WESTAR ENERGY INC /KS - 10-Q Quarterly Report

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

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

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 1-3523

Westar Energy, Inc.

(Exact name of registrant as specified in its charter)

Kansas		48-0290150

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

818 South Kansas Avenue Topeka, Kansas 66612 (785) 575-6300

(Address, including Zip code and telephone number, including area code, of registrant’s principal executive offices)

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common Stock, par value $5.00 per share		71,481,021 Shares

(Class)		(Outstanding at November 6, 2002)

INTRODUCTORY NOTE

As announced in our press release of November 7, 2002, our board of directors has placed David C. Wittig, our Chairman of the Board, President and Chief Executive Officer, on administrative leave without pay from all of his positions with us or any of our affiliates following his indictment by a federal grand jury in Topeka, Kansas, for actions arising from his personal dealings with the former president of a Topeka, Kansas, bank. We also announced that our board of directors intends to appoint an acting President and Chief Executive Officer promptly. Currently, a committee appointed by our board of directors comprised of our senior executive officers is performing functions similar and equivalent to those performed by a principal executive officer or chief executive officer. As a result, the principal and chief executive officer certifications required by Rule 13a-14 under the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002 which accompany this Form 10-Q are signed by the members of such committee.

TABLE OF CONTENTS

		Page

PART I. Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets	4

	Consolidated Statements of Income (Loss)	5-6

	Consolidated Statements of Comprehensive Income (Loss)	7

	Consolidated Statements of Cash Flows	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

PART II. Other Information

Item 1.	Legal Proceedings	47

Item 2.	Changes in Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Submission of Matters to a Vote of Security Holders	47

Item 5.	Other Information	47

Item 6.	Exhibits and Reports on Form 8-K	47

Signature		48

Certifications		49

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Form 10-Q are “forward-looking statements.” The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. Forward-looking statements may include words like we “believe,” “anticipate,” “expect,” or words of similar meaning. Forward-looking statements describe our future plans, objectives, expectations or goals. Such statements address future events and conditions concerning:

	•	capital expenditures,
	•	earnings,
	•	liquidity and capital resources,
	•	litigation,
	•	possible corporate restructurings, mergers, acquisitions and dispositions,
	•	compliance with debt and other restrictive covenants,
	•	interest and dividends,
	•	Protection One, Inc.’s financial condition and its impact on our consolidated results,
	•	possible future impairment charges,
	•	environmental matters,
	•	nuclear operations,
	•	ability to enter new markets successfully and capitalize on growth opportunities in non-regulated businesses,
	•	events in foreign markets in which investments have been made and
	•	the overall economy of our service area.

	What happens in each case could vary materially from what we expect because of such things as:
	•	electric utility deregulation or re-regulation,
	•	ongoing municipal, state and federal activities,
	•	future economic conditions,
	•	changes in accounting requirements and other accounting matters,
	•	changing weather,
	•	rate and other regulatory matters, including the impact of the November 8, 2002 order of the Kansas Corporation Commission requiring our financial and corporate restructuring,
	•	the impact of changes and downturns in the energy industry and the market for trading wholesale electricity,
	•	the proposed sale of our interests in ONEOK, Inc.,
	•	the federal grand jury subpoena by the United States Attorney’s Office requesting certain information,
	•	the inquiry by the Securities and Exchange Commission into the restatement of our financial statements and related announcement of the reaudit of our 2001 and 2000 financial statements,
	•	political, legislative and regulatory developments,
	•	amendments or revisions to our current business and financial plans,
	•	regulatory, legislative and judicial actions,
	•	regulated and competitive markets,
	•	the impact of the indictment of our Chief Executive Officer,
	•	the impact of changes in the London Interbank offer rate (LIBOR) on the fair value of our swap transactions, changes in the 10-year United States Treasury rates and the corresponding impact on the fair value of our call option contract and other circumstances affecting anticipated operations, sales and costs.

These lists are not all-inclusive because it is not possible to predict all possible factors.

See “Item 1. Business — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2001, for additional information on matters that could impact our operations and financial results. Any forward-looking statement speaks only as of the date such statement was made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made except as required by applicable laws or regulations.

PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS

WESTAR ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)

				September 30, 2002			December 31, 2001

ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	150,494		$	96,388
	Restricted cash				27,901			15,495
	Accounts receivable, net				116,507			96,824
	Inventories and supplies				144,141			145,000
	Energy trading contracts				52,706			71,421
	Deferred tax assets				6,993			23,284
	Prepaid expenses and other				56,991			54,514

		Total Current Assets			555,733			502,926

PROPERTY, PLANT AND EQUIPMENT, NET					4,004,045			4,044,366

OTHER ASSETS:
	Restricted cash				175,212			38,515
	Investment in ONEOK				702,387			598,929
	Customer accounts, net				424,645			813,733
	Goodwill, net				181,834			879,926
	Regulatory assets				390,639			358,025
	Energy trading contracts				13,868			15,247
	Other				241,621			233,927

		Total Other Assets			2,130,206			2,938,302

ASSETS OF DISCONTINUED OPERATIONS					—			22,938

TOTAL ASSETS				$	6,689,984		$	7,508,532

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Current maturities of long-term debt			$	194,591		$	160,829
	Short-term debt				3,969			222,300
	Accounts payable				102,945			122,968
	Accrued liabilities				232,487			216,017
	Accrued income taxes				102,854			35,048
	Deferred security revenues				47,117			47,891
	Energy trading contracts				54,687			67,859
	Other				65,811			24,570

		Total Current Liabilities			804,461			897,482

LONG-TERM LIABILITIES:
	Long-term debt, net				3,197,588			2,978,450
	Western Resources obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely company subordinated debentures				216,498			220,000
	Deferred income taxes and investment tax credits				812,101			924,178
	Minority interests				69,255			166,850
	Deferred gain from sale-leaseback				165,595			174,466
	Energy trading contracts				5,396			16,500
	Other				330,071			285,181

		Total Long-Term Liabilities			4,796,504			4,765,625

LIABILITIES OF DISCONTINUED OPERATIONS					—			1,364

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
	Cumulative preferred stock, par value $100 per share; authorized 600,000 shares; issued 248,576 shares; outstanding 214,363 shares and 239,364 shares, respectively				21,436			23,936
	Common stock, par value $5 per share; authorized 150,000,000 shares; issued 92,379,938 shares and 86,205,417 shares, respectively				461,900			431,027
	Paid-in capital				1,253,801			1,196,763
	Unearned compensation				(11,173	)		(21,920	)
	Loans to officers				(2,020	)		(1,973	)
	Retained earnings (accumulated deficit)				(152,927	)		606,502
	Treasury stock, at cost, 21,031,518 and 15,097,987 shares, respectively				(463,220	)		(364,901	)
	Accumulated other comprehensive loss, net				(18,778	)		(25,373	)

			Total Shareholders’ Equity		1,089,019			1,844,061

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				$	6,689,984		$	7,508,532

The accompanying notes are an integral part of these consolidated financial statements.

WESTAR ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)

			Three Months Ended September 30,

			2002		2001

SALES:
	Energy		$	442,145	$	417,639
	Monitored Services			86,970		95,851

		Total Sales		529,115		513,490

COST OF SALES:
	Energy			114,628		129,001
	Monitored Services			28,239		28,687

		Total Cost of Sales		142,867		157,688

GROSS PROFIT				386,248		355,802

OPERATING EXPENSES:
	Operating and maintenance			93,102		84,817
	Depreciation and amortization			67,134		102,975
	Selling, general and administrative			72,485		82,409
	Gain on dispositions of monitored services operations			—		(4,861	)

		Total Operating Expenses		232,721		265,340

INCOME FROM OPERATIONS				153,527		90,462

OTHER INCOME (EXPENSE):
	Investment earnings			14,214		11,991
	Gain on extinguishment of debt			1,887		14,236
	Minority interests

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