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 June 30, 1996
[ ] 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 August 14, 1996
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 - 6
Statements of Cash Flows 7 - 8
Statements of Capitalization 9
Statements of Common Stock Equity 10
Notes to Financial Statements 11
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 of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
KANSAS GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Dollars in Thousands)
(unaudited)
June 30, December 31,
1996 1995
ASSETS
UTILITY PLANT:
Electric plant in service . . . . . . . . . . . . . . . . $3,468,581 $3,427,928
Less - Accumulated depreciation . . . . . . . . . . . . . 936,700 893,728
2,531,881 2,534,200
Construction work in progress . . . . . . . . . . . . . . 26,808 40,810
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . . 49,415 53,942
Net utility plant . . . . . . . . . . . . . . . . . . . 2,608,104 2,628,952
OTHER PROPERTY AND INVESTMENTS:
Decommissioning trust . . . . . . . . . . . . . . . . . . 28,551 25,070
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 8,424 7,885
36,975 32,955
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . 88 53
Accounts receivable and unbilled revenues (net) . . . . . 81,652 76,490
Advances to parent company . . . . . . . . . . . . . . . 214,303 34,948
Fossil fuel, at average cost. . . . . . . . . . . . . . . 14,895 17,522
Materials and supplies, at average cost . . . . . . . . . 30,545 31,458
Prepayments and other current assets. . . . . . . . . . . 30,427 17,128
371,910 177,599
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes . . . . . . . . . . . . . . 208,367 208,367
Deferred coal contract settlement costs . . . . . . . . . 13,136 14,612
Phase-in revenues . . . . . . . . . . . . . . . . . . . . 35,089 43,861
Other deferred plant costs. . . . . . . . . . . . . . . . 31,406 31,539
Corporate-owned life insurance (net). . . . . . . . . . . 10,473 7,279
Unamortized debt expense. . . . . . . . . . . . . . . . . 24,513 25,605
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 42,376 32,645
365,360 363,908
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $3,382,349 $3,203,414
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Statements):
Common stock equity . . . . . . . . . . . . . . . . . . . $1,169,030 $1,186,077
Long-term debt (net). . . . . . . . . . . . . . . . . . . 684,006 684,082
1,853,036 1,870,159
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . . . . . . . . . 250,000 50,000
Long-term debt due within one year. . . . . . . . . . . . - 16,000
Accounts payable. . . . . . . . . . . . . . . . . . . . . 58,478 50,783
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 19,455 17,766
Accrued interest. . . . . . . . . . . . . . . . . . . . . 9,082 7,903
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 6,603 6,608
343,618 149,060
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . . 794,468 800,934
Deferred investment tax credits . . . . . . . . . . . . . 71,345 72,970
Deferred gain from sale-leaseback . . . . . . . . . . . . 237,880 242,700
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 82,002 67,591
1,185,695 1,184,195
COMMITMENTS AND CONTINGENCIES (Note 2)
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $3,382,349 $3,203,414
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
June 30,
1996 1995
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $ 163,038 $ 144,747
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 21,828 19,167
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 5,618 5,076
Power purchased . . . . . . . . . . . . . . . . . . . . . 2,464 523
Other operations. . . . . . . . . . . . . . . . . . . . . 38,307 31,794
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 15,439 12,359
Depreciation and amortization . . . . . . . . . . . . . . 23,494 18,316
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 9,215 8,208
State income . . . . . . . . . . . . . . . . . . . . . 2,801 2,387
General . . . . . . . . . . . . . . . . . . . . . . . . 12,047 11,752
Total operating expenses. . . . . . . . . . . . . . . 135,599 113,968
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 27,439 30,779
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (1,565) (1,821)
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 556 731
Income taxes (net). . . . . . . . . . . . . . . . . . . . 4,729 2,184
Total other income and deductions . . . . . . . . . . 3,720 1,094
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 31,159 31,873
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 11,583 11,783
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,694 1,107
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (371) (584)
Total interest charges. . . . . . . . . . . . . . . . 13,906 12,306
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 17,253 $ 19,567
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $ 308,072 $ 283,304
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 43,980 37,396
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 7,375 9,764
Power purchased . . . . . . . . . . . . . . . . . . . . . 6,824 1,206
Other operations. . . . . . . . . . . . . . . . . . . . . 69,676 62,199
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 27,338 24,626
Depreciation and amortization . . . . . . . . . . . . . . 46,862 36,669
Amortization of phase-in revenues . . . . . . . . . . . . 8,772 8,772
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 12,672 15,478
State income . . . . . . . . . . . . . . . . . . . . . 3,992 4,462
General . . . . . . . . . . . . . . . . . . . . . . . . 24,088 23,386
Total operating expenses. . . . . . . . . . . . . . . 251,579 223,958
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 56,493 59,346
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (3,749) (3,537)
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 1,571 2,830
Income taxes (net). . . . . . . . . . . . . . . . . . . . 5,327 3,819
Total other income and deductions . . . . . . . . . . 3,149 3,112
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 59,642 62,458
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 23,299 23,551
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 4,369 2,612
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (979) (1,144)
Total interest charges. . . . . . . . . . . . . . . . 26,689 25,019
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 32,953 $ 37,439
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
June 30,
1996 1995
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $ 648,636 $ 611,593
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 87,176 83,844
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 17,036 15,231
Power purchased . . . . . . . . . . . . . . . . . . . . . 10,195 4,857
Other operations. . . . . . . . . . . . . . . . . . . . . 125,353 118,674
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 50,768 47,384
Depreciation and amortization . . . . . . . . . . . . . . 89,872 69,865
Amortization of phase-in revenues . . . . . . . . . . . . 17,545 17,544
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 45,524 47,617
State income . . . . . . . . . . . . . . . . . . . . . 12,073 12,304
General . . . . . . . . . . . . . . . . . . . . . . . . 46,943 44,342
Total operating expenses. . . . . . . . . . . . . . . 502,485 461,662
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 146,151 149,931
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (2,880) (6,898)
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 3,625 5,101
Income taxes (net). . . . . . . . . . . . . . . . . . . . 10,594 7,871
Total other income and deductions . . . . . . . . . . 11,339 6,074
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 157,490 156,005
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 46,821 47,280
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 6,947 5,323
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (2,665) (1,730)
Total interest charges. . . . . . . . . . . . . . . . 51,103 50,873
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . $ 106,387 $ 105,132
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)
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 32,953 $ 37,439
Depreciation and amortization . . . . . . . . . . . . . . . 36,850 36,669
Other amortization (including nuclear fuel) . . . . . . . . 5,658 7,388
Gain on sales of utility plant (net of tax) . . . . . . . . - (951)
Deferred taxes and investment tax credits (net) . . . . . . (8,091) (10,360)
Amortization of phase-in revenues . . . . . . . . . . . . . 8,772 8,772
Corporate-owned life insurance. . . . . . . . . . . . . . . (12,593) (8,665)
Amortization of gain from sale-leaseback. . . . . . . . . . (4,820) (4,821)
Amortization of acquisition adjustment. . . . . . . . . . . 10,012 -
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . (5,162) (147)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . 2,627 (2,857)
Accounts payable. . . . . . . . . . . . . . . . . . . . . 7,695 5,833
Interest and taxes accrued. . . . . . . . . . . . . . . . 2,868 6,605
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 10,076 (12,881)
Changes in other assets and liabilities . . . . . . . . . . (31,859) 9,254
Net cash flows from operating activities. . . . . . . . 54,986 71,278
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 31,314 40,556
Sales of utility plant. . . . . . . . . . . . . . . . . . . - (1,723)
Corporate-owned life insurance policies . . . . . . . . . . 22,468 25,639
Death proceeds of corporate-owned life insurance. . . . . . - (250)
Net cash flows used in investing activities . . . . . . 53,782 64,222
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . 200,000 (25,000)
Advances to parent company (net). . . . . . . . . . . . . . (179,355) (27,511)
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (16,135) (25)
Borrowings against life insurance policies. . . . . . . . . 44,321 45,578
Repayment of borrowings against life insurance policies . . - (73)
Dividends to parent company . . . . . . . . . . . . . . . . (50,000) -
Net cash flows from (used in) financing activities . . . (1,169) (7,031)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . 35 25
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . 53 47
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 88 $ 72
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized) . . . . . . . . . . . . . . . . . . . . . $ 50,652 $ 48,809
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 17,600 18,100
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
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 106,387 $ 105,132
Depreciation and amortization . . . . . . . . . . . . . . . 73,131 69,865
Other amortization (including nuclear fuel) . . . . . . . . 13,463 12,426
Gain on sales of utility plant (net of tax) . . . . . . . . - (951)
Deferred taxes and investment tax credits (net) . . . . . . 6,120 10,670
Amortization of phase-in revenues . . . . . . . . . . . . . 17,545 17,544
Corporate-owned life insurance. . . . . . . . . . . . . . . (32,476) (17,081)
Amortization of gain from sale-leaseback. . . . . . . . . . (9,639) (9,641)
Amortization of acquisition adjustment. . . . . . . . . . . 16,741 -
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . (13,672) (10,657)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . 1,714 (3,536)
Accounts payable. . . . . . . . . . . . . . . . . . . . . 3,552 (5,177)
Interest and taxes accrued. . . . . . . . . . . . . . . . (2,770) (2,557)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 20,977 (1,683)
Changes in other assets and liabilities . . . . . . . . . . (26,588) (491)
Net cash flows from operating activities. . . . . . . . 174,485 163,863
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 84,696 83,130
Sales of utility plant. . . . . . . . . . . . . . . . . . . - (1,723)
Corporate-owned life insurance policies . . . . . . . . . . 27,176 28,049
Death proceeds of corporate-owned life insurance. . . . . . (10,333) (250)
Net cash flows used in investing activities . . . . . . 101,539 109,206
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . 225,000 (200)
Advances to parent company (net). . . . . . . . . . . . . . (122,399) 23,674
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (16,135) (25)
Borrowings against life insurance policies. . . . . . . . . 45,789 46,962
Repayment of borrowings against life insurance policies . . (5,185) (73)
Dividends to parent company . . . . . . . . . . . . . . . . (200,000) (125,000)
Net cash flows from (used in) financing activities . . . (72,930) (54,662)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . 16 (8)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . 72 77
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . $ 88 $ 72
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized) . . . . . . . . . . . . . . . . . . . . . $ 73,651 $ 73,544
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 41,660 28,209
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1996 1995
COMMON STOCK EQUITY (see Statements):
Common stock, without par value, authorized and issued
1,000 shares. . . . . . . . . . . . . . . . . . . . . . . $1,065,634 $1,065,634
Retained earnings . . . . . . . . . . . . . . . . . . . . . 103,396 120,443
Total common stock equity . . . . . . . . . . . . . . . . 1,169,030 63% 1,186,077 63%
LONG-TERM DEBT:
First Mortgage Bonds:
Series Due 1996 1995
5-5/8% 1996 $ - $ 16,000
7.6% 2003 135,000 135,000
6-1/2% 2005 65,000 65,000
6.20% 2006 100,000 100,000
300,000 316,000
Pollution Control Bonds:
5.10% 2023 13,822 13,957
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
387,762 387,897
Total bonds. . . . . . . . . . . . . . . . . . . . . . 687,762 703,897
Less:
Unamortized premium and discount (net). . . . . . . . . . 3,756 3,815
Long-term debt due within one year. . . . . . . . . . . . - 16,000
Total long-term debt . . . . . . . . . . . . . . . . . 684,006 37% 684,082 37%
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . $1,853,036 100% $1,870,159 100%
(a) Market-Adjusted Tax Exempt Securities (MATES). As of June 30, 1996, the rate
on these bonds ranged from 3.62% to 3.66%.
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, 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 . . . . . . . . . . . . . . . . . . . . . 110,873
Dividend to parent company . . . . . . . . . . . . . (150,000)
BALANCE DECEMBER 31, 1995, 1,000 shares. . . . . . . 1,065,634 120,443
Net Income . . . . . . . . . . . . . . . . . . . . . 32,953
Dividend to parent company . . . . . . . . . . . . . (50,000)
BALANCE JUNE 30, 1996, 1,000 shares. . . . . . . . . $1,065,634 $ 103,396
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: Kansas Gas and Electric Company (the Company, KGE) is a rate-
regulated electric utility and wholly-owned subsidiary of Western Resources,
Inc. (Western Resources). The Company is engaged in the production, purchase,
transmission, distribution, and sale of electricity. The Company serves
approximately 275,000 electric customers in southeastern Kansas.
On March 31, 1992, Western Resources through its wholly-owned subsidiary
KCA Corporation (KCA), acquired all of the outstanding common and preferred
stock of KGE. Simultaneously, KCA and KGE merged and adopted the name of KGE
(the Merger).
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 in its financial statements its proportionate
share of all transactions of WCNOC as it does other jointly-owned facilities.
The Company prepares its financial statements in conformity with
generally accepted accounting principles as applied to regulated public
utilities. The accounting and rates of the Company are subject to
requirements of the Kansas Corporation Commission (KCC) and the Federal Energy
Regulatory Commission (FERC). The financial statements require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, to disclose contingent assets and liabilities at the balance
sheet date, and to report amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 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 financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of June 30, 1996 and
December 31, 1995, and the results of its operations for the three, six and
twelve month periods ended June 30, 1996 and 1995. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's 1995 Annual Report on Form 10-K.
On April 24, 1996, FERC issued its final rule on Order No. 888, Promoting
Wholesale Competition Through Open Access Non-discriminatory Transmission
Services by Public Utilities; Recovery of Stranded Costs by Public Utilities
and Transmitting Utilities. The Company has reviewed this order and does not
expect it to have a material effect on operations.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI) are recorded in
Corporate-owned Life Insurance (net) on the balance sheets:
June 30, December 31,
1996 1995
(Dollars in Millions)
Cash surrender value of contracts. . $407.8 $360.3
Borrowings against contracts . . . . (397.3) (353.0)
COLI (net) . . . . . . . . . . . $ 10.5 $ 7.3
Income is recorded for increases in cash surrender value and net death
proceeds. Interest expense is recognized for COLI borrowings. The net income
generated from COLI contracts, including the tax benefit of the interest
deductions and premium expenses, are recorded as Corporate-owned Life
Insurance (net) on the Statements of Income. The income from increases in
cash surrender value and net death proceeds was $5.4 million, $10.2 million
and $24.7 million for the three, six and twelve months ended June 30, 1996,
respectively, compared to $4.2 million, $8.1 million and $16.0 million for the
three, six and twelve months ended 1995, respectively. The interest expense
deduction taken was $7.0 million, $13.9 million and $27.6 million for the
three, six and twelve months ended June 30, 1996, respectively, compared to
$6.0 million, $11.7 million and $22.9 million for the six and twelve months
ended 1995, respectively. On August 2, 1996, Congress passed the Health
Insurance Portability and Accountability Act of 1996 which President Clinton
has indicated that he intends to sign. The act is expected to have minimal
impact on the Company's COLI contracts.
Cash and Cash Equivalents: 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 has been associated with three former
manufactured gas sites which may contain coal tar and other potentially
harmful materials. The Company and the Kansas Department of Health and
Environment (KDHE) entered into a consent agreement governing all future work
at the three 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 costs incurred
for site investigation and risk assessment in 1995 and 1994 were minimal. The
Company is aware of other Midwestern utilities which have incurred remediation
costs ranging between $500,000 and $10 million per site. 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.
Decommissioning: The Company accrues decommissioning costs over the
expected life of the Wolf Creek generating facility. The accrual is based on
estimated unrecovered decommissioning costs which consider inflation over the
remaining estimated life of the generating facility and are net of expected
earnings on amounts recovered from customers and deposited in an external
trust fund.
On June 9, 1994, the KCC issued an order approving the estimated
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 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 expensed approximated $3.6 million in 1995 and will increase annually
to $5.5 million in 2024. These expenses are deposited in an external trust
fund. The average after tax expected return on trust assets is 5.9%
The Company's investment in the decommissioning fund, including
reinvested earnings approximated $28.6 million and $25.1 million at June 30,
1996 and December 31, 1995, respectively. Trust fund earnings accumulate in
the fund balance and increase the recorded decommissioning liability. 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 staff of the Securities and Exchange Commission (SEC) has questioned
certain current accounting practices used by nuclear electric generating
station owners regarding the recognition, measurement and classification of
decommissioning costs for nuclear electric generating stations. In response to
these questions, the FASB is expected to issue new accounting standards for
removal costs, including decommissioning in 1997. If current electric utility
industry accounting practices for such decommissioning costs are changed: (1)
annual decommissioning expenses could increase, (2) the estimated present
value of decommissioning costs could be recorded as a liability rather than as
accumulated depreciation, and (3) trust fund income from the external
decommissioning trusts could be reported as investment income rather than as a
reduction to decommissioning expense. When revised accounting guidance is
issued, the Company will also have to evaluate its effect on accounting for
removal costs of other long-lived assets. The Company is not able to predict
what effect such changes would have on results of operations, financial
position, or related regulatory practices until the final issuance of revised
accounting guidance, but such effect could be material.
The Company carries premature decommissioning insurance which has several
restrictions. One of these is that it can only be used if Wolf Creek incurs
an accident exceeding $500 million in expenses to safely stabilize the
reactor, to decontaminate the reactor and reactor station site in accordance
with a plan approved by the Nuclear Regulatory Commission (NRC), and to pay
for on-site property damages. This decommissioning insurance will only be
available if the insurance funds are not needed to implement the NRC-approved
plan for stabilization and decontamination.
Nuclear Insurance: The Price-Anderson Act limits the combined public
liability of the owners of nuclear power plants to $8.9 billion for a single
nuclear incident. If this liability limitation is insufficient, the U.S.
Congress will consider taking whatever action is necessary to compensate the
public for valid claims. The Wolf Creek owners (Owners) have purchased the
maximum available private insurance of $200 million and the balance is
provided by an assessment plan mandated by the NRC. Under this plan, the
Owners are jointly and severally subject to a retrospective assessment of up
to $79.3 million ($37.3 million, Company's share) in the event there is a
major nuclear incident involving any of the nation's licensed reactors. This
assessment is subject to an inflation adjustment based on the Consumer Price
Index and applicable premium taxes. There is a limitation of $10 million
($4.7 million, Company's share) in retrospective assessments per incident, per
year.
The Owners carry decontamination liability, premature decommissioning
liability, and property damage insurance for Wolf Creek totaling approximately
$2.8 billion ($1.3 billion, Company's share). This insurance is provided by a
combination of "nuclear insurance pools" ($500 million) and Nuclear Electric
Insurance Limited (NEIL) ($2.3 billion). In the event of an accident,
insurance proceeds must first be used for reactor stabilization and site
decontamination. The Company's share of any remaining proceeds can be used
for property damage or premature decommissioning costs up to $1.3 billion
(Company's share). Premature decommissioning insurance cost recovery is
excess of funds previously collected for decommissioning (as discussed under
"Decommissioning").
The Owners also carry additional insurance with NEIL to cover costs of
replacement power and other extra expenses incurred during a prolonged outage
resulting from accidental property damage at Wolf Creek. If losses incurred
at any of the nuclear plants insured under the NEIL policies exceed premiums,
reserves, and other NEIL resources, the Company may be subject to
retrospective assessments of approximately $11 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 certain emissions. To meet the monitoring and
reporting requirements under the acid rain program, the Company installed
continuous monitoring and reporting equipment at a total cost of approximately
$2.3 million by the December 31, 1995 deadline. The Company expects some
additional equipment acquisitions and other expenditures to be needed to meet
Phase II sulfur dioxide requirements. Current estimated costs for Phase II
are approximately $5 million.
The nitrogen oxides and toxic limits, which were not set in the law, were
proposed by the EPA in January 1996. The Company is currently evaluating the
steps it will need to take in order to comply with the proposed new rules, but
is unable to determine its compliance options or related compliance costs
until the evaluation is finished later this year. The Company will have three
years to comply with the new rules.
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, 1995, WCNOC's nuclear fuel commitments (Company's share) were
approximately $15.3 million for uranium concentrates expiring at various times
through 2001, $120.8 million for enrichment expiring at various times through
2014, and $72.7 million for fabrication through 2025. At December 31, 1995,
the Company's coal and natural gas contract commitments in 1995 dollars under
the remaining terms of the contracts were $643 million. The largest coal
contract expires in 2020, with the remaining coal contracts expiring at
various times through 2013.
Energy Act: As part of the 1992 Energy Policy Act, a special assessment
is being collected from utilities for a uranium enrichment, decontamination,
and decommissioning fund. The Company's portion of the assessment for Wolf
Creek is approximately $7 million, payable over 15 years. Management expects
such costs to be recovered through the ratemaking process.
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 29.7% and 30.1% for the three month periods,
25.6% and 30.1% for the six month periods, and 30.6% and 33.1% for the twelve
month periods ended June 30, 1996 and 1995, 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.
4. RATE MATTERS AND REGULATION
KCC Rate Proceedings: On August 17, 1995, the Company filed with the KCC
a request to more rapidly recover its investment in its assets of Wolf Creek
over the next seven years. The request involved acceleration of depreciation
of Wolf Creek by $50 million for each of the next seven years. The Company
sought to reduce electric rates for its customers by approximately $8.7
million annually for the seven year period. The Company also requested to
extend the service life of certain of its transmission and distribution assets
for both the Company's and KPL's electric jurisdictions.
On May 23, 1996, the Company implemented the first $8.7 million reduction
on an interim basis. On July 25, 1996, the KCC Staff, Western Resources, and
the Company entered into an agreement whereby its rates would be reduced an
additional $37.3 million and the current interim $8.7 million rate reduction
would become permanent upon final order in the proceeding. Other provisions
of the agreement include an $8.7 million annual KPL electric rate reduction
upon final order, a $10 million annual KGE rate reduction at January 1, 1998,
and a five year incentive rate mechanism requiring all regulated earnings in
excess of a 12% regulatory return on equity to be shared 50/50 between
customers and shareholders. The agreement specifies that the plan and
electric rates will remain in place five years subject to changes necessary to
reflect the effect of laws and/or edicts, or other material changes in
circumstances which have a substantial net impact upon the Company's utility
operations or revenues. On August 9, 1996, Western Resources, the Company,
and the KCC Staff were joined by the Citizens Utility Ratepayers Board and the
City of Wichita, Kansas in filing a motion to the KCC to approve the
agreement.
On April 15, 1996, Western Resources filed an application with the KCC
requesting an order approving its proposal to merge with KCPL and for other
related relief. On July 29, 1996, Western Resources filed its First Amended
Application with the KCC in its proceeding for approval to merge with KCPL.
The amended application reflected the increase in Western Resources' offer for
KCPL from $28 to $31 per share and proposed an incentive rate mechanism
requiring all regulated earnings in excess of the merged Company's 12.61%
return on equity to be split among customers, shareholders, and additional
depreciation on Wolf Creek.
5. WESTERN RESOURCES' PROPOSED MERGER WITH KANSAS CITY POWER & LIGHT COMPANY
On April 14, 1996, in a letter to Mr. A. Drue Jennings, Chairman of the
Board, President and Chief Executive Officer of Kansas City Power & Light
Company (KCPL), Western Resources proposed an offer to merge with KCPL.
On April 22, 1996, KCPL's Board of Directors rejected the Western
Resources' proposal and announced its intention to proceed with a merger
agreement entered into on January 19, 1996 with UtiliCorp United Inc. (UCU).
Following the rejection of the April 14 offer, Western Resources filed proxy
materials with the SEC for use in soliciting proxies from KCPL shareholders
against the approval of the UCU/KCPL merger. Western Resources believes its
offer is financially superior for KCPL shareholders and is actively seeking to
have KCPL shareholders vote against the proposed UCU/KCPL merger. On April
22, 1996, Western Resources announced its intention to commence an offer to
exchange shares of Western Resources common stock for each KCPL share (the
Offer) and filed with the SEC a registration statement on Form S-4 relating to
such exchange offer. On July 3, the registration statement became effective
and on July 8, exchange offer materials were mailed to KCPL shareholders.
The number of shares of Western Resources common stock to be delivered
per KCPL share pursuant to the initial Offer would have been equal to the
quotient (rounded to the nearest 1/100,000) determined by dividing $28 by the
average of the high and low sales prices of Western Resources common stock on
the New York Stock Exchange for each of the twenty consecutive trading days
ending with the second trading day immediately preceding the expiration of the
Offer (the Exchange Ratio), provided that the Exchange Ratio would not have
been less than 0.833 nor greater than 0.985. On May 6, 1996, Western
Resources announced a change in the terms of the Offer so that the Exchange
Ratio would not be less than 0.91 nor greater than 0.985, and presented the
new offer to the KCPL Board.
On June 17, 1996, Western Resources raised its Offer to $31 from $28 with
an exchange ratio of 0.933 to 1.1 shares of Western Resources common stock for
each KCPL common share. The increased Offer, which remains a stock-for-stock
transaction, is valued at $1.9 billion. On June 24, 1996, KCPL's Board of
Directors also rejected this offer.
KCPL shareholders were scheduled to vote on the UCU/KCPL merger at their
annual shareholders' meeting on May 22, 1996. On May 20, 1996, KCPL announced
that it had reached a restructured merger agreement with UCU and canceled the
May 22, 1996 vote. The vote on the new transaction was scheduled for an
August 7, 1996, special shareholder meeting. On May 20, 1996 KCPL also filed
suit against Western Resources and a KCPL shareholder in the Federal District
Court for the Western District of Missouri (the Court) for a declaratory
order, among other things, determining that the restructured transaction was
legal pursuant to Missouri law, that its adoption was not a breach of
fiduciary duty, and that a simple majority of shares voted would be required
to approve the transaction rather than the vote of two-thirds of all
outstanding shares required for approval of the original proposal.
On August 2, 1996, the Court denied KCPL's request with respect to the
requisite vote, holding a two-thirds vote of outstanding shares would be
required to approve the restructured transaction. As a result, KCPL postponed
the special shareholder meeting until August 16, 1996.
According to KCPL's quarterly report on Form 10-Q for the quarter ended
June 30, 1996, there were issued and outstanding 61,902,083 shares of KCPL
common stock.
Western Resources intends to acquire, after consummation of the Offer,
the remaining KCPL shares pursuant to a merger of Western Resources and KCPL
(the Merger).
Western Resources has filed applications with the KCC and Missouri Public
Service Commission seeking approval of the Merger. Western Resources will
also need approval from the FERC and the NRC. See Note 4 for discussion of
rate proceedings.
Western Resources' proposal is designed to qualify as a pooling of
interests for financial reporting purposes. Under this method, the recorded
assets and liabilities of Western Resources and KCPL would be carried forward
at historical amounts to a combined balance sheet. Prior period operating
results and statements of financial position, cash flows and capitalization
would be restated to effect the combination for all periods presented.
KCPL is a public utility company engaged in the generation, transmission,
distribution, and sale of electricity to approximately 430,000 customers in
western Missouri and eastern Kansas. KCPL and Western Resources have joint
interests in certain electric generating assets, including Wolf Creek.
Completion of the Offer and the Merger are subject to various conditions,
including approvals from shareholders, regulatory and other governmental
agencies.
The merger proposal contains certain analyses and statements with respect
to the financial condition, results of operations and business of the Company
following the consummation of the Offer and the Merger, including statements
relating to the cost savings that will be realized from the Merger. Such
analyses and statements include forward looking statements with respect to,
among other things: (1) expected cost savings from the Merger; (2) normal
weather conditions; (3) future national and regional economic and competitive
conditions; (4) inflation rates; (5) regulatory treatment; (6) future
financial market conditions; (7) interest rates; (8) future business
decisions; and (9) other uncertainties, which though considered reasonable by
the Company, are beyond the Company's control and difficult to predict.
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 1995. The following updates certain
information provided in the 1995 Form 10-K, and analyzes the changes in the
results of operations between the three, six and twelve month periods ended
June 30, 1996 and comparable periods of 1995.
FINANCIAL CONDITION
General: The Company had net income of $17.3 million and $33.0 million
for the three and six months ended June 30, 1996 compared to $19.6 million and
$37.4 million for the same periods in 1995, respectively. The decreases in
net income were primarily due to the amortization of the acquisition
adjustment as a result of the Merger and higher operating expenses, resulting
from Wolf Creek's eighth refueling outage during the first quarter of 1996.
An increase in net generation due to customer demand for air conditioning load
during the second quarter of 1996 also contributed to higher operating
expenses. These higher expenses offset the increases in sales and revenues the
Company experienced during the three and six months ended June 30, 1996 as
compared to the same periods of 1995.
Net income for the twelve months ended June 30, 1996, of $106.4 million,
increased slightly from net income of $105.1 million for the comparable period
of 1995. The increase was primarily due to increased interchange (sales to
other utilities) and residential sales as a result of warmer spring
temperatures as compared to last year.
Liquidity and Capital Resources: All 1,000 shares of the Company's common
stock are held by Western Resources.
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 June 30, 1996, short-term borrowing amounted to
$250 million compared to $50 million at December 31, 1995.
During the second quarter of 1996, the Company increased its borrowings
against the accumulated cash surrender values of the corporate-owned life
insurance policies by $42.5 million and received $1.8 million from increased
borrowings on Wolf Creek Nuclear Operating Company policies.
OPERATING RESULTS
The following discussion explains variances for the three, six and twelve
months ended June 30, 1996, to the comparable periods of 1995.
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 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, six
and twelve months ended June 30, 1996 from the comparable periods of 1995.
Increase in electric sales volumes:
3 Months 6 Months 12 Months
Ended Ended Ended
Residential 22.8% 15.9% 12.8%
Commercial 9.5% 7.5% 5.1%
Industrial 1.8% 2.6% 4.2%
Total Retail 9.3% 7.5% 6.9%
Wholesale & Interchange 117.4% 61.5% 30.5%
Total electric sales 25.2% 15.8% 10.3%
Revenues for the three and six months ended June 30, 1996, of $163.0
million and $308.1 million, increased approximately thirteen and nine percent
from revenues of $144.7 million and $283.3 million for the comparable periods
of 1995, respectively. These increases are largely due to increased
residential and interchange sales as a result of warmer spring temperatures
experienced during the second quarter of 1996 compared to 1995.
The Company's service territory experienced a 129% increase in the number
of cooling degree days during the second quarter of 1996, as compared to the
second quarter of 1995 and a 31% higher than normal number of cooling degree
days.
Revenues for the twelve months ended June 30, 1996, increased
approximately six percent to $648.6 million from revenues of $611.6 million
for the comparable period of 1995. The increase can also be attributed to
increased interchange and residential sales as a result of warmer spring
temperatures as discussed above.
Operating Expenses: Total operating expenses increased nineteen and
twelve percent for the three and six months ended June 30, 1996, respectively,
compared to the same periods of 1995. The increases are primarily
attributable to the amortization of the acquisition adjustment and increased
fuel, purchased power and other operating expenses due to Wolf Creek being
off-line for its eight refueling and maintenance outage. Also contributing to
the increases in fuel and operating expenses was the increase in net
generation due to increase in demand for air conditioning load from
residential customers during the spring months of 1996.
Total operating expenses increased approximately nine percent for the
twelve months ended June 30, 1996 compared to the same period of 1995. The
increase was due to the amortization of the acquisition adjustment and Wolf
Creek's refueling outage mentioned above.
The amortization of the acquisition adjustment, which began in August
1995, amounted to $5.0 million, $10.0 million and $16.7 million for the three,
six and twelve months ended June 30, 1996, respectively.
Other Income and Deductions: Other income and deductions, net of taxes,
increased for the three and six months ended June 30, 1996, compared to the
same periods of 1995 primarily as a result of the reclassification of income
taxes applicable to the amortization of acquisition adjustment.
Other income and deductions, net of taxes, increased to $11.3 million for
the twelve months ended June 30, 1996 from $6.1 million for the twelve months
ended June 30, 1995. The increase was primarily due to receipt of death
benefit proceeds under COLI contracts during the fourth quarter of 1995.
Interest Expense: Interest expense increased thirteen percent and seven
percent for the three and six months ended June 30, 1996, compared to the same
periods of 1995, respectively. These increases are attributable to higher
interest expense on short-term debt during the second quarter of 1996.
Interest expense for the twelve months ended June 30, 1996, remained
virtually unchanged, compared to the same period of 1995. An increase in
allowance for funds used during construction (AFUDC) charges due to a higher
AFUDC rate and the impact of increased COLI borrowings which reduce the need
for other long-term debt and thereby reducing interest expense were offset by
the increase in short-term debt interest expense.
OTHER INFORMATION
Amortization: In accordance with the KCC order relating to the
acquisition of the Company by Western Resources, amortization of the
acquisition adjustment commenced in August 1995. The amortization will amount
to approximately $20 million (pre-tax) per year for 40 years. Western
Resources and the Company can recover the amortization of the acquisition
adjustment through cost savings under a sharing mechanism approved by the KCC.
KANSAS GAS AND ELECTRIC COMPANY
Part II Other Information
Item 4. Submission of Matters to a Bote 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
Proposed Merger of Western Resources with Kansas City Power & Light
Company: See Note 2 of the Notes to Financial Statements.
Rate Plans: See Note 4 of the Notes to Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges for
12 Months Ended June 30, 1996 (filed electronically)
Exhibit 27 - Financial Data Schedule (filed electronically)
(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
August 14, 1996 By /s/ Richard D. Terrill
Richard D. Terrill
Secretary, Treasurer and
General Counsel
UT
1000
6-MOS
DEC-31-1996
JUN-30-1996
PER-BOOK
2,608,104
36,975
371,910
365,360
0
3,382,349
1,065,634
0
103,396
1,169,030
0
0
684,006
250,000
0
0
0
0
0
0
1,279,313
3,382,349
308,072
11,337
234,915
251,579
56,493
3,149
59,642
26,689
32,953
0
32,953
50,000
23,299
54,986
0
0
Exhibit 12
KANSAS GAS AND ELECTRIC COMPANY
Computations of Ratio of Earnings to Fixed Charges
(Dollars in Thousands)
Unaudited
Twelve
Months
Ended
June 30,
1996 1995 1994 1993
Net Income. . . . . . . . . . . . . $106,387 $110,873 $104,526 $108,103
Taxes on Income . . . . . . . . . . 47,003 51,787 55,349 46,896
Net Income Plus Taxes. . . . . 153,390 162,660 159,875 154,999
Fixed Charges:
Interest on Long-Term Debt. . . . 46,821 47,073 47,827 53,908
Interest on Other Indebtedness. . 6,947 5,190 5,183 6,075
Interest on Corporate-owned
Life Insurance Borrowings . . . 27,594 25,357 20,990 11,865
Interest Applicable to Rentals. . 25,370 25,375 25,096 24,967
Total Fixed Charges . . . . . 106,732 102,995 99,096 96,815
Earnings (1). . . . . . . . . . . . $260,122 $265,655 $258,971 $251,814
Ratio of Earnings to Fixed Charges. 2.44 2.58 2.61 2.60
1992
Pro Forma April 1 | January 1
1992 (2) to Dec. 31 | to March 31 1991
(Successor) |(Predecessor)
Net Income. . . . . . . . . . . . . $ 77,981 $ 71,941 | $ 6,040 $ 53,602
Taxes on Income . . . . . . . . . . 20,378 23,551 | (3,173) 15,955
Net Income Plus Taxes. . . . . 98,359 95,492 | 2,867 69,557
|
Fixed Charges: |
Interest on Long-Term Debt. . . . 57,862 42,889 | 14,973 59,668
Interest on Other Indebtedness. . 15,121 11,777 | 3,344 17,838
Interest on Corporate-owned |
Life Insurance Borrowings . . . 7,155 5,294 | 1,861 7,304
Interest Applicable to Rentals. . 30,212 22,133 | 8,079 32,193
Total Fixed Charges . . . . . 110,350 82,093 | 28,257 117,003
|
Earnings (1). . . . . . . . . . . . $208,709 $177,585 | $ 31,124 $186,560
|
Ratio of Earnings to Fixed Charges. 1.89 2.16 | 1.10 1.59
(1) Earnings are deemed to consist of net income to which has been added income taxes (including net
deferred investment tax credit) and fixed charges. Fixed charges consist of all interest
on indebtedness, amortization of debt discount and expense, and the portion of rental
expense which represents an interest factor.
(2) The pro forma information for the year ended December 31, 1992 was derived by combining the
historical information of the three month period ended March 31, 1992 (Predecessor) and the nine
month period ended December 31, 1992 (Successor). No purchase accounting adjustments were made
for periods prior to the Merger in determining pro forma amounts because such adjustments
would be immaterial. (See Note 1 of Notes to Financial Statements)
