Aquila Credit Questioned
Moody’s Investor Services has scheduled a review for a possible rating downgrade of Aquila. As of May 20, Aquila Inc.’s senior unsecured debt rating was Baa3. Moody’s cited Aquila’s focused growth in the energy merchant market, increasing business and financial risk, and a 40-percent drop in first-quarter earnings from a year ago as reasons for the review.

Aquila has turned to reducing its costs by $100 million and selling $500 million in assets to hold off the credit-rating sector. In May the company announced it would eliminate a total of 700 jobs, 525 of which are in Kansas City. Aquila’s proxy contest for control of Quanta Services board was also settled in May with all pending litigation withdrawn.

President and CEO Robert Green stated that his company foresaw Moody’s action as a possible outcome of Aquila’s business plans and that Aquila has kept Moody’s updated of plans to improve cash flow.

Andersen K.C. Joins KPMG
Nine partners and 160 members of Andersen’s Kansas City office have switched to KPMG as of May 21. Three partners and 60 staff members from Andersen’s Omaha, Neb., office have also joined KPMG.

Announcements of the personnel shift came after Butler Manufacturing moved its audit work from Andersen to KPMG days before. Aquila has also dismissed Andersen and appointed KPMG. The company was Andersen’s fifth-largest public client. KPMG doubled its staff size with the move to 21 partners and over 300 employees and surpassed Ernst & Young as the largest accounting firm in Kansas City, according to Ingram’s Top Area Accounting Firms list, March 2002.

Farmland Head Steps Down
Robert Terry has been named president and CEO of Farmland after Bob Honse informed the board of his plans to retire. Honse was asked to step down immediately to "ensure continuity of leadership as the company continues to work toward financial strength." Farmland reported increasing losses in its last quarter and has reduced fertilizer production, placing two plants on idle.

Sceptor vs. Postal Terrorism
Sceptor Industries is helping to pilot-test an Automatic Bio-agent Detection System for the United States Postal Service. The company, spun off of Kansas City’s Midwest Research Institute, is working with a team led by Northrop Grumman Corporation to develop the system for large- scale automated mail-sorting equipment.

Sceptor has tailored its existing pathogen detection systems to meet the needs set forth by the postal service. The USPS is expected to select equipment this summer for a potential multimillion dollar contract. The company’s detection systems sample the air for viruses, bacteria and other pathogens, including anthrax.

IT Students Lose Conseva
Conseva Learning Center announced on May 3 that it could no longer weather the economic slump. The company has ceased all operations. Conseva strived for profitability, marketing its courses until the very end. Officers and shareholders worked to restructure debt and attract new capital and made additional capital investments without success. Students are completing their courses with Foss Training and Consulting.

SouthWestern Bell Cuts 5,000
SBC Southwestern Bell announced that it would cut 5,000 of its 190,000-
employee work force. The reduction adds to 10,000 job cuts over the last two
quarters. The cuts will affect workers in 13 states including Kansas and Missouri. Exact numbers for either state or for Kansas City have not been reported.

Applebee’s to Branch Out
Applebee’s reported its plans to increase its domestic restaurant count from 1,413 to its full potential of 2,300. The company plans for future franchise acquisitions and announced $75 million set aside for stock repurchases. Approximately 100 new Applebee’s restaurants are expected to open annually.

In addition, Applebee’s announced in May a three-for-two stock split that will occur in the form of a 50-percent stock dividend. The dividend will be payable June 11, 2002.

CORRESPONDENT

Jefferson City
Budget Passes, Stadium Bill Disappears
The Missouri General Assembly agreed to raise $672 million in new revenue as it finished the 2002 session. The state will gain $50 million by selling bonds against the state’s share of the 1998 tobacco settlement. A $111.6 million revenue-enhancement plan, written to close tax loopholes on businesses, was also passed.

The two bills ensured that the legislators were out of session on time, as Gov. Bob Holden had promised to veto budget bills and call a special session to redraft the budget if lawmakers failed to create enough revenue to cover spending.

The state legislature also agreed to send a transportation tax proposal before Missouri voters this fall. The tax would create $511 million in its first year by raising the general sales tax by a half-cent and the fuel tax by four cents.

Sponsors of the Missouri stadium bill removed the $644 million economic development plan from the table late in the session citing insufficient support. The bill proposed $9.8 million a year for 30 years for Arrowhead and Kauffman renovations.

Topeka
Longest Legislative Session in History
Shortly after 3 a.m. on the 106th day of the legislative session, a $252 million tax plan was approved.
The tax package raises the state’s 4.9-percent sales tax to 5.3 percent.

The cigarette excise tax will jump 46 cents from 24 cents on July 1 and nine cents more on Jan. 1, 2003. Other changes include an inheritance tax of up to 15 percent on property inherited by distant relatives and non-relatives. Corporations will pay double the fees for business conducted in the state, and sales tax will also be imposed on customized computer software.

The plan may not be enough to prevent cuts in state aid to schools and universities. The legislature needed to pass a $300 million tax plan to fund the $4.4 billion 2003 budget that it approved. Gov. Bill Graves stated that though
education had been spared, cuts weren’t out of the question if revenues come up short.