ML20081H157
| ML20081H157 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 12/31/1994 |
| From: | Hayes J WESTERN RESOURCES, INC. (FORMERLY KANSAS POWER & |
| To: | |
| Shared Package | |
| ML20081H134 | List: |
| References | |
| NUDOCS 9503240114 | |
| Download: ML20081H157 (52) | |
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F / Headquartered in Topeka, Kansas, Western Resourcesiinc. 1 through the KPL and KG&E operating gmups. Sales for 1994 totaled 91,978,000 thousand cubic feet, and transportation -
%; d (NYSE: WR) is a diversilled energy company saleswhich amountedsupplieselectricitfand to 51,039,000 thousand cubic feet.natural gas in Kansa O M oma.-
A 1,700-mile intrastate transmission pipeline system and It also offers, natural gas management services thmugh its - underground storage facilities, both located in Kansas, are S
- subsidiaries, Astra Resources, Inc. and Mid Continent , Market operated by Gas Senice.
s Center, Inc., and has interests in energy technology development.
Gas Senice operailons headquarters are in Topeka, Kansas.-
ELECTRIC UTILITY OPERATIONS : NATURAL BAS SERVICES Under its operating groups, KPL and KG&E, Western Resources Capitalizing on deregulation and a pdme geographic location.
Tgenerates and distributes electricity to more than 593,000 the Mid Continent Market Center will use Westem Resources * '
- customers in eastem and central Kansas, transmission pipeline network and significant storage facilitics '-
%e companies operate approximately 6,300 miles of electric to offer natural gas transportation, wheeling, parking, balancing, c . transmission lines with intermnnections to 11 other electric - and storage senices to customers throughout the central and -
(2 _ utilities in the central United States. Electric capacity is 5,230 midwest regions of North America. The new subsidiary, head-megawatts, with 62 pement of that capacity fueled by coal,10 quartered in Topeka, Kansas, is scheduled for full operation .
- percent by uranium, and 28 pertent by natural gas or fuel oil, bylate 1995. , j Sales for 1994 totaled 19,786,000 megawatt hours.
ENEReY etELATED SUSINESSES:-
Operations headquarters are in Topeka, Kansas, for KPL and in Wichita, Kansas, for KG&E. Energy-related businesses consist of.the holdings of Astra Resources, Inc., a wholly-owned subsidiary of Western Resources headquartemd in llouston, Texas.' 'q NATURAL BAS UTILITY OPERATIONS a COMPRESSION SERVICES I
- Retail and wholesale natural gas is distributed to more than - l 643,000 customers in Kansas and northeastern Oklahoma Astra Resouas Compmssion, Inc. sells compression senices j to oil and natural gas producing, gas gathering, pipeline, and storage or reinjection pmjects ne company operates in Texas, j
. .m , New Mexim, louisiana, Mississippi, Colorado Oklahoma, the -- q
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,m < M' Culf of Mexico, and Argentina. The headquarten is in East , ]
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NATURAL CAS MARKETING F WCI PERFORNANbE } Astra Resources Marketing, Inc. operates as a full-senice gas ' -
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, eg [' marketer, arranging for the purchase and delivery of natural -
gas to large users. The company serves industnJ, wmmemial y Ca:A awAN's LETTrai and municipal customers in the mideratinent area along -
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pipelines from northern Texas to the Creat Lakes. The d
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/AlooE AT WESTrnN) RESOURCES 7 mmpany is based in Topeka, Kansas.
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NATURAL CAS PROCES$1NC AND GATHERING Astra Gas Company participates in a large gas prucessing plant in
~W'Sr1EcTsnENANCIAI ATA G ,'
,4 E 229a g , New Mexico and operates three gathering systems in Oklahoma. ;
nG, . ,1 e .j9 ' . , , ._gx The processing plant removes liquids such as butane and propane J
~ y MANACEMENT) Df00$5I0N AND AN4usis from natural gas before it is delivered for other uses. ne p #
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y companys gathering systems provide gathering, compression, b ' ' [STATEwNNis hNo NoTts ? treating, and dehpirating of natural gas produced from wells and
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% * ', then redelivers the gas to various inter- and intrastate pipelines.
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e , %e headquarters ofilce is in llouston, Texas, with a gas supply
" (TEN-TEAR COMPARATIVE DATA L ^ department located in Oklahoma City, Oklahoma.
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> ; DraccioasfNo Orricrasi gy Thmugh Astra Limited Partners. Inc., Astra holds investments l M., 1483 i ,
,b in energy and tecimolog related businesses developing h
I 5 ' ' 's' e ygTon, I'NtoRMATio ,'- 7 h-up ud g an mew The company is based in llouston, Texas.
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PlelANCIAL DATA hkearnin sni!hons)
Operating revenues :: s . .- .f. ..,.,, , , ,i. ,, , ,.., ,. . t $ - 1,818 . 8 1,909 ;
} Operating expenses c .' c , .. . .._... . . . ,. 1,348. , ' 1,617 '
' 1. Net in60me> , . . . . .... . . , ,,# .. ... . . . .- 187- i177 iCross plant in senice. ,. ,,
, . . . . 5,963 ' ' 6.222 :
Emlhdded host oflorg-term debt . . ,. . . . . . . . 7.8% ' 8.1% '
, t interest coverage ratio (before income taxes, including AFUDC) . . ,
3.43,y L 2.79 '
1 OPEZATING DATA .
- Electric:
S:.les (thousands of MWII)
- Utility service . . .. .
. , 15,887-- 15,464 (
, Wholesale and interchange . . . . 3,899 4,525' Total ' . . ,, . , ,,. 19,788 19,989 .
- Customers (awruge) . .
. , , . 4 583,859 585,042 :
- Natural gas: .
Sales (thousands of MCF)
- Utility senice . . . 91,978 159,112
- Transportation . , . . . 51,099 73,574 Total . . . . 143,037.' - 232,686 Customers (average) , ,., . 884,909; .1,092,713 Number of employees (at year end) . . . . . . 4,330 5,295 COMISON STOCK DATA Earnings per share .s . . . ., $ 2.82 8 2.76--
Dividends per share' , . , 8 1.98 $ 1.94
/ Book value per share . . , , .. . . . $ 23.93 ' $ 23.0S -
Average shares outstanding , , . , , 81,817,873' ' 59.294,091 =
Number ofcommon shareholders , ,., , 44,037 - 45.768
- Return on average common equity . ,, . . , , .. 12.0% , - 12.4% :
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hnicmtauon reflects the sales of the Missourt Properbes effective January 31,1994 and February 28,1994.
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- WESTERN RES20CCES,1NC, 3 s
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- DEARnFELLOw SHAREHOLDERS: .
In 1994, we' strengthened our competitive position . in a rapidly changing marketplace. 4 We continued to capitalize on gmwth opportunities ,
- Hetail sales fmm electric utility operations and build vahie for our customers and shareholders. surpassed 1993 by 3%, illustraling the economic i hiomover, the men and women of Western Resources health of our senice territory. The increase occurred ~
raised the bar ofpedormance and committed to in spite of milder than normal weather.
' shaping our company into the nation's leading energ
- To increase profits from natural gas assets, we L business. No small order in an industry of shifting created the Afid Continent hfarket Center. It will-
! competitive alignments, increasing customer use our intrastate pipeline to move natural gas among expectations and advancing tecimology. But we're interstate pipelines and pmvide other services for operating with talented people, and we're setting a bmad range of customers. '
tough-minded strategic directions for the years '
- Our balance sheet and cash' flow imprmed with sh'e ad. We intend to pmilt fmm the opportunities . the completed sale of our natural gas properties in
' that change offers. Missouri. We have increased our flexibility to pursue
' Our confidence, we believe, is well-placed. It further growth opportunities. ,
. spdngs fmm the ability to shape change while man-
- Expenses were reduced 17% through the aging the business amid some of the most complex divestiture of our Missouri properties and greater challenges of our time. operating efficiencies.
In that context, especially, we are proud of our
- We developed and applied innovative elec-1994 performance. trotechnology solutions to impmve our customers' o Profits were up 6%. production capabilities.- l c Earnings grew $.06 per share to $2.82.
- Non-regulated operations, thmugh our wholly-
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.o We increased the annual dividend 2.1% to at owned Astra Resources subsidiary, continued to gmw . i indicated annual $1.9S per common share, the 35th income contributions and shareholder value. ;
' dividend increase in the last 36 years. We have never
- Three national awards recognized our leader--
reduced the dividend. In January,1995, the com- ship in emimnmental stewardship and alternative pany increased the dividend again to an indicated energy applications. ! annual $2.02. . [.
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y emergy heelease 4 s.$ This level of performance was y Ne g j [ C The way we will succeed is . T ..CE_/ achieved in the midst of a declin , - to engage everyone thmughout:
. ing stock market not seen in our
* ""' Y, ""f the organization in relmigorating -
_4"$ **# j .. Lindustryin 20 years. The nation's % Mby :eme4*mier : i [ our culture. A company that wants1
- utility stocks, and others ofintemst-' 43 y feeuweene,[L [ ' to lead the industry must focus on rate-sensitive businesses, wre held .. O;
h e MM newideas and a common commita - down byincreasing interest rates. [p; ]7., flesselet 4 eerength, F,lAu n.,to step out of the bound4 0f. ment , llowever, with a year-end stock . 8'"'thfendg;"' . traditional behaviors. In line with
- price of $28 5/8, Western Resources d C[hsmasheeses$5}' ; that philosophy,we have begun
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once again outperformed two , p[' ,d(( f[ to work togethet to change the :
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cultum ofour company. ' -
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' Dow Jones Utility Index and the Our change emphasizes Standard & Poor's Electric Index. personal leadership. It encourages :
Along with this solid performance, we launched everyone to make contributions that will realize our -. a dramatic shift in our cultum and competitive focus vision. It values strategic msults over tasks; creative l in what we call Pmject BLUEPRINT. Thmugh this thinking and responsible dsk-taking over guarded : .
; project we completed a company-wide strategic deliberations. And it means that we will streamline planning process and a restatement of our vision operations into a more flexible corporate structure and driving force values. with a readiness to act.
Our vision is this: "Westem Resources will be. Some say long-standing corporate cultures can't the leading energy business in America. We will be be changed. I disagree. In the space of a few months,
~ driven by customer satisfaction, financial stmngth, Project BLUEPRINT has taken hold. People arei grow 1h, and marketing." excited and imolved. Already, we are bmaking Our vision and values mquire an aggressive, away from conventional thinking and comentional
. alnbitious focus that will engage our best efforts and perfor nance expectations.
energy for the long tenn. I strongly believe that only We are bringing together employees fmm all -
' the highest goals lead to the gmatest acmmplishments. levels and corners of the company in a series of rewn .
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. employees create new business j y.pidQy[p 3 y
, In the pages that follow,you - -
- initiatives - from fmding new and . [A <+W. ' IM * ,
f/#{Y: c will read more about the values-
*petterways to serve our customers - e]1 *y{ Cfp4 + that drive our vision and our to eliminating outdated business ~ [_ U\[ ' strategies to gmw the valueL practims. There are no off-the-table M"&L' :/, %q(
- ofyourinvestment iideas. There are no constraints at , ?j ' f< s.
~ : We are working from the - :
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M ~ " " ' beliefs that long-term customer Already, scores of business loyaltyis essential to our business plans cnd organizational economies success, that the company must
' are being implemented that will bring riew n: venues maintain strong credit and pnwide a competithe and cost savings to the bottorn line. ~ return to' shareholders, that growth is critical to'our *
- Pmject BLUEPRINT is a means to accelerate - future, and that the key to financial strength and .
. significantly and dramatically - our ability to pro- growth is in expanding existing markets and creating duce positive results. It is the strategic framework newintegrated businesses.
' that gives each of us a new understanding of how We enter 1995 with a new spirit, embracin'g our work ties in with what the company stands for. change as opportunity and working toward a We have set out on a multi-year journey, joined visiorithat stretches both our thinking and our together by a beliefin values that are deeply held, perfonnance.
b .j jolm E. Ilayes, Jr. Chairman of the Board, President, and Cldef Executive Officer u PIVE
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' At iti heart, customer satisfaction requires Western
- When the fluctuating price of crude oil threat- .
Remurces to be a full-service energy provider, offering ened pmducers' pmfitability- and the continued :
! c range of senices that add value beyorid the delivery operation of many electric-powered oil wells in our -
of a commodity energy product. senice territory - we worked together to find a Customers' needs vary. For some, cost may be mutually beneficial solution: we offered oil operators :
'of overriding importance. For others, power quality the option oflinking their electricity rates to oil prices.1
/ is most important, or the benefits of the latest In so doing, we helped our customers continue profits technologies, able business operations, and we kept selling electricity.
We focused on this reality systematically and with
- We worked with a Kansas foundry to help .
Texcellent results in 1994. recapture business it was losing - business that was We began with an analysis of our top 100 electricity' going out of state.- because the foundry didn't have i customers. We examined their unique needs and ways the capacity to fill orders. The pmblem was the foundry ; we could better meet them now and in the future.' could only operate during off-peak hou's, r fium early - : We analyzed potential competition fmm co-generation, evening to mid-morning. With a modest contract ; J self-generation and independent power pmducers. adjustment, we are supplying power to keep the Knowing their needs, we took steps to refine foundry operations going 24 bours a day except during -
- and strengthen our relationships with these major the summer peak period. The foundry is now filling -
customers. Our efforts have shown positive results. onlers rather than turning th'em away. And Western
' For the near term, solidifying relationships with Resources sells almost 1.5 million additional kilowatt
- major customers translates into a predictable, stable hours of energy each' year.
revenue stream. For the long term, it is a positive
- Making it easier for customers to do business i demohstration to customers that we are committed with us is another way we demonstrate our commit.
to do Cll we can to be their strategic partner, ment to customer satisfaction. Consolidated customer 1 Demonstrating our commitment to customers service phone centers and an interactive telephone , ' means action, not rhetoric. And to be meaningful.. system allow us to respond quicker and at greater ! our actions go beyond " business as usual." economy. No matter when, or from where, a customer ]' Continually, we work to find new and better ways needs us, we are able to respond quicldy.
< to serve our customers:
- The full-time engineering specialists at our Power Technology Center helped more than 100 industrial ,
oevsa
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andlarge commercial customers votesedded Q~h;p maintenance costs over a tradi-solve sophisticated technical k j x .v 4 - n hhy.,,
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' tional treatment system. And problems related to power quality iSesed 8e dhoometene offy^ it gains Western Resources an issues. By budging the gap dhM #
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- between research and practical g[
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fees"y; - ' hours of el ctricity sales peryear. , application, the center utilizes ?' ettklemahlp.ji,? Acting as partnen with . thelatest in technology to help f. gg 2 . < g- engmeering and design firms, as
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problems and maximize their 9 ,w.da 44 Resoumes is able to offerinnova-
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efficiency and competitiveness. .- L w, m t tive, cost-efilc.ient ways to meet a_&,.teemmests..Ilow'.well;
~ ; ., . , . A n. w ug, . ,
- The center also enhancedits '
emimnmental goals. 4..g we worst wIIk' east b Meer *
, s
; computes modeling capabilities 7wm -
-3 We are pmud that our empha- !
in 1994, t.nablingit to develop your Intersjad emetomoes . sis on value-added senice dehvery - '
'. Ls p reflecto en too we7 ' W .
and test solutions in the lab has eamed Westem Resoustes
' , f Vweek wtth ser$a p' -
without committing the time and , , a~ w1 one of the highest honors the expense imched in field trials. $wpenteenel oesteme88. s l , electricindustryhas to bestow. Every case the center encounters 7 d%7 , f f g, _ Our eleviechnologies program
~ is unique. A common thread that
-links them is that each problem
% s
, MT f M [ was named the winner of Edison Electric Institute's Common
- 'affects astomer pmductivity. A second common thread Coals Award for Emimamental Partnerships. Western is that each problem represents an opportunity for Resources is the only utility in the country to haie
- Westera Resources to differentiate itselfin the market- twice won this prestigious award.
. place and dWetrate it's commitment to a true Our neual reputation for emironmental
. strategic partnership uiih cushners, leadership is Q defining element of Western Resourtes*
o We helped a municipal customer reap the identity among all our customers. Olniously, this is a e benefits of a lower-cost and emironmentally sound great source of pride for everyone in the company. And ultreviolet wastewater treatment system. In a business sense, it is important as ariother factor that This innovative electric process saves the city of differentiates us fmm competitors - a value-added
. Salina, Kansas, an estimated 40% in operations and aspect of the senice we prmide, saear
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the preeminent emironmental ,,; .
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- of three more natid awards ,
J ' dential and industrial customers' ' . i in 1994: the NationalWildlife i - M approval of our senice remained I'cusfogBERS.' t
? Federation's National Coaserva- very positive. Almost 90%of ;
Mg~ ~ ' ' < ' tion Achievement Award for a ^
,W,t residential customers approve
. Corpor-te leadership. ; ;,,] 1<j the quality ofservice we provide.
a special citation fmm the F# .f ,, D We received similarly high marks ) i presidential Points of Light . ,,f,6,4].k:" from our 50 largest customers ;
? Foundation...and the Silver Teal for our reliability, responsiveness,
' Award from Ducks Unlimited. competen'ce, and initiative.
More importantly, the Green Team fosters a We are committed to build on these positi e L corporde culture that makes emironmental initiathes perceptions. We will continue to earn custonier .
. natural at every corner of the company. satisfaction - and, therefore, business success -
S In 19M, the Green Team's attention shifted more by demonstrating through our everyday actions that
- to renewable energy and energ efilciency applications. we are committed to be the most effective strategic Employees developed pilot projects for practical partner possible.
Lcustomer applications of solar-powered security lights, , e , i et 4 M E
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. Western Resources outperformed the 1994 averages of the .SS# Electric 'and Dow Jones Utility indexes. a
- p. --
OE ST E R N C ESCUT.C E S, IN c. F I X A X C I A L" S T R E N G T H: The company must maintain investment grade credit and provide a competitive return to shareholders. To engage in understatement,1994 was a challenging Western Resources shareholders during the las't fhe year. The Federal Resene increased interest rates years averages 11% annually, again besting the perfor-L 2.5 percentage points - twice the increase many fore- mance of the S&P Electric, Dow Jones Utility and, also; casters had predicted. Iligher interest rates upset the the $&P 500 indexes.
- markets and were a major factor, along with increasing Our focus on increasing shareholder value is best '.
- industry competition, in causing electric utility stock illustrated by the long-term growtliofyour investment.
prices to go down. But while Western Resources In the last decade, the total value ofyour holdings in struggled with the near-term priw ofits stock, our Western Resourees has more than tripled..
' financial performance illustrated the ongoing strength In _1994, we extended a reconi of growth and of your imestment. '
strengthened our financial position: Higher interest rates caused bond rating agencies
- Net income increased 6% or $10 million.
to downgrade the debt ratings of more than 19 utilities. Earnings per share were $2.82, up from $2.'76 the Western Resources
- imestment grade debt ratings previous year. The increase resulted from significantly -
remained firm with all three major rating agencies - lower operating and interest expenses reflecting the' . , Standard & Poor's, Moody's and Fitch. Indeed, Fitch sale - and pmfit from the sale - of Missouri natural upgraded our preferred stock rating, gas properties completed in the first quarter. . 'l In keeping with tradition, Western Resources
- Retail electric sales increased 3%, despite a ,
again raised its dividend, by 2.1% to $1.98 per share 4% cooler summer 'Ihe effects of unseasonably mild of common. In 1995, the first quarter dividend of weather were overcome by aggressive and innovative .!
$.50_1/2 per common share is $.01 per share higher marketing initiatives: commercial and industrial than the 1994 quarterly rate. On an annualized basis, electricity sales increased 4% over 1993, while more ; the indicated 1995 dividend rate is $2.02. Still, our weather-sensitive residential sales rose 1%. ; payout ratio remains lower than the industry average,
- Our senice area economy continued growing at a )
an advantage in a competitive emironment. healthy pace. In 1994,40 companies chose our territory - E In e lackluster year for stocks, Western Resotutes , as the location for their new and expanded businesses.
- again outperformed 1994 industry averages such as the Those operations represent an increased electric demand ~
S&P Electric and the Dow Jones Utility indexes. Total of 19.5 megawatts and an additional annual consump-return (disidends plus stock prim appreciation) for tion of 80 million kilowatt hours. For natural gas ]
)
I
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; myenues, those site decisions temeemsees namnegh h% Proceeds imm th' e sales of p inmslate into an additional 164,196 ' $ M' ens hag f Missouri gas pmperties were E thousand cubic feet of sales. {.}W g gj.g '4 3 g ' used to mduce long-term and J
.. o %e divestiture of Missouri hinne e M Mj short-term debt balances. We ,
gas pmperties caused a 36% 9 ,assees M ' yI also renegotiated our credit lines
' decline in sales. ne mild winter h(?h operettoes.y% ' to lower fees, expanded our -
; was responsible for an additional f ,
%gpg %[ . sources of credit, and extended .
3% decline. Gas transport g gQ commitments. revenues, adjusted to exclude Missomi, moved up 2%. 1 W in addition, we refunded five series of pollution contml bonds - r4
~ g ,]@)g) , s , j"p . down 17% from the previous year. . - < 5.875% to 6.8%, replacing them A primary factorwas the sale of with $121.9 million in Market . ' Missouri gas pmperties. But continued savings and Adjusted Tax Exempt Securities (MATES) with variabic enhanced efilciencies fmm the 1992 KPl/KC&E - interest rates that averaged just over 3%.' ; merger also played an important role, as did 1994 The bottom line of these actions is a much stronger J cost-contmlinitiatives, balance sheet and improved financial flexibility. We -
c' Astra Resources' non-regulated energy businesses reduced short-term debt, while increasing our access _ again increased their contribution to net income. and flexibility. And we drove down our long-term debt
. Revenues moved up 23% to $147 million. ratio from 55% of capitalization in 1992 to 45%, while c We punued an aggressive debt management incre.aing equity capitalization from 37% to 40% in
. L plan. This strategy reduced total interest expense the same period.
Happmximately 11%, or almost $16 million. In 1994, Enhanced financial strength puts us in a solid
. 'our debt declined by $300 million. competitive position, and gives us the ability to pursue
.We have refinanced virtually all reIdeemable debt attractive imestment opportunities. __
f possible dwing the last two and one-half yean when Looking ahead, we expect inemased sales of natural 1interest rates fell to 20-yar lows. gas, gas transyntation and electricity in 1995. And we pmject continued cost reductions from stringent ; w T iw a tv s
y CESTE R N;G ESO URC ESJ INC. l w ,l _ t - j faYAL aarseu} j.Q '
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.. i l management of operating /H. -
a Economists project
. expenses. m. . j continued growth,;
- Natural gas and gas 5 ? particularlyin machinery j transportation sales 4 7 manufacturing and j activities will be bolstered ,, services, both heasy - 1 c es s 'f
, g oe s sax 3eep 7m; by the Mid Continent -
7 ^y; g ,,,,,, pg ,4 y gy je? users of energy. Market Center. s ,m '4 W. meseem nessansee'swo , ar eneminine seems emesse es,sesses - Js In a period of - Electricity sales are ; e m me senese,e a seer . eso een mesen unemy i.e , change, our focus remains Pmjected toincrease from ) *" 8""* *"*",n*es*e".',"een*s'en"e*s*e"e".".is.ee.same sethe:"'same: addI sigru'ficant s neseemos sense our emphasis on strategic ,, Annemme e esses yearynsmg semenu a6% value to your im'estment.- I marketing as we add The best way to do this, new revenue streams 1 s ., 8AMAE' "I88 88EEAAIM,@ -. 4 we believe,is to impreve and further exploit oppor- . profits by expanding
. tunities in cost-saving :-
,) g pyggo,e :
existing mark.;ts, creating and productivity-building eenWSMWNb%
.; O a w d3SM
~n dbH :m newintegrated busi-electrotechnologies for j %. .f.. e M j ff. nesses, eliminating -
. 4,g < Ql e. t 4 the , industrial, medical, ~p .
l business pmcesses that - z N and municipal sectors. ) 'som don't add value, and Astra Resources is on lA,g%EL @, $$[ ~p 4 I strengthening our
, '4 -
track to again increase its , y m. financial structure.
' mntributions to Western hh $ 4
J d .I Collectively, all these -
; burces' earnings 7:p ~
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. . , I"f [*1 n l'8 I i esj f e*J J I
"' And all our markets pany for the bene ^ of N benefit from a Kansas E O"e's [ E *"""" **"" [ E .
shareholders, employees, economy that forecasters , go,gge,, seen emmenes east.'uneen is souk m.e 'nmese . andj[ customers. agree will temain stmng- " ** '"""8 8'"' *8"" 88" 8*se4een dose se e si.e sesse .
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. The development of. the Mid Continent Market enter, an integrated natural gas operation, will improht asset util 'ation and eartsings.
t e
CESTERN RESCUCCES,ICC. j f w GROWTH We teill increase income by aggressively pursuing new business opportunities, maximizing use ofour resources and capitalizing on our competitive strengths.
. Westem Resources is on a course for growth. We have to as much as 750 million cubic feet per day, adding acted aggressively to build on our core strengths while significant new annual revenue ..
moving to take advantage of changing market conditions. On the electric side of the business, we expanded Deregulation in the natural gas industry gave us ~ sales of energy and senices when the Federal Energy the opportunity to create a new profit center in 1994 Regulatory Commission approved Western Resources' and move toward our goal of business growth in the membership in the Western System Power Pool (WSPP). region. Our new wholly-owned Mid Continent Market WSPP membership allows us to sell wholesale
' Center will use our 1,700-mile intrastate pipeline to electricity in new markets outside our senice area.
transport natural gas among 10 inter- and intrastate And it gives us the opportunity to market transmission , pipelines and provide related senices such as storage senices to other utilities over our strategically-located and balancing. 6.300 miles of electric transmission facilities. The project maximizes use of existing assets and In less than a year of WSPP association, we earned
~ - opens new markets for producers, marketers and $5 million in new revenue by marketing our existing distributors of natural gas in 12 states. It will offer transmission capability.
enhanced transmission capacity, speed and flexibility. With further deregulation of the electric industry, Also, we'll make available options for short- and long- Western Resources will be well-positioned to take , term storage ofinventoties at our Yaggy gas storage greater advantage of additional energy and transmis-facility in central Kansas. sion sales opportunities. What's the potential? By the end of 1995, we Action taken at the Jeffrey Energy Center prosides estimate that the center will move an average 550 . another example ofincreasing net income by the million cubic feet of gas daily- enough to heat more efficient use of existing resources. th!m a half-million homes on the coldest winter day. With its long and steady performance, Jeffrey - Atd that increased volume will boost company ranks in the industry's 90th percentile in production rewnues in 1935. . efliciency. Also, Jeffrey's availability and reliability rank When we complete all pipeline interconnections well above the national average for coal-fired plants.
-likely by early 1996 - volume capacity will grow 1
FIFTEEN -
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A~ Imeresse sales of essegy2W 1,000 newjobs to Wichita to . record, conventional thinking l , , . .. "w . develop ~its 777 jetliner. The y [ . would suggest that jeIIrey *isn't .
'j jf$ , 3,g"4 K g,eemste end servlees. ' " ' Cessna Aircraft Company
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m bmken* and, therefore, doesn't . announced it would build'a . need " fixing." ggeogogh ,og$,Need , production plant in Independence,
. But Western Resources +
@& >?*M %+d,a Ye Kansas, expand its Wichita :
F
"~" ' a'eese,oge s' m, gre W gg,ocouA ' A Py took a more aggressive view. We /
- facilities, and add 2,000 upgraded one of JefTrey's three '
' twas < treC e. .* ,A 4
%py 9 new jobs.
turbines to reap two significant > > 7 n 'Outside the regulated utility . meregneeses einessesses,1 s m maam ' iem';t beneflts. . . g. . < business, the energy industry,s.
". -t First, the upgrade means an <,
s .1 . s i gmwth areas offer great oppor-
, ; ..n" M and w< -
estim:ted annual fuelcost savings *, ,e a a.- . tunity to build shareholder value.
' Empeed to' areas essential' of $2 milh.on. Second, Jeffrey.s u _$s Western Resources is pursuing
*r increased efilciency creates value Wy to tese energy seemetry a strategy ofwell-considered
^""h $
yE h,.[~M, gare a natural extension of our - i by pmducing an additional 50 expansion into businesses that . megawatts ofpower for sale. E
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- In 1995, we'll continue to * ";% f[U I,$ .yg [ g own. We focus o'n opportunities r .~
,' 7w maximize the energy center's '
w M.BE "~ VM that can enhance our operating <
- performance by upgradingits efBeiency, capitalize on our'
- second turbine. strengths, and have the potential to make a significant .
The positive economic outlook for our senice long-term contribution to the bottorr. line. a region also is good for earnings. Going into 1995, we Astra Resources, thmugh its energy company .
- expect power consumption to grow at an annual rate of holdings, continues to expand in domestic and >
more than 2E Job growth in Kansas continues, and is international markets and is making a growing ' - fed by expansion in the aircraft production industy. In contribution to our success. It seeks business oppor-1994. The Boeing Company announced it would bring tunities that draw on its interests in gas compression - f g sexvssa
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investment.s in advanced tech- i
' JJ -
' A w ff ( SARATE P Further, Astra Resources'.-
nolo'gy energy companies. business interests extend to - f
? In 1994, Astra Resources ,%yn*,9 -imestments in high tecimology;
- posted its best-ever business ' s' M "EIN "E[ [y '
that will grow the electric' ; l results. Net income was up 1395
~
s 3+IN 1994 AIIe Move ' 1i. 7 ?N indus'try. Research and devel-Each ofits gas systems and service V ;jn, , , opment of superconductivity operating gmups increased sales % .[ 3 D 37n . ,
. applications is one example.
TOWARS OUR GSAI A-. e. and improved earnings. . Another is wu. e. less automated -
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. LOFBU6tNESS GROWTH a -
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s y ,t- , Research and developmeni~ ! which almost doubled its cus- s -' - i projects are in line with our .
&IN THE REGION. ,- .
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, . strategic intent to grow the . ,
l 4[ [ V*?'SM,' D cnd increased gas sales nearly service arm of the business- , 20 billion cubic feet.
^ ^
',% especially pmmising because it Astra Resources Compression, ',N'/ < h , i1 offers customers added value.
Inc. had its third straight year
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j It is no accident growth of double-digit revenue gruwth. opportunities are comerging Operating in six states, the Gulf of Mexico and for Western Resources. They leverage strengths we've f Argentina, Astra Resources Compression's strategy been adding for years. They all represent our ability . !
' for growth is based on turnkey service packaging to to keep adding value for our customers and share- U
' its customers and aggresshe pursuit of domestic and holders. And they reflect the initiative of a company ,
; international business opportunities. of people resohed to profit from the opportunities
. Accelerated growth is essential to Astra Resources ~ that change offers.
and its mission to focus on businesses that can make [ l e I . ( e vsavsan
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WEST ERN. R E 50URC ES. INC. *
' 4 MARKETIXG
) The key tofinancial strength and gmwth is in expanding existing markets'
\ and creating new integrated businesses.
. Intensified competition makes it imperative that we Electricity sales for commercial and industrial
{ build partnerships witli our customers. Cetting closer customers topped 1993 by 4% - twice the average
- to the people we do business with - listening to them annual growth rate of the past three years.
and fully understanding their needs -is a prerequisite ' Our largest 100 customers have, together with - for satisfying their requirements. . other customers, the option of getting their power
. Another is removing any baniers that exist to our from co-generation, self-generation, and independent delivery of superb customer senice. That began in - power pmducen.
, ~ 1994 with a restructuring of our marketing organization We took steps to manage and solidify our that places emphasis on delivering what our customers partnerships with these important customers, starting -
want, whether it be more product and senice options with a study of their operations and varying needs. Our - or different pricing structures. inter $t is to keepJarge accounts on Western Resources
- For customer service to be our trademark - and energy system. Equally important, we believe that indi-our competitive strength - we must be uniquely adept viduahzed account management can increase sales at meeting customers' energy needs. That begins with significantly above traditional levels.-
giving our people the responsibility for ensuring that Already we've seen positive results. For example,
'our business customers have the energy tools they need eight of our top 10 customen have signed contracts to be more efficient and profitable - and that our ranging up to 12 years in length.'All of these contracts -
residential customers have access to products that have prosisions for customers to increase their
, can enhance quality oflife, electricity usage over the life of their contracts.
- Our restructuring imches far more than moving - Vulcan Chemicals was one of our 1994 success -
boxes on organizational charts. It integrate's account- stories - and a strong testimonial for our aggressive - ability and ~tesponsibility for customer satisfaction with marketing strategy. Vulcan not ordy signed a new .
- high performance objectives. long. term contract, it decided to shut down the co-With the machinery in place, Western Resourtes is generation plant it has used for more than a decade.
'in a position to be a strong competitor. Results in 1994 The result is that Western Resourtes will retain existing
~f showwe are on the right track. sales of vulcan's 80 megawatts - plus, it will book WINETREN-
J E S T E ,. ; ES ^ U _.C E S, IN C. I e
.7 i
'STR ATKelCf FOdUS:
, Suled 'leag-torme ,'
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., pre. 2.iei...;.
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'mn,
r9g ' J.; new sales of 32 megawatts to 7 Develop.and deploy < > cut costs, and have significant replace power formerly supplied fe..M-ett pred. t. , - emimnmental benefits. These by Vulcan's co-generation plant. '
- and services. .; ,
- tecimologies use ekctricity to Another example involved -
o, . efficiently perform a wide variety c consuative partnership with . metsia. mid grew sales.~. , f critical processes - from - Wal-Mart Stores in planning its < " 3l , treating wastewater to drying first emironmental demonstration paint on automobiles and
. , g ,,,t , , ' ,
store in the United States in - sterilizing equipment in hospitals.
.1 customer focused ,
Lawrence, Kansas. The store's Working with the printing firm
/ergeoisstles.\y innovatiw design includes a Graphic Impressions in liutchin-naturallight system that i son, Kansas, Western Resourms automatically dirns fluoms- , iN introdumd an electrotechnolog ! cent lights when there is adequate called electric ultraviolet (UV).
sunlight. Nine meters located throughout the store A UV unit replaced a gas-fired comection oven # 2 dry continually monitor electricity usage. Also, the store has printed materials - and do it cheaper, twice as f ,t, space conditioning system that uses outdoor air and and with a higher quality finish than the old technolog. chilled water fmm ice storage tanks during operating Western Resourtes gained 76,000 kilowatt hours in new hours - and no ozone-depleting refrigerants. When annual sales - and a very happy customer. the store closes, compressors refreeze the water for For municipal customers, ekstratechnologies offer . cooling the next day. Western Resources has gained cast savings and other benefits in helping communities sales of 500,000 kilowatt hours annually and improved comply with water and wastewater starxlards. In load factor. We also earned Wal-Mart President Bill Topeka, a new wastewater treatment plant uses an Fields' compliment for our role as a " valuable efIluent heat pump that operates at better than 400% vendor / partner and technical consultant." efficiency compared to the standard boiler's 80% Pioneering niche markets is another important efliciency. IIutchinson's wastewater plant uses UV part of our marketing strategy. Western Resources has treatment to eliminate the health, emironmental, become a recognized industry leader in marketing elec- and safety hazards of chlorine treatment. And after we trotechnologies that increase customers' pmductivity, assisted Emporia with a pilot study, it is building the twsarv
r ' l _+. , DESTEQN RESOURCES INC, ,
~. TOTAL ELECTWet CUST9MERS -
~
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. facility in Kansas to use
' mst-effective ozone
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g g partnerships, and new growth . f, ' is a top priority in 1995. electrotec5mology. , k h i - Our new marketing
' IIospitals, too, have LgE y o jg orgamzation will re'earch s wide applications for electro- Y k' f A : and develop newproducts and L l
# ony ; es c = e4 ,
technologies. Western . services that will add revenue Resources has worked with % w M = = . m en T,ees :; and further differentiate
' hospitals in Topeka and Wichita Western Resourws as a to eliminate the threat of a - value-added,long-term -
j new and particularly virulent TOTAL RETAIL ELECTR4C SALES [ strategic partner. - strain of bacteria that resists WoosimoogiiiiiiiniW?MW ' For business customers, com'entional disinfecting 4 18" 7* there is promise in marketing i treatments. UV lights will 9kWk ' . . . b d our technical expertise. 1:2 installed in the hospitals * ') - q]j gj In short, Western
~
ventilation ducts to kill J ** [ . , , p Li we , Resources has gone beyond - the bacteria before disease = 1sK ' 4, ' traditional utility marketing. can spread. i 1s s
~
T %q y?- Th " Business as usual' no longer We will continue working , .g g _, , applies. Indeed," business as N $y (d
~
in close partnership with usual"is no longer acceptable. research institutes, engineering gy q Ig4 $ - We have the right strateg finns and customers to pursue j< , p; in place. We have a new . energ-based solutions to a - [hi h i Nb organization and performance
. Variety ofindustrial, manufac- , :. et 1 (ts3 ) 94 ; requirement that fit the turing, and commercial , strategv. And it's working.
problems. h= *se= psi. iwen======s weseber the past to. yeara.- twsutveas
M ^ (1994ar 1993- ::1992m 1991" Il990 ~. l Mallars An tlinusands) ~
' War efded December 31. ; CCOCE STATE ENT Of.TA '
(Oper:. ting revenuesi J Electric l , , , .,,, , , , . - $1,121,781- $ 1,104,537 - $ ' 682,885 $ f 471,839. - $ : 463,707 Natural gas. ;,. . ., , 498,142 804,822 1 673,363 690,339 ' 686,048'
- Total operating rewnues . , u. .. . 1,817,943 ;1,909,359 1,556,248- '1,162,178 - 1,149,755 )
7Opentingexpenses i . , , , _ 1,348,397; l 1,617,296 1,317,079- 1,032.557 1,017,765. : 1
~
; Allowance for funds used during ' . . . 'I construction , , , .... 2,987- 2,631 2,002 1,070 ' 1,181, l 3 Income before cumulative effect of. _
']
accounting change . ,,
. . . 187,447 177,370 127,8 % 72,285 79,619 .'
- Cumulative effect to January 1.1991, of change in revenue recognition ,
- - :- . 17,360-. -
i Net income .. . ... , 187,447 177,370 127,884 89,645 79,619- ' r Earnings applicable to (ummon stock. , 174,029 163,864 115,133 83,26S 77,875
@&rs in thousands)
December 31, ' BALANCE SHEET DATA l
; Cross plant in service . . . 4 5,943,304 $ 6,222,483 86,033,023 $2,535,448 $ 2,421.562 Construction work in pmgress . . 35,290- 80,192 - 68,041 17,114 . 20,201 c Total' assets . . . , . , , 5,189,418 5,412,048 5,438,906 2,112,513.- .2,016,029 -. i lemg. term debt and preferenw stock subject to mandatory redemption 1,507,028 1,673,988 2,077,459 690,612 595,524 :
1 i War ended Decernber 31. -
. CCCCN STOCK DATA lj f Earnings per share before cumulative d icifect of accounting change . , $ 2.82 $ 2.76 - $ 2.20 $ 1.91 - $ 2.25
- Cumulative effect toJanuary 1,1991, of l
. change in rewnue recognition per share . .50 -
- Earningsper share. , $ 2.82 $ 2.76 $ 2.20 $ 2.41 : $ 2.25 j
, Dividends per share. . $ 1.98 $ 1.94 $ 1.90 $ ' 2.04 m ' S 1.80 -
Book value per share ~ . $23.93 $23.08 $21.51 $ 18.59 _ $18.25 ., Average shares outstanding (000\). 81,415 59,294 52,272 34,566- 34,566 ' ' l
- . Interest coverage ratio (before income !
l ' taxes, including AFUDC). 2.42 2.79 2.27 - 2.69 : 2.86 '; r- . SPE1ATING REVENUESL q.
,. m m ,, ,' if 0738470N8.SRPENSESl' # j
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ge ., kO N. ..- 7' . 9amos =
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, ,# .{'
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.. I h desse 17% #de yees,1. kh i 75[,;g , (analet ene to the sales }. 7f g. q l 5 . esenamend e p ? or emeenass esteessl wMa mesensassee 1
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.yQg 3l [* f > c j_f,,;, LV yy I (1) Information reflects the sa6es of the Missouri Properties (Note 2).
(2) Inform = bon reflects the rnerger with KG&E on March 31,1992 (see Note 3). !
- (3) Includes special, one-time dwidend of $0.18 per share pad February 28.1991. l
. , . . . , - . , - _ - . . -- -, . . - - , ~ -, -. .
i
+ . FINANCIEL CON ITION 1
iSENERAL: Earnings we're $2.82 per daare ofcommon stock based l 5 The folkning table reflects, thmugh the dates of the sales of the i on 61,617,873 average aimmon shares for 1994, an increase fmm Missouri Pmperties, the approximate operating revenues and
- B76 in 1993 on 59,294,091 average mmmon shares. Net income operating income for the years ended December 31,1994,1993,
' for 1994 increased to $187.4 million'compan d to $177.4 million in z and 1992, and net utility plant at December 31,1993 and 1992, 1993. %e inemase in net income and camings pei Share is a result - : related to the Missouri Pmperties (see Note 2)r ,.
L of the gain on Se sale of the Company's natural ga distribution , p,c,, n,t, . l pmperties and operations in the State of Missouri, si duced interest Amount company ' expense, atti higner electric sales mmbined with her fuel costs. toonas in enousanos, unaueneo) . Dividends increwed four wnts per comne 6.sre in 19M to 1888
' $1.95 per share in January 1995, the Board of Directors declared c quartedy dividend of 501/2 cents per mmmon share, an increase
$ [',; ; ; ; 87 [ N:
. ,0f one wut over the prwious quarter. Based on currently pmjected gges.
operating results, the Company does not r ipate a material - Operating revenues . . . . . ... $349.749 18.3% i opeistingincome ., . .. 20,748 7.1% diange in its disidend policy or paput r approximately 70% 298,039 Net utlUty plant . . ,, , 6.6% g g yggy 1
- %e book value ter sham was $23.93 at Dewmber 31,1994, toca !
Operstmg menues , , , $299,202 19.2% compared to $23.0S at December 31; 1993. %e 1994 closing , , l stock price of $28 5/8 was 120 penent of book value. %ere were
- 61,617,873 mmmon shares outstanding at Demmber 31,1994.
2
^
On January 31,1994, the Company sold substantially all of its separate audited fmancialinformation was not kept by the - 1 Misscart natural gas distribution pmperties and operations to Company for the Missouri Properties.%is unaudited financial; Southern Union Company (Soutbern Union). ne Company sold information is based on assumptions and allocations of expenses
~ '
- the remaining Missouri properties to United Cities Gas Company of the Company as a dole. _
(United Cities) on Febmary 28,1994. %e pmpss sold to - For acklitional information regarding the sales of the Missouri Southem Union and United Cities are referred e,ix. ein as ' Pmperties and the pending litigation, see Notes 2 and 4 of the the
- Mis;ouri Pmperties? %% the sales Notes to Consolidated I'mancial :
' the Company is no longer operating as a '-
Statementsc K utility in the State of Missouri, i CAPlfAL EXPEND 4TURESi ~
-. s-A UGUIDITY AFD CAPITAL < %e portion of the Missouri Properties ,
7 gg.ggj - 4 RESOURCES:The Company's liquidity - purchased by Southern Union was sold saafmaatyessens % G k[ is a function ofits ongoing construction " ! for an estimated sale price of $400 mik lica, in cash, based on a calculation as ,,,;hqqf%%%mdhl pmgram, designed to improve facihties - l 4 ;k . which prmide eketric and natural gas : of December 31,1993. United Cities seeI 97,hffQ M "N ?.hh ? senice and meet futum ctmtomer - ! , , purchased the Company's natural gas senice requirements. -2 distribution system in and amund the - EM r s I Nhyy",j
' City of Palm)ra, Missouri, for $665,000 { During 1%mstmdian expenditums
. f r the Company's electric system were "
j Jin cash. ;
.. p so ,-
i appmximately $152 million and nuclear
- As a result of the sales of the Missoun 9 fuel expenditures were appmximately Pmperties, as described in Note 2 of g' i - y$
$21 million. It is pmjeded that adequate 1
- the Notes to Consolidated Finanaal y $ '
i i capacity margins will be maintained i
, Statements, the Company remgnimd a se 3 % without the addition of any major gen- 1 gain of appmximately $19.3 mdlion, net erating facilities through the tum of the ~
h,* j , (('
' of tax,($0.31 per share) and ceased '
century. ne construction expenditums J l mmrding the results of operations for 6 " U 5 for imprmements on the natural gas l
- the Misert Properties dwing the first f' ~g 7g swtem, including the Company 1s servke .)
_ quarter of 19M. Consequently, the AM ""
, ',me replacement program, were appmsi !
; Company's msults of operations for the ~' y; , r"<t 9s'> '
imately $65 million during 1994. twehe momhs ended December 31, s ; nie$er amenes empe, menenee 1994 are not comparable to the results
, ' Semaines emesteet se teosp' f outletereses % A ' -
of operatkms for the same peAxis end-ing December 31,1993 and 1992. , g d !deesseeeasempiasse.( w
- A
.i
~l T W E N T Y.T N RS E 1 -
e P s [ Capital expenditures for 1995 thmugh 1997 are anticipated to > ' On Febmary 17,1994, KG&E refmanced the City of La Cygne,-
. be as followsr Kansas,5 3/4% Pollution Contml Revenue Refundmg Bonds . .
Series 1 7 , $1,9 Doctric Nuclear Fuel ' 14stural Gn principal amount, with 5.10% Pollution ~
. Control Revenue Refunding Bonds Series 1994, $13,982,500
. principal amount, due 2023. - +
996 $ ,, On March 4,1994, the Company retired the following First
'19974 m....,. o o ' 108.500 24,000 58.100 Mortgage Bonds: $19 million of 75/8% Series due April 1,1999, L
- $30 nnition of 81/8% Series due June 1,2007, and $50 million - e of 8 5/B% Series due March 1,2017.
1 %ese expenditures are estimates prepared for planning purprnes
- and are subject to revisions from time to time (see Note 7). -
On April 28,1994, two series of Market-Adjusted Tax Exempt .
& Company's net cash flows to capital ex;rrxhtures wem 97 penent Securities (MATES) totalling $75.5 million were sold on behalf I
; for 1994 and during the last five years has mernged DS percent. of the Company and three series of MATES totalling $46.4 nulhon l W Company anticipates all ofits cash requimments for capital were sold on behalf of KG&E. W rate on these bonds was 2.95%
' expenditures through 1997 will be provided from net cash flows. for the initial auction period. & intenst rates am being reset periodically via an auction pmeess. As of December 31,1994, the 7 ,
& Company's capital needs thmugh 1999 for bond maturities rates on these lends ranged imm 3.94% to 4.10%.W net pm .
. and cash sinking fund mquirements for bonds and preference ceals from the new issues, together with available cash, were used <
7 cock are appmximately $156 million. %is capital will be pimided to reftmd five series of poUution control bonds totalling $121.9 fmm internal and extemal sourms available under then existing million bearing interest rates between 5 7/8% and 6.8%.' financial conditions. On October 5, the Company extended the term ofits $350 million -
. W embedded cost oflong-term debt was 7.6% at Demmber 31, mvohing credit facihty which will now expim on October 5,1999.
.1994,e decrease from 8.1% at Demmber 31,1993. & decrease was primarily mumplished through mfinancing of higher cost debt. On Nmember 1,1994, KC&E terininated along-term agreement c ntaiwd praisions for the sak of mammts neaNe and '
= b Companys short-term financing requiren.ents are satisfied, '
unbiDed menues, and phase-in mvenues (see Note 11). as needed, through the sale of commerdal paper, sho,t-term bank loans and lorrowings under unsecuwd lines of credit maintained %e Company has a Customer Stock Purchase Plan (CSPP) and'a -
- cith banks. At December 31,1994, short-term borrowings
- Dividend Reinvestment and Stock Purchase Plan (DRIP). Shares '
amounted to $3012 million, ofwhich $157.2 million was issued under the CSPP and DRIP may be either original issue
- commercial paper (see Notes 0 and 11). shares or shares purchased on the
, At Deember 31,'1994, the Company .# ,
open market. had bank eredit arnmgements available ,feoodse pseess~ DAYS $ ,
, of $145 million.
.A "ge December 31,1994,was 49 percent gh$%
& Company's short-term debt balance gM7 common stock equity,6 percent pre- 1 at Dommber 31,1994. decreased approx- TMS ' , W9N 4; . 6 6k ferred and preference stock, and 45 - -
L imately $132.7 miDion fmm Demmber 31, .g ,s, m m permnt long-term debt. %e capital 1993. %e decrease is primarily a result
- of the use of the pruceeds from the sales asseM c 1 p g' 4Q4 ,
M structure at December 31,'1994, including short-term debt and current
+
i of the Masouri Propaties and the
- V d *
% . maturities oflong , term debt was Issuance, on January 20,19M, of $100 sees N N*
' i 45 percent common stock equity, . !
million of Kansas Gas and Elmtric a y 5 percent preferred and preference Campany (KC&E) first mortgage Exmds, + q6 nose w
,w"] It* i stock, and 50 percent debt. As of 630% Series due January 15,2006. Demmber 31,1994, the Company's londs wem rat #A3" by Mmdy's -
~'
L in January 19N, thei Company entered i ese k ( N(' Investors Senice,"A." by Standard into an agreement with Oklahoma Muni. ~{
& Pmr's Ratings Gmup, and "A? l
- cipal Power Authority (OMPA). Under 9 , 7 the agreement, the Company weeiwd a
[~ { j;, by Fitch Investors Senice.
+kl{ ' '
prepayment of appmximately $41 million RESULTS 0F OPERATIONS
' for which the Companywillprmide , * - (es5 [ et ( } es ( I De j ienj:
. ' capacity and transmission senkes to : se 1 pear assumes 2; fat 4
.b following,is an explanation of
. OMPA thmugh the year 2013. gg . p, a+ ol sigrancant variations fmm prior year ;
On January 31,1994, the' Company 5 M* *******"8 eeste
****** 1 results in revenues, operating expenses, ' redeemed the mmaining $2,466,000 , , asse(. other inmme and deductions, interest principal ammmt of Cas Senice M(P toe woe ,, ehem s charges and preferred and preference i L Company 81/2% Series First Mortgage , , dividend requirements. & results of ' - Bonds duc 1997c 4
twsmtv rosa >
y [ operations of the Companyticlude the ethities of KC&E Cnce 'and during 1995 and beyond, there will he no revenues related 1 the merger on March 31,1992 and exclude the methities related tp to the Missouri Propeities (see Note 2). 5 the hilssouri Pmperties following the sales of those properties in - 1994 COMPARED TO 1993: Electric rewnues increased i the fint quarter of1994. two percent dming 1994 pdmarily as a result of a four percent : L For additionalinformation regarding the sales of the Missouri increase in mmmercial and industrial electric sales. Residential - Properties and the pending litigation, see Notes 2 and 4 of the electric sales increased one percent despite four percent cooler . Notes torwM*d Financial Statements. Additionalinforma- temperatures during the primary air conditioning load months of f
~ tion relating to changes between }ean is provided in the Notes June, July, and August. Partially offsetting these inciases in elec -
to Consolidated Financial Statements. tric revenues was a fourteen penent decrease in wholesale and ' I
+ intemhange sales as a result of higher than normal sales in 1993 -
to other utilities while their generating units were dcnyn due to f , , REhENES
- P the flooding of 1993.
II The oprating rewnues of the Company are based on sales Natural gas revenues and sales dmeased significantly in 1994 as _ volumes and rates authorized by certain state regtdatory commis- a msult of the sales of the Missouri Properties in the fint quaiter L -
- sions and the Federal Energy Regulatory Commission (FERC). of 1994 (see Note 2). Also mntributing to the decrease in natural i Rates, charged for the sale and delivery of natural gas and electrio. gas revenues were redumd natural gas sales for spam heating as._
1ity, are designed to nwver the mst of service and allow ime'ston a a result of much warmer temperatures during the winter season i fair rate of return. Future natural gas and ehrtric sales will be of 1994 mmpared to 1993. I affected by weather tunditions, competition from #ver generating 1993 COMPARED TO 1992: Electric seenues increased signifi-
' sources, competing fuel sources, customer (xmservation efforts, cantly in 1993 as a result of the Merger. Also contributing to the -
and the merall economy of the Company's service area. gase was ineseased electne safes for space heating, resulting .. ; y Tid Kansas Corporation Commission (KCC) order apprming from mlder winter temperatures in the fast quarter of 1993, and '
.the' merger with KC&E on March 31,1992 (Merger), prm* led inemased sales for cooling load, resulting from warmer tempera-a moratorium on increases, with certain exceptions, in the tures in the second and third quarters of 1993. KC&E electric ;
- Company'sjurisdictional electric and natural gas rates until August rewnues of $017 million haw heen includalin the Company's
' 1995. %e KCC onlered refunds totalling $32 million to the 1993 electric rewnues. %is compares to KC&E rewnues of $424
' combined companies' customers to share with customers the million, from April 1,1992, thmugh December 31,1992, included Merger-related cost savings achieved during the moratorium in the Company's 1992 electric rwenues. Partially offsetting these perici Refunds of $8.5 million were increases in electric rwenues was the made in April 1992 and December 1993 amortization of the Merger-related icnd the remaining refund hf $15 million 10 EATING ' DEGREE DAYSh customer refund.
. was made in September 1994 (see Note 3).
idsM ljioresW sussesl p %hq Ekstric rewnues for 1993 compared to pm forma reveuues for 1992, giving - On March 26,1992,in connection with sees M MhM dhN effect to the Merger as ifit had occurred the Merger, the KCC approwd tle elim-ination of the Energy Cost Adjustment
,g
..#'"^'
g yy 'ggp % at January L 1992, would have increased as a result of the warmer summer and
- Clause for most Kansas retail electric cus, sees !
colder winter temperatures in 1993. . tomers of both the Company and KC&E - +T r Retail sales of kilowatt hours on a pro effectiw April 1,1992. The fuel msts are ineeV h I
- O{' forma comparatise basis increased from -
now included in base rates and are estab- <. j d . I
* ' approximately 14.6 billon for 1992 to -
- hshed at alew! intended by the KCC to $ 2 appmximately 15.5 billion for 1993, equal the projected average cost of fuel ases u or six penent, j
through August 1995. Anyvarianmin '
-Natural gas revenues for 1993 increased . 5 fuel costs from the pmjected average .sened i; approximately 20 penent as a result of
- will knpact the Companys earnings. >
h 4hd da win " ?
- Future natural gas revenues will be reduced as a result of the sales of the
.G" g } g f~ temperatuses,the fullimpact of . ,
increased retail natural gas rates (see r Missouri Pmperties. %e Consolidated isej (eaj es y es M #8 - Note 5), and an 11 pement increase Statements ofIreome include rewnues s a -- se veer seersnat: e, ate in the unit mst of gas passed on to - , of $77 million for the portion of the first s* , customers through the purdiased gas '
. quarter of1994 prior to the sales of the y gogg,,, go,,,,,, tensa meesmagf adjustment clauses (PCA). The mlder . !
Missouri Pmperties, $350 million for ; -
, winter temperatures are refleded in a s
1993, and 8299 million for 1992. Follow- 1 J - 17 percent increase in natural gas sales ,
- ing the sales of the Missouri Properties - [@ '
to residential customers. '!
, i~
t w s a r v.r s v a ,
gj <#m - . E , . i r
....s ,
]4
- SP'ERATING EXPEECES : , . increase was increased interest expense on corporate-owned life? I
.. .- insurance (COU) barmwings. Also partially offsetting the increase : ; ;
[ (1994 COMPARED TO 1993: Total operating expenses. E was the recognition ofincome in 1993 fmm death;promeds fmm' , p [ decreased 17 percent during 1994 primarily as a result of the , COU policies? !
~ 1 sales of the Missoud Properties (Note 2). Also contributing to the Other inmme and deductions, net of taxes, increased $1.3 miBion 5 bdecrease arre lower fuel costs for electric generathm and mdumd T natural gas purchases as a result oflower sales caused by milder in 1993 compared to 1992. KC&E other income and deductions,-
/ winter temperatures in 1994 compared to 1993c~ not of taxes, of $19 million have twen includal in the Companyt -
total for 1993 compared to $17 million in 1992 from April 1, f Partially offsetting the decreases in operating expemes was higher ' thmugh Ddmber 31,1992. Income fmm KC&E's COM 'i
- income tax expense. As of Dommber 31,1993, KC&E had fully totalled $S miDion in 1993.'
smortled its deferred income tax reserves mlated to the allow-
! ance for borrowed funds used during umstruction capitalled for INTEREST CHARGES AND PREFERRED AND PREFERENCE ~
2 Wolf Cak Generating Station % completion of the amortiza. DIVIDEND REQUIREMENTS: Totalintemst charges decreased lion 'of these defermd income tax mserws increased inmme tax 17 pement for the twehe months ended Dewmber 31,1994, as ,
; expense and thereby rahiced net himme by appnulmately $12 a result of lower debt balances and the mfmancing of higher cost , ,
million hi 1994, and in the future will reduce net income by this debt, as well as inemased COU bormwings which intemt is :
. same cmount cach year. reflected in Other income and Deductions, on the Consohdated -
Statements of Income. The Company's embakbd cost oflong- .t 1998 COMPARED TO 1992: Operating expenses increased for I term debt decreased to 7.6% at Dnember 31,1994, compared 1993 primarily as a result of the Merger. KC&E operating expenses to 8.1% and 8.2% at December 31,1993 and 1992, respmtively, of $470 million have been included in the Company's operating pdmarily as a msult of the refinancing of higher omt debt.- ~ J expemes for the year ended December 31,1993. This compares I to KC&E operating expenses of $316 million, fmm April 1,1992, Partially offsetting these decreases in interest expense were higher . '
= through December 31,1992,includalin the Company's 1992 interest rates on short-tenn bormwings.
fpemting expemes. Interest diarges for 1993 were higher than 1992 as a msult of 5 ! Other factors, excluding the Merger, entributing to the increase the Merger. EC&E interest charges of $59 million for 1993 were
;in operating expenses were higher fuel and pumhased power inchaled in the Company's total interest charges mmpared to -
- expemes caused by increased electne sales to nmet cooling load $53 million for the nine months ended December 31,1992. W z and increased natural gas purchases caused by a 16 perwnt full twehe month effect ofinterest on debt to acquire KC&E . l f increase in natural gas sales and an 11 also mntributed to the increase in total percent higher unit cost of gas whidi is -
interest charges. The increased interest passed on to customers through the PGA. , f Egi333333 cesieF'eEsth charges were partially offset through Also contributing to the increase were S,. - . ~ h.h;77[g$ 1 wer debt balances and reduced inter.
' higher general taxes due to increases in
' Mh eh N est charges from mfmancing higher cost -l plant, the pmperty tax assessment ratio, so?hc.:pgm %g gh I ng-term debt and lower interest rates ,
- and higher mill hwies. A constitutional y - on miablesrate debt.
l
' r.mendment in Kansas changed the i assessment on utility property fmm 30 to fa=i
[ gg[Dd(J! bW MERGER IMPLEMENTATION: In accordance with the KCC Merger l 33 pewnt. As a result of this change the 4 order, amortization of the acquisition : Cornpany had an increased property tax f g]! Qi " adjustment wdlmmmence August , expeme of appmximately $6.1 million
. g 1995. The ammtization will amount to .
in 1993. ' u appmximately $20 milbon (pre-tax) per . Partially offsetting the increases were saw M year f r @ years. % Company can inp as a mmit of the Merger and reduced U ! R recover the amortization of the acquisi-ret lease expense for La Cn;ne 2 result- rab f r y tion adjustment diar $ emt saving ing fmm mfmancing of secured facility -
.i under a shadng mechanism appmved - ,
i bonds (see Note 10). ,qj i 4' by die KCC as descraedin Note 3 of: the Notes to the Consolidated Financial - ', d OTHER INCOME AND DEDUCTIONS: " [ ,, A Statements. While the Company has - Other income and deductions, net of ,JeiTM IssNes )N , achieved smings imm the Merger, there taxes, was ldgher for the tweh'e months
-~ ended Dewmher 31,1994 compared to . . T, Q 7 ,f f[Gs y ], jg [ v is no assuronw that the sa ings adileved will be suflicient to, or that the !
i
- 1993 due to the ravgnitmn of the gain ' Name assures to. sense Meer aest jR , cost savings sharing mechanism will I on the sales of the Missouri Properties 3 (esM have meanse la emannsee @ l operate as to, fully offset the amortiza-- !
' of appredmately $19.3 million, net of ^ '**"'888 8 8"8' ?***'*" R '
****'8" tion of the acquisition adjustment.
Q ax. t (see Note 2). Partially offsetting this , ,j; I i l i s W s N T V.S t a 'I
i
; OTNE2 INr003ATISM (mm the generati , or' potential generation,~ of electricity by -
large mmmercial and industrial customers, and independent l HIFLAfl0N: Under the ratemaking procedures prescribed by apmd e ' 1 the regulatory commissions to which the Companyis subject.
- only the original cost of plant is reemerable in rewnues as %e 1992 Energy Policy Aet (Act) mpares increased efBeiency - depreciation. %erefore, because of inflation, present and future of energy usage and will potentially change tle way ch ctricity is I depreciation punisions are inadequate for purposes of nudntain., marketed. %e Act also prmides for increased mmpetition in the (ing the purchasing power invested by common shareholders and wholesale electric market by permitting the FERC to order third;?
the related cash flows are inadequate for wplacing prope ty. The Party amess to utilities
- transmission systems and by hberalizing impact of tids ratemaking process on mmmon shareholders is the rules for ownership of generating facihties. As past of the : ,
? mitigated to the extent depreciable pmperty is fmanced wid, My, Mnpany agnd byen es obransm%n ? debt that can be repaid with dollars ofless purchasing gm systnn fw wholaale transacdonsmuring m, wMesale eledrk - 'z Widle the Company has experienwd relatively hav inflation in revenues represerted less than ten percent of the Company's total ' the ment past, the cumulative effect ofinflation on operating elatric r-es.
costs may require the Company to seek regulattyy rate relief Operating in this mmpetitive emimument muld plaw pmssure , to temver these higher costs. on utility profit margins and cmlit quality. hlesale and ..
~
i FERC ORDER No. 636: In 1992 the FERC issued Order No. 636 industrial customers snay tiaraten to pursue cogeneration, self-(FERC 636) which the FERC Intended to complete the deregula. generation, retail wheehng, municipalization or relocation to otler ' [ tion of natural gas production and facihtate competitkm in the gas seniw territories in an attempt to obtain mduced energy costs. / t transportation industry. FERC 636 has affected the Company in Increasing competition has resuhed in credit rating agencies j
/-
sevend ways. The rules pnnide j;reater pmtection for pipeline applying rmre stringent guidelines when making utihty emlit , mmpanies by prmiding for reemery of all fixed costs thmugh rating determinations.
. contracts with local distribution companies and other customers %e Company is prmiding reduwd electric rates for industrial /
- choosing to transport gas on a firm (non-interruptible) basis. The expansion projects and economic devekipment pmjects in an order also separates the purchase of natural gaa from the trans- effort to malatain and increase electric load. In 1994, %e Boeing portation and storage of natural gas, shifting additional responsi- Company announced it would bring 1,000 new jobs to Wieta to bility to distribution mmpanies for the provision (through pmebase deveksp its 777 jetliner, and Cessna Airemft Company announced :
and/or storage) oflong. term gas supply and transportation to it woukt build a productim plant in Independenw. Kansas, along . distribution points. Under the new rules, distribution companies with expanding its Wichita facihties, with an addition of 2,000 jobs. elect the amount and type of senices taken fmm pipelines %e in order to retain its current electric load, the Cm has and Company may be hable to one or more ofits pipeline suppliers for will continue to negotiate with some ofits larger in i cus-costs related to the transition fmm its traditional natural gas sales tomers,who are able to develop mgeneration facilities, for kmg-senice to the restmetured seniws required by FERC 636. The term contracts although some negotiated rates may result in company beheves substantially all of these msts will be rennemd reduwd margins for the Compaej. During 1996, the Company from its customers and any additional transition costs will le will lose a major industrial customer to mgeneration resuhing in : immaterial to the Company's fmancial position or results of ope
- a mluction to pre-tax earnings of appmximately $7 to $8 milhon <
~ tions. For additional infonnation regarding FERC 636 costs, see g; Note 5 of the Notes to Consolidated Financial Statements,
, yg,ys decision Wh g g , y pgg g.
ENVIRONMENTAL: he Company has taken a proactive position than energy mst. with respect to the potential emironmental liabihty associated To capitalize on opportunities in the non-regulated natural gas with former manufactured gas sdes and has an agreement with industry, the Company, tlaough its v/ holly-owned subsidiary Mid the Kansas Depa11 ment ofIlealth and Emimament to systemati- Continent Market Center, Inc. (Market Center), is estabhshing cally evaluate these sites in Kansas (see Note 7). a natural gas market center in Kansas. %e Market Center will Although the Company currently has no Phase I affected units pnnide natural gas transportation, storage, and gathering senices, . under the Clean Air Act of 1990, the Company has apphed for an as well as halancing, and title transfer capability. Upon appmval t early substitution permit to brieg tis m-owned la Cygne Station imm tle KCC, the Company intends to transfer tertain natural under the Phase 1 guidehnes. he oxides of nitmgen (NOx) and gas transmisske assets having a rahie of approximately $52.1 air toxic limits, which were not set in law, will be specified in future milhou to the Mark 4 Center. In addition, the Company indends to - Enyismunental Protection Ageng (EPA) regulations. %e EPA's extend credit to the Market Center enabhng tle Market Center pmposed NOx regulations wem ruled im'alid by the Court and to borrow up to an aggmgate principal amount of $25 million
" until such time as the EPA resubmits new pmposed regulations, on a term hasis to mnstmd new facihties and $5 million on a the Compmy will be unable to determine its mmpliance options revohing emht basis for working capital. %e Market Center will i or related compliance costs (ree Note 7). prmide no notxe natural gas transportation and storage senicv5 - COMPEfl710N: As a regulatal utihty, the Company curmntly has to the Company under a long-term mntract. %e Company will limited direct competition for mtail electric seniw in its mrtifed mutmue to opemte and maintain the Market Center's assets senice area. Ilowever, there is competition, based largely on prim, under a separate mntract.
Twsury.ssvan
E onesmher 31. - - / 1994iu 1993 AOOETS .
. kLtim in ilmmauk)
UnuTT PLANT (Notes 1 and 9): .
- 1. Electric plant in service _ ,
. . . ,, ,,. . , , _4 5,238,175 $ 5,110,617 '
Ltural gas plant in service , , . . .- . , , 737,191 - 1,111,866 5,983,308 6.222,4S3
' less - Accumulated'depfeciation , , . , , ,, . . . . , . . . 1,790,298' -1,821,710 -
4,173,100 4,400,773
. Constructhm work in progress . . . . , . . '. SS,290 80,192 Nuclear fuel (net) , , . .,,, .. . ..., , , 39,800 29,271 :
Net utility plant] , . . , , 4,298,200 - 4.510,236 '
. Onita PanPran AND INVE5DIENTS:
Net non-utihtyimestments . . . , , . 74,017' 61,497 L Decommissioning trust (Note 7) . s . , , 18,944 13,2041 Other. . ,. .. . 13,556 10,658
~
104,817 85,359 Ct'antxT sstTs: Cash and cash equivalents (Note 1)'. ... , , , , 2,715 1,217 l Accounts receivable and unbilled menues (net) (Note 1) , 219,700 238,137:
' Fossil fuel, at average cost . , , , , 38,742 30,934 Cas stored underground, at average cost . . . 45,222' - 51,788 Materials and suppbes, at average cost . , 56,145 - 55,156, Prepapnents and other current assets , , . 27,932 34,128.
390,538- 411,360 Dctranro CnAncts ANu Ontra Assris:
. Deferred future income taxes (Note 13) . , , . . ., . 101,80s 111,159 -
Deferred cual contract settlement costs (Note 5) ,
, , 33,006 40,522 Phaso in rewnues (Note 5) , . . . -81,406 '
78,950 Corporate-owrmd life insurance (net) (Note 1) , , . 18,987 4,743 Other deferred plant costs ,
. 31,784 32,008 :
Unamortized debt expen* , ,
.; 58,237- 55,999 Other (Note 57 . . . 92,399' 81.712 398,285 405,093 TOTAL AsstTs $ 5,189,818
. . . . $ 5.412.048 CAPITALIZATION AND LIABILITIES CAPRAUZAnON (We Statements) , . $ 3,006,341 8 3.121,021 CtT,ntsT Instunts:
Short-term debt (Note 6) , , 308,200 440,895 1.ong-term debt due within one p ar (Note 11) . 80L 3.204 - Acanmts payable , , . 130,414 172,338' Actnwd taxes -
' 84,966 46,076 Accrued interest and dividends . 41,069 65,825 Other 09,025' 65,492 658,956 793,830 ~ Dnrranto Cacom AND Onita IJAntunts:
Deferred imume taws (Note 13) ,
, 971,014 968,637 Defermi investment tax credits (Note 13) , , 137,451. 150,289 Deferrt d gain from sale-leaseback (Note 10) . . 252,3411 261,9S1
' Other 146,315
. 116,290-1 1,527,321' 1,497,197 Comsm!ENTN AND CONTINCENCIE5 (Notes 4 and 7) -
TOTAL CAPMAUT.AnUN AND LIABlunEs , 8 5,189,818 $ 5.412,048
. (1)Information reflects the sales of the Missourt Properties (Note 2).
The Notes to Consohdated Onencial $tatements are an Mtegrat part of this statement. T W E N T V.E l a N T
i wr eued Decenter 31, ' ' 1994m 1993' 1992m *
, . . . .. ' dolha
< in clanana. empt per sime smmmes)
OPERmNc REVENUES (Notes 1 and 5):- Electric - . ,, . . . , . L $1,121,781 $1,104,537- 8_ 682,685 Natural gas' . ., , . . . ., 498,182 - 804,822 673,363 : Total operating levenues . . . . . .. 1,817,943' 1,909,359 1,556,24S
~ OPERmNc ExrENsEs:
- Fuel used for generation:
Fossil fuel ..., ,. , . . 220,768 - 237,053 .190,653 Nuclear fuel . . .. . . . . . . -13,582 . 13.275 10,126-
. Pokr purchased ,, , .. . - '15,438 ;16,396 14,819 Natural gas purchases . . , . 312,578- - 500,189 '403,326
- Other operations . . . .. .. . 303,391 '349,160 _ 296,642 :
Ma3ntenance .. . .. . . , . . . - 113,188 117,843 101,611 Depreciation and amortization ~ . . , . , , . . 151,830 164,364 '144,013 Amortization ofphase-in revenues . . 17,544 17,545 13,158 Taxes (see Statements):
' Federalinmme - . . 78,477 62,420 34,905'
- State income - , . . , . . 19,148 15,558 7,095 Ceneral . . . 104,882 123,493 100,731'
' Total operating expenses , 1,348,397 1,617,296 1,317,079
. OrERmNc INCOME :
. 249,548-- 292,063 239.169 j OrnER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net) . .
. . (5,354) 7.641 - 9,3082 Cain on sales of Missouri Propedies (Note 2) ~ . 30,701 > - -
Miscellaneous (net) . .', ., 12,838 18,418- _ 18,976
' Income taxes (net) (see Statements) _ , (4,329) (777) (4,098) '
Total other income and deductions .' . 33,858 25,482 ' 24,186 INCOME BErORE INrEREST CHtRCEs . 303,402 317,545 263,355: INTEREET CHARCES: long-term debt 7 98,483- 123,551- 117,464 Other . . . . . . , 20,139 19,255 . 20,009 -
' Allowance for borrowed funds used during . .
construction (credit) (2,487) (2,631) (2,002) Totalinterest charges 115,955 140,175 135.471
= NETINCOME -147,447 177,370 - 127,884- , PRErERRED AND PREEERENCE DmDENDs . . . 13,418 13,506 12,751 EARNINcs ArrtJcARt.E m COMMON SroCr . $ 174,029 $ 163.864 8- 115,133 ,
AVER 4CE COMMON SHARES OUTSMNDINc . 81,817,873 59,294,091 52,271,932 EARNtNcs FER AVERACE COMMON SilARE Ot'TSTANDINc $2.82 $2.76 - $2.20 l DIVIDENDS DECLARED PER COMMON SHME . $L98 $1.94 $1.90 ' (1)Informat.on reflects the sales of the Missouri Properties (Note 2) '
- a (2) Informaton reflects the merger with MG&E on March 31.1992 (Note 3).
The Notes to Coneohdated Financial Statements are en integral part of tNs statement. t w r af f.as m s
~
war eneed Decenber si, ' o .1984m ~ 1993 1992m -
- an nintiumamh)
) Casu Finws raoM OrEmarisc AcrnmEse ,
Net income : . . . . . .. . .. , ,,.. . .. .. . , , , . . $ 187,447 $177,370 $127,884 Depreciation and ar' n ortization -, . . . . . . . . . . - , , . .... 151,430 164,364 144,013 iother amortization (including nuclear fuel) ., . . ... . . .,. 10,905 11,254 8,930:
! Gain on sales of utility plant (net of tax) ... , ' c' , , (19,298) -- -
1 Deferred taxes and investment *.ax credits (net) . . . , . (18,555) 27,686 26,900 ~
= Amortization of phase-in revenues . , , . . ... 17,544- 4 17,545 - 13,158 Corporate-owned life insurance . .. . .. . . . (17,346) ,
(21,650): (14,704)
' Amortizi. tion of gain from sale-leaseback . . . . . . . . .. . . (9,640) - (9,640) - . (7,231)
Changea in other working capitalitems (net of effects from the sales of the Missouri Properties):
. Accounts recchable and unbilled revenues (net) (Note 1) . . (75,830)' ' (15,536)' (12,227)
Fossilfuel . . . ... ., , . ., . . (7,838). 18,073 14,990 Ga stored underground ' . . . ., ,. (5,403) (37,144) . 4,522 j Ace runts payable . . .. . . . . . . . (41,882). l (43,169) - ' (10,194): Acf .ued taxes ' . , , , . 20,786 ~ 7,485' (52,185) Ner . . . ..... . . . . 12,813 (3,165) (19,433)- Changes in other assets and liabilities '. . . . . / S0,964 (18,569). 21,508 268,779 Net cash flows fmm operating aethities , , , . :274,904 ' 245,931 CASH Flows USED IN ImESTINc ActumEs:
~
- Additions to utility plant . , , . 237,808 237,631 . 202,493 Merger with KG&E . . -
.- 473,7522 Utility imestment ,,. . . .
- 2,500 .-:
Sales of utility plant , ,. . ,, (402,076)' - -
' Non-utilityinvestments (net) . , . .. . . ... 9,041 14,271 29,099
. Corporate-owned life insurance policies ... .26,418 . 27,268 20,233 Death proceeds of corporate-owned life insurance policies ,t - (10,160) (6,789)
Net cash flows (from) used in investing aethities , , (128,921) 271,510 ,718,788
' CASH Flows now FhANcmc AcTnmEs:
Short-term debt (net) . . . ,.. . (132,695) 218.670 .42,825 Bank' term loan issued for Merger with KC&E ,
-- 480,000 Bank term loan retired . .
- (230,000) (250,000)
- Bonds issued . 235,923: 223,500 485,000 '
Bonds retired . . . (228,908) (366,466)- (236,966)
~ Revohing credit' agreements (net) (115,000) (35,000) -
- Other long-term debt (net) . .. . (67,893) 7,043 14,498 Borrowings against life insurance policies (net) . . . 42,175 183,260 (5,649) -
Common stock issued (net) . , - 125,991 -- Preference stock issued (net) . . . .
- - .50,000 P vference stoc;k redeemed , .
(2,734) - (2,600) Bank term loan issuance expenses .. .
- - (10,753)'
Dhidends on preferred, preference, and common stock.. '(134,906) .(127,316) (99,440). Net cash fkiws from (used in) fmancing aethities . (398,202) (3,052) 466,915 NET INCREASE (Dr. CREASE) IN CASH AND CASH EQUIVA1.ENrs 1,498 342 (5,942) . CASH AND CASH Evenurxrs: . Beginning of the period . 1,217 ' 875 c 6,817 End of the period , $ 2,715 $ 1,217 '$ 875 Courostvrs or MEncEn utTu KC&Et . Assets acpired . . '
$3,142,455 Liabilities assumed . . .(2,076,821)
' Common stock issued (589,920)
' Cash paid ... . . 475,714' I.ess cash acquired . .
~
(1,962) Net cash paid . $ 473,752 (1)Information reflects the sales of the Missouri Properbes (Note 2).
' (2)Irdormation reflects the merger wfth MG&C on March 31,1992 (Note 3), ,,
The Notes to Consolidated Financial Statements are an Wegral part of tNs statement. TIII R TY
war ended December 31, ~ 1994m 1993 19923 i (&Ars in ilmusana) FEDERAL INCOME Turs Payable currently . . . . . . . $ 98,748 $ 41,200 $ 16,687 Defermd taxes arising from: Depreciation and other property related items . .. 29,506 25,552 25,163 Energy and purchased gas adjustment clauses 9,764 (8,192) (4,180) Unbilled revenues - - 2,458' Natural gas line survey and replamment program (313) 355 (1,106) Missouri Property sales - (36,343) - -- Prepaid power sale . , (13,759) - - Other . , (800) 6,166 4,121-Amortization ofinvestment tax credits (6,733) (1,982) (4,918) Total Federalincome taxes . 80,064 63,099 _ 38.225 less: Federal income taxes applicable to non-operating items: Missouri Property sales 9,485 - -- Other .#. , , (5,893) 679 , 3,320 Total Federal income taxes applicable to non-operating items . 3,587 679 3,320 Total Federal inmme taxes charged to operations , 76,4'"T 62,420 34,905 STATE INCOME TAKES: Payable currently . , 17,758 9,869 2,522 = Deferred (net) . , 2,129 5.787 5,352 Total State income taxes - 19,887 15,656 > 7.874 less: State income taxes applicable to non-operating items 742 98 779
, Total State income taxes charged to operations 19,145 15,558 7,095 CENERAt.TuEs: ,
. Property and oier taxes 86,687 84,583 68,643 Franchise taxes 5,118 22,878 19,583 Payroll taxes , 12,879 16,032 -12,505 Total general taxes 104,682 123,493 100,731 TOTAL TuEs CitAncEn To OPERATIONS $ 200,304 $201,471 $142,731 The effective income tax rates set forth below are computed by dividing total Federal and State income taxes by the sum of such taxes and net income. The di(ference between the effective rates and the Federal statutory income tax rates are as follows: War ended Decamber 31, 1994m 1993 lo92m
. Enremt INCOME Tu RATE 35.3 % 31.0 % 27.0 %
EnTcr or: Additional depreciation . (1.4) (2.9) (5.1) Acce',erated amortization of certain deferred taxes .7 6.0 7.6 State inmme taxes . (4.8) (4.0) (2.6) Amortizat'an ofinvestment tax credits 2.4 2.7 3.4 Corporate-owned life insurance . 2.1 3.0 2.9 Other difTerences ,
.5 (.8) ' .8 STATtTTORT FEDERAL INOOME Tu RATE 35.0 % 35.0 % 34.0 %
(1)Information reflects the sales of the Masouri Properties (Note 2). (2)Information reflects the rnerger with AG&E on March 31,1992 (Note 31 The Notos to Consolktated Financial Statements are an integral part of this statvnent, f NIf.t Y.O N E
December 31/ 1SH - 1993 L .. . .. . . . . : (dults,in thousands) -
. COMMON $f0CK Entm (see Statement?):
Common stock, par value $5 per share, L authorized 85,000,000 s) ' rs,
. ,; outstanding 61,617,873 . ares . . , , . , , . $ ~ 308,009 - .$ 308,089 Paid-in capital L , . .... ,,, , , 847,992 ' 667,738
; Eetained earnings * ... .. . . . . , , ,. . 498,374 446,348 -
- 1,474,455 40% <1,422,175i 45%
CUMt'I.&UVE ParTaarn AND PatrrarNCE Surs (Note 12):
? Not subject to mandatory redemption,
, Par value $100 per share, at,thorized
. 600,000 shares, outstanding-- . .,
41/2% Series, 138,576 shares . . . . . .... .13,888 13,85$ . 41/4% Series,60,000 shares ., , ,. 4,000 - 6,000 ' 5% Series,50,000 shares . ... . 5,000 , 5,000-24,888 24,85S
. 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- 8% '174,658 6%
'Insc-Traw Drst (Note 11)i -
First mortgage bonds : ,. . , , , 841,000, 842,466 Pollution control bonds ' .. 521,922 1508,440 ~ Other pollution control obligations . ..
- 13,980 Revoking credit. agreements , .
- - 115,000 -
Other long-term agreement . _ ..
- 53,913 :.-
. . Iess:
Unamortized premium and discount (net) . . , 5,814 . 6,607-Iong-term debt due within one year SO 3.204 1,387,028 45% 1,523,9SS 49% TOTA 1. CAPITAUZADON , $ 3,006,341 100% $ 3,121.021 100% 4 A 4
.e s
i The Notes to Consohdated Financial Statements are an integral part of this statement.
, e n s s t r-t w o ,
m ly s
- - 2 cowuow.
- $1ucx '
- Par >.nu
- CArret arruwm ;
EARNINGS 47 $Ms ., , , L wnmkon d4 < M BALon2 th:CsusEm 31,19914 -
.E., ,.
2 34,566.170 : hares . L , , *.
. . . .. . . .c.. , , . , . , , . l $172,831 ' i8 87,099 l $382,519 ; .' , ' 7 Net inconi 7. . . 4 .. . . , . . . ,. .. . , . . . . . < 1127,8M -
c? Cash dividen'de; Y l Preferred and preference stock? .- ..J,.,.,. . . . . . . , (12,751):l
' + Comrcon stocli, $1.w pe.r share i i.~. . . . . , ,.. . . . . . . . .
+
'(99,135)"
' ~ ; Experws on preference stock . . . . , ,, . ,,, .. . . . *
(14; ' . (14). :
; 1ssuance of 23,479,3mhares of common stock ,
.:-in the merger with KG&E 3 . . , , ... . .. . .. . . . . ., - 117,397 - '472,523 '
W J BA ANCE DE:CEMBER 31,1992 .. . . -
< L 58,045,550 shares 1,.' . , . . . . , . . .. , , . . . . 290,228 -559,636' 398.503 '
(Net income , .. . 4; .. . , , 4 , . . . .. . . . . . . . . . . . . , . 3- 177,370'
. . , ' j..
~
2 Cash dividends:
- Preferred and preference stock . . .. . . . ,
.(13,506)
~ . J Common stock, $1.94 per share . . . . . . , . . . .
(116,019)- jExpenses on common and preference stock . . . . (3,453)( l Issuan= of 3,572,323 shares of common stock , . . . . . . .17,861 ' 111,555 -
- i i BALANCE DECEMBER 31,1093 :
; 61,617,873 shams . . ., , . . , . . , , . . . 308,089 667,736 . ;446,348?
- Net ir.come " . . . ,,. . . . . , , . ,, .
137,4471- ' Cash dividends-
- Preferred and preference stock' ., . , -(13,413)1
.~M ' Common stock, $1.98 per share .. . , . ..,. , . .
- (133,008)-
! Expenses on common stock . . . . .
-(ass)
Distribution of conimon stock under the - ~ .. J ,
- Customer Stock 1%rchase Plan . ., , . , -482-9 BALANCE DECEMBER 31,1994 , ..
,61,617,873 shares ; . . . . . . . . . . . . .
. $ ass,see 4es7, sea,'- '440s,374;.'
e 4-r t
~
~
,y )'
f
.j
,g l
., The Notes to Consolldated Financial Statements are en integral part of this statement
'"4 2 futafvfuess ",
& ~, W
, , +
gW 4 - - J Y s p;g _ NS$lMMARY OF SteNIFicANTl INCOssE TAK5 locome tax expense includes prmisford for K ( ACCol8NTING POLICIES l ' Mocome taxes currently papble and deferred income taxes calcu. ed in c nf manw wMiinmme tax lawi segulatmy onkrs, and t [.eRetERAL: Resomtes;Inc. (the Co %[Westem Consolidated Fm'. (ee Resources), include the. subsidianes, Astra Resounes,Inc. ancial N te 13). Statementi of Western
. !tatement of Financial Acmunting Standards No.109 (SFAS 109),. , jgcounts ofitsshally I i(Astra). Kansas Gas and Electric Company (KC&E) since March Investment tax credits previously deferred are being amonized to ;
P 31,1992 (see Note 3), KPL Fundmg Corporation (KFC), and - . Income mer the life of the property which gave rise to, the cmdits.< C l M!d Continent Market Center Inc. (Market Center); KC&E
- REVENUES: We Company accrues estimated unbilled ekctric l owns 47 pentnt of. Wolf Creek Nuclear Operating Corporation and natural gas revenues. %fs method of ecognizing menues l
. (WCNOC), the operating company for Wolf Creek Generatin'g . best matches menues with costs of senices prmided to'cus.
- Station (Wolf Creek). %e Company reconis its proportionate - tomers and aho mnforms'the ComWs anung treemd .
( share of all transactions of WCNOC as it does otherjointly-owned of unbilled revenues with the tax treatment of such menues.
- faciliucs. All significant intermmpany transactions have been ehm' ' Unbilled revenues repmsent the estimated amount customers will J J insted.ne operations of Astra, KFC, and Market Center wo be billed for service pnided fmm the time meters were last read .
< J not material to the Company's results of operations.%e Company : to the end of the accounting period. Unbilled menues of $61 . p conducting its utility business as KPL, Cas Service, and thmugh million and $99 milhon are reconled as a component of amounts 3 1 its wholly-owned subsidiary, KC&E. %e Company is conducting rewivable and ~unhilled rewnues (net) on the Consolidated ' . h : its non-utility business through Astra.' Balance Sheets as of December 31,1994 and 1993, respectively. - , 4%e accumting policies of the Company am in'accordance with %e Company had mserves for doubtful accounts rewivable' og g3,4,;;;;o'n and $4.3 million at December 31,1994 and 1993, '7 {( public generally utilitics. auep%e accounting and rates of the Company areted accounting - ': pdnciples as a ' mspectivelf
.o subject to requirements of the Kansas Corporation Commission .
- ~ , -
4 KCC), the Oklahoma Corporation Commission (OCC), and the FUEL COSTS: he mst of nuclear fuelin process of refmement,S { (Federal Energy Regulatmy Commission (FERC). conversion, enrichment,'and fabdcation is mcorded as an asset at3 original cost and is amortized to expense based upon the quantity
; UTIdTY PLANT: Utihty piant is stated at cost. For constmeted of heat produced for the neration of electricity. %e accumu-l
. plant, cost includes contracted senices, direct labor and matedals, lated amortization of m;c ear fuel in the reactor at Dewmber 3C Indimet charges for engineering. supervision, general and adminis- '
1994 and 1993, was $13.6 million and $17.4 million, respectively.-~ ' r / trative costs, and an allowan for funds used during construction
.' (AFUDC). The AFUDC rate was 4.08% in 1994. 4.10% in 1993, CASH SURRENDFR VALUE OF LIFE INSURANCE .
7 and 5.99% in 1992. %e cost of additions to utihty plant'and CONTRACTS: %e folkming amounts related to corporate-owned ,
- replacement maits of pmperty is italized. Matutenance costs life insurance mntracts'(COLI), pdmarily with one highly rated T and replacement of minoritems property are charged to major insur we mmpany, are recorded in Corporate-owned Ilfe a losurance , et) on the Consolidated Balance Shats.
expense as incurred. When units of depredable property are ' retired, they are rerrmed from the plant accounts and the original 1994 1993
; cost plus renmal charges less salvage are charged to accumulated ~
depreciation. Cash surrender value of contracts . .. . . ... ' $ 408.9 $ 326.3 ' l 7 DEPRECIAfl0N Depreciation is provided on the straight-line 8orrowings against contracts . ., . ..... (391.9) ' (321.6) h method based on estimated useful lives of rty. Composite - Cou (neo
+
$ 17.0 : $ n 4.7 R
- paisions for book depreciation approximat 2.87% during 1994,3.02% during 1993, and 3.03% during 1992 of the average - ' - -
%e COLI bormwings will be repaid upon receipt of proceeds. j
; original cost of depreciable property.
fmm death benefits under contracts.The Company recognizes 1 a CONSOUDATED 8TATERIENTS OF CASM FLOWS: For inemases in the cash surrender value of contracts, resulting from . , purpoh-s of the Consolidated Statements of Cash Flows, the premiums and inwstment earnings on a tax free basis, and the :
, Company considers highly liquid collateralized debt instruments tax deductible interest on the COLI borrowings in Corporate- '
purchased eith a maturity of thme months or less to be cash owned Life Insunnce (net) on the Consolidated Statements of L
- equhalents.
Inwme. Intemst expense related to KC&E's COLI for 1994, i Cesh patd for inteest and inemne taxes for each of the three years 1993, and the nine months ended December 31,1992, was , iended December 31,3re as follows: $21.0 million, $11.9 million, and $5.3 million, respectiwly. : j
< 1994' 1993 1992 As appmQ 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 (see Note 8) to offset Statement of-M*'est on hncing acues Financial Acomting Standards No.106 (SFAS 10f' and State-(net of amount capttanted) . . . . $134,785 $171,734 $128,505 I 90,229 24,968 ment of Financial Accounting Standards No.112 (SFAS 112) ;
. tncome taws . . . . . . , .... 4P 108 expenses, RECLASSIFICAT6DNS Certain amounts in prior years have been l
, rmlassified to confonn with classiftcations used in the current year j presentation.
i s u sa t t.r e va - a L.6
V
/ 2; $ ALES CF CbOCU21 NATU2AL Separate audited fmandal information was not kept the:
SAS DISTRISUTION PROPERTIES Company for the Missouri Pmperties. This unaudit fmancial
- On Jamiary 31,1994, the Company sold substantially all ofits inf rmation is based on asseptims and allocations of ex}nses
, Missouri natural gaa distribution pmperties and operations to . f the Company as a whole.
- Southern Union Company (Southern Union). & Company sold
- the remaining Missouri properties to United Cities Gas Company 3.' ACQUISITION AND WlERGER ,
? (Ur.ited Cities) on February 28,19% & p rties sold to Southern Urdon and Uniteil Cities are refe to herein as the On March 31,1992, the Company, through its wholly-owned . . .
'Missourl Pmperties/' With the sales the Company is no longer subsidiary KCA Corporation (KCA), acx]uired all of the outstand '
= operating as a utility in the State of Missouri. Ing mmmon and prefermd stock of Kansas Gas and Electric .
Company for $454 million in cash and 23,479,3S0 shams of com. - 7'11e portion of the Missouri Properties purchased by Southern mon stock (the Merger). & Company also paid $20 million in v Union was sold for an estimated sale price of $400 million, in costs to complete the Merger. Simultaneously, KCA and Kansas ' L cash, based on a calculation as of December 31,1993. & sale
' Cas and Electric Company merged and adopted the name of agreement provided for estimated amounts in the sale price calcu- Kansas Gas and Electric Company (KC&E);The Merger was lation to be adjusted to actual as of January 31,1994, within 120 accounted for as a pumhase. For income tax the tax E dap of closing. Disputes with respect to proposed adjustments basis of the KC&E assets was not changed by th rger.
b al upon differences between estimates and actuals are to be resolvect within 60 dap of mbmission of the disputes by Southem As the Company acquired 100 pement of the common and
- Union or submitted to arbitration by an accounting firm to be preferred stock of KC&E, the Company moorded an acquisition
. agmed to by both parties. Southem Union propose.1 a number Pmndmn of $490 millim on the Consolidated Balance Sheet for c the difTemuce in pumbase price and book value. This acquisition of adjustments to the purchase price, some of which the Company
. has cdsputed. & Com maintains the disputed adjustments Premium and related income tax re uirement of $311 million
- are not permitted under sale agmement. In the I under SFAS 109 have been classifle as plant acquisition adjust-
^ Company's management, the resolution e prim of these ment la purbnion Electdc Plantof in the Service on the Consolidated Balance '
L adjustments will not have a materialimpact on the Company's Sheets. Under the prmisions of orders of the KCC, the acquisi-financial position or results of operations. For information regard- ti" Premimn is reemded as an acquisitim adjustment and not -
. ing litigation in connection with the sale of the Missouri Pmperties allocated to the other assets and liabilities of KG&E.
to Southern Union, see Note 4. In the November 1991 KCC order apprmin[; the Merger, a . United Cities purchased the Company's natural gas distribution mechanism ns approved to share equally between the sharehold-, ,
- ystem in and around the City of PalEiyra, Missouri, for $665,000 ers and ratepayers the cost savings generated by the Merger in .
in cash. - excess of the rewnue requirement needed to allow recovery of the amortization of a portion of the acquisition adjustment,
. During the first quarter of 1994, the Company recognized a including income tax, calculated on the basis of a punhase price gain olappmximately $19.3 million, net of tax, on the sales of the c f KG&E's cummon stock at $29.50 per share. W order prmides -
Missouri Properties. As of the respective dates of the sales of the an amortization period for the acquisition adjustment of 40 pars- > Missouri Pmperties, the Company ceased moording the r-ndts of commencing in August 1995, at which time the full amount of operations, and remmed the assets and liabilities fmm the Consoli- cost sasings is iected to haw been implemented. Merger sasings dated Balanm Sheet relateo m the Missouri Pmperties. & gain - will be measur by application of an inflatioriindex to certain pre-is reflected in Other Inmme and Deductions, on the Consolidated
. merger operating and maintenanm mes at the time of the next -
Statements ofInmme. Kansas rate case. %hile the Company has achtewd savings from W folkning table reflects the appmximate operating rewnues the Merger, there is no assurance that the savings achieved will le .
. and operating income for the years ended December 31,1994, sufficient to, or the mst sasings sharing mechanism will operate as 1993, and 1992, and net utility plant at December 31,1993 and to, fully offset the amortization of the acquisition adjustment h 1992, related to the Missouri Properties: order further prmides a moratodum on increases, with certain exceptions,in the Company's Kansas electric and natural gas rates w until August 1995 'Ihe KCC ordered refunds totalling $32 million -
g to the combined companies' customers to share with customers
. ~
the Merger-related mst savings achieved during the moratonum k Operating revenues . $ 77,008 4.8% period. Refunds of $8.5 million were made in April 1992 and [ Operating income . . . .. . 4.997 1.9% December 1993 and the remaining refund of $15 million was ~ . made in September 1994. - 1888 h KCC order apprcning the Merger required the legal reorgan-0 ,h. .] $ izati n f KG&E so that it was no longer held as a separate subsidiary after January 1,1995, unless good cause was shown ,
- Net utmty plant . .,, , ,,. 296.039 6.6%
why such separate existence should be maintained. & Securities sees- and Exchange Commission (SEC) order relating to the Merger operaung revenues .., . $299.202 19.2% granted the Company an exemption under the Public Utility operatirs income ... . 11.177 4,7% lloidmg Company Act (PUIICA) until January 1,1995. &
- Net utulty plant . . .. 272,126 6.1% Company has bee'n granted regulatory apprmal from the KCC t a l a t y.r e v s
e -
, r x: ,
4.
, ?
[which bliminats: the requirenent for a combination. As c result of Sec. II 2" with respect to the natural gas busineIss N Kansas and .
' I he t sales of the ilissmui Properties, the Company is now exempt : Missouri. %e Companyls moperating with the Department of '
y from regulation as a holding company under Section L 3(a)(1) of ' Justice, but is not aware of any violadon of the antitrust laws in 0 tle PUNCAL . . connection with its business o erations.
' OAs the Merger did not occur untG Mamh 31,1992, the twelve %e Company and its subsidiaries are imolved in various' other ;
imonths ended Decemler 31,1992, results of operations for the legal and emironmental proceedings. Management believes Company reported in its statements ofincome, cash flows, and that guate prmision has been made wititin the Consolidated . common stock equity reflect KC&E's results ofoperations for only Financiat Statements for these other matters and amordingly , the raine months ended December 31,1992. Pm forma revenues . ' believes their ultimate dispositions will not haw a material M$1.7 billion, ating inmme of $269 million, net inmme of . advene elTect upon the business, financial position, or results -
! $132 inillion earnings per 6 hare of $2.03 for the year ended ofoperations of the Company.
- December 31,1992 give effect to the Merger as ifit had ~ occurred
^ j January 1,1992 This pm forma information is not necessarily indicauve of the results of operations that would have occurmd 5. RATE MATTERS AND RESULATION ; had the Merger leen consummated on Jamuuy 1,1992, nor is %e Company, under rate orders from the KCC, OCC and the it necessarilyindicative of future operating results. FERC, reemers increases in fuel and natural gas costs thmugh' I
fuel adjustment dauses for wholesale and cedain retail electric ; J customers and various purdiased gas ad ustment dauses (PGA) . kLESAL PROCEEDINGS for natural gas customers. ne KCC an the OCC require the On June 1,1994, Southern Union filed an action against the annual difIerence between actual gas mst incurmi and cost Company, ne Bishop Gmup, Ltd., and other entities afilliated reemered through the application of the PGA be defermd . with he Bishop Gmup,in the Federal District Court for the . and amortized through rates in subsequent periods. 1Westem District of Missouri (the Comt)(Soesthem Union Com- ELAINA1.ON OF THE ENERGY COST ADNSTMENT
. prmy n Westem Remurws, Inc. et d, Case No. 94-509-CWW-1) CLAUSE (ECA): On March 26,1992,in connecuon with the alleging, among other things, bmach of the Missouri Pmperties Merger, the KCC approved the elimination of the ECA for most
.- _sale agreement relating to centain gas supply mntracts between Kansas retail electric customers of both the Company and KG&E .
the Company and various Bishop entities that Southem Union effective April 1,1992. %e prmisions for fuel costs included in
. assumed, and mquesting unspecified monetary damages as well base rates were established at a lewl intended by the KCC to ,
as dedaratory relief. On August 1,1994, the Company filed its equal the projected average cost of fuel thmugh August 1995, and . answer and counterdalm denying all daims asserted against it by to indude remvery of costs prmided by previously issued orders - Southem U%m and mquesting declaratoryjudgment with respect relating to coal mntract settlements. Any variance in fuel costs "
- to certain r,djustments in the purchase price for the Missouri fmm the projected average will impact the Companfs earnings.
Properties pmposed by Southem Union and disputed by the FERC PaoCEEDINGS: On August 19,1994, Williams Natural Compan On August 24,1994. Southem Union fik d dalms Gas Company (WNG) filed a revised application with the FERC against Company for alleged punhase prix adjustments to direct bill approximately $14.7 million of FERC Order No. 636 totalling $19 million. %e Company subsequently agreed that a roximately $4 million of the pumhase pnce adjustments wem (FERC 636) transition costs to the Company related to natural - , f gas sales service in Kansas and Oklahoma. nese costs are cur-su > ject to arbitration. On January 16,1995, the Comt held the renti being moovemd from the Co fs current Kansa's and - ' remaining $15 million of pmposed adjustments to the purchase
' priw were subject to arbitratkm under the sale agreement. In the Oklaboma customers.De Comp""Y f ews ""Y uture transition .
e sts ultimatelywdl be mcmered thmugh charges to its cus. opinica of the Cmnpanys management, the d sputed adjustments tomers, and any urmmered transition costs will not be material are not proper adjustments to the purchase price For additional to the Omnpanys fmancial posidon w msalts of opnades. Fw : 5 information regarding the sales of the Missouri Properties, additionalinformation with respect to FERC 636, see Manage- i dd ment) Discusrion and Analysis.
! On August 15,1994, the Bishop entities filed an answer vnd daims On Omber 5,1994, WNG liled an application with the FEliC to against Southem Union and the Company alleging, anong other dimit bill to the Company up to $30.4 million of settlement wsts '
things. breach of those certain gas suppg mntracts. %e Bishop d to Amoco Production Co y(Amoco) related tolitigation entities claimed damages up to 62m aumongr.,r,st tb u, mgany fetween WNG and Amoco ng the proper price to be paid ' and Southern Union %e Companys management klieves that. f key WNG from Amoco. ne proposed direct
. thmugh the sale agreement, Southem Union assumed allliabilities hlus rde W phndered by the Company -
- arisir; out of or related to gas supply contracts associated with the in Kansas and Oklahoma. At December 31,1994,814.2 million I Missouri Pmperties.%e Companys nuutagement also believes of these costs have been bhl to the Company %e Company
- it b not liable for any daims asserted agains, it by the Bishop I believes substantially all of these costs and any future settlement L entities and will egomusly defend such daims.
msts ultimately will he ecovered through ch es toits Kau ,
. %e Company has rewived a civil investigative demand fmm the and Oklahoma customers, and any unreeme , settlement costs 1 U.S. Department ofjustiw seeking attain information in coimeo-will not be material to the Companfs fluancial position or results .
! ' tica with the department's imestigado#to determine whether ofoperations. there is, has becu. or may be a dolation of the Sherman Act KCC PROCEEDemeS: On Dcwmber 22,1994, the Co in ; mnjunction with the Market Center, filed an application he
]
TIlla f T.4 8 a
mqw - ryem - - y , . (( , h [ ,. @ KCC to fornid natural gas market center in Kansas. The_ Marketi dn February 199L KC&E paid $8.5 million to ' settle 6 coal contract ' ECenter will pnwide natural gas transportation, storage, and - , lawsuit with AMAX Coal Company and recordecl the papnent as f ,
*i sering seniws, as well as balancing, knd title transfer capa- : a defermd charge in Deferred Charges and Othei Assets, on the c Upon appnwal fmm the KCC, the Company intends to ' - Consohdated Balanw Sheet.The KCC appnned the reemery j[y trans. certain natural gas transmission assets having a value 1 of the' settlement' plusof a return, equivalent to the carrying cost ;
Q approximately $52.1 million to the Market Center. In addition, the - 'of the asset, mer the remaining term of the terminated contract j Company intends to extend credit to the Market Center enabling '- - (thmugh 1996h
~
K the Market Center to borrow up to an aggregate primipal mnount : Fanc omtaa me. SaS: In 1990, the FERCissued Order No.
, of $25 million on a tenn basis to construct new facilities and -
a million on a revolving ensht basis for working capPal *lhe - ?.of 528 which take-or-pay authorized settlement newgasmethcds costs by natural fortheir pipehnes from the a z Market Center wdl pnnide no notice natural gas transpanation i customers. Settlements were reached between the Companfs two ' O{lheand storage seniws to the and Company under = a long-term largest gas pipelines and their customers in FERC proceedings mntract. Company will continue to operate maintain the Market related to take,or-pay issues. The settlements address the alloca-Center's assets under a separate ocmtract. : tion of take-or-pay settlement costs between the pipelines and (On January 24,1992, the KCC issued an order allowing the Com- their customers. Iknvever, the amount which one of the pipelines
- ) pany to mmtinue the deferral of sen ice line replawment pmgram will be alloed to recover is yet to be detennined. Litiption -
- costs incurred since January 1,1992, including depmciation, pmp- continues between the Company and a former upstmam pipehne c erty taxes, and canying costs for mcovery in the next general rate -
supplier to one of the Companfs pipeline suppliers cor ceming -
! case, At December-31,1994, approximately $7.2 million of these the amount of such costs which may ultimately be allocated to the L deferrals have ten included in Defern i Charges and Dther ' Companfs pipeline supplier. The Companfs share of any costs
, (Assets, Other, on the Consolidated Balance Sheet. allocated to the Companfs pipeline supplier will be chargal to
~ On December 30,1991, the KCC approved a pennanent natural the Company. Due to the uncertainty concerning the am<rmt '
gas rate bereuse.of $39 million annually and the Company discon. to be recered by the Companfs current suppliers and of the e tinued the deferral of accelerated hne s'uney costs on January 1,- outmme of the htigation between the Company and its curant - 21992. Appmximateh $3.1 million of these deferred costs remain Pi Pehne's upstmam supplier, the Company is unable to estimate ,
- in Defermd Charge's and Other Assets, Other, on the Consolb . its future liability for take-or-pay settlement costs. Ilmvever, the .
. dated Balance Sheets at Decemler 31,1994, with the balance KCC has appmved mechanisms which am designed to allow the -
being included in rates and amortized to expense during a Company to recover these take-or-pay costs imm its customers. -
; 43-month period, mmmencing January 1,1992.
TOGalf SANSS: In December 1991 'the KCC, and the OCC 'S. SHORT TERM DEST f apprmed agreements authorizing the Company to mfund t - Ne CowOon-term financing nquimments are satisfl5d. customers appnnimately $40 million of the romods of the Tight through the sale of commerdal paper, shon-term bank k>ans ,
; Sa'nds antitrust IP.igation settlement to be co ected on behalf of and borrowings under unsecured lines of credit maintained with -
- Western Resounes natural gas customers To secure the refund banks. Information mnwrning these arrangements for the } ears .
L of settlement pnxmds, the Commissions authorimd the establish- ended December 31,1994,1993, and 1992,is set fonh belown
- 3ent of an independently aduunistered trust to collect and
~ maintafn cash ^ receipts rewiwd under Tight Sands settlement w w ended Decenter.31, :1994- ,1993 1992 agreements and pnwide for the reftmds made. The tpst has 1donars m thousands) ,
' N "" "" F"#5- Unes of credtt at year end , . .. , $145,000aj $145,000 $250,000cn -
' SATE STASIL8EATION PLAN: In 1988, the KCC issued an order Shortterm detit out-requiring tlw acc:ual of phase-in revenues be discontinued by ' standing at yew end . . . . . 308.200 440.895 . ~ 222.225 Weighted average interest rate '
i KG&E effective December 31,19SS. Effective January 1,19S9,
. on debt outstanding amar KC&E legan amonizing the phase 4n revenue asset ch a straight-' 6, en ng , . 6.2 % 3h line basis over 9 I/2 } ears. At Demmber 31,1994, appmximately g ,
Cl million of deferred phase-in revenues remained on the det>t outstandng ddng Consolidated Balance Sheet the penod . 4 . , ,. ,, 4 $485,395 $443.895 $263,900 COAL CONTMACT SETTLEGRENTS: In March 1990, the KCC Monthly amage - sh rt-term dobt . . . . , . 214.180 347,278 179,577 Issued an order allowing KC&E to defer its share of a 1999 coal - a wag M g armtruct settlement with the Pittsburg and Midway Coal Mining Company amounting to $223 million. This amount was recorded (including tees) .. ..,, 4.63% - 3.44% 4.90% L y as a deferred charge and is inchided in Deferred Chaq;es and Other Assets, on the Consolidated Balance Sheet. The settlement (1) thwamt to $121 milhon ui january IW5.
- - ' mmlted in the termination of a long-term coal contract.%e KCC
@ Ih""! N> $ 55 milLCn Januaiy IW1
' ? perudtted KC&E to reemer this settlement as followsd6 perwnt . .
- of the settlement plus a mturn over the mmaining term of the ter. In mnnection with the commitments, the Company has agreed ..
Eoinated contract (through 2002) and 24 pement to be amortind to pay wrtair %es to the banks. Available lines of omdit and
' to expense with a defermd return equhalent to the carrying mst the n'nused portion of the nwohing credit facihty are utilim!
,, of the ass (t to support the Companfs outstandmg short-term debt.
TusaTV.ssysm [
q" _ , e .
?
I E7f consmstusavs Ano cowtsweancess' . sites. %e Company's obligation e the remaining Missouri site and de a site appears to be hmited based a de Companfs ? LAs put ofits ongoing operations and construction program [ tie i
' **Perience at similar sites gf en its limited exposure and settle- ' L Company has commitments under purchase orders and mntrads ment costs. In the opinion of the Companys management, the t wideh have an unexpended balance of approximately $77 miDion moluu n of daew manen wG mt haw a rnatesialimpact on .
J Dommber 31,1994. Approximatdy $32 million is attributable ' ' 1 to nxxlifications to upgrade the three turbines at Jeffrey Energy. N'* O*P""7I*""Clal osition P or results ofoperations
' Center to be completed by Decemler 31,1998. Phns for future ' CLEAN AIR ACT % Clean Air Act Amendme'nts of19901
" mnstruction of utihty plant are discussed in the Management's (the Act) require a two2phase reduction in sulfur dioxide and !
) Discussian and Analysis seedon; oxides of nitrogen (NOx) emissions efTective in 1995 and 2000 '
! in Jariuary 1994, the Company entered into 'an agreement with . ""d 8 Pmbable reduction in toxic emissions. To meet the monitor.
ing and mporting requienents under the acid rain pmgram, thef Oklahoma Mmdcipal Power Authority (OMPA). Under the ~ U agmement, the Company recelwxl a p nayment of approximately . Company installed mntinuous monitoring and mporting
. $41 milhon for which the Company will prmide capacity and - nent at a FM md f appm*natdy $m nemme Company ;
transmission services to OMPA through the year 2013. b n i e2P"d Mmd equipment to Wuw dw ernisdons - to be necessary under Phase II. Although the Company currendy. ' RBANUFACTURED SAS SITES: %e Compny was previously has no Phase I afTected units, the Company applied for an early - associated with 20 former marmfadured gas sites kicated in ' substitution permit to bring the co<mned La Cygne St&n under "
' Kansas which may contain mal tar and other potentially harmful the Phase I gui k, lines.,
. materials. %ese sites wem operated decades ago by predecessor ne NOx and air toxic limits, which were not set in tha law, wd
, companies, and wem owned by the Company for a period of time
. f afler operations luid ocaud. %e Company and the Kansas Depan , le ihd in future EPA regulations. %e EPA.s pm,wmed NOx e adons wem mkd imulid by the Court and un6 such time
' ' ment of Ilealth and Emimnment (KDIIE) conducted pmliminary "8 the EPA resubmits new pmposed mgulations,(ne Company '
+ auessments of the shes at a mst of approximately $500,000. %e ud. le unable to detennine its mmplianw options or related results of the preliminary hnestigations determined the Company * ! does not have a connedian to four of the sites, Of the remaining mmPhanw msts. ,
c 16 sites, the site investigation and risk assessment field work of OTNER ENVIRONRIENTAL ABATTERS: As part of the sale of J the highest prianty site was completed in 1991 at a total cost of the Company's Missouri Properties to Southern Union, Southern approxhnately $450.000. %e Company has not remived the final Union aissumed responsibility under an agreement for any ervi-- reprt so as to determh e the extent of contamination and the ronmental matters related to the Missoun Properties pmehas 1 amount of any possible remediation, by Southern Union pending at the date of the sale or that may - anse aner el singJw any emimnmental matters pending or dis-ne Company and KDllE entend into a amsent agreement aneed within two years of the date of the agreement, and after -
' governing all future work at these sites. %e terms of the consent ,
agreement will allow the Company to imestigate the 16 sites and punumg seal oder ptendal manvry,opdons,6e Company
- may le liable fw up to a maximum of $7.5 million under a sharing .
' set remediation priorities lawd upon the results of the investiga-arrangement with Southern Union prmided for in the agmementi tions and risk analyses. %e prioritiud siteswill be investigateil -
mer e 10 year period. %e agmement will allow the Company to SPENT NUCLEAR FUEL DISPOSAL: Under the Nuclear Waste . set mutual objecthes with the KDilE in order to expedite effeo Policy Ad of 19'i2, the U.S.. Department of Energy (DOE) is tive respase acthities and to control costs and emimnmental responsible for the ulthnate storage and disposal of spent nuclear - impact. %c Company is aware of other utilities in Region VII fuel removed from nuclear reactors. Under a contract with the of tie EPA (Kansas Missouri Nebraska, and lowa) which have DOE for disposal of spera nuclear fuel, the Company pap a
'incured remediation costs for manufadured gas sites ranging quaderly fee to DOE of one mill per kikrwatt hour on net nuclear hetween $3A000 and $10 million, dependmg on the site, and generation. %ese fees are included as part of nuclear fuel expense that the KCC has issued an maxmnting onler which will permit and amounted to $3h million for 1994, $3.5 mi!! ion for 1993, and -
. another Kansas utility to rmner its remediation costs through $1.6 millkm for 1992.
rates. To the extent that such remediatkm msts are not reemered %e Company along with the other m ownen of Wolf Cmek am
- thmugh rates, the msts could be material to the Company's fman. among 14 mmpanies that filed a lawsuit on June 20,1994, seeking cial position or results of operations degnding on the degme an interpmtation of the DOE's obligation to begin acwpting spent ofremediation uired and number at years mer which the rmelear fuel for disposal in 1998. The Federal Nuclear Waste remmliation must ne completed. Policy Act requires DOE ultimately to acwpt and dispose of SUPERFUND SITES:De Company has been identified as one nuclear utilitief spent fuel He DOE has filed a motion to have
~ofIumemus potentially msponsible parties in four hazardous this case dismissed. %e issue to le decided in this case is whether waste sites listed by the EPA as Superfund sites. One site is a DOE must begin accepting spent fuelin 199S or at a futura date.
gmundmater contamination site in Wichita, Kansas (Wrhita site). Wolf Creek contains an on site spent fuel storage facility which. two tre mil mntamination sites in Misspuri (Missouri sites), and under current regulatory guidelines, prmides space for the storage one $lte is a solid waste land-fill kicatec!in Edwardsville, Kansas of spent fuel thmugh the year 2006 while sdil maintaining full une (Edwardwille site). Settlement agmemmts rek asing the oft-kmd capability. %e Company beliems adxjuate additional Company from liability for future msponse or costs have been storage space can le obtained as necessary entend into at the Edwardnille site and one of the Missouri a tasaft.sssat ,
W ; - . , b y,' k . .
' , seeemusessesetete OnJune 9,'1994, the KCCissued an - The Owners also carry' additional insurarme with NEIL to aner >
l0 Decomtrdssioning order appnning tb demmmissioning Cost Study cost. of theduring which estimates the Company's 1993 Wolf Creek a pmlonged ~ costs outage resulting fmmof replacement accidental pmperty . pow damage at Wolf Creek. Iflosses incurmd 'at any of the nuclear ' 4[if =share "L wr.t of WolftoCre.ek method, decommissioning be approximately costs, under
$595 million primarily; plantsthe immediate insured ; policies exc?eed premiums, L under the NEIL
' during the r9:fod 2025 through 2033, or approximately $174 mile ? msenes, and other NEIL resources, the Company may be subject i lion in 19d dollars. %ese costs were calculated using an assumed ' to retrospective assessments of appmximately $13 million per year. '
[inGetion rate of 3.45% over the remaining servim hfe,in 1993, Although the Company maintains various insurance policies to %
> OI9'"'5: ,
. , punide comrage for potential losses and liabilities msulting fmm -
Decommissioning costs are being diarged to operating expenses an amident or an 'extemled outage, the Company's insurance cov-O accordance with the KCC order. Electric rates charged to cus- . - erage may not be adequate to c(wer the costs that could msult i tomers prmide for renwery of these decomndssioning costs over . from a catastrophic accident or exten&d outage at Wolf Creeka the hfe ofWolf Creek. Amounts so expensed ($3.5 milhon in 1994 Any substantial losses not covemd by insurame, to the extent not increasing annually to $5.5 million in 2024) and earnings on trust - reanerable through rates, would have a material adverse effect qfund assets are deposited in an etternal trust fund. Theassumed ~ on the Company's Anancial mndition and results ofoperations. return on trust assets is 5.9%. FEDERAL Inc01st TAXEss During 1991, the Internal Revenue k'
%e Company's. investment in the decommissioning fund, includ- Senice (4RS) completed an examination of KG&E's federal
- ing reinvestal earnings was $16.9 milhon and $13.2 million at income tax returns for the years 1984 thmugh 19SS. In April 1992,1 December 31,1994 and 1993, respectively. nese amounts are ' KG&E receimd the examination report and upon resiew fded a EL reflected in Decommissioning Trust, and the mlated liability is written pmtest in August 1992. In October 1993, KG&E received r haluded in Deferred Credits and Other Liabilities, Other, on the another examination mport for the years 1989 and 1990 am ring CConsolidated Balance Sheets, the same issues identifled in the peious examinatkm report. -
UPon review of this report, KG&E filed a written protest in ' (The Company carries $118 ndllion in premature decommissioninf insurance. %e insurance anerage has several sestrictions. One o November 1993. %e most significant proposed adjustments ' . these is that it can only be used if Wolf Creek incurs an amident reduce the depmcialde basis of certain assets and investment - exceedmg $500 milhon in expenses to safely stabilize the reactor, tax endits generated. Management beliens there are significant -
; to demntaminate the mactor and reactor station site in accordance questi ns regarding the theory, mmputations, and sampling tech l with a plan approved by the Nuclear R mlatory Commission niques used tw the IRS to arrhe at its proposed adjustments, and also believes a'ny additional tax expense incurred or loss ofinvestJ t (NRC), and to pay for on-site property nages. If the amount designated as &dommissioning insurance is needed to implement ment tax cmats wdl not be material to the Company's fmancial
- o the NRC-approved Ian for stalahzation and demntamination, p sitim and wsults ofoperations. Additionalinmme tax payments, I am expeted to be offset by investment tax cmht carryfor-L it would not be avai able for demmmissioning purposes.
'w , alternative minimum tax cmdit carryforwards, or deferred ISUCLEAR INSURAlscE %e Prke Anderson Act limits the tax provisions.
combined public liability of the owners of nudear power plants to
/ C9 billion for a single nuclearincident %e Wolf Creek ovmers FUEL constelfseENTS:To supply a portion of the fuel mjuire-(Owners) have punhased the maximum availabic private insurance ments for its generating plants, the Company has entemd into vari us commitments to obtain nudear fuel, coal, and natural
; of $200 million and the balance is pnni&d by an assessment plan mandated by the NRC. Under this plan, the Owners am jointly gas. S me of these contracts mntain prmisions for' price escalation and ndnimum purdiase commitmentsi At December 31,1994,
- and severally subject to a mtrospectiw assessment of up to
" $79.3 million ($37.3 million, Company's share)in the event there WCNOCi nuclear fuel commitments (Companys share) were is c major nuclear incident involving any of the nation's heensed -
approximately $12.6 million for uranium concentrates expidng at reactors. *llds assessinent is subject to an inflation adjustment various times through 1997, $122.9 mt!! ion for enrichment expir. based on the Consumer Price Index and applicable premium ing at various times thmugh 2014, and $50.5 million for fabrica-taxes. These is a hmitation of $10 million ($1.7 million, Company's tion thmugh 2012. At December 31,1994, the Company's coal
; share) in retmspective assessments per incident, per year, and natural gas contract commitments in 1994 &illan under tie remaining terms of the contracts were approximately $3 billion He Owners carry decontamination liability, premature &commis- and $9 million, respectively. %e largest coal mntract expires in sioning liabihty, and pmpeity danrge insuraine for Wolf Cwek 2020, with the remaining coal contracts expiring at mrious times totalhng approximately $2.8 billion ($1.3 billion, Company's sham). thmugh 2013. %e majority of natural gas contracts continue J his insurance is prmi&ad by a combination of"nudear insurance through 1995 with automatic one-year extension provisions. In
, . pools"($500 million) and Nudear Electric Insurance Limited the normal murse of business, additional commitments and spot ."t (NEIL)($2.3 billion). In the event c nmident,insuranm market pumhases will be made to obtain adequate fuel supphes. promeds snust first be used fqr mact, hilization and site decontaminatioit %e Company's shan any t remainingpmceeds ENEney AcT: As part of the 1992 Energy Policy Act, a speial
. can be used for pmperty damage up to $1.2 billion (Company's assessment is leing collected fmm utilities for a uranium enridi-sl are) and premature demmmissioning <xists up to $118 million ment, decontamination, and decommissiordng fund. ne Com-
"(Company's sham) in euess of funds peiously collected for P""Y8 lution of the assessment for Wolf Creek is appmximately
- decommissioning (as discussed under " Decommissioning"). $7 million, payable over 15 years. Management expects such msts to be recovemd thmugh the ratemaking process, n ,
TNiaTV.N8N8
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~
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NM BasPteVEE BRISEFlf PLANE] '4 , emphpes tiKG&E acquirt i Manch 31s 1992isce" Note 3).; L ArmthmW nnphen, w4th to or more yean of senke; ek eted x
, Pswesear %s Compny maintains nonmntnbbtory ddirEd ;
N P"'# # """ "" " P*E""'
;lenefit psion plans etnerir sulstantially ndi emphpes, Pension j
-um an; es of KG&E. In at dithm,68 employees receivedj ilenefits~are based rin *ars o senke and the employechx>mpen. ' ' . MngM-m Aed severame hMmGts;im3u(hn Isation ditrik the live ghest ]mid comecutive } ears out of teu s K a uana as ,han on plan pnnisims for cally
< hefore ntirement %e Company's policy is to fund pemlon.nats '
"*""'"' "" "7 #P"#"
- P*E"""" " "P" d acemed, subject to limitatkms sc4 by the Em krwe Hetimment "P " " ' " * " I"
~
#"'" b' M nmme I Security Act'of 1974 and the Intern Hewsiue Code,-
pundiase acunmting for the Merger.The actuarial ant of .:the IThe f(dlouing tables pnnide information m the annponents mer Kansas Pter aml IJght Company employees, of 'approximately"- i of pension cost,imxled status, and aduarial assumptions for : I $11 milhon, wm exymed in 1992.; L
- the Company's pemim plans:
PostestinsessNT: The Company slopted the prewnsOf .. z War ended Decemter 31. 1994' 1993- 1992 Statement of Financial Annunting Standards Nd 100 (SFAS 106); (donars in thousands) in the first quarter of 1993. This statenmnt requhes the accrual e
; Pension Cost: of postmtirement benefits other than pensions, primarily medical :
Service cost . . .. . . a . .... , $ 10.197 8 9,778 $ 9,847.. henefit crats, during the years an empkryce pim' ides senke,!
" ""
- I " " " i * # ""
fit i , ,.. .,, 29,734' ' 35,68R' . 29,457 (Gain) kes on plan assets . - . . . 7,351 ' (64,113)' (38.967) n ed mp mnr ation whk:h allows a 20-year amortization 2
's Deferred Irwestment galn (loss) . ' (38,457) 29.190 . 7,705 - of the amumulated benefit obl ation. SFAS 106 expense um Net amorttration , , , . . . 245 (669) ' (948) approximately $12A minion an $265 millkin for 1994 and 1993,'
' Net pension cost . , , ,, $ 9.070 $ 9,874 $ 7,094 "I ""E"" ** "EE"'
imately $114.6 million and $1fdi5 million at IAwmler 31,19 and 1993 nypect wly. The ralmthm in luth the 1994 obligation : December 31, 1994' 1993 1992 and expeme is primarily ilm result of the sales of the Missouri :
. tomars in tnousands) Pmperties. To mitigate the impact of SFAS 106 expenw. the '
JReconemation of Funded Status: Company has implemented programs to mduce health catti
- Actuarialpresentvakse ., costs. In addition, the Company rathed an onler imm the KCC of benefit obligations: .
permitting the initial deferral of SFAS 106 expense, To mitigate.1 Vested . . . . . . . <. . . , , $278,545 $353.023 $316,100 the impact SFAS 106 expense will have on rate increases, the ' ,
' Nurwested , a , . . . . . . . 19,132 26,983 19.331 Company wdl irrlude in the future computation of amt of wrvim L Total ,,,,. . .. . . $297.677 : $380.006 $335.431, the admd SFAS 1(Wi expense and an income stream generated 8'
from COLI, To the extent SFAS 106 expense exoceds inmine . s mm the COLI pmgran',t this exwss is being defernd On ador. and
$375,521 $490,339 $452.372 dam'e i the pnnWns of the FASB Dnerging lasues Task O fair value ..... , , . .
Projected benefit obligatron ,, . 378,146 468.996 424.232 - Force issue No. 9212) and wdl le offset by income generated ' through the deferral period by the COLI pmgram. Shmdd thej en o[rlset 7,[. ) inanne stmam generatal by the COLI pmgram not he sufficient .' Unrecogntred prior service costs . . , 47,796 64.217 55,886 m offset the deferral SFAS 106 expeme, the KCC onlet allows. 1 Urwecognized net gain . , , , . . 156,079) (108.783) (100,486) man'ery of such deficit thrnugh the ratemaking promss.)
. Accrued pensitn costs . . . , $(13.113) $(25,979) $(25.552) Prior to the adoption of SFAS 10G, the Company) policy was to; .
mognize the amt of wtirre health care and hfe insurance benefits D as expense when ehtims and pmmlums for life insurance pohcies ~ War ended December 31, 1994 1993 1992 > wempaid, The mst of prmthng health care and life insurance
- Actuartal Assumptions: henents to 2,928 retimes was $S.1 milhon in 1992. ;
- Discount rate , , . . . 8.0-8.5% 7.0-7.75% 8.08.5%
Tic folkminE it able summarizes the status of the Comp""v's Annuat malary increase rate . . . 5.0% 5.0% 6.0% > tongterm rate of retum . . . . 8.0-8.5% 8.0-8.5% 8.0.-8,5% putmtimment pl.ms for financial statement purposes and the ,
' related ammmts included in the Camsolidatal Balance Sheets:
.RiflREGIENT AND VOLUNTARY SEPARATION PLANS In December 31, 1994 1993. =
jamtary 1992, the Board tif Dimotors appimtd early retirement (dohara in thousands) ' p!s H and wluntary separatkm pmgrams. %e voluntary early g i wtirement plam were ollered to all watml participants In the W tm m M 'i Comp.myi defmed pension plan who reached the age of 53 with benefit obligatgins: 10 or axne years of servke on or lefore May 1,1992. Certain Retirees .. . ,, ..., , . $ 68.570 $111,499 - pension plan impnnetnentis we're made, incdudmg a waiwr of the Acuve ernployees fully eligible , , , . . ,
' 13,549 11.848
- aduarial rtyhttion factors for early mtimment and a cash incen-
~
Active ernployees not fully eHgible . m 32.484 43.1M
' the payable as a montIJy supplement up to 60 months or as a Unrecognized prior service cost . . 9,391 18.li4
' - lump om payment. Of the 738 employees eligible for the early unrecogntred transit 6on obingation . . . . . . (117.067) (160.731) [ retimment option,531, mpmwnting ten percent of the cumbined unrecogmeed not gain poss) , , ,. , 14.489 (7.100) - l (Compas#s wuti(twr einied to wtire on or before the May 1. Batance stwat nabmty . . . . . . . . .. , $20,516 $ 16,820 +
' i 1992, dEadhne. Sewnty one of those eletting to mtire were
-I roast
j s 1
'g; 1 4
Q .o l-' r
' ; veer ended December 31.. l 1994- '1993 Amants and capadty mpmsent delomfanys sham. %e !
Company's share of operating expenses of the plants in seni .,
' '- i as well as sudi ex[ emes for a 50 permnt undivided interest -
[ Arviusi bNrNe . 5 in .La Cype 2 (representing 335 MW capacity) sold and leased ' back to the Company in 1987, are induded in operating expenses "
- ' hpected rule of retum . . . . . . . .. u . . . - . . 8.5% i 8.5 % .
, on the Consolidated Statrinents ofInmme. %e Company's share
'For measurement purposes, an annual health care mst gmwth dother transactions associated with the plants is included in the"
' rate of 12% was assumed for 1994, decreasing 1% per par to 5% 8PPmpriate class;fication in the Company's Consolidated Financial '
in 2001 and thereafter. %e health care cost trend rate has a signif. - Statements. .
? icant effect on the pmjected benefit obligation. Increasing the .
itrend rate 1% each year would incmase the present value of 10. LEASES
! the amum ed projected benefit obligation by $4.7 million At December 31,1994, the Compamy had leases emering various )
} and the aggregate on the servim and interest cost components pmperty and equipment. Certain lease agreements meet the crite- ,
7by $43 milha. ria, as set forth in Statement of Financial Acmunting Standards l POSTRISPLOYRIENT:The Company adopted Statement of No.13, for classification as capitalleases. Financial Accounting Standards No.112 (SFAS 112)in the first . Rental payments for capital and operating leases and estimaied . l uarter of1994, which estabhshed accounting and reporting stan- rental mmmitments are as folkws:
,: for postemployment benefits. The statement requires the Company to moognize the liability to prwide postemployment capitat : operaung .
war ended December 31. Leews Leases benefits when the liabihty has been incurred. ne Company
' receiwd an order fmm the KCC permitting the initial deferral .
- tooners in thousands)
' oiSFAS 112 expense. To mitigate the impact SFAS 112 expense 1992 .,,. . . , . . . . - $ 2.426 8 52.701 '
- will have on rate increases, the Company will include in the future 1993 . .. ... ... . .. .. .. 3.272 ~ 55.011 computation of mst of senice the actual SFAS 112 transition 1994 . . .. .~. .. ,4.. . 2.987 55.076 msts and expenses and an income stream generated from COLI. , Future commitments: ,
%e 1994 expense under SFAS 112 was appmximately $2.7 1995 .... .. ., .,, .. .... .. 3,783 . 48.524 million. At Dwember 31.1994, the Companfs SFAS 112 liability 1996 . .... ~.... .. ... . ... 3.627 . l 46.211 :
recorded on the Consolidated Balance Sheet was approximately 1997 . .. . . . ,.,,,.. 1,511 ' 42,851 -
. C.4 million. 1998 ... . . ,o.... . ......... - 41.464 1999 ... ... . . . . .o.. . 39.955 SAVIIIGS: %e Company maintains savings plans in which Thmafter . . , . ... ,........ , -- 753.062 ~
substantially all employees participate. The Company matches
" " " " $ 8K 19 4 087 employees' mntributions up to specified maximum limits. %e as intest . . . . - . . ....... ..., 784 funds of the plans are deposited with a trustee and invested at each employeek option in one or more investment funds, includ. Net obugation . . .. .. ... ,, . . $ 8.137
' ing Q Company stock fund. %e Company) contributions were Cl milhon, $5.8 milhon, and 65.4 million for 1994,1993, and In 19S7, KC&E sold and leased back I'ts 50 percent undivided 1992, respectively. interest in the la Cygne 2 generating unit. %e la Cype 2 leaw -
1848899R8 PROPERTY SALE: Effecthe January 31,1994, the . has an inidal term d 29 years, widi mious dons to mnew dig ' lease w mpunimse the 50 percent undivi& interest. KC&E Company transfened a portion of the assets and liabilities of the remains re Company's pension plan to a pension plan established by Southern o sts and[ier relatednsible for its share of operation a rating costs of La Cygne 2.%elease , LUnion. ne amount of assets transferred equal the rojected ben-is an OPerad825 l ease fw ancial mporungpurposes. eilt obligation for employees and retines associate with Southern Union's portion of the Missouri Pmperties plus an a&btional As pennitted under the la Cype 2 lease agreement, the Comymy . O milhon. in 1992 requested the Trustee Lessor to mfmance $341.1 mulion - of secured facility bonds of the Tmstee and owner ofla Cygne 2. >
. 9, JolNT OWNERSHIP OF UTILITigg he transaction was mquested to redum recurring future net lease expense. In connection with the refinancing on September ~;
Company's Ownership at December 31,1994 , 29,1992, a one-time payment of appmxituately $27 m@on was > made by the Company wldch has been deferred and is Iring WService invest. Accumulated Net Per. amortized mer the remaining life of the lease and included in. - ostes ment Depreciauon om cent ' operating expense as part of the future lease expense. At Decem.'
? "" '" * "'*"d") ber 31,1994, appmximately $24.8 million of this deferral remained)
La Cgne 1 (a) . . June 1973 $ 152.816 8 98.124 343 50 on the Consolidated Balance Sheet EJeffrey 1 C) . . . . July 1978 276,689 122.721 587 84 ,
- Jeffrey 2 C) .. . . May 1980 285.579 109.743 600 84 Future minimum annual lease papnents, included in the table
' Jeffrey 3 C) . . . . May 1983 397,646 134.199 588 64 ahme, required under the La Cype 2 lease agreement are '
Wolf Creek (c) . Sep 1985 1.376.335 317.311 545 47 appmximately $34.6 million for ekh year through 1999 and
$ an m mer he mmainder of the lease.
. UNntly owned with Kamas cuy Power & taghi canguny ECPL) r
' 09 Matly owned =tth Utilicorp Una*llac ne gain o appmximately $322 million renhzed at the date of t) pnely owned wah KcrL amt Kamai meric Pn.cr capratw, Inc. the sale lof La Cygne 2 has leen deferred for financial reporting .
r e a v v.e a s ,
- k. r s c s h
a
- w 3 A n.
pwposes?s , ,"amortized and D being C.6 milhon per par) mer 4 1 kng-term debt tatstanding at December 31,1,994 and 1993,Lwas( ,
'~ yl hh tlw initial lease tenn in pmporthm to tle related lease experde. !-as follows:
c KC4 E's lease expeme, net of amortizatkm of the deferred gain ( -
' R and C one-time payment,was approximately $22.5 udllion for:
1894 ' 1883 ' i1994 and 1993, al J $20.6 million for the nine months ended , -
, , ' (doners in thousane) o ;
E Dowmler 31,1992 , -
. tensessa messasses
- :V nrst mortgage tiond ser6es:"
Pem 71/s% dus 1999 ; % . . . . , e . m m . . . $ [125,'000 Il 125.0000 4115LSIGS.YERMDEST! 7 54% due 1999 6. . o . . . . .. ~u . -1 3 19,000 ' [The amowd of first mortgage bobds authorized by the Weziern L 87 W w2n Lm~-m.on.m 175.WO ( ~ 75.R
.} mI h Resounes Mortgage and Deed of Trust, dated July 1,1939,'as ?
- supplemented,is unlimited. 'lle amotmt of fint mortgage bonds .
2007 '""l"~"" .
'. 8 5/8% due 2017 . . M . . . . . . . . , . L , J L- 1
. I 50.000 J miitteorized by the KG&E Mortgage and Deed of Thist, dated 7 . s 1/2% de 2022 a 4. . . - . . . . . . . . .
- 125,000 p 125.000 ;
M Aprti ),1940, as supplemented. As limited to a maximum of - - 7,65% due 2023 . . m . . o . . . . ~ . . ; . 200,000 : 100.000 f , 1 $2 billion.-Annnmts of additional bonds wideh may be issued are t 525.000 : ! 624,000 ' u to property, earnings, and onstain restrictive pnniskms of Mortgage ' - Pollution control bond series: , r 5.90% due 2007 4 ........mo .... :31.000 '
? On January 20,1994. KG&E lasued $100 million of First . 6 3,Al% due 2009 . . o o . u . . . . . . . . . .-i .-45,000 -
- Mortgage Bonds. 6.20% Series due January 15,2006. : vamble due 2032 ii) . . . . o . . . . . . o 45,000 , - . .
; On January 31.1994.'the Com ' y micemed the remaining V table de 2032 (2) m . o . -.m- 30,n L '4
' $2,466,000 principal amount as Senice Company (GSC) 6% de 2033 . . m . o m mo.. . '58.m ; 58,n --
i 81/23 Series First Mortgage Bonds due 1997, in additkm. the .
= 134.000 ' 134,500 9
( Company had the GSC Mortgage and Deed of Tmst discharged. ,,,, , 2 Debt discount and expenses are lming amortimd mer the remain. Rrst mortgage bond aertes:
. . Ing thts of each issue. The Western Resoumes and KG&E 5 5/8% due 1996 . . . . . . . . . . . . .,f 16.000 1 " 16.000s
? Imprmement and maintename fund requirements for witain lint m%on2ws omm mom. 135.000: 135,000 61/2% due 2005, i , , . . . . n .i , . . . . . 65,000 - 1 65.000 1 i mortgago Imd neries can le met by bonding additional pmpetty. . 6.20% due 2006 . . .. . . . . m . , , m . . 100.000.- -
t.With the retirement of certain Western Resourws aml EG&E
< }xillution control series imds, them are no kinger any bond sink. 316,000 216,000' N ing fund requirements. During 1995. 480 thousand of bonds will Ponuuan control tiord sees-
. be redeemed. During 1996. $16 million of bonds will mature and : 6.80% due 2004 1. . . . . . . m .;..... - 14,500 -
$ 125 million of bonds will mature in 1999- 5 T/B% due 2007 . . . . u . . m . . . . . . . . W 21.940 "
~ ~ On Nmember 1.1994, the Company terminated a long-tenn 6% due 2@7 . o o m m,- m . o m m y :io,e j q agmement width contained pnnisions for the sale of acunmts fg 7 { "]']l} ', 1 ; ,,,,,, j
( moeivable and unbilled rtwenues (nwhables) and phase-in 7.0% due 2031 . m . . . . . . . . . . o . . , . 327,500- 327.500;
, i nnenues up to a total of $180 million. Amounts related to receiv- vertable due 2032 (4) . . . . . . . . u , . . . . :14.500- 1-ables wem memunted for as sales w8 dle those mlated to phano-in Verlable due 2032 (5) . . . . . . . . . . . . . . 10,000' -
wvenues were accounted for as collateralimd bornmings. At 387.922 - 373.940 :
' December 31,1993, outstanding rtwivables amounting to $56.S
~
' 3
- ndllion were tensidend sold under the agreement. *lhe weighted 800 M awrage interest rate. including fees, on this agreement was 4.6% . Mrst mortgage tiond sehs: .
r
. for 1994. 33% for 1993, and 6.6% for the nine months emled 81/2% due 1997 . . . .. . . . . m . ..o. - - 2.466 '
December 31,1992. - *
.- 2,406 : *
- In January 1993, the Company renegotiated its 6600 milhon bank other ponuuan control bbugauons . . o , ,. - 13,980
; tenn loan and temlving omdit facility used to fmance the Merger RevoMng credit agreement . . . . . , m . . -~ 115.000 l into a $350 million revolving cmht facility, secured by KG&E other song-term agnement . ..... .... - 53,913 common stod On Octoler 5.1994, the Company extended the .
Lew , ,
'unamortired debt discount . ....oo 5.814 6.607. < [ term of this fadlity to expre on October 5.1999.T ' he unumi por. ,
Long4enn debt de within one par . . 80 3.204 l tion of the revolving cmait facility may le used to punide support L for outstanding short-term debt. At December 31.1994, there was $1,357,028 ~ $1,523,988, ,
' no outstarKling balance under the fadhty.. Rates at Dmomfer 31,1994. (1) 3.04% (2) 4 05%,(3) 4.10%,(4) 4.10%
and (5) 410% >) a
~
i b e , reef t two r
e
# 4 h1 9pf . s ,
p < d2iCoaIMON STOCK AND CURIULAftVE-' . the Company's net deferred incxnne tax liabihty and mrresponding J i PREFERRED AND PREFERENCE STOCK - : deferred futum inwme taxes at Dewmber 31,1994.1 ~ ~ ' T%N Company's Restated Articles ofincorporation, as amended, . Defernd income taxes result from temporary differences between J f prwides for 85,000.000 authorized shares of common stock. At the Anancial statement and tax basis of the Com,nany's assets and J t December 31,1994. 61,617,873 shares were outstanding. liabilities. The sounes of these differences and their cumulathe? 1%e Company has a Customer Stock Purchase Plan (CSPP) and a L tareffces are as foUmn
' DMdend Heinvestment and Stock Purchase Plan (DRIP). Shares De ember 31, 1994.
i issued under the CSPP and DRIP may be either origirial issue . shares or shares pudased on the open market. At Dewmber 31,' ' Debts' crwns 1 Total.
; E1994,2,031,794 shares were available under the CSPP registration ~ '
. (doHers in thousands) .
& statement and 1,183,323 shares were available under the DRIP sources d Deterred income Taxes:
; registration statement. Accelerated depreciatkin and -
2 NOT SUBJECT TO MANDATORY REDEMPfl0N:The cumula.
'h*' P*P'"# ""' " ~ 8 '#33I '#33I tive preferred stock is redeemable in whole or in part on 30 to 60 **" 8** { _ gg,4413 ,gg,443)
; , . days notice at the option of the Company. Phasein revenues . . . . ', ,; - (27,677) .(27,677)1 l SUBJECT TO MANDATORY REDEMPTION: %e mandatory Natural gas une N : sinking fund provisions of the 8.50% Series preference stock say and mplacmenf .,
- M.m) . - (4.083 ) : s y**.
' require the Company to redeem 50,000 shares annually beginning , ( on July 1,1997, at $100 per share. The Company may, at its option, we4easeback . . . . . . .. 110,556 - 1 110.556 '
redeem up to an additional 50,000 shares on each July 1, at $100 Anemeuve minimum ' per share. The 8.50% Series also is redeemable in whole or in put, . tax credrts - ... ..... . 41,163 - 41,163: 0 the option of the Company, subject to certain restrictions on Detene cosi conact
- refunding, at a ndemption p ice of $106.80, $106.23 and $105.67 setuements . .... ..
, .(12,966) . (12.966) -
per share beginning July 1,1994,1995 and 1996, respectively. Defened compensauon/ . .. D 12,284 , - The mandatory sinking fund pmvisions of the 755% Series , P'" ,', 1,j _ ;(3iB,i } (3 ) preferenw stock require the Company to redeem 25,000 shares ogorre futise income annually beginning on April 1,2002, and each April I through taxes , .............. -
.(101.886) (101.886)
; 2006 and the remaining allares on April 1,2007, all at $100 per Loss on reacquisakin , .
4 share. The Company may, at its option, redeem up to an addil ' of debt . . . . . . . . . .. - ' ;(10,792) (10,792)' tional 25,000 shares on each April l at $100 per share. De 75S% Prepaid power sale . . ... 16,878 ' wL , 16,878 Series also is redeemable in whole or in part, at the option of the Other , . . .. ..... .. .- (13,427) (13.427); , i Company, subject to wrtain restrictions on refunding, at a redemp- ' ' Total Deferred income Taxes ., . $180.881 ${1.151.895) $(971,014)- tionprice of $106.06, $105.31, and $104.55 per share beginning i Apru 1,1994,1995, and 1996, respectively. 3g, g: 13, mconsE TAXES Debns Crens - Mal
' - (dollars in thousands) '
. %e Company adopted the provisions of SFAS 109 in the Arst Sources W DderrM Inzmdm quarter of 1992. EG&E adopted the pmvisions of SFAS 96 in mate depmm and J 1987 and SFAS 109 in 1992. %ese statements require the Com- . Other property noms ,,, . , $ . $ '(653.592) $(653.592)
. pany to establish deferred tax assets and liabilities, as appmpriate, Energy and purchased gas -
for all temporary differences, and to adjust defermd tax tialances ac$ustment clauses . . . . 2.452 ' - 2,452 . to reflect changes in tax rates expeded to be in eficet during the Phase 4n revenues . . . , . . . - (35,573) ' L(35,573) ; ' d periods the temporary diffemnces reverse. Natural gas line survey and '
' In amordance with various rate orders received fmm the ECC DM red on and the OCC, the Company has not pt collected thmugh rates salMesseback . . . .. 116,186 -- 116,186 the amounts necessary to pay a significant portion of the net Altemauve minimum
' deferred irnome tax liabilities. As management beliews it is pmb- tax credits . . . ...
- 39,882 - ' 39,882 4 i ble u that the net future increases in income taxes payable will be Deferred coal contract retxnemd from customers through futute rates, it has recorded a setuements . . . . , .., -
(14.980) - (14.980) - Ddened compensanon/
' deferred asset for these amounts. %ese assets are also a tenp-pension HabHNy . . . ~ 11,301 11.301 rury difference for which deferred income tax liabilities have been ,
A quisnion premium . . . , - (301.394) (301,394)-
' Ermided, Accorthngly, the adt5stion of SFAS 10P 'id not have a Deferred future income
; matedalimpact on the Companyh results of operations' taxes . .... .... .. - (111,159) (111,159).
- At Demmber 31,1994, the Company has alternathe minimum Loss on reacquisnion *
; tax cralits generated prior to April 1.1992, which forward of debt . . . .. . - (9,298) (9.298) .
Dther , , ... - (4,741) (4,741) !
; without expiration, of $41.2 millkm which may be uc to offset . .,,.,
future egular tax to the extent the mgular tax exceeds the alterna. Total Deferred income Taxes $169,821 $(1.138,458) $ (968,637.) .
, tive minimum tax.%ese credits have been applied in determining FeaTV.TNatt
w - A r 54. SESMENTS OF BU$lNEssi The portion of the table above related to the Missouri Properticsl 3 VThe Companyis e public utility engaged in the generation, ; bas follut , 6 ' transmission. distribution, and sale of electricity in Kansas and . 1994 1993 1992-E the transpo tation distribution, and sale of natural gas lu Kansas - E and Oklahomag (dears m mousands, unaused) 5+ Natural gas revenues . . . . . 6 L $ 77,008 . $ 349,749 : $ 299,202 ' h [ War ended December 31, 11994m 1993 1992m - 'Operatirt expenses excluding , , income taxes . . . , , . . . . . . , . . 69.114 326,329 ' ' 288.558-L toouars in thousanos) 2,897: 2,672 - ! : Operatang revenuesj . Income taxes . . . . . . . . . . . m . . (533) . - Operating meome m . . . . . . . . . . 4.997 ' '20.748- 11,177 Doctrie . . . . . . . . _. y . . ' 51,121,781 $1,104.537 $ 882,885 P
. Natural gas :, . . . . . . . . . 496.162 804.822 673.363 mntmaW assets . o . . . .... .- 398.464 361.612 ' <
Depreciation and amortization . . . - 1,274 - ~ ~ 12,668 13.172' 1.617,943 1,909,359 1.556.248 Maintenance . . . . . . . . . . .. . . . 1,099 . ~ 10.504 9.640 Capital apes . . . . . . . . 1 3.682 38,821- 36,669 , Operstng espenses excludmg
. Income taxes:
' Dectric . . . , . . . . . . . . . . 768.317 .701.563 - 632,109
- Natural gas . . . . . . . . . . 484.458 ' 747.755 - 642.910 15. FAIN VALUE OF FINANCIAL INSTNUMENTS --
1.252.775 1.539.318 1,275,079 The following methods and assumptions were used to estimate the g fair value of each class of financialinstnunents for which it is prac . le tric . .... .... 100,078 73,425 41,184 k to esurnate that due as sd fo&n Matement @nad Natural gas . . . . . . .. (4.456) ' 4.553 816 Accounting Standank No.107: 95,622 77,978 42,000 CAmet Asse CAese Reunntawes - . g g . The cartying amount approximates the fair value because of the - Doctric . . . . . ,... 253,386 239,549 209,532 - short-term maturity of these investments. Natural gas . . . . . . . . . . , . 16.100 52.514 29.637 ER.ma a===== Taust -
$ 269,546 8 292,063 $ 239,169 % fair value of the decommissioning trust is based on quoted market prims at December 31.1994 and 1993, identifiable assets at December 31: .
VAntesta Raft Dest ==- Doctric . . . . . . . . . . . $4,346,312 $4,231.277 $4390.117 The carrying amount approximates the fair value because of the .
- Natural gas . . . , . 654,483 1.040,513 918,729 shori-term variable rates of these debt instruments.
Other corporate assets (3) . 188.823 140.258 130.060
$5,189,618 $5,412.048 $5438,906 Fsuseemes Def -
The fair value of the fixed-rate debt is based on the sum of the estimated value of each issue taking into consideration the Interest a
, rate. maturity, and redemption praisims of each issue.
Doctric . . . . . . . . . . . . . $ 123.696 $ 126.034 $ 105.842 Repasanasta Paarguesset Steest - Natural gas .. . ,, . . . ... 27,934 38.330 38.17_1 % fair ulue of the redeemable prefererice stock is based on the
> $ 151,630 $ 164.364 5 144,013 sum of the estimated value of eacn issue taking into consideration the dMdend rate, maturity. and mdemption patwislans of each issue.
' Mantenance: lhe estimated fair values of the Company's fmancial instruments Doctric . . 4 . .... . . $ 88,162 $ 87,696 & 73,104 am as folles-Natural gas . . , , ,. 25.024 30.147 28.507 - _ .
$ 113,186 $ 117,843 $ 101.611 December 31. 1994 1993 1994 1993 Capital expenditures: (doners in thousands)
Doctric . . . . . . .. $ 152,384 $ 137,874 $ 95.465 Cash and cash Nucleer fuel . .. 20.590 5,702 15,839 equivalents . . . . . . . $ 2.715 8 1.217 $ 2.715 $ 1,217-Natural gas , , . 64.722 94.055 91.189 DecommbsW
$ 237,696 5 237,631 5 202,493 trust . ' . ... 16,944 13.204 16.633 13,929 Vadatne< eta dett . . . . . 822,045 931,3M - 822.045 931,352 ~
Flued <ste deto . . . . 1,240.982 1,364,804 1.171,866 1,473,569
' (1)lufunnathm evflects tle sales of tim Miswert Pngerties (Note 2).
(2) Infbrumtion reflects tie suerger with KC&E on March 31. lW2 (Note 3L * * * * " " . stock . ... .. 150.000 150,000 155.375 160,780 - (3) FHuciplh omh. temporary cah knestm nts, non-uut.ty onets aml .
. defenntdungest The fair value estimates presented herein are bawd on infornw tion available as of Demmber 31,1994 and 1993. hse fair value estiinates have not beervompmhensively revalued for the pur.
pe of these financial statements since that date, and current n utes of fair value may differ significantly from the amounts ' muted herein. remtv.rese
116i eUARTERLY RESULYS (UNAUDITED) ' .
' The amcrunts in tlie table are imaudited but,in the opinion of numagement, mutain all adjustments (mnsisting only of normal recurring adjustments) nemssary im a fair preamtation of the results of such periods. The business of the Company is seasonal in natme and, in the opinion of management, unupons hetMen the quarten of ayear do not giw a true indication of overall twnds and changes in operations.
Rrst Second Third - Fourth . (dollars in thousands, except per share amounts)
- 1994ki) .
Operating revenues . . . . . . . . . . . . . . . .... .. ,,. , . . . $538,372 $341.132 $379,213 ~ $359,226 Oper3ng income . . . . . . . , , , , ,... . . . . ,, . 7 3,7812 53.899 - 83,884 57,981 Net ucome . . , , , , . 4 ., , ,, 66.133 30.247-
- 57,679 - 33,388
- Camings applicatale to common stock . . ...... .. ... . , 62,779 26.892 54,324 30.034 Eamings por share . . . .. ,... . . . . $ 1.02 5
- 0.44 $' O.88 $ 0.48 .
DMdends per share .. . . . ., ,,. . . .. ...... $ 0.495 $ 0.495 $ 0.495 $ 0.495
' Average common shares outstanding , , , , . ,g, , .. 61,618 61,618 61,618 61.618 - Cominon stock price:
Hig't . . o , , ., , ,. ,
$ 34 7/8 $ 29 3/4 $ 29 5/8 $ 291/4 tow ' . . . . . . , , .. ,, .. . , , - . . . $ 281/4 $ 261/8 $ 26 3/4 $ '271/6 1903 ,
- Operang revenues .
, , , $579.581 -$400.411 $419.018 $510,349 Operning income . . . . .. . .. 85,950 60,282 81.225- 64,E06 Net income , , .,,. , , . ... ,, 54,814 .30,723 56,807 35.026 D;nings applicatile to common stock . . .. 51.468 27,320 53,405 31,671 Eamings per share . . . . , , $ 0.89 $ 0.47 $. 0.90 $ 0.51 DMdends per share . . . . .. . . . ., $ 0.485 $ 0.485 $ 0.485 $ 0.483 #
Average commun shares octstanding . . ., ,. 58,046 58,046' 59.441 ' 61.603 Common stock pnce: - High . . ... . .. . .. .., , , , , L 35 3/4 $ 361/8 $ 371/4 - . $ 37 Low .. . . .. . ,, . . , , S 30 3/8 $ 32 3/4 $' 35 $ 32 3/4 (1)Information reflects the sales of the Missourt ProperUes (Note 2).- EPORT OF INDEPENDENT PUBLtc ACC OUN T AN T S ' - TO THE SHAREHOLDERS AND BOARD OF ments. An audit also includes assessing the acmunting pdnci- ~ DIRECTORS OF WESTERN RESOURCES, INC.: ' ples used and significant estimates made by management, as u We have audited the amompanying consolidated balanm wrl! as evaluating the overall financial statement presentatim,
' sheets cnd statements of capitalization of Western Resources, We beliew that our audits and the mport of other auditors Inc., and subsidiaries as of December 31.1994 and 1993, and pnnide a reasonable basis for our opinion.
the related consolidated statements ofincome, cash flows, ]n our opinion, based on our audits and the mport of other taxes rmd common stock equity for each of the three years in auditors, the financial statements referm! to alxwe pnSent - the period ended December 31,1994. These financial state- fairly, in all material respects, the financial position of Western - ments are the msponsibility of the Company's management. Resourms. Inc., and subsidiaries as of December 31,1994 and Our mspansibility is to expmss an opinion on these financial 1993, and the results of their operations and their cash flows for
- statements based on our audits. We did not audit the financial each of the three wan in the period ended December 31,1994:
sttements of Kansas Gas and Ekactric Company, a wholly- in conformity with generally acmpted acmunting principles. owned subsidiary of Western Resoumes, Inc., as of and for the year endal Decendier 31,1992, which statements mileet AQld k Note 13'to the consolidated financial state - ments, effective January 1,1992, the Company chan fed its assets cnd remnues of 61 reent and 2, pemnt, respectimly, method of accounting for income taxes. As e 'ne in Note of the consolidatal totals or 1992. Ese statements were hudited by other auditors whose wport luu been furnished 81993, '" '1'" ""*"IIda'e**"dal
**"*""I5'f
- I"""*'Y I fol accounting the Company changed its method o -
' to us and our opinion, insofar as it mlates to the amounts Postretimment benefits, As explamed in Note 8 to the con-included for that entity, is based sol9mn the rep' art of tjict cuditors.
solidated financial statements, effective January 1,1994, the Company changed its method of accounting for postemploy- s enerally acmpted ment benefits. We cuditing mn' ducted standards. Wse our standanls audits rnjuirein t acconlance with g' hat we plan and pdorm the audits to obtain reasonable assurance about whether the financial statements are fme of material misstate- ARTilDR ANDERSEN LLP ment. An audit includes examining, on a test basis, evidenm Kansas City, Missouri, supporting the amounts and disclosures in the financial stato. January 25,1995 . l
, e .n.m . :
w .- , I ~' e . . . . . , i Isecoms.CTAf tessesT CT3 (81,000:H , 'i
. Orrm4 TING ExrENsEs
[ !? Total . Fuel- Power Natural ' *
, Operating ' ' Used for : . Purchased Gas' -- Other ' f Mair> - I Deprar . Operating .
p; ; Wars - Revenues ' Gerieration ! - (Net) Purchases ' Operations ' tenance cistion - Tames -. - Income -
- ; } 1994A , $1',417,MS ? $3M,338 ; $15,438 - .$313,576 $303,301- atagias , $133,174 , _ $300,304 $308,548 11,909,359 250,328; 16,396
- 500,189 349,160f 117,843 181,909 . 201,471 . 292,063 L 1993 L;-1992m 1,556,24S - 200,779 14,S19 403,326 296,642 ' 101,611 157,171' 142,731 239,169 1991- 1,162,178 ' -146,256 - 5,335 439,323 '193,319 60,515 - 85,735- 102,074- ;129,621
'1990 1,149,755 148,681 2.65B 456,868 178,448 . 57,817' 76,815 96,478 c '131,990
- 1989 . . 1,127,623 149,796 148 451,896 171,094 58,442 . 73,305 I97506. 1125,536
.1988 1,100,114 14S,787 (2,356) 456,347 165,234 : 55.128 70,406 112,146-- 130,422 1987- :1,166,458 - 144,495 .2,328 4S5,995 153,789 - 49,598: 67,804 , .124,115 138,334-
- . 1986 .1,19S,884 144,693
- - 2,065 511,3441 151,676 45,642 -- 65,20S , 135,417 : 142,639;
' '1985 1,354,128 150,679 2,279 655,429 - 150,295 45,962 60,794. 142,6S0' . 146,010-
~ ELEITZlC STATISTICS: ,
' Cm,trANr SYSTEM Serrty MWII SALES (1,000s) AT PEAK Horn (NET MW)-
System System Peak Accredited
. Not Responsi- G%eratirg System Wars ' Residential - Commert.lal industrial ' Other Total < . Load bility (3) Capacity . ' Capacity (3) 1994- ' 5,003 5,30s 5,410 4,005 19,7es . ^ 3,730 3,730 i . 5,3301 4,800
.1993 4.960 5,100 5,301 4,628 19,989 3,821 3,827 5,184' 4,985
.19923)' 3,842 4,473 4,419 3,119 15,853 3,583 3,590 . 5,139 - 4,807:
19911 2,556. 3,051 1,047 - 1,9S4 m 9,538m 1,973 1,959- 2,622 2,367 1990-. ; 2,403 ' 2,952 ~ 1,954 . 1,820 ' 9,129 . 1,957 1,948 ; 2,5S9 2,344 1939 - 2,248 2,814 1,925 2,077 9,064 1,838 l 1,623 - 2,589 ^ 2,345 19SS 2,296- 2,762 1,S77 2.174 9,129 1,026 1,919 , 2fi26 - 2,287 1987 2,153 2,633 1,816 + 2,001 8,603: 1,818 1,821- 2,505 2,241 1
~ 19% ' 2,075 2,521 1,821 2,125 8,542 1,737 1,740 2,531- . ' 2,262 19S5- 1,9S9 2,405 1,852 2,296 8,542 - 1,637 ,1,615; 2,672- ,! 2,435 1AT CAL SAS STATISTICS:
MCF SAtzs (1,000s) Average Cost of L
' Gas Purchased '.
Years Res6dential Commercial Industrial Other Transportation Total Per MCF i 1994 o - 64,804, , as,536. tes 43 51,000 :143,837 $3.06 : 1993 110,045 47,536 1,490 41 73,574 232,686 3.05 ' 1992 93,779 40,556 2,214 94 68,425 205.068 2.74 .
- 1991 97,297 47,075 2,655 14,960m. 78,055 240,042m ' 2.87 f 1990. 95,247 43,973 3.207 1,361 72,623 216All' 2.90-1989- 104,057 47,339 5,637 1,403 58,025 216,461 2.75-198S 104A71 52,567 19,929 2,455 37,424 216,846 . 2.57 1987- 94,842 50,946 29,917 2,101 24,5S4 = 202,390 2.67 '
'19S6
~ 97,368 54,132 4S,181 2,523 5,752 207,956 2.50 19S5 106,315 59,947 53,170 7,540 9,664 236,636 '2'79 (1)Information reflects the sales of the Missouri Properties (Note 2).
(2) Information reflects the merger with KG8 E on March 31,1992 (NotAr 3).
; (3) Net of off eystem sales arid purchases.
(!) Restated to ,eflect two.for-one stock tulit on May 5.1967 FORTV.SIM
pg, u J,
' ' ~
y 3 J6 "I h Orusa INooue l . I > N ANO DrovcnoNs :- : INTEREST CHARCES - U INOOME, EARNINCE, AND. DIVIDENDS < U N t
! Other -
,. ; income & ~
r , . . . . . ', Preferred
. . ., . '&Applicable Earnings Eamings . Dividends i
~ per " Declared per l'
- APUDC/ l Deductions ~ 1.ongTerm 1 . , AFUDC . ' Not-. L Preference ' ' to Common - ' Common : Comrron :-
1 Eaulty - ' (Net) ' Debt other . Debt ' Income ' Dividends Stocit - Share (4) ' Share (4) t p M.,4 M *-$33,388, ~ $ 98,483 '. $38,130 ~ - $(3,487) $187,447 $13,418 ; $174,339 , - $3,83.. $L98 i p% ; 25,482 ' 2123,551' - 19,255 , - (2,631) . 177,370- :13,506 .163,864' '
~ 2.76 > c 1,94 Ej < H - . > 24,186 - '
117,464 ~ 20,009 ' "(2,002) 127,SS4 12,751 .I15,133 . ' 2.20 . 1.90; M @4 ~ 3,351 -51,267- 10,490 (1,070) 89,645m , 6,377, 83,26Sm 2.41in ! J 2.M m ' b ;E-- ; 9,012 - 51,542 . I1,022 . (1,181) 79,619. 1,744, 77,875 2.25- 1.80 ' V .
~
?.W . ..859 :46,378 : 8,742 : (1,503) 72,778 1,S57 !70,921f 2.05 1,76 L 44,362 . 7,135 (1,327) 79,791 1,970.. :77,821- ' 2.25 1.72
^
(461) c375 1,188 48,185 - 3,517- (496) '8S,691- 3,700 , 84,991 2.46 1.65 q
'366 % 750., 50,213 2,902 .(742) 91,382 ' 7/>33 '83,749 2.42' ' 1.58 L h l406: ; . 41 48,423 . 5,026 -(760) 87,975 m :8,973 , ' 79,002rs) 2.30m 1,48 . t!
Unu1T PMNT -
. Eircraic RnmTs ($1,000s) . CustouEns - ($1,000s)
Average - Gross ,
*. Residentiat - Commercial industrial Other Total total Additions ' Total :
$30s,371n $334,000 $30s,83s as se,ae n $1,131,781 ges,see $164,3es' es,see,ans
' 384,618- 319,686. ' 261,898 138,335 -1,104,537 585,042 147,5561 , '5,169,915 i L 296,917 271,303 211,593 103,072 8S2,8S5 - 577,918 93,340 ' , 5,04S,9034 160,831 149,1521 78,138 ' 83,718 471,839 306,203 42,3S7 ;1,684,147 ? . e 152,509- 146,001 79,225 65,972 463,707 ~ E03,535 J 46,697' 1,649,367
-142,308' ' 139,567 78,267 92,201- 452,343 300,028 54,207f 1,613,095 = : 6 149,155 138,318 77,201 D6,4SS 461,160 ' 295,072 62,010 ' 1,563,444 149,914: 143,084- 82,972 93,755 469,725 295,371 = 52,792 ; '1,510,067 l150,950 ; 145,166 89,084 97,674 4S2,874 291,967 : 47,526 ; ' 1,466,334-45,712 _ 140,764 91,747 - 101,951 480,174 .2S8,674 : 48,109' 1,428,383 :
' UTIIIIT PLANT NAtt.' MAL CAs EntNCEs ($1,000s)~ CUSTOMERS ' ($1,000s) '
- Average ~ J Gross '
. Residentist Commercial industrial Other - Totai ~ Total Additions ' total -
$333,348 $135,570 $3,473 $34,773 $496,143 064,809 . ' $ 44,135 5.780,408
' 529,260 - 209,344 7,294 '58,924 804,822 1,092,713 '100,324- :1,129,792 e
- 440,239- 7169,470 7,8M 55,850 673,363 1,083,467 89,520 '1,040,373 o( ?433,871 . 182,456 10,546 63,436 690,339' 1,067,840' 80,630 , 865,448-E 439,956 , 176,279 - 12,994 56,819 6S6,044 ' 1,059,140 84,553 '789,428
- 430,250 ~ '172,62S 18,021 54,381 675,280 . 1,053,787 91,613. \ 708,787 418,190- 181,506 57,434 47,824 704,954 1,042,140 - 50,227 - 620,803 ;
e 390,218 ' 178,402 87,207 40,906 696,733 '1,030,422 . 49,906 572,382 386,954- 164,721 131,090 13,245 716.010 1,011,656 46,319 520,631 452,854 225,735 164,782 30,583 873,954 998,306 ' 40,370 462,677 ~ p 20 includes cumulative effect to January 1,1985, of change in revenue recogrcon, a (5,793.000 or 50.17 per share decrer 38.
' . ~Q includes special, oretime divedend of so.se per share pad Februay 28,1991.
. m includes cumuistive effect to January 1,1991, or change in fevenue recognition, a $17,360.000 or so.so per share inc rease.
';~ JThe cumulat;ve effect of this change increased natural gas sales by 14,838,000 MCr and electric sales by 256.000 MW H. reavv.ssvsm
g ,
- ~
~,
,s g, 1 ' / q Y -
DIRECyggs; - OFFICERSi .. of Western lle6rees. inc., its operating groups and subsidiaries" Frank J.Becaer(58)$ ' David IL Hughes (86) j- ' EXECUTIVE OFFICERS ? CORPORATE -
- - Elected 1968. , ' '
-l Eletted 1992. ' ' . John E. Hayes, Jr. (57) 1989 - ~ Fred M. Bryan (53) 1989 L Bu investments, Inc. - ! rk Ca diabnan pe Board. Pmident, . Executhe h Pmident. Iluman 3 and Chief Lsecutive Omcer : ~ Resourws .
Dorado. Kamas +
. F-n City. Missmui
[CmmrdrimI Audit and naara. . Cmnndnees: Nominating William E. Brown (55) 1962 -- James T, Clark (54) 1978 Corporate AMic Pdicy Corpete AMic Pdky Prendent and Chief Executhe 2 h Pmident, Internal Audit " - ,
. , . . _ . : Omccr- KPL ^
" Gene A. Budig (55) - Russell W. Meyr,Jr. (62) Milliam B. Moore (42) 1976 :
6.' Elected 1987. - . Elected 1992. . . b President, Finance Q Presklent ,' . . . - Chairman and Chief Ewcutive '.Executive James $. Maines, Jr.and h Nsident (48). 1980 !, c American leegua of Pmfesshea!' O$cer - Chief Administratae Omccr ' David E. Roth (39) 1979 i Bawball Clubs ' - : Cessna Aircraft Company - h Nsident, Lalor New York, New York Wichita. Kamas *
^ steven 1. Kitchen (49) 1964 ; ..
2- Comndttres: Audit and Jhance. Canmitrecs: Hanum Resources. Executhe h Nsident and Edward H. Sebaub (63) 1989 ;
; Nominating Nominating - Chief Financial Omcer J h Nsident, Government;
.. . =, Affairs
~
. C 'Q. Chandler (68) ' John H. Roldnson (07) "; " *
- Elected 1992. . - Elected 1991 eneral Counsel
*
- D""* " *
' Chairman of tim Board . - Chairman Embus . N Pmident, Management ,
INTI;UST nnancial Corporatie gg ck & ye,teg ; luformation Systems and
. Wichita, Kansas Carl M. Koupal, Jr. (41) 1992 , Telearnmunications .
Kansas City. Missouri
'8" " "' rpo e om, rate uM ky .
. " , ".,8h . J rry Courington (49) 1977,..
Development -
. umnas E. desenger (H) Marjorie 1. See.r (70) . Thomas E. Shea (45) 1972 '
I nvestn ents d Financial . ultant . Consultant Armstrong Shank Marketing Thomas L. Grennan (42) 1974
- Wichita, Kamas Richard D.Terrill(40) 1990 Wichita, Kansas W Nsident. Electric g ..
Committees: Audst and Anarn* Pmduction Committees: Human llewurm.
'.E*"'"*""R Corparate PuMic Pdky Richard M. Haden (55) 1966 .
Ewcutzve h President, Fleid ASTRA RESOURCES, INC. I 5Eu W hw C. M N H8) M 1-gg,c,, g99l* Chairman of the Board and - '. Chairman, Peident, and Chief 1 P5hlent . Nonnan E. Jackson (57) 1960, Pnsident . Faecutive O$cer . I Capitol Federal Savings and loan "d-S%nal eNPace Company - Executive Vice Nsident, Electric
/Associatica - "" W C"*"d*8 Engineeringand held Operutions . Dwain L. Milliams (47)'1993 -
- Topeka. Kamas N"*"" II'""'"* b President Administration, ?
- Committecs: Human flewurrvs. '" "8H"E Hans E. Mutens H5) 1990 . and Chief Financial Omcer , s
' Carpate Punk Pdky h Pmsident, Operathms Kenneth J. Wagnon (56') II'""i"E -
Elected 19N7' , O Ap as of Decemler 31,3904
. Julm E. Hays. Jr. (57) President * *
' Elected 1989. ES&E "
Cl Irmar.of the Board. Nsident, Capital Enterprises, Inc. Wichita, Kansas Kent R. Brown (49) 1982 an Ch:sf Executive Ofiker Pmident and Chief Executhe
- Westem Resmures, Inc, Cmumittees: Hunum hourm.
Omcer Topeka. Kamas No"enating Richard D. LaGree (64) 1956 h Nsident, Field Operations SAS SERWCE William C. Eliason (42) 1988
% President. Cas Sente +
P 4 remtv stent V ,
.--_-_m_-_-- -
--=
+
~
s isNARENOLDER INSUIRBES ~ . DIVIDEND REINVEITMENT ?
~
For questions or assistance regarding stock transfers, lost - """P'""""""""'"""" .L' : or stolen certificates or dividend checks, address changes, ' Ihe mmpany's Dividend Reinvestment and Stock L and mnsohdating accounts, stockholders may call toll-free Purchase Plan (Plan) offers common shareholders a
- 1-800448-8165, If calhng outside the U.S., please call . method of purchasing additional shares of common. stock. :
'Ecollect:112 613-7147. Or write to: Any mmmon shareholder of remrd is eligible to participate in the Plan. Options of the plan include full or partial -
Westem Resources,Inc. reimestment of dividends, monthly cash imestments, and e/o Chemical Bank . safekeeping ofcertificate shares. Additionalinformation g Shareholder Services - on the plan and an authonzation card will be sent to you
' P.O. Box 24970, Church Street Station l< on request. Please call 1-800448-8165. Or write to: ' - ' New York, New York 10249 4 018 Western Resources, Inc.
Please include a daytime telephone number in your Diddend Reinvestment L corresponden . P. O. Box 24970. Church Street Station New York, New York 10249-0018
' For other shareholder inquiries and requests for reports, such as the Form 10-K, please call 1-800-527-2495 STOCK EXCNANGE LISTINGS, dt" "Deker Symbol (NYSEh WR L
l
"' *Imestor Relations Department Daily newspaper stock table listing: WstnRes -
!. Western Resources, Inc. P. O. Box 889 STOCK TRANSFER OFFICES /REelSTRARS Topeka, Kansas 66601-OS89 - PrincipalTransfer Agent and Registrar Chemical Bank INVESTOR RELATIONS P.O. Box 24970, Church Street Station
. Financial analysts desiring information, please call New York, New York 10249-0018 -
1-800-527 2495,orwrite:- ' Director ofimestor Relations Co-Transfer Agerit Western Resources. Inc. Bank IV Topeka, N.A. Imestor Relations Department Trust Department p,o,gagggg One Townsite Plaza, P.O. Box SS Topeka, Kansas 66601-0889 Topeka, Kansas 66601-00SS .
~
' Co-Registrar L II " '
hierrantile Bank of Topeka The armual meeting of shareholders will le held at P.O. Box 178 ~ 11:00 a.in., Tuesday, hiay 2,1995 at: Topeka, Kansas 66601-0178 '
, Kansas Expocentre One Expocentre Drive WESTERN RESOURCES AND hianct Conference Center Ka&E FIRST MORTSAGE SONDS Topeka, Kansas Principal Trustee, Paying Agent, and Registrar liarris Trust and Savings Bank
' DIVIDEND PAYMENT DATES Ill West hionroe Street Chicago, Illinois 60603-4003.
. Quarterly dividends on common, preferred and preference Call collect: 312 461-683S stock usually are paid on or about the first ofJanuary, April, July, and Odober. All cash dividends paid lyy the company are taxable as ordinary inctnne. Diddend payments may GENERAL INFORMATION-CORPORATE ADDRESS le sent chTironically to your bank, savings and loan, or Western Resources, Inc.
, credit union and credited to your acmunt on the payment 818 Kansas Avenue date 'Ib receive information alcut this option, please call Topeka, Kansas 66612-1217 1-800-648-8165. 913-575-6300 -
Westem &sourres' Annual kportfor 1994 uns porpamlfcw tie O genered informatum of the sharrlwlders and employees of the annpany
. N.] and tu rwt intended to be und in amnec1km with any sale, or ofer to "Ilds tqwnt was printed ou rensicd pagwr using soy-leed inksi imy, any semrity rf the amapreny.
restv.ums
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