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SCHEDULE 14A INFORMATION
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WESTERN RESOURCES, INC.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
WESTERN RESOURCES, INC.
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(Name of Person(s) Filing Proxy Statement)
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The following presentation was distributed to financial analysts on or
about June 11, 1998:
COVER
PUTTING THE PIECES TOGETHER
Western Resources [Logo]
TITLE PAGE
Western Resources
"Putting the Pieces Together"
BT Alex. Brown
West Coast Utilities Seminar
PAGE 1
Western Resources
is a leading consumer
services company with
interests in monitored
security and energy.
PAGE 2
Focus on Growth
Generate non-cyclical recurring monthly revenues (RMR)
Maximize financial returns
Monetize those assets not fitting this criteria
PAGE 3
Focus on Growth
Expand national branded presence
Grow customer base
Add lines of business
PAGE 4
Focus on Growth
Our extended company's customer goals
Dec
1996 Today 1999 2001
------------------------------------------------
Security 430,000 1,350,000 1,725,000 2,700,000
Gas 650,000 1,400,000 1,400,000 3,000,000
Electric 600,000 614,000 1,057,000 2,000,000
------------------------------------------------
Total 1,680,000 3,364,000 4,182,000 7,700,000
PAGE 5
Western Resources
Monitored Security Strategy
PAGE 6
Protection One
[Logo]
PAGE 7
Protection One Overview
#1 residential market share in large and growing markets - California,
Florida and Texas
1.3 million subscribers -- 80%+ residential
Second largest national provider of security alarm monitoring and
related services
Experienced and successful management team
Excellent financial performance
PAGE 8
Protection One Strategy
Establish #1 national residential market position
Continue to generate strong growth
Dealer program
Acquisitions
Other distribution channels, including strategic alliances
Expand customer relationships
Build preeminent national brand name
Continue to improve margins and achieve strong financial performance
PAGE 9
(This page contains a color coded map of the United States disclosing the
number of security customers in each state.)
Strong National Presence
Yellow > 125,000 Include CA, FL, and TX
Red 20,000 - 125,000 Include AZ, GA, KS, MI, NC, NV,
NY, OH, OK, OR, TN, and WA
Blue < 20,000 Include all remaining states
PAGE 10
Favorable Market Conditions
Residential market growth in excess of 15% per year
Consolidation of fragmented market
Low residential penetration (11%)
Demographic trends
PAGE 11
(This page contains a bar graph)
Annual Growth of New Systems
(In Millions)
1991 - 1.9
1992 - 2.0
1993 - 2.1
1994 - 2.1
1995 - 2.2
1996 - 2.3
1997 - 2.4
Note: Approximately 67% of systems installed are residential and small
commercial. Source : Security Sales
PAGE 12
(This page contains a flowchart)
Growth Strategy Leverages Market Dynamics
_________________________________________
| Rapid Subscriber Growth |
|_________________________________________|
^ ^
| |
_____________ _________|________ ________|_______
| Alliances |______| Dealer Program | | Acquisitions |
|_____________| |__________________| |________________|
^ ^ ^
| | |
______|_______ _________|________ ________|_______
| New Channels | | Market Growth | | Consolidation |
|______________| |__________________| |________________|
PAGE 13
Security Creates Franchise Value
High margin, recurring revenues
Long-term customer relationships
Reliable growth machine creates value with each new subscriber
Excellent strategic position for partnering
Increased brand awareness
PAGE 14
Strategic Alliances
Partnership benefits to Protection One:
Proprietary source of prospective customers
Increased density of subscriber base
Reduction in cost to generate new subscribers
Branding
Partnership benefits to partners:
Revenue enhancement and customer base expansion
Increase brand loyalty and customer retention
Key Alliances
Pacific Power
Utah Power
Salt River Project
Kansas City Power & Light
Oklahoma Natural Gas
KPL/KGE
Kaufman and Broad
Southwestern Bell
PAGE 15
Enhanced Services
Innovative and comprehensive portfolio of enhanced services
Extended service protection
Patrol and alarm response
Two-way voice communication
Supervised monitoring services
Pager service
Cellular phone line back-up
Medical ID card
Mobile services
Offered as a bundled package with monitoring services
PAGE 16
Growth Objectives
Positive earnings contribution to Western Resources
Revenue and subscriber growth of 25%
EBITDA growth of 30%
Reduce weighted average cost of capital
Generate shareholder accretion from growth activities
PAGE 17
(This page contains a bar graph)
Expanding EBITDA Margins
Sept. 1995 - 39.8%
Sept. 1996 - 43.8%
Sept. 1997 - 45.3%
Pro Forma 1998 Q1 - 46.0%
PAGE 18
Investment Highlights
Growing and consolidating industry
Strong revenue and earnings growth opportunities
Leading national provider of security alarm monitoring and related
services
Proven operating and financial track record
PAGE 19
Western Resources
Gas Strategy
PAGE 20
ONEOK
[Logo]
PAGE 21
Gas Strategy
Converted business requiring $20 million of cash annually to a positive
$40 million cash dividend
Hold 45% ownership interest in ONEOK
3.1 million shares common stock
20 million shares voting convertible preferred
Current value is $1 billion
PAGE 22
Gas Strategy
Currently 8th-largest natural gas LDC in nation
More than 1.4 million natural gas customers
25% of net income from unregulated operations
Goal of being one of the top 3 natural gas providers
Well capitalized to fund growth
Experienced management team
PAGE 23
Western Resources
Electric Strategy
PAGE 24
Westar Energy
[Logo]
PAGE 25
Electric Strategy
Grow the business
Expand geographic footprint - grow customer base and generation
Continue to be a low-cost energy provider
Reduce costs further through reorganization and economies of scale
PAGE 26
Electric Strategy
Short-Term:
8,500 megawatts of generation
1 million electric customers
$8.2 billion in assets
$2 billion in annual revenues
PAGE 27
Electric Strategy
Long-Term:
Super-regional competitor
Strong marketing presence
Competitive cost profile
20,000 megawatts of generation
PAGE 28
Western Resources
Business Plan Summary
PAGE 29
Management Focus
Growth:
25%+ growth in security business
Be one of the top 3 natural gas providers
Double the size of electric company after KCPL merger
PAGE 30
Management Focus
Efficiencies:
Improve margins
Created corporate structure with separate lines of business
Parent company focused on cross business unit synergies
PAGE 31
Management Focus
Continue Acquisitions
Fill in business lines
Enter new lines of business
PAGE 32
Western Resources Value
Shares Market Value
(millions) Price* (millions)
---------- -------- ----------
Protection One 70.8 $10.3750 $ 734.6
ONEOK - common 3.1 39.0625 121.1
- convertible preferred 20.0 43.8125** 876.3
Westar Energy 249.2 12.0000*** 2,990.4
Hanover Compressor 3.2 25.9375 83.0
Onsite Energy 5.6 1.2500 7.0
Unregulated Investments,
(net of debt) 198.3
Western Resources Debt (300.0)
---------
Western Resources Value $4,710.7
Value per Western Resources Share 99.8 $47.20
* Based on share closing price at 5/29/98
** Includes estimated $4.75 per share premium over the common stock market
price
*** Wester Energy price estimated by dividing the expected initial dividend
of $0.72 by an average utility yield of 6%
PAGE 33
Western Resources
Committed to growing shareowner value
PAGE 34
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, possible corporate restructurings, mergers, acquisitions,
dispositions, liquidity and capital resources, interest and dividend rates,
environmental matters, changing weather, nuclear operations, and accounting
matters. What happens in each case could vary materially from what we expect
because of such things as electric utility deregulation, including ongoing
state and federal activities; future economic conditions; legislative
developments; our regulatory and competitive markets; and other circumstances
affecting anticipated operations, revenues and costs.
The following questions were received via the Internet on our WRI/KCPL joint
web site and were answered on or about June 11, 1998:
1) Since it appears that Western Resources will be below the $38.23 level,
what will be the ratio of KCPL shares to Western Resources shares?
2) Are the brokerage houses that are advising you willing to guarantee the
$10.50 share price for Westar Energy?
3) Why is there going to be still two companies instead of just Western
Resources?
Answers:
1) The Amended Merger Agreement dated March 18, 1998, includes a number of
steps above and below the $38.28 to $47.00 price collar. The Western
Resources average price to be used to determine the conversion ratio will be
the 20-day average price 10 days prior to the completion of the merger. This
will occur after receipt of all necessary approvals.
2) There is no guarantee of the future value of the Westar Energy common
stock. The estimated $10 to $12 value has been determined using current
electric utility measures applied to estimated dividend payments.
3) The separate utility structure allows shareowners to participate in a
pure play electric company while also participating in the more diverse
holdings of Western Resources.