ITEM 7. MANAGEMENT’S DISCUSSION AND                ANALYSIS OF FINANCIAL CONDITION                AND RESULTS OF OPERATIONS INTRODUCTION In Management’s Discussion and Analysis, we discuss the general financial condition, significant annual changes and the operating results for us and our subsidiaries. We explain: what factors impact our business, what our earnings and costs were in 2002, 2001 and 2000, why these earnings and costs differ from year to year, why these earnings and costs differ from year to year, how our earnings and costs affect our overall financial condition, what our capital expenditures were for 2002, what we expect our capital expenditures to be for the years 2003 through 2005, how we plan to pay for these future capital expenditures, critical accounting policies, and any other items that particularly affect our financial condition or earnings. As you read Management’s Discussion and Analysis, please refer to our consolidated financial statements and the accompanying notes, which show our operating results. SUMMARY OF SIGNIFICANT ITEMS Overview A number of significant developments have impacted us and our business operations since January 2002. We hired a new chief executive officer and senior management team. We filed a new Debt Reduction and Restructuring Plan (the Debt Reduction Plan) with the Kansas Corporation Commission (KCC) that reflects our decision to return to being exclusively a Kansas electric utility, replacing an earlier plan that contemplated the separation of Westar Industries, Inc. (Westar Industries). We began implementing the Debt Reduction Plan by (a) selling a portion of our ONEOK, Inc. (ONEOK) preferred stock, exchanging the remaining preferred stock for a new class of ONEOK preferred stock and modifying our related agreements with ONEOK, (b) reducing our first quarter 2003 dividend 37% to $0.19 per share, and (c) exploring alternatives for the disposition of our interests in Protection One, Inc. (Protection One) and Protection One Europe. In May and June 2002, we refinanced approximately $1.3 billion of outstanding debt. A Special Committee of our board of directors, the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC) and a federal grand jury initiated investigations into various matters. We recorded impairment charges related to our monitored security businesses of approximately $864.9 million, net of tax benefit and minority interests, of which $671.0 million was related to goodwill and $193.9 million was related to customer accounts. We repurchased a portion of our 6.25% senior unsecured notes that have a final maturity of August 15, 2018 and are putable and callable on August 15, 2003 (the putable/callable notes). As a result, we recognized a loss related to the fair value of a call option associated with the putable/callable notes for 2002 of $23.7 million, net of a $15.7 million tax benefit.		We reduced our utility work force by approximately 400 employees through a voluntary separation program. We restored service from a severe ice storm in late January 2002 and incurred $19.3 million for restoration costs, a portion of which was capitalized. ONEOK gave us notice of termination effective December 2003 of a shared services agreement pursuant to which we provide customer service functions to each other, including meter reading, customer billing and call center operations. We expect termination of this agreement will increase our annual costs to provide these services by approximately $11 million to $13 million. New Chief Executive Officer and Senior Management Team James S. Haines, Jr., joined us in December 2002 as our chief executive officer and president and a member of the board of directors. He replaced David C. Wittig, who resigned on November 22, 2002 from all of his positions with us and our affiliates. Mr. Wittig had been on administrative leave without pay since November 7, 2002 as a result of his indictment by a federal grand jury in Topeka, Kansas, for actions arising from his personal dealings. Mr. Haines added new members to our senior management team, including William B. Moore as executive vice president and chief operating officer, and Mark A. Ruelle as executive vice president and chief financial officer. All of these officers were previously employed with us and have a strong background in the electric utility business. Douglas T. Lake, our executive vice president and chief strategic officer, resigned as a member of the board of directors and was placed on unpaid leave from all of his other positions with us and our affiliates on December 6, 2002. See Note 35 of the Notes to Consolidated Financial Statements, “Potential Liabilities to David C. Wittig and Douglas T. Lake,” for information about our potential liabilities to Mr. Wittig and Mr. Lake. KCC Orders and Debt Reduction and Restructuring Plan On February 6, 2003, we filed the Debt Reduction Plan with the KCC outlining our plans for paying down debt and restructuring the company. The Debt Reduction Plan calls for the sale of our non-utility assets, including our interests in Protection One, Protection One Europe and ONEOK. As part of the Debt Reduction Plan, the first quarter 2003 dividend on our common stock was reduced 37% to $0.19 per share. In addition, the Debt Reduction Plan contemplates the potential issuance of additional Westar Energy equity, if needed to further reduce debt following the disposition of all material nonutility assets. On February 10, 2003, the KCC issued an order in which it stated that the Debt Reduction Plan appears to make a goodfaith effort to address the concerns expressed in the KCC’s prior orders and that the KCC needed additional time to review the Debt Reduction Plan prior to addressing other issues. The KCC also stayed the requirement of a December 23, 2002 order that we form a utilityonly subsidiary for our former KPL electric utility division (KPL) no later than August 1, 2003. The Debt Reduction Plan replaced a previous financial plan to which we devoted extensive efforts throughout 2002 to obtain KCC approval. This plan contemplated the sale of Westar Industries common stock in a rights offering. We refer you to our Annual Report on Form 10-K for the year ended December 31, 2001 and subsequent Quarterly Reports on