SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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
WESTERN RESOURCES, INC.
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 48-0290150
(State or Other Jurisdiction of (Employer
Incorporation or Organization) Identification No.)
818 KANSAS AVENUE, TOPEKA, KANSAS 66612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code (913) 575-6300
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 14, 1997
Common Stock, $5.00 par value 65,039,762
WESTERN RESOURCES, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4 - 5
Consolidated Statements of Cash Flows 6 - 7
Consolidated Statements of Capitalization 8
Consolidated Statements of Common Stock Equity 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Part II. Other Information
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
WESTERN RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
UTILITY PLANT:
Electric plant in service . . . . . . . . . . . . . . . $5,472,321 $5,448,489
Natural gas plant in service. . . . . . . . . . . . . . 847,679 834,330
6,320,000 6,282,819
Less - Accumulated depreciation . . . . . . . . . . . . 2,098,632 2,058,596
4,221,368 4,224,223
Construction work in progress . . . . . . . . . . . . . 90,062 93,834
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . 35,810 38,461
Net utility plant. . . . . . . . . . . . . . . . . . 4,347,240 4,356,518
INVESTMENTS AND OTHER PROPERTY:
Investment in ADT (net) . . . . . . . . . . . . . . . . 599,991 590,102
Security business and other property. . . . . . . . . . 602,896 584,647
Decommissioning trust . . . . . . . . . . . . . . . . . 33,707 33,041
1,236,594 1,207,790
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . 2,289 3,724
Accounts receivable and unbilled revenues (net) . . . . 271,542 318,966
Fossil fuel, at average cost. . . . . . . . . . . . . . 40,194 39,061
Gas stored underground, at average cost . . . . . . . . 10,064 30,027
Materials and supplies, at average cost . . . . . . . . 62,633 66,167
Prepayments and other current assets. . . . . . . . . . 28,963 36,503
415,685 494,448
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes. . . . . . . . . . . . . . 217,257 217,257
Corporate-owned life insurance (net). . . . . . . . . . 84,254 86,179
Regulatory assets . . . . . . . . . . . . . . . . . . . 230,931 241,039
Other . . . . . . . . . . . . . . . . . . . . . . . . . 56,709 44,550
589,151 589,025
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $6,588,670 $6,647,781
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statement):
Common stock equity . . . . . . . . . . . . . . . . . . $1,637,827 $1,624,680
Cumulative preferred and preference stock . . . . . . . 74,858 74,858
Western Resources obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely company subordinated debentures. . . . . . . . 220,000 220,000
Long-term debt (net). . . . . . . . . . . . . . . . . . 1,407,450 1,681,583
3,340,135 3,601,121
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . . . . . . . . 1,226,737 980,740
Accounts payable. . . . . . . . . . . . . . . . . . . . 115,186 180,540
Accrued taxes . . . . . . . . . . . . . . . . . . . . . 122,564 83,813
Accrued interest and dividends. . . . . . . . . . . . . 62,423 70,193
Other . . . . . . . . . . . . . . . . . . . . . . . . . 39,719 36,806
1,566,629 1,352,092
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . 1,107,213 1,110,372
Deferred investment tax credits . . . . . . . . . . . . 123,848 125,528
Deferred gain from sale-leaseback . . . . . . . . . . . 230,650 233,060
Other . . . . . . . . . . . . . . . . . . . . . . . . . 220,195 225,608
1,681,906 1,694,568
COMMITMENTS AND CONTINGENCIES (Notes 5 and 7)
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $6,588,670 $6,647,781
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $ 268,308 $ 268,985
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 357,889 286,637
Total operating revenues. . . . . . . . . . . . . . . . 626,197 555,622
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 55,604 60,990
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 6,291 1,757
Power purchased . . . . . . . . . . . . . . . . . . . . . 5,845 8,045
Natural gas purchases . . . . . . . . . . . . . . . . . . 159,113 150,523
Other operations. . . . . . . . . . . . . . . . . . . . . 190,034 141,361
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 25,936 24,839
Depreciation and amortization . . . . . . . . . . . . . . 50,785 43,711
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 16,136 17,417
State income. . . . . . . . . . . . . . . . . . . . . . 5,371 4,179
General . . . . . . . . . . . . . . . . . . . . . . . . 25,042 25,132
Total operating expenses. . . . . . . . . . . . . . . 544,543 482,340
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 81,654 73,282
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (2,720) (2,184)
Equity in earnings of investees and other (net) . . . . . 7,260 5,737
Income taxes (net). . . . . . . . . . . . . . . . . . . . 3,453 680
Total other income and deductions . . . . . . . . . . 7,993 4,233
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 89,647 77,515
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 23,795 26,499
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 25,690 7,160
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (871) (933)
Total interest charges. . . . . . . . . . . . . . . . 48,614 32,726
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 41,033 44,789
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 1,230 3,355
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 39,803 $ 41,434
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 64,807,081 63,163,715
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ .61 $ .66
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ .525 $ .515
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
Twelve Months Ended
March 31,
1997 1996
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $1,196,756 $1,161,622
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 920,638 693,901
Total operating revenues. . . . . . . . . . . . . . . . 2,117,394 1,855,523
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 240,604 226,053
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 24,496 16,494
Power purchased . . . . . . . . . . . . . . . . . . . . . 25,392 20,235
Natural gas purchases . . . . . . . . . . . . . . . . . . 363,345 312,576
Other operations. . . . . . . . . . . . . . . . . . . . . 656,668 519,599
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 100,219 106,638
Depreciation and amortization . . . . . . . . . . . . . . 190,796 165,625
Amortization of phase-in revenues . . . . . . . . . . . . 17,544 17,545
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 68,776 72,238
State income. . . . . . . . . . . . . . . . . . . . . . 20,227 18,404
General . . . . . . . . . . . . . . . . . . . . . . . . 96,962 97,444
Total operating expenses. . . . . . . . . . . . . . . 1,805,029 1,572,851
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 312,365 282,672
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (2,785) (3,136)
Special charges from ADT. . . . . . . . . . . . . . . . . (18,181) -
Equity in earnings of investees and other (net) . . . . . 33,246 22,689
Income taxes (net). . . . . . . . . . . . . . . . . . . . 5,763 7,303
Total other income and deductions . . . . . . . . . . 18,043 26,856
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 330,408 309,528
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 103,037 98,615
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 65,340 30,320
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (3,163) (4,297)
Total interest charges. . . . . . . . . . . . . . . . 165,214 124,638
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 165,194 184,890
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 12,714 13,419
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 152,480 $ 171,471
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 64,238,154 62,510,297
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ 2.37 $ 2.75
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ 2.07 $ 2.03
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 41,033 $ 44,789
Depreciation and amortization . . . . . . . . . . . . . . 53,197 44,199
Amortization of nuclear fuel. . . . . . . . . . . . . . . 5,014 1,198
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Corporate-owned life insurance. . . . . . . . . . . . . . (5,512) (5,940)
Amortization of gain from sale-leaseback. . . . . . . . . (2,410) (2,410)
Deferred acquisition costs. . . . . . . . . . . . . . . . (10,159) -
Equity in earnings of investees . . . . . . . . . . . . . (13,177) (3,778)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . 47,424 (13,644)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . (1,133) 7,365
Gas stored underground. . . . . . . . . . . . . . . . . 19,963 24,117
Accounts payable . . . . . . . . . . . . . . . . . . . (65,354) (25,580)
Accrued taxes . . . . . . . . . . . . . . . . . . . . . 38,751 49,686
Other . . . . . . . . . . . . . . . . . . . . . . . . . 5,865 9,260
Changes in other assets and liabilities . . . . . . . . . (1,200) (6,395)
Net cash flows from operating activities. . . . . . . 116,688 127,253
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . 40,902 38,427
Purchase of ADT common stock. . . . . . . . . . . . . . . - 443,520
Non-utility investments (net) . . . . . . . . . . . . . . 22,155 8,563
Corporate-owned life insurance policies . . . . . . . . . 415 28,360
Net cash flows used in investing activities . . . . . 63,472 518,870
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . 245,997 138,850
Bonds retired . . . . . . . . . . . . . . . . . . . . . . (65) (135)
Revolving credit agreements (net) . . . . . . . . . . . . (273,594) 275,000
Other long-term debt retired. . . . . . . . . . . . . . . (541) -
Borrowings against life insurance policies. . . . . . . . 671 -
Common stock issued (net) . . . . . . . . . . . . . . . . 7,386 13,528
Dividends on preferred, preference and common stock . . . (34,505) (35,090)
Net cash flows (used in) from financing activities. . (54,651) 392,153
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . (1,435) 536
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . 3,724 2,414
End of the period . . . . . . . . . . . . . . . . . . . . $ 2,289 $ 2,950
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . $ 58,813 $ 37,796
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 7,044 7,616
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Twelve Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 165,194 $ 184,890
Depreciation and amortization . . . . . . . . . . . . . . . 199,626 166,087
Amortization of nuclear fuel. . . . . . . . . . . . . . . . 19,501 12,484
Gain on sales of utility plant (net of tax) . . . . . . . . - (11)
Amortization of phase-in revenues . . . . . . . . . . . . . 17,544 17,545
Corporate-owned life insurance. . . . . . . . . . . . . . . (29,285) (29,512)
Amortization of gain from sale-leaseback. . . . . . . . . . (9,640) (9,640)
Deferred acquisition costs. . . . . . . . . . . . . . . . . (41,677) -
Equity in earnings of investees . . . . . . . . . . . . . . (18,772) (3,778)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . 13,594 (56,073)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . 7,183 (5,731)
Gas stored underground. . . . . . . . . . . . . . . . . . (6,075) 20,530
Accounts payable. . . . . . . . . . . . . . . . . . . . . (24,421) 27,431
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 15,774 (29,039)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 14,930 9,478
Changes in other assets and liabilities . . . . . . . . . . (58,755) (6,691)
Net cash flows from operating activities . . . . . . . 264,721 297,970
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 201,984 224,083
Sales of utility plant. . . . . . . . . . . . . . . . . . . - (140)
Purchase of ADT common stock. . . . . . . . . . . . . . . . 145,842 443,520
Security business acquisitions. . . . . . . . . . . . . . . 368,535 -
Non-utility investments (net) . . . . . . . . . . . . . . . 20,155 21,320
Corporate-owned life insurance policies . . . . . . . . . . 26,062 54,715
Death proceeds of corporate-owned life insurance policies . (10,653) (10,719)
Net cash flows used in investing activities . . . . . . 751,925 732,779
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . 884,437 62,237
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (16,065) (135)
Revolving credit agreement (net). . . . . . . . . . . . . . (323,594) 325,000
Other long-term debt retired. . . . . . . . . . . . . . . . (541) -
Other mandatorily redeemable securities . . . . . . . . . . 120,000 100,000
Redemption of preference stock. . . . . . . . . . . . . . . (100,000) -
Borrowings against life insurance policies. . . . . . . . . 46,649 46,490
Repayment of borrowings against life insurance policies . . (4,963) (5,269)
Common stock issued (net) . . . . . . . . . . . . . . . . . 27,070 45,501
Dividends on preferred, preference and common stock . . . . (146,450) (139,181)
Net cash flows from financing activities. . . . . . . . 486,543 434,643
NET DECREASE IN CASH AND CASH EQUIVALENTS. . . . . .. . . . . (661) (166)
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . . 2,950 3,116
End of the period . . . . . . . . . . . . . . . . . . . . . $ 2,289 $ 2,950
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . . $ 190,730 $ 140,948
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 66,120 92,297
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
1997 1996
COMMON STOCK EQUITY (see statement):
Common stock, par value $5 per share,
Authorized 85,000,000 shares, outstanding
64,872,146 and 64,625,259 shares, respectively . $ 324,361 $ 323,126
Paid-in capital. . . . . . . . . . . . . . . . . . 745,584 739,433
Retained earnings. . . . . . . . . . . . . . . . . 567,882 562,121
1,637,827 49% 1,624,680 45%
CUMULATIVE PREFERRED AND PREFERENCE STOCK:
Preferred stock not subject to mandatory redemption,
Par value $100 per share, authorized
600,000 shares, outstanding -
4 1/2% Series, 138,576 shares. . . . . . . . . 13,858 13,858
4 1/4% Series, 60,000 shares . . . . . . . . . 6,000 6,000
5% Series, 50,000 shares . . . . . . . . . . . 5,000 5,000
24,858 24,858
Preference stock subject to mandatory redemption,
Without par value, $100 stated value,
Authorized 4,000,000 shares, outstanding -
7.58% Series, 500,000 shares . . . . . . . . . 50,000 50,000
74,858 2% 74,858 2%
WESTERN RESOURCES OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUST
HOLDING SOLELY COMPANY
SUBORDINATED DEBENTURES. . . . . . . . . . . . . 220,000 7% 220,000 6%
LONG-TERM DEBT:
First mortgage bonds . . . . . . . . . . . . . . . 825,000 825,000
Pollution control bonds. . . . . . . . . . . . . . 521,618 521,682
Revolving credit agreements. . . . . . . . . . . . - 275,000
Other long-term debt . . . . . . . . . . . . . . . 66,054 65,190
Less:
Unamortized premium and discount (net) . . . . . 5,222 5,289
1,407,450 42% 1,681,583 47%
Total Capitalization. . . . . . . . . . .. . . . . . $3,340,135 100% $3,601,121 100%
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
(Dollars in Thousands)
(Unaudited)
Common Paid-in Retained
Stock Capital Earnings
BALANCE DECEMBER 31, 1995, 62,855,961 shares. . . . . $314,280 $697,962 $540,868
Net income. . . . . . . . . . . . . . . . . . . . . . 44,789
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (3,355)
Common stock, $0.515 per share. . . . . . . . . . . (32,563)
Issuance of 393,180 shares of common stock. . . . . . 2,935 10,272
BALANCE MARCH 31, 1996, 63,249,141 shares . . . . . . 317,215 708,234 549,739
Net income. . . . . . . . . . . . . . . . . . . . . . 124,161
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (11,484)
Common stock, $1.545 per share. . . . . . . . . . . (99,048)
Issuance of 1,376,118 shares of common stock. . . . . 5,911 31,199 (1,247)
BALANCE DECEMBER 31, 1996, 64,625,259 shares. . . . . 323,126 739,433 562,121
Net income. . . . . . . . . . . . . . . . . . . . . . 41,032
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (1,230)
Common stock, $0.525 per share. . . . . . . . . . . (34,041)
Issuance of 246,887 shares of common stock. . . . . . 1,235 6,151
BALANCE MARCH 31, 1997, 64,872,146 shares . . . . . . $324,361 $745,584 $567,882
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND OTHER INFORMATION
General: The Consolidated Financial Statements of Western Resources, Inc.
(the company) and its wholly-owned subsidiaries, include KPL, a rate-regulated
electric and gas division of the company, Kansas Gas and Electric Company (KGE),
a rate-regulated electric utility and wholly-owned subsidiary of the company,
Westar Security, Inc.(Westar Security), a wholly-owned subsidiary which provides
monitored electronic security services, Westar Energy, Inc., a wholly-owned
subsidiary which provides non-regulated energy services, Westar Capital, Inc.
(Westar Capital), a wholly-owned subsidiary which holds equity investments in
technology and energy-related companies, The Wing Group Limited (The Wing
Group), a wholly-owned developer of international power projects, and Mid
Continent Market Center, Inc. (Market Center), a wholly-owned regulated gas
transmission service provider. KGE owns 47% of Wolf Creek Nuclear Operating
Corporation (WCNOC), the operating company for Wolf Creek Generating Station
(Wolf Creek). The company records its proportionate share of all transactions of
WCNOC as it does other jointly-owned facilities. All significant intercompany
transactions have been eliminated.
The company prepares its financial statements in conformity with generally
accepted accounting principles as applied to regulated public utilities. The
accounting and rates of the company are subject to requirements of the Kansas
Corporation Commission (KCC), the Oklahoma Corporation Commission (OCC), and the
Federal Energy Regulatory Commission (FERC). The financial statements require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, to disclose contingent assets and liabilities at the
balance sheet dates, and to report amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the company's 1996 Annual
Report on Form 10-K and the KGE 1996 Annual Report on Form 10-K.
The company currently applies accounting standards that recognize the
economic effects of rate regulation Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation", (SFAS 71)
and, accordingly, has recorded regulatory assets and liabilities related to its
generation, transmission and distribution operations. In 1996, the KCC
initiated a generic docket to study electric restructuring issues. A retail
wheeling task force has been created by the Kansas Legislature to study
competitive trends in retail electric services. During the 1997 session of the
Kansas Legislature, bills were introduced to increase competition in the
electric industry. Among the matters under consideration is the recovery by
utilities of costs in excess of competitive cost levels. There can be no
assurance at this time that such costs will be recoverable if open competition
is initiated in the electric utility market. In the event the company
determines that it no longer meets the criteria set forth in SFAS 71, the
accounting impact would be an extraordinary non-cash charge to operations of
an amount that would be material. Criteria that give rise to the
discontinuance of SFAS 71 include, (1) increasing competition
that restricts the company's ability to establish prices to recover specific
costs, and (2) a significant change in the manner in which rates are set by
regulators from a cost-based regulation to another form of regulation. The
company periodically reviews these criteria to ensure the continuing application
of SFAS 71 is appropriate. Based on current evaluation of the various factors
and conditions that are expected to impact future cost recovery, the company
believes that its net regulatory assets are probable of future recovery. Any
regulatory changes that would require the company to discontinue SFAS 71 based
upon competitive or other events may significantly impact the valuation of the
company's net regulatory assets and its utility plant investments, particularly
the Wolf Creek facility. At this time, the effect of competition and the amount
of regulatory assets which could be recovered in such an environment cannot be
predicted. See Note 6 for further discussion on regulatory assets.
Environmental Remediation: Effective January 1, 1997, the company adopted
the provisions of Statement of Position (SOP) 96-1, "Environmental Remediation
Liabilities". This statement provides authoritative guidance for recognition,
measurement, display, and disclosure of environmental remediation liabilities in
financial statements. The company is currently evaluating and in the process
of estimating the potential liability associated with environmental
remediation. Management does not expect the amount to be significant to the
company's results of operations as the company will seek recovery of these costs
through rates as has been permitted by the KCC in the case of another Kansas
utility. Additionally, the adoption of this statement is not expected to have a
material impact on the company's financial position. To the extent that such
remediation costs are not recovered through rates, the costs may be material to
the company's operating results, depending on the degree of remediation required
and number of years over which the remediation must be completed.
Consolidated Statements of Cash Flows: For purposes of the Consolidated
Statements of Cash Flows, the company considers highly liquid collateralized
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI) are recorded in
Corporate-owned Life Insurance (net) on the Consolidated Balance Sheets:
March 31, December 31,
1997 1996
(Dollars in Millions)
Cash surrender value of contracts (1). $561.7 $563.0
Borrowings against contracts . . . . . (477.4) (476.8)
COLI (net). . . . . . . . . . $ 84.3 $ 86.2
(1) Cash surrender value of contracts as presented represents the value of the
policies as of the end of the respective policy years and not as of March 31,
1997 and December 31, 1996.
Income is recorded for increases in cash surrender value and net death
proceeds. Interest expense is recognized for COLI borrowings except for certain
contracts entered into in 1993 and 1992. The net income generated from COLI
contracts purchased prior to 1992 including the tax benefit of the interest
deduction and premium expenses are recorded as Corporate-owned Life Insurance
(net) on the Consolidated Statements of Income. The income from increases in
cash surrender value and net death proceeds was $4.2 million and $24.9 million
for the three and twelve months ended March 31, 1997, respectively, compared to
$4.7 million and $23.5 million for the three and twelve months ended March 31,
1996, respectively. The interest expense deduction taken was $6.9 million and
$27.7 million for the three and twelve months ended March 31, 1997,
respectively, compared to $6.9 million and $26.6 million for the three and
twelve months ended March 31, 1996, respectively.
The COLI contracts entered into in 1993 and 1992 were established to
mitigate the cost of postretirement and postemployment benefits. As approved by
the KCC, the company is using the net income stream generated by these COLI
policies to offset the costs of postretirement and postemployment benefits. A
significant portion of this income stream relates to the tax deduction currently
taken for interest incurred on contract borrowings under these COLI policies.
On August 2, 1996, Congress passed legislation that will phase out tax
benefits associated with the 1992 and 1993 COLI policies. The loss of tax
benefits will significantly reduce COLI earnings. The company is evaluating
other methods to replace the 1992 and 1993 COLI policies. The company also has
the ability to seek recovery of postretirement and postemployment costs through
the rate making process. Regulatory precedents established by the KCC are
expected to permit the accrued costs of postretirement and postemployment
benefits to be recovered in rates. If a suitable COLI replacement product
cannot be found, or these costs cannot be recovered in rates, the company may be
required to expense the regulatory asset. The company currently expects to be
able to find a suitable COLI replacement. The legislation had minimal impact on
the company's COLI policies entered into prior to 1992. See Notes 9 and 12 to
the Consolidated Financial Statements of the company's 1996 Annual Report on
Form 10-K for additional disclosure.
Reclassifications: Certain amounts in prior years have been reclassified
to conform with classifications used in the current year presentation.
2. MERGER AGREEMENT WITH KANSAS CITY POWER & LIGHT COMPANY
On February 7, 1997, Kansas City Power & Light Company (KCPL) and the
company entered into an agreement whereby KCPL would be merged with and into the
company. The merger agreement provides for a tax-free, stock-for-stock
transaction valued at approximately $2 billion. Under terms of the agreement,
KCPL shareowners will receive $32 of company common stock per KCPL common share,
subject to an exchange ratio collar of not less than .917 to no more than 1.100
common shares. Consummation of the KCPL Merger is subject to customary
conditions including obtaining the approval of KCPL's and the company's
shareowners and various regulatory agencies. The company expects to be able to
close the KCPL Merger in the first half of 1998.
The KCPL Merger, will create a company with more than two million security
and energy customers, $9.5 billion in total assets, $3.0 billion in annual
revenues and more than 8,000 megawatts of electric generation resources.
The KCPL Merger is designed to qualify as a pooling of interests for
financial reporting purposes. Under this method, the recorded assets and
liabilities of the company and KCPL would be carried forward at historical
amounts to a combined balance sheet. Prior period operating results and the
consolidated statements of financial position, cash flows and capitalization
would be restated to effect the combination for all periods presented.
KCPL is a public utility company engaged in the generation, transmission,
distribution, and sale of electricity to approximately 430,000 customers in
western Missouri and eastern Kansas. KCPL and the company have joint interests
in certain electric generating assets, including Wolf Creek.
As of March 31, 1997, the company estimates it has incurred approximately
$35 million of transaction costs associated with the KCPL Merger. The company
anticipates expensing these costs in the first reporting period subsequent to
closing the KCPL Merger.
3. STRATEGIC ALLIANCE WITH ONEOK INC.
On December 12, 1996, the company and ONEOK Inc. (ONEOK) announced an
agreement to form a strategic alliance combining the natural gas assets of both
companies. Under the agreement for the proposed strategic alliance, the company
will contribute its natural gas business to a new company (New ONEOK) in
exchange for a 45% equity interest. The proposed transaction is subject to
approval by regulatory authorities and ONEOK shareowners. The company is
working towards consummation of the transaction during the second half of 1997.
For additional information on the Strategic Alliance with ONEOK Inc., see
Note 6 of the company's 1996 Annual Report on Form 10-K.
4. INVESTMENTS
During 1996, the company purchased approximately 38 million common shares
of ADT Limited (ADT) for approximately $589 million. The shares purchased
represent approximately 25% of ADT's common equity. Goodwill of approximately
$369 million is associated with this investment and is being amortized over 40
years. The company uses the equity method of accounting for this investment.
On December 18, 1996, the company announced its intention to offer to
exchange $22.50 in cash ($7.50) and shares ($15.00) of the company's common
stock for each outstanding common share of ADT not already owned by the
company or its subsidiaries (ADT Offer). The value of the ADT Offer, assuming
the company's average stock price prior to closing is above $29.75 per common
share, is approximately $3.5 billion, including the company's existing
investment in ADT. If the ADT Offer is completed, the company presently intends
to propose and seek to have ADT effect an amalgamation, pursuant to which a
newly created subsidiary of the company incorporated under the laws of Bermuda
would amalgamate with and into ADT (Amalgamation). Based upon the closing
stock price of the company on March 13, 1997, approximately 60.1 million shares
of company common stock would be issuable pursuant to an acquisition of ADT.
However, the actual number of shares of company common stock that would be
issuable in connection with the ADT Offer and the Amalgamation will depend on
the exchange ratio and the number of shares validly tendered prior to the
expiration date of the ADT Offer and the number of shares of ADT outstanding at
the time the Amalgamation is completed.
On March 3, 1997, the company announced a change in the ADT Offer. Under
the terms of the revised ADT Offer, ADT shareowners would receive $10 cash plus
0.41494 of a share of company common stock for each share of ADT tendered, based
on the closing price of the company's common stock on March 13, 1997. ADT
shareowners would not, however, receive more than 0.42017 shares of company
common stock for each ADT common share.
Concurrent with the announcement of the ADT Offer on December 18, 1996, the
company filed a registration statement on Form S-4 with the Securities and
Exchange Commission (SEC) related to the ADT Offer. On March 14, 1997, the
registration statement was declared effective by the SEC. The expiration date
of the ADT Offer was 5 p.m., EDT, April 15, 1997. The company extended the ADT
offer to June 17, 1997, and may continue to do so from time to time until the
various conditions to the ADT Offer have been satisfied or waived. The ADT
Offer will be subject to the approval of ADT and company shareowners. On
January 23, 1997, the waiting period for the Hart-Scott-Rodino Antitrust
Improvement Act expired. On February 7, 1997, the company received regulatory
approval from the KCC to issue company common stock and debt necessary for the
ADT Offer.
The board of directors for ADT have recommended the rejection of the ADT
Offer and on March 17, 1997, ADT announced that it had entered into a definitive
merger agreement pursuant to which Tyco International Ltd. (Tyco), a diversified
manufacturer of industrial and commercial products, would effectively acquire
ADT in a stock for stock transaction valued at $5.6 billion, or approximately
$29 per ADT share of common stock.
On March 18, 1997, the company issued a press release indicating that it
had mailed the details of the ADT Offer to ADT shareowners and that it would be
reviewing the Tyco offer as well as considering its alternatives to such offer
and assessing its rights as an ADT shareowner.
5. LEGAL PROCEEDINGS
The company requested that the District Court for the Southern District of
Florida require that ADT hold a special shareowners meeting no later than March
20, 1997. In its filing, the company claimed that the ADT board of directors
has breached its fiduciary and statutory duties and that there is no reason to
delay the special meeting until July 8, 1997 as established by ADT. See Note 4
for additional information regarding the proposed acquisition of ADT.
On December 26, 1996, an ADT shareowner filed a purported class action
complaint against ADT, ADT's board of directors, the company and the company's
wholly-owned subsidiary, Westar Capital in the Civil Division of the Circuit
Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida. (Charles
Gachot v. ADT, Ltd., Western Resources, Inc., Westar Capital, Inc., Michael A.
Ashcroft, et al., Case No. 96-10912-AN) The complaint alleges, among other
things, that the company and Westar Capital are breaching their fiduciary duties
to ADT's shareowners by failing to offer "an appropriate premium for the
controlling interest" in ADT and by holding "an effective blocking position"
that prevents independent parties from bidding for ADT. The complaint seeks
preliminary and permanent relief enjoining the company from acquiring the
outstanding shares of ADT and unspecified damages. The company believes it has
good and valid defenses to the claims asserted and does not anticipate any
material adverse effect upon its overall financial condition or results of
operations.
As part of the acquisition of Westinghouse Security Systems (WSS) on
December 31, 1996, WSS assigned to WestSec,Inc., a wholly-owned subsidiary of
Westar Capital established to acquire the assets of WSS, a software license with
Innovative Business Systems (IBS) which is integral to the operation of its
security business. On January 8, 1997, IBS filed litigation in Dallas County,
Texas in the 298th Judicial District Court concerning the assignment of the
license to WestSec, (Innovative Business Systems (Overseas) Ltd., and Innovative
Business Software, Inc. v. Westinghouse Electric Corporation, Westinghouse
Security Systems, Inc., WestSec, Inc., Western Resources, Inc., et al., Cause
No. 97-00184). The company and Westar Capital have demanded Westinghouse
Electric
Corporation defend and indemnify them. While the loss of use of the license may
have a material impact on the operations of WestSec, management of the company
currently does not believe that the ultimate disposition of this matter will
have a material adverse effect upon the company's overall financial condition or
results of operations
The company and its subsidiaries are involved in various other legal,
environmental, and regulatory proceedings. Management believes that adequate
provision has been made and accordingly believes that the ultimate dispositions
of these matters will not have a material adverse effect upon the company's
overall financial position or results of operations.
6. RATE MATTERS AND REGULATION
Utility expenses and credits recognized as regulatory assets and
liabilities on the Consolidated Balance Sheets are recognized in income as the
related amounts are included in service rates and recovered from or refunded to
customers in utility revenues. The company expects to recover the following
regulatory assets in rates:
March 31, December 31,
1997 1996
(Dollars in Thousands)
Coal contract settlement costs $ 19,788 $ 21,037
Service line replacement 11,629 12,921
Post employment/retirement benefits 43,800 40,834
Deferred plant costs 31,199 31,272
Phase-in revenues 21,931 26,317
Debt issuance costs 77,020 78,532
Deferred cost of gas purchased 16,777 21,332
Other regulatory assets 8,787 8,794
Total regulatory assets $230,931 $241,039
See Note 9 included in the company's 1996 Annual Report on Form 10-K for
additional information regarding regulatory assets.
Rate Proceedings: On May 23, 1996, the company implemented an $8.7 million
electric rate reduction to KGE customers on an interim basis. On October 22,
1996, the company, the KCC Staff, the City of Wichita, and the Citizens Utility
Ratepayer Board filed an agreement at the KCC whereby the company's retail
electric rates would be reduced, subject to approval by the KCC. This agreement
was approved on January 15, 1997. Under the agreement, on February 1, 1997,
KGE's rates were reduced by $36.3 million and, in addition, the May 1996 KGE
interim reduction became permanent. KGE's rates will be reduced by another $10
million effective June 1, 1998, and again on June 1, 1999. KPL's rates were
reduced by $10 million effective February 1, 1997. Two one-time rebates of $5
million will be credited to the company's customers in January 1998 and 1999.
The agreement also fixes annual savings from the merger with KGE at $40
million. This level of merger savings provides for complete recovery of and a
return on the acquisition premium.
On November 27, 1996, the KCC issued a Suspension Order and on December 3,
1996, an order was issued which suspended, subject to refund, costs related to
purchases from Kansas Pipeline Partnership included in the company's COGR. On
December 12, 1996, the company filed a Petition for Reconsideration or For More
Definite Statement by Staff of the Issues to be addressed in this Docket. On
March 3, 1997, the Staff issued a More Definite Statement specifying which
charges from Kansas Pipeline Partnership (KPP) it asserts are inappropriate for
inclusion in the company's COGR. The company responded to the More Definite
Statement stating that it does not believe any of the charges from KPP should be
disallowed from its COGR. The company does not expect this proceeding to have
a material adverse effect on its results of operations.
7. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites: The company has been associated with 15 former
manufactured gas sites located in Kansas which may contain coal tar and other
potentially harmful materials. The company and the Kansas Department of Health
and Environment (KDHE) entered into a consent agreement governing all future
work at the 15 sites. The terms of the consent agreement will allow the company
to investigate these sites and set remediation priorities based upon the results
of the investigations and risk analysis. The prioritized sites will be
investigated over a ten year period. The agreement will allow the company to
set mutual objectives with the KDHE in order to expedite effective response
activities and to control costs and environmental impact. As of March 31, 1997,
the costs incurred for site investigation and risk assessment have been minimal.
Since the site investigations are preliminary, no formal agreement on costs to
be incurred has been reached, and the minimum potential liability would not be
material to the financial statements, an accrual for these environmental
contingencies has not been reflected in the accompanying financial statements.
In accordance with the terms of the ONEOK agreement, ownership of twelve of the
aforementioned sites will be transferred to New ONEOK upon closing. The ONEOK
agreement limits the company's liabilities to an immaterial amount for future
remediation of these sites.
Superfund Sites: The company is one of numerous potentially responsible
parties at a groundwater contamination site in Wichita, Kansas (Wichita site)
which is listed by the EPA as a Superfund site. The company has previously been
associated with other Superfund sites of which the company's liability has been
classified as de minimis and any potential obligations have been settled at
minimal cost. In 1994, the company settled Superfund obligations at three sites
for a total of $57,500. No Superfund obligations have been settled since 1994.
The company's obligation at the Wichita site appears to be limited based on this
experience. In the opinion of the company's management, the resolution of these
matters is not expected to have a material impact on the company's financial
position or results of operations.
Clean Air Act: The Clean Air Act Amendments of 1990 (the Act) require a
two-phase reduction in certain emissions. To meet the monitoring and reporting
requirements under the acid rain program, the company installed continuous
monitoring and reporting equipment at a total cost of approximately $10 million
as of December 31, 1996. The company does not expect material expenditures to
be needed to meet Phase II sulfur dioxide requirements.
In the fourth quarter of 1996, the Environmental Protection Agency (EPA)
issued new standards applying to nitrogen oxides (NOx) emissions from the
company's effected coal units. Both Jeffrey Energy Center and Lawrence Energy
Center will require operational modifications and possible minor capital
investments to modify the emission controls. The company will have until the
year 2000 to comply.
Decommissioning: The company accrues decommissioning costs over the
expected life of the Wolf Creek generating facility. The accrual is based on
estimated unrecovered decommissioning costs which consider inflation over the
remaining estimated life of the generating facility and are net of expected
earnings on amounts recovered from customers and deposited in an external trust
fund.
Approval of the 1996 Decommissioning Cost Study was received from the KCC
on February 28, 1997. Based on the study, the company's share of these
decommissioning costs, under the immediate dismantlement method, is estimated to
be approximately $624 million during the period 2025 through 2033, or
approximately $192 million in 1996 dollars. These costs were calculated using
an assumed inflation rate of 3.6% over the remaining service life from 1996 of
29 years.
Decommissioning costs are currently being charged to operating expenses in
accordance with prior KCC orders. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek. Amounts
expensed approximated $3.7 million in 1996 and will increase annually to $5.6
million in 2024. These expenses are deposited in an external trust fund. The
average after tax expected return on trust assets is 5.7%. An updated funding
schedule, on which the contributions are not materially different, was submitted
to the KCC on March 10, 1997. Approval of this funding schedule is still
pending with the KCC.
The company's investment in the decommissioning fund, including reinvested
earnings approximated $33.7 million and $33.0 million at March 31, 1997 and
December 31, 1996, respectively. Trust fund earnings accumulate in the fund
balance and increase the recorded decommissioning liability. These amounts are
reflected in Investments and Other Property, Decommissioning trust, and the
related liability is included in Deferred Credits and Other Liabilities, Other,
on the Consolidated Balance Sheets.
The staff of the SEC has questioned certain current accounting practices
used by nuclear electric generating station owners regarding the recognition,
measurement, and classification of decommissioning costs for nuclear electric
generating stations. In response to these questions, the Financial Accounting
Standards Board is expected to issue new accounting standards for removal costs,
including decommissioning, in 1997. If current electric utility industry
accounting practices for such decommissioning costs are changed: (1) annual
decommissioning expenses could increase, (2) the estimated present value of
decommissioning costs could be recorded as a liability rather than as
accumulated depreciation, and (3) trust fund income from the external
decommissioning trusts could be reported as investment income rather than as a
reduction to decommissioning expense. When revised accounting guidance is
issued, the company will also have to evaluate its effect on accounting for
removal costs of other long-lived assets. The company is not able to predict
what effect such changes would have on results of operations, financial
position, or related regulatory practices until the final issuance of revised
accounting guidance, but such effect could be material.
The company carries premature decommissioning insurance which has several
restrictions. One of these is that it can only be used if Wolf Creek incurs an
accident exceeding $500 million in expenses to safely stabilize the reactor, to
decontaminate the reactor and reactor station site in accordance with a plan
approved by the Nuclear Regulatory Commission (NRC), and to pay for on-site
property damages. This decommissioning insurance will only be available if the
insurance funds are not needed to implement the NRC-approved plan for
stabilization and decontamination.
Nuclear Insurance: The Price-Anderson Act limits the combined public
liability of the owners of nuclear power plants to $8.9 billion for a single
nuclear incident. If this liability limitation is insufficient, the U.S.
Congress will consider taking whatever action is necessary to compensate the
public for valid claims. The Wolf Creek owners (Owners) have purchased the
maximum available private insurance of $200 million and the balance is provided
by an assessment plan mandated by the NRC. Under this plan, the Owners are
jointly and severally subject to a retrospective assessment of up to $79.3
million ($37.3 million, company's share) in the event there is a major nuclear
incident involving any of the nation's licensed reactors. This assessment is
subject to an inflation adjustment based on the Consumer Price Index and
applicable premium taxes. There is a limitation of $10 million ($4.7 million,
company's share) in retrospective assessments per incident, per year.
The Owners carry decontamination liability, premature decommissioning
liability, and property damage insurance for Wolf Creek totaling approximately
$2.8 billion ($1.3 billion, company's share). This insurance is provided by a
combination of "nuclear insurance pools" ($500 million) and Nuclear Electric
Insurance Limited (NEIL) ($2.3 billion). In the event of an accident, insurance
proceeds must first be used for reactor stabilization and site decontamination.
The company's share of any remaining proceeds can be used for property damage or
premature decommissioning costs up to $1.3 billion (company's share). Premature
decommissioning insurance cost recovery is excess of funds previously collected
for decommissioning (as discussed under "Decommissioning").
The Owners also carry additional insurance with NEIL to cover costs of
replacement power and other extra expenses incurred during a prolonged outage
resulting from accidental property damage at Wolf Creek. If losses incurred at
any of the nuclear plants insured under the NEIL policies exceed premiums,
reserves, and other NEIL resources, the company may be subject to retrospective
assessments under the current policies of approximately $8 million per year.
Although the company maintains various insurance policies to provide
coverage for potential losses and liabilities resulting from an accident or an
extended outage, the company's insurance coverage may not be adequate to cover
the costs that could result from a catastrophic accident or extended outage at
Wolf Creek. Any substantial losses not covered by insurance, to the extent not
recoverable through rates, would have a material adverse effect on the company's
financial condition and results of operations.
Fuel Commitments: To supply a portion of the fuel requirements for its
generating plants, the company has entered into various commitments to obtain
nuclear fuel and coal. Some of these contracts contain provisions for price
escalation and minimum purchase commitments. At December 31, 1996, WCNOC's
nuclear fuel commitments (company's share) were approximately $15.4 million for
uranium concentrates expiring at various times through 2001, $59.4 million for
enrichment expiring at various times through 2003, and $70.3 million for
fabrication through 2025. At December 31, 1996, the company's coal contract
commitments in 1996 dollars under the remaining terms of the contracts were
approximately $2.6 billion. The largest coal contract expires in 2020, with the
remaining coal contracts expiring at various times through 2013.
Energy Act: As part of the 1992 Energy Policy Act, a special assessment
is being collected from utilities for a uranium enrichment, decontamination, and
decommissioning fund. The company's portion of the assessment for Wolf Creek is
approximately $7 million, payable over 15 years. Management expects such costs
to be recovered through the ratemaking process.
Investment Commitments: During 1996, The Wing Group obtained ownership
interests in independent power generation projects under construction in The
Republic of Turkey and Colombia. The Wing Group or other non-regulated company
subsidiaries are committed to future funding of equity interests in these
projects. In 1997, commitments are not expected to exceed $31 million.
Currently, equity commitments beyond 1997 are approximately $5 million. The
company has also committed $105 million through June of 1998 to power generation
projects in the People's Republic of China.
8. INCOME TAXES
Total income tax expense included in the Consolidated Statements of Income
reflects the Federal statutory rate of 35%. The Federal statutory rate produces
effective income tax rates of 35.9% and 33.5% for the three and twelve month
periods ended March 31, 1997 compared to 33.1% and 31.6% for the three and
twelve month periods ended March 31, 1996. The effective income tax rates vary
from the Federal statutory rate due to permanent differences, including the
amortization of investment tax credits, and accelerated amortization of certain
deferred income taxes.
WESTERN RESOURCES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
company's 1996 Annual Report on Form 10-K. The following updates the
information provided in the 1996 Annual Report on Form 10-K and analyzes certain
changes in the results of operations between the three and twelve month periods
ended March 31, 1997 and comparable periods of 1996.
Certain matters discussed in this Form 10-Q are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
company's future plans, objectives or goals are also forward-looking
statements. Such statements address future events and conditions concerning
capital expenditures, earnings, litigation, rate and other regulatory matters,
the pending KCPL Merger, the ADT Offer, the strategic alliance with ONEOK,
liquidity and capital resources, interest rates, changing weather conditions,
and accounting matters. Actual results in each case could differ materially
from those currently anticipated in such statements, by reason of factors such
as electric utility restructuring, including the ongoing state and federal
activities; future economic conditions; developments in the legislative,
regulatory and competitive markets in which the company operates; and other
circumstances affecting anticipated revenues and costs.
FINANCIAL CONDITION
General: Net income for the first quarter of 1997 was $41 million, down
from net income of $45 million for the same period of 1996. The company earned
$0.61 per share of common stock for the first quarter of 1997, a decrease of
$0.05 per share from the first quarter of 1996. Operating revenues were $626
million and $556 million for the three months ended March 31, 1997 and 1996,
respectively.
Net income for the twelve months ended March 31, 1997, was $165 million
compared to $185 million for the same period of 1996. The company earned $2.37
per share of common stock for the twelve months ended March 31, 1997, a decrease
of $0.38 per share from the comparable period of 1996. Operating revenues were
$2.1 billion for the twelve months ended March 31, 1997 compared to $1.9 billion
for the same period of 1996.
The changes in net income and operating revenues are primarily due to the
reasons discussed below in Results of Operations. The earnings per share for
the three months ended March 31, 1997 have decreased compared to prior year due
to warmer winter weather and increased financing charges. Earnings per share
for the twelve months ended March 31, 1997 have decreased compared to the prior
twelve month period primarily due to interest expense associated with
short-term
borrowings related to the expansion of monitored-security and energy-related
businesses and due to a one-time restructuring charge recorded by ADT Limited
(ADT).
A quarterly dividend of $0.525 per share was declared in the first quarter
of 1997, for an indicated annual rate of $2.10 per share. The book value per
share was $25.25 at March 31, 1997, up from $25.14 at December 31, 1996. There
were 64,807,081 and 63,163,715 average shares outstanding for the first quarter
of 1997 and 1996, respectively.
Liquidity and Capital Resources: The company's short-term financing
requirements are satisfied, as needed, through the sale of commercial paper,
short-term bank loans and borrowings under unsecured lines of credit maintained
with banks. At March 31, 1997, short-term borrowings amounted to $1.2 billion,
of which $937 million was commercial paper and the balance was from uncommitted
bank loans.
The company's short-term debt balance at March 31, 1997, increased
approximately $884 million from March 31, 1996. The increase was primarily a
result of the company's purchases of an approximate 25% common equity interest
in ADT and its purchase of WSS. See Note 4 for further discussion of the ADT
purchase.
At March 31, 1997, the company had short-term bank credit arrangements
available of $973 million, of which $0 was outstanding.
The company maintains a $350 million revolving credit agreement that
expires on October 5, 1999. Under the terms of this agreement, the company may,
at its option, borrow at different market-based interest rates and is required,
among other restrictions, to maintain a total debt to total capitalization ratio
of not greater than 65% at all times. A facility fee is paid on the $350
million commitment. The unused portion of the revolving credit facility may be
used to provide support for commercial paper. At March 31, 1997, the company
had $0 borrowed under the facility.
The company filed a shelf registration with the SEC on April 29, 1997 to
sell up to $550 million in first mortgage bonds and debt securities. The SEC
declared this registration effective on May 13, 1997. When combined with a
previous registration, the company will have up to $750 million in bonds and
securities available for sale. Net proceeds of any securities sales will be
used primarily to repay short-term debt and for other corporate purposes.
RESULTS OF OPERATIONS
Revenues: The company's revenues vary with levels of usage as a result of
changing weather conditions during comparable periods and are sensitive to
seasonal fluctuations between consecutive periods. Future electric and natural
gas revenues will continue to be affected by weather conditions, the electric
rate reduction which was implemented on February 1, 1997, changes in the
industry, changes in the regulatory environment, competition from other sources
of energy, competing fuel sources, customer conservation efforts, wholesale
demand, and the overall economy of the company's service area.
The following table reflects changes in electric sales for the three and
twelve months ended March 31, 1997 from the comparable periods of 1996.
Increase (Decrease) in electric sales volumes:
3 Months 12 Months
ended ended
Residential (1.8)% 1.2%
Commercial 0.9% 2.5%
Industrial (3.0)% (1.4)%
Other 3.3% (0.2)%
Total retail sales (1.3)% 0.7%
Wholesale and interchange 38.5% 50.9%
Total electric sales 7.6% 10.9%
Electric revenues remained virtually unchanged for the three months ended
March 31, 1997 compared to the same period of 1996. Electric revenues increased
3% for the twelve months ended March 31, 1997 compared to the same period of
1996. The increase was due primarily to an increase in wholesale and interchange
sales due to increased sales to power brokers.
The following table reflects changes in natural gas sales for the three and
twelve months ended March 31, 1997 from the comparable periods of 1996.
Increase (Decrease) in regulated natural gas sales volumes:
3 Months 12 Months
ended ended
Residential (14.7)% (4.3)%
Commercial (15.9)% (7.6)%
Industrial (29.4)% (27.8)%
Transportation (2.4)% (6.5)%
Other 69.4% 41.0%
Total Deliveries (9.8)% (0.8)%
Regulated natural gas revenues increased 6.7% for the three months ended
March 31, 1997 compared to March 31, 1996 due to the gas revenue increase
authorized by the KCC on July 11, 1996 and as a result of higher gas costs
passed on to customers through the cost of gas rider (COGR). Regulated natural
gas revenues increased 16.6% for the twelve months ended March 31, 1997 compared
to the same period of 1996 as a result of higher gas costs passed on to
customers through the COGR, increased as-available gas sales, and the gas
revenue increase ordered by the KCC on July 11, 1996.
Non-regulated gas revenues increased approximately $23 million to
approximately $79 million, or 41%, for the three months ended March 31, 1997
compared to March 31, 1996. Non-regulated gas revenues increased approximately
$82 million to approximately $270 million, or 44%, for the twelve months ended
March 31, 1997 compared to the same period of 1996. Non-regulated gas revenues
for the three and twelve months ended March 31, 1997 increased as a result of
3% and 7% increases, respectively, in sales volumes of the company's
wholly-owned subsidiary Westar Gas Marketing, Inc. (Westar Gas Marketing).
When the alliance with ONEOK is complete, the company will contribute its
natural gas business to New ONEOK in exchange for a 45% equity interest.
Operating Expenses: Total operating expenses increased 13% for the three
months ended March 31, 1997 compared to 1996. The increase is attributable to
increased other operating expenses due to an increase in net generation as a
result of increased sales to wholesale and interchange customers.
Total operating expenses increased 15% for the twelve months ended March
31, 1997 compared to 1996. The increase is primarily attributable to the
amortization of the acquisition adjustment related to the KGE merger and
increased fuel expense, purchased power, natural gas purchases, and other
operating expenses. The increases in fuel, purchased power, and operating
expenses were due to the increase in net generation as a result of higher
customer demand for air conditioning load during the second quarter of 1996 and
higher sales to wholesale and interchange customers. These increases were
partially offset by decreased maintenance and income tax expense.
The amortization of the acquisition adjustment associated with the
company's 1992 acquisition of KGE, which began in August 1995, amounted to $5.0
million and $20.8 million for the three and twelve months ended March 31, 1997
compared to $5.0 million and $11.7 million for the three and twelve months ended
March 31, 1996. On January 15, 1997, the KCC fixed the annual merger savings
level at $40 million which provides complete recovery of the acquisition premium
amortization expense and a return on the acquisition premium.
Other Income and Deductions: Other income and deductions, net of taxes,
increased $3.8 million for the three months ended March 31, 1997 compared to
1996 attributable to earnings from subsidiary investments. Other income and
deductions, net of taxes, decreased $8.8 million for the twelve months ended
March 31, 1997 compared to 1996 primarily due to a one-time restructuring charge
recorded by ADT Limited, in which the company owns approximately 25% of the
common stock.
Interest Charges and Preferred and Preference Dividend Requirements: Total
interest charges increased 49% and 33% for the three and twelve months ended
March 31, 1997 from the comparable periods in 1996, respectively. The increases
for the three and twelve months interest charges reflects interest paid on
higher short-term debt balances to finance the company's investment in ADT and
the purchase of WSS. The increases also reflect interest payments related to
the company's mandatory redeemable preference stock which was issued in December
of 1995 and July of 1996. Partially offsetting the higher interest charges were
lower preferred and preference dividends due to the redemption of preference
stock in July of 1996. See discussion above in Liquidity and Capital Resources
regarding higher short-term debt balances.
WESTERN RESOURCES, INC.
Part II Other Information
Item 5. Other Information
Merger Agreement with Kansas City Power & Light Company: See Note 2 of the
Notes to Consolidated Financial Statements.
Strategic Alliance with ONEOK Inc.: See Note 3 of the Notes to the
Consolidated Financial Statements.
Rate Plans: See Note 6 of the Consolidated Financial Statements.
Investments: See Note 4 of the Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3 - By-laws of the company (filed electronically)
Exhibit 12 - Computation of Ratio of Consolidated Earnings
to Fixed Charges for 12 Months Ended
March 31, 1997 (filed electronically)
Exhibit 27 - Financial Data Schedule (filed electronically)
(b) Reports on Form 8-K:
Form 8-K filed February 10, 1997 - Press release regarding the
company's merger with KCPL, including Agreement and Plan of
Merger between the company and KCPL, dated as of February 7,
1997.
Form 8-K filed April 2, 1997 - Proforma financial statements of
the company and KCPL as of December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Western Resources, Inc.
Date May 14, 1997 By /s/ S. L. KITCHEN
S. L. Kitchen, Executive Vice President
and Chief Financial Officer
Date May 14, 1997 By /s/ JERRY D. COURINGTON
Jerry D. Courington,
Controller
Exhibit 3
WESTERN RESOURCES, INC.
BY-LAWS
(as amended March 19, 1997)
ARTICLE I
STOCKHOLDERS
Section 1. The annual meeting of the stockholders of the Company shall
be held on the first Tuesday of May in each year (or if said day be a legal
holiday, then on the next succeeding day not a holiday), at 11:00 A.M. or, on
such other day and at such time as the Board of Directors may deem reasonable
and appropriate, at the principal office of the Company in the City of Topeka,
Kansas, or such other place as the Board of Directors may designate for the
purpose of electing Directors and transacting such other business as may
properly be brought before the meeting.
Section 2. Special meetings of the stockholders may be held upon call
of the Board of Directors or the Chairman of the Board or the President, at
such time and at such place within or without the State of Kansas as may be
stated in the call and notice.
Section 3. Notice stating the place, day and hour of every meeting of
the stockholders, and in the case of a special meeting further stating the
purpose for which such meeting is called, shall be mailed at least ten days
before the meeting to each stockholder of record who shall be entitled to vote
thereat, at the last known post office address of each such stockholder as it
appears upon the books of the Company. Such further notice shall be given by
mail, publication or otherwise, as may be required by law. Any meeting may be
held without notice if all of the stockholders entitled to vote are present or
represented at the meeting, or all of the stockholders entitled to notice of
the meeting sign a waiver thereof in writing.
Section 4. The holders of record of a majority of the shares of the
capital stock of the Company issued and outstanding, entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders, and the vote of a majority of such quorum shall
be necessary for the transaction of any business, unless otherwise provided by
law, by the Articles of Incorporation or by the By-laws. If at any meeting
there shall be no quorum, the holders of record, entitled to vote, of a
majority of such shares of stock so present or represented may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall have been obtained, when any business may be
transacted which might have been transacted at the meeting as first convened
had there been a quorum.
Section 5. Meetings of the stockholders shall be presided over by the
Chairman of the Board or, if he is not present, by the President or, in
his absence, by a Vice President. In the event that none of such officers be
present, then the meeting shall be presided over by a chairman to be chosen at
the meeting. The Secretary of the Company or, if he is not present, an
Assistant Secretary of the Company or, if neither the Secretary nor an
Assistant Secretary is present, a secretary to be chosen at the meeting shall
act as secretary of the meeting.
Section 6. At all meetings of the stockholders every holder of record
of the shares of the capital stock of the Company, entitled to vote thereat,
may vote thereat either in person or by proxy.
Section 7. At all elections of directors the voting shall be by written
ballot and stockholders may cumulate their votes.
Section 8. The Board of Directors shall have power to close the stock
transfer books of the Company for a period not exceeding sixty days preceding
the date of - -
(a) Any meeting of the stockholders;
(b) Any payment of any dividends;
(c) Any allotment of rights;
(d) Any effective date of change or conversion or
exchange of capital stock;
or, in lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date not exceeding sixty days preceding the effective date of
any of the above enumerated transactions, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to receive notice of and to vote at such meeting, or to receive
payment of such dividend, or to receive allotment of rights, or to exercise
rights of change, conversion or exchange of capital stock, as the case may be,
or to participate in any of the above transactions, notwithstanding any
transfer of any stock on the books of the Company after such record date fixed
as aforesaid.
ARTICLE II
DIRECTORS
Section 1. Subject to the provisions of the Articles of Incorporation,
the
Directors shall be elected at the regular annual meeting of stockholders, but
if such election of Directors is not held on the day of the annual meeting,
the Directors shall cause the election to be held as soon thereafter as
conveniently may be. Also, subject to the provisions of the Articles of
Incorporation, the Directors shall be divided into three classes, which shall
be as nearly equal in number as possible, and no class shall include fewer
than two Directors. Directors shall hold office for a term of three years and
until their successors are elected and qualified, except that in 1990, the
first class of Directors shall be elected for a term of one year and the
second class of Directors shall be elected for a term of two years. Each
class of Directors shall be designated by the year in which its term ends.
The Board shall fill vacancies in any class in the manner prescribed in this
Article II, provided that any such newly elected Director shall serve for the
remainder of the term applicable to the vacancy being filled. Notwithstanding
the foregoing, whenever the holders of the preferred stock or preference stock
issued by the Company shall have the right, voting separately by class, to
elect Directors at an annual or special meeting of the stockholders, the
election, term of office, and filling of vacancies of such Directors shall be
governed by the terms of the Articles of Incorporation applicable thereto, and
such Directors so elected shall not be divided into classes pursuant to this
paragraph. Directors elected by a vote of the holders of preferred stock or
preference stock as provided in the Articles of Incorporation shall hold
office only so long as is required by the Articles of Incorporation. Except
as otherwise provided in the By-laws and Articles of Incorporation, no
Director shall be removed except for cause. This paragraph shall not be
amended or repealed, and no provision inconsistent herewith shall be adopted,
without the affirmative vote of the holders of at least 80% of the outstanding
shares of stock of the Company entitled to vote in any election.
Each director who is not a salaried full time officer or employee of the
Company shall be
conclusively deemed to have resigned from the Board of Directors of the
Company if he retires, resigns, or is removed from the primary business
position which he held at the time of his election to the Board.
No director who is not a salaried full time officer or employee of the
Company shall be designated by the Board of Directors of the Company as a
nominee for re-election to the Board of Directors at an annual meeting of
stockholders if he shall have attained the age of seventy (70) at year-end
prior to such annual meeting.
No director who is a salaried full time officer or employee of the
Company shall be designated by the Board of Directors of the Company as a
nominee for re-election to the Board of Directors at an annual meeting of
stockholders, if he shall have attained the age of sixty-five (65) at year-end
prior to such annual meeting, or if he is no longer a full time officer or
employee of the Company, or if he has been removed, during the 12 month period
prior to Board action on nominees, from the position he previously held with
the Company, except that any chief executive officer serving on the Board may
be re-nominated for a maximum of five (5) years after his retirement as chief
executive officer, on a year to year basis.
Each Director before entering upon his duties shall file with the
corporation written acceptance of his office. A majority of the members of
the Board shall constitute a quorum for the filling of vacancies of the Board
of Directors and the transaction of business, but if at any meeting of the
Board there shall be less than a quorum present, a majority of the Directors
present may adjourn the meeting from time to time without notice, other than
announcement of the meeting, until a quorum shall have been obtained, when any
business may be transacted which might have been transacted at the meeting as
first convened had there been a quorum. The acts of a majority of the
Directors present at any meeting at which there is a quorum shall, except as
otherwise provided by
law, by the Articles of Incorporation or the By-Laws, be the acts of the
Board.
Section 2. Vacancies in the Board of Directors, caused by death,
resignation or otherwise, may be filled at any meeting of the Board of
Directors and the directors so elected shall hold office until the next annual
meeting of the stockholders and until their successors are elected and
qualified.
Section 3. Meetings of the Board of Directors shall be held at such
place within or without the State of Kansas as may from time to time be fixed
by resolution of the Board or as may be specified in the call of any meeting.
Regular meetings of the Board shall be held at such time as may from time to
time be fixed by resolution of the Board, and notice of such meetings need not
be given. Special meetings of the Board may be held at any time upon call of
the Chairman of the Board or the President or a Vice President, by oral,
telegraphic or written notice, duly served on or sent or mailed to each
director not less than two days before any such meeting. Members of the Board
may participate in any meeting of such Board by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute presence in person at the meeting. A meeting of the
Board may be held without notice immediately after the annual meeting of the
stockholders at the same place at which such meeting is held. Any meeting may
be held without notice if all of the directors are present at the meeting, or
if all of the directors sign a waiver thereof in writing. Any action required
or permitted to be taken at any meeting of the board of directors may be taken
without a meeting if all members of the board consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the
board.
Section 4. Meetings of the Board of Directors shall be presided over by
the Chairman of the Board, or, if he is not present, by the
President or, if he is absent, by a Vice President. In the event none of such
officers are present, then the meeting shall be presided over by a chairman to
be chosen at the meeting. The Secretary of the Company or, if he is not
present, an Assistant Secretary of the Company or, if neither the Secretary
nor an Assistant Secretary is present, a secretary to be chosen at the meeting
shall act as secretary of the meeting.
Section 5. Each director of the Company who is not a salaried officer
or salaried employee of the Company shall be entitled to receive such
remuneration for serving as a director and as a member of any committee of the
Board as may be fixed from time to time by the Board of Directors.
ARTICLE III
OFFICERS
Section 1. The Board of Directors, as soon as may be after its election
held in each year, shall choose one of its number President of the Company and
shall appoint one or more Vice Presidents, a Secretary and a Treasurer of the
Company and from time to time may appoint such Assistant Secretaries,
Assistant Treasurers, and other officers and agents of the Company as it may
deem proper. The offices of Secretary and Treasurer may be held by the same
person, and a Vice President of the Company may also be either the Secretary
or the Treasurer.
Section 2. The term of office of all officers shall be one year or
until the respective successors are chosen or appointed, but any officer or
agent may be removed, with or without cause, at any time by the affirmative
vote of a majority of the members of the Board then in office. No agreement
for the employment of any officer or agent for a period longer than one year
shall be authorized.
Section 3. Subject to such limitations as the Board of Directors may
from time to time prescribe, the officers of the Company shall each have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as from time to time may be conferred by the Board of
Directors. The Treasurer, the Assistant Treasurers and any other officers or
employees of the Company may be required to give bond for the faithful
discharge of their duties, in such sum and of such character as the Board may
from time to time prescribe.
Section 4. The salaries of all officers and agents of the Company shall
be fixed by the Board of Directors, or pursuant to such authority as the Board
may from time to time prescribe.
ARTICLE IV
CERTIFICATES OF STOCK
Section 1. The interest of each shareholder in the Company shall be
evidenced by a certificate or certificates for shares of stock of the Company
in such form as the Board of Directors may from time to time prescribe.
Certificates for shares of stock of the Company shall be signed by the
Chairman of the Board or the President or any Vice President and the Treasurer
or any Assistant Treasurer of this corporation and sealed with its corporate
seal, or when the same bear the facsimile signature of the Chairman of the
Board or the President or any Vice President and of the Treasurer or any
Assistant Treasurer of the corporation and its facsimile seal and shall be
countersigned and registered in such manner, if any, as the Board may by
resolution, prescribe.
Section 2. The shares of stock of the Company shall be transferable
only on the books of the Company by the holders thereof in person or by duly
authorized attorney, upon surrender for cancellation of certificates for a
like number of shares of the same class of stock, with duly executed
assignment and power of transfer endorsed thereon or attached thereto and such
proof of the authenticity of the signatures as the Company or its agents may
reasonably require.
Section 3. No certificate for shares of stock of the Company shall be
issued in place of any certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of the loss, theft, or
destruction, and upon indemnification of the Company and its agents to such
extent and in such manner as the Board of Directors may from time to time
prescribe.
ARTICLE V
CHECKS, NOTES, ETC.
All checks and drafts on the Company's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to time
by the Board of Directors; provided that checks drawn on the Company's
dividend, general and special accounts may bear the facsimile signature,
affixed thereto by a mechanical device, of such officer or agent as the Board
of Directors shall authorize.
ARTICLE VI
FISCAL YEAR
The Fiscal year of the Company shall begin on the first day of January
in each year and shall end on the thirty-first day of December following.
ARTICLE VII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Company
and the words "Corporate Seal Kansas".
Exhibit 12
WESTERN RESOURCES, INC.
Computations of Ratio of Earnings to Fixed Charges and
Computations of Ratio of Earnings to Combined Fixed Charges
and Preferred and Preference Dividend Requirements
(Dollars in Thousands)
Unaudited
Twelve
Months
Ended
March 31, Year Ended December 31,
1997 1996 1995 1994 1993 1992
Net Income . . . . . . . . . . . $165,194 $168,950 $181,676 $187,447 $177,370 $127,884
Taxes on Income. . . . . . . . . 83,240 86,102 83,392 99,951 78,755 46,099
Net Income Plus Taxes. . . . 248,434 255,052 265,068 287,398 256,125 173,983
Fixed Charges:
Interest on Long-Term Debt . . 103,037 105,741 95,962 98,483 123,551 117,464
Interest on Other Indebtedness 50,665 34,685 27,487 20,139 19,255 20,009
Interest on Other Mandatorily
Redeemable Securities. . . . 14,675 12,125 372 - - -
Interest on Corporate-owned
Life Insurance Borrowings. . 33,586 35,151 32,325 26,932 16,252 5,294
Interest Applicable to
Rentals. . . . . . . . . . . 32,947 32,965 31,650 29,003 28,827 27,429
Total Fixed Charges. . . . 234,910 220,667 187,796 174,557 187,885 170,196
Preferred and Preference Dividend
Requirements:
Preferred and Preference
Dividends. . . . . . . . . . 12,714 14,839 13,419 13,418 13,506 12,751
Income Tax Required. . . . . . 6,406 7,562 6,160 7,155 5,997 4,596
Total Preferred and Preference
Dividend Requirements. . . . 19,120 22,401 19,579 20,573 19,503 17,347
Total Fixed Charges and Preferred
and Preference Dividend
Requirements. . . . . . . . . 254,030 243,068 207,375 195,130 207,388 187,543
Earnings (1) . . . . . . . . . . $483,344 $475,719 $452,864 $461,955 $444,010 $344,179
Ratio of Earnings to Fixed Charges 2.06 2.16 2.41 2.65 2.36 2.02
Ratio of Earnings to Combined Fixed
Charges and Preferred and Preference
Dividend Requirements. . . . . 1.90 1.96 2.18 2.37 2.14 1.84
(1) Earnings are deemed to consist of net income to which has been added income taxes (including
net deferred investment tax credit) and fixed charges. Fixed charges consist of all interest
on indebtedness, amortization of debt discount and expense, and the portion of rental expense
which represents an interest factor. Preferred and preference dividend requirements consist
of an amount equal to the pre-tax earnings which would be required to meet dividend
requirements on preferred and preference stock.
UT
1,000
3-MOS
DEC-31-1997
MAR-31-1997
PER-BOOK
4,347,240
1,236,594
415,685
589,151
0
6,588,670
324,361
745,584
567,882
1,637,827
270,000
24,858
1,407,450
290,008
0
936,729
0
0
0
0
2,021,798
6,588,670
626,197
18,054
523,036
544,543
81,654
7,993
89,647
48,614
41,033
1,230
39,803
34,041
23,795
116,688
0.61
0
