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Westar Energy CEO Discusses Q2 2011 Results - Earnings Call Transcript

With that, I'll turn the call over to Tony.

Tony Somma

Thanks, Bruce. Good morning, everyone. Earnings per share for the quarter were $0.38 compared with $0.47 last year. For the quarter, gross margin increased $10 million or 3% due mostly to higher prices. Weather in the quarter, as measured by cooling degree days, was almost the same as last year.

Turning to the expense side, O&M for the quarter increased about $12 million or 13% excluding a $4 million increase in SPP transmission cost, most of which had a favorable revenue offset. It should be noted, last year we reversed a liability associated with assets we sold in the 1990s, thus reducing 2010 O&M by $5 million.

Current year increases include the following: $4 million of Wolf Creek, half of which was for regulatory compliance and the balance due to increased expenses for this year's refueling and maintenance outage; $2 million on our distribution system for tree-trimming where we're seeing value and a more sophisticated approach to optimize electrical reliability with more targeted expenditures, this program will be a component of our upcoming rate case as we like to expand it; and $2 million increase on property taxes which was also offset with higher revenues.

Partially offsetting the increases were the $2 million reduction in storm amortization expense, something that will continue through the remainder of the year.

SG&A expenses increased $8 million due primarily to higher legal fees related to the arbitration of two former executives and the amortization of deferred energy efficiency program cost with the latter also having a corresponding revenue offset. Last, depreciation expense increased $4 million due largely to planned additions for environmental and transmission projects completed last year.

Now, turning to our financing plans for the year, through June we settled 3.1 million shares priced last year on a forward contract, receiving about $66 million. We still have 9.7 million shares priced last year, reflecting about $226 million of available equity that we plan on selling this quarter or early next. Beyond this, we don't have plans to sell additional equity this year.

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