Incremental Period" for purposes of this Plan shall be 36 months." 3. The first sentence of Section 3.2 is amended to read in its entirety as follows: "In the event of the Involuntary Termination of any Employee who is not a senior officer on the date on which the applicable Agreement is entered into (or amended), the Company shall pay such Employee an amount equal to the product of such Employee's weekly base salary as in effect immediately prior to the date of Involuntary Termination (or if greater, immediately prior to the date of the Change in Control), multiplied by the greater of (I) 17 weeks or (ii) a number of weeks equal to two times the Employee's number of full years of employment by the Company or a Subsidiary." 4. Section 3.5 is amended to read in its entirety as follows: "3.5 In the event that the employment of an Employee who is a senior officer on the date on which the applicable Agreement is entered into (or amended) terminates pursuant to Section 3.1 or 3.4 hereof, and such Employee subsequently begins to receive retirement benefits under The Empire District Electric Company Employees' Retirement Plan (or any successor plan) (the "Retirement Plan"), the Company shall also commence payment to such Employee at the same time of a monthly amount equal to the difference between (I) the monthly retirement benefits the Employee would have been entitled to receive under the terms of the Retirement Plan and The Empire District Electric Company Supplemental Executive Retirement Plan (or any successor plan) (the "Supplemental Plan"), as in effect on the day on which his employment terminates, if the Employee had accumulated additional service equal to the "Incremental Period" applicable to such Employee and received earnings during such Incremental Period at the rate in effect during the year in which his employment terminates (calculated on an annualized basis), and (ii) the retirement benefits he is then receiving under the Retirement Plan and Supplemental Plan. The benefits payable pursuant to this Section 3.5 shall include all ancillary benefits under the Retirement Plan and Supplemental Plan (such as early retirement and survivor benefits and benefits available at retirement), and shall be paid in the same form as the benefits payable under the Retirement Plan. The Employee's beneficiary for purposes of the benefits payable pursuant to this Section 3.5 shall be the same person or persons as determined under the Retirement Plan." 5. Section 3 is amended by adding the following new Section 3.8 at the end thereof: "3.8 If any payment or benefit received by or in respect of an Employee who is a senior officer on the date on which the applicable Agreement is entered into (or amended) which is provided under this Plan or any other plan, arrangement or agreement with the Company or any of its Subsidiaries (determined without regard to any additional payments required under this Section 3.8 and Appendix A) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed) or any interest or penalties are incurred by such Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), the Company shall pay to the Employee with respect to such Payment at the time specified in Appendix A an additional amount (the "Gross-up Payment") such that the net amount retained by the Employee from the Payment and the Gross-up Payment, after reduction for any Excise Tax upon the Payment and any Federal, state and local income and employment tax and Excise Tax upon the Gross-up Payment, shall be equal to the Payment. The calculation and payment of the Gross-up Payment shall be subject to the provisions of Appendix A. The Gross-up Payment shall be made from the general assets of the Company." 6. The first sentence of Section 4.2 is amended to read in its entirety as follows: "If the payment of any severance pay or other benefits hereunder to an Employee who is not a senior officer on the date on which the applicable Agreement is entered into (or amended), either alone or together with other payments which such Employee has a right to receive from the Company and its Subsidiaries, would constitute a "parachute payment" (as defined in Section 280G of the Code), the payments to such Employee required by this Plan shall be reduced to the largest amount as will result in no portion of the payment being subject to the excise tax (the "Excise Tax") imposed by Section 4999 of the Code; but only if, by reason of such reduction, such Employee's "net after tax benefit" would exceed the "net after tax benefit" if such reduction were not made." 7. The attached Appendix A is added at the end of the Plan. Appendix A Gross-up Payments The following provisions shall be applicable with respect to the Gross-up Payments described in Section 3.8: a. For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (a) all of the Payments received or to be received shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of tax counsel selected by the Company, the Payments (in whole or in part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or excess parachute payments (as determined after application of Section 280G(b)(4)(B) of the Code), and (b) the value of any non-cash benefits or any deferred payment or benefit shall be determined by independent auditors selected by the Company in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment the Employee shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation to which such payment could be subject based upon the state and locality of the Employee's residence or employment, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. In addition, for purposes of determining the amount of the Gross-up Payment, the Company shall make a determination of the amount of employment taxes required to be paid on the Gross-up Payment. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-up Payment attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and Federal and state and local income and employment tax imposed on the portion of the Gross-up Payment being repaid by the Employee if such repayment results in a reduction in Excise Tax and/or a Federal and state and local income or employment tax deduction), plus interest on the amount of such repayment at the Federal short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payments the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest, penalties or additions payable with respect to such excess) at the time that the amount of such excess is finally determined. Notwithstanding the foregoing, the Company shall withhold from any payment due to the Employee the amount required by law to be so withheld under Federal, state or local wage and employment tax withholding requirements or otherwise (including without limitation Section 4999 of the Code), and shall pay over to the appropriate government authorities the amount so withheld. b. The Gross-up Payment with respect to a Payment shall be paid not later than the thirtieth day following the date of the Payment; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Employee on such date an estimate, as determined in good faith by the Company, of the amount of such payments and shall pay the remainder of such payments (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Employee, payable on the fifth day after demand by the Company (together with interest at the Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the Code). At the time that payments are made under Section 3.8 and this Appendix A, the Company shall provide the Employee with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including, without limitation, any opinions or other advice the Company has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). -----END PRIVACY-ENHANCED MESSAGE-----