OCT 29, 2009 - 16:30 ET
FOR: WESTAR ENERGY
Third Quarter Earnings Decline Driven by Coolest Summer in Over 40 Years
TOPEKA, KS--(Marketwire - October 29, 2009) - Westar Energy, Inc. (NYSE: WR) today announced
earnings of $81 million, or $0.73 per share, for the third quarter 2009
compared with earnings of $88 million, or $0.80 per share, for the third
quarter 2008. Earnings for the nine months ended Sept. 30, 2009 were $163
million, or $1.48 per share, compared with earnings of $155 million, or
$1.50 per share, for the same period last year.
The decrease in earnings for the quarter was due primarily to lower retail
revenues resulting from extremely cool summer weather and the effects of
the soft economy on industrial sales. Wholesale revenues, too, declined
due principally to lower average market prices.
The increase in earnings for the nine months ended Sept. 30, 2009 was due
primarily to price increases authorized for capital investments and higher
operating costs. The effects of higher prices were partially offset by
reduced energy sales and higher operating and maintenance, depreciation and
interest expenses. The earnings for the nine months ended Sept. 30 for
both years include 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 September 30,
-----------------------------------------------
2009 2008 Change % Change
----------- ----------- ---------- ----------
(Dollars in Thousands)
Retail $ 417,399 $ 422,314 $ (4,915) (1.2)
Wholesale 70,383 114,566 (44,183) (38.6)
Energy marketing 2,013 8,845 (6,832) (77.2)
Other 38,739 29,128 9,611 33.0
----------- ----------- ----------
Total Revenues $ 528,534 $ 574,853 $ (46,319) (8.1)
----------- ----------- ----------
Nine Months Ended September 30,
-----------------------------------------------
2009 2008 Change % Change
----------- ----------- ---------- ----------
(Dollars in Thousands)
Retail $ 1,063,101 $ 1,021,478 $ 41,623 4.1
Wholesale 221,779 305,490 (83,711) (27.4)
Energy marketing 15,720 12,539 3,181 25.4
Other 117,513 93,392 24,121 25.8
----------- ----------- ----------
Total Revenues $ 1,418,113 $ 1,432,899 $ (14,786) (1.0)
----------- ----------- ----------
Retail revenues for the quarter decreased due to lower kilowatt-hour (KWh)
sales reflecting extremely cool weather and the effects of the soft economy
on industrial sales. The impact of lower KWh sales was offset partially by
price increases earlier this year. Retail revenues for the nine months
ended Sept. 30, 2009 increased due primarily to higher prices, more than
offsetting a 5 percent decline in KWh sales.
Wholesale revenues decreased for both periods due principally to lower
average market prices resulting from reduced demand.
Energy marketing gross margins decreased for the quarter due primarily to
lower market prices and lower demand. For the nine months ended Sept. 30,
2009 energy marketing gross margins increased due primarily to the
settlement of forward contracts for the sale of electricity on favorable
terms. Excluding the gains from forward contracts, gross margins decreased
$6 million for the period. These forward contracts related to sales that
produced margins for the benefit of retail customers. The energy for the
contracts was initially intended to be produced by the company, but was
later satisfied by favorable open market purchases.
Fuel and Purchased Power Expense
--------------------------------
Three Months Ended September 30,
------------------------------------
%
2009 2008 Change Change
-------- -------- -------- -------
(Dollars in Thousands)
Fuel and purchased power $141,470 $220,140 $(78,670) (35.7)
Nine Months Ended September 30,
-------------------------------------------
2009 2008 Change % Change
---------- ---------- --------- ---------
(Dollars in Thousands)
Fuel and purchased power $ 402,622 $ 557,944 $(155,322) (27.8)
Fuel and purchased power expense for both periods decreased due to lower
demand for electricity and lower unit costs for both fuel and purchased
power. The decrease in fuel and purchased power expense was largely
reflected in lower prices to customers and did not significantly serve to
increase earnings.
Operating and Maintenance Expense
---------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
-------- -------- ------- ---- -------- -------- -------- ----
(Dollars in Thousands)
Operating
and
maintenance $130,295 $107,672 $22,623 21.0 $392,272 $354,656 $ 37,616 10.6
Operating and maintenance expense increased for both periods due primarily
to higher network transmission expense (which is largely offset by higher
transmission revenues), the amortization of previously deferred storm costs
and additional maintenance expense principally at generating facilities.
Depreciation and Amortization Expense
-------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- ---------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
------- ------- ------- ------- -------- -------- ------- -------
(Dollars in Thousands)
Depreciation
and
amortiz-
ation $64,516 $51,966 $12,550 24.2 $186,544 $150,467 $36,077 24.0
Depreciation expense increased for both periods primarily as a result of
last year's large construction projects having been completed and placed in
service.
Selling, General and Administrative Expense
-------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
------- ------- ------- ----- -------- -------- ------ ------
(Dollars in Thousands)
Selling,
general
and
administr-
ative $41,920 $50,802 $(8,882) (17.5) $143,540 $136,712 $6,828 5.0
Selling, general and administrative expense decreased for the quarter due
primarily to a $7 million decrease in pension and other employee benefit
costs. The decrease was attributed principally to the company having
recorded a $5 million credit to expense in accordance with a recent
regulatory order that authorizes the deferral of pension and employee
benefit costs for future recovery.
For nine months ended Sept. 30, 2009 selling, general and administrative
expense increased 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.
Other Income (Expense)
----------------------
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- --------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
------ ------- ------- ----- ------- ------- ------- -----
(Dollars in Thousands)
Investment
income
(loss) $3,986 $(2,986) $ 6,972 233.5 $ 8,516 $(2,902) $11,418 393.5
Other
income 1,217 12,796 (11,579) (90.5) 5,627 22,956 (17,329) (75.5)
Other
expense (4,539) (4,517) (22) (0.5) (11,441) (11,179) (262) (2.3)
------ ------- ------- ------- ------- -------
Total
Other
Income $ 664 $ 5,293 $(4,629) (87.5) $ 2,702 $ 8,875 $(6,173) (69.6)
Investment income increased for both periods due principally to gains on
investments compared with losses on those investments in the same periods
last year.
Other income for both periods decreased due principally to recording less
equity AFUDC and corporate-owned life insurance (COLI) proceeds. The
decrease in equity AFUDC is attributable to the completion of several large
construction projects in the past year, at which time further accrual of
AFUDC for these projects ceased. There have been no COLI proceeds recorded
in 2009 compared with $6 million in COLI proceeds the third quarter last
year.
Interest Expense
----------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
------- ------- ------ ------ -------- ------- ------- ------
(Dollars in Thousands)
Interest
expense $41,599 $31,920 $9,679 30.3 $116,769 $72,920 $43,849 60.1
Interest expense increased for the third quarter due primarily to the
company having issued additional debt to fund capital investments.
Interest expense for the nine months ended Sept. 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 also as a result of the company having issued
additional debt to fund capital investments. The increase was partially
offset by lower interest rates on variable rate debt and less short-term
borrowing.
Income Tax Expense
------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- ------------------------------
% %
2009 2008 Change Change 2009 2008 Change Change
------- ------- ------- ----- ------- ------- ------- ------
(Dollars in Thousands)
Income tax
expense
(benefit) $28,256 $29,361 $(1,105) (3.8) $48,354 $13,808 $34,546 250.2
Income tax expense for the nine months ended Sept. 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
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.
Earnings Guidance
The company affirmed its full-year 2009 earnings guidance of $1.35 to $1.45
per share. 2009 earnings guidance excludes a $0.30 per share benefit
related to the tax settlement associated with its former non-regulated
businesses, and includes $0.10 per share for COLI proceeds, none of which
have been realized to date. 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, October 30
with the investment community at 12 p.m. ET (11 a. m. CT). Investors,
media and the public may listen to the conference call by dialing
888-679-8038, participant code 26742216. 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 third quarter 2009
financial information, the company's third quarter report on Form 10-Q for
the period ended Sept. 30, 2009 filed with the Securities and Exchange
Commission October 29, 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 Form 10-K for the period ended Dec. 31, 2008 and
our Form 10-Q for the period ended Sept. 30, 2009 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 Nine Months Ended
September 30, September 30,
2009 2008 Change 2009 2008 Change
-------- -------- -------- ---------- ---------- --------
Revenue $528,534 $574,853 $(46,319) $1,418,113 $1,432,899 $(14,786)
-------- -------- -------- ---------- ---------- --------
Fuel and
purchased
power 141,470 220,140 (78,670) 402,622 557,944 (155,322)
Operating and
maintenance 130,295 107,672 22,623 392,272 354,656 37,616
Depreciation
and
amortization 64,516 51,966 12,550 186,544 150,467 36,077
Selling,
general and
administrative 41,920 50,802 (8,882) 143,540 136,712 6,828
-------- -------- -------- ---------- ---------- --------
Total
Operating
Expenses 378,201 430,580 (52,379) 1,124,978 1,199,779 (74,801)
-------- -------- -------- ---------- ---------- --------
Income from
Operations 150,333 144,273 6,060 293,135 233,120 60,015
Other income 664 5,293 (4,629) 2,702 8,875 (6,173)
Interest
expense 41,599 31,920 9,679 116,769 72,920 43,849
Income tax
expense
(benefit) 28,256 29,361 (1,105) 48,354 13,808 34,546
-------- -------- -------- ---------- ---------- --------
Income from
Continuing
Operations 81,142 88,285 (7,143) 130,714 155,267 (24,553)
Results of
discontinued
operations,
net of tax - - - 32,978 - 32,978
-------- -------- -------- ---------- ---------- --------
Net Income 81,142 88,285 (7,143) 163,692 155,267 8,425
Preferred
dividends 242 242 - 727 727 -
-------- -------- -------- ---------- ---------- --------
Net Income
Attributabl
to Common
Stock $ 80,900 $ 88,043 $ (7,143) $ 162,965 $ 154,540 $ 8,425
======== ======== ======== ========== ========== ========
Basic Earnings
Per Share $ 0.73 $ 0.80 $ (0.07) $ 1.48 $ 1.50 $ (0.02)
======== ======== ======== ========== ========== ========
Average
equivalent
common shares
outstanding 109,753 108,715 109,543 102,312
Dividends
declared per
share $ 0.30 $ 0.29 $ 0.01 $ 0.90 $ 0.87 $ 0.03
FOR FURTHER INFORMATION PLEASE CONTACT:
