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, 1995
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 8, 1995
Common Stock, $5.00 par value 61,887,278
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 18
Part II. Other Information
Item 4. Submission of Matters to a Vote to Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
WESTERN RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
UTILITY PLANT:
Electric plant in service . . . . . . . . . . . . . . . $5,261,016 $5,226,175
Natural gas plant in service. . . . . . . . . . . . . . 750,950 737,191
---------- ----------
6,011,966 5,963,366
Less - Accumulated depreciation . . . . . . . . . . . . 1,828,447 1,790,266
---------- ----------
4,183,519 4,173,100
Construction work in progress . . . . . . . . . . . . . 80,274 85,290
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . 42,263 39,890
---------- ----------
Net utility plant. . . . . . . . . . . . . . . . . . 4,306,056 4,298,280
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Net non-utility investments . . . . . . . . . . . . . . 73,238 74,017
Decommissioning trust . . . . . . . . . . . . . . . . . 17,827 16,944
Other . . . . . . . . . . . . . . . . . . . . . . . . . 10,965 13,556
---------- ----------
102,030 104,517
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . 3,116 2,715
Accounts receivable and unbilled revenues (net) . . . . 214,863 219,760
Fossil fuel, at average cost. . . . . . . . . . . . . . 41,646 38,762
Gas stored underground, at average cost . . . . . . . . 24,519 45,222
Materials and supplies, at average cost . . . . . . . . 55,834 56,145
Prepayments and other current assets. . . . . . . . . . 41,727 27,932
---------- ----------
381,705 390,536
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes. . . . . . . . . . . . . . 101,886 101,886
Deferred coal contract settlement costs . . . . . . . . 32,025 33,606
Phase-in revenues . . . . . . . . . . . . . . . . . . . 57,020 61,406
Corporate-owned life insurance (net). . . . . . . . . . 46,497 16,967
Other deferred plant costs. . . . . . . . . . . . . . . 31,723 31,784
Unamortized debt expense. . . . . . . . . . . . . . . . 56,971 58,237
Other . . . . . . . . . . . . . . . . . . . . . . . . . 80,715 92,399
---------- ----------
406,837 396,285
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $5,196,628 $5,189,618
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statement). . . . . . . . . . . . . . $3,017,600 $3,006,341
---------- ----------
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . . . . . . . . 280,063 308,200
Long-term debt due within one year. . . . . . . . . . . - 80
Accounts payable. . . . . . . . . . . . . . . . . . . . 96,183 130,616
Accrued taxes . . . . . . . . . . . . . . . . . . . . . 147,288 86,966
Accrued interest and dividends. . . . . . . . . . . . . 59,491 61,069
Other . . . . . . . . . . . . . . . . . . . . . . . . . 63,917 69,025
---------- ----------
646,942 655,956
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . 962,917 971,014
Deferred investment tax credits . . . . . . . . . . . . 137,345 137,651
Deferred gain from sale-leaseback . . . . . . . . . . . 249,931 252,341
Other . . . . . . . . . . . . . . . . . . . . . . . . . 181,893 166,315
---------- ----------
1,532,086 1,527,321
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 5)
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $5,196,628 $5,189,618
========== ==========
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,
1995 1994(1)
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $ 253,258 $ 251,497
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 164,288 286,875
---------- ----------
Total operating revenues. . . . . . . . . . . . . . . . 417,546 538,372
---------- ----------
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 46,931 52,640
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 4,688 3,863
Power purchased . . . . . . . . . . . . . . . . . . . . . 3,549 2,351
Natural gas purchases . . . . . . . . . . . . . . . . . . 101,738 198,652
Other operations. . . . . . . . . . . . . . . . . . . . . 75,820 77,563
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 26,842 26,497
Depreciation and amortization . . . . . . . . . . . . . . 38,397 39,308
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 17,494 22,092
State income. . . . . . . . . . . . . . . . . . . . . . 4,657 5,222
General . . . . . . . . . . . . . . . . . . . . . . . . 24,527 32,016
---------- ----------
Total operating expenses. . . . . . . . . . . . . . . 349,029 464,590
---------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 68,517 73,782
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (1,716) (1,235)
Gain on sale of Missouri Properties (see Note 2). . . . . - 30,701
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 3,662 2,367
Income taxes (net). . . . . . . . . . . . . . . . . . . . 1,182 (8,945)
---------- ----------
Total other income and deductions . . . . . . . . . . 3,128 22,888
---------- ----------
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 71,645 96,670
---------- ----------
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 23,846 26,691
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 7,087 4,515
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (863) (669)
---------- ----------
Total interest charges. . . . . . . . . . . . . . . . 30,070 30,537
---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 41,575 66,133
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 3,355 3,354
---------- ----------
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 38,220 $ 62,779
========== ==========
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 61,746,996 61,617,873
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ .62 $ 1.02
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ .505 $ .495
(1) Information reflects the sales of the Missouri Properties (Note 2).
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,
1995 1994(1)
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $1,123,542 $1,104,763
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 373,575 763,387
---------- ----------
Total operating revenues. . . . . . . . . . . . . . . . 1,497,117 1,868,150
---------- ----------
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 215,057 231,291
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 14,387 14,431
Power purchased . . . . . . . . . . . . . . . . . . . . . 16,636 14,149
Natural gas purchases . . . . . . . . . . . . . . . . . . 215,662 489,235
Other operations. . . . . . . . . . . . . . . . . . . . . 301,648 341,328
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 113,531 117,415
Depreciation and amortization . . . . . . . . . . . . . . 150,719 162,762
Amortization of phase-in revenues . . . . . . . . . . . . 17,544 17,545
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 71,879 64,668
State income. . . . . . . . . . . . . . . . . . . . . . 18,580 16,330
General . . . . . . . . . . . . . . . . . . . . . . . . 97,193 119,101
---------- ----------
Total operating expenses. . . . . . . . . . . . . . . 1,232,836 1,588,255
---------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 264,281 279,895
---------- ----------
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (5,835) 5,137
Gain on sale of Missouri Properties (see Note 2). . . . . - 30,701
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 14,133 15,082
Income taxes (net). . . . . . . . . . . . . . . . . . . . 5,798 (8,456)
---------- ----------
Total other income and deductions . . . . . . . . . . 14,096 42,464
---------- ----------
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 278,377 322,359
---------- ----------
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 95,638 117,154
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 22,711 19,037
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (2,861) (2,521)
---------- ----------
Total interest charges. . . . . . . . . . . . . . . . 115,488 133,670
---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 162,889 188,689
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 13,419 13,514
---------- ----------
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 149,470 $ 175,175
========== ==========
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 61,649,712 60,174,937
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ 2.42 $ 2.91
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ 1.99 $ 1.95
(1) Information reflects the sales of the Missouri Properties (Note 2).
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,
1995 1994(1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 41,575 $ 66,133
Depreciation and amortization . . . . . . . . . . . . . . 38,397 39,308
Other amortization (including nuclear fuel) . . . . . . . 3,534 2,806
Gain on sales of utility plant (net of tax) . . . . . . . (940) (19,296)
Deferred taxes and investment tax credits (net) . . . . . (9,489) (62,412)
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Corporate-owned life insurance. . . . . . . . . . . . . . (4,976) (4,519)
Amortization of gain from sale-leaseback. . . . . . . . . (2,410) (2,410)
Changes in working capital items (net of effects from
the sale of the Missouri Properties):
Accounts receivable and unbilled revenues (net) . . . . 4,897 (57,247)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . (2,884) (5,466)
Gas stored underground. . . . . . . . . . . . . . . . . 20,703 29,705
Accounts payable . . . . . . . . . . . . . . . . . . . (34,433) (41,438)
Accrued taxes . . . . . . . . . . . . . . . . . . . . . 59,701 122,167
Other . . . . . . . . . . . . . . . . . . . . . . . . . 7,961 (7,218)
Changes in other assets and liabilities . . . . . . . . . 10,205 111,629
----------- ----------
Net cash flows from operating activities. . . . . . . 136,227 176,128
----------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . 51,171 44,506
Sales of utility plant. . . . . . . . . . . . . . . . . . (1,583) (402,076)
Non-utility investments (net) . . . . . . . . . . . . . . 2,651 668
Corporate-owned life insurance policies . . . . . . . . . 28,352 281
----------- ----------
Net cash flows (from) used in investing activities. . 80,591 (356,621)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . (28,137) (320,480)
Bonds issued. . . . . . . . . . . . . . . . . . . . . . . - 113,982
Bonds retired . . . . . . . . . . . . . . . . . . . . . . (105) (101,466)
Revolving credit agreements (net) . . . . . . . . . . . . - (115,000)
Other long-term debt (net). . . . . . . . . . . . . . . . - (67,893)
Borrowings against life insurance policies (net). . . . . 2,674 645
Common stock issued . . . . . . . . . . . . . . . . . . . 4,188 -
Dividends on preferred, preference and common stock . . . (33,855) (33,239)
----------- ----------
Net cash flows (used in) from financing activities. . (55,235) (523,451)
----------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 401 9,298
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . 2,715 1,217
----------- ----------
End of the period . . . . . . . . . . . . . . . . . . . . $ 3,116 $ 10,515
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . $ 33,396 $ 31,979
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 130 -
(1) Information reflects the sales of the Missouri Properties (Note 2).
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,
1995 1994(1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 162,889 $ 188,689
Depreciation and amortization . . . . . . . . . . . . . . . 150,719 162,762
Other amortization (including nuclear fuel) . . . . . . . . 11,633 12,184
Gain on sales of utility plant (net of tax) . . . . . . . . (940) (19,296)
Deferred taxes and investment tax credits (net) . . . . . . 36,368 (42,798)
Amortization of phase-in revenues . . . . . . . . . . . . . 17,544 17,545
Corporate-owned life insurance. . . . . . . . . . . . . . . (17,703) (22,015)
Amortization of gain from sale-leaseback. . . . . . . . . . (9,640) (9,640)
Changes in working capital items (net of effects from
the sale of the Missouri Properties):
Accounts receivable and unbilled revenues (net) . . . . . (13,486) (46,338)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . (5,246) 2,087
Gas stored underground. . . . . . . . . . . . . . . . . . (14,405) (10,113)
Accounts payable. . . . . . . . . . . . . . . . . . . . . (34,677) (30,726)
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . (41,710) 87,961
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 27,992 2,773
Changes in other assets and liabilities . . . . . . . . . . (40,460) 112,956
---------- ----------
Net cash flows from operating activities . . . . . . . 228,878 406,031
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 244,361 240,070
Utility investment. . . . . . . . . . . . . . . . . . . . . - 2,500
Sales of utility plant. . . . . . . . . . . . . . . . . . . (1,583) (402,076)
Non-utility investments (net) . . . . . . . . . . . . . . . 11,024 7,419
Corporate-owned life insurance policies . . . . . . . . . . 54,489 27,119
Death proceeds of corporate-owned life insurance policies . - (10,157)
---------- ----------
Net cash flows (from) used in investing activities. . . 308,291 (135,125)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . 159,648 (205,285)
Bonds issued. . . . . . . . . . . . . . . . . . . . . . . . 121,941 278,982
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (122,545) (409,432)
Revolving credit agreement (net). . . . . . . . . . . . . . - (360,000)
Other long-term debt (net). . . . . . . . . . . . . . . . . - (13,980)
Borrowings against life insurance policies (net). . . . . . 44,204 183,284
Common stock issued (net) . . . . . . . . . . . . . . . . . 4,188 125,991
Preference stock redeemed . . . . . . . . . . . . . . . . . - (2,734)
Dividends on preferred, preference and common stock . . . . (135,422) (129,574)
---------- ----------
Net cash flows (used in) from financing activities. . . 72,014 (532,748)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . (7,399) 8,408
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . . 10,515 2,107
---------- ----------
End of the period . . . . . . . . . . . . . . . . . . . . . $ 3,116 $ 10,515
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . . $ 136,202 $ 162,744
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 90,359 49,108
(1) Information reflects the sales of the Missouri Properties (Note 2).
The Notes to Consolidated Financial Statements are an integral part of these statements.
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
March 31, December 31,
1995 1994
(Unaudited)
COMMON STOCK EQUITY (see statement):
Common stock, par value $5 per share,
authorized 85,000,000 shares, outstanding
61,760,853 and 61,617,873 shares, respectively . $ 308,804 $ 308,089
Paid-in capital. . . . . . . . . . . . . . . . . . 671,465 667,992
Retained earnings. . . . . . . . . . . . . . . . . 505,404 498,374
---------- ----------
1,485,673 49% 1,474,455 49%
---------- ----------
CUMULATIVE PREFERRED AND PREFERENCE 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
--------- ----------
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
8.50% Series, 1,000,000 shares. . . . . . . 100,000 100,000
--------- ----------
150,000 150,000
--------- ----------
174,858 6% 174,858 6%
--------- ----------
LONG-TERM DEBT:
First mortgage bonds . . . . . . . . . . . . . . . 841,000 841,000
Pollution control bonds. . . . . . . . . . . . . . 521,817 521,922
Less:
Unamortized premium and discount (net) . . . . . 5,748 5,814
Long-term debt due within one year . . . . . . . - 80
---------- ----------
1,357,069 45% 1,357,028 45%
---------- ----------
TOTAL CAPITALIZATION . . . . . . . . . . . . . . . . $3,017,600 100% $3,006,341 100%
========== ==========
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, 1993, 61,617,873 shares . . . . $308,089 $667,738 $446,348
Net income. . . . . . . . . . . . . . . . . . . . . . 66,133
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (3,354)
Common stock, $0.495 per share. . . . . . . . . . . (30,500)
Expenses on common stock. . . . . . . . . . . . . . . (224)
-------- -------- --------
BALANCE MARCH 31, 1994, 61,617,873 shares . . . . . . 308,089 667,514 478,627
Net income. . . . . . . . . . . . . . . . . . . . . . 121,314
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (10,064)
Common stock, $1.485 per share. . . . . . . . . . . (91,503)
Expenses on common stock. . . . . . . . . . . . . . . (4)
Distribution of common stock under the Customer
Stock Purchase Plan . . . . . . . . . . . . . . . . 482
-------- -------- --------
BALANCE DECEMBER 31, 1994, 61,617,873 shares. . . . . 308,089 667,992 498,374
Net income. . . . . . . . . . . . . . . . . . . . . . 41,575
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (3,355)
Common stock, $0.505 per share. . . . . . . . . . . (31,190)
Issuance of 142,980 shares of common stock. . . . . . 715 3,473
-------- -------- --------
BALANCE MARCH 31, 1995, 61,760,853 shares . . . . . . $308,804 $671,465 $505,404
======== ======== ========
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 condensed consolidated financial statements of the Company
include the accounts of its wholly-owned subsidiaries, Astra Resources, Inc.
(Astra Resources), Kansas Gas and Electric Company (KG&E), KPL Funding
Corporation (KFC), and Mid Continent Market Center Inc. (MCMC). KG&E owns 47%
of the Wolf Creek Nuclear Operating Corporation (WCNOC), the operating company
for the 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 operations of Astra Resources, KFC, and MCMC were not
material to the Company's results of operations. The Company is conducting
its utility business as KPL, Gas Service, and through its wholly-owned
subsidiary, KG&E. The Company is conducting its non-utility business through
Astra Resources.
The financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission (SEC).
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, the accompanying condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of the Company as of March 31, 1995 and December 31, 1994, and the
results of its operations for the three and twelve month periods ended March
31, 1995 and 1994. These condensed consolidated financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Company's 1994 Annual Report on Form 10-K and the KG&E Annual
Report on Form 10-K incorporated by reference in the Company's 1994 Annual
Report on Form 10-K.
The accounting policies of the Company are in accordance 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), Oklahoma Corporation Commission, and the Federal
Energy Regulatory Commission (FERC).
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance (COLI) contracts, primarily with one
highly rated major insurance company, are recorded on the consolidated balance
sheets:
March 31, December 31,
1995 1994
(Dollars in Millions)
Cash surrender value of contracts $441.1 $408.9
Borrowings against contracts (394.6) (391.9)
COLI (net) $ 46.5 $ 17.0
The COLI borrowings will be repaid upon receipt of proceeds from death
benefits under contracts. Increases in the cash surrender value of contracts,
resulting from premiums and investment earnings, are recognized as income on a
tax free basis in Corporate-owned Life Insurance (net) on the Consolidated
Statements of Income. For the three and twelve months ended March 31, 1995,
income from increases in cash surrender value, net of premium and
administrative expenses, and income from death proceeds was $3.9 million and
$16.1 million, respectively, compared to $3.5 million and $19.9 million for
the three and twelve months ended March 31, 1994, respectively. Interest
expense on COLI borrowings is recorded as a tax deductible expense in
Corporate-owned Life Insurance (net) on the Consolidated Statements of Income.
For the three and twelve months ended March 31, 1995, interest expense on COLI
borrowings was $5.6 million and $21.9 million, respectively, compared to $4.7
million and $14.8 million for the three and twelve months ended March 31,
1994, respectively.
As approved by the KCC, the Company is using a portion of the net income
stream generated by COLI policies purchased in 1993 and 1992 by the Company to
offset Statement of Financial Accounting Standards No. 106 (SFAS 106) and
Statement of Financial Accounting Standards No. 112 (SFAS 112) expenses.
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.
2. SALES OF MISSOURI NATURAL GAS DISTRIBUTION PROPERTIES
On January 31, 1994, the Company sold substantially all of its Missouri
natural gas distribution properties and operations to Southern Union Company
(Southern Union). The Company sold the remaining Missouri properties to
United Cities Gas Company (United Cities) on February 28, 1994. The
properties sold to Southern Union and United Cities are referred to herein as
the "Missouri Properties." With the sales, the Company is no longer operating
as a utility in the State of Missouri.
The portion of the Missouri Properties purchased by Southern Union was
sold for an estimated sale price of $400 million, in cash. The sale agreement
provided for estimated amounts in the sale price calculation to be adjusted to
actual. Southern Union proposed a number of adjustments to the purchase
price, some of which the Company disputed. The disputed items were submitted
to an arbitrator in February 1995. Based on the decision of the arbitrator
rendered in April 1995, Southern Union paid the Company $3.6 million,
including interest, for the disputed items. For information regarding
litigation in connection with the sale of the Missouri Properties to Southern
Union, see Note 3.
United Cities purchased the Company's natural gas distribution system in
and around the City of Palmyra, Missouri, for $665,000 in cash.
During the first quarter of 1994, the Company recognized a gain of
approximately $19.3 million, net of tax, on the sale of the Missouri
Properties. As of the respective dates of the sales of the Missouri
Properties, the Company ceased recording the results of operations, and
removed the assets and liabilities from the Consolidated Balance Sheet related
to the Missouri Properties. The gain is reflected in Other Income and
Deductions on the three and twelve months ended March 31, 1994 Consolidated
Statements of Income.
The Company's operating revenues and operating income for the three and
twelve months ended March 31, 1995, do not include any results related to the
Missouri Properties.
The following table reflects the approximate operating revenues
(unaudited) and operating income (unaudited) related to the Missouri
Properties for the three and twelve months ended March 31, 1994, through the
sale to Southern Union on January 31, 1994 and United Cities on February 28,
1994:
March 31, 1994
3 months ended 12 months ended
(Dollars in Thousands)
Operating Revenues. . . . . . . . $77,008 $284,813
Percent of Total Company. . . . 14.3% 15.2%
Operating Income. . . . . . . . . $4,997 $14,426
Percent of Total Company. . . . 6.8% 5.2%
Separate audited financial information was not kept by the Company for
the Missouri Properties. This unaudited financial information is based on
assumptions and allocations of expenses of the Company as a whole.
3. LEGAL PROCEEDINGS
On June 1, 1994, Southern Union filed an action against the Company, The
Bishop Group, Ltd., and other entities affiliated with The Bishop Group, in
the Federal District Court for the Western District of Missouri (the Court)
(Southern Union Company v. Western Resources, Inc. et al., Case No. 94-509-CV-
W-1) alleging, among other things, breach of the Missouri Properties sale
agreement relating to certain gas supply contracts between the Company and
various Bishop entities that Southern Union assumed, and requesting
unspecified monetary damages as well as declaratory relief. On August 1,
1994, the Company filed its answer and counterclaim denying all claims
asserted against it by Southern Union and requesting declaratory judgment with
respect to certain adjustments in the purchase price for the Missouri
Properties proposed by Southern Union and disputed by the Company. On August
24, 1994, Southern Union filed claims against the Company for alleged purchase
price adjustments totalling $19 million. The Company subsequently agreed that
approximately $4 million of the purchase price adjustments were subject to
arbitration. On January 18, 1995, the Court held the remaining $15 million of
proposed adjustments to the purchase price were subject to arbitration under
the sale agreement. The disputed items were submitted to an arbitrator in
February 1995. Based on the decision of the arbitrator rendered in April
1995, Southern Union paid the Company $3.6 million including interest, for the
disputed items. For additional information regarding the sales of the
Missouri Properties, see Note 2.
On August 15, 1994, the Bishop entities filed an answer and claims
against Southern Union and the Company alleging, among other things, breach of
those certain gas supply contracts. The Bishop entities claimed damages up to
$270 million against the Company and Southern Union. In March, 1995 this
litigation between the Company and the Bishop entities was settled with the
realignment of the commercial relationship between the parties. The
resolution of this matter is not expected to have a material adverse impact on
the Company.
The Company received a civil investigative demand from the U.S.
Department of Justice seeking certain information in connection with the
department's investigation "to determine whether there is, has been, or may be
a violation of the Sherman Act Sec. 1-2" with respect to the natural gas
business in Kansas and Missouri. The Company is cooperating with the
Department of Justice, but is not aware of any violation of the antitrust laws
in connection with its business operations.
The Company and its subsidiaries are involved in various other legal and
environmental proceedings. Management believes that adequate provision has
been made within the Consolidated Financial Statements for these other matters
and accordingly believes their ultimate dispositions will not have a material
adverse effect upon the business, financial position, or results of operations
of the Company.
4. RATE MATTERS AND REGULATION
KCC Rate Proceedings: On January 24, 1992, the KCC issued an order
allowing the Company to defer service line replacement program costs incurred
since January 1, 1992, including depreciation, property taxes, and carrying
costs for recovery in the next general rate case. At March 31, 1995,
approximately $8.7 million of these deferrals have been included in Deferred
Charges and Other Assets, Other, on the Consolidated Balance Sheet.
5. COMMITMENTS AND CONTINGENCIES
As a part of its ongoing operations and construction program, the Company
had commitments under purchase orders and contracts which had an unexpended
balance of approximately $77 million at December 31, 1994. Approximately $32
million was attributable to modifications to upgrade the three turbines at
Jeffrey Energy Center to be completed by December 31, 1998.
In January 1994, the Company entered into an agreement with Oklahoma
Municipal Power Authority (OMPA). Under the agreement, the Company received a
prepayment of approximately $41 million for which the Company will provide
capacity and transmission services to OMPA through the year 2013.
Manufactured Gas Sites: The Company was previously associated with 20
former manufactured gas sites located in Kansas which may contain coal tar and
other potentially harmful materials. These sites were operated decades ago by
predecessor companies, and were owned by the Company for a period of time
after operations had ceased. The Company and the Kansas Department of Health
and Environment (KDHE) conducted preliminary assessments of the sites at a
cost of approximately $500,000. The results of the preliminary investigations
determined the Company does not have a connection to four of the sites. Of
the remaining 16 sites, the site investigation and risk assessment field work
of the highest priority site was completed in 1994 at a total cost of
approximately $450,000. The Company has not received the final report so as
to determine the extent of contamination and the amount of any possible
remediation.
The Company and KDHE entered into a consent agreement governing all
future work at these sites. The terms of the consent agreement will allow the
Company to investigate the 16 sites and set remediation priorities based upon
the results of the investigations and risk analysis. The prioritized sites
will be investigated over a 10 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. The
Company is aware of other utilities in Region VII of the EPA (Kansas,
Missouri, Nebraska, and Iowa) which have incurred remediation costs for
manufactured gas sites ranging between $500,000 and $10 million, depending on
the site, and that the KCC has issued an accounting order which will permit
another Kansas utility to recover its remediation costs through rates. To the
extent that such remediation costs are not recovered through rates, the costs
could be material to the Company's financial position or results of operations
depending on the degree of remediation required and number of years over which
the remediation must be completed.
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. The Company's obligation at the Wichita site appears
to be limited based on the Company's experience at similar sites given its
limited exposure and settlement costs. In the opinion of the Company's
management, the resolution of this matter will not 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 sulfur dioxide and oxides of nitrogen (NOx) emissions
effective in 1995 and 2000 and a probable reduction in toxic 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. The Company does not expect additional
equipment to reduce sulfur emissions to be necessary under Phase II. Although
the Company has no units subject to Phase I regulations, the owners obtained
an early substitution permit to bring the co-owned La Cygne Station under the
Phase I regulations.
The NOx and air toxic limits, which were not set in the law, will be
specified in future EPA regulations. The EPA's proposed NOx regulations were
ruled invalid by the U.S. Court of Appeals for the District of Columbia
Circuit and until such time as the EPA resubmits new proposed regulations, the
Company will be unable to determine its compliance options or related
compliance costs.
Other Environmental Matters: As part of the sale of the Company's
Missouri Properties to Southern Union, Southern Union assumed responsibility
under an agreement for any environmental matters related to the Missouri
Properties purchased by Southern Union pending at the date of the sale or that
may arise after closing. For any environmental matters pending or discovered
within two years of the date of the agreement, and after pursuing several
other potential recovery options, the Company may be liable for up to a
maximum of $7.5 million under a sharing arrangement with Southern Union
provided for in the agreement.
Spent Nuclear Fuel Disposal: Under the Nuclear Waste Policy Act of 1982,
the U.S. Department of Energy (DOE) is responsible for the ultimate storage
and disposal of spent nuclear fuel removed from nuclear reactors. Under a
contract with the DOE for disposal of spent nuclear fuel, the Company pays a
quarterly fee to DOE of one mill per kilowatthour on net nuclear generation.
These fees are included as part of nuclear fuel expense.
The Company along with the other co-owners of Wolf Creek are among 14
companies that filed a lawsuit on June 20, 1994, seeking an interpretation of
the DOE's obligation to begin accepting spent nuclear fuel for disposal in
1998. The Federal Nuclear Waste Policy Act requires DOE ultimately to accept
and dispose of nuclear utilities' spent fuel. The DOE has filed a motion to
have this case dismissed. The issue to be decided in this case is whether DOE
must begin accepting spent fuel in 1998 or at a future date. Wolf Creek
contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through
the year 2006 while still maintaining full core off-load capability. The
Company believes adequate additional storage space can be obtained as
necessary.
Decommissioning: On June 9, 1994, the KCC issued an order approving the
decommissioning costs of the 1993 Wolf Creek Decommissioning Cost Study which
estimates the Company's share of Wolf Creek decommissioning costs, under the
immediate dismantlement method, to be approximately $595 million primarily
during the period 2025 through 2033, or approximately $174 million in 1993
dollars. These costs were calculated using an assumed inflation rate of 3.45%
over the remaining service life, in 1993, of 32 years.
Decommissioning costs are being charged to operating expenses in
accordance with the KCC order. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek.
Amounts so expensed ($3.5 million in 1994 increasing annually to $5.5 million
in 2024) and earnings on trust fund assets are deposited in an external trust
fund. The assumed return on trust assets is 5.9%.
The Company's investment in the decommissioning fund, including
reinvested earnings was $17.8 million and $16.9 million at March 31, 1995 and
December 31, 1994, respectively. These amounts are reflected in
Decommissioning Trust, and the related liability is included in Deferred
Credits and Other Liabilities, Other, on the Consolidated Balance Sheets.
The Company carries $118 million in premature decommissioning insurance.
The insurance coverage 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. If the
amount designated as decommissioning insurance is needed to implement the NRC-
approved plan for stabilization and decontamination, it would not be available
for decommissioning purposes.
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. 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 totalling
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 up to $1.2 billion (Company's share) and premature
decommissioning costs up to $118 million (Company's share) in 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 of approximately $13 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 position and results of operations.
Federal Income Taxes: During 1991, the Internal Revenue Service (IRS)
completed an examination of KG&E's federal income tax returns for the years
1984 through 1988. In October 1993, KG&E received another examination report
for the years 1989 and 1990 covering the same issues identified in the
previous examination report. In April 1995, after approximately four years of
negotiations with the Appeals Office of the IRS, KG&E reached agreement on the
ultimate disposition of the issues raised in the examination reports. Based
on the settlement agreement, management believes that adequate tax reserves
have been provided and the settlement will have no effect on the Company's
financial position or 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, coal, and natural gas. Some of these contracts contain
provisions for price escalation and minimum purchase commitments. At December
31, 1994, WCNOC's nuclear fuel commitments (Company's share) were
approximately $12.6 million for uranium concentrates expiring at various times
through 1997, $122.9 million for enrichment expiring at various times through
2014, and $56.5 million for fabrication through 2012. At December 31, 1994,
the Company's coal and natural gas contract commitments in 1994 dollars under
the remaining terms of the contracts were approximately $3 billion and $9
million, respectively. The largest coal contract expires in 2020, with the
remaining coal contracts expiring at various times through 2013. The majority
of natural gas contracts expire in 1995 but have automatic one-year extension
provisions. In the normal course of business, additional commitments and spot
market purchases will be made to obtain adequate fuel supplies.
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.
6. 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 33.8% and 35.6% for the three month
periods and 34.7% for the twelve month periods ended March 31, 1995 and 1994,
respectively. 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 the Company's 1994 Annual Report on Form 10-K. The
following updates the information provided in the 1994 Annual Report on Form
10-K and analyzes the changes in the results of operations between the three
and twelve month periods ended March 31, 1995 and comparable periods of 1994.
As a result of the sales of the Missouri Properties, as described in
Note 2, Sales of Missouri Natural Gas Distribution Properties, of the Notes to
Consolidated Financial Statements, the Company recognized a gain of
approximately $19.3 million, net of tax, and ceased recording the results of
operations for the Missouri Properties during the first quarter of 1994.
Consequently, the Company's operating revenues and operating income for the
three and twelve months ended March 31, 1995, do not include any results
related to the Missouri Properties and are not fully comparable to the results
of operations for the same periods ending March 31, 1994.
The following table reflects the approximate operating revenues
(unaudited) and operating income (unaudited) related to the Missouri
Properties for the three and twelve months ended March 31, 1994, through the
sale to Southern Union on January 31, 1994 and United Cities on February 28,
1994:
March 31, 1994
3 months ended 12 months ended
(Dollars in Thousands)
Operating Revenues. . . . . . . . $77,008 $284,813
Percent of Total Company. . . . 14.3% 15.2%
Operating Income. . . . . . . . . $4,997 $14,426
Percent of Total Company. . . . 6.8% 5.2%
Separate audited financial information was not kept by the Company for
the Missouri Properties. This unaudited financial information is based on
assumptions and allocations of expenses of the Company as a whole.
For additional information regarding the sales of the Missouri Properties
and the pending litigation see Note 2 and Note 3 of the Notes to Consolidated
Financial Statements.
FINANCIAL CONDITION
General: Net income for the first quarter of 1995 was $42 million, down
from net income of $66 million for the same period of 1994. The Company
earned $0.62 per share of common stock for the first quarter of 1995, a
decrease of $0.40 per share from the first quarter of 1994. The decrease in
net income and earnings per share is primarily due to the inclusion, in the
first quarter of 1994, of the gain on the sales of, and operating income from,
the Missouri Properties prior to the sales in the first quarter of 1994.
Operating revenues were $418 million and $538 million for the three
months ended March 31, 1995 and 1994, respectively. The decrease in revenues
is caused by lower natural gas revenues as a result of the sales of the
Missouri Properties, mild winter temperatures, resulting in lower natural gas
sales in the first quarter of 1995 compared to 1994, and a lower unit cost of
natural gas. Changes in the unit cost of natural gas are passed on to
customers through purchased gas adjustment clauses (PGA).
Net income for the twelve months ended March 31, 1995, was $163 million
compared to $189 million the same period of 1994. The Company earned $2.42
per share of common stock for the twelve months ended March 31, 1995, a
decrease of $0.49 per share from the comparable period of 1994. The decrease
in net income and earnings per share is primarily due to the inclusion of the
gain on the sales of, and operating income from, the Missouri Properties prior
to the sales in the first quarter of 1994.
Operating revenues were $1.5 billion for the twelve months ended March
31, 1995 compared to $1.9 billion for the same period of 1994. The decrease
in revenues is a result of the sales of the Missouri Properties, mild winter
temperatures in the first quarter of 1995 compared to 1994, and a lower unit
cost of natural gas passed on to customers through the PGA.
A quarterly dividend of $0.505 per share was declared in the first
quarter of 1995, for an indicated annual rate of $2.02 per share. The book
value per share was $24.06 at March 31, 1995, up from $23.93 at December 31,
1994. There were 61,746,996 and 61,617,873 average shares outstanding for
the first quarter of 1995 and 1994, 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, 1995, short-term borrowings amounted to
$280 million, of which $151 million was commercial paper.
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 sales will continue to be affected by weather conditions,
competing fuel sources, 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, 1995 from the comparable periods of 1994.
Increase (decrease) in electric sales volumes:
3 Months 12 Months
ended ended
Residential (2.2)% 2.2%
Commercial 2.1% 4.2%
Industrial 6.5% 4.3%
Total retail sales 2.3% 3.6%
Wholesale and interchange (22.3)% (24.8)%
Total electric sales (3.8)% (3.2)%
Electric revenues increased less than one percent for the three months
ended March 31, 1995 compared to 1994. The slight increase was due to
increased commercial and industrial sales. Partially offsetting these
increases were lower residential and wholesale and interchange sales.
Residential sales were down because of milder temperatures during the first
quarter of 1995, which was seven percent warmer than the first quarter of
1994. Wholesale and interchange sales were lower because of the mild weather
and decreased demand from other utilities. Also offsetting the increase from
commercial and industrial sales was an additional $1.6 million of amortization
of the final merger refund for the three months ended March 31, 1995 compared
to 1994.
Electric revenues increased nearly two percent for the twelve months
ended March 31, 1995, primarily as a result of increased retail sales
resulting from customer growth. Partially offsetting higher electric revenue
from increased retail sales were lower wholesale and interchange sales, and an
additional $4.8 million of amortization of the merger refund for the twelve
months ended March 31, 1995 compared to 1994. The decrease in wholesale and
interchange sales was primarily due to higher sales during the twelve months
ended March 31, 1994 to other utilities while their generating units were down
due to the 1993 floods.
The following table reflects changes in natural gas sales for the three
and twelve months ended March 31, 1995 from the comparable periods of 1994.
Increase (decrease) in natural gas sales volumes:
Excluding Including
Missouri Operations Missouri Operations
3 Months 12 Months 3 Months 12 Months
ended ended ended ended
Residential (7.1)% (13.1)% (30.9)% (44.7)%
Commercial (9.3)% (12.5)% (36.2)% (48.3)%
Industrial (28.0)% (44.3)% (36.2)% (53.8)%
Transportation 1.0 % 8.8 % (20.2)% (30.3)%
Total Deliveries 0.1 % (3.6)% (25.4)% (39.3)%
Natural gas revenues and sales decreased significantly for the three and
twelve months ended March 31, 1995 compared to the same periods of 1994 as a
result of the sales of the Missouri Properties in the first quarter of 1994.
Excluding natural gas sales related to the Missouri Properties, prior to
the sales of those properties in the first quarter of 1994, natural gas
revenues would have also been lower for the three and twelve months ended
March 31, 1995. This decrease was a result of seven percent warmer winter
temperatures in the first quarter of 1995 compared to 1994, and a lower unit
cost of natural gas which is passed on to customers through the PGA. The unit
cost of natural gas sold during the three and twelve months ended March 31,
1995 was significantly lower than the same periods of 1994.
Operating Expenses: Total operating expenses decreased 25 percent and 22
percent for the three and twelve months ended March 31, 1995 compared to the
same periods of 1994. These decreases were primarily the result of the sales
of the Missouri Properties.
Also contributing to the decreased operating expenses for the three and
twelve months ended was lower fossil fuel expense, resulting from decreased
electric generation, and decreased natural gas purchases, resulting from a
lower unit cost of natural gas. As discussed previously, the decreased
generation was primarily due to lower sales to wholesale and interchange
customers.
Income tax expense was higher for the twelve months ended March 31, 1995.
As of December 31, 1993, KG&E had fully amortized its deferred income tax
reserves related to the allowance for borrowed funds used during construction
capitalized for Wolf Creek. The completion of the amortization of these
deferred income tax reserves increased income taxes and thereby reduced net
income by approximately $9 million for the twelve months ended March 31, 1995
compared to 1994.
Other Income and Deductions: Other income and deductions, net of taxes,
was significantly lower for the three and twelve months ended March 31, 1995
compared to 1994 due to the recognition of the gain on the sales of the
Missouri Properties, of approximately $19.3 million, net of tax, during the
first quarter of 1994.
Also contributing to the decrease in Other Income for the twelve months
ended was additional interest expense on increased COLI borrowings.
Interest Charges and Preferred and Preference Dividend Requirements:
Total interest charges decreased two percent for the three months ended and 14
percent for the twelve months ended March 31, 1995 from the comparable periods
in 1994. The decrease was a result of lower debt balances and the refinancing
of higher cost debt, as well as increased COLI borrowings which interest is
reflected in Other Income and Deductions on the Consolidated Statements of
Income. Partially offsetting these decreases were higher interest rates on
short-term borrowings.
OTHER INFORMATION
Merger Implementation: In accordance with the KCC Merger order,
amortization of the acquisition adjustment will commence August 1995. The
amortization will amount to approximately $20 million (pre-tax) per year for
40 years. The Company can recover the amortization of the acquisition
adjustment through cost savings under a sharing mechanism approved by the KCC.
While the Company has achieved savings from the Merger, there is no assurance
that the savings achieved will be sufficient to, or the cost savings sharing
mechanism will operate as to, fully offset the amortization of the acquisition
adjustment.
Early Retirement: In April 1995, the Company announced a voluntary early
retirement program for employees 55 years of age and older with a minimum of
10 years of service as of July 1, 1995. Approximately 420 employees are
eligible for the voluntary retirement program. Although the Company is not
able to predict the cost of the early retirement program at this time, the
total cost, assuming all 420 eligible employees accept early retirement, would
be approximately $9 million in the second quarter of 1995 with cost savings
estimated to be approximately $12 million for 1995. The Company anticipates
approximately 50 percent of the eligible employees will accept early
retirement.
WESTERN RESOURCES, INC.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of shareholders was held on May 2, 1995. At
the meeting the shareholders, representing 51,860,513 shares either in
person or by proxy, voted to:
Elect the following directors to serve a term of three years:
Votes
For Against
David H. Hughes 50,948,032 830,061
John H. Robinson 51,043,253 830,061
Susan M. Stanton 50,991,699 830,061
Kenneth J. Wagnon 51,138,548 830,061
Item 5. Other Information
Structural Realignment: In April 1995 the Company announced it was
creating generation, transmission, and retail marketing groups to support its
strategic goals in its regulated business and better serve its customers and
compete more effectively in the changing energy marketplace.
In addition, the Company is creating two new unregulated companies to
complement Astra Resources, the Company's unregulated natural gas operation.
Astra Power will be responsible for the Company's activities in the
unregulated electric business, including opportunities in energy marketing and
in the independent power production market. Astra Services will develop new
consumer products and services and will seek out investment opportunities that
capitalize on the Company's competitive strengths.
Rate Plans: In April 1995, the Company announced it intends to file a
proposal with the KCC in the summer of 1995 to increase the depreciation on
the assets of Wolf Creek Generating Station by $56 million annually for seven
years beginning in 1996. As a result, the Company will also seek to reduce
electric rates for KG&E customers by approximately $9 million annually for the
same seven year period. In addition, the Company also intends to file a $36
million rate increase request for its Kansas natural gas properties in the
summer of 1995. The increase is being sought to recover costs associated with
the service line replacement program as well as other operating costs.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10(a) - Western Resources, Inc. Executive Salary
Continuation Plan, as revised March 15, 1995
Exhibit 10(b) - Executive Salary Continuation Plan Agreement
between Western Resources, Inc. and
John E. Hayes, Jr.
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Kansas Gas and Electric Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995
(b) Reports on Form 8-K: None
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 8, 1995 By S. L. KITCHEN
S. L. Kitchen, Executive Vice President
and Chief Financial Officer
Date May 8, 1995 By JERRY D. COURINGTON
Jerry D. Courington,
Controller
Exhibit 10(a)
=================================================================
WESTERN RESOURCES, INC.
EXECUTIVE SALARY CONTINUATION PLAN
(Revised March 15, 1995)
=================================================================
WESTERN RESOURCES, INC.
EXECUTIVE SALARY CONTINUATION PLAN
Table of Contents
Page
ARTICLE I
Definitions and Construction
1.1 Definitions 1
1.2 Construction 2
ARTICLE II
Eligibility and Participation
2.1 Eligibility 2
2.2 Participation 2
ARTICLE III
Death Benefit
3.1 Amount and Payment of Death Benefit 2
3.2 Partial Distribution Prior to Death 3
ARTICLE IV
Retirement Benefit
4.1 Retirement 3
4.2 Disability 4
4.3 Vesting of Retirement Benefit 4
4.4 Forfeitability of Retirement Benefit 4
ARTICLE V
Beneficiary 4
ARTICLE VI
Leave of Absence 5
ARTICLE VII
Source of Benefits
7.1 Benefits Payable 5
7.2 Investments to Facilitate Payment
of Benefits 5
7.3 Ownership of Insurance Contracts 5
7.4 Trust for Payment of Retirement Benefits 6
ARTICLE VIII
Termination of Employment 6
ARTICLE IX
Termination of Participation 7
i
ARTICLE X
Terminations, Amendment, Modification or Supplement
of Plan
10.1 Termination 7
10.2 Rights and Obligations Upon Termination 7
ARTICLE XI
Other Benefits and Agreements 8
ARTICLE XII
Restrictions on Alienation of Benefits 8
ARTICLE XIII
Administration of this Program
13.1 Appointment of Committee 8
13.2 Committee Officials 9
13.3 Committee Action 9
13.4 Committee Rules and Powers - General 9
13.5 Reliance of Certificates, etc 9
13.6 Liability of Committee 9
13.7 Determination of Benefits 10
13.8 Information to Committee 10
13.9 Manner and Time of Payment of Benefit 10
ARTICLE XIV
Adoption of Plan by Subsidiary, Affiliated or
Associated Companies 10
ARTICLE XV
Miscellaneous
15.1 Execution of Receipts and Releases 10
15.2 No Guarantee of Interests 10
15.3 Company Records 11
15.4 Evidence 11
15.5 Notice 11
15.6 Change of Address 11
15.7 Effect of Provisions 11
15.8 Headings 11
15.9 Governing Law 11
APPENDIX I
Executive Salary Continuation Plan Agreement
for Western Resources, Inc. I-1-3
APPENDIX II
Executive Salary Continuation Plan Agreement for
Astra Resources, Inc., a Wholly Owned
Subsidiary of Western Resources, Inc II-1-3
APPENDIX III
Change of Beneficiary Form for Executive Salary
Continuation Plan III-1
ii
WESTERN RESOURCES, INC.
EXECUTIVE SALARY CONTINUATION PLAN
PURPOSE
The purpose of the Western Resources, Inc. Executive Salary
Continuation Plan is to provide the specified benefits to a
select group of management and highly compensated employees who
contribute materially to the continued growth, development and
future business success of Western Resources, Inc., and its
subsidiaries. It is the intention of Western Resources, Inc. that
this program and the individual plans established hereunder be
administered as unfunded welfare benefit plans established and
maintained for a select group of management or highly compensated
employees.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. For purposes of this Program, the
following phrases or terms shall have the indicated meanings
unless otherwise clearly apparent from the context:
A. "Beneficiary" shall mean the person or persons or
the estate of a Participant entitled to receive any benefits under
a Plan Agreement entered into in accordance with the terms of this
Program.
B. "Board of Directors" shall mean the Board of
Directors of Western Resources, Inc., unless otherwise indicated
or the context otherwise requires.
C. "Committee" shall mean the Human Resources
Committee of the Board of Directors or such other Committee
appointed to manage and administer the Program and individual Plan
Agreements in accordance with the provisions of Article XIII
hereof.
D. "Company" shall mean Western Resources, Inc., and
its subsidiaries and predecessor entities.
E. "Compensation" shall mean the base and short term
incentive cash compensation paid to or deferred by a Participant
during a calendar year.
F. "Totally and Permanently Disabled" means when, on
the basis of medical evidence, it is determined that a Participant:
a) is totally disabled so as to be prevented from any
comparable employment with the Company, including a disability
resulting from an occupational cause; and
b) will be disabled permanently.
1
G. "Employee" shall mean any person who is in the
regular full-time employment of the Company or is on authorized
leave of absence therefrom, as determined by the personnel rules
and practices of the Company. The term does not include persons
who are retained by the Company solely as consultants or under
contract.
H. "Participant" shall mean an Employee who is selected
and elects to participate in the Program through the execution of
a Plan Agreement in accordance with the provisions of Article II.
I. "Plan Agreement" shall mean the form of written
agreement which is entered into by and between the Company and an
Employee selected to become a Participant as a condition to
participation in the Program. The form of agreement currently
used is attached hereto as Appendix I.
J. "Program" shall mean the Western Resources, Inc.
Executive Salary Continuation Plan as embodied herein and as
amended from time to time.
K. "Rabbi Trust" shall mean the trust created to hold
assets which will be used to pay the benefits provided hereunder,
as provided in Section 7.4.
L. "Retirement" and "Retire" shall mean severance of
employment with the Company, other than as the result of death or
Total and Permanent Disability.
1.2 Construction. The singular when used herein may
include the plural unless the context clearly indicates to the
contrary. The words "hereof", "herein", "hereunder", and other
similar compounds of the word "here" shall mean and refer to the
entire Program and not to any particular provision or section.
Whenever the words "Article" or "Section" are used in this Program,
or a cross reference to an "Article" or "Section" is made, the
Article or Section referred to shall be an Article or Section of
this Program unless otherwise specified.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. In order to be eligible for
participation in the Program, an Employee must be selected by the
Committee which, in its sole and absolute discretion, shall
determine eligibility for participation in accordance with the
purposes of the Program.
2.2 Participation. An Employee, having been selected to
participate in this Program by the Committee, shall, as a
condition to participate, complete and return to the Committee a
duly executed Plan Agreement electing to participate in the
Program and agreeing to the terms and conditions thereof.
ARTICLE III
DEATH BENEFIT
3.1 Amount and Payment of Death Benefit. In the event a
Participant dies prior to Retirement from the Company, the
Company will pay or cause to be paid a Death Benefit (as herein
defined) to such Participant's Beneficiary in the amount or
amounts set forth in such Particiant's Plan Agreement and as
therein specified, commencing on the first day of the month
following the date of such Participant's death, or as otherwise
specified in such Participant's Plan Agreement.
2
3.2 Partial Distribution Prior to Death. If a Participant
shall die after becoming entitled to a Retirement Benefit, but
before the total amount payable to such Participant as a
Retirement Benefit has been paid, the Retirement Benefit payments
then remaining unpaid to such Participant shall be paid to such
Participant's Beneficiary, in accordance with the payment
schedule pursuant to which payments are made under Sections 4.1,
4.2, or 4.3.
ARTICLE IV
RETIREMENT BENEFIT
4.1 Retirement. If a Participant has remained an Employee
until age sixty-five (65) and shall then retire, the Company will
pay or cause to be paid to such Participant as a Retirement
Benefit (as herein defined), the amount per month specified
herein and in such Participant's Plan Agreement, commencing on
the first day of the month following such Participant's
retirement, or as otherwise specified in such Participant's Plan
Agreement. If a Participant Retires prior to age sixty-five
(65), the Company will pay or cause to be paid to such
Participant as a Retirement Benefit, the amount (if any) per
month specified herein and in such Participant's Plan Agreement,
commencing on the first day of the month following such
Participant's Retirement, or as otherwise specified by such
Participant and as permitted by such Participant's Plan
Agreement. Provided however, retirement benefit payments shall
not commence until the later of (i) the Participant attaining the
age of fifty (50), and (ii) the commencement of retirement
benefit payments to the Participant under the Western Resources,
Inc. Retirement Plan.
Retirement Benefit
Retirement Age Percentage
50 & under 50.00%
51 51.20%
52 52.40%
53 53.60%
54 54.80%
55 56.00%
56 56.57%
57 57.14%
58 57.71%
59 58.28%
60 58.85%
61 59.42%
62 60.00%
63 60.56%
64 61.13%
65 & over 61.70%
3
4.2 Disability. If a Participant shall become Totally
and Permanently Disabled prior to Retirement and such total
disability continues for more than six (6) months, such
Participant shall be entitled to the same retirement benefit such
Participant would have received had such Participant attained the
age of sixty-five (65) at the time of such total disability.
4.3 Vesting of Retirement Benefit. Notwithstanding any
provision contained herein which may imply or specify to the
contrary, a Participant's Retirement Benefit shall unconditionally
vest in such Participant according to the following vesting
schedule:
Years of Service Vested Percentage of
with the Company Retirement Benefit
0 to 5 0%
6 10%
7 20%
8 30%
9 40%
10 50%
11 60%
12 70%
13 80%
14 90%
15 or more 100%
If a participant attains age 65, such Participant shall be 100%
vested regardless of the above schedule. Retirement Benefits
hereunder offsetting the limitations of Internal Revenue Code
Section 401 (a)(17) shall be immediately vested for all purposes.
4.4 Forfeitability of Retirement Benefit.
Notwithstanding any provision contained herein which may imply or
specify to the contrary, a Participant's right to receive a
Retirement Benefit under this Program and such Participant's Plan
Agreement shall be forfeitable to the extent that such Retirement
Benefit has not vested as described in Section 4.3.
ARTICLE V
BENEFICIARY
A Participant shall designate a beneficiary to receive
benefits under the Program and Plan Agreement by completing the
appropriate space in the Plan Agreement. If more than one
Beneficiary is named, the shares and/or precedence of each
Beneficiary shall be indicated. As a condition to any married
Participant designating a Beneficiary other than such
4
Participant's spouse, the Committee may require the spouse's
consent. A Participant shall have the right to change the
Beneficiary by submitting to the Committee a Change of
Beneficiary in the form attached as Appendix III hereof;
provided, however, that no change of Beneficiary shall be
effective until acknowledged in writing by the Committee. If the
Company has any doubt as to the proper Beneficiary to receive
payments hereunder, the Company shall have the right to withhold
such payments until the matter is finally adjudicated. Any
payment made or caused to be made by the Company in good faith
and in accordance with the provisions of this Program and a
Participant's Plan Agreement shall fully discharge the Company
from all further obligations with respect to such payment.
ARTICLE VI
LEAVE OF ABSENCE
If a Participant is authorized by the Company for any
reason, including military, medical, or other, to take a leave of
absence from employment, such Participant's Plan Agreement shall
remain in effect.
ARTICLE VII
SOURCE OF BENEFITS
7.1 Benefits Payable. Amounts payable hereunder shall be
paid exclusively from the general assets of the Company or the
Rabbi Trust to be established pursuant to Section 7.4, and no
person entitled to payment hereunder shall have any claim, right,
security interest, or other interest in any fund, trust, account,
insurance contract, or asset of the Company which may be looked
to for such payment. The Company's liability for the payment of
benefits hereunder shall be evidenced only by this Program and
each Plan Agreement entered into between the Company and a
Participant.
7.2 Investments to Facilitate Payment of Benefits.
Although the Company is not obligated to invest in any specific
asset or fund, or purchase any insurance contract, in order to
provide the means for the payment of any liabilities under this
Program, the Company may elect to do so, and, in such event, no
Participant shall have any interest whatever in such asset, fund,
or insurance contract. In the event the Company elects to
purchase or causes to be purchased insurance contracts on the
life of a Participant as a means for making, offsetting, or
contributing to any payment, in full or in part, which may become
due and payable by the Company under this Program or a
Participant's Plan Agreement, such Participant agrees to
cooperate in the securing of life insurance on such Participant's
life by furnishing such information as the Company and the
insurance carrier may require, including the results and reports
of previous Company and other insurance carrier physical
examinations as may be requested, and taking any other action
which may be requested by the Company and the insurance carrier
to obtain such insurance coverage. If a Participant does not
cooperate in the securing of such life insurance, the Company
shall have no further obligation to such Participant under this
Program, and such Participant's Plan Agreement shall terminate.
7.3 Ownership of Insurance Contracts. The Company shall
be the sole owner of any insurance contracts acquired on the life
of a Participant with all incidents of ownership therein,
including, but not limited to, the right to cash and loan values,
dividends, if any, death benefits, and the right to termination
thereof, and
5
a Participant shall have no interest whatsoever in such
contracts, if any, and shall exercise none of the incidents of
ownership thereof. Provided however, the Company may assign any
such insurance contracts to the trustee of the Rabbi Trust.
7.4 Trust for Payment of Retirement Benefits. The Company
shall create a Rabbi Trust for the purpose of facilitating any
retirement benefits payable hereunder. Such trust will be funded
upon the occurrence of any of the following events:
a) At the Retirement of a Plan Participant;
b) Upon a decision by the Board of Directors ;
c) If the shareholders of the Company approve the
merger or consolidation of the Company with or into any
other corporation (other than a corporation
wholly-owned by the Company immediately prior to such
event) or the acquisition of substantially all of the
business or assets of the Company by any other person
or entity (other than a corporation wholly-owned by the
Company immediately prior to such event);
d) If a change occurs in the Board of Directors of the
Company whereby Directors comprising a majority of the
Board of Directors immediately prior to such change do
not continue to comprise such a majority immediately
after such change, provided that incremental and/or
related changes (including but not limited to
resignations from the Board of Directors) which occur
within an 18 month period of time shall be considered
to be but a single change for purposes of this
subparagraph; or
e) If, as a result of any tender offer or otherwise,
any person or entity or affiliated group becomes the
beneficial or record owner (directly or indirectly) of
more than 10% of the outstanding voting securities of
the Company.
Such funding will be in an amount sufficient for the
trustee to purchase Single Premium Annuities from qualified and
financially sound insurance companies to provide the applicable
vested retirement benefits payable under this Program and Plan
Agreements. Such funding and the purchase of insurance, if any,
will not relieve the Company of its obligations to pay or cause
to be paid the benefits hereunder.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
Neither this Program nor a Participant's Plan Agreement,
either singly or collectively, in any way obligate the Company,
or any subsidiary of the Company, to continue the employment of a
Participant with the Company, or any subsidiary of the Company,
nor does either limit the right of the Company or any subsidiary
of the Company at any time and for any reason to terminate the
Participant's employment. Termination of a Participant's
employment with the Company, or any subsidiary of the Company,
for any reason, whether by action of the Company, subsidiary, or
Participant, shall immediately terminate the Participant's
participation in this Program and such Participant's Plan
Agreement, and all further obligations of either party
thereunder, except as may be provided in Article X and the
Participant's Plan Agreement. In no event shall this Program or
a Plan Agreement, either singly or collectively, by their terms
or implications constitute an employment contract of any nature
whatsoever between the Company, or any subsidiary, and a
Participant.
6
ARTICLE IX
TERMINATION OF PARTICIPATION
A Participant reserves the right to terminate participation
in this Program and such Participant's Plan Agreement at any time
by giving the Company written notice of such termination not less
than 30 days (i) prior to the anniversary date of any contract or
contracts of insurance on the life of such Participant which may
be in force and utilized by the Company in connection with this
Program, or (ii) prior to the date a Participant selects for
termination if no insurance contract is in effect.
ARTICLE X
TERMINATIONS, AMENDMENT, MODIFICATION,
OR SUPPLEMENT OF PLAN
10.1 Termination. The Company reserves the right to
terminate, amend, modify, or supplement this Program, wholly or
partially, from time to time, and at any time. The Company
likewise reserves the right to amend, modify, or supplement any
Plan Agreement, wholly or partially, from time to time. Such
right to terminate, amend, modify, or supplement this Program or
any Plan Agreement shall be exercised for the Company by the
Committee; provided, however, that the Committee shall take no
action to terminate this Program or a Plan Agreement or to reduce
benefits, with respect to any person who is a Participant (or a
Beneficiary) at the time of the termination or reduction. This
prohibition against the reduction of Participants' benefits shall
apply as well to benefits Participants may earn (under this
Program and their Plan Agreement) by their future service and
future increases in compensation. Any termination of this Program
shall be limited to Employees who at the time of such termination
are not Participants. Provided however, in the event of a change
of control of the Company, the surviving corporation, if other
than the Company, may terminate this Program and the Plan
Agreements upon substitution by such corporation of a plan or
program providing benefits no less favorable to the Participants.
10.2 Rights and Obligations Upon Termination. Upon the
termination of this Program by the Committee, or the termination
of any Plan Agreement by a Participant, in accordance with the
provisions for such termination, neither this Program nor the
7
Plan Agreement shall be of any further force or effect, and no
party shall have any further obligation under either this Program
or any Plan Agreement so terminated, except as provided in
Sections 4.3, 10.1 or as elsewhere provided in this Program.
ARTICLE XI
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and such
Participant's Beneficiary hereunder and under such Participant's
Plan Agreement are in addition to any other benefits available to
such Participant under any other program, plan or agreement of
the Company for its Employees and the Participants, and, except
as may be otherwise expressly provided for, this Program and Plan
Agreements entered into hereunder shall supplement and shall not
supersede, modify, or amend any other program, plan or agreement
of the Company or a Participant. Moreover, benefits under this
Program and Plan Agreements entered into hereunder shall not be
considered compensation for the purpose of computing
contributions or benefits under any plan maintained by the
Company, or any of its subsidiaries, which is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended.
ARTICLE XII
RESTRICTIONS ON ALIENATION OF BENEFITS
No right or benefit under this Program or a Plan Agreement
shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge the same
shall be void. No right or benefit hereunder or under any Plan
Agreement shall in any manner be liable for or subject to the
debts, contracts, liabilities, or torts of the person entitled to
such benefit. If any Participant or Beneficiary under this
Program or a Plan Agreement should become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge
any right to a benefit hereunder or under any Plan Agreement,
then such right or benefit shall, in the discretion of the
Committee, cease, and in such event, the Committee may hold or
apply the same or any part thereof for the benefit of such
Participant or Beneficiary, his or her spouse, children, or other
dependents, or any of them, in such portion as the Committee, in
its sole and absolute discretion, may deem proper.
ARTICLE XIII
ADMINISTRATION OF THIS PROGRAM
13.1 Appointment of Committee. The general administration
of this Program, and any Plan Agreements executed hereunder, as
well as construction and interpretation thereof, shall be vested
in the Committee, the number and members of which shall be
designated and appointed from time to time by, and shall serve at
the pleasure of, the Board of Directors. Any such member of the
Committee may resign by notice in writing filed with the
secretary of the Committee. Vacancies shall be filled promptly by
the Board of Directors.
8
13.2 Committee Officials. The Board of Directors may
designate one of the members of the Committee as Chairman and may
appoint a secretary who need not be a member of the Committee.
The secretary shall keep minutes of the Committee's proceedings
and all data, records, and documents relating to the Committee's
administration of this Program and any Plan Agreements executed
hereunder. The Committee may appoint from its number such
subcommittees with such powers as the Committee shall determine
and may authorize one or more of its members or any agent to
execute or deliver any instrument or make any payment on behalf
of the Committee.
13.3 Committee Action. All resolutions or other actions
taken by the Committee shall be by the vote of a majority of
those present at a meeting at which a majority of the members are
present, or in writing by all the members at the time in office
if they act without a meeting.
13.4 Committee Rules and Powers - General. Subject to the
provisions of this Program, the Committee may from time to time
establish rules, forms, and procedures for the administration of
this Program, including Plan Agreements. Except as herein
otherwise expressly provided, the Committee shall have the
exclusive right to interpret this Program and any Plan
Agreements, and to decide any and all matters arising thereunder
or in connection with the administration of this Program and any
Plan Agreements, and it shall endeavor to act, whether by general
rules or by particular decisions, so as not to discriminate in
favor of or against any person. The Committee shall have the
exclusive right to determine Total and Permanent Disability with
respect to a Participant (consistent with this Plan's definition
of the term ), such determinations to be made on the basis of
such medical and/or other evidence that the Committee, in its
sole and absolute discretion, may require. Such decisions,
actions, and records of the Committee shall be conclusive and
binding upon the Company, the Participants, and all persons
having or claiming to have rights or interests in or under this
Program.
13.5 Reliance on Certificates, etc. The members of the
Committee and the Officers and Directors of the Company shall be
entitled to rely on all certificates and reports made by any duly
appointed accountants, and on all opinions given by any duly
appointed legal counsel. Such legal counsel may be counsel for
the Company.
13.6 Liability of Committee. No member of the Committee
shall be liable for any act or omission of any other member of
the Committee, or for any act or omission on his part, excepting
only his own willful misconduct. The Company shall indemnify and
save harmless each member of the Committee against any and all
expenses and liabilities arising out of membership on the
Committee, excepting only expenses and liabilities arising out of
a Committee member's own willful misconduct. Expenses against
which a member of the Committee shall be indemnified hereunder
shall include, without limitation, the amount of any settlement
or judgment, costs, counsel fees, and related charges reasonably
incurred in connection with a claim asserted, or a proceeding
brought, or settlement thereof. The foregoing right of
indemnification shall be in addition to any other rights to which
any such member may be entitled.
9
13.7 Determination of Benefits. In addition to the powers
hereinabove specified, the Committee shall have the power to
compute and certify, under this Program and any Plan Agreement,
the amount and kind of benefits from time to time payable to
Participants and their Beneficiaries, and to authorize all
disbursements for such purposes.
13.8 Information to Committee. To enable the Committee to
perform its functions, the Company shall supply full and timely
information to the Committee on all matters relating to the
compensation of all Participants, their retirement, death, or
other cause for termination of employment, and such other
pertinent facts as the Committee may require.
13.9 Manner and Time of Payment of Benefits. The
Committee shall have the power, in its sole and absolute
discretion, to change the manner and time of payment of benefits to
be made to a Participant or his Beneficiary from that set forth in
the Participant's Plan Agreement if requested to do so by such
Participant or Beneficiary.
ARTICLE XIV
ADOPTION OF PLAN BY SUBSIDIARY,
AFFILIATED OR ASSOCIATED COMPANIES
Any corporation which is a subsidiary of the Company may,
with the approval of the Committee, adopt this Plan and thereby
come within the definition of Company in Article I hereof.
ARTICLE XV
MISCELLANEOUS
15.1 Execution of Receipts and Releases. Any payment to
a Participant, a Participant's legal representative, or Beneficiary
in accordance with the provisions of this Program or any Plan
Agreement executed hereunder shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Company.
The Company may require such Participant, legal representative,
or Beneficiary, as a condition precedent to such payment, to
execute a receipt and release therefor in such form as it may
determine.
15.2 No Guarantee of Interests. Neither the Committee nor
any of its members guarantees the payment of any amounts which
may be or becomes due to any person or entity under this Program
or any Plan Agreement executed hereunder. The liability of the
Company to make any payment under this Program or any Plan
Agreement executed hereunder is limited to the then available
assets of the Company and the trust established under Section 7.4
hereof.
10
15.3 Company Records. Records of the Company as to a
Participant's employment, termination of employment and the
reason therefor, reemployment, authorized leaves of absence, and
compensation shall be conclusive on all persons and entities,
unless determined to be incorrect.
15.4 Evidence. Evidence required of anyone under this
Program and any Plan Agreement executed hereunder may be by
certificate, affidavit, document, or other information which the
person or entity acting on it considers pertinent and reliable,
and signed, made, or presented by the proper party or parties.
15.5 Notice. Any notice which shall be or may be given
under this Program or a Plan Agreement executed hereunder shall
be in writing and shall be mailed by United States mail, postage
prepaid. If notice is to be given to the Company, such notice
shall be addressed to the Company at:
818 S. Kansas Avenue
Topeka, Kansas 66612
and marked to the attention of the Secretary, Executive Salary
Continuation Plan Administrative Committee; or, if notice to a
Participant, addressed to the address shown on such Participant's
most recent employment file with the Company.
15.6 Change of Address. Any party may, from time to time,
change the address to which notices shall be mailed by giving
written notice of such new address.
15.7 Effect of Provisions. The provisions of this Program
and of any Plan Agreement executed hereunder shall be binding
upon the Company and its successors and assigns, and upon a
Participant, his Beneficiary, assigns, heirs, executors, and
administrators.
15.8 Headings. The titles and headings of Articles and
Sections are included for convenience of reference only and are
not to be considered in the construction of the provisions hereof
or any Plan Agreement executed hereunder.
15.9 Governing Law. All questions arising with respect to
this Program and any Plan Agreement executed hereunder shall be
determined by reference to the laws of the State of Kansas in
effect at the time of their adopting and execution, respectively.
11
The changes made by this revised and restated Program shall
be effective for Participants with respect to whom no Retirement,
Disability, or Death Benefit payments have commenced as of March
15, 1995 and their Beneficiaries.
Signed this 15th day of March, 1995.
WESTERN RESOURCES, INC.
By____________________________
Attested by: (Executive Vice President)
______________________________
(Secretary)
(SEAL)
12
- -----------------------------------------------------------------
APPENDIX I
EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT FOR
WESTERN RESOURCES, INC.
- -----------------------------------------------------------------
EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT
FOR WESTERN RESOURCES, INC.
I acknowledge that, as an Employee of Western Resources, Inc., I
have been offered an opportunity to participate in the Western
Resources, Inc. Executive Salary Continuation Program (Program)
described in the attached document (which is incorporated herein
by reference), and that I have elected one of the alternatives
set forth as indicated by the space which I have checked:
________ To participate in the Program
________ Not to participate in the Program
My Retirement Benefit, disability benefits, death benefits, and
commencement of such payments, and designated Beneficiary(ies)
are agreed to be as follows:
1.A Retirement Benefit (Article IV of Program). Subject to
the vesting schedule in Section 4.3 of the Program, an amount
which, when combined with existing pension benefits under the
Western Resources, Inc. Retirement Plan, will provide the
percentage of the final 36 months average Compensation, for life
(15 years minimum) as illustrated below:
Retirement Benefit
Retirement Age Percentage
50 & under 50.00%
51 51.20%
52 52.40%
53 53.60%
54 54.80%
55 56.00%
56 56.57%
57 57.14%
58 57.71%
59 58.28%
60 58.85%
61 59.42%
62 60.00%
63 60.56%
64 61.13%
65 & over 61.70%
1
1.B Commencement of Retirement Benefit Payments. The amount
of the Retirement Benefit Payments will be based on the following
table depending upon the Participant's age when Benefit Payments
are to commence:
Age At Payout Percentage Factor
Commencement of Of Retirement Benefit
Benefit Payments Percentage
50 50%
51 55%
52 60%
53 65%
54 70%
55 75%
56 80%
57 85%
58 90%
59 95%
60 & older 100%
2. IRC Section 401(a)(17) Limitations. Notwithstanding
Paragraphs 1A and 1B above, the Program and this Plan Agreement
shall provide a Retirement Benefit attributable to the
Participant's annual base compensation that is in excess of IRC
Section 401(a)(17) limitations. This benefit will be computed by
applying the same benefit formula, vesting provisions, and early
retirement provisions as are in the Western Resources, Inc.
Pension Plan. Any benefit provided under this provision will
offset the benefit provided under Paragraphs 1A and 1B above.
3. Disability Benefit (Article IV of Program). If Total and
Permanent Disability should occur prior to Retirement, an amount
which, when combined with then existing pension benefits under
the Western Resources, Inc. Retirement Plan, will provide 61.7%
of the final 36 months average Compensation for life (15 years
minimum).
4. Death Benefit. (Article III of Program). If death occurs
before Retirement, an amount which, when combined with then
existing pension benefits under the Western Resources, Inc.
Retirement Plan, will provide 50% (or the vested Retirement
Benefit, whichever is greater) of the previous 36 months average
Compensation, payable to the Beneficiary for 180 months following
death.
5. Participant hereby designates as Primary Beneficiary under
the Program and this Plan Agreement:
2
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________
and, Participant hereby designates as Secondary Beneficiary under
the Program and this Plan Agreement:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
The term "Beneficiary" as used herein shall mean the Primary
Beneficiary if such Primary Beneficiary shall survive Participant
by at least 30 days, and shall mean the Secondary Beneficiary if
Primary Beneficiary does not survive Participant by at least 30
days, and shall mean the Estate of the Participant, if neither
Primary nor Secondary Beneficiary survives Participant by at
least 30 days. Participant shall have the right to change
Participant"s designation of Primary and/or Secondary Beneficiary
from time to time, in such manner as shall be required by the
Company, it being agreed that no change in beneficiary shall be
effective until acknowledged in writing by the Committee. (If
Beneficiary is to be irrevocable, strike and initial previous
sentence.)
I further acknowledge that neither the Company nor any of its
subsidiaries, affiliated companies, officers, employees, or
agents has any responsibility whatsoever for the changes which I
may make in other personal plans or programs as a result of my
decision regarding the Program and they are fully released to
such extent. The Company agrees that although the Program may be
terminated or modified at any time, in the sole discretion of the
Company, a Participant shall have those rights provided for in
Article X of said Program to the extent such may be applicable to
such Participant's at the time of such termination.
IN WITNESS WHEREOF, Western Resources, Inc. and Plan
Participant have executed this Plan Agreement as of March 15,
1995.
WESTERN RESOURCES, INC.
_____________________________
Executive Vice President
PARTICIPANT:
_______________________
(Signature)
________________________
(Type or Print Name)
3
- -----------------------------------------------------------------
APPENDIX II
EXECUTIVE SALARY CONTINUATION PLAN
AGREEMENT FOR ASTRA RESOURCES, INC.
- -----------------------------------------------------------------
EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT
FOR ASTRA RESOURCES, INC., A WHOLLY OWNED SUBSIDIARY OF
WESTERN RESOURCES, INC.
I acknowledge that, as an Employee of Astra Resources, Inc., a
wholly owned subsidiary of Western Resources, Inc., I have been
offered an opportunity to participate in the Western Resources,
Inc. Executive Salary Continuation Program (Program) described in
the attached document, and that I have elected one of the
alternatives set forth as indicated by the space which I have
checked:
To participate in the Program
Not to participate in the Program
My Retirement Benefit, disability benefits, death benefits, and
commencement of such payments, and designated Beneficiary(ies)
are agreed to be as follows:
1.A Retirement Benefit (Article IV of Program). Subject to
the vesting schedule in Section 4.3 of the Program, an amount
which, when combined with existing pension benefits under the
Western Resources, Inc. Retirement Plan, will provide the
percentage of the final 36 months average Compensation, for life
(15 years minimum) as illustrated below:
Retirement Benefit
Retirement Age Percentage
50 & under 50.00%
51 51.20%
52 52.40%
53 53.60%
54 54.80%
55 56.00%
56 56.57%
57 57.14%
58 57.71%
59 58.28%
60 58.85%
61 59.42%
62 60.00%
63 60.56%
64 61.13%
65 & over 61.70%
1
1.B Commencement of Retirement Benefit Payments. The
amount of the Retirement Benefit Payments will be based on the
following table depending upon the Participant's age when Benefit
Payments are to commence:
Age At Payout Percentage Factor
Commencement of Of Retirement Benefit
Benefit Payments Percentage
50 50%
51 55%
52 60%
53 65%
54 70%
55 75%
56 80%
57 85%
58 90%
59 95%
60 & older 100%
2. IRC Section 401(a)(17) Limitations. Notwithstanding
Paragraphs 1A and 1B above, the Program and this Plan Agreement
shall provide a Retirement Benefit attributable to the
Participant's annual base compensation that is in excess of IRC
Section 401(a)(17) limitations. This benefit will be computed by
applying the same benefit formula, vesting provisions, and early
retirement provisions as are in the Western Resources, Inc.
Pension Plan. Any benefit provided under this provision will
offset the benefit provided under Paragraphs 1A and 1B above.
3. Disability Benefit (Article IV of Program). If Total
and Permanent Disability should occur prior to Retirement, an
amount which, when combined with then existing pension benefits
under the Western Resources, Inc. Retirement Plan, will provide
61.7% of the final 36 months average Compensation for life (15
years minimum).
4. Death Benefit. (Article III of Program). If death
occurs before Retirement, an amount which, when combined with then
existing pension benefits under the Western Resources, Inc.
Retirement Plan, will provide 50% (or the vested Retirement
Benefit, whichever is greater) of the previous 36 months average
Compensation, payable to the Beneficiary for 180 months following
death.
5. Participant hereby designates as Primary Beneficiary
under the Program and this Plan Agreement:
2
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________
and, Participant hereby designates as Secondary Beneficiary under
the Program and this Plan Agreement:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
The term "Beneficiary" as used herein shall mean the Primary
Beneficiary if such Primary Beneficiary shall survive Participant
by at least 30 days, and shall mean the Secondary Beneficiary if
Primary Beneficiary does not survive Participant by at least 30
days, and shall mean the Estate of the Participant, if neither
Primary nor Secondary Beneficiary survives Participant by at
least 30 days. Participant shall have the right to change
Participant's designation of Primary and/or Secondary Beneficiary
from time to time, in such manner as shall be required by the
Company, it being agreed that no change in beneficiary shall be
effective until acknowledged in writing by the Committee. (If
Beneficiary is to be irrevocable, strike and initial previous
sentence.)
I further acknowledge that neither the Company nor any of its
subsidiaries, affiliated companies, officers, employees, or
agents has any responsibility whatsoever for the changes which I
may make in other personal plans or programs as a result of my
decision regarding the Program and they are fully released to
such extent. The Company agrees that although the Program may be
terminated or modified at any time, in the sole discretion of the
Company, a Participant shall have those rights provided for in
Article X of said Program to the extent such may be applicable to
such Participant's at the time of such termination.
IN WITNESS WHEREOF, Western Resources, Inc. and Plan
Participant have executed this Plan Agreement as of March 15,
1995.
WESTERN RESOURCES, INC.
__________________________________
Executive Vice President
PARTICIPANT:
_________________________________
(Signature)
_________________________________
(Type or Print Name)
3
- -----------------------------------------------------------------
APPENDIX III
CHANGE OF BENEFICIARY FORM FOR
EXECUTIVE SALARY CONTINUATION PLAN
- -----------------------------------------------------------------
WESTERN RESOURCES, INC.
CHANGE OF BENEFICIARY FORM FOR
EXECUTIVE SALARY CONTINUATION PLAN
I,___________________________________, as a Participant in the
above Plan, hereby request to change the Beneficiary Designation
dated ________________ as follows:
Primary Beneficiary:_____________________________________________
_________________________________________________________________
_________________________________________________________________
Secondary Beneficiary:___________________________________________
_________________________________________________________________
_________________________________________________________________
The term "Beneficiary" as used herein shall mean the Primary
Beneficiary if such Primary Beneficiary shall survive Participant
by at least 30 days, and shall mean the Secondary Beneficiary if
Primary Beneficiary does not survive Participant by at least 30
days, and shall mean Estate of the Participant, if neither
Primary nor Secondary Beneficiary survives Participant by at
least 30 days. Participant shall have the right to change
Participant's designation of Primary and/or Secondary Beneficiary
from time to time in such manner as shall be required by the
Company, it being agreed that no change in beneficiary shall be
effective until acknowledged in writing by the Committee. (If
Beneficiary is to be irrevocable, strike and initial previous
sentence.)
DATE: PARTICIPANT:
_________________________ _________________________
(Signature)
________________________
Type or Print Name)
PARTICIPANT'S SPOUSE:
_______________________
(Signature)
_______________________
(Type or Print Name)
Exhibit 10(b)
EXECUTIVE SALARY CONTINUATION PLAN AGREEMENT
FOR WESTERN RESOURCES, INC.
I acknowledge that, as an Employee of Western Resources, Inc., I
have been offered an opportunity to participate in the Western
Resources, Inc. Executive Salary Continuation Program (Program)
described in the attached document (which is incorporated herein
by reference), and that I have elected one of the alternatives
set forth as indicated by the space which I have checked:
________ To participate in the Program
________ Not to participate in the Program
My Retirement Benefit, disability benefits, death benefits, and
commencement of such payments, and designated Beneficiary(ies)
are agreed to be as follows:
1.A Retirement Benefit (Article IV of Program). Subject to
the vesting schedule in Section 4.3 of the Program, provided the
reference to age 65 in the next to last sentence thereof shall be
age 61, and not withstanding the schedule contained therein, an
amount which, when combined with existing pension benefits under
the Western Resources, Inc. Retirement Plan, will provide the
percentage of the final 36 months average Compensation, for
life (15 years minimum) as illustrated below:
Retirement Benefit
Retirement Age Percentage
50 & under 50.00%
51 51.20%
52 52.40%
53 53.60%
54 54.80%
55 56.00%
56 56.57%
57 57.14%
58 57.71%
59 58.28%
60 58.85%
61 60.00%
62 60.00%
63 60.56%
64 61.13%
65 & over 61.70%
1.B Commencement of Retirement Benefit Payments. The
amount of the Retirement Benefit Payments will be based on the
following table depending upon the Participant's age when
Benefit Payments are to commence:
Age At Payout Percentage Factor
Commencement of Of Retirement Benefit
Benefit Payments Percentage
50 50%
51 55%
52 60%
53 65%
54 70%
55 75%
56 80%
57 85%
58 90%
59 95%
60 & older 100%
2. IRC Section 401(a)(17) Limitations. Notwithstanding
Paragraphs 1A and 1B above, the Program and this Plan
Agreement shall provide a Retirement Benefit attributable to the
Participant's annual base compensation that is in excess of IRC
Section 401(a)(17) limitations. This benefit will be computed by
applying the same benefit formula, vesting provisions, and early
retirement provisions as are in the Western Resources, Inc.
Pension Plan. Any benefit provided under this provision will
offset the benefit provided under Paragraphs 1A and 1B above.
3. Disability Benefit (Article IV of Program). If Total and
Permanent Disability should occur prior to Retirement, an
amount which, when combined with then existing pension benefits
under the Western Resources, Inc. Retirement Plan, will provide
61.7% of the final 36 months average Compensation for life (15
years minimum).
4. Death Benefit. (Article III of Program). If death occurs
before Retirement, an amount which, when combined with then
existing pension benefits under the Western Resources, Inc.
Retirement Plan, will provide 50% (or the vested Retirement
Benefit , whichever is greater) of the previous 36 months average
Compensation, payable to the Beneficiary for 180 months
following death.
5. Participant hereby designates as Primary Beneficiary
under the Program and this Plan Agreement:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_______________________________________
and, Participant hereby designates as Secondary Beneficiary under
the Program and this Plan Agreement:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_______________________________________
The term "Beneficiary" as used herein shall mean the Primary
Beneficiary if such Primary Beneficiary shall survive Participant
by at least 30 days, and shall mean the Secondary Beneficiary if
Primary Beneficiary does not survive Participant by at least 30
days, and shall mean the Estate of the Participant, if neither
Primary nor Secondary Beneficiary survives Participant by at least
30 days. Participant shall have the right to change Participant's
designation of Primary and/or Secondary Beneficiary from time to
time, in such manner as shall be required by the Company, it being
agreed that no change in beneficiary shall be effective until
acknowledged in writing by the Committee. (If Beneficiary is to be
irrevocable, strike and initial previous sentence.)
I further acknowledge that neither the Company nor any of its
subsidiaries, affiliated companies, officers, employees, or agents
has any responsibility whatsoever for the changes which I may make
in other personal plans or programs as a result of my decision
regarding the Program and they are fully released to such extent.
The Company agrees that although the Program may be terminated or
modified at any time, in the sole discretion of the Company, a
Participant shall have those rights provided for in Article X of
said Program to the extent such may be applicable to such
Participant's at the time of such termination.
IN WITNESS WHEREOF, Western Resources, Inc. and Plan
Participant have executed this Plan Agreement as of March 15, 1995.
WESTERN RESOURCES, INC.
_______________________
Executive Vice President
PARTICIPANT:
______________________
(Signature)
John E. Hayes, Jr.
UT
1000
3-MOS
DEC-31-1995
MAR-31-1995
PER-BOOK
4,306,056
102,030
381,705
406,837
0
5,196,628
308,804
671,465
505,404
1,485,673
150,000
24,858
1,357,069
128,900
0
151,163
0
0
4,038
3,250
1,891,677
5,196,628
417,546
20,969
326,878
349,029
68,517
3,128
71,645
30,070
41,575
3,355
38,220
31,189
23,846
136,227
0.62
0
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
[ ] 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 1-7324
KANSAS GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
KANSAS 48-1093840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 208
WICHITA, KANSAS 67201
(Address of Principal Executive Offices)
316/261-6611
(Registrant's telephone number, including area code)
Indicated 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 8, 1995
Common Stock (No par value) 1,000 Shares
Registrant meets the conditions of General Instruction H(1)(a) and (b) to Form
10-Q and is therefore filing this form with a reduced disclosure format.
KANSAS GAS AND ELECTRIC COMPANY
INDEX
Page
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets 3
Statements of Income 4 - 5
Statements of Cash Flows 6 - 7
Statements of Capitalization 8
Statements of Common Stock Equity 9
Notes to Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
KANSAS GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
1995 1994
(Unaudited)
ASSETS
UTILITY PLANT:
Electric plant in service . . . . . . . . . . . . . . . . $3,407,455 $3,390,406
Less - Accumulated depreciation . . . . . . . . . . . . . 851,335 833,953
---------- ----------
2,556,120 2,556,453
Construction work in progress . . . . . . . . . . . . . . 30,979 32,874
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . . 42,263 39,890
---------- ----------
Net utility plant . . . . . . . . . . . . . . . . . . . 2,629,362 2,629,217
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Decommissioning trust . . . . . . . . . . . . . . . . . . 17,827 16,944
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 8,628 11,561
---------- ----------
26,455 28,505
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . 57 47
Accounts receivable and unbilled revenues (net) . . . . . 61,439 67,833
Advances to parent company . . . . . . . . . . . . . . . 72,442 64,393
Fossil fuel, at average cost. . . . . . . . . . . . . . . 14,344 13,752
Materials and supplies, at average cost . . . . . . . . . 30,465 30,921
Prepayments and other current assets. . . . . . . . . . . 10,574 16,662
---------- ----------
189,321 193,608
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes . . . . . . . . . . . . . . 102,789 102,789
Deferred coal contract settlement costs . . . . . . . . . 17,114 17,944
Phase-in revenues . . . . . . . . . . . . . . . . . . . . 57,020 61,406
Other deferred plant costs. . . . . . . . . . . . . . . . 31,723 31,784
Corporate-owned life insurance (net). . . . . . . . . . . 9,592 9,350
Unamortized debt expense. . . . . . . . . . . . . . . . . 27,230 27,777
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 38,140 40,430
---------- ----------
283,608 291,480
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $3,128,746 $3,142,810
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see Statements) . . . . . . . . . . . . . . $1,943,072 $1,925,196
---------- ----------
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . . . . . . . . . 10,000 50,000
Accounts payable. . . . . . . . . . . . . . . . . . . . . 39,530 49,093
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 37,886 15,737
Accrued interest. . . . . . . . . . . . . . . . . . . . . 13,787 8,337
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 10,186 11,160
---------- ----------
111,389 134,327
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . . 684,763 689,169
Deferred investment tax credits . . . . . . . . . . . . . 75,408 74,841
Deferred gain from sale-leaseback . . . . . . . . . . . . 249,931 252,341
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 64,183 66,936
---------- ----------
1,074,285 1,083,287
COMMITMENTS AND CONTINGENCIES (Note 2) ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $3,128,746 $3,142,810
========== ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $ 138,557 $ 136,604
---------- ----------
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 18,229 20,839
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 4,688 3,863
Power purchased . . . . . . . . . . . . . . . . . . . . . 683 1,252
Other operations. . . . . . . . . . . . . . . . . . . . . 30,405 30,631
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 12,267 11,340
Depreciation and amortization . . . . . . . . . . . . . . 18,353 19,119
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Taxes (see Statements):
Federal income. . . . . . . . . . . . . . . . . . . . . 7,270 6,469
State income . . . . . . . . . . . . . . . . . . . . . 2,075 1,710
General . . . . . . . . . . . . . . . . . . . . . . . . 11,634 12,117
---------- ----------
Total operating expenses. . . . . . . . . . . . . . . 109,990 111,726
---------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 28,567 24,878
---------- ----------
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (1,716) (1,235)
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 2,099 858
Income taxes (net) (see Statements) . . . . . . . . . . . 1,635 1,787
---------- ----------
Total other income and deductions . . . . . . . . . . 2,018 1,410
---------- ----------
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 30,585 26,288
---------- ----------
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 11,768 12,093
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505 1,353
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (560) (368)
---------- ----------
Total interest charges. . . . . . . . . . . . . . . . 12,713 13,078
---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 17,872 $ 13,210
========== ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
Twelve Months Ended
March 31,
1995 1994
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $ 621,833 $ 615,120
---------- ----------
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 87,773 92,998
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 14,387 14,431
Power purchased . . . . . . . . . . . . . . . . . . . . . 6,575 9,109
Other operations. . . . . . . . . . . . . . . . . . . . . 114,834 122,041
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 48,915 47,215
Depreciation and amortization . . . . . . . . . . . . . . 70,691 75,811
Amortization of phase-in revenues . . . . . . . . . . . . 17,544 17,545
Taxes (see Statements):
Federal income. . . . . . . . . . . . . . . . . . . . . 51,013 40,805
State income . . . . . . . . . . . . . . . . . . . . . 12,792 9,863
General . . . . . . . . . . . . . . . . . . . . . . . . 44,609 45,817
---------- ----------
Total operating expenses. . . . . . . . . . . . . . . 469,133 475,635
---------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 152,700 139,485
---------- ----------
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (5,835) 5,137
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 6,320 3,853
Income taxes (net) (see Statements) . . . . . . . . . . . 7,138 5,568
---------- ----------
Total other income and deductions . . . . . . . . . . 7,623 14,558
---------- ----------
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 160,323 154,043
---------- ----------
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 47,502 51,897
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,335 5,871
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (1,702) (1,307)
---------- ----------
Total interest charges. . . . . . . . . . . . . . . . 51,135 56,461
---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 109,188 $ 97,582
========== ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 17,872 $ 13,210
Depreciation and amortization . . . . . . . . . . . . . . . 18,353 19,119
Other amortization (including nuclear fuel) . . . . . . . . 3,534 2,806
Gain on sales of utility plant (net of tax) . . . . . . . . (940) -
Deferred taxes and investment tax credits (net) . . . . . . (5,282) 1,907
Amortization of phase-in revenues . . . . . . . . . . . . . 4,386 4,386
Corporate-owned life insurance. . . . . . . . . . . . . . . (4,976) (4,519)
Amortization of gain from sale-leaseback. . . . . . . . . . (2,410) (2,410)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . 6,394 (26,956)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . (592) (4,662)
Accounts payable. . . . . . . . . . . . . . . . . . . . . (9,563) (4,891)
Interest and taxes accrued. . . . . . . . . . . . . . . . 27,599 36,519
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,570 4,891
Changes in other assets and liabilities . . . . . . . . . . 7,480 (4,998)
---------- ----------
Net cash flows from operating activities. . . . . . . . 67,425 34,402
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 21,240 18,500
Sales of Utility plant. . . . . . . . . . . . . . . . . . . (1,583) -
Corporate-owned life insurance policies . . . . . . . . . . 417 281
Death proceeds of corporate-owned life insurance. . . . . . (250) -
---------- ----------
Net cash flows used in investing activities . . . . . . 19,824 18,781
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . (40,000) (124,200)
Advances to parent company (net). . . . . . . . . . . . . . (8,049) 61,847
Bonds issued. . . . . . . . . . . . . . . . . . . . . . . . - 113,982
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (25) -
Other long-term debt (net). . . . . . . . . . . . . . . . . - (67,893)
Borrowings against life insurance policies (net). . . . . . 483 645
---------- ----------
Net cash flows from (used in) financing activities . . . (47,591) (15,619)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . 10 2
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . 47 63
---------- ----------
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 57 $ 65
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized) . . . . . . . . . . . . . . . . . . . . . $ 6,058 $ 5,993
Income taxes . . . . . . . . . . . . . . . . . . . . . . . - -
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Twelve Months Ended
March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 109,188 $ 97,582
Depreciation and amortization . . . . . . . . . . . . . . . 70,691 75,811
Other amortization (including nuclear fuel) . . . . . . . . 11,633 12,184
Gain on sales of utility plant (net of tax) . . . . . . . . (940) -
Deferred taxes and investment tax credits (net) . . . . . . 18,160 22,115
Amortization of phase-in revenues . . . . . . . . . . . . . 17,544 17,545
Corporate-owned life insurance. . . . . . . . . . . . . . . (17,703) (22,015)
Amortization of gain from sale-leaseback. . . . . . . . . . (9,640) (9,640)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . (23,371) (706)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . (2,088) 419
Accounts payable. . . . . . . . . . . . . . . . . . . . . (6,674) 2,447
Interest and taxes accrued. . . . . . . . . . . . . . . . (4,412) 6,490
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (243) (16,700)
Changes in other assets and liabilities . . . . . . . . . . 1,297 (14,818)
---------- ----------
Net cash flows from operating activities. . . . . . . . 163,442 170,714
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 92,620 69,851
Sales of Utility plant. . . . . . . . . . . . . . . . . . . (1,583) -
Corporate-owned life insurance policies . . . . . . . . . . 26,554 27,119
Death proceeds of corporate-owned life insurance. . . . . . (250) (10,157)
---------- ----------
Net cash flows used in investing activities . . . . . . 117,341 86,813
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . (21,600) (90,200)
Advances to parent company (net). . . . . . . . . . . . . . 58,503 (52,771)
Bonds issued. . . . . . . . . . . . . . . . . . . . . . . . 46,440 178,982
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (46,465) (140,000)
Other long-term debt (net). . . . . . . . . . . . . . . . . - (13,980)
Borrowings against life insurance policies (net). . . . . . 42,013 183,284
Revolving credit agreement (net). . . . . . . . . . . . . . - (150,000)
Dividends to parent company . . . . . . . . . . . . . . . . (125,000) -
---------- ----------
Net cash flows from (used in) financing activities . . . (46,109) (84,685)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . (8) (784)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . 65 849
---------- ----------
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 57 $ 65
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized) . . . . . . . . . . . . . . . . . . . . . $ 68,609 $ 72,660
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 30,509 29,354
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
March 31, December 31,
1995 1994
(Unaudited)
COMMON STOCK EQUITY (see Statements):
Common stock, without par value, authorized and issued
1,000 shares. . . . . . . . . . . . . . . . . . . . . . . $1,065,634 $1,065,634
Retained earnings . . . . . . . . . . . . . . . . . . . . . 177,442 159,570
---------- ----------
Total common stock equity . . . . . . . . . . . . . . . . 1,243,076 64% 1,225,204 64%
---------- ----------
LONG-TERM DEBT:
First Mortgage Bonds:
Series Due 1995 1994
5-5/8% 1996 $ 16,000 $ 16,000
7.6% 2003 135,000 135,000
6-1/2% 2005 65,000 65,000
6.20% 2006 100,000 100,000
316,000 316,000
Pollution Control Bonds:
5.10% 2023 13,957 13,982
Variable (a) 2027 21,940 21,940
7.0% 2031 327,500 327,500
Variable (a) 2032 14,500 14,500
Variable (a) 2032 10,000 10,000
387,897 387,922
---------- ----------
Total bonds. . . . . . . . . . . . . . . . . . . . . . 703,897 703,922
Less:
Unamortized premium and discount (net). . . . . . . . . . 3,901 3,930
---------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . 699,996 36% 699,992 36%
---------- ----------
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . $1,943,072 100% $1,925,196 100%
========== ==========
(a) Market-Adjusted Tax Exempt Securities (MATES). As of March 31, 1995, the rate
on these bonds ranged from 4.05% to 4.08%.
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF COMMON STOCK EQUITY
(Dollars in Thousands)
(Unaudited)
Common Retained
Stock Earnings
BALANCE DECEMBER 31, 1992, 1,000 shares. . . . . . . $1,065,634 $ 71,941
Net income . . . . . . . . . . . . . . . . . . . . . 108,103
---------- ----------
BALANCE DECEMBER 31, 1993, 1,000 shares. . . . . . . 1,065,634 180,044
Net income . . . . . . . . . . . . . . . . . . . . . 104,526
Dividend to parent company . . . . . . . . . . . . . (125,000)
---------- ----------
BALANCE DECEMBER 31, 1994, 1,000 shares. . . . . . . 1,065,634 159,570
Net Income . . . . . . . . . . . . . . . . . . . . . 17,872
---------- ----------
Balance March 31, 1995, 1,000 shares . . . . . . . . $1,065,634 $ 177,442
========== ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND OTHER INFORMATION
General: On March 31, 1992, Western Resources, Inc. (Western Resources)
through its wholly-owned subsidiary KCA Corporation (KCA), acquired all of the
outstanding common and preferred stock of Kansas Gas and Electric Company
(KG&E) for $454 million in cash and 23,479,380 shares of Western Resources
common stock (the Merger). Simultaneously, KCA and KG&E merged and adopted
the name of Kansas Gas and Electric Company.
The Company owns 47% of the Wolf Creek Nuclear Operating Corporation
(WCNOC), the operating company for the Wolf Creek Generating Station (Wolf
Creek). The Company records its proportionate share of all transactions of
WCNOC as it does other jointly-owned facilities.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI), primarily with one
highly rated major insurance company, are recorded on the balance sheets:
March 31, December 31,
1995 1994
(Dollars in Millions)
Cash surrender value of contracts. . $321.3 $320.6
Borrowings against contracts . . . . (311.7) (311.2)
------ ------
COLI (net) . . . . . . . . . . . $ 9.6 $ 9.4
COLI borrowings will be repaid upon receipt of proceeds from death
benefits under contracts. Increases in the cash surrender value of contracts,
resulting from premiums and investment earnings, are recognized as income on a
tax free basis in Corporate-owned Life Insurance (net) on the Statements of
Income. For the three and twelve months ended March 31, 1995, income from
increases in cash surrender value, net of premium and administrative expenses,
was $3.9 million and $16.1 million, respectively, compared to $3.5 million and
$19.9 million for the three and twelve months ended March 31, 1994,
respectively. Interest expense on COLI borrowings is recorded as a tax
deductible expense in Corporate-owned Life Insurance (net) on the Statements
of Income. For the three and twelve months ended March 31, 1995, interest
expense on COLI borrowings was $5.6 million and $21.9 million, respectively,
compared to $4.7 million and $14.8 million for the three and twelve months
ended March 31, 1994, respectively.
Statements of Cash Flows: For purposes of the Statements of Cash Flows,
cash and cash equivalents include cash on hand and highly liquid
collateralized debt instruments purchased with maturities of three months or
less.
2. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites: The Company was previously associated with six
former manufactured gas sites which contain coal tar and other potentially
harmful materials. The Company and the Kansas Department of Health and
Environment (KDHE) conducted preliminary assessments of these sites at minimal
cost. The results of the preliminary investigations determined the Company
does not have a connection to two of the sites.
The Company and KDHE entered into a consent agreement governing all
future work at the four remaining 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 10 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. The Company is aware of other utilities in Region VII
of the EPA (Kansas, Missouri, Nebraska, and Iowa) which have incurred
remediation costs for such sites ranging between $500,000 and $10 million,
depending on the site and that the KCC has permitted another Kansas utility to
recover its remediation costs through rates. To the extent that such
remediation costs are not recovered through rates, the costs could be material
to the Company's financial position or results of operations depending on the
degree of remediation and number of years over which the remediation must be
completed.
Spent Nuclear Fuel Disposal: Under the Nuclear Waste Policy Act of 1982,
the U.S. Department of Energy (DOE) is responsible for the ultimate storage
and disposal of spent nuclear fuel removed from nuclear reactors. Under a
contract with the DOE for disposal of spent nuclear fuel, the Company pays a
quarterly fee to DOE of one mill per kilowatthour on net nuclear generation.
These fees are included as part of nuclear fuel expense.
The Company along with the other co-owners of Wolf Creek are among 14
companies that filed a lawsuit on June 20, 1994, seeking an interpretation of
the DOE's obligation to begin accepting spent nuclear fuel for disposal in
1998. The Federal Nuclear Waste Policy Act requires DOE ultimately to accept
and dispose of nuclear utilities' spent fuel. The DOE has filed a motion to
have this case dismissed. The issue to be decided in this case is whether DOE
must begin accepting spent fuel in 1998 or at a future date. Wolf Creek
contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through
the year 2006 while still maintaining full core off-load capability. The
Company believes adequate additional storage space can be obtained as
necessary.
Decommissioning: On June 9, 1994, the KCC issued an order approving the
decommissioning costs of the 1993 Wolf Creek Decommissioning Cost Study which
estimates the Company's share of Wolf Creek decommissioning costs, under the
immediate dismantlement method, to be approximately $595 million primarily
during the period 2025 through 2033, or approximately $174 million in 1993
dollars. These costs were calculated using an assumed inflation rate of 3.45%
over the remaining service life, in 1993, of 32 years.
Decommissioning costs are being charged to operating expenses in
accordance with the KCC order. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek.
Amounts so expensed ($3.5 million in 1994 increasing annually to $5.5 million
in 2024) and earnings on trust fund assets are deposited in an external trust
fund. The assumed return on trust assets is 5.9%.
The Company's investment in the decommissioning fund, including
reinvested earnings was $17.8 million and $16.9 million at March 31, 1995 and
December 31, 1994, respectively. These amounts are reflected in
Decommissioning Trust, and the related liability is included in Deferred
Credits and Other Liabilities, Other, on the Balance Sheets.
The Company carries $118 million in premature decommissioning insurance.
The insurance coverage 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. If the
amount designated as decommissioning insurance is needed to implement the
NRC-approved plan for stabilization and decontamination, it would not be
available for decommissioning purposes.
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. 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 totalling
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 up to $1.2 billion (Company's share) and premature
decommissioning costs up to $118 million (Company's share) in 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 of approximately $13 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 position and results of operations.
Clean Air Act: The Clean Air Act Amendments of 1990 (the Act) require a
two-phase reduction in sulfur dioxide and oxides of nitrogen (NOx) emissions
effective in 1995 and 2000 and a probable reduction in toxic 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 $2.3 million. The Company does not expect additional
equipment to reduce sulfur emissions to be necessary under Phase II. Although
the Company has no units subject to Phase I regulations, the owners obtained
an early substitution permit to bring the co-owned La Cygne Station under the
Phase I regulations.
The NOx and air toxic limits, which were not set in the law, will be
specified in future EPA regulations. The EPA's proposed NOx regulations were
ruled invalid by the U.S. Court of Appeals for the District of Columbia
Circuit and until such time as the EPA resubmits new proposed regulations, the
Company will be unable to determine its compliance options or related
compliance costs.
Federal Income Taxes: During 1991, the Internal Revenue Service (IRS)
completed an examination of the Company's federal income tax returns for the
years 1984 through 1988. In October 1993, the Company received another
examination report for the years 1989 and 1990 covering the same issues
identified in the previous examination report. In April 1995, after
approximately four years of negotiations with the Appeals Office of the IRS,
the Company reached agreement on the ultimate disposition of the issues raised
in the examination reports. Based on the settlement agreement, management
believes that adequate tax reserves have been provided and the settlement will
have no effect on the Company's financial position or 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, coal, and natural gas. Some of these contracts contain
provisions for price escalation and minimum purchase commitments. At
December 31, 1994, WCNOC's nuclear fuel commitments (Company's share) were
approximately $12.6 million for uranium concentrates expiring at various times
through 1997, $122.9 million for enrichment expiring at various times through
2014, and $56.5 million for fabrication through 2012. At December 31, 1994,
the Company's coal and natural gas contract commitments in 1994 dollars under
the remaining terms of the contracts were $721 million and $9 million,
respectively. The largest coal contract was renegotiated in early 1993 and
expires in 2020, with the remaining coal contracts expiring at various times
through 2013. The majority of natural gas contracts expire in 1995 but have
automatic one-year extension provisions. In the normal course of business,
additional commitments and spot market purchases will be made to obtain
adequate fuel supplies.
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.
3. INCOME TAXES
Total income tax expense included in the Statements of Income reflects
the Federal statutory rate of 35 percent. The Federal statutory rate produces
effective income tax rates of 30.1% and 32.6% for the three month periods and
34.2% and 31.6% for the twelve month periods ended March 31, 1995 and 1994,
respectively. The effective income tax rates vary from the Federal statutory
rate due to the permanent differences, including the amortization of
investment tax credits, and accelerated amortization of certain deferred
income taxes.
KANSAS GAS AND ELECTRIC COMPANY
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 Item 7 of the
Company's Annual Report on Form 10-K for 1994.
The following updates the information provided in the 1994 Form 10-K, and
analyzes the changes in the results of operations between the three and twelve
month periods ended March 31, 1995 and comparable periods of 1994.
FINANCIAL CONDITION
General: The Company had net income of $17.9 million for the first
quarter of 1995 compared to $13.2 million for the first quarter in 1994. The
increase in net income was primarily due to higher revenues, resulting from
increased commercial and industrial sales, and lower fuel and purchased power
expenses. Also contributing to the increase was a $1.6 million gain from the
sale of rail cars.
Net income for the twelve months ended March 31, 1995, of $109.2 million,
increased from net income of $97.6 million for the comparable period of 1994.
The increase was primarily due to increased sales to all retail customer
classes. Also contributing to the increase in net income were lower fuel and
purchase power expenses, and reduced other operations expenses.
Liquidity and Capital Resources: The KG&E common and preferred stock was
redeemed in connection with the Merger, leaving 1,000 shares of common stock
held by Western Resources. The debt structure of the Company and available
sources of funds were not affected by the Merger.
The Company's short-term financing requirements are satisfied through
short-term bank loans and borrowings under unsecured lines of credit
maintained with banks. At March 31, 1995, short-term borrowing amounted to
$10 million compared to $50 million at December 31, 1994.
OPERATING RESULTS
The following discussion explains variances for the three and twelve
months ended March 31, 1995, to the comparable periods of 1994.
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.
Increase (decrease) in electric sales volumes:
3 Months 12 Months
Ended Ended
Residential (3.2)% 1.4%
Commercial 1.5% 3.6%
Industrial 9.8% 5.2%
Total Retail 3.6% 3.6%
Wholesale & Interchange (42.5)% (44.1)%
Total electric sales (8.4)% (7.7)%
Revenues for the first quarter of 1995 increased approximately one
percent to $138.6 million, compared to first quarter 1994 revenues of $136.6
million, primarily due to increases in commercial and industrial sales as a
result of customer growth. Partially offsetting these increases were
decreases in residential and wholesale and interchange sales due to the milder
winter temperatures experienced during the first quarter of 1995 compared to
last year. Also offsetting the increase was an additional $1 million
(Company's share) of amortization of the final merger refund for the three
months ended March 31, 1995 compared to 1994.
Revenues for the twelve months ended March 31, 1995, increased
approximately one percent to $621.8 million from revenues of $615.1 million
for the comparable period of 1994. The increase can be attributed to
increased sales in all retail customer classes as a result of customer growth.
Partially offsetting these increases in retail sales was a decrease in
wholesale and interchange sales. The decrease was primarily due to the higher
sales during the twelve months ended March 31, 1994, to other utilities while
their generating units were down due to the 1993 floods. Also offsetting the
increase for the twelve months ended March 31, 1995, was an additional $2.8
million (Company's share) of amortization of the final merger refund.
Operating Expenses: Total operating expenses decreased approximately two
percent for the first quarter and approximately one percent for the twelve
months ended March 31, 1995 compared to the same periods of 1994. These
decreases can be attributed to decreases in fuel and purchase power expenses.
As discussed previously, the decrease is primarily due to lower sales to
wholesale and interchange customers.
Partially offsetting these decreases for the twelve months ended March
31, 1995, was increased federal income taxes due to the completion at December
31, 1993, of the accelerated amortization of deferred income tax reserves
relating to the allowance for borrowed funds used during construction
capitalized for Wolf Creek. The completion of the amortization of these
deferred income tax reserves increased income taxes and thereby reduced net
income by approximately $9 million for the twelve months ended March 31, 1995
compared to 1994.
Other Income and Deductions: Other income and deductions, net of taxes,
increased in the first quarter of 1995 compared to the first quarter of 1994
primarily as a result of a $1.6 million gain realized from the sale of rail
cars.
Other income and deductions, net of taxes, decreased to $7.6 million for
the twelve months ended March 31, 1995 from $14.6 million for the twelve
months ended March 31, 1994. The decrease was primarily due to additional
interest expense on increased COLI borrowings. Also contributing to the
decrease was the receipt of death benefit proceeds from COLI policies during
the twelve months ended March 31, 1994.
Interest Expense: Interest expense decreased approximately three percent
for the first quarter and approximately nine percent for the twelve months
ended March 31, 1995 compared to the same periods of 1994. These decreases
resulted primarily from lower interest rates on variable-rate debt due to
refinancing of higher cost fixed-rate debt. Also accounting for the decrease
was the impact of increased COLI borrowings which reduce the need for other
long-term debt and thereby reduced interest expense. COLI interest is
reflected in Other Income and Deductions on the Income Statement.
OTHER INFORMATION
Merger Implementation: In accordance with the KCC Merger order,
amortization of the acquisition adjustment will commence August 1995. The
amortization will amount to approximately $20 million (pre-tax) per year for
40 years. Western Resources and the Company (combined companies) can recover
the amortization of the acquisition adjustment through cost savings under a
sharing mechanism approved by the KCC. While the combined companies have
achieved savings from the Merger, there is no assurance that the savings
achieved will be sufficient to, or the cost savings sharing mechanism will
operate as to, fully offset the amortization of the acquisition adjustment.
Early Retirement: In April 1995, Western Resources announced a voluntary
early retirement program for employees 55 years of age and older with a
minimum of 10 years of service as of July 1, 1995. Approximately 420
employees are eligible for the voluntary retirement program. Although Western
Resources is not able to predict the cost of the early retirement program at
this time, the total cost, assuming all 420 eligible employees accept early
retirement, would be approximately $9 million in the second quarter of 1995
with cost savings estimated to be approximately $12 million for 1995. Western
Resources anticipates approximately 50 percent of the eligible employees will
accept early retirement. Although the Company has no employees, costs of the
early retirement program along with any cost savings realized by Western
Resources would be allocated to the Company.
KANSAS GAS AND ELECTRIC COMPANY
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Information required by Item 4 is omitted pursuant to General Instruction
H(2)(b) to Form 10-Q.
Item 5. Other Information
Rate Plan: In April 1995, the Company announced it intends to file a
proposal with the KCC in the summer of 1995 to increase the depreciation on
the assets of Wolf Creek Generating Station by $56 million annually for seven
years beginning in 1996. As a result, the Company will also seek to reduce
electric rates by approximately $9 million annually for the same seven year
period.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURE
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.
KANSAS GAS AND ELECTRIC COMPANY
May 8, 1995 By Richard D. Terrill
Richard D. Terrill
Secretary, Treasurer and
General Counsel
