Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
EDE > SEC Filings for EDE > Form 10-Q on 9-May-2014All Recent SEC Filings

Show all filings for EMPIRE DISTRICT ELECTRIC CO

Form 10-Q for EMPIRE DISTRICT ELECTRIC CO


9-May-2014

Quarterly Report


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

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,


Table of Contents

including the sale of wholesale energy to four towns in Missouri and Kansas. 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 which provides natural gas distribution to customers in 48 communities in northwest, north central and west central Missouri. Our other segment consists of our fiber optics business.

During the twelve months ended March 31, 2014, our gross operating revenues were derived as follows:

Electric segment sales*   90.0 %
Gas segment sales          8.7
Other segment sales        1.3


*Sales from our electric segment include 0.3% from the sale of water.

Earnings



The following table represents our basic and diluted earnings per weighted
average share of common stock for the applicable periods ended March 31 (in
dollars):



                                            Three Months Ended           Twelve Months Ended
                                           2014           2013           2014           2013

Basic and diluted earnings per
weighted average share of common
stock                                   $      0.48    $      0.30    $      1.67    $      1.38

Weather that was considerably colder than normal and colder than the comparable 2013 quarter was the primary driver of increased electric and gas earnings quarter over quarter.

Increases in electric customer rates resulting from the April 1, 2013 Missouri rate increase positively impacted electric results in each period presented. However, increased regulatory operating expenses, depreciation and amortization expenses, property and other tax expenses, largely offset the impact of increased customer rates in each period. Increased AFUDC due to higher levels of construction activity positively impacted results during each period presented. First quarter 2014 results improved partially due to one-time pre-tax regulatory charges recorded in the first quarter of 2013 related to a construction disallowance and a reversal of a prior period gain on the sale of assets as required by our 2013 Missouri rate case order.

The table below sets forth a reconciliation of basic and diluted earnings per share between the three months and twelve months ended March 31, 2013 and March 31, 2014, which is a non-GAAP presentation. The economic substance behind our non-GAAP earnings per share (EPS) measure is to present the after tax impact of significant items and components of the statement of income on a per share basis before the impact of additional stock issuances. The dilutive effect of additional shares issued included in the table reflects the estimated impact of all shares issued during the periods ended March 31.

We believe this presentation is useful to investors because the statement of income does not readily show the EPS impact of the various components, including the effect of new stock issuances. This could limit the readers' understanding of the reasons for the EPS change from the previous year's EPS. This information is useful to management, and we believe this information is useful to investors, to better understand the reasons for the fluctuation in EPS between the prior and current years on a per share basis.

In addition, although a non-GAAP presentation, we believe the presentation of gross margin (in the table below and elsewhere in this report) is useful to investors and others in understanding and analyzing changes in our electric operating performance from one period to the next, and have included the analysis as a complement to the financial information we provide in accordance with GAAP. We define electric gross margins as electric revenues less fuel and purchased power costs. We define gas gross margins as gas operating revenues less cost of gas in rates. This reconciliation and margin information may not be comparable to other companies' presentations or more useful than the GAAP presentation included in the statement of income. We also note that this presentation does not purport to be an alternative to earnings per share determined in accordance with GAAP as a


Table of Contents

measure of operating performance or any other measure of financial performance presented in accordance with GAAP. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

                                                Three Months Ended      Twelve Months Ended
Earnings Per Share - 2013                      $               0.30    $                1.38

Revenues
Electric segment                               $               0.36    $                0.60
Gas segment                                                    0.06                     0.14
Other segment                                                  0.00                     0.02
Total Revenue                                                  0.42                     0.76
Electric fuel and purchased power                             (0.15 )                  (0.10 )
Cost of natural gas sold and transported                      (0.05 )                  (0.10 )
Gross Margin                                                   0.22                     0.56

Operating - electric segment                                  (0.01 )                  (0.11 )
Operating - gas segment                                        0.00                    (0.01 )
Operating - other segment                                      0.00                     0.00
Maintenance and repairs                                       (0.02 )                  (0.02 )
Depreciation and amortization                                 (0.03 )                  (0.14 )
Loss on plant disallowance                                     0.03                     0.03
Other taxes                                                   (0.02 )                  (0.07 )
Interest charges                                               0.00                    (0.01 )
AFUDC                                                          0.02                     0.07
Change in effective income tax rates                           0.00                     0.02
Other income and deductions                                   (0.01 )                  (0.01 )
Dilutive effect of additional shares issued                    0.00                    (0.02 )
Earnings Per Share - 2014                      $               0.48    $                1.67

Factors impacting gross margin and net income for the quarter and twelve months ended March 31, 2014 are presented on a segment basis under "Results of Operations" below.

Recent Activities

Day-Ahead Market

The Southwest Power Pool (SPP) regional transmission organization (RTO) implemented a Day-Ahead Market, or Integrated Marketplace, on March 1, 2014 in which market participants buy and sell wholesale energy and reserves in both day-ahead and real-time markets through the operation of a single, consolidated SPP balancing authority. Through the Integrated Marketplace, the SPP is able to coordinate next-day generation across the region and provide participants, including Empire, with greater access to reserve energy. See "- Markets and Transmission" below for more information.

Integrated Resource Plan

We filed our Integrated Resource Plan (IRP) with the MPSC on July 1, 2013. The IRP analysis of future loads and resources is normally conducted once every three years. Our IRP supports our Compliance Plan discussed in Note 7 of "Notes to Consolidated Financial Statements" under Item 1.

On March 12, 2014, the MPSC issued an order approving our IRP, effective March 12, 2014.

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, 2014, compared to the same periods ended March 31, 2013.


Table of Contents

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
                2014          2013         2014          2013

Electric     $     17.9    $     10.2   $     66.3    $     54.7
Gas                 2.3           1.9          2.7           2.1
Other               0.7           0.5          2.7           1.7
Net income   $     20.9    $     12.6   $     71.7    $     58.5

Electric Segment



Gross Margin



         The table below represents our electric gross margins for the
applicable periods ended March 31 (dollars in millions):



                                   Quarter Ended       Twelve Months Ended
                                  2014      2013        2014          2013

Electric segment revenues        $ 153.1   $ 128.8   $     560.7    $  519.7
Fuel and purchased power            55.6      45.3         185.7       179.0
Electric segment gross margins   $  97.5   $  83.5   $     375.0    $  340.7

As shown in the table above, electric segment gross margin increased approximately $14.0 million during the first quarter of 2014 as compared to the first quarter of 2013 mainly due to increased demand resulting from colder weather in the first quarter of 2014 and increased rates for our Missouri electric customers.

The electric gross margin increased approximately $34.3 million for the twelve months ended March 31, 2014 as compared to the same period in 2013, due to a full twelve months of increased Missouri electric rates that were effective April 1, 2013, increased demand resulting from the favorable 2013-2014 heating season and an increase in average electric customer counts.

Sales and Revenues

Electric operating revenues comprised approximately 85.2% of our total operating revenues during the first quarter of 2014.

The amounts and percentage changes from the prior periods in kilowatt-hour (kWh) sales by major customer class for on-system (native load) 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           2014      2013     Change(1)     2014        2013      Change(1)
Residential               641.6     571.1        12.3 %   2,007.1     1,945.4         3.2 %
Commercial                388.5     359.7         8.0     1,570.6     1,580.1        (0.6 )
Industrial                237.1     240.6        (1.4 )   1,012.0     1,027.3        (1.5 )
Wholesale on-system        84.1      84.4        (0.4 )     342.7       353.1        (2.9 )
Other(2)                   35.2      33.0         6.6       131.6       125.9         4.5
Total on-system sales   1,386.5   1,288.8         7.6     5,064.0     5,031.8         0.6



(1) Percentage changes are based on actual kWh sales and may not agree to the rounded amounts shown above.

(2) Other kWh sales include street lighting, other public authorities and interdepartmental usage.

KWh sales for our on-system customers increased 7.6% during the first quarter of 2014 as compared to the first quarter of 2013, primarily due to increased demand resulting from colder weather in the first quarter of 2014. The increase in residential and commercial kWh sales was mainly due to the colder weather. Total heating degree days for the first quarter of 2014 were 14.6% more than the same period last year and 14.8% more than the 30-year average. Industrial sales decreased 1.4%.


Table of Contents

KWh sales for our on-system customers increased 0.6% during the twelve months ended March 31, 2014, as compared to the same period in 2013, due to increased demand resulting from increased customer counts and colder weather, which was mostly offset by the milder cooling season weather in the 2013 period. Residential kWh sales increased 3.2% primarily due to the favorable weather. Commercial kWh sales decreased slightly and industrial sales decreased 1.5%.

The amounts and percentage changes from the prior periods in electric segment operating revenues by major customer class for on-system and off-system sales for the applicable periods ended March 31, were as follows:

                                        Electric Segment Operating Revenues
                                                   (in millions)
                                                               12         12
                          First       First                  Months     Months
                         Quarter     Quarter        %        Ended      Ended         %
Customer Class            2014        2013      Change(1)     2014       2013     Change(1)
Residential             $    72.2   $    61.2        17.9 % $  238.6   $  221.5         7.7 %
Commercial                   40.1        34.8        15.2      167.7      159.2         5.3
Industrial                   18.0        17.1         5.2       81.4       77.9         4.5
Wholesale on-system           5.1         4.8         7.5       20.4       19.4         5.4
Other(2)                      3.9         3.5        11.3       15.4       14.0         9.3
Total on-system
revenues                $   139.3   $   121.4        14.7   $  523.5   $  492.0         6.4
Off-system and SPP
Integrated
Market activity(3)            9.3         3.7       153.1       21.1       16.2        30.9
Total Revenues from
kWh Sales                   148.6       125.1        18.8      544.6      508.2         7.2
Miscellaneous
Revenues(4)                   4.0         3.2        24.9       14.0        9.6        45.4
Total Electric
Operating Revenues      $   152.6   $   128.3        19.0   $  558.6   $  517.8         7.9
Water Revenues                0.5         0.5         0.0        2.1        1.9        12.8
Total Electric
Segment Operating
Revenues                $   153.1   $   128.8        18.9   $  560.7   $  519.7         7.9



(1) Percentage changes are based on actual revenues and may not agree to the rounded amounts shown above.

(2) Other operating revenues include street lighting, other public authorities and interdepartmental usage.

(3)As of March 1, 2014, off-system revenues were effectively replaced by SPP Integrated Market activity. For the first quarter of 2014, SPP integrated market net sales were $6.2 million. See "- Markets and Transmission" below for more information.

(4)Miscellaneous revenues include transmission net revenue, late payment fees, renewable energy credit sales, rent, etc.

Revenues for our on-system customers increased $17.9 million during the first quarter of 2014 primarily due to colder weather as compared to the first quarter of 2013. The impact of weather and other related factors increased revenues an estimated $9.2 million. Rate changes increased revenues an estimated $7.6 million. Improved customer counts increased revenues an estimated $0.4 million. An increase in fuel recovery revenue (and corresponding increase in fuel expenses, resulting in no net effect on gross margin) from Missouri customers during the first quarter of 2014 compared to the prior year quarter increased revenues by $0.7 million.

Revenues for our on-system customers increased $31.4 million for the twelve months ended March 31, 2014. Rate changes, primarily the April 2013 Missouri rate increase, contributed an estimated $31.2 million to revenues. Weather and other related factors increased revenues an estimated $2.2 million. Improved customer counts increased revenues an estimated $2.1 million. A change to our estimate of unbilled revenues in the third quarter of 2012 increased revenues $3.4 million. The 2014 twelve-month ended period does not include a corresponding adjustment. Additionally, a $0.7 million decrease in fuel recovery revenue (and corresponding reduction in fuel expenses, resulting in no net effect on gross margin) from Missouri customers during the twelve months ended March 31, 2014 compared to the same period in 2013 negatively impacted revenues.

Off-System Electric Transactions

In the past, in addition to sales to our own customers, we also sold power to other utilities as available, including (since 2007) through the SPP Energy Imbalance Services (EIS) market. However, on March 1, 2014, the SPP RTO implemented a Day-Ahead Market, or Integrated Marketplace, which replaces the real-time EIS market. SPP integrated market activity is settled for each market


Table of Contents

participant in various time increments. When we sell more generation to the market than we purchase, based on the prescribed time increments, the net sale is included as part of electric revenues. When we purchase more generation from the market than we sell, based on the prescribed time increments, the net purchase is recorded as a component of fuel and purchased power on the financial statements. See "- Markets and Transmission" below. The majority of our market activity sales margin is included as a component of the fuel adjustment clause in our Missouri, Kansas and Oklahoma jurisdictions and our transmission rider in our Arkansas jurisdiction. As a result, nearly all of the market activity sales margin flows back to the customer and has little effect on margin or net income.

Miscellaneous Revenues

Our miscellaneous revenues were $4.0 million for the first quarter of 2014 as compared to $3.2 million for the first quarter of 2013.

Our miscellaneous revenues were $14.0 million for the twelve months ended March 31, 2014 as compared to $9.6 million for the same period in 2013, mainly due to increased transmission revenues.

These revenues are comprised mainly of transmission revenues, reflecting our position as an SPP transmission owner, late payment fees and renewable energy credit sales.

Operating Revenue Deductions - Fuel and Purchased Power

Included in our fuel and purchased power expenditures are our generation costs and net purchases from the SPP Integrated Marketplace. Net SPP integrated market activity is settled for each market participant in various time increments. When we purchase more generation from the market than we sell, based on the prescribed time increments, the net purchase is recorded as a component of fuel and purchased power on the financial statements. 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 statements of income for the applicable periods ended March 31, 2014 and 2013.

                                        Three Months Ended           Twelve Months Ended
(in millions)                          2014           2013           2014           2013
Actual fuel and purchased power
expenditures(1)                     $      61.3    $      47.7    $     195.6    $     180.6
Missouri fuel adjustment
recovery (2)                                0.3           (0.4 )         (2.0 )         (1.2 )
Missouri fuel adjustment
deferral(3)                                (4.6 )         (1.1 )         (4.0 )          2.4
Kansas and Oklahoma regulatory
adjustments(3)                             (0.5 )          0.1           (0.9 )          0.7
SWPA amortization(4)                       (0.8 )         (0.8 )         (2.8 )         (2.9 )
Unrealized (gain)/loss on
derivatives                                (0.1 )         (0.2 )         (0.2 )         (0.6 )
Total fuel and purchased power
expense per income statement        $      55.6    $      45.3    $     185.7    $     179.0



(1) The periods ended March 31, 2014 include SPP integrated market net purchases of $6.3 million.

(2) A positive amount indicates costs recovered from customers from under recovery in prior deferral periods. A negative amount indicates costs refunded to customers from over recovery in prior deferral periods.

(3)A negative amount indicates costs have been under recovered from customers and a positive amount indicates costs have been over recovered from customers.

(4) Missouri ten year amortization of the $26.6 million payment received from the SWPA in September, 2010.


Table of Contents

Operating Expenses - Other Than Fuel and Purchased Power



The table below shows regulated operating expense increases/(decreases) during
the first quarter of 2014 and the twelve months ended March 31, 2014 as compared
to the same periods in 2013.



                                                  Three Months Ended      Twelve Months Ended
(in millions)                                       2014 vs. 2013            2014 vs. 2013
Transmission and distribution expense(1)         $                1.8    $                 5.6
General labor expense                                             0.6                      1.9
Steam power other operating expense                               0.5                      1.2
Regulatory commission expense                                     0.1                      0.5
Customer assistance expense                                       0.2                      0.5
Customer accounts expense                                         0.0                      0.7
Employee pension expense                                          0.0                      0.4
Property insurance                                                0.1                      0.4
Other power operation expense                                     0.1                      0.3
Regulatory reversal of gain on prior period
sale of assets(2)                                                (1.2 )                   (1.2 )
Employee health care expense                                     (1.0 )                   (1.3 )
Injuries and damages expense                                     (0.1 )                   (0.4 )
Professional services                                             0.0                     (0.3 )
Banking fees                                                     (0.1 )                   (0.5 )
Other miscellaneous accounts (netted)                            (0.1 )                    0.4
TOTAL                                            $                0.9    $                 8.2



(1) Mainly due to increased SPP transmission charges.

(2)Regulatory reversal in 2013 of a prior period gain on the sale of our Asbury unit train as part of our 2013 rate case Agreement with the MPSC.

The table below shows maintenance and repairs expense increases/(decreases) during the first quarter of 2014 and the twelve months ended March 31, 2014 compared to the same periods in 2013.

                                                  Three Months Ended      Twelve Months Ended
(in millions)                                       2014 vs. 2013            2014 vs. 2013
Transmission and distribution maintenance
expense                                          $                1.6    $                 3.8
Maintenance and repairs expense at the Asbury
plant                                                            (0.5 )                   (2.1 )
Maintenance and repairs expense to SLCC                          (0.4 )                   (2.2 )
Maintenance and repairs expense at the State
Line plant                                                        0.0                      0.5
Maintenance and repairs expense at the Iatan
plant                                                            (0.2 )                   (0.3 )
Maintenance and repairs expense at the Plum
Point plant                                                      (0.1 )                    0.4
Maintenance and repairs expense at the
Riverton plant - steam                                           (0.1 )                   (0.3 )
Maintenance and repairs expense at the
Riverton plant - gas                                              0.1                      0.1
Iatan deferred maintenance expense                                0.4                      1.1
Other miscellaneous accounts (netted)                             0.3                      0.5
TOTAL                                            $                1.1    $                 1.5

Depreciation and amortization expense increased approximately $1.9 million (12.9%) and $9.1 million (16.2%) during the quarter and twelve month periods ended March 31, 2014, respectively, primarily due to increased depreciation rates resulting from our 2013 Missouri electric rate case settlement and increased plant in service.

Other taxes increased approximately $1.3 million and $4.1 million during the quarter and twelve month periods ended March 31, 2014, respectively, due to increased property tax reflecting our additions to plant in service and increased municipal franchise taxes.


Table of Contents

Gas Segment

Gas Operating Revenues and Sales

The following table details our natural gas sales for the periods ended March 31:

                        Total Gas Delivered to Customers



                              Three Months Ended       Twelve Months Ended
(bcf sales)                 2014   2013   % change   2014    2013   % change
Residential                 1.54   1.34       15.5 %  2.95   2.38       23.8 %
Commercial                  0.67   0.60       10.4    1.41   1.21       16.9
Industrial                  0.04   0.03        8.3    0.07   0.07       14.8
. . .
  Add EDE to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for EDE - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.