<PAGE>
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, 1999
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
<TABLE>
<CAPTION>
UTILICORP UNITED INC.
(Exact name of registrant as specified in its charter)
<S> <C>
Delaware 44-0541877
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
20 West Ninth Street, 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 8, 1999
- -----
Common Stock, $1 par value 92,921,474
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Information regarding the consolidated condensed financial statements
is set forth on pages 3 through 13.
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 14 through 24.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------
Quantitative and qualitative disclosures regarding market risk can be
found on page 9.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
None.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- --------------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
- --------------------------
None.
ITEM 6. EXHIBITS
- -----------------
Exhibits and Reports on Form 8K 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>
Three Months Ended
September 30,
- -------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $6,464.2 $3,808.6
Cost of sales 6,175.1 3,560.9
- -------------------------------------------------------------------------------------------------------------
GROSS PROFIT 289.1 247.7
- -------------------------------------------------------------------------------------------------------------
Operating, administrative and maintenance expense 149.1 149.6
Depreciation and amortization 47.4 37.2
OTHER INCOME (EXPENSE):
Equity in earnings from investments and partnerships 14.0 24.1
Other income 17.1 3.9
Minority interest and other expense (9.1) (3.3)
- -------------------------------------------------------------------------------------------------------------
Total other income 22.0 24.7
- -------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INTEREST AND TAXES 114.6 85.6
- -------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest expense - long-term debt 44.3 27.7
Interest expense - short-term debt 3.9 6.9
Minority interest in income of partnership and trust holdings 2.4 2.2
- -------------------------------------------------------------------------------------------------------------
Total interest expense 50.6 36.8
- -------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 64.0 48.8
Income taxes 21.5 20.3
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 42.5 $ 28.5
=============================================================================================================
EARNINGS PER SHARE:
Basic $.46 $.36
Diluted $.46 $.36
=============================================================================================================
DIVIDENDS PER SHARE $.30 $.30
=============================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
DOLLARS IN MILLIONS 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $14,235.4 $9,269.0
Cost of sales 13,390.2 8,557.6
- --------------------------------------------------------------------------- ---------------- -------------------
GROSS PROFIT 845.2 711.4
- --------------------------------------------------------------------------- ---------------- -------------------
Operating, administrative and maintenance expense 435.2 412.4
Depreciation and amortization 141.9 110.3
Provision for asset impairments --- 27.7
OTHER INCOME (EXPENSE):
Equity in earnings from investments and partnerships 34.7 107.3
Other income 34.5 15.3
Minority interest and other expense (25.5) (23.0)
- --------------------------------------------------------------------------- ---------------- -------------------
Total other income 43.7 99.6
- --------------------------------------------------------------------------- ---------------- -------------------
EARNINGS BEFORE INTEREST AND TAXES 311.8 260.6
- --------------------------------------------------------------------------- ---------------- -------------------
INTEREST EXPENSE:
Interest expense - long-term debt 122.1 88.9
Interest expense - short-term debt 5.3 10.8
Minority interest in income of partnership and trust holdings 6.8 6.7
- --------------------------------------------------------------------------- ---------------- -------------------
Total interest expense 134.2 106.4
- --------------------------------------------------------------------------- ---------------- -------------------
EARNINGS BEFORE INCOME TAXES 177.6 154.2
Income taxes 58.4 58.9
- --------------------------------------------------------------------------- ---------------- -------------------
NET INCOME $ 119.2 $ 95.3
=========================================================================== ================ ===================
EARNINGS PER SHARE:
Basic $1.30 $1.20
Diluted $1.30 $1.18
=========================================================================== ================= ==================
DIVIDENDS PER SHARE $.90 $.90
================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
DOLLARS IN MILLIONS 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 181.2 $ 120.5
Funds on deposit 52.6 13.4
Accounts receivable, net 2,587.6 1,276.9
Inventories and supplies, at average cost 255.5 235.1
Price risk management assets 169.7 173.1
Prepayments and other 55.4 85.8
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,302.0 1,904.8
- ---------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 3,672.0 3,313.9
Investments in subsidiaries and partnerships 1,002.2 519.8
Price risk management assets 209.5 215.5
Merchant notes receivable 166.7 20.1
Deferred charges 145.2 156.8
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 8,497.6 $ 6,130.9
================================================================================================================
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 20.2 $ 248.8
Short-term debt 290.3 235.6
Accounts payable 2,854.6 1,415.3
Accrued liabilities 87.2 49.7
Price risk management liabilities 162.5 192.2
Other current liabilities 95.2 89.6
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,510.0 2,231.2
- ---------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES:
Long-term debt, net 2,234.2 1,376.6
Deferred income taxes and credits 432.6 429.5
Price risk management liabilities 296.1 308.4
Minority interest 109.2 151.6
Other deferred credits 57.9 87.3
- ---------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 3,130.0 2,353.4
- ---------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities of
partnership 100.0 100.0
Company-obligated mandatorily redeemable security of trust holding
solely parent company senior deferrable notes 250.0 --
Common shareowners' equity 1,507.6 1,446.3
Commitments and contingencies
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 8,497.6 $6,130.9
================================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME--UNAUDITED
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ------------------------------------------------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income $42.5 $28.5 $119.2 $95.3
Other comprehensive income (loss):
Unrealized translation adjustments .7 (10.3) -- (26.5)
- ------------------------------------------------------ ------------ ------------- ------------- -------------
Comprehensive Income $43.2 $18.2 $119.2 $68.8
=============================================================================================================
</TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF COMMON SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
DOLLARS IN MILLIONS 1999 1998
- ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Common Stock: authorized 200,000,000 shares, par value $1 per
share; 93,603,434 shares outstanding at September 30, 1999
and 93,574,853 shares outstanding at December 31, 1998;
authorized 20,000,000 shares of Class Acommon stock, par
value $1 per share, none issued $ 93.6 $ 93.6
Premium on Capital Stock 1,238.6 1,253.5
Retained Earnings 225.8 190.0
Treasury Stock, at cost (501,843 and 2,159,330 shares at September 30,
1999 and December 31, 1998, respectively) (12.8) (53.2)
Accumulated Other Comprehensive Losses (37.6) (37.6)
- ---------------------------------------------------------------------------------------------------------------
TOTAL COMMON SHAREOWNERS' EQUITY $1,507.6 $1,446.3
===============================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
- -----------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 119.2 $ 95.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 141.9 110.3
Provision for asset impairments -- 27.7
Net changes in price risk management assets and liabilities (32.5) (30.7)
Deferred income taxes and credits 3.2 17.6
Equity in earnings from investments and partnerships (34.7) (81.8)
Dividends from investments and partnerships 28.0 25.3
Merchant notes receivable (146.6) --
Minority interests 8.0 2.0
Gain on sale of subsidiary stock -- (25.5)
Changes in certain assets and liabilities:
Accounts receivable/payable, net 6.1 32.1
Accounts receivable, sold 122.8 --
Inventories and supplies (20.4) (82.8)
Prepayments and other 7.4 27.7
Deferred charges, net 11.7 7.9
Accrued liabilities, net 43.0 93.1
Other (32.6) 6.7
- -----------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 224.5 224.9
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (93.3) (89.4)
Repayment of debt securities -- 101.1
Investments in international businesses (487.0) (82.6)
Purchase of minority interest in Aquila Gas Pipeline (44.0) --
Investment in gas storage and gathering assets (111.0) --
Investment in Quanta Services, Inc. (208.3) --
Other (102.6) (44.3)
- -----------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES $(1,046.2) $(115.2)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
UTILICORP UNITED INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED, CONTINUED
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
- --------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock (acquired)/sold $ 40.4 $ (52.5)
Issuance of company-obligated mandatorily redeemable preferred
securities of trust holdings 250.0 --
Issuance of long-term debt 885.2 26.4
Retirement of long-term debt (250.3) (179.7)
Short-term borrowings (repayments), net 54.7 257.8
Cash dividends paid (83.3) (72.7)
Other (14.3) (12.3)
- --------------------------------------------------------------------------------------------------------------
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES 882.4 (33.0)
- --------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 60.7 76.7
Cash and cash equivalents at beginning of period 120.5 89.5
- --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 181.2 $ 166.2
==============================================================================================================
</TABLE>
See accompanying notes to consolidated condensed financial statements.
8
<PAGE>
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 our 1998
Annual Report on Form 10-K. We believe it is best to read our year-end
consolidated financial statements in conjunction with this report. The
year-end financial statements presented were derived from our audited
financial statements, but do not include all disclosures required by
generally accepted accounting principles. In our opinion, the accompanying
consolidated condensed financial statements reflect all adjustments (which
include only normal recurring adjustments) necessary for a fair
representation of our financial position and the results of our 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 1999 presentation.
FINANCIAL INSTRUMENTS
TRADING OPERATIONS
We use a variety of financial instruments in connection with price risk
management services provided by Aquila Energy Corporation, a wholly-owned
subsidiary. These financial instruments include forward contracts that commit
us 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 Mercantile 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
We use 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 our future sales and
purchases of commodities used in our 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.
9
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
2. EARNINGS PER COMMON SHARE
The following table shows the amounts used in computing basic and diluted
earnings per share and the effect on income and weighted average number of
shares of dilutive potential common stock for the three- and nine-month
periods ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
IN MILLIONS, EXCEPT PER SHARE AMOUNTS September 30, September 30,
---------------------------- ---------------------------
- --------------------------------------------------------- -------------- ------------- ------------- -------------
1999 1998 1999 1998
- --------------------------------------------------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings available for common shares $42.5 $28.5 $119.2 $95.3
Interest expense on convertible bonds .1 .1 .2 .2
- --------------------------------------------------------- -------------- ------------- ------------- -------------
Earnings available for common shares
after assumed conversion of dilutive securities $42.6 $28.6 $119.4 $95.5
- --------------------------------------------------------- -------------- ------------- ------------- -------------
Earnings per share:
Basic $ .46 $ .36 $ 1.30 $ 1.20
- --------------------------------------------------------- -------------- ------------- ------------- -------------
Diluted $ .46 $ .36 $ 1.30 $ 1.18
- --------------------------------------------------------- -------------- ------------- ------------- -------------
Weighted average number of common shares
used in basic EPS 91.7 79.2 91.3 79.7
Share effect of dilutive securities:
Stock options .5 .8 .5 .9
Convertible bonds .3 .3 .3 .4
- --------------------------------------------------------- -------------- ------------- ------------- -------------
Weighted number of common shares and dilutive
potential common shares used in diluted EPS 92.5 80.3 92.1 81.0
- --------------------------------------------------------- -------------- ------------- ------------- -------------
</TABLE>
3. MERGER AND ACQUISITION ACTIVITIES
AQUILA TENDER OFFER
On May 7, 1999, approximately 3.4 million shares of Aquila Gas Pipeline
Corporation (AQP) were tendered to UtiliCorp at $8.00. The 3.4 million shares
together with the 24.0 million shares already held represented 93% of AQP's
total shares outstanding. All remaining shares not tendered were converted in
a "short-form" merger into a right to receive $8.00 per share. The short-form
merger was completed on May 14, 1999, and AQP is no longer a publicly traded
company.
NATURAL GAS STORAGE FACILITY
Our Aquila Energy subsidiary agreed on March 29, 1999, to purchase Western
Gas Resources Storage Inc. The $100 million cash transaction increases
Aquila's ownership and control of strategically located natural gas storage
assets. The 2,200 acre subsurface facility in Katy, Texas, has a storage
capacity of 20 billion cubic feet. The purchase closed in the second quarter.
10
<PAGE>
UTILICORP UNITED INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS--CONTINUED
(UNAUDITED)
TRUSTPOWER ACQUISITION
Effective January 31, 1999, we closed the purchase of New Zealand based
TrustPower. Working through our 78.8% owned New Zealand utility,
UnitedNetworks Limited, completion of this transaction made us New Zealand's
largest electricity distribution company, adding approximately 96,000
TrustPower customers to UnitedNetworks' system.
AUSTRALIAN MULTINET GAS ACQUISITION
On March 12, 1999, we acquired a 25.5% interest in Multinet/Ikon, a natural
gas network and retailer in Victoria, Australia, for $224 million. This
investment doubles our customer base in Australia
ST. JOSEPH LIGHT & POWER COMPANY
On October 19, 1999, St. Joseph Light & Power Company (SJL&P) and UtiliCorp
filed a joint application with the Missouri Public Service Commission (MPSC)
requesting approval of the companies' plans to merge in a transaction valued
at approximately $270 million. SJL&P shareholders approved the combination in
June and will receive $23 worth of UtiliCorp common stock for each share of
SJL&P common stock. The transaction, which is subject to approval by various
state and federal regulatory agencies, will be accounted for as a purchase.
We expect to close this transaction by mid-2000.
EMPIRE DISTRICT ELECTRIC COMPANY
On May 10, 1999, The Empire District Electric Company (Empire) agreed to
merge into UtiliCorp. Upon closing, Empire's shareholders will be entitled to
receive $29.50 for each share of Empire common stock they hold, payable in
either cash or UtiliCorp common stock. The value of the merger consideration
per share will decrease if UtiliCorp's common stock is trading below $22 per
share at closing and will increase if UtiliCorp's common stock is trading
above $26 per share at closing. The consideration paid to Empire
shareholders, estimated to be $800 million, including assumption of debt, is
subject to certain conditions, such as cash and stock maximums, as well as
certain regulatory approvals. The shareholders of Empire voted to approve the
merger on September 3, 1999. We expect this merger to be completed by
mid-2000.
SALE OF WEST VIRGINIA POWER DIVISION
On September 9, 1999, we agreed to sell our West Virginia Power division to
Allegheny Energy, Inc. for $75 million. In addition to the sale of West
Virginia Power's electric and natural gas distribution assets, separate
transactions include a 20-year supply agreement for our Aquila Energy unit to
provide natural gas to Allegheny and an agreement for Allegheny to purchase
Appalachian Electric Heating, our heating and air conditioning service
operations in West Virginia. The sale of the assets is subject to the
approvals of several governmental bodies. It is expected that all required
approvals will be received and the transaction will close in 1999.
11
<PAGE>
QUANTA SERVICES, INC.
On September 23, 1999, we invested $186 million in Quanta Services, Inc.
(Quanta) Preferred Stock. Quanta is a provider of specialized construction
services to electric utilities, telecommunications and cable television
companies, and governmental entities. The preferred stock is convertible into
6.2 million common shares based on a strike price of $30. This investment
will be accounted for by the equity method of accounting. We received a $3.7
million advisory fee from Quanta during the third quarter. In addition, we
have purchased approximately 4.9 million shares of Quanta's Common Stock on
the open market and in privately negotiated transactions through November 1,
1999, bringing our total investment in Quanta to approximately $312 million.
4. DEBT REFINANCING EXCHANGE OFFER
In the first quarter of 1999, approximately $131.8 million of our 9% senior
notes were exchanged for 8.27% senior notes and $20.2 million of our 10.5%
senior notes were exchanged for 9.03% senior notes. These exchanges
effectively lowered our interest rate on the two senior note issues.
5. ISSUANCE OF SENIOR NOTES
In July 1999, we issued $250 million of 7% senior notes due July 15, 2004. We
used the proceeds to reduce our short-term debt.
On November 15, 1999, we plan to issue $200 million of 7.625% senior notes
due November 15, 2009. We will use the proceeds to retire $100 million of
senior notes maturing on November 15, 1999, and to reduce short-term debt.
The September 30, 1999, balance sheet reflects a $200 million
reclassification from short-term debt and current maturities of long-term
debt to long-term debt to reflecting the subsequent financing of that
short-term debt.
6. PREMIUM EQUITY PARTICIPATING SECURITIES
In September 1999, we issued 10,000,000 9.75% Premium Equity Participating
Security Units ("PEPS Units") for $250 million. Each PEPS Unit had an issue
price of $25 and consists of a contract to purchase shares of UtiliCorp
common stock on or prior to November 16, 2002 and a preferred security of UCU
Capital Trust I. The sole asset of UCU Capital Trust I consists of $257.7
million of 7.35% senior deferrable notes due November 16, 2004 of UtiliCorp.
Each purchase contract yields 2.40% per year, paid quarterly, on the $25
stated amount of the PEPS Unit. Each trust preferred security yields 7.35%
per year, paid quarterly on the $25 stated amount of the PEPS unit, until
November 16, 2002. On November 16, 2002, following a remarketing of the trust
preferred securities, the yield will be reset at a rate that will be equal to
or greater than 7.35%.
7. PLANT EXPLOSION
On July 1, 1999, the Unit # 3 exhaust duct of our Greenwood peaking
generating facility in Missouri exploded. The unit's gas-fired turbine
suffered minimal damage but its exhaust duct was destroyed and is being
rebuilt at a cost of about $2.0 million. While the plant was down for this
rebuild, we also carried out a major overhaul that had been scheduled for
next spring. The plant is estimated to be back on-line by mid-November.
8. INDEPENDENT POWER PROJECT
On September 1, 1999, Fort James-Pennington, Inc. exercised its contractual
right to call our 50% partnership interest in the Naheola cogeneration
project in Pennington, Alabama. On October 19, 1999, the purchase price for
that interest was determined by the parties to be approximately
12
<PAGE>
$83.7 million which will result in a pre-tax gain of between $5-$8 million.
The transaction is expected to close by December 31, 1999.
9. REPORTABLE SEGMENT RECONCILIATION
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
- -----------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Sales:
U.S. Utilities $ 356.3 $ 331.5 $ 1,132.3 $1,111.7
Aquila Energy 5,919.4 3,399.8 12,388.0 7,877.9
International 188.3 78.8 714.2 280.7
Other .2 (1.5) .9 (1.3)
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
Total $ 6,464.2 $ 3,808.6 $ 14,235.4 $9,269.0
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
EBIT:
U. S. Utilities $ 44.3 $ 54.0 $ 147.8 $ 156.7
Aquila Energy 28.2 24.7 57.3 46.3
International 39.0 14.1 101.5 75.9
Other 3.1 (7.2) 5.2 (18.3)
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
Total $ 114.6 $ 85.6 $ 311.8 $ 260.6
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
</TABLE>
13
<PAGE>
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. OUR BUSINESS SEGMENTS INCLUDE THE FOLLOWING BUSINESS
GROUPS: U.S. UTILITIES, CONSISTING PRIMARILY OF TRANSMISSION, DISTRIBUTION AND
GENERATION UTILITY OPERATIONS IN THE U.S., AQUILA ENERGY CORPORATION (AQUILA),
CONSISTING PRIMARILY OF ENERGY MARKETING (BOTH GAS AND ELECTRIC), INDEPENDENT
POWER PROJECTS AND GAS PROCESSING, GATHERING AND TRANSMISSION AND INTERNATIONAL,
CONSISTING OF VARIOUS OPERATIONS THAT INCLUDE GENERATION, GAS MARKETING,
ELECTRIC DISTRIBUTION AND VARIOUS EQUITY INVESTMENTS. THE LIQUIDITY AND CAPITAL
RESOURCES SECTION IS PREPARED ON A CONSOLIDATED BASIS.
FORWARD-LOOKING INFORMATION
This report contains forward-looking information. These statements involve risks
and uncertainties, and there are certain important factors that can cause actual
results to differ materially from those anticipated. Some of the important
factors that can cause actual results to differ materially from those
anticipated include:
- Both our utility and energy merchant businesses are
weather-sensitive.Weather, which can affect results significantly
to the extent that temperatures differ from normal.
- We are exposed to market risk and may incur losses from our
marketing and trading operations.
- We may not be able to implement our strategy if we are unable to
access or generate capital at competitive rates.
- The timing and extent of changes in interest rates.
- We may not be able to successfully integrate acquired businesses
into our operations.
- The volatility of natural gas and natural gas liquids prices can
significantly affect the earnings contribution from the Energy
Assets segment of our Aquila Energy business group.
- The pace of well connections to our gas gathering system.
- Our development of a merchant power plant may not be successful or
profitable.
- The pace and degree of regulatory changes in the U.S. and abroad.
- The value of the U.S. dollar relative to the British pound,
Canadian dollar, Australian dollar, and New Zealand dollar.
- The earnings contribution from our Australian operations may
decrease in the near future.
- The continued expansion of the electric power markets and
development of liquid term markets.
- Pending rate proceedings.
- Expansion of electric markets in the United Kingdom and Europe.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
We believe our liquidity and capital resources are sufficient and provide
adequate financial flexibility. Our operations have historically generated
strong positive cash flow, which, along with our credit lines, accounts
receivable sales programs, common stock offerings and ability to issue public
debt, have provided adequate liquidity to meet our short-term and long-term cash
requirements, including requirements for acquisitions.
We utilize accounts receivable sales programs to efficiently manage our
working capital and provide immediate liquidity. In September 1999, due to
growth in the trading business, we increased our total capacity under these
programs by $125 million to $405 million. At September 30, 1999, we had sold
approximately $370.8 million of receivables under these programs. In addition
to the accounts receivable sales program, we can issue up to $150 million of
commercial paper which is supported by a $250 million revolving credit
agreement. We had no commercial paper borrowings at September 30, 1999.
We completed an exchange offer that effectively lowered the interest rates to be
paid on two issues of senior notes. Approximately $131.8 million of our 9%
senior notes were exchanged for 8.27% senior notes and $20.2 million of our
10.5% senior notes were exchanged for 9.03% senior notes.
In July 1999, we issued $250 million of 7% senior notes due July 15, 2004. We
used the proceeds to reduce our short-term debt.
On November 15, 1999, we plan to issue $200 million of 7.625% senior notes due
November 15, 2009. We used the proceeds to retire $100 million of senior notes
maturing on November 15, 1999, and to reduce short-term debt. The September 30,
1999, balance sheet reflects a $200 million reclassification from short-term
debt and current maturities of long-term debt to long-term debt to reflecting
the subsequent financing of that short-term debt.
In September 1999, we issued 10,000,000 9.75% Premium Equity Participating
Security Units ("PEPS Units") for $250 million. Each PEPS Unit had an issue
price of $25 and consists of a contract to purchase shares of UtiliCorp
common stock on or prior to November 16, 2002 and a preferred security of UCU
Capital Trust I. The sole asset of UCU Capital Trust I consists of $257.7
million of 7.35% senior deferrable notes due November 16, 2004 of UtiliCorp.
Each purchase contract yields 2.40% per year, paid quarterly, on the $25
stated amount of the PEPS Unit. Each trust preferred security yields 7.35%
per year, paid quarterly on the $25 stated amount of the PEPS unit, until
November 16, 2002. On November 16, 2002, following a remarketing of the trust
preferred securities, the yield will be reset at a rate that will be equal to
or greater than 7.35%.
While there are no definitive plans, we are evaluating the potential of
selling a partial interest in our New Zealand investments to reduce our
ownership from 78.8% to less than 50%. The impact of this sell down will
deconsolidate New Zealand and return this investment to an equity investment.
If New Zealand is sold down to below 50%, approximately $500 million of
long-term debt would be removed from our balance sheet. The income from our
New Zealand investments would also decrease reflective of the reduced
ownership interest.
SIGNIFICANT BALANCE SHEET MOVEMENTS
Total assets increased by $2,366.7 million since December 31, 1998. This
increase is primarily attributable to the following:
- Cash and cash equivalents increased by $60.7 million. This
increase primarily relates to the sale of the retail business by a
subsidiary of UnitedNetworks.
- Accounts receivable, net increased $1,310.7 million. Increased
volumes in the trading business was the primary contributor.
- Net property, plant and equipment increased $358.1 million. This
increase is due primarily to the acquisition of TrustPower network
assets in New Zealand and the acquisition of the gas storage
facility by Aquila.
- Investments in subsidiaries and partnerships increased $482.4
million primarily due to the acquisition of Multinet/Ikon Energy
in March 1999 and the Quanta investment in September 1999.
15
<PAGE>
- Merchant notes receivable increased $146.6 million. This results
from increased energy related loan activity by Aquila Energy. This
is a new line of business for Aquila started in October 1998.
Total liabilities increased by $2,055.4 million and common shareholders' equity
increased by $311.3 million since December 31, 1998. These increases are
primarily attributable to the following:
- Short-term and long-term debt together increased $683.7 million.
This increase is primarily due to the acquisition activity in New
Zealand, the Multinet/Ikon acquisition in Australia and the Quanta
investment in September 1999.
- Accounts payable increased by $1,439.3 million. Increased activity
in the trading business was the primary contributor.
- Company-obligated mandatorily redeemable security of trust holding
solely parent company senior deferred notes increased $250.0
million. These were issued in September 1999.
- Common shareholders' equity increased by $61.3 million primarily
due to a decrease of $40.4 million in treasury stock, an increase
of $35.8 million in retained earnings, and an offsetting decrease
of $14.9 in the premium on capital stock.
RESULTS OF OPERATIONS
The results of operations for the 1998 period were impacted by several items
which do not have a continuing effect on our financial position or results of
operations. The consolidated table below summarizes the impact of the
non-recurring items on earnings before interest and taxes (EBIT) and diluted
earnings per share (EPS).
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS EBIT EPS EBIT EPS EBIT EPS EBIT EPS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As reported $114.6 $.46 $85.6 $.36 $311.8 $1.30 $260.6 $1.18
Non-recurring items:
Provision for asset impairments (a) -- -- -- -- -- -- 27.7 .20
UK contract settlements (b) -- -- -- -- -- -- 13.4 .10
Australia initial public offering (c) -- -- -- -- -- -- (45.3) (.31)
- -----------------------------------------------------------------------------------------------------------------------
Normalized $114.6 $.46 $85.6 $.36 $311.8 $1.30 $256.4 $1.17
=======================================================================================================================
</TABLE>
a) In 1998, we recorded a $27.7 million provision for impaired assets relating
to certain retail gas marketing assets, termination of EnergyOne L.L.C.,
and the write-off of an independent power project.
b) In 1998, we settled two above-market gas contracts at a net loss of $6.6
million. In addition, a court ruled against us on a disputed gas supply
contract requiring us to record $6.8 million in interest related to the
contract.
c) United Energy Limited (UEL) sold to the public in the second quarter of
1998 42% of its common stock resulting in a $45.3 million gain.
Normalized earnings or normalized income are terms used by management to
describe the recurring earnings or income. These terms are not meant to replace
net income or other measures under generally accepted accounting principles.
16
<PAGE>
U.S. UTILITIES
The table below summarizes the operations of our U. S. utilities for the
following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ---------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Electric $225.8 $205.9 $ 513.4 $ 492.6
Gas 79.5 65.4 450.6 445.4
Other 51.0 60.2 168.3 173.7
- ---------------------------------------------------------------------------------------------------------
Total sales 356.3 331.5 1,132.3 1,111.7
- ---------------------------------------------------------------------------------------------------------
Cost of sales:
Electric 109.0 75.4 223.7 186.2
Gas 37.3 28.1 257.4 262.0
Other 44.5 48.5 143.7 144.9
- ---------------------------------------------------------------------------------------------------------
Total cost of sales 190.8 152.0 624.8 593.1
- ---------------------------------------------------------------------------------------------------------
Gross profit 165.5 179.5 507.5 518.6
- ---------------------------------------------------------------------------------------------------------
Operating expenses:
Other operating 66.9 70.3 196.6 200.8
Maintenance 12.7 12.2 38.9 34.7
Taxes, other than income taxes 17.1 16.2 45.2 45.7
Depreciation and amortization 28.6 27.1 86.7 81.8
- ---------------------------------------------------------------------------------------------------------
Total operating expenses 125.3 125.8 367.4 363.0
- ---------------------------------------------------------------------------------------------------------
Other income 4.1 .3 7.7 1.1
- ---------------------------------------------------------------------------------------------------------
EBIT $ 44.3 $ 54.0 $ 147.8 $ 156.7
=========================================================================================================
</TABLE>
QUARTER-TO-QUARTER
EBIT for our U.S. Utilities decreased $9.7 million when comparing 1999 to 1998.
This decrease is primarily due to higher purchase power costs (approximately
$5.5 million) stemming from open market purchases of power to meet high demands
during a heat wave in July. Our need to supplement our power resources was
heightened by the unavailability of Greenwood Unit No. 3. EBIT was also reduced
because of higher depreciation expenses from additional information technology
expenditures and higher allocated operating expenses.
YEAR- TO-DATE
(FACTORS DISCUSSED IN THE QUARTER-TO-QUARTER COMPARISON ALSO AFFECTED THE
YEAR-TO-DATE COMPARISONS.)
EBIT for the nine months ended September 30, 1999, was $8.9 million less than
the same period in 1998. Weather for the nine-month period in 1999 was milder
than the same period in 1998, reducing EBIT by about $2.0 million. The Missouri
rate case, which became effective in April 1998, reduced 1999 EBIT by $6.4
million when compared to the 1998 period. Additionally, the increased purchased
power costs and depreciation expense discussed above impacted the nine month
period, but were offset by increased customer usage and growth.
REGULATORY MATTERS
Electric and gas rate cases in West Virginia were settled during the third
quarter. The settlement in the electric case resulted in a $.7 million increase
in rates based on the 1997 information filed. However, since that time,
purchased power contracts have been re-negotiated, reducing the costs of
purchased power by about $1.7 million. Accordingly, the rates charged to our
electric
17
<PAGE>
customers in West Virginia will be reduced by about $1.0 million annually.
The gas case resulted in an increase in gas rates of $2.5 million.
In response to a show-cause motion by the Staff of the Kansas Corporation
Commission, we filed a revenue requirement report that validated that our rates
are just and reasonable. This report indicated that rates could be increased
$3.6 million. However, we deferred making a formal request due to a negotiation
of a purchased power contract. The Staff of the Kansas Corporation Commission
has responded to our filing and recommended to the Commission that our electric
rates be reduced by $19.9 million annually. This recommended reduction relates
to four primary areas, the Jeffrey Energy Center lease, off-system sales, a new
purchase power agreement and the book depreciation rates on new systems and
equipment. We filed rebuttal testimony on October 22. Hearings are scheduled for
December 1999 and we expect a final decision by the Commission in January 2000.
We filed for gas rate increases in Nebraska Rate Area 2 and 3 requesting $3.3
million and $2.8 million, respectively. In addition, we have filed for a gas
rate increase in Kansas for $5.9 million.
ST. JOSEPH LIGHT & POWER COMPANY
On March 4, 1999, St. Joseph Light & Power Company (SJL&P) agreed to merge into
UtiliCorp. Under the agreement, SJL&P shareholders will receive UtiliCorp common
shares equal to $23.00 per SJL&P common share. We will account for the
transaction as a purchase. The merger was approved by SJL&P shareholders on June
16, 1999, and is subject to approval by state and federal regulatory agencies.
The total purchase price is approximately $270 million, including the assumption
of about $80 million in debt.
On October 19, 1999, we filed a joint application with SJLP requesting approval
by the Missouri Public Service Commission of the merger transaction. Key matters
contained in that filing were:
- Significant synergies are anticipated from generation, economies of
scale and elimination of duplicate positions.
- Rates are proposed to be frozen for 5 years
- We will retain financial benefits from the merger during the five year
freeze, in the sixth year we begin sharing the savings with the
ratepayer.
- The merger of two Missouri utilities avoids out-of-state job
migration.
It is expected that approval for the SJLP transaction will be obtained in
mid-2000.
EMPIRE DISTRICT ELECTRIC COMPANY
On May 10, 1999, The Empire District Electric Company (Empire) agreed to
merge into UtiliCorp. Upon closing, Empire's shareholders will be entitled to
receive $29.50 for each share of Empire common stock they hold, payable in
either cash or UtiliCorp common stock. The value of the merger consideration
per share will decrease if UtiliCorp's common stock is trading below $22 per
share at closing and will increase if UtiliCorp's common stock is trading
above $26 per share at closing. The consideration paid to Empire
shareholders, estimated to be $800 million, including assumption of debt, is
subject to certain conditions, such as cash and stock maximums. The merger
was voted on by Empire shareholders on September 3, 1999, and is subject to
approval by certain state and federal regulatory agencies. We expect this
merger to be completed by mid-2000.
QUANTA SERVICES, INC.
On September 23, 1999, we invested $186 million in Quanta Services, Inc.
(Quanta) Preferred Stock. Quanta is a provider of specialized construction
services to electric utilities, telecommunications and cable television
companies, and governmental entities. The preferred stock is convertible into
6.2 million common shares based on a strike price of $30. This investment
18
<PAGE>
will be accounted for by the equity method of accounting. We received a $3.7
million advisory fee from Quanta during the third quarter. In addition, we
have purchased approximately 4.9 million shares of Quanta's Common Stock on
the open market and in privately negotiated transactions through November 1,
1999, bringing our total investment in Quanta to approximately $312 million.
AQUILA ENERGY
The table below summarizes the operations of Aquila Energy for the following
periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ---------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Marketing and trading $5,612.0 $3,197.1 $11,622.3 $7,172.0
Energy assets 307.4 202.7 765.7 705.9
- ---------------------------------------------------------------------------------------------------------
Total sales 5,919.4 3,399.8 12,388.0 7,877.9
- ---------------------------------------------------------------------------------------------------------
Cost of sales:
Cost of marketing and trading 5,576.8 3,162.5 11,533.4 7,080.7
Energy assets 277.3 184.6 689.0 643.5
- ---------------------------------------------------------------------------------------------------------
Total cost of sales 5,854.1 3,347.1 12,222.4 7,724.2
- ---------------------------------------------------------------------------------------------------------
Gross profit 65.3 52.7 165.6 153.7
- ---------------------------------------------------------------------------------------------------------
Operating expenses:
Operating and maintenance 38.3 32.2 108.9 89.5
Provision for asset impairments --- --- --- 17.2
Depreciation, depletion and amortization 8.8 7.3 25.5 22.4
- ---------------------------------------------------------------------------------------------------------
Total operating expenses 47.1 39.5 134.4 129.1
- ---------------------------------------------------------------------------------------------------------
Other income, net 10.0 11.5 26.1 21.7
- ---------------------------------------------------------------------------------------------------------
Reported EBIT 28.2 24.7 57.3 46.3
Non-recurring items:
Provision for asset impairments --- --- --- 17.2
- ---------------------------------------------------------------------------------------------------------
Normalized EBIT 28.2 24.7 57.3 63.5
- ---------------------------------------------------------------------------------------------------------
EBIT by business subunit:
Marketing and trading 10.6 11.5 17.8 22.1
Energy assets 17.6 13.2 39.5 41.4
=========================================================================================================
Total $ 28.2 $ 24.7 $ 57.3 $ 63.5
=========================================================================================================
</TABLE>
QUARTER-TO-QUARTER
MARKETING AND TRADING
EBIT for Marketing and Trading was $.9 million less than the prior year
primarily due to $2.7 million of moving costs associated with the relocation
of its Omaha operation to Kansas City. Gas and power trading volumes were up
over the prior year by 7% and 78%, respectively. Strong energy term and gas
trading results were offset by lower power trading performance stemming from
less favorable market opportunities in 1999 compared to 1998 and the move of
traders to Kansas City from Omaha. Included in the strong term results was
income of $20 million associated with a gas sales contract and a favorable
change in estimate relating to the discount rate used to value certain
long-term contracts.
ENERGY ASSETS
The increase in EBIT was due to the following factors:
- A 12% increase in gas throughput volumes which increased EBIT by $4.9
million.
19
<PAGE>
- A 61% increase in natural gas liquids (NGLs) prices which increased
EBIT by $3.8 million.
- Favorable impact from the first quarter's restructuring efforts which
reduced operating expenses by $1.3 million.
Partially offsetting the above favorable factors were the following:
- The non-recurrence of a $3.6 million gain recorded in the 1998 quarter
related to the partial sale of an IPP project.
- Lower EBIT results related to various IPP projects between quarters.
YEAR-TO-DATE
(FACTORS DISCUSSED IN THE QUARTER-TO-QUARTER COMPARISON ALSO AFFECTED THE
YEAR-TO-DATE COMPARISONS.)
MARKETING AND TRADING
Marketing and trading EBIT decreased $4.3 million on a year-to-date basis
compared to 1998. Gas and power trading volumes for the nine-month periods
increased 15% and 94%, respectively. As mentioned above, market opportunities
in power were not as great in 1999 as in 1998 and the move to Kansas City has
resulted in distractions impacting trading performance. Also, gas storage
levels remained high earlier in the year, limiting our earnings opportunities
in 1999. In addition to the favorable impact of large gas sales contracts,
the year-to-date results include an enhancement of the contract portfolio
resulting from improvements in regulatory risks associated with certain
long-term contracts.
ENERGY ASSETS
Energy Assets EBIT decreased $1.9 million on a year-to-date basis compared to
1998. In the first quarter of 1999, although throughput volumes increased 24%,
NGL prices and production volumes decreased 19% and 25%, respectively, resulting
in a net reduction of EBIT. Since the first quarter, throughput volumes and NGL
prices have improved helping offset the EBIT reduction from the first quarter.
When these factors are combined with a restructuring charge of $2.8 million,
costs associated with the evaluation of the tender offer for AQP shares and the
absence of the $3.6 million gain on the sale of an interest in an IPP, EBIT has
declined by $1.9 million on a year-to-date basis.
AQUILA GAS PIPELINE TENDER OFFER
On May 7, 1999, approximately 3.4 million shares of Aquila Gas Pipeline
Corporation (AQP) were tendered to UtiliCorp at $8.00. The 3.4 million
shares, together with the 24.0 million shares already held, represented 93%
of AQP's total shares outstanding. All remaining shares not tendered were
converted in a "short-form" merger into a right to receive $8.00 per share.
The short-form merger was completed on May 14, 1999. As a result, AQP is no
longer a publicly traded company.
NATURAL GAS STORAGE FACILITY
On March 29, 1999, we agreed to purchase Western Gas Resources Storage, Inc. for
$100 million in cash. This storage facility will provide access to 20 BCF of
natural gas in a strategic location to enhance physical and trading activities.
The 2,200 acre subsurface facility is located in Katy, Texas. The purchase
closed in the second quarter of 1999.
20
<PAGE>
MERCHANT GAS-FIRED POWER PLANT
A subsidiary of Aquila is building a 580-megawatt gas-fired power plant that
will sell its output into the central U.S. wholesale market and to a
regulated utility division of UtiliCorp. The power plant is expected to be
completed in phases with simple-cycle operation starting in June 2001 and a
combined-cycle operation starting in January 2002. Total estimated
construction cost is $277 million and we expect to complete negotiations with
a potential partner sometime during the fourth quarter.
INDEPENDENT POWER PROJECT
On September 1, 1999, Fort James-Pennington, Inc. exercised its contractual
right to call our 50% partnership interest in the Naheola cogeneration project
in Pennington, Alabama. On October 19, 1999, the purchase price for that
interest was determined by the parties to be $83.7 million which will result in
a pre-tax gain of $5-$8 million. Closing is expected to occur by December 31,
1999. This IPP currently provides $9-$10 million of annual EBIT.
INTERNATIONAL
The table below summarizes the operations of our international business for the
following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ---------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $188.3 $ 78.8 $714.2 $280.7
- ---------------------------------------------------------------------------------------------------------------
Cost of sales 129.8 61.5 542.7 238.0
- ---------------------------------------------------------------------------------------------------------------
Gross profit 58.5 17.3 171.5 42.7
- ---------------------------------------------------------------------------------------------------------------
Operating expenses:
Other operating 14.8 7.3 41.6 21.5
Maintenance .5 --- 2.7 ---
Taxes, other than income taxes 2.9 3.0 8.7 9.2
Depreciation and amortization 10.6 2.7 33.3 8.6
- ---------------------------------------------------------------------------------------------------------------
Total operating expense 28.8 13.0 86.3 39.3
- ---------------------------------------------------------------------------------------------------------------
Equity earnings in subsidiaries and partnerships 6.7 8.9 14.9 77.2
Other income (expense) 2.6 .9 1.4 (4.7)
- ---------------------------------------------------------------------------------------------------------------
Reported EBIT 39.0 14.1 101.5 75.9
- ---------------------------------------------------------------------------------------------------------------
Non-recurring items:
Gain on sale --- --- --- (45.3)
UK gas contracts reserve --- --- --- 13.4
- ---------------------------------------------------------------------------------------------------------------
Normalized EBIT $ 39.0 $ 14.1 $101.5 $ 44.0
- ---------------------------------------------------------------------------------------------------------------
EBIT by business subunit:
Australia $ 10.3 $ 4.9 $ 21.9 $ 19.4
New Zealand 23.9 2.9 60.0 8.1
United Kingdom (.4) 1.2 6.9 .4
Canada 5.2 5.1 12.7 16.1
===============================================================================================================
Normalized EBIT $ 39.0 $ 14.1 $101.5 $ 44.0
===============================================================================================================
</TABLE>
QUARTER-TO-QUARTER
DELIVERY NETWORKS (AUSTRALIA, NEW ZEALAND AND CANADA)
In Australia, the operational integration of our purchase earlier this year of
the Multinet/Ikon gas distribution system has been completed and provided a
$4.8 million contribution to EBIT when compared to the prior year.
21
<PAGE>
EBIT from New Zealand increased $21.0 million to $23.9 million in 1999 compared
to 1998. This increase is due to the additional $744 million we invested in New
Zealand over the last twelve months and the successful integration of those
purchases into our existing operations. As a result of these investments, our
ownership interest in UnitedNetworks increased to 78.8% from 37.5%. We
consequently reflect New Zealand's activities on a consolidated basis in 1999,
but in 1998 New Zealand investments were reflected on the equity method. This
change impacts quarter-to-quarter comparisons and is a key reason for increases
in sales, cost of sales, and operating expense and the decrease in equity
earnings in 1999 compared to 1998.
ENERGY MERCHANT (UNITED KINGDOM)
EBIT from our international energy merchant business decreased $1.6 million
compared to the prior year. This decrease is primarily due to higher operating
expenses stemming from the expansion costs associated with opening offices in
Spain, Norway and Germany.
On October 1, 1999, a gas sales contract expired and was not renewed. This
will reduce our indirect customer count by about .5 million or about 45%. The
loss of this customer base is not expected to have a material impact on our
total consolidated EBIT.
YEAR-TO-DATE
(FACTORS DISCUSSED IN THE QUARTER-TO-QUARTER COMPARISON ALSO AFFECTED THE
YEAR-TO-DATE COMPARISONS.)
DELIVERY NETWORKS (AUSTRALIA, NEW ZEALAND AND CANADA)
EBIT from Australia increased $2.5 million on a year-to-date basis. Offsetting
the $6.8 million contribution of our Multinet/Ikon acquisition in the second and
third quarters was the impact of our reduced ownership in the electric
distribution business resulting from the initial public offering in the second
quarter of 1998.
New Zealand EBIT increased $51.9 million on a year-to-date basis due to
increased ownership, full consolidation of the investment and a successful
integration of our investments, as discussed above.
EBIT from Canada was down $3.4 million year-to-date in 1999 primarily due to
warmer than expected weather, a change in regulatory accounting requirements,
and the timing of capital projects.
ENERGY MERCHANT (UNITED KINGDOM)
EBIT increased $6.5 million in our international energy merchant business on a
year-to-date basis. Trading results improved and we had a substantial increase
in our indirect customers when compared to the prior year. EBIT in 1999 was also
enhanced by the settlement of non-economic gas supply contracts in the 1998
second quarter.
AUSTRALIAN MULTINET/IKON ACQUISITION
On March 30, 1999, we acquired a 25.5% interest in Multinet Gas/Ikon Energy, a
natural gas network and retailer in Victoria, Australia, for $224.0 million.
TRUSTPOWER ACQUISITION
Effective January 31, 1999, we closed the purchase of New Zealand based
TrustPower. Working through our 78.8% owned New Zealand utility, UnitedNetworks
Limited, completion of this
22
<PAGE>
transaction makes us the country's largest electricity distribution company.
The $261 million deal added approximately 96,000 TrustPower customers to
UnitedNetworks' system.
EUROPEAN EXPANSION
In a strategic move toward developing significant positions in key European
markets, we have opened offices in Norway and Germany. These offices will
offer energy-related and risk management services which will be directed
toward industrial and energy groups, with a focus on both physical and
financial energy trading. We previously announced the opening of an office in
Spain.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued a new standard on
derivatives that requires companies to declare each derivative as either a fair
value or cash flow hedge and record the derivative and the underlying instrument
at fair value. The income statement impact depends on whether the derivative is
a fair value or cash flow hedge. This new standard will have an impact on
certain interest rate financial instruments currently being used in some of the
international business units and may impact certain commodity contracts. The
financial impact of this standard, which is effective January 1, 2001, is not
known at this time.
YEAR 2000 STATUS
STATUS OF KEY PROCEDURE AREAS
We have addressed Year 2000 readiness in our information and operational
systems. Prior to June 30 we completed remediation of mission critical systems
and development of local contingency plans to utilize in the unlikely event of a
Year 2000 interruption in our systems or one of our key suppliers. We are
currently completing post-remediation testing and verification of upgrades. We
are also integrating, arranging for resources, and finalizing staff assignments
for the contingency plans.
Certain non-critical systems that are not Year 2000 ready may not be replaced or
remediated by year end. These systems are not critical to UtiliCorp and will not
impact our ability to provide energy services to our customers, bill and collect
receivables or provide financial information. A more detailed update on our Year
2000 program is described below.
INFORMATION SYSTEMS AND TECHNOLOGY
Many of our information systems and related software are already Year 2000
ready. We installed several new software systems, including financial, customer
information (in certain locations), and various support systems through a
company-wide reengineering project that began in 1994.
The final portions of our customer information system will be implemented in
2000, but the existing system which these portions will replace is currently
Year 2000 ready. We expect to spend approximately $145.4 million in new
information technology. Of this amount, to date we have spent $139.2 million.
OPERATIONS AND EMBEDDED SYSTEMS
We identified, inventoried, and assessed all potentially affected equipment,
systems, and software. We have completed certain system replacements that affect
our ability to serve customers and manage operations. Our estimated cost of
remediation is approximately $2.8
23
<PAGE>
million. Certain non-mission critical systems that do not affect energy flow
or management will be remediated as needed, some after December 31, 1999.
We prepared contingency plans for our businesses that includes procedures to
operate our energy networks under conditions arising from possible Year 2000
issues. We are integrating these local level plans into a uniform whole and
coordinating our contingency plans with other utilities and suppliers.
24
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS
(a) LIST OF EXHIBITS:
10 Dwayne L. Hart Employment Contract
27 Financial Data Schedule--For the nine months ended
September 30, 1999.
(b) REPORT ON FORM 8-K
We filed reports on Form 8-K for the quarter ended September 30, 1999,
as follows:
<TABLE>
<CAPTION>
DATE Description
---- ------------------------------------------------
<S> <C>
September 23, 1999 Supplemental Indenture and Other Documents in
Support of Issuance of Premium Equity
Participating Securities
October 6, 1999 Underwriting Agreement, the Remarketing
Agreement, and the Twelfth Supplemental
Indenture entered into in connection with the
Premium Equity Participating Security
November 5, 1999 Reporting results of operations for the period
ending September 30, 1999
</TABLE>
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/ Dwayne L. Hart
--------------------------------
Dwayne L. Hart
Senior Vice President and Chief Financial Officer
Date: November 12, 1999
By: /s/ Daniel J. Streek
--------------------------------
Daniel J. Streek
Vice President & Assistant Controller
Date: November 12, 1999
26
<PAGE>
[LETTERHEAD]
February 2, 1999
Mr. Dwayne Hart
4119 Purdue St.
Houston, TX 77005
Dear Dwayne,
I am pleased to extend an offer to you to join UtiliCorp United as Senior Vice
President and Chief Financial Officer. This position reports to me and is
located in Kansas City, Missouri. This offer is firm, and you can accept it at
anytime within the next 180 days as soon as your employment with UtiliCorp will
not materially violate any obligations you have with your current or former
employer. The time period, of course, can be extended by mutual consent.
The key elements of your employment are summarized below:
OVERVIEW OF COMPENSATION
------------------------
Base Annual Salary $350,000
Sign-on Bonus 150,000
Initial reporting incentive payable in cash on
signing and reporting to work. Thereafter, three
payments of $150,000 payable on your service
anniversary date. You will have the option of
receiving this special annual retention bonus in
cash, restricted stock or other available forms of
deferred income.
1999 Annual Incentive Plan (% of base-$350,000)
Target 55% 192,500
Maximum 85% 297,500
Additional bonus (restricted stock election)
You may elect to take any part of your annual
incentive plan in UCU three year restricted stock.
You will receive a bonus of 33 percent of the value
of shares taken in restricted stock and the bonus
shares are also awarded in restricted stock.
For example: Assume you receive an incentive award
of $200,000 and elect to take 100% in restricted
stock. You receive a "bonus" of additional restricted
stock worth $66,000 ($200,000 x 33 percent).
<PAGE>
Long Term Incentive Plan:
The UtiliCorp Long Term Incentive Plan consists of
annual grants of Non-Qualified Stock Options and
Performance Units. The actual size of the grants are
determined each year by the Compensation Committee of
the Board on advice from their consultant.
Stock Options:
For 1999 you will receive a grant of 70,500 (Post-Split) non-qualified
stock options, vesting over four years with the "strike price" to be
established by the UCU Compensation Committee at its next meeting
following your accession.
Performance Unit Plan: (3 year cycle)
Actual Performance unit awards are determined based on UCU's Total
Shareholder Return (TSR) performance over a three year period relative
to a specified peer group of 12 companies.
Your number of units:
<TABLE>
<CAPTION>
Target Maximum
<S> <C> <C>
97-99 cycle 2,000 4,000 (one year pro rata)
98-00 cycle 8,000 16,000 (two years pro rata)
99-01 cycle 16,000 32,000
</TABLE>
Payout examples: 99-01 cycle
Assumptions: UCU is ranked 7th
Award matrix = 110% of target
Dividends paid over 3 years = $5/share
12/31/01 UCU stock value = $36
(16,000 units x 110%) x ($36 + $5) = $ 721,600
UCU is ranked 1st, 2nd, or 3rd
Award matrix = 200% of target
(16,000 units x 200%) x ($36 + $5) = $1,312,000
Ownership Targets and Restricted Stock Bonus Election:
Any payments made under the Performance Unit Plan are one year
restricted stock until such time that you have accumulated
shareholdings of the Company from any source, excluding unexercised
stock options, of at least TWO TIMES your annual base salary. Once
you have met the targeted share ownership, compensation from this
plan will be paid in cash.
If eligible for payment in cash, you may elect to take any portion
of your award in restricted stock and receive a bonus of 25 percent
in one year restricted stock.
2
<PAGE>
Employment Agreement:
UCU will enter into an employment agreement that in the event you
are terminated without cause, the Company will continue salary
payments at your base salary rate for two years following the date
of termination. In addition, the Company will pay a lump sum equal
to two times the targeted incentive compensation benefit that would
be paid to you for the year during which the termination occurs if
all the targeted goals in effect on the date of termination were
exceeded. (Note: The initial agreement will be a two year
Change-In-Control agreement -- Employment Agreements are under
development.)
ELIGIBILITY TO PARTICIPATE IN UTILICORP UNITED'S EMPLOYEE BENEFIT PROGRAMS
WHICH INCLUDE:
- Executive perquisites package including:
- $5,000 after tax payment;
- $5,300 after tax payment per year financial planning services;
- Participation in Executive Life Insurance Plan of one times base
salary in addition to the standard company paid two times
base salary
- Long term disability insurance paid a 100% of base salary
- You will be eligible to participate in UtiliCorp's 401(k) Savings
Plan the first of the month following date of hire. The 401(k) Plan
has a dollar for dollar employer match up to 6% of your pre-tax and/or
after-tax contributions. Employer contributions are made in UtiliCorp
stock and vested over five years at 20% per year. You may make total
contributions up to 15% of pay subject to IRS limitations.
- You will be eligible to participate in the non-qualified Capital
Accumulation Program. This includes the excess 401(k) program
(Supplemental Contributory Retirement Plan) of up to 15% of base
salary with the same UCU match of $1 for $1 up to 6% of base salary.
You may elect to defer base salary and incentive compensation into the
Deferred Compensation Plan and have the same 401(k) investment options
with an additional election to select an annualized investment rate of
return equal to 130% of Moody's Corporate Bond Yield. In addition,
you will participate in the Supplemental Executive Retirement Plan to
receive the full Defined Pension Plan formula that is limited by
government limitation to highly paid executives.
- Eligible for four weeks vacation annually with one week carryover to
the next calendar year.
- Defined Benefit Pension Plan - Eligible immediately; 100% employer
sponsored, 0% vested until 5 years of employment with a minimum of
1,000 hours worked per calendar year, then 100% vested.
- The Employee Stock Purchase Plan allows you to purchase stock at 15%
discount up to 20% of your base salary in any calendar year up to a
maximum of $25,000.
- The company contributes 3% of your pay in the Employee Stock
Contribution Plan, in corporate stock, vesting at 20% per year with
1,000 hours service.
3
<PAGE>
- Eligibility under the terms of the Beneflex plan to select medical,
dental, vision, life insurance, AD&D and disability coverage. You
will receive benefit credits to apply to your selections.
- A copy of our relocation policy is enclosed. The last page of the
policy must be signed and returned to Human Resources for relocation
reimbursement to become effective.
- Ten paid holidays per year.
This offer is contingent upon passing a pre-employment drug test which must be
completed within 2 business days after accepting the position. Please contact
Donna Gavin at (800) 941-6271 to arrange.
This offer is also contingent upon a satisfactory background investigation which
will be completed upon acceptance of this offer.
It should be understood that all the preceding benefit plans are subject to
change during the normal course of UtiliCorp-wide plan re-designs.
If you decide to accept the offer of employment, PLEASE COMPLETE THE PERSONAL
DATA FORM ENCLOSED WITH THIS LETTER AND RETURN IT ALONG WITH YOUR WRITTEN
CONFIRMATION.
In order for UtiliCorp United to comply with the Immigration Reform and Control
Act of 1986, you must provide documentation of your identity and legal
eligibility for employment in the United States. You must bring this
documentation with you on your first day of employment for your orientation.
A complete list of acceptable documents is enclosed. In addition to the I-9,
please complete as many of the forms as possible, (eg. W-4's, direct deposit,
etc.) and bring everything with you to orientation.
I will await your written confirmation by February 5, 1999. If you have any
questions, please do not hesitate to call me at (816) 467-3507.
Sincerely,
/s/ Rick Green
Enclosure
cc: Leo Morton
Donna Gavin
4
<PAGE>
X Offer Accepted Offer Declined
- ----- -----
I understand and agree that, in the event I am terminated for cause or
voluntarily resign within twelve months after the date of hire, the Company
may withhold and retain from any compensation due me, any amount up to and
including the total amount of the reporting bonus and relocation expenses
paid to date on my behalf to the maximum extent permitted by applicable law. I
also understand that if the total amount of the reporting bonus and relocation
expenses paid to date on my behalf has not been repaid in full to the Company
within thirty days following my termination for cause or voluntary termination
that I will be responsible for all Company costs and expenses, including
attorney's fees and other legal costs incurred by the Company in seeking to
enforce this repayment provision.
By accepting this offer I acknowledge that you have instructed me and I have
agreed that I will not use any confidential information of any prior employer
and that my duties will be different from the duties I perform for my present
employer.
/s/ Dwayne L. Hart 2/15/99
- --------------------------------------------------------------------------------
Signature/Date
5
<PAGE>
[LETTERHEAD]
February 9, 1999
Mr. Dwayne Hart
4119 Purdue St.
Houston, TX 77005
Dear Dwayne:
I was pleased to learn that you have accepted our offer to join UtiliCorp as
Senior Vice President and Chief Financial Officer, in accordance with the terms
of our recent offer letter. While I understand that you may not be able to join
us immediately, I also understand that you will be making every effort to join
us as soon as you can. I look forward to receiving your signed acceptance.
For the period between your announcement and your confirmed employment start
date, UtiliCorp is prepared to advance to you a sum up to an amount equivalent
to the sign-on bonus. You may use that money for your interim living expenses
prior to beginning employment. You should check on the availability of COBRA
continuation coverage through ENRON and the possibility of converting to an
individual life insurance policy through the current carrier. You may also want
to consider coverage under your wife's group policy in this interim period.
Once you are able to begin employment, your 1999 Annual Incentive Plan payout,
scheduled for March, 2000, will not be affected. For the purpose of determining
plan payout, you will be treated as if you were on payroll for the entire year.
UtiliCorp is also prepared to support you by reimbursing you for any legal
expenses associated with your defense of any alleged violation of your
employment agreement with ENRON should such action be taken by your former
employer. We will also coordinate with you on any internal or external
announcements of your new position at UtiliCorp.
I hope this letter provides you with the assurance you need to move forward to
the next significant step. I wish you well and offer the assistance of UtiliCorp
in any way that would be prudent and productive.
Sincerely,
/s/ Rick Green
cc: Leo Morton
<PAGE>
Dwayne Hart
Rick Green
April 30, 1999
PERFORMANCE UNIT PLAN
Page 2 of your February 2, 1999 offer letter contained the following reference
to the Performance Unit element of your Long Term Incentive Plan:
PERFORMANCE UNIT PLAN: (3 YEAR CYCLE)
ACTUAL PERFORMANCE UNIT AWARDS ARE DETERMINED BASED ON UCU's TOTAL
SHAREHOLDER RETURN (TSR) PERFORMANCE OVER A THREE YEAR PERIOD RELATIVE TO
A SPECIFIED PEER GROUP OF 12 COMPANIES.
YOUR NUMBER OF UNITS:
<TABLE>
<CAPTION>
TARGET MAXIMUM
<S> <C> <C>
97-99 CYCLE 2,000 4,000 (ONE YEAR PRO RATA)
98-00 CYCLE 8,000 16,000 (TWO YEARS PRO RATA)
99-01 CYCLE 16,000 32,000
</TABLE>
As we have discussed, we have modified the target and maximum number of units
you will receive for the cycles ending in 1999 and 2000 as well as dropped
references to pro rata treatment. The units indicated above are also pre-split
units. This was taken into account in the modification. The referenced section
is hereby amended to read as follows:
PERFORMANCE UNIT PLAN: (3 YEAR CYCLE)
ACTUAL PERFORMANCE UNIT AWARDS ARE DETERMINED BASED ON UCU's TOTAL
SHAREHOLDER RETURN (TSR) PERFORMANCE OVER A THREE YEAR PERIOD RELATIVE
TO A SPECIFIED PEER GROUP OF 12 COMPANIES.
YOUR NUMBER OF UNITS:
<TABLE>
<CAPTION>
TARGET MAXIMUM
<S> <C> <C>
97-99 CYCLE 11,000 22,000
98-00 CYCLE 17,587 35,174
99-01 CYCLE 24,000 48,000
</TABLE>
Should you have questions regarding this modification, Please contact Leo
Morton.
<PAGE>
UCU LTIP
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PERFORMANCE UNITS
1997-99 1998-00 1999-01
TARGET TARGET TARGET TARGET TARGET TARGET
(PRE-SPLIT) (POST-SPLIT) (PRE-SPLIT) (POST-SPLIT) (PRE-SPLIT) (POST-SPLIT)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BAND Ia 23,000 34,500 32,000 48,000 44,000 66,000
- -------------------------------------------------------------------------------------------------
BAND Ib 18,400 27,600 25,600 38,400 35,200 52,800
- -------------------------------------------------------------------------------------------------
BAND II 6,000 9,000 12,000 18,000 16,000 24,000
- -------------------------------------------------------------------------------------------------
BAND III 4,000 6,000 5,000 7,500 7,000 10,500
- -------------------------------------------------------------------------------------------------
BAND IV 2,000 3,000 2,500 3,750 5,000 7,500
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
STOCK OPTIONS
- -------------------------------------------------------------
GRANTED 2/98 GRANTED 2/99 YEAR 2000*
<S> <C> <C> <C>
BAND Ia 90,000 130,000 195,000
BAND Ib 72,000 104,000 156,000
BAND II 35,000 47,000 70,500
BAND III 15,000 20,000 30,000
BAND IV 7,500 13,500 20,250
BAND V 3,750 5,000 7,500
- -------------------------------------------------------------
</TABLE>
* Post-split number. Calculation = 2/99 Option grant x 1.5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ENDING SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 181
<SECURITIES> 0
<RECEIVABLES> 2,588
<ALLOWANCES> 0
<INVENTORY> 256
<CURRENT-ASSETS> 3,302
<PP&E> 5,259
<DEPRECIATION> 1,587
<TOTAL-ASSETS> 8,498
<CURRENT-LIABILITIES> 3,510
<BONDS> 2,234
350
0
<COMMON> 94
<OTHER-SE> 1,414
<TOTAL-LIABILITY-AND-EQUITY> 8,498
<SALES> 14,235
<TOTAL-REVENUES> 14,235
<CGS> 13,390
<TOTAL-COSTS> 577
<OTHER-EXPENSES> 26
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 178
<INCOME-TAX> 59
<INCOME-CONTINUING> 119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119
<EPS-BASIC> 1.30
<EPS-DILUTED> 1.30
</TABLE>
