<PAGE>
FORM 10-Q/A
(Amendment No. 1 to the
Quarterly Report Pursuant
to Section 13 or 15(d) of
the Securities Exchange Act
of 1934.)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended MARCH 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ____________
Commission file number: 1-3562
UTILICORP UNITED INC.
(Exact name of registrant as specified in its charter)
Delaware 44-0541877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 Commerce Tower, 911 Main, Kansas City, Missouri 54105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 816-421-6600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 2, 1996
- ----- --------------------------
Common Stock, $1 par value 46,608,768
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Information regarding the condensed consolidated financial statements is
set forth on pages 3 through 12.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations can be found on pages 13 through 18.
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 SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
See page 19 for unaudited pro forma financial statements and related notes
for KC United Corp.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits and reports on Form 8-K can be found on page 25.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended March 31,
IN MILLIONS EXCEPT PER SHARE 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales $1,084.4 $726.3
Cost of Sales 834.7 490.1
- --------------------------------------------------------------------------------
GROSS PROFIT 249.7 236.2
- --------------------------------------------------------------------------------
Operating, administrative and maintenance expense 129.8 117.1
Depreciation, depletion and amortization 31.9 37.6
- --------------------------------------------------------------------------------
INCOME FROM OPERATIONS 88.0 81.5
- --------------------------------------------------------------------------------
Interest expense and minority interests:
Interest expense - long-term debt 27.8 24.2
Interest expense - short-term debt and other interest 6.6 6.4
Minority interests 2.7 .7
- --------------------------------------------------------------------------------
Total interest and minority interest expense 37.1 31.3
- --------------------------------------------------------------------------------
Other income:
Equity in earnings of investments and partnerships 7.6 2.2
Interest Income 6.5 1.9
- --------------------------------------------------------------------------------
Total other income 14.1 4.1
- --------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 65.0 54.3
- --------------------------------------------------------------------------------
Income taxes 27.7 22.1
- --------------------------------------------------------------------------------
NET INCOME 37.3 32.2
- --------------------------------------------------------------------------------
Preferred dividends .5 .5
- --------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR COMMON SHARES 36.8 31.7
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary 46.23 44.74
Fully diluted 46.57 45.24
- --------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
Primary $.80 $.71
Fully diluted .79 .70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
Twelve Months
Ended March 31,
IN MILLIONS EXCEPT PER SHARE 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales $3,156.7 $2.351.0
Cost of Sales 2,226.5 1,516.7
- --------------------------------------------------------------------------------
GROSS PROFIT 930.2 834.3
- --------------------------------------------------------------------------------
Operating, administrative and maintenance expense 524.3 460.2
Depreciation, depletion and amortization 139.7 147.0
Provision for asset impairments 34.6 -
- --------------------------------------------------------------------------------
INCOME FROM OPERATIONS 231.6 227.1
- --------------------------------------------------------------------------------
Interest expense and minority interests:
Interest expense - long-term debt 113.8 91.8
Interest expense - short-term debt and other interest 23.7 17.0
Minority interests 5.6 3.2
- --------------------------------------------------------------------------------
Total interest and minority interest expense 143.1 112.0
- --------------------------------------------------------------------------------
Other income:
Equity in earnings of investments and partnerships 29.2 16.4
Interest Income 24.9 7.2
- --------------------------------------------------------------------------------
Total other income 54.1 23.6
- --------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 142.6 138.7
- --------------------------------------------------------------------------------
Income taxes 57.6 51.1
- --------------------------------------------------------------------------------
NET INCOME 85.0 87.6
- --------------------------------------------------------------------------------
Preferred dividends 2.1 1.9
- --------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR COMMON SHARES $ 82.9 $ 85.7
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary 45.62 43.52
Fully diluted 45.98 44.26
- --------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
Primary $1.82 $1.97
Fully diluted 1.81 1.95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
DOLLARS IN MILLIONS 1996 1995
(Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 118.0 $ 110.7
Funds on deposit 33.2 41.2
Accounts receivable, net 335.9 332.2
Inventories and supplies, at average cost 70.4 112.5
Price risk management assets 48.3 26.4
Prepayment and other 59.8 53.0
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 665.6 676.0
- --------------------------------------------------------------------------------
Property, plant and equipment, net 2,298.4 2,279.6
- --------------------------------------------------------------------------------
Investments in subsidiaries and partnerships 585.8 574.4
- --------------------------------------------------------------------------------
Price risk management assets 155.3 175.5
- --------------------------------------------------------------------------------
Deferred charges 181.9 180.4
- --------------------------------------------------------------------------------
TOTAL ASSETS $3,887.0 $3,885.9
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 15.2 $ 15.1
Short-term debt 201.5 288.6
Accounts payable 427.9 434.3
Accrued liabilities 87.4 34.8
Price risk management liabilities 87.7 67.9
Other 94.8 107.1
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 914.5 947.8
- --------------------------------------------------------------------------------
LONG-TERM LIABILITIES:
Long-term debt, net 1,365.9 1,355.4
Deferred income taxes and credits 278.6 279.2
Price risk management liabilities 75.7 94.6
Other deferred credits 142.0 137.2
- --------------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 1,862.2 1,866.4
- --------------------------------------------------------------------------------
Company-obligated mandatorily redeemable
preferred securities of partnership 100.0 100.0
- --------------------------------------------------------------------------------
Preferred and preference stock 25.4 25.4
- --------------------------------------------------------------------------------
Common shareowner's equity 984.9 946.3
- --------------------------------------------------------------------------------
Commitments and contingencies
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNER'S EQUITY $3,887.0 $3,885.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF PREFERRED AND PREFERENCE
STOCK
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
DOLLARS IN MILLIONS EXCEPT PER SHARE (Unaudited)
- ----------------------------------------------------------------------------
<S> <C> <C>
Preference Stock, not mandatorily redeemable:
$2.05 series, 1,000,000 shares $25.0 $25.0
Preferred Stock of subsidiary, retractable .4 .4
- ----------------------------------------------------------------------------
TOTAL PREFERRED AND PREFERENCE STOCK $25.4 $25.4
- ----------------------------------------------------------------------------
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF COMMON SHAREOWNER'S EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
DOLLARS IN MILLIONS EXCEPT PER SHARE (Unaudited)
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK: authorized 100,000,000 shares,
par value $1 per share, 46,484,930 shares
outstanding (45,965,952 at
December 31, 1995) $ 46.5 $ 46.0
PREMIUM ON CAPITAL STOCK 816.8 800.6
RETAINED EARNINGS 122.6 106.2
- ----------------------------------------------------------------------------
CURRENCY TRANSLATION ADJUSTMENT (1.0) (6.5)
- ----------------------------------------------------------------------------
TOTAL COMMON SHAREOWNER'S EQUITY $984.9 $946.3
- ----------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended March 31,
DOLLARS IN MILLIONS 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37.3 $ 32.2
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization 31.9 36.6
Net changes in price risk management assets and
liabilities (.8) 1.0
Deferred taxes and investment tax credits (.6) 7.8
Equity in earnings from investments and partnerships (7.6) (2.2)
Dividends from investments and partnerships 2.8 1.6
Changes in certain current assets and liabilities,
net of effects of acquisitions and restructuring--
Accounts receivable and accrued revenues (51.7) (44.0)
Accounts receivable sold 48.0 44.7
Fuel and materials 42.1 39.2
Accounts payable (6.4) (50.4)
Accrued taxes 42.9 31.0
Other (9.4) 13.4
Changes in other assets and liabilities, net 8.7 12.7
- ----------------------------------------------------------------------------------------------
CASH PROVIDED FROM OPERATING ACTIVITIES 137.2 123.6
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (17.9) (20.0)
Purchase of utility and other businesses -- (100.9)
Investments in energy related properties (12.0) (3.3)
Other (19.3) 4.8
- ----------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (49.2) (119.4)
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 16.7 2.7
Treasury stock sold (acquired) -- 4.3
Issuance of long-term debt, net of premium paid 10.6 --
Retirements of long-term debt -- (5.3)
Short-term borrowing (repayments), net (87.1) 47.1
Cash dividends paid (20.9) (19.7)
- ----------------------------------------------------------------------------------------------
CASH PROVIDED (USED IN) FROM FINANCING ACTIVITIES (80.7) 29.1
- ----------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 7.3 33.3
Cash and cash equivalents at beginning of period 110.7 67.2
- ----------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $118.0 $100.5
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
Twelve Months
Ended March 31,
DOLLARS IN MILLIONS 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 85.0 $ 87.6
Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization 150.9 145.5
Provision for asset impairments 34.6 --
Net changes in price risk management assets and
liabilities (41.2) 1.0
Deferred taxes and investment tax credits (29.6) 74.9
Equity in earnings from investments and partnerships (29.2) (16.4)
Dividends from investments and partnerships 19.8 18.6
Changes in certain current assets and liabilities,
net of effects of acquisitions and restructuring--
Accounts receivable and accrued revenues (175.1) 14.0
Accounts receivable sold 54.1 (7.4)
Fuel and materials 24.8 (20.9)
Accounts payable 137.9 (50.2)
Accrued taxes 5.2 2.0
Other 6.9 7.6
Changes in other assets and liabilities, net 30.7 15.6
- ----------------------------------------------------------------------------------------------
CASH PROVIDED FROM OPERATING ACTIVITIES 274.8 271.9
- ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (107.3) (130.8)
Purchase of utility and other businesses -- (129.1)
Investments in international businesses (379.3) --
Investments in non-regulated generating assets (59.0) (21.5)
Proceeds on sale of oil and gas properties 204.5 --
Investments in energy related properties (152.7) (105.9)
Other (70.9) (43.3)
- ----------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES $(564.7) $(430.6)
- ----------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--CONTINUED
UNAUDITED
<TABLE>
<CAPTION>
Twelve Months
Ended March 31,
DOLLARS IN MILLIONS 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ 43.5 $ 5.3
Issuance of company-obligated mandatorily
redeemable 100.0 --
preferred securities of partnership
Retirements of preference stock -- (11.3)
Treasury stock sold (acquired) 2.3 (2.3)
Issuance of long-term debt, net of premium paid 425.8 104.2
Retirements of long-term debt (155.0) (5.3)
Short-term borrowing (repayments) net (28.0) 204.3
Cash dividends paid (81.2) (78.1)
- ----------------------------------------------------------------------------------------------
CASH PROVIDED FROM FINANCING ACTIVITIES 307.4 216.8
- ----------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 17.5 58.1
Cash and cash equivalents at beginning of period 100.5 42.4
- ----------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $118.0 $100.5
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
9
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(1) Summary of Significant Accounting Policies: The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with the accounting policies described in the consolidated financial
statements and related notes included in the company's 1995 Form 10-K. It is
suggested that those consolidated financial statements be read in conjunction
with this report. The year-end financial statements presented were derived
from the company's audited financial statements, but do not include all
disclosures required by generally accepted accounting principles. In the
opinion of management, the accompanying condensed consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair representation of the financial position of
the company and the results of its operations. Certain estimates and
assumptions that affect reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods shown have been made in preparing the
consolidated financial statements. Actual results could differ from these
estimates.
(2) On January 19, 1996, the company, KCPL and KC United Corp. (KCU) entered
into an Agreement and Plan of Merger (the Merger Agreement) which provides for a
strategic business combination of the company and KCPL in a "merger-of-equals"
transaction (the Transaction). Pursuant to the Merger Agreement, the company
and KCPL will merge with and into KCU (which may be renamed at the discretion of
the company and KCPL), a corporation formed for the purpose of the Transaction.
Under the terms of the Merger Agreement, each share of the company's common
stock will be exchanged for 1.096 shares of KCU common stock and each share of
KCPL common stock will be exchanged for one share of KCU common stock. Based on
the number of shares of the company's common stock and KCPL's common stock
outstanding on the date of the Merger Agreement, the company's common
shareholders will receive about 45% of the common equity of KCU and KCPL's
common shareholders will receive about 55%.
The Transaction is designed to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method, the recorded
assets and liabilities of the company and KCPL would be carried forward to the
consolidated financial statements of KCU at their recorded amounts. The income
of KCU would include the combined income of the company and KCPL as though the
merger occurred at the beginning of the accounting period. Prior period
financial statements would be combined and presented as KCU.
The Transaction will create a diversified energy company with total
combined sales of over $3.5 billion, over $6.5 billion in total assets and about
2.5 million customers in the United States, Canada, the United Kingdom, New
Zealand, Australia, China and Jamaica. The business of the combined companies
will consist of electric utility operations, gas utility operations and various
non-utility enterprises including independent power projects and gas marketing,
gathering and processing operations.
The Transaction is subject to approval by each company's shareholders and a
number of regulatory authorities. Obtaining the regulatory approvals is
expected to take about 12 to 18 months. The Merger Agreement includes
termination provisions which may require certain payments to the non-terminating
party under certain circumstances, including a payment of $58 million if the
Transaction is terminated by a party and within two-and-one half years following
such termination, the terminating party agrees to consummate or consummates
certain business combination transactions.
10
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
On April 14, 1996 KCPL received an unsolicited bid from Western Resources
Inc., which the Board of Directors of KCPL unanimously rejected on April 21,
1996. Both KCPL and the company remain fully committed to the proposed merger.
As of March 31, 1996, the company had $4.2 million of merger related costs
recorded as deferred charges on its consolidated condensed balance sheet.
(3) On September 6, 1995, Power Partnership Limited (PPL), of which the company
owns 49.9%, acquired United Energy Limited (UE), an Australian electric
distribution utility, from the State of Victoria. As part of the acquisition
the company paid approximately $257.9 million for its 49.9 percent ownership
interest, primarily financed through Australian-dollar-based debt.
The acquisition was recorded as a purchase and is accounted for using the
equity method of accounting. The equity investment is included in Investments
in subsidiaries and partnerships on the condensed consolidated balance sheet.
Pro forma unaudited results of operations for UtiliCorp United Inc., assuming
the acquisition had occurred at the beginning of the period, are shown below.
<TABLE>
<CAPTION>
Dollars in millions Quarter Ended
except per share March 31, 1995
-------------------------------------------------
<S> <C>
Sales $726.3
Income from operations 81.5
Net income 35.4
Earnings available for common
shares 34.9
-------------------------------------------------
Primary earnings per share $ .78
Fully diluted earnings per share .77
-------------------------------------------------
</TABLE>
(4) The table below contains summarized financial information on the company's
unconsolidated material equity investments as of March 31, 1995 and
December 31, 1995 and for the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
DOLLARS IN MILLIONS March 31, 1996 December 31, 1995
- ----------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets $ 297.2 $ 336.5
Non-current assets 2,860.7 2,785.3
- ----------------------------------------------------------------------
TOTAL ASSETS $3,157.9 $3,121.8
- ----------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities $ 276.0 $ 276.5
Non-current liabilities 2,122.6 2,125.6
Equity 759.3 719.7
- ----------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $3,157.9 $3,121.8
- ----------------------------------------------------------------------
</TABLE>
11
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
Dollars in millions March 31, 1996 March 31, 1995
-------------------------------------------------------------
<S> <C> <C>
Sales $263.3 $292.4
Costs and Expenses 235.9 260.6
-------------------------------------------------------------
Net Income $ 27.4 $ 31.8
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
(5) In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-based
Compensation" (SFAS 123). SFAS 123 requires the company to either record or
disclose pro forma information on the fair value of certain stock-based programs
including stock options and employee stock purchase plans. The company
currently provides stock options to certain employees and has an employee stock
purchase program whereby employees may purchase company common stock at a 15%
discount. Under SFAS 123, these plans require either recording compensation
expense or pro forma disclosures of net income and earnings per share as if the
company elected to record compensation expense. The company will elect to
disclose information required by SFAS 123. For the quarters ended March 31,
1996 and 1995, compensation expense relating to stock-based compensation plans
was $.9 million and $1.2 million, respectively. If the company would have
recorded compensation expense, earnings per share would have been reduced by
$.01 and $.02 for the quarters ended March 31, 1996 and 1995, respectively.
(6) In April 1996 one of the power projects in which UtilCo Group, a subsidiary
of the company, holds an ownership interest entered into a long-term lease
arrangement with a third party. This transaction will be accounted for as a
sales type lease by the partnership and will result in the recognition of a
gain. UtilCo Group's portion of such gain, through its equity earnings share,
is expected to be approximately $25 million, on a pre-tax basis.
An amendment of a power purchase agreement at another UtilCo Group project
will require UtilCo Group to record a $3 million charge, on a pre-tax basis,
in May 1996.
(7) Certain reclassifications have been made to prior year amounts to conform
to the current year's presentation.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
UTILICORP UNITED INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
UTILICORP UNITED INC. (THE COMPANY) CONTAINS THREE SEGMENTS: ELECTRIC
OPERATIONS, GAS OPERATIONS AND ENERGY RELATED BUSINESSES. THE COMPANY HAS
OTHER OPERATIONS THAT AFFECT SALES AND INCOME FROM OPERATIONS WHICH ARE
DISCUSSED IN THE OTHER BUSINESSES AND EQUITY INVESTMENTS SECTION. EACH
SEGMENT IS DISCUSSED SEPARATELY IN THE RESULTS OF OPERATIONS SECTION. THE
LIQUIDITY AND CAPITAL RESOURCES SECTION IS PREPARED ON A CONSOLIDATED BASIS.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities increased $13.6 million for the
quarter ended March 31, 1996 compared to the same period in 1995. The
primary factors causing the increase relate to the timing of cash payments
and cash receipts. Cash provided from operating activities for the twelve
months ended March 31, 1996 was $2.7 million higher than in 1995. The 1996
twelve-month cash flow statement reflects a provision for asset impairments
and the income effects of a change in accounting. Neither the provision for
asset impairments nor the change in accounting affect cash flow from
operations; however, certain individual components are affected.
Cash used in investing activities decreased $70.2 million for the quarter
ended March 31, 1996, compared to 1995. Cash used in investing activities
varies depending on the number and magnitude of investment and acquisition
opportunities. In the first quarter 1995, the company closed its Missouri
pipeline acquisition ($78.0 million), its acquisition of a gas marketing
company ($6.6 million) and Aquila Gas Pipeline's acquisition of a gas
processing, gathering and marketing company ($16.3 million). Other investing
activities in 1996 reflect the renovation of a new headquarters building
and investments in new software systems.
Cash used in investing activities for the twelve months ended March 31,
1996 compared to the same periods in 1995 increased by $134.1 million. As
with the quarter period discussed above, investing activities tend to
fluctuate significantly depending on the timing of acquisition opportunities.
For the twelve-month period ended March 31, 1996, the company invested
$379.3 million internationally. Partially offsetting this cash outflow were
cash proceeds on the sale of substantially all of the company's oil and gas
production assets for $204.5 million.
To supplement the company's internally generated cash flows, the company
has various short-term credit programs. A primary source of cash has been bank
borrowings from uncommitted bank lines. In addition the company can issue
commercial paper aggregating $150 million. To support the commercial paper
program, the company has a $250 million committed revolving credit agreement
with a consortium of banks.
The company also has two accounts receivable sale programs. The level of
funding available from these programs varies depending on the level of eligible
accounts receivable. Under these programs, the company may borrow another $13.6
million.
13
<PAGE>
On December 8, 1995, the company obtained an extended grace period for a
long-term debt to capitalization ratio covenant from its creditor on its
9.21% senior notes. The grace period extends to June 30, 1996. The company
continues to classify this debt as long-term as management believes it is
probable that the company will meet the convenant ratio by June 30, 1996 and
for foreseeable future periods.
RESULTS OF OPERATIONS
ELECTRIC OPERATIONS
THE COMPANY'S ELECTRIC SEGMENT INCLUDES THE ELECTRIC OPERATIONS OF MISSOURI
PUBLIC SERVICE, WEST KOOTENAY POWER, WEST VIRGINIA POWER, AND WESTPLAINS ENERGY.
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOLLARS IN MILLIONS 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------
SALES $143.3 $129.9 $591.1 $556.1
- --------------------------------------------------------------------------------------------
Cost of sales-fuel and purchased power 52.6 47.1 198.6 189.7
- --------------------------------------------------------------------------------------------
GROSS PROFIT 90.7 82.8 392.5 366.4
- --------------------------------------------------------------------------------------------
EXPENSES:
Other operating 27.9 25.7 119.1 104.6
Maintenance 9.6 9.0 35.9 38.5
Taxes, other than income taxes 11.4 11.8 50.9 50.0
Depreciation and amortization 14.1 13.2 54.6 50.8
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 63.0 59.7 260.5 243.9
- --------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS $ 27.7 $ 23.1 $132.0 $122.5
- --------------------------------------------------------------------------------------------
</TABLE>
QUARTER-TO-QUARTER
Income from operations increased 20% in the 1996 quarter compared to the
1995 quarter. Colder winter weather in 1996 combined with over 8,100 average
additional customers increased sales and gross profit by $13.4 million and
$7.9 million, respectively, in 1996 compared to 1995.
TWELVE MONTHS ENDED MARCH 31, 1996 TO 1995
Income from operations increased 8% in 1996 compared to 1995. The
twelve-month period in 1996 had increased sales and gross profit of $35.0
million and $26.1 million, respectively, over the same period in 1995. The
1996 period benefited from a hot summer as well as a colder winter which were
primary reasons for an 8% increase in tariff electricity volumes sold.
Partially offsetting the sales and gross profit increases were increases in
other operating expenses related to employee severance costs and sales and
marketing costs pertaining to EnergyOne activities.
14
<PAGE>
GAS OPERATIONS
THE COMPANY'S GAS SEGMENT INCLUDES GAS OPERATIONS OF MISSOURI PUBLIC SERVICE,
KANSAS PUBLIC SERVICE, PEOPLES NATURAL GAS, NORTHERN MINNESOTA UTILITIES,
MICHIGAN GAS UTILITIES, UTILICORP PIPELINE SYSTEMS AND WEST VIRGINIA POWER.
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOLLARS IN MILLIONS 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------
SALES $300.4 $245.9 $671.3 $580.2
Cost of sales-gas purchased for resale 195.5 152.0 392.4 340.9
- --------------------------------------------------------------------------------------------
GROSS PROFIT 104.9 93.9 278.9 239.3
- --------------------------------------------------------------------------------------------
EXPENSES:
Other operating 32.6 31.5 130.9 117.6
Maintenance 2.3 2.2 9.2 8.7
Taxes, other than income taxes 6.6 7.0 26.0 23.6
Depreciation and amortization 9.4 8.3 35.4 31.1
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 50.9 49.0 201.5 181.0
- --------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS $ 54.0 $ 44.9 $ 77.4 $ 58.3
- --------------------------------------------------------------------------------------------
</TABLE>
QUARTER-TO-QUARTER
Income from operations increased 20% in 1996 compared to the same period in
1995. This past winter was approximately 19% colder than in 1995 and 9% colder
than average winter temperatures. In addition to favorable weather, the average
customer count increased approximately 16,100 over the 1995 period. Colder
temperatures combined with additional customers resulted in sales and gross
profit increases of $54.5 million and $11.0 million, respectively, over the 1995
periods.
TWELVE MONTHS ENDED MARCH 31, 1996 TO 1995
Income from operations increased 33% in 1996 over the same period in 1995.
An extremely cold winter combined with a mild 1995 first quarter contributed to
sales and gross profit increases of $91.1 million and $39.6 million over 1995
periods. Also contributing to the increase were over 27,600 average additional
customers over the 1995 period. The colder weather and additional customers
resulted in a 11% increase in tariff volumes sold for the 1996 period over 1995.
Partially offsetting the sales and gross profits increases were operating
expense increases of $13.3 million compared to 1995. The increase is due to
employee severance and restructuring activities, additional sales and marketing
costs and payroll and benefit increases.
15
<PAGE>
ENERGY RELATED BUSINESSES
THE ENERGY RELATED BUSINESS SEGMENT CONSISTS SOLELY OF THE CONSOLIDATED
OPERATIONS OF THE COMPANY'S AQUILA ENERGY SUBSIDIARY, INCLUDING 82%-OWNED
AQUILA GAS PIPELINE (AGP). AQUILA PROVIDES ENERGY MARKETING AND RISK
MANAGEMENT SERVICES AND IS INVOLVED IN THE GATHERING, PROCESSING AND
MARKETING OF NATURAL GAS AND THE SALE OF NATURAL GAS LIQUIDS. ITS AQUILA
POWER SUBSIDIARY BEGAN WHOLESALE MARKETING OF ELECTRICITY IN 1995.
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOLLARS IN MILLIONS 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------
SALES $475.9 $241.4 $1,408.5 $913.6
- --------------------------------------------------------------------------------------------
Cost of sales 434.9 196.5 1,210.0 735.4
- --------------------------------------------------------------------------------------------
GROSS PROFIT 41.0 44.9 198.5 178.2
- --------------------------------------------------------------------------------------------
EXPENSES:
Operating and maintenance 17.3 15.9 72.6 70.3
Depreciation, depletion and amortization 6.2 14.7 41.1 59.5
Provisions for asset impairments -- -- 13.2 --
- --------------------------------------------------------------------------------------------
TOTAL EXPENSES 23.5 30.6 126.9 129.8
- --------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS, BEFORE
MINORITY INTERESTS $ 17.5 $ 14.3 $ 71.6 $ 48.4
- --------------------------------------------------------------------------------------------
</TABLE>
QUARTER-TO-QUARTER
Income from operations increased 22% over the 1995 period reflecting
significant increases in natural gas and natural gas liquid sales and higher
commodity prices. Offsetting this increase was a decline of $3.2 million of
operating income resulting from Aquila's oil and gas production business
which was sold in September 1995.
Sales increased $234.5 million due to a 34% increase in natural gas
marketing volumes, an 18% increase in pipeline throughput volumes, a 37%
increase in natural gas liquids production and an average price increase of
$1.08 per mmbtu on marketing volumes sold in the period. Changes in natural
gas market prices can significantly affect sales revenues in a period without
necessarily impacting gross profit proportionately. Gross profit from
Aquila's gas marketing and gas pipeline and processing businesses increased
by $14.4 million due to the volume increases discussed above, 10% higher
natural gas liquids prices and a 40% increase in net gas marketing margins.
Gross profit for the 1995 quarter included $18.3 million in gross profit from
Aquila's oil and gas production business.
Depreciation, depletion and amortization expense decreased by $8.5
million in 1996 primarily due to the sale of the oil and gas properties
discussed above.
TWELVE MONTHS ENDED MARCH 31, 1996 TO 1995
Income from operations increased by 48% in the 1996 period compared to
the 1995 period. Income from operations in the 1996 period was favorably
affected by additional gross profit ($29.8 million) from price risk
management activities, partially offset by a provision from impaired assets
stemming from early adoption of Statement of Financial Accounting Standards
No. 121 ($13.2 million). Excluding these two items, income from operations
increased 14% over 1995.
Sales increased $494.9 million over 1995 as marketing volumes increased 42%
to 1.5 Tbtu per day. Pipeline throughput volumes rose 31% and natural gas
liquids production increase 13% over 1995 levels. Average marketing sales
prices increased $.38 per mmbtu
16
<PAGE>
over last year. Gross profit was $20.3 million higher than the prior year
stemming from strong volume increases in Aquila's marketing and pipeline
businesses. Together the marketing and pipeline gross profit was $62.2
million greater than in the prior period. Aquila's oil and gas production
business contributed $41.9 higher in million to 1995 compared to 1996.
Operating and maintenance expenses were $2.3 million higher in 1996
primarily due to expansion of Aquila's natural gas gathering and processing
capabilities, the start-up of an electricity marketing business and the
acquisition of a gas marketing and gathering company in January 1995.
Operating and maintenance expenses were favorably affected by the sale of the
oil and gas production business. Depreciation, depletion and amortization
expense was $18.4 million lower than last year due to the sale of the oil and
gas business.
OTHER BUSINESSES AND EQUITY INVESTMENTS
Other businesses and equity investments consist primarily of UtilCo Group
(a subsidiary of the company), operations in the United Kingdom, various gas
marketing and service contract businesses and equity investment in Australia
and New Zealand. The commentary that follows centers on the major items of
significance affecting these businesses and investments.
Net income from UtilCo Group was $2.2 million for the quarter ended March
31, 1996 or about the same as in last year's quarter. Net income for the
twelve months ended March 31, 1995 was $9.0 million (before a $9.3 million
after tax provision for impaired assets) compared to $7.6 million in the
prior year. The first quarter of 1995 includes a $2.0 million tax benefit
stemming from a deferred tax adjustment. Operating income increased in both
the quarter and twelve-month 1996 periods over 1995 due to better project
performance and the acquisition of a new project in May 1995.
In April 1996 one of the power projects in which UtilCo Group holds an
ownership interest entered into a long-term lease arrangement with a third
party. This transaction will be accounted for as a sales type lease by the
partnership and will result in the recognition of a gain. UtilCo Group's
portion of such gain, through its equity earnings share, is expected to be
about $25 million on a pre-tax basis.
An amendment of a power purchase agreement at another UtilCo Group project
will require UtilCo Group to record a $3 million charge, on a pre-tax basis,
in May 1996.
Net income from Australia was $.2 million and $3.1 million for the
quarter and twelve months, respectively, ended March 31, 1996. United Energy
Limited, and electric distribution company, was acquired by the company and
two other partners in September 1995. United Energy Limited is a winter
peaking (July and August) utility with approximately 520,000 customers.
17
<PAGE>
INTEREST INCOME
Interest income increased $4.6 million and $17.7 million for the quarter
and twelve-month periods in 1996 compared to 1995 due to interest received on
interest bearing financial instruments related to the company's investment in
an Australian electric distribution company and additional interest income
from temporary cash investments in the United Kingdom.
INTEREST EXPENSE
Total interest expense increased $3.8 million for the quarter ended March
31, 1996 compared to the prior year quarter. This increase is primarily due
to additional long-term borrowings issued in the second quarter of 1995 and
new Australian and New Zealand dollar borrowings issued in the third and
fourth quarters. Total interest expense for the twelve-month period ended
March 31, 1996 increased $28.7 million primarily due to the same reasons
mentioned for the quarter.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER MATTERS
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of Kansas
City Power & Light Company (KCPL) and UtiliCorp United Inc. (UtiliCorp),
including their respective subsidiaries, after giving effect to the
Transaction. Further information concerning the Merger Agreement and
proposed merger transaction is included in Note 2 to the Consolidated
Condensed Financial Statements in Part I of this report. The unaudited pro
forma combined condensed balance sheet at March 31, 1996, gives effect to the
Transaction as if it had occurred at March 31, 1996. The unaudited pro forma
combined condensed statements of income for each of the three months ended
March 31, 1996, and 1995, give effect to the Transaction as if it had occurred
at the beginning of those periods. These statements are prepared on a basis
consistent with generally accepted accounting principles. In addition, the
statements are prepared on the basis of accounting for the Transaction as a
pooling of interests and are based on the assumptions set forth in the notes
thereto.
The following pro forma financial information has been prepared from, and
should be read in connection with, the historical consolidated financial
statements and related notes of KCPL and UtiliCorp. The following
information is not necessarily indicative of the financial position or
operating results that would have occurred had the Transaction been
consummated on the date, or at the beginning of the periods, for which the
Transaction is being given effect nor is it necessarily indicative of future
operating results or financial position.
19
<PAGE>
KC UNITED CORP.
UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
MARCH 31, 1996
(thousands)
<TABLE>
<CAPTION>
UtiliCorp KCPL Pro Forma
(as reported) (as reported) Combined
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utility plant in service $2,721,045 $3,399,478 $6,120,523
Accumulated depreciation 1,030,945 1,177,540 2,208,485
-------------------------------------------
Net utility plant in service 1,690,100 2,221,938 3,912,038
Construction work in progress and
nuclear fuel, net 63,952 140,560 204,512
-------------------------------------------
Total utility plant, net 1,754,052 2,362,498 4,116,550
Other property and investments 1,130,074 188,059 1,318,133
Current assets 665,578 142,563 808,141
Deferred charges and other assets 337,260 183,331 520,591
-------------------------------------------
Total assets $3,886,964 $2,876,451 $6,763,415
- ------------------------------------------------------------------------------------------
Capitalization
Common stock and premium
on common stock (Note 1) $ 863,283 $ 449,697 $1,312,980
Retained earnings 122,682 449,377 572,059
Other stockholders' equity (1,022) (1,714) (2,736)
-------------------------------------------
Total common equity 984,943 897,360 1,882,303
Preferred and preference stock (Note 4) 25,356 90,276 115,632
Company-obligated mandatorily
redeemable preferred securities
of partnership 100,000 - 100,000
Long-term debt, net 1,365,935 841,040 2,206,975
-------------------------------------------
Total capitalization 2,476,234 1,828,676 4,304,910
Current liabilities 914,437 237,140 1,151,577
Deferred income taxes 259,059 649,042 908,101
Other deferred liabilities 237,234 161,593 398,827
-------------------------------------------
Total capitalization and liabilities $3,886,964 $2,876,451 $6,763,415
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Unaudited
Pro Forma Combined Condensed
Financial Statements.
20
<PAGE>
KC UNITED CORP
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(thousands, except per share data)
<TABLE>
<CAPTION>
UtiliCorp KCPL Pro Forma
(as reported) (as reported) Combined
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $1,084,434 $206,624 $1,291,058
Operating expenses 996,468 158,267 1,154,735
-------------------------------------------
Operating income before income taxes 87,966 48,357 136,323
Interest charges 34,404 14,258 48,662
Other income, net (11,409) 2,384 (9,025)
-------------------------------------------
Income before income taxes 64,971 31,715 96,686
Income taxes 27,659 7,192 34,851
-------------------------------------------
Net income 37,312 24,523 61,835
Preference and preferred stock
dividend requirements (Note 4) 513 957 1,470
-------------------------------------------
Earnings available for
common shares $36,799 $23,566 $60,365
- ------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (Note 1)
-Primary 46,233 61,902 112,573
-Fully diluted (Note 5) 46,568 61,902 112,941
Earnings per share
-Primary $.80 $.38 $.54
-Fully diluted (Note 5) $.79 $.38 $.54
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
21
<PAGE>
KC UNITED CORP
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(thousands, except per share data)
<TABLE>
<CAPTION>
UtiliCorp KCPL Pro Forma
(as reported) (as reported) Combined
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $726,303 $198,906 $925,209
Operating expenses 644,818 157,846 802,664
-------------------------------------------
Operating income before income taxes 81,485 41,060 122,545
Interest charges 30,600 13,023 43,623
Other income, net (3,389) (6,803) (10,192)
-------------------------------------------
Income before income taxes 54,274 34,840 89,114
Income taxes 22,108 11,953 34,061
-------------------------------------------
Net income 32,166 22,887 55,053
Preference and preferred stock
dividend requirements (Note 4) 513 1,026 1,539
-------------------------------------------
Earnings available for
common shares $31,653 $21,861 $53,514
- ------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (Note 1)
-Primary 44,743 61,902 110,940
-Fully diluted (Note 5) 45,242 61,902 111,487
Earnings per share
-Primary $.71 $.35 $.48
-Fully diluted (Note 5) $.70 $.35 $.48
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
22
<PAGE>
KC UNITED CORP
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31
(thousands, except per share data)
<TABLE>
<CAPTION>
Increase
1996 1995 (Decrease)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $1,291,058 $925,209 $365,849
Operating expenses 1,154,735 802,664 352,071
-------------------------------------------
Operating income before income taxes 136,323 122,545 13,778
Interest charges 48,662 43,623 5,039
Other income, net (9,025) (10,192) (1,167)
-------------------------------------------
Income before income taxes 96,686 89,114 7,572
Income taxes 34,851 34,061 790
-------------------------------------------
Net income 61,835 55,053 6,782
Preference and preferred stock
dividend requirements (Note 4) 1,470 1,539 (69)
-------------------------------------------
Earnings available for
common shares $ 60,365 $ 53,514 $ 6,851
- ------------------------------------------------------------------------------------------
Weighted average common shares
outstanding (Note 1)
-Primary 112,573 110,940 1,633
-Fully diluted (Note 5) 112,941 111,487 1,454
Earnings per share
-Primary $.54 $.48 $.06
-Fully diluted (Note 5) $.54 $.48 $.06
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
23
<PAGE>
KC UNITED CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma combined financial statements reflect the conversion of each
outstanding share of KCPL common stock into one share of KCU common stock
outstanding and the conversion of each outstanding share of UtiliCorp
common stock into 1.096 shares of KCU common stock, as provided in the
Merger Agreement. The pro forma combined financial statements are
presented as if the companies were combined during all periods included
herein. No pro forma adjustments were necessary.
2. The allocation between KCPL and UtiliCorp and their customers of the about
$600 million in net estimated cost savings over the ten-year period
following the Merger, less transaction costs, will be subject to regulatory
review and approval. Transaction costs, currently estimated to be about
$30 million (including fees for financial advisors, attorneys, accountants,
consultants, filings and printing), are being deferred for post-merger
amortization in accordance with future regulatory approvals. As of March
31, 1996, $5.4 and $4.2 million in merger-related costs had been deferred
by KCPL and UtiliCorp, respectively.
The net estimated costs savings and transactions costs do not reflect
certain other costs that could be incurred by KCU, such as increases or
decreases in costs caused by the provisions of the employment agreements
with Messrs. Jennings and Green, severance agreements with certain
executives and the KCU Plans.
The net estimated cost savings, transaction costs and certain other costs
have not been reflected in the pro forma combined financial statements
because of the inability to predict regulatory treatment or estimate the
amount of such costs that would impact any one period.
3. Intercompany transactions (including purchased and exchanged power
transactions) between KCPL and UtiliCorp during the periods presented were
not material and, accordingly, no pro forma adjustments were made to
eliminate such transactions. All financial statement presentation and
accounting policy differences are immaterial and have not been adjusted in
the pro forma combined financial statements.
4. Prior to the consummation of the Merger, KCPL must redeem its cumulative
preferred stock outstanding as provided in the Merger Agreement. Under the
Merger Agreement, UtiliCorp must also redeem the UtiliCorp preferred stock
outstanding if the effective time occurs on or after March 1, 1997.
Because the basis of accounting for the merger is a pooling of interests,
the effect of these redemptions is not required to be reflected in the pro
forma combined financial statements. The only redemption premium is
$755,000 applicable to the KCPL preferred stock. The continuing effect of
these redemptions is anticipated to be immaterial.
5. The fully diluted earnings per common share was determined assuming
UtiliCorp's outstanding convertible subordinated debentures were converted
into UtiliCorp common stock at the beginning of the periods presented. In
calculating fully diluted earnings per share, earnings available for common
shares were adjusted to eliminate interest expense, net of tax.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits
*2 Agreement and Plan of Merger, dated as of January 19, 1996, by and among
KCPL, UtiliCorp and KCU (Exhibit 2-1 to the Company's Current Report on
Form 8-K dated January 24, 1996.)
10 Summary of Terms and Conditions of Employment of Chuck K. Dempster.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule--For the three months ended March 31, 1996.
(b) Reports on Form 8-K
A current report on Form 8-K dated January 19, 1996, with respect to Item 5
was filed with the Securities and Exchange Commission by the Registrant.
A current report on Form 8-K/A dated February 8, 1996, with respect to
Items 2 and 7 was filed with the Securities and Exchange Commission by the
Registrant.
* Exhibits marked with an asterisk are incorporated by reference pursuant
to Rule 12(b)-23.
25
<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.
UTILICORP UNITED INC.
By: /s/ Richard C. Green, Jr.
-------------------------
Richard C. Green, Jr.
Chairman of the Board and Chief Executive Officer
Date: June 20, 1996
By: /s/ Terry G. Westbrook
----------------------
Terry G. Westbrook
Chief Financial Officer
(Principal Financial Officer and Chief Accounting Officer)
Date: June 20, 1996
By: /s/ James S. Brook
------------------
James S. Brook
Vice President
Date: June 20, 1996
26
<PAGE>
1
SUMMARY OF TERMS AND CONDITIONS
CHUCK DEMPSTER
The following outlines the terms and conditions for your assignment to United
Gas in London, England for a period of up to 3 years. The UtiliCorp expatriate
employee policy is attached, and this policy, or any amendments thereto, will
govern the terms and conditions of your assignment.
You will be assigned to United Gas, with the job title of Chairman and CEO of
UtiliCorp U.K. Inc. in keeping with your responsibilities and local practice.
In addition to the above job title, you will continue to be a Senior Vice
President of UtiliCorp United. Your supervisor will be Bob Green.
The scope of your responsibilities in this position will be business development
with the Regional Electric Companies in the U.K., with full profit and loss
responsibility for the organization.
The position will be located in London, England.
BASE SALARY:
- Your current base salary is $240,000.
- Your initial base salary will be $252,000 for this assignment.
- You will receive Annual Reviews.
ANNUAL INCENTIVE OPPORTUNITY:
- Upon acceptance of this assignment, your maximum bonus opportunity for
this assignment will be 45% of base salary at target and 70% of base
salary at maximum. This represents the annual incentive program for
Executive Band II.
- This bonus will be awarded based in part of the results of Utilicorp
United, UtiliCorp U.K. Inc. and your individual contributions. Upon
acceptance of this position, you and Bob Green will develop the
measures for which your individual and United Gas will be paid on.
LONG TERM INCENTIVE OPPORTUNITY:
- Currently, you participate in the stock options plan and three year
performance plan as a long term incentive vehicle.
- Under our revised executive compensation plans, you will continue to
participate in plans with a targeted pay out of 75% through the
combination of stock options and three year performance plans. This
represents the Long Term incentive program for Executive Band II.
<PAGE>
2
EMPLOYEE BENEFITS:
You will continue to be eligible to participate in the employee benefits plans
of a domestic UtiliCorp executive including, but not limited to:
Health Care Defined Benefit Pension Plan
401(k) Plan Employee Stock Ownership Plan
Life Insurance Long Term Disability Insurance
Holidays Vacation
Capitol Accumulation Plan (CAP)
Supplementary Contributory Retirement Plan (SCRP)
EXECUTIVE PERQUISITES:
You will continue to be eligible to participate in the executive perquisites
program including:
- A payment of $5,000 net designed to allow you to decide for yourself
how these dollars should be spent, keeping in mind that these dollars
are to be used for the mutual benefit of our customers and
shareholders in attracting new business, and to assist you in carrying
out your executive responsibilities.
- Financial planning assistance of up to $5,000 per year.
- The executive LTD program that will allow you to receive an after tax
benefit, vs. a pre-tax benefit in the event you become eligible for
LTD. Under this plan, UtiliCorp pays the premium on your behalf, and
we gross up your income to reflect this premium and taxes due on those
premiums, resulting in an after tax benefit to you.
- Tax preparation assistance that is normally provided executives of up
to $250 will not be applicable due to the tax equalization of the
expatriate assignment. We will be paying for all of your tax
preparation.
- You will receive an extra one times life insurance, for a total of
three times salary.
- Executive tools available to you will include a home computer, fax
machine, cellular phone and an extra residential phone line to
facilitate communications.
- You will be eligible to join a city club in London to facilitate
business transactions. The club must be approved by Bob Green prior
to you committing any funds to the club.
INVOLUNTARY TERMINATION:
- In the event you are terminated involuntarily anytime through the year
1999, you will receive a lump sum payment equal to 2.99 times the
average of your last five year's base salary.
REPATRIATION TO THE U.S.
<PAGE>
3
- At the conclusion of this assignment, you will be reassigned to the
U.S. in an assignment determined to be appropriate at that time.
Relocation expenses associated with your repatriation are covered
under the expatriate assignment policy.
ITEMS RESPECTING THE EXPATRIATE POLICY:
The following items are detailed in the expatriate policy, and are expanded upon
below:
C) Allowances
1. Goods and services
- At the proposed rate of pay, you will be eligible for a monthly
goods and services allowance of U.S. $1,377 per month as an
individual.
- Assuming your wife will be joining you in London, your goods and
services allowance for both of you will be $1,454 per month.
- If you have children who will be joining you in London, the goods
and services allowance will increase by approximately $90 per
month per child.
2. Housing allowance
- You will be provided company housing in a rented furnished
apartment or house. The geographic areas we have targeted are
listed as "expensive" in the ORC housing cost tables. In
conducting your search for a suitable residence, we will assist
you in obtaining the services of a Realtor to assist you in your
housing search.
- As discussed in our orientation, to reflect the fact that no
matter where an employee lives, he or she should share in the
costs of housing. Employees are charged a monthly amount to
reflect this. We will be withholding from your salary the amount
of U.S. $2,598 per month to reflect this cost.
3. Foreign service premium
- To compensate you for leaving the United States and having to
adjust to a foreign work assignment, you will be paid the amount
of U.S. $24,000 net of taxes upon acceptance of the position in
London.
- Upon return from the assignment, you will receive a completion
bonus in the amount of 10% of your then current base salary net
of taxes.
5. Home leave
- You will be eligible for one (1) annual home leave for you and
your family. In the event that you may have children attending
college (under the age of 23) we will pay for one (1) visit by
those children to you in London per year.
- If that travel to London is greater than 7 hours duration, travel
for home leave will be at Business Class fares for you and your
family.
D) Tax equalization
<PAGE>
4
1. Hypothetical tax calculation
- Prior to your departure, you should prepare your tax records that
were completed for 1994. I will ask that you turn those sealed
records over to Rob Etienne who will forward them to the firm of
Arthur Andersen & Co., who will calculate the estimated tax
liability for you as if you had not left the United States. That
monthly tax withholding will be made from your pay. At the end
of the U.S. tax year, the firm of Arthur Andersen will calculate
your actual tax liability, and we will refund or charge you the
difference from that which we have withheld via the hypothetical
tax withholding.
- We will pay your entire tax liability for United Kingdom taxes
associated with your income. Any income your spouse may earn in
England will not be tax equalized.
E) Company Cars
- We will provide you with a leased - rented car upon successful
completion of a drivers education program. This is being done due
to safety considerations for driving on the opposite side of the
road.
- Should you sell your vehicle(s) here in the U.S., we will
reimburse as per the expatriate policy.
F) Schooling
- Per the expatriate policy, we will reimburse you for schooling for
dependent children from K - 12th grade at a day school (non
boarding) of your choice in London. What will not be reimbursed is
for field trips not directly related to a course of study, e.g. an
optional spring field trip to Hong Kong.
- If you have children attending school in the U.S., per the policy
we will provide one round trip economy airfare annually.
G) Relocation expenses
1. All reasonable and actual moving expenses will be reimbursed. In that
you will be provided with furnished housing, items such as clothes and
personal effects (family mementos that make a house a home) will be
shipped via air freight.
2. We will reimburse the cost of storage for your household goods in
Omaha.
3. We will provide you with an allowance of $5,000, net of taxes for the
purchase of household goods in London.
4. To assist you in this transmission, we will provide for the purchase
of your primary residence in Omaha under the home purchase provisions
of our relocation policy.
H) Home Country Housing
<PAGE>
5
1. Per the expatriate policy, in the event you elect to sell your
personal residence, we will reimburse you for the amount of any forced
loss sale. The appraised value of the house will be used to determine
the amount of such sale, if any.
2. Per the policy, in the event you choose to retain your residence, we
will supply security and property management for up to three (3)
months.
I) Repatriation
1. Per the policy, all actual moving expenses will be reimbursed.
2. Per the policy, you will receive an amount of $5,000, net of taxes,
for purchase of household goods upon repatriation.
J. Miscellaneous Provisions
1. In the event you are considering transporting household pets, please
advise Rob Etienne immediately. The United Kingdom has extensive and
lengthy quarantine regulations with respect to animals being
transported in the country.
<PAGE>
UTILICORP UNITED INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended Ended
March 31, March 31,
1996 1995 1996 1995
---------------- -----------------
Line No.
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings Available for Common Shares:
(a) Earnings available for common shares as reported 36.80 31.65 82.87 85.74
(b) Elimination of interest on convertible subordinated
debenture, net of tax 0.08 0.12 0.36 0.53
(c) Elimination of dividends on cumulative
convertible preference stock - - - (0.14)
---------------- -----------------
(d) Fully Diluted Earnings Available 36.88 31.77 83.23 86.13
---------------- -----------------
---------------- -----------------
Weighted Average Common Shares Outstanding:
(e) Primary weighted average shares outstanding
as reported 46.23 44.74 45.62 43.52
(f) Assumed conversion of convertible subordinated
debenture 0.34 0.50 0.36 0.54
(g) Assumed conversion of cumulative convertible
preference shares - - - 0.20
---------------- -----------------
(h) Fully Diluted Weighted Average Shares
Outstanding 46.57 45.24 45.98 44.26
---------------- -----------------
---------------- -----------------
Earnings Per Common Share:
Primary (a/e) $.80 $.71 $1.82 $1.97
Fully Diluted (d/h) .79 .70 1.81 1.95
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Condensed
Consolidated Financial Statements for the Quarter ending March 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 666
<TOTAL-DEFERRED-CHARGES> 182
<OTHER-ASSETS> 3039
<TOTAL-ASSETS> 3887
<COMMON> 47
<CAPITAL-SURPLUS-PAID-IN> 817
<RETAINED-EARNINGS> 123
<TOTAL-COMMON-STOCKHOLDERS-EQ> 985
0
25
<LONG-TERM-DEBT-NET> 1366
<SHORT-TERM-NOTES> 202
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1294
<TOT-CAPITALIZATION-AND-LIAB> 3887
<GROSS-OPERATING-REVENUE> 1084
<INCOME-TAX-EXPENSE> 28
<OTHER-OPERATING-EXPENSES> 0
<TOTAL-OPERATING-EXPENSES> 162
<OPERATING-INCOME-LOSS> 88
<OTHER-INCOME-NET> 14
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 34
<NET-INCOME> 37
1
<EARNINGS-AVAILABLE-FOR-COMM> 37
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 137
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
</TABLE>
