SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission File Number 1-3523
WESTERN RESOURCES, INC.
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 48-0290150
(State or Other Jurisdiction of (Employer
Incorporation or Organization) Identification No.)
818 KANSAS AVENUE, TOPEKA, KANSAS 66612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code (913) 575-6300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 30, 1997
Common Stock, $5.00 par value 65,220,373
<page1>
WESTERN RESOURCES, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4 - 6
Consolidated Statements of Cash Flows 7 - 8
Consolidated Statements of Capitalization 9
Consolidated Statements of Common Stock Equity 10
Notes to Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Part II. Other Information
Item 4. Submission of Matters to a Vote to Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
<page2>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
UTILITY PLANT:
Electric plant in service . . . . . . . . . . . . . . . $5,495,749 $5,448,489
Natural gas plant in service. . . . . . . . . . . . . . 860,752 834,330
6,356,501 6,282,819
Less - Accumulated depreciation . . . . . . . . . . . . 2,131,200 2,058,596
4,225,301 4,224,223
Construction work in progress . . . . . . . . . . . . . 93,487 93,834
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . 43,998 38,461
Net utility plant. . . . . . . . . . . . . . . . . . 4,362,786 4,356,518
INVESTMENTS AND OTHER PROPERTY:
Investments in ADT (net). . . . . . . . . . . . . . . . 609,265 590,102
Security business and other property. . . . . . . . . . 614,839 584,647
Decommissioning trust . . . . . . . . . . . . . . . . . 34,638 33,041
1,258,742 1,207,790
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . 1,899 3,724
Accounts receivable and unbilled revenues (net) . . . . 277,676 318,966
Fossil fuel, at average cost. . . . . . . . . . . . . . 38,719 39,061
Gas stored underground, at average cost . . . . . . . . 30,508 30,027
Materials and supplies, at average cost . . . . . . . . 61,679 66,167
Prepayments and other current assets. . . . . . . . . . 38,508 36,503
448,989 494,448
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes. . . . . . . . . . . . . . 259,537 217,257
Corporate-owned life insurance (net). . . . . . . . . . 85,455 86,179
Regulatory assets . . . . . . . . . . . . . . . . . . . 228,895 241,039
Other . . . . . . . . . . . . . . . . . . . . . . . . . 57,915 44,550
631,802 589,025
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $6,702,319 $6,647,781
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statement):
Common stock equity . . . . . . . . . . . . . . . . . . $1,633,381 $1,624,680
Cumulative preferred and preference stock . . . . . . . 74,858 74,858
Western Resources obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely subordinated debentures. . . . . . . . . . . . 220,000 220,000
Long-term debt (net). . . . . . . . . . . . . . . . . . 1,406,654 1,681,583
3,334,893 3,601,121
CURRENT LIABILITIES:
Short-term debt . . . . . . . . . . . . . . . . . . . . 1,272,658 980,740
Accounts payable. . . . . . . . . . . . . . . . . . . . 153,502 180,540
Accrued taxes . . . . . . . . . . . . . . . . . . . . . 75,613 83,813
Accrued interest and dividends. . . . . . . . . . . . . 64,627 70,193
Other . . . . . . . . . . . . . . . . . . . . . . . . . 57,284 36,806
1,623,684 1,352,092
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . 1,147,402 1,110,372
Deferred investment tax credits . . . . . . . . . . . . 122,169 125,528
Deferred gain from sale-leaseback . . . . . . . . . . . 227,693 233,060
Other . . . . . . . . . . . . . . . . . . . . . . . . . 246,478 225,608
1,743,742 1,694,568
COMMITMENTS AND CONTINGENCIES (Notes 5 and 7)
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $6,702,319 $6,647,781
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page3>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1997 1996
<S> <C> <C>
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $ 274,396 $ 294,231
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 179,607 141,890
Total operating revenues. . . . . . . . . . . . . . . . 454,003 436,121
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 56,384 60,598
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 5,999 5,618
Power purchased . . . . . . . . . . . . . . . . . . . . . 8,700 6,852
Natural gas purchases . . . . . . . . . . . . . . . . . . 57,166 49,561
Other operations. . . . . . . . . . . . . . . . . . . . . 149,846 136,487
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 28,696 30,152
Depreciation and amortization . . . . . . . . . . . . . . 56,458 43,102
Amortization of phase-in revenues . . . . . . . . . . . . 4,386 4,386
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 5,721 11,014
State income. . . . . . . . . . . . . . . . . . . . . . 2,266 3,952
General . . . . . . . . . . . . . . . . . . . . . . . . 22,301 25,379
Total operating expenses. . . . . . . . . . . . . . . 397,923 377,101
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 56,080 59,020
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (749) (1,565)
Equity in earnings of investees and other (net) . . . . . 17,738 5,332
Income taxes (net). . . . . . . . . . . . . . . . . . . . 2,089 2,296
Total other income and deductions . . . . . . . . . . 19,078 6,063
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 75,158 65,083
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 23,570 26,605
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 28,168 10,415
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (915) (683)
Total interest charges. . . . . . . . . . . . . . . . 50,823 36,337
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 24,335 28,746
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 1,229 3,354
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 23,106 $ 25,392
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 65,045,268 63,465,666
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ .36 $ .40
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ .525 $ .515
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page4>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $ 542,704 $ 563,216
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 537,496 428,527
Total operating revenues. . . . . . . . . . . . . . . . 1,080,200 991,743
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 111,988 121,588
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 12,290 7,375
Power purchased . . . . . . . . . . . . . . . . . . . . . 14,545 14,897
Natural gas purchases . . . . . . . . . . . . . . . . . . 216,279 200,084
Other operations. . . . . . . . . . . . . . . . . . . . . 335,268 279,246
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 54,632 54,991
Depreciation and amortization . . . . . . . . . . . . . . 107,243 85,415
Amortization of phase-in revenues . . . . . . . . . . . . 8,772 8,772
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 26,475 26,808
State income. . . . . . . . . . . . . . . . . . . . . . 7,631 7,763
General . . . . . . . . . . . . . . . . . . . . . . . . 47,343 50,511
Total operating expenses. . . . . . . . . . . . . . . 942,466 857,450
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 137,734 134,293
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (3,469) (3,749)
Equity in earnings of investees and other (net) . . . . . 24,998 11,069
Income taxes (net). . . . . . . . . . . . . . . . . . . . 5,542 985
Total other income and deductions . . . . . . . . . . 27,071 8,305
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 164,805 142,598
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 47,365 53,104
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 53,858 17,575
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (1,786) (1,616)
Total interest charges. . . . . . . . . . . . . . . . 99,437 69,063
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 65,368 73,535
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 2,459 6,709
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 62,909 $ 66,826
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 64,926,833 63,314,691
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ .97 $ 1.06
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ 1.05 $ 1.03
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page5>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Twelve Months Ended
June 30,
1997 1996
<S> <C> <C>
OPERATING REVENUES:
Electric. . . . . . . . . . . . . . . . . . . . . . . . . $1,176,921 $1,193,343
Natural gas . . . . . . . . . . . . . . . . . . . . . . . 958,355 726,030
Total operating revenues. . . . . . . . . . . . . . . . 2,135,276 1,919,373
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 236,390 239,491
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 24,877 17,036
Power purchased . . . . . . . . . . . . . . . . . . . . . 27,240 24,992
Natural gas purchases . . . . . . . . . . . . . . . . . . 370,950 321,538
Other operations. . . . . . . . . . . . . . . . . . . . . 664,017 535,207
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 98,763 109,168
Depreciation and amortization . . . . . . . . . . . . . . 205,550 168,415
Amortization of phase-in revenues . . . . . . . . . . . . 17,544 17,545
Taxes:
Federal income. . . . . . . . . . . . . . . . . . . . . 69,724 74,516
State income. . . . . . . . . . . . . . . . . . . . . . 18,903 19,563
General . . . . . . . . . . . . . . . . . . . . . . . . 93,884 98,232
Total operating expenses. . . . . . . . . . . . . . . 1,827,842 1,625,703
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 307,434 293,670
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (1,969) (2,880)
Special charges from ADT. . . . . . . . . . . . . . . . . (18,181) -
Equity in earnings of investees and other (net) . . . . . 45,652 25,932
Income taxes (net). . . . . . . . . . . . . . . . . . . . 7,547 6,484
Total other income and deductions . . . . . . . . . . 33,049 29,536
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 340,483 323,206
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 100,002 101,217
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 83,093 34,134
Allowance for borrowed funds used during
construction (credit) . . . . . . . . . . . . . . . . . (3,395) (4,065)
Total interest charges. . . . . . . . . . . . . . . . 179,700 131,286
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 160,783 191,920
PREFERRED AND PREFERENCE DIVIDENDS. . . . . . . . . . . . . 10,589 13,419
EARNINGS APPLICABLE TO COMMON STOCK . . . . . . . . . . . . $ 150,194 $ 178,501
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . 64,631,972 62,903,857
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING . . . . . . . $ 2.32 $ 2.84
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . . . . . $ 2.08 $ 2.04
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page6>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 65,368 $ 73,535
Depreciation and amortization . . . . . . . . . . . . . . 117,573 90,555
Amortization of nuclear fuel. . . . . . . . . . . . . . . 9,803 5,602
Amortization of phase-in revenues . . . . . . . . . . . . 8,772 8,772
Corporate-owned life insurance. . . . . . . . . . . . . . (13,930) (12,565)
Amortization of gain from sale-leaseback. . . . . . . . . (5,367) (4,820)
Deferred acquisition costs. . . . . . . . . . . . . . . . (14,534) (5,910)
Equity in earnings of investees . . . . . . . . . . . . . (25,791) (11,788)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . 41,290 25,292
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 342 8,373
Gas stored underground. . . . . . . . . . . . . . . . . (481) 300
Accounts payable . . . . . . . . . . . . . . . . . . . (27,038) (17,184)
Accrued taxes . . . . . . . . . . . . . . . . . . . . . (12,239) (10,998)
Other . . . . . . . . . . . . . . . . . . . . . . . . . 17,015 (2,333)
Changes in other assets and liabilities . . . . . . . . . (15,726) (21,332)
Net cash flows from operating activities. . . . . . . 145,057 125,499
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . 105,592 86,906
Purchase of ADT common stock. . . . . . . . . . . . . . . - 443,520
Non-utility investments (net) . . . . . . . . . . . . . . 27,092 4,761
Corporate-owned life insurance policies . . . . . . . . . 24,557 50,828
Death proceeds of corporate-owned life insurance policies (2,155) -
Net cash flows used in investing activities . . . . . 155,086 586,015
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . 291,918 536,305
Bonds retired . . . . . . . . . . . . . . . . . . . . . . (65) (16,135)
Revolving credit agreements (net) . . . . . . . . . . . . (273,594) (50,000)
Other long-term debt (net). . . . . . . . . . . . . . . . (1,405) 20
Borrowings against life insurance policies. . . . . . . . 47,782 44,321
Repayment of borrowings against life insurance policies . (652) -
Common stock issued (net) . . . . . . . . . . . . . . . . 13,996 16,103
Dividends on preferred, preference and common stock . . . (69,776) (71,008)
Net cash flows from financing activities. . . . . . . 8,204 459,606
NET (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . (1,825) (910)
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . 3,724 2,414
End of the period . . . . . . . . . . . . . . . . . . . . $ 1,899 $ 1,504
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . $ 130,152 $ 95,490
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 41,430 49,104
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page7>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Twelve Months Ended
June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 160,783 $ 191,920
Depreciation and amortization . . . . . . . . . . . . . . . 217,646 170,133
Amortization of nuclear fuel. . . . . . . . . . . . . . . . 19,886 12,862
Amortization of phase-in revenues . . . . . . . . . . . . . 17,544 17,545
Corporate-owned life insurance. . . . . . . . . . . . . . . (31,078) (17,307)
Amortization of gain from sale-leaseback. . . . . . . . . . (10,187) (9,639)
Deferred acquisition costs. . . . . . . . . . . . . . . . . (40,142) (5,910)
Equity in earnings of investees . . . . . . . . . . . . . . (23,376) (11,788)
Changes in working capital items:
Accounts receivable and unbilled revenues (net) . . . . . (31,476) (53,157)
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . 7,650 3,882
Gas stored underground. . . . . . . . . . . . . . . . . . (2,702) 4,550
Accounts payable. . . . . . . . . . . . . . . . . . . . . 5,499 14,239
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 25,468 (19,007)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 37,673 9,596
Changes in other assets and liabilities . . . . . . . . . . (58,344) (24,048)
Net cash flows from operating activities . . . . . . . 294,844 283,871
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to utility plant. . . . . . . . . . . . . . . . . 218,195 216,542
Purchase of ADT common stock. . . . . . . . . . . . . . . . 145,842 443,520
Security business acquisitions. . . . . . . . . . . . . . . 368,535 -
Non-utility investments (net) . . . . . . . . . . . . . . . 28,894 10,714
Corporate-owned life insurance policies . . . . . . . . . . 27,736 51,962
Death proceeds of corporate-owned life insurance policies . (12,808) (10,900)
Net cash flows used in (from) investing activities. . . 776,394 711,838
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt (net) . . . . . . . . . . . . . . . . . . . 532,903 456,955
Bonds retired . . . . . . . . . . . . . . . . . . . . . . . (65) (16,135)
Revolving credit agreement (net). . . . . . . . . . . . . . 1,406 (57,500)
Other long-term debt issued . . . . . . . . . . . . . . . . (1,425) 20
Other mandatorily redeemable securities . . . . . . . . . . 120,000 100,000
Redemption of preference stock. . . . . . . . . . . . . . . (100,000) -
Borrowings against life insurance policies. . . . . . . . . 49,439 45,789
Repayment of borrowings against life insurance policies . . (5,615) (5,269)
Common stock issued (net) . . . . . . . . . . . . . . . . . 31,105 43,688
Dividends on preferred, preference and common stock . . . . (145,803) (140,555)
Net cash flows from (used in) financing activities. . . 481,945 426,993
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . 395 (974)
CASH AND CASH EQUIVALENTS:
Beginning of the period . . . . . . . . . . . . . . . . . . 1,504 2,478
End of the period . . . . . . . . . . . . . . . . . . . . . $ 1,899 $ 1,504
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest on financing activities (net of amount
capitalized). . . . . . . . . . . . . . . . . . . . . . . $ 205,297 $ 147,164
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 59,018 85,105
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page8>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
COMMON STOCK EQUITY (see statement):
Common stock, par value $5 per share,
authorized 85,000,000 shares, outstanding
65,081,753 and 63,847,133 shares, respectively . $ 325,408 $ 323,126
Paid-in capital. . . . . . . . . . . . . . . . . . 751,147 739,433
Retained earnings. . . . . . . . . . . . . . . . . 556,826 562,121
1,633,381 49% 1,624,680 45%
CUMULATIVE PREFERRED AND PREFERENCE STOCK:
Preferred stock not subject to mandatory redemption,
Par value $100 per share, authorized
600,000 shares, outstanding -
4 1/2% Series, 138,576 shares. . . . . . . . . 13,858 13,858
4 1/4% Series, 60,000 shares . . . . . . . . . 6,000 6,000
5% Series, 50,000 shares . . . . . . . . . . . 5,000 5,000
24,858 24,858
Preference stock subject to mandatory redemption,
Without par value, $100 stated value,
Authorized 4,000,000 shares, outstanding -
7.58% Series, 500,000 shares . . . . . . . . . 50,000 50,000
74,858 2% 74,858 2%
WESTERN RESOURCES OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
HOLDING SOLELY COMPANY
SUBORDINATED DEBENTURES. . . . . . . . . . . . . 220,000 7% 220,000 6%
LONG-TERM DEBT:
First mortgage bonds . . . . . . . . . . . . . . . 825,000 825,000
Pollution control bonds. . . . . . . . . . . . . . 521,617 521,682
Revolving credit agreement . . . . . . . . . . . . - 275,000
Other long-term debt . . . . . . . . . . . . . . . 65,191 65,190
Less:
Unamortized premium and discount (net) . . . . . 5,154 5,289
1,406,654 42% 1,681,583 47%
$3,334,893 100% $3,601,121 100%
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page9>
<TABLE>
WESTERN RESOURCES, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
(Dollars in Thousands)
(Unaudited)
<CAPTION>
Common Paid-in Retained
Stock Capital Earnings
<S> <C> <C> <C>
BALANCE DECEMBER 31, 1995, 62,855,961 shares. . . . . $314,280 $697,962 $540,868
Net income. . . . . . . . . . . . . . . . . . . . . . 73,535
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (6,709)
Common stock, $1.03 per share . . . . . . . . . . . (65,263)
Issuance of 991,172 shares of common stock. . . . . . 4,955 23,876 (1,247)
BALANCE JUNE 30, 1996, 63,847,133 shares. . . . . . . 319,235 721,838 541,184
Net income. . . . . . . . . . . . . . . . . . . . . . 95,415
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (8,130)
Common stock, $1.03 per share . . . . . . . . . . . (66,348)
Issuance of 778,126 shares of common stock. . . . . . 3,891 17,595
BALANCE DECEMBER 31, 1996, 64,625,259 shares. . . . . 323,126 739,433 562,121
Net income. . . . . . . . . . . . . . . . . . . . . . 65,368
Cash dividends:
Preferred and preference stock. . . . . . . . . . . (2,459)
Common stock, $1.05 per share . . . . . . . . . . . (68,204)
Issuance of 456,494 shares of common stock. . . . . . 2,282 11,714
BALANCE JUNE 30, 1997, 65,081,753 shares. . . . . . . $325,408 $751,147 $556,826
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<page10>
WESTERN RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND OTHER INFORMATION
General: The Consolidated Financial Statements of Western Resources, Inc.
(the company) and its wholly-owned subsidiaries, include KPL, a rate-regulated
electric and gas division of the company, Kansas Gas and Electric Company (KGE),
a rate-regulated electric utility and wholly-owned subsidiary of the company,
Westar Security, Inc. (Westar Security), a wholly-owned subsidiary which
provides monitored electronic security services, Westar Energy, Inc., a
wholly-owned subsidiary which provides non-regulated energy services, Westar
Capital, Inc. (Westar Capital), a wholly-owned subsidiary which holds equity
investments in security, technology and energy-related companies, The Wing Group
Limited (The Wing Group), a wholly-owned developer of international power
projects, and Mid Continent Market Center, Inc. (Market Center), a
wholly-owned regulated gas transmission service provider. KGE owns 47% of Wolf
Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf
Creek Generating Station (Wolf Creek). The company records its proportionate
share of all transactions of WCNOC as it does other jointly-owned facilities.
All significant intercompany transactions have been eliminated.
The company prepares its financial statements in conformity with generally
accepted accounting principles as applied to regulated public utilities. The
accounting and rates of the company are subject to requirements of the Kansas
Corporation Commission (KCC), the Oklahoma Corporation Commission (OCC), and the
Federal Energy Regulatory Commission (FERC). The financial statements require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, to disclose contingent assets and liabilities at the
balance sheet dates, and to report amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the company's 1996 Annual
Report on Form 10-K and the KGE 1996 Annual Report on Form 10-K.
The company currently applies accounting standards that recognize the
economic effects of rate regulation Statement of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of Regulation", (SFAS 71)
and, accordingly, has recorded regulatory assets and liabilities related to its
generation, transmission and distribution operations. In 1996, the KCC
initiated a generic docket to study electric restructuring issues. A retail
wheeling task force has been created by the Kansas Legislature to study
competitive trends in retail electric services. During the 1997 session of the
Kansas Legislature, bills were introduced to increase competition in the
electric industry. Among the matters under consideration is the recovery by
utilities of costs in excess of competitive cost levels. There can be no
assurance at this time that such costs will be recoverable if open competition
is initiated in the electric utility market. In the event the company
determines that it no longer meets the criteria set forth in SFAS 71, the
accounting impact would be an extraordinary non-cash charge to operations of
an amount that would be material. Criteria that give rise to the
discontinuance of SFAS 71 include, (1) increasing competition that restricts
the company's ability to establish prices to recover specific costs, and (2)
a significant change in the manner in which rates are set by regulators from
a cost-based regulation to another form of regulation. The company
periodically reviews these criteria to ensure the continuing application
of SFAS 71 is appropriate. Based on current evaluation of the various factors
<page11>
and conditions that are expected to impact future cost recovery, the company
believes that its net regulatory assets are probable of future recovery. Any
regulatory changes that would require the company to discontinue SFAS 71 based
upon competitive or other events may significantly impact the valuation of the
company's net regulatory assets and certain utility plant investments,
particularly the Wolf Creek facility. At this time, the effect of competition
and the amount of regulatory assets which could be recovered in such an
environment cannot be predicted. See Note 6 for further discussion on regulatory
assets.
Environmental Remediation: Effective January 1, 1997, the company adopted
the provisions of Statement of Position (SOP) 96-1, "Environmental Remediation
Liabilities". This statement provides authoritative guidance for recognition,
measurement, display, and disclosure of environmental remediation liabilities in
financial statements. The company's best current estimate of the most likely
range of environmental costs to be incurred per site based upon limited current
information presently available is approximately $100,000 to $10 million. It
should be noted that additional information and testing could result in costs
significantly below or in excess of the amounts noted above to be incurred. The
KCC has permitted another Kansas utility to recover certain remediation costs
through rates. To the extent that such remediation costs are not recovered
through rates, the costs could be material to the company's financial position
or results of operations, depending on the degree of remediation required and
number of years over which the remediation must be completed.
Consolidated Statements of Cash Flows: For purposes of the Consolidated
Statements of Cash Flows, the company considers highly liquid collateralized
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI) are recorded in
Corporate-owned Life Insurance (net) on the Consolidated Balance Sheets:
June 30, December 31,
1997 1996
(Dollars in Millions)
Cash surrender value of contracts (1). $609.4 $563.0
Borrowings against contracts . . . . . (523.9) (476.8)
COLI (net). . . . . . . . . . $ 85.5 $ 86.2
(1) Cash surrender value of contracts as presented represents the value of the
policies as of the end of the respective policy years and not as of June 30,
1997 and December 31, 1996.
Income is recorded for increases in cash surrender value and net death
proceeds. Interest expense is recognized for COLI borrowings except for certain
contracts entered into in 1993 and 1992. The net income generated from COLI
contracts purchased prior to 1992 including the tax benefit of the interest
deduction and premium expenses are recorded as Corporate-owned Life Insurance
(net) on the Consolidated Statements of Income. The income from increases in
cash surrender value and net death proceeds was $6.7 million, $10.9 million, and
$26.1 million for the three, six, and twelve months ended June 30, 1997,
respectively, compared to $5.4 million, $10.2 million, and $24.7 million for the
three, six, and twelve months ended June 30, 1996, respectively. The interest
expense deduction taken was $7.4 million, $14.4 million, and $28.1 million for
<page12>
the three, six, and twelve months ended June 30, 1997, respectively, compared
to $7.0 million, $13.9 million, and $27.6 million for the three, six, and twelve
months ended June 30, 1996, respectively.
The COLI contracts entered into in 1993 and 1992 were established to
mitigate the cost of postretirement and postemployment benefits. As approved by
the KCC, the company is using the net income stream generated by these COLI
policies to offset the costs of postretirement and postemployment benefits. A
significant portion of this income stream relates to the tax deduction currently
taken for interest incurred on contract borrowings under these COLI policies.
In 1996, Congress passed legislation that will phase out tax benefits
associated with the 1992 and 1993 COLI policies and eliminate the benefit
altogether beginning after 1999. The loss of tax benefits will significantly
reduce COLI earnings. The company filed an application with the KCC on May 9,
1997 requesting approval to invest in an Affordable Housing Tax Credit program
in replacement of the 1992 and 1993 COLI policies. The company has the ability
to seek recovery of postretirement and postemployment costs through the rate
making process. Regulatory precedents established by the KCC are expected to
permit the accrued costs of postretirement and postemployment benefits to be
recovered in rates. If a suitable COLI replacement product cannot be found, or
these costs cannot be recovered in rates, the company may be required to expense
the regulatory asset of approximately $46 million. The legislation had minimal
impact on the company's COLI policies entered into prior to 1992. See Notes 9
and 12 to the Consolidated Financial Statements of the company's 1996 Annual
Report on Form 10-K for additional disclosure.
Reclassifications: Certain amounts in prior years have been reclassified
to conform with classifications used in the current year presentation.
2. MERGER AGREEMENT WITH KANSAS CITY POWER & LIGHT COMPANY
On February 7, 1997, Kansas City Power & Light Company (KCPL) and the
company entered into an agreement whereby KCPL would be combined with the
company. The merger agreement provides for a tax-free, stock-for-stock
transaction valued at approximately $2 billion. Under terms of the agreement,
KCPL shareowners will receive $32 of company common stock per KCPL common share,
subject to an exchange ratio collar of not less than .917 to no more than 1.100
common shares. Consummation of the KCPL Merger is subject to customary
conditions including obtaining the approval of KCPL's and the company's
shareowners and various regulatory agencies. The company expects to be able to
close the KCPL Merger in the first half of 1998.
The KCPL Merger, will result in a company with more than two million
security and energy customers, $9.5 billion in total assets, $3.0 billion in
annual revenues and more than 8,000 megawatts of electric generation resources
on a consolidated basis.
The KCPL Merger is designed to qualify as a pooling of interests for
financial reporting purposes. Under this method, the recorded assets and
liabilities of the company and KCPL would be carried forward at historical
amounts to a combined balance sheet. Prior period operating results and the
consolidated statements of financial position, cash flows and capitalization
would be restated to effect the combination for all periods presented.
<page13>
KCPL is a public utility company engaged in the generation, transmission,
distribution, and sale of electricity to approximately 430,000 customers in
western Missouri and eastern Kansas. KCPL and the company have joint interests
in certain electric generating assets, including Wolf Creek.
The company estimates it will incur approximately $48 million of
transaction costs associated with the KCPL Merger. The company anticipates
expensing these costs in the first reporting period subsequent to closing the
KCPL Merger.
3. STRATEGIC ALLIANCE WITH ONEOK INC.
On December 12, 1996, the company and ONEOK Inc. (ONEOK) announced an
agreement to form a strategic alliance combining the natural gas assets of both
companies. Under the agreement for the proposed strategic alliance, the company
will contribute its regulated and non-regulated natural gas business to a new
company (New ONEOK) in exchange for a 45% equity interest. The proposed
transaction is subject to approval by regulatory authorities and ONEOK
shareowners. The company is working towards consummation of the transaction
during the second half of 1997.
For additional information on the Strategic Alliance with ONEOK Inc., see
Note 6 of the company's 1996 Annual Report on Form 10-K.
4. INVESTMENTS
During 1996, the company acquired approximately 38.3 million common shares
of ADT Limited (ADT) for approximately $589 million and made an offer to acquire
the remaining ADT common shares it did not already own. This offer was rejected
by ADT. The company's offer was withdrawn on July 2, 1997. On July 2, 1997,
ADT merged with Tyco International (Tyco). The merger was completed in a stock
for stock transaction. At the merger date, the company's 38.3 million ADT
common shares were converted to approximately 18 million common shares of Tyco.
This amount represents less than 10% of the total Tyco common shares
outstanding. Due to the consummation of this merger, the company is no longer
interested in maintaining a significant investment in Tyco. The company
discontinued the equity method of accounting for this investment following the
merger and will reclassify this investment as an available for sale security in
July of 1997 pursuant to Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
company's average basis in its Tyco common stock approximates $35 per share.
The market price of the Tyco common stock as reported on the New York Stock
Exchange at the close of business on July 29, 1997 was $80.19 per common share.
The company has sold approximately 5 million shares or $387 million of Tyco
stock and now holds 13.5 million shares of Tyco. The company will record a
material gain on the sale of these shares of Tyco stock during the third quarter
of 1997. Net proceeds from the Tyco stock sale will be used to repay short-term
debt, for corporate acquisitions and for other corporate purposes.
<page14>
5. LEGAL PROCEEDINGS
On December 18, 1996, Westar Capital filed a complaint in the U.S. District
Court for the Southern District of Florida against ADT and others. The
complaint alleges that ADT breached its fiduciary duty to its shareholders in
connection with certain warrants granted to Republic Industries and actions
taken with respect to the company's offer for ADT. On April 16, 1997, Westar
Capital filed a petition with the Supreme Court of Bermuda alleging that the
ADT/Tyco merger wrongly deprived ADT shareholders of appraisal rights under the
Bermuda Companies Act. The cases are currently pending.
On December 26, 1996, an ADT shareowner filed a purported class action
complaint against ADT, ADT's board of directors, the company and the company's
wholly-owned subsidiary, Westar Capital in the Civil Division of the Circuit
Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida. (Charles
Gachot v. ADT, Ltd., Western Resources, Inc., Westar Capital, Inc., Michael A.
Ashcroft, et al., Case No. 96-10912-AN) The complaint alleges, among other
things, that the company and Westar Capital are breaching their fiduciary duties
to ADT's shareowners by failing to offer "an appropriate premium for the
controlling interest" in ADT and by holding "an effective blocking position"
that prevents independent parties from bidding for ADT. The complaint seeks
preliminary and permanent relief enjoining the company from acquiring the
outstanding shares of ADT and unspecified damages. The company believes it has
good and valid defenses to the claims asserted and does not anticipate any
material adverse effect upon its overall financial condition or results of
operations.
On January 8, 1997, Innovative Business Systems, Ltd. (IBS) filed suit
against the company and Westinghouse Electric Corporation (WEC), Westinghouse
Security Systems, Inc. (WSS), and WestSec, Inc. (WestSec), a wholly-owned
subsidiary of the company established to acquire the assets of WSS, in Dallas
County, Texas district court (Cause No 97-00184) alleging, among other things,
breach of contract by WEC and interference with contract against the company in
connection with the sale by WEC of the assets of WSS to the company. IBS claims
that WEC improperly transferred software owned by IBS to the company and that
the company is not entitled to its use. The company has demanded WEC defend and
indemnify it. WEC and the company have denied IBS' allegations and are
vigorously defending against them. While the loss of use of the license could
have a material impact on the operations of WestSec, management does not believe
that the ultimate disposition of this matter will have a material adverse effect
upon the company's overall financial condition or results of operations.
The company and its subsidiaries are involved in various other legal,
environmental, and regulatory proceedings. Management believes that adequate
provision has been made and accordingly believes that the ultimate dispositions
of these matters will not have a material adverse effect upon the company's
overall financial position or results of operations.
6. RATE MATTERS AND REGULATION
Utility expenses and credits recognized as regulatory assets and
liabilities on the Consolidated Balance Sheets are recognized in income as the
related amounts are included in service rates and recovered from or refunded to
customers in utility revenues. The company expects to recover the following
regulatory assets in rates:
<page15>
June 30, December 31,
1997 1996
(Dollars in Thousands)
Coal contract settlement costs $ 18,537 $ 21,037
Service line replacement 10,337 12,921
Post employment/retirement benefits 46,224 40,834
Deferred plant costs 31,125 31,272
Phase-in revenues 17,545 26,317
Debt issuance costs 75,520 78,532
Deferred cost of gas purchased 21,009 21,332
Other regulatory assets 8,597 8,794
Total regulatory assets $228,894 $241,039
See Note 9 included in the company's 1996 Annual Report on Form 10-K for
additional information regarding regulatory assets.
Rate Proceedings: On May 23, 1996, the company implemented an $8.7 million
electric rate reduction to KGE customers on an interim basis. On October 22,
1996, the company, the KCC Staff, the City of Wichita, and the Citizens Utility
Ratepayer Board filed an agreement at the KCC whereby the company's retail
electric rates would be reduced, subject to approval by the KCC. This agreement
was approved on January 15, 1997. Under the agreement, on February 1, 1997,
KGE's rates were reduced by $36.3 million and, in addition, the May 1996 KGE
interim reduction became permanent. KGE's rates will be reduced by another $10
million effective June 1, 1998, and again on June 1, 1999. KPL's rates were
reduced by $10 million effective February 1, 1997. Two one-time rebates of $5
million will be credited to the company's customers in January 1998 and 1999.
The agreement also fixes annual savings from the merger with KGE at $40
million. This level of merger savings provides for complete recovery of and
a return on the acquisition premium.
On November 27, 1996, the KCC issued a Suspension Order and on December 3,
1996, an order was issued which suspended, subject to refund, the collection of
costs related to purchases from Kansas Pipeline Partnership (KPP) included in
the company's cost of gas rider (COGR).
On July 29, 1997, the KCC approved a settlement agreement between the
company and certain entities affiliated with The Bishop Group, Ltd. (Bishop
Entities), including KPP, and the KCC staff which settles all major outstanding
issues between the company and the Bishop Entities. The settlement agreement
also terminates several proceedings before the KCC, including the investigation
of the company's purchasing practices and the resulting suspension of the
company's COGR in the December 3, 1996 order. Dismissal of the KCC
investigation ends the suspension and eliminates any potential refund liability
for gas costs related to purchases from KPP included in the company's COGR.
On May 30, 1997, the company and KCPL jointly filed applications with the
KCC and the Missouri Public Service Commission asking for approval of a
combination of the two companies.
<page16>
7. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites: The company has been associated with 15 former
manufactured gas sites located in Kansas which may contain coal tar and other
potentially harmful materials. The company and the Kansas Department of Health
and Environment (KDHE) entered into a consent agreement governing all future
work at the 15 sites. The terms of the consent agreement will allow the company
to investigate these sites and set remediation priorities based upon the
results of the investigations and risk analysis. The prioritized sites will be
investigated over a ten year period. The agreement will allow the company to
set mutual objectives with the KDHE in order to expedite effective response
activities and to control costs and environmental impact. As of June 30, 1997,
the costs incurred for site investigation and risk assessment have been minimal.
Since the site investigations are preliminary, no formal agreement on costs to
be incurred has been reached, but the minimum potential liability would not be
material to the financial statements. An accrual for these environmental
contingencies has not been reflected in the accompanying financial statements.
In accordance with the terms of the ONEOK agreement, ownership of twelve of the
aforementioned sites will be transferred to New ONEOK upon closing. The ONEOK
agreement limits the company's liabilities to an immaterial amount for future
remediation of these sites.
Superfund Sites: The company is one of numerous potentially responsible
parties at a groundwater contamination site in Wichita, Kansas (Wichita site)
which is listed by the EPA as a Superfund site. The company has previously been
associated with other Superfund sites of which the company's liability has been
classified as de minimis and any potential obligations have been settled at
minimal cost. In 1994, the company settled Superfund obligations at three sites
for a total of $57,500. No Superfund obligations have been settled since 1994.
The company's obligation at the Wichita site appears to be limited based on this
experience. In the opinion of the company's management, the resolution of these
matters is not expected to have a material impact on the company's financial
position or results of operations.
Clean Air Act: The Clean Air Act Amendments of 1990 (the Act) require a
two-phase reduction in certain emissions. To meet the monitoring and reporting
requirements under the acid rain program, the company installed continuous
monitoring and reporting equipment at a total cost of approximately $10 million
as of June 30, 1997. The company does not expect material expenditures to be
needed to meet Phase II sulfur dioxide requirements.
In the fourth quarter of 1996, the Environmental Protection Agency (EPA)
issued new standards applying to nitrogen oxides (NOx) emissions from the
company's effected coal units. Both Jeffrey Energy Center and Lawrence Energy
Center will require operational modifications and possible minor capital
investments to modify the emission controls. The company will have until the
year 2000 to comply.
Decommissioning: The company accrues decommissioning costs over the
expected life of the Wolf Creek generating facility. The accrual is based on
estimated unrecovered decommissioning costs which consider inflation over the
remaining estimated life of the generating facility and are net of expected
earnings on amounts recovered from customers and deposited in an external trust
fund.
<page17>
Approval of the 1996 Decommissioning Cost Study was received from the KCC
on February 28, 1997. Based on the study, the company's share of these
decommissioning costs, under the immediate dismantlement method, is estimated to
be approximately $624 million during the period 2025 through 2033, or
approximately $192 million in 1996 dollars. These costs were calculated using
an assumed inflation rate of 3.6% over the remaining service life from 1996 of
29 years.
Decommissioning costs are currently being charged to operating expenses in
accordance with prior KCC orders. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek. Amounts
expensed approximated $3.7 million in 1996 and will increase annually to $5.6
million in 2024. These expenses are deposited in an external trust fund. The
average after tax expected return on trust assets is 5.7%. An updated funding
schedule, on which the contributions are not materially different, was submitted
to the KCC on March 10, 1997. Approval of this funding schedule is pending with
the KCC.
The company's investment in the decommissioning fund, including reinvested
earnings approximated $34.6 million and $33.0 million at June 30, 1997 and
December 31, 1996, respectively. Trust fund earnings accumulate in the fund
balance and increase the recorded decommissioning liability. These amounts are
reflected in Investments and Other Property, Decommissioning trust, and the
related liability is included in Deferred Credits and Other Liabilities, Other,
on the Consolidated Balance Sheets.
The staff of the SEC has questioned certain current accounting practices
used by nuclear electric generating station owners regarding the recognition,
measurement, and classification of decommissioning costs for nuclear electric
generating stations. In response to these questions, the Financial Accounting
Standards Board is expected to issue new accounting standards for removal costs,
including decommissioning, in 1998. If current electric utility industry
accounting practices for such decommissioning costs are changed: (1) annual
decommissioning expenses could increase, (2) the estimated present value of
decommissioning costs could be recorded as a liability rather than as
accumulated depreciation, and (3) trust fund income from the external
decommissioning trusts could be reported as investment income rather than as a
reduction to decommissioning expense. When revised accounting guidance is
issued, the company will also have to evaluate its effect on accounting for
removal costs of other long-lived assets. The company is not able to predict
what effect such changes would have on results of operations, financial
position, or related regulatory practices until the final issuance of revised
accounting guidance, but such effect could be material.
The company carries premature decommissioning insurance which has several
restrictions. One of these is that it can only be used if Wolf Creek incurs an
accident exceeding $500 million in expenses to safely stabilize the reactor, to
decontaminate the reactor and reactor station site in accordance with a plan
approved by the Nuclear Regulatory Commission (NRC), and to pay for on-site
property damages. This decommissioning insurance will only be available if the
insurance funds are not needed to implement the NRC-approved plan for
stabilization and decontamination.
Nuclear Insurance: The Price-Anderson Act limits the combined public
liability of the owners of nuclear power plants to $8.9 billion for a single
nuclear incident. If this liability limitation is insufficient, the U.S.
<page18>
Congress will consider taking whatever action is necessary to compensate the
public for valid claims. The Wolf Creek owners (Owners) have purchased the
maximum available private insurance of $200 million and the balance is provided
by an assessment plan mandated by the NRC. Under this plan, the Owners are
jointly and severally subject to a retrospective assessment of up to $79.3
million ($37.3 million, company's share) in the event there is a major nuclear
incident involving any of the nation's licensed reactors. This assessment is
subject to an inflation adjustment based on the Consumer Price Index and
applicable premium taxes. There is a limitation of $10 million ($4.7 million,
company's share) in retrospective assessments per incident, per year.
The Owners carry decontamination liability, premature decommissioning
liability, and property damage insurance for Wolf Creek totaling approximately
$2.8 billion ($1.3 billion, company's share). This insurance is provided by a
combination of "nuclear insurance pools" ($500 million) and Nuclear Electric
Insurance Limited (NEIL) ($2.3 billion). In the event of an accident, insurance
proceeds must first be used for reactor stabilization and site decontamination.
The company's share of any remaining proceeds can be used for property damage or
premature decommissioning costs up to $1.3 billion (company's share). Premature
decommissioning insurance cost recovery is excess of funds previously collected
for decommissioning (as discussed under "Decommissioning").
The Owners also carry additional insurance with NEIL to cover costs of
replacement power and other extra expenses incurred during a prolonged outage
resulting from accidental property damage at Wolf Creek. If losses incurred at
any of the nuclear plants insured under the NEIL policies exceed premiums,
reserves, and other NEIL resources, the company may be subject to retrospective
assessments under the current policies of approximately $8 million per year.
Although the company maintains various insurance policies to provide
coverage for potential losses and liabilities resulting from an accident or an
extended outage, the company's insurance coverage may not be adequate to cover
the costs that could result from a catastrophic accident or extended outage at
Wolf Creek. Any substantial losses not covered by insurance, to the extent not
recoverable through rates, would have a material adverse effect on the company's
financial condition and results of operations.
Fuel Commitments: To supply a portion of the fuel requirements for its
generating plants, the company has entered into various commitments to obtain
nuclear fuel and coal. Some of these contracts contain provisions for price
escalation and minimum purchase commitments. At December 31, 1996, WCNOC's
nuclear fuel commitments (company's share) were approximately $15.4 million for
uranium concentrates expiring at various times through 2001, $59.4 million for
enrichment expiring at various times through 2003, and $70.3 million for
fabrication through 2025. At December 31, 1996, the company's coal contract
commitments in 1996 dollars under the remaining terms of the contracts were
approximately $2.6 billion. The largest coal contract expires in 2020, with the
remaining coal contracts expiring at various times through 2013.
Energy Act: As part of the 1992 Energy Policy Act, a special assessment
is being collected from utilities for a uranium enrichment, decontamination, and
decommissioning fund. The company's portion of the assessment for Wolf Creek is
approximately $7 million, payable over 15 years. Management expects such costs
to be recovered through the ratemaking process.
<page19>
Investment Commitments: During 1996, The Wing Group obtained ownership
interests in independent power generation projects under construction in The
Republic of Turkey and Colombia. The Wing Group or other non-regulated company
subsidiaries are committed to future funding of equity interests in these
projects. In 1997, commitments are not expected to exceed $31 million. Equity
commitments beyond 1997 are currently expected to approximate $5 million. The
company has also committed $105 million through June of 1998 to power generation
projects in the People's Republic of China.
8. INCOME TAXES
Total income tax expense included in the Consolidated Statements of Income
reflects the Federal statutory rate of 35%. The Federal statutory rate produces
effective income tax rates of 27.9%, 33.1%, and 33.1% for the three, six, and
twelve month periods ended June 30, 1997 compared to 31.6%, 32.5%, and 31.9% for
the three, six, and twelve month periods ended June 30, 1996. The effective
income tax rates vary from the Federal statutory rate due to permanent
differences, including the amortization of investment tax credits, and
accelerated amortization of certain deferred income taxes.
9. MERGER AGREEMENT WITH PROTECTION ONE, INC.
On July 30, 1997, Protection One, Inc. (Protection One), a publicly held
security provider, and the company entered into an agreement to combine the
security assets of both companies. Under the agreement, the company will
contribute its security business assets, approximately $250 million in cash and
additional funding for a special dividend to current Protection One shareholders
of $7.00 per common share in exchange for an 80.1% equity interest on a
fully-diluted basis. The aggregate amount of this dividend is expected to
approximate $117 million. Protection One will assume approximately $47
million in debt of Westar Security. As of March 31, 1997, Protection One
reported approximately $265 million of long-term debt, all or a portion of which
may be reduced by the cash payment in the transaction. The company will utilize
short-term borrowings, long-term borrowings or funds received from the sale of
Tyco stock to fund this transaction.
Protection One serves approximately 228,000 customers with a large
concentration of its customers in the western portion of the United States. The
company plans to account for this acquisition using the purchase method of
accounting. The proposed transaction is subject to satisfaction of customary
conditions, including approval by Protection One shareholders. The company
expects to consummate this transaction during the second half of 1997.
<page20>
WESTERN RESOURCES, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
company's 1996 Annual Report on Form 10-K. The following updates the
information provided in the 1996 Annual Report on Form 10-K and analyzes certain
changes in the results of operations between the three, six, and twelve month
periods ended June 30, 1997 and comparable periods of 1996.
Certain matters discussed in this Form 10-Q are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
company's future plans, objectives or goals are also forward-looking
statements. Such statements address future events and conditions concerning
capital expenditures, earnings, litigation, rate and other regulatory matters,
the pending KCPL Merger, the strategic alliance with ONEOK, liquidity and
capital resources, interest rates, changing weather conditions, nuclear
operations, and accounting matters. Actual results in each case could differ
materially from those currently anticipated in such statements, by reason of
factors such as electric utility restructuring, including the ongoing state and
federal activities; future economic conditions; developments in the legislative,
regulatory and competitive markets in which the company operates; and other
circumstances affecting anticipated operations, revenues and costs.
FINANCIAL CONDITION
General: Net income for the second quarter of 1997 was $24.3 million,
down from net income of $28.7 million for the same period of 1996. The company
earned $0.36 per share of common stock for the second quarter of 1997, a
decrease of $0.04 per share from the second quarter of 1996. Operating revenues
were $454 million and $436 million for the three months ended June 30, 1997 and
1996, respectively.
Net income for the six and twelve months ended June 30, 1997, was $65.4
million and $160.8 million, respectively, compared to $73.5 million and $191.9
million for the same periods of 1996. The company earned $0.97 and $2.32 per
share of common stock, respectively, for the six and twelve months ended June
30, 1997 compared to $1.06 and $2.84 for the comparable periods of 1996.
Operating revenues were $1.1 billion and $2.1 billion for the six and twelve
months ended June 30, 1997, respectively. These revenues compare to $1.0
billion and $1.9 billion for the same periods of 1996.
The changes in net income, earnings per share, and operating revenues are
primarily due to the reasons discussed below in Results of Operations.
<page21>
A quarterly dividend of $0.525 per share was declared in the second quarter
of 1997, for an indicated annual rate of $2.10 per share. The book value per
share was $25.10 at June 30, 1997, down slightly from $25.14 at December 31,
1996. There were 65,045,268 and 63,465,666 average shares outstanding for the
second quarter of 1997 and 1996, respectively.
Liquidity and Capital Resources: The company's short-term financing
requirements are satisfied, as needed, through the sale of commercial paper,
short-term bank loans and borrowings under unsecured lines of credit maintained
with banks. At June 30, 1997, short-term borrowings amounted to $1.3 billion,
of which $968 million was commercial paper and the balance was from uncommitted
bank loans.
The company's short-term debt balance at June 30, 1997, increased
approximately $292 million from December 31, 1996. The increase was primarily
a result of the company's converting $275 million borrowed under a revolving
credit agreement to short-term debt during the first quarter of 1997.
At June 30, 1997, the company had bank credit arrangements available of
$973 million, of which $0 was outstanding.
The company maintains a $350 million revolving credit agreement that
expires on October 5, 1999. Under the terms of this agreement, the company may,
at its option, borrow at different market-based interest rates and is required,
among other restrictions, to maintain a total debt to total capitalization ratio
of not greater than 65% at all times. A facility fee is paid on the $350
million commitment. The unused portion of the revolving credit facility may be
used to provide support for commercial paper. At June 30, 1997, the company
had $0 borrowed under the facility.
The company currently has an effective registration statement under which
up to $550 million in bonds and other debt securities are registered for sale.
The company currently expects to sell these debt securities in the third quarter
of 1997. Net proceeds of any securities sales will be used primarily to repay
short-term debt, for corporate acquisitions and for other corporate purposes.
The company estimates it will incur approximately $48 million of
transaction costs associated with the KCPL Merger. The company anticipates
expensing these costs in the first reporting period subsequent to closing the
KCPL Merger.
Due to the consummation of the ADT and Tyco merger, the company is no
longer interested in maintaining a significant investment in Tyco and has
reclassified this investment as an available for sale security in July of 1997
subsequent to the ADT/Tyco merger. See Note 4 of the Notes to the Consolidated
Financial Statements.
Subsequent to the ADT/Tyco merger which was completed on July 2, 1997, the
company has sold approximately 5 million shares or $387 million of Tyco stock
and now holds 13.5 million shares of Tyco. The company will record a material
gain on the sale of these shares of Tyco stock during the third quarter of 1997.
This gain will be material to the company's financial position and results of
operations. Net proceeds from the Tyco stock sale will be used to repay
short-term debt, for corporate acquisitions and for other corporate purposes.
See Note 4 of the Notes to the Consolidated Financial Statements.
<page22>
RESULTS OF OPERATIONS
Revenues: The company's revenues vary with levels of usage as a result of
changing weather conditions during comparable periods and are sensitive to
seasonal fluctuations between consecutive periods. Future electric and natural
gas sales will continue to be affected by weather conditions, the electric rate
reduction which was implemented on February 1, 1997, changes in the industry,
changes in the regulatory environment, competition from other sources of energy,
competing fuel sources, customer conservation efforts, wholesale demand, and the
overall economy of the company's service area.
The following table reflects changes in electric sales for the three, six,
and twelve months ended June 30, 1997 from the comparable periods of 1996.
Increase (decrease) in electric sales volumes:
3 Months 6 Months 12 Months
ended ended ended
Residential (6.7)% (4.4)% (4.3)%
Commercial (3.0)% (1.2)% (0.4)%
Industrial 0.3% (1.3)% (2.2)%
Other 1.7% 2.5% 0.5%
Total retail sales (3.0)% (2.2)% (2.2)%
Wholesale and interchange (16.3)% 7.2% 28.8%
Total electric sales (6.5)% 0.1% 4.6%
Electric revenues decreased 6.7% for the three months ended June 30, 1997
compared to the same period of 1996. The decrease is largely due to decreased
residential, commercial, and interchange (sales to other utilities) sales as a
result of mild spring temperatures compared to last year. Also contributing to
the decrease in interchange sales was missed sales opportunities as a result of
a coal-fired plant having been taken off-line for unscheduled maintenance during
the second quarter. The company's service territory experienced a 53% decrease
in the number of cooling degree days during the second quarter of 1997, as
compared to the second quarter of 1996 and a 47% lower than normal number of
cooling degree days.
Electric revenues were lower 3.6% percent and 1.4%, respectively for the
six and twelve months ended June 30, 1997 compared to the same periods of 1996.
The decrease was due to decreased residential, commercial and industrial sales
as a result of milder spring and winter temperatures experienced during the
first six months of 1997 compared to the same period of 1996.
Electric revenues were also lower for all three periods due to the rate
reductions implemented on February 1, 1997. See Note 6 of the Notes to the
Consolidated Financial Statements.
The following table reflects changes in natural gas sales for the three,
six, and twelve months ended June 30, 1997 from the comparable periods of 1996.
<page23>
Increase (decrease) in natural gas sales volumes:
3 Months 6 Months 12 Months
ended ended ended
Residential 7.7% (10.4)% (2.4)%
Commercial (4.1)% (13.6)% (7.5)%
Industrial (43.6)% (34.8)% (30.9)%
Transportation (4.1)% (3.2)% (4.9)%
Other 32.3% 40.9% 54.1%
Total Deliveries 6.4% (4.7)% 1.9%
Regulated natural gas revenues increased 11.7% for the three months ended
June 30, 1997 compared to June 30, 1996 primarily due to the gas revenue
increase authorized by the KCC on July 11, 1996 and as a result of higher gas
costs passed on to customers through the cost of gas rider (COGR). Regulated
natural gas revenues increased 8.1% and 16.2% for the six and twelve months
ended June 30, 1997, respectively, compared to the same periods of 1996 as a
result of higher gas costs passed on to customers through the COGR, increased
as-available gas sales, and the gas revenue increase ordered by the KCC on July
11, 1996. See Note 6 of the Notes to the Consolidated Financial Statements.
Non-regulated gas revenues decreased approximately $3 million to
approximately $49 million, or 6%, for the three months ended June 30, 1997
compared to June 30, 1996. Non-regulated gas revenues for the three months
ended June 30, 1997 decreased primarily as a result of a 9% decrease in the
market prices of gas sold by the company's wholly-owned subsidiary Westar Gas
Marketing, Inc. (Westar Gas Marketing).
Non-regulated gas revenues increased approximately $20 million to
approximately $128 million, or 19%, and approximately $68 million to
approximately $267 million, or 34%, for the six and twelve months ended June 30,
1997, respectively, compared to the same periods of 1996. Non-regulated gas
revenues for the six and twelve months ended June 30, 1997 increased primarily
as a result of 26% and 39% increases, respectively, in the market prices of gas
sold by the company's wholly-owned subsidiary Westar Gas Marketing.
When the alliance with ONEOK is complete, the company will contribute its
regulated and non-regulated natural gas business to New ONEOK in exchange for a
45% equity interest. See Note 3 of the Notes to the Consolidated Financial
Statements.
Operating Expenses: Total operating expenses increased 6% for the three
months ended June 30, 1997 compared to the same period of 1996. The increase is
primarily attributable to the amortization of goodwill related to the company's
subsidiary acquisitions. Also contributing to the increase in total operating
expenses was increased purchased power due to a coal-fired plant having been
taken off-line for maintenance during the first half of 1997. The increase was
partially offset by decreased income tax expense.
Total operating expenses increased 10% and 12% for the six and twelve
months ended June 30, 1997 compared to the same periods of 1996. These
increases are primarily attributable to the amortization of goodwill related
to the company's subsidiary acquisitions. Also contributing to the increases in
total operating expenses was increased nuclear fuel due to Wolf Creek having
been taken off-line for its eighth refueling and maintenance outage during the
first quarter of 1996. Amortization of the acquisition adjustment related to
the KGE merger
<page24>
also contributed to the increase for the twelve month period ended June 30,
1997.
The amortization of the acquisition adjustment associated with the
company's 1992 acquisition of KGE, which began in August 1995, amounted to $5.3
million, $10.3 million and $21.1 million for the three, six and twelve months
ended June 30, 1997, respectively, compared to $5.0 million, $10.0 million and
$16.7 million for the three, six, and twelve months ended June 30, 1996,
respectively. On January 15, 1997, the KCC fixed the annual merger savings
level at $40 million which provides complete recovery of the acquisition premium
amortization expense and a return on the acquisition premium.
Other Income and Deductions: Other income and deductions, net of taxes,
increased $13.0 million, and $18.8 million for the three and six months ended
June 30, 1997 compared to same periods of 1996. These increases are primarily
attributable to the company's $7.5 million net gain on the sale of a
non-strategic equity investment.
Other income and deductions, net of taxes, increased $3.8 million for the
twelve months ended June 30, 1997 compared to 1996 primarily due to earnings
from subsidiary investments. Partially offsetting this increase was a one-time
restructuring charge recorded by ADT Limited, in which the company, at that
time, owned approximately 25% of the common stock as discussed in Note 4 of the
Notes to the Consolidated Financial Statements.
Interest Charges and Preferred and Preference Dividend Requirements: Total
interest charges increased 40%, 44%, and 37% for the three, six, and twelve
months ended June 30, 1997 from the comparable periods in 1996, respectively.
The increases for the three and six months ended interest charges reflects
interest paid on higher short-term debt balances to finance the company's
investment in ADT and the purchase of WSS. The increase for the twelve months
ended interest charges reflects interest paid on higher short-term debt balances
to finance the company's investment in ADT. The increases also reflect interest
payments related to the company's mandatory redeemable preference stock which
was issued in December of 1995 and July of 1996. Partially offsetting the
higher interest charges were lower preferred and preference dividends due to the
redemption of preference stock in July 1996. See discussion above in Liquidity
and Capital Resources regarding higher short-term debt balances.
<page25>
WESTERN RESOURCES, INC.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The company's Annual Meeting of Shareholders was held on May 29, 1997. At
the meeting the shareholders, representing 54,725,392 shares either in person or
by proxy, voted to:
Elect the following directors to serve a term of three years:
Votes
For Against
John C. Dicus 53,179,901 1,545,313
John E. Hayes, Jr. 53,173,289 1,551,925
Russell W. Meyer, Jr. 53,196,052 1,529,162
Louis W. Smith 53,155,150 1,570,776
The following directors will continue to serve their unexpired terms:
David H. Hughes, John H. Robinson, Frank J. Becker, Gene A. Budig, C.Q.
Chandler, Thomas R. Clevenger, and David C. Wittig.
Item 5. Other Information
Merger Agreement with Protection One, Inc.: See Note 9 of the Notes to the
Consolidated Financial Statements.
Merger Agreement with Kansas City Power & Light Company: See Note 2 of the
Notes to the Consolidated Financial Statements.
Strategic Alliance with ONEOK Inc.: See Note 3 of the Notes to the
Consolidated Financial Statements.
Rate Plans: See Note 6 of the Notes to the Consolidated Financial
Statements.
Investments: See Note 4 of the Notes to the Consolidated Financial
Statements.
<page26>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 12 - Computation of Ratio of Consolidated Earnings
to Fixed Charges for 12 Months Ended June 30,
1997 (filed electronically)
Exhibit 27 - Financial Data Schedule (filed electronically)
(b) Reports on Form 8-K:
Form 8-K filed April 2, 1997 - Proforma financial statements of
the company and KCPL as of December 31, 1996.
Form 8-K filed July 25, 1997 - Proforma financial statements of
the company and KCPL as of March 31, 1997.
<page27>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Western Resources, Inc.
Date July 30, 1997 By /s/ S. L. KITCHEN
S. L. Kitchen, Executive Vice President
and Chief Financial Officer
Date July 30, 1997 By /s/ JERRY D. COURINGTON
Jerry D. Courington,
Controller
<page28>
Exhibit 12
<TABLE>
WESTERN RESOURCES, INC.
Computations of Ratio of Earnings to Fixed Charges and
Computations of Ratio of Earnings to Combined Fixed Charges
and Preferred and Preference Dividend Requirements
(Dollars in Thousands)
<CAPTION>
Unaudited
Twelve
Months
Ended
June 30, Year Ended December 31,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Income . . . . . . . . . . . $160,783 $168,950 $181,676 $187,447 $177,370 $127,884
Taxes on Income. . . . . . . . . 81,080 86,102 83,392 99,951 78,755 46,099
Net Income Plus Taxes. . . . 241,863 255,052 265,068 287,398 256,125 173,983
Fixed Charges:
Interest on Long-Term Debt . . 100,002 105,741 95,962 98,483 123,551 117,464
Interest on Other Indebtedness 65,868 34,685 27,487 20,139 19,255 20,009
Interest on Other Mandatorily
Redeemable Securities. . . . 17,225 12,125 372 - - -
Interest on Corporate-owned
Life Insurance Borrowings. . 33,663 35,151 32,325 26,932 16,252 5,294
Interest Applicable to
Rentals. . . . . . . . . . . 32,927 32,965 31,650 29,003 28,827 27,429
Total Fixed Charges. . . . 249,685 220,667 187,796 174,557 187,885 170,196
Preferred and Preference Dividend
Requirements:
Preferred and Preference
Dividends. . . . . . . . . . 10,589 14,839 13,419 13,418 13,506 12,751
Income Tax Required. . . . . . 5,340 7,562 6,160 7,155 5,997 4,596
Total Preferred and Preference
Dividend Requirements. . . . 15,929 22,401 19,579 20,573 19,503 17,347
Total Fixed Charges and Preferred
and Preference Dividend
Requirements. . . . . . . . . 265,614 243,068 207,375 195,130 207,388 187,543
Earnings (1) . . . . . . . . . . $491,548 $475,719 $452,864 $461,955 $444,010 $344,179
Ratio of Earnings to Fixed Charges 1.97 2.16 2.41 2.65 2.36 2.02
Ratio of Earnings to Combined Fixed
Charges and Preferred and Preference
Dividend Requirements. . . . . 1.85 1.96 2.18 2.37 2.14 1.84
(1) Earnings are deemed to consist of net income to which has been added income taxes (including
net deferred investment tax credit) and fixed charges. Fixed charges consist of all interest
on indebtedness, amortization of debt discount and expense, and the portion of rental expense
which represents an interest factor. Preferred and preference dividend requirements consist
of an amount equal to the pre-tax earnings which would be required to meet dividend
requirements on preferred and preference stock.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1997 AND THE STATEMENT OF INCOME AND THE STATEMENT OF CASH
FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,362,786
<OTHER-PROPERTY-AND-INVEST> 1,258,742
<TOTAL-CURRENT-ASSETS> 448,989
<TOTAL-DEFERRED-CHARGES> 631,802
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 6,702,319
<COMMON> 325,408
<CAPITAL-SURPLUS-PAID-IN> 751,147
<RETAINED-EARNINGS> 556,826
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,633,381
270,000
24,858
<LONG-TERM-DEBT-NET> 1,406,654
<SHORT-TERM-NOTES> 305,009
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 967,649
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,094,768
<TOT-CAPITALIZATION-AND-LIAB> 6,702,319
<GROSS-OPERATING-REVENUE> 1,080,200
<INCOME-TAX-EXPENSE> 28,564
<OTHER-OPERATING-EXPENSES> 908,360
<TOTAL-OPERATING-EXPENSES> 942,466
<OPERATING-INCOME-LOSS> 137,734
<OTHER-INCOME-NET> 27,071
<INCOME-BEFORE-INTEREST-EXPEN> 164,805
<TOTAL-INTEREST-EXPENSE> 99,437
<NET-INCOME> 65,368
2,459
<EARNINGS-AVAILABLE-FOR-COMM> 62,909
<COMMON-STOCK-DIVIDENDS> 68,204
<TOTAL-INTEREST-ON-BONDS> 47,365
<CASH-FLOW-OPERATIONS> 145,057
<EPS-PRIMARY> 0.97
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