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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: 1-3562
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.)
20 West Ninth, Kansas City, Missouri 64105
(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 November 7, 1997
- ----- --------------------------------
Common Stock, $1 par value 53,764,490
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Information regarding the consolidated condensed financial statements is
set forth on pages 3 through 14.
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 15 through 21.
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
None.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits can be found on page 23.
(b) Reports on 8-K - None.
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
Quarter Ended September 30,
DOLLARS IN MILLIONS 1997 1996
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Sales $2,256.5 $892.6
Cost of sales 2,019.5 687.8
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GROSS PROFIT 237.0 204.8
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Operating, administrative and maintenance expense 142.6 127.9
Write-off of deferred merger costs, net -- 11.0
Depreciation, depletion and amortization 32.6 32.6
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INCOME FROM OPERATIONS 61.8 33.3
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Other income (expense):
Equity in earnings from investments and partnerships 16.7 23.8
Other income 5.7 8.6
Minority interest and other expense (5.8) (4.9)
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Total other income 16.6 27.5
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EARNINGS BEFORE INTEREST AND TAXES 78.4 60.8
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Interest expense:
Interest expense - long-term debt 28.1 31.8
Interest expense - short-term debt 4.3 3.6
Minority interest in income of partnership 2.3 2.3
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Total interest expense 34.7 37.7
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EARNINGS BEFORE INCOME TAXES 43.7 23.1
Income taxes 18.8 9.0
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NET INCOME 24.9 14.1
Preference dividends -- .5
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EARNINGS AVAILABLE FOR COMMON SHARES $24.9 $13.6
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See accompanying notes to consolidated condensed financial statements.
3
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
Nine Months Ended
September 30,
DOLLARS IN MILLIONS 1997 1996
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Sales $5,866.2 $2,742.1
Cost of sales 5,158.3 2,084.1
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GROSS PROFIT 707.9 658.0
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Operating, administrative and maintenance expense 411.6 393.8
Write-off of deferred merger costs, net -- 11.0
Depreciation, depletion and amortization 95.7 96.5
Provision for asset impairments 26.5 --
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INCOME FROM OPERATIONS 174.1 156.7
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Other income (expense):
Equity in earnings from investments and partnerships 54.1 82.7
Merger termination fee 53.0 --
Other income 12.2 14.6
Minority interest and other expense (18.4) (16.2)
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Total other income 100.9 81.1
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EARNINGS BEFORE INTEREST AND TAXES 275.0 237.8
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Interest expense:
Interest expense - long-term debt 85.7 87.8
Interest expense - short-term debt 8.5 8.4
Minority interest in income of partnership 6.7 6.7
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Total interest expense 100.9 102.9
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EARNINGS BEFORE INCOME TAXES 174.1 134.9
Income taxes 71.0 57.2
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EARNINGS BEFORE EXTRAORDINARY ITEM 103.1 77.7
Loss on extinguishment of debt (net of income tax
of $4.5) (7.2) --
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NET INCOME 95.9 77.7
Preference dividends .3 1.5
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EARNINGS AVAILABLE FOR COMMON SHARES $95.6 $76.2
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See accompanying notes to consolidated condensed financial statements.
4
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31,
DOLLARS IN MILLIONS 1997 1996
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ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 109.0 $ 137.1
Funds on deposit 42.4 56.8
Accounts receivable, net 747.5 811.6
Inventories and supplies, at average cost 141.3 110.9
Price risk management assets 92.4 55.2
Prepayments and other 53.4 32.9
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TOTAL CURRENT ASSETS 1,186.0 1,204.5
Property, plant and equipment, net 2,449.4 2,406.7
Investments in subsidiaries and partnerships 729.8 761.0
Price risk management assets 156.8 154.1
Deferred charges 178.3 178.6
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TOTAL ASSETS $4,700.3 $4,704.9
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LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 158.3 $ 25.7
Short-term debt 251.9 252.0
Accounts payable 1,004.5 912.9
Accrued liabilities 47.2 50.0
Price risk management liabilities 106.2 71.7
Other 48.5 107.3
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TOTAL CURRENT LIABILITIES 1,616.6 1,419.6
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LONG-TERM LIABILITIES:
Long-term debt, net 1,237.3 1,470.7
Deferred income taxes and credits 344.4 313.7
Price risk management liabilities 57.5 64.5
Minority interest 60.1 56.9
Other deferred credits 96.4 96.5
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TOTAL LONG-TERM LIABILITIES 1,795.7 2,002.3
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Company-obligated mandatorily redeemable
preferred securities of partnership 100.0 100.0
Preference stock -- 25.0
Common shareowners' equity 1,188.0 1,158.0
Commitments and contingencies
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TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $4,700.3 $4,704.9
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See accompanying notes to consolidated condensed financial statements
5
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF PREFERENCE STOCK
September 30, December 31,
DOLLARS IN MILLIONS 1997 1996
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Preference Stock: (Unaudited)
$2.05 series, 1,000,000 shares, redeemed $-- $25.0
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TOTAL PREFERENCE STOCK $-- $25.0
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CONSOLIDATED CONDENSED STATEMENTS OF COMMON SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
DOLLARS IN MILLIONS 1997 1996
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<S> <C> <C>
Common Stock: authorized 100,000,000 shares, par value (Unaudited)
$1 per share, 53,753,800 shares outstanding
(53,293,645 at December 31, 1996 ); authorized
20,000,000 shares of Class A common stock, par
value $1 per share, none issued $53.8 $53.3
Premium on Capital Stock 1,002.9 991.7
Retained Earnings 148.9 125.3
Treasury Stock, at cost (29,160 and 228,807 shares
at September 30, 1997 and December 31, 1996,
respectively) (1.2) (6.4)
Currency Translation Adjustment (16.4) (5.9)
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TOTAL COMMON SHAREOWNERS' EQUITY $1,188.0 $1,158.0
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
Quarter Ended Sept. 30,
DOLLARS IN MILLIONS 1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $24.9 $14.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 32.6 32.6
Net changes in price risk management assets and
liabilities (16.2) (16.3)
Deferred income taxes and credits 17.8 11.8
Equity in earnings from investments and
partnerships (16.7) (23.8)
Dividends from investments and partnerships 14.2 16.6
Minority interests 1.4 2.0
Changes in certain assets and liabilities:
Accounts receivable, net (243.9) (1.0)
Accounts receivable sold (5.0) 27.4
Inventories and supplies (42.0) (28.9)
Prepayments and other (4.1) 21.4
Deferred charges, net 3.0 18.9
Accounts payable 282.3 (8.2)
Accrued liabilities 3.7 2.1
Other (.5) (6.7)
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CASH PROVIDED BY OPERATING ACTIVITIES 51.5 62.0
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (35.0) (34.6)
Purchase of domestic businesses -- (53.9)
Investments in international businesses (.6) (.8)
Investments in energy related properties (14.7) (5.0)
Other (20.8) (13.8)
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CASH USED FOR INVESTING ACTIVITIES (71.1) (108.1)
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7
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED, CONTINUED
Quarter Ended Sept. 30,
DOLLARS IN MILLIONS 1997 1996
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2.5 4.2
Treasury stock acquired (.6) (11.0)
Retirement of long-term debt (12.5) (26.1)
Short-term borrowings (repayments), net (1.1) 96.0
Cash dividends paid (23.7) (21.5)
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CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (35.4) 41.6
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Decrease in cash and cash equivalents (55.0) (4.5)
Cash and cash equivalents at beginning of period 164.0 148.8
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $109.0 $144.3
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See accompanying notes to consolidated condensed financial statements.
8
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
Nine Months Ended Sept. 30,
DOLLARS IN MILLIONS 1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $95.9 $77.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 95.7 96.5
Net changes in price risk management assets and
liabilities (12.4) (17.8)
Deferred income taxes and credits 30.7 21.0
Equity in earnings from investments and
partnerships (54.1) (82.7)
Dividends from investments and partnerships 25.0 27.1
Minority interests 5.3 6.2
Provision for asset impairments 26.5 --
Loss on extinguishment of debt 7.2 --
Changes in certain assets and liabilities:
Accounts receivable, net 33.1 45.7
Accounts receivable sold 45.0 52.7
Inventories and supplies (30.4) 9.0
Prepayments and other (20.5) 21.2
Deferred charges, net 8.2 (4.9)
Accounts payable 91.6 (21.3)
Accrued liabilities, net 1.7 34.7
Other (59.6) (10.3)
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CASH PROVIDED BY OPERATING ACTIVITIES 288.9 254.8
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (93.4) (82.5)
Purchase of domestic businesses -- (53.9)
Investments in international businesses (3.6) (28.6)
Investments in energy related properties (23.6) (22.0)
Other (28.4) (42.5)
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CASH USED FOR INVESTING ACTIVITIES (149.0) (229.5)
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9
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UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED, CONTINUED
Nine Months Ended Sept. 30,
DOLLARS IN MILLIONS 1997 1996
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 13.2 31.3
Treasury stock sold / (acquired) 2.6 (11.0)
Issuance of long-term debt 20.1 25.0
Retirement of long-term debt (106.5) (26.1)
Retirement of preference stock (25.0) --
Short-term borrowings (repayments), net (0.1) 52.3
Cash dividends paid (71.0) (63.2)
Other (1.3) --
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CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (168.0) 8.3
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(Decrease) Increase in cash and cash equivalents (28.1) 33.6
Cash and cash equivalents at beginning of period 137.1 110.7
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $109.0 $144.3
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See accompanying notes to consolidated condensed financial statements.
10
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UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the accounting policies described in the
consolidated financial statements and related notes included in UtiliCorp's 1996
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 audited financial statements of UtiliCorp United Inc. (the
company), but do not include all disclosures required by generally accepted
accounting principles. In the opinion of management, the accompanying
consolidated condensed 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
sales and expenses during the reporting periods shown have been made in
preparing the consolidated condensed financial statements. Actual results could
differ from these estimates.
Certain prior year amounts in the consolidated financial statements have been
reclassified where necessary to conform to the 1997 presentation.
FINANCIAL INSTRUMENTS
TRADING OPERATIONS
The company uses a variety of financial instruments in connection with price
risk management services provided by Aquila Energy Corporation, a wholly-owned
subsidiary of the company. These financial instruments include forward
contracts which commit the company to purchase or sell energy in the future;
swap agreements which require payment to (or receipt of payments from)
counterparties based on the differential between specific prices for the related
commodity; futures and options contracts traded on the New York Mercentile
Exchange and other contractual arrangements. The value of all the financial
instruments used for price risk management activities are recorded at market
value with changes in value reflected in the statement of income.
NON-TRADING ACTIVITIES FOR COMMODITY OPERATIONS
The company utilizes various exchange-traded and over-the-counter financial
instrument contracts to hedge anticipated purchases and sales of natural gas and
natural gas liquids. The financial instruments used are futures, options,
forward contracts and price and basis swaps. Financial instruments used for
non-trading activities are designated as a hedge at inception where there is a
direct relationship to the price risk associated with the company's future sales
and purchases of commodities used in the company's operations. Financial
instruments used to hedge anticipated transactions are accounted for under the
deferral method with gains and losses on these transactions recognized in sales
when the hedged transaction occurs.
VARIABLE LONG-TERM DEBT SECURITIES
The company has a $100 million interest rate swap agreement whereby the company
exchanges variable Australian dollar debt interest for fixed rate interest.
Changes in the unrealized gains and losses on interest rate swap contracts do
not result in the realization or expenditure of cash
11
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UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
unless the contracts are terminated or the underlying debt is retired.
2. MERGER TERMINATION FEE
On September 17, 1996, Kansas City Power & Light Company (KCPL) terminated the
Amended and Restated Agreement and Plan of Merger (the Agreement) among KCPL, KC
Merger Sub, Inc., the company, and KC United Corp., which would have provided
for the merger of the company and KCPL.
In February 1997, Western Resources Inc. and KCPL signed a definitive agreement
to merge. As a result, KCPL paid the company a $53 million termination fee
which was recorded as a gain in the first quarter of 1997.
3. PROVISION FOR ASSET IMPAIRMENTS
As part of the sale of the company's oil and gas production assets in
September 1995, the company retained a net profits interest in the properties
which was contingent upon the future performance and activities of the oil
and gas properties sold and certain payout criteria related to the sale
transaction. At the time of the sale, the net profits interest was valued at
$22.5 million. Pursuant to the sales agreement, periodic drilling and reserve
updates are provided each year to the company. After receiving the March
1997, study the company recorded a $15.5 million first quarter charge against
earnings primarily to reflect the latest estimate of its net realizable value.
During the first quarter of 1997, the company evaluated some of its
technology related investments and eliminated certain technology related
positions. In light of recent organizational changes at one of the company's
strategic partners and the results to date, the company expensed
approximately $11.0 million consisting of certain contractual and software
rights and severance costs.
4. EXTINGUISHMENT OF DEBT
During the first quarter of 1997, the company retired, at a premium, $69.1
million of its 10.5% Series Senior Notes that were to mature in 2020. The
transaction resulted in an extraordinary loss of $7.2 million, net of an
income tax benefit of $4.5 million. This early retirement is expected to
save $2.5 million per year in interest costs based on the October 1, 1997
issuance of Senior Notes described in Note 9.
5. REDEMPTION OF PREFERENCE STOCK
On March 1, 1997, the company redeemed its $2.05 Series Preference Stock at par.
This redemption is expected to increase earnings available for common shares by
an estimated $1.1 million per year based on current interest rates.
12
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UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
6. EARNINGS PER SHARE
Primary and fully diluted earnings per share for the three months and nine
months ending September 30, 1997 and 1996 are as follows:
Three Months
Ended Nine Months Ended
IN MILLIONS, EXCEPT PER SHARE AMOUNTS September 30, September 30,
- --------------------------------------------------------------------------------
1997 1996 1997 1996
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Earnings available for common shares $24.9 $13.6 $95.6 $76.2
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Earnings per share:
Primary:
Earnings before extraordinary item $.46 $.29 $1.91 $1.64
Extraordinary item -- -- (.13) --
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Earnings available for common $.46 $.29 $1.78 $1.64
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Fully Diluted:
Earnings before extraordinary item $.46 $.29 $1.91 $1.63
Extraordinary item -- -- (.13) --
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Earnings available for common $.46 $.29 $1.78 $1.63
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Weighted Average Shares Outstanding:
Primary 53.76 46.60 53.56 46.51
Fully Diluted 54.01 46.91 53.84 46.84
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7. LONG-TERM GAS SUPPLY CONTRACTS
In 1996, the company realigned certain business relationships in the United
Kingdom (UK). Its equity relationships in three retail gas partnerships were
terminated. As part of the termination of one of its equity relationships, the
company assumed an interest in two long-term gas supply contracts (for
deliveries through 2005) that it assimilated into its existing portfolio of
sales and supply contracts. Based on management's estimates and available
market data at December 31, 1996, the company carried a $14 million reserve
relating to potential future losses that may have existed within the portfolio
of contracts. The net present value of the range of future losses was estimated
to be between $14 and $23 million.
Due to the decline in natural gas prices in the UK since December 31, 1996, the
company increased its reserve in the first quarter related to its current
portfolio of contracts by $5.0 million to $19 million. As the U.K. natural gas
market does not have liquid long-term pricing, it is difficult to calculate
future profitability of the portfolio. However, management believes that this
reserve is adequate and that any additional increases in the reserve would not
be material.
13
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UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
8. REGULATORY MATTERS
MISSOURI
In the first quarter of 1997, the Staff of the Missouri Public Service
Commission (MPSC) filed a complaint against the company seeking to reduce
annual Missouri electric revenues by $23 million. In September 1997, the
MPSC increased the size of its recommendation for rate reduction to $28.5
million. In a separate filing with the MPSC, the company requested to
increase electric rates by $24.6 million. The MPSC is reviewing the
company's position with the final order to be issued in March 1998. The
primary differences between these two dockets center on rate of return,
capital structure, transition costs, depreciation methods and corporate
allocations.
The company's filing is designed to recover inflationary and other cost
increases which include the investment of approximately $20 million in plant and
facility improvements. The rate increase also reflects the request for a
temporary surcharge of $.0028 per kilowatt-hour to cover cost related to
transitioning to the competitive customer-choice marketplace. In addition, the
filing includes a mechanism to lessen the impact of the surcharge on consumers,
and requests the MPSC approve the establishment of a $1 million fund to assist
low-income customers.
MICHIGAN
In March 1997, the Michigan Public Service Commission (MPS) issued an order on
the company's pending gas rate request and granted a $1.7 million annual revenue
increase. In response to the MPS order, the company filed for reconsideration
of certain issues totaling $1.5 million. The MPS has not set a schedule for the
reconsideration filing.
9. ISSUANCE OF SENIOR NOTES
On October 1, 1997, the company issued $150 million of 6.875% Senior Notes that
will mature in 2004. The net proceeds from the issuance were used to reduce
short-term debt.
14
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
UTILICORP UNITED INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT WHERE NOTED, THE FOLLOWING DISCUSSION REFERS TO THE CONSOLIDATED ENTITY,
UTILICORP UNITED INC. THE BUSINESS SEGMENTS OF THE COMPANY INCLUDE THE
FOLLOWING BUSINESS GROUPS: UTILICORP ENERGY DELIVERY (UED), CONSISTING PRIMARILY
OF TRANSMISSION AND DISTRIBUTION UTILITY OPERATIONS; AQUILA ENERGY CORPORATION
(AQUILA), CONSISTING PRIMARILY OF ENERGY MARKETING (BOTH GAS AND ELECTRIC), AND
GAS PROCESSING, GATHERING AND TRANSMISSION; AND GENERATION, CONSISTING OF
DOMESTIC ELECTRIC GENERATION AND INDEPENDENT POWER PROJECTS. THE COMPANY ALSO
HAS VARIOUS OPERATIONS THAT INCLUDE GENERATION, GAS MARKETING, ELECTRIC
DISTRIBUTION AND VARIOUS EQUITY INVESTMENTS THAT ARE DISCUSSED IN THE
INTERNATIONAL SECTION OF THIS REPORT. THE LIQUIDITY AND CAPITAL RESOURCES
SECTION IS PREPARED ON A CONSOLIDATED BASIS.
UTILICORP ENERGY SOLUTIONS (UES), CONSISTING OF RETAIL GAS MARKETING, APPLIANCE
REPAIR AND SERVICE CONTRACTS, WAS REALIGNED DURING THE SECOND QUARTER OF 1997
INTO THE OPERATIONS OF UED AND AQUILA. THE REALIGNMENT IS EXPECTED TO BETTER
LEVERAGE EXISTING SUPPORT FACILITIES, PROCESSES AND EXPERTISE.
FORWARD-LOOKING INFORMATION
This Form 10-Q contains forward-looking information. Although the company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved. Important factors that could
cause actual results to differ materially from those in the forward looking
statements herein include changes in the prices of natural gas, natural gas
liquids and electricity, future deregulation initiatives and their regulatory
actions against the company, specifically, the ongoing Missouri earnings
investigation, successful rollout of future products and services directly or
through alliances, changes in the future state or federal income tax rates and
laws, changes in the Canadian, Australian, New Zealand and British currencies
relative to the U.S. dollar and changes in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the company's liquidity and capital resources are
sufficient and provide adequate financial flexibility. The company's operations
have historically generated strong positive cash flow, which, along with the
company's credit lines, accounts receivable sales programs, common stock
offerings and ability to issue public debt, have provided adequate liquidity to
meet the company's short-term and long-term cash requirements, including
requirements for acquisitions.
The company uses its accounts receivable sales programs to efficiently manage
its working capital and provide immediate liquidity. In April 1997, the company
increased one of its accounts receivable sales programs from $100 million to
$150 million to keep pace with the company's growing energy marketing business.
At September 30, 1997, there was $5 million available under these programs. In
addition to the accounts receivable sales program, the company can issue up to
$150 million of commercial paper which is supported by a $250 million revolving
credit agreement. At September 30, 1997, there was $70 million in commercial
paper borrowings outstanding.
15
<PAGE>
During the first quarter of 1997, the company redeemed its $2.05 Series
Preference Stock at par ($25 million) and retired $69.1 million of its 10.5%
Series Senior Notes with short-term debt.
On October 1, 1997, the company issued $150 million of unsecured Senior Notes at
a coupon rate of 6.875 percent. The seven year notes are not redeemable by the
company prior to maturity. Proceeds from the issuance were used to reduce
short-term debt.
CONSOLIDATED FINANCIAL CONDITION
Total assets have decreased by $4.6 million since December 31, 1996. This
decrease is mainly attributable to a decrease in cash and cash equivalents of
$28.1 million which can be explained in the consolidated condensed statements
of cash flows for the nine months ended September 30, 1997 and a decrease in
accounts receivable of $64.1 million which reflects the additional $45
million of accounts receivable sold under the accounts receivable sales
program. These decreases have mainly been offset by increases in inventories
and supplies and price risk management assets. These increases reflect the
increased trading at Aquila. Total liabilities have decreased by $9.6
million since December 31, 1996. The decrease is mainly attributable to
reductions in other current liabilities of $58.8 million and long-term debt
of $100.8 million. The decrease in other current liabilities reflects
purchase gas adjustments for differences in gas prices paid by the company
and gas rates actually billed to the customer. These differences, which may
reflect charges greater or less than amounts actually billed to the customer,
are adjusted periodically so that billing rates will reflect the actual
costs of gas paid by the company. The decrease in long-term debt mainly
reflects the early extinguishment of debt as described in Note 4 of the
financial statements. The most significant fluctuations offsetting these
decreases were increases in accounts payable and price risk management
liabilities. Both of these reflect the increased trading volumes at Aquila
as its wholesale energy business continues to expand.
The remaining increases and decreases in the components of the company's
financial position reflects normal operating activity.
RESULTS OF OPERATIONS
The results of operations for the 1997 and 1996 periods have been impacted by
several items which do not have a continuing effect on the company's financial
position or results of operations. The consolidated table below summarizes the
impact of the non-recurring items on an earnings before interest and taxes
(EBIT) and earnings per share (EPS) basis.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
- --------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------
EBIT EPS EBIT EPS EBIT EPS EBIT EPS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS REPORTED $78.4 $.46 $60.8 $.29 $275.0 $1.78 $237.8 $1.64
NON-RECURRING ITEMS:
Merger termination fee (Note 2) -- -- -- -- (53.0) (.61) -- --
Provision for asset impairments (Note 3) -- -- -- -- 26.5 .31 -- --
Reserve for long-term gas supply
contracts and other reserves (Note 7) -- -- -- -- 6.5 .07 -- --
Write-off of deferred merger costs, net (a) -- -- 11.0 .15 -- -- 11.0 .15
Gain on sales lease, net (b) -- -- -- -- -- -- (20.9) (.26)
Loss on extinguishment of debt (Note 4) -- -- -- -- -- .13 -- --
- --------------------------------------------------------------------------------------------------------------------
NORMALIZED $78.4 $.46 $71.8 $.44 $255.0 $1.68 $227.9 $1.53
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
a) In 1996, the company expensed deferred merger costs, net of a termination
fee received, resulting in a pre-tax charge of $11 million.
b) In 1996, the company recorded a gain from a sales lease on a power project
which was partially offset by certain restructuring reserves in connection
with changes in power project agreements. The result of these items
increased 1996 EBIT by $20.9 million.
Normalized earnings or income are terms used by management to describe the
recurring earnings or income of the company. These terms are not meant to
replace net income or other measures under generally accepted accounting
principles.
ENERGY DELIVERY
The table below summarizes the operations of UtiliCorp Energy Delivery for the
following periods:
Quarter Ended Nine Months Ended
September 30, September 30,
- --------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Sales:
Electric $173.8 $156.8 $424.5 $398.0
Gas 69.7 60.8 524.2 478.4
Other 51.3 31.0 180.8 91.7
Purchases from Generation (91.6) (80.6) (233.8) (216.0)
- --------------------------------------------------------------------------------
Total net sales 203.2 168.0 895.7 752.1
- --------------------------------------------------------------------------------
Cost of sales:
Electric 3.2 3.2 10.5 10.8
Gas 32.4 25.9 329.5 288.9
Other 43.7 21.1 154.3 64.7
- --------------------------------------------------------------------------------
Total cost of sales 79.3 50.2 494.3 364.4
- --------------------------------------------------------------------------------
Gross profit 123.9 117.8 401.4 387.7
- --------------------------------------------------------------------------------
Operating expenses:
Other operating 56.2 54.8 171.0 161.8
Maintenance 7.7 6.5 20.3 19.0
Taxes, other than income taxes 14.7 13.3 41.5 38.9
Depreciation and amortization 17.7 17.0 52.1 52.2
- --------------------------------------------------------------------------------
Total operating expenses 96.3 91.6 284.9 271.9
- --------------------------------------------------------------------------------
Income from operations 27.6 26.2 116.5 115.8
Other income 2.2 4.6 5.1 8.3
- --------------------------------------------------------------------------------
EBIT $29.8 $30.8 $121.6 $124.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
QUARTER-TO-QUARTER
EBIT in 1997 compared to the 1996 quarter is down $1.0 million or 3%. The
decrease in EBIT mainly results from an increase in operating expenses of $4.7
million and a decrease in other income of $2.4 million. Operating expenses
increased by $2.2 million due to inflation, higher depreciation of $.7 million
related to plant additions and $.9 million related to the realignment of certain
operations. Other income decreased in 1997 due to certain one time asset sales
that occurred in 1996. These unfavorable items were partially offset by customer
growth of 2% and favorable weather conditions which increased margins by $3.2
million and $2.8 million, respectively.
17
<PAGE>
YEAR-TO-DATE
EBIT in 1997 for the nine months ended September 30, was down $2.5 million
compared to 1996. The lower EBIT mainly results from unfavorable weather,
inflation and costs related to the realignment of certain operations which
reduced EBIT by $6.6 million, $6.6 million and $3.7 million, respectively. In
addition, other income decreased by $3.2 million due to certain one time asset
sales that occurred in 1996. These unfavorable items were partially offset by
customer growth of 2%, a renegotiated purchase power contract and gas rate
increases which increased EBIT by $11.5 million, $1.4 million and $4.8 million,
respectively.
GENERATION
The table below summarizes the operations of Generation for the following
periods:
Quarter Ended Nine Months Ended
September 30, September 30,
- --------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Sales to Energy Delivery $91.6 $80.6 $233.8 $216.0
Cost of sales 55.0 46.9 133.7 122.8
- --------------------------------------------------------------------------------
Gross profit 36.6 33.7 100.1 93.2
- --------------------------------------------------------------------------------
Operating expenses:
Other operating 12.2 12.5 35.5 37.4
Maintenance 4.1 2.9 11.6 10.5
Taxes, other than income taxes 1.7 1.6 5.2 5.0
Depreciation and amortization 4.1 4.2 12.1 13.0
- --------------------------------------------------------------------------------
Total operating expenses 22.1 21.2 64.4 65.9
- --------------------------------------------------------------------------------
Income from operations 14.5 12.5 35.7 27.3
Equity in earnings of investments and
partnerships 5.5 5.8 20.5 40.2
Other income (expense) -- (.6) .3 (.5)
- --------------------------------------------------------------------------------
EBIT 20.0 17.7 56.5 67.0
Non-recurring items:
Gain on sales lease of a power
project, net -- -- -- (20.9)
- --------------------------------------------------------------------------------
Normalized EBIT $20.0 $17.7 $56.5 $46.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
QUARTER-TO-QUARTER
Generation's 1997 third quarter normalized EBIT was $2.3 million or 13% above
the 1996 quarter. This increase was primarily due to a 11% increase in
off-system sales volumes due to hot July weather, supplemented by low cost
hydro power purchases. This improvement at the gross profit level was
partially offset by timing of maintenance projects that were completed in the
third quarter.
YEAR-TO-DATE
Generation's 1997 normalized EBIT for the nine months ended September 30, 1997,
was $10.4 million or 23% above the 1996 period. Both sales and gross profits
improved due to additional off-system sales margins. For the 1997 period, off
system sales volumes increased 72% over 1996 due to favorable summer conditions
discussed above and opportunities related to the spring and fall outage season.
Unplanned outages at other utilities, price volatility and excess hydro
18
<PAGE>
power availability contributed to the off-system opportunity. EBIT also
benefited from staff reductions that took effect at the end of 1996.
AQUILA ENERGY
The table below summarizes the operations of Aquila Energy for the following
periods:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
- -------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Energy marketing $1,812.0 $506.8 $4,234.9 $1,300.5
Gas sales, transmission and processing 92.7 87.8 286.5 276.9
- -------------------------------------------------------------------------------------
Total sales 1,904.7 594.6 4,521.4 1,577.4
- -------------------------------------------------------------------------------------
Cost of sales:
Cost of energy marketing 1,773.3 493.8 4,148.9 1,253.9
Cost of gas gathering and processing 68.8 62.1 207.7 196.5
- -------------------------------------------------------------------------------------
Total cost of sales 1,842.1 555.9 4,356.6 1,450.4
- -------------------------------------------------------------------------------------
Gross profit 62.6 38.7 164.8 127.0
- -------------------------------------------------------------------------------------
Operating expenses:
Operating and maintenance 30.5 20.5 81.3 62.1
Depreciation, depletion and amortization 7.0 6.7 19.9 19.7
Provision for asset impairments -- -- 15.5 --
- -------------------------------------------------------------------------------------
Total operating expenses 37.5 27.2 116.7 81.8
- -------------------------------------------------------------------------------------
Income from operations 25.1 11.5 48.1 45.2
Minority interest expense and other 2.3 4.1 7.6 8.9
- -------------------------------------------------------------------------------------
EBIT 22.8 7.4 40.5 36.3
Non-recurring items:
Provision for asset impairments -- -- 15.5 --
- -------------------------------------------------------------------------------------
Normalized EBIT $22.8 $7.4 $56.0 $36.3
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
QUARTER-TO-QUARTER
The 1997 normalized EBIT increased $15.4 million or 208% versus the comparable
quarter in 1996. This increase is due to the 1997 margins of $62.6 million
($35.2 million and $27.4 million related to Aquila Energy Marketing (AEM) and
Aquila Gas Pipeline (AQP), respectively), exceeding the 1996 margins of $38.7
million ($9.2 million and $29.5 million related to AEM and AQP, respectively) by
$23.9 million.
Gas marketing volumes at AEM increased 228% for the 1997 quarter compared to
the 1996 quarter due to the planned expansion of this business. The
additional volumes and volatile gas prices added $16.8 million of margin to
the 1997 quarter compared to 1996. The power marketing business experienced
a 1,202% increase in GWH sold in the 1997 quarter versus 1996. The power
marketing business was in a start-up phase in 1996. For the 1997 quarter,
this business turned profitable and contributed $5.3 million of additional
margin to the 1997 quarter compared to 1996. The retail gas marketing
businesses which were aligned into Aquila during the second quarter of 1997,
improved margins by $3.0 million compared to 1996.
Sales and costs of sales for AQP were up due to a 4% increase in throughput, a
5% increase in natural gas prices and a 37% increase in marketed volumes.
However, gross profits related to AQP are down $2.1 million due to a 10%
decrease in natural gas liquid (NGL) production, and a 9% decrease in NGL
prices. NGL margins are very sensitive to changes in prices as a $.01
19
<PAGE>
change in price per gallon has a $1.9 million impact on EBIT for the year.
The lower NGL production is mainly due to leaner gas which reduces liquid
extraction. NGL price movements are due to many factors including the price
of gas, gas processing capability and various other economic conditions. The
throughput volumes for the quarter were slightly above the prior year's
level, but are expected to remain flat to slightly down compared to prior
year periods. The pricing differential between the Katy Hub (located in
Eastern Texas) and the Waha Hub (Located in Western Texas) affecting margins
on AQP's Oasis Pipe Line investment continued to be at relatively low levels
for the quarter.
The increase in operating expenses is primarily the result of hiring additional
marketers, traders and support staff to implement Aquila's growth strategy.
YEAR-TO-DATE
The 1997 normalized EBIT increased $19.7 million or 54% versus the comparable
quarter in 1996. This increase is due to the 1997 margins of $164.8 million
($71.5 million and $93.3 million related to AEM and AQP, respectively),
exceeding the 1996 margins of $127.0 million ($34.7 million and $92.3 million
related to Aquila marketing and AQP, respectively) by $37.8 million.
A significant portion of the increase in margins is related to wholesale energy
marketing, as total volumes for gas and power marketing increased by 234% and
1,432% respectively, due to the expansion of the business. These increases
improved overall margins by $36.8 million.
Sales and costs of sales for AQP were up due to a 9% increase in natural gas
prices, a 3% increase in NGL prices and a 60% increase in marketed volumes.
However, gross profits related to AQP are only slightly up due to a 5% decrease
in NGL production, and a 2% decrease in throughput volumes.
The increase in operating expenses is primarily the result of hiring additional
marketers, traders and support staff to implement Aquila's growth strategy.
20
<PAGE>
INTERNATIONAL
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
- -------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1997 1996 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Electric (Canada) $20.7 $21.9 $ 67.4 $ 69.1
Gas Marketing ( United Kingdom) 35.1 26.5 144.4 125.9
- -------------------------------------------------------------------------------------
Total Sales 55.8 48.4 211.8 195.0
- -------------------------------------------------------------------------------------
Cost of Sales:
Cost of fuel and purchased power (Canada) 6.2 6.0 20.8 20.4
Cost of gas marketing (United Kingdom) 35.4 27.6 148.9 122.8
- -------------------------------------------------------------------------------------
Total Cost of sales 41.6 33.6 169.7 143.2
- -------------------------------------------------------------------------------------
Gross Profit 14.2 14.8 42.1 51.8
- -------------------------------------------------------------------------------------
Operating expenses:
Other operating 5.2 5.2 15.0 18.2
Maintenance 2.5 1.6 7.7 6.5
Taxes, other than income taxes 2.9 3.1 8.7 9.3
Depreciation and amortization 2.7 3.0 8.3 8.5
- -------------------------------------------------------------------------------------
Total Expense 13.3 12.9 39.7 42.5
- -------------------------------------------------------------------------------------
Income from operations .9 1.9 2.4 9.3
Equity earnings in subsidiaries and
partnerships 11.5 18.1 34.3 42.7
Other income 2.2 1.5 3.7 2.0
- -------------------------------------------------------------------------------------
EBIT 14.6 21.5 40.4 54.0
Non-recurring item :
UK gas contracts reserve -- -- 5.0 --
- -------------------------------------------------------------------------------------
Normalized EBIT $14.6 $21.5 $45.4 $54.0
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
QUARTER-TO-QUARTER
International normalized EBIT decreased $6.9 million or 32% in 1997 compared
to 1996. This decrease was primarily due to an EBIT decrease of $7.2 million
from the Australian operations. The decrease in Australian EBIT reflects
the impact from lower exchange rates, a current court ruling on the
non-deductibility of certain expenses for tax purposes, the timing of certain
revenues and expenses and continued market pressures on profit margins as
additional customers become subject to competition in the retail market.
YEAR-TO-DATE
International's normalized EBIT decreased $8.6 million or 16% in 1997 compared
to 1996. This decrease was primarily due to a $4.5 million and $3.9 million
decrease in EBIT in the United Kingdom (UK) and Australian operations,
respectively. The $4.5 million decrease in UK EBIT mainly reflects the
realization of unfavorable long-term gas supply contracts that did not begin
until the fourth quarter of 1996. The $3.9 million decrease in EBIT for the
Australian operations primarily reflects lower exchange rates, a current court
ruling on the non-deductibility of certain expenses for tax purposes and
continued market pressures on profit margins as additional customers become
subject to competition in the retail market.
21
<PAGE>
NEW ZEALAND JOINT VENTURE
Mercury Energy and UtiliCorp N.Z., Inc. (a 79% owned subsidiary of the
company) announced a proposal in June 1997 to establish a 50-50 joint venture
whereby their existing shareholdings of Power New Zealand (PNZ) will be
placed in a new holding company which will have effective control (64
percent) of PNZ's capital. The holding company will offer minority
shareholders $6 NZ per share with the intention of acquiring 100 percent of
PNZ. As a result of their controlling position, the partners will move
quickly to capture the savings available from a cooperative approach to
operating the businesses of Mercury Energy and PNZ. Upon execution, the
proposal is conditional on obtaining various regulatory approvals.
NEW ENERGYONE PARTNERSHIP
The company and PECO Energy Company announced in June 1997 the establishment of
EnergyOne, L.L.C., the industry's first nationwide branded energy marketing
company designed to speed the benefits of competition to other utilities and
consumers. EnergyOne serves as the management clearing house responsible for
developing relationships with suppliers, evaluating and selecting new products
and services, and establishing wholesale pricing mechanisms. Participating
utilities serve as retail distributors of the products, drawing upon EnergyOne's
national marketing identity and support. Both the company and PECO Energy hold
a 50 percent equity interest in EnergyOne and are the initial retail
distributors. EnergyOne obtains revenues from franchise, royalty and
transaction fees from participating distributors and suppliers.
For the quarter and year-to-date periods ended September 30, 1997, the
company's investment in the EnergyOne partnership reduced the company's EBIT
by $3.4 million and $6.2 million, respectively.
INTERNALLY DEVELOPED SOFTWARE
The company is in the process of developing certain software systems to
upgrade its financial and customer information systems. The new systems will
provide the support and information needed to achieve the operational
strategies of the company. In connection with these new systems, the primary
year 2000 issues will be solved. The financial systems are anticipated to be
installed by mid-1998 and the customer information system by 1999.
NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS
130). SFAS 130 established standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is defined as all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. This statement focuses on disclosure and will result
in the company displaying a separate financial statement illustrating the
movements and components of comprehensive income. SFAS 130 is required to be
adopted in fiscal years beginning after December 15, 1997.
22
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS
(a) List of Exhibits
4 Ninth Supplement Indenture, dated as of September 1, 1997.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule--For the nine months ended September 30, 1997.
23
<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: November 14, 1997
By: /s/ James S. Brook
---------------------------
James S. Brook
Vice President and Controller
Date: November 14, 1997
24
<PAGE>
Execution Copy
____________________________________________________________
____________________________________________________________
UTILICORP UNITED INC.
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
____________________
6.875% Senior Notes Due 2004
____________________
NINTH SUPPLEMENTAL INDENTURE
Dated as of September 1, 1997
____________________
____________________________________________________________
____________________________________________________________
<PAGE>
NINTH SUPPLEMENTAL INDENTURE, dated as of September 1, 1997 (herein
called the "Ninth Supplemental Indenture"), between UTILICORP UNITED INC., a
corporation duly organized and existing under the laws of the State of
Delaware (hereinafter called the "Company"), party of the first part, and THE
FIRST NATIONAL BANK OF CHICAGO, a national banking association duly organized
and existing under the laws of the United States, as Trustee under the
Original Indenture referred to below (hereinafter called the "Trustee"),
party of the second part.
WITNESSETH:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture, dated as of November 1, 1990 (hereinafter called the
"Original Indenture"), to provide for the issuance from time to time of
certain of its unsecured senior notes (hereinafter called the "Securities"),
the form and terms of which are to be established as set forth in Sections
201 and 301 of the Original Indenture; and
WHEREAS, Section 901 of the Original Indenture provides, among
other things, that the Company and the Trustee may enter into indentures
supplemental to the Original Indenture for, among other things, the purpose
of establishing the form or terms of the Securities of any series as
permitted in Sections 201 and 301 of the Original Indenture; and
WHEREAS, the Company desires to create a series of the Securities
in an aggregate principal amount of $150,000,000 to be
<PAGE>
designated the "6.875% Senior Notes Due 2004" (the "Senior Notes"), and all
action on the part of the Company necessary to authorize the issuance of the
Senior Notes under the Original Indenture and this Ninth Supplemental
Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make the Senior Notes when
executed by the Company and completed, authenticated and delivered by the
Trustee as in the Original Indenture and this Ninth Supplemental Indenture
provided, the valid and binding obligations of the Company and to constitute
these presents a valid and binding supplemental indenture and agreement
according to its terms, have been done and performed; and
WHEREAS, Section 901 of the Original Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Original Indenture to, among other things, add to the covenants of the
Company for the benefit of the Holders of all or any series of Securities; and
WHEREAS, the Company desires to limit the issuance of Mortgage Bonds
under its General Mortgage (as hereinafter defined) as set forth in Section 204
of this Ninth Supplemental Indenture for the benefit of the Holders of the
Senior Notes;
2
<PAGE>
NOW, THEREFORE, THIS NINTH SUPPLEMENTAL INDENTURE WITNESSETH:
That in consideration of the premises, the Company covenants and
agrees with the Trustee, for the equal benefit of holders of the Senior Notes,
as follows:
ARTICLE ONE
DEFINITIONS
The use of the terms and expressions herein is in accordance with the
definitions, uses and constructions contained in the Original Indenture and the
form of Senior Note attached hereto as Exhibit A.
ARTICLE TWO
TERMS AND ISSUANCE OF THE SENIOR NOTES
Section 201. ISSUE OF SENIOR NOTES. A series of Securities which
shall be designated the "6.875% Senior Notes Due 2004" shall be executed,
authenticated and delivered in accordance with the provisions of, and shall
in all respects be subject to, the terms, conditions and covenants of the
Original Indenture and this Ninth Supplemental Indenture (including the form
of Senior Note set forth as Exhibit A hereto). The aggregate principal
amount of Senior Notes of the series created hereby which may be
authenticated and delivered under the Original Indenture shall not, except as
permitted by the provisions of the Original Indenture, exceed $150,000,000.
3
<PAGE>
Section 202. FORM OF SENIOR NOTES; INCORPORATION OF TERMS. The
form of the Senior Notes shall be substantially in the form of Exhibit A
attached hereto. The terms of such Senior Notse are herein incorporated by
reference and are part of this Ninth Supplemental Indenture.
Section 203. PLACE OF PAYMENT. The Place of Payment will be
initially the corporate trust offices of the Trustee which, at the date
hereof, are located at The First National Bank of Chicago, One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126 and The First National Bank
of Chicago, 14 Wall Street, 8th Floor, New York, New York 10005.
Section 204. LIMITATION ON ISSUANCE OF MORTGAGE BONDS. The
Company will not issue any Mortgage Bonds under its General Mortgage
Indenture and Deed of Trust, dated September 15, 1988, between the Company
and Commerce Bank of Kansas City, N.A., as Trustee (the "General Mortgage"),
without making effective provision, and the Company covenants that in any
such case effective provisions will be made, whereby the Senior Notes shall
be directly secured by the General Mortgage equally and ratably with any and
all other obligations and indebtedness thereby secured.
4
<PAGE>
ARTICLE THREE
MISCELLANEOUS
Section 301. EXECUTION OF SUPPLEMENTAL INDENTURE. This Ninth
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Original Indenture and, as provided in the Original
Indenture, this Ninth Supplemental Indenture forms a part thereof.
Section 302. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this Ninth Supplemental Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall control.
Section 303. EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
Section 304. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Ninth Supplemental Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
Section 305. SEPARABILITY CLAUSE. In case any provision in this
Ninth Supplemental Indenture or in the Senior Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 306. BENEFITS OF NINTH SUPPLEMENTAL INDENTURE. Nothing in
this Ninth Supplemental Indenture or in the Senior
5
<PAGE>
Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder and the holders, any benefit or any
legal or equitable right, remedy or claim under this Ninth Supplemental
Indenture.
Section 307. GOVERNING LAW. This Ninth Supplemental Indenture and
each Senior Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be governed by and construed in
accordance with the laws of said State.
Section 308. EXECUTION AND COUNTERPARTS. This Ninth Supplemental
Indenture may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
UTILICORP UNITED INC.
[Seal] By: /s/ Dale J. Wolf
--------------------------
Name: Dale J. Wolf
Title: Vice President,
Finance
Attest:
/s/ Randy Miller
- --------------------------------
Title: Asst. Treasurer
THE FIRST NATIONAL BANK
OF CHICAGO, as Trustee
[Seal] By: /s/ Tony Estevez
-------------------------------
Name: Tony Estevez
Title: Supervisor
Attest:
/s/ Francis Ballentino
- ----------------------------------
Title: Trust Officer
7
<PAGE>
STATE OF MISSOURI )
) ss.:
COUNTY OF JACKSON )
On the 1st day of September, 1997, before me personally came Dale
J. Wolf, to me known, who, being by me duly sworn, did depose and say that he
is Vice President-Finance of UtiliCorp United Inc., the corporation described
in and which executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Joyce Auer
-----------------------
Notary Public,
State of Missouri
STATE OF NEW YORK )
) ss.:
COUNTY OF QUEENS )
On the 6th day of October, 1997, before me personally came Tony
Estevez, to me known, who, being by me duly sworn, did depose and say that he
is Supervisor of The First National Bank of Chicago, the national banking
association described in and which executed the foregoing instrument; that he
knows the seal of said association; that the seal affixed to said instrument
is such association seal; that it was so affixed by authority of the Board of
Directors of said association, and that he signed his name thereto by like
authority.
/s/ Bertrand A. Reynolds, Jr.
-----------------------------
Notary Public,
State of New York
<PAGE>
EXHIBIT A
[FORM OF FACE OF SENIOR NOTE]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES HEREINAFTER DESCRIBED AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY NOMINEE TO A SUCCESSOR OF THE DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR.
REGISTERED REGISTERED
UTILICORP UNITED INC.
6.875% SENIOR NOTE DUE 2004
No. 918005 AP4 $
UTILICORP UNITED INC., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ____________________, or registered
assigns, the principal sum of __________________________________________ DOLLARS
on October 1, 2004, and to pay interest thereon from October 1, 1997, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on April 1 and October 1 in each year, commencing
April 1, 1998, at the rate per annum provided in the title hereof, until the
principal hereof is paid or made available for payment, and, subject to the
terms of the Indenture, at the rate per annum provided in the title hereof on
any overdue principal and premium, if any, and (to the extent that the payment
of such interest shall be legally enforceable) on any overdue instalment of
interest. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Holder in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
payment, which shall be the March 15 or September 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date, and may either
<PAGE>
be paid to the Holder in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Trustee, in
which event notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of and premium, if any, and interest on
this Security will be made at the office or agency of the Trustee maintained
for that purpose in the Borough of Manhattan, The City of New York, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. The Company may pay
principal by check payable in such money or by wire transfer to a dollar
account maintained by the holder (if the holder of the Security holds an
aggregate principal amount of Securities in excess of $5,000,000). The
Company may pay interest by mailing a dollar check to a holder's registered
address or, upon application by the holder hereof to the Registrar, not later
than the applicable record date, by wire transfer to a dollar account
maintained by the holder (if the holder of the Security holds an aggregate
principal amount of Securities in excess of $5,000,000).
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof, or an Authenticating Agent,
by manual signature of one of its authorized officers, this Security shall
not be entitled to any benefit under the Indenture or be valid or obligatory
for any purpose.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
UTILICORP UNITED INC.
Dated: By:___________________________
Title:
________________
Attest:
______________________________
[Seal] Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Senior
Notes of the series designated
herein referred to in the
within-mentioned Indenture
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:____________________________
Authorized Officer
3
<PAGE>
[FORM OF REVERSE OF SENIOR NOTE]
UTILICORP UNITED INC.
6.875% SENIOR NOTE DUE 2004
This Senior Note is one of a duly authorized series of securities
of the Company (herein called the "Securities"), issued and to be issued in
one or more series under an Indenture, dated as of November 1, 1990, as
amended and supplemented (as amended and supplemented, the "Indenture"),
between the Company and The First National Bank of Chicago, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designated on the face hereof, limited in aggregate
principal amount to $150,000,000.
This Security is not subject to any sinking fund, nor may this
Security be redeemed at the option of the Company prior to the Maturity Date.
Interest payments for this Security will be computed and paid on
the basis of a 360-day year of twelve 30-day months. If an Interest Payment
Date falls on a day that is not a Business Day, such Interest Payment Date
will be the following day that is a Business Day.
The Indenture contains provisions for defeasance of (a) the entire
indebtedness of this Security and (b) certain restrictive covenants upon
compliance by the Company with certain conditions set forth therein.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than 66 2/3% in principal amount of the
Securities at the time Outstanding of all series to
<PAGE>
be affected (voting as a class). The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders
of all Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon
all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest, if any, on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
This Security shall be exchangeable for Securities registered in the
names of Persons other than the Depositary with respect to such series or its
nominee only as provided in this paragraph. This Security shall be so
exchangeable if (x) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for such series or at any time ceases to be a
clearing agency registered as such under the Securities Exchange Act of 1934,
(y) the Company executes and delivers to the Trustee an Officers' Certificate
providing that this Security shall be so exchangeable or (z) there shall have
occurred and be continuing an Event of Default with respect to the Securities of
such series. Securities so issued in exchange for this Security shall be of the
same series, having the same interest rate, if any, and maturity and having the
same terms as this Security, in authorized denominations and in the aggregate
having the same principal amount as this Security and registered in such names
as the Depositary for such Global Security shall direct.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of a Security of the series of which this
Security is a part is registrable in the Security Register, upon surrender of
this Security for registration of transfer at the office or agency of the
Company in any place where the principal of and premium, if any, and interest,
if any, on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
2
<PAGE>
The Securities of the series of which this Security is a part are
issuable only in registered form without coupons in denominations of $1,000 and
in integral multiples thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Holder in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security shall be governed by and construed in accordance with
the laws of the State of New York.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
3
<PAGE>
UTILICORP UNITED INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11
<TABLE>
<CAPTION>
(In thousands except per share amounts) Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------------ -------------------
<S> <C> <C> <C> <C>
Earnings Available for Common Shares:
(a) Income before extraordinary item $24,894 $13,576 $102,783 $76,184
(b) Extraordinary item -- -- (7,200) --
------------------ -------------------
(c) Primary Earnings Available 24,894 13,576 95,583 76,184
Elimination of interest on convertible
subordinated debenture, net of tax 62 80 199 245
------------------ -------------------
(d) Fully Diluted Earnings Available $24,956 $13,656 $ 95,782 $76,429
------------------ -------------------
------------------ -------------------
Weighted Average Common Shares
Outstanding:
(e) Primary weighted average shares
outstanding, as reported 53,756 46,595 53,564 46,510
Assumed conversion of convertible
subordinated debenture 254 315 277 325
------------------ -------------------
(f) Fully Diluted Weighted Average Shares
Outstanding 54,010 46,910 53,841 46,835
------------------ -------------------
------------------ -------------------
Earnings Per Common Share:
Income before extraordinary item (a/e) $.46 $.29 $1.91 $1.64
Extraordinary item (b/e) -- -- (.13) --
------------------ -------------------
Primary Earnings Available $.46 $.29 $1.78 $1.64
Fully Diluted (d/f) $.46 $.29 $1.78 $1.63
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30,
1997 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-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 109
<SECURITIES> 0
<RECEIVABLES> 747
<ALLOWANCES> 0
<INVENTORY> 141
<CURRENT-ASSETS> 1,186
<PP&E> 2,449
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,700
<CURRENT-LIABILITIES> 1,617
<BONDS> 1,396
0
0
<COMMON> 54
<OTHER-SE> 1,134
<TOTAL-LIABILITY-AND-EQUITY> 4,700
<SALES> 2,256
<TOTAL-REVENUES> 2,256
<CGS> 2,019
<TOTAL-COSTS> 2,195
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 44
<INCOME-TAX> 19
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
