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, 2004
OR
| ¨ | 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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
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 |
85,881,634 shares | |
| (Class) | (Outstanding at November 1, 2004) |
| Page | ||||
| PART I. Financial Information |
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| Item 1. |
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| 4 | ||||
| 5-6 | ||||
| 7 | ||||
| 8 | ||||
| 9 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 | ||
| Item 3. |
33 | |||
| Item 4. |
33 | |||
| PART II. Other Information |
||||
| Item 1. |
34 | |||
| Item 2. |
34 | |||
| Item 3. |
34 | |||
| Item 4. |
34 | |||
| Item 5. |
34 | |||
| Item 6. |
34 | |||
| 35 | ||||
2
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,” “target,” “expect,” “pro forma,” “estimate,” “intend” and 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, |
| • | accounting matters, |
| • | compliance with debt and other restrictive covenants, |
| • | interest rates and dividends, |
| • | environmental matters, |
| • | nuclear operations, 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, |
| • | regulated and competitive markets, |
| • | ongoing municipal, state and federal activities, |
| • | economic and capital market conditions, |
| • | changes in accounting requirements and other accounting matters, |
| • | changing weather, |
| • | rates, cost recoveries and other regulatory matters, |
| • | the impact of changes and downturns in the energy industry and the market for trading wholesale electricity, |
| • | the impact of “Hours of Service” legislation that was enacted in January 2004 on the number of hours during which employees may operate equipment, |
| • | the outcome of the notice of violation received on January 22, 2004 from the Environmental Protection Agency and other environmental matters, |
| • | political, legislative, judicial and regulatory developments, |
| • | the impact of the purported shareholder and employee class action lawsuits filed against us, |
| • | the impact of our potential liability to David C. Wittig and Douglas T. Lake for unpaid compensation and benefits and the impact of claims they have made against us related to the termination of their employment and the publication of the report of the special committee of the board of directors, |
| • | the impact of changes in interest rates, |
| • | changes in, and the discount rate assumptions used for, pension and other post-retirement and post-employment benefit liability calculations, as well as actual and assumed investment returns on pension plan assets, |
| • | the impact of changing interest rates and other assumptions on our decommissioning liability for Wolf Creek Generating Station, |
| • | transmission reliability rules, |
| • | changes in the expected tax benefits and contingent payments resulting from the loss on the sale of our monitored services business, |
| • | homeland security considerations, |
| • | coal, natural gas and oil prices, and |
| • | other circumstances affecting anticipated operations, sales and costs. |
These lists are not all-inclusive because it is not possible to predict all factors. This report should be read in its entirety and in conjunction with our Annual Report on Form 10-K, as amended, for the year ended December 31, 2003. No one section of this report deals with all aspects of the subject matter and additional information on some matters that could impact our operations and financial results may be included in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2003. 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.
3
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 38,328 | $ | 79,559 | ||||
| Restricted cash |
14,723 | 17,925 | ||||||
| Accounts receivable, net |
105,434 | 80,971 | ||||||
| Inventories and supplies |
127,143 | 136,636 | ||||||
| Energy marketing contracts |
14,689 | 35,385 | ||||||
| Deferred tax assets |
33,361 | 119,041 | ||||||
| Prepaid expenses and other |
52,254 | 43,177 | ||||||
| Assets of discontinued operations |
— | 570,541 | ||||||
| Total Current Assets |
385,932 | 1,083,235 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, NET |
3,890,201 | 3,909,500 | ||||||
| OTHER ASSETS: |
||||||||
| Restricted cash |
29,183 | 31,854 | ||||||
| Regulatory assets |
427,818 | 411,315 | ||||||
| Nuclear decommissioning trust |
84,123 | 80,075 | ||||||
| Energy marketing contracts |
7,644 | 4,190 | ||||||
| Other |
295,389 | 214,336 | ||||||
| Total Other Assets |
844,157 | 741,770 | ||||||
| TOTAL ASSETS |
$ | 5,120,290 | $ | 5,734,505 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current maturities of long-term debt |
$ | 70,986 | $ | 190,747 | ||||
| Short-term debt |
— | 1,000 | ||||||
| Accounts payable |
101,666 | 94,700 | ||||||
| Accrued taxes |
109,472 | 102,287 | ||||||
| Energy marketing contracts |
16,764 | 28,000 | ||||||
| Other |
134,182 | 128,384 | ||||||
| Liabilities of discontinued operations |
— | 475,597 | ||||||
| Total Current Liabilities |
433,070 | 1,020,715 | ||||||
| LONG-TERM LIABILITIES: |
||||||||
| Long-term debt, net |
1,659,383 | 1,966,039 | ||||||
| Long-term debt, affiliate |
— | 103,093 | ||||||
| Deferred income taxes and investment tax credits |
1,033,630 | 1,039,620 | ||||||
| Deferred gain from sale-leaseback |
141,938 | 150,810 | ||||||
| Accrued employee benefits |
97,968 | 101,892 | ||||||
| Asset retirement obligation |
85,512 | 80,695 | ||||||
| Nuclear decommissioning |
84,123 | 80,075 | ||||||
| Energy marketing contracts |
2,546 | 1,111 | ||||||
| Other |
250,226 | 153,695 | ||||||
| Total Long-Term Liabilities |
3,355,326 | 3,677,030 | ||||||
| COMMITMENTS AND CONTINGENCIES (see Notes 7 and 8) |
||||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Cumulative preferred stock, par value $100 per share; authorized 600,000 shares; issued and outstanding 214,363 shares |
21,436 | 21,436 | ||||||
| Common stock, par value $5 per share; authorized 150,000,000 shares; issued 85,805,416 and 72,840,217 shares, respectively |
429,027 | 364,201 | ||||||
| Paid-in capital |
913,273 | 776,754 | ||||||
| Unearned compensation |
(13,532 | ) | (15,879 | ) | ||||
| Loans to officers |
— | (2 | ) | |||||
| Retained earnings (accumulated deficit) |
(13,760 | ) | (102,782 | ) | ||||
| Treasury stock, at cost, 203,575 shares |
— | (2,391 | ) | |||||
| Accumulated other comprehensive loss, net |
(4,550 | ) | (4,577 | ) | ||||
| Total Shareholders’ Equity |
1,331,894 | 1,036,760 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 5,120,290 | $ | 5,734,505 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
| Three Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| SALES |
$ | 421,489 | $ | 438,167 | ||||
| OPERATING EXPENSES: |
||||||||
| Fuel and purchased power |
120,037 | 121,434 | ||||||
| Operating and maintenance |
99,970 | 86,356 | ||||||
| Depreciation and amortization |
42,464 | 41,805 | ||||||
| Selling, general and administrative |
40,638 | 35,669 | ||||||
| Total Operating Expenses |
303,109 | 285,264 | ||||||
| INCOME FROM OPERATIONS |
118,380 | 152,903 | ||||||
| OTHER INCOME (EXPENSE): |
||||||||
| Investment earnings |
5,194 | 6,394 | ||||||
| Gain on sale of ONEOK, Inc. stock |
— | 38,522 | ||||||
| Loss on extinguishment of debt and settlement of putable/callable notes |
— | (17,588 | ) | |||||
| Other income |
681 | 331 | ||||||
| Other expense |
(4,404 | ) | (4,367 | ) | ||||
| Total Other Income |
1,471 | 23,292 | ||||||
| Interest expense |
31,508 | 57,495 | ||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
88,343 | 118,700 | ||||||
| Income tax expense |
27,974 | 38,116 | ||||||
| INCOME FROM CONTINUING OPERATIONS |
60,369 | 80,584 | ||||||
| Results of discontinued operations, net of tax |
— | (161,651 | ) | |||||
| NET INCOME (LOSS) |
60,369 | (81,067 | ) | |||||
| Preferred dividends, net of gain on reacquired preferred stock |
242 | 216 | ||||||
| EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK |
$ | 60,127 | $ | (81,283 | ) | |||
| BASIC AND DILUTED EARNINGS (LOSS) PER AVERAGE COMMON SHARE OUTSTANDING (see Note 2): |
||||||||
| Basic earnings available from continuing operations |
$ | 0.70 | $ | 1.11 | ||||
| Results of discontinued operations |
— | (2.23 | ) | |||||
| Basic earnings (loss) available |
$ | 0.70 | $ | (1.12 | ) | |||
| Diluted earnings available from continuing operations |
$ | 0.69 | $ | 1.09 | ||||
| Results of discontinued operations |
— | (2.20 | ) | |||||
| Diluted earnings (loss) available |
$ | 0.69 | $ | (1.11 | ) | |||
| Average equivalent common shares outstanding |
86,059,210 | 72,571,600 | ||||||
| DIVIDENDS DECLARED PER COMMON SHARE |
$ | 0.19 | $ | 0.19 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
5
WESTAR ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)