Westar Energy, Inc Year-End Earnings. Released March 13, 2006

Transcription

1 Westar Energy, Inc 2005 Year-End Earnings Released March 13, 2006 Contents Page Income statements 1 Balance sheets 3 Statements of cash flows 4 Earnings variances 5 Supplemental data 7 Bruce Burns Director Investor Relations bruce_burns@wr.com NOTE: The Notes to the Consolidated Financial Statements in the company's Annual Report on Form 10-K for the year ended December 31, 2005 should be read in conjunction with this financial information. The enclosed statements have been prepared for the purpose of providing information concerning the Company and not in connection with any sale, offer for sale, or solicitation to buy any securities.

2 Westar Energy, Inc. Consolidated Income Statements Three Months Ended December 31, Change % Change (In Thousands, Except Per Share Amounts) SALES: Residential $ 96,857 $ 88,444 $ 8, Commercial 95,158 89,268 5, Industrial 61,535 58,855 2, Other retail (291) (329) Total Retail Sales 253, ,238 17, Tariff-based wholesale 42,046 33,907 8, Market-based wholesale 49,131 38,362 10, Energy marketing 25,417 10,308 15, Transmission 18,508 19,277 (769) (4.0) Other 5,717 6,215 (499) (8.0) Total Sales 394, ,307 49, OPERATING EXPENSES: Fuel used for generation 167,972 86,351 81, Purchased power 16,820 12,546 4, Operating and maintenance 114, ,542 3, Depreciation and amortization 22,838 42,660 (19,822) (46.5) Selling, general and administrative 41,337 49,831 (8,492) (17.0) Total Operating Expenses 363, ,930 61, INCOME FROM OPERATIONS 30,136 41,377 (11,241) (27.2) OTHER INCOME (EXPENSE): Investment earnings 2,112 4,204 (2,092) (49.8) Other income 2, , Other expense (4,479) (3,584) (894) 24.9 Total Other Income (Expense) (349) 1,310 (1,659) (126.6) Interest expense 24,591 29,948 (5,357) (17.9) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 5,196 12,739 (7,544) (59.2) Income tax benefit (1,705) (4,202) 2, INCOME FROM CONTINUING OPERATIONS 6,901 16,941 (10,041) (59.3) Results of discontinued operations, net of tax ,902 (71,160) (99.0) NET INCOME 7,643 88,843 (81,201) (91.4) Preferred dividends (2) (0.8) EARNINGS AVAILABLE FOR COMMON STOCK $ 7,401 $ 88,599 $ (81,199) (91.6) BASIC EARNINGS PER SHARE $ 0.08 $ 1.03 $ (0.95) (92.2) Average equivalent common shares outstanding (in thousands) 87,069 86,193 be read in conjunction with this financial information. Page 1

3 Westar Energy, Inc. Consolidated Income Statements Year Ended December 31, Change % Change (In Thousands, Except Per Share Amounts) SALES: Residential $ 458,806 $ 425,150 $ 33, Commercial 404, ,991 17, Industrial 242, ,518 2, Other retail 376 (46) Total Retail Sales 1,106,155 1,051,613 54, Tariff-based wholesale 185, ,868 41, Market-based wholesale 145, ,465 5, Energy marketing 47,089 26,321 20, Transmission 76,591 77,540 (949) (1.2) Other 22,217 24,682 (2,465) (10.0) Total Sales 1,583,278 1,464, , OPERATING EXPENSES: Fuel used for generation 430, ,617 76, Purchased power 97,803 66,171 31, Operating and maintenance 437, ,002 25, Depreciation and amortization 150, ,310 (18,790) (11.1) Selling, general and administrative 166, ,498 (7,438) (4.3) Total Operating Expenses 1,282,550 1,174, , INCOME FROM OPERATIONS 300, ,891 10, OTHER INCOME (EXPENSE): Investment earnings 11,365 16,746 (5,381) (32.1) Loss on extinguishment of debt - (18,840) 18, Other income 9,948 2,756 7, Other expense (17,580) (14,879) (2,701) (18.2) Total Other Income (Expense) 3,733 (14,217) 17, Interest expense 109, ,151 (33,071) (23.3) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 195, ,523 61, Income tax expense 60,513 33,443 27, INCOME FROM CONTINUING OPERATIONS 134, ,080 34, Results of discontinued operations, net of tax ,790 (78,048) (99.1) NET INCOME 135, ,870 (43,260) (24.2) Preferred dividends EARNINGS AVAILABLE FOR COMMON STOCK $ 134,640 $ 177,900 $ (43,260) (24.3) BASIC EARNINGS PER SHARE $ 1.55 $ 2.14 $ (0.59) (27.6) Average equivalent common shares outstanding (in thousands) 86,855 82,941 be read in conjunction with this financial information. Page 2

4 ASSETS Westar Energy, Inc. Consolidated Balance Sheets As of December 31, (Dollars in thousands) CURRENT ASSETS: Cash and cash equivalents $ 38,539 $ 24,611 Restricted cash 2,430 2,256 Accounts receivable, net 124,711 92,532 Inventories and supplies, net 101, ,563 Energy marketing contracts 55,948 23,155 Tax receivable 1,565 90,845 Deferred tax assets 19,211 - Prepaid expenses 30,452 29,179 Regulatory assets 39,300 16,137 Other 61,646 21,580 Total Current Assets 475, ,858 PROPERTY, PLANT AND EQUIPMENT, NET 3,947,732 3,910,987 OTHER ASSETS: Restricted cash 25,014 27,408 Regulatory assets 398, ,458 Nuclear decommissioning trust 100,803 91,095 Energy marketing contracts 75,698 4,904 Other 187, ,434 Total Other Assets 786, ,299 TOTAL ASSETS $ 5,210,069 $ 5,001,144 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 100,000 $ 65,000 Accounts payable 109, ,593 Accrued taxes 100,568 97,874 Energy marketing contracts 11,710 20,431 Accrued interest 36,609 30,506 Deferred tax liabilities - 2,163 Regulatory liabilities 50,970 1,553 Other 140,403 99,170 Total Current Liabilities 550, ,290 LONG-TERM LIABILITIES: Long-term debt, net 1,562,990 1,639,901 Deferred income taxes 911, ,706 Unamortized investment tax credits 65,558 68,957 Deferred gain from sale-leaseback 130, ,981 Accrued employee benefits 158, ,152 Asset retirement obligation 129,888 87,118 Energy marketing contracts 2,007 1,547 Regulatory liabilities 111,523 29,466 Other 150, ,704 Total Long-Term Liabilities 3,222,563 3,169,532 COMMITMENTS AND CONTINGENCIES (see Notes 14 and 16 in 2005 Form 10-K) SHAREHOLDERS' EQUITY: Cumulative preferred stock, par value $100 per share; authorized 600,000 shares; issued and outstanding 214,363 shares 21,436 21,436 Common stock, par value $5 per share; authorized 150,000,000 shares; issued 86,835,371 shares and 86,029,721 shares, respectively 434, ,149 Paid-in capital 923, ,932 Unearned compensation (10,257) (10,361) Retained earnings 109,987 55,053 Accumulated other comprehensive (loss) income, net (40,987) 113 Total Shareholders' Equity 1,437,439 1,409,322 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,210,069 $ 5,001,144 be read in conjunction with this financial information. Page 3

5 Westar Energy, Inc. Consolidated Statements of Cash Flows Year Ended December 31, (Dollars in thousands) Revised CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: Net income $ 135,610 $ 178,870 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations, net of tax (742) (78,790) Depreciation and amortization 150, ,310 Amortization of nuclear fuel 13,315 14,221 Amortization of deferred gain from sale-leaseback (8,469) (11,828) Amortization of corporate-owned life insurance 16,265 12,622 Non-cash stock compensation 3,219 7,916 Net changes in energy marketing assets and liabilities 5,799 4,383 Loss on extinguishment of debt - 18,840 Accrued liability to certain former officers 2,018 8,384 Gain on sale of utility plant and property - (503) Net deferred income taxes and credits 25,552 (5,215) Changes in working capital items, net of acquisitions and dispositions: Accounts receivable, net (32,179) (11,561) Inventories and supplies 22,745 10,368 Prepaid expenses and other (65,635) (35,114) Accounts payable 6,929 6,439 Accrued taxes 91,938 43,463 Other current liabilities (20,876) (5,907) Changes in other, assets 20,374 12,846 Changes in other, liabilities (12,492) 6,880 Cash flows from operating activities 353, ,624 CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: Additions to property, plant and equipment (212,814) (197,149) Purchase of securities within the nuclear decommissioning trust fund (372,426) (313,241) Sale of securities within the nuclear decommissioning trust fund 367, ,105 Investment in corporate-owned life insurance (19,346) (19,658) Proceeds from investment in corporate-owned life insurance 10,997 - Proceeds from sale of Protection One, Inc. - 81,670 Proceeds from sale of Protection One, Inc. bonds - 26,640 Proceeds from sale of plant and property - 8,604 Proceeds from sale of international investment - 11,219 Issuance of officer loans and interest, net of payments - 2 Proceeds from other investments 13,990 16,548 Cash flows used in investing activities (212,029) (76,260) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: Short-term debt, net - (1,000) Proceeds from long-term debt 642, ,301 Retirements of long-term debt (741,847) (1,188,081) Funds in trust for debt repayments - 78 Repayment of capital leases (4,898) (4,977) Borrowings against cash surrender value of corporate-owned life insurance 58,039 57,090 Repayment of borrowings against cash surrender value of corporate-owned life insurance (13,026) (444) Issuance of common stock, net 5, ,130 Cash dividends paid (74,593) (56,189) Reissuance of treasury stock - 1,927 Cash flows used in financing activities (127,934) (323,165) CASH FLOWS FROM (USED IN) DISCONTINUED OPERATIONS: Cash flows from operating activities - 2,265 Cash flows used in investing activities - (3,412) Net cash used in discontinued operations - (1,147) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,928 (54,948) CASH AND CASH EQUIVALENTS: Beginning of period 24,611 79,559 End of period $ 38,539 $ 24,611 (See Note 2 in Form 10-K) be read in conjunction with this financial information. Page 4

6 Supplemental Data - Earnings Variances ($ per share) 2004 ongoing earnings 0.24 Discontinued operations 0.83 A Investigation/litigation expense (0.04) B 2004 GAAP earnings 1.03 Weather - retail 0.04 Other retail - growth and usage 0.06 Tariff- based wholesale 0.06 C Market-based wholesale 0.07 D Energy marketing 0.11 E Other revenues (0.01) Fuel and purchased power (0.58) F Operating and maintenance (0.02) G Depreciation and amortization 0.13 H Selling, general and administration 0.06 I Other income (expense) (0.01) Interest expense 0.04 J Income tax expense (0.07) K Discontinued operations (0.82) A Share dilution (0.01) 2005 GAAP earnings 0.08 Discontinued operations (0.01) A Investigation/litigation expense 0.01 B Rate order adjustments (0.05) L 2005 ongoing earnings 0.03 Westar Energy, Inc. 4th Quarter 2005 vs A B C D E F G H I J K L Sale of the company's interest in monitored security businesses Expenses related to the company's former management and shareholder lawsuits Increased sales and sales volumes partially due to cooler weather in addition to an increase in price Increase due to an increase in market prices; sales volumes were 26% below 2004 levels Energy marketing benefited from favorable market opportunities Fuel expense increased due primarily to the reversal of $70.9 million ($42.7 million after tax) mark-to-market gains on fuel contracts that previously reduced fuel expense; during the quarter the company used significantly higher cost sources of generation; purchased power increased due to a 70% increase in volumes and a 23% increase in the average price per MWh compared with 2004 Increase reflects the $10.4 million write-off of disallowed plant costs, which was partially offset by decreased maintenance costs for generation facilities and the distribution system; and, $2.7 million reduction in LaCygne 2 operating lease expense Decrease due primarily to the establishment of a $20.1 million regulatory asset for the difference in depreciation rates allowed by the KCC and rates used for financial reporting between Aug 2001 and Mar 2002 Decrease is due primarily to lower legal fees Decrease is due primarily to the retirement of debt and the refinancing of higher cost debt Income tax reserve adjustment and miscellaneous adjustments due primarily to tax treatment of regulatory items Rate Order adjustments: $10.1 million ($6.1 million after tax) increase to operating and maintenance expenses and a decrease of $20.1 million ($10.9 million after tax) for depreciation expense be read in conjunction with this financial information. Page 5

7 Westar Energy, Inc. Twelve Months Ended December 2005 vs Supplemental Data - Earnings Variances ($ per share) 2004 ongoing earnings 1.50 Discontinued operations 0.95 A Investigation/litigation expense (0.14) B RSU vesting former management (0.03) C Loss on debt retirement (0.14) D 2004 GAAP earnings 2.14 Weather - retail 0.19 Other retail - growth and usage 0.10 Tariff- based wholesale 0.29 E Market-based wholesale 0.03 F Energy marketing 0.14 G Other revenues (0.02) Fuel and purchased power (0.67) H Operating and maintenance (0.18) I Depreciation and amortization 0.13 J Selling, general and administration 0.05 K Other income (expense) 0.12 L Interest expense 0.23 M Income tax expense (0.03) N Discontinued operations (0.90) A Share dilution (0.07) 2005 GAAP earnings 1.55 Discontinued operations (0.01) A Investigation/litigation expense 0.08 B Write-off DCS costs 0.02 O Rate order adjustments (0.05) P 2005 ongoing earnings 1.59 A B C D E F G H I J K L M N O P Sale of the company's interest in monitored security businesses Expenses related to the company's former management and shareholder lawsuits Vesting of RSUs for former senior management In 2004 two debt issues were retired at a loss. Increase due primarily to warmer weather and increased sales related to an agreement to supply power to another utility Increase due to higher market prices; sales volumes were 28% below 2004 levels Energy marketing benefited from favorable market opportunities Fuel increase is due primarily to the use of higher cost generation as a result of the Wolf Creek refueling and maintenance outage, other planned and unplanned unit outages and inventory constraints; purchased power reflects increased purchases at higher market prices Increased cost of operating and maintenance of distribution system; $10.4 million write-off of disallowed plant costs as result of KCC rate order; increases partially offset by $5.4 million reduction in LaCygne unit 2 lease expense Decrease due primarily to the establishment of a $20.1 million regulatory asset for the difference in depreciation rates allowed by the KCC and rates used for financial reporting between Aug 2001 and Mar 2002 Decrease is due to reduced legal fees and insurance costs that were partially offset by increases in employee pension and benefit expenses Recognized a loss in 2004 of $18.8 million in connection with the redemption of Company debt; the 2004 loss on reacquired debt was partially offset in 2005 by $7.2 million related to proceeds from corporate-owned life insurance Decrease was due to lower debt balances and lower interest rates due to refinancing activities Income tax reserve adjustment and miscellaneous adjustments due primarily to tax treatment of regulatory items Costs associated with terminating the development of a plant operating system at Wolf Creek Rate Order adjustments: $10.1 million ($6.1 million after tax) increase to operating and maintenance expenses and a decrease of $20.1 million ($10.9 million after tax) for depreciation expense be read in conjunction with this financial information. Page 6

8 Supplemental Data - Revenue and Sales Westar Energy, Inc Three Months Ended December 31, Change % Change Sales Residential $ 96,857 $ (Dollars In Thousands) 88,444 $ 8, Commercial 95,158 89,268 5, Industrial 61,535 58,855 2, Other retail (291) (329) Total Retail Sales 253, ,238 17, Tariff-based wholesale 42,046 33,907 8, Market-based wholesale 49,131 38,362 10, Energy marketing 25,417 10,308 15, Transmission 18,508 19,277 (769) (4.0) Other 5,717 6,215 (498) (8.0) Total Sales $ 394,078 $ 344,307 $ 49, Energy Sales Residential 1,383 (Thousands of MWh) 1, Commercial 1,720 1, Industrial 1,451 1, Other retail (1) (3.8) Total Retail 4,579 4, Tariff-based wholesale 1,307 1, Market-based wholesale 775 1,053 (278) (26.4) Total wholesale 2,082 2,141 (59) (2.8) Total Energy Sales 6,661 6, Tariff-based wholesale - average $/MWh $ $ $ Market-based wholesale - average $/MWh $ $ $ Energy Supply Generated - Gas/oil 296 (Thousands of MWh) coal 5,128 5,332 (204) (3.8) nuclear 1,235 1, Purchased Total Energy Supply (Company Share) 6,983 6, Last Yr / 20 yr Ave Change % Change Degree Days Heating Actual compared to last year 1,850 1, Actual compared to 20 year average 1,850 1, Cooling Actual compared to last year Actual compared to 20 year average Page 7

9 Supplemental Data - Revenue and Sales Westar Energy, Inc. Twelve Months Ended December 31, Change % Change Sales Residential $ 458,806 $ (Dollars In Thousands) 425,150 $ 33, Commercial 404, ,991 17, Industrial 242, ,518 2, Other retail 376 (46) Total Retail Sales 1,106,155 1,051,613 54, Tariff-based wholesale 185, ,868 41, Market-based wholesale 145, ,465 5, Energy marketing 47,089 26,321 20, Transmission 76,591 77,540 (949) (1.2) Other 22,217 24,682 (2,465) (10.0) Total Sales $ 1,583,278 $ 1,464,489 $ 118, Energy Sales Residential 6,384 (Thousands of MWh) 5, Commercial 7,151 6, Industrial 5,581 5, Other retail (1) (1.0) Total Retail 19,217 18, Tariff-based wholesale 5,490 4, Market-based wholesale 2,950 4,115 (1,165) (28.3) Total wholesale 8,440 8,688 (248) (2.9) Total Energy Sales 27,657 27, Tariff-based wholesale - average $/MWh $ $ $ Market-based wholesale - average $/MWh $ $ $ Energy Supply Generated - Gas/oil 1,768 (Thousands of MWh) 1, coal 21,940 21, nuclear 4,146 4,762 (617) (12.9) Purchased 1,656 1, Total Energy Supply (Company Share) 29,509 28, Last Yr / 20 yr Ave Change % Change Degree Days Heating Actual compared to last year 4,636 4, Actual compared to 20 year average 4,636 4, Cooling Actual compared to last year 1,760 1, Actual compared to 20 year average 1,760 1, Page 8