-----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, Lmlf2ypolgH9gZyZT+GT4Ehh5IQxpMlYygi6bM/uie03erNhfJMVmIcy04XdDVQY 2oUBlLriIWB1X4r1sFmOjw== 0000032689-97-000018.txt : 19971114 0000032689-97-000018.hdr.sgml : 19971114 ACCESSION NUMBER: 0000032689-97-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 001-03368 FILM NUMBER: 97713284 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) x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 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 October 31, 1997: 16,719,429 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 - (none) Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
PART I. FINANCIAL INFORMATION Item 1. Financial Statements STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, 1997 1996 Operating revenues: Electric $68,357,538 $62,456,522 Water 278,267 279,905 68,635,805 62,736,427 Operating revenue deductions: Operating expenses: Fuel 13,331,713 10,024,341 Purchased power 10,669,833 12,535,397 Other 7,478,792 7,381,824 Total operating expenses 31,480,338 29,941,562 Maintenance and repairs 3,151,675 3,099,614 Depreciation and amortization 6,027,277 5,449,548 Provision for income taxes 7,289,717 6,228,640 Other taxes 3,311,842 3,293,386 51,260,849 48,012,750 Operating income 17,374,956 14,723,677 Other income and deductions: Allowance for equity funds used during construction - 198,018 Interest income 41,800 32,886 Other - net (125,992) (90,426) (84,192) 140,478 Income before interest charges 17,290,764 14,864,155 Interest charges: Long-term debt 4,151,434 3,694,834 Commercial paper 428,108 200,645 Allowance for borrowed funds used during (55,094) (207,122) construction Other 73,869 66,573 4,598,317 3,754,930 Net income 12,692,447 11,109,225 Preferred stock dividend requirements 604,085 604,085 Net income applicable to common stock $12,088,362 $10,505,140 Weighted average number of common shares outstanding 16,659,014 16,313,605 Earnings per weighted average share of common stock $0.73 $0.64 Dividends per share of common stock $0.32 $0.32 See accompanying Notes to Financial Statements.
STATEMENTS OF INCOME (UNAUDITED) Nine Months Ended September 30, 1997 1996 Operating revenues: Electric $161,132,210 $157,187,060 Water 788,370 795,733 161,920,580 157,982,793 Operating revenue deductions: Operating expenses: Fuel 28,015,413 25,934,740 Purchased power 33,856,591 36,331,697 Other 22,962,567 22,056,487 Total operating expenses 84,834,571 84,322,924 Maintenance and repairs 9,658,074 10,241,475 Depreciation and amortization 17,282,089 16,088,943 Provision for income taxes 10,140,360 9,722,300 Other taxes 8,864,914 9,115,528 130,780,008 129,491,170 Operating income 31,140,572 28,491,623 Other income and deductions: Allowance for equity funds used during construction - 503,771 Interest income 92,298 106,598 Other - net (293,998) (253,122) (201,700) 357,247 Income before interest charges 30,938,872 28,848,870 Interest charges: Long-term debt 12,447,244 11,086,308 Commercial paper 812,312 437,605 Allowance for borrowed funds used during (1,047,349) (493,070) construction Other 260,501 211,180 12,472,708 11,242,023 Net income 18,466,164 17,606,847 Preferred stock dividend requirements 1,812,255 1,812,255 Net income applicable to common stock $16,653,909 $15,794,592 Weighted average number of common shares outstanding 16,555,456 15,891,919 Earnings per weighted average share of common stock $1.01 $0.99 Dividends per share of common stock $0.96 $0.96 See Accompanying Notes to Financial Statements.
STATEMENTS OF INCOME (UNAUDITED) Twelve Months Ended September 30, 1997 1996 Operating revenues: Electric $208,878,772 $202,133,121 Water 1,042,974 1,037,657 209,921,746 203,170,778 Operating revenue deductions: Operating expenses: Fuel 35,655,008 32,816,342 Purchased power 44,917,923 45,843,412 Other 30,952,227 31,309,900 Total operating expenses 111,525,158 109,969,654 Maintenance and repairs 13,088,682 13,599,189 Depreciation and amortization 22,782,656 21,294,411 Provision for income taxes 12,218,060 11,389,555 Other taxes 11,005,872 11,870,608 170,620,428 168,123,417 Operating income 39,301,318 35,047,361 Other income and deductions: Allowance for equity funds used during construction 35,073 709,023 Interest income 144,069 156,605 Other - net (385,403) (338,609) (206,261) 527,019 Income before interest charges 39,095,057 35,574,380 Interest charges: Long-term debt 16,242,500 14,782,105 Commercial paper 1,050,597 497,448 Allowance for borrowed funds used during (1,435,765) (576,366) construction Other 329,201 287,430 16,186,533 14,990,617 Net income 22,908,524 20,583,763 Preferred stock dividend requirements 2,416,340 2,416,340 Net income applicable to common stock $20,492,184 $18,167,423 Weighted average number of common shares outstanding 16,512,487 15,708,249 Earnings per weighted average share of common stock $1.24 $1.16 Dividends per share of common stock $1.28 $1.28 See accompanying Notes to Financial Statements.
BALANCE SHEETS September 30, 1997 December 31, (Unaudited) 1996 ASSETS Utility plant, at original cost: Electric $790,177,034 $714,913,653 Water 5,569,830 5,331,286 Construction work in progress 6,245,605 37,016,435 801,992,469 757,261,374 Accumulated depreciation 258,316,371 242,051,460 543,676,098 515,209,914 Current assets: Cash and cash equivalents 3,169,068 2,246,136 Accounts receivable - trade, net 17,795,337 12,704,920 Accrued unbilled revenues 4,996,644 6,423,760 Accounts receivable - other 1,961,370 2,874,669 Fuel, materials and supplies 13,908,254 14,435,741 Prepaid expenses 1,209,534 796,413 43,040,207 39,481,639 Deferred charges: Regulatory assets 37,701,475 37,831,661 Unamortized debt issuance costs 3,443,932 3,633,349 Other 1,235,738 823,177 42,381,145 42,288,187 Total Assets $629,097,450 $596,979,740 CAPITALIZATION AND LIABILITIES: Common stock, $1 par value, 16,710,016 and 16,436,559 shares issued and outstanding, Respectively $16,710,016 $16,436,559 Capital in excess of par value 149,431,799 145,313,610 Retained earnings (Note 2) 52,100,384 51,340,554 Total common stockholders' equity 218,242,199 213,090,723 Preferred stock 32,901,800 32,901,800 Long-term debt 196,443,575 219,533,678 447,587,574 465,526,201 Current liabilities: Accounts payable and accrued liabilities 12,014,623 14,607,179 Commercial paper 26,500,000 7,500,000 Customer deposits 3,065,486 2,820,896 Interest accrued 5,975,985 3,455,254 Taxes accrued, including income taxes 6,889,711 449,771 Current maturities - first mortgage bonds 23,000,000 - 77,445,805 28,833,100 Noncurrent liabilities and deferred credits: Regulatory liability 17,817,808 18,648,961 Deferred income taxes 67,904,695 64,992,745 Unamortized investment tax credits 9,111,990 9,561,000 Postretirement benefits other than pensions 4,495,108 4,417,796 Other 4,734,470 4,999,937 104,064,071 102,620,439 Total Capitalization and Liabilities $629,097,450 $596,979,740 See accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, 1997 1996* Operating activities: Net income $18,466,164 $17,606,847 Adjustments to reconcile net income to cash flows: Depreciation and amortization 19,559,179 17,984,543 Pension income (543,899) (879,750) Deferred income taxes - net 1,748,019 2,280,368 Investment tax credit - net (449,010) (507,040) Allowance for equity funds used during - (503,771) construction Issuance of common stock for 401(k) plan 501,872 499,754 Other 92,056 34,912 Cash flows impacted by changes in: Receivables and accrued unbilled revenues (2,750,002) (3,412,824) Fuel, materials and supplies 527,487 (453,103) Prepaid expenses and deferred charges (1,446,049) (3,811,127) Accounts payable and accrued liabilities (2,592,557) (1,904,930) Customer deposits, interest and taxes accrued 9,205,261 7,984,057 Other liabilities and deferred credits 355,746 1,008,493 Net cash provided by operating activities 42,674,267 35,926,429 Investing activities: Construction expenditures (46,856,979) (45,113,703) Allowance for equity funds used during - 503,771 construction Net cash used in investing activities (46,856,979) (44,609,932) Financing activities: Proceeds from issuance of common stock 3,889,773 18,861,558 Dividends (17,706,334) (17,095,150) Payment of debt issue costs 24,205 - Repayment of first mortgage bonds (102,000) (83,000) Net proceeds from short-term borrowings 19,000,000 6,500,000 Net cash provided by financing activities 5,105,644 8,183,408 Net increase (decrease) in cash and cash 922,932 (500,095) equivalents Cash and cash equivalents at beginning of period 2,246,136 3,816,775 Cash and cash equivalents at end of period $3,169,068 $3,316,680 *Certain reclassifications have been made to conform to 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 have been prepared in accordance with the accounting policies described in the financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. There are no significant differences between the Company's interim and annual accounting policies. 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, 1997 $51,340,554 Changes January 1 through June 30: Net Income 5,773,717 Less cash dividends on common stock: $0.64 per share 10,566,329 Less cash dividends on preferred stock: 5% cumulative - $0.250 per share 97,545 4-3/4% cumulative - $0.2375 per share 95,000 8-1/8% cumulative - $0.40625 per share 1,015,625 Total changes January 1 through June 30 (6,000,782) Balance at July 1, 1997 45,339,772 Changes July 1 through September 30: Net Income 12,692,447 Less quarterly cash dividends on common stock: $0.32 per share 5,327,750 Less quarterly cash dividends on preferred stock: 5% cumulative - $0.125 per share 48,773 4-3/4% cumulative - $0.11875 per share 47,500 8-1/8% cumulative - $0.203125 per share 507,812 Total changes July 1 through September 30 6,760,612 Balance at September 30, 1997 $52,100,384 Note 3 - Regulatory Matters See discussion of the Missouri rate proceeding under Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Operating Revenues and Kilowatt-Hour Sales." 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, nine-month and twelve-month periods ended September 30, 1997, compared to the same periods ended September 30, 1996. Operating Revenues and Kilowatt-Hour Sales Of the Company's total electric operating revenues during the third quarter of 1997, approximately 42% were from residential customers, 31% from commercial customers, 17% from industrial customers, 4% from wholesale on-system customers and 3% from wholesale off-system transactions. 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 Nine Twelve Nine Twelve Third Months Months Third Months Months Quarter Ended Ended Quarter Ended Ended Residential 6.0% (2.0)% 0.1% 8.9% 0.8% 1.8% Commercial 7.8 0.9 1.8 8.8 2.2 1.9 Industrial 0.9 2.3 3.8 6.9 4.2 4.8 Wholesale On- 5.6 3.5 5.3 3.4 (0.3) 1.6 System Total System 5.3 0.5 2.1 8.5 2.2 2.8
Residential and commercial Kwh sales and revenue were up during the third quarter of 1997 compared to the third quarter of 1996. Summer temperatures were cooler than normal but warmer than those experienced during the summer of 1996. Increases of 1.9% in the average number of residential customers served and 2.6% in the average number of commercial customers served compared to the year ago period also contributed to the increased Kwh sales and revenue. Industrial Kwh sales were up slightly during the third quarter of 1997. Revenues for all classes were positively affected by the increases in Missouri rates discussed below. On-system wholesale Kwh sales were up during the period, primarily due to the warmer weather conditions discussed above. The smaller relative increase in revenues associated with those sales resulted from the operation of the fuel adjustment clause applicable to these FERC regulated sales. This clause requires changes in fuel and purchased power costs to be passed through to customers. For the nine and twelve months ended September 30, 1997, total Kwh sales to and revenue from the Company's on-system customers were up slightly over the year earlier period. Residential and commercial Kwh sales were negatively impacted by the mild weather conditions experienced during the first half of the year. Industrial sales, which are not particularly weather-sensitive, were positively affected by continuing increases in business activity in the Company's service territory. Revenues from Kwh sales for each of these customer classes were positively affected by the increases in Missouri rates. On August 30, 1996, the Company filed a request with the Missouri Public Service Commission for a general increase in rates for its Missouri electric customers in the amount of approximately $23.4 million, or 13.8%. A stipulated agreement was filed by the parties to the case on April 4, 1997 and amended on June 23, 1997. On July 17, 1997 the Missouri Commission issued an order approving an increase in rates in the amount of approximately $10.6 million, or 6.43% effective July 28, 1997. The amount approved did not include the Company's investment in Unit No. 2 at the Company's State Line Plant. The Commission deemed that Unit No. 2, which had been in operation and supplying power to its customers and to the wholesale power market since June 18, 1997, did not meet all of the nine specified in-service criteria. On July 25, 1997, the Company filed an Application for Rehearing regarding the status of Unit No. 2, asking the Commission to modify its order by granting the Company an additional $3.35 million in revenue requirement associated with the Company's investment in Unit No. 2. On September 11, 1997, the Missouri Commission issued an order approving an additional increase in rates in the amount of $3.0 million, or 1.7% effective September 19, 1997, making the total increase in annual revenue from this proceeding approximately $13.6 million, or 8.25%. Off-System Transactions 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 third quarter of 1997, revenues from such off-system transactions were approximately $2.7 million, compared to approximately $1.9 million during the third quarter of 1996. For the nine months ended September 30, 1997, revenues from such transactions were approximately $5.6 million, compared to approximately $5.0 million during the nine months ended September 30, 1996. For the twelve months ended September 30, 1997, revenues from such off-system transactions were approximately $7.4 million, compared with approximately $6.3 million during the twelve months ended September 30, 1996. The increase in revenues from off-system transactions during the 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. Operating Revenue Deductions During the third quarter of 1997, total operating expenses increased approximately $1.5 million (5.1%) compared to the same period last year. Purchased power costs were app roximately $1.9 million (14.9%) lower during the period. The amount of power the Company purchased during the third quarter of 1997 was significantly less than that purchased during the same period last year, primarily due to greater availability during the current period of the Company's own generating facilities. The Asbury Plant set a Company record by running continuously for 170 days during the second and third quarters, before shutting down for a minor tube leak on October 14. The Company's State Line Plant also experienced high availability during the period. In addition, Unit No. 2 at the State Line Plant began commercial operation on June 18, 1997. Total fuel costs increased approximately $3.3 million (33.0%) during the quarter, primarily due to this increased use of the Company's own generating facilities. Other operating expenses and maintenance and repairs expense increased slightly compared to the third quarter of last year. Depreciation and amortization expense increased approximately $0.6 million (10.6%) during the third quarter due to increased levels of plant and equipment placed in service. Total income taxes were up during the quarter due to higher taxable income. Taxes other than income taxes were virtually level with the same period last year. For the nine months ended September 30, 1997, total operating expenses were up approximately $0.5 million (0.6%) compared to the same period last year. Total purchased power costs decreased $2.5 million (6.8%) during the period, due primarily to the significantly increased generation by the Asbury and State Line Plants discussed above, along with more favorable prices for purchased energy. Total fuel costs increased approximately $2.1 million (8.0%) during the period, due primarily to the increased generation from the Company's own generating facilities. Other operating expenses during the nine months ended September 30, 1997, increased by approximately $0.9 million (4.1%), due primarily to higher production expenses other than fuel and purchased power. Maintenance and repairs expense decreased $0.6 million (5.7%), due primarily to decreased levels of distribution system maintenance. Distribution system maintenance expenses were higher during the nine-month period ended September 30, 1996, primarily due to repairs associated with damage from a windstorm, which occurred at the end of April 1996. Depreciation and amortization expense increased due to the additional plant and equipment placed in service. Total provision for income taxes increased due to higher taxable income, and other taxes decreased $0.3 million (2.8%). For the twelve months ended September 30, 1997, total operating expenses increased approximately $1.6 million (1.4%) when compared to the same period of 1996. Total purchased power costs decreased $0.9 million (2.0%) during the period. Purchased power costs were lower due primarily to the factors discussed for the three months and nine months ended September 30, 1997. Fuel costs increased approximately $2.8 million (8.7%) during the twelve-month period, also due primarily to the factors discussed for the third quarter and nine months ended September 30, 1997. Other operating expenses during the twelve months ended September 30, 1997 decreased approximately $0.4 million (1.1%), due primarily to lower general and administrative costs. Maintenance and repairs expense decreased $0.5 million (3.8%); for the reasons discussed above for the nine months ended September 30, 1997. Depreciation and amortization expense increased due to the additional plant and equipment placed in service. Total provision for income taxes increased due to higher taxable income. Other taxes decreased $0.9 million (7.3%) reflecting decreased property taxes. Nonoperating Items During the third quarter of 1997, total allowance for funds used during construction ("AFUDC") decreased over the prior year level reflecting completion of State Line Unit #2 in June 1997. AFUDC increased during the nine and twelve months ending September 30, 1997 compared to prior year levels, reflecting a higher level of construction work in progress, particularly due to construction of Unit #2 at the Company's State Line Power Plant. Interest income decreased during the nine and twelve months ending September 30, 1997, primarily reflecting lower balances of cash available for investment. Interest charges on long-term debt increased during the periods due to the $25 million issuance of First Mortgage Bonds in December 1996. Commercial paper and other interest charges increased during the periods primarily due to increased usage of short-term debt to finance the Company's construction program. Earnings For the third quarter of 1997, earnings per share of common stock were $0.73 compared to $0.64 earned during the third quarter of 1996. For the nine months ended September 30, 1997, earnings per common share were $1.01 compared to $0.99 earned for the same period last year. Earnings per common share for the twelve months ended September 30, 1997, were $1.24 compared to $1.16 earned during the same period last year. Increased revenues resulting from weather conditions favorable to Kwh sales, customer growth, and the increases in Missouri rates effective on July 28, 1997 and September 19, 1997 more than offset the increase in fuel costs, higher first mortgage bond interest and short-term debt interest discussed above. Earnings for the nine months and twelve months ended September 30, 1997 also reflect increased levels of AFUDC and a greater number of average common shares outstanding because of the Company's issuance of 880,000 shares of common stock in April 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's construction-related expenditures totaled $8.8 million during the third quarter of 1997, compared to $22.4 million for the same period of 1996. For the nine months ended September 30, 1997, construction-related expenditures totaled $46.9 million compared to $45.1 million for the same period of 1996. Approximately $10.3 million of expenditures during the first nine months of 1997 were related to the construction of Unit #2 at the State Line Power Plant. Approximately one-half of construction expenditures for the first nine months of 1997 were satisfied from cash generated internally from operations; the remainder was provided from 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's construction expenditures are expected to total approximately $55.3 million in 1997, including approximately $22.2 million for additions to the Company's distribution system to meet projected increases in customer demand and approximately $11.9 million for the completion of Unit No. 2 at the State Line Power Plant. The Company currently estimates that internally generated funds will provide at least one-half of the funds required for the remainder of its 1997 construction expenditures. As in the past, the Company intends to utilize short-term debt to finance the additional amounts needed for such construction and to repay such borrowings with internally generated funds and out of 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. The Company will continue to utilize short-term debt as needed to support normal operations or other temporary requirements. The Company currently has effective with the Securities and Exchange Commission a shelf registration statement under which it may sell up to $80 million aggregate value of its Common Stock, Cumulative Preferred Stock, and/or First Mortgage Bonds. ACCOUNTING POLICIES WITH RESPECT TO REGULATORY ASSETS In accordance with Statement of Financial Financial Accounting Standards 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, and, accordingly, the Company has recorded certain regulatory assets and liabilities. In its Order of May 23, 1997, the Missouri Public Service Commission appointed a Retail Electric Competition Task Force (the "Task Force") to prepare reports making recommendations as to how Missouri should implement retail electric competition in the event that legislation is enacted which authorizes it. The Task Force has not as yet made any recommendations, however, there can be no assurance that legislation deregulating the retail electric industry in Missouri will not be passed in the future. In the event such legislation is passed, the Company may determine that it no longer meets the criteria set forth in SFAS 71 with respect to some or all of the regulatory assets and liabilities. These criteria include,(1) increasing competition that restricts the Company's ability to establish prices to recover specific costs, and (2) a significant change in the manner in which rates are set by regulators from a cost-based regulation to another form of regulation. The Company periodically reviews these criteria to ensure the continuing application of SFAS 71 is appropriate. Based on current evaluation of the various factors and conditions that are expected to impact future cost recovery, the Company believes that its net regulatory assets are probable of future recovery. Any regulatory changes that would require the Company to discontinue SFAS 71 based upon competitive or other events may impact the valuation of the Company's net regulatory assets and certain utility plant investments and require write-offs which could have a material adverse effect on the Company's financial condition and results of operations, depending on how the treatment of regulatory assets and liabilities are considered for recovery by the regulators. YEAR 2000 INFORMATION SYSTEMS MODIFICATIONS The Company is currently assessing its alternatives with respect to ensuring that its computer operating system and associated applications are capable of processing Year 2000 transactions. Alternatives include modifications to the existing system and applications, replacement of the existing system and applications, and combinations thereof. Although the total cost of preparing the Company's information systems for the Year 2000 cannot be determined at this time, the Company does not believe these costs will have a material effect on its operating results or financial position. FORWARD LOOKING STATEMENTS Certain matters discussed in this quarterly report are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements address future plans, objectives, expectations and events or conditions concerning various matters such as capital expenditures, earnings, litigation, rate and other regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those currently anticipated in such statements, by reason of factors such as the cost and availability of purchased power and fuel; electric utility restructuring, including ongoing state and federal activities; future economic conditions; legislation; regulation; competition; and other circumstances affecting anticipated rates, revenues and costs. PART II. OTHER INFORMATION Item 5. Other Information. At September 30, 1997, the ratio of earnings to fixed charges, and the ratio of earnings to fixed charges and preferred stock dividend requirements, were 2.97x and 2.46x, respectively. See Exhibit (12) hereto. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. (12) Computation of Ratios 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 third quarter of 1997. 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 /s/ R. B. Fancher R. B. Fancher Vice President - Finance By /s/ G. A. Knapp G. A. Knapp Controller and Assistant Treasurer November 10, 1997 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 September 30, 1997 Income before provision for income taxes and fixed $52,767,534 charges (Note A) Fixed charges: Interest on first mortgage bonds $15,357,870 Amortization of debt discount and expense less 884,630 premium Interest on short-term debt 1,053,597 Other interest 326,201 Rental expense representative of an interest factor 161,612 (Note B) Total fixed charges 17,783,910 Preferred stock dividend requirements: Preferred stock dividend requirements not 2,338,304 deductible for tax purposes Ratio of income before provision for incomes taxes 1.527 to net income Nondeductible dividend requirements 3,570,590 Deductible dividends 78,036 Total preferred stock dividend requirements 3,648,626 Total combined fixed charges and preferred stock dividend $21,432,536 requirements Ratio of earnings to fixed charges 2.97X Ratio of earnings to combined fixed charges and preferred stock dividend requirements 2.46x 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 SEPTEMBER 30, 1997 AND THE STATEMENT OF INCOME AND THE STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1997 SEP-30-1997 PER-BOOK 543,676,098 0 43,040,207 42,381,145 0 629,097,450 16,710,016 149,431,799 52,100,384 218,242,199 0 32,901,800 196,443,575 0 0 26,500,000 23,000,000 0 0 0 132,009,876 629,097,450 161,920,580 10,140,360 120,639,648 130,780,008 31,140,572 (201,700) 30,938,872 12,472,708 18,466,164 1,812,255 16,653,909 15,894,079 12,447,244 42,674,267 1.01 1.01
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