SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____to_____
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234
(214) 777-1000
0-346 Central Power and Light Company 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
(512) 881-5300
0-343 Public Service Company of Oklahoma 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000
1-3146 Southwestern Electric Power Company 72-0323455
(A Delaware Corporation)
428 Travis Street
Shreveport, Louisiana 71156-0001
(318) 222-2141
0-340 West Texas Utilities Company 75-0646790
(A Texas Corporation)
301 Cypress Street
Abilene, Texas 79601-5820
(915) 674-7000
Indicate by check mark whether the registrants (1) have
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 registrants were
required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
Common Stock Outstanding at July 28, 1995
Shares
Central and South West Corporation 191,789,895
Central Power and Light Company 6,755,535
Public Service Company of Oklahoma 9,013,000
Southwestern Electric Power Company 7,536,640
West Texas Utilities Company 5,488,560
This combined Form 10-Q is separately filed by Central
and South West Corporation, Central Power and Light Company,
Public Service Company of Oklahoma, Southwestern Electric
Power Company and West Texas Utilities Company. Information
contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each other
registrant makes no representation as to information relating
to the other registrants.
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY
COMPANIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1995
Page
Number
GLOSSARY OF TERMS 3
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements. (Unaudited) 4
Central and South West Corporation and Subsidiary Companies 5
Consolidated Statements of Income 6
Consolidated Balance Sheets 7
Consolidated Statements of Cash Flows 9
Results of Operations 10
Central Power and Light Company 14
Statements of Income 15
Balance Sheets 16
Statements of Cash Flows 18
Results of Operations 19
Public Service Company of Oklahoma 22
Consolidated Statements of Income 23
Consolidated Balance Sheets 24
Consolidated Statements of Cash Flows 26
Results of Operations 27
Southwestern Electric Power Company 29
Statements of Income 30
Balance Sheets 31
Statements of Cash Flows 33
Results of Operations 34
West Texas Utilities Company 36
Statements of Income 37
Balance Sheets 38
Statements of Cash Flows 40
Results of Operations 41
Notes to Financial Statements 43
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 54
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 56
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders. 58
Item 5. Other Information. 59
Item 6. Exhibits and Reports on Form 8-K. 60
Signatures. 62
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this text are
defined below:
Abbreviation or Acronym Definition
1987 Order................... Order granted in September 1987 to WTU by the
Texas Commission in connection with Docket
No. 7289, Application of WTU for Deferred
Accounting Treatment of Certain Oklaunion-
Related Costs
Agreement in Principle....... Agreement in Principle to settle certain CPL
regulatory matters
ALJ.......................... Administrative Law Judge
ANI.......................... American Nuclear Insurance
Burlington Northern.......... Burlington Northern Railroad Company
Cimmaron..................... Cimmaron Chemical Company
Cities....................... Several cities in CPL's service territory
Court of Appeals............. Court of Appeals, Third District of Texas,
Austin, Texas
CPL.......................... Central Power and Light Company, Corpus Christi,
Texas
CPL Settlement Agreement..... Settlement Agreement filed by CPL with the Texas
Commission to settle certain CPL regulatory
matters
CSW.......................... Central and South West Corporation, Dallas,
Texas
CSW Suit..................... Suit filed by CSW against El Paso in the United
States Bankruptcy Court in Austin, Texas
CSWE......................... CSW Energy, Inc., Dallas, Texas
CSW System................... Central and South West Corporation and
subsidiaries
CWIP......................... Construction work in progress
DEV-I........................ CSW Development-I, Inc.
Electric Operating Companies. CPL, PSO, SWEPCO and WTU
El Paso...................... El Paso Electric Company
El Paso Suit................. Suit filed by El Paso against CSW in state
district court in El Paso, Texas
EPA.......................... Environmental Protection Agency
FMB.......................... First Mortgage Bonds
Kwh.......................... Kilowatt-hour
MCPC......................... Mid-Continent Power Company
MDEQ......................... Mississippi Department of Environmental Quality
Merger....................... The proposed merger whereby El Paso would become
a wholly owned subsidiary of CSW
Merger Agreement............. Agreement and Plan of Merger between El Paso and
CSW, dated as of May 8, 1993, as amended
MGP.......................... Manufactured gas plant or coal gasification plant
Mississippi Power............ Mississippi Power Company
Mmbtu........................ Million Btu (British thermal unit)
Mw........................... Megawatt
Mwh.......................... Megawatt-hour
NEIL......................... Nuclear Electric Insurance Limited
NRC.......................... Nuclear Regulatory Commission
Oklahoma Commission.......... Corporation Commission of the State of Oklahoma
Oklaunion.................... Oklaunion Power Station Unit No. 1
PCB.......................... Polychlorinated Biphenyl
PCRB......................... Pollution Control Revenue Bonds
PFD.......................... Proposal for Decision
PRP.......................... Potentially Responsible Party
PSO.......................... Public Service Company of Oklahoma, Tulsa,
Oklahoma
RCRA......................... Resource Conservation and Recovery Act of 1976
RFP.......................... Rate Filing Package
SEC.......................... Securities and Exchange Commission
STP.......................... South Texas Project nuclear electric generating
station
SWEPCO....................... Southwestern Electric Power Company, Shreveport,
Louisiana
Texas Commission............. Public Utility Commission of Texas
TNRCC........................ Texas Natural Resource Conservation Commission
Transok...................... Transok, Inc. and subsidiaries, Tulsa, Oklahoma
TSCA......................... Toxic Substance Control Act of 1976
Westinghouse................. Westinghouse Electric Corporation
WTU.......................... West Texas Utilities Company, Abilene, Texas
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
CSW
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Millions, except per share amounts)
REVENUES
Electric operating revenues $ 774 $ 785 $ 1,288 $ 1,458
Gas 134 116 270 288
Other diversified 12 7 21 12
920 908 1,579 1,758
OPERATING EXPENSES AND TAXES
Fuel and purchased power 257 292 492 581
Gas purchased for resale 76 60 148 170
Gas extraction and marketing 24 23 52 45
Other operating 149 145 258 289
Charges for terminated Merger 42 -- 42 --
Maintenance 41 45 78 86
Depreciation and amortization 92 89 186 176
Taxes, other than federal income 49 51 86 100
Federal income taxes 20 46 (23) 61
750 751 1,319 1,508
OPERATING INCOME 170 157 260 250
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability
amortization 10 17 21 34
Other 11 4 34 10
21 21 55 44
INCOME BEFORE INTEREST CHARGES 191 178 315 294
INTEREST CHARGES
Interest on long-term debt 56 55 112 108
Interest on short-term debt and
other 27 16 52 31
83 71 164 139
NET INCOME 108 107 151 155
Preferred stock dividends 5 4 10 9
NET INCOME FOR COMMON STOCK $ 103 $ 103 $ 141 $ 146
AVERAGE COMMON SHARES
OUTSTANDING 191.4 189.0 191.1 188.8
EARNINGS PER SHARE OF COMMON
STOCK $ 0.54 $ 0.55 $ 0.74 $ 0.78
DIVIDENDS PAID PER SHARE OF
COMMON STOCK $ 0.43 $ 0.425 $ 0.86 $ 0.85
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Millions)
ASSETS
PLANT
Electric utility
Production $ 5,833 $ 5,802
Transmission 1,409 1,377
Distribution 2,607 2,539
General 776 764
Construction work in progress 442 412
Nuclear fuel 163 161
Total electric 11,230 11,055
Gas 821 798
Other diversified 37 15
12,088 11,868
Less - Accumulated depreciation 4,053 3,870
8,035 7,998
CURRENT ASSETS
Cash and temporary cash investments 34 27
Accounts receivable 904 837
Materials and supplies, at average cost 164 162
Electric fuel inventory, substantially at
average cost 140 118
Gas inventory/products for resale 23 23
Under-recovered fuel costs -- 54
Accumulated deferred income taxes 20 2
Prepayments and other 44 42
1,329 1,265
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 515 516
Mirror CWIP asset 317 322
Other non-utility investments 335 394
Income tax related regulatory assets, net 265 216
Other 318 274
1,750 1,722
$ 11,114 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Millions)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock: $3.50 par value
Authorized shares: 350.0 million
Outstanding shares: June 30, 1995,
191.7 million
December 31, 1994,
190.6 million $ 671 $ 667
Paid-in capital 586 561
Retained earnings 1,801 1,824
Total Common Stock Equity 3,058 3,052
Preferred stock
Not subject to mandatory redemption 292 292
Subject to mandatory redemption 35 35
Long-term debt 2,954 2,940
TOTAL CAPITALIZATION 6,339 6,319
CURRENT LIABILITIES
Long-term debt and preferred stock due within
twelve months 31 7
Short-term debt 846 910
Short-term debt - CSW Credit, Inc. 748 573
Accounts payable 258 286
Accrued taxes 97 111
Accrued interest 47 61
Refund due customers 52 --
Over-recovered fuel costs 61 21
Other 129 138
2,269 2,107
DEFERRED CREDITS
Income taxes 2,072 2,048
Investment tax credits 313 320
Mirror CWIP liability and other 121 191
2,506 2,559
$ 11,114 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
(Millions)
OPERATING ACTIVITIES
Net Income $ 151 $ 155
Non-cash Items Included in Net Income
Depreciation and amortization 208 195
Deferred income taxes and investment tax
credits (50) 38
Mirror CWIP liability amortization (21) (34)
Charges for terminated Merger 42 --
Regulatory assets established for restructuring
charges (21) --
Changes in Assets and Liabilities
Accounts receivable (74) (44)
Over and under- recoveries of fuel 94 (16)
Accounts payable (19) (57)
Accrued taxes (14) (5)
Refund due customers pursuant to CPL Agreement
in Principle 52 --
Other (54) (18)
294 214
INVESTING ACTIVITIES
Capital expenditures and acquisitions (212) (268)
Non-affiliated accounts receivable collections (90) (114)
CSWE projects 32 37
Other (15) (7)
(285) (352)
FINANCING ACTIVITIES
Common stock sold 29 25
Proceeds from issuance of long-term debt 40 138
Retirement of long-term debt (6) (2)
Reacquisition of long-term debt (1) (14)
Redemption of preferred stock -- (4)
Change in short-term debt 111 125
Payment of dividends (175) (170)
(2) 98
NET CHANGE IN CASH AND CASH EQUIVALENTS 7 (40)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27 62
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34 $ 22
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 166 $ 131
Income taxes paid $ 17 $ 14
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Set forth below is information concerning the consolidated
results of operations for CSW for the three month and six month
periods ending June 30, 1995. For information concerning the results
of operations for each of the Electric Operating Companies, see the
discussions below under the heading RESULTS OF OPERATIONS following
the financial statements of each of the Electric Operating Companies.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock was
unchanged at $103 million during the second quarter of 1995 compared
to the second quarter of 1994. Earnings per share decreased to $0.54
from $0.55 due to an increase in the number of shares of CSW common
stock outstanding. Included in the second quarter 1995 results was
the establishment of a reserve of $42 million for deferred merger and
acquisition costs as a result of CSW's termination of the Merger on
June 9, 1995. Also impacting earnings were increased interest costs
and lower earnings from Mirror CWIP liability amortization.
Offsetting these factors were increased gas revenues, non-fuel
electric revenues and prior year tax adjustments.
Operating Revenues. Operating revenues increased 1% to $920
million in the second quarter of 1995 from $908 million in the second
quarter of 1994. This increase reflects increased gas revenues offset
partially by decreased electric revenues. Gas revenues increased due
to higher gas sales and transportation which were offset partially by
lower gas prices. Electric revenues decreased primarily due to lower
fuel revenues in the second quarter of 1995 compared to the second
quarter of 1994. Total retail Kwh sales increased 2.2% in the second
quarter of 1995 as compared to the second quarter of 1994.
Residential, commercial and industrial sales were up 2.5%, 1.9% and
2.1%, respectively. Increased usage, primarily by industrial
customers, and new residential and commercial customers, contributed
to the Kwh sales growth.
Fuel and Purchased Power. Fuel and purchased power expense
decreased 12% to $257 million in the second quarter of 1995 from $292
million in the second quarter of 1994. The total composite unit cost
of fuel decreased 8% to $1.65 per Mmbtu in the second quarter of 1995
from $1.79 per Mmbtu in the second quarter of 1994, reflecting lower
gas, lignite and nuclear fuel prices and increased use of less costly
nuclear fuel. These lower costs reduced total fuel expense $34
million. Purchased power decreased $1 million or 8% in the second
quarter of 1995.
Gas Purchased for Resale. Gas purchased for resale increased 27%
to $76 million in the second quarter of 1995 from $60 million in the
second quarter of 1994 due to an increase in gas sales volumes which
was partially offset by a decrease in the average cost of gas.
Charges for Terminated Merger. CSW recorded a $42 million charge
for the establishment of a reserve for deferred merger and acquisition
costs as a result of CSW's termination of the Merger on June 9, 1995.
See Part II - Other Information - Item 1. for additional information
related to the termination of the Merger and litigation arising in
connection therewith.
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994 (continued)
Maintenance. Maintenance decreased 9% to $41 million in the
second quarter of 1995 from $45 million in the second quarter of 1994.
This decrease was due primarily to lower levels of maintenance
associated with STP.
Depreciation and Amortization. Depreciation and amortization
increased 3% from $89 million to $92 million due primarily to
increases in all classes of depreciable plant.
Federal Income Taxes. Federal income taxes decreased $26 million
during the second quarter of 1995 from $46 million during the second
quarter of 1994. This decrease resulted primarily from prior year tax
adjustments at the Electric Operating Companies as well as lower pre-
tax income. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
Other Income and Deductions. Mirror CWIP liability amortization
decreased 35% to $11 million in the second quarter of 1995 from $17
million in the second quarter of 1994. The decrease reflects the
original liability amortization schedule agreed upon in the settlement
of CPL rate cases in 1990 and 1991. Other income increased $6 million
during the second quarter of 1995 as compared to the second quarter of
1994. The increase was primarily attributable to the reclassification
of CSWE's operating activities. Prior to 1994, CSWE was in the
developmental stage of its business and, accordingly, its operating
activities were classified in Other Income and Deductions. However,
in conjunction with the completion of three projects in 1994, CSWE's
revenues and expenses were classified as operating activities in Other
Diversified Revenues and Other Operating Expenses at the end of 1994.
Both of these components had negative earnings impacts classified in
Other Income and Deductions during the second quarter of 1994.
Interest on Short-Term Debt and Other. Interest on short-term
debt and other increased $11 million during the second quarter of 1995
as compared to the second quarter of 1994 due to higher levels of
short-term borrowings and higher short-term interest rates.
COMPARISON OF THE SIX MONTH ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
decreased 3% to $141 million during the first six months of 1995 from
$146 million during the first six months of 1994. Earnings per share
decreased to $0.74 from $0.78, reflecting the impact of the Agreement
in Principle as well as the establishment of a $42 million reserve for
deferred merger and acquisition costs associated with CSW's
termination of the Merger on June 9, 1995. Also adversely impacting
earnings were increased interest costs and lower earnings from Mirror
CWIP liability amortization. Partially offsetting these factors were
increased non-fuel electric revenues and lower taxes.
Operating Revenues. Operating revenues decreased 10% to $1,579
million during the six months ended June 30, 1995 from $1,758 million
during the six months ended June 30, 1994. This decrease reflects a
$62 million write-off of fuel under-recovery and $50 million of
reserves for refunds recorded in the first quarter of 1995 as a result
of the Agreement in Principle. In addition, fuel revenues were lower
in the first six months of 1995 as compared to the first six months of
1994 due to lower fuel costs as described below. The decrease in
operating revenues was offset in part by a 2.4% increase in total retail
Kwh sales in the first six months of 1995 as compared to the first six
months of 1994. Residential, commercial and industrial sales increased
1.2%, 2.0% and 3.5%, respectively, during the six
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
months ended June 30, 1995. Increased usage, particularly among
industrial customers, and new residential and commercial customers
caused the increase. Gas revenues decreased 6% to $270 million during
first six months of 1995 from $288 million during the first six months
of 1994. This decrease was due to lower gas prices partially offset
by increased gas sales and transportation volumes.
Fuel and Purchased Power. Fuel and purchased power expense
decreased 15% to $492 million during the six months ended June 30,
1995 from $581 million during the six months ended June 30, 1994. The
composite unit cost of fuel decreased 16% to $1.63 per Mmbtu in the
first six months of 1995 from $1.93 per Mmbtu in the first six months
of 1994, reflecting lower gas, lignite and nuclear fuel prices and
increased use of less costly nuclear fuel. These lower costs reduced
total fuel expense by $83 million. Purchased power decreased $6
million or 21% in the first six months of 1995 as compared to the
first six months of 1994 due primarily to increased generation from
STP which replaced power that had been purchased during the first six
months of 1994 when STP was out of service.
Gas Purchased for Resale. Gas purchased for resale decreased 13%
to $148 million during the six months ended June 30, 1995 from $170
million during the six months ended June 30, 1994 due to a decrease in
the average cost of gas which was partially offset by higher sales
volumes.
Gas Extraction and Marketing. Gas extraction and marketing
expenses increased $7 million to $52 million during the six months
ended June 30, 1995 as compared to the comparable period in 1994. The
increase was due to higher natural gas liquids sales volumes.
Other Operating. Other operating expense decreased 11% to $258
million during the six months ended June 30, 1995 from $289 million
during the six months ended June 30, 1994. This decrease was
primarily due to the recognition of a $21 million regulatory asset for
previously recorded restructuring charges. Also contributing to the
decrease was the reversal of $7 million in rate case costs pursuant to
the Agreement in Principle and reductions in employee related costs.
Charges for Terminated Merger. CSW recorded a $42 million charge
for the establishment of a reserve for deferred merger and acquisition
costs as a result of CSW's termination of the Merger on June 9, 1995.
See Part II - Other Information - Item 1. for information related to
the termination of the Merger and litigation arising in connection
therewith.
Maintenance. Maintenance decreased 9% to $78 million during the
six months ended June 30, 1995 from $86 million during the six months
ended June 30, 1994. This decrease was due to lower levels of
maintenance at the Electric Operating Companies, with the exception of
SWEPCO where maintenance increased slightly, and costs associated with
STP.
Depreciation and Amortization. Depreciation and amortization
increased 6% from $176 million to $186 million due primarily to
increases in all classes of depreciable plant.
Taxes, Other than Federal Income. Taxes other than Federal
income decreased 14% to $86 million during the six months ended June
30, 1995 from $100 million during the six months ended June 30, 1994.
This decrease was due primarily to lower ad valorem tax expense as a
result of a true-up to prior year estimates.
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Federal Income Taxes. Federal income taxes decreased $84 million
during the first six months of 1995 compared to the first six months
of 1994. This decrease was due to a $34 million reduction of deferred
Federal income taxes resulting from the Agreement in Principle, a $23
million reduction due to prior year tax adjustments at the Electric
Operating Companies and lower pre-tax income. See NOTE 6. Federal
Income Taxes for additional information related to the tax
adjustments.
Other Income and Deductions. Mirror CWIP liability amortization
decreased 38% to $21 million during the six months ended June 30, 1995
from $34 million during the six months ended June 30, 1994. The
decrease reflects the original liability amortization schedule agreed
upon in the settlement of CPL rate cases in 1990 and 1991. Other
income increased $24 million to $34 million during the six months
ended June 30, 1995 from $10 million during the six months ended June
30, 1994. This increase was due primarily to increased interest
income of $12 million and recognition of $8 million of previously
deferred factoring income pursuant to the Agreement in Principle.
Other income also increased $3 million as a result of the sale by PSO
of non-utility fiber-optic telecommunication property during the first
quarter of 1995.
Interest on Short-Term Debt and Other. Interest on short-term
debt and other increased $21 million to $52 million in the first six
months of 1995 from $31 million during the first six months of 1994.
This increase reflects higher levels of short-term borrowing and
higher short-term interest rates.
CPL
CENTRAL POWER AND LIGHT COMPANY
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $324,525 $333,169 $451,807 $596,398
OPERATING EXPENSES AND TAXES
Fuel 76,000 88,052 136,064 166,076
Purchased power 3,956 14,049 7,027 29,848
Other operating 57,455 54,907 80,989 109,681
Maintenance 14,697 19,169 31,902 37,728
Depreciation and amortization 37,372 34,939 74,372 69,240
Taxes, other than Federal income 20,522 21,398 29,997 41,317
Federal income taxes 18,005 25,585 (35,618) 30,495
228,007 258,099 324,733 484,385
OPERATING INCOME 96,518 75,070 127,074 112,013
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability amortization 10,250 17,000 20,500 34,000
Allowance for equity funds
used during construction (114) (62) (115) (24)
Other 2,477 390 10,574 1,390
12,613 17,328 30,959 35,366
INCOME BEFORE INTEREST CHARGES 109,131 92,398 158,033 147,379
INTEREST CHARGES
Interest on long-term debt 28,534 27,953 57,094 54,632
Interest on short-term debt
and other 6,050 2,418 11,349 6,387
Allowance for borrowed funds
used during construction (1,097) (443) (2,416) (1,096)
33,487 29,928 66,027 59,923
NET INCOME 75,644 62,470 92,006 87,456
Preferred stock dividends 3,468 3,641 7,364 7,099
NET INCOME FOR COMMON STOCK $ 72,176 $ 58,829 $ 84,642 $ 80,357
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $3,076,016 $3,070,005
Transmission 457,729 451,050
Distribution 854,724 828,350
General 219,689 216,888
Construction work in progress 158,537 142,724
Nuclear fuel 163,283 161,152
4,929,978 4,870,169
Less - Accumulated depreciation
and amortization 1,470,966 1,400,343
3,459,012 3,469,826
CURRENT ASSETS
Cash 2,023 642
Special deposits 668 668
Accounts receivable 48,602 29,865
Materials and supplies, at average cost 66,157 66,209
Fuel inventory, at average cost 23,589 22,916
Accumulated deferred income taxes 2,558 --
Under-recovered fuel costs -- 54,126
Prepayments and other 5,231 2,316
148,828 176,742
DEFERRED CHARGES AND OTHER ASSETS
Deferred STP costs 488,544 488,987
Mirror CWIP asset 316,814 321,825
Income tax related regulatory assets, net 349,931 288,444
Other 106,189 76,875
1,261,478 1,176,131
$4,869,318 $4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value, authorized
12,000,000 shares; issued and
outstanding 6,755,535 shares $ 168,888 $ 168,888
Paid-in capital 405,000 405,000
Retained earnings 882,108 857,466
Total Common Stock Equity 1,455,996 1,431,354
Preferred stock 250,351 250,351
Long-term debt 1,469,060 1,466,393
TOTAL CAPITALIZATION 3,175,407 3,148,098
CURRENT LIABILITIES
Long-term debt due within twelve months 526 723
Advances from affiliates 145,129 161,320
Accounts payable 52,257 75,051
Accrued taxes 50,365 59,386
Accumulated deferred income taxes -- 13,812
Accrued interest 22,633 24,681
Over-recovered fuel costs 33,445 --
Refund due customers 52,237 --
Other 23,264 31,476
379,856 366,449
DEFERRED CREDITS
Accumulated deferred income taxes 1,119,516 1,087,317
Investment tax credits 155,638 158,533
Mirror CWIP liability and other 38,901 62,302
1,314,055 1,308,152
$4,869,318 $4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $92,006 $87,456
Non-cash Items Included in Net Income
Depreciation and amortization 86,648 80,107
Deferred income taxes and
investment tax credits (48,553) 23,922
Mirror CWIP liability amortization (20,500) (34,000)
Regulatory assets established for restructuring
charges (20,652) --
Allowance for equity funds
used during construction 115 24
Changes in Assets and Liabilities
Accounts receivable (18,737) 3,685
Fuel inventory (673) (7,923)
Accounts payable (22,794) (12,524)
Accrued taxes (9,021) (7,121)
Over- and under-recovered fuel costs 87,571 (24,904)
Refund due customers pursuant to Agreement
in Principle 52,237 --
Accrued restructuring charges (828) (6,823)
Other (23,852) (11,478)
152,967 90,421
INVESTING ACTIVITIES
Construction expenditures (65,087) (77,366)
Allowance for borrowed funds
used during construction (2,416) (1,096)
(67,503) (78,462)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 99,190
Reacquisition of long-term debt (745) (459)
Retirement of preferred stock -- (3,581)
Change in advances from affiliates (16,191) (71,973)
Payment of dividends (67,147) (36,988)
(84,083) (13,811)
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,381 (1,852)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 642 2,435
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,023 $ 583
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $64,250 $57,599
Income taxes paid $ 1,502 $ 26
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock increased 23%
to $72.2 million during the second quarter of 1995 from $58.8 million in the
second quarter of 1994. The increase was due primarily to increased non-fuel
revenues, decreased plant maintenance and prior year tax adjustments, offset
partially by decreased Mirror CWIP liability amortization and higher
depreciation and interest expenses.
Electric Operating Revenues. Total revenues decreased 3% to $324.5
million during the second quarter of 1995 from $333.2 million during the
second quarter of 1994 due primarily to a $22.4 million decrease in fuel
revenue resulting from lower average unit fuel costs and purchased power as
discussed below. Partially offsetting the decrease in fuel revenue was a
$14.0 million increase in non-fuel revenue resulting from a 6% increase in
retail Kwh sales and a 60% increase in lower margin sales for resale. The
increase in retail sales was attributable to increased usage per customer in
1995. The increase in sales for resale was due primarily to a new contract
with an existing customer.
Fuel. Fuel expense decreased approximately 14% to $76.0 million during
the second quarter of 1995 from $88.1 million during the second quarter of
1994. The decrease in fuel expense was due primarily to a 27% decrease in the
average unit cost of fuel from $1.88 per Mmbtu in the second quarter of 1994
to $1.38 per Mmbtu in the second quarter of 1995 resulting from the
expiration of higher priced gas contracts, the renegotiation of a coal
contract and increased usage of lower unit cost nuclear fuel. The decrease in
the cost of fuel was partially offset by an 18% increase in generation
attributable to the restart of STP Unit 2 in May 1994.
Purchased Power. Purchased power decreased $10.1 million during the
second quarter of 1995 as compared to the second quarter of 1994 due to the
increased generation at STP Unit 2, which replaced power that had been
purchased during the second quarter of 1994 when STP Unit 2 was out of
service.
Other Operating. Other operating expense increased $2.5 million, or 5%,
during the second quarter of 1995 as compared to the second quarter of 1994.
This increase was due primarily to higher administrative and general expenses,
partially offset by lower nuclear plant operating expenses than those incurred
during 1994 while STP was out of service.
Maintenance. Maintenance expense decreased $4.5 million, or 23%, during
the second quarter of 1995 as compared to the second quarter of 1994, due
primarily to decreased nuclear maintenance expense than that incurred during
1994 while STP was out of service and the postponement of previously scheduled
plant maintenance.
Depreciation and Amortization. Depreciation and amortization increased
$2.4 million, or 7%, during the second quarter of 1995 as compared to the
second quarter of 1994 as a result of an increase in depreciable property and
the amortization of restructuring charges associated with the Agreement in
Principle. See NOTE 2. Litigation and Regulatory Proceedings for additional
information related to the Agreement in Principle.
Federal Income Taxes. Federal income taxes decreased $7.6 million in
the second quarter of 1995 as compared to the second quarter of 1994 due
primarily to prior year tax adjustments. See NOTE 6. Federal Income Taxes
for additional information related to the tax adjustments.
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994 (continued)
Other Income and Deductions. Mirror CWIP liability amortization
decreased $6.8 million compared to the second quarter of 1994. In accordance
with the original liability amortization schedule agreed upon in the
settlement of its rate cases in 1990 and 1991, CPL is amortizing its Mirror
CWIP liability in declining amounts over the years 1991 through 1995. Other
income was higher in the second quarter of 1995 when compared to the second
quarter of 1994 due primarily to the recognition of factoring income pursuant
to the Agreement in Principle and an increase in consolidated tax savings.
Interest Charges. Interest on short-term debt and other increased $3.6
million in the second quarter of 1995 when compared to the second quarter of
1994 as a result of higher levels of short-term debt outstanding at higher
interest rates and the recognition of interest expense associated with over-
recovered fuel.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock increased 5% to
$84.6 million during the first six months of 1995 from $80.4 million in the
first six months of 1994. Increased non-fuel revenue, decreased plant
maintenance and prior year tax adjustments, offset by decreased Mirror CWIP
liability amortization and higher depreciation expense, contributed to this
increase. Partially offsetting this increase were lower earnings resulting
from the effects of the Agreement in Principle. See NOTE 2. Litigation and
Regulatory Proceedings for additional information related to the Agreement in
Principle.
Electric Operating Revenues. Total revenues decreased $144.6 million, or
24%, during the first six months of 1995 as compared to the first six months of
1994 due primarily to a $50.0 million reserve for refund and a $62.3 million
write-off of under-recovered fuel costs resulting from the Agreement in
Principle. Under the Agreement in Principle, CPL will provide customers a one-
time base rate refund of $50.0 million. In addition, CPL will not charge
customers for $62.3 million in replacement power costs associated with the
1993-1994 STP outage.
Also contributing to the decrease in revenue was a $53.4 million decrease
in fuel revenue resulting from lower average unit fuel costs and purchased
power as discussed below. Partially offsetting the decrease in fuel revenue
was a $21.1 million increase in non-fuel revenue resulting from a 5% increase
in retail Kwh sales and a 50% increase in lower margin sales for resale. The
increase in retail sales was attributable to increased usage per customer in
1995. The increase in sales for resale was due primarily to a new contract
with an existing customer.
Fuel. Fuel expense decreased $30.0 million, or 18%, during the first six
months of 1995 as compared to the first six months of 1994. The decrease in
fuel expense was due primarily to a 32% decrease in the average unit cost of
fuel from $2.03 per Mmbtu for the first six months of 1994 to $1.38 per Mmbtu
for the first six months of 1995 resulting from the expiration of higher
priced gas contracts, the renegotiation of a coal contract and increased usage
of lower unit cost nuclear fuel. The decrease in the cost of fuel was
partially offset by a 21% increase in generation attributable to the restart of
STP Units 1 and 2 in February and May 1994, respectively.
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Purchased Power. Purchased power decreased $22.8 million during the first
six months of 1995 as compared to the first six months of 1994 due to increased
generation at STP, which replaced power that had been purchased during the
first half of 1994 when STP was out of service.
Other Operating. Other operating expense decreased $28.7 million, or 26%,
during the first six months of 1995 as compared to the first six months of
1994. The decrease was primarily due to the recognition of a $20.7 million
regulatory asset for previously recorded restructuring charges. Also
contributing to the decrease was the reversal of $6.5 million in rate case
costs pursuant to the Agreement in Principle.
Maintenance. Maintenance expense decreased $5.8 million, or 15%, during
the first six months of 1995 as compared to the first six months of 1994, due
primarily to decreased nuclear maintenance expense than that incurred during
1994 while STP was out of service and the postponement of previously scheduled
plant maintenance.
Depreciation and Amortization. Depreciation and amortization increased
$5.1 million, or 7%, during the first six months of 1995 when compared to
first six months of 1994 as a result of increased depreciable property and the
amortization of restructuring charges associated with the Agreement in
Principle.
Taxes, Other than Federal Income. Taxes other than Federal income
decreased $11.3 million during the first six months of 1995 as compared to the
first six months of 1994 due primarily to lower ad valorem tax expense
resulting from a true-up to prior year estimates.
Federal Income Taxes. Federal income taxes decreased $66.1 million in
the first six months of 1995 as compared to the first six months of 1994 due
primarily to the accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in Principle, prior
year tax adjustments and lower pre-tax income. See NOTE 6. Federal Income
Taxes for additional information related to the tax adjustments.
Other Income and Deductions. Mirror CWIP liability amortization decreased
$13.5 million during the first six months of 1995 as compared to the first six
months of 1994. In accordance with the original liability amortization
schedule agreed upon in the settlement of its rate cases in 1990 and 1991, CPL
is amortizing its Mirror CWIP liability in declining amounts over the years
1991 through 1995. Other income was higher in the first six months of 1995
when compared to 1994 due primarily to the recognition of factoring income
pursuant to the Agreement in Principle and an increase in consolidated tax
savings.
Interest Charges. Interest on long-term debt increased $2.5 million
during the first six months of 1995 as compared to the first six months of
1994 as a result of increased long-term debt outstanding. Interest on short-
term debt and other increased $5.0 million in the second quarter of 1995 when
compared to the second quarter of 1994 as a result of higher levels of short-
term debt outstanding at higher interest rates and the recognition of interest
expense associated with over-recovered fuel.
PSO
PUBLIC SERVICE COMPANY OF OKLAHOMA
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $161,644 $174,631 $310,060 $332,140
OPERATING EXPENSES AND TAXES
Fuel 62,989 71,462 133,462 141,548
Purchased power 5,651 9,722 10,394 22,836
Other operating 28,092 29,189 57,960 59,815
Maintenance 8,749 9,398 15,062 17,444
Depreciation and amortization 16,580 15,605 33,065 31,008
Taxes, other than Federal income 7,041 7,963 13,773 14,587
Federal income taxes 4,172 7,484 5,126 8,666
133,274 150,823 268,842 295,904
OPERATING INCOME 28,370 23,808 41,218 36,236
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 59 143 539 239
Other 528 211 3,216 109
587 354 3,755 348
INCOME BEFORE INTEREST CHARGES 28,957 24,162 44,973 36,584
INTEREST CHARGES
Interest on long-term debt 7,398 7,398 14,797 14,797
Interest on short-term debt
and other 1,770 1,223 3,537 2,213
Allowance for borrowed funds used
during construction (723) (386) (1,322) (660)
8,445 8,235 17,012 16,350
NET INCOME 20,512 15,927 27,961 20,234
Preferred stock dividends 204 204 408 408
NET INCOME FOR COMMON STOCK $ 20,308 $ 15,723 $ 27,553 $ 19,826
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $ 925,664 $ 902,602
Transmission 352,446 346,433
Distribution 681,102 668,346
General 152,430 150,898
Construction work in progress 93,060 96,133
2,204,702 2,164,412
Less - Accumulated depreciation 892,475 859,894
1,312,227 1,304,518
CURRENT ASSETS
Cash 1,930 5,453
Accounts receivable 22,680 21,531
Materials and supplies, at average cost 40,518 39,888
Fuel inventory, at LIFO cost 24,505 17,820
Accumulated deferred income taxes 9,284 6,670
Prepayments 2,970 7,889
101,887 99,251
DEFERRED CHARGES AND OTHER ASSETS 57,651 61,345
$1,471,765 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $15 par value, authorized
11,000,000 shares; issued 10,482,000
shares and outstanding 9,013,000
shares $ 157,230 $ 157,230
Paid-in capital 180,000 180,000
Retained earnings 141,822 124,269
Total Common Stock Equity 479,052 461,499
Preferred stock 19,826 19,826
Long-term debt 378,501 402,752
TOTAL CAPITALIZATION 877,379 884,077
CURRENT LIABILITIES
Long-term debt due within twelve months 25,000 --
Advances from affiliates 52,435 55,160
Payables to affiliates 26,378 27,876
Accounts payable 36,903 59,899
Payables to customers 29,920 22,655
Accrued taxes 18,460 17,356
Accrued interest 5,465 8,867
Other 21,546 15,157
216,107 206,970
DEFERRED CREDITS
Accumulated deferred income taxes 280,314 281,139
Investment tax credits 47,616 49,011
Income tax related regulatory
liabilities, net 17,473 18,611
Other 32,876 25,306
378,279 374,067
$1,471,765 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $27,961 $20,234
Non-cash Items Included in Net Income
Depreciation and amortization 35,903 33,632
Deferred income taxes and
investment tax credits (5,972) 3,303
Allowance for equity funds used
during construction (539) (239)
Changes in Assets and Liabilities
Accounts receivable (1,149) 7,348
Materials and supplies (7,315) 6,567
Prepayments 4,919 (5,573)
Accounts payable (8,320) (4,758)
Accrued taxes 1,104 5,424
Accrued restructuring charges (417) (4,052)
Other current liabilities 6,389 (1,549)
Other deferred credits 7,570 (4,609)
Other 2,750 (962)
62,884 54,766
INVESTING ACTIVITIES
Construction expenditures (48,672) (59,184)
Allowance for borrowed funds used during
construction (1,322) (660)
Other (3,281) (1,391)
(53,275) (61,235)
FINANCING ACTIVITIES
Change in advances from affiliates (2,725) 17,613
Payment of dividends (10,407) (12,408)
(13,132) 5,205
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,523) (1,264)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,453 2,429
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,930 $ 1,165
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $19,509 $15,685
Income taxes paid $ 5,908 $ 10
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 29% to $20.3 million during the second quarter of 1995
from $15.7 million during the second quarter of 1994. The
increase resulted primarily from prior year tax adjustments.
Electric Operating Revenues. Revenues decreased 7% to
$161.6 million during the second quarter of 1995 from $174.6
million during the second quarter of 1994. The decreased
revenues were due primarily to a $14.6 million reduction in fuel
revenues and a 3.8% decrease in retail Kwh sales which was
primarily the result of decreased weather-related demand. PSO
recovers its monthly fuel and purchased power expenses currently
in its revenues; therefore the decrease in these costs resulted
in lower revenues.
Fuel. Fuel expense decreased 12% to $63.0 million during
the second quarter of 1995 as compared to $71.5 million during
the second quarter of 1994. This decrease was due primarily to a
reduction in the over-recovery of fuel costs, as well as a
reduction in average unit fuel costs from $2.05 per Mmbtu in 1994
to $1.86 per Mmbtu in 1995. The decrease in average unit fuel
costs was attributable to the settlement of coal transportation
litigation and a reduction in the spot market price of natural
gas. Such decreases were partially offset by an increase in
higher unit fuel cost natural gas-fired generation and the
reversal of prior year accruals for potential liabilities related
to coal transportation. See Part II - OTHER INFORMATION - Item
1. Legal Proceedings for additional information related to
pending coal transportation litigation.
Purchased Power. Purchased power decreased $4.1 million, or
42%, during the second quarter of 1995 as compared to the second
quarter of 1994 due primarily to decreased purchases of economy
energy.
Federal Income Taxes. Federal income taxes decreased $3.3
million, or 44%, during the second quarter of 1995 as compared to
the second quarter of 1994 primarily as a result of prior year
tax adjustments, offset in part by higher pre-tax income. See
NOTE 6. Federal Income Taxes for additional information related
to the tax adjustments.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 39% to $27.6 million for the six months ended June 30,
1995 from $19.8 million for the six months ended June 30, 1994.
The increase resulted primarily from the sale during the first
quarter of 1995 of non-utility fiber optic telecommunication
property, decreased operating and maintenance expenses and prior
year tax adjustments.
Electric Operating Revenues. Revenues decreased 7% to
$310.1 million during the first six months of 1995 from $332.1
million during the first six months of 1994 due primarily to a
$22.8 million reduction in fuel revenues and a 2.0% decrease in
retail Kwh sales (which was primarily the result of decreased
weather-related demand). PSO recovers its monthly fuel and
purchased power expenses currently in its revenues; therefore,
the decrease in these costs resulted in lower revenues.
PSO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Fuel. Fuel expense decreased approximately 6% to $133.5
million during the first six months of 1995 as compared to $141.5
million in the same period of 1994. This decrease was due
primarily to a reduction in the over-recovery of fuel costs, as
well as a reduction in average fuel costs from $2.07 per Mmbtu in
1994 to $1.79 per Mmbtu in 1995. The decrease in average fuel
costs was attributable to the settlement of certain coal
transportation litigation and a reduction in the price of natural
gas. Such decreases were partially offset by a 7% increase in
Kwh generation and the reversal of prior year accruals for
potential liabilities related to coal transportation. See Part
II - OTHER INFORMATION - Item 1. Legal Proceedings for additional
information related to pending coal transportation litigation.
Purchased Power. Purchased power decreased $12.4 million,
or 55%, during the first six months of 1995 as compared to the
same period of 1994 due primarily to decreased purchases of
economy energy.
Maintenance Expenses. Maintenance expenses decreased 14% to
$15.1 million for the six months ended June 30, 1995 from $17.4
million for the same period of 1994 primarily as a result of
decreased overhead line maintenance activities.
Depreciation and Amortization. Depreciation and
amortization expense increased $2.1 million, or 7%, during the
first six months of 1995 as compared to the first six months of
1994 due primarily to increases in depreciable plant.
Federal Income Taxes. Federal income taxes decreased 41% to
$5.1 million during the first six months of 1995 from $8.7
million during the same period of 1994 primarily as a result of
prior year tax adjustments, offset in part by higher pre-tax
income. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
Other Income and Deductions. Other income and deductions
increased $3.4 million primarily as a result of a $2.7 million
gain on the sale of non-utility fiber optic telecommunication
property during the first quarter of 1995.
Interest on Short-term Debt and Other. Short-term debt and
other increased $1.3 million due primarily to higher levels of
short-term debt outstanding at higher short-term interest rates.
SWEPCO
SOUTHWESTERN ELECTRIC POWER COMPANY
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $212,960 $211,989 $382,200 $402,055
OPERATING EXPENSES AND TAXES
Fuel 78,652 87,312 141,844 174,502
Purchased power 4,269 4,050 9,732 8,609
Other operating 29,357 29,975 57,949 57,977
Maintenance 11,471 10,955 20,816 19,931
Depreciation and amortization 20,359 19,878 40,643 39,640
Taxes, other than Federal income 12,207 12,751 23,072 25,651
Federal income taxes 7,767 10,369 12,679 14,226
164,082 175,290 306,735 340,536
OPERATING INCOME 48,878 36,699 75,465 61,519
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 656 736 2,105 1,403
Other 1,042 438 1,452 1,488
1,698 1,174 3,557 2,891
INCOME BEFORE INTEREST CHARGES 50,576 37,873 79,022 64,410
INTEREST CHARGES
Interest on long-term debt 11,117 10,900 22,437 21,713
Interest on short-term debt
and other 2,835 1,553 5,684 3,133
Allowance for borrowed funds
used during construction (1,446) (431) (2,694) (824)
12,506 12,022 25,427 24,022
NET INCOME 38,070 25,851 53,595 40,388
Preferred stock dividends 840 841 1,618 1,681
NET INCOME FOR COMMON STOCK $ 37,230 $ 25,010 $ 51,977 $ 38,707
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $1,403,839 $1,401,418
Transmission 404,088 385,113
Distribution 763,781 733,707
General 222,626 213,563
Construction work in progress 146,240 149,508
2,940,574 2,883,309
Less - Accumulated depreciation 1,069,905 1,026,751
1,870,669 1,856,558
CURRENT ASSETS
Cash 2,379 1,296
Accounts receivable 47,455 54,344
Materials and supplies, at average cost 28,987 28,109
Fuel inventory, at average cost 73,189 61,701
Accumulated deferred income taxes 4,762 6,592
Prepayments and other 14,202 13,071
170,974 165,113
DEFERRED CHARGES AND OTHER ASSETS 58,811 57,536
$2,100,454 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $18 par value, authorized
7,600,000 shares; issued and
outstanding 7,536,640 shares $ 135,660 $ 135,660
Paid-in capital 245,000 245,000
Retained earnings 327,440 297,462
Total Common Stock Equity 708,100 678,122
Preferred stock
Not subject to mandatory redemption 16,032 16,032
Subject to mandatory redemption 34,778 34,828
Long-term debt 595,580 595,833
TOTAL CAPITALIZATION 1,354,490 1,324,815
CURRENT LIABILITIES
Long-term debt and preferred stock
due within twelve months 5,140 5,270
Advances from affiliates 65,414 81,868
Accounts payable 48,598 50,138
Over-recovered fuel cost 9,751 12,200
Customer deposits 11,907 13,075
Accrued taxes 32,885 12,495
Accrued interest 9,970 17,175
Other 19,464 30,615
203,129 222,836
DEFERRED CREDITS
Accumulated deferred income taxes 364,220 365,441
Investment tax credits 78,986 81,023
Income tax related regulatory liabilities,
net 41,910 44,836
Other 57,719 40,256
542,835 531,556
$2,100,454 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $53,595 $40,388
Non-cash Items Included in Net Income
Depreciation and amortization 45,676 44,316
Deferred income taxes and
investment tax credits (4,354) 1,226
Allowance for equity funds used during
construction (2,105) (1,403)
Changes in Assets and Liabilities
Accounts receivable 6,889 (9,798)
Fuel inventory (11,488) 15,796
Accounts payable (1,540) 5,482
Accrued taxes 20,390 17,204
Accrued interest (7,205) --
Over- and under-recovered fuel costs (2,449) 1,697
Restructuring charges (288) (3,663)
Other 5,099 5,702
102,220 116,947
INVESTING ACTIVITIES
Construction expenditures (52,465) (66,728)
Allowance for borrowed funds used during
construction (2,694) (824)
Other (3,370) (2,007)
(58,529) (69,559)
FINANCING ACTIVITIES
Change in advances from affiliates (16,454) (27,864)
Redemption of preferred stock (50) --
Retirement of long-term debt (1,692) (1,559)
Reacquisition of long-term debt -- (1,713)
Payment of dividends (24,412) (18,682)
(42,608) (49,818)
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,083 (2,430)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,296 6,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,379 $ 4,293
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $30,964 $23,374
Income taxes paid $ 2,581 $ 1,932
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 49% to $37.2 million during the second quarter of 1995
from $25.0 million during the second quarter of 1994. The
increase was due primarily to an increase in non-fuel revenue and
prior year tax adjustments.
Electric Operating Revenues. Electric operating revenues
increased $1.0 million to $213.0 million during the second
quarter of 1995 from $212.0 million during the second quarter of
1994 due primarily to a $5.6 million increase in non-fuel revenue
offset in part by a $4.6 million decrease in fuel revenue due to
lower average fuel costs. The increase in non-fuel revenues was
primarily the result of a 3.6% increase in retail Kwh sales.
Fuel. Fuel expense decreased 10% to $78.7 million during the
second quarter of 1995 when compared to the second quarter of
1994 due primarily to a 7% decrease in generation and a decrease
in the average unit fuel cost from $1.74 per Mmbtu in 1994 to
$1.71 per Mmbtu in 1995. The decrease was due primarily to the
settlement of litigation with fuel suppliers and lower natural
gas prices. Because SWEPCO recovers its fuel expenses currently
in revenues, the decrease in these expenses resulted in lower
electric operating revenues during the second quarter of 1995.
Maintenance. Maintenance increased $0.5 million, or 5%,
during the second quarter of 1995 when compared to the first
quarter of 1994 due primarily to an increase in scheduled power
plant maintenance partially offset by decreased overhead line
maintenance. Overhead line maintenance expense was higher in the
second quarter of 1994 as a result of an ice storm that impacted
SWEPCO's distribution system during that period.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased $0.5 million, or 4%, during the second quarter
of 1995 when compared to the second quarter of 1994 due primarily
to a decrease in ad valorem taxes partially offset by an increase
in state franchise taxes.
Federal Income Taxes. Federal income taxes decreased 25% to
$7.8 million during the second quarter of 1995 from $10.4 million
during the second quarter of 1994 due primarily to prior year tax
adjustments partially offset by higher pre-tax income. See NOTE
6. Federal Income Taxes for additional information related to
the tax adjustments.
Interest on Short-Term Debt and Other. Interest expense on
short-term debt and other increased $1.3 million, or 83%, during
the second quarter of 1995 when compared to the second quarter of
1994 due primarily to higher levels of short-term debt
outstanding at higher short-term interest rates.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 34% to $52.0 million during the six months ended June
30, 1995 from $38.7 million during the six months ended June 30,
1994. This increase was due primarily to an increase in non-fuel
revenue and prior year tax adjustments.
SWEPCO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Electric Operating Revenues. Electric operating revenues
decreased $19.9 million, or 5%, during the first six months of
1995 when compared to the first six months of 1994 due primarily
to a $37.4 million decrease in fuel revenues that resulted from
lower average unit fuel cost. Partially offsetting the decrease
in fuel revenue was a $17.7 million increase in non-fuel revenue,
which reflected a 3.5% increase in retail Kwh sales.
Fuel. Fuel expense decreased 19% to $141.8 million during
the first six months of 1995 when compared to the first six
months of 1994 due primarily to a decrease in the average unit
cost of fuel from $1.81 per Mmbtu in 1994 to $1.65 per Mmbtu in
1995 and a 9% decrease in generation. The decrease in the
average unit fuel cost was due primarily to the settlement of
litigation with fuel suppliers and lower natural gas prices.
Purchased Power. Purchased power expense increased $1.1
million, or 13%, during the first six months of 1995 as compared
to the first six months of 1994 primarily due to contractual
terms which call for increased operating reserves and on-peak
capacity negotiated as a part of the 1993 purchase of Bossier
Rural Electric Membership Corporation and a net increase in
economy purchases.
Maintenance. Maintenance increased $0.9 million, or 4%, in
the first six months of 1995 from $19.9 million during the first
six months of 1994 due primarily to increased scheduled power
plant maintenance partially offset by decreased overhead line
maintenance. Overhead line maintenance expense was higher in the
first six months of 1994 as a result of an ice storm that
impacted SWEPCO's distribution system during that period.
Depreciation. Depreciation increased $1.0 million, or 3%,
during the first six months of 1995 when compared to the first
six months of 1994 due to an increase in depreciable plant.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased $2.6 million, or 10%, during the first six
months of 1995 when compared to the first six months of 1994 due
primarily to a decrease in ad valorem taxes partially offset by
an increase in state franchise taxes.
Federal Income Taxes. Federal income taxes decreased $1.5
million, or 11%, to $12.7 million during the first six months of
1995 from $14.2 million during the first six months of 1994 due
primarily to prior year tax adjustments, which was partially
offset by higher pre-tax income. See NOTE 6. Federal Income
Taxes for additional information related to the tax adjustments.
Interest on Short-Term Debt and Other. Interest expense on
short-term debt and other increased $2.6 million, or 81%, during
the first six months of 1995 when compared to the first six
months of 1994 due primarily to higher levels of short-term debt
outstanding at higher short-term interest rates.
WTU
WEST TEXAS UTILITIES COMPANY
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $ 83,049 $ 83,016 $157,970 $166,335
OPERATING EXPENSES AND TAXES
Fuel 29,763 31,198 60,928 70,728
Purchased power 2,482 1,251 3,825 2,038
Other operating 17,497 17,373 31,561 33,336
Maintenance 4,048 3,847 6,997 7,786
Depreciation and amortization 8,053 7,852 16,117 15,657
Taxes, other than Federal income 5,514 5,661 11,340 11,160
Federal income taxes 2,506 2,876 4,120 4,185
69,863 70,058 134,888 144,890
OPERATING INCOME 13,186 12,958 23,082 21,445
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 113 -- 110 2
Other 723 819 934 1,100
836 819 1,044 1,102
INCOME BEFORE INTEREST CHARGES 14,022 13,777 24,126 22,547
INTEREST CHARGES
Interest on long-term debt 5,298 4,744 10,138 9,127
Interest on short-term debt
and other 956 902 2,154 1,786
Allowance for borrowed funds used
during construction (158) (61) (325) (104)
6,096 5,585 11,967 10,809
NET INCOME 7,926 8,192 12,159 11,738
Preferred stock dividends 66 151 132 302
NET INCOME FOR COMMON STOCK $ 7,860 $ 8,041 $ 12,027 $ 11,436
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $ 427,797 $ 427,736
Transmission 194,387 194,402
Distribution 307,069 308,905
General 73,147 73,938
Construction work in progress 42,838 23,257
1,045,238 1,028,238
Less - Accumulated depreciation 376,161 364,383
669,077 663,855
CURRENT ASSETS
Cash 4,169 2,501
Accounts receivable 29,738 23,165
Materials and supplies, at average cost 16,622 16,519
Fuel inventory, at average cost 8,210 9,229
Coal inventory, at LIFO cost 10,226 6,442
Accumulated deferred income taxes 3,171 3,068
Prepayments and other 2,675 1,091
74,811 62,015
DEFERRED CHARGES AND OTHER ASSETS
Deferred Oklaunion costs 26,503 26,914
Other 25,838 26,111
52,341 53,025
$ 796,229 $ 778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value, authorized
7,800,000 shares; issued and
outstanding 5,488,560 shares $ 137,214 $ 137,214
Paid-in capital 2,236 2,236
Retained earnings 133,531 132,504
Total Common Stock Equity 272,981 271,954
Preferred stock 6,291 6,291
Long-term debt 250,997 210,047
TOTAL CAPITALIZATION 530,269 488,292
CURRENT LIABILITIES
Long-term debt due within twelve months 650 650
Advances from affiliates 15,123 46,315
Accounts payable 27,591 35,407
Accrued taxes 6,688 7,452
Accrued interest 5,535 4,394
Over-recovered fuel costs 3,622 1,586
Other 4,481 2,743
63,690 98,547
DEFERRED CREDITS
Accumulated deferred income taxes 132,440 146,146
Income tax related regulatory liabilities,
net 25,076 9,217
Investment tax credits 31,221 31,882
Other 13,533 4,811
202,270 192,056
$ 796,229 $ 778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $12,159 $11,738
Non-cash Items Included in Net Income
Depreciation and amortization 16,809 16,456
Deferred income taxes and
investment tax credits 1,389 3,099
Allowance for equity funds used during
construction (110) (2)
Changes in Assets and Liabilities
Accounts receivable (6,573) 3,264
Accounts payable (7,845) (25,873)
Accrued taxes (764) (2,442)
Over- and under-recovered fuel costs 2,036 (4,299)
Accrued restructuring charges (202) (2,534)
Other 9,149 (2,810)
26,048 (3,403)
INVESTING ACTIVITIES
Construction expenditures (20,421) (18,816)
Allowance for borrowed funds used during
construction (325) (104)
Other (735) (774)
(21,481) (19,694)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 39,491 39,356
Reacquisition of long-term debt -- (12,127)
Change in advances from affiliates (31,192) 6,988
Payment of dividends (11,198) (10,302)
(2,899) 23,915
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,668 818
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,501 706
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,169 $ 1,524
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 9,588 $ 6,965
Income taxes paid $ 8,009 $ 5,834
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994.
Net Income for Common Stock. Net income for common stock
decreased 2% to $7.9 million during the second quarter of 1995
from $8.0 million in the second quarter of 1994. This decrease
was due primarily to higher interest expense on long-term debt.
Electric Operating Revenues. Electric operating revenues
increased slightly in the second quarter of 1995 as compared to
the second quarter of 1994. The increase was attributable
primarily to a $0.4 million increase in non-fuel revenues
resulting from increased on-system sales for resale to additional
customers, partially offset by the implementation of an interim
retail rate reduction of approximately $5.7 million on an annual
basis effective October 1, 1994. The increase in non-fuel
revenues was offset by a $0.3 million decrease in fuel revenues.
Fuel. Fuel expense decreased $1.4 million, or 5%, during
the second quarter of 1995 as compared to the second quarter of
1994 due primarily to an 8% decrease in generation. Partially
offsetting the effects of this decrease in generation was an
increase in average unit fuel costs to $1.78 per Mmbtu in 1995
from $1.75 per Mmbtu in 1994. The increase in unit fuel costs
resulted from an increase in the per unit cost of coal, which was
due to a higher level of minimum contract purchases during the
second quarter of 1995 and an increase in higher unit fuel cost
gas-fired generation. Such increases were partially offset by a
decrease in the price of natural gas.
Purchased Power. Purchased power increased $1.2 million
during the second quarter of 1995 as compared to the second
quarter of 1994, primarily as a result of additional economy
energy purchases made during the second quarter of 1995 and the
planned maintenance outage at Oklaunion that was longer in
duration in 1995 than in 1994.
Federal Income Taxes. Federal income taxes decreased $0.4
million, or 13%, during the second quarter of 1995 as compared to
the second quarter of 1994 due primarily to prior year tax
adjustments recorded in the second quarter of 1995. See NOTE 6.
Federal Income Taxes for additional information related to the
tax adjustments.
Interest on Long-Term Debt. Interest charges on long-term
debt increased 12% to $5.3 million during the second quarter of
1995 from $4.7 million in the second quarter of 1994 due to
higher levels of long-term debt outstanding.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 5% to $12.0 million during the first six months of 1995
from $11.4 million in the first six months of 1994. The increase
was due primarily to decreased other operating and maintenance
expenses partially offset by increased interest on long-term
debt.
Electric Operating Revenues. Electric operating revenues
decreased $8.4 million, or 5%, in the first six months of 1995 as
compared to the first six months of 1994. This decrease was
attributable to an $8.6 million decrease in fuel revenues,
partially offset by a $0.2 million increase in non-fuel revenues
which resulted primarily from increased on-system sales for
resale to additional customers, partially offset
WTU RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
by the implementation of an interim retail rate reduction of
approximately $5.7 million on an annual basis effective October
1, 1994.
Fuel. Fuel expense decreased $9.8 million, or 14%, for the
first six months of 1995 as compared to the first six months of
1994 due primarily to a 6% decrease in generation and a 7%
decrease in average unit fuel costs from $2.05 per Mmbtu in 1994
to $1.90 per Mmbtu in 1995. The decrease in unit fuel costs was
due primarily to lower natural gas prices. The decreases were
partially offset by an increase in gas-fired generation during a
planned maintenance outage at Oklaunion that was longer in
duration in 1995 than in 1994.
Purchased Power. Purchased power increased $1.8 million
during the first six months of 1995 when compared to the
comparable period of 1994 primarily as a result of additional
economy energy purchases made during the first six months of 1995
and the planned maintenance outage at Oklaunion that was longer
in duration in 1995 than in 1994.
Other Operating. Other operating expenses decreased $1.8
million, or 5%, in the first six months of 1995 as compared to
the first six months of 1994 due primarily to decreased
production expenses related to the planned maintenance outage at
Oklaunion which was longer in duration in 1995 than in 1994,
decreased environmental expenditures and decreased employee
related costs.
Maintenance. Maintenance expenses decreased by $0.8
million, or 10%, during the first six months of 1995 as compared
to the first six months of 1994. This decrease was due in part
to decreased electric plant expenses that reflect plant overhauls
undertaken during the first six months of 1994 but not during the
comparable period in 1995. In addition, decreased distribution
expenses associated with tree trimming activities which have been
delayed until later in 1995 also contributed to the overall
decrease in maintenance expenses. These decreases were partially
offset by increased maintenance expense associated with the
planned outage at Oklaunion that was longer in duration in 1995
than in 1994.
Interest on Long-Term Debt. Interest charges on long-term
debt increased 11% to $10.1 million during the first six months
of 1995 from $9.1 million in the first six months of 1994 due to
higher levels of long-term debt outstanding.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Principles of Preparation
CSW, CPL, PSO, SWEPCO and WTU
The condensed CSW, CPL, PSO, SWEPCO and WTU financial
statements included herein have been prepared by each registrant
pursuant to the rules and regulations of the SEC. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although each registrant believes
that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in the registrants'
combined Annual Report on Form 10-K for the year ended December
31, 1994 and combined Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
The unaudited financial information furnished herewith
reflects all adjustments which are, in the opinion of management
of such registrant, necessary for a fair statement of the results
of operations for the interim periods. Information for quarterly
periods is affected by seasonal variations in sales, rate
changes, timing of fuel expense recovery and other factors.
Certain financial statement items for prior years have been
reclassified to conform to the 1995 presentation.
2. Litigation and Regulatory Proceedings
CSW, CPL, PSO, SWEPCO and WTU
See the registrants' combined Annual Report on Form 10-K for
the year ended December 31, 1994 and combined Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 for additional
discussion of litigation and regulatory proceedings. Reference
is also made to Part II-OTHER INFORMATION-Item 1. Legal
Proceedings for additional discussion of litigation matters.
CPL Rate Cases
CSW and CPL
The Texas Commission General Counsel, several Cities in
CPL's service territory and others initiated actions in late 1993
and early 1994 requesting a review by the Texas Commission of
CPL's base rates. The requests for a review of CPL's rates arose
out of the unscheduled 1993-1994 STP outage.
On April 5, 1995, CPL reached an Agreement in Principle with
other parties to pending regulatory proceedings involving base
rate, fuel and prudence issues relating to STP. On May 16, 1995,
CPL filed with the Texas Commission the CPL Settlement Agreement.
As discussed below, pursuant to the CPL Settlement Agreement,
base rate and fuel refunds and the reduction of CPL's fuel
factors are being implemented on an interim basis during the
summer of 1995. Hearings on the CPL Settlement Agreement were
held on July 19, 1995, and the final Texas Commission order
approving the CPL Settlement Agreement is expected in September
1995.
Under the CPL Settlement Agreement, CPL will provide
customers a one-time base rate refund of $50 million. In
addition, CPL will refund approximately $30 million in over-
recovered fuel cost through April 1995 and will not charge
customers for $62.25 million in replacement power costs and
related interest primarily associated with the 1993-1994 STP
outage. There will be no ongoing change in base rate levels.
However, CPL reduced its fuel factors by approximately $55
million on an annual basis beginning with the billing month of
July 1995, due to projections of lower fuel costs. CPL will
continue to seek resolution of its remaining non-nuclear fuel
costs through the current fuel reconciliation proceeding, Docket
No. 13650.
Neither CSW nor CPL experienced any significant earnings
impact during the second quarter of 1995 as a result of the
Agreement in Principle. Details of the items in the Agreement in
Principle which significantly impacted CSW's and CPL's earnings
during the first quarter of 1995, including several accounting
provisions, are set forth in the table below:
Earnings Impact of Significant Provisions of
Agreement in Principle
Pre-tax After-tax
(millions)
Base Rate Refund $ (50) $(33)
Fuel Write-off (62) (40)
Current Flowback of Excess
Deferred Federal Income Taxes 34 34
Capitalization of Previously
Expensed Restructuring and
Rate Case Costs 26 17
Recognition of Factoring
Income 12 8
The CPL Settlement Agreement additionally resolves (a) all
STP prudence issues through June 30, 1994, (b) potential claims
of excessive earnings for the five year period ending December
31, 1994 (a period in which CPL's rates were frozen), (c) certain
issues with respect to the treatment of Mirror CWIP and (d)
certain other pending issues. The CPL Settlement Agreement
resolves two cases now pending at the Texas Commission, the rate
inquiry in Docket No. 12820 and the prudence inquiry in Docket
No. 13126.
CPL has operated with its current rates in effect for more
than four years under a previous rate freeze agreement. That
rate freeze expired December 31, 1994. Under the Agreement in
Principle, CPL agreed not to file before September 28, 1995 for a
change in base rates. CPL anticipates that it will file a new
rate case with the Texas Commission after September 28, 1995
seeking to recover a retail revenue deficiency and to replace non-
cash earnings from Mirror CWIP with cash earnings. CPL is
amortizing its Mirror CWIP liability in declining amounts over
the years 1991 through 1995. Non-cash earnings of $68 million
were recognized in 1994, a decrease from the $75.7 million
recognized in 1993. The remaining liability to be amortized for
1995 is $41 million, which will fully amortize the Mirror CWIP
liability.
Civil Penalties
CSW and CPL
In May 1995, the NRC staff informed STP management that it
revoked a proposed $100,000 civil penalty and associated
violations filed against HLP in October 1994. As previously
reported, the proposed penalty was the result of what the NRC
believed was discrimination against a contractor employee at STP
who brought complaints of possible safety problems to the NRC's
attention. These actions resulted from the findings of an NRC
investigation of alleged violations of STP security and work
procedures in 1992. The incident cited by the NRC was the
subject of a hearing that concluded in July 1995 before a United
States Department of Labor judge with a ruling not expected
before 1996.
Power Purchases and Sales
CSW and PSO
MCPC
Reference is made to CSW's and PSO's combined Annual Report
on Form 10-K for the year ended December 31, 1994 and combined
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 for background on agreements PSO entered into in 1989 with
MCPC, a cogeneration development company located in northeastern
Oklahoma. The agreements provided, among other matters, that PSO
would deliver natural gas to MCPC for conversion to electrical
energy and that MCPC would supply energy to PSO. Subsequent to
1989, a series of disputes arose between PSO and MCPC relating to
the delivery of electric energy by MCPC to PSO and the charges
for the energy. The disputes involved both a lawsuit in the
District Court of Tulsa County, Oklahoma and proceedings before
the Oklahoma Commission.
On March 31, 1995, PSO, MCPC and the Oklahoma Commission
Staff signed a joint settlement resolving all issues pursuant to
the various proceedings before the Oklahoma Commission and the
District Court. The settlement, among other things, eliminated a
requirement that MCPC deliver an annual minimum of 394,200 Mwh of
Assured Delivery Energy and related provisions associated with
underdelivery charges. Most other provisions of the agreement
between PSO and MCPC were kept intact. The Oklahoma Commission
issued an order in May 1995 approving the settlement. The
settlement is on terms satisfactory to PSO and will not have a
material effect on CSW's or PSO's consolidated results of
operations or financial condition.
Rate Proceeding - Docket No. 13369
CSW and WTU
On August 25, 1994, WTU filed a petition with the Texas
Commission and cities with original jurisdiction to review WTU's
rates, proposed an interim across-the-board base retail rate
reduction of 3.25%, or approximately $5.7 million, effective
October 1, 1994, and sought until February 28, 1995, to develop
and file a RFP. WTU also requested the ability to "true-up,"
back to October 1, 1994, any difference in revenue requirements
upon final order of the Texas Commission and proposed that any
increases over the pre-October 1, 1994, base rates be implemented
prospectively on the effective date of the final order. WTU's
fuel reconciliation, Docket No. 13172, which was filed with the
Texas Commission on June 30, 1994, was consolidated with this
proceeding in September 1994.
On February 28, 1995, WTU filed with the Texas Commission
and cities with original jurisdiction an RFP which indicates a
revenue increase of approximately $14.5 million. However, WTU
simultaneously filed with the parties a settlement proposal to
reduce overall base rate revenue by 3.25%, effective October 1,
1994, which would have an annual impact in the rate year
beginning January 1, 1996 of approximately $5.9 million. The
settlement proposal reflects WTU's desire to maintain competitive
rates, recognizes the importance of competitive rates in the
changing electric service marketplace, and demonstrates WTU's
strong commitment to the long-term success of WTU and its
customers. Although settlement was not reached by the May 8
extended deadline, WTU continues to remain open to settlement.
On May 9, 1995, WTU filed an errata to its rate filing
package requesting a revised revenue increase of $12.6 million.
On June 8, 1995, WTU filed an additional errata but did not
revise the requested revenue increase at that time, citing no new
cost-of-service calculations.
Hearings are scheduled to begin August 14, 1995 at the Texas
Commission, with a final order anticipated in the fourth quarter
of 1995. On July 17, 1995 and July 24, 1995, the other parties
to the rate case and the Texas Commission staff filed testimony
that recommends WTU reduce rates by $14 million to $43 million
and make fuel refunds to customers of up to $8.7 million. The
proposed rate reductions assume the exclusion of Oklaunion-
related deferred accounting costs from WTU's rate base.
Management cannot predict the outcome of the rate proceeding or
the fuel reconciliation, but believes that the ultimate
resolution of these matters may, if not favorably resolved, have
a material adverse effect on WTU's results of operations and
financial condition. Management believes the ultimate resolution
of WTU's rate proceeding and the fuel reconciliation will not
have a material adverse effect on CSW's consolidated results of
operations or financial condition.
Rate Case Proceeding - Docket No. 7510
CSW and WTU
On February 15, 1995, the Court of Appeals affirmed all
aspects of the District Court judgment relating to the Texas
Commission's allowance of non-Oklaunion depreciation rates and
the surcharge of rate case expenses, reversed the District
Court's judgment relating to the exclusion of deferred Oklaunion
carrying costs in rate base, and remanded the case to the Texas
Commission to reexamine the issue of deferred costs in light of
the remand of Docket No. 7289, Application of WTU for Deferred
Accounting Treatment of Certain Oklaunion - Related Costs. WTU
filed a motion for rehearing at the Court of Appeals seeking
clarification of certain aspects of its order and arguing that
the Court of Appeals erred in remanding the case to the Texas
Commission for it to determine to what extent deferred costs are
necessary to preserve WTU's financial integrity because the issue
was not briefed or argued to the Court of Appeals and was,
therefore, waived. Other parties to the proceeding also filed
motions for rehearing. All motions were denied by the Court of
Appeals on April 26, 1995.
In May 1995, WTU filed its Application for Writ of Error to
the Supreme Court of Texas seeking discretionary review by that
Court to advance its argument that waiver has occurred. Other
parties to the appeal also sought review by the Supreme Court of
Texas. WTU's Application for Writ of Error may, if granted,
prevent further review of financial integrity issues with respect
to deferred accounting in any remand of Docket No. 7510. If a
broader remand is permitted and if the Texas Commission concludes
in Docket No. 7289 that deferred accounting was necessary to
preserve WTU's financial integrity during the deferral period,
the Texas Commission must decide to what extent the deferred
Oklaunion costs, including carrying costs, should be included in
rates in order to preserve WTU's financial integrity. See
Deferred Accounting below for a discussion of potential effects
of an adverse decision in the Docket No. 7289 remand.
For additional information regarding WTU's regulatory
matters, see CSW's and WTU's combined Annual Report on Form 10-K
for the year ended December 31, 1994, combined Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 and
combined Current Report on Form 8-K dated July 10, 1995.
Deferred Accounting
CSW and WTU
In September 1987, WTU received the 1987 Order from the
Texas Commission approving its request in Docket No. 7289,
Application of WTU for Deferred Accounting Treatment of Certain
Oklaunion - Related Costs. The 1987 Order authorized WTU to
defer operating expenses and carrying costs associated with
Oklaunion incurred subsequent to its December 1986 commercial
operation date until December 1987 when retail rates including
Oklaunion in WTU's rate base became effective. As a result, WTU
originally recorded approximately $32 million of Oklaunion
deferred costs, of which approximately $25 million were carrying
costs, to be recovered and amortized over the remaining life of
the plant.
Following a series of appeals challenging the 1987 Order,
the Supreme Court of Texas in October 1994 remanded WTU's
deferred accounting case to the Texas Commission to make a formal
finding whether the deferral of Oklaunion costs was necessary to
protect WTU's financial integrity during the deferral period.
The Texas Commission utilized a measurable harm standard in the
1987 Order approving the deferral of the Oklaunion costs.
On July 10, 1995, the ALJ in the WTU remand proceeding
before the Texas Commission, Docket No. 13949, issued a PFD and
Proposed Order. The PFD recommended that the 1987 Order be
reversed and WTU's request for deferred accounting treatment for
Oklaunion be denied.
In recommending denial of deferred accounting treatment for
WTU, the PFD asserts that deferred accounting was not necessary
to protect WTU's financial integrity. If the Texas Commission
adopts the ALJ's recommendation, WTU would be required to write
off the $26.5 million current balance of unamortized deferred
accounting costs related to Oklaunion.
Further, WTU has been recovering deferred accounting costs
since December 1987 through rates approved in Texas rate case
proceeding Docket No. 7510. As discussed above, the final Texas
Commission order in Docket No. 7510 has been the subject of
several legal proceedings and the issue of deferred accounting in
Docket No. 7510 remains on appeal. If the Texas Commission
adopts the PFD as proposed, WTU may be required at some point in
the remand of Docket No. 7510 to refund to customers deferred
accounting costs recovered in rates since December 1987. The refund
could potentially be up to $37 million including interest of
approximately $7 million as of June 30, 1995.
The Texas Commission is scheduled to consider the ALJ's
recommendation at its final order meeting to be held on August 2,
1995. The timing of a decision in WTU's currently pending rate
case, Docket No. 13369, could be impacted by the resolution of
WTU's deferred accounting case in Docket No. 13949.
While management can give no assurances as to the outcome of
the remanded proceeding, management believes that all of the
Oklaunion deferred costs were necessary to preserve WTU's
financial integrity during the deferral period and, accordingly,
that the 1987 Order should be upheld. Although WTU will continue
to pursue its position vigorously before the Texas Commission,
WTU can give no assurance as to what action the Texas Commission
will take or the results of any appeals that may arise therefrom.
If WTU's deferred accounting treatment is ultimately reversed and
not favorably resolved, WTU could experience a material adverse
effect on its results of operation and financial condition and
CSW could experience a material adverse effect on its
consolidated results of operation in the year recorded but not on
its continuing consolidated results of operation or financial
condition.
CSW and CPL
CPL was granted deferred accounting treatment for certain
STP Unit 1 and 2 costs by Texas Commission orders issued in
October 1990 and December 1990, respectively. In 1994, the
Supreme Court of Texas sustained deferred accounting as an
appropriate mechanism for the Texas Commission to use in
preserving the financial integrity of CPL. Because the Texas
Commission formally concluded that deferred accounting treatment
with respect to the STP costs was necessary to preserve the
financial integrity of CPL, the WTU deferred accounting
proceedings discussed above are not expected to affect CPL's
continued use of deferred accounting. CPL believes that the
language of the Supreme Court of Texas' opinion suggests that the
appropriateness of allowing deferred accounting may again be
reviewed under a financial integrity standard in the first case
in which the deferred STP costs will begin being recovered through
rates. If the courts decide that subsequent review under the
financial integrity standard is required, that review would be
conducted in a remand of the STP Unit 1 and 2 orders. Pending
the ultimate resolution of CPL's deferred accounting issues, CPL
is unable to predict how its deferred accounting orders will
ultimately be resolved by the Texas Commission.
If CPL's deferred accounting matters are not favorably
resolved, CSW and CPL could experience a material adverse effect
on their respective results of operations and financial
condition. While CPL's management is unable to predict the
ultimate outcome of these matters, management believes CPL will
receive approval of its deferred accounting orders or will be
successful in renegotiation of its rate orders, so that there
will be no material adverse effect on CSW's or CPL's results of
operation or financial condition.
For additional information on CPL's and WTU's deferred
accounting proceedings, see CPL's and WTU's combined Annual
Report on Form 10-K for the year ended December 31, 1994 and
combined Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3. Dividends
CSW, CPL, PSO, SWEPCO and WTU
The subsidiary companies' mortgage indentures, as amended
and supplemented, contain certain restrictions on the use of
their retained earnings for cash dividends on their common stock.
These restrictions do not limit the ability of CSW to pay
dividends to its shareholders. At June 30, 1995, approximately
$1.5 billion of the subsidiary companies' retained earnings were
available for payment of cash dividends by CSW to its
shareholders. At June 30, 1995, the amount of retained earnings
available for payment of cash dividends to CSW by the Electric
Operating Companies was as follows:
Retained Earnings
Available for
Company Dividends
(millions)
CPL $752
PSO 142
SWEPCO 327
WTU 134
4. Earnings and Dividends Per Share of Common Stock
CSW
Earnings per share of common stock are computed by dividing
net income for common stock by the average number of common
shares outstanding for the respective periods. Dividends per
common share reflect per share amounts paid during the periods.
5. Commitments and Contingent Liabilities
Termination of El Paso Merger
CSW
For information regarding the commitments and contingent
liabilities relating to the termination of the Merger, reference
is made to PART II - OTHER INFORMATION-Item 1. Legal
Proceedings.
Environmental
CSW and SWEPCO
For information regarding environmental issues, reference is
made to PART II - OTHER INFORMATION-Item 5. Other Information.
CSWE Projects
CSW
Mulberry
The 117 Mw facility, which is 50% owned by Dev-I (a
wholly-owned subsidiary of CSWE), achieved commercial operation
in August 1994. CSWE has provided construction services to the
Mulberry cogeneration facility through Dev-I. CSWE's maximum
potential liability under the fixed price contract is $29 million
and is expected to decrease to zero over the next two years as
contractual standards are met. Additionally, Dev-I entered into
a fixed price contract of $14 million to construct the Mulberry
thermal host facility. At June 30, 1995, the estimated costs of
the host facility were approximately $48 million. The host
facility is expected to be completed by the end of the fourth
quarter of 1995. Negotiations are ongoing to determine how the
$34 million of costs exceeding the contract will be allocated
between Dev-I and its partner, each of whom has alleged that the
other party is responsible for the cost overruns. Dev-I has
sought to resolve the cost overruns with its business partner
through binding arbitration and has entered into a non-binding
memorandum of understanding intended to settle the Mulberry cost
overrun issues, as well as certain other outstanding issues
between the parties with respect to the Mulberry project and
other projects in which Dev-I and its business partner are
involved. The memorandum of understanding contemplates a final
settlement during the third quarter of 1995 that would, if
implemented, result in the disassociation of Dev-I and its
business partner. CSW has provided additional guarantees to the
project totaling approximately $42 million. Management cannot
predict whether the memorandum of understanding will lead to a
final settlement and, if not, whether the parties will submit to
binding arbitration or pursue litigation. While management
cannot predict the ultimate resolution of this matter, management
does not believe that it will have a material adverse impact on
CSW's consolidated results of operations or financial condition.
Fort Lupton
CSWE has entered into an agreement on the Fort Lupton
project through a wholly-owned subsidiary, CSW Fort Lupton Inc.,
to purchase 50% of the 272 Mw project for $79.5 million of
equity. As of June 30, 1995, $43 million of equity had been
provided. CSWE has provided four letters of credit to the
project totaling $18.3 million. During March 1995, CSW Fort
Lupton Inc. closed permanent project financing on the Fort Lupton
facility which allowed CSW Fort Lupton Inc. to repay its $100
million construction borrowings to CSW.
Orange
The 103 Mw facility commenced commercial operation in June
1995. CSWE has committed to provide up to $130 million of
construction financing to the Orange cogeneration project in
which CSWE owns a 50% interest through Dev-I. Of this total, Dev-
I had provided $100 million at June 30, 1995. Dev-I expects to
obtain third party permanent financing for this project by year
end. In addition, CSW has provided five letters of credit to the
project totaling $5.3 million.
Other
As of June 30, 1995, CSWE had posted security deposits and
other security instruments of approximately $13 million on four
additional projects in various stages of development,
construction and operation.
Nuclear Insurance
CSW and CPL
As previously reported, in connection with the licensing and
operation of STP, the owners have purchased the maximum limits of
nuclear liability insurance, as required by law, and have
executed indemnification agreements with the NRC in accordance
with the financial protection requirements of the Price-Anderson
Act.
The Price-Anderson Act, a comprehensive statutory
arrangement providing limitations on nuclear liability and
governmental indemnities, is in effect until August 1, 2002. The
limit of liability under the Price-Anderson Act for licensees of
nuclear power plants is $8.92 billion per incident, effective as
of January 1995. The owners of STP are insured for their share
of this liability through a combination of private insurance
amounting to $200 million and a mandatory industry-wide program
for self-insurance totaling $8.72 billion. The maximum amount
that each licensee may be assessed under the industry-wide
program of self-insurance following a nuclear incident at an
insured facility is $75.5 million per reactor, which may be
adjusted for inflation, plus a five percent charge for legal
expenses, but not more than $10 million per reactor for each
nuclear incident in any one year. CPL and each of the other STP
owners are subject to such assessments, which CPL and other
owners have agreed will be allocated on the basis of their
respective ownership interests in STP. For purposes of these
assessments, STP has two licensed reactors.
The owners of STP currently maintain on-site decontamination
liability and property damage insurance in the amount of $2.75
billion provided by ANI and NEIL. Policies of insurance issued
by ANI and NEIL stipulate that policy proceeds must be used first
to pay decontamination and clean-up costs before being used to
cover direct losses to property. Under project agreements, CPL
and the other owners of STP will share the total cost of
decontamination liability and property insurance for STP,
including premiums and assessments, on a pro rata basis,
according to each owner's respective ownership interest in STP.
CPL purchases, for its own account, a NEIL I Business
Interruption and/or Extra Expense policy. This insurance will
reimburse CPL for extra expenses incurred, up to $1.65 million
per week, for replacement generation or purchased power as the
result of a covered accident that shuts down production at STP
for more than 21 weeks. The maximum amount recoverable for Unit
1 is $111.3 million and for Unit 2 is $111.8 million. CPL is
subject to an additional assessment up to $2.1 million for the
current policy year in the event that losses as a result of a
covered accident at a nuclear facility insured under the NEIL I
policy exceeds the accumulated funds available under the policy.
On August 28, 1994, CPL filed a claim under the NEIL I
policy relating to the 1993 - 1994 outage at STP Units 1 and 2.
NEIL is currently reviewing the claim. CPL management is unable
to predict the ultimate outcome of this matter.
Henry W. Pirkey Power Plant
CSW and SWEPCO
In connection with the lignite mining contract for its Henry
W. Pirkey Power Plant, SWEPCO has agreed, under certain
conditions, to assume the obligations of the mining contractor.
As of June 30, 1995, the maximum SWEPCO would have to assume is
$73 million. The maximum amount may vary as the mining
contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of June 30, 1995 is approximately $60.7
million.
6. Federal Income Taxes
CSW, CPL, PSO, SWEPCO and WTU
Due to the tax implications of the Agreement in Principle on
the financial statements of CSW and CPL recorded in the first quarter
of 1995 and the effects of the prior year tax adjustments on the
financial statements of CSW, CPL, PSO, SWEPCO and WTU recorded during
the second quarter of 1995, the following reconciliation is presented.
CSW 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in millions) ($ in millions)
Tax at statutory rates $42.7 35.0% $43.8 35.0%
Differences
Amortization of ITC (3.5) (2.9)% (7.0) (5.6)%
Mirror CWIP (2.7) (2.2)% (5.4) (4.3)%
Prior period adjustments (22.2) (18.2)% (57.4) (45.9)%
Other 2.0 1.0% 2.7 2.2%
$16.3 12.7% ($23.3) (18.6)%
Prior period adjustments of $22.2 million for tax balances
which are not required for future tax obligations are the primary
cause of the effective tax rate being lower than the statutory
rate for the three months ending June 30, 1995. In addition, prior
period adjustments for the six months ending June 30, 1995 reflect the
accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in
Principle.
CPL 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $32,064 35.0% $20,242 35.0%
Differences
Amortization of ITC (1,447) (1.6)% (2,895) (5.0)%
Mirror CWIP (2,711) (3.0)% (5,421) (9.4)%
Prior period adjustments (11,893) (13.0)% (47,182) (81.6)%
Other (45) -- 1,083 1.9%
$15,968 17.4% ($34,173) (59.1)%
Prior period adjustments of $11.9 million for tax balances
which are not required for future tax obligations are the primary
cause of the effective tax rate being lower than the statutory
rate for the three months ending June 30, 1995. In addition, prior
period adjustments for the six months ending June 30, 1995 reflect the
accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in
Principle.
PSO 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $8,309 35.0% $11,498 35.0%
Differences
Amortization of ITC (697) (2.9)% (1,395) (4.2)%
Prior period adjustments (3,624) (15.2)% (3,624) (11.0)%
Other (761) (3.2)% (1,588) (4.8)%
$3,227 13.7% $4,891 15.0%
Prior period adjustments of $3.6 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
cause of the effective tax rate being lower than the statutory
rate for the three and six month periods ending June 30, 1995.
SWEPCO 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $15,709 35.0% $22,679 35.0%
Differences
Amortization of ITC (1,019) (2.3)% (2,037) (3.1)%
Prior period adjustments (6,253) (13.9)% (6,253) (9.7)%
Other (1,624) (3.6)% (3,188) (4.9)%
$6,813 15.2% $11,201 17.3%
Prior period adjustments of $6.3 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
cause of the effective tax rate being lower than the statutory
rate for the three and six month periods ending June 30, 1995.
WTU 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $3,638 35.0% $5,571 35.0%
Differences
Amortization of ITC (330) (3.2)% (661) (4.2)%
Prior period adjustments (663) (6.4)% (663) (4.2)%
Other (176) (1.7)% (489) (3.0)%
$2,469 23.7% $3,758 23.6%
Prior period adjustments of $0.7 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
cause of the effective tax rate being lower than the statutory
rate for the three and six month periods ending June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the
registrants' combined Annual Report on Form 10-K for the year
ended December 31, 1994 and combined Quarterly Report on Form 10-
Q for the quarter ended March 31, 1995. Reference is also made
to each registrant's unaudited Financial Statements and related
Notes to Financial Statements included herein. The information
included therein should be read in conjunction with, and is
essential in understanding, the following discussion and
analysis.
Results of Operations
CSW, CPL, PSO, SWEPCO and WTU
Reference is made to PART I-FINANCIAL INFORMATION - Item 1.
Financial Statements.
Capital Requirements, Liquidity and Financing
CSW, CPL, PSO, SWEPCO and WTU
Construction and Capital Expenditures
Construction expenditures for the CSW System for the six
months ended June 30, 1995 were $206 million. These construction
expenditures were primarily for improvements to existing
production, transmission and distribution facilities, as well as
enhancements by Transok of existing gas gathering and
transmission systems. The improvements are required to meet the
needs of new customers and to satisfy the changing requirements
of existing customers. The CSW System anticipates that the
majority of all funds required for construction for the remainder
of the year will be provided from internal sources.
Short-Term Financing
The CSW System uses short-term debt to meet fluctuations in
working capital requirements and other interim capital needs.
The registrants, together with other members of the CSW System,
have established a money pool to coordinate short-term borrowings
and to make borrowings outside the money pool through CSW's
issuance of commercial paper. As of June 30, 1995, the CSW
System had entered into two revolving credit facilities totaling
$1.2 billion which replaced bank lines of credit used to back up
its commercial paper program.
Long-Term Financing
The CSW System is committed to maintaining financial
flexibility by maintaining a strong capital structure and
favorable securities ratings which help to assure future access
to capital markets when required. CSW, in order to strengthen
its capital structure and support growth from time to time, may
issue additional shares of its common stock. At June 30, 1995,
the capitalization ratios of each of the registrants were as
follows:
Company Common Preferred Long-Term
Equity Stock Debt
CSW 48% 5% 47%
CPL 46% 8% 46%
PSO 55% 2% 43%
SWEPCO 52% 4% 44%
WTU 52% 1% 47%
CSW and CPL
On July 19, 1995, CPL sold to underwriters $200 million of 6
5/8% FMB, Series KK, due July 1, 2005. The proceeds will be used
principally to redeem $139.2 million of 9 3/8% FMB, Series Z, due
December 1, 2019. The remainder of the proceeds will be used to
repay short-term debt, to provide working capital and for other
general corporate purposes.
On July 27, 1995, CPL sold to underwriters $100.6 million of
6.1% Pollution Control Revenue Refunding Bonds, Series 1995, due
July 1, 2028. The proceeds will be used to redeem two separate
outstanding PCRB issues, $68.9 million of 10 1/8%, Series 1984
PCRB, due October 15, 2014 and $31.8 million of 9 3/4%, Series U
FMB (secures Series 1985A collateralized PCRB), due July 1,
2015.
Regulatory Matters
CSW, CPL, PSO, SWEPCO and WTU
Reference is made to NOTE 2. Litigation and Regulatory
Proceedings for a discussion of each of the Electric Operating
Companies' regulatory matters.
Litigation Relating to Termination of El Paso Merger
CSW
For information regarding the commitments and contingent
liabilities relating to the termination of the Merger, reference
is made to PART II-OTHER INFORMATION-Item 1. Legal Proceedings.
PART II - OTHER INFORMATION
For background and earlier developments relating to Part II
information reference is made to the registrants' combined Annual
Report on Form 10-K for the year ended December 31, 1994 and
combined Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
Item 1. Legal Proceedings.
Litigation Relating to Termination of El Paso Merger
CSW
In May 1993, CSW entered into a Merger Agreement pursuant to
which El Paso would emerge from bankruptcy as a wholly-owned
subsidiary of CSW. El Paso is an electric utility company
headquartered in El Paso, Texas, which had filed a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy
Code on January 8, 1992.
On June 9, 1995, CSW sent a letter to El Paso declining to
extend the termination date under the Merger Agreement as
requested by El Paso and terminating the Merger Agreement. CSW's
June 9, 1995 letter also informed El Paso that it was revoking
the Modified Third Amended Plan of Reorganization for the
proposed Merger with El Paso by a contemporaneous filing with the
United States Bankruptcy Court for the Western District of Texas,
Austin Division, before which the El Paso bankruptcy
reorganization proceeding is pending.
On June 9, 1995, following CSW's notification that it was
terminating the Merger and withdrawing the Modified Third Amended
Plan of Reorganization, El Paso filed the El Paso Suit against
CSW in state district court in El Paso, Texas, claiming breach of
contract, breach of duty of good faith and fair dealing, breach
of fiduciary duty, business disparagement, tortious interference
with contract and fraud in the inducement. El Paso's suit seeks
a $25 million termination fee from CSW, CSW's share of certain
costs related to the Modified Third Amended Plan of
Reorganization, additional unspecified damages, punitive damages,
interest as permitted by law, reasonable attorneys fees and court
costs. On June 15, 1995, CSW filed suit against El Paso in the
United States Bankruptcy Court in Austin, Texas seeking a $25
million termination fee from El Paso due to El Paso's breaches of
the Merger Agreement, at least $3.6 million in rate case expenses
incurred by CSW on behalf of El Paso related to state regulatory
merger proceedings and a declaratory judgment that CSW properly
terminated the Merger Agreement. CSW also removed the El Paso
Suit from state district court to the United States Bankruptcy
Court in El Paso, Texas and requested that the action be
transferred to the United States Bankruptcy Court in Austin,
Texas, the bankruptcy court that has jurisdiction over El Paso's
bankruptcy case. The action has since been transferred to the
United States Bankruptcy Court in Austin, Texas. El Paso may
file a motion with the Austin bankruptcy court to remand its
lawsuit back to the state district court in El Paso or to change
venue from Austin to El Paso. CSW believes that it has
substantial defenses to the El Paso Suit and intends to defend
the El Paso Suit, and to pursue the CSW Suit, vigorously.
However, the outcome of the two lawsuits cannot presently be
predicted.
Background Information
For background information and earlier developments related
to the Merger, reference is made to CSW's Annual Report on Form
10-K for the year ended December 31, 1994, Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, Current Report on
Form 8-K dated May 23, 1995 and the documents referenced therein.
For further information related to the termination of the Merger,
the El Paso Suit and the CSW Suit, reference is made to CSW's
Current Reports on Form 8-K (i) dated June 9, 1995 and filed June
9, 1995 and (ii) dated June 9, 1995 and filed June 28, 1995, and
the documents referenced therein.
Cimmaron Litigation
CSW
On January 12, 1994, Cimmaron brought suit against CSW and
its wholly owned subsidiary, CSWE, in the 125th District Court of
Houston, Harris County, Texas. Cimmaron alleged that CSW and
CSWE breached commitments to participate with Cimmaron in a
failed BioTech Cogeneration project located in Colorado.
Cimmaron alleged breach of contract, fraud and negligent
misrepresentation claims in its petition and sought damages
totaling $250 million, punitive damages of an unspecified amount
and recovery of attorney's fees.
CSWE filed a counterclaim against Cimmaron and third-party
claims against the principals of Cimmaron on December 22, 1994,
alleging that they misrepresented and omitted material facts
about their experience and background and about the proposed
cogeneration project. CSWE sought damages of $500,000 (the
earnest money paid when the letter of intent was executed), the
costs incurred by CSWE in its due diligence investigation and
unspecified punitive damages. On January 10, 1995, Cimmaron
filed a first amended original petition to add claims of
negligence and gross negligence against the members of CSWE's
board of directors at the time of the failed project.
Effective July 27, 1995, the parties agreed upon a
settlement whereby they would dismiss their respective claims in
the BioTech Cogeneration litigation. The terms of the settlement
are on terms satisfactory to CSW and CSWE and will not have a
material adverse impact on CSW's consolidated results of
operations or financial condition.
Westinghouse Litigation
CSW and CPL
CPL and other owners of STP are plaintiffs in a lawsuit
filed in October 1990 in District Court in Matagorda County,
Texas against Westinghouse seeking damages and other relief. The
suit alleges that Westinghouse supplied STP with defective steam
generator tubes that are susceptible to stress corrosion
cracking. Westinghouse filed an answer to the suit in March 1992
denying the plaintiffs' allegations. A jury trial commenced on
July 5, 1995 in Bay City, Texas.
Inspections detected early indications of stress corrosion
cracking in steam generator tubes at STP. Management believes
the steam generator tubes will continue to deteriorate. The STP
owners have authorized the plant to solicit competitive bids for
replacement of the steam generators in 1999 for Unit 1 and 2000
for Unit 2.
A preliminary damages report prepared by experts for the STP
owners estimates that replacement of the STP Unit 1 and Unit 2
steam generators will cost approximately $285 million, of which
CPL's share would be approximately 25 percent. The estimated
replacement cost of $285 million does not include replacement
power costs, additional operating expenses and other costs that
are being sought from Westinghouse in the pending litigation.
Recoverability of these amounts and the steam generator
replacement costs from Westinghouse is uncertain. However,
management believes that the ultimate resolution of this matter
will not have a material adverse effect on CSW's or CPL's results
of operations or financial condition.
Burlington Northern Transportation Contracts
CSW and PSO
In June 1992, PSO filed suit in Federal District Court in
Tulsa, Oklahoma, against Burlington Northern seeking declaratory
relief under a long-term contract for the transportation of coal.
In July 1992, Burlington Northern asserted counterclaims against
PSO alleging that PSO breached the contract. The counterclaims
sought damages in an unspecified amount. In December 1993, PSO
amended its suit against Burlington Northern seeking damages and
declaratory relief under federal and state anti-trust laws. PSO
and Burlington Northern filed motions for summary judgment on
certain issues in the litigation. In March 1994, the court
issued an order granting PSO's motions for summary judgment and
denying Burlington Northern's motion. It was not necessary for
the court to decide the federal and state anti-trust claims
raised by PSO. Judgment was rendered in favor of PSO by the
United States District Court in May 1994. In June 1994,
Burlington Northern appealed this judgment to the United States
Court of Appeals for the Tenth Circuit. In April 1995, the Tenth
Circuit entered an order reversing the District Court's decision
in part and affirming the order in part. On May 2, 1995, PSO
filed a petition for rehearing by the Tenth Circuit. The
petition for rehearing was denied May 31, 1995 and the case has
been remanded to the District Court for further proceedings.
Management believes the ultimate resolution of this matter will
not have a material adverse effect on CSW's or PSO's consolidated
results of operations or financial condition.
PCB Cases
CSW and PSO
As previously reported, PSO has been named defendant in
complaints filed in state court in Oklahoma alleging, among other
things, that some of the plaintiffs were contaminated with PCBs
and other toxic by-products following transformer malfunctions.
As of July 28, 1995, the complaints totaled approximately $395
million, of which amount approximately one-third represents
punitive damages. Some claims have been dismissed, certain of
which resulted in settlements among the parties. The settlements
have not had a material adverse effect on CSW's or PSO's
consolidated results of operations or financial condition.
Although management cannot predict the outcome of these
proceedings, management believes that PSO has defenses to these
claims and intends to pursue them vigorously. Moreover,
management has reason to believe that PSO's insurance may cover
some of these claims. Management also believes that the ultimate
resolution of these cases will not have a material adverse effect
on CSW's or PSO's consolidated results of operations or financial
condition.
Other Legal Claims and Proceedings
CSW, CPL, PSO, SWEPCO and WTU
The CSW System is party to various other legal claims and
proceedings arising in the normal course of business. Management
does not expect disposition of these matters to have a material
adverse effect on the registrants' results of operations or
financial condition. See NOTE 2. Litigation and Regulatory
Proceedings for a discussion of each of the Electric Operating
Companies regulatory matters.
Item 4. Submission of Matters to a Vote of Security Holders.
CSW, CPL, PSO, SWEPCO and WTU
The information required for Item 4 was previously reported
in Item 4 of the registrants' combined Form 10-Q for the quarter
ended March 31, 1995.
Item 5. Other Information.
Environmental Matters
Toxic Substances Control Act of 1976
CSW and CPL
Under the TSCA, the storage, use and disposal, among other
things, of PCBs are regulated. Violations of the TSCA may lead to
fines and penalties. CPL was inspected by the EPA in 1992 and
found to have TSCA record-keeping and other violations for PCBs.
CPL negotiated a settlement with the EPA and has accepted a
penalty of approximately $76,000. CPL is awaiting the consent
agreement from the EPA.
Sol Lynn Superfund Site
CSW and CPL
The Sol Lynn salvage yard was declared a Superfund site by
the EPA after it was found to contain a number of contaminants
including PCBs. Gulf States Utilities Company remediated the site
for approximately $2 million and sought to recover a portion of
the remediation costs from alleged PRPs, including CPL. In March
1995, CPL and Gulf States Utilities Company reached an agreement
pursuant to which CPL agreed to pay $50,000 as its share of
remediation costs, pending court approval.
PCB Storage Facilities
CSW and PSO
PSO investigated and identified PCB contamination at one of
its PCB storage facilities in Sand Springs, Oklahoma. PSO made
proper notification to the EPA of the contamination that was
caused by spills prior to the adoption of PCB spill regulations.
PSO negotiated a remediation plan with the EPA. Remediation began
in November 1994, and the remediation costs were $235,000. As
part of the remediation plan, the EPA requested PSO to sample the
land surrounding the PCB storage building site. The land will
include an active PSO substation and an industrial area that is
privately owned. The extent of any PCB contamination has not been
determined on either site.
Suspected MGP Sites in Texarkana, Texas and Arkansas and
Shreveport, Louisiana
CSW and SWEPCO
SWEPCO owns a suspected former MGP site in Texarkana, Texas
and Arkansas. The EPA ordered an initial investigation of this
site, as well as a site in Shreveport, Louisiana, which is no
longer owned by SWEPCO. The contractor who performed the
investigations of these two sites recommended to the EPA that no
further action be taken at this time. The contractor also
discovered that an underground storage tank was in place at the
Texarkana site and that it was leaking. SWEPCO removed the tank
in early 1995 and has made a request for closure from the Arkansas
Department of Pollution Control and Ecology based on soil and
ground water quality results.
Childress Substation Site
CSW and WTU
In response to its discovery of a prior release of
transformer oil from a 138 Kv (kilovolt) autotransformer at the
Childress substation, WTU contracted with a consultant in February
1995 to conduct a subsurface soil investigation to determine the
extent of soil contamination. The investigation showed that
hydrocarbon contamination was present in concentrations above the
TNRCC accepted levels. On March 21, 1995, the contractor began
removing contaminated materials for disposal. Post-excavation
sample analyses indicated that the site was cleaned to TNRCC
approved levels and the excavation was backfilled and restored to
its original condition. The project was completed on April 28,
1995 at a cost of approximately $216,000. The final closure
report was submitted to the TNRCC in June 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(3) Articles of Incorporation
Second Restated Certificate of Incorporation of CSW dated
April 23, 1990 - (Exhibit 3.1)
Certificate of Amendment to Second Restated Certificate of
Incorporation dated May 20, 1991 - (Exhibit 3.2)
(12) Computation of Ratio of Earnings to Fixed Charges
CPL - (Exhibit 12.1)
PSO - (Exhibit 12.3)
SWEPCO - (Exhibit 12.4)
WTU - (Exhibit 12.5)
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
CPL - (Exhibit 12.2)
(27) Financial Data Schedules
CSW - (Exhibit 27.1)
CPL - (Exhibit 27.2)
PSO - (Exhibit 27.3)
SWEPCO - (Exhibit 27.4)
WTU - (Exhibit 27.5)
(b) Reports on Form 8-K:
CSW
CSW filed a Current Report on Form 8-K, dated April
5, 1995, Item 5. Other Events, reporting developments in
CPL regulatory matters.
CSW filed a Current Report on Form 8-K dated May 23,
1995, Item 5. Other Events, reporting developments in the
proposed El Paso Merger.
CSW filed a Current Report on Form 8-K, dated June 9,
1995 and filed June 9, 1995, Item 5. Other Events,
reporting that CSW had declined to extend the termination
date under the Merger Agreement and revoking the Third
Amended Plan of Reorganization.
CSW filed a Current Report on Form 8-K, dated June 9,
1995 and filed June 28, 1995, Item 5. Other Events,
reporting litigation between CSW and El Paso.
CSW filed a Current Report on Form 8-K, dated July
10, 1995, Item 5. Other Events, reporting an ALJ
recommendation regarding WTU deferred accounting.
CPL
CPL filed a Current Report on Form 8-K, dated April
5, 1995, Item 5. Other Events, reporting developments in
its regulatory matters.
PSO
No Current Reports on Form 8-K were filed for PSO.
Item 6. Exhibits and Reports on Form 8-K. (continued)
(b) Reports on Form 8-K: (continued)
SWEPCO
No Current Reports on Form 8-K were filed for SWEPCO.
WTU
WTU filed a Current Report on Form 8-K, dated July
10, 1995, Item 5. Other Events, reporting an ALJ
recommendation regarding deferred accounting.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, each registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized. The
signature for each undersigned registrant shall be deemed to
relate only to matters having reference to such registrant or its
subsidiaries.
CENTRAL AND SOUTH WEST CORPORATION
Date: August 1, 1995 /s/ Wendy G. Hargus
Wendy G. Hargus
Controller and Chief Accounting Officer
(Principal Accounting Officer)
CENTRAL POWER AND LIGHT COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
WEST TEXAS UTILITIES COMPANY
Date: August 1, 1995 /s/ R. Russell Davis
R. Russell Davis
Controller and Chief Accounting Officer
(Principal Accounting Officer)
EXHIBIT 12.1
CENTRAL POWER AND LIGHT COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $271,311
Adjustments:
Federal income taxes 61,304
Provision for deferred Federal income taxes (45,815)
Deferred investment tax credits (5,789)
Other income and deductions 10,457
Allowance for borrowed and equity funds
used during construction 4,919
Mirror CWIP amortization 54,500
Earnings $350,887
Fixed Charges:
Interest on long-term debt $113,870
Interest on short-term debt and other 17,327
Fixed Charges $131,197
Ratio of Earnings to Fixed Charges 2.67
EXHIBIT 12.2
CENTRAL POWER AND LIGHT COMPANY
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $271,311
Adjustments:
Federal income taxes 61,304
Provision for deferred Federal income taxes (45,815)
Deferred investment tax credits (5,789)
Other income and deductions 10,457
Allowance for borrowed and equity funds
used during construction 4,919
Mirror CWIP amortization 54,500
Earnings $350,887
Fixed Charges:
Interest on long-term debt $113,870
Interest on short-term debt and other 17,327
Preferred stock dividend requirements 14,719
Fixed Charges and Preferred Requirements $145,916
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends 2.40
EXHIBIT 12.3
PUBLIC SERVICE COMPANY OF OKLAHOMA (CONSOLIDATED)
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $103,240
Adjustments:
Federal and state income taxes 34,946
Provision for deferred Federal
and state income taxes (1,494)
Deferred investment tax credits (2,789)
Other income and deductions 4,040
Allowance for borrowed and equity funds
used during construction 3,475
Earnings $141,418
Fixed Charges:
Interest on long-term debt $ 29,594
Amortization of debt issuance cost 1,568
Other interest 3,600
Fixed Charges $ 34,762
Ratio of Earnings to Fixed Charges 4.07
EXHIBIT 12.4
SOUTHWESTERN ELECTRIC POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(Thousands except Ratio)
(Unaudited)
Operating Income $159,868
Adjustments:
Federal and state income taxes 24,104
Provision for deferred Federal and
state income taxes 16,604
Deferred investment tax credits (4,215)
Other income and deductions 4,621
Allowance for borrowed and equity funds
used during construction 8,668
Interest portion of financing leases 2,060
Earnings $211,710
Fixed Charges:
Interest on long-term debt $ 44,120
Amortization of debt issuance cost 3,558
Other interest 6,560
Interest portion of financing leases 2,060
Fixed Charges $ 56,298
Ratio of Earnings to Fixed Charges 3.76
EXHIBIT 12.5
WEST TEXAS UTILITIES COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(Thousands Except Ratio)
(Unaudited)
Operating Income $56,401
Adjustments:
Federal income taxes 9,531
Provision for deferred Federal income taxes 6,668
Deferred investment tax credits (1,321)
Other income and deductions 4,044
Allowance for borrowed and equity funds
used during construction 801
Earnings $76,124
Fixed Charges:
Interest on long-term debt $19,557
Interest on short-term debt and other 3,902
Fixed Charges $23,459
Ratio of Earnings to Fixed Charges 3.24
<TABLE> <S> <C>
<ARTICLE> UT
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<NAME> CENTRAL AND SOUTH WEST CORPORATION
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5 4 10 9
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<TOTAL-INTEREST-ON-BONDS> 56 55 112 108
<CASH-FLOW-OPERATIONS> 200 107 293 214
<EPS-PRIMARY> .54 .55 .74 .78
<EPS-DILUTED> .54 .55 .74 .78
</TABLE>
<TABLE> <S> <C>
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<NUMBER> 003
<NAME> CENTRAL POWER AND LIGHT COMPANY
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<TOTAL-OPERATING-EXPENSES> 228,007 258,099 324,733 484,385
<OPERATING-INCOME-LOSS> 96,518 75,070 127,074 112,013
<OTHER-INCOME-NET> 12,613 17,328 30,959 35,366
<INCOME-BEFORE-INTEREST-EXPEN> 109,131 92,398 158,033 147,379
<TOTAL-INTEREST-EXPENSE> 33,487 29,928 66,027 59,923
<NET-INCOME> 75,644 62,470 92,006 87,456
3,468 3,641 7,364 7,099
<EARNINGS-AVAILABLE-FOR-COMM> 72,176 58,829 84,642 80,357
<COMMON-STOCK-DIVIDENDS> 25,000 20,000 60,000 30,000
<TOTAL-INTEREST-ON-BONDS> 28,534 27,953 57,094 54,632
<CASH-FLOW-OPERATIONS> 135,029 79,957 152,967 90,421
<EPS-PRIMARY> .38 .31 .44 .43
<EPS-DILUTED> .38 .31 .44 .43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 004
<NAME> PUBLIC SERVICE COMPANY OF OKLAHOMA
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,312,227 0 1,312,227 0
<OTHER-PROPERTY-AND-INVEST> 4,706 0 4,706 0
<TOTAL-CURRENT-ASSETS> 101,887 0 101,887 0
<TOTAL-DEFERRED-CHARGES> 16,843 0 16,843 0
<OTHER-ASSETS> 36,102 0 36,102 0
<TOTAL-ASSETS> 1,471,765 0 1,471,765 0
<COMMON> 157,230 0 157,230 0
<CAPITAL-SURPLUS-PAID-IN> 180,000 0 180,000 0
<RETAINED-EARNINGS> 141,822 0 141,822 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 479,052 0 479,052 0
0 0 0 0
19,826 0 19,826 0
<LONG-TERM-DEBT-NET> 378,501 0 378,501 0
<SHORT-TERM-NOTES> 52,435 0 52,435 0
<LONG-TERM-NOTES-PAYABLE> 0 0 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 25,000 0 25,000 0
0 0 0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0 0 0
<LEASES-CURRENT> 0 0 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 516,951 0 516,951 0
<TOT-CAPITALIZATION-AND-LIAB> 1,471,765 0 1,471,765 0
<GROSS-OPERATING-REVENUE> 161,644 174,631 310,060 332,140
<INCOME-TAX-EXPENSE> 5,177 8,666 6,647 10,242
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204 204 408 408
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<CASH-FLOW-OPERATIONS> 38,837 50,541 62,884 54,766
<EPS-PRIMARY> .11 .08 .14 .11
<EPS-DILUTED> .11 .08 .14 .11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<SUBSIDIARY>
<NUMBER> 005
<NAME> SOUTHWESTERN ELECTRIC POWER COMPANY
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,870,669 0 1,870,669 0
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<TOTAL-CURRENT-ASSETS> 170,974 0 170,974 0
<TOTAL-DEFERRED-CHARGES> 33,180 0 33,180 0
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<TOTAL-ASSETS> 2,100,454 0 2,100,454 0
<COMMON> 135,660 0 135,660 0
<CAPITAL-SURPLUS-PAID-IN> 245,000 0 245,000 0
<RETAINED-EARNINGS> 327,440 0 327,440 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 708,100 0 708,100 0
34,778 0 34,778 0
16,032 0 16,032 0
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<LONG-TERM-DEBT-CURRENT-PORT> 145 0 145 0
1,200 0 1,200 0
<CAPITAL-LEASE-OBLIGATIONS> 12,159 0 12,159 0
<LEASES-CURRENT> 3,795 0 3,795 0
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<TOT-CAPITALIZATION-AND-LIAB> 2,100,454 0 2,100,454 0
<GROSS-OPERATING-REVENUE> 212,960 211,989 382,200 402,055
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<OTHER-OPERATING-EXPENSES> 150,307 159,534 292,960 324,780
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<TOTAL-INTEREST-EXPENSE> 12,506 12,022 25,427 24,022
<NET-INCOME> 38,070 25,851 53,595 40,388
840 841 1,618 1,681
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<EPS-PRIMARY> .19 .13 .27 .21
<EPS-DILUTED> .19 .13 .27 .21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000105860
<NAME> WEST TEXAS UTILITIES COMPANY
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1995 JUN-30-1994
<BOOK-VALUE> PER-BOOK PER-BOOK PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 669,077 0 669,077 0
<OTHER-PROPERTY-AND-INVEST> 959 0 959 0
<TOTAL-CURRENT-ASSETS> 74,811 0 74,811 0
<TOTAL-DEFERRED-CHARGES> 26,503 0 26,503 0
<OTHER-ASSETS> 24,879 0 24,879 0
<TOTAL-ASSETS> 796,229 0 796,229 0
<COMMON> 137,214 0 137,214 0
<CAPITAL-SURPLUS-PAID-IN> 2,236 0 2,236 0
<RETAINED-EARNINGS> 133,531 0 133,531 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 272,981 0 272,981 0
0 0 0 0
6,291 0 6,291 0
<LONG-TERM-DEBT-NET> 250,997 0 250,997 0
<SHORT-TERM-NOTES> 15,123 0 15,123 0
<LONG-TERM-NOTES-PAYABLE> 0 0 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 650 0 650 0
0 0 0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0 0 0
<LEASES-CURRENT> 0 0 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 250,187 0 250,187 0
<TOT-CAPITALIZATION-AND-LIAB> 796,229 0 796,229 0
<GROSS-OPERATING-REVENUE> 83,049 83,016 157,970 166,335
<INCOME-TAX-EXPENSE> 2,506 2,876 4,120 4,185
<OTHER-OPERATING-EXPENSES> 67,357 67,182 130,768 140,705
<TOTAL-OPERATING-EXPENSES> 69,863 70,058 134,888 144,890
<OPERATING-INCOME-LOSS> 13,186 12,958 23,082 21,445
<OTHER-INCOME-NET> 836 819 1,044 1,102
<INCOME-BEFORE-INTEREST-EXPEN> 14,022 13,777 24,126 22,547
<TOTAL-INTEREST-EXPENSE> 6,096 5,585 11,967 10,809
<NET-INCOME> 7,926 8,192 12,159 11,738
66 151 132 302
<EARNINGS-AVAILABLE-FOR-COMM> 7,860 8,041 12,027 11,436
<COMMON-STOCK-DIVIDENDS> 11,000 5,000 11,000 10,000
<TOTAL-INTEREST-ON-BONDS> 5,298 4,744 10,138 9,127
<CASH-FLOW-OPERATIONS> 24,871 23,496 26,048 (3,403)
<EPS-PRIMARY> .04 .04 .06 .06
<EPS-DILUTED> .04 .04 .06 .06
</TABLE>
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
CENTRAL AND SOUTH WEST CORPORATION
CENTRAL AND SOUTH WEST CORPORATION, a Delaware
corporation (the "Corporation"), certifies as follows:
Pursuant to the provisions of Section 242 and 245
of Title 8 of the Delaware Code Annotated, the stockholders
of the Corporation have duly adopted the following Second
Restated Certificate of Incorporation. The Corporation
filed its original Certificate of Incorporation under the
name of Central and South West Utilities on July 31, 1925,
and on February 3, 1947, filed a merger agreement with
American Public Service by which the name of the Corporation
was changed to Central and South West Corporation. The
Corporation filed a Restated Certificate of Incorporation on
April 30, 1974. This Second Restated Certificate of
Incorporation restates and integrates the provisions of the
Restated Certificate of Incorporation of April 30, 1974 as
heretofore amended or supplemented and effects the following
further amendments thereto:
(i The provisions of Article FOURTH have been
amended to (a) increase the total number of shares of
Common Stock which the Corporation shall have authority
to issue from 120,000,000 shares of Common Stock of the
par value of $3.50 per share to 150,000,000 shares of
Common Stock of the par value of $3.50 per share in the
first paragraph of
- 2 -
Article Fourth; (b) delete the cumulative voting
provisions in the second paragraph of Article FOURTH;
and (c) delete the provisions which grant the
stockholders preemptive rights on certain issues of the
Corporation's Common Stock in the third paragraph of
Article FOURTH;
(ii) The provisions of Article SEVENTH have been
amended to (a) adopt a staggered board of directors,
divided into three classes and serving three year terms
with only one class of directors to be elected at each
annual meeting of the stockholders and (b) provide that
the board of directors shall appoint to fill any
vacancies on the board or appoint directors to the
board of directors in the event the number of directors
on the board of directors is increased;
(iii) Article EIGHT has been deleted in its
entirety;
(iv) Articles NINTH, TENTH, ELEVENTH and TWELFTH
have been renumbered as Articles EIGHT, NINTH, TENTH
and ELEVENTH, respectively; and
(v) A "fair price" provision, designed to insure
that all of the stockholders are treated fairly and
equitably in the event of certain unsolicited takeover
actions has been adopted by the stockholders and
included as Article TWELFTH.
------------------------------------------
FIRST: The name of the Corporation is Central and
South West Corporation.
SECOND: The registered office of the Corporation
in the State of Delaware is located at 1209 Orange Street,
New
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Castle County, Wilmington, Delaware 19801, and the name of
its registered agent at that address is The Corporation
Trust Company.
THIRD: The nature of the business of the
Corporation or object or purposes to be transacted, promoted
or carried on by it are:
(1) To acquire in any lawful manner and to own,
hold, sell, assign, transfer, exchange or otherwise
dispose of, any stocks, bonds, debentures, obligations,
notes, evidences of indebtedness, warrants, securities
of any kind and property, both real and personal, of
any kind; and while the owner of any such stocks,
bonds, notes, debentures or other securities or
obligations, to exercise all the powers, rights and
privileges, including among other things the right to
vote thereon for any and all purposes; and to invest
and deal with the moneys of the Corporation in any
lawful manner;
(2) To aid in any lawful manner by loan,
contribution, guaranty or otherwise, the issuer of any
stocks, bonds, debentures, evidences of indebtedness,
obligations, warrants or securities of any kind at any
time held, or controlled directly or indirectly, by the
Corporation, and to do any and all lawful acts or
things designed to protect, preserve, enhance or
improve the value of any securities or property held by
the Corporation; and to use the funds, assets and
credit of the Corporation for any of said purposes;
- 4 -
(3) To guarantee and to assume the payment of any
dividends on any shares of capital stock of any company
in which the Corporation may, either directly or
indirectly, have an interest as a stockholder or
otherwise; and to assume and to guarantee, by
endorsement or otherwise, the payment of the principal
of and the interest on bonds, notes or other
obligations created or to be created by any such
company;
(4) To borrow money, to issue bonds, debentures,
notes or other obligations, secured or unsecured, of
the Corporation; to secure the same by mortgage or deed
of trust or pledge or other lien upon any or all of the
property, rights, privileges and franchises of the
Corporation wheresoever situated, acquired or to be
acquired; to confer upon the holders of any debentures,
bonds, notes or other obligations of the Corporation,
secured or unsecured, the right to convert the same
into any class of stock of any series of the
Corporation now or hereafter to be issued upon such
terms as shall be fixed by the Board of Directors
subject to the provisions hereof; to purchase and
otherwise acquire shares of its own capital stock and
to hold, sell, assign, transfer and reissue any or all
of such shares; provided that the Corporation shall not
use its funds or property for the purchase of its own
shares of capital stock when such use shall cause any
impairment of the capital of the Corporation, except as
such purchase out of capital may be permitted by law;
and provided further that shares of its
- 5 -
own capital stock owned by the Corporation shall not be
voted upon, directly or indirectly;
(5) To conduct business in the State of Delaware
and other states, the District of Columbia, territories
and colonies of the United States and in foreign
countries, and to have one or more offices out of the
State of Delaware as well as within said state;
provided, however, that nothing herein contained shall
be deemed to authorize the Corporation to conduct,
maintain or operate public utilities within the State
of Delaware;
(6) To have and to exercise all the powers now or
hereafter conferred by the laws of the State of
Delaware upon corporations organized under the laws
under which the Corporation is organized and any and
all Acts amendatory thereof and supplemental thereto.
The foregoing clauses shall be construed both as
objects and powers; and it is hereby expressly provided that
the foregoing enumeration of specific powers shall not be
held to limit or restrict in any manner the power of the
Corporation, and that the Corporation shall possess such
incidental powers as are reasonably necessary or convenient
for the accomplishment of any of the objects or powers
hereinbefore enumerated, either alone or in association with
other corporations, associations, firms or individuals, to
the same extent and as fully as individuals might or could
do as principals, agents, contractors or otherwise.
- 6 -
FOURTH: The total number of shares of stock which
the Corporation shall have authority to issue is 150,000,000
shares of Common Stock of the par value of $3.50 each.
Each share of Common Stock shall entitle the
holder thereof to one vote at all meetings of stockholders.
In the election of directors of the Corporation, the
principle of cumulative voting shall not apply.
Any shares of Common Stock now or hereafter
authorized, and any securities convertible into Common
Stock, may be issued without first being offered to
stockholders. The Common Stock may be issued and sold to
such persons, and at a price, not less than the par value
thereof, whether stockholders or not, and for such corporate
purposes, as may be determined by the Board of Directors.
The Corporation may from time to time, when
authorized by the Board of Directors, issue scrip for
fractional shares of stock. Such scrip shall not confer
upon the holder any right to dividends, or any voting or
other rights of a stockholder of the Corporation, but the
Corporation shall from time to time upon the surrender of
such scrip for fractional share within such time as the
Board of Directors may determine, or without limit of time
if the Board of Directors so determines, issue one or more
whole shares of stock aggregating the number of whole shares
issuable in respect of the scrip so surrendered; provided
that the scrip so surrendered shall be properly endorsed for
transfer if in registered form. The scrip may also at the
option of the Board of Directors provide that, at the option
of the Board of
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Directors, there may be sold by the Corporation at public or
private sale at any time on or after any determined date, in
such manner and on such terms as the Board of Directors may
in its absolute discretion determine, the number of shares
of stock of the Corporation in respect of which such scrip
certificates are then outstanding and thereafter the bearer
of such scrip certificates, upon surrender thereof at the
office or agency of the Corporation, shall be entitled to
receive their proper proportion of the net proceeds of such
sale but without interest and on and after the date of such
sale shall be entitled to no other rights in respect of such
scrip certificates.
The Corporation reserves the right to increase or
decrease its authorized capital stock or to reclassify the
same and to amend, alter, change or repeal any provision
contained in this Second Restated Certificate of
Incorporation, or any amendment hereto, in the manner now or
hereafter prescribed by law, and all rights conferred upon
stockholders in this Second Restated Certificate of
Incorporation, or any amendment hereto, are granted subject
to this reservation.
FIFTH: The Corporation shall have perpetual
existence.
SIXTH: The private property of the stockholders of
the Corporation shall not be subject to the payment of
corporate debts to any extent whatever.
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SEVENTH:
(1) At each annual meeting of stockholders,
directors of the Corporation shall be elected to hold
office until the expiration of the term for which they
are elected, and until their successors have been duly
elected and qualified; except that if any such election
shall not be so held, such election shall take place at
a stockholders' meeting called and held in accordance
with the Delaware General Corporation Law. The
directors of the Corporation shall be divided into
three classes as nearly equal in size as is
practicable, hereby designated Class I, Class II and
Class III. The term of office of the initial Class I
directors shall expire at the next succeeding annual
meeting of stockholders, the term of office of the
initial Class II directors shall expire at the second
succeeding annual meeting of stockholders and the term
of office of the initial Class III directors shall
expire at the third succeeding annual meeting of
stockholders. For the purposes hereof, the initial
Class I, Class II and Class III directors shall be
those directors elected at the April 19, 1990 annual
meeting and designated as members of such Class. At
each annual meeting after the April 19, 1990 annual
meeting, directors to replace those of a Class whose
terms expire at such annual meeting shall be elected to
hold office until the third succeeding annual meeting
and until their respective successors shall have been
duly elected and shall qualify. If the number of
directors is hereafter changed, any newly created
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directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as
nearly equal in number as is practicable.
(2) Any director may be removed from office by the
stockholders of the Corporation only for cause and only
by the affirmative vote of the holders of eighty
percent (80%) of the voting power of the outstanding
shares of Common Stock.
(3) The number of directors constituting the
entire Board of Directors shall be not less than nine
(9) nor more than fifteen (15) as may be fixed from
time to time by resolution adopted by a majority of the
entire Board of Directors; provided, however, that no
decrease in the number of directors constituting the
entire Board of Directors shall shorten the term of any
incumbent director. A majority of the entire Board of
Directors may adopt a resolution at any time to
increase the number of directors to not more than
fifteen (15) and, by vote of a majority of the Board of
Directors, elect a new director or directors to fill
any such newly created directorship. Any such new
director shall hold office until the next annual
meeting of stockholders and until his successor shall
have been duly elected and qualified.
(4) Vacancies occurring on the Board of Directors
for any reason may be filled by vote of a majority of
the remaining members of the Board of Directors,
although less than a quorum, at any meeting of the
Board of Directors. A
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person so elected by the Board of Directors to fill a
vacancy shall hold office until the next succeeding
annual meeting of stockholders of the Corporation and
until his or her successor shall have been duly elected
and qualified.
EIGHT: The following additional provisions are
inserted for the management of the business and for the
conduct of the affairs of this Corporation and for the
creation, definition, limitation and regulation of the
powers of the Corporation, the directors and the
stockholders:
(1) The Board of Directors shall have power from
time to time to fix and determine and to vary the
amount to be reserved as working capital of the
Corporation and, before the payment of any dividends or
making any distribution of profits, it may set aside
out of the net profits of the Corporation such sum or
sums as it may from time to time in its absolute
discretion think proper whether as a reserve fund to
meet contingencies or for the equalizing of dividends
or for repairing or maintaining any property of the
Corporation or for such corporate purposes as the Board
shall think conducive to the interests of the
Corporation, subject only to such limitations as the
Bylaws of the Corporation may from time to time impose.
(2) The Board of Directors shall also have power
without the assent or vote of the stockholders to make,
alter, amend and repeal the Bylaws of the Corporation;
to fix the times for the declaration and payment of
dividends; to authorize and cause to be executed and
delivered
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mortgages on and instruments of pledge, or any other
instruments creating liens, on the real and personal
property of the Corporation; and to make and determine
the use and disposition of any surplus or net profits
over and above the capital of the Corporation.
(3) Subject to direction by resolution of a
majority of the stockholders, the Board of Directors
shall have power from time to time to determine whether
and to what extent and at what times and places and
under what conditions and regulations the accounts and
books of the Corporation (other than the stock ledger)
or any of them, shall be open to the inspection of
stockholders; and no stockholder shall have any right
to inspect any account or book or document of the
Corporation except as conferred by statute or
authorized by the directors or by a resolution of the
stockholders.
(4) The Board of Directors shall have the power
to appoint an Executive Committee from among their
number, which Committee, to the extent and in the
manner provided in the Bylaws of the Corporation, shall
have and may exercise all of the powers of the Board of
Directors, so far as may be permitted by law, in the
management of the business and affairs of the
Corporation whenever the Board of Directors is not in
session. The fact that the Executive Committee has
acted shall be conclusive evidence that the Board of
Directors was not in session at the time of such
action.
(5) The Corporation shall be entitled to treat
the person in whose name any share, right or option is
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registered and the bearer of any scrip or right payable
to bearer, as the owner thereof for all purposes, and
shall not be bound to recognize any equitable or other
claim to or interest in such share, right, option or
scrip on the part of any other person, whether or not
the Corporation shall have notice thereof, save as may
be expressly provided by the laws of the State of
Delaware.
NINTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any
class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any
creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for
this Corporation under the provisions of Section 279 of
Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders
or class of stockholders of this Corporation, as the case
may be, to be summoned in such manner as the said Court
directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this
Corporation, as the case may be, agrees to any compromise or
arrangement and to any reorganization of this Corporation as
a consequence of such compromise or arrangement, the said
compromise or arrangement and
- 13 -
the said reorganization shall, if sanctioned by the Court of
which the said application has been made, be binding on all
the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation,
as the case may be, and also on this Corporation.
TENTH: Authorized shares of Common Stock of the
Corporation shall be issued in exchange for any remaining
outstanding shares of Common Stock of Central and South West
Utilities on the following basis:
(1) There shall be issued to each holder of such
shares of Common Stock of Central and South West
Utilities a number of shares of Common Stock of the
Corporation computed by (i) multiplying the number of
shares of Common Stock of Central and South West
Utilities held by such holder by .8095, (ii) rounding
the resulting product to the next lower number in the
event such product is not a whole number, and (iii)
multiplying such product as so rounded by four.
(2) There shall be paid to each holder of such
shares of Common Stock of Central and South West
Utilities, in any case in which the product of the
number of shares of Common Stock of Central and South
West Utilities held by him multiplied by .8095 is not a
whole number, cash equal to $12.00 multiplied by the
fraction by which such product exceeds the next lower
whole number, in lieu of shares of Common Stock of the
Corporation.
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(3) Such shares of Common Stock of the
Corporation shall be issued, and such cash paid, upon
the surrender for cancellation, to the Corporation, of
the certificates representing such shares of Common
Stock of Central and South West Utilities, duly
endorsed for transfer if required, and in satisfaction
of all dividend and other rights in respect of such
shares.
ELEVENTH: To the full extent permitted by the
General Corporation Law of the State of Delaware or any
other applicable laws as presently or hereafter in effect,
no director of the Corporation shall be personally liable to
the Corporation or its stockholders for or with respect to
any acts or omissions in the performance of his or her
duties as a director of the Corporation. No amendment to or
repeal of this Article ELEVENTH shall apply to or have any
effect on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such
amendment.
TWELFTH. A. Higher Vote for Certain Business
Transactions. In addition to any affirmative vote required
by law or this Second Restated Certificate of Incorporation
of the Bylaws of the Corporation, and except as otherwise
expressly provided in Section C of this Article TWELFTH:
(1) any merger or consolidation of the Corporation
or any Subsidiary (as hereinafter defined) with (a) any
Interested Stockholders (as hereinafter defined) or (b)
any other company (whether or not itself an Interested
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Stockholder) which is or after such merger or
consolidation would be an Affiliate (as hereinafter
defined) or Associate (as hereinafter defined) of an
Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions) to or with any Interested
Stockholder or any Affiliate or Associate of any
Interested Stockholder, involving any assets or
securities of the Corporation, any Subsidiary or any
Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder, having an aggregate Fair
Market Value (as hereinafter defined) in excess of
$25,000,000; or
(3) the adoption of any plan or proposal for the
termination, liquidation or dissolution of the
Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
(4) any reclassification of securities (including
any reverse stock split) or recapitalization of the
Corporation or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving
an Interested Stockholder) that has the effect,
directly of indirectly, of increasing the proportionate
share of any class or series of Common Stock (as
hereinafter defined), or any securities convertible
into Common Stock or into equity securities of the
Corporation or any Subsidiary, that is beneficially
owned by any Interested
- 16 -
Stockholder or any Affiliate or Associate of any
Interested Stockholder; or
(5) any tender offer or exchange offer made by the
Corporation for shares of Common Stock which may have
the effect of increasing an Interested Stockholder's
percentage beneficial ownership (as hereinafter
defined) so that following the completion of the tender
offer or exchange offer the Interested Stockholder's
percentage beneficial ownership of the outstanding
Common Stock may exceed 110% of the Interested
Stockholder's percentage beneficial ownership
immediately prior to the commencement of such tender
offer or exchange offer; or
(6) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder having an
aggregate Fair Market Value in excess of $25,000,000;
or
(7) any agreement, contract or other arrangement
providing for any one or more of the actions specified
in the foregoing clauses (1) to (6) shall require: (1)
the affirmative vote of the holders of Voting Stock (as
hereinafter defined) representing shares equal to at
least eighty percent (80%) of the then issued and
outstanding Voting Stock of the Corporation authorized
to be issued from time to time under Article FOURTH of
this Second Restated Certificate of Incorporation; and
(2) the affirmative vote
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of a majority of the then issued and outstanding Voting
Stock of the Corporation, excluding any shares of
Voting Stock beneficially owned by such Interested
Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law or
any agreement with any national securities exchange or
otherwise.
B. Definition of "Business Combination". For the
purposes of this Article TWELFTH the term "Business
Combination" shall mean any transaction that is referred to
in any one or more of clauses (1) through (6) of Section A
of this Article TWELFTH.
C. When Higher Vote is Not Required. The provisions
of the preceding Section A shall not be applicable to any
particular Business Combination, and such Business
Combination shall require only such affirmative vote, if
any, as is required by law or by any other provision of this
Second Restated Certificate of Incorporation or the Bylaws
of the Corporation or any agreement with any national
securities exchange, if all of the conditions specified in
either of the following Paragraphs (1) or (2) are met or, in
the case of a Business Combination not involving the payment
of consideration to the holders of the Corporation's
outstanding Common Stock, if the condition specified in the
following Paragraph (1) is met:
(1) The Business Combination shall have been
approved by a majority (whether such approval is made
prior to or subsequent to the acquisition of beneficial
ownership of the Voting Stock that caused the
Interested Stockholder to
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become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
(2) All of the following conditions shall have
been met with respect to the outstanding Common Stock,
whether or not the Interested Stockholder has
previously acquired beneficial ownership of any shares
of the Common Stock:
(a) The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation
of the Business Combination, of consideration
other than cash to be received per share by
holders of the Common Stock in such Business
Combination shall be at least equal to the highest
amount determined under clauses (i), (ii), (iii),
and (iv) below:
(i) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested
Stockholder of beneficial ownership of shares
of the Common Stock (x) within the two-year
period immediately prior to the first public
announcement of the proposed Business
Combination (the "Announcement Date") or (y)
in the transaction in which it became an
Interested Stockholder, whichever is higher,
in either case as adjusted for any
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subsequent stock split, stock dividend,
subdivision or reclassification with respect
to the Common Stock;
(ii) the Fair Market Value per share of the
Common Stock on the Announcement Date or on
the date on which the Interested Stockholder
became an Interested Stockholder (the
"Determination Date"), whichever is higher, as
adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with
respect to the Common Stock;
(iii) (if applicable) the price per share
equal to the Fair Market Value per share of
the Common Stock determined pursuant to the
immediately preceding clause (ii), multiplied
by the ratio of (x) the highest price per
share (including any brokerage commission,
transfer taxes and soliciting dealers' fees)
paid by or on behalf of the Interested
Stockholders for any share of the Common Stock
in connection with the acquisition by the
Interested Stockholder of beneficial ownership
of shares of the Common Stock within the two-
year period immediately prior to the
Announcement Date, as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with respect
to the Common Stock to (y) the Fair Market
Value per share of the Common Stock on the
first day in such two-year period on which the
- 20 -
Interested Stockholder acquired beneficial
ownership of any shares of the Common Stock,
as adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification with respect to Common
Stock; and
(iv) the Corporation's net income per share
of the Common Stock for the four full
consecutive fiscal quarters immediately
preceding the Announcement Date, multiplied
by the higher of the then price/earnings
multiple (if any) of such Interested
Stockholder or the highest price/earnings
multiple of the Corporation within the two-
year period immediately preceding the
Announcement Date (such price/earnings
multiples being determined by dividing (x) an
amount equal to the highest price per share
during a day as reported in The Wall Street
Journal from the Composite Tape for the New
York Stock Exchange by (y) the immediately
preceding publicly reported twelve-months
earnings per share).
(b) The consideration to be received by holders of
the Common Stock shall be in cash or in the same
form as previously has been paid by or on behalf of
the Interested Stockholder in connection with its
direct or indirect acquisition of beneficial
ownership of shares of such Common Stock. If the
consideration previously paid by the Interested
Stockholder to acquire Common
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Stock varied among the recipients thereof as to
form, the form of consideration to be paid for
such Common Stock in connection with the Business
Combination shall be either cash or the form used
to acquire beneficial ownership of the largest
number of shares of such Common Stock previously
acquired by the Interest Stockholder.
(c) After the Determination Date and prior to the
consummation of such Business Combination: (1)
there shall have been no reduction in the annual
rate of dividends paid on the Common Stock (except
as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock),
except as provided by a majority of the Continuing
Directors; (ii) there shall have been an increase
in the annual rate of dividends paid on the Common
Stock as necessary to reflect any reclassification
(including any reverse stock split),
recapitalization, reorganization or any similar
transaction that has the effect of reducing the
number of outstanding shares of Common Stock,
unless the failure so to increase such annual rate
is approved by a majority of the Continuing
Directors; and (iii) such Interested Stockholders
shall not have become the beneficial owner of any
additional shares of Common Stock except as part
of the transaction that results in such Interested
Stockholder becoming an Interested Stockholder and
except in a transaction that, after
- 22 -
giving effect thereto, would not result in any
increase in the Interested Stockholder's
percentage of beneficial ownership of Common
Stock.
(d) After the Determination Date, such Interested
Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as
a stockholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such
Business Combination or otherwise.
(e) A proxy or information statement describing
the proposed Business Combination and complying
with the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and
regulations thereunder (the "Act") (or any
subsequent provisions amending or replacing such
Act, rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days
prior to the consummation of such Business
Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act or subsequent provisions).
The proxy or information statement shall contain on
the first page thereof, in a prominent place, any
statement as to the advisability of the Business
Combination that the Continuing Directors, or any
of them, may choose to make and, if
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deemed advisable by a majority of the Continuing
Directors, the opinion of an investment banking
firm selected by a majority of the Continuing
Directors as to the fairness (or not) of the terms
of the Business Combination from a financial point
of view to the holders of the outstanding shares
of Common Stock other than the Interested
Stockholder and its Affiliates or Associates (as
hereinafter defined), such investment banking firm
to be paid a reasonable fee for its service by the
Corporation.
(f) Such Interested Stockholder shall not have
made any major change in the Corporation's
business or equity capital structure without the
approval of a majority of the Continuing
Directors.
D. Certain Definitions. The following definitions
shall apply with respect to this Article TWELFTH:
(1) The term "Common Stock" or "Voting Stock"
shall mean all common stock of the Corporation
authorized to be issued from time to time under Article
FOURTH of the Second Restated Certificate of
Incorporation that by its terms may be voted on all
matters submitted to stockholders of the Corporation
generally.
(2) The term "person" shall mean any individual,
firm, company or other entity and shall include any
group comprised of any person and any other person with
whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding,
directly or
- 24 -
indirectly, for the purpose of acquiring, holding,
voting or disposing of the Common Stock.
(3) The term "Interested Stockholder" shall mean
any person (other than the Corporation or any
Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit or dividend
reinvestment plan of the Corporation or any Subsidiary
or any trustee of or fiduciary with respect to any such
plan when acting in such capacity) who (a) is the
beneficial owner of Voting Stock representing five
percent (5%) or more of the votes entitled to be cast
by the holders of all then outstanding shares of Voting
Stock; or (b) is an Affiliate or Associate of the
Corporation and at any time within the two-year period
immediately prior to the Announcement Date was the
beneficial owner of Voting Stock representing five
percent (5%) or more of the votes entitled to be cast
by the holders of all then outstanding shares of Voting
Stock.
(4) A person shall be a "beneficial owner" of any
Common Stock (a) which such person or any of its
Affiliates or Associates beneficially owns, directly or
indirectly; (b) which such person or any of its
Affiliates or Associates has, directly or indirectly,
(i) the right to acquire (whether such right is
exercisable immediately or subject only to the passage
of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any
- 25 -
agreement, arrangement or understanding; or (c) which
is beneficially owned, directly or indirectly, by any
other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Common Stock. For
purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this
Section D, the number of shares of Common Stock deemed
to be outstanding shall include shares deemed
beneficially owned by such person through application
of Paragraph 5 of this Section D, but shall not include
any other shares of Common Stock that may be issuable
pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights,
warrants, or options, or otherwise.
(5) An "Affiliate" of a specified person is a
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, the person specified. The
term "Associate", used to indicate a relationship with
any person, means (a) any company (other than the
Corporation or any Subsidiary) of which such person is
an officer or partner or is, directly or indirectly,
the beneficial owner of ten percent (10%) or more of
any class of equity securities, (b) any trust or other
estate in which such person has a substantial
beneficial interest or as to which such person serves
as trustee or in a similar fiduciary
- 26 -
capacity, and (c) any relative or spouse of such
person, or any relative of such spouse, who has the
same home as such person or who is a director or
officer of the Corporation or any of its parents or
Subsidiaries.
(6) The term "Subsidiary" means any company of
which a majority of any class of equity security is
beneficially owned by the Corporation; provided
however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph (3) of
this Section D, the term "Subsidiary" shall mean only a
company of which a majority of each class of equity
security is beneficially owned by the Corporation.
(7) The term "Continuing Director" means any
member of the Board of Directors of the Corporation
(the "Board of Directors"), who, while such person is a
member of the Board of Directors, is not an Affiliate
or Associate or representative of any Interested
Stockholder and who was a member of the Board of
Directors prior to the time that any Interested
Stockholder became an Interested Stockholder, and any
successor of a Continuing Director, who, while such
successor is a member of the Board of Directors, is not
an Affiliate or Associate or representative of any
Interested Stockholder and who is recommended or
elected to succeed the Continuing Director by a
majority of Continuing Directors.
(8) The term "Fair Market Value" means (a) in the
case of cash, the amount of such cash; (b) in the case
of stock, the highest closing sale price during the 30-
day period
- 27 -
immediately preceding the date in question of a share
of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted
on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on
the principal United States securities exchange
registered under the Act on which such stock is listed,
or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding
the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or
any similar system then in use, or if no such
quotations are available, the fair market value on the
date in question of a share of such stock as determined
by a majority of the Continuing Directors in good
faith; and (c) in the case of property on the date in
question as determined in good faith by a majority of
the Continuing Directors.
(9) In the event of any Business Combination in
which the Corporation survives, the phrase
"consideration other than cash to be received" as used
in Paragraphs 2(a) and 2(b) of Section C of this
Article TWELFTH shall include the shares of Common
Stock and/or the shares of any other class of Voting
Stock retained by the holders of such shares.
E. Powers of the Continuing Directors. A majority of
the Continuing Directors shall have the power and duty to
determine
- 28 -
for purposes of this Article TWELFTH, on the basis of
information known to them after reasonable inquiry, (1)
whether a person is an Interested Stockholder, (2) the
number of shares of Common Stock or other securities
beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, and (4) whether the
assets that are the subject of any Business Combination
have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate
Fair Market Value in excess of the amounts set forth in
clauses (2) and (6) of Section A of this Article TWELFTH.
Any such determination made in good faith by a majority of
the Continuing Directors shall be binding and conclusive for
all the purposes of this Article TWELFTH.
F. No Effect on Fiduciary Obligations of Interested
Stockholders. Nothing contained in this Article TWELFTH
shall be construed to relieve any Interested Stockholder
from any fiduciary obligation imposed by law.
G. No Effect on Fiduciary Obligation of Directors.
The fact that any Business Combination complies with the
provisions of Section C, Paragraph 2 of this Article TWELFTH
shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or
recommend its adoption or approval to the stockholders of
the Corporation, nor shall such compliance limit, prohibit
or otherwise restrict in any manner the Board of Directors,
or any member thereof, with respect to
- 29 -
evaluations of or actions and responses taken with respect
to such Business Combination.
--------------------
IN WITNESS WHEREOF, said CENTRAL AND SOUTH WEST
CORPORATION has caused this Restated Certificate of
Incorporation to be signed by Ferd. C. Meyer, Jr., its Vice
President and General Counsel, and its corporate seal to be
hereunto affixed and attested by Philip I. McConnell, its
Secretary, this 23 day of April, 1990.
CENTRAL AND SOUTH WEST CORPORATION
Ferd C. Meyer, Jr.
Vice President
(Corporate Seal)
ATTEST:
Philip I. McConnell
Secretary
CERTIFICATE OF AMENDMENT
to
SECOND RESTATED CERTIFICATE OF INCORPORATION
of
CENTRAL AND SOUTH WEST CORPORATION
Central and South West Corporation (the "Corporation"),
a Corporation organized and existing under and by virtue of
the laws of the State of Delaware, hereby certifies that:
1. In accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware (Title
8 of the Delaware Code), the Board of Directors and the
Common Stock-holders of the Corporation have duly adopted
the following amendment to the Corporation's Second Restated
Certificate of Incorporation, as heretofore amended (the
"Certificate").
2. Article "Fourth" of the Certificate is hereby
amended by changing the first sentence thereof to read as
follows:
"The total number of shares of stock which the
Corporation shall have authority to issue is Three
Hundred and Fifty Million (350,000,000) shares of
Common Stock of the par value of $3.50 each."
IN WITNESS WHEREOF, Central and South West Corporation
has caused this Certificate of Amendment to be signed by
Ferd. C. Meyer, Jr., its Senior Vice President and General
Counsel, and sealed with its corporate seal and attested by
Frederic L. Frawley, its Secretary, this 20th day of May,
1991.
Central and South West Corporation
(CORPORATE SEAL) Ferd C. Meyer, Jr.
Senior Vice President
and General Counsel
ATTEST:
Frederic L. Frawley
Secretary
