SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 1996
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, TX 75202-1234
(214) 777-1000
<PAGE> 2
Item 2. Acquisition or disposition of assets.
Acquisition of SEEBOARD plc.
On November 6, 1995, Central and South West Corporation
(CSW), indirectly through CSW (UK) plc (CSW (UK)), announced
its intention to commence an offer (the Offer) in the United
Kingdom to acquire all of the outstanding share capital of
SEEBOARD plc (SEEBOARD), a regional electric company based
in the United Kingdom, for an aggregate purchase price of
approximately $2.52 billion, subject to reduction as
described below. Prior to the Offer, the outstanding share
capital of SEEBOARD was widely held and publicly traded on
the International Stock Exchange of the United Kingdom and
the Republic of Ireland (the London Stock Exchange). The
aggregate purchase price contained in the Offer was
determined by CSW based upon the then prevailing market
price of SEEBOARD shares on the London Stock Exchange, plus
a premium over such price in an amount sufficient, as
determined by CSW, to provide fair compensation to the
holders of SEEBOARD shares and to enable CSW to acquire a
significant position in SEEBOARD early in the Offer. On
January 10, 1996, CSW (UK) announced that all conditions
necessary to consummate the Offer had been satisfied or
waived, and that the Offer had been declared wholly
unconditional. Under applicable law, CSW (UK) is required
to pay on or before January 31, 1996 for all shares that
have been validly tendered by January 10, 1996.
As of January 9, 1996, CSW (UK) owned approximately
73,393,000 shares of SEEBOARD capital stock, constituting
approximately 29.9% of the outstanding share capital of
SEEBOARD, and had received pursuant to the Offer acceptances
in respect of approximately 116,822,000 shares of SEEBOARD
capital stock, constituting approximately 47.6% of the
outstanding share capital of SEEBOARD.
Pursuant to the terms of the Offer, the aggregate
purchase price to be paid in the Offer was reduced by
approximately $400 million to approximately $2.12 billion to
reflect the distribution by SEEBOARD to its shareholders,
including CSW (UK), of SEEBOARD's ownership interest in
National Grid Holding plc (the National Grid) on December
11, 1995 (the Grid Distribution). CSW (UK) received
34,492,964 shares of National Grid common stock, representing
2.0% of the outstanding share capital of the National Grid,
in the Grid Distribution. CSW (UK) intends to dispose of
its ownership interest in the National Grid and apply the
proceeds from such sale (approximately $98 million based
upon the market price of the National Grid shares on January
9, 1996) to repay indebtedness incurred pursuant to the CSW
Investments credit facility (as hereinafter defined). CSW
has contributed, or committed to contribute, to CSW (UK) up
to $850 million of the approximately $2.12 billion required
to complete the acquisition of SEEBOARD shares in connection
with the Offer. CSW expects to obtain such funds through
the proceeds of borrowings under a $850 million senior
credit agreement entered into on November 6, 1995 for that
purpose with a consortium of banks led by Citibank, N.A.,
Credit Suisse, and Union Bank of Switzerland (the CSW Credit
Agreement). Borrowings under the CSW Credit Agreement are
unsecured and mature on November 6, 2000, subject to
prepayment by CSW at any time. As of January 9, 1996, CSW
had borrowed approximately $731 million under the CSW Credit
Agreement to fund, indirectly through CSW (UK), open market
purchases of capital stock of SEEBOARD.
CSW (UK) intends to obtain the remaining amounts
necessary to consummate the Offer, approximately $1.27
billion, from capital contributions or loans to be made to
CSW (UK) by its sole shareholder, CSW Investments (CSW
Investments), which has arranged a senior secured credit
facility for that purpose with a consortium of banks led by
Citibank International plc, Credit Suisse, and Union Bank of
Switzerland (the CSW Investments Credit Facility). Neither
CSW nor CSW International, Inc., a wholly owned subsidiary
of CSW and the indirect parent of CSW Investments and CSW
(UK), has guaranteed or is otherwise liable for amounts
borrowed under the CSW Investments Credit Facility.
SEEBOARD's principal business is the distribution and
supply of electricity in southeast England. SEEBOARD has
its headquarters in Crawley, West Sussex. It has a
distribution territory that covers approximately 3,000
square miles which extends from the outlying areas of London
to the English Channel. SEEBOARD serves approximately 2
million customers, approximately 80% of which are
residential and commercial and approximately 20% of which
are industrial. For the year ended March 31, 1995, SEEBOARD
had electricity sales of 17.7 billion kilowatt-hours and a
profit before tax of approximately $224 million on revenues
of approximately $1.9 billion. SEEBOARD is also involved in
certain activities other than electricity distribution,
including electrical contracting and retailing, gas supply
and electricity generation. The earnings of SEEBOARD
<PAGE> 3
presented above have been converted into U.S. dollar amounts
for illustrative purposes only at an exchange rate of 1.00 pound=
$1.5788, which was the prevailing rate of exchange at the
close of business on November 3, 1995, the business day
prior to the announcement of the Offer.
In November 1995, CSW accounted for its investment in
SEEBOARD using the equity method in its consolidated
financial statements. In December 1995, CSW began full
consolidation accounting for SEEBOARD in its consolidated
financial statements.
Item 7. Financial Statements and Exhibits
(a) Financial statements for businesses acquired.
Audited financial statements of SEEBOARD plc for the
fiscal years ended March 31, 1995 and March 31, 1994 and
auditor's report thereon and unaudited financial statements for the
six months ended September 30, 1995 and September 30, 1994.
(b) Pro forma financial information.
Unaudited pro forma condensed consolidated statements of
income for the nine months ended September 30, 1995 and
the year ended December 31, 1994 and unaudited pro forma
condensed consolidated balance sheets as of September 30, 1995.
(c) Exhibits.
Exhibit 23.1 - Consent of KPMG, Chartered Accountants, Registered
Auditors.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
CENTRAL AND SOUTH WEST CORPORATION
Date: January 19, 1996
By: /s/ Wendy G. Hargus
Wendy G. Hargus
Controller
<PAGE> 5
AUDITED FINANCIAL STATEMENTS OF SEEBOARD plc FOR THE YEARS
ENDED MARCH 31, 1995 AND 1994 AND AUDITOR'S REPORT THEREON
(The symbol for British pounds sterling has been denoted by the
symbol # in the following financial statements and accompanying
tables.)
SEEBOARD plc - ACCOUNTS
for the year ended 31 March 1995
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the directors to prepare financial
statements for each financial year which give a true and
fair view of the state of affairs of the Company and Group
and of the profit or loss for that period. In preparing
those financial statements, the directors are required to:
* select suitable accounting policies and then apply
them consistently;
* make judgements and estimates that are reasonable and
prudent;
* state whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
* prepare financial statements on a going concern basis
unless it is inappropriate to presume that the Group
will continue in business.
The directors are responsible for keeping proper accounting
records which disclose, with reasonable accuracy, the financial
position of the Company, and for ensuring that the financial
statements comply with the Companies Act 1985. They have
general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
- ------------------------------------------------------------------------------
To the shareholders of SEEBOARD plc
We have audited the accompanying consolidated balance sheets of SEEBOARD
plc and subsidiaries as at 31 March 1995 and 31 March 1994, and the
related consolidated profit and loss accounts and statements of cash
flows for each of the years in the two year period ended 31 March 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
SEEBOARD plc and subsidiaries at 31 March 1995 and 31 March 1994 and
the results of their operations and cash flows for each of the years
in the two year period ended 31 March 1995 in conformity with generally
accepted accounting principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles
in the United States. Application of generally acccepted accounting
principles in the United States would have affected results of operations
and shareholders' equity as of and for the years ended 31 March 1995
and 31 March 1994 to the extent summarised in Note 26 to the consolidated
financial statements.
KPMG
London, England Chartered Accountants
6 June 1995 Registered Auditors
<PAGE> 6
SEEBOARD plc - GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 March 1995
1995 1994
Note #m #m
Turnover 1 1,195.6 1,218.1
Cost of sales (846.3) (879.7)
Gross profit 349.3 338.4
Net operating costs and administrative expenses 2 (210.7) (218.4)
Operating profit 138.6 120.0
Income from fixed asset investments 3 14.7 13.6
Profit on ordinary activities before interest 153.3 133.6
Net interest 4 1.5 (1.9)
Government debt premium 5 (12.8) -
Profit on ordinary activities before taxation 142.0 131.7
Taxation on profit on ordinary activities 7 (38.0) (35.0)
Profit on ordinary activities after taxation 104.0 96.7
Minority interests (0.1) (0.2)
Profit for the financial year 103.9 96.5
Dividends 8 (35.1) (29.8)
Retained profit 68.8 66.7
Earnings per ordinary share
Normal 9 41.5p 37.8p
Adjusted to exclude Government debt premium
write off 9 946.6p 37.8p
A statement of movements on the profit and loss account is given in note 19.
Recognised gains or losses
There are no recognised gains or losses (1994 #nil) other than the profit for
the financial year.
<PAGE> 7
SEEBOARD plc - BALANCE SHEETS
as at 31 March 1995
Group Company
1995 1994 1995 1994
Note #m #m #m #m
Fixed assets
Tangible assets 10 525.3 494.2 525.2 494.2
Investments 11 57.3 57.4 60.8 60.8
582.6 551.6 586.0 555.0
Current assets
Stocks 12 10.5 10.7 10.5 10.7
Debtors 13 220.4 194.7 214.7 188.2
Investments 15 13.2 9.7 8.5 6.5
Cash at bank and in hand 36.0 175.3 24.4 164.5
280.1 390.4 258.1 369.9
Creditors (amounts falling
due within one year) 16 251.1 268.3 237.8 256.1
Net current assets 29.0 122.1 20.3 113.8
Total assets less current
liabilities 611.6 673.7 606.3 668.8
Creditors (amounts falling
due after more than one year) 16 14.3 83.4 14.0 82.5
Provisions for liabilities
and charges 17 36.2 45.1 36.2 45.1
Minority interests 0.4 0.3 - -
Net assets 560.7 544.9 556.1 541.2
Capital and reserves
Called up share capital 18 122.5 128.2 122.5 128.2
Share premium account 19 5.5 1.2 5.5 1.2
Capital redemption reserve 19 6.8 - 6.8 -
Profit and loss account 19 425.9 415.5 421.3 411.8
Shareholders' funds 560.7 544.9 556.1 541.2
<PAGE> 8
SEEBOARD plc - GROUP CASH FLOW STATEMENT
for the year ended 31 March 1995
1995 1994
Note #m #m
Net cash inflow from operating
activities 23 106.4 285.8
Returns on investments and servicing
of finance
Interest received 5.8 6.7
Interest paid (4.6) (8.4)
Government debt premium (12.8) -
Dividends received 11.5 9.7
Dividends paid (31.2) (26.3)
Net cash outflow from returns on
investments and servicing of finance (31.3) (18.3)
Taxation
Corporation tax paid (including ACT) (43.0) (33.7)
Cash flow from operations after tax 32.1 233.8
Investing activities
Purchase of tangible fixed assets (68.3) (79.6)
(Purchase)/sale of current asset investments (1.4) 2.7
Purchase of fixed asset investments - (0.2)
Receipts from sales of tangible fixed assets 3.3 0.8
Net cash outflow from investing activities (66.4) (76.3)
Net cash (outflow)/inflow before financing (34.3) 157.5
Financing
Issue of ordinary share capital 3.1 2.0
Purchase of own shares (60.5) -
Repayment of Government debt (54.0) (26.0)
Net cash outflow from financing (111.4) (24.0)
(Decrease)/increase in cash and cash
equivalents 23 (145.7) 133.5
<PAGE> 9
SEEBOARD plc - ACCOUNTING POLICIES
New accounting standards
Except for the effect of two new Financial Reporting
Standards issued by the Accounting Standards Board the
accounting policies of the Group remain unchanged. The
two standards, which have a direct impact upon these
accounts, are FRS4 - Capital Instruments and FRS5 -
Reporting the substance of transactions.
During the year, SEEBOARD repurchased Government debt for
#66.8m, representing a premium of #12.8m over the book
amount of the debt. In compliance with FRS4, this premium
on repayment has been shown separately as a charge to the
profit and loss account.
The Employee Share Ownership Trust (ESOT) received a
further loan of #2m during the year, making a total of
#8.5m, with which it has purchased SEEBOARD shares. In
compliance with FRS5 the ESOT has been consolidated into
the Group and the amounts loaned are shown as own shares
purchased. Comparative figures in the balance sheet have
been restated accordingly.
Basis of preparation
The accounts have been prepared under the historical cost
convention in accordance with the Companies Act 1985 and
applicable accounting standards.
No profit and loss account is presented for the Company as
provided by Section 230 of the Companies Act 1985.
Consolidation
The accounts consolidate the financial statements of
SEEBOARD plc ('the Company'), its subsidiary undertakings
and its share of the results of associated undertakings
('the Group'). The results of the subsidiaries are
included in the consolidated profit and loss account from
the date of acquisition. Goodwill arising on consolidation,
being the excess of the purchase price of subsidiaries
and associates over the fair value of the net assets acquired,
is written off against reserves.
An associated undertaking is one in which the Group has a
long term interest and over which it exercises significant
but not dominant influence. The Group's share of the
profits less losses of associates is included in the
profit and loss account within income from fixed asset
investments and the Group's share of net assets is
included in investments in the balance sheet. Where an
accounting policy of an associate represents a significant
departure from that of the Group, appropriate adjustments
to the results of the associate are made on consolidation.
Turnover
Turnover represents the value of electricity consumption
during the year, which includes an estimate of the sales
value of units supplied to customers between the date of
the last meter reading and the year end, and the invoice
value of other goods and services provided, exclusive of
value added tax.
Cost of sales, net operating costs and administrative expenses
Cost of sales includes the purchase cost of electricity,
use of system charges and all other costs incurred to the
point of sale. Other costs are analysed between net
operating costs and administrative expenses. Net
operating costs, referred to by the Companies Act 1985
as distribution costs, include all other costs with the
exception of finance and administrative expenses.
<PAGE> 10
SEEBOARD plc - ACCOUNTING POLICIES
Regulated income
Where there is an over recovery of Supply or Distribution
Business revenues against the regulated maximum allowable
amount, revenues equivalent to the over recovered amount
are deferred. The deferred amount is deducted from
turnover and included in creditors within accruals and
deferred income. Where there is an under recovery,
any potential future recovery is not anticipated.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less accumulated
depreciation. The charge for depreciation is calculated on
a straight line basis to write off assets over their
estimated useful lives. Freehold land is not depreciated.
The lives of each major class of asset are:
Network plant and buildings 40 years, at 3% for
20 years then 2% per annum
Non-network buildings Up to 60 years
Fixtures, equipment and vehicles Up to 10 years
In the case of major projects, such as the construction of
generation plant, cost includes interest capitalised during
the construction period.
Customers' contributions are credited to the profit and
loss account at the same rate as the network is depreciated.
Property clawback
Under a trust deed, HM Government is entitled to a proportion
of certain property gains accruing or treated as accruing as
a result of property disposals. A provision for clawback of
gains in respect of property disposals is made only to the
extent that it is probable that a liability will crystallise.
Such a liability will crystallise when an actual or deemed
disposal occurs.
Stocks
Stocks are valued at the lower of cost and net realisable value.
Leases
Rental costs under operating leases are charged to the
profit and loss account in equal annual amounts over the
period of the lease.
Pension costs
Contributions to the Electricity Supply Pension Scheme are
charged to the profit and loss account so as to spread the
cost of pensions over employees' working lives with the
Company. The capital cost of ex-gratia and supplementary
pensions is charged to the profit and loss account in the
accounting period in which they are granted.
Deferred taxation
Deferred taxation arises in respect of items where there
is a timing difference between their treatment for accounting
purposes and their treatment for taxation purposes. A provision
or asset for deferred taxation, using the liability method,
is established to the extent that it is probable that a liability
or asset will crystallise in the foreseeable future.
<PAGE> 11
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
1 Turnover, profit and net assets by business
Turnover, profit before taxation and net assets of continuing
operations attributable to the following classes of business were:
Profit before
Turnover taxation Net assets
1995 1994 1995 1994 1995 1994
#m #m #m #m #m #m
Distribution 306.1 292.0 116.8 101.1 399.9 383.6
Supply 1,049.7 1,090.9 16.5 14.5 22.2 (50.3)
Other activities 117.8 115.6 5.3 4.4 80.1 69.1
Unallocated - - - - (28.0) (35.7)
Inter-activity sales (278.0) (280.4) - - - -
1,195.6 1,218.1 138.6 120.0 474.2 366.7
NGH dividends and investment - - 14.7 13.6 56.9 56.9
Net interest and net cash - - 1.5 (1.9) 29.6 121.3
Government debt premium - - (12.8) - - -
1,195.6 1,218.1 142.0 131.7 560.7 544.9
2 Net operating costs and administrative expenses
1995 1994
#m #m
Net operating costs - depreciation 32.4 30.7
- other 151.4 158.5
183.8 189.2
Administrative expenses 26.9 29.2
210.7 218.4
Certain costs previously shown under administrative expenses
have been reclassified and the comparative figures have been
restated accordingly.
Net operating costs and administrative expenses
include: 1995 1994
#m #m
Operating lease rentals 4.9 5.2
Auditors' remuneration 0.1 0.1
Remuneration of auditors for non audit work 1.1 0.6
3 Income from fixed asset investments
1995 1994
#m #m
Dividends from The National Grid Holding plc (NGH) 14.8 13.6
Share of loss of associated undertakings (0.1) -
14.7 13.6
<PAGE> 12
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
4 Net interest
1995 1994
#m #m
Interest payable:
On bank loans, overdrafts and other loans wholly
repayable within five years (4.6) (1.7)
On long term loans repayable in whole or in part
after five years - (6.7)
Interest receivable 6.1 6.5
1.5 (1.9)
5 Government debt premium
Early repayment of Government debt
On 23 August 1994, Government debt with a book amount of #54m was
repaid at a premium of #12.8m. The debt carried a fixed rate of interest
of 12.365% per annum and was repayable in 2008.
6 Directors and employees
(a) Directors' share options
<TABLE>
<CAPTION>
Granted Date from
Date of Held at during Held at Exercise which Expiry
Scheme grant 1.4.1994 the year 31.3.1995 price exercisable date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T J Ellis Executive option 9.12.1991 27,000 - 27,000 156.0p 9.12.1994 9.12.2001
Executive option 18.1.1993 107,000 - 107,000 235.5p 18.1.1996 18.1.2003
S Gutteridge Executive option 18.1.1993 126,000 - 126,000 235.5p 18.1.1996 18.1.2003
M J Pavia - - - - - - -
A R Smith Sharesave 18.12.1990 4,542 - 4,542 87.5p 1.3.1996 1.9.1996
Executive option 18.1.1993 30,000 - 30,000 235.5p 18.1.1996 18.1.2003
Executive option 21.7.1994 - 25,000 25,000 337.0p 21.7.1997 21.7.2004
J Weight Sharesave 18.12.1990 3,514 - 3,514 87.5p 1.3.1996 1.9.1996
Sharesave 30.9.1992 2,232 - 2,232 154.5p 1.12.1997 1.6.1998
Executive option 18.1.1993 50,000 - 50,000 235.5p 18.1.1996 18.1.2003
</TABLE>
No options were either exercised or lapsed during the year.
The market price of the shares at 31 March 1995 was 343p and
the range during the year was 304p to 488p.
Share options to be granted to executive directors in 1995/6
will be subject to strict performance criteria. The
exercise of these options will require that the Company's
share price performance over the three year period from the
date of the grant is maintained in the top third of the RECs
and that electricity prices to domestic customers are
consistently in the lowest third.
<PAGE> 13
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
6 Directors and employees continued
(b) Emoluments of directors of the Company were
as follows: 1995 1994
#000 #000
Salaries 837 720
Benefits 46 75
Fees 118 112
1,001 907
Pension contributions 139 77
1,140 984
1995 1994
Salary Benefits Total Total
#000 #000 #000 #000
Chairman
Sir Keith Stuart 70 - 70 70
(Paid to Associated British
Ports Holdings PLC)
Executive directors
T J Ellis (highest paid director) 206 8 214 184
S Gutteridge 118 10 128 117
M J Pavia (appointed 1.10.1994) 75 4 79 -
A R Smith (appointed 1.1.1995) 24 2 26 -
J Weight (appointed 1.7.1993) 102 14 116 80
Salary and benefits do not include pension contributions.
The Company's pension contributions on behalf of T J Ellis,
highest paid director, amounted to #30,000 (1994 #26,000).
No bonuses are paid to any directors. Furthermore, non-
executive directors receive neither share options nor
pension entitlements. All executive directors have service
contracts terminable by two years' notice. The emoluments
of the directors (excluding pension contributions) fell into
the following bands:
1995 1994
Number Number
#1 - #5,000 1 -
#10,001 - #15,000 - 1
#15,001 - #20,000 3 3
#20,001 - #25,000 1 1
#25,001 - #30,000 2 1
#65,001 - #70,000 1 1
#70,001 - #75,000 - 1
#75,001 - #80,000 1 -
#80,001 - #85,000 - 1
#110,001 - #115,000 1 -
#115,001 - #120,000 1 1
#120,001 - #125,000 - 1
#125,001 - #130,000 1 -
#130,001 - #135,000 - 1
#135,001 - #140,000 1 -
#180,001 - #185,000 - 1
#210,001 - #215,000 1 -
Pension contributions paid in respect of the early
retirement of former directors amounted to #271,350. A
pension of #29,300 (1994 #28,790) was paid in the year to a
former Chairman. Following a judgment of the High Court on
9 December 1994 a payment of #201,370 was made to T A Boley,
a former director, as compensation for the early termination
of his service contract in April 1993.
<PAGE> 14
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
6 Directors and employees continued
(c) Employment costs
The aggregate remuneration of all employees, including the
directors of the Group, comprised:
1995 1994
#m #m
Wages and salaries 85.5 95.1
Social security costs 7.1 8.2
Other pension costs 12.7 4.6
105.3 107.9
Less: charged as capital expenditure (17.8) (20.5)
Charged to profit and loss account 87.5 87.4
Other pension costs in 1994 included the release of pension
provision of #9.0m in respect of the equalisation of pension
rights no longer required.
1995 1994
(d) Average number of employees in the Group during the year
were: 4,680 5,339
7 Taxation on profit on ordinary activities
1995 1994
#m #m
UK corporation tax at 33% (1994 33%) 40.1 30.9
Tax on The National Grid Holding plc dividends 3.0 2.7
Deferred tax (1.2) 1.4
41.9 35.0
Adjustment to taxation in respect of prior years' profits (3.9) -
38.0 35.0
8 Dividends Shares ranking Dividends
for dividend payable
1995 1995 1994
000's #m #m
Interim dividend paid of 4.0p (1994 3.3p)
per ordinary share 241,387 9.7 8.3
Proposed final dividend of 10.5p
(1994 8.45p) per ordinary share 241,585 25.4 21.5
35.1 29.8
An employee share ownership trust, which holds 3,448,662
shares in the Company, has waived its right to all but a
nominal dividend.
9 Earnings per ordinary share
Earnings per ordinary share of 41.5p (1994 37.8p) are calculated
by dividing the profit for the financial year of #103.9m (1994 #96.5m)
by the average issued share capital of 250,525,000 (1994 255,206,000)
ordinary shares. Earnings per ordinary share, excluding the
non-recurring effect of the premium of #12.8m paid in respect of the
repurchase of Government debt, amounted to 46.6p based on an adjusted
profit of #116.7m.
<PAGE> 15
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
10 Tangible fixed assets
(a) Group and Company
Non-
network Vehicles
land & Fixtures & & mobile
Network buildings equipment plant Total
Cost #m #m #m #m #m
At 1 April 1994 623.9 77.7 67.9 22.3 791.8
Additions 50.3 6.2 8.2 0.5 65.2
Disposals (4.3) (2.2) (1.0) (2.9) (10.4)
At 31 March 1995 669.9 81.7 75.1 19.9 846.6
Depreciation
At 1 April 1994 227.6 16.1 41.8 12.1 297.6
Disposals (4.3) (1.2) (1.0) (2.2) (8.7)
Charge for the year 16.5 3.2 9.4 3.3 32.4
At 31 March 1995 239.8 18.1 50.2 13.2 321.3
Net book amount
At 31 March 1995 430.1 63.6 24.9 6.7 525.3
At 31 March 1994 396.3 61.6 26.1 10.2 494.2
All assets are owned by the Company with the exception of
fixtures and equipment owned by Southern Gas Ltd at a cost
of #0.1m (net book amount #0.1m).
(b) The net book amount of non-network land and buildings
comprised:
1995 1994
#m #m
Freehold 61.4 58.3
Short leasehold 2.2 3.3
63.6 61.6
Non-network land, included at #6.7m (1994 #7.6m), is not
depreciated.
(c) Included in fixed assets at 31 March 1995 are assets in
course of construction amounting to #33.8m (1994 #26.6m).
<PAGE> 16
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
11 Fixed asset investments
Group Company
1995 1994 1995 1994
#m #m #m #m
The National Grid Holding plc 56.9 56.9 56.9 56.9
Investments in subsidiary companies - - 3.4 3.4
Investments in associated companies 0.2 0.3 0.3 0.3
Other fixed asset investments 0.2 0.2 0.2 0.2
57.3 57.4 60.8 60.8
The holding in The National Grid Holding plc was acquired
from The Secretary of State for Energy on 23 May 1990. The
investment was revalued to #56.9m to represent the Company's
share, being 7.3%, of' the pro forma historical cost value
of the net assets as at 31 March 1990 of The National Grid
Company plc which is wholly owned by The National Grid
Holding plc. A proposal for the demerger to shareholders of
the Company's investment in The National Grid Holding plc is
well advanced.
The Company's principal investment in an associate comprises
a 37.5% interest in Medway Power Ltd (Medway), a company
formed to construct, own and operate a 660 MW gas fired
power station on the Isle of Grain, Kent. The power
station, which is presently undergoing commissioning trials,
is expected to commence generating electricity commercially
in the autumn. The Company has entered into an agreement to
purchase 50% of Medway's output of electricity for 15 years
commencing in 1995.
A schedule of the Company's principal subsidiary and
associated undertakings is given in note 24.
12 Stocks
Group and Company
1995 1994
#m #m
Raw materials and consumables 2.3 3.6
Work in progress 1.6 1.7
Finished goods and goods for resale 6.6 5.4
10.5 10.7
13 Debtors Group Company
1995 1994 1995 1994
#m #m #m #m
Amounts falling due within one year:
Trade debtors 174.6 145.1 166.8 137.4
Amounts owed by group undertakings - - 2.0 1.3
Credit sale installments not yet due 14.5 10.0 14.5 10.0
Other debtors 7.6 16.9 7.4 16.9
Prepayments and accrued income 0.7 3.6 0.5 3.5
Dividends receivable 8.0 7.6 8.5 7.6
Deferred tax 6.3 5.1 6.3 5.1
211.7 188.3 206.0 181.8
Amounts falling due after more than
one year:
Credit sale installments not yet due 2.4 1.0 2.4 1.0
Advance corporation tax recoverable 6.3 5.4 6.3 5.4
220.4 194.7 214.7 188.2
<PAGE> 17
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
14 Deferred tax
Total unprovided deferred tax liabilities computed at a rate
of 33% (1994 33%) were as follows:
Group and Company
1995 1994
#m #m
Capital allowances in excess of depreciation 136.0 127.5
Other timing differences (11.1) (14.0)
124.9 113.5
A transfer to/(from) deferred tax of #1.2m (1994 (#1.4m))
increased the deferred tax asset in respect of short term
timing differences from #5.1m at 31 March 1994 to #6.3m at
31 March 1995.
15 Current asset investments
Group Company
1995 1994 1995 1994
#m #m #m #m
Own shares purchased 8.5 6.5 8.5 6.5
Other investments 4.7 3.2 - -
13.2 9.7 8.5 6.5
Of the other investments #4.1m (1994 #3.0m) were listed on
the London Stock Exchange.
At 31 March 1995 3,448,662 (1994 2,990,000) ordinary shares
were held by an independently managed trust in connection
with Company share schemes (see note 18).
16 Creditors
Group Company
1995 1994 1995 1994
#m #m #m #m
Amounts falling due within one year:
Advance payments 26.0 43.2 25.5 41.7
Bank loans and overdrafts 6.4 - 6.4 -
Payments received on account 6.0 7.3 6.0 7.3
Trade creditors 106.1 85.8 101.7 82.0
Corporation tax 31.7 37.5 31.4 37.2
Other taxation and social security 0.5 0.6 0.5 0.2
Proposed dividend 25.4 21.5 25.4 21.5
Other creditors 26.7 16.9 18.6 10.7
Accruals and deferred income 22.3 55.5 22.3 55.5
251.1 268.3 237.8 256.1
Amounts falling due after more than one year:
Government debt - 54.0 - 54.0
Advance payments 11.4 28.5 11.1 27.6
Other creditors 2.9 0.9 2.9 0.9
14.3 83.4 14.0 82.5
<PAGE> 18
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
16 Creditors continued
Bank loans and overdrafts outstanding at 31 March 1995 were repayable
as follows:
Group and Company
1995 1994
#m #m
Repayable within one year 6.4 -
Repayable after five years - 54.0
6.4 54.0
On 23 August 1994 marketable bonds of #54m were repurchased from HM
Treasury at a premium of #12.8m.
17 Provisions for liabilities and charges
Restructuring Pensions Other Total
#m #m #m #m
Group and Company
Balance at 1 April 1994 26.6 2.1 16.4 45.1
Applied during the year (27.6) - (3.2) (30.8)
Provided in the year 20.4 0.5 1.0 21.9
Balance at 31 March 1995 19.4 2.6 14.2 36.2
Included within other provisions are amounts set aside in respect of
uninsured potential losses arising from storm damage of #6.5m
(1994 #5.5m).
18 Called up share capital
(a) Share capital
Authorised: Number #m
Ordinary shares of 50p each 400,000,000 200.0
Special rights redeemable preference share of #1 1 -
Allotted and fully paid:
At 1 April 1994 256,386,637 128.2
Issue of ordinary 50p shares arising from exercise
of options 1,246,310 0.6
Issue of ordinary 50p shares to employees under
a matching offer 1,001,050 0.5
Ordinary 50p shares cancelled (13,600,000) (6.8)
At 31 March 1995 245,033,997 122.5
The special rights redeemable preference share of #1, registered in
the name of The Secretary of State for Trade and Industry, was redeemed
at par on 31 March 1995.
(b) Cancellation of ordinary shares
During the course of the year 13,600,000 ordinary shares were purchased
at an average price of 430p. The shares have been cancelled and in
accordance with Section 170 of the Companies Act 1985 an amount of
#6.8m equivalent to the nominal value of the cancelled share capital
has been transferred to the capital redemption reserve, as set out in
note 19.
<PAGE> 19
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
18 Called up share capital continued
(c) Employee share schemes
On 8 September 1994 1,001,050 ordinary shares were allotted to
employees under a one for one matching offer.
At 31 March 1995 the following options over the Company's ordinary
shares were outstanding:
Number Price Period of
of Date options per exercise
shares granted share Six months from
Savings related share
option scheme
5,176,000 18 December 1990 87.5p 1 March 1996
2,573,378 30 September 1992 154.5p 1 December 1997
7,749,378
Executive share option
scheme From To
80,000 17 January 1991 127.5p 1994 2001
27,000 9 December 1991 156.0p 1994 2001
2,771,000 18 January 1993 235.5p 1996 2003
350,000 21 July 1994 337.0p 1997 2004
3,228,000
(d) At 31 March 1995 3,448,662 ordinary shares of the Company were
held in an independently managed employee share ownership trust,
formed to purchase shares in the Company on the open market, for
use in satisfying the share option schemes.
(e) At 31 March 1995 Seeboard Share Scheme Trustees Ltd held 3,278,919
ordinary shares on behalf of employees in respect of the profit
sharing scheme arrangements.
19 Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
Group Company
Share Capital profit Share- profit and
Share premium redemption and loss holders' loss
capital account reserve account funds account
#m #m #m #m #m #m
<S> <C> <C> <C> <C> <C> <C>
Balance at 1 April 1994 128.2 1.2 - 415.5 544.9 411.8
Retained profit for the year - - - 68.8 68.8 67.9
Issue of ordinary shares 1.1 4.3 - - 5.4 -
Cancellation of ordinary shares - - - (58.4) (58.4) (58.4)
Transfer to capital redemption
reserve (6.8) - 6.8 - - -
Balance at 31 March 1995 122.5 5.5 6.8 425.9 560.7 421.3
</TABLE>
The cumulative amount of goodwill written off to reserves at 31 March
1995 was #3.9m (1994 #3.9m).
<PAGE> 20
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
20 Pension costs
The Company's employees are entitled to join the Electricity Supply
Pension Scheme which provides pension and other related benefits,
based on final pensionable pay, to employees throughout the
Electricity Supply Industry. The assets of the Scheme are held in a
separate trustee administered fund. A full actuarial valuation of
the Scheme is carried out on a triennial basis. These accounts
incorporate the results of the latest valuation of the Scheme
carried out as at 31 March 1992.
Pension costs charged to the profit and loss account for the year
were #12.7m (1994 #4.6m as reduced by the release of a provision of
#9.0m for the equalisation of pension rights no longer required). The
latest full actuarial valuation of the Company's section of the Scheme
was carried out by Bacon and Woodrow, consulting actuaries, as at 31
March 1992 and the results of this valuation have been used as the basis
for assessing pension costs. The 'attained age' method was used for the
valuation and the principal actuarial assumptions adopted were that the
investment return would exceed salary increases by 2% per annum
(exclusive of merit awards) and exceed future pension increases by 4%
per annum.
The actuarial value of the assets of the Company's section of the Scheme
as at 31 March 1992 represented 104% of the actuarial value of the
accrued benefits. After allowing for benefit improvements granted as
a result of the valuation and the provision made from surplus to cover
contingencies and anticipated short term early retirement costs, this
reduces to 100%. The accrued benefits include all benefits for
pensioners and other former members as well as benefits based on service
completed to date for active members, allowing for future salary rises.
The total market value of the assets of the Scheme as at 31 March 1992
was #9,492m of which #414m represented the section of the Scheme which
relates to the members and beneficiaries of the Company. Contributions
payable by the Company to the Scheme during the year (excluding
provisions) were #12.2m (1994 #13.6m).
21 Lease obligations
The following annual obligations under operating leases for equipment
and vehicles expire:
Group and Company
1995 1994
#m #m
Within one year 0.4 0.2
In the second to fifth year inclusive 0.5 1.0
0.9 1.2
The following annual obligations under operating leases for non-network
land and buildings expire:
Group and Company
1995 1994
#m #m
Within one year 0.1 -
In the second to fifth year inclusive 0.7 0.5
In more than five years 2.6 2.7
3.4 3.2
<PAGE> 21
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
22 Capital and other commitments
Capital investment authorised by the Board of Directors but not provided
for as at 31 March 1995 amounted to #51.3m (1994 #51.9m) in respect
of which the Board of Directors has entered into contractual commitments
of #9.5m (1994 #9.3m).
On 10 April 1992 the Company entered into an agreement to subscribe for
37.5% of the equity and subordinated loan stock of Medway Power Ltd,
(Medway), a company formed to construct, own and operate a 660 MW power
station on the Isle of Grain, Kent. The maximum amount of the commitment
by the Company to Medway, which is dependent upon actual construction
costs, is #22.9m. At the same date a power purchase agreement was
entered into by the Company to purchase 50% of' Medway's output for 15
years commencing in 1995.
At 31 March 1995, Medway had tangible assets of #293.0m and a project
bank loan secured on those assets amounting to #284.9m. The lending
banks have no right of recourse to the shareholders of Medway,
including the Company, in respect of the repayment of the bank loan.
23 Notes to the cash flow statement
Reconciliation of operating profit to net cash inflow from operating
activities
1995 1994
#m #m
Operating profit 138.6 120.0
Non cash items
Depreciation 32.4 30.7
Profit on sale of fixed assets (1.6) (0.4)
Decrease in provisions (6.6) (4.2)
24.2 26.1
Movement in working capital
Decrease in stocks 0.2 0.7
(Increase)/decrease in debtors (23.4) 13.0
(Decrease)/increase in creditors
(Decrease)/increase in advance payments (34.3) 71.7
(Decrease)/increase in Supply regulatory
over recovery (33.8) 33.8
Improved power purchase credit terms - 23.0
Increase/(decrease) in other creditors 34.9 (2.5)
(56.4) 139.7
Net cash inflow from operating activities 106.4 285.8
<PAGE> 22
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
23 Notes to the cash flow statement continued
Analysis of cash and cash equivalents
Balance Movement in year
1995 1994 1995 1994
#m #m #m #m
Short term deposits 35.4 157.0 (121.6) 123.0
Cash at bank and in hand 0.6 18.3 (17.7) 10.5
Bank overdraft (6.4) - (6.4) -
29.6 175.3 (145.7) 133.5
Analysis of changes in financing during the year
Share capital Government
and premium debt
1995 1994 1995 1994
#m #m #m #m
Balance at 1 April 1994 129.4 63.7 54.0 80.0
One for one scrip issue - 63.7 - -
One for one matching offer 2.3 - - -
Transfer to capital redemption reserve (6.8) - - -
124.9 127.4 54.0 80.0
Movement of funds
Cash outflow from financing - - (54.0) (26.0)
Issue of share capital 3.1 2.0 - -
Balance at 31 March 1995 128.0 129.4 - 54.0
24 Subsidiary and associated undertakings
The undertakings at 31 March 1995 which are incorporated and operate
in England and Wales (unless otherwise stated) are as follows:
Percentage of
ordinary shares
held Activities
Principal subsidiary undertakings
Seeboard Insurance Company Ltd (Isle of Man) 100% Insurance
Longfield Insurance Company Ltd (Isle of Man) 100% Insurance
SEEBOARD (Generation) Ltd 100% Holding company
Southern Gas Ltd 75% Gas supply
Associated undertakings
SEEBOARD International Ltd 51% Overseas consultancy
Medway Power Ltd 37.5% Generation
<PAGE> 23
SEEBOARD plc - NOTES TO THE ACCOUNT'S
31 March 1995
25 Supplementary current cost information
Group current cost profit and loss account for the year ended
31 March 1995
1995 1994
#m #m
Historical cost profit on ordinary activities before
taxation 142.0 131.7
Current cost adjustments:
Depreciation (35.0) (34.7)
Cost of sales (0.1) (0.2)
Monetary working capital 0.3 (1.6)
Current cost profit on ordinary activities before taxation 107.2 95.2
Taxation on profit on ordinary activities (38.0) (35.0)
Current cost profit on ordinary activities after taxation 69.2 60.2
Minority interests (0.1) (0.2)
Current cost profit for the financial year 69.1 60.0
Dividends (35.1) (29.8)
Current cost retained profit 34.0 30.2
Group current cost balance sheet as at 31 March 1995
1995 1994
#m #m
Fixed assets
Tangible assets 961.5 939.4
Investments 229.5 229.6
1,191.0 1,169.0
Net current assets 29.0 122.1
Creditors (amounts falling due after more than one year) 14.3 83.4
Provisions for liabilities and charges 36.2 45.1
Minority interests 0.4 0.3
Net assets 1,169.1 1,162.3
Capital and reserves
Called up share capital 122.5 128.2
Share premium account 5.5 1.2
Capital redemption reserve 6.8 -
Current cost reserve 956.8 931.0
Profit and loss account 77.5 101.9
Shareholders' funds 1,169.1 1,162.3
<PAGE> 24
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
25 Supplementary current cost information continued
Current cost accounting allows for price changes specific to the
business, principally through the use of indices, when reporting
assets employed and profits thereon. Fixed assets and stocks are
stated in the balance sheet at net current replacement cost which in
turn requires adjustments to the depreciation charge and to cost of
sales in the profit and loss account.
A monetary working capital adjustment is made to allow for the effects
of inflation on the working capital required to support the day to day
operations of the Group and a gearing adjustment reduces the effect of
the above adjustments in the profit and loss account to take account of
financing the business partly by net borrowings. No gearing adjustment
has been made in the current year as the Group has no net borrowings.
The fixed asset investment has been included at directors' valuation.
Current cost turnover, profit and net assets by activity
Current cost turnover, profit before taxation and net assets of
continuing operations attributable to the following classes of business
were:
Profit before
Turnover taxation Net assets
1995 1994 1995 1994 1995 1994
#m #m #m #m #m #m
Distribution 306.1 292.0 84.0 67.4 790.9 785.0
Supply 1,049.7 1,090.9 16.0 12.7 22.4 (50.3)
Other activities 117.8 115.6 3.8 3.4 125.1 112.9
Unallocated - - - - (28.0) (35.7)
Inter-activity sales (278.0) (280.4) - - - -
1,195.6 1,218.1 103.8 83.5 910.4 811.9
NGH dividends and investment - - 14.7 13.6 229.1 229.1
Net interest and net cash - - 1.5 (1.9) 29.6 121.3
Government debt premium - - (12.8) - - -
1,195.6 1,218.1 107.2 95.2 1,169.1 1,162.3
Reconciliation of movements in current cost reserves
Current Profit Capital Current
cost and loss and other cost net
reserve account reserves assets
#m #m #m #m
Balance at 1 April 1994 931.0 101.9 129.4 1,162.3
Current cost retained profit for the year - 34.0 - 34.0
Revaluation of net fixed assets 26.0 - - 26.0
Cost of sales adjustment 0.1 - - 0.1
Monetary working capital adjustment (0.3) - - (0.3)
Issue of ordinary shares - - 5.4 5.4
Cancellation of ordinary shares - (58.4) - (58.4)
Balance at 31 March 1995 956.8 77.5 134.8 1,169.1
<PAGE> 25
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
26 Reconciliation to U. S. GAAP
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
SEEBOARD's consolidated financial statements have been prepared in
accordance with UK GAAP which differs in certain significant respects
from US GAAP. The significant differences as they relate to SEEBOARD
summarised in the following paragraphs. The approximate effect of the
adjustments to profit after taxation and extraordinary items and equity
shareholders' funds which would be required under US GAAP are set forth
in the tables below.
Income from fixed asset investments
Dividends from the National Grid Holding plc have been recorded, in
accordance with UK GAAP, in the profit for the year to which they
pertain. Under US GAAP dividends are recorded in the financial
statements of the year in which they are declared.
Pension costs
Under UK GAAP, pension costs represent the expected cost of providing
benefits to be charged to the profit and loss account so as to spread
the cost over the expected remaining service lives of employees. Under
US GAAP the annual pension cost comprises the estimated cost of benefits
accruing in the period adjusted for a portion of the deficit or surplus
arising at the time Statement Number 87 of the United States Financial
Accounting Standards Board ("SFAS 87") "Employer's Accounting for Pensions"
was adopted. The charge is further adjusted to reflect a portion of the
cost of benefit improvements and any surpluses/deficits falling outside
a 10% fluctuation "corridor".
Deferred taxation
UK GAAP requires provision for deferred taxation only when it is expected
that a liability will become payable in the foreseeable future. US GAAP
requires full provision for deferred taxes to be made using enacted future
tax rates.
Premium on redemption of bonds
Under UK GAAP, a premium or discount on the repurchase of bonds before
their maturity date is an expense in determining profit before taxation.
Under US GAAP, the premium or discount would be described as a loss or
gain from extinguishment of debt and, if material, would be classified
on the face of the consolidated profit and loss account as an extraordinary
item.
Dividends
Under UK GAAP, dividends are recorded by the group as a deduction from the
profit for the year to which they pertain. Under US GAAP dividends
are recorded in the financial statements in the period in which
they are declared.
Employee Share Ownership Trust (ESOT)
Under UK GAAP, the cost of shares in the Company purchased by an ESOT is
included within the current asset investments as "own shares purchased".
Under US GAAP this amount is included as a deduction to shareholders
equity.
<PAGE> 26
SEEBOARD plc - NOTES TO THE ACCOUNTS
31 March 1995
Approximate effect on profit after taxation and extraordinary items of
significant differences between UK GAAP and US GAAP:
March March
1995 1994
#m #m
Profit after taxation under UK GAAP 103.9 96.5
US GAAP adjustments:
Income from fixed asset investments (0.6) (1.3)
Pension costs 9.3 1.2
Premium on redemption of Government bonds 12.8 -
Taxation effects on the foregoing adjustments (3.0) (0.2)
Deferred taxation (11.4) (11.9)
Profit before extraordinary loss under US GAAP 111.0 84.3
Extraordinary loss: Premium on redemption of bonds (12.8) -
Profit after taxation and extraordinary loss under
US GAAP 98.2 84.3
pence pence
Earnings per share under US GAAP:
Profit before extraordinary loss 44.3 33.0
Extraordinary loss (5.1) -
Profit after taxation and extraordinary loss 39.2 33.0
Approximate cumulative effect on equity shareholders' funds of significant
differences between UK GAAP and US GAAP:
31 March 31 March
1995 1994
#m #m
Equity shareholders' funds under UK GAAP 560.7 544.9
US GAAP adjustments:
Income from fixed asset investments (9.9) (9.3)
Pension costs 27.3 18.0
Dividends 25.4 21.5
Employee share ownership trust (8.5) (6.5)
Tax effects on the above adjustments (7.2) (4.2)
Deferred taxation (124.9) (113.5)
Equity shareholders' funds under US GAAP 462.9 450.9
STATEMENT OF CASH FLOWS: BASIS OF PREPARATION
SEEBOARD's statement of cash flows is prepared in accordance with UK
Financial Reporting Standard 1 (FRS 1), the objectives and principles
of which are similar to those set out in Statement of Financial
Accounting Standards 95, "Statement of Cash Flows" (SFAS 95) under
US GAAP. The principal differences between FRS 1 and SFAS 95 relate
to classification.
Cash flows from taxation and returns on investments and servicing of
finance under FRS 1 would be included in operating activities under
SFAS 95. Under FRS 1 net cash and cash equivalents include short term
borrowings repayable within 3 months from the date of their advance.
Under SFAS 95 short-term borrowings repayable within 3 months from the
date of their advance and overdraft balances would not be included within cash
and cash equivalents and movements on those borrowings and overdraft balances
would be included in financing activities. In addition, under SFAS 95
changes in minority interests would be presented as a cash flow from
operating activities.
<PAGE> 27
UNAUDITED FINANCIAL STATEMENTS OF SEEBOARD plc FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1995
(B) Unaudited interim results for the six months ended 30 September, 1995
(The symbol for British pounds sterling has been denoted by the symbol #
in the following financial statements and accompanying tables.)
SEEBOARD plc
GROUP PROFIT AND LOSS ACCOUNT
Unaudited Audited
Six Months Ended Year Ended
30 September, 31 March,
Note 1995 1994 1995
#m #m #m
Turnover 1 512.2 509.3 1,195.6
Operating profit 38.5 40.1 138.6
Income from fixed asset investments - 4.8 14.7
Profit on ordinary activities before
interest and taxation 38.5 44.9 153.3
Net interest 0.9 1.4 1.5
Government debt premium 3 - (12.8) (12.8)
Profit on ordinary activities before
taxation 1 39.4 33.5 142.0
Taxation on profit on ordinary
activities 2 (10.4) (10.2) (38.0)
Profit on ordinary activities after
taxation 29.0 23.3 104.0
Minority interests 0.1 - (0.1)
Profit for the period 3 29.1 23.3 103.9
Dividends 4 - (9.7) (35.1)
Retained profit 29.1 13.6 68.8
Earnings per ordinary share
Normal 3 11.9p 9.1p 41.5p
Adjusted 3 14.1p 46.6p
Dividend per share 4 NIL 4.0p 14.5p
There are no recognised gains or losses other than the profit for the period.
<PAGE> 28
SEEBOARD plc
GROUP BALANCE SHEET
Unaudited Audited
Six Months Ended Year Ended
30 September, 31 March,
Note 1995 1994 1995
#m #m #m
Fixed assets
Tangible assets 537.1 509.1 525.3
Investments 57.3 57.4 57.3
594.4 566.5 582.6
Current assets
Stocks 10.2 12.3 10.5
Debtors 171.7 165.9 220.4
Investments 42.8 42.3 13.2
Cash and short term deposits 60.1 101.3 36.0
284.8 321.8 280.1
Creditors (amounts falling due within
one year) 241.2 317.5 251.1
Net current assets 43.6 4.3 29.0
Total assets less current liabilities 638.0 570.8 611.6
Creditors (amounts falling due after
more than one year) 11.0 20.7 14.3
Provisions for liabilities and charges 5 36.5 44.5 36.2
Minority interests 0.3 0.3 0.4
Net assets 590.2 505.3 560.7
Capital and reserves
Called up share capital 122.7 122.4 122.5
Share premium 5.7 5.3 5.5
Capital redemption reserve 6.8 6.8 6.8
Profit and loss account 455.0 370.8 425.9
590.2 505.3 560.7
<PAGE> 29
SEEBOARD plc
GROUP CASH FLOW STATEMENT
Unaudited Audited
Six Months Ended Year Ended
30 September, 31 March,
1995 1994 1995
#m #m #m
Cash inflow from operating activities
Operating profit 38.5 40.1 138.6
Depreciation 16.2 17.0 32.4
Profit on sale of fixed assets (0.2) (1.1) (1.6)
Working capital movements 50.4 48.6 (63.0)
104.9 104.6 106.4
Interest 0.5 0.8 1.2
Government debt premium - (12.8) (12.8)
Dividends received - - 11.5
Dividends paid (25.4) (21.5) (31.2)
Corporation tax paid (1.4) (1.6) (43.0)
Net cash inflow from operations after
taxation 78.6 69.5 32.1
Investing activities
Purchase of tangible fixed assets (27.2) (34.6) (68.3)
Net purchase of treasury investments (29.6) (30.5) (1.4)
Receipts from sales of tangible fixed
assets 0.6 2.1 3.3
Net cash inflow/(outflow) before financing 22.4 6.5 (34.3)
Financing
Issue of ordinary share capital 0.4 3.1 3.1
Purchase of own shares - (34.5) (60.5)
Repayment of debenture loan - (54.0) (54.0)
Increase/(decrease) in cash and cash
equivalents 22.8 (78.9) (145.7)
<PAGE> 30
SEEBOARD plc
GROUP NOTES
Basis of preparation of interim financial statements
The interim financial statements for the six months ended 30 September, 1995
for SEEBOARD plc and its subsidiaries, which are unaudited, have been prepared
on the basis of the accounting policies set out in the Group's 1995 statutory
accounts.
The figures for the financial year ended 31 March, 1995 are not the Group's
full statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the Registrar of
Companies. The report of the auditors was unqualified.
1. Segmental analysis
Unaudited Unaudited Audited
Six Months Ended Six Months Ended Year Ended
30 September, 1995 30 September, 1994 31 March, 1995
Profit Profit Profit
before before before
Turnover taxation Turnover taxation Turnover taxation
#m #m #m #m #m #m
Distribution 128.6 42.0 142.3 43.6 306.1 116.8
Supply 437.1 (4.0) 444.1 (4.2) 1,049.7 16.5
Other activities 57.0 0.5 49.2 0.7 117.8 5.3
Inter-activity sales (110.5) - (126.3) - (278.0) -
512.2 38.5 509.3 40.1 1,195.6 138.6
Income from fixed asset
investments - 4.8 14.7
Net interest 0.9 1.4 1.5
Government debt premium - (12.8) (12.8)
512.2 39.4 509.3 33.5 1,195.6 142.0
2. Taxation
The charge for taxation for the six months ended 30 September, 1995 has been
computed by applying the estimated effective tax rate for the full financial
year.
3. Earnings per ordinary share
Earnings per ordinary share of 11.9p are calculated by dividing the profit
for the period of #29.1m by the average issued share capital of 245.23m
ordinary shares. Adjusted earnings per ordinary share shown in respect of
the six months ended 30 September, 1994 and the year ended 31 March, 1995
exclude the Government debt premium of #12.8m.
4. Interim dividend
Assuming that the recommended cash offer, of 635p per SEEBOARD Share, made by
CS First Boston on behalf of CSW (UK) plc becomes wholly unconditional, the
Directors do not intend to pay an interim dividend in respect of the six
months ended 30 September, 1995.
<PAGE> 31
SEEBOARD plc
GROUP NOTES (Continued)
5. Provisions for liabilities and charges
Restructuring Pension Other Total
#m #m #m #m
Balance at 1 April, 1995 19.4 2.6 14.2 36.2
Applied during the year (6.4) - (0.3) (6.7)
Provided in the year 6.6 0.2 0.2 7.0
Balance at 30 September, 1995 19.6 2.8 14.1 36.5
6. Net cash
Unaudited Audited
30 September, 31 March,
1995 1994 1995
#m #m #m
Cash and short term deposits 60.1 101.3 36.0
Bank overdraft (7.7) (4.9) (6.4)
Cash and cash equivalents 52.4 96.4 29.6
Treasury investments 34.3 33.7 4.7
86.7 130.1 34.3
Proceeds of #99.2m from a Eurobond issue were received on 3 October, 1995.
7. Reconciliation of movements in shareholders' funds
Group
Share Capital Profit
Share Premium Redemption and Loss Shareholders
Capital Accounts Reserve Account Funds
#m #m #m #m #m
Balance at 1 April, 1995 122.5 5.5 6.8 425.9 560.7
Retained profit for the period - - - 29.1 29.1
Issue of ordinary shares 0.2 0.2 - - 0.4
Balance at 30 September, 1995 122.7 5.7 6.8 455.0 590.2
8. The National Grid Holding plc
At an extraordinary meeting to be held on 8 December, 1995, approval will be
sought for the demerger of SEEBOARD's shareholding in the National Grid. If
approval is given, SEEBOARD's investment in The National Grid Holding plc
will be distributed as a dividend in specie.
9. Summary of Significant Differences Between UK and US Generally
Accepted Accounting Principles
SEEBOARD's interim financial statements are unaudited and have been prepared
in accordance with UK GAAP which differs in certain significant respects from
US GAAP. The significant differences, as they relate to SEEBOARD, are
explained in Note 26 to the SEEBOARD accounts for the years ended
31 March 1995 and 1994 included elsewhere herein. The approximate
effect of the adjustments to profit after taxation and extraordinary items
and equity shareholders'funds which would be required under US GAAP are set
forth in the tables below.
<PAGE> 31
SEEBOARD plc
GROUP NOTES (Continued)
Approximate effect on profit after taxation and extraordinary items of
significant differences between UK GAAP and US GAAP:
Half year Half year
to 30 to 30
September September
1995 1994
Profit after taxation under UK GAAP 29.1 23.3
US GAAP adjustments:
Income from fixed asset investments - (4.8)
Pension costs 5.0 4.7
Premium on redemption of bonds - 12.8
Taxation effects on the foregoing adjustments (1.6) (0.8)
Deferred taxation (2.5) (5.9)
Profit before extraordinary loss under US GAAP 30.0 29.3
Extraordinary loss: Premium on redemption of bonds - (12.8)
Profit after taxation and extraordinary loss under 30.0 16.5
US GAAP
pence pence
Earnings per share under US GAAP:
Profit before extraordinary loss 12.2 11.4
Extraordinary loss - (5.0)
Profit after taxation and extraordinary loss 12.2 6.4
Approximate cumulative effect on equity shareholders' funds of
significant differences between UK GAAP and US GAAP:
Half year to Half year to
30 September 30 September
1995 1994
#m #m
Equity shareholders' funds under UK GAAP 590.2 505.2
US GAAP adjustments
Income from fixed asset investments (9.9) (14.1)
Pension costs 32.3 22.7
Dividends payable - 9.7
Employee share ownership trust (8.5) (8.6)
Tax effects on the foregoing adjustments (8.8) (5.0)
Deferred taxation (127.4) (119.4)
Equity shareholders' funds under US GAAP 467.9 390.5
STATEMENT OF CASH FLOWS: BASIS OF PREPARATION
SEEBOARD's statement of cash flows is prepared in accordance with UK
Financial Reporting Standard 1 (FRS 1), the objectives and principles
of which are similar with those set out in Statement of Financial
Accounting Standards 95, "Statement of Cash Flows" (SFAS 95) under
US GAAP. The principal differences between FRS 1 and SFAS 95 relate
to classification.
Cash flows from taxation and returns on investments and servicing of finance
under FRS 1 would be included as operating activities under SFAS 95. Under
FRS 1 net cash and cash equivalents include short-term borrowings
repayable within 3 months from the date of their advance. Under SFAS 95
short-term borrowings repayable within 3 months from the date of their
advance and overdraft balances would not be included within cash and cash
equivalents and movements on those borrowings and overdraft balances would be
included in financing activities. In addition, under SFAS 95 changes in
minority interests would be presented as a cash flow from operating
activities.
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
BALANCE SHEETS
The unaudited pro forma condensed consolidated statements of income and
balance sheets required by Item 7(b) are filed as part of this Form 8-K. The
pro forma results give effect to the acquisition of SEEBOARD accounted for
under the purchase method of accounting for the nine months ended September
30, 1995 and the twelve months ended December 31, 1994 as if the transaction
had been consummated at the beginning of the periods presented for the pro
forma condensed consolidated statements of income and at the end of the
period presented for the pro forma condensed consolidated balance sheets.
The unaudited pro forma condensed consolidated statements of income for the
year ended December 31, 1994 include the results of operations of SEEBOARD
for the year ended March 31, 1995. The unaudited pro forma condensed
consolidated statements of income for the nine months ended September 30,
1995 include the results of operations of SEEBOARD for that period.
Consequently, revenues of approximately $555 million and net income of
approximately $55 million of SEEBOARD have been included in both periods
presented.
The unaudited pro forma condensed consolidated statements of income and
balance sheets are based upon preliminary fair value allocations related to
the purchase of SEEBOARD. The allocations are subject to revision after more
detailed analyses, appraisals and evaluations are completed. The condensed
historical balance sheets and statements of income for each company and for
the pro forma consolidated company have been prepared in accordance with
United States Generally Accepted Accounting Principles. The pro forma
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results that would have occurred if the SEEBOARD
acquisition had taken place at the beginning of the period specified, nor is
it necessarily indicative of future operating results. Pro forma financial
statements were converted at a translation rate of $1.54/pound for the income
statement dated December 31, 1994 and $1.58/pound for income statement and
balance sheets dated September 30, 1995.
The unaudited pro forma condensed consolidated statements of income and
balance sheets should be read in conjunction with the consolidated financial
statements of CSW and the related notes thereto included in CSW's Combined
Annual Report on Form 10-K for the year ended December 31, 1994 and CSW's
Combined Quarterly Report on Form 10-Q for the quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995, as well as the financial statements of
SEEBOARD, prepared in accordance with generally accepted accounting
principles in the United Kingdom, for the fiscal year ended March 31, 1995
and the six months ended September 30, 1995 and notes thereto included in
Item 7(a) to this Current Report on Form 8-K.
<PAGE> 34
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CSW SEEBOARD Adjustments Consolidated
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES $ 2,666 $ 1,365 $ - $ 4,031
OPERATING EXPENSES AND TAXES
Operating expenses 1,655 1,185 - 2,840
Depreciation and amortization 280 38 30 (a) 348
Taxes, other than federal income 140 - - 140
Federal income taxes 64 52 (37)(b) 79
2,139 1,275 (7) 3,407
OPERATING INCOME 527 90 7 624
OTHER INCOME AND DEDUCTIONS 76 8 (8)(c) 76
INCOME BEFORE INTEREST CHARGES 603 98 (1) 700
INTEREST CHARGES 249 (1) 103 (d) 351
NET INCOME 354 99 (104) 349
Preferred stock dividends 14 - - 14
NET INCOME FOR COMMON STOCK $ 340 $ 99 $ (104) $ 335
EARNINGS PER SHARE OF COMMON STOCK $1.78 $1.75
AVERAGE COMMON SHARES OUTSTANDING 191.4 191.4
</TABLE>
Notes to Pro Forma Condensed Consolidated Statements of Income
(a) Reflects the increase in depreciation expense for the step-up in basis of
plant acquired and the increase in amortization expense of goodwill recorded
in connection with the acquisition of SEEBOARD.
(b) Reflects the estimated income tax effects of the acquisition.
(c) Reflects the elimination of revenues from the National Grid Group
plc, the share of which were distributed by SEEBOARD to its
shareholders' effective December 11, 1995. In addition, the
adjustment assumes the consumption of the CSW Grid sale.
(d) Reflects interest expense on indebtedness or to be incurred pursuant to the
CSW Credit Agreement and the CSW Investments Credit Facility to finance the
acquisition, reduced by interest expense on indebtedness to be repaid from
(i) cash on hand of SEEBOARD at the closing date of the acquisition, (ii)
amounts to be received upon the factoring by SEEBOARD of 80% of its
accounts receivable (the receivables factoring) and (iii) the proceeds from
the sale of CSW (UK)'s interest in the National Grid (the CSW Grid Sale).
<PAGE> 35
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Pro Forma Pro Forma
CSW SEEBOARD Adjustments Consolidated
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
December 31, March 31, December 31,
1994 1995 1994
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES $ 3,623 $ 1,842 $ - $ 5,465
OPERATING EXPENSES AND TAXES
Operating expenses 2,298 1,564 - 3,862
Depreciation and amortization 356 50 38 (a) 444
Taxes, other than federal income 196 - - 196
Federal income taxes 179 82 (50) (b) 211
3,029 1,696 (12) 4,713
OPERATING INCOME 594 146 12 752
OTHER INCOME AND DEDUCTIONS 111 22 (22) (c) 111
INCOME BEFORE INTEREST CHARGES 705 168 (10) 863
INTEREST CHARGES 293 (2) 135 (d) 426
NET INCOME 412 170 (145) 437
Preferred stock dividends 18 - - 18
NET INCOME FOR COMMON STOCK $ 394 $ 170 $ (145) $ 419
EARNINGS PER SHARE OF COMMON STOCK $2.08 $ 2.21
AVERAGE COMMON SHARES OUTSTANDING 189.3 189.3
See the accompanying notes on the previous page.
</TABLE>
<PAGE> 36
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995
Pro Forma Pro Forma
CSW SEEBOARD Adjustments Consolidated
(Millions)
ASSETS
Net plant $ 8,057 $ 848 $ 87 (a) $ 8,992
Current Assets
Cash 61 95 (95) (b) 61
Accounts receivable 1,006 261 (209) (c) 1,058
Other 416 58 26 (a) 500
Investment in National Grid - 91 (91) (d) -
Goodwill - - 1,447 (a) 1,447
Deferred Charges and Other 1,756 61 6 (a) 1,823
$ 11,296 $ 1,414 $ 1,171 $ 13,881
CAPITALIZATION & LIABILITIES
Capitalization
Common stock $ 673 $ - $ - $ 673
Paid-in capital 597 201 (201) (a) 597
Retained earnings 1,914 539 (539) (a) 1,914
Total Common Stock
Equity 3,184 740 (740) 3,184
Preferred stock 326 - - 326
Long-term debt 3,001 - 1,880 (b) 4,881
Total Capitalization 6,511 740 1,140 8,391
Current Liabilities 2,247 381 - 2,628
Deferred Income Taxes 2,111 218 31 (a) 2,360
Other Liabilities 427 75 - 502
$ 11,296 $ 1,414 $ 1,171 $ 13,881
Notes to Pro Forma Condensed Consolidated Balance Sheets.
(a) Reflects the following preliminary purchase accounting adjustments resulting
from the acquisition of SEEBOARD, determined as if the acquisition occurred
on September 30, 1995:
(millions)
Step-up in basis of plant $ 87
Fair value adjustment of other assets 26
Increase in goodwill on acquisition 1,447
Recognition of additional pension asset 6
Elimination of the paid-in capital of SEEBOARD 201
Elimination of the retained earnings of SEEBOARD 539
Increase in deferred taxes on preliminary purchase
accounting adjustments 31
(b) Reflects indebtedness incurred or to be incurred pursuant to the CSW Credit
Agreement and the CSW Investments Credit Facility to finance the
acquisition, reduced by indebtedness to be repaid from (i) cash on hand
of SEEBOARD at the closing date of the acquisition, (ii) the proceeds of
the receivables factoring and (iii) the proceeds from the CSW Grid Sale.
(c) Assumes the consummation of the receivables factoring.
(d) Assumes the consummation of the CSW Grid Sale and distribution
of the grid shares.
<PAGE> 37
EXHIBIT 23.1
The Directors
SEEBOARD plc
We consent to the incorporation by reference in the registration statement
on Form S-8 (File nos. 2-70746, 33-12992, 33-46301, 33-63027 and 33-64233)
and on Form S-3 (File No. 33-50193) of Central and South West Corporation
of our report dated 6 June 1995, with respect to the consolidated balance
sheets of SEEBOARD plc and subsidiaries as of 31 March 1995 and 31 March
1994 and the related profit and loss accounts incash flows for each of the
years in the two-year period ended 31 March 1995, which report appears
in Form 8-K of Central and South West Corporation dated 19 January 1996.
KPMG
Chartered Accountants London
Registered Auditors 19 January 1996
