SOURCE: Westar Energy, Inc.

Westar Energy, Inc.

August 06, 2009 16:35 ET

Westar Energy Announces Second Quarter 2009 Results

TOPEKA, KS--(Marketwire - August 6, 2009) - Westar Energy, Inc. (NYSE: WR) today announced net income of $38 million, or $0.35 per share, for the second quarter 2009 compared with net income of $6 million, or $0.06 per share, for the second quarter 2008. Net income for the six months ended June 30, 2009 was $83 million, or $0.75 per share, compared with net income of $67 million, or $0.67 per share, for the same period last year. The increase in net income for both periods was due principally to recent price adjustments reflecting higher costs, some of which the company had already been incurring, associated with investments in gas peaking and wind generating facilities, transmission lines and emission controls equipment. The net income for the six months ended June 30 for both years includes substantial federal income tax adjustments related to prior period activity.

Per share results for both periods also reflect more shares outstanding as a result of the company having issued additional shares to fund capital investments.

Revenues
--------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- ----- -------- -------- ------- -----
                               (Dollars in Thousands)

Retail
 sales    $355,041  $331,068 $23,973   7.2 $645,702 $599,164 $46,538   7.8
Wholesale
 sales      65,651    87,746 (22,095)(25.2) 151,396  190,925 (39,529)(20.7)
Energy
 marketing     325       738    (413)(56.0)  13,707    3,693  10,014 271.2
Other       46,795    31,667  15,128  47.8   78,774   64,264  14,510  22.6
          --------  -------- -------       -------- -------- -------
 Total
 Revenues $467,812  $451,219 $16,593   3.7 $889,579 $858,046 $31,533   3.7
          --------  -------- -------       -------- -------- -------

Retail revenues for both periods increased due primarily to price increases which more than offset declines in retail sales volumes of 0.5 percent and 4 percent for the respective periods. Wholesale revenues decreased for both periods due principally to lower average market prices.

Energy marketing increased for the six months ended June 30, 2009 due primarily to the settlement of forward contracts for the sale of electricity on favorable terms.

Fuel and Purchased Power
------------------------

           Three Months Ended June 30,       Six Months Ended June 30,
         -------------------------------- --------------------------------
                                      %                               %
           2009     2008    Change Change   2009    2008     Change Change
         -------- --------  ------- ----- -------- -------- -------- -----
                              (Dollars in Thousands)
Fuel and
 purchased
 power   $120,508 $191,355 $(70,847)(37.0)$261,152 $337,804 $(76,652)(22.7)

The decreases in fuel and purchased power expense for both periods reflect a significant reduction in the amount of power purchased from others and a reduction in the unit costs of fuel and purchased power.

Operating and Maintenance
-------------------------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- -----  -------- -------- ------- -----
                               (Dollars in Thousands)

Operating
 and      $139,810  $130,966 $ 8,844   6.8  $261,978 $246,984 $14,994   6.1
 maintenance

Operating and maintenance expense increased for both periods due primarily to higher transmission expense, the amortization of previously deferred storm costs and additional expense for new generating facilities completed in the past year.

Depreciation and Amortization
-----------------------------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- ----- -------- -------- ------- -----
                               (Dollars in Thousands)

Depreciation
 and      $ 63,814  $ 49,605 $14,209  28.6 $122,028 $ 98,501 $23,527  23.9
 amortization

Depreciation expense increased for both periods primarily as a result of last year's large construction projects now being in service.

Selling, General and Administrative
-----------------------------------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- ----- -------- -------- ------- -----
                               (Dollars in Thousands)

Selling,
 general
 and      $ 53,638  $ 44,254 $ 9,384  21.2 $101,619 $ 85,910 $15,709  18.3
 administrative

Selling, general and administrative expenses increased for both periods due principally to an increase in pension and other employee benefit expenses. The increase in pension expense was attributable primarily to the lower than expected returns on pension assets last year.

Interest Expense
----------------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- ----- -------- -------- ------- -----
                               (Dollars in Thousands)

Interest
 expense  $ 40,094  $ 30,311 $ 9,783  32.3 $ 75,170 $ 41,001 $34,169  83.3

Interest expense increased for the second quarter due primarily to the company having issued additional debt in 2008 to fund capital investments. The increase was partially offset by a decline in interest rates on variable rate debt.

Interest expense for the six months ended June 30, 2009 increased due primarily to the reversal in 2008 of $18 million of accrued interest associated with uncertain income tax liabilities (which reduced 2008 interest expense) and the increased interest expense as a result of the company having issued additional debt in 2008 to fund capital investments.

Income Tax Expense
------------------

            Three Months Ended June 30,       Six Months Ended June 30,
          -------------------------------- --------------------------------
                                       %                               %
            2009      2008    Change Change   2009    2008    Change Change
          --------  -------- ------- ----- -------- --------  ------- -----
                               (Dollars in Thousands)

Income tax
 expense
 (benefit) $15,696  $  2,687 $13,009 484.1 $ 20,098 $(15,552) $35,650 229.2

Income tax expense increased for the second quarter due primarily to higher taxable income.

Income tax expense for the six months ended June 30, 2009 increased due primarily to the reversal in 2008 of $29 million of income tax reserves (which reduced 2008 income tax expense) as a result of completing a federal income tax audit for prior years.

Discontinued Operations

In January 2009 the company reached a settlement with the IRS that permitted it to utilize operating losses generated from the divestiture of its former non-regulated businesses. This settlement resulted in a first quarter 2009 net earnings benefit from discontinued operations of $33 million, or $0.30 per share.

2009 Earnings Guidance

The company narrowed earnings guidance for 2009 by reducing the upper end of its previously issued guidance range by $0.10 per share. The new range, $1.65 to $1.80 per share, reflects the ongoing softness in energy marketing and the economy's negative effect on industrial sales. 2009 earnings guidance excludes a $0.30 per share benefit related to the tax settlement associated with its former non-regulated businesses. The company has posted to its Web site a summary of the principal earnings drivers and adjustments used in arriving at 2009 earnings guidance. The summary is located under Investor Presentations within the Investors section of the company Web site at www.WestarEnergy.com.

Conference Call and Additional Company Information

Westar Energy management will host a conference call Friday, August 7 with the investment community at 9 a.m. ET (8 a.m. CT). Investors, media and the public may listen to the conference call by dialing 888-679-8038, participant code 94205051. A Web cast of the live conference call will be available at www.WestarEnergy.com.

Members of media are invited to listen to the conference call and then contact Karla Olsen with any follow-up questions.

This earnings announcement, a package of detailed second quarter 2009 financial information, updated 2009 earnings guidance, the company's second quarter report on Form 10-Q for the period ended June 30, 2009 filed with the Securities and Exchange Commission August 6, 2009 and other filings the company has made with the Securities and Exchange Commission are available on the company's Web site at www.WestarEnergy.com.

Westar Energy, Inc. (NYSE: WR) is the largest electric utility in Kansas, providing electric service to about 684,000 customers in the state. Westar Energy has about 6,800 megawatts of electric generation capacity and operates and coordinates more than 35,000 miles of electric distribution and transmission lines.

For more information about Westar Energy, visit us on the Internet at http://www.WestarEnergy.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 "believe," "anticipate," "target," "expect," "pro forma," "estimate," "intend," "guidance" or words of similar meaning. Forward-looking statements describe future plans, objectives, expectations or goals. Although Westar Energy believes that its expectations are based on reasonable assumptions, all forward-looking statements involve risk and uncertainty. Therefore, actual results could vary materially from what we expect. Please review our Annual Report on Form 10-K for the year ended Dec. 31, 2008 for important risk factors that could cause results to differ materially from those in any such forward-looking statements. Any forward-looking statement speaks only as of the date such statement was made, and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made except as required by applicable laws or regulations.


                            WESTAR ENERGY, INC.
                    CONSOLIDATED STATEMENTS OF INCOME
                                (UNAUDITED)
                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                     Three Months Ended            Six Months Ended
                         June 30,                      June 30,
                 2009      2008      Change    2009      2008      Change
               ---------- --------- -------- ---------- -------- ---------

Sales          $  467,812 $ 451,219 $ 16,593 $  889,579 $858,046 $  31,533
               ---------- --------- -------- ---------- -------- ---------

Fuel and
 purchased
 power            120,508   191,355  (70,847)   261,152  337,804   (76,652)
Operating and
 maintenance      139,810   130,966    8,844    261,978  246,984    14,994
Depreciation
 and
 amortization      63,814    49,605   14,209    122,028   98,501    23,527
Selling,
 general and
 administrative    53,638    44,254    9,384    101,619   85,910    15,709
               ---------- --------- -------- ---------- -------- ---------
  Total
   Operating
   Expenses       377,770   416,180  (38,410)   746,777  769,199   (22,422)
               ---------- --------- -------- ---------- -------- ---------

  Income from
   Operations      90,042    35,039   55,003    142,802   88,847    53,955

Other income        4,134     3,804      330      2,037    3,583    (1,546)
Interest
 expense           40,094    30,311    9,783     75,170   41,001    34,169
Income tax
 expense
 (benefit)         15,696     2,687   13,009     20,098  (15,552)   35,650
               ---------- --------- -------- ---------- -------- ---------

  Income from
   Continuing
   Operations      38,386     5,845   32,541     49,571   66,981   (17,410)

Results of
 discontinued
 operations,
 net of tax             -         -        -     32,978        -    32,978
               ---------- --------- -------- ---------- -------- ---------

  Net Income       38,386     5,845   32,541     82,549   66,981    15,568
Preferred
 dividends            242       242        -        485      485         -
               ---------- --------- -------- ---------- -------- ---------

  Net Income
   Attributable
   to Common
   Stock       $   38,144 $   5,603 $ 32,541 $   82,064 $ 66,496 $  15,568
               ========== ========= ======== ========== ======== =========

  Basic Earnings
   Per Share   $     0.35 $    0.06 $   0.29 $     0.75 $   0.67 $    0.08
               ========== ========= ======== ========== ======== =========


Average
 equivalent
 common shares
 outstanding      109,539   100,734             109,435   99,075

 Dividends
  declared per
  share        $     0.30 $    0.29 $   0.01 $     0.60 $   0.58 $    0.02