<PAGE>
Filed by Western Resources, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Western Resources, Inc.
Commission File No. 001-3523
On March 29, 2000, Western Resources, Inc., a Kansas corporation,
issued the following:
Exhibit No.
(a) Press release
(b) Script for Year-End Analyst Conference Call
(c) Investor Presentation
<PAGE>
Exhibit A
Media contact:
Michel' J. Philipp
[LOGO] Western Resources Phone: 785.575.1927
making life a little easier FAX: 785.575.6399
[email protected]
Investor contact:
Jim Martin
Phone: 785.575.6549
FAX: 785.575.8160
[email protected]
- --------------------------------------------------------------------------------
WESTERN RESOURCES ANNOUNCES SEPARATION,
REPORTS 1999 RESULTS,
ANNOUNCES DIVIDEND POLICY
TOPEKA, Kansas, March 29, 2000 (6:30 a.m. CST) -- Western Resources
(NYSE:WR) announced today that it will separate its electric utility business,
to be called Westar Energy, from its non-electric business, which will be
renamed later and until then referred to as "Westar Capital." Both companies
will be public entities. The separation is expected to be accomplished by means
of a voluntary exchange offer and is expected to be completed prior to year-end
2000.
"We believe that Westar Energy, as a pure-play electric company, will
unlock the value associated with our electric assets by providing shareholders
an investment opportunity exclusively in our electric utility operations," said
David C. Wittig, Western Resources chairman of the board, president and chief
executive officer.
"While the businesses of the total company are strong, they have
different growth, financial, and business profiles and are evaluated differently
by investors," said Wittig. "Many of our shareholders have wanted greater
definition to the business, specifically a desire to have the company return to
its core business as strictly an electric utility. This strategy gives our
shareholders a choice of which business they wish to own, and gives the
financial community a
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<PAGE>
p. 2 - EARNINGS
clearer understanding of where the company's value lies. In fact, this is very
similar to the structure we would have built had the KCPL transaction been
completed."
Westar Energy will consist of two electric utilities, KPL and KGE,
that provide electric service to approximately 628,000 customers in Kansas. The
non-electric company, Westar Capital, will consist of the company's approximate
85% ownership interest in Protection One (NYSE:POI), a monitored security
company; its approximate 45% ownership interest in ONEOK Inc. (NYSE:OKE), a
Tulsa-based natural gas company; its 100% ownership interest in Protection One
Europe; its 40% ownership in Paradigm Direct LLC, a direct marketing company;
and other investments.
The exchange offer will provide Western Resources shareholders with
the opportunity to exchange some or all of their Western Resources common stock
for shares in Westar Capital. The terms of the offer, including the exchange
rate, will be determined and announced on commencement of the offer, expected to
be in the third quarter of 2000. The offer of shares in Westar Capital will be
made only by means of a prospectus.
Western Resources believes, without giving assurances, that the
separate companies will have per share market values above Western Resources'
current stock price levels. The exchange is expected to be a one-for-one
exchange with between 29 and 37 million shares exchanged for Westar Capital. Any
shares not subscribed will be held for possible later distribution or sale.
Upon completion of the transaction, Westar Energy intends to raise
approximately $300 million of equity. Proceeds will be used to repay debt.
"For the investor seeking the profile and income of a utility
investment, and the opportunity for a growing dividend, Westar Energy will have
two solidly performing electric
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<PAGE>
p. 3 - EARNINGS
utilities located in solid markets," said Wittig. "Investors in the non-electric
business, Westar Capital, will be able to evaluate and realize a different
risk/reward potential under this structure, one more focused on growth and
capital appreciation. The new corporate structure will allow the management team
of each business to focus its energies and abilities on maximizing the potential
and value of its assets."
For example, in the non-electric business area, Wittig said that
Protection One announced today that customer attrition for the fourth quarter
1999 had improved and Protection One expects attrition to be lower in the first
quarter 2000 than the fourth quarter 1999. Protection One also has made
significant progress in the last six months to enhance customer service, retain
customers and reduce debt.
Management Team
Wittig, 44, will serve as the chairman of the board, president and
chief executive officer of Westar Capital and will be the chairman of Westar
Energy. The balance of the management teams will be announced at a later date.
Each company will remain headquartered in Topeka, Kansas. Customers of KPL, KGE
and Protection One should see no changes as a result of this transaction.
Bond Ratings
The rating agencies previously indicated that they were reviewing
Western Resources' debt ratings with negative implications. With this
announcement, the company expects the rating agencies to take action, but has a
goal of maintaining an investment grade rating on its senior secured debt.
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<PAGE>
p. 4 - EARNINGS
1999 Earnings
Western Resources also announced today that operating earnings in its
electric utility business were $147 million, or $2.19 per share for 1999, versus
$133 million, or $2.03 per share for 1998.
For 1999, total operating earnings were $99 million, or $1.48 per
share, as compared with $127 million, or $1.94 per share for 1998. Total
operating earnings for 1999 include a $0.57 per share contribution from the
company's equity interest in ONEOK, a ($0.71) loss from Protection One, and a
$(0.57) loss associated with interest charges and other costs.
Net income for 1999 was $11.3 million, or $0.17 per share, versus
$44.2 million or $0.67 per share for 1998. Net income for 1999 includes one-
time and non-recurring charges associated with the marking to market of certain
investments, the write-off of the company's KCPL merger-related costs and
adoption of an accelerated amortization method at Protection One. The company
has been liquidating its investment portfolio in non-strategic businesses. Gains
resulting from the sale of these and other investments are approximately $100
million pre-tax, which will be reflected in the first quarter 2000.
(For complete details, see the attached Statement of Operations and
Consolidated Balance Sheets for the quarters and years ended December 31, 1999
and 1998 for Western Resources. Also see the 1999 results announcement of
Protection One released today.)
Dividend Action
Separately, Western Resources announced today that it will adopt a
policy of an annual cash dividend of $1.20 per share effective with the
anticipated dividend in July 2000. The $1.20
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p. 5 - EARNINGS
annual dividend also is anticipated to be the annual dividend for Westar Energy.
The non-electric company, Westar Capital, does not anticipate paying a dividend.
New Western Resources Board Members
The company also announced today that Owen F. Leonard, president, KL
Industries, Inc., Saddle Brook, New Jersey, and John C. Nettels, Jr., partner,
Morrison & Hecker, L.L.P., Attorneys, Wichita, Kansas, have been elected to the
Western Resources board of directors.
Prior to joining KL Industries, Leonard served as chief financial
officer of The Pullman Company, was treasurer of Wheelabrator-Frye, Inc., and
served as a manager at Arthur Andersen & Co. Leonard received his bachelors of
business administration degree in accounting from Iona College. He also serves
as chairman of the board of OMX, Inc.
Nettels, who has been a partner at Morrison & Hecker since 1994,
joined the law firm in 1985. He received his bachelor's of arts degree and his
law degree from The University of Kansas. He has served on the Protection One
board of directors and is active in the Wichita Chamber of Commerce and the
University of Kansas Chancellor's Club.
In other board-related news, the company announced that David H.
Hughes, retired vice chairman, Hallmark Cards, Inc., retired from the Western
Resources board. Hughes had served on the company's board of directors since
1988.
"We continue to be fortunate to have such strong, solid and capable
board members," said Wittig. "David Hughes has seen a lot of change during his
tenure and has been a strong participant in guiding the direction and strategy
of this company. He always has put the interests
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p. 6 - EARNINGS
of shareholders first in his decision making. We wish him happiness and health
in his well-deserved retirement.
"I also am pleased to welcome Owen and John to our board and know they
will provide valuable insight as we continue to move the company forward and
build shareholder value," Wittig said.
Annual Meeting Set
The company announced that its 2000 annual meeting of shareholders
will be June 15 at the Topeka Performing Arts Center, 214 S.E. 8th Street,
Topeka, Kansas. Shareholders of record on April 26 may attend and vote at the
meeting.
In addition, the company announced that its 1999 annual report to
shareholders will be mailed on or about April 15, 2000. The mailing of the
company's annual report has been delayed as a result of delays in finalizing
Protection One's year-end financials.
A copy of the company's Form 10-K is available on the Securities and
Exchange Commission's Edgar System, the company's internet site at www.wr.com,
or, prior to mailing of the annual report, may be obtained by shareholders from
the company by contacting the company's investor relations department at (785)
575-1898.
The exchange offer of Westar Capital shares for Western Resources
shares has not yet commenced. This press release does not constitute an offer to
sell or exchange any securities. Any offer will be made pursuant to a
registration statement and a tender offer statement to be filed with the
Securities and Exchange Commission. Western Resources shareholders are urged to
read the registration statement, and the tender offer statement when they are
available because
<PAGE>
they will contain important information relating to the offer. A prospectus
relating to the offer will be disseminated to all Western Resources
shareholders. Shareholders will also be able to obtain the registration
statement, the tender offer statement and other filed documents for free at the
Internet website maintained by the Securities and Exchange Commission at
http://www.sec.gov. In addition, Western Resources will make the filed documents
- -------------------
available for free to Western Resources shareholders.
Western Resources (NYSE: WR) is a consumer services company with
interests in monitored services and energy. The company has total assets of more
than $8 billion, including security company holdings through ownership of
Protection One (NYSE: POI), which has more than 1.4 million security customers
in 48 states. Its utilities, KPL and KGE, provide electric service to
approximately 628,000 customers in Kansas. Through its ownership in ONEOK Inc.
(NYSE: OKE), a Tulsa-based natural gas company, Western Resources has a 45
percent interest in the eighth largest natural gas distribution company in the
nation, serving more than 1.4 million customers. For more information about
Western Resources and its operating companies, visit us on the Internet at
http://www.wr.com.
- ------------------
Forward-Looking Statements: Certain matters discussed in this news
release are "forward-looking statements." The Private Securities Litigation
Reform Act of 1995 has established that these statements qualify for safe
harbors from liability. Forward-looking statements may include words like we
"believe", "anticipate," "expect" or words of similar meaning. Forward-looking
statements describe our future plans, objectives, expectations, or goals. Such
statements address future events and conditions concerning capital expenditures,
earnings, litigation, rate and other regulatory matters, the outcome of
Protection One accounting issues being reviewed by the SEC staff, possible
corporate restructurings, mergers, acquisitions, dispositions, liquidity and
capital resources, interest and dividend rates, environmental matters, changing
weather, nuclear operations, ability to enter new markets successfully and
capitalize on growth opportunities in nonregulated businesses, events in foreign
markets in which investments have been made, and accounting matters. Our actual
results may differ materially from those discussed here. See the company's and
Protection One's 1999 Annual Report on Form 10-K, and current reports on Form
8-K for further discussion of factors affecting the company's and Protection
One's performance. Western Resources disclaims any obligation to update any
forward-looking statements as a result of developments occurring after the date
of this news release.
<PAGE>
Attachment 1
FOURTH QUARTER REPORT
WESTERN RESOURCES, INC.
<TABLE>
<CAPTION>
Quarter Ended December 31, Year Ended December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
1. Sales $ 450,436,000 $ 487,008,000 $ 2,036,158,000 $ 2,034,054,000
2. Net Income $ (75,787,000) $ (84,484,000) $ 12,459,000 $ 47,756,000
3. Earnings Available
for Common Stock $ (76,070,000) $ (84,768,000) $ 11,330,000 $ 44,165,000
4. Average Common Shares
Outstanding 68,012,000 65,870,000 67,080,000 65,634,000
5. Basic Earnings per
Average Share
Outstanding $ (1.12) $ (1.29) $ 0.17 $ 0.67
6. EBITDA $ 28,158,000 $ 5,067,000 $ 668,464,000 $ 567,515,000
7. Net Utility Plant
(after depreciation) $ 3,826,438,000 $ 3,752,493,000
</TABLE>
<PAGE>
Attachment 2
1999 PER SHARE RESULTS
WESTERN RESOURCES, INC.
<TABLE>
<CAPTION>
Earnings(1) Adj. Earnings(2) Cash Flow(3)
Year Ended December 31, 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Utility(4) $ 2.19 $ 2.03 $ 2.49 $ 2.34 $ 4.68 $ 4.48
ONEOK 0.57 0.56 0.57 0.57 0.54 0.53
Protection One (0.71) (0.18) (0.34) 0.13 0.00 0.00
Other (Net of Interest on
Unallocated Debt) (0.57) (0.47) (0.55) (0.46) (0.55) (0.44)
Earnings Before Non-Operating
COLI and Non-Recurring Events $ 1.48 $ 1.94 $ 2.17 $ 2.58 $ 4.67 $ 4.57
Western Resources -
Non-Operating COLI (0.09) 0.18 (0.09) 0.18 (0.09) 0.18
Non-Recurring Events (0.88) (1.60) (0.88) (1.60) (1.08) (1.60)
Protection One -
Increased Amortization Expense (0.32) 0.00 (0.32) 0.00 0.00 0.00
Non-Recurring Events (0.02) 0.15 (0.02) 0.15 0.00 0.00
Total Earnings per Share $ 0.17 $ 0.67 $ 0.86 $ 1.31 $ 3.50 $ 3.15
</TABLE>
(1) Line of business reporting does not reflect intercompany eliminations
(2) Earnings + goodwill amortization.
(3) Earnings + utility depreciation and amortization + ONEOK dividends.
(4) Interest expense is allocated on $1.9 billion of debt.
<PAGE>
Exhibit B
Year-End Earnings
Analyst Conference Call
7:30 a.m. CST
Wednesday, March 29, 2000
Suggested Remarks for
David C. Wittig,
Bill Moore
and Jim Martin
<PAGE>
JAM: Good morning . . . I'm Jim Martin.
We appreciate your interest in discussing Western Resources' year-end
earnings and corporate structure changes we have in mind to unlock the value of
our company's assets.
Joining us on the call this morning from Western Resources are . . .
. David Wittig, chairman, president and CEO; and,
. Bill Moore, executive vice president and chief financial officer.
[Pause]
Before we begin, I'd like to remind you that certain matters
discussed in our remarks today are "forward-looking statements."
1
<PAGE>
The Private Securities Litigation Reform Act of 1995 has established
that these statements qualify for safe harbors from liability.
Forward-looking statements may include words like we "believe",
"anticipate," "expect" or words of similar meaning. Forward-looking statements
describe our future plans, objectives, expectations, or goals and includes the
financial estimates and assumptions referred to later.
Such statements address future events and conditions concerning
capital expenditures, earnings, litigation, rate and other regulatory matters,
achievement of anticipated cost savings, possible corporate restructurings,
mergers, acquisitions, dispositions, liquidity and capital resources, interest
and dividend rates, environmental matters, changing weather, nuclear operations,
ability to enter new markets successfully and
2
<PAGE>
capitalize on growth opportunities in nonregulated businesses, events in
foreign markets in which investments have been made, and accounting matters.
Our actual results may differ materially from those discussed here.
See the company's and Protection One's 1999 Annual Report on Form 10-K and
current reports on Form 8-K for further discussion of factors affecting the
company's and Protection One's performance.
Western Resources disclaims any obligation to update any
forward-looking statements as a result of developments occurring after the date
of this teleconference.
As always, we welcome your questions at the conclusion of our remarks
today, but please be aware that we have only one hour scheduled for this
conference call.
3
<PAGE>
With that said, I'd like to turn the call over to David Wittig.
David . . .
[Pause]
DCW: Thanks, Jim.
Earlier this morning, we announced our plans to separate Western
Resources into two publicly traded entities, Westar Energy -- which will contain
our current regulated electric utility property and Westar Capital -- which will
include our non-electric businesses, including our ownership in Protection One,
ONEOK, Paradigm Direct, Protection One Europe and other assets.
We also announced our dividend strategy and released fourth quarter
and year-end '99 earnings.
We'd like to talk about these developments and discuss our plans for
2000 and beyond. We'll take your questions at the conclusion of our remarks.
4
<PAGE>
[Pause]
First, let's talk about the restructuring.
Our goal in creating two separate companies is to unlock the value of
our electric utility asset and give the marketplace an opportunity to invest in
the "pure-play" electric utility and/or the non-electric business investment,
offering a different risk/reward potential.
We recognize that while the assets of the total company are strong,
they have different growth, financial, and business profiles and are evaluated
differently by investors. We believe our restructuring gives the financial
community and shareholders a clearer understanding of where the value lies and
how to value our assets in the market.
[Pause]
5
<PAGE>
Westar Energy, the regulated ELECTRIC COMPANY, will be comprised of
two electric utilities, KPL and KGE, that provide electric service to
approximately 628,000 customers in Kansas. The non-electric business, which will
be renamed later and referred to today as Westar Capital, will be comprised of
the approximate 85% ownership interest in Protection One; our 45% ownership
interest in ONEOK, Inc.; Protection One Europe; Paradigm Direct and other
investments.
Some of our shareholders have expressed a desire for the company to
be structured in a way to provide greater focus on a line of business,
specifically a desire to have the company return to its core business as
strictly an electric utility. A very similar structure would have been created
had the KCPL transaction been completed.
6
<PAGE>
For investors seeking the profile and income of a utility investment,
and the opportunity for a growing dividend, Westar Energy will be comprised of
two solidly performing electric utilities located in stable markets.
Investors in Westar Capital, the non-electric business, will share in
the growth potential of the company, which will have strong cash flow as a
result of the ONEOK ownership position, and the opportunity for growth in the
business of Protection One. The transaction is expected to be completed prior to
year-end 2000.
Now, I'd like to recap the year. Let's start with . . .
Electric business highlights:
- -----------------------------
. Wholesale electricity sales were up more than 16 percent in 1999 over 1998.
7
<PAGE>
. Power marketing activities added $0.18 per share to 1999 earnings.
. Regarding power generation, we added 147 megawatts of peaking generation, with
additional purchases from the City of McPherson facilities and the
reactivation of a natural gas steam unit at our Neosho plant near Parsons,
Kansas.
. Through construction of three new natural-gas units at KGE's Gordon Evans
Energy Center, and our partnership with Empire District Electric in the State
Line Plant near Joplin, we plan to add 148 megawatts in 2000, and another 350
megawatts in 2001. We should be well prepared to handle our native load, peak
demands and take advantage of power marketing opportunities.
8
<PAGE>
Let's move to our natural gas investment:
- ----------------------------------------
. In 1999, we completed the second full year of our ONEOK investment. ONEOK
increased their annual common dividend by $0.04 cents in 1999, which in turn
increased our preferred dividend by $0.06 cents per share.
. Though their plans to combine with Southwest Gas have been called off, ONEOK
continues to grow their company through acquisitions on the unregulated side
of their company. Notably, their recent agreements to acquire significant
storage, transmission, gathering and processing assets in the mid-continent
region from Dynegy, Inc and Kinder Morgan, Inc.
9
<PAGE>
Moving to our monitored services investment -- Protection One . . .
- -------------------------------------------------------------------
. On an earnings per share basis, Protection One did not achieve their goals in
1999. Changes in the customer account amortization rates required us to record
larger losses for Protection One on Western's statements despite the fact that
these charges have no cash impact on Western.
. Protection One continues to move aggressively to turn its results around.
Protection One has enhanced customer service and retention of customers.
Attrition for the fourth quarter 1999 improved to 14.7% on an annualized basis
and Protection One expects attrition to be lower in the first quarter 2000.
. Earlier this month, Western Resources purchased the Continental European (CET)
and United Kingdom
10
<PAGE>
operations, collectively the "European operations," and certain other assets
of Protection One for $244 million.
. Under the agreement, Western Resources paid approximately $183 million in cash
and transferred to Protection One debt securities with a market value of
approximately $61 million. Cash proceeds from the transaction were used to
reduce the outstanding balance owed to Western Resources on Protection One's
revolving credit facility.
. In addition, the companies finalized an amendment to the credit facility for
Protection One which reduced the facility to $115 million, down from $250
million.
. Regarding the growth model for Protection One, they have reduced the reliance
on the more expensive dealer model, one that added customers at an average of
35 MRR at its peak. The new model now focuses on
11
<PAGE>
dealers who are paid a lower multiple, internal sales growth in selected
markets and Paradigm Direct. Through these channels, Protection One is adding
customers at a lower multiple.
Regarding our dividend policy . . .
- -----------------------------
. Our board of directors has authorized the adoption of a policy of annual cash
dividends on common stock of $1.20 per share effective with the anticipated
dividend payment in July 2000. This is a decrease from our current $2.14
annual cash dividend on common stock.
. The $1.20 annual dividend also is anticipated to be the annual dividend policy
for the electric utility -- Westar Energy -- following the restructuring.
[Pause]
12
<PAGE>
DCW: Let's turn now to 1999 earnings. For those details, I'd like to turn it
over to Bill Moore. Bill . . .
WBM: Thanks, David.
Total operating earnings for 1999 were $99 million, or $1.48 per share, as
compared with $127 million, or $1.94 per share in 1998.
Reported earnings for 1999 were $11.3 million or $0.17 per share, versus $44.2
million or $0.67 per share for 1998. Earnings for 1999 include one-time costs
associated with the company's merger-related activities, marking investments to
market, and adoption of an accelerated method to amortize customer accounts at
Protection One.
[Pause]
13
<PAGE>
In reviewing the year's financial results, it is easier if the
earnings are separated by lines of business and between ongoing operations and
non-recurring income.
Let's start with ELECTRIC RESULTS:
The 1999 earnings for the electric business were $147 million or
$2.19 per share.
The electric earnings were hindered by milder-than-normal weather,
which was more than offset by our wholesale marketing activities and outstanding
performance by our generating units.
1999 electric EBITDA was $501 million with operating cash flow of
approximately $314 million or $4.68 per share. (Operating cash flow defined as
earnings + utility depreciation + goodwill amortization.)
14
<PAGE>
Adjusted earnings (defined as earnings plus goodwill) were $167.1
million or $2.49 per share.
Moving to the NATURAL GAS segment:
The 1999 earnings for our ONEOK investment were $38 million or $0.57
per share.
Cash flow for 1999 amounted to $36 million, or $0.54 per share.
Regarding our MONITORED SERVICES investment:
Our share of 1999 earnings from our monitored services operations
were $(47.9) million or $(0.71) per Western share.
EBITDA in this business was $207 million in 1999.
15
<PAGE>
[Pause]
Regarding unallocated debt and other . . .
Interest cost on unallocated debt net of other was $0.57 per share.
The interest costs on unallocated debt represent interest on our consolidated
debt which is not allocated to either electric operations nor to Protection One.
Non-recurring items were $(1.31) per share in 1999. These items
include a $(0.69) per share loss in marking to market certain investments;
$(0.16) per share for costs associated with the company's KCPL merger-related
activities, and $(0.32) per share for a change in amortization at Protection
One.
I should point out, however, that the company has been liquidating
non-strategic holdings and expects to
16
<PAGE>
have approximately $100 million in pre-tax gains in the first quarter 2000.
[Pause]
Now. . . I'd like to offer you a description of the restructuring transaction we
announced this morning . . .
As you have heard, by the end of this year, we anticipate closing a
transaction that splits the existing company into two separate publicly traded
entities. We are not commencing an exchange offer today. The offer will be made
later this year by a prospectus, which will contain important information that
Western Resources shareholders will need to make a decision.
Western Resources anticipates filing a registration statement with
the SEC to register the Westar Capital shares. Upon this registration statement
going effective
17
<PAGE>
and the exchange offer commencing, which we expect to be 3 to 4 months after
filing, Western Resources shareholders will have a choice.
They can:
1) either submit some or all shares in exchange for shares in the
non-electric company; or,
2) not submit their shares and remain electric utility shareholders.
The exchange rate is expected to be one-for-one and will finally be
set at the time of the commencement of the offer. Our goal is to have the
exchange offer completed by year-end 2000. No shareholder vote approval is
required.
It is our goal to have between approximately 29 million and 37
million shares of Western Resources stock submitted for exchange into shares of
Westar Capital.
[Pause]
18
<PAGE>
WBM: Let me explain further the make-up of the two new entities. The
non-electric company will include the company's 85% ownership in Protection One,
the company's 45% ownership in ONEOK, the European security business, ownership
in Paradigm Direct, and nonregulated generating assets.
Finally, the non-electric company will have a warrant to purchase up
to 19.9% of the outstanding Westar Energy common stock. The exercise price will
be equal to the estimated trading value of Westar Energy at the time the
exchange offer commences. The implied valuation of the warrant is $30-$40
million.
[Pause]
Westar Energy, the ELECTRIC COMPANY, on the other hand, will own the
regulated electric assets currently comprised of our KPL division and our KGE
subsidiary.
19
<PAGE>
The annual common dividend, which was just announced to be $1.20
commencing with the July 2000 dividend, is anticipated to remain the same upon
completion of the exchange offer. The consolidated debt of Westar Energy is
expected to be reduced from $3.9 billion to approximately $3.0 billion.
Upon completion of the transaction, the electric company intends to
issue approximately $300 million in equity.
Finally, with regard to the TAX CONSEQUENCES:
There are no tax implications for shareholders who do not participate
in the exchange offer. Shareholders who choose to participate in the exchange
offer will have a gain or loss depending on the original cost of their Western
Resources shares. Shareholders should consult their tax advisor for their
specific situation.
20
<PAGE>
With that as a framework, I'll turn it back over to Jim . .
[Pause]
JAM: I want to remind you that the exchange offer of Westar Capital
shares for Western Resources shares has not yet commenced. This analyst call
does not constitute an offer to sell or exchange any securities. Any offer will
be made pursuant to a registration statement and a tender offer statement to be
filed with the SEC. Western Resources shareholders are urged to read the
registration statement, and the tender offer statement when they are available
because they will contain important information relating to the offer. A
prospectus relating to the offer will be disseminated to all Western Resources
shareholders. Shareholders will also be able to obtain the registration
statement, the tender offer statement and other filed
21
<PAGE>
documents for free at the Internet website maintained by the SEC at
http://www.sec.gov. In addition, Western Resources will make the filed documents
- -------------------
available for free to Western Resources shareholders.
With that... we're open to your questions.
[Question and Answer Session]
DCW: This concludes our call.
If we at Western Resources can offer any follow-up on our phone call
this morning, please contact Jim Martin at (785) 575-6549. Or to listen to a
play-back of this call, dial 303-590-3000 -- reservation number 695235 --
through April 5, 2000.
22
<PAGE>
Exhibit C
Unlocking Shareholder Value
March 30, 2000
Western Resources
[LOGO] Western Resources
<PAGE>
Disclaimer
The exchange offer of Westar Capital shares for Western Resources shares has not
yet commenced. This presentation does not constitute an offer to sell or
exchange any securities. Any offer will be made pursuant to a registration
statement and a tender offer statement to be filed with the Securities and
Exchange Commission. Western Resources shareholders are urged to read the
registration statement, and the tender offer statement when they are available
because they will contain important information relating to the offer. A
prospectus relating to the offer will be disseminated to all Western Resources
shareholders. Shareholders will also be able to obtain the registration
statement, the tender offer statement and other filed documents for free at the
Internet website maintained by the Securities and Exchange Commission at
http://www.sec.gov. In addition, Western Resources will make the filed documents
- -------------------
available for free to Western Resources shareholders.
1
<PAGE>
Unlocking Shareholder Value
o Significant trading discount exists in Western Resources' stock
o Discount likely to persist
- Protection One Earnings continue to depress consolidated EPS
- Continuing holding company discount
o Separation of the Utility (Westar Energy) and non-electric utility assets
(Westar Capital) will allow the market to more accurately value these separate
companies
o Following proposed transaction, goal is to maintain investment grade senior
secured credit rating
2
<PAGE>
Unlocking Shareholder Value
o Western Resources will be split into two publicly traded entities through a
non pro rata exchange offer
- Westar Energy - Pure play electric utility consisting of KPL and KGE
- Westar Capital - Consists of Protection One, ONEOK, Paradigm Direct,
Protection One Europe and other assets.
o Advantages
- Unlocks value by creating a pure play Electric Utility
- Allows investors to invest in Westar Capital, 2nd largest residential
provider of monitored security and 45% owner of ONEOK
3
<PAGE>
Valuation Assumptions
o Exchange offer
- Split is expected to be achieved through a non pro rata exchange offer
- Up to approximately 37 million shares of Westar Capital will be offered to
the shareholders with a minimum of approximately 29 million shares
outstanding, subject to the terms in the final exchange offer. If the offer
is undersubscribed, Westar Energy will hold the shares below approximately
29 million for possible later distribution or sale.
- Partial disposition of Protection One through issuance of $15 million
preferred stock to third party
- Westar Energy issues approximately $300 million in equity, following close
of transaction
o Westar Energy grants Warrant to Westar Capital
- In conjunction with the exchange offer, Westar Capital receives warrant to
acquire 19.9% of the common stock of Westar Energy. The Warrant expires in
12 years. The exercise price will be equal to the estimated trading value of
Westar Energy at the time the exchange offer commences. The implied
valuation of the Warrant is $30 - $40 million.
4
<PAGE>
Key Execution Mechanics
<TABLE>
<CAPTION>
Pre Separation Separation Post Separation
<S> <C> <C>
o Organization of Westar Capital o Westar Capital distributed to o Westar Capital
current Western Resources
o Partial disposition of Protection shareholders in exchange for WR - New company with Protection
One provides tax shelter shares One, ONEOK, Paradigm
Direct, Protection One
o Westar Energy grants Westar - Exchange is non-pro rata; Europe and Other
Capital Warrant to purchase shareholders choose whether Investments
Westar Energy shares post- to participate
separation o Westar Energy
- Shareholders likely will treat - Electric utility assets
receipt of Westar Capital
stock as capital gain or loss - Issuance of approximately
for tax purposes $300 million of equity
- EPS accretion for Utility
shareholders
</TABLE>
5
<PAGE>
Current Western Resources Valuation
Value per
Western Resources WR Share (1)
- ----------------------------- ------------
Westar Energy (2) $26.06
ONEOK (3) 9.43
Protection One (3) 2.48
Protection One Europe (4) 3.33
Other Investments (5) 4.27
Debt (6) (16.27)
- ----------------------------- ------------
Value per WR Share $29.30
Current WR Stock Price (3) $16.75
Current Price Discount 42.83%
(1) Shares outstanding at Western Resources of 67.6 million.
(2) Calculated using earnings of $2.19 per share times S&P average multiple of
11.9.
(3) Market prices as of 3/24/00. ONEOK value includes $4.87 premium for
preferred shares.
(4) Cost basis of $225 million.
(5) Other Investments include marketable securities (net of tax), unregulated
generation, Paradigm and interest due from Protection One.
(6) Assumes $1.1 billion in debt.
6
<PAGE>
New Westar Energy Pro Forma Fact Sheet
Westar Energy (dollars in millions, except per share amount)
- --------------------------------------------------------------------------------
Electric Customers 628,000
Generation 12/31/99 5,458 MW
12/31/99 Assets $4,674
1999 Revenues $1,429
1999 EBITDA $501
Pro Forma 1999 Net Income to Common $85
Pro Forma 12/31/99 Debt $3,000
Anticipated Common Dividend per Share $1.20
7
<PAGE>
New Westar Energy -Pro Forma Valuation *
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Assumes Minimum Assumes Maximum
Westar Energy Valuation Subscription Level Subscription Level
- ----------------------- ------------------ ------------------
<S> <C> <C>
1999 Pro Forma Net Income $147.00 $147.00
Interest on Unallocated Debt (1) ($54.45) ($54.45)
Other Pro Forma Adjustments ($8.05) ($8.05)
------------------ ------------------
Net Income $84.50 $84.50
Shares Outstanding - millions (2) 38.6 30.6
EPS $2.19 $2.76
================== ==================
Anticipated Dividend $1.20 $1.20
</TABLE>
(1) Unallocated Debt of $1.1 billion.
(2) Minimum subscription assumes 38.6 million shares of Westar Energy and 29
million shares of Westar Capital. Maximum subscription assumes 30.6 million
shares of Westar Energy and 37 million shares of Westar Capital. Assumes 1:1
exchange ratio.
* Excludes issuance of approximately $300 million of equity.
8
<PAGE>
New Westar Energy -Pro-Forma Valuation *
<TABLE>
<CAPTION>
Westar Energy Implied Stock Price (1)
-------------------------------------
Minimum Maximum
Subscription Subscription
Average Industry Multiples EPS of $2.19 EPS of $2.76
- --------------------------------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
S&P Electric Index P/E 11.9 $26.05 $32.86
Dividend Yield 6.2% $19.35 $19.35
Everen Index P/E 12.7 $27.80 $35.07
Dividend Yield 5.8% $20.69 $20.69
Philadelphia Index P/E 13.0 $28.46 $35.90
Dividend Yield 5.9% $20.34 $20.34
- --------------------------------------------- ---------------- ------------------
P/E Average 12.5
Average Yield 6.0%
---------------------------------------------------------------
Average Stock Price $23.78 $27.37
---------------------------------------------------------------
</TABLE>
(1) Based on 1999 Pro Forma Net Income for Westar Energy
* Excludes issuance of approximately $300 million of equity. Index averages as
of 3/24/00.
9
<PAGE>
Westar Capital Pro Forma Fact Sheet
(dollars in millions)
Assets (1) EBITDA (3)
---------- ----------
Protection One $167.7 $165.0
Protection One Europe $225.0 $42.7
---------- ----------
Total $392.7 $207.7
Assets (2) Net Income (4)
---------- ---------------
ONEOK $637.5 $37.6
Paradigm Direct 35.4 0.8
Unregulated Generation 84.7 6.3
Marketable Securities (net of tax) 111.8 9.8
Due from Protection One 56.9 2.8
Value of Warrant 35.0 -
---------- ---------------
Total $961.3 $57.3
(1) Protection One calculated using 3/24/00 market price. Protection One Europe
calculated using 3/1/00 purchase price.
(2) ONEOK calculated using 3/24/00 market price, includes $4.87 premium on
preferred shares. Paradigm, unregulated generation, amount due from Protection
One and marketable securities calculated using 12/31/99 book value. Warrant
valuation based upon binomial valuation method.
(3) EBITDA calculated using 1999 results.
(4) Net Income calculated using 1999 results.
10
<PAGE>
Westar Capital - Pro Forma Asset Valuation
(dollars in millions, except per share amounts)
Assumes Minimum Assumes Maximum
Westar Capital Valuation Subscription Level Subscription Level
- ------------------------ ------------------ ------------------
Protection One (1) $167.7 $167.7
ONEOK (1) 637.5 637.5
Unregulated Generation 84.7 84.7
Paradigm 35.4 35.4
Protection One Europe 225.0 225.0
Marketable Securities (net of tax) 111.8 111.8
Due from Protection One 56.9 56.9
Value of Warrant (2) 35.0 35.0
------------------ ------------------
Net Assets $1,354.0 $1,354.0
Shares Outstanding (3) 29.0 37.0
Theoretical Stock Price $46.69 $36.59
Holding Company Discount
- --------------------------------------------------------------------------------
30% $32.68 $25.62
- --------------------------------------------------------------------------------
40% $28.01 $21.96
- --------------------------------------------------------------------------------
50% $23.34 $18.30
(1) Based on Market Prices as of 3/24/00. ONEOK value includes $4.87 premium for
preferred shares.
(2) Warrant valuation based upon binomial valuation method.
(3) Minimum subscription assumes 29 million shares of Westar Capital and 38.6
million shares of Westar Energy. Maximum subscription assumes 37 million shares
of Westar Capital and 30.6 million shares of Westar Energy.
11
<PAGE>
Forward-Looking Statements
Forward-Looking Statements: Certain matters discussed in this presentation are
"forward-looking statements." The Private Securities Litigation Reform Act of
1995 has established that these statements qualify for safe harbors from
liability. Forward-looking statements may include words like we "believe",
"anticipate," "expect" or words of similar meaning. Forward-looking statements
describe our future plans, objectives, expectations, or goals. Such statements
address future events and conditions concerning capital expenditures, earnings,
litigation, rate and other regulatory matters, achievement of anticipated cost
savings, possible corporate restructurings, mergers, acquisitions, dispositions,
liquidity and capital resources, interest and dividend rates, environmental
matters, changing weather, nuclear operations, ability to enter new markets
successfully and capitalize on growth opportunities in nonregulated businesses,
events in foreign markets in which investments have been made, and accounting
matters. Our actual results may differ materially from those discussed here. See
the company's and Protection One's 1999 Annual Reports on Form 10-K and
quarterly reports on Forms 10-Q and current reports on Form 8-K for further
discussion of factors affecting the company's and Protection One's performance.
Western Resources disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date of this
presentation.
12
