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SEC FILE No. 33-50633
FILED PURSUANT TO RULE 424(B)(5)
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 15, 1993)
$40,000,000
West Texas Utilities Company
FIRST MORTGAGE BONDS, SERIES T, 7-1/2%, DUE 2000
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Interest payable April 1 and October 1
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THE FIRST MORTGAGE BONDS, SERIES T, 7-1/2% (THE "NEW BONDS") WILL MATURE ON
APRIL 1, 2000. THE NEW BONDS MAY NOT BE REDEEMED BY THE COMPANY PRIOR TO
MATURITY AND ARE NOT SUBJECT TO ANY SINKING FUND. THE NEW BONDS WILL BE
ISSUED ONLY IN FULLY REGISTERED FORM IN DENOMINATIONS OF $1,000 AND
INTEGRAL MULTIPLES THEREOF. SEE "SUPPLEMENTAL DESCRIPTION OF THE
NEW BONDS".
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE 99.492% AND ACCRUED INTEREST, IF ANY
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
----------- -------------- -------------
<S> <C> <C> <C>
Per New Bond.............................. 99.492% .600% 98.892%
Total..................................... $39,796,800 $240,000 $39,556,800
</TABLE>
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(1) Plus accrued interest, if any, from March 2, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Company, estimated at
$100,000.
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The New Bonds are offered, subject to prior sale, when, as and if accepted
by the Underwriters and subject to approval of certain legal matters by Sidley &
Austin, counsel for the Underwriters. It is expected that delivery of the New
Bonds will be made on or about March 2, 1995, at the office of Morgan Stanley &
Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
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MORGAN STANLEY & CO. J.P. MORGAN SECURITIES INC.
Incorporated
February 22, 1995
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NEW BONDS AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUPPLEMENT SUMMARY
The following material is qualified in its entirety by, and should be read
in conjunction with, the information appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus and in the documents, financial
statements and other information incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFERING
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<S> <C>
Company.......................... West Texas Utilities Company
Amount and Type of Securities.... $40,000,000 First Mortgage Bonds, Series T
Interest Payment Dates........... April 1 and October 1, commencing October 1, 1995
Maturity Date.................... April 1, 2000
Redemption....................... The New Bonds may not be redeemed prior to maturity.
Security......................... Secured, together with all other outstanding First
Mortgage Bonds, by a mortgage on substantially all
of the Company's properties
Use of Proceeds.................. To repay a portion of the Company's short-term debt,
to reimburse the Company's treasury for reacquiring
approximately $10,000,000 of its First Mortgage
Bonds, Series O, 9 1/4%, Due December 1, 2019, to
provide working capital and for other general
corporate purposes
</TABLE>
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1993 1992 1991
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(UNAUDITED)
<S> <C> <C> <C> <C>
Operating Revenues...................... $342,991 $ 345,445 $ 315,370 $ 318,966
Operating Income........................ 54,763 46,576 57,302 57,925
Net Income Before Cumulative Effect of a
Change in Accounting Principles....... 37,366 26,517 35,007 36,368
Cumulative Effect of a Change in
Accounting Principles................. -- 3,779 -- --
Net Income.............................. 37,366 30,296 35,007 36,368
Net Utility Plant....................... 663,855 653,426 651,221 650,833
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION AT
DECEMBER 31, 1994
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<S> <C> <C>
(UNAUDITED)
Long-Term Debt................................................... $210,047 43.0%
Preferred Stock.................................................. 6,291 1.3
Common Equity.................................................... 271,954 55.7
-------- -----
$488,292 100.0%
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Subsequent to the date of the accompanying Prospectus, the Company filed
with the Commission an Annual Report on Form 10-K for the year ended December
31, 1993, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994, and Current Reports on Form 8-K dated
February 15, 1994, July 5, 1994, and February 17, 1995, which documents are
incorporated by reference in this Prospectus Supplement.
THE COMPANY
West Texas Utilities Company, a Texas corporation (the "Company"), is a
public utility company engaged in the production, purchase, transmission,
distribution and sale of electricity in central west Texas. Central and South
West Corporation ("CSW"), a registered public utility holding company under the
Public Utility Holding Company Act of 1935, owns all of the issued and
outstanding Common Stock of the Company. The Company's executive offices are
located at 301 Cypress, Abilene, Texas 79601, telephone number (915) 674-7000.
RATIO OF EARNINGS TO FIXED CHARGES:
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<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
(UNAUDITED)
3.37 2.80 3.22 3.30 3.05 3.23
</TABLE>
For computation of the ratio: (i) earnings consist of operating income plus
Federal income taxes, deferred income taxes and investment tax credits, other
income and deductions and allowance for funds (both borrowed and equity) used
during construction; and (ii) fixed charges consist of interest on long-term
debt and other interest charges.
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS
The Company's net income for common stock increased to $37 million in 1994
compared to $29 million in 1993. This increase is primarily a reflection of the
following items. Electric operating revenues decreased by $2.5 million or 1% in
1994 compared to 1993 due to a decrease in off-system sales, which was partially
offset by higher retail sales. The decrease in electric operating revenues was
more than offset by lower operating expenses of approximately $10.6 million
resulting from the absence of restructuring charges in 1994 and lower fuel and
purchased power expenses. Operating expenses were also impacted by an increase
in other operating expenses in 1994 reflecting a reimbursement in 1993 for the
settlement of a dispute relating to a coal supply contract. A $2.3 million
increase in other income resulting from tax benefits received under the
Company's tax sharing agreement with CSW also contributed to the 1994 increase
in net income.
In 1993, the Company accrued $15 million (pre-tax) to meet the costs of a
restructuring and early retirement program. The restructuring charge in 1993 was
partially offset by a one-time $5.4 million increase in net income resulting
from a change in accounting for unbilled revenues, the purpose of which was to
match revenues with production expenses on a more timely basis and to conform to
the prevalent practice in the electric utility industry. In addition, net income
in 1993 was reduced by $1.6 million for the adoption of Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits.
RATE CASE PROCEEDINGS
On August 25, 1994, the Company filed a petition with the Public Utility
Commission of Texas ("Texas Commission") instituting a review of the Company's
rates and proposing an interim rate reduction. On September 23, 1994, the Texas
Commission issued an order, at the Company's request, directing the
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Company to implement an interim rate reduction of 3.25% or approximately $5.7
million in annual retail revenues, effective October 1, 1994. In a pretrial
conference, the parties agreed to a consolidation of the Company's rate case
with its fuel reconciliation proceeding which was filed in June 1994. The rate
filing package is scheduled to be filed with the Texas Commission no later than
February 28, 1995 and will be based on a test year ending June 30, 1994. The
Company anticipates that hearings in the consolidated rate proceeding will be
held in mid-1995 and that the Texas Commission will issue an order in the third
or fourth quarter of 1995.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds offered hereby will be used
by the Company to repay a portion of the Company's short-term debt, to reimburse
the Company's treasury for reacquiring approximately $10,000,000 of its First
Mortgage Bonds, Series O, 9 1/4%, Due December 1, 2019, to provide working
capital and for other general corporate purposes. At February 1, 1995, the
Company had outstanding approximately $47,700,000 of short-term debt with a
weighted average interest cost of approximately 6.2%.
SUPPLEMENTAL DESCRIPTION OF THE NEW BONDS
The following description of the particular terms of the New Bonds offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the New Bonds set forth in
the accompanying Prospectus.
GENERAL
The New Bonds will mature on April 1, 2000, and will bear interest at the
rate of 7 1/2% per annum payable on April 1 and October 1, commencing October 1,
1995.
The New Bonds offered hereby will be authenticated under the Indenture
against $40,000,000 aggregate principal amount of previously retired First
Mortgage Bonds.
REDEMPTION
The New Bonds offered hereby may not be redeemed by the Company prior to
maturity.
MAINTENANCE AND RENEWAL
The New Bonds are entitled to the covenants of the Indenture described in
the Prospectus under the heading "Description of the New Bonds -- Maintenance
and Renewal" except that the first sentence of such section is no longer
applicable and the reference to "Series I through R" in the second sentence of
such section shall instead refer to "Series I through T". The Indenture now
provides that so long as any Bonds of Series I through T are outstanding, the
Company is required to expend during each calendar year an amount equal to at
least 2.9% (unless modified upon application to the Securities and Exchange
Commission) of the average amount of depreciable property for (1) the
construction or acquisition of bondable property on which the Indenture is a
first lien, subject only to permitted encumbrances and liens and prepaid liens,
or (2) the retirement, through purchase or payment of Bonds issued under the
Indenture, or redemption of Bonds issued under the Indenture that are subject to
redemption.
ISSUANCE OF ADDITIONAL BONDS
The Indenture does not fix an overall limitation on the aggregate principal
amount of Bonds of all series that may be outstanding thereunder. An aggregate
amount of $195,203,000 in principal amount of Bonds was outstanding under the
Indenture on December 31, 1994.
Based on the unused net expenditures for bondable property test described
in the accompanying Prospectus, which is currently the most restrictive of the
Indenture's issuance tests, the Company, as of December 31, 1994, could have
issued approximately $18,429,980 principal amount of additional Bonds. At
December 31, 1994, the Company had approximately $63,847,000 principal amount of
previously retired Bonds available for authentication of additional Bonds and
such unused net expenditures aggregated approximately $30,713,633.
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UNDERWRITERS
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof, the Underwriters named below have severally agreed to
purchase, and the Company has agreed to sell to them, severally, the respective
principal amounts of the New Bonds set forth opposite their respective names
below:
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<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NEW BONDS
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<S> <C>
Morgan Stanley & Co. Incorporated............................................... $20,000,000
J.P. Morgan Securities Inc...................................................... 20,000,000
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Total................................................................. $40,000,000
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</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the New Bonds are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the New
Bonds if any are taken.
The Underwriters have advised the Company that they propose to offer part
of the New Bonds directly to the public at the public offering price set forth
on the cover page of this Prospectus Supplement and part to certain dealers at a
price that represents a concession not in excess of .35% of the principal amount
of the New Bonds. Any Underwriter may allow, and such dealers may reallow, a
discount not in excess of .25% of the principal amount of the New Bonds to
certain other dealers. After the initial public offering of the New Bonds, the
offering price, concession and discount may be changed.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company does not intend to apply for listing of the New Bonds offered
hereby on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the New Bonds, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the New Bonds and any such market making
may be discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the New Bonds.
In the ordinary course of their respective businesses, Morgan Stanley & Co.
Incorporated has from time to time performed investment banking services for CSW
and certain of its affiliates, and affiliates of J.P. Morgan Securities Inc.
have engaged, and may in the future engage, in commercial and investment banking
transactions with the Company and affiliates of the Company. Sidley & Austin,
counsel for the Underwriters, has represented CSW and affiliates of CSW from
time to time in connection with certain legal matters.
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