-----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, Me87ULvVK3A7LXFF04P8IqN0AWJoCJ1RDnYCRoWMsXvB8Jm6fOXtnLYIM7coSPRj mXtQMA9l2HZKoHKFZaRAzA== 0000032689-98-000024.txt : 19981116 0000032689-98-000024.hdr.sgml : 19981116 ACCESSION NUMBER: 0000032689-98-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98748445 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 33 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, 1998 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 November 2, 1998: 17,020,666 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 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 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 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 PART I. FINANCIAL INFORMATION Item 1. Financial Statements STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, 1998 1997 Operating revenues: Electric $ 77,563,240 $ 68,357,538 Water 296,532 278,267 77,859,772 68,635,805 Operating revenue deductions: Operating expenses: Fuel 16,878,973 13,331,713 Purchased power 12,448,247 10,669,833 Other 7,922,086 7,478,792 Total operating expenses 37,249,306 31,480,338 Maintenance and repairs 3,646,052 3,151,675 Depreciation and amortization 6,272,011 6,027,277 Provision for income taxes 7,978,800 7,289,717 Other taxes 3,689,937 3,311,842 58,836,106 51,260,849 Operating income 19,023,666 17,374,956 Other income and deductions: Allowance for equity funds used - - during construction Interest income 65,314 41,800 Other - net (324,968) (125,992) (259,654) (84,192) Income before interest charges 18,764,012 17,290,764 Interest charges: Long-term debt 4,618,450 4,151,434 Commercial paper 47,669 428,108 Allowance for borrowed funds used (89,277) (55,094) during construction Other 82,490 73,869 4,659,332 4,598,317 Net income 14,104,680 12,692,447 Preferred stock dividend requirements 604,085 604,085 Net income applicable to common stock $ 13,500,595 $ 12,088,362 Weighted average number of common 16,969,760 16,659,014 shares outstanding Basic and diluted earnings per $ 0.80 $ 0.73 weighted average share of common stock 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, 1998 1997 Operating revenues: Electric $184,720,788 $161,132,210 Water 796,374 788,370 185,517,162 161,920,580 Operating revenue deductions: Operating expenses: Fuel 33,173,021 28,015,413 Purchased power 37,972,352 33,856,591 Other 22,987,532 22,962,567 Total operating expenses 94,132,905 84,834,571 Maintenance and repairs 11,285,244 9,658,074 Depreciation and amortization 18,658,543 17,282,089 Provision for income taxes 13,576,690 10,140,360 Other taxes 9,748,281 8,864,914 147,401,663 130,780,008 Operating income 38,115,499 31,140,572 Other income and deductions: Allowance for equity funds used - - during construction Interest income 116,697 92,298 Other - net (673,920) (293,998) (557,223) (201,700) Income before interest charges 37,558,276 30,938,872 Interest charges: Long-term debt 13,255,306 12,447,244 Commercial paper 634,789 812,312 Allowance for borrowed funds used (251,327) (1,047,349) during construction Other 263,114 260,501 13,901,982 12,472,708 Net income 23,656,294 18,466,164 Preferred stock dividend requirements 1,812,255 1,812,255 Net income applicable to common stock $21,844,039 $16,653,909 Weighted average number of common 16,879,863 16,555,456 shares outstanding Basic and diluted earnings per $ 1.29 $ 1.01 weighted average share of common stock 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, 1998 1997 Operating revenues: Electric $237,895,177 $208,878,772 Water 1,012,249 1,042,974 238,907,426 209,921,746 Operating revenue deductions: Operating expenses: Fuel 41,268,184 35,655,008 Purchased power 51,248,646 44,917,923 Other 30,671,450 30,952,227 Total operating expenses 123,188,280 111,525,158 Maintenance and repairs 14,470,677 13,088,682 Depreciation and amortization 24,771,745 22,782,656 Provision for income taxes 16,436,330 12,218,060 Other taxes 12,103,097 11,005,872 190,970,129 170,620,428 Operating income 47,937,297 39,301,318 Other income and deductions: Allowance for equity funds used 150,524 35,073 during construction Interest income 155,084 144,069 Other - net (833,049) (385,403) (527,441) (206,261) Income before interest charges 47,409,856 39,095,057 Interest charges: Long-term debt 17,401,104 16,242,500 Commercial paper 965,731 1,050,597 Allowance for borrowed funds used (279,443) (1,435,765) during construction Other 339,355 329,201 18,426,747 16,186,533 Net income 28,983,109 22,908,524 Preferred stock dividend requirements 2,416,340 2,416,340 Net income applicable to common stock $ 26,566,769 $ 20,492,184 Weighted average number of common 16,841,908 16,512,487 shares outstanding Basic and diluted earnings per $ 1.58 $ 1.24 weighted average share of common stock Dividends per share of common stock $ 1.28 $ 1.28 See accompanying Notes to Financial Statements.
BALANCE SHEETS September 30, December 31, 1998 1997 (Unaudited) ASSETS Utility plant, at original cost: Electric $819,832,854 $795,880,240 Water 6,195,397 5,824,165 Construction work in progress 11,060,712 8,114,680 837,088,963 809,819,085 Accumulated depreciation 280,971,803 262,834,707 3 262,834,70 556,117,160 546,984,378 Current assets: Cash and cash equivalents 8,328,115 2,545,282 Accounts receivable - trade, net 21,877,284 13,270,329 Accrued unbilled revenues 4,133,806 6,047,738 Accounts receivable - other 2,787,803 1,552,998 Fuel, materials and supplies 14,923,393 13,215,068 Prepaid expenses 966,321 1,001,469 53,016,722 37,632,884 Deferred charges: Regulatory assets 36,372,142 37,472,225 Unamortized debt issuance costs 3,717,919 3,374,780 Other 937,907 1,000,700 41,027,968 41,847,705 Total Assets $650,161,850 $626,464,967 CAPITALIZATION AND LIABILITIES: Common stock, $1 par value, 17,012,633 and 16,776,654 shares issued and outstanding, Respectively $ 17,012,633 $ 16,776,654 Capital in excess of par value 154,871,146 150,784,239 Retained earnings (Note 2) 57,109,719 51,472,897 Total common stockholders' equity 228,993,498 219,033,790 Preferred stock 32,901,800 32,901,800 Long-term debt 246,082,106 196,384,541 507,977,404 448,320,131 Current liabilities: Accounts payable and accrued 15,936,173 14,862,581 liabilities Commercial paper - 28,000,000 Customer deposits 3,400,084 3,140,621 Interest accrued 6,812,832 3,509,680 Taxes accrued, including income 11,609,258 817,045 taxes Current maturities - first mortgage - 23,000,000 bonds 37,758,347 73,329,927 Noncurrent liabilities and deferred credits: Regulatory liability 16,666,059 17,540,757 Deferred income taxes 71,495,551 69,344,653 Unamortized investment tax credits 8,493,000 8,971,000 Postretirement benefits other than 4,711,950 4,463,488 pensions Other 3,059,539 4,495,011 104,426,099 104,814,909 Total Capitalization and Liabilities $650,161,850 $626,464,967 See accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, 1998 1997 Operating activities: Net income $ 23,656,294 $ 18,466,164 Adjustments to reconcile net income to cash flows: Depreciation and amortization 21,149,731 19,559,179 Pension income (1,679,891) (543,899) Deferred income taxes - net 1,357,752 1,748,019 Investment tax credit - net (478,000) (449,010) Allowance for equity funds used - - during construction Issuance of common stock for 401(k) 532,472 501,872 plan Other 66,958 92,056 Cash flows impacted by changes in: Receivables and accrued unbilled (7,927,828) (2,750,002) revenues Fuel, materials and supplies (1,708,325) 527,487 Prepaid expenses and other deferred 22,743 (1,446,049) charges Accounts payable and accrued 1,073,592 (2,592,557) liabilities Customer deposits, interest and 14,354,828 9,205,261 taxes accrued Other liabilities and deferred 492,881 355,746 credits Net cash provided by operating 50,913,207 42,674,267 activities Investing activities: Construction expenditures (29,029,008) (46,856,979) Allowance for equity funds used - - during construction Net cash used in investing activities (29,029,008) (46,856,979) Financing activities: Proceeds from issuance of first 49,672,000 - mortgage bonds Proceeds from issuance of common 3,790,414 3,889,773 stock Dividends (18,019,472) (17,706,334) Payment of debt issue costs (544,308) 24,205 Repayment of first mortgage bonds (23,000,000) (102,000) Net proceeds (repayments) from short- (28,000,000) 19,000,000 term borrowings Net cash provided by (used in) (16,101,366) 5,105,644 financing activities Net increase in cash and cash 5,782,833 922,932 equivalents Cash and cash equivalents at beginning 2,545,282 2,246,136 of period Cash and cash equivalents at end of $ 8,328,115 $ 3,169,068 period 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, 1997. The information furnished reflects all adjustments, consisting only of normal recurring adjustments, which are, in the Company's opinion, necessary to present fairly the results for the interim periods presented. Note 2- Retained Earnings Balance at January 1, 1998 $ 51,472,897 Changes January 1 through June 30: Net Income 9,551,614 Quarterly cash dividends on common stock: $0.64 per share (10,779,525) Quarterly 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 (2,436,081) Balance at July 1, 1998 49,036,816 Changes July 1 through September 30: Net Income 14,104,680 Quarterly cash dividends on common stock: $0.32 per share (5,427,692) 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 8,072,903 Balance at September 30, 1998 $ 57,109,719
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, 1998, compared to the same periods ended September 30, 1997. Operating Revenues and Kilowatt-Hour Sales Of the Company's total electric operating revenues during the third quarter of 1998, approximately 44% were from residential customers, 31% from commercial customers, 16% from industrial customers, 5% 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 16.3% 12.2% 10.1% 18.7% 17.7% 16.1% Commercial 8.7 7.6 6.5 12.5 13.1 13.4 Industrial 3.2 2.2 2.0 4.7 8.4 8.8 Wholesale On- 12.9 12.1 10.6 17.4 16.3 15.5 System Total System 7.8 7.4 6.8 14.1 14.4 13.9
Above-average temperatures in the Company's service territory during the third quarter of 1998 resulted in increases in both residential and commercial Kwh sales and revenue compared to the same period of 1997, when temperatures were unusually mild. Cooling degree days (the number of degrees that the average temperature for that period were above 65 F) were 30.8% greater for the third quarter of 1998 as compared to the third quarter of 1997 and 16.6% greater than the 20-year norm for that time period. This had the effect of increasing air conditioning usage during the quarter and contributing, in part, to the increased sales and revenues. Revenues were also helped by the annual rate increases of $10,589,364 (6.43%) and $3,000,000 (1.7%) granted by the Missouri Public Service Commission effective July 28, 1997, and September 19, 1997, respectively, and by the annual rate increase of $358,848 (6.6%) granted by the Arkansas Public Service Commission effective August 24, 1998. Industrial Kwh sales and related revenues, which are not particularly weather-sensitive, were positively affected during the third quarter of 1998 by continuing increases in business activity throughout the Company's service territory as well as the Missouri and Arkansas rate increases discussed above. On-system wholesale Kwh sales increased during the third quarter of 1998 reflecting the weather conditions and continuing increases in business activity discussed above. Revenues associated with those sales increased more than the corresponding Kwh sales as a result of the operation of the fuel adjustment clause applicable to these FERC regulated sales. This clause permits the pass through to customers of changes in fuel and purchased power costs. For the nine and twelve months ended September 30, 1998, total Kwh sales to and operating revenues from the Company's residential and commercial customers increased, reflecting the warmer temperatures experienced during the second and third quarters of 1998, as well as the Missouri and Arkansas rate increases discussed above. Industrial sales continued to grow due to strong business activity in the Company's service territory. 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 1998 and the nine month and twelve month periods ended September 30, 1998, revenues from such off- system transactions were approximately $2.6 million compared to approximately $2.7 million during the third quarter of 1997, $6.7 million compared to approximately $5.6 million during the nine months ended September 30, 1997, and $8.8 million compared with approximately $7.4 million during the twelve months ended September 30, 1997, respectively. The Company is a member of the Southwest Power Pool ("SPP"), a regional division of the North American Electric Reliability Council, which requires its members to maintain reserve margins of 12.00% effective October 1, 1998. On December 19, 1997, the SPP filed an open access transmission tariff (the "Regional Tariff") on behalf of its members to provide pool-wide, short-term transmission services using pricing which is based on distance. As of June 1, 1998, the date the FERC declared the Regional Tariff effective, SPP began providing short-term firm and non-firm point-to-point transmission services for periods of less than one year under this tariff. These services supplant those same services provided under the Company's open access transmission tariff. The Company, however, will continue to provide long-term, point-to-point transmission services and network transmission services under its own open access transmission service tariff. The Company cannot currently predict the effect of these tariffs on its future operations. Operating Revenue Deductions During the third quarter of 1998, total operating expenses increased approximately $5.8 million (18.3%) compared to the same period last year. Purchased power costs were ap proximately $1.8 million (16.7%) higher while total fuel costs increased approximately $3.5 million (26.6%). The significant increase in total purchased power and fuel costs was primarily due to the warmer temperatures experienced during the third quarter of 1998. Fuel costs were also impacted by the increased usage of the Company's higher-cost gas turbines as a result of the increase in customer demand resulting from the warmer temperatures. Other operating expenses for the quarter increased approximately $0.4 million (5.9%) as compared to the same period last year, primarily due to higher customer accounts expenses. Maintenance and repairs expense increased approximately $0.5 million (15.7%) during the period, primarily due to increased levels of transmission system maintenance. Depreciation and amortization expense increased approximately $0.2 million (4.1%) during the third quarter of 1998 due to increased levels of plant and equipment placed in service. Total income taxes increased $0.7 million (9.5%) during the quarter due to higher taxable income. Taxes other than income taxes increased $0.4 million (11.4%). For the nine months ended September 30, 1998, total operating expenses were up approximately $9.3 million (11.0%) compared to the same period last year. Total purchased power costs increased $4.1 million (12.2%). This increase was primarily due to purchases of replacement energy during the Asbury Plant outage in the first quarter of 1998 that resulted from a generator winding problem as well as increased customer demand in the second and third quarters of 1998 due to the warmer temperatures. Total fuel costs increased approximately $5.2 million (18.4%) during the period, due primarily to the increased generation from the Company's own generating facilities resulting from the increased customer demand in the warmer second and third quarters of 1998. Maintenance and repairs expense increased $1.6 million (16.9%) during the same period. This increase was primarily due to the increased expenses associated with the five-year scheduled maintenance outage at the Riverton Plant during the second quarter of 1998, as well as the additional expenses incurred at Asbury during the first quarter outage. Depreciation and amortization expense increased $1.4 million (8.0%) due to the additional plant and equipment placed in service. Total provisions for income taxes increased $3.4 million (33.9%) and for other taxes increased $0.9 million (10.0%) during the period for the reasons discussed with respect to the third quarter results. For the twelve months ended September 30, 1998, total operating expenses increased approximately $11.7 million (10.5%) compared to the year ago period. Total purchased power costs increased $6.3 million (14.1%) and fuel costs increased approximately $5.6 million (15.7%) during the twelve- month period, due primarily to the factors discussed for the third quarter and nine months ended September 30, 1998. Other operating expenses during the twelve months ended September 30, 1998 decreased approximately $0.3 million (0.9%), due primarily to lower general and administrative costs. Maintenance and repairs expense increased $1.4 million (10.6%), for the reasons discussed above for the nine months ended September 30, 1998. Depreciation and amortization expense increased $2.0 million (8.7%) due to the additional plant and equipment placed in service, primarily State Line Unit No. 2 in June 1997. Total provision for income taxes increased $4.2 million (34.5%) due to higher taxable income. Other taxes increased $1.1 million (10.0%) also due to increased revenues. The Company has scheduled maintenance on two combustion turbines which will add approximately $2.2 million to operating expenses during the fourth quarter of 1998. Nonoperating Items During the third quarter of 1998, total allowance for funds used during construction ("AFUDC") increased slightly over the prior year level but decreased during the nine and twelve months ending September 30, 1998 compared to prior year levels. This decrease reflects lower levels of construction work in progress, particularly due to the completion of Unit No.2 at the Company's State Line Power Plant. Interest income increased slightly during each of the periods ended September 30, 1998. Interest charges on first mortgage bonds increased during the periods due to the issuance of $50.0 million of the Company's First Mortgage Bonds in April 1998. The proceeds from that sale were used to redeem $23.0 million in mature bonds and to repay short-term debt. Commercial paper and other interest charges decreased during the periods primarily due to the repayment of the short- term debt. Other-net deductions totaled approximately $0.8 million for the twelve-month period ended September 30, 1998, a $0.4 million (116.2%) increase over the same period last year. This increase was primarily due to one-time startup costs for the Company's non-regulated ventures, such as home security and fiber optics leasing. Earnings Earnings per share increased seven, twenty-eight and thirty-four cents per share in the third quarter and nine month and twelve month periods ended September 30, 1998, respectively, primarily due to increased revenues resulting from the Arkansas rate increase and the two Missouri rate increases as well as the above-average temperatures in the second and third quarters of 1998 discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company's construction-related expenditures totaled $9.0 million during the third quarter of 1998, compared to $8.8 million for the same period of 1997. For the nine months ended September 30, 1998, construction-related expenditures totaled $29.0 million compared to $46.9 million for the same period of 1997. Approximately $6.2 million of construction expenditures during the third quarter of 1998 and approximately $17.8 million of construction expenditures during the first nine months of 1998 were related to additions to the Company's transmission and distribution systems to meet projected increases in customer demand. Approximately $0.8 million of construction expenditures during the third quarter of 1998 and approximately $2.4 million of construction expenditures during the first nine months of 1998 were related to the Company's investment in fiber optics cable and equipment which the Company plans to utilize and to lease to other entities. The large decrease in construction expenditures for the first nine months of 1998 is mainly due to the completion of Unit No. 2 at the State Line Power Plant, which was placed in service June, 1997. During the first nine months of 1998, 100% of construction expenditures and other funds requirements were satisfied internally from operations. The Company's construction expenditures are expected to total approximately $35.6 million in 1998, including approximately $19.1 million for additions to the Company's distribution system to meet projected increases in customer demand. The Company announced plans on October 2, 1998 for the construction of a 350 megawatt addition to the State Line Power Plant. It is estimated that construction would begin in the fall of 1999 and the addition would be operational approximately 20 months later. The Company has submitted requests for proposals to supply the gas, as well as requests for proposals for the purchase of power from the plant or to join with the Company in the construction and ownership of the planned facilities. However, the Company's plans to proceed with the construction and to obtain financing are dependent upon the proposals received, as well as obtaining any required governmental permits. The estimated cost of the additional generating facilities would total approximately $180 million. On April 28, 1998, the Company sold to the public in an underwritten offering $50 million aggregate principal amount of its First Mortgage Bonds, 6.50% Series due 2010. The net proceeds from this sale were added to the Company's general funds and were used to repay $23 million of the Company's First Mortgage Bonds, 5.70% Series due May 1, 1998 and to repay short-term indebtedness, including indebtedness incurred in connection with the Company's construction program. The Company currently estimates that internally generated funds will provide all of the funds required for the remainder of its 1998 construction expenditures. In the past, the Company has utilized short-term debt to finance any additional amounts needed for such construction and repaid 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. The Company will continue to utilize short-term debt as needed to support normal operations or other temporary requirements. ENVIRONMENTAL MATTERS The Environmental Protection Agency (the "EPA") announced its new emission levels for nitrogen oxide ("NOx") on September 24, 1998. The Company's Asbury Plant must meet an emission level limit of 0.15 lbs. NOx/mmbtu by April 1, 2003. The Company is currently assessing various compliance scenarios, including installing scrubbers at a potential cost of approximately $25 million. ACCOUNTING MATTERS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" in February 1998, effective for fiscal years beginning after December 15, 1997. SFAS 132 amends SFAS 87, "Employers' Accounting for Pensions" and SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS 132 revises employers' disclosures concerning pension and other postretirement benefit plans but will not impact the company's financial position or results of operations. YEAR 2000 Year 2000 Background Many existing computer programs use only two digits to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming century change. As a result, computer systems may fail completely or produce erroneous results unless corrective measures are taken. The Company is engaged in an on-going project to identify, evaluate and implement changes to both information technology ("IT") and non-IT systems in order to achieve a Year 2000 date conversion with no adverse effect on customers or disruption to business operations. The Company has also become a member of the Edison Electric Institute's Year 2000 Committee and the Electric Power Research Institute's Y2K Embedded Systems Program in order to assist in the implementation of its Year 2000 Readiness Plan. In addition, the Company is participating in the North American Electric Reliability Council's ("NERC") efforts to prepare mission critical systems for Year 2000 readiness. NERC's target is to have all mission critical electric power production, transmission, and delivery systems Year 2000 ready by June 30, 1999. The Company is working within that framework and plans to participate in two industry-wide Year 2000 drills on April 9,1999 and September 9, 1999. The Company is using a multi-step approach in achieving its Year 2000 Readiness Plan. These steps include creating awareness of the Year 2000 problem, forming a Year 2000 task force, developing procedures for documenting Year 2000 readiness, developing methodology for the Year 2000 readiness plan and testing and remediation of Year 2000 affected items pursuant to the Year 2000 Readiness Plan. Developing the methodology for the Year 2000 Readiness Plan includes developing and implementing an ongoing communication program with both internal and external parties, performing an inventory of possible Year 2000 affected items, assessing and prioritizing each such inventory item as to level of criticality, scheduling testing and remediation of such items in order of criticality, and developing contingency planning. Management consultants will be retained to review the process involving the implementation of the Year 2000 Readiness Plan as well as the plan itself. Any changes required by this independent review will then be implemented. The Company has purchased a new financial management software package from PeopleSoft that is Year 2000 ready. The package includes systems for general ledger, accounts payable and asset management; purchasing and inventory; human resources, benefits, time and labor, and payroll; as well as budgeting and project tracking. In addition, a new customer information system is being developed internally which will be Year 2000 ready. Installation of these systems, which are anticipated to substantially mitigate the Company's Year 2000 exposure, is expected to be completed during the first half of 1999. State of Readiness A task force has been appointed and is charged with documenting and testing areas of the Company which may be affected by the Year 2000. The targeted areas include general preparation, power generation, energy management systems, telecommunications, substation controls and system protection and business information systems. Within each of these areas, the task force is examining the status of IT systems, non-IT systems and third parties such as vendors, customers and others with whom the Company does business. The inventory of Year 2000 items was completed in September 1998. Assessing and prioritizing each item within the Year 2000 inventory as to the level of criticality was also completed in September 1998. The ongoing testing and remediation of the highest level of critical items is scheduled to be completed by the end of the second quarter of 1999. The Year 2000 task force will also develop contingency plans in the event that unanticipated problems are encountered due to the Year 2000. These plans are also scheduled to be completed during the second quarter of 1999. The Company is currently in the process of obtaining readiness certifications from third party vendors for all of its core applications and operating systems. The Company expects to complete this process by the end of the first quarter of 1999. All critical applications will be tested, however, regardless of whether a certification of readiness has been obtained. In addition, the Company has begun to contact other third parties with whom the Company does business (such as major customers, power pools, power suppliers, transmission providers and telecommunications providers) in order to assess their states of readiness. This initial contact phase is expected to be completed by the end of 1998. The Company will continue to monitor the progress of these third parties even after the initial contact phase. The Company currently plans to substantially complete its Year 2000 testing and compliance projects by the end of the second quarter of 1999. Year 2000 Costs The Company currently estimates that total costs (which include the costs of the new financial management software package and the new customer information system) to update all of our systems for Year 2000 readiness will be approximately $3.7 million, of which approximately $1.5 million of these costs have already been incurred and capitalized as of September 30, 1998 while $0.2 million have been incurred and expensed. Of these capitalized costs, $0.5 million were included in the capital budget. The remaining costs are expected to be incurred in the fourth quarter of 1998 and in 1999. Costs for specific Year 2000 remediation projects will be charged to expense while costs to replace software for business purposes other than addressing Year 2000 issues will be capitalized. Risk Assessment and Contingency Plans At this time, the Company believes the most reasonably likely worst case scenario is that key customers could experience significant reductions in their power needs due to their own Year 2000 issues, and there could be a temporary disruption of service to some customers due to cascading disruptions caused by other entities whose systems are connected to the Company's. The Company is assessing the risk of this scenario and will be formulating contingency plans, currently scheduled to be completed during the second quarter of 1999, to mitigate the potential impact. The Company's Readiness Plan is designed to provide corrective action with respect to Year 2000 risks. If the Plan is not successfully carried out in a timely manner, or if unforeseen events occur, Year 2000 problems could have a material adverse impact on the Company. Management does not expect such problems to have such an effect on its financial position or results of operations. 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, Year 2000 readiness (including estimated costs, completion dates, risks and contingency plans) 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; weather, business and economic conditions; legislation; regulation, including rate relief and environmental regulation; competition; and other circumstances affecting anticipated rates, revenues and costs. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. PART II. OTHER INFORMATION Item 5. Other Information. At September 30, 1998, the ratio of earnings to fixed charges, and the ratio of earnings to combined fixed charges and preferred stock dividend requirements, were 3.39x and 2.83x, respectively. See Exhibit (12) hereto. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. (10) (a) Retirement Plan for Directors of the Empire District Electric Company as amended August 1, 1998. (b) Stock Unit Plan for Directors of the Empire District Electric Company. (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) In a current report dated October 5, 1998, the Company filed, under Item 5. "Other Events," a press release announcing the Company's plans to construct an additional 350 megawatts of electric power generation at the State Line Power Plant. 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 13, 1998 EX-10 2 EXHIBIT (10a) RETIREMENT PLAN FOR DIRECTORS OF THE EMPIRE DISTRICT ELECTRIC COMPANY Effective January 1, 1990 1. Purpose The Empire District Electric Company (the "Company") has adopted this Retirement Plan for Directors of The Empire District Electric Company (the "Plan") in order to enhance the Company's ability to attract and retain competent and experienced persons to serve as Directors and to recognize the service of Directors of the Company by providing such Directors with retirement benefits. 2. Definitions Except as otherwise specified or as the context may otherwise require, the following terms have the meanings indicated below for all purposes of this Plan: (a) Director means any person who is serving on the Effective Date of the Plan, or who in the future serves as a member of the Board of Directors of the Company (the "Board"). (b) Service means service as a Director. (c) Compensation means the annual Board retainer fee (exclud- ing meeting and committee fees) established by the Board as in effect on the date of the Directors termination of Service (disregarding any increase or decrease in such fee that may be approved after such termination of Service). (d) Retirement Date means the first day of the calendar month coinciding with or next following the later of (i)the date the Director attains the age of 65 years and (ii) the date the Director ceases to be a Director. (e) Effective Date means January 1, 1990. (f) Change in Control means the time when (a) any person, either individually or together with such person's affili- ates and associates, shall have become the beneficial owner, directly or indirectly, of at least 20% of the outstanding Common Stock of the Company or (b) individuals who shall qualify as Continuing Directors shall have ceased for any reason to constitute at least a majority of the Board of Directors of the Company or (c) the Company is wholly or partially liquidated, or participates in a merger, consolidation or reorganization in which it or any entity controlled by it is not the surviving entity. The term "Continuing Director" has the meaning assigned to that term in Article V of the Articles of Incorporation of the Company as in effect on January 1, 1990. 3. Eligibility Any Director who has (i) completed five or more years of service and (ii) has never been an officer of the Company. 4. Benefits The annual rate of retirement benefits payable hereunder to a Director who meets the eligibility requirements shall be an annual amount equal to the Director's Compensation. Benefits shall commence on a Director's Retirement Date and shall be payable in equal monthly installments. Payments shall cease upon the earlier of (i) the date of the Director's death or (ii) the completion of payments for a period of time equal to the period of the Director's Service. 5. Provision of Benefits All benefits payable hereunder shall be provided from the general assets of the Company. No Director shall acquire any interest in any specific assets of the Company by reason of this Plan. A Director shall have the status of an unsecured general creditor of the Company with respect to any benefits which become payable pursuant to this Plan. 6. Amendment and Termination The Company reserves the right to terminate this Plan or amend this Plan in any respect at any time; provided, however, that no such termination or amendment may reduce the retirement benefits then being paid to any retired Director or the retirement bene- fits then accrued by any Director who has completed at least five years of service. 7. Administration This Plan shall be administered by the Compensation Committee of the Board. The Compensation Committee shall have full authority and absolute discretion: (A) To construe and interpret the Plan; and (B) To make all determinations and take all other actions necessary or advisable for the proper administration of the Plan. All such actions and determinations shall be conclusively binding upon all persons for all purposes. 8. Change in Control In the event of a Change in Control: (i) each person who is a Director on the day preceding the Change in Control and who has never been an officer of the Company shall be entitled to receive benefits under this Plan based on the period of his or her Service both before and after the Change in Control, whether or not such Director's period of Service is at least five years, and (ii) each person who is a Director on the day preceding the Change in Control shall be paid immediately in cash in one lump sum an amount equal to the total of the payments the Director would have received if his Retirement Date had occurred on the date of Change in Control and he had lived for a period thereafter at least as long as the period of his Service. 9. Miscellaneous The adoption and maintenance of this Plan shall not constitute a contract between the Company and any Director. Nothing herein contained shall be deemed to give any Director the right to be retained as a Director, nor shall it interfere with the Director's right to resign as a Director at any time. This instrument shall be construed in accordance with and governed by the laws of the State of Kansas. The Company shall have the right to deduct from any distribu- tions made under this plan, any federal, state or local states or any other amounts required by law to be withheld with respect to such distribution. The cost of benefit payments from this Plan and the expenses of administering the Plan shall be borne by the Company. Unless the context clearly requires otherwise, the masculine pronoun whenever used shall include the feminine and neuter pro- noun, the singular shall include the plural, and vice versa. In no event shall the Company make any payment under the plan to any assignee or creditor of a Director, except as otherwise required by law. Prior to the time of a payment hereunder, a Director shall have no rights by way of anticipation or other- wise to assign or otherwise dispose of any interest under this Plan, nor shall a Director's rights hereunder be assigned or transferred by operation of law. The retirement benefits herein contained are in addition to all other awards, arrangements, contracts or benefits, if any that any Director may have by virtue of service for the Company, unless and to the extent that any such award, arrangement, contract or benefit otherwise provides. Amendment to Retirement Plan for Directors of the Empire District Electric Company The Retirement Plan for Directors of The Empire District Electric Company is hereby amended, effective as of August 1, 1998, in the following respects: 1. Section 2(b) is amended to read as follows: "(b) Service means service as a Director, but disregarding any service on or after the date on which the Director becomes a participant in the Stock Unit Plan for Directors of The Empire District Electric Company." 2. Section 3 is amended to read as follows: "3. Eligibility Any Director who (i) has completed five or more years of service, (ii) has never been an officer of the Company, (iii) became a Director prior to August 1, 1998, and (iv) has not elected to convert his or her accrued benefits under this Plan into stock units under the Stock Unit Plan for Directors of The Empire District Electric Company. No person who is first elected as a Director on or after August 1, 1998 shall be eligible to participate in this Plan." 3. Section 4 is amended by adding at the end thereof the following sentence: "Anything in this Plan to the contrary notwithstanding, any Director who elects to convert his or her accrued benefits under this Plan into stock units under the Stock Unit Plan for Directors of The Empire District Electric Company pursuant to the terms of said Stock Unit Plan for Directors shall not be entitled to any benefits under this Plan." EXHIBIT (10)(b) STOCK UNIT PLAN FOR DIRECTORS OF THE EMPIRE DISTRICT ELECTRIC COMPANY 4. Purpose. The Empire District Electric Company (the "Company") has adopted this Stock Unit Plan for Directors of The Empire District Electric Company (the "Plan") in order to enhance the Company's ability to attract and retain competent and experienced persons to serve as Directors and to recognize the service of Directors of the Company by providing such Directors with retirement benefits, and in order to provide a stock-based retirement compensation program for Directors that will foster a strong incentive to put forth maximum effort for the continued growth and success of the Company. 5. Effective Date. This Plan is effective as of August 1,1998. 6. Definitions. (a) "Account" means an account established for each Eligible Director on the books of the Company that will be credited with Stock Units. (b) "Annual Retainer Fees" means the annual rate of Board retainer fees (excluding meeting and committee fees) established by the Board as in effect at the applicable time. (c) "Board" means the Board of Directors of the Company. (d) "Cash Retirement Plan" means the Retirement Plan for Directors of The Empire District Electric Company, as said plan may be amended from time to time. (e) "Committee" means the Compensation Committee of the Board. (f) "Common Stock" means common stock, $1.00 par value, of the Company, or any substituted class of common stock, provided such stock is the primary publicly traded equity issue of the Company. (g) "Company" means The Empire District Electric Company and its successors. (h) "Effective Date" means August 1, 1998. (i) "Eligible Director" means an Eligible Existing Director or an Eligible New Director. (j) "Eligible Existing Director" means any Director of the Company who (i) is serving on the Board on the Effective Date, (ii) has never been an officer of the Company and (iii) has elected to participate in this Plan pursuant to Section 6(b). (k) "Eligible New Director" means any Director of the Company who (i) first becomes a Director after the Effective Date and (ii) has never been an officer of the Company. (l) "Fair Market Value" means with respect to the Common Stock the mean between the high and low prices of Common Stock on the New York Stock Exchange Composite Tape on the day of the required calculation or, if there should be no sale on that date, on the next preceding day on which there was a sale. (m) "Payment Date" means the earlier to occur of the following dates: (i) the Eligible Director's Retirement Date, or (ii) the Eligible Director's death. (n) "Plan" means the Stock Unit Plan for Directors of The Empire District Electric Company as it may be amended from time to time. (o) "Retirement Date" means the date on which the Director ceases to be a Director other than by reason of death. (p) "Stock Unit" means a measure of value, expressed as a share of Common Stock, credited to the Eligible Director's Account, and payable in Common Stock upon a Payment Date, as provided in this Plan. 7. Limitations on Issuance of Stock. Anything in this Plan to the contrary notwithstanding, (i) no single Director may acquire under this Plan more than one percent of the shares of the Company's Common Stock outstanding at the time this Plan is adopted, and (ii) this Plan, together with all other plans of the Company (other than plans for which shareholder approval is not required under subsections (1) and (3) of Rule 312.03(a) of the New York Stock Exchange Listed Company Manual), shall not permit the issuance of more than five percent of the Company's Common Stock outstanding at the time this Plan is adopted. 8. Administration. This Plan shall be administered by the Committee. The Committee shall have full authority and absolute discretion (i) to construe and interpret the Plan, reconcile inconsistencies thereunder and supply omissions therefrom, and (ii) to make all determinations and take all other actions necessary or advisable for the proper administration of the Plan. Any decision or action taken by the Committee in the exercise of such powers or otherwise, arising out of or in connection with the construction, administration, interpretation and effect of the Plan and of its rules and regulations, shall be conclusive and binding upon all persons. 9. Eligibility. (a) Eligible New Directors. An Eligible New Director shall become eligible to participate in this Plan on the date on which he or she first is elected to the Board. (b) Eligible Existing Directors. Each Director who is serving on the Board on the Effective Date and who is participating in the Cash Retirement Plan shall have the right to elect whether (i) to participate in this Plan effective as of the Effective Date in lieu of continued accruals under the Cash Retirement Plan or (ii) to continue accruals under the Cash Retirement Plan. Such election shall be made by filing a prescribed form with the Committee during an election period prescribed by the Committee. If such a Director fails to elect to participate in this Plan within such election period, such Director shall not have the right thereafter to elect to participate and shall not be an Eligible Director. 10. Crediting of Stock Units. (a) Account. Stock Units shall be credited to each Eligible Director's Account in accordance with this Section 7. (b) Credits as of Effective Date. There shall be credited to the Account of each person who is an Eligible Director on the Effective Date a number (calculated to three decimal points) of Stock Units equal to: (i) five-twelfths of the amount of the Annual Retainer Fees as in effect on the Effective Date, divided by (ii) the Fair Market Value of a share of Common Stock on the Effective Date. (c) Annual Credits. As of January 1st of each calendar year beginning with 1999, there shall be credited to the Account of each person who is an Eligible Director on such January 1st a number (calculated to three decimal points) of Stock Units equal to: (i) the Director's Annual Retainer Fees as in effect on such January 1st, divided by (ii) the Fair Market Value of a share of Common Stock on such January 1st. (d) Credits to New Directors. There shall be credited to the Account of each Eligible New Director as of the date of such person's initial election as a Director a number (calculated to three decimal points) of Stock Units equal to: (i) the amount of the Eligible New Director's retainer fees (excluding meeting and committee fees) for the balance of the calendar year of his or her initial election as a Director (computed as a percentage of the Annual Retainer Fees as in effect on the date of his or her initial election), divided by (ii) the Fair Market Value of a share of Common Stock on the date of his or her initial election as a Director. This subsection (d) shall not apply if the effective date of the Eligible New Director's election is January 1st. (e) Election of Eligible Existing Directors to Convert Cash Benefit to Stock Units. Eligible Existing Directors shall have the right to elect, with respect to previously accrued benefits under the Cash Retirement Plan, whether to: (i) retain their retirement benefits under the Cash Retirement Plan for years of service on the Board prior to the Effective Date and to receive benefits under this Plan only with respect to service on or after the Effective Date, or (ii) convert accrued benefits under the Cash Retirement Plan into Stock Units under this Plan ("Converting Directors") as hereinafter set forth. Such election shall be made by filing a prescribed form with the Committee during an election period prescribed by the Committee. Converting Directors shall have credited to their Accounts under this Plan as of the Effective Date or such later conversion date as may be established by the Committee (the "Conversion Date"), a number (calculated to three decimal points) of Stock Units equal to: (i) the product of (A) the Annual Retainer Fees as in effect on the Conversion Date, times (B) the total number of years of service accrued by the Converting Director under the Cash Retirement Plan as of the Effective Date (with credit being given for any period of less than a full year of service at the rate of one-twelfth of a year of service for each full month of service), divided by (ii) the Fair Market Value of a share of Common Stock on the Conversion Date. (f) Dividends. Until fully paid out in accordance with the terms of this Plan, the Company shall credit to each Eligible Director's Account, on each day that the Company pays a declared cash dividend to the stockholders of its Common Stock, a number (calculated to three decimal places) of Stock Units that is equal to (i) the product of the total number of Stock Units in the Eligible Director's Account on the record date established for such dividend, multiplied by the cash dividend per share of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock on the record date. 11. Payout of Accounts. (a) General Payout Terms. Unless installment payments are elected pursuant to subsection (b) or (c) of this Section 8, within 30 days after the Payment Date the Company shall cause to be delivered to the Eligible Director (or, in the event of his or her death, the Eligible Director's beneficiary determined pursuant to subsection (d) of this Section 8) a certificate for the number of shares of Common Stock equal to the whole number of Stock Units in his or her Account as of the Payment Date plus cash for any fractional unit credited to his or her Account as of the Payment Date (such cash amount to be calculated based on the applicable fraction of the Fair Market Value of a share of Common Stock on the Payment Date). (b) Payout on Retirement. With respect to a payout by reason of an Eligible Director's termination of service on a Retirement Date, such Eligible Director may elect, at any time prior to the date which is twelve months before such Retirement Date, to receive, in lieu of a lump sum distribution, distributions in annual installments over a period of years selected by the Eligible Director but not to exceed ten years. Such election shall be made by filing a prescribed form with the Committee. If no such election of installment payments is received by the Committee, the Eligible Director's Account shall be paid out in a lump sum in accordance with subsection (a) of this Section 8. If the Eligible Director files with the Committee such an election to receive installment payments, there shall be distributed to the Eligible Director in January of each year beginning with the January coinciding with or next following the month in which the Eligible Director's Retirement Date falls a certificate for the whole number of shares of Common Stock equal to the quotient (rounded to the next lowest whole number) obtained by dividing (i) the number of Stock Units credited to the Eligible Director's Account as of the December 31st preceding the month of payment (after reduction for Stock Units previously paid out in the form of Common Stock in prior installments and any dividend credits pursuant to Section 7(f) on the remaining balance), by (ii) the number of installments remaining to be paid. The final installment payment shall consist of the number of shares of Common Stock equal to the remaining whole number of Stock Units in the Eligible Director's Account as of the December 31st preceding the month of payment plus cash for any fractional unit in his or her Account as of such December 31st (such cash amount to be calculated based on the applicable fraction of the Fair Market Value of a share of Common Stock on such December 31st). In the event of the death of an Eligible Director who has elected installment payments prior to his or her receipt of all such installment payments, the remaining installment payments shall be paid to the Eligible Director's beneficiary as determined pursuant to subsection (d) of this Section 8 at the time that they would otherwise have been paid to the Eligible Director; provided, however, that the Eligible Director may instead elect (by filing a prescribed form with the Committee) that, upon his or her death prior to receiving all installment payments, the remaining balance in the Eligible Director's Account as of the date of the Eligible Director's death (after reduction for Stock Units previously paid out in the form of Common Stock in prior installments and any dividend credits pursuant to Section 7(f) on the remaining balance) shall be distributed to the Eligible Director's beneficiary determined pursuant to subsection (d) of this Section 8 in a lump sum pursuant to subsection (a) of this Section 8 as if the date of the Eligible Director's death were the Payment Date. (c) Payout on Death While in Service. In the event of the death of an Eligible Director prior to his or her Retirement Date, the Eligible Director's beneficiary determined pursuant to subsection (d) of this Section 8 shall receive a lump sum distribution within 30 days after such death in accordance with subsection (a) of this Section 8 unless prior to such death such Eligible Director has elected that benefits be paid to his or her beneficiary in annual installments over a period of years selected by the Eligible Director but not to exceed ten years. Such election shall be made by filing a prescribed form with the Committee. If the Eligible Director so elects that installment payments be made to his or her beneficiary, such installment payments shall be determined in the same manner as installment payments pursuant to subsection (b) of this Section 8 except the Eligible Director's date of death shall be substituted for the Retirement Date and the payments will be made to the beneficiary rather than to the Eligible Director. (d) Beneficiary Designation. Each Eligible Director shall be entitled to designate a beneficiary or beneficiaries (which may be an entity other than a natural person) who, following the Eligible Director's death, will be entitled to receive any payments to be made under this Plan. At any time, and from time to time, any such designation may be changed or canceled by the Eligible Director without the consent of any beneficiary. Any designation, change, or cancellation must be by written notice filed with the Company and shall not be effective until received by the Company. If no beneficiary has been named by the Eligible Director or if all designated beneficiaries predecease the Eligible Director, payment shall be made to the Eligible Director's estate. (e) Payout in Cash If Required. Anything in this Plan to the contrary notwithstanding, if at the time a payment is due under the Plan, distribution in the form of Common Stock may not be made to any person due to requirements of applicable law, such payment shall not be made in such form but shall instead be made in cash in an amount equal to the Fair Market Value of the shares of Common Stock which would otherwise have been paid out (such Fair Market Value to be computed as of the last day of the month preceding the month in which the cash payment is made). 12. Change in Capitalization. In the event of any change in the outstanding shares of the Company's Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination of shares or other similar corporate change, the Board shall make such adjustments as it deems appropriate in the number of Stock Units in the Eligible Director's Account and in the kind of shares to which the Stock Units relate, and in the number and kind of shares available under this Plan. 13. Unfunded Plan. No Eligible Director shall have any property interest whatsoever in any specific assets of the Company by reason of this Plan. The Eligible Director's Account is not intended to be a trust account or escrow account for the benefit of an Eligible Director or any other person. The sole right of an Eligible Director or his or her personal representative is a right as an unsecured general creditor of the Company. 14. Assignment and Alienation. The rights and benefits of Eligible Directors under this Plan are personal to each Director and neither the Director nor his or her beneficiary shall have the power or right to transfer, assign, anticipate, mortgage or otherwise encumber any interest in the benefits to be paid under this Plan. 15. Annual Report. No later than January 31st of each year, the Company shall provide each Eligible Director with an annual report of his or her Account balance. 16. No Rights of Stockholder. An Eligible Director shall have no rights as a stockholder of Common Stock with respect to the Stock Units credited to his or her Account unless and until a certificate for shares of Common Stock is issued to the Eligible Director by the Company pursuant to the terms of the Plan. 17. Amendment and Termination. The Board shall have the right to amend, suspend, or terminate this Plan in any respect at any time. No amendment, suspension or termination of the Plan (other than through adjustment for changes in capitalization or corporate transactions as herein provided) shall adversely affect any previously accrued benefits hereunder unless the affected Eligible Director consents thereto. 18. Miscellaneous (a) Not Contract. The adoption and maintenance of this Plan shall not constitute a contract between the Company and any Director for continued service as a Director. Nothing herein contained shall be deemed to give any Director the right to be retained as a Director, nor shall it interfere with the Director's right to resign as a Director at any time. (b) Governing Law. This instrument shall be construed in accordance with and governed by the laws of the State of Kansas. (c) Benefit Payments and Expenses. The cost of benefit payments from this Plan and the expenses of administering the Plan shall be borne by the Company. (d) Other Benefits. The benefits herein contained are in addition to all other awards, arrangements, contracts or benefits, if any, that any Director may have by virtue of service for the Company, unless and to the extent that this Plan or any such award, arrangement, contract or benefit otherwise provides. EX-12 3 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, 1998 Income before provision for income taxes and $ 63,917,784 fixed charges (Note A) Fixed charges: Interest on first mortgage bonds $ 16,527,916 Amortization of debt discount and expense less 873,188 premium Interest on short-term debt 967,231 Other interest 337,855 Rental expense representative of an interest 160,765 factor (Note B) Total fixed charges 18,866,955 Preferred stock dividend requirements: Preferred stock dividend requirements not 2,338,304 deductible for tax purposes Ratio of income before provision for incomes 1.554 taxes to net income Nondeductible dividend requirements 3,633,724 Deductible dividends 78,036 Total preferred stock dividend requirements 3,711,760 Total combined fixed charges and preferred stock dividend requirements $ 22,578,715 Ratio of earnings to fixed charges 3.39x Ratio of earnings to combined fixed charges and preferred stock dividend requirements 2.83x 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 4
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE STATEMENT OF INCOME AND THE STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1998 SEP-30-1998 PER-BOOK 556,117,160 0 53,016,722 41,027,968 0 650,161,850 17,012,633 154,871,146 57,109,719 228,993,498 0 32,901,800 246,082,106 0 0 0 0 0 0 0 142,184,446 650,161,850 185,517,162 13,576,690 133,824,973 147,401,663 38,115,499 (557,223) 37,558,276 13,901,982 23,656,294 1,812,255 21,844,039 16,207,217 13,255,306 50,913,207 1.29 1.29
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