UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).
For the fiscal year ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from to
Commission file number 1-3576
ST. JOSEPH LIGHT & POWER COMPANY
(Exact name of registrant as specified in its charter)
State of Missouri 44-04l9850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Francis Street
P.O. Box 998
St. Joseph, Missouri 64502-0998
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 233-8888
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which registered-New York Stock
Exchange
Title of each class-Common stock, without par value
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's outstanding common
stock, based on the closing price therefor on the New York Stock
Exchange at February 28, 1995, was $131,891,321.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Common Stock without par value 3,907,891 shares
(Class) (Outstanding at February 28, 1995)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1994 Annual Report to Shareholders are
incorporated by reference into Parts I, II and IV.
Portions of the 1995 Definitive Proxy Statement for the 1995
annual meeting are incorporated by reference into Part III.
<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
PART I
ITEM 1 - BUSINESS.
St. Joseph Light & Power Company (the "Company") is a Missouri
corporation, incorporated in 1895, with its principal office at
St. Joseph, Missouri and is engaged primarily in the generation,
transmission and distribution of electric energy to customers in
its ten-county service territory in northwest Missouri. It
supplies this service in St. Joseph, the headquarter city, and 52
other incorporated communities and the intervening rural
territory. The service area contains 3,300 square miles. At
December 31, 1994, there were approximately 61,000 electric
customers. In 1994, electric revenues accounted for 87.0% of total
operating revenues.
Natural gas for residential, commercial and industrial purposes is
provided to customers in Maryville, a state university town of
about 10,000, and 14 other smaller communities in northwest
Missouri. Natural gas revenues accounted for 6.1% of total
operating revenues in 1994. Currently there are about 6,300
natural gas customers.
The Company supplies industrial steam to eight customers in St.
Joseph. Industrial steam revenues accounted for 6.9% of total
operating revenues in 1994.
SOURCES AND AVAILABILITY OF RAW MATERIALS.
The Company's principal fuel for electric generation is coal.
Small amounts of natural gas and oil are also used. During 1994,
fuels utilized for electric generation consisted of 92% coal, 4%
oil and 4% gas.
Kansas City Power & Light Company (KCP&L) arranged for a twenty
(20) year supply agreement, effective January 1, 1984, for low
sulphur western coal required for the jointly owned Iatan unit.
KCP&L, the Company and The Empire District Electric Company (EDE),
the owners of the Iatan plant, jointly signed the agreement with
Atlantic Richfield Company for approximately 2 million tons of
Wyoming coal per year through the term of the agreement. The
Iatan owners also entered into a ten (10) year contract effective
April 1, 1986, with the Burlington Northern Railroad Company, for
the transportation of coal from the Wyoming coal fields to Iatan.
Coal requirements for the Lake Road plant in 1995 are anticipated
to be met with present inventory and with contract and spot
purchases. During 1994, the Company entered into a new two year
coal supply agreement effective through April 1996. Natural gas
requirements are met with purchases from regional suppliers and
transported under the industrial tariffs of Missouri Gas Energy as
an interruptible customer. The Company meets all of its oil
requirements through spot purchases.<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 1 - BUSINESS. (Continued)
As a result of the Federal Energy Regulatory Commission Order
#636, the Company entered into a ten year agreement with ANR
Pipeline Company effective November 1993 to provide natural gas
storage and transportation services. The agreement allows for the
acquisition of natural gas on the open market. The Company
believes the arrangement is sufficient to fulfill its natural gas
requirements.
FRANCHISES.
The Company currently holds non-exclusive franchises for its
electric utility operations in substantially all of the
incorporated portions of its service area. The Company holds a
perpetual electric franchise without limitation of time in St.
Joseph. Franchises in 51 additional incorporated municipalities
expire in various years until 2015. One small community is served
without a franchise.
The Company holds gas franchises in each of the 15 communities
served, expiring in various years until 2010.
COMPETITION.
There are four rural electric cooperatives (RECs) within the
Company's service area. These RECs purchase their total power
requirements from generating and transmission cooperatives which
are financed partially by government loans or grants.
Two municipally owned electric distribution systems are located in
the Company's territory serving approximately 900 customers.
The Company's rates are significantly lower than the RECs and
municipally owned systems in the area and also fare very favorably
with other investor-owned utilities in the region.
FINANCIAL INFORMATION ABOUT SEGMENTS OF BUSINESS.
This information is incorporated by reference to Note 8 of Notes
to Financial Statements in the 1994 Annual Report to Shareholders,
page 34, which is Exhibit 13 hereto.
ENVIRONMENTAL REQUIREMENTS.
This information is incorporated by reference to Management's
Discussion and Analysis of Financial Condition and Results of
Operations of the 1994 Annual Report to Shareholders, pages 19-23,
which is Exhibit 13 hereto.
NUMBER OF EMPLOYEES.
There were 354 full time employees and 4 part time employees of
the Company at December 31, 1994.
<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 2 - PROPERTIES.
The Company has an agreement with KCP&L and EDE for joint
ownership of the coal-burning generating plant at Iatan, Missouri.
The Company's share of this plant amounts to 121 MW of net
capability. Refer to "Jointly Owned Iatan Plant" incorporated by
reference to Note 1 of Notes to Financial Statements in the 1994
Annual Report to Shareholders, page 30, which is Exhibit 13
hereto.
The Company owns the Lake Road generating station in St. Joseph,
Missouri with an aggregate net capability of 258 MW (summer
rating), of which 105 MW is coal-fired and 153 MW utilize natural
gas and oil.
The Company owns a 62-mile segment of a 582 mile, 345 KV
transmission line connecting utilities from Kansas City to
Minneapolis. A second 345 KV line, 23 miles in length, is used as
a tie-line for two neighboring utilities, one of which pays all
fixed and operating costs. The Company also owns 32 miles of 345
KV line connecting the Iatan generating plant with the Company's
system. In addition, the Company constructed, with six other
regional utilities, a 103-mile, 345 KV transmission line,
primarily in northwest Missouri, to strengthen the interconnection
network. The line provides a high capacity interconnection
facility directly linking the electric transmission systems of
Nebraska Public Power District, Associated Electric Cooperative of
Springfield, Missouri, and St. Joseph Light & Power Company. The
Company has 80 miles of 161 KV transmission line which serves as
the "backbone" for its internal transmission/distribution system,
and owns the necessary lower voltage distribution lines,
distribution substations, transformers and equipment required to
provide service in its territory.
ITEM 3 - LEGAL PROCEEDINGS.
Certain legal actions are pending which, in management's opinion,
are not expected to materially affect the Company's financial
position or operating results.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Executive Officers of the Registrant.
The following are the executive officers:
T. F. STEINBECKER, President. Age 49. BSBA and MBA, University
of Missouri and CPA.
Employed by the Company in 1975; executive capacity since 1976;
present position since May 1986.
J. A. STUART, Vice President--Engineering and Construction. Age
41. BSEE, California Polytechnic State University. Employed by
the Company and executive capacity since 1994.
<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
Executive Officers of the Registrant. (Continued)
R. L. SLATER, Vice President--Administration. Age 62. BA,
Benedictine College, Atchison, Kansas. Employed by the Company in
1978; executive capacity since 1979; present position since
November 1986.
L. J. STOLL, Vice President--Finance, Treasurer and Assistant
Secretary. Age 42. BSBA, Missouri
Western State College. MBA, Northwest Missouri State University.
Employed by the Company in 1975; executive capacity since 1980;
present position since May 1986.
D. V. SVUBA, Vice President--Power Supply. Age 52. BSEE, Iowa
State University. MSEE,
University of Missouri. Employed by the Company in 1966;
executive capacity since 1990; present position since November
1990.
G. L. MYERS, General Counsel and Secretary. Age 41. AB,
Washington University. JD, University of Missouri-Kansas City.
Employed by the Company and executive capacity since 1979; present
position since May 1989.
Each officer is covered by a three year employment agreement.
There are no family relationships between any officers of the
Company.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Information regarding the principal market for the Company's
common stock, the market prices and the dividends paid on such
stock for the past two years is incorporated by reference to the
1994 Annual Report to Shareholders, page 18, which is Exhibit 13
hereto.
There were 5,452 holders of record of the Company's common stock
as of February 3, 1995, the record date fixed for the dividend
paid on February 17, 1995.
ITEM 6 - SELECTED FINANCIAL DATA.
This information is incorporated by reference to the 1994 Annual
Report to Shareholders, page 18, which is Exhibit 13 hereto.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This information is incorporated by reference to the 1994 Annual
Report to Shareholders, pages 19-23, which is Exhibit 13 hereto.
<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This information is incorporated by reference to the 1994 Annual
Report to Shareholders, pages 24-37, which is Exhibit 13 hereto.
On March 15, 1995, the Company issued $20 million of unsecured
Medium-Term Notes at 8.36% with a maturity date of March 15, 2005.
The Company will use $8.6 million of the proceeds to pay off
short-term borrowings. The remainder will be used for general
corporate purposes.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT.
Information required by Item 10 regarding directors is not
answered for the reason that the registrant will, within 120 days
after the close of the fiscal year, file with the Securities and
Exchange Commission a "Definitive Proxy Statement" pursuant to
Regulation 14A of the Securities Exchange Act of 1934. The
information required is incorporated by reference to such
Definitive Proxy Statement. Certain information concerning the
executive officers of the Company is set forth in Part I under the
caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION.
Item 11 is not answered for the reason that the registrant will,
within 120 days after the close of the fiscal year, file with the
Securities and Exchange Commission a "Definitive Proxy Statement"
pursuant to Regulation 14A of the Securities Exchange Act of 1934.
The information required is incorporated by reference to such
Definitive Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
None.<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 13 is not answered for the reason that the registrant will,
within 120 days after the close of the fiscal year, file with the
Securities and Exchange Commission a "Definitive Proxy Statement"
pursuant to Regulation 14A of the Securities Exchange Act of 1934.
The information required is incorporated by reference to such
Definitive Proxy Statement.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
Financial Statements:
This information is incorporated by reference (as set forth below)
to the 1994 Annual Report to Shareholders, which is Exhibit 13
hereto.
Statements of Income, page 24
Balance Sheets, page 25
Statements of Capitalization, page 26
Statements of Retained Earnings, page 27
Statements of Cash Flows, page 28
Statements of Taxes, page 29
Notes to Financial Statements, pages 30-35
Responsibility for Financial Statements, page 38
Report of Independent Public Accountants, page 38
Financial Statement Schedules:
Schedule II- Valuation and Qualifying Accounts - For the years
ended December 31, 1994, 1993 and 1992 (page 10).
Schedules not listed above are omitted because of absence
of conditions under which they are required or because the
required information is included in the financial statements
submitted.<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K. (Continued)
Exhibits:
Exhibit 3- Restated Articles of Incorporation adopted on May
20, 1987, which is incorporated by reference to
page 16 of the 1987 Form 10-K. By-laws of Company
as amended on January 16, 1991, which is
incorporated by reference to page 17 of the 1990
Form 10-K.
Exhibit 10- Coal Freight Agreement between Burlington Northern
Railroad Company, Seller, and Kansas City Power &
Light Company, St. Joseph Light & Power Company and
The Empire District Electric Company, Buyers. This
exhibit is incorporated by reference to page 17 of
the 1986 Form 10-K.
- Coal Supply Agreement between Atlantic Richfield
Company, Seller, and Kansas City Power & Light Company,
St. Joseph Light & Power Company and The Empire
District Electric Company, Buyers. This exhibit is
incorporated by reference to page 17 of the 1983 Form
10-K.
- CFSI Agreement which is incorporated by reference to
page 17 of the 1989 Form 10-K.
- Form of Key Management Employment Agreements which is
incorporated by reference to page 18 of the 1990 Form
10-K. Amendment to Key Management Employment
Agreements as amended on December 1, 1993, which is
incorporated by reference to page 18 of the 1993 Form
10-K.
- Directors Indemnification Agreement, which is
incorporated by reference to page 19 of
the 1993 Form 10-K.
- Supplemental Executive Retirement Plan which is
incorporated by reference to page 19 of the 1990 Form
10-K. Amendment to Supplemental Executive Retirement
Plan as amended on November 17, which is incorporated
by reference to page 20 of the 1993 Form 10-K.
- Gas Purchase Agreements with ANR Pipeline Company,
which is incorporated by reference to page 21 of the
1993 Form 10-K.
- Coal Supply Agreement with Alternative Fuels,
Incorporated (page 11).
- Employment contract with J.A. Stuart, Vice President-
Engineering and Construction (page 12).
Exhibit 13- The 1994 Annual Report to Shareholders (page 13).
Exhibit 23- Consent of Independent Public Accountants (page
14).
Exhibit 27- Financial Data Schedule (page 15).
<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K. (Continued)
Reports on Form 8-K:
No Form 8-K was required to be filed during the quarter ended
December 31, 1994.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To St. Joseph Light & Power Company:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in St. Joseph Light
& Power Company's Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon
dated January 26, 1995. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
schedules listed in the index above are presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
January 26, 1995.<PAGE>
ST. JOSEPH LIGHT & POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
Column A Column B Column C Column D Column E
Deductions
for Purposes Balance
Balance at Additions for Which at
Beginning Charged Charged to Reserves End Of
Description of Year to Expense Construction Were Created Year
Valuation accounts deducted from assets
to which they apply -
Accumulated Provision for
Uncollectible Accounts:
December 31, 1994 $390256 $160748 $0 $211857 $339147
December 31, 1993 $252947 $278725 $0 $141416 $390256
December 31, 1992 $302714 $146039 $0 $195806 $252947
Other reserves -
Accumulated Provision for Injuries
and Damages:
December 31, 1994 $303110 $222655 $27854 $254426 $299193
December 31, 1993 $439804 $134368 $3547 $274609 $303110
December 31, 1992 $489994 $29614 $3488 $83292 $439804
Accumulated Provision for Major
Medical:
December 31, 1994 $369986 $860883 $0 $1225344 $5525 (4)
December 31, 1993 $349376 $951708 $0 $931098 $369986
December 31, 1992 $401813 $1243368 $0 $1295805 $349376
Accumulated Provision for Other
Post Employment Benefits:
December 31, 1994 $838627 $1310597 $0 $858233 $1290991 (5)
December 31, 1993 $0 $1187993 $0 $349366 $838627 (6)
(1) Net of $126,419 recovery on accounts previously charged off.
(2) Net of $94,839 recovery on accounts previously charged off.
(3) Net of $104,820 recovery on accounts previously charged off.
(4) The Company established a Voluntary Employees' Beneficiary Association
trust in 1994. The ending reserve represents key employees only.
(5) Includes Iatan provision of $94,432.
(6) Includes Iatan provision of $22,276.
<PAGE>
EXHIBIT 23
ST. JOSEPH LIGHT & POWER COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ST. JOSEPH LIGHT & POWER COMPANY
(Registrant)
March 15, 1995 By
T. F. Steinbecker, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
T. F. Steinbecker
President & Director
(Pricipal Executive
Officer)
March 15, 1995
L. J. Stoll
Vice President--Finance,
Treasure & Assistant
Secretary(Pricipal Financial
& Accounting Officer)
March 15, 1995
J. P. Barclay, Jr.
Director
March 15, 1995
D. A. Burkhardt
Director
March 15, 1995
R. M. Burridge
Director
March 15, 1995
J. P. Carolus
Director
March 15, 1995
M. A. Conway
Director
March 15, 1995
D. W. Shinneman
Director
March 15, 1995
R. L. Simpson
Director
March 15, 1995
G. R. Sprong
Director
March 15, 1995
COAL SUPPLY AGREEMENT
This Agreement, dated as of April 11, 1994, made and entered
into by ST. JOSEPH LIGHT & POWER COMPANY, a Missouri
Corporation, ("Buyer"), ALTERNATE FUELS, INC., a Kansas
Corporation, and MACKIE CLEMENS FUEL COMPANY, a Kansas
Corporation, ("Producers"), and FOX VALLEY RESOURCES, INC.,
an Illinois Corporation, ("Sales Agent"). Each may be referred to
individually as "Party" or collectively as "Parties".
WITNESSETH
Subject to the provisions of Section 1, Producers represent that
they will control during the term of this Agreement, mines or sources
of supply ("Producers' Source") with reserves of coal in excess of all
quantities to be purchased and sold; said coals shall be washed and
that coal produced or obtained therefrom will meet the specifications
hereinafter set forth; and that Producers are willing to sell and deliver
to Buyer, coal from Producers' Sources in the quantities and upon the
terms and conditions herein below set forth.
Buyer represents that it desires to purchase coal for use as fuel
in Buyer's Lake Road Generating Station, St. Joseph, Missouri
("Buyer's Plant") and it is willing to purchase and receive from
Producers and pay for, the quantities of coal hereinafter provided to
be purchased and sold during the term of this Agreement, upon the
terms and conditions hereinafter set forth.
Sales Agent represents that it will be responsible for invoicing,
and will perform such administrative functions and services pertaining
to this Agreement assigned to it by Buyer and/or Producers and
agreed to by Sales Agent. Such services shall be performed in a
prompt and professional manner.
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth, the Parties have agreed and do hereby agree as
follows:
SECTION 1
TERM AND RENEWAL
1.1 Unless sooner terminated in accordance with the provisions
hereof, this Agreement shall commence as of the first day of
May, 1994, and shall continue for the term of two (2) years
ending April 30, 1996. For all purposes of this Agreement, each
"Agreement Year" shall begin on May 1 and end on the next
succeeding April 30.
1.2 If Buyer desires an extension of the term of this Agreement
beyond April 30, 1996, Buyer shall so notify Producers and
Sales Agent at least ninety (90) days prior to April 30, 1996. If
Producers then have available uncommitted reserves and
production capacity at their mines and if such production
capacity is not then already committed to other customers of
Producers, the Parties will enter into good faith negotiation for
an extension of the term of this Agreement at a price, and
quantities, and upon such other terms and conditions as are
mutually agreeable. In the event that Producers do not have
coal available from their reserves on April 30, 1996, or in the
event the Parties are unable to agree upon price, quantities and
other terms and conditions for the extended term of this
Agreement by January 31, 1996, this Agreement shall terminate
as of April 30, 1996.
SECTION 2
QUANTITIES
2.1 Producers shall deliver in approximately equally apportioned
amounts and Buyer shall purchase at the delivery point during
each Agreement Year a minimum of 150,000 tons and a
maximum of 180,000 tons of coal for Buyer's Lake Road Plant.
The annual Agreement quantity ("Quantity") of coal to be
purchased by Buyer and delivered by Producer will be
nominated by Buyer at least thirty (30) days prior to the
beginning of each Agreement Year (failing which, such Quantity
shall be deemed to be 150,000 tons).
2.2 All Parties expressly agree and understand that it is critical to
the nature of Buyer's business operation that it receive the
Agreement amounts and quality of coal in a timely manner in
accordance with the agreed to schedule amongst the Parties.
Should Producers fail to deliver coal as scheduled in any month
and not deliver the scheduled tonnage as well as the deficit
tonnage during the following month and therefore a resulting
breach occurs, Buyer reserves the right to delete the deficit
undelivered tonnage from the Quantity and purchase said deficit
from other sources; this shall not limit Buyer's other remedies
at law or equity.
2.3 Buyer may at any time during each Agreement Year request to
purchase and Producers may, if coal is available, sell quantities
in excess of the nominated tonnage for that year by mutual
agreement.
SECTION 3
SOURCE
The source of coal delivered hereinunder shall be from
Producers' mines and reserves located in Barton County, Missouri, and
Crawford County, Kansas.
SECTION 4
POINT OF DELIVERY AND WEIGHING OF COAL
4.1 Subject to Subsections 4.4 and 4.5, all coal purchased and sold
hereunder shall be delivered F.O.B. rail cars Blue Mound Mine,
Oskaloosa, Missouri, ("Point of Delivery"). Scheduling of said
rail cars for coal loading shall be done by Producers. Title and
risk of loss shall pass to Buyer when coal is loaded in the rail
cars at Point of Delivery.
4.2 Certified railroad scale weights of Buyer at or near destination
shall govern for the purpose of determining the quantity of coal
shipped. Buyer shall furnish to Sales Agent all weights
immediately after weighing.
4.3 If Buyer's railroad scale is determined to malfunction or to be
inoperative at any time during the weighing of Producers' coal
at destination which results in an incorrect weight for a
shipment in question, Buyer shall notify Sales Agent as soon as
possible. In such a case, the weight for the shipment in
question shall be determined by multiplying the number of
loaded cars received in that shipment by the average net weight
per car of five (5) previous or subsequent shipments for which
such correct weights are available.
4.4 Producers shall have the right to substitute another Point of
Delivery within the State of Kansas or Missouri, provided the
coal shall be of the same size and quality and have the same
characteristics as provided in Section 5.1 in this Agreement, and
subject to Buyer's approval and provided, further, that any
increased charges for transportation shall be born by Producers.
4.5 During the months of March through November, Producers
shall tender shipments in multiples of not less than 20 nor more
than 26 carloads per shipment. During the months of
December, January and February, Producer shall tender
shipments in multiples of 20 carloads per shipment. Further,
during winter months of December, January and February, no
shipment shall be loaded by Producers until the previous
shipment is unloaded by Buyer or Buyer approval has been
given.
4.6 Where cars of nominal carrying capacity of 200,000 pounds, or
greater, are used, Producers warrant that cars shall be loaded to
an average of 196,000 pounds per shipment.
SECTION 5
QUALITY
5.1 The coal to be supplied hereunder shall be freshly mined,
washed, clean coal, sized 1-1/2" x 0" and shall have the
following approximate average monthly specifications on an "as
received basis":
Moisture 8%
Ash 13%
Sulfur not to exceed 4.5%
Calorific Value 12,300 Btu/lb guaranteed
Size 1-1/2" x 0"
Preparation Washed
5.2 Except as hereinafter provided, Buyer shall have the right to
reject or negotiate a price adjustment on any shipment of coal if
the coal contains excessive amounts of debris, earth, rock, wood,
bone, slate, sand, gravel, tramp metal or other foreign materials
which unreasonably interfere with Buyer's use of the coal in
generating electricity. This determination shall be in Buyer's
absolute discretion.
5.2a If Buyer elects to exercise its rights to reject any
trainload of coal or negotiate a price adjustment, it will
promptly give Sales Agent and Producers notice of its
intention to reject the coal and specify the reason or
reasons giving rise to such rejection. If any trainload of
coal is rejected, title shall immediately pass back to the
appropriate Producer whose coal is in such trainload.
5.2b In the event that coal is received where a monthly
average analysis is less than 11,500 Btu/lb, or coal will
produce more than 8.0 pounds per Million Btu (MMBtu)
of sulfur dioxide (SO2), when burned, as calculated by
the formula:
SO2/MMBtu = %Sulfur x 20,000
Btu/lb
or ash is more than 15%, or moisture is more than 10%,
Buyer may, in addition to the other remedies provided
herein, terminate this Agreement.
5.2c In addition to the right to reject or negotiate a price
adjustment, as set out in 5.2a, above, if Buyer, in its sole
opinion, determines that the coal received exhibits
handling and/or burning characteristics which are
unsatisfactory, Buyer shall have the right to terminate
this Agreement with thirty (30) days written notice to
Sales Agent and Producers.
SECTION 6
SAMPLING AND ANALYSIS
6.1 Buyer shall, at the coal unloading facility and its laboratory,
sample and analyze shipments in a manner consistent with the
procedures being followed by Buyer on the date hereof. Each
sample shall be divided into three parts, one part to be
analyzed by Buyer, one part, if requested within thirty (30) days,
to be furnished to Producer and the third part retained by
Buyer for not longer than forty-five (45) days, to be analyzed by
an independent commercial testing laboratory, should a dispute
arise.
6.2 The as-received quality shall be determined for each shipment
and the monthly weighted average of these analyses shall be
used for the Btu quality adjustment as specified in Section 7. In
the event of a dispute as to the validity of any analysis, or as to
the validity of the sampling and analyzing procedures followed
by Buyer, the validity thereof may be tested by a mutually
acceptable independent commercial testing laboratory and the
results of such testing shall be binding on both Parties. The
cost of the independent testing shall be paid by the requesting
Party.
6.3 In the event that no sample analysis is obtained, or a referee
sample is not available as discussed above, the quality for a
shipment in question shall be the weighted average quality of
the five (5) previously sampled shipments. In cases where five
(5) previous shipments have not been sampled, then the average
quality of the five (5) subsequent sampled shipments shall
apply.
SECTION 7
BTU QUALITY ADJUSTMENT
7.1 It is recognized that the calorific value of the coal actually
delivered may vary slightly from the guaranteed Btu/lb. If the
variation in average calorific value of the coal furnished in any
month does not exceed plus or minus 100 Btu/lb, no Btu quality
adjustment shall be made for such coal. If the weighted
average calorific value of the coal furnished in any month varies
from the 12,300 Btu/lb guaranteed, by more than plus or minus
100 Btu/lb, an adjustment will be made and compensation to
Producers or Buyer, as the case may be, shall be computed in
accordance with the following formula:
C = P x (QA - 12,300)/12,300 x T
Where:
C = Compensation for Producers or Buyer, as the case may
be.
P = Selling price of coal during the month.
QA = Actual weighted average as received Btu/lb for
coal delivered during the calendar month.
T = Tons of coal delivered during the calendar month.
7.2 Within thirty (30) days after the end of each month, Buyer shall
determine the total compensation to Producers or Buyer, as the
case may be, and shall have Sales Agent issue an invoice with
the appropriate debit or credit to Buyer, with payment to be
made in accordance with Section 10.
SECTION 8
PRICE
8.1 Buyer shall pay Producers via Sales Agent in accordance with
Section 10; the appropriate selling price FOB Point of Delivery
under this Agreement during the first two (2) year term the
agreement price shall be $25.00/ton.
8.2 The price shall be subject to adjustment for increases and
decreases after May 1, 1994, in Producers' cost of mining,
producing, preparing or delivering coal under this Agreement
resulting directly from:
8.2a Changes in federal, state or local laws, decisions,
ordinances or orders, or changes in the interpretation or
enforcement of existing federal, state and local laws,
regulations, decisions, ordinances or orders; and,
8.2b Changes in existing taxes or the adoption of new taxes
(other than taxes on profit).
Each adjustment pursuant to this Subsection 8.2 shall be
effective for coal delivered on and after the date of the change
resulting in such adjustment.
8.3 Sales Agent shall provide the Buyer documentation satisfactory
to Buyer to support the adjustments provided for in this
Agreement. If in any event such documentation is not
satisfactory to Buyer, then Producers, Sales Agent and Buyer
shall meet promptly to resolve any differences. If adjustments
result in price changes in excess of 17%, Buyer in its sole
discretion may terminate this Agreement upon thirty (30) days
prior written notice.
SECTION 9
RELIEF FROM ECONOMIC HARDSHIP
9.1 Producers and Buyer acknowledge the possibility of either Party
sustaining an economic hardship under this Agreement because
of conditions which were unforeseeable at the time the
Agreement was signed. At any time either Producers or Buyer
believes it has sustained an actual economic hardship under this
Agreement and wishes to invoke the provisions of this Section
to obtain relief, it shall give notice in writing to the other
Parties setting forth documentary proof of the following:
9.1a The existence, nature, cause, extent, and impact of such
economic hardship;
9.1b The facts establishing that the conditions causing such
economic hardship were reasonably unforeseeable, and;
9.1c The relief which such Party considers reasonable and
appropriate in the circumstances to eliminate such
economic hardship.
9.2 Producers, through Sales Agent, shall furnish to Buyer a
statement based on an audit of all pertinent books and records
and prepared and certified by a recognized firm of certified
public accountants, licensed in the State of Kansas as CPA's, as
shall then be acting as auditors of Producers, setting forth in
detail, all data as shall reasonably be necessary to verify and
support any adjustment to the price as defined in Section 9,
Subsection 9.1, 9.1a, 9.1b, 9.1c and 9.3. If in any event such
statement is not satisfactory to Buyer, then Producers, Sales
Agent and Buyer shall meet promptly to resolve any differences.
Buyer shall have the right at all reasonable times, upon written
notice, to examine the records, and CPA's reports and
workpapers, kept by Producers.
9.3 Upon receipt of a notice pursuant to Subsection 9.1, the Party
receiving the notice shall consider the documentary proof
submitted and any other relevant matters. If it, in its judgment,
finds that the Party sending such notice has sustained an actual
economic hardship due to the cause stated in such notice and is
entitled to relief hereunder, it shall afford such Party reasonable
and appropriate relief. The Party receiving such notice shall
neither arbitrarily refuse to find that the other Party has
sustained an actual economic hardship nor arbitrarily deny
reasonable and appropriate relief to eliminate such hardship if
the same shall be found to exist. Changes in the prevailing
market price of coal or subsequent coal sales by the Producers
shall not be deemed to be an unforeseeable condition.
SECTION 10
BILLING AND PAYMENT
10.1 Sales Agent will prepare and furnish to Buyer following the
initial delivery of coal hereunder, an invoice covering each
shipment of coal delivered to Buyer. Buyer agrees to pay to
Sales Agent the amount thereof within seven (7) days after
receipt of the invoice. Buyer may withhold payment of any
amount of an invoice in dispute pending resolution of the
dispute as provided in this Agreement. If it is subsequently
determined that Buyer owes Sales Agent all or any part of the
amount in dispute, Buyer shall pay such amount to Sales Agent
promptly plus interest at the current prime rate per annum, as
posted with the Mercantile Bank of St. Joseph, Missouri, from a
date fifteen (15) days after the invoice was furnished to Buyer
to the date of payment to Sales Agent.
SECTION 11
COMPLIANCE WITH LAWS; INDEMNIFICATIONS
11.1 Producers agree to comply with, or cause to be complied with,
all local, federal and state laws, rules and regulations, including
any and all, mining, reclamation, and safety and environmental
laws, rules and regulations in the operation of Producers'
Sources.
11.2 Producers agree to indemnify and hold harmless, Buyer, its
successors and assigns, from and against any and all claims,
demands, suits or causes of action, at law or in equity, for
damages and injuries (including death), of every kind and
nature to persons and property occurring on or about the
Producers' Sources, or arising out of the mining, digging,
handling, processing, loading, transporting or removal of
material therefrom (not including rail or truck transportation
from the Point of Delivery to Buyer's Plant), unless caused by
Buyer's negligence.
SECTION 12
INSPECTION
12.1 Duly authorized representatives of Buyer shall have access at all
times during reasonable business hours to Producers' Sources to
observe and inspect operation and the quality of coal mined
therefrom.
SECTION 13
ARBITRATION
13.1 Any controversy, claim, counterclaim, defense, dispute,
difference or misunderstanding arising out of or relating to the
interpretation or application of this Agreement or breach
thereof shall be settled by arbitration before three (3)
arbitrators, one of whom shall be named by Producers, one by
Buyer and a third of whom shall be named by the two
arbitrators appointed by Producer and Buyer, respectively. If
either Buyer or Producers fails to select an arbitrator within
fifteen (15) days after receipt of written notice from the other
of its election to submit a matter to arbitration and naming its
arbitrator, the Party giving such notice shall have the right to
appoint an arbitrator for the Party in default and the two thus
chosen shall then select the third arbitrator. The appointment
of the third arbitrator, if not agreed upon within twenty (20)
days, shall be selected by the Senior Judge for the Western
District of Missouri, then sitting in the United States Federal
District Court of the State of Missouri. No person shall be
eligible for appointment by such Senior Judge who is not
neutral and impartial as to the Parties, meaning that the person
shall not be a director, officer, employee, shareholder or is
otherwise interested in either of the Parties hereto or in the
matter or matters to be arbitrated. Such proceedings will be
governed by the commercial Arbitration Rules of the American
Arbitration Association then in effect and the provisions of RS
MO Sec. 435 et seq., except that a stenographic transcript of the
testimony and a record of the proceedings will be taken and the
arbitrators shall base their decision upon the record and briefs
of the Parties. The brief of the complaining Party shall be filed
with the arbitrators within twenty (20) days after receipt of the
record, and the brief of the other Party shall so be filed within
fifteen (15) days after receipt of the complaining Party's brief.
Judgment upon any valid award rendered by the arbitrators
shall be final and binding on the Parties and may be entered in
a court having jurisdiction thereof.
13.2 The expense of such arbitration shall be divided between the
Parties to such controversy on an equal basis, except that each
Party shall pay the fees and expenses of its own witnesses and
counsel.
SECTION 14
FORCE MAJEURE
14.1 The term "Force Majeure" as used herein shall mean any cause
beyond the reasonable control without the fault or negligence of
the Party affected thereby, such as, without limitation, acts of
God, changes in environmental rules and regulations, acts of the
public enemy, insurrections, riots, strikes, labor disputes,
concerted refusals to work, labor or material shortages,
interruptions to transportation, shortages of transportation
equipment, fires, explosions, floods, breakdowns of or damage
to plants, equipment, pipelines or facilities, engineering or
mining conditions not now known, legislation, orders or acts of
civil or military authority or other causes of a similar or
dissimilar nature, whether or not foreseeable, which wholly or
partly prevent the Parties, or either of them, from carrying out
the terms or receiving the intended benefits of this Agreement.
14.2 If, because of Force Majeure, either Producers or Buyer are
unable to carry out their obligations under this Agreement,
either in whole or in part, and if such Party promptly gives to
the other Parties written notice of such Force Majeure, its
effects and probable duration, then the obligations of the Party
giving such notice shall be excused to the extent made necessary
by such Force Majeure during its continuance, provided that as
much of the Force Majeure condition and/or its effects as can
be eliminated by commercially reasonable means shall be
eliminated with reasonable dispatch. A Force Majeure at the
mine or mines then producing coal for delivery hereunder shall
be deemed a Force Majeure for purposes hereof with full
regard to other mines from which Producers produce coal, and
in such event coal from such other mine or mines shall be
allocated among all customers, including Buyer, supplied from
such mine or mines, in a fair and reasonable manner. In the
event of a Force Majeure at Buyer's Lake Road Generating
Station, Buyer shall allocate coal purchases among all of that
Station's coal suppliers, including Producers, in a fair and
reasonable manner. Any deficiencies in deliveries of coal
hereunder caused by Force Majeure shall not be made up
except by mutual consent.
14.3 In the event of failure to perform on the part of Producers
which is caused by Force Majeure, as hereinabove defined,
Producers agree to use their best effort to continue supplying
coal to Buyer on an emergency basis from other sources of
supply at prices to be negotiated at such time, until the Force
Majeure condition ceases to exist.
SECTION 15
WAIVERS AND LIMITATION
15.1 The failure of any Party to insist in any one or more instances
upon strict performance of any of the provisions of this
Agreement or to take advantage of any of its rights hereunder
shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights, but the same shall continue
and remain in full force and effect.
SECTION 16
SUCCESSORS AND ASSIGNS
16.1 This Agreement shall inure to the benefit of and be binding
upon the Parties hereto and their respective successors and
assigns. No Party may assign this Agreement, in whole or in
part, without the prior written consent of the others, which
consent shall not be unreasonably withheld.
SECTION 17
NOTICES
17.1 Any notice, statement, invoice or other communication required
or permitted by the Agreement shall be in writing and shall,
unless some other mode of delivering the same is expressly
provided for or is accepted by the Party to whom it is delivered,
be delivered by hand to the Party addressed or by electronic
mail or U.S. Mail postage prepaid at its address set out below
or to such other address as may be furnished by such Party to
the other Party.
If to Buyer St. Joseph Light & Power Company
520 Francis Street 64501
P.O. Box 998 64502-0998
St. Joseph, MO
ATTN: Manager of Purchasing
FAX: 816/387-6324
If to Producer Mackie-Clemens Fuel Co.
P.O. Box 299
Pittsburg, KS 66762
FAX: 316/231-2625
If to Producer Alternate Fuels, Inc.
P.O. Box 1268
Pittsburg, KS 66762
FAX: 316/231-0412
If to Sales Agent Fox Valley Resources
P.O. Box 16
Lamar, IN 47550
FAX: 812/529-8381
SECTION 18
GOVERNING LAW
18.1 The terms and provisions of this Agreement shall be
interpreted, construed and governed by the laws of the State of
Missouri.
SECTION 19
ENTIRE AGREEMENT
19.1 This Agreement contains the entire agreement of the Parties
with reference to the subject matter hereof and supersedes all
prior and contemporaneous negotiations, understandings, and
agreements, written or oral between the Parties hereto.
SECTION 20
HEADINGS
20.1 The headings given to paragraphs of this Agreement are
intended for convenience or reference only and shall not affect
the construction or interpretations of this Agreement.
SECTION 21
AUTHORITY
21.1 Each Party represents and warrants to the other Parties that its
execution and performance of this Agreement have been duly
authorized by all necessary corporate proceedings.
SECTION 22
COMMISSIONS, ROYALTIES, FEES OR PAYMENTS
22.1 Producers shall be responsible for any and all commissions,
royalties, fees or payments of any kind to Sales Agent resulting
from Sales Agent's performance and role of this Agreement.
EXECUTED AND DELIVERED as of the date and year first
above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED
BY THE PARTIES.
ST. JOSEPH LIGHT & POWER COMPANY
Buyer
By: D.V. Svuba
Title: Vice-President-Power Supply
ATTEST:
Gary L. Myers, Secretary
ALTERNATE FUELS, INC.
Producer
By: David Uttermeehlen
Title: President
ATTEST:
George M. Barberich, Secretary
MACKIE-CLEMENS FUEL CO.
Producer
By: Dennis G. Woolman
Title: President
ATTEST:
Jeffery M. Lee, Secretary
FOX VALLEY RESOURCES, INC.
Sales Agent
By: Edward P. Donnelly
Title: President
ATTEST:
Joan S. Donnelly, Secretary
EMPLOYMENT CONTRACT
Employment Agreement dated as of May 18, 1994 hereby effective
May 18, 1994 between JOHN A. STUART, JR., St. Joseph, Missouri (the
"Executive"), and ST. JOSEPH LIGHT & POWER COMPANY, a Missouri
corporation (the "Company") with its principal office at 520
Francis Street, St. Joseph, Missouri 64502.
In consideration of the agreements and covenants contained
herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company
shall employ the Executive as its Vice President-Engineering &
Construction for a term commencing on May 18, 1994 and ending on
May 17, 1997, which term shall continue for successive one-year
periods thereafter unless (i) the Company shall, at least two years
and one hundred eighty days prior to the end of any such period,
deliver to the Executive a written notice of its intention to
terminate this Agreement at the end of such period or (ii) the
Executive shall, at least 60 days prior to the end of any such
period, deliver to the Company a written notice of his intention to
terminate this Agreement at the end of such period.
Notwithstanding the foregoing, the Executive may terminate this
Contract upon not less than 60 days prior written notice as of any
date following the date on which the Employee has both become
eligible for early retirement under the St. Joseph Light & Power
Company Restated Pension Plan for Non-Bargaining Employees (the
"Salaried Plan") and has attained age 62. The period during which
this Contract shall be in effect pursuant to the first sentence of
this paragraph is hereinafter referred to as the "Employment
Period." The Executive shall be located at the Company's offices
in St. Joseph, Missouri, and shall not be required to render
services to the Company hereunder from any other location without
his consent. The Executive shall report directly to the President
and Chief Executive Officer and shall have general responsibility
and authority for the engineering and technical requirements of the
Transmission & Distribution system, including design and
construction of the electric system; the supervision of the North
Division; and, such other general responsibilities and authorities
consistent with those of the Vice President-Engineering &
Construction of a Missouri corporation. The Executive agrees to be
employed by the Company in such capacities for the Employment
Period, subject to all the covenants and conditions hereinafter set
forth.
ARTICLE II
Compensation
Section 2.01. Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the
Employment Period an annual salary (the "Annual Salary"), payable
in installments in accordance with the Company's normal payment
schedule for senior management of the Company. The Annual Salary
as of May 18, 1994 shall be $107,000. In no event shall the Annual
Salary be reduced during the Employment Period. The Board may, in
its discretion, increase the Annual Salary from time to time above
the Annual Salary required by this Section 2.01. The increased
salary then shall be the Annual Salary and shall not be reduced
during the Employment Period.
Section 2.02. Incapacity. If at any time during the
Employment Period the Executive is unable to perform his duties
hereunder by reason of illness, accident or other disability (as
confirmed by competent medical evidence), during the first six
months of such incapacity he shall be entitled to receive the
compensation to which he would be entitled pursuant to Section 2.01
hereof, and during any remaining period of such incapacity, he
shall be entitled to receive 75% of such compensation. If the
Executive shall recover and shall resume the performance of his
duties hereunder following any period of incapacity during the term
of this Agreement, the Executive shall be entitled to receive the
compensation to which he would be entitled pursuant to Section 2.01
hereof. Notwithstanding the foregoing provisions of this Section
2.02, the amounts payable to the Executive under this Section 2.02
shall be reduced by any amounts received by the Executive for the
same time periods with respect to any such incapacity pursuant to
any insurance policy, plan or other employee benefit provided to
the Executive by the Company at its expense, and if any such
policy, plan or benefit shall be provided to the Executive at the
expense of the Company and the Executive, the amount of the
reduction provided for in this sentence shall be equitably
determined by the Board on the basis of the proportionate expense
borne by the Company. For purposes of this Section 2.02, more than
one occurrence of incapacity during the Employment Period shall be
treated as a single period of incapacity regardless of any
interruption in such incapacity, except that a new and separate
period of incapacity shall be deemed to have commenced if (i) the
illness, accident or other disability giving rise to the latest
occurrence of incapacity is totally unrelated to any prior
incapacity or (ii) notwithstanding that the illness, accident or
disability giving rise to the latest occurrence of incapacity is
related to any prior incapacity, the Executive has performed his
duties hereunder for a continuous period of at least six months
since the termination of such prior incapacity.
Section 2.03. Other Employee Benefits. The Executive shall
be entitled to participate in all benefit plans maintained by the
Company on behalf of its senior executives, including, without
limiting the generality of the foregoing, the Company's Non-
Bargaining Plans for retirement, hospitalization and death
benefits, and similar or other plans in accordance with the terms
of such plans as from time to time in effect and applicable to
senior executives of the Company, and shall be entitled to
additional benefits, including vacations, holidays, sick leave and
leave of absence, in accordance with the Company's policies with
respect thereto for its senior executives as from time to time in
effect. The Executive and the Company agree that, should this
Agreement be terminated by either party hereto for any reason while
the Executive is suffering from any incapacity as contemplated by
Section 2.02, the Executive shall be treated as an employee of the
Company during the duration of such incapacity for purposes of
receipt of benefits under the Company's long-term disability plan.
ARTICLE III
Termination of Employment
Section 3.01. Event of Termination. In the event that during
the Employment Period there should occur the "Serious Misconduct"
(as hereinafter defined) of the Executive, the Company (acting by
resolution adopted by a majority of the directors then members of
the Board) may elect to terminate the rights and obligations of the
parties hereunder by written notice to the Executive. "Serious
Misconduct" shall mean embezzlement or misappropriation of
corporate funds, other acts of dishonesty, significant activities
harmful to the reputation of the Company, willful refusal to
perform the duties properly assigned to the Executive pursuant to
Article I hereof or significant violation of any statutory or
common law duty of loyalty to the Company. Notwithstanding the
foregoing, during the 3-year period beginning on the date a "change
of control of the Company" [as defined in Section 3.04 D(1) below]
occurs, the Company may not terminate the rights and obligations of
the parties hereunder without first having obtained either a
written admission of such Serious Misconduct from the Executive or
a final judicial determination that the Executive committed such
Serious Misconduct.
Section 3.02. Death. In the event of the death of the
Executive during the Employment Period, his beneficiaries (who
shall be designated in a writing delivered by the Executive to the
Company) shall be entitled to receive any accrued and unpaid
compensation under Sections 2.01 and 2.02.
Section 3.03. Wrongful Termination. In the event that the
Company shall terminate this Agreement prior to the end of the
Employment Period for any reason other than as set forth in Section
3.01, the Executive shall be entitled to receive, immediately upon
such termination in a single lump sum payment, the aggregate amount
of compensation to which he would be entitled under Section 2.01
for the balance of the Employment Period. For all purposes of this
Agreement, any substantial diminution of the responsibilities of
the Executive, the assignment to the Executive of duties of the
type not to be performed by the Executive hereunder, any
requirement that the Executive perform any significant portion of
his services at a location outside St. Joseph, Missouri or any
other breach of this Agreement shall, at the Executive's option, be
deemed to be a termination of this Agreement by the Company for
reasons other than Serious Misconduct.
Section 3.04. Change of Control. Notwithstanding any other
provision of this Agreement to the contrary, should either (i) the
Company discharge, layoff or otherwise terminate the Executive's
employment with the Company whether with or without the Executive's
consent for any reason other than Serious Misconduct pursuant to
Section 3.01 hereof or (ii) the Employee resign or otherwise
terminate his employment with the Company after the date which is
180 days after the date on which a change of control of the Company
occurs for any reason other than the Executive's death, disability
or retirement after becoming eligible for early retirement benefits
under the Salaried Plan and attaining age 62, in either case of (i)
or (ii) above within three (3) years after a change of control of
the Company, the Company shall do the following:
A. Lump Sum Cash Payment: On or before the Executive's
last day of employment with the Company, or its subsidiaries,
or as soon thereafter as possible, the Company shall pay to
the Executive as compensation for services rendered, a lump
sum cash amount (subject to the usual withholding taxes) equal
to (1) three (3) times the sum of the Executive's Annual
Salary at the rate in effect immediately prior to the change
of control plus (2) an amount equal to the compensation (at
the Executive's rate of Annual Salary in effect immediately
prior to the change of control) payable for any period for
which the Executive could have, immediately prior to the date
of his termination of employment, been on vacation and
received such compensation, determined under the Company's
vacation pay plan or program covering the Executive
immediately prior to the change of control. If the time from
the Executive's last day of employment with the Company to the
Executive's 65th birthday is less than 36 months, there shall
be a proportionate reduction of the portion of said payment
computed under clause (1) of the preceding sentence.
B. Life and Health Insurance; Long-term Disability
Coverage. The Executive's participation in, and entitlement
to benefits under: (1) the life insurance plan of the
Company; (2) all the health insurance plan or plans of the
Company or its subsidiaries, including but not limited to
those providing major medical and hospitalization benefits,
dental benefits and vision benefits; and (3) the Company's
long-term disability plan or plans; as all such plans existed
immediately prior to the change of control shall continue as
though he remained employed by the Company or its subsidiaries
for an additional period of three (3) years or until the date
of his 65th birthday, whichever is earlier. To the extent
such participation or entitlement is not possible for any
reason whatsoever, equivalent benefits shall be provided at
the Company's cost.
C. Excise Tax-Additional Payment. (1) Notwithstanding
anything in this Agreement or any written or unwritten policy
of the Company or its subsidiaries to the contrary, (a) if it
shall be determined that any payment or distribution by the
Company or its subsidiaries to or for the benefit of the
Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, any
other agreement between the Company or its subsidiaries and
the Executive or otherwise (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended, (the "Code") or any interest or
penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), or (b) if the
Executive shall otherwise become obligated to pay the Excise
Tax in respect of a Payment, then the Company shall pay to the
Executive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including any Excise Tax, imposed upon the Gross-
Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon such Payment.
(2) All determinations and computations required to be
made under this paragraph C, including whether a Gross-Up
Payment is required under clause (a) of paragraph C(1) above,
and the amount of any Gross-Up Payment, shall be made by the
Company's regularly engaged independent certified public
accountants (the "Accounting Firm"). The Company shall cause
the Accounting Firm to provide detailed supporting
calculations both to the Company and the Executive within 15
business days after such determination or computation is
requested by the Executive. Any initial Gross-Up Payment
determined pursuant to this paragraph C(2) shall be paid by
the Company or the subsidiary to the Executive within 5 days
of the receipt of the Accounting Firm's determination. A
determination that no Excise Tax is payable by the Executive
shall not be valid or binding unless accompanied by a written
opinion of the Accounting Firm to the Executive that the
Executive has substantial authority not to report any Excise
Tax on his federal income tax return. Any determination by
the Accounting Firm shall be binding upon the Company, its
subsidiaries and the Executive, except to the extent the
Executive becomes obligated to pay an Excise Tax in respect of
a Payment. In the event that the Company or the subsidiary
exhausts or waives its remedies pursuant to paragraph C(3) and
the Executive thereafter shall become obligated to make a
payment of any Excise Tax, and if the amount thereof shall
exceed the amount, if any, of any Excise Tax computed by the
Accounting Firm pursuant to this paragraph C(2) in respect to
which an initial Gross-Up Payment was made to the Executive,
the Accounting Firm shall within 15 days after Notice thereof
determine the amount of such excess Excise Tax and the amount
of the additional Gross-Up Payment to the Executive. All
expenses and fees of the Accounting Firm incurred by reason of
this paragraph C(2) shall be paid by the Company.
(3) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the
Executive knows of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(a) give the Company any information reasonably
requested relating to such claim,
(b) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(c) cooperate with the Company in good faith in
order effectively to contest such claim,
(d) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-
tax basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this paragraph C, the Company shall control all proceedings
taken in connection with such contest and, at its sole option,
may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company or the subsidiary shall determine; provided,
however, that if the Company or the subsidiary directs the
Executive to pay such claim and sue for a refund, the Company
or the subsidiary shall advance the amount of such payment to
the Executive, on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax, including interest or penalties
with respect thereto, imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and further provided, that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, control of the contest by
the Company or the subsidiary shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(4) If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to
paragraph C(2), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall
(subject to compliance with the requirements of this paragraph
C by the Company) promptly pay to the Company or the
subsidiary the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company or the subsidiary pursuant to
paragraph C(2), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of
its intent to contest such denial or refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall off-set, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
D. Definitions. (1) Change of Control.
(1) The acquisition by any individual, entity or group
(a "Person"), including any "person" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act"), of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of
20 percent or more of the then outstanding shares of Common
Stock (the "Outstanding Common Stock"); provided that the
following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of a
conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities), (B) any acquisition
by the Company, (C) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any
acquisition by any corporation pursuant to a reorganization,
merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of
the conditions described in clauses (i), (ii) and (iii) of
subsection (3) of this Section 3.04D shall be satisfied; and
provided further, that for purposes of clause (B), if any
Person (other than the Company or any employee benefit plan
(or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company) shall become the
beneficial owner of 20 percent or more of the Outstanding
Common Stock by reason of an acquisition by the Company, and
such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the
Outstanding Common Stock and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change of Control;
(2) individuals who, immediately after the Company's
1994 Annual Meeting of Shareholders, constitute the Board of
Directors (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided that any
individual who becomes a director subsequent to the date of
the Company's 1994 Annual Meeting of Shareholders whose
election, or nomination for election by the Company's
shareholders, was approved by the vote of at least 66-2/3
percent of the directors then comprising the Incumbent Board
shall be deemed to have been a member of the Incumbent Board;
and provided further, that no individual who was initially
elected as a director as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board shall be
deemed to have been a member of the Incumbent Board;
(3) approval by the shareholders of the Company of a
reorganization, merger or consolidation unless, in any such
case, immediately after such reorganization, merger or
consolidation, (i) more than 60 percent of the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
and more than 60 percent of the combined voting power of the
then outstanding securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals or entities who were the
beneficial owners, respectively, of the Outstanding Common
Stock immediately prior to such reorganization, merger or
consolidation and in substantially the same proportions
relative to each other as their ownership, immediately prior
to such reorganization, merger or consolidation, of the
Outstanding Common Stock, (ii) no Person other than the
Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or the corporation
resulting from such reorganization, merger or consolidation
(or any corporation controlled by the Company) and any Person
which beneficially owned, immediately prior to such
reorganization, merger or consolidation, directly or
indirectly, 20 percent or more of the Outstanding Common
Stock) beneficially owns, directly or indirectly, 20 percent
or more of the then outstanding shares of common stock of such
corporation or 20 percent or more of the combined voting power
of the then outstanding securities of such corporation
entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board of Directors providing for
such reorganization, merger or consolidation; or
(4) approval by the shareholders of the Company of (i)
a plan of complete liquidation or dissolution of the Company
or (ii) the sale or other disposition of all or substantially
all of the assets of the Company other than to a corporation
with respect to which, immediately after such sale or other
disposition, (A) more than 60 percent of the then outstanding
shares of common stock thereof and more than 60 percent of the
combined voting power of the then outstanding securities
thereof entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Common Stock immediately prior to such sale or
other disposition and in substantially the same proportions
relative to each other as their ownership, immediately prior
to such sale or other disposition, of the Outstanding Common
Stock, (B) no Person other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the
Company or such corporation (or any corporation controlled by
the Company) and any Person which beneficially owned,
immediately prior to such sale or other disposition, directly
or indirectly, 20 percent or more of the Outstanding Common
Stock beneficially owns, directly or indirectly, 20 percent or
more of the then outstanding shares of common stock thereof or
20 percent or more of the combined voting power of the then
outstanding securities thereof entitled to vote generally in
the election of director and (C) at least a majority of the
members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or
other disposition.
(2) Certain Resignations Treated as Termination by the
Company. A resignation or other termination by the Executive
of his employment with the Company (described in clause (ii)
of the first sentence of this Section 3.04) during the 180 day
period commencing on the date on which a change of control of
the Company occurs shall be treated as termination of such
employment by the Company for purposes of clause (i) of the
first sentence of this Section 3.04 if such resignation or
other termination of such employment is on account of:
(i) the assignment to the Executive of
any duties inconsistent in any respect with
the Executive's position (including status,
offices, titles and reporting requirements),
authority, duties or responsibilities as
contemplated by Section 1.01 or any other
action by the Company which results in a
diminution in such position, authority, duties
or responsibilities, excluding for this
purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and
which is remedied by the Company promptly
after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to
comply with any of the provisions of Section
2.01, other than an isolated, insubstantial
and inadvertent failure not occurring in bad
faith and which is remedied by the Company
promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the
Executive to be based at any office or
location other than that described in Section
1.01; or
(iv) any failure by the Company to
comply with and satisfy Section 4.02.
For purposes of this paragraph (D)(2), any good faith
determination that any of the above described events have
occurred made by the Executive shall be conclusive.
E. Indemnification for Enforcement. If litigation is
brought to enforce or interpret any provision contained
herein, the Company shall indemnify the Executive for his
reasonable attorneys' fees and disbursements incurred in such
litigation, and shall pay prejudgment interest on any money
judgment obtained by the Executive calculated by using the
prime interest rate as reported from time to time in the Wall
Street Journal on the date or dates on which any payment or
payments to the Executive should have been made hereunder.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or
permitted to be given hereunder shall be sufficient if in writing
and delivered personally or sent by registered mail, return receipt
requested, to the addresses hereinabove set forth or to any other
address designated by either party by notice similarly given. Such
notice shall be deemed to have been given upon the personal
delivery or such mailing thereof, as the case may be.
Section 4.02. Assignment and Succession. This Contract shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns, heirs and legatees, provided,
however, that (i) the Executive may not assign his duties and
obligations hereunder to any other person and (ii) the Company may
not assign its duties and obligations hereunder except to another
corporation in connection with a merger or consolidation of the
Company with, or a sale of substantially all of the Company's
assets to, such other corporation, and the Company shall not enter
into or be a party to any such merger or consolidation with or sale
of substantially all of its assets to any other corporation unless
such corporation expressly assumes in writing the duties and
obligations of the Company under this Agreement.
Section 4.03. Headings. The Article, Section, paragraph and
subparagraph headings are for convenience of reference only and
shall not define or limit the provisions hereof.
Section 4.04. Applicable Law. This Agreement shall at all
times be governed by and construed, interpreted and enforced in
accordance with the laws of the State of Missouri.
Section 4.05. Entire Agreement; Amendment. Except as
otherwise provided in Section 2.03 hereof, this Agreement shall be
deemed to supersede any previous agreement between the Company and
the Executive relating to the Employment of the Executive and to
contain the entire understanding and agreement of the parties with
respect to the subject matter hereof. The Company's obligation to
make the payments provided and to otherwise perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company may have against the Executive or others. This Agreement
may not be amended, modified or supplemented except in a writing
signed by each of the parties hereto.
Section 4.06. Severability. In case one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision
of this Agreement or the remainder of such provision or provisions,
but such provision or provisions shall be ineffective only to the
extent of such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or provisions or the
remaining provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein, unless the deletion of
such provision or provisions would be unreasonable.
ARTICLE V
Additional Indemnification
Section 5.01. The Company and Executive hereby adopt the
Indemnification Agreement attached hereto and incorporated herein
as Exhibit I.
ARTICLE VI
Termination of Other Employment Agreement
Section 6.01. The Company and Executive hereby agree
effective with the signing of this Agreement to terminate and
cancel the Employment Agreement dated March 2, 1994 by and between
Company and Executive.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed in duplicate by its duly authorized officer and the
Executive has signed this Contract in duplicate as of the 18th day
of May, 1994.
ST. JOSEPH LIGHT & POWER COMPANY
By: Terry F. Steinbecker
President
John A. Stuart, Jr.
ATTEST:
Gary L. Myers, Secretary
<PAGE>
Exhibit I
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made as of
this 18th day of May, 1994 between ST. JOSEPH LIGHT & POWER
COMPANY, a Missouri corporation (the "Company"), and John A.
Stuart, Jr. (the "Executive").
RECITALS
A. The Executive is an officer of the Company and in such
capacity is performing valuable services for the Company.
B. Article TENTH of the Restated Articles of Incorporation
of the Company (the "Articles") and the Bylaws of the Company
("Bylaws") provides for the indemnification of the officers,
Executives, agents and employees of the Company pursuant to the
provisions of Section 351.355 of the General and Business
Corporation Laws of Missouri (the "Indemnification Statute").
C. The Indemnification Statute provides, among other
provisions, that a corporation shall have the power, subject to
certain exceptions, to give any further indemnity to its Executives
and officers, including indemnification agreements, provided such
indemnity is authorized, directed and provided for in such
corporation's articles of incorporation.
D. ARTICLE VI, Section 6. of the Bylaws authorizes the
Company to enter into agreements with any Executive, officer,
employee or agent providing such rights of indemnification as the
Company deems appropriate up to the maximum extent permitted by
law.
E. The Company presently maintains one or more policies of
Executives and Officers Liability Insurance ("D&O Insurance"),
insuring against certain liabilities which the Company's Executives
and officers may incur as they perform services for the Company.
F. The Company deems it appropriate to enter into agreements
with its Executives to provide them with greater indemnification
against the liabilities they incur in the performance of services
for the Company.
TERMS
NOW, THEREFORE, in consideration of the Executive's agreement
to serve as a Executive of the Company, the parties hereto agree as
follows:
1. Indemnity of Executive. The Company confirms its
commitment of indemnification and agrees to indemnify the Executive
and hold him harmless to the full extent authorized or permitted by
the provisions of the Indemnification Statute, or by any amendment
thereof, or by any other statutory provisions authorizing or
permitting such indemnification which may be adopted after the date
hereof.
2. Maintenance of Insurance. The Company may, but shall not
be required to, continue or increase or otherwise revise the terms
to the benefit of the persons covered thereby all or any part of
the D&O Insurance it has in force and effect as of the date hereof.
If the Company continues to maintain the D&O Insurance, such
insurance shall be primary, to the extent of the coverage provided
thereby, and the Company's agreement to provide the indemnification
set forth herein shall be effective only to the extent that the
Executive is not reimbursed pursuant to the coverage maintained
under the D&O Insurance or any comparable insurance. If the
Company does not maintain such insurance, the Company shall fully
indemnify the Executive in accordance with the provisions of
Section 1 and Section 3 of this Agreement.
3. Additional Indemnity. Subject only to the exclusion set
forth in Section 4 hereof, the Company hereby agrees to indemnify
the Executive and hold him harmless from and against any and all
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the
Executive in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative
or investigative (including any action by or in the right of the
Company) to which the Executive is, was or at any time becomes a
party (other than a party plaintiff suing on his own behalf or
derivatively on behalf of the Company), or is threatened to be made
a party (other than a party plaintiff suing on his own behalf or
derivatively on behalf of the Company) by reason of the fact that
the Executive is or was at any time a Executive, officer, employee
or agent of the Company, or is or was serving or at any time serves
at the request of the Company as a Executive, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise.
4. Limitation on Indemnity. Notwithstanding any other
provision of this Agreement to the contrary, the Company shall not
indemnify any Executive from or on account of such person's conduct
which is finally adjudged to have been knowingly fraudulent or
deliberately dishonest or to have constituted willful misconduct.
5. Continuation of Indemnity. All of the Company's
agreements and obligations contained herein shall continue (a)
during the period that the Executive is a Executive, officer,
employee or agent of the Company or is or was serving at the
request of the Company as a Executive, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, and (b) thereafter so long as the Executive shall be
subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that the Executive is or was
a Executive of the Company or serving in any other capacity
referred to herein.
6. Notification and Defense of Claim. Promptly after the
Executive receives notice of the commencement of any action, suit
or proceeding, the Executive will, if a claim in respect thereof is
to be made against the Company under this Agreement, notify the
Company of the commencement thereof. The failure to notify the
Company will relieve the Company from any liability hereunder to
the extent the Company can show prejudice as a result of such
failure, and will not relieve the Company from any liability which
it may have to the Executive otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which the
Executive notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein
at its own expense; and,
(b) Except as otherwise provided below, to the extent
that it may wish, the Company (jointly with any other indemnifying
party similarly notified) will be entitled to assume the defense
thereof with counsel satisfactory to the Executive. After the
Company notifies the Executive of its election to assume such
defense, the Company will not be liable to the Executive under this
Agreement for any legal or other expenses the Executive
subsequently incurs in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided
below. The Executive shall have the right to employ his counsel in
such action, suit or proceeding, provided that the fees and
expenses of such counsel incurred after the Company has provided
the Executive with notice that it is assuming the defense shall be
at the Executive's expense, unless (i) the Company has authorized
the Executive's employment of counsel, (ii) the Executive shall
have reasonably concluded that there may be a conflict of interest
between the Company and the Executive in the conduct of the defense
of such action, or (iii) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of such counsel shall be at the
Company's expense. The Company shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf
of the Company or as to which the Executive shall have made the
conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify the
Executive for any amounts paid in settlement of any action or claim
effected without the Company's written consent. The Executive
agrees that he will not enter into any settlement discussions or
agreements with respect to any such action or claim unless the
Company, whether or not it is then a party to or threatened with
respect to such action or claim, shall be discharged from any
liability to which it may be subject in connection with such action
or claim as a part of such settlement. The Company shall not
settle any action or claim in any manner which would impose any
penalty or limitation on the Executive without the Executive's
written consent. Neither the Company nor the Executive will
unreasonably withhold his or its consent to any proposed
settlement.
7. Repayment of Expenses. The Executive shall reimburse the
Company for all reasonable expenses the Company pays in defending
any civil or criminal action, suit or proceeding against the
Executive in the event and to the extent that it shall be
ultimately determined that the Executive is not entitled to be
indemnified by the Company for such expenses under the provisions
of the Indemnification Statute, the Articles and Bylaws, this
Agreement or otherwise. Prior to such determination, the Company
shall make such advances as shall be reasonably necessary to pay
such expenses of the Executive, provided the Company receives an
undertaking from the Executive to repay such advances in the event
it is ultimately determined that the Executive is not entitled to
be indemnified therefor.
8. Enforcement.
(a) The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed
hereby in order to induce the Executive to continue as a Executive
of the Company, and acknowledges that the Executive is relying upon
this Agreement in continuing in such capacity.
(b) In the event that the Executive is required to bring
any action to enforce any rights or to collect any money due under
this Agreement and is successful in such action, the Company shall
reimburse the Executive for all of the Executive's reasonable fees
and expenses in bringing and pursuing such action.
9. Separability. Each provision of this Agreement is a
separate and distinct agreement, independent of the others. If any
provision shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the
validity or enforceability of any of the other provisions.
10. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in
accordance with the law of the State of Missouri, without reference
to its rules governing conflicts of laws.
(b) This Agreement shall be binding upon the Executive
and the Company and shall inure to the benefit of the Executive,
his heirs, personal representatives and assigns and to the benefit
of the Company, its successors and assigns; provided, however, the
Company may not assign its duties and obligations hereunder except
to another corporation in connection with a merger or consolidation
of the Company with, or a sale of substantially all of the
Company's assets to, such other corporation, and the Company shall
not enter into or be a party to any such merger or consolidation
with or sale of substantially all of its assets to any other
corporation unless such corporation expressly assumes in writing
the duties and obligations of the Company under this Agreement.
(c) In the event that the Company shall make any payment
to or on behalf of the Executive under the terms of this Agreement,
whether in satisfaction of any judgment, payment in settlement,
reimbursement of expenses, or otherwise, the Company shall succeed
to, and have by way of subrogation, all of the rights theretofore
possessed by the Executive against any other person, firm or
corporation for or on account of the lawsuit, claim or matter in
respect of which the payment was made, including, without
limitation, full subrogation to any claim or right the Executive
had or may have had against any insurance company providing D&O
Insurance to the Company, its officers and Executives.
(d) No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing
signed by both parties hereto.
18
SELECTED FINANCIAL DATA
(In Thousands Except Per Share Data and Percentages)
The following table sets forth financial data regarding St.
Joseph Light & Power Company's financial position and operating
results. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations, and the Financial Statements and Notes
thereto, appearing elsewhere in this Annual Report.
1994 1993 1992 1991 1990
Operating
revenues $90,782 $88,539 $82,555 $89,580 $84,178
Net income $11,066 $7,922 $8,958 $9,790 $10,215
Total
assets $199,699 $191,690 $178,743 $170,893 $165,223
Long-term debt
(excluding current
maturities)
$53,100 $53,100 $51,215 $53,038 $41,261
Common stock data:
Average shares outstanding
3,942,146 4,008,192 4,018,978 4,018,997 4,125,637
Earnings per average
common
share $2.81 $1.98 $2.23 $2.44 $2.48
Dividends per common
share $1.80 $1.76 $1.72 $1.66 $1.60
Market price per
common
share at
year-end $28.50 $29.00 $34.25 $33.88 $28.25
Book value per
common share at
year-end $19.86 $19.07 $18.84 $18.37 $17.62
Return on average
common
equity 14.4% 10.4% 12.0% 13.5% 14.2%
Liquidity and capital resources data:
Construction
Expenditures, excluding
AFUDC $12,224 $12,483 $9,301 $11,581 $12,144
Percent of expenditures financed
internally from
operations 77% 86% 100% 76% 100%
AFUDC as a percent of
earnings 2% 3% 3% 2% 3%
available for common stock
Capitalization ratios
Common
equity 59% 59% 59% 57% 61%
Long-term
debt 41% 41% 41% 43% 39%
Common Stock Market Prices
High Low
1993 First Quarter $37.00 $31.00
Second Quarter 37.75 35.125
Third Quarter 37.875 34.875
Fourth Quarter 36.75 28.75
1994 First Quarter $30.25 $28.00
Second Quarter 30.125 26.50
Third Quarter 29.00 25.00
Fourth Quarter 29.00 25.75
Dividends Paid on Common Stock
1993 First Quarter $.44
Second Quarter .44
Third Quarter .44
Fourth Quarter .44
$1.76
1994 First Quarter $.45
Second Quarter .45
Third Quarter .45
Fourth Quarter .45
$1.80
<PAGE>
19
Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
St. Joseph Light & Power Company (the Company or Light & Power)
is a public utility engaged primarily in the generation and
distribution of electric energy. It also sells natural gas in 15
communities in the northern part of its service area and
industrial steam to eight customers in St. Joseph.
As illustrated by the Segments of Business, Note 8 in Notes to
Financial Statements, the electric segment represents 98% of
pre-tax operating income, 97% of utility plant expenditures and
91% of identifiable assets. Since the electric segment is the
major portion of the Company's business, the following
discussion focuses primarily on it.
The Company is in the second year of three-year agreements with
its physical and clerical bargaining units.
The agreements, effective August 1, 1993, cover nearly
two thirds of the Company's 358 employees.
In December 1994, a severe ice storm disrupted service to about
25% of the Company's customers. Costs incurred to resume service
and repair damages resulting from the ice storm were about $1.4
million. These unusual costs were recorded by the Company as a
regulatory asset and are deferred based upon the accounting
authority order received in January 1995 from the Missouri
Public Service Commission (PSC). Such order authorized the
Company to amortize these costs over a five-year period
beginning March 1995.
The Company intends to seek recovery of the amortization of this
deferral in its next general rate proceeding. In management's
opinion, it is probable that the PSC will allow this recovery
(See Note 7 in Notes to Financial Statements).
In 1993, the Company was adversely affected by flooding along
the Missouri River and its tributaries. As a result, the Company
lost the services of the Iatan generating plant and discontinued
service, for safety reasons, to more than 1,000 customers,
mostly residential. When Iatan returned to service after ten
days, its production was limited due to coal-delivery problems.
The Company's Lake Road plant continued to operate during this
period.
The incremental cost of purchased power and other expenses
associated with the flood significantly exceeded the Company's
normal cost of service. These costs of about $1.1 million were
deferred in accordance with a PSC order and are being amortized
over five years (See Note 7 in Notes to Financial Statements).
These costs are currently being recovered in rates charged to
customers.
RESULTS OF OPERATIONS
Electric Revenues 1994 electric operating revenues were $79.0
million, an increase of 4.3% from 1993 and 11.4% from 1992. The
growth in 1994 revenues reflects a 3.1% price increase in mid-
June. In addition, sales for resale were higher in 1994 than in
both the 1993 and 1992 periods.
Megawatt-hour (mwh) retail sales totaled 1,425,174 in 1994, a
decrease from the 1,428,433 mwh reported in 1993 and an increase
from the 1,343,297 mwh in 1992. While more moderate temperatures
led to lower sales to the residential class, strong sales to
commercial customers largely offset the decrease. Sales to the
commercial class increased 4.0%. Sales to industrial customers
were 3.7% lower, reflecting the closing of two large industrial
customers in 1993. The first, in August, was flood-related; the
other, citing economic reasons, closed in December. Prior to
1993, sales to this customer class had shown steady increases.
Interchange sales for resale and related purchased power expense
increased due to the expanded transactions with regional
utilities in 1994.
Industrial Steam Revenues Industrial steam sales in 1994
decreased 17.9%, while revenues decreased 16.7% from 1993 s
levels. The 1994 decrease in sales was primarily the result of a
large pork processing operation that discontinued operations in
St. Joseph at the end of 1993.
The decrease in revenues, reflecting the loss of this customer,
was partially offset by two months of an $800,000 annual price
increase which became effective November 2, 1994.
Industrial steam sales increased 2.6% and revenues increased
2.7% from 1992 to 1993. The increases primarily were due to
expansion and increased production by the Company's largest
industrial steam user.
Natural Gas Revenues In the natural gas segment, retail sales
revenues in 1994 increased 5.3%, compared to 1993. Revenues
reflect a full-year of an annual rate increase of $275,000
approved in April 1993. Retail sales were 9.1% lower, primarily
the result of warmer winter temperatures. Retail sales revenues
were 23.2% higher in 1993 than in 1992, resulting from a
combination of higher sales, the rate increase, and higher
prices for purchased gas. The latter is reflected in the
Purchased Gas Adjustment and is passed
<PAGE>
20
on to customers.
Fuel and Purchased Power Costs Total costs (generation and
purchased power for system energy and for resale) were $28.1
million for 1994, $1.1 million more than the 1993 expense. This
increase was the result of higher sales for resale transactions
expense which was partially offset by lower fuel costs. Fuel and
purchased power costs were $27.0 million in 1993, $4.1 million
more than the 1992 expense.
The increase from 1992 to 1993 resulted from higher system
requirements, increased cost of fuel and purchased power and the
limited availability of the Iatan plant (the Company's most
efficient unit).
Unit fuel costs were lower in 1994 at 120.4 cents per million
British thermal units (Btu),
down from 127.4 cents per million Btu in 1993 and up from the
115.7 cents per million Btu in 1992. The 1994 decrease resulted
from lower prices for coal and gas and the increased use of the
more-efficient Iatan unit.
Of the total fuel burned in 1994, most was coal, similar to the
pattern of recent years. The cost of coal burned decreased from
the 119.1 cents per Btu in 1993 to 113.9 cents per million Btu
in 1994. The higher cost in 1993 was due to increased use of the
Lake Road facility during the flood and the Iatan plant
maintenance outage. The cost in 1992 was 110.1 cents per million
Btu.
A Wyoming mine supplies low-sulfur coal for the Iatan unit under
a 20-year contract, now in its 11th year. The Company, together
with its Iatan partners, signed a 10-year freight contract with
the Burlington Northern Railroad Company in July 1986. The Iatan
delivered unit price was $15.17 per ton in 1994, $16.33 in 1993
and $16.12 in 1992, The unit price was lower in 1994 due to
favorable spot market purchases and reduced freight expense.
The Iatan unit provided 61.1% of the Company's overall energy
needs in 1994, an increase from the 45.4% and 54.7% in 1993 and
1992, respectively. The low figure for 1993 reflects the reduced
Iatan unit availability during the summer flood and extended
fall outage in 1993.
Light & Power met 24.4% of its energy needs through purchased
power arrangements in 1994. This compares to 36.5% and 32.5% in
1993 and 1992, respectively.
The purchased power came from regional utilities. Purchased
power fixed charges were $1.7 million for 1994, $1.5 million for
1993 and $1.3 million for 1992. The charges were for increased
amounts of firm and peaking capacity for all three periods.
The Lake Road units supplied the remainder of the
energy needs.
Other Operations Expenses of other operations for 1994
decreased $9.7 million in comparison to 1993.
The decrease was primarily due to a June 1994 PSC order which
resulted in a one-time adjustment which reduced pension expense
by about $5.9 million. This action eliminated a regulatory
liability established by the June 1993 PSC order and resulted in
1994 pension expense being $10.4 million less than reported in
the same period in 1993.
Expenses for other operations for 1993 increased $7.6 million
over 1992, mainly due to pension expense. The 1993 increase in
pension expense primarily resulted from a one-time charge of
$4.5 million required by the June 1993 PSC order. That order
resulted in a change to the Company's accounting policy related
to pension expense recognition. Other factors were other post-
employment benefits (OPEB) expenses which increased about
$700,000 due to the adoption of Statement of Financial
Accounting Standards (SFAS) No. 106 - Employer's Accounting for
Postretirement Benefits Other than Pensions (See Note 2 in Notes
to Financial Statements in regard to regulatory treatment) and
increased payroll expenses.
Maintenance The $8.3 million of 1994 maintenance expense was
about the same as 1993 and 1992. The balanced expenses
throughout all periods result from the Company's attempt to
schedule maintenance outages to minimize both maintenance and
generation replacement expenses.
Depreciation Expense Depreciation expense increased each year
as a result of capital additions.
Income Tax Expense Income tax expense totaled $5.2 million in
1994 and reflects an increase of $6.8 million from 1993. This
increase primarily was the result of adjustments required by the
1994 and 1993 rate orders (See Note 7 in Notes to Financial
Statements). Income tax expenses were a negative $1.6 million in
1993 and $4.4 million in 1992.
Other Income and Deductions The amounts reflected in Other
net vary throughout the periods, primarily due to gains and
losses on property and securities as well as to changes in
levels of investable
<PAGE>
21
balances and lower interest rates.
Interest Charges The 1994 long-term interest expense reflects
a decrease of about $97,000 from 1993. The 1993 long term
interest expense figure was about $312,000 lower than for 1992.
These decreases resulted from the retirement of long-term debt
under the Company's sinking fund obligations and to a lowering
of interest rates paid as a result of the refinancing of
existing debt in November 1993. Proceeds under a Medium-Term
Note arrangement were used to refund existing First Mortgage
Bonds with higher interest rates.
FUTURE OUTLOOK
Capacity Light & Power has taken steps to serve its customers'
growing load requirements.
The Company purchased 60 megawatts (mw) of capacity from a
regional supplier in 1994. The Company also has contracts to
purchase 35 mw in 1995, 40 mw in 1996 and 1997, and 25 mw in
1998 and 1999. This provides Light & Power with the ability to
economically meet the growing demand in the service territory.
Additional peaking purchases in these years are still under
consideration. The Company is working with regional utilities in
evaluating base-load capacity options. Participation in a
proposed Iatan 2, a new coal-fired unit at the Iatan 1 site, is
currently being negotiated. This will allow for additional base-
load generating capacity in the early 2000s.
Rate Matters The Company currently applies SFAS No. 71
Accounting for the Effects of Certain Types of Regulation and,
accordingly, has recorded regulatory assets related to its
utility property when appropriate. Management believes the
Company will continue to have its rates approved and regulated
by the PSC for the foreseeable future.
These rates are designed to enable the Company to recover its
service costs and also allow an opportunity for the Company to
earn a return on its investment. Changes within the industry and
a movement toward deregulation of some or all aspects of the
Company's business may require the Company to discontinue the
application of SFAS No. 71 at a future date. The Company
periodically reviews the criteria specified in SFAS No. 71 and
believes this standard will continue to be applicable for the
next several years.
Impact of Inflation Under the rate-making practices followed
by the PSC, only historical costs are recoverable in revenues.
Assuming adequate and timely rate relief, the Company will
recover the increases in costs of service caused by inflation.
Customer Losses Early in 1995, a manufacturer of chemicals and
adhesives, which is both an electric and steam customer, began
phasing out its St. Joseph operation. In 1993, the Company lost
two other industrial customers. One, a manufacturer of medical
supplies, sustained substantial flood damage and decided not to
re-open. In an action unrelated to the flood, a large electric
and industrial steam customer, a pork processing plant,
discontinued its operations in December.
Liquidity and Capital Resources The Company has a total
authorized level of 25 million shares of common stock, four
million shares of cumulative preferred stock and two million
shares of preference stock.
At year end, the Company had $3.7 million in cash and
investments, in addition to $10.1 million in unused lines
of credit.
Common equity was 59% for all three periods. At its November
1990 meeting, the board of directors approved an extension of
the Company's open-market repurchase program first approved in
1988. The extension allows for the purchase of up to an
additional 400,000 shares of its common stock.
Of the additional authorization, 140,000 shares have been
repurchased as of December 31, 1994. There was no preferred or
preference stock outstanding in the last three years.
In 1993, the PSC approved the Company's application to issue up
to $45 million principal amount of new debt.
Late that year, the Company issued $25 million of new debt under
a Medium-Term Note arrangement at interest rates
<PAGE>
22
ranging from 5.77% to 7.33% and in maturities ranging from 1998
through 2023. The proceeds were used to refund existing First
Mortgage Bonds with interest rates ranging from 7% to 9 1/8% and
for other general corporate purposes.
The Company projects capital expenditures (net of Allowance for
Funds Used During Construction (AFUDC)) at about $26.8 million
for 1995. Construction expenditures (net of AFUDC) were $12.2
million in 1994, $12.5 million in 1993 and $9.3 million in 1992.
Construction expenditures (net of AFUDC) for the five-year
period ending 1999 are projected to be approximately $128
million. The Company expects to finance these expenditures
through internally generated funds and the issuance of
additional long-term debt, preferred equity and common equity.
Financial coverages are at levels in excess of those required
for issuance of debt and preferred stock. In December 1994,
Standard & Poors lowered the Company's debt ratings from
A to A minus for secured debt and from A minus to BBB+ for
unsecured debt. While still investment grade, the cut was
attributed to a heavy future construction program for capacity
additions and compliance with environmental regulations, an
increasing reliance on purchased power and strict Missouri
regulatory oversight. Light & Power, however, is not alone in
this situation as increasing interest rates and uncertainties
created by a more competitive environment have negatively
impacted the outlook for the electric utility industry as a
whole.
Management believes the nature of these challenges has been
overstated. Challenges and change create opportunities and
management believes the Company's strong balance sheet and
competitive rates make it well positioned for the future. The
equity ratio of 59% positions the Company well and allows for
supplemental borrowings as future needs dictate.
Cash generated from operations is strong. Over the last three
years, operating cash flows have approximated $16.1 million,
$18.4 million and $18.9 million, respectively. The Company's
earnings to fixed charge coverage ratio is 4.59 before income
taxes at December 31, 1994.
Impact of Accounting Standards Changes Two accounting
standards were adopted by the company in 1993 SFAS No. 109
Accounting for Income Taxes,
and SFAS No. 106 Employer's Accounting for Postretirement
Benefits Other Than Pensions (OPEB).
For a complete discussion of the effect of the changes,
refer to footnote (a) in the Statements of Taxes and Note 2 in
Notes to Financial Statements, respectively. There were no
accounting changes in 1994 that had a material impact on the
financial statements.
Environmental Issues The Company is subject to various
environmental regulations, including those related to air and
water quality, polychlorinated biphenyl (PCB),
ash removal, underground storage tanks and asbestos. Routine
testing and maintenance programs have been put in place to
comply with these regulations.
The Clean Air Act Amendments (CAAA) of 1990 have established
standards for electric utilities to reduce certain emissions
from coal-fired generating stations. Final compliance with this
legislation becomes effective in 2000. Missouri's air quality
law is in compliance with and does not contain requirements that
are more stringent than the new federal legislation.
The Iatan plant, which provides most of the Company's energy,
will not be significantly impacted by this legislation. However,
substantial investments will be required at the Lake Road plant
to meet the CAAA Phase II emission regulations, effective in
2000. It is anticipated the principal
<PAGE>
23
costs will be associated with two of the boilers at this plant,
currently burning regional coal with a medium sulfur content.
The estimated total capital cost, including rail transportation
modifications and nitrous oxide (NOx) controls to accommodate a
fuel switch to a lower sulfur western coal, is approximately $22
million.
Management will seek to recover the costs incurred as a result
of the CAAA legislation through higher rates as the capital
investments are made.
Competition/Deregulation The Company has had a very strong
advantage in its competition with rural electric cooperatives
(RECs) for new housing because the co-op's standard residential
rates are significantly higher. In 1993, however, Missouri's
cooperatives announced a policy to match the competing
supplier's residential price on new housing for a guaranteed
five-year period; the impact appears negligible.
State law prohibits competition with RECs for existing
customers. To meet the competition for new large customers and
to encourage business to locate in our service territory, the
Company implemented an economic development incentive rate in
1993.
The Company's rates also fare very favorably with those of other
investor-owned utilities in the state and region.
For example, Light & Power's residential rates are the second
lowest in Missouri and its industrial rates are the lowest in
the region.
Although natural gas has long been the dominant home- heating
source in the area, the Company is making significant inroads in
making electricity the preferred source for heating. For
instance, 89% of total square footage of all new residential
units built in the Company's service area in 1994 use electric
heat, compared to the national average of 32%.
At present, there are no customer-owned co-generation projects
on Light & Power's system. The Company's very favorable energy
prices do not make co-generation projects attractive. The
Company's price structure results primarily from the use of coal
at Iatan and Lake Road and favorable prices from regional energy
suppliers. The Company does not anticipate energy prices
increasing in the near future to a level which would make co-
generation projects attractive.
Transmission Access The current and future efforts to
encourage wholesale competition ('opening up' the nation's
transmission system) as a result of the National Energy Policy
Act of 1992 are expected to increase the size of the market from
which Light & Power buys and sells firm and non-firm interchange
(wholesale) energy. This will tend to increase the options
available to the Company for meeting its customers' electric
needs as well as increasing options for expanding markets.
It also is the Company's belief that increased transmission
access, being available to others besides Light & Power,
will tend to increase the demand for the available
wholesale energy supply, and possibly result in higher
purchased-energy costs.
Light & Power currently has no full-requirement wholesale
customers. As a result, wholesale competition, as being
implemented today (no retail wheeling), is not expected to place
the Company's retail customers at risk.
Even if retail wheeling were to be implemented, Light & Power
believes that its current low prices (among the lowest in the
region) and the excellent power supply options available to the
Company to meet future requirements,
will permit the Company to remain competitive in comparison to
other regional suppliers.
It is the Company's belief that maintaining its position as
a low-cost provider of electricity, through a balance of
capacity additions and purchased power, will allow it to remain
a competitive supplier of electric energy and retain its
customer base.
<PAGE>
- -24-
Statements of Income
Years ended December 31
1994 1993 1992
Operating revenues (Note 1):
Electric - Retail sales
and other $75,309,000 $74,261,000 $70,493,000
Sales for
resale 3,661,000 1,429,000 412,000
Other 11,812,000 12,849,000 11,650,000
$90,782,000 $88,539,000 $82,555,000
Operating expenses:
Production
fuel $17,470,000 $16,388,000 $14,985,000
Purchased power - System
energy 7,448,000 9,569,000 7,683,000
Resale 3,210,000 1,062,000 280,000
Gas purchased for
resale 3,296,000 3,017,000 2,496,000
Other operations
(Note 2) 14,153,000 23,833,000 16,208,000
Maintenance 8,262,000 8,186,000 8,170,000
Depreciation
(Note 1) 9,834,000 9,514,000 9,134,000
Taxes (See Statements):
General 6,360,000 6,284,000 5,836,000
Income 5,211,000 (1,562,000) 4,358,000
75,244,000 $76,291,000 $69,150,000
Operating
income $15,538,000 $12,248,000 $13,405,000
Other income and deductions:
Allowance for equity funds used
during
construction $117,000 $136,000 $183,000
Other - net (129,000) (5,000) 51,000
$(12,000) $131,000 $234,000
Income before interest
charges $15,526,000 $12,379,000 $13,639,000
Interest charges, net:
Long-term
debt $4,261,000 $4,358,000 $4,670,000
Interest on bank
notes 182,000 102,000 20,000
Allowance for borrowed funds used
during
construction (90,000) (72,000) (88,000)
Other 107,000 69,000 79,000
$4,460,000 $4,457,000 $4,681,000
Net income available for common
stock $11,066,000 $7,922,000 $8,958,000
Weighted average common shares
outstanding 3,942,146 4,008,192 4,018,978
Earnings per average common
share $2.81 $1.98 $2.23
The accompanying Notes to Financial Statements are an integral
part of these statements.
<PAGE>
25-
Balance Sheets
December 31 1994 1993
ASSETS
Utility plant, at original cost (Note 1):
Electric $269,284,000 $262,816,000
Other 9,472,000 9,461,000
$278,756,000 $272,277,000
Less - Reserves for
depreciation 135,415,000 131,107,000
$143,341,000 $141,170,000
Construction work in
progress 4,951,000 4,167,000
$148,292,000 $145,337,000
Other investments $2,346,000 $1,169,000
Current assets:
Cash and cash
equivalents $407,000 $270,000
Temporary
investments 990,000 2,206,000
Accounts receivable, net of reserve
of $339,000 and $390,000
respectively 6,986,000 7,486,000
Unbilled revenue
(Note 1) 3,523,000 3,452,000
Fuel, at average
cost 3,832,000 2,830,000
Materials and supplies, at
average cost 5,324,000 5,011,000
Prepayments and
other 1,233,000 1,174,000
$22,295,000 $22,429,000
Deferred charges:
Debt expense (being amortized over
term of debt) $1,393,000 $1,475,000
Lease payments
receivable 3,660,000 3,782,000
Prepaid pension
expense 7,691,000 6,109,000
Regulatory assets 13,395,000 10,705,000
Other 627,000 684,000
Total deferred $26,766,000 $22,755,000
Total assets $199,699,000 $191,690,000
CAPITALIZATION AND LIABILITIES
Capitalization (See Statements):
Common stock $33,816,000 $33,816,000
Retained earnings 60,708,000 56,745,000
Other paid-in
capital 380,000 362,000
Less - treasury
stock (17,312,000) (14,461,000)
$77,592,000 $76,462,000
Long-term debt 53,100,000 53,100,000
$130,692,000 $129,562,000
Current liabilities:
Outstanding checks in excess of cash
balances $2,803,000 $3,061,000
Accounts payable 7,299,000 6,201,000
Notes payable 6,300,000 0
Accrued income and general
taxes 838,000 887,000
Accrued interest 1,526,000 1,211,000
Accrued vacation 1,170,000 1,034,000
Other 372,000 321,000
Total current
liabilities $20,308,000 $12,715,000
Non-current liabilities and deferred credits:
Capital lease
obligations $2,527,000 $2,542,000
Deferred income
taxes 27,186,000 23,935,000
Investment tax
credit 5,323,000 5,745,000
Accrued claims and
benefits 1,596,000 1,512,000
Deferred revenues 2,609,000 2,729,000
Regulatory
liabilities 7,985,000 12,076,000
Other 1,473,000 874,000
$48,699,000 $49,413,000
Commitments and Contingencies (Notes 1 and 3)
Total capitalization
and liabilitites $199,699,000 $191,690,000
<PAGE>
26-
Statements of Capitalization
December 31 1994 1993
Common Stock and retained earnings
Common stock - authorized 25,000,000 shares, without
par value; issued 4,626,374
shares (a) $33,816,000 $33,816,000
Retained earnings 60,708,000 56,745,000
Other paid-in capital (principally gain on
reacquired
preferred stock) 380,000 362,000
Less - treasury stock, at cost, 718,483 and
617,818 shares,
respectively (17,312,000) (14,461,000)
$77,592,000 $76,462,000
Long-term debt (d):
First Mortgage Bonds-
9.44% Series due
February 1, 2021 $22,500,000 $22,500,000
7-3/8% Pollution Control Revenue Bonds
Series due
February 1, 2013 5,600,000 5,600,000
$28,100,000 $28,100,000
Medium-term Notes
5.77% due
December 8, 1998 $5,000,000 $5,000,000
7.13% due
November 29, 2013 1,000,000 1,000,000
7.16% due
November 29, 2013 9,000,000 9,000,000
7.17%
due December 1, 2023 7,000,000 7,000,000
7.33% due
November 30, 2023 3,000,000 3,000,000
$25,000,000 $25,000,000
Total first mortgage bonds and medium-term notes
$53,100,000 $53,100,000
Total capitalization $130,692,000 $129,562,000
Notes:
(a) Common Stock:
Effective January 1986, the employee stock purchase plan was
suspended; the dividend reinvestment and employee stock
ownership plans were converted to market-share plans wherein
additional shares are being purchased on the open market. At
December 31, 1994 and 1993, the Company had 327,948 shares of
common stock reserved for these plans.
As of December 31, 1994, the Company had issued 4,626,374 common
stock purchase rights (Rights). With the purchase of treasury
stock, 102,300 of these rights were reacquired in 1994. There
were no purchases of treasury stock in 1993. Under the
Restricted Stock Plan, 1,635 and 3,639 Rights were reissued with
shares in 1994 and 1993, respectively. The Rights were issued in
November 1986 as a dividend to holders of the common stock at
the rate of one Right for each share of common stock
outstanding. Such Rights expire on December 4, 1996. Each Right
entitles the holder thereof to buy one-third (1/3) of a share of
common stock at an exercise price of $70.00.
The holders of these Rights do not have any voting
rights. These rights are redeemable, at the option of the
Company, at a price of $0.01 per Right prior to the twentieth
business day after the public announcement that any person has
acquired beneficial ownership of at least 20% of the common
stock. The Rights are evidenced by the common stock certificates
and are not exercisable, or transferable apart from the common
stock, until ten days after a public announcement that a person
acquires 20% or more of the Company or makes a tender offer for
30% or more of the Company's common stock. In the event the
Company is acquired in a merger or other business transaction
(including one in which the Company is the surviving
corporation), it is provided that each Right will entitle its
holder to purchase, at the then current exercise price of the
Right, that number of shares of common stock of the surviving
Company which at the time of such transaction would have a
market value of two times the exercise price of the Right.
The accompanying Notes to Financial Statements are an integral
part of these statements.
<PAGE>
27-
(b) Cumulative Preferred Stock:
The authorized level of cumulative preferred stock is 4,000,000
shares without par value.
(c) Preference Stock:
The authorized level of preference stock is 2,000,000 shares
without par value.
(d) Long-Term Debt:
All first mortgage bonds are secured equally and ratably by a
direct first lien on substantially all fixed property and
franchises now owned or hereafter acquired. During 1993, the
Company arranged a $45 million unsecured Medium-Term Notes
arrangement of which $25 million was used to retire five first
mortgage bond issues. The combined aggregate amount of
maturities and unfulfilled sinking fund requirements for the
next five years is $5 million. This is for the retirement of the
5.77% Medium-Term Note which is due in 1998.
<PAGE>
Statements of Retained Earnings
Years ended December 31 1994 1993 1992
Balance at beginning of
year $56,745,000 $55,877,000 $53,834,000
Net income 11,066,000 7,922,000 8,958,000
$67,811,000 $63,799,000 $62,792,000
Deduct:
Dividends
Common stock $1.80, $1.76 and $1.72
per share,
respectively 7,103,000 7,054,000 6,915,000
Balance at
end of year $60,708,000 $56,745,000 $55,877,000
The accompanying Notes to Financial Statements are an integral
part of these statements.
<PAGE>
- -28-
Statements of Cash Flows
Years ended
December 31 1994 1993 1992
Cash flows from operating activities:
Net income $11,066,000 $7,922,000 $8,958,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,834,000 9,514,000 9,134,000
Pension expense (6,621,000) 3,980,000 (1,445,000)
Other postretirement
benefits 452,000 838,000 0
Deferred taxes and investment tax credit
2,418,000 (4,757,000) 645,000
Allowance for equity funds used during construction
(117,000) (136,000) (183,000)
Net changes in working capital items
not considered elsewhere:
Accounts receivable and unbilled
revenue 429,000 (768,000) (376,000)
Fuel (1,002,000) 2,233,000 271,000
Accounts payable and outstanding
checks 840,000 2,403,000 1,649,000
Accrued income and general
taxes (49,000) (470,000) 33,000
Other, net (288,000) (1,291,000) (14,000)
Net changes in regulatory assets and liabilities
157,000 (1,781,000) 0
Net changes in other assets and liabilities
(1,053,000) 678,000 202,000
Net cash provided by operating
activities $16,066,000 $18,365,000 $18,874,000
Cash flows from investing activities:
Gross additions to
plant $(12,431,000) $(12,692,000) $(9,477,000)
Allowance for borrowed funds used during construction
90,000 72,000 88,000
Investments 39,000 1,109,000 (491,000)
Other 27,000 64,000 96,000
Net cash provided by operating activities
$(12,275,000) $(11,447,000) $(9,784,000)
Cash flows from financing activities:
Increase in notes
payable $6,300,000 $ 0 $ 0
Long-term debt
reacquired 0 (24,941,000) (1,767,000)
Long-term debt
issued 0 25,000,000 0
Treasury stock (purchased)
issued (2,851,000) 67,000 (455,000)
Dividends paid (7,103,000) (7,054,000) (6,915,000)
Net cash used in financing
activities $(3,654,000) $(6,928,000) $(9,137,000)
Net increase (decrease) in cash and cash equivalents
$137,000 $(10,000) $(47,000)
Cash and cash equivalents at beginning
of year $270,000 $280,000 $327,000
Cash and cash equivalents at end
of year $407,000 $270,000 $280,000
Supplemental disclosure of cash flow information
Cash paid during year:
Interest $4,146,000 $5,100,000 $4,754,000
Income tax $3,484,000 $3,794,000 $3,552,000
For purposes of the Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents.
The accompanying Notes to the Financial Statements are an
integral part of these statements.
<PAGE>
- -29-
Statements of Taxes
Years ended
December 31 1994 1993 1992
Components of Income tax expense:
Taxes payable currently
Federal $2,441,000 $2,982,000 $3,495,000
State 397,000 273,000 331,000
$2,838,000 $3,255,000 $3,826,000
Provisions for deferred taxes (a) (f)
Depreciation and other plant-related differences (b)
$105,000 $(163,000) $453,000
Rate case adjustments
(c) 0 (2,747,000) 0
Pensions (c) 2,787,000 (1,778,000) 523,000
Other (53,000) 371,000 111,000
$2,839,000 $(4,317,000) $1,087,000
Investment tax
credit $(422,000) $(440,000) $(441,000)
Total income tax
expense $5,255,000 $(1,502,000) $4,472,000
Less income tax applicable to nonutility operations (d)
(44,000) (60,000) (114,000)
Income tax expense charged to utility operations
$5,211,000 $(1,562,000) $4,358,000
Reconciliation of income tax rates:
Statutory federal income
tax rate 34.0% 34.0% 34.0%
Timing differences flowed through as required
by regulators (2.1) (.6) 2.8
Amortization of investment
tax credit (2.6) (6.9) (3.3)
Amortization of excess deferred
taxes (1.0) (4.0) (1.4)
State income taxes, net of federal income tax benefit
3.1 0 2.4
Rate case
adjustment 0 (42.8) 0
Other .8 (3.1) (1.2)
Effective income tax rate as
reported (e) 32.2% (23.4%) 33.3%
Components of general tax expense:
Real estate and personal
property $2,630,000 $2,652,000 $2,689,000
City license tax 2,549,000 2,503,000 2,057,000
Social Security and
Medicare 1,050,000 1,006,000 969,000
Other 131,000 123,000 121,000
Total general tax
expense $6,360,000 $6,284,000 $5,836,000
Notes:
(a) The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, in the
first quarter of 1993, which requires the use of the liability
method in accounting for income taxes. Under the liability
method, deferred income taxes are established for the tax
consequences of temporary differences by applying the enacted
tax rate to differences between the financial statement carrying
amount and the tax basis of the Company's assets and
liabilities. Such temporary differences are the result of
provisions in the income tax law that either require or permit
certain items to be reported on the income tax return in a
different period than they are reported in the financial
statements.
The adoption of SFAS 109 resulted in the establishment of
additional deferred income taxes and regulatory balances.
Initial application of the statement was reflected as a
cumulative effect of a change in accounting principle and had no
material impact on the Company's Results of Operations.
(b) The Company has elected, for tax purposes, various
accelerated depreciation methods allowed by the Internal Revenue
Code.
(c) The PSC issued a Report and Order dated June 25, 1993, that
required the Company to change its recognition of the tax
effects of certain temporary differences from a normalized to a
flow-through basis. As a result, a one-time addition to earnings
was recorded of approximately $2.7 million to adjust deferred
income taxes and record a regulatory asset for amounts which
will be recovered in rates in future periods. In future periods,
income tax expense related to these items will be recorded
pursuant to the accounting treatment specified in the Report and
Order.
Deferred income taxes previously provided for basis differences
in the Company's prepaid pension asset of approximately $1.8
million were reversed when a different method to recover pension
costs was required by the 1993 rate order (see Note 2 in the
Notes to the Financial Statements). Other minor adjustments to
deferred tax balances were also required. The total tax effect
of the 1993 Report and Order was to decrease deferred income
taxes by about $4.6 million. The 1994 Report and Order required
the Company to change its method of recognition of pension
expense.
In response to the rate order, the Company recorded a one-time
adjustment reducing pension expense by $5.9 million and
eliminating a regulatory liability established as a result of
the 1993 Report and Order. The tax effect was to increase
deferred income taxes by $2.6 million.
(d) The tax effect of items applicable to nonutility operations
is included in Other Income.
(e) The effective income tax rate is computed by dividing total
income tax expense on these statements by the sum of tax expense
and net income.
(f) The principal components of the Company's deferred income
tax balances at December 31, 1994 and 1993, consist of the
following:
1994 1993
Accelerated depreciation and
other plant-related
differences $21,742,000 $22,051,000
Unamortized investment
tax credit (3,441,000) (3,705,000)
Regulatory assets 11,170,000 8,323,000
Regulatory
liabilities (4,544,000) (2,262,000)
Other, net 2,259,000 (472,000)
Total deferred tax
balances $27,186,000 $23,935,000
<PAGE>
- -30-
NOTES TO FINANCIAL STATEMENTS
1 STATEMENT OF ACCOUNTING POLICIES
Utility Plant Utility plant is stated at original cost. These
costs include payroll-related costs such as taxes, pensions and
other fringe benefits and an allowance for funds used during
construction (AFUDC).
Depreciation Provisions for depreciation have been computed on
a straight-line basis by applying rates approved by the Missouri
Public Service Commission (PSC) to the classified account
balances. The Company's annual composite rate was 3.6% for 1994,
3.8% for 1993 and 3.9% for 1992.
Improvement to units of property are capitalized. Property units
retired are charged to accumulated depreciation together with
any related removal costs, net of salvage. Maintenance costs and
replacements of assets which do not constitute property units
are expensed as incurred.
Jointly Owned Iatan Plant The Company has an agreement with
Kansas City Power and Light Company and The Empire District
Electric Company for joint ownership of a coal-burning
generating plant at Iatan, Missouri. The amounts on the right
represent the Company's 18% interest in the 670-megawatt unit.
The Company's share of operating expenses for Iatan is included
as operating expenses in the Statements of Income.
Revenue Recognition Revenues relating to service rendered but
unbilled are recognized in the period the service is provided.
Commitments Refer to Note 9 in the Notes to Financial
Statements regarding lease agreements.
The Company's capital budget for 1995 approximates $26.8
million. The Company has contracts to purchase generating
capacity from regional suppliers of 35 megawatts in 1995, 40
megawatts in 1996 and 1997, and 25 megawatts for 1998 and 1999.
Fixed charges for the generating capacity are: $1,136,000 in
1995, $1,259,000 in 1996, $1,508,000 in 1997, $1,179,000 in 1998
and $1,005,000 in 1999.
Reclassifications Certain reclassifications have been made in
the financial statements to enhance comparability.
December 31
1994 1993
Utility plant $62,180,000 $61,707,000
Reserve for
depreciation $29,331,000 $27,517,000
2 BENEFIT PLANS
Pension Plans The Company has two non-contributory defined-
benefit pension plans, one for bargaining and one for non-
bargaining employees, covering all employees with one year or
more of continuous service. Benefits for both plans are based on
years of service and compensation, utilizing the final average
pay plan benefit formula.The Company's funding policy is to
comply with the minimum funding requirements of the Employee
Retirement Income Security Act (ERISA). Pension costs were
($6,872,000) for 1994, $3,980,000 for 1993 and ($1,445,000) for
1992 of which about ($843,000), $538,000, and ($169,000),
respectively, were (credited) charged to construction.
In the 1993 rate case, the PSC issued a Report and Order that
required pension expenses be recognized on a funding basis for
ratemaking purposes rather than the accrual recognition required
under generally accepted accounting principles (GAAP). The
Company recorded the difference in expense recognition on the
balance sheet as a regulatory liability. For 1993, this resulted
in an increase in operating expenses of approximately $1.3
million, pretax. In response to the PSC Order, the Company
recorded a one-time adjustment increasing pension expense by
approximately $4.5 million and established a regulatory
liability for pension credits accrued in prior periods.
In the 1994 rate case, the PSC issued a Report and Order that
eliminated the regulatory liability established by the 1993
Order. The Company is now required to recognize pension expense
on an accrual basis. The Company eliminated the regulated
liability recorded in 1993, which increased pre-tax income by
about $5.9 million. This non-recurring credit contributed
approximately $3.4 million to earnings after taxes or $.85 per
share in 1994.
Net pension costs, including amounts capitalized, are:
1994 1993 1992
Service cost-benefits earned
during this
period $765,000 $739,000 $784,000
Interest cost on projected
benefit
obligation $1,913,000 $1,926,000 $1,799,000
Actual return on
plan assets 319,000 (4,418,000) (3,126,000)
Amortization of transition
asset (431,000) (431,000) (431,000)
Amortization of prior
service cost 134,000 134,000 85,000
Deferred gain (loss)
on plan assets (4,369,000) 609,000 (556,000)
Regulatory
adjustments (5,203,000) 5,421,000 0
Net pension costs $(6,872,000) $3,980,000 $(1,445,000)
Assumed discount
rate 7.75% 7.5% 8.0%
Assumed increase in future
compensation 4.3% 4.3% 5.6%
Assumed rate of return
on assets 9.0% 9.0% 9.0%
<PAGE>
31-
The funded status of the pension plans at December 31, 1994 and
1993 is shown below.
1994 1993
Actuarial present value of
accumulated plan benefits
Vested $21,286,000 $21,141,000
Non-vested 702,000 667,000
Accumulated benefit
obligation $21,988,000 $21,808,000
Projected benefit obligation $25,729,000 $25,462,000
Plan assets at fair market
value 40,215,000 42,326,000
Plan assets in excess of
projected benefit obligation $14,486,000 $16,864,000
Unrecognized transition asset (3,018,000) (3,450,000)
Unrecognized prior service 1,457,000 1,591,000
Unrecognized net gain (5,234,000) (8,983,000)
Accrued pension asset $7,691,000 $6,022,000
The assets of the plans consist primarily of common stocks,
corporate bonds, United States government securities, collective
investment trust funds and commingled employee benefit trust
funds.
Retirement Savings Plan The Company has a Retirement Savings
Plan under Section 401(k) of the Internal Revenue Code. The plan
covers all regular full-time employees with one year or more of
service. Under this plan, eligible employees may defer and
contribute a portion of current compensation in order to provide
retirement benefits. The Company makes a matching contribution
of 25%, up to 6% of compensation, made by the employee on a
monthly basis. Discretionary matching contributions up to an
additional 25% may be made based on an incentive formula. The
Company made contributions of $366,000 for 1994, $353,000 for
1993 and $318,000 for 1992.
Postretirement Benefit Plan In addition to providing pension
benefits, the Company provides certain postretirement health and
life insurance benefits. Substantially all of the Company's
employees become eligible for these benefits if they reach
retirement age while working for the Company and have 10 years
of service. Employees hired after December 31, 1992, are not
eligible for postretirement life insurance benefits.
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 106 - Employers' Accounting for Postretirement
Benefits other than Pensions, effective January 1993. This
method of accounting for other postemployment benefits (OPEB)
accrues the actuarially determined costs for life insurance and
medical benefits during the employee's period of service. The
Company elected to amortize the estimated unfunded accumulated
obligation at January 1, 1993, of $7,761,000 (transition
obligation) over 20 years.The 1993 electric rate case order
required that OPEB expense be accounted for on a pay-as-you-go
basis by the PSC for ratemaking purposes rather than the accrual
recognition required under SFAS No. 106. The PSC Order did not
comply with the accounting requirements for establishing
regulatory assets. As a result, the Company continued recording
OPEB expense in accordance with SFAS No. 106 even though current
revenues did not reflect a recovery of these expenses.
The PSC ordered the Company in the 1994 electric rate case
decision to account for OPEB costs on an accrual basis for
ratemaking purposes. The ruling did not change the Company's
financial policy of accounting for OPEB expenses on an accrual
basis as required under SFAS No. 106. However, the ruling
permits the accrual level of expenses to be recoverable in
revenues.
The PSC's 1994 order required the Company to externally fund the
obligation. The Company established Voluntary Employees'
Beneficiary Association (VEBA) trusts in October 1994. A VEBA
provides employees with medical and life insurance at a lower
net after tax cost. These trusts include both active and retired
employees. OPEB costs were $1,223,000 for 1994 and $1,166,000
for 1993 of which about $212,000 and $132,000, respectively,
were charged to construction. The 1992 pay-as-you-go costs were
$424,000.
The following table summarizes the status of the Company's
postretirement benefit plan and the related amounts included in
the Balance Sheet at December 31, 1994 and 1993:
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $4,093,000 $4,715,000
Other fully
eligible
participants 1,253,000 1,290,000
Other active
participants 2,525,000 2,748,000
Total benefit
obligation $7,871,000 $8,753,000
Plan assets at
fair market value (448,000) 0
Unrecognized
transition
obligation (6,985,000) (7,373,000)
Unrecognized
net gain (loss) 570,000 (600,000)
Accrued postretirement
benefit cost $1,008,000 $780,000
- -32-
The following table summarizes the net postretirement benefit
cost for 1994 and 1993:
1994 1993
Service cost-benefits
earned during the
period $179,000 $158,000
Interest cost on accumulated
postretirement benefit
obligation 656,000 620,000
Amortization of
transition
obligation 388,000 388,000
Net postretirement
benefit cost $1,223,000 $1,166,000
For measurement purposes, a 9 percent annual rate of increase in
the per-capita cost of covered health care benefits was assumed
for 1995; the rate was assumed to decrease gradually to 6
percent by 2018 and remain at that level thereafter. Increasing
the assumed health care cost trend rates by 1 percentage point
in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1994, by $1,174,000 and
increase the net periodic postretirement benefit cost for the
year then ended by $144,000. The discount rate and investment
rate used in determining the accumulated postretirement benefit
obligation were 7.75% and 9.0%, respectively.
3 CONTINGENCIES
Certain legal actions are pending which may impact the Company.
In management's opinion, the ultimate resolution of these
matters is not expected to materially affect the Company's
financial position or operating results.
4 SHORT TERM BORROWINGS
At December 31, 1994, the Company had bank credit arrangements
of $16,400,000 in conventional lines of credit.
Under these arrangements, the Company had borrowings of
$6,300,000 outstanding at December 31, 1994, with rates varying
from 6.475% to 7.1%. Arrangements do not require compensating
balances. No borrowings were outstanding under the agreements at
December 31, 1993. On November 30, 1993, the Company borrowed
$16,000,000 at rates varying from 3.625% to 4.00% on a short-
term basis. These borrowings were needed as interim financing
after retirement of existing First Mortgage Bonds and before the
issuance of Medium-Term Notes in December 1993. Refer to
Footnote No. (d) in the Notes to Statements of Capitalization.
The weighted average interest rates for borrowings during 1994
and 1993 were 5.3% and 4.1%, respectively.
<PAGE>
5 QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Operating
revenues $22,814,000 $22,701,000 $24,027,000 $21,240,000
Operating
income $3,022,000 $5,530,000 $4,488,000 $2,498,000
Net income $2,002,000 $4,427,000 $3,365,000 $1,272,000
Earnings
available for
common stock $2,002,000 $4,427,000 $3,365,000 $1,272,000
outstanding 3,988,229 3,955,358 3,917,108 3,907,891
Earnings per average
common share $.50 $1.12 $.86 $.33
1993
Operating
revenues $22,758,000 $20,300,000 $24,120,000 $21,361,000
Operating income $3,678,000 $2,899,000 $4,375,000 $1,296,000
Net income $2,482,000 $1,805,000 $3,309,000 $326,000
Earnings available
for common stock $2,482,000 $1,805,000 $3,309,000 $326,000
Weighted average common stock shares
outstanding 4,005,611 4,009,081 4,009,081 4,008,944
Earnings per average
common share $.62 $.45 $.83 $.08
The quarterly data reflect seasonal variations common to the
utility industry. Results of the 1993 fourth quarter were
impacted due to higher maintenance and purchased power expenses
caused by the Iatan plant outage. The 1994 second quarter
reflects the PSC rate order adjustment which contributed $.85
per share to net income.
<PAGE>
- -33-
6 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash and Temporary Investments Temporary investments consist of
government obligations. The fair value of these investments is
estimated based on quoted market prices for the same or similar
issues and approximate the carrying amount.
Other Investments The balance includes a government
obligation, an investment in a business park and a retirement
trust. In 1994, the Company acquired $791,000 in a government
obligation which matures in 1996. The fair-market value of the
obligation is based on a quoted market price. No government
securities were held in 1993. The fair-market value of the
investment in the business park is stated at the original cost
of $500,000 due to the impracticability of estimating the market
value. The fair value of the retirement trust is estimated based
on quoted market prices for same or similar issues. The
investment in the trust is offset by a corresponding amount in
other non-current liabilities for future obligations.
Notes Payable Because of the short maturity of these
borrowings, the carrying value approximates the fair-market
value. Refer to Note 4 in the Notes to Financial Statements
regarding short-term borrowings.
Long-Term Debt Most of the Company's long-term debt is not
publicly traded, therefore, a market price does not exist for
these bonds. The fair value of long-term debt is estimated based
upon market prices for comparable securities with similar
maturities. The estimated fair values of the Company's financial
instruments are shown below.
Carrying Fair
Amount Values
1994
Cash and temporary
investments $1,397,000 $1,400,000
Other
investments $2,346,000 $2,300,000
Notes payable $6,300,000 $6,300,000
Long-term debt $53,100,000 $50,309,000
1993
Cash and temporary
investments $2,476,000 $2,476,000
Other
investments $1,169,000 $1,169,000
Notes payable 0 0
Long-term debt $53,100,000 $55,387,000
The supplementary presentation at the bottom of this page,
presented in accordance with SFAS No. 107, is not expected to
result in a material impact on the Company's financial position
or results of operations. Under the ratemaking principles
followed by the PSC, any excess or deficiency of fair value of
the Company's long-term debt would be used to reduce or increase
the Company's rates over a prescribed amortization period.
7 RATE MATTERS
The Company is regulated by the PSC. In August 1992,
the Company filed a request with the PSC for a
$6.1 million electric increase and a $330,000 natural gas rate
increase. In February 1993, the staff of the PSC filed a
complaint alleging the Company's electric prices should be
reduced by $7.0 million. The staff's complaint was consolidated
with the Company's electric request and on June 25, 1993, the
PSC issued a Report and Order decreasing annual electric
revenues by $876,000, effective July 5, 1993. The PSC approved
an increase of $275,000 in annual natural gas revenues in March
1993, which was effective April 5, 1993.
Included in the Report and Order were regulatory accounting
policies which were different from the Company's current
accounting policies. These differences primarily related to the
recognition of pension expense, OPEB expense and deferred income
tax expense. As a result, the recognition of pension and
deferred income tax expenses followed the accounting treatment
mandated by the PSC Order. Refer to Note 2 in the Notes to
Financial Statements regarding pension and OPEB expenses.
The PSC Order related to deferred income taxes required the
Company to change its recognition of the tax effects
of certain temporary differences from a normalized to a
flow-through basis. (Refer to Note (c) in the Statement of Taxes
regarding deferred income taxes.) As a result, regulatory assets
related to these temporary differences were established,
resulting in a one-time addition to earnings of approximately
$2.7 million.
The Company expended approximately $1,098,000 for the disposal
of existing fly ash residue at the Lake Road facility. In
accordance with the rate order received by the PSC,
these expenditures were deferred and expensed in 1993 and 1994.
In July 1993, the Company filed an application with the PSC
seeking an accounting authority order to allow certain costs and
expenses incurred by the Company as a result of the flood
conditions on the Missouri River and its tributaries in July and
August 1993 to be deferred and amortized over a five-year
period.
<PAGE>
- -34-
In October 1993, the PSC approved the request and the
amortization of approximately $1.1 million began in November
1993.
In November 1993, the Company filed a request with the PSC to
increase annual electric revenues by $5.5 million (7.9 %). The
Company last increased electric prices in 1981 and has had three
price reductions since that time. In December 1993, the Company
filed a request to increase industrial steam revenues by
$800,000 (12.2 %). The last industrial steam increase was in
1988.
In June 1994, the PSC ruled on an electric request increasing
annual revenues by approximately $2.15 million (3.1%) effective
June 15, 1994.
The 1994 PSC rate order required the Company to
change its regulatory accounting policies for pension
and OPEB expenses. Refer to Note 2 in the Notes to Financial
Statements regarding pension and OPEB regulatory treatment.
In October 1994, the PSC ruled on the industrial steam request
increasing annual revenues by $800,000 (12.2%), the full amount
requested. The higher rates became effective November 2, 1994.
In December 1994, the Company filed an application with the PSC
seeking an accounting authority order to allow certain costs and
expenses incurred as a result of an ice storm to be deferred and
amortized over a five-year period. The Company estimates the
costs at about $1.4 million. The PSC approved the request in
January 1995 to defer and amortize the expenses over a five-year
period beginning in March 1995.
The total amount of regulatory assets recorded at December 31,
1994 and 1993, approximates $13.4 million and $10.7 million,
respectively. Regulatory liabilities recorded at December 31,
1994 and 1993, approximates $8.0 million and $12.1 million,
respectively.
8 SEGMENTS OF BUSINESS
The Company is a public utility engaged primarily in the
business of generating and distributing electric energy in a 10-
county area in Northwest Missouri. The Company also is engaged
in the limited sale of natural gas and industrial steam. The
following table sets forth certain information regarding the
Company's segments of business.
1994 1993 1992
Operating Information (Years Ended December 31)
Operating Revenues:
Electric $78,970,000 $75,690,000 $70,905,000
Other 11,812,000 12,849,000 11,650,000
$90,782,000 $88,539,000 $82,555,000
Pretax Operating Income:
Electric $20,248,000 $10,496,000 $16,469,000
Other 501,000 190,000 1,294,000
$20,749,000 $10,686,000 $17,763,000
Other Information:
Depreciation Expense
Electric $9,228,000 $8,922,000 $8,576,000
Other 606,000 592,000 558,000
$9,834,000 $9,514,000 $9,134,000
Utility Plant Expenditures
Electric $12,081,000 $11,854,000 $8,694,000
Other 350,000 838,000 878,000
$12,431,000 $12,692,000 $9,572,000
Asset Information (At December 31)
Identifiable:
Electric
$182,457,000 $174,053,000 $161,961,000
Other 10,481,000 9,855,000 9,109,000
$192,938,000 $183,908,000 $171,070,000
Assets Not
Allocated (a) 6,761,000 7,782,000 7,673,000
$199,699,000 $191,690,000 $178,743,000
(a) Principally includes investments, cash, prepayments and
deferred charges.
<PAGE>
- -35-
9 LEASES
In April 1992, the Company entered into a 50-year capital lease
agreement (36.4-year amortization) with six other regional
utilities for a transmission line and related facilities.
Utility Plant-Electric as of December 31, 1994, includes
$2,527,000 for the net leased joint facilities.
The future minimum lease payments under the capital lease
together with the present value of the net lease payments
(obligations under the capital lease) are:
1995 $215,000
1996 215,000
1997 215,000
1998 215,000
1999 215,000
Later years 6,149,000
Total minimum lease
payments $7,224,000
Less: Amount representing
interest 4,697,000
Present value of obligations
under capital leases $2,527,000
The Company also entered into 50-year direct financing lease
agreements (with amortizations ranging from 31 to 36.4 years)
for terminal and associated leased joint facilities. Lease
payments receivable as of December 31, 1994, are $3,660,000.
Unearned interest of $2,609,000 is included in Non-Current
Liabilities and Deferred Credits.
The future minimum lease payments receivable together with the
present value of net receivables under the leases are:
1995 $123,000
1996 123,000
1997 123,000
1998 123,000
1999 123,000
Later years 3,045,000
Total minimum lease payments
receivable $3,660,000
Less: Amount representing
interest 2,609,000
Present value of net
receivables $1,051,000
<PAGE>
- -36-
Summary of Financial Data
(unaudited)
1994 1993 1992 1991
STATEMENTS OF INCOME (Thousands)
Operating
Revenues $90,782 $88,539 $82,555 $89,580
Operating
Expenses 75,244 76,291 69,150 74,888
Operating
Income $15,538 $12,248 $13,405 $14,692
Other Income and
Deductions (12) 131 234 (46)
Income Before Interest
Charges $15,526 $12,379 $13,639 $14,646
Interest
Charges 4,460 4,457 4,681 4,856
Net Income $11,066 $7,922 $ 8,958 $ 9,790
Preferred Stock Dividend
Requirements 0 0 0 0
Earnings Available for
Common Stock $11,066 $ 7,922 $ 8,958 $ 9,790
COMMON STOCK DATA (Adjusted to reflect three-for-two split in
June 1987)
Earnings Per Share
Common Share $2.81 $1.98 $2.23 $2.44
Dividends Paid
Per Share $1.80 $1.76 $1.72 $1.66
Shares Outstanding -
Average 3,942,146 4,008,192 4,018,978 4,018,997
Return on Average Common
Equity 14.4% 10.4% 12.0% 13.5%
Book Value Per
Share $19.86 $19.07 $18.84 $18.37
Market Price at
Year-End $28.500 $29.000 $34.250 $33.875
CAPITALIZATION (Percent)
Long-Term Debt 40.63 40.98 41.28 42.61
Preferred
Stock 0 0 0 0
Common Equity 59.37 59.02 58.72 57.39
Total 100.00 100.00 100.00 100.00
COVERAGE RATIOS
Pretax Interest
4.59 2.42 3.82 4.05
After Tax Interest and Preferred
Dividend 3.43 2.75 2.88 2.99
MISCELLANEOUS FINANCIAL DATA (Thousands)
Construction Expenditures, Excluding
AFUDC $12,224 $12,483 $9,301 $11,581
Utility Plant at Original
Cost $283,637 $276,376 $267,075 $256,962
Summary of Operating Statistics Electric
SALES REVENUES (Thousands)
Residential $32,791 $31,630 $28,334 $31,154
Commercial 23,556 22,768 22,266 22,487
Industrial 17,325 18,286 18,312 17,871
Other 705 689 699 687
Total Retail Sales
Revenue $74,377 $73,373 $69,611 $72,199
Sales for Resale
Revenue $3,661 $1,429 $412 $5,439
SALES (MWH)
Residential 562,148 564,885 505,047 558,614
Commercial 418,915 402,760 387,013 394,647
Industrial 431,468 447,859 438,230 427,728
Other 12,643 12,929 13,007 12,804
Total Retail
Sales 1,425,174 1,428,433 1,343,297 1,393,793
Sales for
Resale 222,185 91,645 27,355 395,293
RESIDENTIAL CUSTOMER DATA (Average)
Number of
Customers 53,424 53,250 53,037 52,701
Annual KWH
Sales 10,522 10,608 9,523 10,600
Revenue Cents
Per KWH 5.83 5.60 5.61 5.58
SYSTEM DATA (MWH)
System
Requirements 1,526,088 1,532,022 1,445,880 1,498,202
Load Factor
(Percent) 55.0 52.5 52.8 52.6
Net Peak Load 317 333 312 325
System Capability
at Peak 434 434 422 416
<PAGE>
37
Summary of Financial Data
(unaudited)
1990 1989 1988 1987
STATEMENTS OF INCOME (Thousands)
Operating
Revenues $84,178 $83,917 $77,643 $77,400
Operating
Expenses 69,977 69,297 62,788 62,608
Operating
Income $14,201 $14,620 $14,855 $14,792
Other Income and
Deductions 147 467 613 912
Income Before Interest
Charges $14,348 $15,087 $15,468 $15,704
Interest
Charges 4,133 4,409 4,756 5,011
Net Income $10,215 $10,678 $10,712 $10,693
Preferred Stock Dividend
Requirements 0 0 0 13
Earnings Available for
Common Stock $10,215 $10,678 $10,712 $10,680
COMMON STOCK DATA (Adjusted to reflect three-for-two split in
June 1987)
Earnings Per Share
Common Share $2.48 $2.45 $2.34 $2.31
Dividends Paid
Per Share $1.60 $1.52 $1.40 $1.30
Shares Outstanding -
Average 4,125,637 4,350,649 4,585,007 4626601
Return on Average Common
Equity 14.2% 14.6% 14.6% 15.1%
Book Value Per
Share $17.62 $17.13 $16.51 $15.74
Market Price at
Year-End $28.250 $23.875 $20.250 $19.250
CAPITALIZATION (Percent)
Long-Term Debt 38.55 39.85 41.30 43.06
Preferred
Stock 0 0 0 0
Common Equity 61.45 60.15 58.70 56.94
Total 100.00 100.00 100.00 100.00
COVERAGE RATIOS
Pretax Interest
4.71 4.67 4.34 4.47
After Tax Interest and Preferred
Dividend 3.42 3.39 3.23 3.11
MISCELLANEOUS FINANCIAL DATA (Thousands)
Construction Expenditures, Excluding
AFUDC $12,144 $12,557 $6,476 $5,639
Utility Plant at Original
Cost $245,834 $234,757 $221,610 $215,533
Summary of Operating Statistics - Electric
SALES REVENUES (Thousands)
Residential $29,285 $28,079 $28,666 $28,711
Commercial 22,138 21,842 21,296 21,778
Industrial 17,470 17,096 16,041 15,973
Other 684 696 702 1,392
Total Retail Sales
Revenue $69,577 $67,713 $66,705 $67,854
Sales for Resale
Revenue $4,426 $4,835 $785 $1,294
SALES (MWH)
Residential 518,563 498,613 506,059 464,656
Commercial 386,117 383,071 369,761 350,284
Industrial 418,671 410,493 381,538 352,382
Other 12,796 13,027 13,238 13,655
Total Retail
Sales 1,336,147 1,305,204 1,270,596 1,180,977
Sales for
Resale 306,572 339,900 47,288 88,112
RESIDENTIAL CUSTOMER DATA (Average)
Number of
Customers 52,396 51,860 51,456 51,205
Annual KWH
Sales 9,897 9,615 9,835 9,074
Revenue - Cents
Per KWH 5.65 5.63 5.66 6.18
SYSTEM DATA (MWH)
System
Requirements 1,430,518 1,407,757 1,372,358 1,300,870
Load Factor
(Percent) 50.4 51.8 48.4 49.7
Net Peak Load 324 310 323 299
System Capability
at Peak 391 381 361 342
Summary of Financial Data
(unaudited)
1986 1985 1984
STATEMENTS OF INCOME (Thousands)
Operating
Revenues $79,470 $77,463 $76,977
Operating
Expenses 63,973 63,002 62,561
Operating
Income $15,497 $14,461 $14,416
Other Income and
Deductions 806 976 1,066
Income Before Interest
Charges $16,303 $15,437 $15,482
Interest
Charges 5,279 5,639 5,878
Net Income $11,024 $9,798 $9,604
Preferred Stock Dividend
Requirements 235 560 736
Earnings Available for
Common Stock $10,789 $9,238 $8,868
COMMON STOCK DATA (Adjusted to reflect three-for-two split in
June 1987)
Earnings Per Share
Common Share $2.33 $2.02 $1.99
Dividends Paid
Per Share $1.22-1/3 $1.14-2/3 $1.06-2/3
Shares Outstanding -
Average 4,626,761 4,570,706 4,456,478
Return on Average Common
Equity 16.4% 15.3% 16.2%
Book Value Per
Share $14.74 $13.65 $12.73
Market Price at
Year-End $24.625 $15.625 $12.625
CAPITALIZATION (Percent)
Long-Term Debt 45.46 48.15 50.12
Preferred
Stock 1.37 3.12 6.29
Common Equity 53.17 48.73 43.59
Total 100.00 100.00 100.00
COVERAGE RATIOS
Pretax Interest
4.81 4.11 3.85
After Tax Interest and Preferred
Dividend 2.93 2.48 2.32
MISCELLANEOUS FINANCIAL DATA (Thousands)
Construction Expenditures, Excluding
AFUDC $7,456 $7,798 $8,500
Utility Plant at Original
Cost $211,263 $209,108 $202,391
Summary of Operating Statistics Electric
SALES REVENUES (Thousands)
Residential $29,833 $28,969 $29,059
Commercial 22,672 21,803 21,978
Industrial 16,175 16,126 14,721
Other 1,299 1,305 1,366
Total Retail Sales
Revenue $69,979 $68,203 $67,124
Sales for Resale
Revenue $1,332 $182 $198
SALES (MWH)
Residential 455,259 445,741 441,051
Commercial 344,171 328,668 328,242
Industrial 330,138 328,546 291,331
Other 14,238 14,403 14,826
Total Retail
Sales 1,143,806 1,117,358 1,075,450
Sales for
Resale 93,042 9,756 8,597
RESIDENTIAL CUSTOMER DATA (Average)
Number of
Customers 51,137 50,992 50,774
Annual KWH
Sales 8,903 8,741 8,687
Revenue Cents
Per KWH 6.55 6.50 6.59
SYSTEM DATA (MWH)
System
Requirements 1,275,971 1,238,020 1,193,881
Load Factor
(Percent) 52.0 52.0 48.0
Net Peak Load 280 272 283
System Capability
at Peak 368 368 368
<PAGE>
38
Responsibility for Financial Statements
The management of St. Joseph Light & Power Company is
responsible for the preparation and presentation of the
financial information in this Annual Report. The following
financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
and reflect management's best estimates and informed judgments
as required.
To fulfill these responsibilities, management has developed and
maintains a comprehensive system of internal operating,
accounting and financial controls. These controls provide
reasonable assurance that the Company's assets are safeguarded,
transactions are properly recorded and resulting financial
statements are reliable. An internal audit function assists
management in monitoring the effectiveness of the controls.
The Report of Independent Accountants on the financial
statements by Arthur Andersen LLP appears on this page. The
responsibility for the independent auditors is limited to the
audit of financial statements presented and the expression of an
opinion as to their fairness.
The Board of Directors maintains oversight of the Company's
financial situation through its monthly review of operations and
financial condition and its selection of the independent
auditors. The Audit Committee, comprised of board members who
are not employees or officers of the Company, also meets
periodically with the independent auditors and the Company's
internal audit staff. The auditors have complete access to and
meet with the Audit Committee, without management
representatives present, to review accounting, auditing and
financial matters. Pertinent items discussed at the meetings are
reviewed with the full Board of Directors.
Terry F. Steinbecker
President and chief executive officer
Larry J. Stoll
Vice president Finance, treasurer and assistant secretary
<PAGE>
Report of Independent Public Accountants
To the Shareholders of St. Joseph Light & Power Company:
We have audited the accompanying balance sheets and statements
of capitalization of St. Joseph Light & Power Company (a
Missouri corporation) as of December 31, 1994 and 1993, and the
related statements of income, retained earnings, taxes and cash
flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of St. Joseph Light & Power Company as of December 31, 1994 and
1993, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.
As explained in the notes to the statement of taxes and footnote
two of the financial statements, effective January 1, 1993, the
Company changed its methods of accounting
for income taxes and postretirement benefits other
than pensions.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
January 26, 1995
<PAGE>
- -39
Environmental Policy
St. Joseph Light & Power Company will be a good steward of our
environment and will employ the human, material and financial
resources necessary to support this policy.
We will conduct our business responsibly and in a manner
designed to protect the environment and the health and safety of
our employees, customers, and the general public.
We will strive to meet or surpass environmental laws,
regulations and permit requirements.
We will encourage federal and state governments to base
environmental laws, regulations and permit requirements on sound
science and cost effective technology.
We will reduce pollution and conserve raw materials by avoiding
unnecessary generation of wastes, increasing recycling efforts
and disposing of remaining by products in an environmentally
safe manner.
We will establish company environmental goals and
implementation plans.
We will make all reasonable attempts to prevent inadvertent
damage to our environment. Should an environmental accident
occur, we will deal with it promptly and responsibly.
We will inform employees of their roles and responsibilities in
implementation of this policy.<PAGE>
Corporate information
CORPORATE OFFICES
520 Francis Street
Post Office Box 998
St. Joseph, Missouri 64502 0998
(816) 233 8888
(816) 387 6332 (fax)
1 800 367 4562
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1500 Commerce Tower
Kansas City, Missouri 64199
STOCK LISTING AND PRINCIPAL MARKET
New York Stock Exchange
Eleven Wall Street
New York, New York 10005
Symbol: SAJ
COMMON STOCK TRANSFER AGENTS
AND REGISTRARS
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60690
Chemical Bank
450 West 33rd Street
New York, New York 10001
Annual Shareholders Meeting
The annual meeting of shareholders will be at 9 a.m., Wednesday,
May 17, 1995, at the Albrecht Kemper Museum of Art, 2818
Frederick Boulevard, St. Joseph, Missouri.
A proxy statement will be mailed to each shareholder
approximately one month prior to the meeting, requesting the use
of proxies at this meeting.
This report and financial statements contained herein are
submitted for the general information of the security holders of
St. Joseph Light & Power Company, and are not in connection
with, or to induce, any sale or offer to sell or to buy any
securities of the Company, or in connection with preliminary
negotiations for such sale or purchase.
EXHIBIT 23
ST. JOSEPH LIGHT & POWER COMPANY
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference
in this Form 10-K, into the Company's previously filed Form S-3
Registration Statement (Registration No. 2-90732).
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
March 15, 1995.
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