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.
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
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
<footnote>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
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
<FOOTNOTE>
See Accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (UNAUDITED)
Twelve Months Ended
September 30,
1997 1996
<S> <C> <C>
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
<FOOTNOTE>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
September 30,
1997 December 31,
(Unaudited) 1996
<S> <S> <S>
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
<FOOTNOTE>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
1997 1996*
<S> <C> <C>
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
<FOOTNOTE>
*Certain reclassifications have been made to conform to current year
reporting methodology.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
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."
<PAGE>
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:
<TABLE>
<CAPTION>
Operating
Kwh Sales Revenues
Nine Twelve Nine Twelve
Third Months Months Third Months Months
Quarter Ended Ended Quarter Ended Ended
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<TABLE>
<CAPTION>
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
<S> <C>
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
<FOOTNOTE>
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).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 543,676,098
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 43,040,207
<TOTAL-DEFERRED-CHARGES> 42,381,145
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 629,097,450
<COMMON> 16,710,016
<CAPITAL-SURPLUS-PAID-IN> 149,431,799
<RETAINED-EARNINGS> 52,100,384
<TOTAL-COMMON-STOCKHOLDERS-EQ> 218,242,199
0
32,901,800
<LONG-TERM-DEBT-NET> 196,443,575
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 26,500,000
<LONG-TERM-DEBT-CURRENT-PORT> 23,000,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 132,009,876
<TOT-CAPITALIZATION-AND-LIAB> 629,097,450
<GROSS-OPERATING-REVENUE> 161,920,580
<INCOME-TAX-EXPENSE> 10,140,360
<OTHER-OPERATING-EXPENSES> 120,639,648
<TOTAL-OPERATING-EXPENSES> 130,780,008
<OPERATING-INCOME-LOSS> 31,140,572
<OTHER-INCOME-NET> (201,700)
<INCOME-BEFORE-INTEREST-EXPEN> 30,938,872
<TOTAL-INTEREST-EXPENSE> 12,472,708
<NET-INCOME> 18,466,164
1,812,255
<EARNINGS-AVAILABLE-FOR-COMM> 16,653,909
<COMMON-STOCK-DIVIDENDS> 15,894,079
<TOTAL-INTEREST-ON-BONDS> 12,447,244
<CASH-FLOW-OPERATIONS> 42,674,267
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
