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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) December 8, 1999
(December 7, 1999)
WESTERN RESOURCES, INC.
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 1-3523 48-0290150
(State or Other Jurisdiction of (Commission (Employer
Incorporation or Organization) File Number) Identification No.)
818 KANSAS AVENUE, TOPEKA, KANSAS 66612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code (785) 575-6300
WESTERN RESOURCES, INC.
Item 5. Other Events
On or about December 7, 1999 Western Resources, Inc. distributed the
following presentation to financial analysts.
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 - Presentation dated as of December 7, 1999 distributed
by Western Resources, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Western Resources, Inc.
Date December 8, 1999 By /s/ William B. Moore
William B. Moore, Executive Vice
President, Chief Financial
Officer and Treasurer
Date December 8, 1999 By /s/ Leroy P. Wages
Leroy P. Wages, Controller
EXHIBIT INDEX
Exhibit Number Description of Exhibit
99.1 Presentation dated as of
December 7, 1999 distributed
by Western Resources, Inc.
Exhibit 99.1
Cover
Western Resources [Logo]
COMPANY UPDATE
Title
Western Resources [Logo]
Analyst Dinner
December 7, 1999
WESTERN RESOURCES
Our Western Resources
Vision will be a leading
consumer services
company with strategic
holdings focused on
energy and monitored
services.
WESTERN RESOURCES
Goal Manage/monetize our
asset base to create
shareholder value
and produce a total
annual return of 15%
WESTERN RESOURCES
Strategic Focus
- Bring resolution to the KCPL transaction
- Set a dividend policy consistent with the evolution
of Western into a holding company
- Establish Astra Resources - Western's Shared
Services Company
- Turn around the financial results at Protection One
- Look for additional opportunities to enhance
recurring monthly revenues
WESTERN RESOURCES
(This page contains a bar graph
representing Security, Gas, Electric,
and Paradigm Direct customers)
Focus on Growth
Our extended company's customer goals
(Millions of Customers)
Dec-96 1.7
Today 3.6
2003 Goal 10.0
WESTERN RESOURCES
(see forward looking statements)
Holding Company Structure
- Provides investors option to invest in
businesses separately
- Isolates business/financial risk
- Provides opportunity to attract and compensate management
from within each business
- Separates core competencies
WESTERN RESOURCES
Holding Company Financial Goals
Westar Energy
- 10% total return to shareholders
- 3-4% growth with 6-7% dividend yield
- "A" bond rating
- 75% dividend payout
- Isolate stranded cost/regulatory risks from
balance of company
Protection One
- 20% total return to shareholders - 20% growth,
no dividend
- Model for success assumes ability to achieve attrition
below 10%, cost of customers of $750 or below and 50% +
EBITDA margins
WESTERN RESOURCES
(see forward looking statements)
Holding Company Financial Goals
ONEOK
- Look for opportunities to convert to common when
earnings at ONEOK reach $2.75
- Encourage company to use balance sheet to add other
LDC businesses
Western Resources
- 15% total return to shareholders - more flexible
dividend policy
- Limit parent company debt / buy back stock when
price warrants
- Growing and investing in existing and new customer
related businesses
WESTERN RESOURCES
(see forward looking statements)
Westar Energy [Logo]
Westar Earnings goal of $230 to $270 million in 2000
Energy - Short Term EPS growth of 7% (2000 - 2003)
Financial - Long Term EPS growth of 3% (2004 and beyond)
Goals Dividend of $0.72
Variables include
- Hawthorn
- Merger Savings
WESTERN RESOURCES
(see forward looking statements)
Dividend Will indicate dividend plans following
resolution of KCPL transaction
66% of holders are in the DRIP
50% of shares held by individuals are in the DRIP
WESTERN RESOURCES
Establish 600 - 800 Employees
Astra
Resources Market based services of more than $100 million to
(WR's affiliated companies
Shared
Services Services Provided
Company) - Human Resources
- Financial Services
- Legal Services
- Information Technology
- Facilities Mgmt
- Supply Chain
WESTERN RESOURCES
Protection Protection One [Logo]
One
Focus on
- Attrition
- Cost of customers
- EBITDA margins
Equity Returns
- Paradigm
- Internal
- Dealer
WESTERN RESOURCES
Valuation
Western Resources should be valued as
"sum-of-the-parts"
Western will manage/monetize asset base
to produce returns
Ultimately, every asset must produce an
ongoing cash return to justify its
valuation - Protection One will be challenged
to meet that goal or it will be sold/spun off
WESTERN RESOURCES
Valuation Assumptions
Utility
- $2.10 is trailing 12 month earnings for utility
- Westar valuation of $10-$12 per share. Since
Westar Energy has no trading history, there can
be no assurance of actual market price.
- 12.8 multiple based on S&P Utility average P/E
OKE - Market price + premium of $4.87 per share
(preferred shares pay premium dividend)
POI - Market price and Trailing 12 months EBITDA
of $215 million, less debt of $1,109 million
Other Assets -
- Marketable securities - $188 million market value
- Market value of Protection One bonds - $22.8 million
- Investment in Turkey (present value of anticipated
dividend stream) - $48.8 million
- Book value of China - $6.8 million
- Value of Paradigm investment based on last equity
sale - $40 million
Assumes $425 million of debt transferred by KCPL to WR
WESTERN RESOURCES
(see forward looking statements)
Sum of the Parts Valuation
Value per Western Resources Share
Pre-Merger Post-Merger
Utility
EPS of $2.10 x 12.8* multiple $ 26.88 $ 26.88 $10-$12 WSR Price Range $ 22.09 $ 26.51
OKE
$28.75** x 22.65 shares +
estimated $4.87 premium
for preferred 11.18 11.18 6.75 6.75
POI
$1.81**/upside of $215
million (EBITDA) x 8***
less Debt of $1,109 2.97 7.67 1.80 4.63
Other Assets 4.50 4.50 2.72 2.72
Unallocated Debt -13.95 -13.95 -12.30 -12.30
Subtotal 31.58 36.28 21.05 28.31
KLT N/A N/A ?? ??
Total $31.58 $36.28 ?? ??
* Average S&P Utility P/E Multiple
** Closing Market Prices as of 12/6/99
*** Estimated Industry Multiple
WR Shares Outstanding 11/12/99
(millions) 68.09
WR Shares Outstanding Post Merger
(millions) 112.8
(see forward looking statements)
3rd Quarter 1999 Per Share Results
Earnings (1) Adj. Earnings (2) Cash Flow (3)
Utility (4) $1.28 $1.36 $1.90
ONEOK 0.12 0.12 0.12
Protection One (0.27) (0.18) 0.41
Other (Net of Interest on
Unallocated Debt) (0.11) (0.11) (0.10)
Earnings before Non-Operating
COLI and Non-Recurring Events $1.02 $1.19 $2.33
Western Resources
Non-Operating COLI (0.02) (0.02) (0.02)
Non-Recurring Events (0.02) (0.02) (0.02)
Protection One
Increased Amortization Expense (0.32) (0.32) 0.17
Non-Recurring Events 0.06 0.06 0.09
Total $0.72 $0.89 $2.55
(1) Line of business reporting does not reflect intercompany eliminations
(2) Earnings + goodwill amortization
(3) Earnings + depreciation and amortization
(4) Interest expense is allocated on $1.9 billion of debt
(see forward looking statements)
Holding Company Financial Reporting
3rd Quarter 1999 Results Earnings (1) Adj. Earnings (2)
Operating Earnings
Utility (3) $1.28 $1.36
Equity Earnings
Protection One (0.27) (0.18)
ONEOK 0.00 0.00
Investment/Dividend Income
ONEOK 0.12 0.12
Other 0.07 0.07
Interest Expense (0.18) (0.18)
Earnings before Non-Operating
COLI and Non-Recurring Events $1.02 $1.19
Non-Recurring Events
COLI (0.02) (0.02)
Western Resources Other (0.02) (0.02)
Protection One Other 0.06 0.06
Increased Amortization Expense (0.32) (0.32)
Total $0.72 $0.89
(1) Line of business reporting does not reflect intercompany eliminations
(2) Earnings + goodwill amortization
(3) Interest expense is allocated on $1.9 billion of debt
(see forward looking statements)
Strategic Focus
Bring resolution to the KCPL transaction
Set a dividend policy consistent with the
evolution of Western into a holding company
Establish Astra Resources
Turn around the financial results at
Protection One
Look for additional opportunities to
enhance recurring monthly revenues
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, closing
of the KCPL transaction, successful integration of Western Resources' and
KCPL's businesses and achievement of anticipated cost savings, the outcome of
accounting issues being reviewed by the SEC staff, possible corporate
restructurings, mergers, acquisitions, dispositions, liquidity and capital
resources, interest and dividend rates, year 2000 issue, environmental
matters, changing weather, nuclear operations, ability to enter new markets
successfully and capitalize on growth opportunities in non-regulated
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 Western Resources' and Protection One's 1998 Annual
Reports on Form 10-K & 10-K/A, quarterly reports on Forms 10-Q and current
reports on Form 8-K for further discussion of factors affecting Western
Resources' 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.