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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)  

ý
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2002

or

o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                              to                             .

Commission file number: 1-3368

THE EMPIRE DISTRICT ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

Kansas
(State of Incorporation)		   44-0236370
(I.R.S. Employer
Identification No.)

602 Joplin Street, Joplin, Missouri
(Address of principal executive offices)
 
64801
(zip code)

Registrant's telephone number: (417) 625-5100

        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 ý    No o

        Common stock outstanding as of November 1, 2002: 22,525,592 shares.


THE EMPIRE DISTRICT ELECTRIC COMPANY

INDEX

 
  
   Page Number
Part I—Financial Information:    

Item 1.
Consolidated Financial Statements:
 
 

 
a. Consolidated Statement of Income
 
3

 
b. Consolidated Statement of Comprehensive Income
 
6

 
c. Consolidated Balance Sheet
 
7

 
d. Consolidated Statement of Cash Flows
 
8

 
e. Notes to Consolidated Financial Statements
 
9

 
Forward Looking Statements
 
11

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
11

 
Results of Operations
 
11

 
Liquidity and Capital Resources
 
18

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
22

Item 4.
Controls and Procedures
 
23

Part II—Other Information:
 
 

Item 1.
Legal Proceedings—(none)
 
 

Item 2.
Changes in Securities and Use of Proceeds—(none)
 
 

Item 3.
Defaults Upon Senior Securities—(none)
 
 

Item 4.
Submission of Matters to a vote of Security Holders—(none)
 
 

Item 5.
Other Information
 
24

Item 6.
Exhibits and Reports on Form 8-K
 
24

Signatures
 
25

Certifications
 
26

2


PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE EMPIRE DISTRICT ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

 
   Three Months Ended September 30,
  
 
   2002
   2001
  
Operating revenues:              
  Electric   $ 95,680,705   $ 83,045,693  
  Water     283,933     293,601  
  Non-regulated     3,858,777     481,947  
   
 
 
      99,823,415     83,821,241  
Operating revenue deductions:              
  Operating expenses:              
    Fuel     16,677,819     22,280,914  
    Purchased power     15,585,596     12,807,364  
    Other     14,603,764     9,524,697  
    Merger related Expenses     —     39,842  
   
 
 
  Total operating expenses     46,867,179     44,652,817  
 
Maintenance and repairs
 
 
5,958,838
 
 
4,348,149
 
  Depreciation and amortization     6,565,720     8,366,842  
  Provision for income taxes     9,731,964     4,048,425  
  Other taxes     4,441,750     3,991,056  
   
 
 
      73,565,451     65,407,289  
   
 
 
Operating income     26,257,964     18,413,952  
Other income and deductions:              
  Allowance for equity funds used during construction     —     9,773  
  Interest income     21,933     41,804  
  Loss on plant disallowance     —     (4,087,066 )
  Provision for other income taxes     (4,561 )   1,504,917  
  Minority interest     (111,708 )   —  
  Other—net     (465,310 )   (274,734 )
   
 
 
      (559,646 )   (2,805,306 )
   
 
 
Income before interest charges     25,698,318     15,608,646  
Interest charges:              
    Long-term debt—other     5,835,209     6,595,127  
    Trust preferred distributions by subsidiary holding solely parent debentures     1,062,500     1,062,500  
    Commercial paper     201,088     505,064  
    Allowance for borrowed funds used during construction     (152,784 )   (148,418 )
    Other     365,713     235,666  
   
 
 
      7,311,726     8,249,939  
   
 
 
Net income applicable to common stock   $ 18,386,592   $ 7,358,707  
   
 
 
Weighted average number of common shares outstanding     22,455,447     17,680,831  
   
 
 
Basic and diluted earnings per weighted average share of common stock   $ 0.82   $ 0.42  
   
 
 
Dividends per share of common stock   $ 0.32   $ 0.32  
   
 
 

See accompanying Notes to Financial Statements.

3


THE EMPIRE DISTRICT ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

 
   Nine Months Ended September 30,
  
 
   2002
   2001
  
Operating revenues:              
  Electric   $ 228,397,751   $ 201,473,759  
  Water     813,803     820,758  
  Non-regulated     4,813,185     1,195,314  
   
 
 
      234,024,739     203,489,831  
Operating revenue deductions:              
  Operating expenses:              
    Fuel     42,866,163     43,870,568  
    Purchased power     44,927,215     48,604,371  
    Other     37,579,249     27,961,680  
    Merger related Expenses     1,524,355     1,276,596  
   
 
 
  Total operating expenses     126,896,982     121,713,215  
 
Maintenance and repairs
 
 
18,484,345
 
 
11,788,518
 
  Depreciation and amortization     19,500,746     23,004,253  
  Provision for income taxes     11,503,613     1,944,383  
  Other taxes     11,953,860     10,696,867  
   
 
 
      188,339,546     169,147,236  
   
 
 
Operating income     45,685,193     34,342,595  
Other income and deductions:              
  Allowance for equity funds used during construction     —     475,630  
  Interest income     70,707     176,797  
  Loss on plant disallowance     —     (4,087,066 )
  Provision for other income taxes     (87,565 )   1,523,725  
  Minority interest     (111,708 )   —  
  Other—net     (469,816 )   (837,510 )
   
 
 
      (598,382 )   (2,748,424 )
   
 
 
Income before interest charges     45,086,811     31,594,171  
Interest charges:              
    Long-term debt—other     19,028,343     19,787,411  
    Trust preferred distributions by subsidiary holding solely parent debentures     3,187,500     2,479,167  
    Commercial paper     493,050     1,979,315  
    Allowance for borrowed funds used during construction     (392,741 )   (3,551,464 )
    Other     894,096     592,974  
   
 
 
      23,210,248     21,287,403  
   
 
 
Net income applicable to common stock   $ 21,876,563   $ 10,306,768  
   
 
 
Weighted average number of common shares outstanding     21,062,923     17,641,314  
   
 
 
Basic and diluted earnings per weighted average share of common stock   $ 1.04   $ 0.58  
   
 
 
Dividends per share of common stock   $ 0.96   $ 0.96  
   
 
 

See accompanying Notes to Financial Statements.

4


THE EMPIRE DISTRICT ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

 
   Twelve Months Ended September 30,
  
 
   2002
   2001
  
Operating revenues:              
  Electric   $ 290,113,498   $ 263,531,492  
  Water     1,058,392     1,085,274  
  Non-regulated     5,183,899     1,486,865  
   
 
 
      296,355,789     266,103,631  
Operating revenue deductions:              
  Operating expenses:              
    Fuel     55,518,965     55,516,557  
    Purchased power     58,706,796     68,550,323  
    Other     47,822,729     36,474,963  
    Merger Related Expenses     1,639,432     1,557,651  
   
 
 
  Total operating expenses     163,687,922     162,099,494  
 
Maintenance and repairs
 
 
25,790,562
 
 
15,587,444
 
  Depreciation and amortization     26,365,342     30,156,106  
  Provision for income taxes     11,117,933     2,057,267  
  Other taxes     14,847,016     13,381,668  
   
 
 
      241,808,775     223,281,979  
   
 
 
Operating income     54,547,014     42,821,652  
Other income and deductions:              
  Allowance for equity funds used during construction     94,331     1,354,619  
  Interest income     93,358     301,408  
  Loss on plant disallowance     —     (4,087,066 )
  Provision for other income taxes     (52,586 )   1,507,940  
  Minority interest     (111,708 )   —  
  Other—net     (664,392 )   (948,903 )
   
 
 
      (640,997 )   (1,872,002 )
   
 
 
Income before interest charges     53,906,017     40,949,650  
Interest charges:              
    Long-term debt—other     25,625,241     26,374,054  
    Trust preferred distributions by subsidiary holding solely parent debentures     4,250,000     2,479,167  
    Commercial paper     742,950     2,654,808  
    Allowance for borrowed funds used during construction     117,425     (4,890,737 )
    Other     1,197,691     695,461  
   
 
 
      31,933,307     27,312,753  
   
 
 
Net income applicable to common stock   $ 21,972,710   $ 13,636,897  
   
 
 
Weighted average number of common shares outstanding     20,336,656     17,629,871  
   
 
 
Basic and diluted earnings per weighted average share of common stock   $ 1.08   $ 0.77  
   
 
 
Dividends per share of common stock   $ 1.28   $ 1.28  
   
 
 

See accompanying Notes to Financial Statements.

5


THE EMPIRE DISTRICT ELECTRIC COMPANY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 
   Three Months Ended September 30,
  
 
   2002
   2001
  
Net income   $ 18,386,592   $ 7,358,707  

Contracts settled
 
 
(842,190
)
 
—
 
Change in fair market value of open contracts for period     663,791     (1,176,000 )
Income taxes     67,792     446,880  
   
 
 
Net change in unrealized gain/(loss) on derivative instruments:     (110,607 )   (729,120 )
   
 
 
Comprehensive Income   $ 18,275,985   $ 6,629,587  
   
 
 
 
   Nine Months Ended September 30,
  
 
   2002
   2001
  
Net income   $ 21,876,563   $ 10,306,768  

Contracts settled
 
 
290,210
 
 
—
 
Change in fair market value of open contracts for period     9,410,112     (1,889,000 )
Income taxes     (3,686,122 )   717,820  
   
 
 
Net change in unrealized gain/(loss) on derivative instruments:     6,014,200     (1,171,180 )
   
 
 
Comprehensive Income   $ 27,890,763   $ 9,135,588  
   
 
 
 
   Twelve Months Ended September 30,
  
 
   2002
   2001
  
Net income   $ 21,972,710   $ 13,636,897  

Contracts settled
 
 
980,610
 
 
—
 
Change in fair market value of open contracts for period     8,058,212     (1,889,000 )
Income taxes     (3,434,752 )   717,820  
   
 
 
Net change in unrealized gain/(loss) on derivative instruments:     5,604,070     (1,171,180 )
   
 
 
Comprehensive Income   $ 27,576,780   $ 12,465,717  
   
 
 

See accompanying Notes to Financial Statements

6


THE EMPIRE DISTRICT ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED)

 
   September 30,
2002
   December 31,
2001
  
ASSETS              
  Utility plant, at original cost:              
    Electric   $ 1,105,646,683   $ 1,072,289,259  
    Water     8,235,098     7,810,754  
    Construction work in progress     34,400,478     20,136,645  
   
 
 
      1,148,282,259     1,100,236,658  
    Accumulated depreciation     367,544,885     349,743,785  
   
 
 
      780,737,375     750,492,873  
  Current assets:              
    Cash and cash equivalents     7,542,443     11,440,275  
    Accounts receivable—trade, net     30,615,009     19,621,889  
    Accrued unbilled revenues     10,442,761     10,986,746  
    Accounts receivable—other     5,982,152     7,231,772  
    Fuel, materials and supplies     28,591,481     20,094,559  
    Gain in fair value of derivatives     3,106,688     20,000  
    Prepaid expenses     2,355,398     1,063,195  
   
 
 
      88,635,932     70,438,436  
   
 
 
  Noncurrent assets and deferred charges:              
    Regulatory assets     36,105,572     37,743,107  
    Unamortized debt issuance costs     4,828,677     5,180,243  
    Gain in fair value of derivatives     14,226,134     7,706,580  
    Other     21,548,405     18,639,293  
   
 
 
      76,708,788     69,269,223  
   
 
 
      Total Assets   $ 946,082,094   $ 890,220,532  
   
 
 
CAPITALIZATION AND LIABILITIES:              
  Common stock, $1 par value, 22,508,044 and 19,759,598 shares issued and outstanding, respectively   $ 22,508,044   $ 19,759,598  
  Capital in excess of par value     259,289,285     208,223,200  
  Retained earnings (Note 2)     43,107,711     41,906,483  
  Accumulated other comprehensive income (loss) (net)     4,432,890     (1,581,310 )
   
 
 
      Total common stockholders' equity     329,337,930     268,307,971  
Long-term debt:              
  Company obligated manditorily redeemable trust preferred securities of subsidiary holding solely parent debentures     50,000,000     50,000,000  
  Obligations under capital lease     693,621     725,644  
  First mortgage bonds and unsecured debt     308,157,930     308,047,363  
   
 
 
      358,851,551     358,773,007  
   
 
 
  Current liabilities:              
    Accounts payable and accrued liabilities     30,567,132     34,520,862  
    Commercial paper     50,955,680     55,500,000  
    Customer deposits     4,527,165     4,127,061  
    Interest accrued     9,237,247     5,091,240  
    Taxes accrued, including income taxes     13,526,966     —  
    Current maturities—mortgage bonds     —     37,500,000  
    Loss in fair value of derivatives     83,120     1,279,430  
   
 
 
      108,897,310     138,018,593  
   
 
 
  Noncurrent liabilities and deferred credits: