ML20107M803
| ML20107M803 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 12/31/1995 |
| From: | AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML20107M791 | List: |
| References | |
| NUDOCS 9605010129 | |
| Download: ML20107M803 (50) | |
Text
~ ~ - _ _ _ _ _ _ _ _ ~ ~ - - ' - ~ - ' - - . _ _ _
%h*+%
9 A
e temResources p"nm yg
Y%fnM%
~
);
p n
A eMemResources lwong ygy
COMPANY PROFILE WESTERN RESOURCES, I N C,
,, estern Resources is a diversified energy company. Its regulated utilities operate in Kansas and Oklahoma. Through its non-regulated subsidiaries and affiliates, energy-related
- prmiucts and services are developed and marketed in Kansas, Oklahoma, Arkansas, Texas, New Mexico, Colorado, Nebraska, Iowa, hiissouri, Illinois, louisiana, hiississippi, and Alabama, and in South America.
cons suSBNESS UNITS G E N E R ATlO N: Total electric capacity is 5,240 megawatts, with 62 percent of that capacity fueled by coal,10 percent by uranium, and 28 percent by natural gas or fuel oil. Western Resources produced 21 billion kilowatt-hours of electricity in 1995. The generation business unit includes CONTENTS all retail and wholesale regulated power production capabilities and functions owned by Western Resources, Inc.
I 3 Finaneial Periormance TRANSMlSS1ON: The transmission business unit is responsible for all transmission lines and j l
facilities, as well as interconnections to other electric utilities. The company operates approximately 6,300 miles of electric transmission lines with interconnections to 11 other electric utilities in the j
5 Chairman's Letter central Um.ted States.
i 9 A look at Western Resources KPL and KGE distribute electricity and natural gas to more than 1.2 million customers in Kansas and n rtheastern Oklahoma. Sales for 1995 totaled 20,280,000 megawatt-hours ofelectricity and
! 24 Salected Financial Data 94,681 million cubic feet of natural gas, with additional transportation sales of natural gas of 48,292 million cubic feet. Operations headquarters are in Topeka, Kansas, for KPL and 25 Management's Discussion in Wichita, Kansas, for KGE. l cnd Analysis 1
Western Resources, through its Gas Service division, manages more than 1,700 miles of natural i gas transmission pipeline and oversees the activities of the Mid Continent hiarket Center. The )
Statements and Note: Mid Continent Market Center offers natural gas transportation, wheeling, parking, balancing, f9 and storage services to customers throughout the central and midwest regions of North America.
l The Market Center, which began hub operations July 1995, is based in Topeka, Kansas, and moves 46 10-Year Comparative Data an average of 200 million cubic feet of natural gas per day.
48 Directors and Officers 49 investor Inf ormation 1
D E S T E R N Q t S O U Q C E S. I N C.
"Our intent iS to incre8Se our customer h8Se GROWTH BEYOND CORE 4 WESTAR BUSINESS SERVICES: Westar Business Services is structured to pursue opportunities through new in the energy and independent power production markets and provides broad-based energy
~
solutions tailored to meet business needs. Westar Business Services is headquartered in Topeka, Products and Kamas, and is comprised of the following operations:
to make Westar Gas Marketing (formerly Astra Resources Marketing) is a full service natural gas marketing cornpany offering the services of natural gas marketing and sales, purchasing and supply, tramPortadon management, gathe ingJguids pmcening, and Uquids madeting. Revenues Customers' liVBS from this unit totaled $146 million in 1995.
8 little 88Sier" Westar Electric Marketing will manage activities in electric energy markets and independent power production markets, including marketing and brokering power nationwide. Westar Electric also will offer risk management transactions, such as options and futures contracts and energy j conversion and emission allowance trading transactions services. I Westar Sales provides expertise and services, on a national basis, in such areas as energy project
]
management, construction and maintenance of electric, natural gas, communication, and water and wastewater treatment systems.
Westar Cogenex is a joint venture between Westar and EUA Cogenex, based in lowell, Massachusetts, to olTer integrated energy efficiency improvement services to industrial and commercial customers in Kansas, Missouri, Nebraska, Oklahoma, and Arkansas.
WESTAR C0N$UMER SERVlCES: Westar Consumer Services conducts research on customers' needs, develops and tests products and services, and provides ongoing product management.
Through Westar Consumer Services the company has entered the monitored security business and launched home appliance repair coverage service under the name Appliance Care." Westar I Consumer Services is based in Topeka, Kansas.
WESTAR CAPITAL: Westar Capital is a holding company that owns investments in energy-related technology development. One subsidiary, Astra Resources Compression, Inc., merged .
with Hannver Compressor Company of Houston,'lexas, in 1995, to create the second largest rental fleet of natural gas compression units in North America and the third largest such operation in South America. Westar Capital is headquartered in Houston, Texas.
THE WING GROUP: The Wing Group, a developer oflarge international power generation projects, was acquired in early 1996. The Wing Group has interest in projects in Turkey, Kuwait, China, and Southeast Asia with combined generating capacity of 8,000 megawatts. The Wing Group is headquartered in Houston, Texas.
2
1995 FIN ANCI Al. PERFORM ANCE W E S T E R N R E S O U R C E S. I N C.
COMMON STOCK VALUES DOLLAR $ PER 6HARf 36 d g s:Y r ,
F" .
4 y- -
(
,(:
i FIN ANCI AL D ATA (dollars in mhns) E- 1905 Y 1994i !
j Operating revenues [ , $l1,5n j $ 1.618 Y;s ;i Operating expenses ; 1,297 l 1.348 i
Net income 182j 187 to '
.( Gross plant in service i 5,125 ) 5.963 y
5 y) .
Embedded cost oflong-term debt Interest coverage ratio
' 7.7% 3 7.6%
: " 8' * **
(before income taxes, including AFUDC) .
(ty -
e
' 3.14 J
+
3.42 M MARKET OPERATING DATA 3 BOOK ,
h Electnc: c Book value increased slightly and Sales (thousands of MWH) 3 market value increased substantially Utility service ' 16,200 L 15.887 compared to 1994. Wholesale . , .4.012 f 3,899 Total c. 20,2ep ! 19.786 Customers (average) I1000,791 ) 593,859 Natural gas:
Sales (thousands of MCF)
Utility service [, 94,881 / 91.978 Transportation . I: 48,292 1 51.059 EAQNINGS AND DIVIDENDS Total 1s : 142,N3: 143.037 D LLARS PER SHARE Customers (average) : 648,016 " 684.809 4
,, , Number of employees (at year end) :- 4,047 j 4.330 2.90 COMMON STOCK DATA g7 ,!
~yu. .. , , -
{fy- Earnings per share p ($2.71 $2.82 y 3. Dividends per share $2.02 ) $1.98 t1 Book value per share
+ $24.71 - $23.93
- - 's Average shares outstanding . f $2,157,125 5 61.617.873 1 ao '- Number of common shareholders '40,831 44.037 Return on average common equiry . 11.2% ! 12.0 %
, ilnformanon reAccis the sales of the Masouri Properties effecove knuary 31.1994and February 28.1994.
\ 91 . SE 98 a 94 95 i 1 e
DIVIDENDS M EARNINGS Dividends rose 2% in 1995. Earnings in 1994 were higher because of gain on sales of the Missourl natural gas properties.
- includes cumulatwo effect to January 1,1991, of change m revenue recognmon, a 117.300.000 or $0 60 per share increase.
" includes spacel. onetime dmdend of $0.18 per share paid Februay 28.1991.
3
,.-- -man.. a - - .a.nu- ...--. .-.u...---aa-~---m,-av.a--..u-.m--wa -
e w em me.+m. a ..,a o r m a s..aam .,m .m as. u.am a;m. new.a a ,enns-n.2 e. , s . -
W E S T E R N R E S O U R C E S, I N C.
]
- l )
1 l
I i -
e i
J i g
?
h f
'e t
J i
. y>
e I
I '
. .k -
- 4 e ) ,
?
l h;f* jt k,
&, ll[ ,
y.,.
+
- j'; ; ,
f
>y f}: O l
e 1
4
, 1 I. - .. . . - _ _ - . .. -. . - - _ . .1
DEAR FELLOW SH AREHOLDERS: WESTERN R E S o U R C E S, I N C, 1
4 Acrions to achieve l
1 3 year for Western Resources. l As our shareholders know, competitive evolution resulting from customer demands and available technology is driving our industry. To be successful tomorrow, we have set our strategic priorities ambitiously, yet realistically, i Let me share briefly Oh you our plans going forward.
I In an industry with hundreds Jcompetitors, the largest having no more than four d percent market share, it is clear tha: we must grow in order to achieve our goals.
John E. Hayes, Jr.
il we succeed? By focusing on fout 'iverse components that combine for l
Chairman of the Board. Strong, substantial growth: 1 President, and Chief
- We will acquire large- and small-end energy customers. l Executive Officer !
- Our subsidiary, Westar Consumer Services, will develop and market i
unregulated products and services.
- Another subsidiary, Westar Business Services, will develop and market unregulated products and services for the business sector.
- And we will acquire domestic and international energy companies with substantial earnings and growth potential.
To achicve these strategies, we are guided by four core values: customer satisfaction, financial strength, growth, and marketing. We moved forward on these strategies in 1995 and will accelerate our momentum in 1996.
5
W E S T E R N R E S o U A C E S, I N C.
... actions during the past year created new. While we created new business opportunities in 1995 that strengthened our fmancial ,
and industry position, we also improved results in existing operations. a opportunities .
- First, let's address earnings. Earnings from ongoing operations were up $0.10 for growth..." over 1994. Our 1995 common stock earnings of $2.71 were down from 1994's earnings of $2.82. The difference can be attributed in part to a $0.31 gain in 1994 on the sale of the company's Missouri natural gas properties.
- Operationally, we were solid performers. In 1995, our electric operating revenues were two percent higher than the previous year, reflecting a return to more normal weather patterns. Operating expenses were down four percent, a result of continued cost-control efforts.
- Western Resources' stock price in 1995 closed at $33 3/8 per share, up 17%
from 1994's year-end price of $28 5/8. Our stock performance is another indication that Western Resources is emerging as a strong contender amid the ,
uncertain, rapidly changing landscape that characterizes the energy industry.
And, as we journey into 1996 and beyond, we will continue our course to be a major l force in the energy industry. As you read this year's annual report, what quickly becomes clear is that so many of our actions during the past year created new opportunities for growth in the future.
Our aggressive action in 1995 is a direct result of a process - Project BLUEPRINT, in which we have involved every employee to commit Western P: sources to the future vision.
L Project BLUEPRINT, launched in 1994, involves every single person in the company" l
l in redefining our business. We bring together people from all levels and every part of.
6
WESTERN R E S o U R C E S. I N C.
TOTAL METURN
??$
- y:A r' '6
, .Mfi?$?
hm; '
l y,;; ,3 the organization in a series of multi-day forums. Individuals are charged to re-think 1*
+ 1 a the way we do business - and the way they perform their jobs. Then, working
.. i 4 together in what we call Z-Teams, people create new business initiatives.
u ,
100
- g j p We know we can do better than mere incremental improvement. We proved that g,,_...,u ,, in 1995 by creating new growth opportunities while improving performance in our
(#*" existing businesses. 1 1
M S&P 600 I wEstEnYnYsouncEs In clie pages that follow, we describe in more detail how we have advanced our four core values and, in the process, advanced the value ofyour investment in Western Western Resources' five-year Resources.
cumulative total return continues to outperform Standard & Poor's 500 l and Electric Utility indexes. The graph l represents the value of $100 invested Our vision remains clear and our convictions strong.
on December 31.1990, including stock price tppreciation and reinvestments of dividends. Assumes a fiscal year jg js imperative to look at business in a new way, a different way, 2nd subscribe ;
ending December 31.
to a philosophy that embodies innovation and creativity.
Competition is here and.we embrace it, JOHN E. H AYES. JR.
Chairman of the Board. President, and Chief Executive Officer O
e 7
-~- ~.__ _ _ " = _ . . ~ _ - _ _ _ ~ ~ ~ ~ ~ . _ _ _ , , . ~._'%a.a.
- N MESOURcgg,, C l
- l l
y f
S
___-__ e d
0
/ , .
s I
h I t' k
4 p s -
/
~ s i
e g O
e E
4 4
i i
i 1
CUSTCMER S ATISFACTICN W E S T E R N R E S O U R C E S, I N C.
A s energy-savvy is the hallmark by which all successful energy companies of the future will be measured l
< j Make no mistake. Energy usage growth alone will not ensure our viability. ;
l J
Our intent is to increase our customer base through new products and services that make l customers' lives a little casier. And actions taken in 1995 give customers more value-added options, more services, and more satisfaction.
W ,
p First, we implemented a service guarantee program, entrusting employees to drive the process.
If, for any reason, a customer is not satisfied with the timeliness of our appointments for l
"p installations of security lighting and service connections, the customer automatically is refunded Th reghel up t 25 percent on their next energy bill.
economy continues Who makes the decision? The customer, no questions asked.
on a healthy course As we continually monitor the program to ensure quality control and customer satisfaction, the with the aircraft numbers tell the story. Since its inception last September, less than $2,000 has been refunded to manufacturing customers, an average of $22 per customer request. Compare that to more than 116,000 customer industry adding service c ntacts during the same time and one thing becomes clear: we are delivering on our promise te ensure every customer is satisfied. Guaranteed.
jobs to meet new contracts Achieving customer satisfaction also requires new business offerings.
and orders.
Consequently, we quickly established a presence in the security service business, an emerging industry with incredible growth opportunities. In fact, the largest security provider in the nation has less than 1.5 million customers. The security business is a natural fit for us, an extension of l
our ability to provide round-the-clock safety, reliability, and service.
In 1995, we acquired two local security service providers: Mobilfone Security of Topeka and Communications & Signaling, Inc. (CSI), also of Topeka. Mobilfone and CSI both provide sales, installation, and security monitoring services to Kansas homes and businesses. We intend to acquire Mobilfone Paging, which provides paging services to more than 250 communities and offers regional and interstate paging via satellite.
9
's W E S T E R N Q E S O U Q C E S, I N C.
Through Westar Consumer Services the company entered A thira security.rciatea transaction is an agreement that proviacs us an ii.7% ownership in the ,.
prestigious international security provider ADT Limited, with an option to acquire an additional .
the monitored ii.7% stock ownership. ,
Security huSineSS Perhaps more intriguing, however, are our plans to propose to ADT the possibilities of jointly marketing Westar energy products through AD T's network of more than 200 sales offices thr ughout North America, the United Kingdom, and Europe. You will learn more about and launched a home our national marketing strategy and Westar brand identity throughout this report.
appliance repair We also launched a new consumer service - Appliance Care - taking the worry from home
" ' " " " " "**'d""""""'
coverage service."
For a low, monthly fee added to customers' monthly energy bill, consumers can conveniendy guard against repairs with no inspections or deductibles. Initially introduced in Wichita and Hutchinson, Kansas, the plan has expanded to other cities within our KPL and KGE service territory. Consumer response has been encouraging, with enrollments exceeding 1995 projections and estimated annualized revenue gain of more than $1 million. We plan to expand Appliance Care statewide in Kansas in 1996.
To be successful, customer satisfaction must also apply to commercial and industrial customers.
To that end, we are offering integrated energy management services through our 1995 joint venture with EUA Cogenex Corporation, the country's largest energy management firm.
Custom wrvices marketed with EUA Cogenex give convenience to our business customers by reducing their energy dependence through efficiency improvements and creative energy supply solutions.
Convenience in the natural gas compression and handling services for customers in North America, the Gulf of Mexico, and South America has increased through our 1995 merger with Hanover Compression Company. Overnight we created North America's second largest .
and South America's third largest fleet of rental natural gas compression units.
10
CUSTOMER S ATISFACTION WESTERN RESOURCES, I N C.
Y e
0
/
And for power producers, marketers, and local distribution companies within the midwest, the Mid Continent Market Center, which started operations in July 1995, by year end was moving an average daily total of close to 200 million cubic feet of natural gas on our existing intrastate pipeline. The Market Center continues our customer satisfaction trategies by ofTering one-stop shopping to producers, marketers, and local distribution companies in the natural gas business.
The KPL and KGE operating groups provide 24-hour coverage through our Repeatedly in 1995, customers voted with their dollars to do business in our service territory.
consolidated customer action centers and service personnel. Here, Bob Smith, f,"'"*f,'"*",'["*,**7; "P[**
, , ug ' ' U r's A few examples. Fortune 500 company, Armour-Swift-Eckrich, culminated a year-long search by locats., a new $24 million meat processing plant in Junction City, Kansas. Western Resources' economic development staff was involved with courting the project from the beginning. The plant will employ 320 to 340 people the first year and 400 people by 2000. The producer ofluncheon meats and frozen meat products sought a location with good geography, available labor, access to an interstate highway, reasonably-priced utilities and an attractive community image. Saying the community " exceeds every one of our initial expectations," Armour-Swift-Eckrich praised Junction ty s being a " winner n every c unt we ked at." Estimated annual enery sales of more than "The Market Center 43 million kilowatt-hours are expected.
continues our In the aviation industry, Cessna, Raytheon (formerly Beech Aircraft), and Boeing all plan to expand their facilities and add jobs in territories served by our KPL and KGE operating groups.
Phillips Lighting, a major manufacturer of fluorescent lamps, also plans an expansion that will add i satisfaClion electricity sales of about seven million kilowatt-hours and boost natural gas sales by 243 million cubic feet. l strategies by These energy-intensive business expansions reinforce the health of the Kansas economy and l
offering one-stop illustrate the company's success in building on the existing customer base and securing the loyalty of that foundation.
i We are committed to earning customers' satisfaction as we broaden our customer base and product i
. offerings. Our focus is the customer and we will maximize every opportunity to strengthen existing producers, customer relan.onsh.ips while developing new partnerships.
marketers, and local distribution companies..."
11
,4 ..m, _a.s. _.. s .m m.,.....eg.6,m..ahu .as.rp44m_ sum.s.Au.asme e E.e,4 54,,_amAs_.da__eu.m4-_mMmh._h_.&.4.A.-m s A .J4 A.,d _. A had. A Am.a.w .A 3._24.y,am,4 ,,,m,,.,.4,,._,,.
S O U R C E g, g y g, a
. p
.... d P
, j
, k,
~
M "
~5 3 ,.
u, N 6j w,L ' g c:,..
,j y, , v. ,
h ' ,* g- , g m .; y n,
- r r;7 ; -
- f. _~. '
, )
l
\ .. .. ---- ,
.f ,
g ,&.
e
- 7 \,g c
,. Q, ,
i, % ) a-8
- . i j S ,
- %n ie ,
<, /
_,n .,
[ , 4, ,
, 4,
- - j
-Ae 3 .
O t
4 3
FINANCIAL STRENGTH W E S T E R N R E S o U R C E S. I N C.
ur commitment to you, our shareholder, is exemplified by maintaining investment grade credit and providing a competitive return. l We believe the aggressive steps we took in 1995 to develop new busmess opportumnes represent j the best way to ensure future financial strength. In a competitive environment, failure to continue j to grow a business means stagnatioa. In this new cra, maintaining the status quo is one of the I riskiest strategies we could pursue. Obviously, we have no intention of allowing that to happen.
i Perhaps most importandy, while establishing attractive new opportunities last year, we also l improved financial performance in our traditional business units.
s
- Operating expenses decreased almost 4% versus 1994. Decreases were mainly attributable to Western Resources' lower fuel costs and savings associated with the divestiture of the Missouri natural gas properties in the first quarter of 1994.
on the New York Stock
- Although reported earnings per share totaled $2.71, down from $2.82 the previous year, it is Exchange (NYSE) important to remember 1994 earnings included a one-time $0.31 gain attributable to the sales of our Missouri gas properties and another $0.08 of operating income from those properties under the symbol WR.
prior to their sale. Adjusting for the effects of the Missouri divestiture, earnings were actually healthier in 1995.
- Total electricity sales increased 3% A return to more normal weather in 1995 contributed to higher sales of electricity to all customer classes. That meant that weather-sensitive residential sales were up 2% because . - he increased air conditioning demands. Industrial electricity sales increased 4%, significantly at :e national average growth rate of 2% last year. Our service area economy continued healthy 3 a. Kansas unemployment for the year averaged 4.7%, well under the national average of 5.6%. And the future looks bright, because some 35 companies chose our territory as the location for their new and expanded operations. Those new customers represent electric demand of 16.5 megawatts and an additional annual consumption of 88 million kilowatt-
, hours. The same new customers will mean the sale of an estimated additional 416,146 thousand cubic feet of gas.
- Total return on your investment continues to outperform representative indexes. Cumulative total return over the last five years for Western Resources stock again exceeded both the S&P Electric and S&P 500 indexes. Annual shareholder return, including dividends paid and stock 13
W E S T E a N R E S O U n C E S. I N C.
"...we will continue !
our course to be a major player in price appreciation, topped 24% in 1995 alone. Increasing dividends and a share value that has .
grown more than 50% since 1990, leave no question that Western Resources is a company that the future of the offers real value for the long term. s energy industry The market and its aa2'rsts are takias = c1oser look at comraaies ia the eactsr business and measuring fmancial strength and value by assessing factors such as management skill, strategic direai n, and adaptabihty m change in additi n to evaluating the traditional influences of whore companies regulatory climate and construction plans.
with a strategic Western Resources has taken steps to reinforce our attractiveness to investors and analysts. And
. . although we do not predict the future or spectdace on earnings, our focus has beer. on laying focus, Vision and the groundwork for shareholders to experience added value in the future.
p:werful brand will The newly formed Westar business units all are expected to increase their contributions to net income.1995 nonregulated business revenues grew 9% to $161 million. With the strong moves be successful." we took last year to develop new businesses, the nonregulated portion of our income should continue to show significant growth.
Continuing our cost-cutting efforts, voluntary early retirement programs were completed at Western Resources and at the Wolf Creek Nuclear Generating Station, of which the company owns a 47% stake. Targets were met when 216, of 420 eligible, employees at Western Resources accepted the plan, effective June 30. Six months savings substantially offset the costs of the plan recorded in the second quarter. Another 56 employees elected to retire early at Wolf Creek.
More than 200 positions will not be replaced. Estimated annual savings from the actions will be approximately $12 million.
l To reinforce the balance sheet, on December 4, the company issued four million shares of 7 7/8%
trust-based preferred securities. This unique financing instrument offers double benefits to the
~
company: the dividends paid are tax deductible by the company, like long-term debt, but the shares bolster the company's equity position, like a stock issue.
By pinpointing the timing of the offering, Western Resources accomplished the lowest interest rate of any securities of this type issued in 1995. The proceeds, $100 million, were used to pay down 14
.- , - - . . . . . . - - . . . - . . . . - . ~ -. .. . .- . - . . . . _ - . - .
FINANCIAL STRENGTH WESTERN R E S O U R C E S, I N C.
l
~
~
g
' I~ the company's level of short-term debt. The short-term debt balance decreased 34% by the end 1
i of 1995 compared to year-end 1994. The company's continued favorable capital structure reflects
~
our efforts to shore up the balance sheet to be ready to take advantage of growth opportunities.
To further strengthen our competitive position for the long term, we filed an innovative multi-part To make life a little easier for shareholders, rate plan with the Kansas Corporation Commission. Briefly, the components include:
improve service, and reduce costs, the company moved its shareholder services in-house, Now, when you have a question
- An increase of $36 million in natural gas rates to compensate for increased operating costs and about your account, an employee handles your inquiry, rather than an agent for the company. Rechell Smith is one of the friendly, helpful representatives who . .
serve you.
- A reduction of $11 milh.on m annual deprec.iar on of transmission plant assets.
- An increase in depreciation expense for the Wolf Creek Generating Station by $50 million a year for the next seven years. At the end of this period, Wolf Creek's fixed costs will be below
$900 per kilowatt, making the nuclear plant competitive with a new coal-fired generating plant.
- Coinciding with Wolf Creek's rate base reduction, is a reduction of KGE retail customers' electric rates by $8.7 million per year for the next seven years. The total rate reduction of about
$61 million by the end of the seventh year will move KGE's retail electric rates toward the national average. KPL rates - already about 27% below the national average - should remain stable.
We believe this plan will ensure that our rates remain competitive, while reducing costs and increasing revenues.
We have every reason to feel confident in our continued financial strength.
"In this new era, Economists agree that our service territory will continue healthy, sustainable growth, mirroring
. national average growth rates. Additional growth in net income will come from continued expense
.mainta. .ining the .
savings and aggressive, strategic marketmg of our services. But even greater growth will come from our new business initiatives, which we talk more about in the next section of this report.
status quo ,s i in summary, our financial strength positions us well for the future, expands customer choices, one of the riskiest and cominues to add signirwam value to your investment.
strategies we could pursue."
15
W M.-p=
4,,wqe..- 5 Ap e hsud='--w -w- *-"AAWN* 3We3--*h4* "-4-**EMr""64h'- '*EN4"NM*4#4*'*h #M*#--4'#h'M O *dM'M " NhM*W+-bh--A&8 AM .4AAA-h-++ a-ae ,4- +4.ees* -.d.
l ' W E s T E R N b E S O U R C E S, I N C.
t n
4 s'
i-I 1-l-
I E
I l' .
l .
A
' e f
{
a "
f .
l k;
7 Y
~ .;
y -
l '
i
/
. l
- j. , .
. ~
~
I.
r ',
I. 1 f I
~ ~
l l .
t ~
i
.r 1
i~ ?g P
'AW * ;
e-
- 1 *
- y. v ~ . .
J f
l .
J' .
i
- f. '
(- t, '
l' '
I t
O 2
1 4
4 4
3 1
i 4
d k
i j;
APPLIANCE CAQE takes the cost, worry, and hastle out of the unexpected breakdown of a maior appliance.This new service from Westar Consumer Services picks up the cab for virtually all parts end labor each and every time stomer ' '"" *" "'edP'i"-
SECURITY SERVICES, sold under convenience and peace ,h, m .,xctana W,,m, nam,,, a n value-added services, system enhancements, of mind come with and payment Hexibility not common in the electronic security business. Dese systems the first two eonsumer can indude such amenicia as 6re and wata
!cak detectors, a built-in pager system to
"'"""""""*"Y""*'"
Products unveiled this arrive home, and the capacity to expand with security devices for future needs.
wrestar Gnuumer Sernces To learn more about these exciting products, pricing for various product packages, product availability in your area, or additional consumer services planned for 1996, call Westar Consumer Services at (913)575-1118 or complete and return the following reply card.
NAME ADDRESS CITv STATE ZIP Interested in: O Appliance Care C Security Services O Information on new products, services as they become available Have a representative call me at , at ,
T s e
F
) L e
c NO POSTAGE NECESSARY .
e IF MAILED E
IN THE UNITED STATES .
BUSINESS REPLY MAIL - -
FIRST-CLASS Mall PERMIT NO. 3429 TOPEKA., KS -
POSTAGE WILL BE PAID BY ADDRESSEE WESTAR CONSUMER SERVICES '
l PO BOX 889 TOPEKA KS 66601-9934 .
lillmilmilnllumillliinlilunlininlillnl '
h b
e D
J 4
e-U
s g.-
~ ..
4 N
t
--m'- .a da.i ' : i,: N a.1 NO POSTAGE NECESSARY .
IF MAILED IN THE UNITED STATES s
~
BUSINESS REPLY MAIL - - -
FIRST-CLASS MAIL PERMIT NO. 3429 TOPEKA KS -
POSTAGE WILL BE PAID BY ADDRESSEE WESTAR CONSUb 9 SERVICES -
PO BOX 889 TOPEKA KS 66601-9934 lillmilinlinlinunilliinfilnnlininlillnl f $
k O
1,
,} s
. p 9
GROWTH W E S T E R N R E S O U R C E S. I N C.
ur growth goals will be realized by increasing income through aggressively pursuing ;
new business opportunities, maximizing use of our resources, and capitalizing on our competitive strengths.
I Our course was set in 1994. And as 1995's joint venture, merger, and acquisition activities !
unfolded, the full meaning behind our growth mission now is clear. To accelerate our aggressive l growth strategy, we appointed former Wall Street merger and acquisition strategist David Wittig as executive vice president of corporate strategy. A native Kansan, David has nearly two decades W
ofinvestment banking experience, most recently as managing director and co-head of mergers and acquisitions for Salomon Brothers, and previously as head of mergers and acquisitions for !
l Kidder, Peabody & Co. j uY j l
With corporate development high on our priority list, shareholders may rest assured that 1995 !
' ' "I I was not an aberration. Western Resources will continue to pursue new growth opportunities is branching out consistent with the company's strategic plan.
into smart, strategic l More specifically, we are evaluating regulated and nonregulated, stand-alone, self-funding
]
growth-oriented businesses that offer collateral power marketing opportunities. We plan to take full advantage j of the fact that the fu se is going to run on electricity. New technologies are gaining !
businesses rolsted dominance in all industries as dependence on microprocessors and electronics increases to the energy .
m the manufacturing and service sectors, business, such as We will focus on companies that offer related products and services, for example: I monitored security 1 I
i systems for reridential
- Energy services and equipment management l l
end commercial
- Power quality and uninterruptible power supply products customers.
- Premise security and environmental monitoring services l . Signaling our expansion into the international power market, earlier this year we acquired The Wing Group, one of the premier power developers in the world.
I 17 1
W E S T E a N R E S O U R C E S. t N C.
"...we are evaluating regulated and nPMregulated, His partnership gives us an excellent means for broadening our markets and providing a solid .
growth opportunity for our company and its shareholders. Under terms of the agreement, the stand-alone, self- company has received options to acquire The Wing Group's interest in projects under development .
in Turkey, Kuwait, China, and Southeast Asia with combined generating capacity of more than funding businesses 8,0@ megawatts. He Wm' g Group acquisition is a logical step in our effort to broaden our competitive energy operations.
that offer collateral As vigorously as we intend to pursue additional merger and acquisition opportunities, we also will continue to work to maximize our existing resources.To accomplish a successful future, we p:wer market.mg <
realize that we must take advantage both of growth venues, as well as rely on employee expertise and talent.
opportun,t,es.,, ii We had some strong success stories this last year.
For example, a multi-disciplinary Project BLUEPRINT task force - called a Z-Team - analyzed our construction budget. Applying creative, innovative thinking, Z-Team members cut 30%,
roughly $300 million during five years, from a $1 billion construction forecast.
Now, instead ofincreasing each year, our construction expense actually declines year-to-year from 1994 through 1996. While construction expenditures will jump slightly m 1997, current estimates call for these costs to fall to 75% of the 1995 levels by 1998.
In fact, no construction of generating capacity is needed until 2002 at the earliest. This trimming does not minimize quality, instead our employees are charged with rethinking business and identifying redundancies or waste in our system. With the lowering of construction expenditures comes an improvement in cash flows.
We saw an opportunity in combining our excess natural gas supply with our ability to transport it. The group wrote an As-Available Gas Sales tariff to bundle or combine excess gas with transportation capacity and sell both as a bundled service.The KCC approved the tariff, giving us a 50-50 split of profits or $1.5 million annually - all from existing capacity and infrastructure and as a result of employee insight.
18
GROWTH WESTERN R E S o U R C E S, I N C.
. Previous to Federal Energy Regulato y Commission Order No. 636, other supplier had inventories in storage and charged Western Resources for gas and carrying costs when we made As we position the company for increased Purchase. We would recover those costs through purchase gas adjustment formulas. But our cost competition in the energy business, we've recovery stopped after the new order. The employee team fded a plan for recovery of these costs
["n*[,d"*
y br nd tar.ou 1d our with the KCC, which approved the plan and allows us to recoup an estimated $2.3 million annually.
traditional service areas, the brand name Westar will appear on our new products and services as we drive into new markets. Another example of maximizing our resources directly involves shareholders. A study of shareholder services found that we could offer quicker, more personal service to our shareholders than the outside vendor we had used for 25 years. Besides providing faster and better senice to our owners to make their lives easier, we also will save an estimated $200,000 annually by bringing this function in-house.
Western Resources' people also have grown consistently more productive. Partly because of increased training and new technology and partly because of expanded empowerment, our improved productivity allowed a workforce reduction of 20% since 1988 - all through voluntary programs. At the end of 1995, our total workforce was 367 positions below budget.
In 1995, many new growth opportunities converged for Western Resources.
We Pened new markets.
ug We increased sales ofenergv products and services.
successful future, And we increased the productivity of existing resources.
we realize that Accomplishments of 1995 will bear an ever-increasing bounty in future years. And we intend t keep our " opportunity pipeline full, balancing external business ooportunities with internal, We must take idea-driven change resulting in growth.
advantage of growth venues, as well as rely on employee expertise and talent."
19
- . _ . . . . . . ~ - . - . . . _ _ - _ - - - - - - - _ __
"" "Es% m g J
T't--
x jg ) c yc g :
- 4>
.f'# .c f .y n q; e : q .i r -
- b. y d._ , r myny c . w cf w 3 g w ,m~y' :n, p
~" .
aw e
- p'.[g QT o
- g. _ -w~7 a;g;.~gg}g\ Rt
~
- p:x Lt ,% * ,<
a4. ,:.:y
- 3 er t ,
- ;,p.w ;Q'4:%.g.g;}l.qf ng?%j=< ~~
4
_pj 4 ; a G: . ,' . IrrEM ma $&
&, 3% . y~~ ;
'_},g-47.;g'mi.;, A ***&.Q~Q;f_g 6' ;%Tf ? @3. pyjgs
,ggr:
- A
', .u- ,-
a
'~ ,
m"
..; .tge } . s f. 4e7 g f g;,,Q, We -.m9:%*Qy::n=.~,-m m~mwra m,m,;mn,e9.:,ipmy,w. g
.w
- 3 .
~~~
n y ?y.~. .~s5.x. . . ,39ge,Q<
W m 4o -_n h ~L f' .. '
g
+ '~ .s&.v- ~t4W- yk'?
.g
%" .. ,""cs '""a v.
- o=
., M +
.{ ~ ,
.x
' PACI/7C . " a'[ :.g .N h { MsMco r ,,
~ wg.,, r-.g "tv.. '*
- + .
~
e
')
e s
e... - 'gm.
M g' l:, -
.y -
=, t
- ;o ;
,[:Uw. & ,.
4~flm;1gi'S
- . lG) 'ff g ,ehl _y , .
,v..
.: w .' ;5 I i Jp
, f,.gh ,
(
a
[ '*
' .,y;, >.m x" 4%
2.hi ?pi" l }?
6 1
l l
1
M ARKETING W E S T E R N R E S O U R C E S, I N C.
Wbelieve there are l l
]
customer needs and expanding beyond our traditional borders with a national brand identity.
The energy business of today allows our larger, industrial customers energy options. The energy business of tomorrow will do the same for the residential market.
This reality demands we truly understarid our customers. When they have an energy choice, we want them to choose us. .
1 I
To that end, we are tailoring pricing plans, offering expertise in solving specific technical Q problems, and providing broad-based analysis and comprehensive energy management plans.
L1 w
We're maximizing growth and marketing it all started in 1994 when we began an in-depth study of our largest customers' operations and ,
l energy needs. We established individualized account management for large customers. And we set i up multi-disciplinary teams to recommend customized approaches to keep our largest customers the U.S. and abroad satisfied and on Western Resources' energy system.
as they fit into We've reaped returns on that investment.
business plan. For example, most of our largest customers have signed contracts ranging up to 10 years in length.
And these contracts have provisions for customers to increase their electricity usage during the contract life.
One of our 1995 success stories involved a 15-year contract worth approximately $300 million with Empire District Electric Company for wholesale electricity. Empire had competing proposals from several other companies. But Empire chose Western Resources as its strategic partner well into the next century. We believe the reason we won the business is that we understood Empire's needs better than our competitors.
To capitalize on our local marketing strength, we introduced Westar, a new, single-brand energy identity for use beyond our traditional service territory.
To complement Westar, we unveiled a new company logo - a single, streamlined star replacing our double-star logo, and will use a company modifier: " making life a little easier." Because of their obvious strengths and recognition with existing customers, the names Western Resources, KPL and KGE will remain in use in their traditional service areas.
21
W E S T E R N E E S O U R C E S. I N C.
l "We are partnering with customers-Iarge and sma11-to W, star, however, wiii se us,a aom,,ticaiiy ana internationatiy a, we penetrat, new mark,t,. ,
Fonifying the Westar energy brand, two new companies - and one renamed - were launched make their lives to concentrate marketing at home and abroad. , j I
3 ll(tlg gagjgr," Westar Consumer Services, Westar Business Services, and Westar Capital (formerly Astra l l
Resources) all have the customer in focus, identifying marketing partnerships, new programs, services, with an unregulated flair. And we've added marketing strength to our Board of Directors through the election of Susan Stanton, President and Chief Operating Officer, Payless Cashways, Inc., Kansas City, Missouri. Susan brings marketing expertise and insight through her more than 12 years of success in retail marketing.
l l
Westar Business Services' leadership in high-technology niche markets is an important part of our marketing strategy. Already a recognized industry leader in marketing electrotechnologies, Western l Resources continues its work with customers to treat wastewater, establish industrial drying processes, or sterilize medical equipment against bacteria that resists conventional disinfectants.
We were instrumental in the decisions to install ozone water treatment technologies for StarKist foods in Imvrence, Kansas, and for the City of Emporia, Kansas. The company joined with a major grocer chain and a case manufacturer to pioneer an innovative non-CFC (Chlorofluorocarbon) case refrigeration system. Th t new technology requires 'n refrigerant and piping and meets or exceeds stricter environmental standards.
Our marketing efforts also achieved significant progress in the deployment of highly efficient drying and curing technologies. Using ultraviolet and radio frequency (RF) technologies, instead of heated air methods, these systems reduce production costs, and lower air condidoning expenses.
The revised processes also result in improved drying operations, eliminate large rolumes of exhaust air, and increase usable floor space. These electrotechnologies are in use at 10 cucomer locations for ink drying, paint drying and curing, and emuhion processing. Several more installations are planned for 1996.
Westar Business Services will aggressively market energy efficiency services for commercial and industrial customers as a result of our new joint venture with EUA Cogenex Corporation. We are confident many of our existing customers will find this new problem-solving service attractive.
22 m ._
MARKETING W E S T E R N R E S o U R C E S, I N C.
CESTAR GAS MARKETING SALES VOLUMES l BILLION CUBIC FEET go .A #h __
,a- / ,
l ggg a :
l ( s And we look forward to serving new customers in our initial, five-state service area ofArkansas,
, Kansas, Missouri, Nebraska, and Oklahoma. Over time, our focus will broaden to reach customers
, k - 1 outside of this five-state territory.
30 i Q
k 10 v.
A A Westar Capital subsidiary, Astra Resources Compression, Inc., joined with Hanover Q
j Compressor Company in 1995. The merged company is the second largest natural gas compression rental unit company serving the North American market and the third largest in i
%,7 South America. The compressor fleet moves natural gas from the wellhead, through the gathering y
l pipelines and processing plants to interstate pipelines. Rental firms, like Hanover, are specialist W; stir Gas Marketing has shown providers Because they own compressors that vary in size and horsepower, they can change
! substrntial growth since its inception In 1988. Sales volumes have grown out equipment to suit the needs of the producer during the life of the well.
from 4.5 billion cubic feet (BCF) to mor3 than 82 BCF in 1995.
p g ; _g g gg _g g ;g of offering uninterruptible power supply systems for domestic and international customers.
These critical service support systems give us an important differentiating strength with commercial and industrial customers. Increasing use of computer-aided, power-sensitive l equipment, by industrial and commercial customers, calls for reliable electricity and stable power i
quality. An interruption in supply can cause serious losses. The annual cost of power interruptions and voltage variances is estimated to be $3 billion to $5 billion nationally.These products also have applications in the home.
For residential and business customers, our new security service - through Westar Security Services - offers a well-known and trusted name for a critical service. Monitored security services
...we introduced are a naturai surgiement that comptement the aegenaabte energy services we greviae ana are just one more way to "make life a little easier" for our customers.
Westar," a new, In short, all these new businesses not only add revenue sources, they also help differentiate and single-brand p sid n Wenem Resources as an aggreuiveaalue-added, long-term strategic partner.
l -
That's precisely the market position we intend to earn. 1 l
energy identity for use beyond i
c our traditional service territory."
l l 23 I
W E S T E R N R E S O U R C E S, I N C.
SELECTED FINANCIAL DATA '
i I~ (dollars in thousands) O 11918 1 1994m 1993 1992i21 1991 l
} p :.
l - Year ended December 31, i
~;
j INCCME STATEMENT DATA {
1 j
j Operating revenues: U j
$ 1,104.537 $ 471,839 Electric [- $1,145,II5 ] $ 1,121,781 $ 882.885 l 428,U6 i 496,162 804,822 673,363 690,339
. Natural gas ,
i 1,617,943 1,909,359 1,556,248 1,162,178
!- Total operating revenues W, 1,572,071 j ,
1,348,397 1,617,296 1,317,079 1,032,557
- Operating expenses ,
P 1,2SEAB7 l Allowance for funds used during ;.
E4,205)}
2,667 2,002 1.070 1 j construction .
R 2.631 ,
i Income before cumulative effect of P 3 d j' accounting change , b l 181,878 j 187,447 177,370 127,884 72,285 i Cumulative efrect to January 1,1991, of h- /
ff N change in revenue recognition [
t -3 - 17,360
' 181,576 j 187,447 1U,370 127,884 89,645 Net income , -
174,029 163,864 115.133 83,268
- Earnings applicable to common stock . {. 7 100,257 ]
~
December 31. J.
DALANCE SHEET DATA [ ;
$ 5,963,366 $ 6.222,483 $ 6.033,023 $ 2.535,448 Gross plant in service , , .
h $8,128,527-j Es 100,401 ) 85.290 80,192 68,041 17,114 Construction work in progress .
!J 5A00,877 -1 5,371,029 5.412,048 5,438,906 2,112,513 Total assets long-term debt, preference stock, and E, ,.'
1,507,028 1,673,988 2,077,459 690,612 other mandatorily redeemable securities ! c1,841,282 j .
a December 31, ,j CCMMON STOCK DATA h.
Earnings per share before cumulative -
2 9 $2.76 $2.20 $1.91 effect of accounting change ' $2.710 $2.82 Cumulative effect to January 1,1991, of n ,
change in revenue recognition per share { : -- 4 - - - ,50 Earnings per share [ ' $2,71 j $2.82
$1.98
$2.76
$1.94
$2.20
$1.90
$2.41
$2.04ai Dividends per share . .
L f'
<'$2A2']
Book value per share . , $24.71 j $23.93 $23.08 $21.51 $18.59 Average shares outstanding (000's) , . p 62,157 q 61,618 59,294 52,272 34,566
' Interest coverage ratio (before income [ 1]
taxes, including AFUDC) , t3.14j 3.42 2.79 2.27 2.69
[c OPERATING REVENUES OPERATING COSTS 4 !
Residential ~ Capital Costs -
l Energy Costs Caramercial
[
- l Depreeletion '
& Amortization l
t o,.r rr Industrial ., & Maintenance
,, s Operating revenues, by custorner class, By c antinuing our strict attention to cost controls, remain evenly allocated. we lowered operating expenses 4% this year.
(1) Information reflects the sales of the Missouri Propenies (Note 2).
(2) Information reflects the merger with KGE on March 31,1992.
(3) Includes special, one-time dividend of 50.18 per share paid February 28.1991, t4
i l' CANAf E".ENT'S CISCUSSi2N AN3 AN ALYSIS W E S T E R N R E S o U R C E S. I N C.
I
(
L l
FINANCIAL CONDITION Generat Earnings were $2.71 per share of common stock based on The following table reflects, through the dates of the sales of the 62,157,125 average common shares for 1995, a decrease from $2.82 Missouri Properties, the approximate operating revenues and operat-in 1994 on 61,617,873 average common shares. Net income for 1995 ing income for the years ended December 31,1994 and 1993, and decreased to $181.7 million compared to $187.4 million in 1994. The net utility plant at December 31,1993, related to the Missouri ,
i decrease in net income and earnings per share is primarily due to the Properties (See Note 2): I indusion of the ga:n on the sales of, and operating income from, the Percent of Total Amount Company nawral gas distribution p operties and operations in the State of j Missouri prior to the sales in the first quarter of 1994. toonars in tnousanos.unaucited)
Dividends for 1995 increated four cents per common share to $2.02 1ss4 ;
Operaqng roemes $ 77 M8 (8% i per share. In January 1996, the Board of Directors declared a quarterly Operating income . 4.997 19%
dividend of 51 1/2 cents per common share, an increase of one cent over the previous quarter. ,,,3 CAPITALIZATION
SUMMARY
The bod value per share $349,749 Operating revenues 18.3 %
was $24.71 at December 31, Operating income . 20.748 7.1%
" Net utility plant 296,039 6.6%
j 1995, compared to $23.93 at December 31,1994.
Separate audited fmancial information was not kept by the company The 1995 closing stock I f r the Missouri Properties.This unaudiced financial information price of $33.38 was 135 is based on assumptions and allocations of expenses of the company percent of book value.
There were 62,855,961 as a whole.
g, common shares outstanding For additionalinformation regarding the sales of the Missouri at December 31,1995. Properties and the pending litigation see Notes 2 and 3 of the Notes to Consolidated Financial Statements.
20 % On January 31,1994, the company sold substantially Uquidity and Capital Resources:The company's liquidity is a fimc-all ofits Missouri natural gas tion ofits ongoing construction and maintenance program designed distribution properties and to improve facilities which provide electric and natural gas service operations to Southern and meet future customer service requirements. Acquisitions and Union Company (Southern subsidiary investments also affect the company's liquidity.
EEMAB ECU TIES Union).The company sold During 1995, construction expenditures for the company's electric MPREFERRED AND PREFERENCE STOCK the remaining Missouri prop- system were approximately $154 million and nuclear fuel expendi-LONG-TERM DEBT tures were approximately $28 million. It is projected that adequate Company (Uruted C. .)
ines capacity margins will be maintained without the addition of any l n hr on February 28,1994.The I[n'da$"'Rj a S]n major generating facilities through the tum of the century. The con-and common stock for the DRIP improved PmPerries sold to Southern struction expenditures for improvements on the natural gas system, th3 company's equity position. As a result. Union and United Cities including the company's service line replacement program, were lon9-tum dabt la only 43% of totai are referred to herein as approximately $55 million during 1995.
l capitanzation- the " Missouri Properties."
l Capital expenditures for 1996 through 1998 are anticipated to be
! . The portion of the Missouri Properties purchased by Southern Union ,, ratio,,.
was sold for $404 million. United Cities purchased the company's natural gas distribution system in and around the City of Palmyra,
. . (dollars in thousands)
Missoun, for $665,000.
19 $ 6 3 300
. During the first quarter of 1994, the company recognized a gain of [; g approximately $19.3 million, net of tax, on the sales of the Missouri 1998. 20,800 42.100 119.100 Properties. As of the respective dates of the sales of the Missouri Pmperties, the company ceased recording the results of operations, These expenditures are estimates prepared for planning purposes and removed the assets and liabilities related to the Missouri Properties and are subject to revisions (See Note 5).
from the Consolidated Balance Sheets. The gain is reflected in Other income and Deductions, on the Consolidated Statements ofIncome.
25
{
! I CANA!EMENT'S DISCUSSIEN AND ANALYSl8 WESTERN R E s o U R C E S. I N C.
)
The company's net cash flows to capital expenditures was 83 percent to $203 million, of which $26 million was commercial paper (See for 1995 and during the last five years has averaged 97 percent. The Notes 10 and 12). At December 31,1995, the company had bank !
company anticipates all ofits cash requirements for capital expenditures credit arrangements available of $121 million. j through 1998 will be provided from net cash flows.
The company's short-term debt balance at December 31,1995, )
l The company's capital needs through 2000 for bond maturities and decreased approximately $105 million from December 31,1994. l l cash sinking fund requirements for bonds and preference stock are The decrease is primarily a result of the proceeds from the sale of j approximately $236 million. This capital will be provided from internal the Other Mandatorily Redeemable Securities being used to pay end extemal sources available under then existing financial conditions. off short-term debt.
The embedded cost oflong-term debt was 7.7% at December 31,1995, The company has a Dividend Reinvestment and Stock Purchase Plan .
an increase from 7.6% at December 31,1994. Higher interest rates on (DRIP). Shares issued under the DRIP may be either original issue variable-rate long-term debt contributed to the slight increase in the shares or shares purchased on the open market.
cost of debt in 1995 compared to 1994.
The company's capital structure at December 31,1995, was 48 percent On December 14,1995 common stock equity,6 percent pieferred and preference stock,3 per-
)
CMLING DEGREE DAYS Testern Resources Capital I, cent other mandatorily redeemable securities, and 43 percent long-term j WICHITA, KANSAS a wholly-owned trust, of debt. The capital structure at December 31,1995, including short-term which the sole asset is subor- debt and current maturities oflong-term debt, was 45 percent common l_ dinated debentures of the stock equity,5 percent preferred and preference stock,3 percent other l company, issued four million mandatorily redeemable securities, and 47 percent debt. ;
preferred securities of 7 7/8%
. . . Cumulative QuarterlyIncome REsutTs OF OPERATIONS l i > *' Preferred Securities, Series A, The following is an exrlanation of significant variations from prior year for $100 million.The securi-results in revenues, operating expenses, other income and deductions, ties are shown as Western interest charges and preferred and preference dividend requirements. l 1
Resources Obligated I The resuhs of operations of the company exclude the activities related 5"
l Mandatorily Redeemable to the Missouri Properties foll wing the sales of those properties in the Preferred Secunnes of first quarter of 1994.
SubsidiaryTrust holding
- '8 ' 85 solely Subordinated For additional information regarding the sales of the Missouri
. 20 Year Normal: 1,72s Pr Perries and the pending litigation, see Notes 2 and 3 of the Notes Debentures (Other Mandatorily Redeemable to Consolidated Financial Statements. Additional information relating 1995 t;mperatures were almost 12% , ,
m changes between years is providedm, the Notes to Consolidated
, coolir than in 1994 and more than 14% ScCurities) on the Con.
coolar thss the 20-year average. Financial Statements.
solidated Statements of Capitalization (See ,
RWENUES Note 7).
HE TjN D GREE DAYS The operating revenues of the company are based on sales volumes l On January 26,1996, the and rates authonzed by certain state regulatory commissions and the company used available cash som Federal Energy Regulatory Commission (FERC). Future natural gas and borrowings under its and electric sales will be affected by weather conditions, competitio i l
1
. ( _
revolving credit agreement fmm dier sources of energy, competing fuel sources, customer conser-e ysees to purchase 15.4 million
\ vati n eff rts, and the overall economy of the company's service area.
common shares of common
~4eno stock in ADT Limited for Natural gas revenues were reduced as a result of the sales of the 9 $215.6 million (See Note 5). Missouri Properties. The Consolidated Statements ofIncome include
""~ The company's short-term anues f $77 million for the portion of the first quarter of 1994 ,
Prior to the sales of the Missouri Properties and revenues of $350 mil-financing requirements are 20" ~ li n fr m the Missouri Properties for 1993. Following the sales of the satisfied, as needed, through Miss uri Properties, no revenues related to the Missouri Properties
! ' , the sale of commercial
! paper, short-term bank are included in the Consolidated Statements ofIncome (See Note 2).
et 32 sa 94 95 loans and borrowings under 1995 Compared to 1994: Electric revenues increased two percent in
. 2o Year Normal: 6,21s unsecured lines of credit 1995 as a result ofincreased sales in all customer classes. The increase
- We experienced a near normal heating maintained with banks. At is primarily attributable to a higher demand for air conditioning load seison in 1995 with temperatures December 31,1995, short- during the summer months of 1995 compared to 1994. The company's avtrsging 6% cooler than last year. term borrowings amounted service territory experienced normal temperatures during the summer 26 i _
~ . . . _
- l. C*A%ACEZIMT'3 CCCUSSIEN AN3 A%ALYCIS W E S T E R N R E S o U R C E S. I N C.
of 1995, but were more than 20 percent warmer, based on cooling Partially offsetting the decreases in operating expenses was higher degree days, compared to the summer of 1994. The company has income tax expense. As of December 31,1993, Kansas Gas and Electric i- filed an electric rate reduction request with the Kansas Corporation Company (KGE) had fully amortized its deferred income tax reserves l Commission (KCC) (See Note 4). related to the allowance for borrowed funds used during construction capitalized for Wolf Creek Generating Station ~ The' completion of the
. j
-Natural gas revenues decreased in 1995 primarily as a result of the sales of Missouri Properties in the first quaner of 1994 (See Note 2). am rtization of these deferred income tax reserves increased income tax - i l
-* The company has fded a $36 million rate increase request for its expense and reduced net income by approximately $12 million in 1994. !
Kansas natural gas properties with the KCC (See Note 4). Othw income and Deductions: Other income and deductions, net of taxes, decreased for the twelve months ended December 31,1995, com-
, Excluding natural gas sales related to the Missouri Properties, prior to the sales of those propenies in the first quarter of 1994, total natural Pared to 1994 as a result of the gain on the sales of Missouri Properties
' gas revenues remained vinually unchanged in 1995. Natural gas rev- remrded in the first quaner of 1994 and additional interest expense on enues increased from increased transponation sales and as-available increased corporate-owned life insurance (COU) borrowings. Panially sales, but these increases were offset by decreased commercial and ffsetting this decrease was the recognition ofincome from death bene- !
industrial ales and a lower unit cost of naturJ gas which is passed IIt Proceeds under COU contracts during the fourth quaner of 1995 -
on to customers through the purchased gas adjustment (PGA). (See Notes 1 and 6 for discussion of cunent legislation affecting COU).
As-available gas is excess natural gas under contract that the company Otha income and deductions, net of taxes, was higher for the twelve did not require for custouer sales or storage that is typically sold to gas m nths ended December 31,1994 compared to 1993 due to the
. marketers. According to the company's tariff, the nomin{ twargin made rec gnition of the gain on the sales of the Missouri Properties of on as-available gas sales, is returned 50% to customers through the approximately $19.3 million, net of tax (See Note 2). Partially offset-PGA and 50% is reflected in wholesale sales of the company. ting this increase was increased interest expense on COU borrowings.
A*c parually offsetting the increase was the recognition ofincome 1994 Compared to 19e3: Electric revenues increased two percent during in 19'93 from death benefit proceeds from COU policies.
1994 primarily as a result of a four percent increase in commercial and interest Charges and Profwred and Preference Dividend flequirements.
industrial electric sales. Residential electric sales increased one percent despite four percent cooler temperatures during the primary air condi- Total interest charges increased three percent for the twelve months tioning load months ofJune, July, and August. Panially offsetting these ended December 31,1995, primarily due to higher deb: balances ,
increases in electric revenues was a 14% decrease in wholesale and and higher interest rates on short-term borrowings and variable j interchange sales as a result of higher than normal sales in 1993 to 1 ng-term debt.
other utilities while their generating units were down due to the The company's embedded cost oflong-term debt increased to 7.7%
flooding of 1993, at December 31,1995, compared to 7.6% and 8.1% at December 31, 1994 and 1993. Higher interest rates on variable-rate long-term debt Natural gas revenues and sales decreased significantly ir,1994 as a result c ntributed to the slight increase in the cost of debt in 1995 compared ;
of the sales of the Missouri Properties as previously mentioned above.
Also contributing to the decrease in natural gas revenues were reduced I I994*
natural gas sales for space heating as a result of much warmer tempera- Totalinterest charges decreased 17% in 1994 compared to 1993 as tures during the winter season of 1994 compared to 1993. a result oflower debt balances and the refinancing of higher cost debt, as well as increased COU borrowings, the interest on which is reflected ;
CPERATING EXPENSES ,
in Other Income and Deductions, on the Consolidated Statements of i 1995 Compared to 1994: Total operating expenses decreased four percent.
Inc me. Partially offsetting these decreases in interest expense were ;
higher interest rates on short-term borrowings.
in 1995 compared to 1994.The decrease is largely due to the sales of l Missouri Propenies, lower natural gas purchases resulting from lower Merger implementation: In accordance with the KCC Merger order,
. . sales. and lower fuel expense resulting from a lower unit cost of fuel amortization of the acquisition adjustment commenced August 1995.
used for generation. The amortization will amount to approximately $20 million (pre-tax) !'
Per year for 40 yean. The company can recover the amonization of Partially offsetting this decrease were expenses related to an early retire-
' ment program. In the second quaner of1995, $7.6 million related to the acquisition adjustmen: through cost savings under a sharing mechan-ism approved by the KCC.
early retirement programs was recorded as an expense.
Based on the order issued by the KCC, with regard to the recovery of The company has filed a request with the KCC to increase the annual the acquisition premium, the company must achieve a level of savings depreciation expense for Wolf Creek Generating Station (See Note 4).
on an annual basis (considering sharing provisions) of approximately 1994 Compared to 1993: Total operating expenses decreased 17%
$27 million in order to recover the entire acquisition premium.To the during 1994 primarily as a result of the sales of the Missouri Properties extent that the company's actual operations and maintenance expense is (See Note 2). Also contributing to the decrease were lower fuel costs for lower than the KCC-stipulated index, the company will realize merger electric generation and reduced natural gas purchases as a result oflower savings. The company has calculated, in conformance with the KCC sales caused by milder winter temperatures in 1994 compared to 1993. order, annual savings associated with the acquisition to be in excess of 27 v w
- - - ... - - - -- . ~. .- -. -- - ..
M ANA%E%ENT'S DISCUSSION AND AN ALYSIS W E $ T E R N R E S O U R C E S. I N C.
$27 million for 1995. As management presemly expects to continue not set in law, continue to be subject to the Environmental Protection this level of savings, the amount is expected to be sufficient to allow Agency's (EPA) rules-making procedures. The company will follow the for the full recovery of the acquisition premium. development of these regulations and establish compliance strategies when mandated by regulation (See Note 5).
OTHER INFORit ATION Competition:As a regulated utility, the company currently has limited inflation: Under the raremaking procedures prescribed by the regulatory direct competition for retail electric service in its certified service area.
commissions to which the company is subject, only the original cost of However, there is competition, based largely on price, from the genera- '
plant is recoverable in rates charged to customers. Therefore, because tion, or potential generation, of electricity by large commercial and ofinflation, present and future depreciation provision are inadequate industrial customers, and independent power producers. ,
for purposes of maintaining the purchasing power invested by common The 1992 Energy Policy Act (Act) requires increased efficiency of shareholders and the related cash flows are inadequate for replacing energy usage and has affected the way electricity is marketed. The Act property. The impact of this raremaking process on common share-also provides for increased competition in the wholesale electric market holders is mitigated to the extent depreciable property is financed with by permitting the FERC to order third pairy access to utilities' trans-debt that can be repaid with mission systems and by liberalizing the rules for ownership of generating d 11 rs ofless purchasing CAPITAL EXPENDITURES facilities. As part of the Merger, the company agreed to open access of MILLIONS OF DOLLARS power. While the Company its transmission system for wholesale transactions. During 1995, whole-has experienced relatively low sale electric revenues represented approximately nine percent of the 2M mflation in the recent past, company's total electric revenues.
the cumulative effect ofinfla-
- 1280' Operating in this competitive environment could place pressure on tion on operating costs may utility Profit margins and credit quality. Wholesale and industrial require the company to seek 1s0 cmmmers may threaten to pursue cogeneration, self-generation, retail regulatory rate relief to wheeling, municipalization or relocation to other service territories in recover these higher costs.
, an attempt to obtain reduced energy costs. Increasing competition has Environmental:The company rerulted in credit rating agencies applying mcm stringent guidelines has taken a proactive position
"~ when making utility credit rating determinations (Set " ate 1 for the with respect to the potential effects of competition on Statement of Financial Accounting Standards environmentalliability No. 71).
associated with former
- 88 - 88 '5 The company is providing competitive electric rates for industrial manufactured gas sites and expansion projects and economic development projects in an effort to has an agreement with the capital expenditures decreased maintain and increase electric load. During 1996, the company will Kansas Department of Health slightly and are expected to decrease 1 se a major industrial customer to cogeneration resulting in a reduc-and Environment to system-
- '"'"" ti n S Pre-tax earnings of approximately $7 to $8 million annually.
crically evaluate these sites This customer's decision to develop its own cogeneration project was in Kansas (See Note 5).
EMBEDDED COST OF DEBT based largely on factors other than energy cost.
PERCENT Although the company cur-To capitalize on opportunities in the non-regulated natural gas indus-rently has no Phase I affected
" units under the Clean Air Act try, the company, through its whollymwned subsidiary Mid Continent Market Center, Inc. (Market Center), has established a natural gas mar-of1990, the company has
- e ket center in Kansas. The Market Center, which began operations on applied for and has been July 1,1995, provides natural gas transportation, storage, and gathering accepted for an early substitu-tion permit to bring the services, as well as balancing, and title transfer capability. The company ,
transferred certain natural gas transmissi n assets having a net book co-owned La Cygne Station 4' Value f aPProximately $50 million to the Market Centet.The Market under the Phase I guidelines.
Cenrer will provide no notice natural gas transportation and storage -
The oxides of nitrogen and .
2- air toxic limits, which were sems m the company under a long-term contract.
91 92 93 94 95 Ths average interest rate on our debt rirnained stable this year and is still below 8%
28
O!NS!Ll?ATED CALANCE SHEETS W E S T E R N R E S O U R C E S, 1 N C.
December 31. (dollars in thousands) ^ IM i J 1994m Assets ,
1, i Utility Plant (Notes I and 8):
l Electric plant in service .. . .. . . . .
($ t EN1,874j ' $ 5.226.175 Natural gas plant in service . . . . . ... . ... N7,83 4 737,191.
[ L 8,138,527 . 4 5.963.366 Less - Accumulated depreciation . . .. M 1,915,530 6 1,790.266 I
- 4JetIN 4.173.100 Construction work in progress . . , .
ip ; III,401 y 85.290
, Nuclear fuel (net) . . . ., , . .
b EE3,9820 39.890 Net utility plant . . . . . . . ' *4.35,318- 4.298.280 Other Property and investments: Lj
{
Net non-utility investments . . . 98,s44 11 74.017 l
Decommissioning trust (Note 5) .
' M,0N f 16.944 J Other . . . .. 9,325 ~ 13.556
> 134,338 % 104,517 Current Assets:
Cash and cash equivalents (Note 1) . .
. 3.414 0 2.715 Accounts receivable and unbilled revenues (net) (Note 1) 57 jet ; 219,760 Fossil fuel, at average cost . . .
, g le,NI % 38,762 l
Gas stored underground, at average cost . .. II,HB L 45.222 Materials and supplies, at average cost . . . . .. . . .
p 57,IIs " ~ 56.145
~
Prepayments and other current assets . . , , . ' 30,873 " 27.932 b = 421,523 P 390.536 1 Deferred Charges and Other Assets: ?.
a j Deferred future income taxes (Note 9) . . . : 3BI,4M > 283.297 1 Deferred coal contract settlement costs (Note 4) . . . , 27,274 1 33.606 l Phase-in revenues (Note 4) .
8 H43,851 e ! 61.406 Corporate-owned life insurance (net) (Notes 1 and 6) ,
i44,143 1 16.967 Other deferred plant costs , . . .
31,538 - 31.784 Unamortized debt expec,e , . . .
f L 58,II1 L 58.237 Other . . . .. . .
!:- : 102,401 4 92.399 IIB,4IB . 577.6 %
Total Assets . . . . . i83 E4II,877 0 $ 5.371.029 4
CAPITALIZATION AND LIABILITIES Capitalization (See Statements): . . . ( 8 3,219,231 :' ' $ 3,006.341 Current Liabilities: [
Short-term debt (Note 12) .
E i ass,4pe < 308.200 Long-term debt due within one year (Note 10) . . ' 16,800
> ' 80 l Accounts payable
/140,194d 130.616 l
Accrued taxes '
- N,III L 86,966 i Accrued interest and dividends 82,157 i 61.069 Other . . . ; 4RJIS i 69,025 ;
s '5 538,835 655,956 Deferred Credits and Other Liabilities: -
Deferred income taxes (Note 9) . .
s1,167,4N i 1,152.425 Deferred investment tax credits (Note 9) . . (13tJII ~ ; 137.651 j Deferred gain from sale-leaseback (Note 13) , . 342,MO _ 252.341 Other . . , .
. IN J54 / 166.315 1,731,810 - 1.708,732 Commitments and Contingencies (Notes 3 and 5) , ,
Total Capitalization anci Liabilities . . . ! 8.J 5,400.477 > $ 5.371,029 (1) Information reflecu the sales of the Missouri Properties (Note 2).
The Notes to Consolidared Financial Statemenu are an integral part of this surement.
29
. - . - . . . - - - = = . - .- .-, .- ._
1 M,0!Ll! ATE 3 STATE!E2TS CF INEE W E S T E R N R E S o U R C E S. I N C. !
Year ended December 31. (dollars in thousands, except per share arnounts) < -Md 1994n 1993 4 1 Operating Revenues (Notes 1 and 4): ;Q
)..
Electric ... .,. . . .. . ,.. . . t 8 ? 1,14LIIIN $ 1.121,781 $ 1.104.537
- Natural gas . . . . . ,. . .. .
h l 4E116 ? 496,162 804,822 '
t Total operating revenues . . . . . . . . . . . b 11,512,871 a 1.617.943' 1,909.359 Operating Expenses k,1
- Fuel used for generation: P ,
Fossil fuel . . .. . .... . .. . . h 2 1,804; 220.766 - 237.053 Nudear fuel . . . . .. . ... . . . . F 1:Mes 13.562 13.275 Power purchased . . . . . . . . . , .. . . Eh' { 475 l 15.438 ' 16.396 , -1 Natural gas purchases . . ,. , .. .
( 38,1987, 312,576 500,189 1 Other operations . , . . . . . . p M7,279,y 303.391 349.160 Maintenance ..... . . . . . . . .
10I,841 j 113.186 117.843 Depreciation and amonization . . .
19L915 i . 151.630 164.364
- Amortization of phase-in revenues . . .
-; @[ L 17,545 j 17.544 17.545 .;
Taxes (See Statements): N '
Federalincome . . . . .
_.10,13 1 76.477 62.420 State income . . . . . . . (43883 19.145 15,558 General . .. .
- 'ILIIIQ 104.682 123.493 Total operating expenses . .. .
51,IIL8BF d 1.348.397 1.617.296 Operating income . . . 2434 M 269.546 292,063 Other income and Deductions: ~ P'
.Q ;
Corporate-owned life insurance (net) . . '(2,008) j (5.354) 7.841 Gain on sales of Missouri Properties (Note 2) . . .
30.701 .-
Miscellaneous (net) . . .. , .
- 28,4e7]1 12.838 18.418 Income taxes (net) (See Statements) .. . .
{'15,131 (4.329) (777)
Total other income and deductions . . < 5987d 33.856 25.482 P i 1: 1 income Before Interest Charges , . . . . . F LWl,IB1j 303.402 317.545 ;
4 a.;9 Interest Charges: n . di long-term debt . . . .. . . . p (EIII - 98.483 '123.551
. Other . ... . . . . . . . R t 27,8I0 ? 20.139 19.255 Allowance for borrowed funds used during construction (credit) . . . . .
VT L ,1(4,38)
, , a! (2.667) (2.631) -
t
- Not income .
Total interest charges . . .
.4 .
[
F
.144151 18tA15j 115.955 187,447 140.175 177.370 Preferred and Preference Dividends . , , , ,
h /13Aff 3 13.418 13.506 l Earnings Applicable to Common Stock . . . . . .
f 8' E100,357 3 $
174.029 $ 163,864 l L
e m
1
- e. . . . .a
' Average Common Shares Outstanding . . . . P y 82,157,125 d 61.617.873 59.294.091 W . 3 L . n.j ,
Earnings Por Average Common Share Outstanding . .. , ;. l $2.71 j $2.82 $2.76 A
Dividends Declared Per Common Share . . Y( ( ;. .$2.82] $1.98 $1.94 -
(1)Information reflects the sales of the Missouri !%perties (Note 2).
The Notes to Consolidated Financial Scarements are an integral part of this statement.
30
CINO2LCATED STATEMENTS CF CASH FLCSS W E S T E R N R E S O U R C E S. I N C.
Year ended December 31. (dollars in thousands) O i im !! 1994m 1993-Cash Flows from Operating Activities: [{ , h
- l Net income . . . . !$i E181,838A $ 187,447 $ 177,370 1 i
Depreciation and amortization .. . , ,
M SIE15d 151.630 164.364 Other amortization (including nuclear fuel) - 10,905 11,254 .
h ' $415 3 '
( Gain on sales of utility plant (net of tax) . . . . , ,
p i tul)j (19.296) -
I l Deferred taxes and investment tax credits (net) . . . (16,555). 27.686 j Amortization of phase-in revenues , . , ,. ,. ... . $g <; 17,545 1%M2y d 17,544 17,545 Corporate-owned life insurance . . . . . . . .
f - ((EIS)j (17.246) (21,650)
Amortization of gain from sale-leaseback . . , . . .. F i(RAG)1 (9.640) (9.640) !
l Amortization of acquisition adjustmeut . . . .
[3 s 0 8,3tBj -
Changes in other working capital items (net of effects b,_ g ,
from the sales of the Missouri Properties):
Accounts receivable and unbilled revenues (net) (Note 1) . [ ,Ll37,53t)] .d (75.630) (15.536) l l .
[ i Fossil fuel . .L ( (15,ISP (7.828) 18.073 Gas stored underground , ,. L17,116 (37,144) l f (5.403)
Accounts payable ,
! f.18,538 ? (41,682) (43.169)
Accrued taxes . . @ L(Est)! 20,756 7,485 )
Other . ,
f j8,1N] 41,309 25.400 !
Changes in other assets and liabilities . . . . h (112); 31,480 (45.927) )
E 8,900 a Net cash ' lows from operating activities ,
h 267,791 276.111 Cash Flows Used in Investing Activities:
. Additions to utility plant .
h<
Eh _ 23Lat7j d
237,696 237.631 Utility investment . P'(-g -
2.500 Sales of utility plant ) (1,721) 1 (402.076) ~-
Non-utility investments (net) .h@^ 1 M50 j 9.04): 14.271 I
Corporate-owned Efe insurance policies @ ; E1Nd 54,914 55.833 l
Death proceeds of corporate-owned life insurance policies itt1,187H . (1.251) (10.590) l f
Net cash flows used in (from) investing activities . p II4,III d (101.676) - 299.645 )
- v. ,
Cash Flows from Financing Activities: f *3 Short-term debt (net) M < (10 UII)] (132.695) - 218.670 Bank term loan retired . ,
k 6---jj -
(230.000) -
Bonds issued . . .. .
$* %)j 235,923 223 500 ,
Bonds retired . .
$ .i(105 3 (223,906) 0 66.466) l Revolving credit agreements (net) . .
f " }II,MS j (115.000)- (35.000) ,
Other long-term debt (net) , , i --W (67.893) 7,043 l Other mandatorily redeemable securities @l.10BAID , - -
Borrowings against life insurance policies (net) . . fy;{4I,015( 70.408 210.188 Common stock issued (net) F i 38,181i - 125,991 Preference stock redeemed N# i -- l - (2,734)
Dividends on preferred, preference, and common stock . h (137,905l3 (134.806) (127,316) l
, Net cash flows (used in) from financing activities . . $ T(12,705)$ (367,969) 23.876 p
Not increase (Decrease) in Cash and Cash Equivalents . . . . p J (301)j, 1.498 342 i Cash and Cash Equivalents: M *q Beginning of the period .
h ~ /2,55)9 1,217 875 e
End of the period . .
ji$i ? t,414 d $ ~ 2.715 $ 1,217 n
i
. Supplemental Disclosures of Cash Flow Information f Cash Paid for: T }1 Interest on financing activities (net of amount capitalized) . . $$(131,54B $ 134,785 $ 171,734 Income taxes ,s . 84,811 Jf 90.229 49,108 f
1 0; Information refluss the sales'of the Masouri Propenics (Note 2).
The Nines to Coneohdated Financial Statements are an integral pan of thu stacement.
31
1 CES!U! ATE) STATE ~ TENTS CF TAXES W E S T E R N R E S O U R C E S, I N C.
Yrar ended December 31. (doll. irs in thousands) L '1M 199401 1993 Federalincome Taxes: ..
Payable currently . 1$ l 51,218 '- $ 98,748 $ 41.200 l Deferred taxes arising from: C Alternative minimum tax credit .
- 23,815 E Depreciation and other property related items .
[ (1,813) j 29.506 25.552 Energy and purchased gas adjustment clauses 5w238 ' 9.764 (8.192)
Natural gas line survey and replacement program
,' 1,152 * (313) 355 .
Missouri Property sales . . .
[ ;c (36.343) -
Prepaid p,wer sale . l 1(23)j (13,759) -
Other . L . (7,008)3 (800) 6.166 . j Amortization ofinvestment tax credits [ 18,788)) (6.739) (1,982)
Total Federalincome taxes , , .
15,983' 80.064 63.099 l
Less: [. . -
Federal income taxes applicable to non-operating items: [
2 j
Missouri Property sales [ '
-f 9.485 -
1 Other , , ,. , , , . [
- (4,225 0 (5,898) 679 l Total Federal income taxes applicable [
to non-operating items . . . [' :(d,229) f 3,587 679 i.
Total Federal income taxes charged to operations 70,132 ; 76.477 62.420 l~
State income Taxes: I: J 4
' . 17,303 - 17,758 l Payable currently . 9.869 Deferred (net) . .. 1288 e 2,129 5.787 Total State income taxes . 17.489 19.887 15.656
[
Less:
State income taxes applicable to non-operating items 98
[ .(899) 742
. Total State income taxes charged to operations 18JII 19.145 15.558 General Taxes: [
Property and other taxes F . 83,738 i 86.687 84,583 Franchise taxes ! , 25 .? 5.116 22,878 ,
Payroll taxes . . . ' 13.075 0 12,879 16.032 I Total general taxes charged to operations : 98,53I 104.682 123,493 j
Total Taxes Charged to Operations [$ - 185,300 - $ 200,304 $ 201.471 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 incorne. The difference between the effective rates and the Federal statutory income tax rates are as follows:
Year ended December 31. , 19 5 - 199401 1993
~
Effective income Tax Rate , ' 31.8% 35.3 % 31.0 %
Effect of: l(
State income taxes . . . (4.3) 2 (4.6) (4.0) '
Amortization ofinvestment tax credits , , : 2.5 : 2.4 2.7 Corporate-owned life insurance .
Flow through and amortization, net .
E{ '
4 3.2 e
(.2) ?
2.1
(.7) 3.0 3.1 Other differences . b 2.0 - .5 (.8)
Statutory FederalIncome Tax Rate .
' 35.0% 35.0 % 35 0 %
(O Information reflects the sales of the Missouri Properties (Note 2).
The Notes to Consolidated Financial Statements are an inregral part of this statement.
32
In " making life a little easier,"
we want you to have the most complete, up-to-date information aCCOSS10 = western Res=rces at var fingertips- either via telephone ggg or on-line computer. Get immediate answers to your questions by going directly to answers. the source.
6771 b lCCS PO Box 889,818 Kansas Ave., Topeka, KS 66601 Shoreholder inquiries Wester Consumer Services 1-800-527-2495 913-575 1118 Investor Relations Wester Business Services 913-575-8226 913 575-1935 KPL Customer Action Center Mid Continent Merket Center 1-800-794 4780 913-575-1100 KGE Customer Action Center Internet 1-800 794-6101 http://www.wstnres. corn M k'gY a Mb2AdL.#,
a . . j. , ;
s - - c TWggo:egn a p-p l, U$$ Pflf,;;: .,
9.
., 7yf ,j'jhf h a (4;-h, n
Ahem f4 s).
ppgSL %+y;;QN
[j jf by~{ a _
M, lRIlil **Q L
y, .
, g w L f g/.Y)f ,a m
j ;-
g^, fi (c
I 7'
a c.
.M# i
~
- --. .. w. .y gy.
> l l l
1
~~
] ] M,, ...
s- . ] f d - . N ?
' gA@{$ agl[g a j
m'y r!
oe I
kr 3 !._ L
- - - ;2 j
I R d A N h! . ! !
) [fh ,
"$g -
- ;A@m =
N i s v g- ' t g
lll $
~
$, @ M d $
y n. m :. w ; y u 44
, ,.l.li:y':
p:;w. . n x .y.%:I.O en.i-$.?h.. t:. xy ::%.A.@h,'.f.:;bl y;- .e _
- *i ,M.' ,
d' f .~ l:l N . 'I;h. ; ; 'I' . *l ,
. . ;.b*{hs ;'ij.Ip. .*:;.L
$; 'O..;,l3;l.l i ][.;;'h;'M;Q:.
's9:::WL:;;:.> n:;;;..?>: .t!.::s: .
';Q W['+W', i Q:!l9.y;'i -
ll;[;;-;<;$$?lf['{'lll.),)$ *-[l.llj;.5:.v$ :s;.1,jj
" lf/$l?.?:7W @:fWG).M./: V pp Ch kh aw?&.
h ... . %.
.f:p?%:iMdwg : :: - *< e ' q; f. i f:.V. Yj.a . w & y b:. e.
. .. . M lNn::. m : e u 6hhhh;h.hkk.]U:}h}M*1?l;i&5$3.l,$:'
%a. saWenw?. :5.. M..,.. .t:y vx
.:s;R. .,..esm:4:?,9.
x.
Ms m.,,. . .y . ,. r lhb
< .N
. 4,.h!NNk;...a.'bh:5 (: $ *
?! . h': .i"Nbh i
N
CMSILl! ATE ~1 CTATEZE%TS CF CAPITALIZATliN WESTERN R E S O U R C E S,1 N C.
December 31. (dollari in thousands) 1985 - 1994 Common Stock Equity (See Statements):
Common stock, par value $5 per share, i authorized 85,000,000 shares, outstanding 62,855,961 and 61,617,873 shares, respectively . . ; $ ! !314,300 I $ 308,089 Paid-in capital . . . . .. . .. . . . 107,982 : 667,992 Retained earnings . . . .. . . 548,888 498,374 1,553,110 40% - 1,474,455 49 % i i
Cumulative Preferred and Preference Stock (Note 7): ,
- Preferred stock not subject to mandatory redemption, Par value $100 per share, authorized 600,000 shares, outstanding-41/.2% Series, 138,576 shares . . . . 13,858 - 13,858
' 41/e% Series,60,000 shares . . . 8,000 ; 6,000 5% Series,50,000 shares . . ' 5,see - 5,000
- 24,858 : '
24,858 Preference stock subject to mandatory redemption, ;
Without par value, $100 stated value, authorized 4,000,000 shares, outstandmg -
7.58% Series,500,000 shares .. . 50,000 50,000 8.50% Series, 1,000,000 shares , , , 100,000 - 100,000 !
l
- 190,000 1 150,000 i i
174,0I8 . 0%- 174,858 6% !
1 Company-Obligated Mandatority Redeemable i Preferred Securities of Western Resources Capitali Holding Solely Company Subordinated Debentures (Note 7): . . 100,000 3%L -
0%
Long-Term Debt (Note 10): .
-)
First mortgage bonds . . . .. . . - M1,ses 841,000 i Pollution control bonds . . . 521,817 : 521,922 Revolving credit agreements . . . . L 50,000 ; -
' less: . ..
Unamortized premium and discount (net) . , , ,
f 5.564 5.814 l long-term debt due within one year . . 18,000 80 1,391,283 43 % " 1,357,028 45 %
Total Capitalization , . . $ 3,219,231 :100% $ 3,006,341 100 % j 4
a l
l L-The Notes to Consolidated Financial Statements are an imegral part of this statement.
33
C'f'iSILL 31TE3 STATEZEITS f'F COM21CS STICK EIUITY W E S T E R N R E S o U R C E S. I N C.
COMMON PA!o-IN REWNED (dollars in thousanda) STocx CARIAL EARNWGS Balance December 31,1992 58,045,550 shares . . . . -, , , . $ 290.228 $ 559.636 $ 398,503 Net income . .. . . . . . - . .. . . . .
-177.370
. Cash dividends: . .
Preferred and preference stock . . .,, ... . . . . .
(13.506) l Common stock, $1.94 per share . . (116.019)
Expenses on common and preference stock . , ,.. . (3.453)
Issuance of 3,572,323 shares ofcommon stock . . . . . .. 17.861 111.555 :
1 Balance December 31,1993 -j 61,617,873 shares . .. . . .. 308.089 667,738 446.348 i Net income . . . . . 187.447 !
Cash dividends:
Preferred and preference stock , . , . . . .. (13.418)
Common stock, $1.98 per share , , . . (122.003) ,
Expenses on common stock :. .. .. . . . . . (228)
Distribution of common stock under the Customer Stock Purchase Plan . . . . . 482 Balance December 31,1994 61,617,873 shares . . .. . . . . , . 308.089 667,992 498.374 Net inceme , . . . . . . . . . 181.676 i Cash dividends:
Preferred and preference stock . . . , (13,419)
Common stock, $2.02 per share . . (125,763)
Expenses on common stock . . . . (772)
Irsuance of 1,238,088 shares of common stock . . . . 6,191 30,742 1
I
- Balance December 31,1995 .)'
62,855,961 shares . . . . . , . . . . , 8 314.200 - $ 897,982 $540,III
)
l
(~ The Notes to Consolidated Financial Statements are an imegral part of this statement.
l l 34' i
t
. ~- - - -- -
COTES TC CCOS!LIIATED FINANCIAL STATEMENTS WESTERN R E S O U R C E S. I N C.
- 1. SumuAsiv OF SIGNIFICANT be necessary for the company to reduce the carrying value of a portion ACCOUNTING POLICIES ofits plant and equipment to the ex. tent that it is expected to become General:The Consolidated Financial Statements of Western Resources, impaired. At this time, it is not possible to estimate the amount of the j I
inc. (the company) and its wholly-owned subsidiaries, include KPL, a company's plant and equipment, if any, that would be considered unre-rite-regulated electric and gas division of the company, Kansas Gas and coverable in such circumstances, as the effect of any future competition Electric Company (KGE), a rate-regulated electric utility and wholly. on the company's rates is not clear at this time.
, owned subsidiary of the company, the Westar companies, non-utility Utility Plant Utility plant is stated at cost. For constructed plant, cost j subsidiaries, and Mid Continent Market Center, Inc. (Market Center), includes contracted services, direct labor and materials, indirect charges j a regulated gas transmission service provider. KGE owns 47 percent of for engineering, supervision, general and administrative costs, and an j
- Wolf Creek Nuclear Operating Corporation (WCNOC), the operating allowance for funds used during construction (AFUDC). The AFUDC l company for Wolf Creek Generating Station (Wolf Creek). The com- rate was 6.31% in 1995,4.08% in 1994, and 4.10% in 1993.The ;
p2ny records its proportionate share of all transactions of WCNOC cost of additions to utility plant and replacement units of property i as it does other jointly-owned facilities. All significant intercompany are capitalized. Maintenance costs and replacement of minor items of transactions have been eliminated. The operations of non-utility sub. property are charged to expense as incurred. When units of depreciable !
sidiaries were not material to the company's overall results ofoperations. PmPerty are retired, they are removed from the plant accounts and the original cost plus removal charges less salvage are charged to The company is an investor-owned holding company. The company is
. . accumulated deprecianon.
engaged pn.ncipally .m the production, purchase, transmission, distribu-tion and sale of electricity and the delivery and sale of natural gas. The In accordance with regulatory decisions made by the KCC, amortization 1 company serves approximately 601,000 electric customers in eastern of the accpisition premium of approximately $801 million resulting j and central Kansas and approximately 648,000 natural gas customers from the KGE purchase began in August of 1995.The premium is i in Kansas and northeastern Oklahoma.The company's non-utility being amortized over 40 years and has been classified as electric plant subsidiaries whk h market natural gas primarily to large commercial in service. Accumulated amortization through December 31,1995, and industrif ,mers, provide other energy-related products and totaled $6.7 million.
services and ; W clectronic security services. In March 1995, the Financial Accounting Scandards Board (FASB)
The company pepares its fmancial statements in conformity with issued Statement of Financial Accounting Standards No.121, ,
generally accepted accounting principles as applied to regulated " Accounting for the Impairment oflong-Lived Assets and for Long- -l '
public utilities.The accounting and rates of the company are subject Lived Assets to Be Disposed Of" (SFAS 121).This Statement imposes to requirements of the Kansas Corporation Commission (KCC), the stricter criteria for regulatory assets by requiring that such assets be Oklahoma Corporation Commission (OCC), and the Federal Energy Probeble of future recovery at each balance sheet date. The company Reguhtory Commission (FERC). The financial statements require will adopt this standard on January 1,1996, and does not expect that management to make estimates and assumptions that affect the adoption will have a material impact on the fmancial position or results reported amounts of assets and liabilities, to disclose contingent of Operations based on the company's current regulatory structure. This assets and liabilities at the balance sheet date, and to report amounts conclusion may change in the future ifincreases in competition influ-I of revenues and expenses during the reporting period. Actual results ence regulation and wholesale and retail pricing in the electric industry.
could differ from those estimates. Depreciation: Depreciation is provided on the straight-line method The company follows the accounting for regulated enterprises based on estimated useful lives of property. Composite provisions for prescribed by Statement of Financial Accounting Standards No. 71 book depreciation approximated 2.84% during 1995,2.87% during
" Accounting for the Effects of Certain Types of Regulations" (SFAS 71). 1994, and 3.02% during 1993 of the average original cost of depre.
This pronouncement requires deferral of certain costs and obligations ciable property. The methods and rates of depreciation used by the based upon approvals received from regulators to permit recovery company have not varied materially from the methods and rates which or require refund of these costs and revenues in future periods. would have been used if the company were not regulated and not sub-Consequently, the recorded net book value of certain assets and liabili, ject to the provisions prescribed by SFAS 71. In the past, the methods ties may be different than that which would otherwise be recorded by and rates have been determined by depreciation studies and approved unregulated enterprises. On a continuing basis, the company re aews by the various regulatory bodies. The company periodically evaluates its the continued applicability of SFAS 71 based on the current regulatory depreciation rates considering the past and expected future experience and competitive environment. Although recent developments suggest in the operation ofits facilities.The company has proposed to more "the electric generation industry may become more competitive, the rapidly recover the company's investment in nuclear generating assets of degree to which regulatory oversight of the company will be lifted Wolf Creek to reduce the capital costs to a level more closely paralleling and competition will be permitted is uncertain. Currently, there are that of non-nuclear generating facilities (For information regarding no proceedings or actions at the KCC to open the company's electric such proposal, see Note 4).
markets to greater competition. As a result, the company continues to Consolidated Statements of Cash Flows: For purposes of the Consoli-believe that accounting under SFAS 71 is appropriate. If the company dated Statements of Cash Flows, the company considers highly liquid were to determine that the use of SFAS 71 were no longer appropriate, collateralized debt instruments purchased with a maturity of three it would be required to write-off the deferred costs and obligations that months or less to be cash equivalents.
represent regulatory assets and liabilities referred to above. It may also l
l 35
C%TEs TO CCXLl! ATE 3 FINANCIAL sTATEZE%Ts W E S T E R N R E S O U R C E S, I N C.
income Texes:The company accounts for income taxes in accordance are recorded in Corporate-owned 1.ife Insurance (net) on the with the provisions of Statement of Fmancial Accounting Standards Consolidated Balance Sheets:
No.109 " Accounting for Income Taxes" (SFAS 109). Under SFAS 109, 1995 1994 deferred tax assets and liabilities are recognized based on temporary dif.
ferences in amounts recorded for financial reporting purposes and their Idollars in millional respective tax bases (See Note 9). Cash surrender value of contracts. . $ 479.9 $ 408.9 Bo ngs agabst contracts . . (435.8) (391.9)
Investment tax credits previously deferred are being amortized to income over the life of the property which gave rise to the credits. C0lj(net) . . . $ 44.1 $ 17.0 Revenues: Operating revenues for both electric and natural gas Income is recorded for increases in cash surrender value and net death '
services mclude esumated amounts for services rendered but unbilled at proceeds. Interest expense is recognized for COU borrowings except the end of each year. Unbilled revenues of $66 milhon and $61 milhon for certain contracts entered into in 1993 and 1992. The net income are recorded as a component of accounts receivable and unbilled revenues generated from COU contracts purchased prior to 1992 including (net) on the Consolidated Balance Sheets as of December 31,1995 and the tax benefit of the interest deduction and premium expenses are 1994, respectively, recorded as Corporate-owned Life Insurance (net) on the Consolidated The company's recorded reserves for doubtful accounts receivable Statements of Income. The income from increases in cash surrender totaled $4.9 million and $3.4 million at December 31,1995 and 1994, value and net death proceeds was $22.7 rnillion in 1995, $15.6 million respectively. in 1994, and $19.7 million in 1993. The interest expense deduction taken was $25.4 million for 1995, $21.0 million for 1994, and $11.9 investments: The company records its investment and ownership per.
centage of earnings or losses utilizing the equity method of accounting million for 1993.
when the company's ownership interest allows it to exert significant The COU contracts entered into in 1993 and 1992 were established influence over the operations of an investec. to mitigate the cost of postretirement and postemployment benefits.
In December 1995, a non-regulated subsidiary's net assets were A8 SPProved by the KCC, the company is using the net income stream exchanged for a 20% equity interest in a corporation supplying gas generated by these COU policies to offset the costs of postretirement -
compression units to natural gas producers.This investment is valued and postemployment benefits. A sigmficant portion of tlus income -
at approximately $56 million, and is included in net non-utility invest- stream relates to the tax deduction currently taken for interest incurred ments on the Consolidated Balance Sheets as of December 31,1995. n contract borrowings under these COU policies.The amount of the interest deduction used to offset these benefits costs was $7.0 million Debt leeuence and Reacquisition Expense: Debt premium, discount, for 1995, $5.8 million for 1994, and $4.5 million for 1993.
and issuance expenses are amortized over the life of each issue. Under regulatory procedures, debt reacquisition expenses are amortized over Federal legislation is pending, which, if enacted, may substantially the remaining life of the reacquired debt or, if refinanced, the life reduce or eliminate the tax deduction for interest on COU borrowings, of the new debt. and thus reduce a significant portion of the net income stream gener-ated by the COU contracts (See Note 6).
Risk Management:The company is exposed to price risk from ReclassWicetione: Certain amounts in prior years have been reclassified fluctuating natural gas prices resulting from gas marketing activities of a non-regulated subsidiary. This subsidiary utilizes various fmancial to conform with classifications used in the current year presentation.
instruments to mitigate much ofits exposure to fluctuating market prices of commodities. These financial instruments are designated 2. SALES OF MISSOURI NATURAL as hedges and as such, gains or losses associated with these financial eAs oisTRisUTION PROPERTIES instruments are deferred until the commodity being hedged is On January 31,1994, the company sold substantially all ofits Missouri delivered. natural gas distribution properties and operations to Southern Union At December 31,1995, this subsidiary had entered into natural gas Company (Southern Union). The company sold the remaining financial instruments with a contractual volume of 11.05 billion cubic Missai properties to United Cities Gas Company (United Cities) n February 28,1994.The properties sold to Southern Union and feet expiring through 2000. The market value of these instruments as of December 31,1995, was $2.7 million more than the contract value. United Cities are referred to herein as the
- Missouri Properties." -
Fuel Coste:The cost of nuclear fuel in process of refinement, conver- The ponion of the Missouri Properties purchased by Southern Union y sion, enrichment, and fabrication is recorded as an asset at original cost was sold for $404 million. For information regarding litigation in c nnection with the sale of the Missouri Properties to Southern Union,
- and is amortized to expense based upon the quantity of heat produced see Note 3. United Cities purchased the company's natural gas
' for the generation of electricity. The accumulated amortization of
' nuclear fuelin the reactor at December 31,1995 and 1994, was $28.5 distribution system in and around the City of Palmyra, Missouri, for
$665,000. During the first quarter of 1994, the company recognized million and $13.6 million, respectively.
a gain of approximately $19.3 million, net of tax, on the sales of the cash surrender value of LNe insurance contracts:The following Missouri Properties. As of the respective dates of the sales of the Missouri amounts related to corporate-owned life insurance contracts (COU) Properties, the company ceased recording the results of operations, and removed the assets and liabilities from the Consolidated Balance Sheet related to the Missouri Properties. The gain is reflected in Other Income and Deductions, on the Consolidated Statements ofIncome.
38
NITES T3 C NS!Ll! ATE 3 FINAMIAL STATE %E*:TS W E $ 7 E R N R E S O U R C E S,1 N C.
The following table reflects the approximate operating revenues and Subject to the approval of the KCC, the company has entered into operating income induded in the company's consolidated results for five new gas supply contracts with certain Bishop entities which are the years ended December 31,1994 and 1993, and net utility plant currently regulated by the KCC. A contested hearing was held for the at December 31,1993, related to the Missouri Properties: approval of those contracts. While the case was under consideration by p% g the KCC, the FERC issued an order under which it extended jurisdic-Amount company rion over de Bishop entities. On November 3,1995, the KCC stayed (d@ars in thousands, unaudited) its considerat'on of the contracts between the company and the Bishop y entities until rie FERC takes fmal appealable action on its assenion Operating revenues . $ 77.008 4.8% ofjurisdiction Over the Bishop entities. The settlement of the panies' Operatingincorne . 4.997 1.9% disputes is not contingent upon the KCC's approval of these contracts.
The company and its subsidiaries are involved in various other legal, en nmem > *nd reSulamrY Proceedings. Management believes that Ope ating revenues . $349.749 18 3 %
Operating income . 20.748 7.1% adequate provision has been made wnhm the Consolidated Financial Net utility plant . . 296.039 6.6% Statements for these other matters and accordingly believes their ultimate dispositions will not have a material adverse effect upon Separate audited fmancial information was not kept by the company the company's overall fmancial position or results of operations.
for the Missouri Properties. This unaudited fmancial information is based on assumptions and allocations of expenses of the company 4. RATE MATTERS AND REGULATION
- as a whole.
The company, under rate orders from the KCC, OCC, and FERC, recovers increases in fuel and natural gas costs through fuel adjustment
- 3. LEGAL PROCEEDINGS clauses for wholesale and cenain retail electric customers and various On June 1,1994, Southern Union filed an action against the company, Purchased gas adjustment clauses (PGA) for natural gas customers. The The Bishop Group, Ltd., and other entities affiliated with The Bishop KCC and the OCC require the annual difference between actual gas Group, alleging, among other things, breach of the Missouri Properties cost incurred and cost recovered through the application of the PGA
' sale agreemerit relating to certain gas supply contracts between the be deferred and amortized through rates in subsequent periods.
company and various Bishop entities. Southern Union assumed KCC Rate Proceedings: On August 17,1995, the company filed with
~
these contracts upon the sale of the Missouri Properties and requested the KCC a request to more rapidly recover its investment in its assets unspecified monetary damages as well as declaratory relief. On August of Wolf Creek over the next seven years. If the request is granted, 1,1994, the company filed its answer and counterclaim denying all depreciation expense for Wolf Creek will increase by approximately daims assened against it by Southern Union induding claims related $L million for each of the next seven years. As a result of this pro-to the purchase price of the Missouri Properties.The disputed purchase posal, the company will also seek to reduce electric rates for KGE price adjustments were submitted to an arbitrator in February 1995. customers by approximately $9 million annuaPy for the same seven Based on the decision of the arbitrator rendered in April 1995, year period. .
Southern Union paid the company $3.6 million induding interest.
The request also reduces the annual depreciation expense by approxi- !
For additional information regarding the sales of the Missoun mately $11 million for electric transmission, distribution and cenain .
Propernes, see Note 2.
generating plant assets to reflect the effect ofincreasing useful lives of ,
In May 1995, Southern Union fded its amended complaint against these propenies. Hearings before the KCC on the depreciation changes i the company, alleging a variety of new theories in support ofits revised and voluntary rate reductions are expected to occur in May 1996.
damage claims. Southern Union now claims that it has overpaid th? In addition, the company filed a $36 million annual rate increase company from between $38 to $53 milhon dollars for the Missoun request for its Kansas natural gas properties.The increase is being Properues. The company has filed its amended answer denying each sought to recover costs associated with its service line replacement pro-and every daim made by Southern Umon m its amended complaint.
gram as well as other increased operating costs (See discussion below The company has filed motions for summary judgment against the regarding KCC order issued on January 24,1992). On January 26,
, amended complamt. The resolunon of this matter is not expected 1996, the KCC staff submitted testimony related to this rate increase to have a matenal adverse impact on the company.
recommending an increase of current gas rates of approximately l
'On August 15,1994 the Bishop entities fded an answer and claims
$34 million annually. The ultimate decision related to the company's
- against Southern Union and the company alleging, among other request resides with the KCC. Hearings before the KCC on the gas <
things, breach of those cenain gas supply contracts. The Bishop rate increase proposal are scheduled to begin February 19,1996, )
entities daimed damages up to $270 million against the company with approval of new permanent rates expected to become effective !
and Southern Union. On March 1,1995 this litigation between the in April 1996. I company and the Bishop entities was jointly dismissed with prejudice On June 30,1995, the KCC granted a certificate authori7.ing the busi-l and the parties exchanged mutual releases of any and all daims. The ness operations of the Market Center. The Market Center, which began :
j gas supply contracts at issue in the above haganon were canceled.
operations on July 1,1995, provides natural gas transportation, storage, The agreements between the company and the Bishop entities resolved and gathering services, as well as balancing, and tide transfer capability. J i disputes between them in regulatory proceedings before the KCC, the The company transferred certain natural gas transmission assets having l Missouri Public Service Commission, and the FERC. a net book value of approximately $50 million to the Market Center. l 37 I_____--__2. - -
z CCTES TO CCSILl3 ATE 3 Fl"AMIAL STATEZELT3 WESTEaN R E S o U R C E S, I N C.
On January 24,1992, the KCC issued an order allowing the company ' On January 26,1996, the company purchased 15.4 million of such to continue the deferral of service line replacement program costs ADT common shares for $215.6 million ($14 per share).The company incurred since January 1.1992, including depreciation, property has an option to purchase the remaining 15.4 million common shares taxes, and carrying costs for recovery in the next general rate case. At held by the corporation through May 1997 at the higher of $14 per December 31,1995, approximately $14.2 million of these deferrals share or the market price as defmed.
have been included in Deferred Charges and Other Assets, Other, The selling corporation has granted the company an irrevocable voting on the Consolidated Balance Sheet.
proxy with respect to the option shares during the option period. The Tl9ht sands: In December 1991, the KCC and the OCC approved shares purchased and the option shares represent approximately 24%
agreements authorizing the company to refund 't o customers approxi- of ADT's common equity. The company intends to account for its mately $40 million of the proceeds of the Tight Sands antitrust litigation investment in ADT using the equity method of accounting. ,
setdement to be collected on behalf of Western Resources' natural gas Manufactured Gas sites:The company has been associated with 15 customers. To secure the refund of settlement proceeds, the Commissions former manufactured gas sites located in Kansas which may contain authorized the establishment of an independently administered trust coal tar and other potentially harmful materials. The company and to ' collect and maintain cash receipts received under Tight Sands settle ^
the Kansas Department of Health and Environment (KDHE) entered ment agreements and provide for the refunds made.The trust has into a consent agreement governing all future work at the 15 sites. The a tenn of ten years, terms of the consent agreement will allow the company to investigate j Rate stabilization Plan: In 1988, the KCC ordered the accrual of these sites and set remediation priorities based upon the results of the phase-in revenues to be discontinued by KGE cffective December 31, investigations and risk analysis. The prioritized sites will be investigated 1988. KGE began amortizing the phase-in revenue asset on a straight- over a 10 year period.The agreement will allow the company to set line basis over 9 years beginning January 1,1989. At December 31, mutual objectives with the KDHE in order to expedite effective 1995, approximately $44 million of deferred phase-in revenues remain response activities and to control costs and environmental impact.
to be recoverei The costs incurred for site investigation and risk assessment in 1995 coal contract settlements: In March 1990, the KCC issued an order and 1994 were minimal. The company is aware of other Midwestern allowing KGE to defer its share of a 1989 coal contract settlement utilities which have incurred remediation costs ranging between mth the Pittsburg and Midway Coal Mining Company amounting 8500,000 and $10 million per site. The KCC has permitted another ta $22.5 million. This amount was recorded as a deferred charge and K,ansas utility to recover its remedianon costs through rates. To the is included in Deferred Charges and Other Assets on the Consolidated extent that such remediation costs are not recovered through rates, Balance Sheet. The settlement resulted in the termination of a long, the costs could be material to the company's financial position or term coal contract.The KCC permitted KGE to recover this settlement resuks of operations depending on the degree of remediation required and number of years over which the remediation must be completed.
as follows: 76 percent of the settlement plus a return over the remain-ing term of the terminated contract (through 2002) and 24 percent superfund sites: The company is one of numerous potentially respon-to be amortized to expense with a deferred rerum equivalent to the sible parties at a groundwater contamination site in Wichita, Kansas, carrying cost of the asset. (Wichita site) which is listed by the EPA as a Superftmd site. The c mPany has previously been associated with other Superfund sites In February 1991, KGE paid $8.5 million to settle a coal contract f which the company's liability has been classified as de mimmis and lawsuit with AMAX Coal company and recorded the payment as any potential obligations have been settled at mimmal cost. In 1994, a defered charge in Deferred Charges and Other Assets on the the company settled Superfund obligations at three sites for a total of Consolidated Balance Sheet. The KCC approved the recovery of the
$57,500.The company's obligation at the Wichita site appears to be settlement plus a return, equivalent to the carrying cost of the asset, hm,tedi based on this experience. In the opimon of the company's man-over the remaining term of the terminated contract (through 1996).
agement, the resolunon of this matter is not expected to have a material impact on the company's financial position or results of operations.
S. commermENrs AND CONTINGENCIES Clean Air Act:The Clean Air Act Amendments of 1990 (the Act)
As part ofits ongoing operations and construction program, the require a two-phase reduction in certain emissions. To meet the company has commitments under purchase orders and contracts monitoring and reporting requirements under the acid rain program, ,
which have an unexpended balance of approximately $92 million the company installed continuous monitoring and reporting equipment
-at December 31,1995. Approximately $20 million is attributable t at a total cost of approximately $10 million from 1993 through 1995.
- modifications to upgrade the three turbines at Jeffrey Energy Center The company does not expect additional equipment acquisitions .
to be completed by December 31,1998. or other material expenditures to be needed to meet Phase 11 sulfur In January 1994, the company entered into an agreement with dioxide requirements.
Oldahoma Municipal Power Authority (OMPA). Under the agreement, Other Environmental Matters:As part of the sale of the company's the company received a prepayment of approximately $41 million for Missouri Properties to Southern Union, Southern Union assumed which the company will provide capacity and transmission services t responsibility for any environmental matters related to the Missouri OMPA through the year 2013. Pmperties.The company may be liable for up to a maximum of Investment: On December 21,1995 the company entered into $7.5 million for 15 years after the date of the sde under a sharing Stock Purchase and Equity Agreements with another corporation to arrangement with Southern Union for environmental maners pending ,
acquire up to 30.8 million common shares of ADT Limited (ADT). or discovered within the two year period ended January 31,1996. j ADT's principal business is providing electronic security services.
J 30
D%TES TD CMS;Ll3 ATE 3 FIN A*"CI AL STATETE%TS W E S T E R N R E S O U R C E S, I N C.
I i
I
! Decommissioning:The company accrues decommissioning costs over (Owners) have purchased the maximum available private insurance the expected life of the Wolf Creek generating facility.The accrual is of $200 million and the balance is provided by an assessment plan j based on estimated unrecovered decommissioning costs which consider mandated by the NRC. Under this plan, the Owners are jointly and 1 inflation over the remaining estimated life of the generating facility and severally subject to a retrospective assessment of up to $79.3 million
, are net of expected earnings on amounts recovered from customers and ($37.3 million, compan/s share) in the event there is a major nudear l l deposited in an external trust fund. incident involving any of the nation's licensed reactors. This assessment l On June 9,1994, the KCC issued an order approving the estimated is subject to an inflation adjustment based on the Consumer Price decommissioning costs as determined by a 1993 Wolf Creek Decom- Index and applicable premium taxes. There is a limitation of missioning Cost Study to be recovered in races. The cost study estimated $10 million ($4.7 million, compan/s share) in retrospective j the compan/s share of decommissioning costs to be $595 million or assessments per incident, per year. -
approximately $174 million in 1993 dollars. The decommissioning The Owners carry decontamination liability, premature decom-costs are currently expected to be incurred during the period 2025 missioning liability, and property damage insurance for Wolf Creek throu;;h 2033. These costs were calculated using an assumed inflation totaling approximately $2.8 billion ($1.3 billion, compan/s share). I rate of 3.45% and an average after tax expected return on crust fund This insurance is provided by a combination of" nuclear insurance l assets of 5.9%. Decommissioning costs are being charged to operating pools" ($500 million) and Nuclear Electric insurance Limited (NEIL) expenses in accordance with the KCC order. Amounts expensed ($2.3 billion). In the event of an accident, insurance proceeds must approximated $3.6 million in 1995 and will increase annually to first be used for reactor stabilization and site decontamination.The l
$5.5 million in 2024. compan/s share of any remaining proceeds can be used for property I The compan/s investment in the decommissioning fund, induding damage or premature decommissioning costs up to $1.3 billion reinvested earnings, approximated $25.0 million and $16.9 a illion at (mmpanys share). Premature decommissioning insurance cost j December 31,1995 and December 31,1994 respectively.Tru.st fund remvery is excess f funds previously collected for decommissioning '
earnings accumulate in the fund balance and ' increase the recorded (as discussed under " Decommissioning").
decommissioning liability. These amounts are reflected in Decom- The Owners also carry additional insurance with NEIL to cover missioning Trust, and the related liability is induded in Deferred Credits costs of replacement power and other extra expenses incurred during ,
and Other Liabilities, Other, on the Consolidated Balance Sheets. a prolonged outage resulting from accidental property damage at Wolf The staff of the SEC has questioned certain current accounting Creek. Iflosses incurred at any of the nudear plants insured under the practices used by nuclear electric generating station owners regarding NEIL policies exceed premiums, reserves, and other NEIL resources, the recognition, measurement, and dassification of decommissioning the mmpany may be subject to retrospective assessments under the ;
costs for nuclear electric generating stations. In response to these current Policic8 of aPProximately $11 million. l questions, the FASB is expected to issue new accounting standards for Although the company maintains various insurance policies to provide removal costs, induding decommissioning in 1996. If current electric coverage for potential losses and liabilities resulting from an accident j utility industry accounting practices for such decommissioning costs are or an extended outage, the compan/s insurance coverage may not be ;
I changed: (1) annual decommissioning expenses could increase, (2) the adequate to cover the costs that could result from a catastrophic acci-estimated present value of decommissioning costs could be recorded as dent or extended outage at Wolf Creek. Any substantial losses not a liability rather than as accumulated depreciation, and (3) trust fund covered by insurance, to the extent not recoverable through rates, income from the external decommissioning trusts could be reported would have a material adverse effect on the compan/s financial as investment income rather than as a reduction to decommissioning condition and results of operations.
expense. When revised accounting guidance is issued, the company will Fuel Commitments:To supply a portion of the fuel requirements for its also have to evaluate its effect on accounting for removal costs of other l generating plants, the company has entered into various commitments long-lived assets. At this time, the company is not able to predict what to obtain nudear fuel and coal. Some of these contracts contain provi-effect such changes would have on results of operations, financial posi-sions for price escalation and minimum purchase commitments. At tion, or related regulatory practices until the final issuance of revised December 31,1995, WCNOC's nudear fuel commitments (companis accounting guidance.
share) were approximately $15.3 million for uranium concentrates
,The company carries premature decommissioning insurance which expiring at various times through 2001, $120.8 million for enrichment has several restrictions. One of these is that it can only be used if Wolf expiring at various times through 2014, and $72.7 million for fabrica-
- Creek incurs an accident exceeding $500 million in expenses to safely tion through 2025. At December 31,1995, the companis coal contract
, stabilize the reactor, to decontaminate the reactor and reactor station commitments in 1995 dollars under the remaining terms of the con-site in accordance with a plan approved by the Nudear Regulatory tracts were approximately $2.5 billion. The largest coal contract expires Commission (NRC), and to pay for on-site property damages. This in 2020, with the remaining coal contracts expiring at various times
- decommissioning insurance will only be available if the insurance funds through 2013.
j are not needed to implement the NRC-approved plan for stabilization Energy Act:As part of the 1992 Energy Policy Act, a special assessment and decontamination, is being collected from utilities for a uranium enrichment, decontami-i Nuclear Insurance:The Price-Anderson Act limits the combined public nation, and decommissioning fund. The compan/s portion of the liability of the owners of nudear power plants to $8.9 billion for a assessment for Wolf Creek is approximately $7 million, payable over single nuclear incident. If this liability limitation is insufficient, the 15 years. Management expects such costs to be recovered through U.S. Congress will consider taking whatever action is necessary to the ratemaking process.
compensate the public for valid claims. The Wolf Creek owners 39
' W E S T E R N R E S O U R C E S,1 N C.
' MTES TO CiNS!L12 ATE 7 FINANSIAL STATEUENTS l
l
- 6. EmPLovEE SENEFIT PLANS Based on actuarial projections and adoption of the transition method i Pension:The comoany maintains qualified noncontributory defined fimplementation which allows a 20-year amortization of the accumu.
lated benefit obligation, postretirement benefits expenses approximated benefit pension plans covering substantially all employees. Pension benefits are based on years of service and the employee's compensation
$15.0 million and $12.4 million for 1995 and 1994, respectively.
The company's total postretirement benefit oblyation approximated j during the five highest paid consecutive years out of ten before retire-
$123.2 million and $114.6 million at Decembt 3 s,1995 and 1994, ment. The company's policy is to fund pension costs accrued, subject to limitations set by the Employee Retirement Income Security Act re8Pectively. In addition, the company received an order from the KCC permitting the initial deferral of SFAS 106 expense in excess
. of 1974 and the Internal Revenue Code.
of amounts previously recognized. To mitigate the impact incremental seiery continuetion: The company maintains a non-qualified Execuu.ve SFAS 106 expense will have on rate increases, the company will include .
Salary Continuation Program for the benefit of certain management in the future computation of cost of service the actual postretirement employees, mcluding executive oflicers.
f benefits expenses and an income stream generated from COU contracts The following tables provide information on the components of pension purchased in 1993 and 1992. To the extent postretirement benefits and salary continuation costs under Statement of Financial Accounting expenses exceed income from the COU program, this excess is being Standards No. 87 " Employers' Accounting for Pension Plans" (SFAS 87), .
deferred (in accordance with the provisions of the FASB Emerging funded status and actuarial assumptions for the company: Issues Task Force issue No. 92-12) and will be offset by income gener-ated through the deferral period by the COU program. Because these Year ended December 31, 1995 1994 1993 expenses were deferred, there was no effect on the results of continuing 4 wars msands) operations in 1995. At December 31,1995, approximately $25.3 mil- l SFAS 87 Expense: lion of postretirement expenses had been deferred pursuant to the KCC I Service cost . $ 11.059 $ 10.197 $ 9.778 order. Pending federal legidation may substantially reduce or eliminate l tax benefits associated with COU contracts. If this legislation is enacted e it obligat on , , 32.416 29.734 35.688 (Gain) loss on plan assets . (102,731) 7.351 (64.113) or should the income stream generated by the COU program not be Deferred investment gain (loss) . 70,810 (38.457) 29.190 sufficient to offset postretirement benefit costs on an accrual basis, Netamortization . . 1.132 245 . (669) the KCC order allows the company to seek recovery of a deficiency
' Net expense , ,
$ 12,586 $ 9.070 $ 9.874 through the ratemaking process. Regulatory precedents established by -
the KCC generally permit the accrual costs of postretirement benefits to be recovered in rates.
D e 3t 1995 1994 M Idenarsin thousands) The following table summarizes the status of the company's postretire-fleconciliation of Funded Status: ment benefit plans for financial statement purposes and the related I Actuarial present value of amounts included in the Consolidated Balance Sheets: ;
benef!t obligations:
Daember 31 1995 1994 Vested . , . ,. . $331.027 $278.545 $353.023 Non-vested . 21.775 19.132 26.983 Idouarsin thousands)
Total . ., , $352.802 $297.677 $380.006 Reconciliation of Funded Status:
Actuarial present value of postratirement Plan assets (principally debt benefit obligations:
snd equity securities)at Retirees . $ 81.402 $ 68.570 fair value , , .
$444,608 $375.521 $490.339 Active employees fully eligible . 7.645 13.549
- Projected benefit obligation . 456.707 378,146 468.996 Active employees not fully eligible . 34.144 32,484 Funded status . . (12.099) (2.625) 21.343 Total . $123,191 $114,603 Unrecognized transition asset (527) (2.205) (2.756)
Unrecognized prior service costs 64,217 Fair value of plan assets 46 -
57.087 47.796 Unrecognized net (gain) . (75.312) (56,079) (108.783) Funded Status (123.145) (114.603)
Accrued liability . . $ (30.851) $(13,113) $ (25.979) Unrecognized prior service cost . . (8.900) (9.391)
Unrecognized transition obligation . 111.443 117,967 Unrecognized net (gain). (7.271) (14.489)*
Year ended December 31 1995 1994 1993 Accrued postretirement benefit costs . $ (27.873) $(20.516) .
Actuarial Assumptions:
Discount rate . .. 7.5% 8.0-8.5% 7.0-7.75% December 31 1995 1994 Annual salary increase rate 4.75 % 5.0% 5.0%
Long-term rate of retum . 8.5-9.0% 8.0-8.5% 8.0-8.5% Actuarial Assumptions:
Discount rate 7.5% 8.0-8.5%
Annual salary increase rate . 4 75 % 5.0%
Postretirement:The company adopted the provisions of Statement of Expected rate of retum . 9.0% 8.5%
Financial Accounting Standards No.106 " Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106) in the first For measurement purposes, an annual health care cost growth rate quarter of 1993. Tlus statement requires the accrual of postretirement of 11% was assumed for 1995, decreasing one percent per year to five benefits other than pensions, pnmanly medical benefit costs, during percent in 2001 and thereafter. The health care cost trend rate has a sig-the years an employee provides semce. nificant effect on the projected benefit obligation. Increasing the trend rate by one percent each year would increase the present value of the 40
CTE3 T3 C3%SIL1!ATED FCA%CIAL STATE %ENTS W '! S T E R N R E S 0 0 R C E S. I N C.
accumulated projected benefit obligation by $4.3 million and the on April 1,2002, and each April 1 through 2006 and the remaining aggregate of the service and interest cost components by 50.4 million. shares on April 1,2007, all at $100 per share.The company may, at Postemployment:The company adopted Statement of Financial its prion, redeem up to an additional 25,000 shares on each April 1 ;
Accounting Standards No. I12 " Employers' Accounting for at $100 per share. The 7,58% Series also is redeend!- 6. dnole or in '
Postemployment Benefits" (SFAS 112) in the first quarter of 1994, P" 85 the Prion of the company, subject to certain restrictions on which established accounting and reporting standards for postemploy. refunding, at a redemption price of $1c5.31, $104.55, and $103.79 ment benefits. The statement requires the company to recognize the Per share beginning April 1,1995,1996, and 1997, respectively.
- liability to provide postemployment benefits when the liability has been Other Menetority Redeemable Securities: On December 14,1995, incurred.The company received an order from the KCC permitting the Western Resources Capital I, a wholly-owned trust, issued four million
, initial deferral of SFAS 112 expense. To initigate the impact SFAS 112 preferred securities of 7 7/8% Cumulative Quartedy Income Preferred .
expense will have on rate increases, the company will include in the Securities, Series A, for $100 million. The trust interests represented
. future computation of cost of service the actual SFAS 112 transition
{
by the preferred securities are redeemable at the option of Western
]
costs and expenses and an income stream generated from COLI Resources Capital 1, on or after December 11,2000, at $25 per pre-contracts purchased in 1993 and 1992. At December 31,1995 approx- ferred security plus accrued interest and unpaid dividends. Holders imately $8.3 million of postemployment expenses had been deferred of the securities are entided to receive distributions at an annual rate i pursuant to the KCC order. Pending federal legislation may substan- of 7 7/8% of the liquidation preference value of $25. Distributions are tially reduce or eliminate tax benefits associated with COLI contracts. payable quarterly, and in substance are tax deductible by the company.
If this legislation is enacted or should the income stream generated by The sole asset of the trust is $103 million principal amount of 7 7/8%
t he COLI program not be suflicient to offset postemployment benefit Deferrable Interest Subordinated Debentures, Series A due December 11, costs on an accrual basis, the KCC order allows the company to seek 2025 (the Subordinated Debentures).
recovery of such deficit through the ratemaking process. The 1995 and In addition to the company's obligations under the Subordinated 1994 expense under SFAS 112 was approd nately $3.6 million and I Debentures, the company has agreed, pursuant to a guarantee issued S2.7 million, respectively. At December 31,1995 and 1994, the com-to the trust, the provisions of the trust agreement establishing the trust panfs SFAS 112 liability recorded on the Consolidated Balance Sheets and a related expense agreement to guarantee on a subordinated basis was approximately $8.7 million and $8.4 million, respectively.
payment of distributions on the preferred securities (but not if the trust 1 Savings:The corapany maintains savings plans in which substantially does not have sufficient funds to pay such distributions) and to pay all all employees participate. The company matches employees' contribu- of the expenses of the trust (collectively, the "Back-up Undertakings").
tions up to specified maximum limits. The funds of the plans are Considered together the Back-up Undertakings.
deposited with a trustee and invested at each employee's option in one The security obligations constitute a full and unconditional guarantee or more investment funds, including a company stock fund. The com-by the company of the trust obligations under the preferred securities, pan /s contributions were $5.1 million, $5.1 million, and $5.8 million The securities are shown as Western Resources Obligated Mandatorily for 1995,1994, and 1993, respectively.
Redeemable Preferred Securities of Subsidiary Trust holding solely ,
Subor5nated Debentures on the Consolidated Statemer.ts of -1
- 7. COMMON STOCK, PREFERRED STOCK, Capitalization.
PIEFERENOE STOCK AND OTHER MANDATORILY EEDEEMASLE SECURITIES
. The compan/s Restated Articles ofincorporation, as amended, provides 8. JOINT OWNERSHIP OF UTILITY PLANTS for 85,000,000 authorized shares of conunon stock. At December 31, 1 Company's OwnersNp at December 31.1995 l
'1995,62,855,961 shares were outstanding.
in-Semce Invest Accumulated Net Per- ,
The company has a Dividend Reinvestment and Stock Purchase Plan o,1,3 ,n n, nep,,aaijon m e,nt !
(DRIP). Shares issued under the DRIP may be either original issue shares or shares purchased on the open market. At December 31,1995, idollarsin thousanos) l La Cygne 1 (a) . Jun 1973 $ 155.566 $ 99.133 341 50 3,017,627 shares were available under the DRlP registrat on statement. Jeffrey 1(b) Jul 1978 285.357 116.771 587 84 flot subioet to mandatory redemption: The cumulative preferred stock Jeffrey 2 (b) May 1980 289.443 109.858 617 84 is redeemable in whole or in part on 30 to 60 days notice at the option Jeffrey 3(b) May 1983 389.157 143.862 591 84 Wf Creek (c) . Sep 1985 1.371.878 335.941 548 47
'of the company.
- Subject to mandatory redemption:The mandato sinking fund (aMointly owned with unas City P,wa & Light Company (KCPL)
(b) jointly owned with UtihCorp Un; red inc pmvisions of the 8.50% Series prefc ence stock require the company <c) joinay owned with KCrt and nnui ucciric Power Cm.panive. lac.
to redeem 50,000 shares annually beginning on July 1,1997, at 5100 Amounts and capacity represent the companfs share. The companis per share. The company may, at its option, redeem up to an addirional share of operating exp% Ct he plants in service above, as well as 50,000 shares on each July 1, at $100 per share. The 8.50% Series also such expenses for a 5~ nt undivided interest in La Cygne 2 is redeemable in whole or in part, at the option of the company, subject (representing 335 MW capacity) sold and leased back to the company to certain restrictions on refunding, at a redemption price of $196.23, in 1987, are included n operating expenses on the Consolidated
$105.67, and $105.10 per share beginning kiy 1.1991 %6 and Statements ofIncome TE companfs share ofother transactions 1997, respectively. associated with the p!mts r. included in the appropriate classification The mandatory sinking fund provisions of the 7.58% Series preference in the compan/s Consv.idated Financial Statements.
stock require the company to redeem 25,000 shares annually beginning 41
l NOTES 70 CZ2LI2 ATE] Fl2A*J1AL CTATEZE%TS ' W E S T E R N R E S o U R C E S, I N C. 1 9, income TAxss - there are no longer any bond sinking ftmd requirements. During 1996,
$16 million of bonds will mature, $125 million of bonds will mature Under SFAS 109, temporary differences gave rise to deferred tax assets and deferred tax liabilities at December 31,1995 and 1994, respectively, - in 1999 and $75 million of bonds will mature in 2000.
as follows: In January 1993, the company renegotiated its $600 million bank term loan and revolving credit facility used to finance the Merger into
" " a $350 million revolving credit facility, secured by KGE common stock.
Id "8'"" th "88'd81 On October 5,1994, the company extended the term of this facility to Defered Tax Assets expire on October 5,1999, The unused portion of the revolving credit Deferred gain on sale-leaseback . .. . '$ 105,007 $ 110,556 '
facility may be used to provide support for outstanding short-term Altemative Minimum tax carry forwards 18.740 41,163 debt. At December 31,1995, there was $50 million outstanding '
Otbr , ,, 30,789 29,162 under the facility, Total Deferred Tax Assets , , , $ 154,536 $ 180,881 term debt outstanding at December 31,1995 and 1994, was
. Deferred Taxliabilities:. as follows:
Accelerated Depreciation & Other $ 653.134 $ 661.433 Acquisition Premium , ,, 315.513 318,190 b8"*' 3 "
- 282,476 . 283,297 (dollarsin thousands!
Deferred Future Income Taxes ,
Other , , , , , , ,, , ,,, , 70,883 70,386 Western me.ource. l 8 9 "
TotalDeferredTaxliabilities , , $1,322,006 $1,333,306 7 d 99 . , $ 125,000 $ 125,000 Accumulated Deferred 87/8% due 2000 , 75,000 75,000 i income Taxes, Net . ., , $1,167,470 $1,152,425 71/4% due 2002 ,
100,000 100.000 l 81/2% due 2022 . . 125,000 125,000 f
7.65% due 2023. , , 100,000 100,000 l
In accordance with various rate orders received from the KCC and the 525 2 525 m I OCC, the company has not yet collected through rates the amounts necessary to pay a significant portion of the net deferred income tax ' Pollution control bond series.
liabilities. As management believes it is probable that the net future Variable due 2032 (1) . , , , 45,000 45,000 ;
variable due 2032(2). 30,500 30,500 increases in income taxes payable will be recovered from customers, 6% due 2033 . 58,420 58.500 it has recorded a deferred asset for these amounts.These assets are also ,
a temporary difference for which deferred income tax liabilities have 133,920 134,000
)
been provided. gg, I At December 31,1995, the company has ahernative minimum tax First mon 9 age bond series:
credits generated prior to April 1,1992, which carry forward without 5 5/8% due 1996 , 16,000 16,000 expiration, of $18,7 million which may be used to offset future regular 7.60% due 2003. . 135,000 '35,000 61/2% due 2005 , 65,000 85,000 tax to the extent' the regular tax exceeds the ahernative minimum tax.
These credits have been applied in determining the company's net 6.20% due 2006, 100.000 100 000 j deferred income tax liability and corresponding deferred future 316,000 316,000 income taxes at December 31,1995' Pollution control bond series:
5.10% due 2023. . . 13,957 13,982
- 10. Loma-Tenu pasT Variable due 2027 (3) , 21,940 21,940 7.0% due 2031 327,500 327,500 The amount of first mortgage bonds authorized by the Western Variable due 2032 (4) . 14,500 14,500 Resources Mortgage and Deed ofTrust, dated July 1,1939, as supple-Variable due 2032 (5) . 10,000 10,000 mented, is unlimited. The amount of first mortgage bonds authorized 387,897 387,922 by the KGE Mortgage and Deed ofTrust, dated April 1,1940, as supplemented,is limited to a maximum of $2 billion, Amounts of 4 additional bonds which may be issued are subject to property, earnings, Revolving Credit Agreement 50,000 and certain resmetive provisions of each Mortgage. Less:
Unamortized debt discount 5,554 5.814'
- Debt disco'm; and expenses are being amortized over the remaining 16,000 L ng-term debt due w, thin one year 80 lives of each issue. The Western Resources and KGE improvement and
$1,391,263 $1,357,028 maintenance fund requirements for certain first mortgage bond series can be met by bonding additional property, With the retirement of g g ,g9 , g%, g,, g ,%g, l
- j. certain Western Resources and KGE pollution control series bonds, I
l r
42 l
CC.Tes 73 COZXLIGATE] FlZAMIAL STATEZEETS - W E S T E R N R E S O U R C E S, I N C.
i 4 ;
- 11. secusNTs or susimass The portion of the table above related to the Missouri Propenies The company is principally a public utility engaged in the generation, is as follows: .
transmission, distribution, and sale of electricity in Kansas and the igg 4 l 3993 transportation, distribution, and sale of natural gas in Kansas and Idoriars ininousands, unaatited)
- Natural gas revenues . $ 77,008 $349.749 Year er:ded December',1, 1995 19 N 1993 Operating expenses excluding .
.e income taxes . . . 69,114 326,329 Idollars in thousands)
Operating reverraes:
Inc neaxes . . . 2,897 2.672
- }'
Operadng income . . . . 4,997 20,748 Electric. . , . . . $1,145,895 $1.121,781 $1.104.537 Natural gas ,
Identifiable assets . --
398.464
, 426.176 496,162 804,822 Depreciation and amortization . 1,274 12,668 1,572,071 1,617,943 1,909,359 Maintenance . . 1,099 10,504 Capital expenditures .. 3,682 38,821 Operating expenses exclud.mg e c. 791,563
. smme mT
. 788.900 768.317 Natural gas . , 419,267- 484,458 747,755 The company's short-term financing requirements are satisfied through 1.208.167 1.252,775 1,539,318 the sale of commercial paper, short-term bank loans, and borrowings ;
under unsecured lines of credit maintained with banks. Information income taxes: concerning these arrangements for the years ended December 31,1995, Electric. . . ... . 94,042 100,078 73,425 1994, and 1993,is set forth below:
Natural gas . . , , (5,522) (4,456) 4,553 Year ended December 31, 1995 19')4 1993 88,520 95.622 77,978 Operating income; Available lines of credit $121,075 $145,000 $145,000 .
Electric. . . . 262.953 253,386 239,549 Short-term debt out-Natural gas . .. . . 12.431 16.160 52.514 standing at year end .
203,450 308.200 440,895
$ 275,384 $ 269,546 $ 292,063 Weighted average interest rate ;
on debt outstanding at year '
identifiable assets at December 31: end(including fees). . 6.02 % 6.25 % 3.67% . )
Electric , . . $4,470,359 $4,346.312 $4,231,277 Maximum amount of short- j Naturalgas . .. , 712,858 654.483 1.040,513 term debt outstanding during Oth:r corporate assetsm 307,460 370.234 140,258 the period $355,615 $485,395 $443.895 l
$5,490.677 $5,371,029 $5.412.048 Monthly average I short-tenn debt . 301,871 214.180 347,278 l
Other Information- Weighted daily average interest :
Depreciation and amortization:
rates during the year l Electric . , $ 133,421 $ 123,696 $ 126.034 (including fees) 6.15% 4.63 % 3.44 % l Natural gas 23.494 27,934 38,330
$ 156,915 $ 151.630 $ 164,364 In connection with the above arrangements, the company has agreed to pay certain fees to the banks. Available lines of credit and the unused j Maintenance: portion of the revolving credit facility are utilized to support the com. l Electric . $ 87,942 $ 88,162 $ 8'.696 Pany's outstanding short-term debt. j Naturalgas . 20,699 25,024 30,147 l
$ 108,641 $ 113.186 $ 117.843 i
Capital expenditures:
Electric . $ 153,931 $ 152,384 $ 137,874
, Nuclear fuel . 28.465 20,590 5,702 Natural gas 54,431 64,722 94,055 i
$ 236.827 $ 237,696 3 237,631 (1) Information tdlects the sales of the Miamuri Properties (Note 2).
(2) Principally cash, temporary ouh investments, non-utihty assets, and deferred charges.
43
CTE7 T@ 7.C NS!Li! ATE 3 FITAMI AL STATEZENTS W E S T E h N R E S O U R C E S, I N C.
- 13. LEASES 14. FAIR VALUE OF FINANCIAL INSTRUMENTS At December 31,1995, the company had leases covering various The following methods and assumptions were used to estimate the fair property and equipment. Certain lease agreements in 1994 and 1993 value of each class of financial instruments for which it is practicable met the criteria, as set forth in Statement of Financial Accounting to estimate that value as set forth in Statement of Financial Account-Standards No.13, " Accounting for bases", for dassification as capital ing Standards No.107 " Disclosures about Fair Value of Financial leases. Capital lease payments were $'.0 million and $3.3 million in Instruments":
1994 and 1993, respeively. At December 31,1995, the company Cash and Cash Equivalents - .
had no capital leases. The carrying amount approximates the fair value because of the Rental payments for operating leases and estimated rental commitments short-term maturity of these investments.
are as follows: Decommissioning Trust -'
Operating The carrying amount is recorded at the fair value of the decommission-Year ended December 31 Leases ing trust and is based on' quoted market prices at December 31,1995 toonars in thousands) and 1994.
$ 55,011 Variable-rate Debt -
1993 , .
1994 ,. . 55.076 he carrying am unt approximates the fair value because of the 1995 63.353 sh rt-term variable rates of these debt instruments.
Future Commitments:
Fixed-rate Debt -
1996 55.992 The fair value of the fixed-rate debt is based on the sum of the 1997 49.892 estimated value of each issue taking into consideration the interest ,
1998 45,069 rate, maturity, and redemption provisions of each issue. !
1999 .
41,882 Redeemable Preference Stock - !
2000 , 41.292 The fair value of the redeemable preference stock is based on the 721 - !
Thereafter . sum of the estimated value of each issue taking into consideration Total . $955.871 the dividend rate, maturity, and redemption provisions of each issue. !
Other Mandatorily Redeemable Securities - ;
In 1987. KGE sold and leased back its 50 percent undivided interest The fair value of the other mandatorily redeemable securities is based ,
in the La Cygne 2 generating unit. The b Cygne 2 lease has an initial on the sum of the estimated value of each issue taking into considera-
. term of 29 years, with various options to renew the lease or repurchase tion the dividend rate, maturity, and redemption provisions of each issue.
the 50 percent undivided interest. KGE remains responsible for its share The carrying values and estimated fair values of the company's fmancial of operation and maintenance costs and other related operating costs of La Cygne 2. The lease is an operating lease for fmancial reporting I"8""**"'8 " 88 I II *5 I purposes. carrying value Fairvalue December 31 1995 1994 1995 1994 As permitted under the La Cygne 2 lease agreement, the company in 1992 requested the Trustee Lessor to refmance $341.1 million of Idonars m thousands) secured facility bonds of the Trustee and owner of b Cygne 2. The Cash and cash equivalents . $ 2,414 $ 2.715 5 2.414 $ 2,715 transaction was requested to reduce recurring future net lease expense.
Decommissioning trust . 25,070 16,944 25.070 16.633 In connection with the refi" ig on September 29,1992, a one-time Variable-rate debt 811.190 822.045 811.190 822.045 p2yment of approximately , .nillion was made by the company Fixed-rate debt . 1,240.877 1.240.982 1,294,365 1.171,866 which has been deferred and is being amortized over the remaining life Redeemable preference of the leae and included in operating expense as part of the future lease stock . 150.000 150.000 160,405 155.375 expense. At December 31,1995, approximately $23.7 million of this Other Mandatorily deferral remained on the Consolidated Balance Sheet. PD,000 -
Redeemable Securities -
102.000 Future minimum annual lease payments, included in the table above, ,
required under the La Cygne 2 lease agreement are approximately The fair value estimates presented herein are based on information
$34.6 million for each year through 2000 and $646 million over amilable as of December 31,1995 and 1994.These fair value estimates '
the remainder of the lease, have not been comprehensively revalued for the purpose of these finan- ,
The gain of approximately $322 million realized at the date of the cial stayments since that date, and current estimates of fair value may differ ugmficantly from the amounts presented herem.
sale of b Cygne 2 has been deferred for financial reporting purposes, and 'is being amortized ($9.6 million per year) over the initial lease Certain subsidiarica cf the company use financial instruments to hedge term in proportion to the related lease expense. KGE's lease expense, price fluctuations in ther portfolios of commodity transactions. The net of amortization of the deferred gain and a one-time payment, financial instruments used include futures and options traded on the was approximately $22.5 million for 1995,1994, and 1993. New York Mercantile Exchange and swaps and options traded in the over-the-counter market.These subsidiaries are subject to credic risk on its over-the-counter transactions and monitors the creditworthiness of its counterparties, which consist primarily oflarge financial institutions.
44
COTES T@ CC2f L1!ATED FINA%CIAL STATEEENTg WESTERN R E S O U R C E S, I N C.
1
- 15. OuARTERLv RESuLTS (UNAUDITED)
The amounts in the table are unaudited but, in the opinion of management, contain a! adjustments (consisting only of normal recurring adjust-ments) necessary for a fair presentation of the results of such periods. The business of thnompany is seasonal in nature and, in the opinion of management, comparisons between the quarters of a year do not give a true indication of overall trends and changes in operations.
First Second Thud - Fourth (dollars in thousands. except per share amounts) 8 1995 Operatingrevenues , $ 417.546 $ 333,380 $ 423,860
, $ 397,285 Operating income 68.517 48,029 99,429 59,409 Net income 41,575 21,716 71,905 46,480 Eamings applicable to common stock 38,220 68,550 18.362 43,125 Eamings per share . $ 0.62 $ 0.30 $ 1.10 $ 0.69 Dividends per share . $ 0.505
$ 0.505 $ 0.505 $ 0.505 Average common shares outstanding 61,7< 7 61,886 62,244 62,712 Common stock price:
High . 5 ?33/8
$ 32 1/2 $ 32 7/8 $ 34 Low $ 285/8 $ 30 1/4 $ 29 3/4 $ 31 1994ni Operating revenues . .
$ 538.372 $ 341,132 $ 379,213 $ 359.226 Operating income 73.782 53,899 83,884 57,981 Netincome , 66,133 30.247 57,679 33,388 Eamings applicable to common stock 62,779 26,892 54,324 30,034 Eamings per share . $ 1.02 0.44
$ $ 0.88 $ 0.48 Dividends per share . S 0.495 $ ' 0495
$ 0.495 $ 0.495 Average common shares outstanding 61,618 61,618 61,618 61,618 Common stock price:
High $ 34 7/8 $ 29 3/4 $ 29 5/8 $ 29 1/4 Low $ 28 1/4 $ 26 1/8 $ 26 3/4 $ 27 3/8 (1) Information reflects the sales of the hiusnuri Properties (Note 2).
CEP*RT OF INDEPENDENT PUBLIC ACCOUNTANTS T3 THE SHAREHOLDERS AND BOARD OF DIRECTORS CF WESTERN RESOURCES, INC.: as evaluating the overall fmancial statement presentation We believe p
We have audited the accompanying consolidated balance sheets and statements of capitahzanon of Western Resources, Inc., and subsidianes In our opinion, the financial statements referred to above present fairly, as of December 31,1995 and 1994, and the related consolidated state- in all material respects, the consolidated financial position of Western Resources, Inc., and subsidiaries as of December 31,1995 and 1994,
, ments ofincome, cash flows, taxes and common stock equity for each
, of the three years m the period ended December 31,1995. These W didd aluf Waim&id b for each of the three years in the period ended December 31,1995, fmancial statements are the responsibihty of the company's manage-e ment. Our responsibibry is to express an opmion on these fmancial in conformity with generally accepted accounting principles.
st2tements based on our audits. As explained in Note 6 to the consolidated financial statements, effec.
We conducted our audits m accordance with generally accepted tive January 1,1993, the company changed its method of accounting auditmg standards.Those standards require that we plan and perform for postretirement benefits and effective January 1,1994, the company the audits to obtam reasonable assurance about wie her the financial r!= ;ed its rt.cthod of accounting for postemployment benefits.
statements are free of material misstatement. An audit includes examin-ing, on a test basis, evidence supporting the amounts and dEclosures in ARTHUR ANDERSEN LLP the financial statemene An audit also includes assessing the accounting Kansas City, Missouri, l principles used and signiheant estimates made by management, as well January 26,1996 l
l 45
TEN. YEA] OCPAIATIVE CATA
> 12COME STATEMENT DAT A ($1.000s):
Operating Expenses Depre-Total Fuel . Power Natural ciation &
Operating Used for Purchased Gas Other Main- Amorti- Operating Years Revenues' Generation (Net) Purchases ~ Operations tenance ration Taxes income 1995 $1,572,071 $231,419 $15,739 $263,790 $317,279 $10B,641 $174,460 $105,359 $275,304 1994m 1,617,943 234,328 15,438 312,576 303,391 113,186 169,174 200,304 269.546 292,063
- 1993 1,909,359 250.328 16,396 500,189 349.160 117,843 181,909 201,471 1992m 1.556,248 200,779 14,819 403,326 296.642 101,611 157,171 142,731 239,169 e 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 2.658 456,868 178,448 57,817 76,815 96.478 131,990 1.127,623 149,796 148 451,896 171,094 58,442 73,305 97.406 125,536 1989 1988 1,166.114 148,787 (2,356) 486,347 165,234 55,128 70.406 112,146 130,422 1987 1,166.458 144,495 2,328 485.995 153,789 49,598 67,804 124.115 138,334 1980 1,198,884 144,693 2,065 511.344 151.676 45,842 65,208 135.417 142,639 kLECTRIC STATISTICS:
Company System Supply MWH Sales (1,000s) at Peak Hour (Not MW)
System System Peak Accredited Net Responsi- Generating System Years Residential Commercial Industnal Other Total Load bility ni Capacity Capacity oi 5,088 5,453 5,619 4,120 20,200 3,979 4,004 5,240 4,966 1995 5,003 5.368 5,410 4,005 19,786 3,720 3,730 5,230 4,960 1994 4,960 5,100 5,301 4,628 19,989 3,821 3.827 5,184 4,985 1993 3,842 4,473 4.419 3.119 15.853 3,583 3,590 5,139 4,807 1992m 1991 2,556 3.051 1,947 1,984m> 9,538si 1,973 1,959 2,622 2.367 2,403 2,952 1,954 1,820 9.129 1,957 1,948 2.589 2,344 !
1990 2,248 2,814 1,925 2,077 9.064 1,838 1,823 2.589 2,345 1989 1988 2,296 2,782 1,877 2,174 9,129 1,926 1,919 2,526 2.287 2,153 1,816 2,001 8.603 1,818 1,821 2,505 2,241 1987 2.633 2,075 2,521 1,821 2,125 8,542 1,737 1,740 2.531 2,262 1986 N ATURAL GAS STATISTICS:
MCF Sales (1,000s)
Average Cost of Gas Purchased Years Hesidential Co.amercial industrial Other Transportation Total Per MCF 55,810 21,245 548 17,078 48,292 142,973 $2.68 1995 64,804 26,526 605 43 51,059 143,037 3.06 1994m 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 2.74 240,042mi '
1991 97,297 47,075 2.655 14,960mi 78.055 2.87 1990 95,247 43,973 3.207 1,361 72,623 216,411 2.90 1989 104,057 47,339 5,637 1,403 58,025 216.461 2.75 e 104,471 52,567 19,929 2,455 37.424 216,846 2.57 1988 1987 94,842 50,946 29.917 2,101 24,584 202,330 2.67 1986 97,368 54.132 48.181 2.523 5,752 207,956 2.50 I
(1) Information reflecu che sales of the Manuri hoperties (Noic 2).
(2) Information reflecu the merger with KGE on March 3 t,1992.
(3) Net of chystem sales and purchases.
(4) Rrsiated to reflect tw+for<me seack sphr on May 5,1987.
46
W E S T E R N R E S O U R C E S, I N C, Other income and Deductione Interest Chargee ' income, Earnings, and Dividends Other Eamings Earnings Dividends income & Preferred & Applicable ' per Declared per ,
AFUDC Deductions Long-Term AFUDC- Net Preference to Common Common - Common Equity (Net) Debt Other Debt income Dwidends Stock Share 14) Share 14)
$- $25,907 8 95,962 $27,059 $(4.206) $181,676 $13,419 $188,257 $2.71 $2.02
- 33,856 98,483 20,139 (2,667) 187,447 13.418 174,029 2.82 1.98
- - 25,482 123,551 19,255 (2,631) 177,370 13,506 163,864 2.76 1.94
- - 24,186 117,464 20,009 (2,002) 127,884 12,751 115,133 2,20 1.90 3,351 51,267 10,490 (1,070) 89,645m 6,377 83.268m 2.41:si 2.04 s
- 9,012 51,542 11,022 (1,181) 79.619 1,744 77,875 2.25 1.80 859 46,378 8.742 (1,503) 72,778 1,857 70,921 2.05 1.76 (461) 44,362 7,135 (1,327) 79,791 1,970 77,821 2.25 1,72 375 1,188 48,185 3.517 (496) 88,691 3.700 84,991 2.46 1.65 366- 750 50,213 2,902 (742) 91,382 7,633 83,749 2,42 1.58 Utility Mont Electric Revenues ($1,000s) Customers ($1,000s)
Other Average Gross Residential Commercial Industrial & Misc. Total Total Additions Total
$396,025 $340,819 $268,947 $140,104 $1,145,895 000,791 $179,000 $5,415,754 388,271 334,059 265,838 133,613 1,121,781 593.859 164,305 5.293,995 384,618 319,686 261,898 138,335 1,104,537 585,042 147,556 5,169,915 296,917 271,303 211,593 103,072 882,885 577,918 93,340 5,048,903 160,831 149,152 78,138 83.718 471,839 306.203 42,387 1,684,147 152,509 146,001 79.225 85,972 463,707 303,535 46.697 1,649,367 142,308 139,567 78,267 92.201 452,343 300,028 54,207 1,613,095 149.155 138,318 77,201 96,486 461,160 295,072 62,010 1,563.444 149,914 143,084 82,972 93,755 469,725 295,371 52,792 1,510.067 150,950 145,166 89,084 97,674 482,874 291,967 47,526 1,466,334 Utility Mont Natural Gas Reveaues ($1,000s) Customers ($1,000s)
Other Average Gross Hesidential Commercial Industrial & Misc. Total Total Additions Total
$274,550 $ 94,349 $ 3,051 $54,226 $426,176 648,016 $ 53,162 $ 700,255 332,348 125,570 3,472 34,772 496,162 684,809 64.125 750,496 529,260 209.344 7,294 58,924 804,822 1,092,713 100,324 1,129,792 440,239 169,470 7,804 55,850 673,363 1,083,467 89.520 1,040,373
- 433,871 182.486 10,546 63,436 690,339 1,067,640 80.630 865,448 439.956 176,279 12.994 56,819 686,048 1,059,140 84,553 789,428 e 430,250 172,628 18,021 54.381 675,280 1,053,787 91,613 708,787 418,190 181,5G'l 57,434 47,824 704,954 1,042,140 50,227 620,803 t
390.218 178,402 87.207 40,906 696,733 1,030.422 49,906 572,382 386,954 184,721 131,090 13,245 716.010 1,011,686 46.319 520,631 i
(5) Incimics special, one4ime dividend of 50.18 per shue paal February 28.1991.
(6) Includes cumulative effcci to January 1,1991, of change in revenue recognition 5t7,360,000 or 50.50 per share increme.
The cumulaive etTect ofilm change increased natural ga sales by 14,838.rsoo MCF and electric sales by 256,000 MTll.
t 47
C1! ECTO 13 A'O CFFl!EIS W E S T E R N R E S O U fi C E S. I N C.
l Cl2ECTORS OFFICERS Frank J. Becker (59) Russell W. Meyer, Jr. (63) EXECUTIVE OFFICERS CORPORATE
~
John E. Ilayes,Jr. (58) 1989 James T. Clark (55) 1978 dn Cha rm n } Chief Executive Chairman of the Board. President, Vice President, Managemer.t Becker Investments, Inc. Officer and Chief Execuuve Omcer Informanon Systems and Lawrence, Kansas Cessna Aircraft Company Comminm: As.dit and Finance, Wichita, Kansas William E. Brown (56.) 1962*
Corporate Public Polig Comminm Human Rnouren, Executive Vice President and Chief Wd' liam G. Eliason (43) 1988 - ,
- "'"# "# P"* "3 '" '" ** P"' "*
Gene A. Budig (56) . .
Elected 1987. John H. Pobinson (68) James S. liaines, Jr. (49) 1980 Richard M.11aden (56) 1966 l President Elected 1991. Executive Vice President and Chief Executive Vice President. Field .
American League of Professional Chairman Emeritus Operating Officer Services
- Baseball Clubs . Black & Vearch New York, New York Kansas City, Missouri . Steven L Kitchen (50) 1964 James A. Martin (38) 1983 Executive Vice President and Chief Vice President, Finance
Gmminm: Audit and Finance. Comminm Corporate Public Slig Human Rnouan hnancial Officer N:minating Carl Ricketts (38) 1982 Carl M. Koupal,Jr. (42) 1992 Vice President, Labor C. Q. Chandler (69) Marjorie I. Setter (71)
Elected 1992.*
h**C""v '
Elected 1992.
Chairman of the Board Consultant Admuu. eOmen stranve Vice President Vice andPresident, David Chief E. Roth (40) 1979 Human Resources INTRUST Financial Corporation Armstmng Shank Marketing John K. Rosenberg (50) 1979 Wichita, Kansas Wichita, Kansa5 Executive Vice President and Mark A. Ruelle (34) 1986 Ommittm: AuditandFinance, Committm: Human Raourca. General Counsel Vice President Corporate Corporate Publiclblig Corporate Public Polig Development David C.Wittig (40) 1995 Thomas R. Clevenger (60) Louis W. Smith (52) Executive Vice President, Corporate Edward H. Schaub (64) 1989 Dected 1975. Elected 1991. Vice President, Government Affairs ,
Strategy investments and Financial President and Chief Operating Conadtant Oflicer J,erry D. Courington (50) 1977 Wichita, Kansas Ewing Marion Kauffman RETAIL OPERATIONS Gmmittm AuditandFinance, Foundation KPL .gThomas E. Shea (46) 1972
. Nominating Kansas City, Missouri
"""' Bqan (54) 1W John C. Dicus (62)
Elected 1990.
- N[#,
f', Richard D. Terrill (41) 1980 Secretary Chairman of the Board and Susan M. Stanton (47) MoE President Elected 1995. WESTAR CAPITAL Capicol Federal Savings and Ioan President and Chief Operating Kent R. Brown (50) 1982[
Associanon Officer President and Chief Execuove C. Bob Cline (49) 1991 Chairman, President, and Chief Topeka, Kansas Payless Cashways, Inc. Officer Execuuve 0%cu -
Committm: Corporate Publiclblig Kansas City. Missouri re ( ) 78
'IIiam B Human Raouren Committen: Corporate Public Polig ,;
"""#" "*" SERVICES John E.11 ayes, Jr. (58) President Elected 1989. Kenneth J.Wagnon (57) Kenneth T.Wymore (43) 1974 )
Chairman of the Board, President, Elected 1987. Richard D. LaGree (65) 1956*
President Vice President, Field Operations and Chief Executive Officer President Westan Resources,Inc. Capital Enterprises, Inc. Rita A. Sharpe (37) 1977 Wichita, Kansas GENERANN Vice President Topeka, Kansas mnunm: Human Raourn, David H.11aghes (67) Thomas L Grennan Q3) 1974 Rodrick S. Donovan (37) 1994 Nonunanng Vice President, Generanon Services Und 1988. Vice President
- ' "'" TRANSMISSION flafmar Ir c. WESTAR CONSUMER SERVICES Kansas City, Missouri Norman E. Jackson (58) 1960 Comminen: Nominating, Executive Vice President, Electric Steven A. Millstein (43) 1995 Corporate Public Policy Transmission and Engineerin8 President a Services Hans E. Mertens (46) 1990 Vice President, Electric ,
Transmission Services I
() Age an of December 31.1995 Date joined Wesacrn Resources or prednesnor wmpany j
% Sener retired from rhe Board of Durctors effective May 2. I995.
l [1] Mr. William E. Brown reiired from the company e6ccrive June 30.1995.
f
[2) Mr. Kent R. Bmwn -tired from the company effeaive June 15.1995.
[3] Mr. Rwhard D. laGree retired fmm the company cKeaive June 15,1995.
4
1;VESTCO INFICATl:0 WESTERN R E S O U R C E S, I N C.
l l ' SHAIEHOLDER AZ) A!SISTANCE INFORM ATION INVESTOR RELATIONS Secun.ty analysts seekm.g mformation about the company, The Sharehokler Services Department provides information and Pl ease call 913-575-8226, or write:
i assistance to shareholders, including inquines regarding lost, stolen, or destroyed dividend checks. Write or call our roll-free number, Director ofInvestor Relations 800-527-2495 from 8 am to 5 pm (Cenital Time). In the Topeka area, Western Resources call 575-6394 (FAX 913-575-1796). PO. Box 889 Topeka, KS 66601-0889 L Written inquiries should be addressed to:
Western Resources Internet Address:investrel@wstnres.com Copies of the Form 10-K Annual Report to the Securities Shareholder Services -
f P.O. Box 750320 and Exchange Commission and other published reports can Topeka, KS 66675-0320 be obtained without charge by contacting Investor Relations at the above address.
internet Address: sharsvcs@wstnres.com Please include a daytime telephone number in your correspondence- STOCK TRAN8FER AGENTS AND REGISTRARS CIVI END REINVESTMENT Western Resources, Inc.
i A;3 STOCK PURCHASE PLAN P.O. Box 750320 Western Resources offers common shareholders a program to Topeka, Kansas 66675-0320 purchase additional shares of common stock. Options of the Continental Stock Transfer & Trust Company Dividend Remvestment and Stock Purchase Plan include full or '
2 Broadw partial reinvestment of dividends, optional cash payments, invested New York New York 10004 semi-monthly, automatic electromc mvestment, and safekeepmg of i share certificates. Investors may become a Western Resources shareholder through the Plan with a mmimum minal investment COm m me of$250. Ticker Symbol (NYSE): WR Daily stock table listing: WstnRes To receive additionalinformation about the Dividend Reinvestment and Stock Purchae Plan, please contact Shareholder Services at the TRUSTEE FOR SONDS number listed above.
PrincipalTrustee, Paying Agent, and Registrar Ci:ECT DEPOSIT OF DIVID END3 ards Tmst and Savings Bank Western Resources offers, at no charge, the option of direct deposit U I **St M "r e Street of dividends. Quartedy dividend payments are deposited directly to Chicago, Illmo.is60603-4003 your bank accoun. the same day the dividends are paid. Participating Call collect 312-461-6838 shareholders receive a record of the transaction. To enroll for this service, wrjre or call Shareholder Services to request an authorization CORPORATE ADDRESS
. form. The form must be received at least 30 days prior to she dividend Western Resources ,
payment date. 818 Kansas Avenue Topeka, Kansas 66612-1217 CUPLICATE M AILINGS To climinate duplicate mailings, possibly because of stock registered Intemet site at http://www.wstnres.com in more than one way, please write Shareholder Services. Western Appliance Carer Westarr and " making life a litr/c casier,=
- Resources is required, by law, to create a separate account for each are senice marks of Western Resources, Inc.
name when stock is held m similar but different names (e.g. John A.
Smith, John Smith, John A. Smith & Mary Smith JT TEN, etc.). ,,y,,,,,,
Help us reduce mailing and record keepmg costs by consolidanng Anticipated record and payment dates for 1996 dividends on y ur accounts.
a Western Resources common stock:
2 AZU AL MEETING Record Payment
.The annual meeting of shareholders will be at: December 5,1995 January 2 March 4 April 1 11:00 a.m., Tuesday, May 7,1996, at June 4 July 1 Kansas Expocentre September 4 October 1 Maner Conference Center One Expocentre Drive Topeka, Kansas OL;
'1% repon was printed on recyded paper using soy & sed inks.
l l <&h ,
49
i yWestern Resources P.O. Box 889, Topeka, Kansas 66601-0889 http://www.wstnres.com