WESTAR ENERGY INC /KS - FORM 8-K - EX-99.2 - 2011 FIRST QUARTER EARNINGS PACKAGE

Attached files

file	filename
8-K - FORM 8-K - WESTAR ENERGY INC /KS	d8k.htm
EX-99.1 - PRESS RELEASE - WESTAR ENERGY INC /KS	dex991.htm

Exhibit 99.2

Westar Energy, Inc

2011 First Quarter Earnings

Released May 5, 2011

Contents


	Page
Consolidated statements of income		1
Consolidated balance sheets		2
Consolidated statements of cash flows		3
Earnings variances		4
Supplemental data		5
Capitalization & Long-term Debt Table		6
GAAP to Non-GAAP reconciliation		7

Bruce Burns

Director Investor Relations

785-575-8227

bruce.burns@WestarEnergy.com

NOTE:

The Notes to the Condensed Consolidated Financial Statements in the company’s Quarterly Report on Form 10-Q for the period ended March 31, 2011 should be read in conjunction with this financial information. The enclosed statements have been prepared for the purpose of providing information concerning the Company and not in connection with any sale, offer for sale, or solicitation to buy any securities.

Westar Energy, Inc.

Consolidated Statements of Income

(Unaudited)


	Three Months Ended March 31,
	2011			2010			Change			% Change
	(In Thousands, Except Per Share Amounts)

REVENUES:
Residential	$	152,908		$	144,742		$	8,166			5.6
Commercial		128,827			117,470			11,357			9.7
Industrial		79,196			69,040			10,156			14.7
Other retail		(3,014	)		1,993			(5,007	)		(251.2	)

Total Retail Revenues		357,917			333,245			24,672			7.4
Wholesale		78,594			82,748			(4,154	)		(5.0	)
Transmission		37,176			36,629			547			1.5
Other		8,033			7,208			825			11.4

Total Revenues		481,720			459,830			21,890			4.8

OPERATING EXPENSES:
Fuel and purchased power		134,184			133,800			384			0.3
Operating and maintenance		137,351			121,172			16,179			13.4
Depreciation and amortization		70,259			66,930			3,329			5.0
Selling, general and administrative		48,767			45,927			2,840			6.2

Total Operating Expenses		390,561			367,829			22,732			6.2

INCOME FROM OPERATIONS		91,159			92,001			(842	)		(0.9	)

OTHER INCOME (EXPENSE):
Investment income		1,968			1,757			211			12.0
Other income		2,249			854			1,395			163.3
Other expense		(5,368	)		(4,494	)		(874	)		(19.4	)

Total Other Expense		(1,151	)		(1,883	)		732			38.9

Interest expense		43,538			44,616			(1,078	)		(2.4	)

INCOME BEFORE INCOME TAXES		46,470			45,502			968			2.1
Income tax expense		13,513			13,820			(307	)		(2.2	)

NET INCOME		32,957			31,682			1,275			4.0
Less: Net income attributable to nonontrolling interests		1,373			1,002			371			37.0

NET INCOME ATTRIBUTABLE TO WESTAR ENERGY		31,584			30,680			904			2.9
Preferred dividends		242			242			—			—

NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	31,342		$	30,438		$	904			3.0


Earnings per common share, basic	$	0.27		$	0.27		$	—			—

Average equivalent common shares outstanding (in thousands)		113,875			110,925			2,950			2.7

DIVIDENDS DECLARED PER COMMON SHARE	$	0.32		$	0.31		$	0.01			3.2

Effective tax rate		29.1	%		30.4	%

The Notes to the Condensed Consolidated Financial Statements in the company’s Quarterly Report on Form 10-Q

for the period ended March 31, 2011 should be read in conjunction with this financial information.

Westar Energy, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, except par values)

(Unaudited)


	March 31, 2011		December 31, 2010
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	3,343	$	928
Accounts receivable, net		204,434		227,700
Inventories and supplies, net		220,642		206,867
Energy marketing contracts		5,996		13,005
Taxes receivable		22,459		16,679
Deferred tax assets		20,135		30,248
Prepaid expenses		16,068		12,413
Regulatory assets		67,379		73,480
Other		15,442		20,289

Total Current Assets		575,898		601,609

PROPERTY, PLANT AND EQUIPMENT, NET		6,038,935		5,964,439

PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET		342,157		345,037

OTHER ASSETS:
Regulatory assets		800,514		787,585
Nuclear decommissioning trust		133,102		126,990
Energy marketing contracts		9,064		9,472
Other		263,086		244,506

Total Other Assets		1,205,766		1,168,553

TOTAL ASSETS	$	8,162,756	$	8,079,638


LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	—	$	61
Current maturities of long-term debt of variable interest entities		26,858		30,155
Short-term debt		305,340		226,700
Accounts payable		178,870		187,954
Accrued taxes		68,261		45,534
Energy marketing contracts		2,845		9,670
Accrued interest		95,050		77,771
Regulatory liabilities		29,539		28,284
Other		157,297		176,717

Total Current Liabilities		864,060		782,846

LONG-TERM LIABILITIES:
Long-term debt, net		2,490,878		2,490,871
Long-term debt of variable interest entities, net		272,866		278,162
Deferred income taxes		1,114,611		1,102,625
Unamortized investment tax credits		100,670		101,345
Regulatory liabilities		142,899		135,754
Deferred regulatory gain from sale-leaseback		96,167		97,541
Accrued employee benefits		454,885		483,769
Asset retirement obligations		127,777		125,999
Energy marketing contracts		—		10
Other		61,933		66,878

Total Long-Term Liabilities		4,862,686		4,882,954

COMMITMENTS AND CONTINGENCIES (See Notes 8 & 9 in Form 10-Q)
TEMPORARY EQUITY		—		3,465


EQUITY:
Westar Energy 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 and outstanding 113,587,852 and 112,128,068 shares, respectively		567,939		560,640
Paid-in capital		1,422,842		1,398,580
Retained earnings		418,230		423,647

Total Westar Energy Shareholders’ Equity		2,430,447		2,404,303

Noncontrolling Interests		5,563		6,070

Total Equity		2,436,010		2,410,373

TOTAL LIABILITIES AND EQUITY	$	8,162,756	$	8,079,638

The Notes to the Condensed Consolidated Financial Statements in the company’s Quarterly Report on Form 10-Q

for the period ended March 31, 2011 should be read in conjunction with this financial information.

Westar Energy, Inc.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)


	Three Months Ended March 31,
	2011			2010
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	32,957		$	31,682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		70,259			66,930
Amortization of nuclear fuel		5,787			6,084
Amortization of deferred regulatory gain from sale-leaseback		(1,374	)		(1,374	)
Amortization of corporate-owned life insurance		6,308			5,840
Non-cash compensation		2,201			2,130
Net changes in energy marketing assets and liabilities		455			(181	)
Accrued liability to certain former officers		647			504
Net deferred income taxes and credits		16,286			20,518
Stock-based compensation excess tax benefits		(629	)		(277	)
Allowance for equity funds used during construction		(1,752	)		(455	)
Changes in working capital items:
Accounts receivable		20,344			21,068
Inventories and supplies		(13,584	)		(1,673	)
Prepaid expenses and other		5,640			(3,260	)
Accounts payable		(2,164	)		10,001
Accrued taxes		17,123			11,382
Other current liabilities		(19,493	)		(15,267	)
Changes in other assets		(20,327	)		7,758
Changes in other liabilities		(23,308	)		(9,442	)

Cash flows from operating activities		95,376			151,968


CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Additions to property, plant and equipment		(155,945	)		(103,272	)
Purchase of securities within trust funds		(28,152	)		(8,319	)
Sale of securities within trust funds		27,582			7,628
Proceeds from investment in corporate-owned life insurance		512			448
Proceeds from federal grant		2,113			—
Investment in affiliated company		(381	)		5
Other investing activities		2,198			690

Cash flows used in investing activities		(152,073	)		(102,820	)


CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Short-term debt, net		78,640			(33,600	)
Retirements of long-term debt		(191	)		(646	)
Retirements of long-term debt of variable interest entities		(8,386	)		(7,954	)
Repayment of capital leases		(444	)		(610	)
Borrowings against cash surrender value of corporate-owned life insurance		1,062			965
Repayment of borrowings against cash surrender value of corporate-owned life insurance		(2,897	)		(1,981	)
Stock based compensation excess tax benefits		629			277
Issuance of common stock, net		25,787			25,904
Distributions to shareholders of noncontrolling interests		(1,880	)		(1,466	)
Cash dividends paid		(33,208	)		(31,054	)

Cash flows (used in) from financing activities		59,112			(50,165	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,415			(1,017	)

CASH AND CASH EQUIVALENTS:
Beginning of period		928			3,860

End of period	$	3,343		$	2,843

The Notes to the Condensed Consolidated Financial Statements in the company’s Quarterly Report on Form 10-Q

for the period ended March 31, 2011 should be read in conjunction with this financial information.

Westar Energy, Inc.

1st Quarter 2011 vs. 2010

Earnings Variances


				Change
	($ per share)			(Dollars in thousands)
2010 earnings attributable to common stock	$	0.27		$	30,438


		*Favorable / (Unfavorable)*

Retail					24,672	A
Wholesale					(4,154	) B
Transmission					547
Other revenues					825
Fuel and purchased power					(384	)
SPP network transmission costs					(4,897	)

Gross Margin					16,609	C
Operating and maintenance w/o SPP NITS					(11,282	) D
Depreciation and amortization					(3,329	) E
Selling, general and administrative					(2,840	) F
Other expense					732
Interest expense					1,078
Income tax expense					307
Net income attributable to noncontrolling interests					(371	)
Change in shares outstanding		(0.01	)


2011 earnings attributable to common stock	$	0.27		$	31,342


		Major factors influencing the period to period change in EPS — Favorable/(Unfavorable)

A		Due principally to price increases; MWh sales increased 2 percent (see page 7 for changes is sales by class)

B		Due primarily to decreased demand; MWh sales decreased 17 percent, while average market prices increased 14 percent

C		Due primarily to increased retail revenues driven largely by price increases

D		Higher maintenance and repair expenses due primarily to power plant outages - ($4.2M); increased maintenance for tree trimming on electrical distribution system - ($2.8M); higher operating costs for regulatory compliance at Wolf Creek - ($1.4M); increased ad valorem tax expense, which is largely offset in revenues via a property tax surcharge - ($0.8M); decrease in distribution expenses for completed storm amortizations - $1.2M

E		Higher plant balances and benefit of 15 year book depreciation on a transmission project

F		Increase due primarily to: higher legal fees - ($1.7M); amortization of energy efficiency programs - ($0.9M) (offset in revenues via energy efficiency tariff)

The Notes to the Condensed Consolidated Financial Statements in the company’s Quarterly Report on Form 10-Q

for the period ended March 31, 2011 should be read in conjunction with this financial information.

Westar Energy, Inc

Revenue, Sales and Energy Supply

Supplemental Data


	Three Months Ended March 31,
	2011			2010			Change			% Change
	(Dollars In Thousands)
Revenues
Residential	$	152,908		$	144,742		$	8,166			5.6
Commercial		128,827			117,470			11,357			9.7
Industrial		79,196			69,040			10,156			14.7
Other retail		3,018			2,929			89			3.0
Provision for rate refunds		(6,032	)		(936	)		(5,096	)		(544.4	)

Total Retail Revenues		357,917			333,245			24,672			7.4
Tariff-based wholesale		60,138			56,296			3,842			6.8
Market-based wholesale		18,456			26,452			(7,996	)		(30.2	)
Transmission		37,176			36,629			547			1.5
Other		8,033			7,208			825			11.4

Total Revenues	$	481,720		$	459,830		$	21,890			4.8


	(Thousands of MWh)
Electricity Sales
Residential		1,658		1,682		(24	)	(1.4	)
Commercial		1,704		1,666		38		2.3
Industrial		1,337		1,277		60		4.7
Other retail		22		22		—		—

Total Retail		4,721		4,647		74		1.6

Tariff-based wholesale		1,376		1,572		(196	)	(12.5	)
Market-based wholesale		534		726		(192	)	(26.4	)

Total wholesale		1,910		2,298		(388	)	(16.9	)

Total Electricity Sales		6,631		6,945		(314	)	(4.5	)


	(Dollars per MWh)
Total retail	$	75.81	$	71.71	$	4.10		5.7
Tariff-based wholesale	$	43.70	$	35.81	$	7.89		22.0
Market-based wholesale	$	34.56	$	36.44	$	(1.88	)	(5.2	)


	(Dollars In Thousands)
Fuel and Purchased Power
Fuel used for generation	$	114,536		$	126,285		$	(11,749	)	(9.3	)
Purchased power		20,836			14,385			6,451		44.8

Subtotal		135,372			140,670			(5,298	)	(3.8	)
Emissions allowances, VIE and miscellaneous		98			264			(166	)	(62.9	)
Fuel expense recovery (RECA)		(1,286	)		(7,134	)		5,848		82.0

Total fuel and purchased power expense	$	134,184		$	133,800		$	384		0.3


	(Thousands of MWh)
Electricity Supply
Generated - Gas/oil		332			318			14		4.4
Coal		4,859			5,531			(672	)	(12.1	)
Nuclear		1,024			1,100			(76	)	(6.9	)
Wind		116			108			8		7.4

Subtotal electricity generated		6,331			7,057			(726	)	(10.3	)
Purchased		598			313			285		91.1

Total Electricity Supply		6,929			7,370			(441	)	(6.0	)


	(Dollars per MWh)
Average cost of fuel used for generation	$	18.09		$	17.89		$	0.20		1.1
Average cost of purchased power	$	34.84		$	45.96		$	(11.12	)	(24.2	)
Average cost of fuel and purchased power	$	19.54		$	19.09		$	0.45		2.4


Degree Days
	2011		2010 / 20 yr Avg		Change			% Change
Cooling
Actual compared to last year		12		5		7			140.0
Actual compared to 20 year average		12		2		10			500.0
Heating
Actual compared to last year		2,692		2,704		(12	)		(0.4	)
Actual compared to 20 year average		2,692		2,460		232			9.4

Westar Energy, Inc.

Capitalization


	March 31, 2011				December 31, 2010
	(Dollars in Thousands)
Current maturities of long-term debt	$	—			$	61
Current maturities of long-term debt of VIEs		26,858				30,155
Long-term debt, net		2,490,878				2,490,871
Long-term debt of variable interest entities, net		272,866				278,162

Total debt		2,790,602	53.4	%		2,799,249	53.7	%
Preferred		21,436	0.4	%		21,436	0.4	%
Common equity		2,409,011	46.1	%		2,382,867	45.8	%
Noncontrolling interests		5,563	0.1	%		6,070	0.1	%

Total capitalization	$	5,226,612	100.0	%	$	5,209,622	100.0	%


GAAP Book value per share	$	21.21			$	21.25
Period end shares outstanding (in thousands)		113,588				112,128

Outstanding long-term debt table


	CUSIP		March 31, 2011			December 31, 2010
			(Dollars in Thousands)
Westar Energy:
First Mortgage Bond series:
6.00% Series due July 2014		95709TAA8	$	250,000		$	250,000
5.15% Series due January 2017		95709TAB6		125,000			125,000
5.95% Series due January 2035		95709TAC4		125,000			125,000
5.10% Series due July 2020		95709TAD2		250,000			250,000
5.875% Series due July 2036		95709TAE0		150,000			150,000
6.10% Series due May 2047		95709T704		150,000			150,000
8.625% Series due December 2018		95709TAG5		300,000			300,000

				1,350,000			1,350,000
Pollution control bond series:
Variable series due April 2032 (Wamego)		933623BN9		30,500			30,500
Variable series due April 2032 (St Marys)		792609AF6		45,000			45,000
5.0% Series due February 2033 (Wamego)		933623BQ2		57,425			57,530

				132,925			133,030
Other long-term debt:
4.36% Equipment financing loan due 2011				—			61

				—			61

Total Westar Energy				1,482,925			1,483,091
KGE
First mortgage bond series:
6.53% Series due December 2037		485260BJ1		175,000			175,000
6.15% Series due May 2023		485260B@1		50,000			50,000
6.64% Series due May 2038		485260B#9		100,000			100,000
6.70% Series due June 2019		U24448AB5		300,000			300,000

				625,000			625,000
Pollution control bond series:
5.3% Series due June 2031		121825BW2		108,600			108,600
5.3% Series due June 2031		933623BR0		18,900			18,900
4.85% Series due June 2031		121825CB7		50,000			50,000
5.10% Series due March 2023		502828AH9		13,318			13,343
Variable rate series due April 2027 (LaCygne)		502828AJ5		21,940			21,940
Variable rate series due April 2032 (St Marys)		792609AE9		14,500			14,500
Variable rate series due April 2032 (Wamego)		933623BM1		10,000			10,000
5.6% Series due June 2031		121825CD3		50,000			50,000
6.0% Series due June 2031		121825CE1		50,000			50,000
5.0% Series due June 2031		121825CF8		50,000			50,000

				387,258			387,283

Total KGE				1,012,258			1,012,283

Total long-term debt				2,495,183			2,495,374


Unamortized debt discount				(4,305	)		(4,442	)
Long-term debt due within one year				—			(61	)

Total long-term debt, net			$	2,490,878		$	2,490,871

Westar Energy, Inc.

GAAP to Non-GAAP Reconciliation

Fuel and purchased power costs fluctuate with electricity sales and unit costs. As permitted by regulators, prices are adjusted to reflect changes in fuel and purchased power costs, and accordingly changes to these costs have a minimal impact on net income. For this reason, Westar management believes that gross margin is a useful measure for understanding changes in operating performance from one period to the next. Gross margin is calculated as total revenues less the sum of fuel and purchased power costs and SPP network transmission costs. SPP network transmission costs are included as a component of gross margin because these costs reflect the costs of providing network transmission service, and a significant component of transmission revenue is recognized when providing this service.

Operating and maintenance expense includes SPP network transmission costs (SPP NITS). The SPP network transmission costs are included in gross margin for the reasons shown above, and are therefore excluded from operating and maintenance expense w/o SPP NITS used to reconcile earnings from the comparable prior year period to the earnings for the current period. Westar management believes this measurement is useful for understanding changes in operating performance from one period to the next. Operating and maintenance expense w/o SPP NITS is calculated by subtracting the SPP network transmission costs from operating and maintenance expense.

The calculations of gross margin and operating and maintenance expense w/o SPP NITS for the three months ended March 31, 2011 and 2010 are shown in the table below. The table also includes a reconciliation of gross margin to income from operations Income from operations is the GAAP financial measure most directly comparable to gross margin. Operating and maintenance expense is the GAAP financial measure most directly comparable to operating and maintenance expense w/o SPP NITS.


	Three Months Ended March 31,
	2011			2010		Change
	(Dollars In Thousands)
Revenues
Residential	$	152,908		$	144,742	$	8,166
Commercial		128,827			117,470		11,357
Industrial		79,196			69,040		10,156
Other retail		(3,014	)		1,993		(5,007	)

Total Retail Revenues		357,917			333,245		24,672
Wholesale		78,594			82,748		(4,154	)
Transmission		37,176			36,629		547
Other		8,033			7,208		825

Total Revenues		481,720			459,830		21,890
Less: Fuel and purchased power expense		134,184			133,800		384
SPP network transmission costs		32,051			27,154		4,897

Gross Margin	$	315,485		$	298,876	$	16,609


Gross margin	$	315,485		$	298,876	$	16,609
Add: SPP network transmission costs		32,051			27,154		4,897
Less: Operating and maintenance expense		137,351			121,172		16,179
Depreciation and amortization expense		70,259			66,930		3,329
Selling, general and administrative expense		48,767			45,927		2,840

Income from operations	$	91,159		$	92,001	$	(842	)


Operating and maintenance expense	$	137,351		$	121,172	$	16,179
Less: SPP Network transmission costs		32,051			27,154		4,897

Operating and maintenance expense w/o SPP NITS	$	105,300		$	94,018	$	11,282

WESTAR ENERGY INC /KS - FORM 8-K - EX-99.2 - 2011 FIRST QUARTER EARNINGS PACKAGE - May 5, 2011

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WESTAR ENERGY INC /KS Reports