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| EDE > SEC Filings for EDE > Form 10-Q on 7-May-2009 | All Recent SEC Filings |
7-May-2009
Quarterly Report
EXECUTIVE SUMMARY
We operate our businesses as three segments: electric, gas and other. The Empire District Electric Company (EDE) is an operating public utility engaged in the generation, purchase, transmission, distribution and sale of electricity in parts of Missouri, Kansas, Oklahoma and Arkansas. As part of our electric segment, we also provide water service to three towns in Missouri. The Empire District Gas Company (EDG) is our wholly owned subsidiary. It provides natural gas distribution to customers in 44 communities in northwest, north central and west central Missouri. Our other segment consists of our non-regulated businesses, primarily, a 100% interest in Empire District Industries, Inc., a subsidiary for our fiber optics business. During the twelve months ended March 31, 2009, 86.3% of our gross operating revenues were provided from sales from our electric segment (including 0.3% from the sale of water), 12.8% from our gas segment and 0.9% from our other segment.
Earnings
During the first quarter of 2009, basic and diluted earnings per weighted average share of common stock were $0.32 as compared to $0.21 in the first quarter of 2008. For the twelve months ended March 31, 2009, basic and diluted earnings per weighted average share of common stock were $1.29 as compared to $1.14 for the twelve months ended March 31, 2008. As reflected in the table below, the primary positive drivers for both the first quarter of 2009 and the twelve months ended March 31, 2009 were reduced electric fuel and purchased power costs and increased electric revenues primarily due to the August 2008 Missouri rate increase (discussed below), partially offset by negative weather and other related factors. The primary negative driver was increased maintenance costs for both periods.
The following reconciliation of basic earnings per share between the three months and twelve months ended March 31, 2008 versus March 31, 2009 is a non-GAAP presentation. We believe this information is useful in understanding the fluctuation in earnings per share between the prior and current years. The reconciliation presents the after tax impact of significant items and components of the statement of operations on a per share basis before the impact of additional stock issuances which is presented separately. Earnings per share for the three months and twelve months ended March 31, 2008 and 2009 shown in the reconciliation are presented on a GAAP basis and are the same as the amounts included in the statements of operations. This reconciliation may not be comparable to other companies or more useful than the GAAP presentation included in the statements of operations.
Three Months Twelve Months
Ended Ended
Earnings Per Share - 2008 $ 0.21 $ 1.14
Revenues
Electric on-system $ 0.03 $ 0.10
Electric off - system and other (0.07 ) 0.07
Gas 0.02 0.14
Other 0.00 0.03
Expenses
Electric fuel and purchased power 0.20 0.19
Cost of natural gas sold and transported (0.03 ) (0.17 )
Regulated - electric segment 0.02 0.02
Regulated -gas segment (0.01 ) (0.01 )
Other segment 0.00 (0.01 )
Maintenance and repairs (0.04 ) (0.08 )
Depreciation and amortization 0.02 0.02
Other taxes (0.01 ) (0.01 )
Interest charges (0.03 ) (0.11 )
AFUDC 0.02 0.12
Change in effective income tax rates (0.02 ) (0.05 )
Gain on sale of assets - (0.03 )
Dilutive effect of additional shares issued - (0.08 )
Other income and deductions 0.01 0.01
Earnings Per Share - 2009 $ 0.32 $ 1.29
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Recent Activities
Equity Distribution Program
On February 25, 2009, we entered into an equity distribution agreement with UBS Securities LLC (UBS). Under the terms of the agreement, we may offer and sell shares of our common stock, par value $1.00 per share, having an aggregate offering price of up to $60 million from time to time through UBS, as sales agent. We intend to use the net proceeds from this equity distribution program to repay short-term debt and for general corporate purposes, including to fund our current construction program. As of April 30, 2009, no shares have been sold pursuant to this program.
Any sales of the shares pursuant to the equity distribution agreement will be made by means of ordinary brokers' transactions on the New York Stock Exchange at market prices or as otherwise agreed with UBS. Under the terms of the program agreement, we may also sell shares to UBS as principal for UBS' own account at a price agreed upon at the time of sale.
Financings
On March 27, 2009, we issued $75 million principal amount of 7% first mortgage bonds due April 1, 2024. The net proceeds (after payment of expenses) of approximately $72.7 million, were used to repay short-term debt incurred, in part, to fund our current construction program.
On March 11, 2009, we entered into a $50 million unsecured credit agreement. This agreement provides for $50 million of revolving loans to be available to us for working capital, general corporate purposes and to back-up our use of commercial paper and terminates on July 15, 2010. This credit agreement is in addition to, and has substantially the same terms as (other than pricing), our Amended and Restated Unsecured Credit Agreement dated March 14, 2006. There were no borrowings under the new agreement at March 31, 2009.
Regulatory Matters
All pending applications for rehearing in our 2006 rate case were denied by the MPSC on November 20, 2008. On December 15, 2008, the OPC filed a Petition for Writ of Review with the Cole County Circuit Court regarding the MPSC's decisions in our 2006 rate case. Praxair and
Explorer Pipeline filed a Petition for Writ of Review on December 19, 2008. These actions were consolidated into one proceeding. Briefs have been filed by all parties.
For additional information, see "Rate Matters" below.
RESULTS OF OPERATIONS
The following discussion analyzes significant changes in the results of operations for the three-month and twelve-month periods ended March 31, 2009, compared to the same periods ended March 31, 2008.
The following table represents our results of operations by operating segment for the applicable periods ended March 31 (in millions):
Three Months Ended Twelve Months Ended
2009 2008 2009 2008
Income from continuing operations
Electric $ 8.8 $ 4.4 $ 41.9 $ 33.3
Gas 1.8 2.4 1.0 1.8
Other 0.3 0.2 0.8 0.5
Income from continuing operations $ 10.9 $ 7.0 $ 43.7 $ 35.6
Income from discontinued operations - - - 0.1
Net income* $ 10.9 $ 7.0 $ 43.7 $ 35.7
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Electric Segment
Overview
Our electric segment income for the first quarter of 2009 was $8.8 million as compared to $4.4 million for the first quarter of 2008.
Electric operating revenues comprised approximately 78.2% of our total operating revenues during the first quarter of 2009. Of our total electric operating revenues during the first quarter of 2009, approximately 45.7% were from residential customers, 27.9% from commercial customers, 14.0% from industrial customers, 4.4% from wholesale on-system customers, 3.7% from wholesale off-system transactions, 2.6% from other electric revenues, primarily public authorities and 1.7% from miscellaneous sources. The percentage of revenues provided from our wholesale off-system transactions decreased during the first quarter of 2009 as compared to the first quarter of 2008 primarily due to decreased market demand resulting from mild weather in the first quarter of 2009.
The amounts and percentage changes from the prior periods in kilowatt-hour ("kWh") sales and operating revenues by major customer class for on-system sales and for off-system sales for the applicable periods ended March 31, were as follows:
kWh Sales
(in millions)
First First 12 Months 12 Months
Quarter Quarter % Ended Ended %
Customer Class 2009 2008 Change* 2009 2008 Change*
Residential 550.9 593.5 (7.2 )% 1,910.3 1,978.8 (3.5 )%
Commercial 376.0 379.0 (0.8 ) 1,619.1 1,632.0 (0.8 )
Industrial 240.2 262.0 (8.3 ) 1,051.5 1,116.9 (5.9 )
Wholesale on-system 80.8 85.4 (5.5 ) 339.9 347.6 (2.2 )
Other** 32.2 32.0 0.6 123.9 120.7 2.7
Total on-system sales 1,280.1 1,351.9 (5.3 ) 5,044.7 5,196.0 (2.9 )
Off-system 133.9 140.4 (4.6 ) 681.7 511.8 33.2
Total KWh Sales 1,414.0 1,492.3 (5.2 ) 5,726.4 5,707.8 0.3
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**Other kWh sales include street lighting, other public authorities and interdepartmental usage.
Electric Segment Operating Revenues
(in millions)
12 12
First First Months Months
Quarter Quarter % Ended Ended %
Customer Class 2009 2008 Change* 2009 2008 Change*
Residential $ 48.6 $ 48.6 (0.1 )% $ 179.2 $ 178.5 0.4 %
Commercial 29.7 27.9 6.3 134.6 130.6 3.1
Industrial 14.9 14.8 0.2 67.4 68.1 (1.0 )
Wholesale on-system 4.7 5.1 (7.3 ) 18.9 19.2 (1.9 )
Other** 2.7 2.6 7.7 11.2 10.4 8.0
Total on-system
revenues $ 100.6 $ 99.0 1.6 $ 411.3 $ 406.8 1.1
Off-system 4.0 7.5 (46.8 ) 26.2 23.5 11.4
Total Revenues from
KWh Sales 104.6 106.5 (1.8 ) 437.5 430.3 1.7
Miscellaneous
Revenues*** 1.8 1.8 (0.6 ) 7.0 6.2 11.6
Total Electric
Operating Revenues $ 106.4 $ 108.3 (1.8 ) $ 444.5 $ 436.5 1.8
Water Revenues 0.4 0.4 (2.7 ) 1.8 1.9 (5.0 )
Total Electric Segment
Operating
Revenues $ 106.8 $ 108.7 (1.8 ) $ 446.3 $ 438.4 1.8
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**Other operating revenues include street lighting, other public authorities and interdepartmental usage.
***Miscellaneous revenues include transmission service revenue, late payment fees, rent, etc.
Quarter Ended March 31, 2009 Compared to Quarter Ended March 31, 2008
Operating Revenues and Kilowatt-Hour Sales
KWh sales for our on-system customers decreased during the first quarter of 2009 as compared to the first quarter of 2008 primarily due to milder weather in 2009. Revenues for our on-system customers increased approximately $1.6 million, or 1.6%. Rate changes, primarily the August 2008 Missouri rate increase (discussed below), contributed an estimated $7.0 million to revenues while continued sales growth contributed an estimated $0.4 million. Our electric customer growth for the twelve months ended March 31, 2009 was 0.1%. Weather and other related factors decreased revenues an estimated $5.8 million. Total heating degree days (the sum of the number of degrees that the daily average temperature for each day during that period was below 65† F) for the first quarter of 2009 were 6.8% less than the same period last year and 6.4% less than the 30-year average.
During the first quarter of 2009, the decrease in residential kWh sales and slight decrease in residential revenues (which were partially offset by the August 2008 Missouri rate increase) was primarily due to the mild weather in the first quarter of 2009. The decrease in commercial kWh sales was mainly due to the mild weather while the increase in commercial revenues was primarily due to the aforementioned Missouri rate increase.
Industrial kWh sales decreased 8.3% mainly due to a slowdown created by economic uncertainty while the associated revenues increased 0.2% due to the effects of the Missouri rate increase which partially offset the economic conditions.
On-system wholesale kWh sales decreased during the first quarter of 2009 as compared to the same period in 2008 reflecting the mild weather in the first quarter of 2009. Revenues associated with these FERC-regulated sales decreased more than sales as a result of the fuel adjustment clause applicable to such sales. This clause permits the distribution to customers of changes in fuel and purchased power costs.
Off-System Electric Transactions
In addition to sales to our own customers, we also sell power to other utilities as available, including through the Southwest Power Pool (SPP) energy imbalance services (EIS) market. See "- Competition" below. The majority of our off-system sales margins are now included as a component of the fuel adjustment clause in our Missouri, Kansas and Oklahoma jurisdictions and generally adjust the fuel and purchased power expense. The MPSC authorized a fuel adjustment
clause for our Missouri customers (effective September 1, 2008) which established a base cost for the recovery of fuel and purchased power expenses used to supply energy. The clause permits the distribution to customers of 95% of the changes in fuel and purchased power costs above or below the base cost. Off-system sales margins are also part of the recovery of fuel and purchased power costs. As a result, the off-system sales margin flows back to the customer. The following table sets forth information regarding these sales and related expenses for the quarters ended March 31:
(in millions) 2009 2008 EIS revenues $ 1.5 $ 3.0 Other revenues 2.5 4.5 Total off-system revenues 4.0 7.5 EIS expenses 1.2 2.3 Other expenses 2.0 3.4 Total off-system expenses 3.2 5.7 Net $ 0.8 $ 1.7 |
Revenues and related expenses were less during the first quarter of 2009 as compared to the first quarter of 2008 primarily due to decreased market demand resulting from the mild weather in the first quarter of 2009. Total purchased power related expenses are included in our discussion of purchased power costs below.
Miscellaneous Revenues
Our miscellaneous revenues were $1.8 million for both the first quarter of 2009 and the first quarter of 2008. These revenues are comprised mainly of transmission revenues, late payment fees and renewable energy credit sales.
Operating Revenue Deductions
During the first quarter of 2009, total electric segment operating expenses decreased approximately $6.7 million (6.9%) compared with the same period last year.
Total fuel and purchased power expenses decreased approximately $10.2 million (17.8%) during the first quarter of 2009. The table below is a reconciliation of our actual fuel and purchased power expenditures (netted with the regulatory adjustments) to the fuel and purchased power expense shown on our statement of operations for the first quarter of 2009 and 2008.
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