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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.
For the fiscal year ended December 31, 1998
/ / 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 44-0419850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Francis Street, P. O. Box 998, St. Joseph, Missouri
(Address of principal executive offices)
64502-0998
(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
Title of each class which registered
- ------------------------------- -------------------------
Common Stock, without par value New York Stock Exchange
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. [ X ]
The aggregate market value of the registrant's outstanding
common stock, based on the closing price therefor on the New York
Stock Exchange at March 8, 1999, was $167,446,071.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, without par value 8,168,101 shares
- ------------------------------- -----------------------------
(Class) (Outstanding at March 8, 1999)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1998 Annual Report to Shareholders are
incorporated by reference into Parts I, II and IV.
Portions of the 1999 Definitive Proxy Statement for the 1999
annual meeting are incorporated by reference into Part III,
excluding therefrom the sections titled "Report of Compensation
Committee" and "Cumulative Total Shareholder Return."
The 1998 Annual Report to Shareholders and the 1999 Definitive
Proxy Statement will be mailed to shareholders on or about April
9, 1999.
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PART I
ITEM 1 - BUSINESS.
St. Joseph Light & Power Company is a Missouri corporation,
incorporated in 1895. SJLP Inc., its wholly owned subsidiary, was
formed in September 1996 to pursue investments in non-utility
areas. Collectively, these entities are referred to as the
"Company."
The Company 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 headquarters city, and
52 other incorporated communities and the intervening rural
territory. The service area contains approximately 3,300 square
miles. At December 31, 1998, there were approximately 62,000
electric customers. In 1998, electric revenues accounted for 72%
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 4% of total operating revenues in 1998. Currently
there are about 6,400 natural gas customers. The Company
supplies industrial steam to six customers in St. Joseph.
Industrial steam revenues accounted for 5% of total operating
revenues in 1998.
Effective May 31, 1997, SJLP Inc. acquired a controlling
interest in Percy Kent, a manufacturer of multiwall and small
paper bags, primarily for food products, agricultural products,
specialty chemicals, pet foods and other consumer packaging
companies throughout the United States. In 1998, manufacturing
revenues accounted for 19% of total operating revenues.
On March 4, 1999, the Company and UtiliCorp United Inc.
entered into an Agreement and Plan of Merger to form a strategic
business combination. Under terms of the agreement, each share
of common stock of the Company, valued at $23.00 per share, will
be exchanged for UtiliCorp United Inc. common stock. The
transaction is subject to several closing conditions, including
approval by the Company's shareholders and approval by a number
of state and federal regulatory agencies. Approval by UtiliCorp
United Inc. shareholders is not required. Management expects the
merger to be completed in mid-2000.
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 1998,
fuels utilized for electric generation consisted of 92% coal, 2%
oil and 6 % gas.
The Company, Kansas City Power & Light Company (KCP&L) and The
Empire District Electric Company (EDE), the joint owners of the
Iatan plant, have a twenty-year agreement with a Wyoming mine for
low sulfur western coal. The agreement provides for approximately
two million tons of coal per year through 2003. The coal is
delivered by rail under an agreement, which extends through 2000.
The remaining coal requirements at the Iatan plant are met with
spot purchases.
Management anticipates meeting coal requirements for the Lake
Road plant in 1999 with present inventory, short-term contracts
and spot purchases. The Company's rail contract provides for a
minimum of 180,000 tons per year and expires at the end of 2001.
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.
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The Company acquires its natural gas for resale on the open
market and with short-term contracts. An agreement with ANR
Pipeline Company provides natural gas storage and transportation
services until 2003. Management 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 2018. 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 2016.
COMPETITION.
There are three 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 compare very
favorably with other investor-owned utilities in the region.
Further competition information is incorporated by reference to
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1998 Annual Report to Shareholders,
pages 10-15, which is Exhibit 13 hereto.
FINANCIAL INFORMATION ABOUT SEGMENTS OF BUSINESS.
This information is incorporated by reference to Note 8 of the
Notes to Consolidated Financial Statements in the 1998 Annual
Report to Shareholders, pages 28-29, 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 1998 Annual Report to Shareholders, pages 10-
15, which is Exhibit 13 hereto.
NUMBER OF EMPLOYEES.
There were 339 full-time employees and 5 part-time employees
at December 31, 1998.
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 18% share of this plant is 121 megawatts
(mw) of net capability. Refer to "Jointly Owned Iatan Plant"
incorporated by reference to Note 1 of Notes to Consolidated
Financial Statements in the 1998 Annual Report to Shareholders,
page 22, which is Exhibit 13 hereto.
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The Company owns the Lake Road generating station in St.
Joseph, Missouri with an aggregate net capability of 257 mw
(summer rating), of which 107 mw is coal-fired and 150 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, Missouri
to Minneapolis, Minnesota. 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 97 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 results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during
the fourth quarter of 1998.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the executive officers of the Company:
T. F. STEINBECKER, President. Age 53. BSBA and MBA, University
of Missouri and CPA. Employed by the Company in 1975;
executive capacity since 1976; present position since May
1986.
G. L. MYERS, Vice President, General Counsel and Secretary. Age
45. AB, Washington University. JD, University of Missouri-
Kansas City. Employed by the Company and executive capacity
since 1979; General Counsel and Secretary from May 1989 -
January 1996; present position since February 1996.
L. J. STOLL, Vice President--Finance, Treasurer and Assistant
Secretary. Age 46. 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.
J. A. STUART, Vice President--Customer Services and Energy
Delivery. Age 45. BSEE, California Polytechnic State
University. Employed by the Company in present position
since 1994. Prior positions include Senior Operations
Consultant, Pacific Gas and Electric Company, June 1993-
March 1994, and Gas and Electric Operations Manager, Pacific
Gas and Electric Company, March 1991-June 1993.
D. V. SVUBA, Vice President--Energy Supply. Age 56. BSEE, Iowa
State University. MSEE, University of Missouri. Employed
by the Company in 1966; executive capacity since 1990;
present position since November 1990.
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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 EQUITY 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
1998 Annual Report to Shareholders, pages 9 and 33, which is
Exhibit 13 hereto.
There were 5,025 holders of record of the Company's common
stock as of February 3, 1999, the record date fixed for the
dividend paid on February 18, 1999.
ITEM 6 - SELECTED FINANCIAL DATA.
This information is incorporated by reference to the 1998
Annual Report to Shareholders, page 9, 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 1998
Annual Report to Shareholders, pages 10-15, which is Exhibit 13
hereto.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This information is incorporated by reference to the 1998
Annual Report to Shareholders, pages 16-30, which is Exhibit 13
hereto.
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."
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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.
Item 12 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 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 1998 Annual Report to Shareholders, which is
Exhibit 13 hereto.
Consolidated Statements of Income, page 16
Consolidated Balance Sheets, page 17
Consolidated Statements of Capitalization, pages 18-19
Consolidated Statements of Retained Earnings, page 19
Consolidated Statements of Cash Flows, page 20
Consolidated Statements of Taxes, page 21
Notes to Consolidated Financial Statements, pages 22-30
Responsibility for Financial Statements, page 31
Report of Independent Public Accountants, page 31
FINANCIAL STATEMENT SCHEDULES:
Schedule II-Valuation and Qualifying Accounts - For the years
ended December 31, 1998, 1997 and 1996 (page 11).
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.
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LIST OF EXHIBITS:
Exhibit 3 (a) - Restated Articles of Incorporation adopted
on May 20, 1987, which are incorporated by
reference to page 16 of the 1987 Form 10-K.
(b) - By-laws of Company as amended on March
19, 1997, which are incorporated by reference to
Exhibit 3 (b) to the 1997 Form 10-K.
Exhibit 4 (a) - Indenture of Mortgage and Deed of Trust
dated April 1, 1946, between the Company and
Harris Trust and Savings Bank and Bartlett Boder,
Trustee which is incorporated by reference to
Exhibit (b) (1)-C in File No. 2-62825.
(b) - Seventeenth Supplemental Indenture
dated as of February 1, 1991 between the Company
and Harris Trust and Savings Bank, which is
incorporated by reference to the 1995 Form 10-K.
(c) - Medium-Term Notes Issuing and Paying
Agency Agreement dated as of November 19, 1993
between the Company and Harris Trust and Savings
Bank, which is incorporated by reference to the
1995 Form 10-K.
(d) - Rights Agreement dated September 18,
1996, which is incorporated by reference to
Exhibit 4 to Form 8-K, dated October 1, 1996.
Amendment to the Rights Agreement as amended on
March 4, 1999, which is incorporated by reference
to Exhibit 4.1 to Form 8-K, dated March 4, 1999.
Long-term debt instruments of the Company in
amounts not exceeding ten percent of the total
assets of the Company will be furnished to the
Commission upon request.
Exhibit 10 (a) - 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. Amendment to
Coal Freight Agreement, as amended on May 20,
1995, is incorporated by reference to the 1995
Form 10-K.
(b) - 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.
(c) - CFSI Agreement which is incorporated by
reference to page 17 of the 1989 Form 10-K.
* (d) - 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 dated December 1,
1993, which is incorporated by reference to page
18 of the 1993 Form 10-K. Form of Amendment to
Amended and Restated Employment Contract dated
March 20, 1996 entered into with certain of its executive
officers. Form of Amendment to Amended and
Restated Employment Agreement dated January 7,
1999 entered into with certain of its executive officers.
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(e) - Directors Indemnification Agreement,
which is incorporated by reference to page 19 of
the 1993 Form 10-K.
* (f) - 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, 1993, which is incorporated by reference to
page 20 of the 1993 Form 10-K. Amendment to
Supplemental Executive Retirement Plan as amended
and restated January 1, 1999.
(g) - Gas Service Agreements with ANR Pipeline
Company, which are incorporated by reference to
page 21 of the 1993 Form 10-K.
* (h) - 1998 Long-Term Incentive Plan which is
** incorporated by reference to the May 20, 1998
Proxy Statement. Officers' Long-Term Incentive
Plan dated January 1, 1999.
(i) - Purchased power agreement with Nebraska
Public Power District, which is incorporated
by reference to Exhibit 10(j) to the 1996 Form 10-
K.
** (j) - Officers' Annual Bonus Plan, which is
incorporated by reference to Exhibit 10(k) to the
1997 Form 10-K.
* (k)- SJLP Inc. Officers' Incentive Plan
**
Exhibit 13 * - The 1998 Annual Report to Shareholders.
Exhibit 21 - Subsidiaries of Registrant, which is
incorporated by reference to Exhibit 21 to the
1997 Form 10-K.
Exhibit 23 * - Consent of Independent Public Accountants.
Exhibit 27 * - Financial Data Schedule.
_________________________________
* Filed herewith.
** Exhibits marked with a double asterisk relate to management
contracts or compensatory arrangements.
REPORTS ON FORM 8-K:
No Current Report on Form 8-K was filed during the quarter ended
December 31, 1998.
On March 4, 1999 a Form 8-K was filed to announce a proposed
merger between UtiliCorp United Inc. and the Company.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To St. Joseph Light & Power Company:
We have audited in accordance with generally accepted auditing
standards, the consolidated 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 22, 1999. Our audits were made for
the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index above is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial
statements and, in our opinion, fairly states 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 22, 1999
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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 17, 1999 By /s/ T.F. Steinbecker
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.
/s/ T.F. Steinbecker President & Director March 17, 1999
T.F. Steinbecker (Chief Executive Officer)
/s/ L.J. Stoll Vice President-Finance, March 17, 1999
L.J. Stoll Treasurer & Assistant
Secretary (Principal
Financial & Accounting
Officer)
/s/ J.P. Barclay, Jr. Director March 17, 1999
J.P. Barclay, Jr.
/s/ D.A. Beck Director March 17, 1999
D.A. Beck
/s/ D.A. Burkhardt Director March 17, 1999
D.A. Burkhardt
/s/ J.P. Carolus Director March 17, 1999
J.P. Carolus
/s/ W.J. Gremp Director March 17, 1999
W.J. Gremp
/s/ D.W. Shinneman Director March 17, 1999
D.W. Shinneman
/s/ R.L. Simpson Director March 17, 1999
R.L. Simpson
/s/ G.R. Sprong Director March 17, 1999
G.R. Sprong
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ST. JOSEPH LIGHT & POWER CO.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Deductions
for Purposes
Balance Additions for Which Balance
Beginning Charged Charged to Reserves at End
Description of Year to Expense Construction Were Created of Year
<S> <C> <C> <C> <C> <C>
Valuation accounts deducted
from assets to which they
apply-
Accumulated Provision for
Uncollectible Accounts:
December 31, 1998 $ 270,028 $ 272,450 $ - $ 260,886(1) $ 281,592
December 31, 1997 $ 232,018 $ 218,224 $ - $ 180,214(2) $ 270,028
December 31, 1996 $ 324,130 $ 191,624 $ - $ 283,736(3) $ 232,018
Other reserves-
Accumulated Provision for
Injuries and Damages:
December 31, 1998 $ 357,030 $ 181,933 $ 5,274 $ 79,429 $ 464,808
December 31, 1997 $ 392,547 $ 81,304 $ 14,219 $ 131,040 $ 357,030
December 31, 1996 $ 362,395 $ 88,920 $ 5,394 $ 64,162 $ 392,547
Accumulated Provision for
Major Medical:
December 31, 1998 $ 105,525 $1,131,796 $ 299,227 $1,431,023 $ 105,525
December 31, 1997 $ 5,525 $1,262,902 $ 297,971 $1,460,873 $ 105,525
December 31, 1996 $ 5,525 $ 830,819 $ 170,167 $1,000,986 $ 5,525
Accumulated Provision for
Other Post Employment
Benefits:
December 31, 1998 $1,343,394 $ 946,844 $ 231,725 $1,223,419 $1,298,544(4)
December 31, 1997 $1,356,468 $ 996,974 $ 198,567 $1,208,615 $1,343,394(5)
December 31, 1996 $1,336,809 $1,020,914 $ 202,121 $1,203,376 $1,356,468(6)
(1) Net of $250,629 recovery on accounts previously charged off.
(2) Net of $204,682 recovery on accounts previously charged off and $75,000
reserve of Percy Kent Bag Co., Inc. on acquisition date.
(3) Net of $143,935 recovery on accounts previously charged off.
(4) Includes Iatan reserve of $153,001.
(5) Includes Iatan reserve of $172,272.
(6) Includes Iatan reserve of $139,157.
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FORM OF AGREEMENT Exhibit 10d
AMENDED AND RESTATED
EMPLOYMENT CONTRACT
Employment Agreement dated as of January 17, 1986 as amended
and restated December 1, 1990, further amended effective December
1, 1993 and further amended and restated May 18, 1994, and hereby
further amended and restated in its entirety herein March 20,
1996, between <<name of executive>> of <<address of executive>> (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 <<executive position>> for a term
commencing on December 1, 1990 and ending on November 30, 1993, 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 Agreement 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 Agreement 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 <<job responsibilities>>.
Notwithstanding the foregoing, the Chief Executive Officer may assign the
Executive from time to time additional responsibilities of an executive
nature which may be of a type theretofore rendered by other
executive officers of the Company or which may be newly created
executive responsibilities determined by the Board of Directors,
which additional responsibilties shall be rendered on a direct
reporting basis to the Chief Executive Officer. Such additional
responsibilities may require a change in the Executive's
corporate title to better reflect the responsibilities to be
performed by him. 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 February 1, 1996 shall be <<salary>>. 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. For the
purpose of this Agreement, a "change of control" of the
Company shall be deemed to have taken place if:
(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 8 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.
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 Amended and Restated Employment
Contract in duplicate as of the 20th day of March, 1996.
ST. JOSEPH LIGHT & POWER COMPANY
By /s/ Terry F. Steinbecker
Terry F. Steinbecker
President
(SEAL)
ATTEST:
/s/ L.J. Stoll
Larry J. Stoll
Assistant Secretary
FORM OF AGREEMENT 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 <<executive name>>
(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.
FORM OF AMENDMENT Exhibit 10d
AMENDMENT TO
AMENDED AND RESTATED
EMPLOYMENT CONTRACT
This Amendment dated as of January 7, 1999 to Amended and
Restated Employment Contract dated as of March 20, 1996 (the
"Employment Contract") is entered into between St. Joseph Light &
Power Company, a Missouri corporation (the "Company"), and <<executive name>>
(the "Executive"). Capitalized terms not defined herein have the respective
meanings set forth in the Employment Contract.
WHEREAS, the Company and the Executive desire to amend the
Employment Contract as set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties agree that the
Employment Contract hereby is amended as set forth below.
1. Clause (ii) of the first sentence of Section 3.04 is
amended by deleting the words "the date which is 180 days after".
2. Paragraph A of Section 3.04 is amended to read in its
entirety as follows:
"A. LUMP SUM CASH PAYMENT. (1) On or before the Executive's
last day of employment with the Company or its subsidiaries, or
as soon thereafter as possible, or on such earlier date as may be
determined by the Company, in its sole discretion, pursuant to
Paragraph A(2) of this Section 3.04, 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 the sum
of (i) three (3) times the sum of the Executive's Annual Salary
at the rate in effect immediately prior to the change of control
plus (ii) three (3) times the Executive's annual target bonus
under the Officers Annual Bonus Plan adopted March 20, 1996 for
the year in which the change of control occurs plus (iii) an
amount equal to the Executive's annual target bonus under the
Officers Annual Bonus Plan adopted March 20, 1996 for the year in
which the change of control occurs multiplied by a fraction, the
numerator of which is the number of days of the year in which the
change of control occurs during which the Executive was employed
by the Company or its subsidiaries and the denominator of which
is 365, plus (iv) 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 or its subsidiaries to
the Executive's 65th birthday is less than 36 months, there shall
be a proportionate reduction of the portion of said payments
computed under clauses (i) and (ii) of the preceding sentence.
(2) The Company may, in its sole discretion, pay to the
Executive all or a portion of the payments computed under clauses
(i), (ii) and (iii) of Paragraph A(1) of this Section 3.04 in any
year preceding the year in which the change of control occurs
(the amount of any such payment being hereinafter referred to as
an "Anticipatory Payment Amount"). In the event that the Company
pays an Anticipatory Payment Amount to the Executive, the
Executive (or in the event of the Executive's death or
disability, his executor or other legal representative) shall,
within 60 days, or as soon thereafter as possible, following the
first to occur of either of the dates set forth below, repay to
the Company an amount equal to the Anticipatory Payment Amount,
minus the amount of all federal and state taxes paid or payable
by the Executive by reason of the payment of the Anticipatory
Payment Amount, plus the amount of any decrease in the federal
and state taxes paid or payable.by the Executive by reason of any
payment by the Executive to the Company pursuant to this
sentence, including without limitation any further decrease
attributable to a payment due to a decrease (the net amount of
the payment required by this sentence to be made by the Executive
to the Company being hereinafter referred to as the "After-Tax
Repayment Amount"):
(i) the date of termination or expiration of the agreement
pursuant to which the change of control was to have occurred and
with respect to which the Anticipatory Payment Amount was paid;
or
(ii) the date of termination of the employment of the
Executive for any reason other than a reason described in clause
(i) or (ii) of the first sentence of this Section 3.04.
The After-Tax Repayment Amount shall be determined by the
Accounting Firm (as defined in paragraph C(2) of this Section
3.04). All expenses and fees of the Accounting Firm incurred by
reason of this paragraph (A)(2) shall be paid by the Company."
3. Paragraphs D(1)(3) and D(1)(4) of Section 3.04 are
amended by deleting the words "approval by the shareholders of"
and substituting in lieu thereof the words "consummation by".
4. Paragraph D of Section 3.04 is amended by deleting
"DEFINITIONS. (1) CHANGE OF CONTROL." at the beginning thereof
and substituting in lieu thereof the WORDS "DEFINITION OF CHANGE
OF CONTROL."
5. Paragraph D(2) of Section 3.04 is deleted in its
entirety.
6. The following new Section 3.05 is added immediately
following Section 3.04:
"Section 3.05. RETENTION BONUS. (A) PAYMENT. If the
Executive remains continuously employed by the Company or its
subsidiaries for a period of 180 days after the date on which a
change of control of the Company occurs, or if within such 180-
day period the employment of the Executive terminates for a
reason described in either clause (i) of the first sentence of
Section 3.04 hereof or paragraph B of this Section 3.05, the
Company shall pay to the Executive a retention bonus in the lump
sum cash amount (subject to the usual withholding taxes) equal to
the sum of (i) the Executive's Annual Salary at the rate in
effect immediately prior to the change of control plus (ii) the
Executive's annual target bonus under the Officers Annual Bonus
Plan adopted March 20, 1996 for the year in which the change of
control occurs. Such retention bonus shall be paid not Later than
190 days following the date of such change of control.
(B) CERTAIN RESIGNATIONS ENTITLING THE EXECUTIVE TO PAYMENT.
A resignation or other termination by the Executive of his
employment with the Company during the 180 day period commencing
on the date on which a change of control of the Company occurs
shall entitle the Executive to payment of the retention bonus
described in paragraph A of this Section 3.05 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 (B), any good faith determination
that any of the above described events have occurred made by the
Executive shall be conclusive."
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company and the
Executive has executed this Amendment as of the day and year
first above written.
ST. JOSEPH LIGHT & POWER COMPANY
By /s/ Gary L. Myers
Gary L. Myers
1998 IN REVIEW
PERCENT
FINANCIAL DATA 1998 1997 CHANGE
Operating revenues $124,374,000 $116,165,000 7.1
Net income $10,664,000 $10,840,000 (1.6)
Basic earnings per share $1.32 $1.36 (2.9)
Diluted earnings per share $1.31 $1.36 (3.7)
Return on average common equity 11.4% 12.2% (6.6)
COMMON STOCK DATA
Market value-to-book value ratio 1.53 1.57 (2.5)
Market price per common share
(year-end) $17.94 $17.75 1.1
Dividends per share $.98 $.96 2.1
Payout ratio 74% 71% 4.2
Dividend yield 5.5% 5.4% 1.9
Price/earnings ratio 13.6 13.1 3.8
Number of shareholders (year-end) 5,049 4,651 8.6
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
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, and the
Consolidated Financial Statements and Notes thereto, appearing elsewhere in this
Annual Report.
(IN THOUSANDS EXCEPT PER SHARE DATA AND PERCENTAGES)
1998 1997 1996 1995 1994
1993
<S> <C> <C> <C> <C> <C>
<C>
STATEMENTS OF INCOME:
Operating revenues $124,374 $116,165 $95,869 $93,521 $90,782 $88,539
Operating expenses 102,187 93,177 74,941 73,249 70,033 77,853
-------- -------- ------- ------- ------- -------
Operating income 22,187 22,988 20,928 20,272 20,749 10,686
Interest charges, net 6,787 6,480 5,807 5,555 4,460 4,457
Other income (847) (440) (504) (1,470) (32) (191)
Income taxes 5,512 6,214 5,268 5,147 5,255 (1,502)
Minority interest 71 (106) - - - -
-------- -------- ------- ------- ------- ------
Net income $10,664 $10,840 $10,357 $11,040 $11,066 $7,922
======== ======== ======= ======= ======= ======
COMMON STOCK DATA:
(Adjusted to reflect two-for-one stock split in July 1996)
For the year ended December 31-
Weighted average shares
outstanding 8,100 7,989 7,868 7,813 7,884 8,016
Basic earnings per share $1.32 $1.36 $1.32 $1.41 $1.40 $.99
Diluted earnings per share $1.31 $1.36 $1.32 $1.41 $1.40 $.99
Dividends per common share $.98 $.96 $.94 $.92 $.90 $.88
Return on average common equity 11.4% 12.2% 12.4% 13.9% 14.4% 10.4%
As of December 31-
Market price per common share $17.94 $17.75 $15.38 $17.75 $14.25 $14.50
Book value per common share $11.76 $11.34 $10.87 $10.42 $9.93 $9.54
LIQUIDITY AND CAPITAL RESOURCES DATA:
Capital-
Expenditures, excluding AFUDC $16,442 $14,346 $14,318 $21,781 $12,224 $12,483
Percent of expenditures financed
internally from operations 79% 79% 92% 58% 77% 86%
AFUDC as a percent of net income 4% 2% 5% 4% 2% 3%
Capitalization ratios-
Common equity 57% 57% 54% 53% 59% 59%
Long-term debt (excluding
current maturities) 43% 43% 46% 47% 41% 41%
Ratio of earnings to fixed
charges 3.23 3.47 3.44 3.63 4.39 2.33
Total assets $251,255 $243,769 $227,250 $219,330 $199,699 $191,690
Long-term obligations $76,417 $71,837 $76,371 $75,612 $55,627 $55,642
</TABLE>
COMMON STOCK MARKET PRICES
High Low
1997 First quarter $16.625 $15.000
Second quarter 17.250 15.375
Third quarter 16.750 15.563
Fourth quarter 17.938 16.313
1998 First quarter $18.625 $17.250
Second quarter 19.000 18.000
Third quarter 19.375 17.813
Fourth quarter 19.125 17.563
DIVIDENDS PAID ON COMMON STOCK
1997 First quarter $.24
Second quarter .24
Third quarter .24
Fourth quarter .24
1998 First quarter $.245
Second quarter .245
Third quarter .245
Fourth quarter .245
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
In Management's Discussion and Analysis, we explain the general
financial condition and operating results of St. Joseph Light &
Power Company, a public utility, its wholly owned subsidiary,
SJLP Inc. and its subsidiary, Percy Kent Bag Co., Inc. (Percy
Kent). As you read Management's Discussion and Analysis, it may
be helpful to refer to our Consolidated Statements of Income,
which present the results of operations for 1998, 1997 and 1996.
We are engaged primarily in the generation and distribution of
electric energy, serving approximately 62,000 customers in
northwest Missouri. We also sell natural gas in 15 communities in
the northern part of our service area and industrial steam to six
customers in St. Joseph. SJLP Inc. was formed in September 1996
to pursue investments in non-utility areas. Effective May 31,
1997, SJLP Inc. acquired a controlling interest in Percy Kent, a
manufacturer of multiwall and small paper bags, primarily for
food products, agricultural products, specialty chemicals, pet
foods and other consumer packaging companies throughout the
United States. Neither SJLP Inc.'s nor Percy Kent's operations
were material to St. Joseph Light & Power Company's consolidated
financial position or results of operations.
About two-thirds of our approximately 350 employees are covered
under physical and clerical bargaining agreements which expire
July 31, 1999. We expect a new contract will be agreed upon and
will not have a significant negative impact on the Company.
Substantially all of Percy Kent's manufacturing labor force is
covered by a collective bargaining agreement, which expires in
March 2000.
RESULTS OF OPERATIONS
1998 vs. 1997
EARNINGS - Diluted earnings per share totaled $1.31 in 1998,
compared with 1997 earnings of $1.36 per share. The earnings
decrease was primarily the result of increases in per unit
purchased power costs.
ELECTRIC REVENUES - 1998 electric operating revenues were $89.7
million, an increase of 3% from 1997. The growth in 1998 revenues
was primarily due to increased retail sales.
Retail sales totaled 1.64 million mwh in 1998, a 4% increase from
the 1.58 million mwh reported in 1997. Warmer summer weather and
the continued strong economy boosted retail sales to all three
customer classes - residential, 2.1%; commercial, 4.7%; and
industrial 5.8%.
We entered into an agreement with another utility in which we
agreed to transfer energy to them in 1998 in exchange for
receiving approximately the same amount of energy from them in
1999. Participation in this agreement reduced the amount of
energy available for resale, resulting in a 42% decrease in sales
for resale volumes.
INDUSTRIAL STEAM REVENUES - Industrial steam revenues increased
1.5% from 1997's level. Sales in 1998 increased 3% as a result of
increased sales to a major customer.
NATURAL GAS REVENUES - Gas revenues declined 20% from 1997, as
the result of a 14% decrease in retail sales and transportation
services due to reduced heating requirements and lower per unit
gas prices which are passed on to customers.
MANUFACTURING REVENUES - The operations of Percy Kent are
reflected in manufacturing revenues and cost of goods sold, which
increased 38% and 34%, respectively. The increases are due to the
inclusion of a full year of operating results in 1998 as compared
to only seven months in 1997, partially offset by the elimination
of lower margin contracts.
FUEL AND PURCHASED POWER - Total energy costs (fuel and purchased
power for system energy and resale) were $29.9 million for 1998,
$2.4 million more than the 1997 expense. This increase was the
result of higher per unit costs for purchased power, increased
system requirements, and more expensive replacement energy
required by outages at the Iatan generating station, partially
offset by lower resale requirements.
Per unit fuel costs were slightly higher in 1998 at $1.099 per
million Btu, up from $1.097 per million Btu in 1997, due to
changes in the mix of fuels and generating units utilized. Of the
total fuel burned in 1998, 92% was coal, similar to the pattern
of recent years. The cost of coal burned decreased from $1.002
per million Btu in 1997 to $.979 per million Btu in 1998.
The coal-fired Iatan plant provided approximately 50% of our
overall energy needs in 1998, a decrease from 52% in 1997, due to
unscheduled outages. A Wyoming mine supplies low-sulfur coal to
the plant under a 20-year contract, which expires in 2003. The
coal is delivered by rail under an agreement which extends
through 2000.
The Lake Road units supplied 25% of our energy needs, down
slightly from 26% in 1997. Per unit fuel costs at Lake Road were
up less than 1% in 1998 from 1997. Since modifying the plant's
main generating units to burn lower cost low-sulfur coal (see
"Environmental Issues"), utilization of the Lake Road plant has
increased in 1997 and 1998 over prior years. Such modifications
and enhancements to optimize performance are continuing.
We met 25% of our energy needs through purchased power
arrangements in 1998 compared to 22% in 1997, reflecting the
purchase of replacement power for Iatan outages. Purchased power
fixed charges for firm and peaking capacity were $2.7 million for
1998 and $2.4 million for 1997.
Per unit costs of purchased power increased almost 18% in 1998.
Along with many utilities in the midwest, we saw the per unit
costs for purchased power reach unprecedented levels during one
week in June. The situation was a result of hot, humid weather
and reduced availability of transmission and generation
facilities, placing the region's electric supply under stress. We
expect this trend of higher prices for purchased energy to
continue.
OTHER OPERATIONS - Other operations expenses for 1998 increased
$1.3 million in comparison to 1997. The increase is primarily the
result of the inclusion of a full year of Percy Kent's expenses
and increased Year 2000 expenses, partially offset by lower
benefits costs for the year.
MAINTENANCE - Consistent with prior years, maintenance expenses
remained relatively stable in 1998, increasing only $.5 million
over 1997, due to increased Lake Road maintenance costs. The
balanced expenses continue to reflect our efforts to schedule
maintenance outages in a way which minimizes both maintenance and
generation replacement costs.
INTEREST CHARGES - The increase in interest charges is primarily
due to the inclusion of a full year of Percy Kent's expenses.
1997 vs. 1996
EARNINGS - Earnings per share totaled $1.36 in 1997, compared
with 1996 earnings of $1.32. The earnings increase was primarily
the result of higher electric sales and lower per unit costs.
ELECTRIC REVENUES - Electric operating revenues for 1997 were
$86.9 million, an increase of 4% from 1996. The growth in 1997
revenues was primarily due to increased retail sales and sales
for resale.
Retail sales totaled 1.58 million mwh in 1997, a 3% increase from
the 1.53 million mwh reported in 1996. Despite moderate summer
weather, the strong economy boosted retail sales to all three
customer classes _ residential, 1.6%; commercial, 4.0%; and
industrial 4.5%.
Sales for resale volume increased 67% as we substantially
increased our generation for resale, as a result of our costs
becoming more competitive with regional suppliers. Per unit costs
at our Lake Road plant have decreased substantially due to
burning a blend of lower-sulfur coal (see "Fuel and Purchased
Power" and "Environmental Issues").
INDUSTRIAL STEAM REVENUES - Industrial steam sales in 1997
decreased 5%, while revenues decreased 4% from 1996's level,
primarily as a result of reduced sales to a major customer.
NATURAL GAS REVENUES - Gas revenues declined 3% from 1996, due to
a 9% decrease in retail sales and transportation services to
large commercial and industrial customers, partially offset by
higher per unit gas prices which are passed on to customers.
MANUFACTURING REVENUES - Manufacturing revenues and cost of goods
sold reflect the acquisition of Percy Kent, whose operating
results from June through December 1997 are included in our 1997
income statement.
FUEL AND PURCHASED POWER - Total energy costs were $27.5 million
for 1997, $.3 million less than the 1996 expense. This decrease
was the result of lower per unit costs and lower steam sales,
partially offset by increased electric system and resale
requirements.
Per unit costs were lower in 1997 at $1.097 per million Btu, down
from $1.131 per million Btu in 1996. Consistent with recent
years, the use of coal accounted for 94% of the total fuel burned
in 1997. The cost of coal burned decreased from $1.047 per
million Btu in 1996 to $1.002 per million Btu in 1997.
The coal-fired Iatan plant provided approximately 52% of our
overall energy needs in 1997, a decrease from 58% in 1996, due to
both unscheduled and scheduled outages throughout the year.
The Lake Road units supplied 26% of our energy needs, up from 16%
in 1996, as a result of substantially lower per unit fuel costs.
We met 22% of our energy needs through purchased power
arrangements in 1997 compared to 26% in 1996. Purchased power
fixed charges for firm and peaking capacity were $2.4 million for
1997 and $1.3 million for 1996.
OTHER OPERATIONS - Expenses of other operations for 1997
increased $3.2 million in comparison to 1996. The increase is
primarily the result of the inclusion of Percy Kent's expenses.
MAINTENANCE - Maintenance expenses for 1997 were $.5 million less
than for 1996. The balanced expenses in both periods resulted
from our attempt to schedule maintenance outages to minimize both
maintenance and generation replacement expenses.
INTEREST CHARGES - The increase in interest charges on long-term
debt, notes payable, and other interest is a result of interest
expense on Percy Kent's borrowings.
FUTURE OUTLOOK
LIQUIDITY AND CAPITAL RESOURCES - Our total authorized capital
stock includes 25 million shares of common stock, four million
shares of cumulative preferred stock, and two million shares of
preference stock. Common equity was 57% of total capitalization
in 1998 and 1997 and 54% in 1996.
Financial coverages are at levels in excess of those required for
the issuance of debt and preferred stock. St. Joseph Light &
Power Company currently holds a secured debt rating of A and an
unsecured debt rating of A- from Standard & Poors. At year-end,
we had $373,000 in cash and temporary investments.
Our short-term financing requirements are satisfied through
borrowings under unsecured lines of credit maintained with banks.
At December 31, 1998, we had available committed lines of credit
of $3.5 million and over $7 million available under uncommitted
lines.
Percy Kent also has a revolving loan agreement through a finance
company which provides them with up to $4.5 million of available
credit. At December 31, 1998, the outstanding borrowings under
this loan agreement, in the amount of $2.1 million, were
classified as long-term in our balance sheet.
Cash generated from operations remains strong. Over the last
three years, operating cash flows have been $20.6 million, $18.6
million, and $21.2 million, respectively. Our ratio of earnings
to fixed charges was 3.23 for 1998.
We project capital expenditures (excluding allowance for funds
used during construction and including non-utility investments)
for the five-year period ending in 2003 to be approximately $71.3
million. We expect to finance these expenditures primarily
through internally generated funds supplemented by external
financing as necessary.
The combined aggregate amount of maturities and payments for long-
term obligations and for operating leases for the next five years
is $10.6 million. See Note (b), Long-Term Debt, in Consolidated
Statements of Capitalization and Note 7, Commitments and
Contingencies, in Notes to Consolidated Financial Statements.
IMPACT OF ACCOUNTING STANDARDS CHANGES - There were no accounting
changes in 1998, 1997 or 1996 that had a material impact on the
financial statements.
MARKET RISK - We are exposed to various market risks in our
business operations. Commodity market prices are one such risk as
Missouri does not have an energy cost adjustment to allow for
current recovery of changes in the cost of fuel or purchased
power.
We have entered into a long-term, fixed-price contract to meet
our fuel needs at the coal-fired Iatan generating plant to
mitigate our exposure to market price fluctuations. Coal for the
Lake Road plant, approximately $8.8 million in 1998, is mainly
purchased on the spot market. The availability and cost of rail
transportation used to deliver coal to our generating facilities
are additional market risks we face. Again, we have long-term
rail service contracts for both Iatan and Lake Road to help
reduce our risk.
We are also exposed to price risk when we purchase energy to meet
our system requirements throughout the year. We have been able to
partially reduce our exposure to that risk for the approximately
400,000 mwh of energy purchased annually by entering into cost-
based contracts for approximately half of those purchases. To
reduce this exposure during the scheduled maintenance outage at
Iatan in early 2000, we have entered a fixed-price contract to
purchase replacement energy. Changes in spot market prices for
energy, similar to those experienced last summer, can have a
significant negative impact (see 1998 vs. 1997 "Fuel and
Purchased Power"). We also have the ability to reduce our need
for spot market purchases by placing into service higher cost
generating units when market prices exceed the cost of the units'
operation. We are required to maintain certain levels of capacity
for which long-term, fixed price contracts are in place (see
"Capacity").
Commodity market prices for natural gas also represent a risk.
However, changes in the price of natural gas purchased for resale
are passed on to our customers.
Interest and inflation rates also pose risks to our financial
position. We have limited our exposure to interest rate risk by
maintaining the majority of our debt capitalization in long-term,
fixed-rate instruments. During the year, we had weighted average
short-term debt outstanding, subject to variable market rates, of
$1,169,000.
Under the ratemaking practices followed by the PSC, only
historical costs are recoverable in revenues. Assuming adequate
and timely rate relief, we will recover the increases in cost of
service caused by inflation.
COMPETITION/DEREGULATION - The 1992 Energy Policy Act (the Act)
promotes competition in the way electricity is transmitted and
marketed. The Act provides for increased competition in the
wholesale electric market by permitting the Federal Energy
Regulatory Commission to order third party access to utilities'
transmission systems and by liberalizing the rules of generating
facility ownership. The opening of the nation's transmission
system has increased the size of the market from which we buy and
sell firm and non-firm (wholesale) energy. This will increase the
options for expanding markets. We also believe that increased
transmission access will increase the demand for available
wholesale energy supply and result in higher purchased energy
costs.
In March 1997, the PSC opened a docket to investigate
restructuring in the electric utility industry in the state of
Missouri. The Retail Electric Competition Task Force, comprised
of representatives from various industry groups, was established
and charged with preparing comprehensive reports for the PSC. The
reports were prepared in 1998 based upon a thorough investigation
of retail wheeling of electricity and related issues, and
included recommendations of how Missouri should implement retail
electric competition in the event that legislation is enacted
which authorizes it.
Based on the PSC docket and deregulation plans implemented or
considered by other states, we believe it is most likely that the
generation portion of the business could become unregulated and
that the transmission and distribution functions will continue to
be regulated. Although bills have been introduced in the 1999
session of the legislature, observers believe that 2000 is the
earliest a bill will be passed, which would defer retail
competition in Missouri until 2001 or later.
If retail wheeling were to be implemented, we believe that our
current low prices and the excellent power supply options
available to us to meet future requirements will permit us to
remain competitive in comparison with other regional suppliers.
While state law currently prohibits competing with rural electric
cooperatives for existing customers, competition remains for new
customers, especially industrial, in the rural areas of our
service territory. To meet the competition for new large
customers and encourage businesses to locate in our service
territory, we offer an economic development incentive rate for
customers meeting certain criteria.
We are taking a proactive stance to meet the increasing
competition within the industry. We continually review our
strategic plan, which focuses on customer-oriented activities
designed to provide high levels of customer satisfaction while
continuing to provide low-priced energy.
EFFECTS OF REGULATION - We are subject to rate regulation by the
PSC. Rates are established to allow us an opportunity to recover
our costs and earn a return on our investment. We currently apply
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation,"
which recognizes the economic effects of rate regulation. In the
event we determine that we no longer meet the criteria for
following SFAS No. 71, the accounting impact would be a non-cash
charge to operations of an amount that could be material.
Criteria that give rise to the discontinuance of SFAS No. 71
include, (1) increasing competition that restricts our ability to
establish prices to recover specific costs, and (2) a significant
change in the manner in which rates are set by regulators from
cost-based regulation to another form of regulation. We
continually review the applicability of SFAS No. 71 based on the
current regulatory environment.
Based on our current evaluation of the various factors and
conditions that are expected to impact future cost recovery (see
"Competition/Deregulation"), we believe that our regulatory
assets, including those related to generation, are probable of
future recovery and that the utilization of SFAS No. 71 continues
to be appropriate.
If the generation portion of the business is deregulated, all or
a portion of its net regulatory assets, which are approximately
$2.3 million at December 31, 1998, are expected to be recovered
from ratepayers through a charge collected by the regulated
businesses.
ENVIRONMENTAL ISSUES - We are subject to various environmental
regulations, including those related to air and water quality,
polychlorinated biphenyl, ash removal, underground storage tanks,
and asbestos. Routine testing and maintenance programs have been
put in place to comply with these regulations.
We continue to plan and implement projects to meet the Phase II
acid deposition control provisions of the Clean Air Act
Amendments of 1990 (CAAA), which establish 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 federal legislation.
While the Iatan plant meets the Phase II requirements, the Lake
Road plant is undergoing modifications in order to meet the
stricter standards. Alterations to the plant's main generating
units have been made, an electrostatic precipitator was modified,
and a continuous emissions monitoring system and flue gas
conditioning system were installed to allow for the use of low-
sulfur coal. Modifications to the ash handling system and rail
modifications which allow coal deliveries by unit train have also
been made.
We anticipate total future capital expenditures of approximately
$4.3 million through 2000 related to the CAAA requirements, for
coal handling equipment modifications, exhaust stack
replacements, boiler modifications, and additional continuous
emissions monitoring equipment.
The Missouri Department of Natural Resources (MDNR) has found
that the ground-level concentration of sulfur-dioxide (SO2) near
the Lake Road plant exceeded the limit set by the National
Ambient Air Quality Standards (NAAQS) twice in 1997 and once in
1998. The maximum allowed is once per year. We have conducted
dispersion air modeling to investigate the problem and identify
appropriate SO2 emission control measures. Based on the modeling,
we have provided MDNR with a proposal to achieve NAAQS
compliance. MDNR has not yet responded to our proposal; however,
we have commenced implementation of the plan to assure that no
further violations occur.
The United States Environmental Protection Agency (EPA) has
recently issued a NOx State Implementation Plan (SIP) Call under
which Missouri, twenty-one other eastern states, and the District
of Columbia are required to revise their SIPs to establish more
stringent emission standards for nitrogen oxides (NOx). This is
being done primarily to help the northeastern states meet the
NAAQS for ozone. The EPA has determined that the transport of NOx
(a precursor of ozone) from neighboring states is the major cause
of ozone non-compliance in the northeastern states. We have
joined with five other western Missouri utilities, other states,
and private organizations in a lawsuit challenging the EPA's SIP
Call. Should the legal challenge fail, some of our units will be
required to meet lower NOx emission standards beginning in 2003.
The full extent of how we will be affected and the related cost
of implementation are not yet known.
The Kyoto Protocol to the United Nations global warming treaty
mandates that the U.S. reduce its overall greenhouse gas
emissions 7% below 1990 levels over the period 2008-2012. Most
observers believe that it will not be ratified by the U.S.
Congress in its present form. A study by Energy Security Analysis
Inc. indicates that the treaty could cost the utility industry
$10 billion annually by 2010, primarily in higher fuel costs. We
cannot currently estimate the impact of the treaty; however, it
could have a significant continuing impact on our results of
operations and financial position.
CAPACITY - Our high-voltage interconnections with other utilities
and membership in power pools provide access to capacity and
energy for emergency and economy purposes and for longer term
capacity transactions. We are a member of the Mid-Continent Area
Power Pool (MAPP) and the Western Systems Power Pool (WSPP).
Through MAPP, we can access over 70 utilities, marketers, and
exempt wholesale generators across the country for both purchases
and sales of energy and capacity, as well as for transmission
services. Over 150 utilities, marketers, and exempt wholesale
generators in the western states are accessible through WSPP.
In July 1996, we signed a long-term contract to purchase both
capacity and energy beginning in mid-2000 and running through mid-
2011. In the first year of the contract, we will receive 60 mw of
electricity. This will increase by 10 mw each year until it
reaches 100 mw in 2004 and remains at that level for the
remainder of the contract.
We also have contracts to purchase an additional 65 mw of
generating capacity from regional suppliers in 1999.
Fixed charges under these contracts total $35 million for the
five years ending in 2003. We believe that these contracts and
power pool memberships will enable us to economically provide for
the growing demand in our service territory.
IMPACT OF THE YEAR 2000 ISSUE - We are currently involved in an
ongoing project to identify, evaluate, and implement
modifications to computer hardware, software, and other equipment
required for the Year 2000 issue. The Year 2000 problem is the
result of computer programs being written using two digits rather
than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. Additionally, other
equipment may have microchips with embedded logic, which may fail
to function correctly after December 31, 1999, resulting in
system failure or miscalculations causing disruptions of
operations.
We have utilized, and will continue to utilize, both internal and
external resources to inventory, reprogram or replace, and test
hardware, software, and embedded systems for Year 2000
modifications. In 1997, we developed and implemented a written
plan for Year 2000 remediation, and substantially completed the
plan in 1998, with additional testing scheduled for 1999. At
December 31, 1998, we had completed the assessment phase of the
project and approximately 90% of the remediation and testing
procedures necessary to achieve Year 2000 compliance. Costs
incurred through December 31, 1998 for remediation efforts
related to Year 2000 issues were approximately $400,000,
excluding the costs of redeployment of existing resources.
Additional costs are expected to be less than $200,000 over the
next year and will be expensed as incurred.
We anticipate that $100,000 of the remaining planned expenditures
will be utilized for non-information technology costs and the
remaining $100,000 will be utilized for testing of the various
systems and remediation of additional items which may be
discovered during final testing.
Because of the nature of the Year 2000 issue and the varying
degrees of exposure and complexities, some business units are
further along in their Year 2000 readiness than others. All
business units have completed their assessment phase of Year 2000
readiness, have developed or are developing contingency plans,
and are in the remediation and testing stages of Year 2000
readiness. Each of our business units is at least 90% finished
with its Year 2000 project.
The costs of the project and the timing for completion of the
Year 2000 modifications are based on our best estimates, which
were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, the
ability to locate and correct all relevant computer codes, and
similar uncertainties. However, there can be no guarantee that
these estimates will be achieved and actual results could differ
materially from those plans.
We have identified the following major areas of risk related to
Year 2000: 1) vendors and/or suppliers, 2) telecommunications,
and 3) generation and power supply. We are addressing these risks
in our contingency planning, and have implemented, or will be
implementing, action plans in advance to mitigate these potential
risks. The most reasonably likely worst case scenarios we
anticipate are: the partial interruption of rail service
affecting coal deliveries to our generating plants; partial loss
of generating capacity in the region for brief periods of time;
and the partial interruption of telecommunication services
affecting our ability to communicate internally and/or with our
customers and other business partners.
We consider vendors and suppliers a risk because of the lack of
control we have over their operations. We have contacted vendors
and suppliers critical to our operations for information
pertaining to their Year 2000 readiness. Although we have found
no specific exposure related to the Year 2000 issue for third
parties' failure to remediate their own Year 2000 problems, there
can be no guarantee that the systems of other companies on which
our systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible
with our systems, would not have a material adverse effect on our
operations.
We consider telecommunications a risk because it performs a
critical function in a large number of our business processes and
plant control functions. Our contingency plans provide for the
availability of alternative methods of communication such as
radios, cellular phones, and satellite phones.
We consider our plant generation and power supply a risk due to
the complexity of the interactions with external systems beyond
our control. Our contingency planning includes placing in service
generating units, which would normally not be in service, to
provide reserves in the event of an unexpected loss of some of
the generation capacity of others in the region. In addition, we
generally maintain a 60-day supply of coal at our generation
facilities and are considering increasing this level to mitigate
the effect of any temporary interruption of rail transportation.
Propane and diesel fuel storage will be scheduled as backup in
case of a natural gas interruption.
Because of the unprecedented nature of the Year 2000 issue and
its effects, the success of related remediation efforts will not
be fully determinable until Year 2000 and thereafter. All
business units have developed or are developing contingency plans
to cover essential business functions and anticipated possible
Year 2000 related failures. These plans will continually be
reviewed and updated.
We presently believe that, with modifications to existing and
conversions to new software, hardware, and embedded systems, the
Year 2000 issue can be mitigated with no significant adverse
effect on customers or disruption to business operations. If such
modifications are not completed, the Year 2000 issue could have a
material adverse effect on our operations.
PROPOSED MERGER - On March 4, 1999, we entered into an Agreement
and Plan of Merger to form a strategic business combination with
UtiliCorp United Inc. Under terms of the agreement, each share of
our common stock, valued at $23.00 per share, will be exchanged
for UtiliCorp United Inc. common stock. The transaction is
subject to several closing conditions, including approval by our
shareholders and approval by a number of state and federal
regulatory agencies. Approval by UtiliCorp United Inc.
shareholders is not required. We expect the merger to be
completed in mid-2000.
FORWARD-LOOKING INFORMATION - This report contains information
based on projections and estimates made by management, which
involve risks and uncertainties. Some of the important factors
which could cause actual results to differ materially from those
anticipated include, but are not limited to, future national and
regional economic conditions, inflation rates, regulatory changes
(including, but not limited to, ongoing state and federal
activities with respect to electric utility deregulation,
competition, and restructuring), weather conditions, financial
market conditions, interest rates, Year 2000 issues, future
business decisions, and other uncertainties, all of which are
difficult to predict and many of which are beyond our control.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 1998 1997 1996
OPERATING REVENUES:
Electric utility $89,678,000 $86,910,000 $83,499,000
Other utility 10,876,000 11,948,000 12,370,000
Manufacturing 23,820,000 17,307,000 -
----------- ----------- -----------
124,374,000 116,165,000 95,869,000
----------- ----------- -----------
OPERATING EXPENSES:
Production fuel 19,964,000 19,166,000 17,821,000
Purchased power 9,896,000 8,307,000 9,911,000
Gas purchased for resale 2,481,000 3,456,000 3,376,000
Manufacturing cost of goods
sold 19,868,000 14,864,000 -
Other operations 22,854,000 21,596,000 18,402,000
Maintenance 8,472,000 7,976,000 8,446,000
Depreciation 11,535,000 11,045,000 10,474,000
Taxes other than income
taxes 7,117,000 6,767,000 6,511,000
----------- ----------- -----------
102,187,000 93,177,000 74,941,000
----------- ----------- -----------
OPERATING INCOME 22,187,000 22,988,000 20,928,000
INTEREST CHARGES, NET:
Long-term debt 6,057,000 6,182,000 5,850,000
Notes payable 562,000 181,000 -
Other 320,000 192,000 172,000
Allowance for borrowed funds
used during construction (152,000) (75,000) (215,000)
---------- ---------- ----------
6,787,000 6,480,000 5,807,000
---------- ---------- ----------
OTHER INCOME 847,000 440,000 504,000
---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 16,247,000 16,948,000 15,625,000
INCOME TAXES 5,512,000 6,214,000 5,268,000
---------- ---------- ----------
INCOME BEFORE MINORITY
INTEREST 10,735,000 10,734,000 10,357,000
MINORITY INTEREST IN INCOME
(LOSS) OF SUBSIDIARY 71,000 (106,000) -
---------- ---------- ----------
NET INCOME $10,664,000 $10,840,000 $10,357,000
=========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,099,928 7,988,714 7,868,169
BASIC EARNINGS PER SHARE $1.32 $1.36 $1.32
===== ===== =====
DILUTED EARNINGS PER SHARE $1.31 $1.36 $1.32
===== ===== =====
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31 1998 1997
- -ASSETS-
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant $324,621,000 $309,028,000
Other 20,377,000 18,865,000
------------ ------------
344,998,000 327,893,000
Less - Reserves for depreciation (167,112,000) (157,127,000)
------------ ------------
177,886,000 170,766,000
Construction work in progress 3,669,000 6,086,000
------------ ------------
181,555,000 176,852,000
OTHER INVESTMENTS 4,922,000 3,477,000
CURRENT ASSETS:
Cash and cash equivalents 371,000 350,000
Temporary investments 2,000 1,649,000
Accounts receivable, net of
reserves of $282,000 and $270,000 10,160,000 9,820,000
Accrued utility revenue 3,674,000 3,287,000
Manufacturing inventories, at
first-in first-out cost 2,911,000 3,570,000
Fuel, at average cost 3,366,000 3,008,000
Materials and supplies, at
average cost 5,674,000 5,778,000
Prepayments and other 1,900,000 1,627,000
--------- ---------
28,058,000 29,089,000
DEFERRED CHARGES:
Debt expense, being amortized
over term of debt 1,349,000 1,571,000
Lease payments receivable 3,166,000 3,289,000
Prepaid pension expense 16,389,000 13,572,000
Regulatory assets 13,843,000 13,940,000
Other 1,973,000 1,979,000
------------ ------------
36,720,000 34,351,000
------------ ------------
$251,255,000 $243,769,000
============ ============
- -CAPITALIZATION AND LIABILITIES-
CAPITALIZATION:
Common stock $33,816,000 $33,816,000
Retained earnings 73,450,000 70,714,000
Other paid-in capital 1,877,000 1,251,000
Less - Treasury stock (13,338,000) (14,613,000)
------------ ------------
95,805,000 91,168,000
Long-term debt 73,515,000 68,744,000
------------ ------------
169,320,000 159,912,000
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARY 1,369,000 1,298,000
CURRENT LIABILITIES:
Outstanding checks in excess
of cash balances 3,512,000 3,288,000
Current maturities of long-term
obligations 1,213,000 8,628,000
Accounts payable 9,988,000 11,400,000
Notes payable 7,290,000 2,621,000
Accrued income and general taxes 823,000 735,000
Accrued interest 1,923,000 1,960,000
Accrued vacation 1,233,000 1,154,000
Other 679,000 565,000
---------- ----------
26,661,000 30,351,000
NON-CURRENT LIABILITIES AND DEFERRED CREDITS:
Capital lease obligations 2,902,000 3,093,000
Deferred income taxes 31,822,000 29,635,000
Investment tax credit 3,689,000 4,096,000
Accrued claims and benefits 1,833,000 1,744,000
Deferred interest 2,138,000 2,255,000
Regulatory liabilities 8,440,000 8,971,000
Other 3,081,000 2,414,000
---------- ----------
53,905,000 52,208,000
COMMITMENTS AND CONTINGENCIES (NOTE 7)
------------ ------------
$251,255,000 $243,769,000
============ ============
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
DECEMBER 31 1998 1997
COMMON EQUITY:
Common stock - authorized 25,000,000
shares,without par value; issued
9,252,748 shares $33,816,000 $33,816,000
Retained earnings 73,450,000 70,714,000
Other paid-in capital (principally
gain on issuance of treasury stock) 1,877,000 1,251,000
Less - Treasury stock, at cost,
1,105,821 and 1,211,110 shares (13,338,000) (14,613,000)
------------ ------------
95,805,000 91,168,000
LONG-TERM DEBT:
First mortgage bonds - 9.44% series
due February 1, 2021 22,500,000 22,500,000
Unsecured pollution control
revenue bonds - 5.85% series due
February 1, 2013 5,600,000 5,600,000
Unsecured medium-term notes -
5.77% due December 8, 1998 - 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
8.36% due March 15, 2005 20,000,000 20,000,000
------------ ------------
40,000,000 45,000,000
Other long-term debt 6,628,000 4,272,000
------------ ------------
74,728,000 77,372,000
Less - Current maturities (1,213,000) (8,628,000)
------------ ------------
73,515,000 68,744,000
------------ ------------
Total capitalization $169,320,000 $159,912,000
============ ============
Notes:(a) Common Stock:
At December 31, 1998, there were 8,146,927 shares of common
stock outstanding.
St. Joseph Light & Power Company (the Company) has an Automatic
Dividend Reinvestment and Optional Cash Payment Plan. Under this
Plan, common shares may be newly issued, reissued or purchased on
the open market. At December 31, 1998, the Company had 326,811
shares of common stock reserved for this Plan. In addition, the
Company has 447,884 shares of stock reserved for its stock-based
compensation plans. Refer to Note 3 in the Notes to Consolidated
Financial Statements.
At December 31, 1998, there were 8,146,927 Rights outstanding.
Each Right entitles the holder thereof to purchase one-half share
of common stock at a price of $35 per one-half share. The Rights,
which expire on December 4, 2006, have no voting rights.
The Rights are exercisable in the event of certain attempted
business acquisitions. Exercising the Rights will cause
substantial dilution to a person or group attempting to acquire
the Company on terms not approved by the Company's board of
directors. Refer to Note 10 in the Notes to Consolidated
Financial Statements.
(b) Long-Term Debt:
The first mortgage bonds are secured equally and ratably by a direct lien on
substantially all fixed property and franchises now owned or hereafter
acquired.
Other long-term debt includes notes payable to banks and finance
companies which are payable through 2003 and bear interest at
rates ranging from 9.635% to 9.75% and prime plus 1.5% to prime
plus 1.75%. These notes are collateralized by substantially all
of the assets of Percy Kent Bag Co., Inc. (Percy Kent). Refer to
Note 1 in the Notes to Consolidated Financial Statements.
The combined aggregate amount of maturities and unfulfilled
sinking fund requirements for the next five years are as follows:
1999 $1,213,000
2000 4,951,000
2001 419,000
2002 1,155,000
2003 1,140,000
----------
$8,878,000
==========
(c) Cumulative Preferred Stock:
Cumulative preferred stock of 4,000,000 shares, without par
value, is authorized.
(d) Preference Stock:
Preference stock of 2,000,000 shares, without par value, is authorized.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31 1998 1997 1996
BALANCE AT BEGINNING OF YEAR $70,714,000 $67,533,000 $64,560,000
NET INCOME 10,664,000 10,840,000 10,357,000
----------- ----------- -----------
81,378,000 78,373,000 74,917,000
LESS - Dividends on common
stock of $.98, $.96 and
$.94 per share (7,928,000) (7,659,000) (7,384,000)
------------ ----------- -----------
BALANCE AT END OF YEAR $73,450,000 $70,714,000 $67,533,000
============ =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,664,000 $10,840,000 $10,357,000
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 12,346,000 11,440,000 10,474,000
Pension expense (2,228,000) (1,961,000) (1,921,000)
Deferred taxes and
investment tax credit 812,000 402,000 768,000
Allowance for equity
funds used during
construction (249,000) (129,000) (316,000)
Net changes in working capital
items not considered elsewhere:
Accounts receivable and
accrued utility revenue (727,000) 591,000 (207,000)
Inventories 405,000 (255,000) 1,008,000
Accounts payable and
outstanding checks (1,188,000) (2,804,000) 1,416,000
Accrued income and
general taxes 88,000 234,000 (211,000)
Other, net (118,000) (147,000) (225,000)
Net changes in regulatory
assets and liabilities 535,000 464,000 (94,000)
Net changes in other assets
and liabilities 266,000 (98,000) 126,000
----------- ----------- -----------
Net cash provided by
operating activities 20,606,000 18,577,000 21,175,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant (16,843,000)(14,128,000) (15,188,000)
Allowance for borrowed funds
used during construction 152,000 75,000 215,000
Investments 202,000 2,996,000 (193,000)
Other 97,000 (18,000) 101,000
----------- ----------- -----------
Net cash used in
investing activities (16,392,000)(11,075,000) (15,065,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Lines of credit increase
(decrease) 6,811,000 (462,000) -
Principal payments under
capital lease obligations (191,000) (178,000) (129,000)
Long-term debt retired (7,873,000) (1,358,000) -
Long-term debt issued 3,087,000 - -
Common stock purchased - (4,000) (17,000)
Common stock issued 1,901,000 1,821,000 1,821,000
Dividends paid (7,928,000) (7,659,000) (7,384,000)
---------- ---------- ----------
Net cash used in financing
activities (4,193,000) (7,840,000) (5,709,000)
---------- ---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 21,000 (338,000) 401,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 350,000 688,000 287,000
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $371,000 $350,000 $688,000
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $6,677,000 $7,444,000 $5,872,000
Income taxes, net of
refunds 4,588,000 5,609,000 4,795,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: A
capital lease obligation of $874,000 was incurred in 1996
when the Company entered into a lease agreement for computer
equipment.
For purposes of the Consolidated 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 Consolidated Financial Statements are
an integral part of these statements.
CONSOLIDATED STATEMENTS OF TAXES
YEARS ENDED DECEMBER 31 1998 1997 1996
COMPONENTS OF INCOME TAX EXPENSE:
Taxes payable currently-
Federal $4,156,000 $5,025,000 $4,097,000
State 544,000 787,000 403,000
---------- ---------- ----------
4,700,000 5,812,000 4,500,000
Provisions for deferred taxes (a)-
Depreciation and other plant-
related differences (b) 648,000 255,000 252,000
Pensions 1,072,000 971,000 948,000
Other (501,000) (417,000) (24,000)
---------- ---------- ----------
1,219,000 809,000 1,176,000
Amortization of investment
tax credits (407,000) (407,000) (408,000)
---------- ---------- ----------
Total income tax expense $5,512,000 $6,214,000 $5,268,000
========== ========== ==========
RECONCILIATION OF INCOME TAX RATES:
Statutory federal income
tax rate 35.0% 35.0% 35.0%
State income tax benefit for
deduction of federal income
taxes (1.8) (1.8) (1.8)
Timing differences flowed
through as required by
regulators 1.8 1.2 (.2)
Amortization of investment
tax credits (2.5) (2.4) (2.6)
Amortization of excess
deferred taxes (1.3) (1.0) (1.0)
State income taxes, net of
federal income tax benefit 5.6 5.8 5.2
Other (2.7) (.4) (.9)
------ ------ ------
Effective income tax rate (c) 34.1% 36.4% 33.7%
====== ====== ======
Notes:(a) The Company has recorded regulatory assets and liabilities
to account for the effect of expected future regulatory actions related to
unamortized investment tax credits, income tax liabilities
recorded at tax rates in excess of current rates, and other items
for which deferred taxes have not previously been provided.
The principal components of the Company's deferred income tax
balances at December 31, 1998 and 1997, consist of the following:
1998 1997
Accelerated depreciation and other
plant-related differences $24,934,000 $24,286,000
Pensions 6,265,000 5,080,000
Unamortized investment tax credits (2,552,000) (2,806,000)
Regulatory assets 12,802,000 12,363,000
Regulatory liabilities (5,888,000) (6,165,000)
Net operating loss and tax credit
carryforwards of Percy Kent, which
expire through 2011 (2,060,000) (2,403,000)
Other, net (1,679,000) (720,000)
----------- -----------
Net deferred tax liabilities $31,822,000 $29,635,000
=========== ===========
(b) The Company has elected, for tax purposes, to apply various
accelerated depreciation methods allowed by the Internal Revenue
Code.
(c) The effective income tax rate is computed by dividing total
income tax expense by the sum of tax expense and net income.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 STATEMENT OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of St. Joseph Light & Power
Company, a public utility, and its wholly owned subsidiary, SJLP
Inc. and its subsidiary, Percy Kent. Collectively, these entities
are referred to as the "Company." All significant intercompany
transactions have been eliminated in consolidation.
The Company is engaged principally in the generation, purchase,
transmission, distribution, and sale of electricity, the
generation and distribution of industrial steam, and the
distribution of natural gas. SJLP Inc. was formed in September
1996, to pursue investments in non-utility areas. Effective May
31, 1997, SJLP Inc. acquired a controlling interest in Percy
Kent, a manufacturer of multiwall and small paper bags.
The acquisition was accounted for as a purchase. Acquired
goodwill of $1,308,000, net of amortization, is included in other
deferred charges in the Consolidated Balance Sheets and is being
amortized on a straight-line basis over 15 years. The
consolidated financial statements include the results of
operations since the date of acquisition. Pro forma financial
data prior to the date of acquisition do not materially differ
from reported results.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is
stated at original cost. These costs include payroll-related
costs such as taxes, pensions and other fringe benefits, and
AFUDC.
Improvements to units of property are capitalized. Utility
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 units of property are expensed as incurred.
DEPRECIATION - Provisions for utility depreciation have been
computed on a straight-line basis by applying rates approved by
the PSC to the classified account balances. The Company's annual
depreciation provisions (including amounts classified elsewhere
in the Consolidated Statements of Income), as a percentage of the
average balance of depreciable property, were 3.7% for 1998 and
1997 and 3.6% for 1996.
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 in Iatan, Missouri. The Company's share of operating
expenses for Iatan is included in operating expenses in the
Consolidated Statements of Income. The amounts below represent
the Company's 18% interest in the 670-megawatt unit:
DECEMBER 31 1998 1997
Electric utility plant $61,541,000 $61,306,000
Reserves for depreciation 35,339,000 33,307,000
REVENUE RECOGNITION - Utility revenues relating to service rendered but
unbilled are recognized in the period the service is provided. Manufacturing
revenues are recognized at the time the finished bags are shipped
to the customer.
ACCOUNTING POLICIES - The preparation of financial statements, in
conformity with generally accepted accounting principles,
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) 133,
"Accounting for Derivative Instruments and Hedging Activities."
The Statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or liability measured at
its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that
receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the
beginning of any fiscal quarter after issuance (that is, fiscal
quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot
be applied retroactively. SFAS 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
The Company has not yet quantified the impacts of adopting SFAS
133 on its financial statements and has not determined the timing
of or method of its adoption of SFAS 133. However, the Statement
could increase volatility in earnings and other comprehensive
income.
In December 1998, the Emerging Issues Task Force reached
consensus on Issue No. 98-10, "Accounting for Contracts Involved
in Energy Trading and Risk Management Activities" (EITF Issue 98-
10). EITF Issue 98-10 is effective for fiscal years beginning
after December 15,1998. EITF Issue 98-10 requires that energy
trading contracts be recorded at fair value on the balance sheet,
with the changes in fair value included in earnings. The effects
of initial application of EITF Issue 98-10 must be reported as a
cumulative effect of a change in accounting principle. Financial
statements for periods prior to initial adoption of EITF Issue 98-
10 may not be restated. The Company believes it does not have any
commitments considered to be trading activity pursuant to the
principles of EITF Issue 98-10.
EARNINGS PER SHARE - Basic and diluted earnings per average
common share were computed by dividing net income by the
following:
1998 1997 1996
Denominator for basic EPS -
Weighted average number of
shares of common stock
outstanding during the year 8,099,928 7,988,714 7,868,169
Stock options (see Note 3) 13,578 7,550 2,182
Contingently issuable shares
pursuant to long-term
incentive plan (see Note 3) 15,423 - 14,306
--------- --------- ---------
Denominator for diluted EPS 8,128,929 7,996,264 7,884,657
========= ========= =========
RECLASSIFICATIONS - Certain reclassifications have been made in
the financial statements to enhance comparability.
2 BENEFIT PLANS
RETIREMENT SAVINGS PLAN - The Company has a Retirement Savings
Plan under Section 401(k) of the Internal Revenue Code. The plan
covers all 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 supplement retirement
benefits. The Company makes a matching contribution of 25
percent of employee contributions, up to 6 percent of
compensation, on a monthly basis. Discretionary matching
contributions up to an additional 25 percent may be made based on
an incentive formula. The Company made contributions of $359,000
for 1998, $300,000 for 1997, and $377,000 for 1996.
Effective January 1, 1999, the Company began making matching
contributions of 50 percent of employee contributions, up to 6
percent of compensation. Additional discretionary awards will no
longer be made. The plan was also amended to allow employees to
begin contributing immediately upon starting employment with the
Company. The Company will begin matching contributions for new
employees after one year of service. This amendment was also
effective January 1, 1999.
PENSION AND POSTRETIREMENT BENEFIT 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 benefit formula. The Company's
funding policy is to comply with the minimum funding requirements
of the Employee Retirement Income Security Act.
In addition to providing pension benefits, the Company provides
certain postretirement medical and life insurance benefits.
Employees hired after December 31, 1992 are not eligible for
postretirement life insurance benefits. Employees covered under
the plans become eligible for these benefits if they reach
retirement age while working for the Company and have 10 years of
service. The Company uses Voluntary Employees' Beneficiary
Association trusts, which cover substantially all active and
retired employees.
The following table summarizes net pension credits and postretirement
benefit costs, including amounts capitalized:
<TABLE>
<CAPTION>
PENSION OPEB
1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned
during the period $977,000 $861,000 $777,000 $216,000 $149,000 $213,000
Interest cost on benefit
obligation 2,433,000 2,280,000 2,053,000 733,000 672,000 707,000
Expected return on plan
assets (5,392,000) (4,755,000) (4,325,000) (229,000) (169,000) (119,000)
Amortization of transition
(asset) obligation (431,000) (431,000) (431,000) 388,000 388,000 388,000
Amortization of prior service
cost 223,000 175,000 138,000 - - -
Recognized net actuarial
(gain) loss (627,000) (551,000) (526,000) - - -
----------- ----------- ----------- --------- --------- ---------
(2,817,000) (2,421,000) (2,314,000) 1,108,000 1,040,000 1,189,000
Amounts credited (charged)
to construction 589,000 460,000 393,000 (232,000) (198,000) (202,000)
----------- ----------- ----------- ---------- --------- ---------
Net benefit costs (credits)
included in operating
expenses $(2,228,000)$(1,961,000)$(1,921,000) $876,000 $842,000 $987,000
==================================== ========= ========= =========
</TABLE>
The following table reconciles the beginning and ending balances
of the plans' benefit obligations and fair value of plan assets and
reconciles the funded status of the plans to the related amounts
recognized in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
PENSION OPEB
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
year $32,643,000 $27,544,000 $10,140,000 $8,747,000
Service cost-benefits earned during
period 977,000 861,000 216,000 149,000
Interest cost on benefit obligation 2,433,000 2,280,000 733,000 672,000
Actuarial (gains) losses 350,000 3,988,000 (55,000) 1,165,000
Plan amendment 633,000 - - -
Participant contributions - - 222,000 175,000
Benefits paid and other
expenses (2,176,000) (2,030,000) (663,000) (768,000)
----------- ----------- ----------- -----------
Benefit obligation at end of year $34,860,000 $32,643,000 $10,593,000 $10,140,000
Change in plan assets:
Fair value of plan assets at
beginning of year $60,971,000 $53,813,000 $2,783,000 $1,955,000
Actual return on plan
assets 8,661,000 9,188,000 588,000 298,000
Employer contribution - - 1,134,000 1,123,000
Participant contributions - - 222,000 175,000
Benefits paid and other expenses (2,176,000) (2,030,000) (663,000) (768,000)
----------- ----------- ---------- ----------
Fair value of plan assets at end
of year $67,456,000 $60,971,000 $4,064,000 $2,783,000
Funded status:
Plan assets in excess of (less than)
benefit obligation $32,596,000 $28,328,000 $(6,529,000)$(7,357,000)
Unrecognized net actuarial (gain)
loss (16,868,000) (14,576,000) (23,000) 391,000
Unrecognized transition (asset)
obligation (1,294,000) (1,725,000) 5,407,000 5,795,000
Unrecognized prior service cost 1,955,000 1,545,000 - -
----------- ----------- ---------- ----------
Prepaid (accrued) benefit cost $16,389,000 $13,572,000 $(1,145,000)$(1,171,000)
Assumptions as of December 31:
Discount rate 7.25% 7.25% 7.25% 7.25%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.30% 4.30% N/A N/A
</TABLE>
For measurement purposes, an 8 percent annual rate of increase in the
per-capita health care benefits was assumed for 1999; the rate was assumed to
decrease gradually to 6 percent by 2020 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
Effect on total of service and
interest cost components $195,000 $174,000
Effect on postretirement benefit
obligation $1,815,000 $1,693,000
3 STOCK-BASED COMPENSATION PLANS
The Company has a long-term stock incentive plan (the Plan). Under the Plan,
non-employee directors are automatically granted restricted stock and non-
qualified options to purchase shares of common stock. All options are
exercisable in full from the date of grant and have exercise prices equal to the
stock's market price on the date of the grant. For 1998, 1997, and 1996, the
Company recorded compensation expense of $55,000, $40,000, and $166,000,
respectively, related to the issuance of restricted shares under the Plan.
The following table is a summary of data regarding stock options
and restricted stock for non-employee directors:
<TABLE>
<CAPTION>
1998 1997
1996
Shares Price(1) Shares Price(1) Shares Price(1)
<S> <C> <C> <C> <C> <C>
<C>
Options outstanding at
January 1 123,000 $15.250 106,000 $15.125 - N/A
Options granted 16,000 18.313 17,000 16.030 106,000 $15.125
Options exercised 18,000 15.222 - N/A - N/A
------- ------- ------- ------- ------- -------
Options outstanding at
December 31 121,000 $15.660 123,000 $15.250 106,000 $15.125
======= ======= ======= ======= ======= =======
Restricted shares granted 3,000 2,500 11,000
Shares available for grant (for
options and restricted stock)
at December 31 144,500 163,500 183,000
(1) weighted average exercise price
</TABLE>
The Company accounts for the option feature of the Plan under
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," under which no compensation cost has been
recognized. The following table shows the assumptions made for
grants in each year, as well as the amounts the Company's net
income and earnings per share would have been had compensation
cost for this plan been recorded consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," using the Black-
Scholes pricing model:
1998 1997 1996
Net income: As reported $10,664,000 $10,840,000 $10,357,000
Pro forma 10,640,000 10,815,000 10,201,000
Basic EPS: As reported $1.32 $1.36 $1.32
Pro forma 1.31 1.35 1.30
Diluted EPS:As reported 1.31 1.36 1.32
Pro forma 1.31 1.35 1.30
Risk-free interest rate 5.81% 6.89% 6.85%
Expected dividend yield 5.83% 5.79% 5.81%
Expected life 10 years 10 years 10 years
Expected volatility 19% 18% 19%
Weighted average fair value of
options granted $2.42 $2.37 $2.37
The Plan also covers long-term incentives for officers and
certain other key employees. It provides for overlapping three-
year performance cycles with stock awards established on the
first day and earned on the last day of each performance cycle.
At December 31, 1998, 303,384 shares were available for issurance
pursuant to this portion of the Plan. Compensation of $132,000,
$(9,000), and $14,000 was expensed for this portion of the Plan
in 1998, 1997, and 1996, respectively.
4 SHORT-TERM BORROWINGS
The Company has arrangements with certain banks to provide
unsecured short-term lines of credit on a committed basis with
available amounts at December 31, 1998, totaling $3,500,000.
Outstanding notes bear interest at rates based on the prime rate
or money market rates. In addition, the Company has agreements
with several banks to borrow, as available, on an uncommitted
basis at market-based rates quoted by the banks.
At December 31, 1998, outstanding borrowings consisted of
$7,290,000 of notes payable to banks with weighted average
interest rates of 6.1%. At December 31, 1997, outstanding
borrowings consisted of $2,621,000 of Percy Kent's notes payable
to other financial institutions with weighted average interest
rates of 11.0%. During 1998 and 1997, weighted average short-term
debt outstanding was $1,169,000 and $1,944,000, with weighted
average interest rates of 6.7% and 10.6%, respectively.
5 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 - The fair value of these
investments is estimated based on quoted market prices for the
same or similar issues and approximates the carrying amount.
OTHER INVESTMENTS - The balance includes investments in
convertible securities of two non-publicly traded companies, a
business park joint venture, community betterment projects, and
retirement trusts. The fair value of the investments in the
convertible securities, the joint venture and the community
betterment projects are stated at the original cost of
$2,028,000, $500,000 and $230,000, respectively, due to the
impracticability of estimating the market value. The fair value
of the underlying instruments of the retirement trusts is
estimated based on quoted market prices for the same or similar
issues. The investment in the trusts is offset by a corresponding
liability for future obligations in other non-current
liabilities.
LONG-TERM DEBT - Most of the Company's long-term debt is not
publicly traded; therefore, a market price does not exist for
these instruments. The fair value of long-term debt is estimated
based upon market prices for comparable securities with similar
maturities.
The difference in carrying amounts and fair values of financial
instruments 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 gain or loss on
early refinancing of the Company's long-term debt would be used
to reduce or increase the Company's rates over a prescribed
amortization period.
Carrying Fair
Amounts Values
1998
Cash and temporary investments $373,000 $373,000
Other investments 4,922,000 5,215,000
Long-term debt 74,728,000 85,739,000
1997
Cash and temporary investments $2,000,000 $2,000,000
Other investments 3,477,000 3,688,000
Long-term debt 77,372,000 86,155,000
6 EFFECTS OF REGULATION
The Company is subject to rate regulation by the PSC. Rates are
established to allow the Company an opportunity to recover its
costs and earn a return on its investment. The Company currently
applies SFAS No. 71, "Accounting for the Effects of Certain Types
of Regulation," which recognizes the economic effects of rate
regulation. In the event the Company determines that it no longer
meets the criteria for following SFAS No. 71, the accounting
impact would be a non-cash charge to operations of an amount that
could be material. Criteria that give rise to the discontinuance
of SFAS No. 71 include, (1) increasing competition that restricts
the Company's ability to establish prices to recover specific
costs, and (2) a significant change in the manner in which rates
are set by regulators from cost-based regulation to another form
of regulation. The continued applicability of SFAS No. 71 is
continually reviewed based on the current regulatory environment.
In March 1997, the PSC opened a docket to investigate
restructuring in the electric utility industry. The Retail
Electric Competition Task Force, comprised of representatives
from various industry groups, was established and charged with
preparing comprehensive reports to the PSC. The reports were
prepared in 1998 based upon a thorough investigation and study of
retail wheeling of electricity and related issues and included
recommendations as to how Missouri should implement retail
electric competition, in the event that legislation is enacted
which authorizes it.
Based on the PSC docket and deregulation plans implemented or
considered by other states, management believes it is most likely
that the generation portion of the business could become
unregulated and that the transmission and distribution functions
will continue to be regulated. Although bills have been
introduced in the 1999 session of the legislature, most observers
believe that the earliest a bill will be passed is 2000, which
would defer retail competition in Missouri until 2001 or later.
Based on a current evaluation of the various factors and
conditions that are expected to impact future cost recovery, the
Company believes that its regulatory assets, including those
related to generation, are probable of future recovery and that
the utilization of SFAS No. 71 continues to be appropriate.
Accordingly, the Company has recorded regulatory assets and
liabilities on the Consolidated Balance Sheets, consisting
primarily of deferred taxes as noted in Note (a) to Consolidated
Statements of Taxes.
On December 1, 1998, the Company filed separate rate cases before
the PSC asking for price increases of approximately $6,100,000,
$500,000, and $275,000 for electric, natural gas, and industrial
steam, respectively. An earlier electric earnings complaint filed
by the PSC staff, requesting a reduction of $6.4 million, has
been consolidated with the Company's electric case. Hearings for
the three cases are scheduled for July 1999. The PSC has until
November 1, 1999, to rule on the Company's proposed increases.
7 COMMITMENTS AND CONTINGENCIES
LEASES - The Company has a 50-year capital lease agreement with
six other regional utilities for a transmission line and related
facilities. Electric utility plant, as of December 31, 1998,
includes $2,902,000 for the leased joint facilities and other
property acquired under capital leases.
The future minimum lease payments under this, and other capital
leases, together with the present value of the net lease payments
(obligations under the capital leases) are:
1999 $426,000
2000 426,000
2001 267,000
2002 216,000
2003 216,000
Later years 5,318,000
----------
Total minimum lease payments 6,869,000
Less - Amounts representing interest 3,967,000
----------
Present value of obligations under
capital leases $2,902,000
==========
The Company also has 50-year direct financing lease
agreements for terminal and associated joint facilities. The
future minimum lease payments receivable, together with the
present value of net receivables, under the leases are:
1999 $123,000
2000 123,000
2001 123,000
2002 123,000
2003 123,000
Later years 2,551,000
----------
Total minimum lease payments receivable 3,166,000
Less - Amounts representing interest 2,138,000
----------
Present value of net receivables $1,028,000
==========
OTHER COMMITMENTS - The Company's capital budget, excluding AFUDC
and including non-utility investments, for 1999 is approximately
$14,677,000. The five-year capital budget is estimated to be
$71,286,000.
The Company has entered into long-term contracts to purchase
generating capacity, fossil fuels, and rail transportation.
Minimum annual amounts to be purchased under these contracts
approximate $10,865,000, $16,741,000, $12,673,000, $11,562,000,
and $14,191,000 for each of the next five years, respectively.
ENVIRONMENTAL CONTINGENCIES - The Company is required to meet
various environmental regulations governing air and water
standards. The Company anticipates future capital expenditures of
approximately $4,315,000 at the Lake Road plant, related to the
requirements of Phase II of the Clean Air Act Amendments which
become effective in 2000.
The United States Environmental Protection Agency (EPA) has
recently issued a NOx State Implementation Plan (SIP) Call under
which Missouri, twenty-one other eastern states, and the District
of Columbia are required to revise their SIPs to establish more
stringent emission standards for nitrogen oxides (NOx). The
Company has joined with five other western Missouri utilities,
other states, and private organizations in a lawsuit challenging
the EPA's SIP Call. Should the legal challenge fail, some of our
generating units will be required to meet lower NOx emission
standards beginning in 2003. The full extent of how the Company
will be affected and the related cost of implementation are not
yet known.
OTHER 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.
8 SEGMENTS OF BUSINESS
The Company has two reportable segments: electric utility and
manufacturing. The Company is principally a public utility
engaged primarily in the business of generating and distributing
electric energy in a 10-county area in northwest Missouri. The
Company's 62,000 regulated customers include residential,
commercial, and industrial classes. The Company's manufacturing
segment represents a controlling interest in a company which
manufactures multiwall and small paper bags primarily for food
products, agricultural products, specialty chemicals, pet foods
and other consumer packaging. Other operations of the Company
include the limited sale of natural gas and industrial steam, as
well as investment in non-utility businesses.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies in
Note 1. The Company evaluates performance and allocates resources
to its regulated business units based on profit or loss from
operations, not including interest charges or nonrecurring gains
and losses, and on the rate of return achieved. The performance
of the Company's manufacturing segment is evaluated based on net
income after taxes and minority interest.
The following table sets forth certain information regarding the Company's
segments of business:
<TABLE>
<CAPTION>
ELECTRIC
UTILITY MANUFACTURING ALL OTHER TOTALS
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Revenues from external customers $89,678 $23,820 $10,876 $124,374
Depreciation 10,813 995 538 12,346
Income taxes 5,307 - (48) 5,259
Segment profit (loss) 15,617 (24) 396 15,989
Segment assets 217,947 13,906 14,804 246,657
Expenditures for segment assets,
including AFUDC 15,659 768 416 16,843
Net regulatory assets 5,191 - 212 5,403
Accumulated deferred income taxes and
investment tax credits 33,252 - 2,259 35,511
Other non-cash items-pension expense (1,941) - (287) (2,228)
YEAR ENDED DECEMBER 31, 1997
Revenues from external customers $86,910 $17,307 $11,948 $116,165
Depreciation 10,409 526 505 11,440
Income taxes 5,881 - 75 5,956
Segment profit (loss) 16,476 (168) 381 16,689
Segment assets 209,505 15,671 12,848 238,024
Expenditures for segment assets,
including AFUDC 13,520 143 465 14,128
Net regulatory assets 4,805 - 164 4,969
Accumulated deferred income taxes and
investment tax credits 31,745 - 1,986 33,731
Other non-cash items-pension expense (1,716) - (245) (1,961)
YEAR ENDED DECEMBER 31, 1996
Revenues from external customers $83,499 - $12,370 $95,869
Depreciation 9,975 - 499 10,474
Income taxes 4,998 - 236 5,234
Segment profit 15,076 - 697 15,773
Segment assets 204,372 - 10,189 214,561
Expenditures for segment assets,
including AFUDC 14,864 - 324 15,188
Net regulatory assets 5,192 - 160 5,352
Accumulated deferred income taxes and
investment tax credits 31,415 - 1,822 33,237
Other non-cash items-pension expense (1,670) - (251) (1,921)
</TABLE>
The following table reconciles reportable segment profit, assets, depreciation,
and income taxes, disclosed above, to the Company's Consolidated Financial
Statements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 (IN THOUSANDS) 1998 1997 1996
<S> <C> <C> <C>
PROFIT
Reportable segment profit $15,593 $16,308 $15,076
Other profit 396 381 697
Interest charges (net)(1) (5,909) (5,931) (5,807)
Other income 837 340 470
Income taxes on other income (253) (258) (79)
-------- -------- --------
Consolidated net income $10,664 $10,840 $10,357
======== ======== ========
ASSETS
Reportable segment assets $231,853 $225,176 $204,372
Other assets 14,804 12,848 10,189
Temporary and other investments 2,810 3,923 8,122
Debt expense 1,324 1,437 1,553
Other assets not allocated 464 385 3,014
-------- -------- --------
Consolidated assets $251,255 $243,769 $227,250
======== ======== ========
DEPRECIATION
Reportable segment depreciation $11,808 $10,935 $9,975
Other depreciation 538 505 499
Less-Manufacturing depreciation included
in cost of goods sold (811) (395) -
-------- -------- --------
Consolidated depreciation $11,535 $11,045 $10,474
======== ======== ========
INCOME TAXES
Reportable segment income taxes $5,307 $5,881 $4,998
Other income taxes (48) 75 236
Income taxes on other income 253 258 34
-------- -------- --------
Consolidated income taxes $5,512 $6,214 $5,268
======== ======== ========
(1) Excludes manufacturing segment interest expense of $878,000 and $549,000 for
1998 and 1997, respectively, as interest expense is included in manufacturing
net income which is the measure of profit or loss used to evaluate the
performance of that segment.
</TABLE>
9 QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1998
<S> <C> <C> <C> <C>
Operating revenues $29,717,000 $30,056,000 $37,366,000 $27,235,000
Operating income 4,999,000 4,842,000 10,122,000 2,224,000
Net income 2,401,000 1,990,000 5,214,000 1,059,000
Weighted average common shares
outstanding 8,056,020 8,092,173 8,114,921 8,135,561
Basic and diluted earnings per average
common share $.30 $.25 $.64 $.13
1997
Operating revenues $23,510,000 $25,199,000 $37,116,000 $30,340,000
Operating income 4,365,000 5,100,000 10,228,000 3,295,000
Net income 1,991,000 2,268,000 5,395,000 1,186,000
Weighted average common shares
outstanding 7,940,138 7,979,852 8,004,627 8,029,089
Basic and diluted earnings per average
common share $.25 $.28 $.67 $.15
The quarterly data reflect seasonal variations common to the utility industry.
</TABLE>
10 SUBSEQUENT EVENT (Unaudited)
On March 4, 1999, the Company and UtiliCorp United Inc. entered
into an Agreement and Plan of Merger to form a strategic business
combination. Under terms of the agreement, each share of common
stock of the Company, valued at $23.00 per share, will be
exchanged for UtiliCorp United Inc. common stock. The
transaction is subject to several closing conditions, including
approval by the Company's shareholders and approval by a number
of state and federal regulatory agencies. Approval by UtiliCorp
United Inc. shareholders is not required. Management expects the
merger to be completed in mid-2000.
The Rights Agreement described in Note (a) to the Consolidated
Statements of Capitalization is inoperative with respect to the
proposed merger agreement.
FINANCIAL RESPONSIBILITY / INDEPENDENT AUDIT
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 preceding
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 Public Accountants on the financial
statements appears on this page. The responsibility of 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.
/s/ Terry F. Steinbecker
Terry F. Steinbecker
President and Chief Executive Officer
/s/ Larry J. Stoll
Larry J. Stoll
Vice President-Finance,Treasurer and Assistant Secretary
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of St. Joseph Light & Power Company:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of St. Joseph Light & Power Company
(a Missouri corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of income,
retained earnings, cash flows, and taxes for each of the three
years in the period ended December 31, 1998. 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 and subsidiaries as of
December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri
January 22, 1999
<TABLE>
<CAPTION>
SUMMARY OF ELECTRIC UTILITY OPERATING STATISTICS
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
SALES (mwh)
Residential 634,165 621,432 611,911 593,881 562,148 564,885
Commercial 493,630 471,698 453,387 437,008 422,582 406,379
Industrial 502,426 474,972 454,662 440,176 431,468 447,859
Other 9,707 9,220 9,505 8,968 8,976 9,310
--------- --------- --------- --------- --------- ---------
Total retail sales 1,639,928 1,577,322 1,529,465 1,480,033 1,425,174 1,428,433
Sales for resale 76,286 132,044 79,156 68,769 222,185 91,645
RESIDENTIAL CUSTOMER DATA (Average)
Number of customers 55,082 54,621 54,237 53,900 53,424 53,250
Annual kwh sales 11,513 11,377 11,282 11,018 10,522 10,608
Revenue (Cents per kwh) 6.07 5.96 5.95 6.06 5.83 5.60
Number of all electric dwellings 11,774 11,137 10,565 10,039 9,513 9,020
COMMERCIAL AND INDUSTRIAL CUSTOMER DATA (Average)
Number of customers 6,757 6,727 6,730 6,713 6,618 6,618
Revenue (Cents per kwh) 4.76 4.78 4.80 4.95 4.81 4.83
SYSTEM DATA
System requirements (mwh) 1,773,388 1,683,048 1,661,029 1,585,624 1,526,088 1,532,022
Load factor (Percent) 53.8 54.9 54.8 52.5 55.0 52.5
Net peak load (mw) 376 350 346 345 317 333
System capability at peak (mw) 433 432 422 417 439 434
</TABLE>
CORPORATE INFORMATION
CORPORATE OFFICES
520 Francis Street
Post Office Box 998
St. Joseph, Missouri
64502-0998
(816) 387-6434
fax (816) 387-6332
1-800-367-4562
http://www.sjlp.com
email: [email protected]
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 AGENT AND REGISTRAR
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60690
ANNUAL SHAREHOLDERS MEETING
The annual meeting of shareholders will
be at 9 a.m., Wednesday, May 19, 1999,
at the Albrecht-Kemper Museum of Art,
2818 Frederick Boulevard, St. Joseph, Missouri.
FORM 10-K
A copy of the Annual Report to the Securities and Exchange
Commission, Form 10-K, will be furnished without charge to any
shareholder upon contacting:
St. Joseph Light & Power Company
Investor Relations Department
520 Francis Street
Post Office Box 998
St. Joseph, Missouri 64502-0998
Access to the Form 10-K is also available via the internet
through the EDGAR database on the SEC website at www.sec.gov or
on the Company's website listed above.
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.
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
* John P. Barclay, Jr., 69
Chairman, President and Chief Executive Officer, Wire Rope Corporation of
America, Inc. (Manufacturer and distributor of wire rope and wire rope
products)
St. Joseph, Missouri, Director since 1974.
Deborah A. Beck, 51
Senior Vice President-Insurance Operations, Northwestern Mutual Life
Insurance Company (Insurance company)
Milwaukee, Wisconsin, Director since 1997.
* Daniel A. Burkhardt, 51
Principal, The Jones Financial Companies (Investment banking and retail
securities firm)
St. Louis, Missouri, Director since 1988.
James P. Carolus, 48
President, Hillyard Industries, Inc. (Manufacturer of maintenance cleaning
products)
St. Joseph, Missouri, Director since 1989.
* William J. Gremp, 56
Managing Director and Senior Vice President, First Union Capital Markets Group
(Banking)
Charlotte, North Carolina, Director since 1995.
David W. Shinneman, 60
President, Shinneman Management Company (Operator of McDonald's restaurants)
St. Joseph, Missouri, Director since 1994.
* Robert L. Simpson, 65
General Partner, St. Joseph Riverboat Partners (Riverboat casino)
St. Joseph, Missouri, Director since 1983.
Gerald R. Sprong, 65
President and Chief Executive Officer, The Morris Plan Company of St. Joseph
(Financial management and lending)
St. Joseph, Missouri, and
Director, Chairman and Chief Executive Officer, First Savings Bank, F.S.B.
(Banking)
Manhattan, Kansas, and
President and Chief Executive Officer, Noble Properties of Iowa, L.L.C.
(Ownership and management of hotels)
Des Moines, Iowa, Director since 1976.
Terry F. Steinbecker, 53
President and Chief Executive Officer, St. Joseph Light & Power Company
St. Joseph, Missouri, Director since 1985.
* Member of Audit Committee
OFFICERS
Terry F. Steinbecker, 53, President and Chief Executive Officer
Gary L. Myers, 45, Vice President, General Counsel and Secretary
Larry J. Stoll, 46, Vice President-Finance, Treasurer and Assistant Secretary
John A. Stuart, 45, Vice President-Customer Service & Energy Delivery
Dwight V. Svuba, 56, Vice President-Energy Supply
GLOSSARY
INDUSTRY TERMINOLOGY:
AFUDC: Allowance for funds used during construction. A method of
compensating a utility for financing costs it incurs during
construction of new facilities, prior to the inclusion of those
facilities in rates.
DISTRIBUTION: The flow of electricity over lower voltage
facilities to the ultimate retail customer-usually
businesses and homes.
GENERATION: The process of transforming other forms of energy,
such as fossil fuels, into electricity. Also, the amount of
electric energy produced, expressed in megawatt-hours.
LOAD: The amount of electric power delivered or required at any
specific point on a system, usually expressed in megawatts.
MISSOURI PUBLIC SERVICE COMMISSION (PSC): The governmental body
that regulates all utilities that do business in Missouri.
PEAK LOAD: The amount of electricity required during periods of
highest demand.
POWER POOL: A group of geographically related electric power
producers who combine their resources through interconnections in
order to transfer power among themselves to realize certain
efficiencies and enhance reliability.
RETAIL WHEELING: The use, for a fee, of transmission facilities
of one system to transmit electrical power produced by another
system.
SYSTEM CAPABILITY: The maximum amount of electricity a given
power plant is able to produce, usually expressed in megawatts.
TRANSMISSION: The flow of electricity from generating stations
over high voltage lines.
COMPANY GENERATING PLANTS:
IATAN: A coal-fired, 670-megawatt electric generating plant in
Iatan, Missouri which is jointly owned by St. Joseph Light &
Power Company, The Empire District Electric Company, and Kansas
City Power & Light.
LAKE ROAD: A 257-megawatt generating facility, owned and operated
by St. Joseph Light & Power Company, that burns a mix of coal and
other fuels, and is located in St. Joseph, Missouri.
FINANCIAL TERMINOLOGY:
BASIC EARNINGS PER SHARE (EPS): The company's net income divided
by the average number of common shares outstanding.
DILUTED EARNINGS PER SHARE: A measure of the company's earnings
per share given the effect of all potential common shares that
were dilutive and outstanding during the period. Potential
common shares are securities (such as options, warrants,
convertible preferred stock, etc.) that do not have a current
right to participate fully in earnings, but could do so in the
future by virtue of their option or conversion rights.
BOOK VALUE PER SHARE: The value of each common share of stock
after all debts are paid, computed by dividing common equity by
the number of common shares outstanding.
DIVIDEND YIELD: Dividends paid per share as a percentage of the
market price per share.
MARKET VALUE-TO-BOOK VALUE RATIO: A measure of the market value
of a company's common shares compared to the book value per
share. This ratio is calculated by dividing the market price per
share of common stock by the book value per share.
PAYOUT RATIO: Dividends paid as a percentage of net income.
PRICE/EARNINGS RATIO: A measure of the market value of a
company's common shares to the earnings per share of common
stock. To calculate this ratio, divide the price of a stock by
its earnings per share.
RETURN ON AVERAGE COMMON EQUITY: The amount, expressed as a
percentage, earned on the company's average common equity for a
given period. Dividing net income less preferred and preference
dividends by average common equity calculates this ratio.
UNITS OF MEASURE:
BRITISH THERMAL UNIT (Btu): The amount of heat energy necessary
to raise the temperature of one pound of water one degree
Fahrenheit. A standard unit for measuring thermal energy or heat.
KILOWATT (kw): A measure of the rate at which electric energy is
generated or consumed.
KILOWATT-HOUR (kwh): A basic unit of electric energy equal to one
kilowatt of power supplied to or taken from an electric circuit
steadily for one hour. The amount of electricity sold or
consumed is measured in kilowatt-hours.
MEGAWATT (mw): A measure of electric power equal to one thousand
kilowatts.
MEGAWATT-HOUR (mwh): A unit of electric energy equal to one
megawatt of power supplied to or taken from an electric circuit
steadily for one hour.
</Page>
Exhibit 23
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 Statements (Registration No. 33-64687 and
No. 333-42875) and previously filed Form S-8 Registration
Statements (Registration No. 33-28109 and No. 333-03839).
Arthur Andersen LLP
Kansas City, Missouri,
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 181555000
<OTHER-PROPERTY-AND-INVEST> 4922000
<TOTAL-CURRENT-ASSETS> 28058000
<TOTAL-DEFERRED-CHARGES> 36720000
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 251255000
<COMMON> 20478000
<CAPITAL-SURPLUS-PAID-IN> 1877000
<RETAINED-EARNINGS> 73450000
<TOTAL-COMMON-STOCKHOLDERS-EQ> 95805000
0
0
<LONG-TERM-DEBT-NET> 73515000
<SHORT-TERM-NOTES> 7290000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1213000
0
<CAPITAL-LEASE-OBLIGATIONS> 2902000
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 70530000
<TOT-CAPITALIZATION-AND-LIAB> 251255000
<GROSS-OPERATING-REVENUE> 124374000
<INCOME-TAX-EXPENSE> 5351000
<OTHER-OPERATING-EXPENSES> 102258000
<TOTAL-OPERATING-EXPENSES> 107609000
<OPERATING-INCOME-LOSS> 16765000
<OTHER-INCOME-NET> 686000
<INCOME-BEFORE-INTEREST-EXPEN> 17451000
<TOTAL-INTEREST-EXPENSE> 6787000
<NET-INCOME> 10664000
0
<EARNINGS-AVAILABLE-FOR-COMM> 10664000
<COMMON-STOCK-DIVIDENDS> 7928000
<TOTAL-INTEREST-ON-BONDS> 6057000
<CASH-FLOW-OPERATIONS> 20606000
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.31
</TABLE>
Exhibit 10f
ST. JOSEPH LIGHT & POWER COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1999)
ST. JOSEPH LIGHT & POWER COMPANY (the "Company") hereby
amends and restates, effective January 1, 1999, the St. Joseph
Light & Power Company Supplemental Executive Retirement Plan (the
"Plan") for selected employees of the Company as follows:
SECTION 1. PURPOSE. The purpose of this Plan is to provide
through a nonqualified arrangement a supplemental retirement
benefit plan to designated key employees who contribute to the
success of the Company as an incentive for such employees to
remain in the employ of the Company. This Plan amends and
restates, effective January 1, 1999, the St. Joseph Light & Power
Company Supplemental Executive Retirement Plan as adopted on
September 21, 1988, as amended (the "Prior Plan") pursuant to the
power of amendment reserved to the Company under Section 9.04
thereof. Except to the extent otherwise provided in Section 9.04
of the Prior Plan, the rights of Participants in the Prior Plan
who become Participants in this Plan shall be determined pursuant
to the terms of this Plan without regard to the Prior Plan.
SECTION 2. DEFINITION. In addition to the terms defined
above, the following words and phrases shall have the meanings
specified below when capitalized:
2.01. COMPENSATION for a month means (i) a Participant's
base salary or wages (excluding overtime) paid during the month,
plus (ii) any amount awarded to the Participant under the
Management Annual Bonus Plan or the Officers' Annual Bonus Plan
and paid during the month.
2.02. BASIC RETIREMENT PLAN means the St. Joseph Light &
Power Company Restated Pension Plan for Non-Bargaining Employees,
as amended from time to time; and, in the case of John A. Stuart,
Jr., it also means his qualified pension plan from Pacific Gas &
Electric Company.
2.03. BOARD means the Board of Directors of the Company.
2.04. FINAL PAY means the monthly average of the
Compensation paid to a Participant during the thirty-six (36)
consecutive full calendar months out of the sixty (60)
consecutive full calendar months immediately preceding or ending
with the Participant's termination of employment (whether such
termination is due to retirement, death, disability or otherwise)
which produces the highest average, multiplied by twelve. If a
Participant has not been employed by the Company for a period of
thirty-six (36) consecutive full calendar months immediately
preceding or ending with his termination, the Participant's Final
Pay shall be the product of (a) the total amount of salary or
wages (excluding overtime) plus any amount awarded to the
Participant under the Management Annual Bonus Plan or the
Officers' Annual Bonus Plan divided by the total number of full
calendar months in which the Participant was employed, and (b)
twelve.
2.05. PARTICIPANT means an employee of the Company selected
by the Board to participate in the Plan as described in Section
3. 2.06. QUALIFIED SPOUSE BENEFIT means an annuity payable in
monthly installments for the life of the Participant with either
50%, 66 2/3%, 75% or 100% of such amount payable after the
Participant's death in monthly installments to the Participant's
Spouse if such Spouse survives the Participant.
2.07. SPOUSE means the legally married husband or wife of
the Participant as of the date benefits commence to the
Participant under the Plan; except that for purposes of Section
6, Spouse means the husband or wife to whom the Participant has
been legally married throughout the one (1) year period ending
upon the Participant's date of death.
2.08. YEARS OF SERVICE shall be calculated in full years and
fractions of a year, rounded up to the nearest full month.
2.09. NORMAL RETIREMENT AGE means age 65.
SECTION 3. PARTICIPATION. Key employees of the Company who
are making or who are expected to make substantial contributions
to the success of the Company, as selected by the Board in its
sole discretion, shall be eligible to participate in the Plan.
Once an employee becomes a Participant, his participation in the
Plan may be terminated only as provided under Section 7.
SECTION 4. BENEFITS.
4.01. SUPPLEMENTAL RETIREMENT BENEFIT. Upon the termination
of a Participant's employment with the Company, the Participant
shall be entitled to receive hereunder from the Company a monthly
pension, commencing as of the last day of the month coinciding
with or next following the later of (a) the Participant's 55th
birthday, or (b) the date the Participant's employment
terminates, and continuing for the Participant's lifetime. The
amount of the Participant's monthly pension shall, after the
applicable limitations set forth in Section 4.03 have been
applied, be the greater of the Participant's "Normal Benefit" or
the Participant's "Grandfathered Benefit." The Participant's
Normal Benefit shall be the product of (a) 3% of the
Participant's Final Pay divided by 12, and (b) his Years of
Service, subject to the limitations set forth in Section 4.03.
The Participant's Grandfathered Benefit shall be the amount to
which the Participant would have been entitled had the
Participant terminated employment on December 31, 1998,
calculated, except as noted in the following sentence, as if the
Plan's terms in effect on December 31, 1998, remained in effect
(including the limitations under Section 4.03 in effect on
December 31, 1998). For purposes of calculating a Participant's
Grandfathered Benefit, any base salary or wages (excluding
overtime, bonuses and any other form of extra compensation) paid
to the Participant in December of 1998 shall be included.
4.02. FORM AND TIME OF PAYMENTS. The pensions computed under
Section 4.01 hereof shall be paid to the Participant on or about
the same time and in the same form (a single-life annuity or a
Qualified Spouse Benefit) as the Participant's pension under the
Basic Retirement Plan. In the case of a pension paid hereunder in
the forrn of a Qualified Spouse Benefit, no reduction shall be
made to reflect a 50% survivor benefit; and, in the case of a
pension paid in the form of a 66 2/3%, 75% or 100% joint survivor
annuity, any actuarial reduction shall be based on, and giving
credit for, the fact there is no reduction for a 50% election.
(In most cases, the combined effect of this provision and Section
4.03 below for longer service Participants will be that there
will be no reduction from a single-life annuity for election of a
66 2/3%, 75% or 100% joint survivor annuity.)
4.03. LIMITATIONS. Notwithstanding anything contained in
this Plan to the contrary, the amount of a Participant's Normal
Benefit, when added to the amount paid to the Participant under
the Basic Retirement Plan and the amount received by the
Participant as an old age benefit (excluding amounts available
for a spouse or dependent) under Title II of the Social Security
Act shall not exceed 70% ofthe Participant's Final Pay. This
limitation shall not apply to a Participant's Grandfathered
Benefit. Instead, the limitation in effect under this Section on
December 31, 1998, shall apply to a Participant's Grandfathered
Benefit. Any amount payable subsequent to a Participant's death
to the Participant's Spouse shall be adjusted to reflect the
limitations under this Section. Any increases, however, in such
old age benefits or Basic Retirement Plan benefits made on
account of increases in the cost of living after the commencement
of benefits hereunder shall not be taken into account hereunder.
A Participant shall use his best efforts to provide the Company
with a statement of his monthly old age benefits at the time he
begins to receive them.
4.04. IMPUTING SOCIAL SECURITY NORMAL RETIREMENT OLD AGE
BENEFITS FOR PARTICIPANTS HAVING REACHED NORMAL RETIREMENT AGE.
For purposes of Section 4.03, a Participant, whose employment by
the Company has terminated, who has reached Normal Retirement age
and who has not provided the Company with a statement of his
monthly old age benefits, shall be deemed to receive old age
benefits to which he is entitled under Title II of the Social
Security Act as of the first date of his Normal Retirement on
which he could commence to receive such benefits ("Normal
Retirement Old Age Benefits") without regard to whether such
Participant has applied for or commenced to receive such
benefits, and the amount of such Normal Retirement Old Age
Benefits shall be reasonably estimated by the Company until such
Participant shall provide to the Company satisfactory evidence
that such benefits have commenced and the amount thereof. Any
change in the amount of benefits payable hereunder on account of
any difference between the amount of such Normal Retirement Old
Age Benefits as estimated by the Company pursuant to the
preceding sentence and the amount of such Normal Retirement Old
Age Benefits determined to be actually payable upon presentation
of evidence thereof to the Company shall be made prospectively
only, with no adjustment for any such difference for periods
prior to the presentation of such evidence. For a Participant
choosing to receive benefits under the Plan prior to his Normal
Retirement Age, no old age benefit under Title II of the Social
Security Act shall be taken into account for purposes of the
limitation of Section 4.03 until Normal Retirement Age is reached
or until the Participant actually commences receipt of an old age
benefit under Title II of the Social Security Act.
SECTION 5. DISABILITY. Notwithstanding any provision of this
Plan to the contrary, if a Participant who is determined to be
totally and permanently disabled and entitled to retirement
benefits under the Basic Retirement Plan terminates employment,
he shall be entitled to receive benefits calculated in accordance
with Section 4. For purposes of Section 4.01, the Participant
shall be credited Years of Service during the period beginning
with the date of his termination of employment due to total and
permanent disability and ending with the date that the long-term
disability benefits from a plan sponsored by the Company cease.
Payment of benefits under this Section 5 shall commence as of the
later of (i) the last day of the month next following the date
the Participant's long-term disability benefits (under Plans
sponsored or purchased by the Company) cease and (ii) the date
payments commence to the Participant under the Basic Retirement
Plan.
SECTION 6. PRE-RETIREMENT DEATH BENEFITS. If a Participant
who is fully vested in his accrued benefit under the Basic
Retirement Plan dies prior to the date on which benefits commence
under this Plan, a monthly benefit shall be payable to the
Participant's Spouse, if any, for the life of such Spouse as
follows:
(a) If the Participant dies after attaining age fifty-five (55),
the amount of such monthly benefit, commencing as of the last day
of the month following the Participant's death, shall be fifty
percent (50%) of the monthly amount that would have been paid to
the Participant under Section 4 if his retirement date were the
date of his death and he had elected for his benefits to be paid
in the form of a 50% Qualified Spouse Benefit.
(b) If the Participant dies prior to attaining age fifty-five
(55), the amount of such monthly benefit, commencing as of the
last day of the month following the date on which the Participant
would have attained age fifty-five (55) had he survived, shall be
fifty percent (50%) of the monthly amount that would have been
paid to the Participant under Section 4 had he survived to age
55, elected to immediately retire and elected for his benefits to
be paid in the form of a 50% Qualified Spouse Benefit. For
purposes of this subsection (b), Participant shall be credited
Years of Service from date of death until the time he would have
reached age 55.
If a Participant dies before becoming fully vested in his accrued
benefits under the Basic Retirement Plan or without a Spouse, no
benefits shall be paid under this Section 6.
SECTION 7. TERMINATION FOR CAUSE. Notwithstanding any
provisions of this Plan to the contrary, if the Board determines
that a Participant's employment with the Company has been
properly terminated due to the Participant's "Serious
Misconduct," 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 Company and such
Participant hereunder by written notice to the Participant.
"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
Participant or significant violation of any statutory or common
law duty of loyalty to the Company.
SECTION 8. PLAN ADMINISTRATION.
8.01. ADMINISTRATOR. The Board shall administer this Plan
and cause to be kept records of individual Participant benefits.
The Board shall have full power and authority to administer and
interpret this Plan (including the determination of an
individuals's eligibility for benefits and the amount of those
benefits, if any), to adopt and review rules relating to this
Plan, and to make any other determinations for the administration
of this Plan.
Subject to the terms of this Plan, the Board shall (i)
select the employees eligible to become Participants, and (ii)
settle claims arising hereunder.
8.02. LEGAL COUNSEL AND ADVISORS. The Board may employ such
counsel, accountants, actuaries, and other agents as it shall
deem advisable in connection with this Plan. The Company shall
pay the compensation of such counsel, accountants, actuaries, and
other agents and any other expense incurred by the Board in the
administration of this Plan.
8.03. CLAIMS PROCEDURE. Benefits shall be payable
automatically when due without a written application by the
Participant or beneficiary. Notwithstanding the foregoing, any
application for benefits by a Participant or beneficiary
submitted to the Board shall constitute a claim. In any instance
where such a claim is denied in whole or in part by the Board,
its decision shall be submitted in writing to the Participant or
beneficiary setting forth the following:
(a) basis for denial of claim;
(b) plan provision on which denial is based;
(c) description of any additional information required of
the Participant or beneficiary; and
(d) an explanation of the procedures for reviewing claims
under this Plan. Upon receipt of a denial of a claim by
the Participant or beneficiary, an appeal requesting
further review may be submitted to the Board within
sixty (60) days. Upon receipt of a request for review,
the Board will render a decision within a reasonable
time thereafter.
SECTION 9. MISCELLANEOUS PROVISIONS.
9.01. NO GUARANTEE OF EMPLOYMENT. Subject to the rights of
Participants under this Plan, nothing contained in this Plan
shall be deemed to give any Participant the right to be retained
in the employment of the Company or to interfere with the right
of the Company to discharge any Participant at any time
regardless of the effect which such discharge shall have upon him
as a Participant under this Plan.
9.02. NATURE OF COMPANY'S OBLIGATIONS. Nothing in this Plan
shall be interpreted as requiring any Employer to set aside any
of its assets for the purpose of funding its obligations under
this Plan. No person entitled to benefits under this Plan shall
have any right, title or claim in or to any specific assets of
the Company, but shall have the right only as a general creditor
of the Company to receive benefits on the terms and conditions
provided herein. Notwithstanding the foregoing, any obligation of
the Company under this Plan shall be offset by any payments to
the Participant or other person from any trust or other funding
medium established by the Company for the purpose of providing
the benefits of this Plan.
9.03. RIGHTS NON-ASSIGNABLE. It is a condition of the Plan,
and all rights of each Participant and any other person entitled
to benefits hereunder shall be subject thereto, that no right or
interest of any Participant or such other person in the Plan
shall be assignable or transferable in whole or in part, either
directly or by operation of law or otherwise, including, but riot
by way of limitation, execution, levy, garnishrnent, attachrnent,
pledge or bankruptcy, but excluding rights or interests arising
by reason of death or mental incompetency, and no right or
interest of any Participant or other person in the Plan shall be
liable for, or subject to, any obligation or liability of such
Participant or other person, including claims for alimony or the
support of any spouse or child.
9.04. AMENDMENT AND TERMINATION. The Company reserves the
right at any time and from time to time, by action of the Board,
to terminate, modify, or amend, in whole or in part, any or all
the provisions of this Plan, including specifically the right to
make any such amendments effective retroactively. In addition,
the Company may amend or modify any provision of this Plan as to
any particular Participant by agreement with such Participant,
provided that such agreement is in writing, is executed by both
the Company and the Participant, and is filed with the records of
this Plan. The provisions of any amendment or modification made
by agreement between a Participant and the Company shall apply
only to the Participant so agreeing and no other. In no event
shall any amendment, modification or termination of this Plan
reduce the amount of, or otherwise adversely affect the right of
any Participant or any other person claining benefits in respect
of the Participant to receive, any benefit to which such
Participant or other person would be entitled upon the
Participant's attainment of the applicable age under the terms of
this Plan as in effect on the date of such amendment,
modification or termination.
9.05. CONSTRUCTION. It is the Company's intention that this
Plan be a plan that is unfunded and maintained primarily for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees within the meaning of
Sections 201, 301 and 401 of ERISA and 29 C.F.R. 2520.104-23.
This Plan shall be governed by and interpreted and enforced in
accordance with the laws of the State of Missouri.
9.06. GENDER AND PLURALS. Wherever used in the Plan, words
of the masculine gender shall include both the masculine and
feminine gender, and, unless the context requires otherwise,
words in the singular shall include words in the plural, and vice-
versa.
SECTION 10. CHANGE OF CONTROL.
10.01. DEFINITION OF CHANGE OF CONTROL. For the purpose of
this Agreement, a "change of control" of the Company shall be
deemed to have taken place if:
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 1
3(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 10.01 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 fort 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.
10.02. EFFECT OF CHANGE OF CONTROL. In the event of a Change
of Control, the following provisions shall apply as of the date
of such Change of Control:
(a) For purposes of Section 4. 1, each Participant shall be
credited with an additional 3 Years of Service, provided that
Years of Service in excess of 25 shall not be taken
into account.
(b) For purposes of Section 4. l, a Participant's Final Pay
shall not be less than his Final Pay would have been had his
termination of employment occurred on the date of the Change of
Control.
(c) Section 7 shall cease to be of any force or effect.
Section 11. SUCCESSORS AND ASSIGNS. This Plan shall be
binding upon the Company and inure to the benefit of the
Participants and their beneficiaries, personal representatives,
heirs and legatees. 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 the Company's assets to, such other
corporation, and the Company shall not enter into or be a party
to any such transaction unless such other corporation expressly
assumes in writing the duties and obligations of the Company
hereunder. The Company agrees that the rights of Participants and
their beneficiaries cannot be realized if limited to actions in
law and agrees that each Participant, beneficiary or personal
representative thereof has the right to enforce any provision of
this Plan in a court of equity by means of an action for specific
performance, an injunction or other appropriate equitable relief.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on this 1st day of December, 1998.
ST. JOSEPH LIGHT & POWER COMPANY
By: /s/ Terry F. Steinbecker
Terry F. Steinbecker
President
ATTEST:
/s/ Gary L. Myers
Gary L. Myers
Secretary
Exhibit 10h
ST. JOSEPH LIGHT & POWER COMPANY
OFFICERS' LONG-TERM INCENTIVE PLAN
(EFFECTIVE JANUARY 1, 1999)
1. MANAGEMENT INCENTIVE.
(a) DEFINITIONS.
(i) "Performance Cycle" shall mean three consecutive calendar
years. Performance Cycles shall overlap (for example, Performance
Cycle 1 shall be January 1, 1999 to December 31, 2001 while
Performance Cycle 2 shall be January 1, 2000 to December 31, 2002
and so on).
(ii) "Peer Group Utilities" shall mean all the companies
contained in the "EEI 100 Index of Investor-Owned Electrics."
(iii)"Total Shareholder Returnee shall mean Common Stock market
price appreciation/depreciation and dividends.
(b) THRESHOLD GOAL FORMULA.
(i) Stock Awards shall be granted as of the first day of a
Performance Cycle. The Threshold level of a Stock Award shall be
determined as a percent of the annual compensation base rate as
follows:
Percent of Annual
Compensation
Participants Base Rate
------------ -----------------
President 30%
Other Officers 20%
A11 Others To be
determined by
the Committee
but not to
exceed 20%
The respective Threshold percentage of the annual compensation
base rate shall be applied to the participant's annual
compensation base rate as of the first day of a Performance
Cycle; provided, however, the Committee may, in its discretion,
affix a day different from the first day of a Performance Cycle
for this purpose for a newly hired or promoted employee. This
product shall be translated into a number of shares of Common
Stock by dividing this product by the closing price of the Common
Stock as of the first business day of the Performance Cycle. This
amount expressed in shares for each respective participant shall
be that participant's Threshold Goal.
(c) PERFORMANCE MEASURE.
(i) Subject to Section 2, a participant shall earn a Stock Award
as of the end of the Performance Cycle applicable to such award
based upon performance against a "Total Shareholder Return"
measure. A Total Shareholder Return for the universe of Peer
Group Utilities referenced above shall be valued on a quarterly
basis throughout the performance cycle and the percentile
performance for these quarters shall be averaged for the
performance cycle. This average shall determine the percentage
award for the performance cycle, in accordance with the table
below. The amount of Stock Award which is earned shall be
determined based on the Company's percentile ranking as measured
against the Peer Group Utilities as follows:
Percentile Award as a %
Performance of Threshold Goal
------------------- -----------------
Up To But
From Excluding
0% 50% 0%
50% 55% 75%
55% 60% 85%
60% 65% 100%
65% 70% 120%
70% 75% 150%
75% 80% 175%
80% or higher 200%
(ii) A prorated Stock Award shall be earned in accordance with
Section l(c)(i) prior to the end of such award's Performance
Cycle in the event of a participant's death, total disability or
retirement under the early or normal provisions of any defined
benefit pension plan sponsored by the Company in which the
participant participates ("Retirement"). Such terminations of
employment are referred to individually or collectively as a
Triggering Event. The Committee shall prorate the respective
Stock Awards applicable to each Performance Cycle rounded to the
nearest month.
(iii) A Stock Award shall be earned in accordance with Section
l(c)(i) and the provisions of 6.8 of the 1998 Long-Term Incentive
Plan (adopted by the shareholders on May 20, 1998) prior to the
end of such award's Performance Cycle, in the event of a Chance
of Control.
(iv) A Stock Award, or portion thereof, may also be earned in
accordance with Section l(c)(i) prior to the end of such award's
Performance Cycle in the event of a participant's voluntary
termination of employment (other than by reason of total
disability or Retirement). If the Committee chooses to make such
an award, it shall use the same methodology as outlined in
l(c)(ii) above with the event of voluntary termination treated in
the same manner as a Triggering Event. Any Stock Award made under
this provision shall be in the absolute discretion of the
Committee.
(v) Notwithstanding anything herein to the contrary, no Stock
Award, or portion thereof, shall be earned for a Performance
Cycle in which the Total Shareholder Return for the Performance
Cycle is not positive.
2. EARNING OF STOCK AWARDS. No Stock Award shall be earned until
the Committee by resolution, written consent or other appropriate
action makes such determination with respect to a particular
employee (the "Grantee") and a Restricted Stock Agreement is
executed by the Company and the Grantee setting forth the terms
and conditions of the Stock Award, including the terms described
in Section 3 below.
3. STOCK AWARDS.(a) TERMINATION OF RESTRICTIONS. The restrictions
shall lapse, expire or terminate upon the earliest to occur
of:(i) The third anniversary of the date as of which the Stock
Award is earned; or
(ii) Upon termination of the Grantee's employment with the
Company because of death, total disability or Retirement; or
(iii)In the event of a Change of Control.
Exhibit 10k
SJLP INC. OFFICERS' INCENTIVE PLAN
The Board of Directors (the "Board') of SJLP Inc. (the
"Company") establishes this Officers' Incentive Plan (the
"Plan"), to encourage and reward the performance of its officers.
The plan is effective January 1, 1998 (the "Effective Date").
1. PARTICIPANTS. Each officer of the Company will be a
Participant in the Plan.
2. BONUS POOL. Each year the Company will establish a Bonus Pool
to be shared among the Participants for that spear as determined
by the Board of Directors as recommended by the Chief Executive
Officer. The Company will make contributions to the Bonus Pool
based upon the performance of the Company and its investments, as
follows:
a. For each entity or other venture (an 'Investment") in which
the Company acquires an interest during the prior year, the
Company will contribute three (3) percent of the amount, if any,
by which the actual earnings of the Investment for the twelve
(12) month period following the month of the Investment was
acquired exceeds the projected earnings of the Investment for
that period.
b. Each year, the Company will contribute ten (10) percent of the
amount by which the Company's net income for the prior year
exceeds the product of the Company's average common equity for
that year multiplied by St. Joseph Light & Power Company's latest
authorized return on equity for electric operations.
c. For each active investment of the Company (an "Active
Investment") sold during the year, the Company will contribute
five (5) percent of any gain from the sale.
Contributions will be made with respect to Investments
acquired and Active Investments sold after the Effective Date.
The Board will approve, in its sole discretion, the method by
which (i) the actual and projected earnings of the Investment are
determined for purposes of subsection a., (ii) the Company's net
income and average common equity are determined for purposes of
subsection b., and (iii) any gain will be computed for purposes
of subsection c., and will determine whether or not an investment
is an Active Investment. Contributions to the Plan will be made
by bookkeeping entry only. No amounts will be held in trust or
otherwise set aside under the Plan for the benefit of
Participants. Amounts due under the Plan will be paid in cash
from the Company's general assets.
3. DISTRIBUTIONS. The total contributions to the Bonus Pool for
each year's performance will be distributed among the
Participants for that year as determined by the Board of
Directors after consideration of the President's recommendation.
The distribution will be made by March 31 of the following year.
The Board, by written resolution, may establish rules concerning
pro rata distributions to Participants who are not officers
during an entire year, and may require a Participant to be an
officer for a minimum period during the year to be eligible for
any distribution for that year.
4. CHANGE OF CONTROL. In the event of a Change of Control
(defined below) of the parent, St. Joseph Light & Power Company,
or the sale of 20% or more of the common stock of SJLP Inc.
("Sale of SJLP Inc."), the Bonus Pool shall be fully vested and
distributions made as soon as practicable but in no event later
than 90 days after the Change of Control or Sale of SJLP Inc. No
prorations shall apply. The Bonus Pool shall be distributed to
the Participants as follows: 40% for the President, 30% for the
Vice President-Finance and Assistant Secretary; 30% for the
General Counsel & Secretary. In regard to 2.c. above, a valuation
of each Investment shall be made using generally accepted
valuation methodologies which are chosen and calculated in the
light most favorable to the Participants. A sale of each
Investment shall then be assumed as of the date of the Change of
Control or Sale of SJLP Inc. and a contribution made in
accordance with the provisions of 2.c. above. Change of Control
shall be defined as in 6.8 (b) of the St. Joseph Light & Power
Company 1998 Long-Term Incentive Plan adopted by the shareholders
at the May 20, 1998 Annual Meeting of Shareholders.
5. PLAN ADMINISTRATION, INTERPRETATION AND AMENDMENT. The Board
has complete authority to administer and interpret the Plan. Its
interpretations shall be binding on the Company and on
Participants. The Board has authority to amend the Plan from time
to time or to terminate the Plan at any time. No amendment or
termination will eliminate or reduce contributions that
previously have been made to the Bonus Pool.
