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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-3523

Westar Energy, Inc.

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x         No    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes    x         No    ¨

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Form 10-Q 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,” “target,” “expect,” “pro forma,” “estimate,” “intend” 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; liquidity and capital resources; litigation; accounting matters; possible corporate restructurings, acquisitions and dispositions; the sale of assets proposed in our Debt Reduction and Restructuring Plan approved by the Kansas Corporation Commission on July 25, 2003; compliance with debt and other restrictive covenants; interest and dividends; environmental matters; nuclear operations; and the overall economy of our service area.

What happens in each case could vary materially from what we expect because of such things as: electric utility deregulation or re-regulation; regulated and competitive markets; ongoing municipal, state and federal activities; economic conditions; changes in accounting requirements and other accounting matters; changing weather; rate and other regulatory matters; the impact of changes and downturns in the energy industry and the market for trading wholesale electricity; the sale of our interests in ONEOK, Inc.; the proposed sale of our interest in Protection One, Inc.; the federal grand jury subpoena by the United States Attorney’s Office requesting certain information; the Securities and Exchange Commission’s review of our consolidated financial statements and other matters; the outcome of the investigation being conducted by the Federal Energy Regulatory Commission regarding power trades with Cleco Corporation and its affiliates and other power marketing and transmission transactions; political, legislative and regulatory developments; regulatory, legislative and judicial actions; the impact of the purported shareholder and employee class action lawsuits filed against Westar Energy, Inc.; the impact of changes in interest rates generally and, specifically, changes in the London Interbank Offer Rate (LIBOR) on the fair value of our swap transactions; changes in and the discount rate assumptions used for pension and other post-retirement and post-employment benefit liability calculations, as well as actual and assumed investment returns on pension plan assets; changes in the expected tax benefits resulting from expected losses on the sale of our monitored services businesses and expected gains from the sale of our remaining investment in ONEOK, Inc.; homeland security considerations; coal, natural gas and oil prices; and other circumstances affecting anticipated operations, sales and costs.

These lists are not all-inclusive because it is not possible to predict all factors. This report should be read in its entirety and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2002. No one section of the report deals with all aspects of the subject matter and additional information on some matters that could impact our operations and financial results may be included in our Annual Report on Form 10-K for the year ended December 31, 2002. Any forward-looking statement speaks only as of the date such statement was made, and we do 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.

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WESTAR ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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WESTAR ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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WESTAR ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Dollars in Thousands, Except Per Share Amounts)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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WESTAR ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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WESTAR ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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WESTAR ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2003

(Unaudited)

1.    DESCRIPTION OF BUSINESS

Westar Energy, Inc., a Kansas corporation incorporated in 1924, operates the largest electric utility in Kansas and owns interests in monitored security businesses, which are reported as discontinued operations, and other investments. Unless the context otherwise indicates, all references in this Form 10-Q to “the company,” “we,” “us,” “our” or similar words are to Westar Energy, Inc., and its consolidated subsidiaries. The term “Westar Energy” refers to Westar Energy, Inc. alone and not together with its consolidated subsidiaries. We provide electric generation, transmission and distribution services to approximately 657,000 customers in Kansas.

Westar Energy and Kansas Gas and Electric Company (KGE), a wholly owned subsidiary, provide rate-regulated electric service using the name Westar Energy. KGE owns 47% of Wolf Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf Creek Generating Station (Wolf Creek).

Westar Industries, Inc. (Westar Industries), our wholly owned subsidiary, owns our interests in Protection One, Inc. (Protection One), ONEOK, Inc. (ONEOK) and our other non-utility businesses. Protection One, a publicly traded, approximately 88%-owned subsidiary, provides monitored security services. On June 30, 2003, we sold our interest in Protection One Europe, which refers collectively to Protection One International, Inc., a wholly owned subsidiary of Westar Industries, and its subsidiaries, including a French subsidiary in which it owned an approximate 99.8% interest. See Note 11 for additional information about the classification of our monitored security businesses as discontinued operations.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

We prepare our consolidated financial statements in accordance with generally accepted accounting principles (GAAP) for the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been condensed or omitted. The accompanying consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2002 (2002 Form 10-K).

Use of Management’s Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an on-going basis, including those related to bad debts, inventories, depreciation, revenue recognition, investments, intangible assets, income taxes, pension and other post-retirement and post-employment benefits, decommissioning of Wolf Creek, asset retirement obligations, realizable value from discontinued operations, environmental issues, contingencies and litigation. Actual results may differ from those estimates under different assumptions or conditions. In our opinion, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation of the financial statements, have been included. The results of operations for the three and six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the full year.

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Stock Based Compensation

For purposes of the pro forma disclosures required by Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure,” the estimated fair value of stock options is amortized to expense over the options’ vesting period. Information related to the pro forma impact on our earnings and earnings per share follows.

Dilutive Shares

Basic earnings per share applicable to common stock are based on the weighted average number of common shares outstanding and shares issuable in connection with vested restricted share units (RSUs) during the period reported. Diluted earnings per share includes the effect of potential issuances of common shares resulting from the assumed vesting of all outstanding RSUs and exercise of all outstanding stock options issued pursuant to the terms of our stock-based compensation plans. The dilutive effect of stock-based compensation and stock options is computed using the treasury stock method. The number of potentially dilutive securities for the three and six months ended June 30, 2003 were 801,715 shares and 698,540 shares, respectively. The potentially dilutive securities for the three and six months ended June 30, 2002 were 789,597 shares and 659,083 shares, respectively. The potentially dilutive securities for the six months ended June 30, 2002 were not included in the computation of diluted earnings per share, since to do so would have been antidilutive because of our net loss position.

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The following table reconciles the weighted average number of common shares outstanding used to compute basic and diluted earnings per share.

Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board (FASB) issued Financial Interpretation Number (FIN) 46, “Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51.” This interpretation provides guidance related to identifying variable interest entities (previously known generally as special purpose entities or SPEs) and determining whether such entities should be consolidated. Certain disclosures are required when FIN 46 becomes effective if it is reasonably possible that a company will consolidate or disclose information about a variable interest entity when it initially applies FIN 46. This interpretation must be applied immediately to variable interest entities created or obtained after January 31, 2003. For those variable interest entities created or obtained on or before January 31, 2003, we must apply the provisions of FIN 46 by the third quarter of 2003. We are currently evaluating the effect of FIN 46.

Accounting for Energy Trading Contracts

In October 2002, the Emerging Issues Task Force (EITF), reached consensus on EITF Issue No. 02-03, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.” EITF Issue No. 02-03, in part, rescinded EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities.” As a result, all new contracts that would otherwise have been accounted for under Issue No. 98-10 and that do not fall within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137, 138 and 149 (collectively SFAS No. 133), can no longer be marked-to-market and recorded in earnings as of October 25, 2002. We are not affected by this change in accounting principle and are not required to reclassify any of our contracts since our energy trading contracts qualify as derivative instruments under the guidance of SFAS No. 133. EITF Issue No. 02-03 also requires that energy trading contracts and derivatives, whether settled financially or physically, be reported in the income statement on a net basis effective January 1, 2003. We began to classify our energy trading contracts on a net basis during the third quarter of 2002.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative, clarifies when a derivative contains a financing component and amends the definition of an underlying, which is a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable. SFAS No. 149 is effective for contracts entered into or modified after June 30,

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2003 except for certain implementation issues and certain provisions of forward purchase and sale contracts and for hedging relationships designated after June 30, 2003. We are currently evaluating the effect of SFAS No. 149.

Accounting for Mandatorily Redeemable Preferred Securities

In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments that have characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability. This statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.

We have determined that the mandatorily redeemable preferred securities issued by Western Resources Capital I and Western Resources Capital II fall under the scope of SFAS No. 150. We currently report these securities in our consolidated balance sheets in the line item Western Resources obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely company subordinated debentures. We are currently evaluating the effect of SFAS No. 150.

Reclassifications

Certain amounts in prior years have been reclassified to conform with classifications used in the current year presentation.

3.    RATE MATTERS AND REGULATION

KCC Orders and Debt Reduction and Restructuring Plan

On November 8, 2002, the Kansas Corporation Commission (KCC) issued an order directing us to file a financial plan and to address additional concerns regarding our level of debt and the structure of our company. Following our filing of a motion for reconsideration and clarification of this order, the KCC issued an order on December 23, 2002 providing further direction in these matters. These orders led us to file a Debt Reduction and Restructuring Plan (the Debt Reduction Plan) with the KCC on February 6, 2003.

On February 10, 2003, the KCC issued an order granting limited reconsideration of its December 23, 2002 order. The KCC also stated that the Debt Reduction Plan appears to make a good-faith 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 raised in our petition for reconsideration of the December 23, 2002 order.

On July 21, 2003, we and Westar Industries entered into a Stipulation and Agreement (Stipulation) with the KCC staff and certain other intervenors in the docket considering the Debt Reduction Plan. In the Stipulation, the parties to the Stipulation asked the KCC to issue an order approving the Debt Reduction Plan, subject to the terms and conditions of the Stipulation. The KCC issued an order approving the Stipulation on July 25, 2003. The principal terms of the Stipulation are as follows:

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The Debt Reduction Plan and certain of the related KCC orders discussed above are discussed in further detail in our 2002 Form 10-K.

March 11, 2003 KCC Order

On March 11, 2003, the KCC issued an order approving, with conditions, a partial stipulation entered into by us, Protection One and certain parties in the KCC docket considering the Debt Reduction Plan. The order, among other things, (a) authorized us to make a payment to Protection One of approximately $20 million for the 2002 tax year under the tax sharing agreement with Protection One, (b) authorized Westar Industries to extend the maturity date of the credit facility it provides to Protection One to January 5, 2005, (c) reduced the amount that may be advanced to Protection One under the credit facility to $228.4 million, and (d) authorized us to pay approximately $3.6 million to Protection One as reimbursement for aviation services provided by a subsidiary of Protection One and for the repurchase of our common and preferred stock held by Protection One.

4.    CHANGES IN ONEOK OWNERSHIP

On January 9, 2003, we announced that Westar Industries had entered into an agreement with ONEOK to sell ONEOK a portion of the shares of ONEOK Series A Convertible Preferred Stock held by Westar Industries at the prevailing market price of ONEOK common stock, less transaction costs, and to exchange Westar Industries’ remaining shares of Series A Convertible Preferred Stock for new shares of ONEOK Series D Non-Cumulative Convertible Preferred Stock. On February 5, 2003, ONEOK repurchased from Westar Industries 9,038,755 shares of its Series A Convertible Preferred Stock, which were convertible into 18,077,511 shares of common stock. We received $300 million as a result of this sale. We recorded a gain of $9.2 million, net of $6.1 million tax, on this transaction.

Westar Industries also exchanged its remaining shares of Series A Convertible Preferred Stock for 21,815,386 new shares of ONEOK’s Series D Convertible Preferred Stock. A shelf registration statement with respect to the sale of the Series D Convertible Preferred and common stock held by Westar Industries has been filed by ONEOK and declared effective. Future sales will be subject to various conditions, including future market conditions. The terms of the Series D Convertible Preferred Stock and the amended terms of a shareholder agreement and registration rights agreement are discussed in our 2002 Form 10-K.

In 2002 and prior periods, we accounted for our ONEOK common stock investment under the equity method of accounting. As a result of changes in our shareholder agreement and registration rights agreement with ONEOK, on January 1, 2003, we began accounting for our ONEOK common stock investment as an available-for-sale security under SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities.” Under SFAS No. 115, the ONEOK common stock is considered available-for-

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sale and will be recorded at quoted market value with changes in the value recorded in other comprehensive income. We will begin accounting for our ONEOK Series D Convertible Preferred Stock investment under this method if and when a public market for these securities develops.

On August 5, 2003, Westar Industries priced a secondary offering of 9,500,000 shares of ONEOK common stock at a public offering price of $19.00 per share, which will result in gross proceeds of approximately $180.5 million. The transaction is expected to close August 11, 2003. Westar Industries will sell 9,500,000 shares of ONEOK common stock in the public offering, consisting of 1,605,263 shares of ONEOK common stock and 7,894,737 shares of ONEOK Series D Convertible Preferred Stock that will be converted into ONEOK common stock immediately prior to closing. At the same time as the public offering, ONEOK will repurchase from Westar Industries 2,631,579 shares of ONEOK common stock at the public offering price of $19.00 per share, or $50.0 million of additional proceeds. Our underwriter for the public offering has been granted an option to purchase up to an additional 1,425,000 shares of ONEOK common stock to cover over-allotments, if any. Following these transactions, assuming the over-allotment option is not exercised, we will own 477,592 shares of ONEOK common stock and 13,920,649 shares of ONEOK Series D Convertible Preferred Stock, which represents an approximate 15% ownership interest in ONEOK assuming conversion of the remaining ONEOK Series D Convertible Preferred Stock. The Transaction Agreement and Underwriting Agreement relating to these transactions were filed on Form 8-K on August 6, 2003.

5.    CALL OPTION

In August 1998, we entered into a call option with an investment bank related to the issuance of $400 million 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).

At the time of issuance of the notes in 1998, we were not required by GAAP to account separately for the call option. However, when we began retiring these putable/callable notes as a part of our overall debt reduction strategy, the portion of the call option associated with the retired notes became a free-standing option required to be treated as a derivative instrument under SFAS No. 133. In addition, under SFAS No. 133, we are required to mark-to-market changes in the anticipated amount of the liability related to the portion of the $400 million in notes that have been retired so that our balance sheets reflect the current fair value of the free standing portion of the call option. For the three months ended June 30, 2003, we recorded a total mark-to-market charge of $1.2 million, net of $0.8 million tax, compared to a charge of $3.7 million, net of $2.5 million tax, for the same period of 2002, related to the call option. For the six months ended June 30, 2003, we recorded a total mark-to-market charge of $6.1 million, net of $4.0 million tax, compared to a charge of $5.4 million, net of $3.5 million tax, for the same period of 2002. Additional information is available in our 2002 Form 10-K.

In the second quarter of 2003, we locked in the settlement cost associated with the call option by purchasing a new call option at a cost of $65.8 million. The portion of the new call option that relates to the portion of debt still outstanding is treated as a cash flow hedge for accounting purposes. Changes in the value of this instrument are reflected in other comprehensive income. For the three and six months ended June 30, 2003, we recorded $3.0 million, net of $2.0 million tax, in other comprehensive income as a result of the change in the market value of the cash flow hedge.

During the three and six months ended June 30, 2003, we purchased $11.5 million and $47.7 million, respectively, face value of our putable/callable notes in the open market.

We have deposited $101.7 million with the trustee to retire the remaining putable/callable notes. This amount represents approximately $98.7 million of principal and $3.0 million of prepaid interest. When the putable/callable notes are paid on August 15, 2003, we will recognize a charge of $8.6 million, net of $5.6 million tax. This amount reflects the remaining liability associated with the original call option net of the change in the value of the new call option we purchased in the second quarter of 2003, which is currently reported in other comprehensive income.

6.    INCOME TAXES

We have recorded income tax expense of $7.4 million and $16.5 million for the three and six months ended June 30, 2003, respectively, compared to income tax benefit of $0.8 million and $7.2 million for the same periods of 2002, using the effective tax rate method. Under this method, we compute the tax related to year-to-date income,

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except for significant, unusual or extraordinary items, at an estimated annual effective tax rate. We individually compute and recognize, when the transaction occurs, income tax expense related to significant, unusual or extraordinary items.

7.    COMMITMENTS AND CONTINGENCIES

EPA New Source Review

The Environmental Protection Agency (EPA) is conducting an enforcement initiative to determine whether modifications at a number of coal-fired power plants owned by us and other utilities are subject to New Source Review requirements or New Source Performance Standards under Section 114 of the Clean Air Act (Section 114). This initiative focuses on whether expenditures at the plants were for routine maintenance or whether the expenditures were for substantial modifications or resulted in improved operations. The EPA requires updating of emission controls when expenditures result in substantial modifications or improved operations.

The EPA has requested information from us under Section 114. The request required us to provide responses to specific EPA questions regarding certain projects and maintenance activities that the EPA believes may have violated the New Source Performance Standard and New Source Review requirements of the Clean Air Act. We filed our response to the initial information requests from the EPA on April 30, 2003, and we submitted additional requested information on June 16, 2003. We are cooperating with this review but are unable to predict the outcome. We believe that the maintenance and capital activities performed at our power plants were generally routine in nature and typical for the utility industry. However, no assurance can be given that the EPA will not assert that the expenditures resulted in substantial modifications or improved operations at our power plants or that the EPA will not initiate an enforcement action to require that we update emission controls at our power plants. As part of its enforcement initiative, the EPA has initiated civil enforcement actions against other unaffiliated utilities that have received requests for information under Section 114. If required, the costs to update our emission controls could be material.

Nuclear Decommissioning Study

The KCC issued an order on April 16, 2003 approving the August 2002 decommissioning study for Wolf Creek as discussed in our 2002 Form 10-K. On June 2, 2003, we filed a funding schedule with the KCC to reflect the KCC’s April 16, 2003 order. We anticipate a KCC order on the funding schedule in the third quarter of 2003.

8.    ASSET RETIREMENT OBLIGATIONS

In June 2001, FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 provides accounting requirements for the recognition and measurement of liabilities associated with the retirement of tangible long-lived assets. Under the standard, these liabilities are recognized at fair value as incurred and capitalized and depreciated over the appropriate period as part of the cost of the related tangible long-lived assets. The adoption of SFAS No. 143 does not impact income. Any income effects are offset by a regulatory asset created pursuant to SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation.” Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for which a legal obligation exists under enacted laws, statutes, written or oral contracts, including obligations arising under the doctrine of promissory estoppel.

We adopted SFAS No. 143 on January 1, 2003, which required us to recognize and estimate the liability for our 47% share of the estimated cost to decommission Wolf Creek. SFAS No. 143 requires the recognition of the present value of the asset retirement obligation we incurred at the time Wolf Creek was placed in service in 1985. On January 1, 2003, we recorded an asset retirement obligation of $74.7 million. In addition, we increased our property and equipment balance, net of accumulated depreciation, by $10.7 million. We also established a regulatory asset for $64.0 million,

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which represents the accretion of the liability since 1985 and the increased depreciation expense associated with the increase in plant.

The following is a reconciliation of the asset retirement obligation, which is included in our consolidated balance sheet in other long-term liabilities: