SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------
:
In the Matter of :
:
CSW CREDIT, INC. : CERTIFICATE
:
CENTRAL AND SOUTH WEST CORPORATION : OF
:
File No. 70-7218 : NOTIFICATION
:
(Public Utility Holding Company Act of 1935) :
- --------------------------------------------------:
1. CSW Credit, Inc. (Credit) hereby files a balance sheet as of September
30, 1996, statements of income for the three and twelve month periods ended
September 30, 1996, and notes to the financial statements as Exhibit 1 attached
hereto.
2. Credit hereby certifies that on September 30, 1996, it had $809,200,000
face amount of commercial paper outstanding at a weighted average cost of 5.44%.
This amount consisted of $407,400,000 issued and sold to Lehman Commercial
Paper, Inc., as dealer, and $401,800,000 issued and sold to Goldman Sachs & Co.,
as dealer, as shown in Exhibit 2 attached hereto. Credit hereby further
certifies that it had no other material borrowings outstanding on September 30,
1996.
3. Credit hereby files as Exhibit 3 attached hereto the earnings coverage
for Credit's indebtedness for the period from July 1, 1996 through September 30,
1996 and Credit's capital structure at September 30, 1996. Credit hereby files
as Exhibit 4 attached hereto the twelve month average of outstanding accounts
receivable and bad debt write-offs related to non-affiliated companies during
said period as of the end of each month.
4. With respect to affiliated companies, Credit hereby certifies that the
allowed returns on common equity for the period from July 1, 1996 through
September 30, 1996 were unchanged in all regulatory jurisdictions from the
previous certificate of notification. Credit also hereby files the discount
calculation for affiliated companies, an analysis of the allowed returns on
common equity and the factoring expense savings for affiliated companies as
shown in Exhibits 5, 6 and 7, respectively, attached hereto.
<PAGE>
5. With respect to Houston Lighting & Power Company (HLP), Credit had
month ending average net receivables of $347,489,000 outstanding during the
twelve months ended September 30, 1996. During the quarter ended September 30,
1996 the daily maximum borrowing relating to the purchase of accounts receivable
from HLP was $486,408,000.
6. Credit hereby certifies it was in accordance with the 50% restriction
on non-affiliated receivables during the quarter ended September 30, 1996, as
shown in Exhibit 4 attached hereto.
7. Credit hereby certifies that during the period July 1, 1996 through
September 30, 1996, HLP receivables were acquired by Credit and sold to The Bank
of New York in order to maintain compliance with the 50% restriction as follows:
July $0, August $0, and September $1,200,000. The figures set forth in Exhibit 4
attached hereto shows the detail of the receivables.
8. Said transactions have been carried out in accordance with the terms
and conditions of, and for the purpose represented in, the Form U-1
Application-Declaration of Central and South West Corporation (CSW) and Credit,
in File No. 70-7218, and in accordance with the terms and conditions of the
Commission's orders dated July 31, 1986, February 8, 1988, December 27, 1989,
August 30, 1990, December 21, 1990, December 24, 1991, December 9, 1992,
December 21, 1993, and December 16, 1994 permitting said Application-Declaration
to become effective, and the Form U-1 Application-Declaration of CSW, Central
Power and Light Company and Credit, in File No. 70-8037, and in accordance with
the terms and conditions of the Commission's orders dated December 8, 1992 and
December 29, 1992, permitting said Application-Declaration to become effective.
<PAGE>
SIGNATURE
As requested by order of the Securities and Exchange Commission pursuant to the
Public Utility Holding Company Act of 1935, Central and South West Services,
Inc. has duly caused this report to be signed on the 14th day of November 1996.
By : /s/ Lawrence B. Connors
Lawrence B. Connors
Controller
CSW Credit, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266-0164
Telephone (214) 777-1000
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Transmission
Number Exhibit Method
- ------- ------- ------------
1 Balance sheet as of September 30, Electronic
1996, statements of income for the three
and twelve month periods ended September 30,
1996, and notes to the financial statements.
2 Commercial paper outstanding at Electronic
September 30, 1996.
3 Earnings coverage for the period from Electronic
July 1, 1996 through September 30, 1996
and capital structure at September 30, 1996.
4 Twelve month average as of the end of each Electronic
month of outstanding accounts receivable of
affiliated and non-affiliated companies and
bad debt write-offs related to non-affiliated
companies during the period July 1, 1996
through September 30, 1996.
5 Discount calculation for affiliated Electronic
companies for the three months
ended September 30, 1996.
6 Analysis of the allowed returns on Electronic
common equity for affiliated
companies at September 30, 1996.
7 Factoring expense savings for Electronic
affiliated companies for the three
months ended September 30, 1996.
EXHIBIT 1
CSW CREDIT, INC.
BALANCE SHEET
SEPTEMBER 30, 1996
(thousands)
UNAUDITED
ASSETS
Accounts receivable, net of allowance for
doubtful accounts of $5,479 $883,118
Cash and temporary cash investments 6,201
Deferred income taxes 3,691
Other assets 2,689
-----------
$895,699
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-term debt $809,200
Deferred credit 17,911
Other liabilities 5,530
Unearned revenues 1,980
Stockholder's equity
Common stock, no par; authorized
1,000 shares; issued and
outstanding 255 shares 1
Paid-in capital 61,077
-----------
$895,699
===========
The accompanying notes to financial statements are an integral
part of these statements.
<PAGE>
CSW CREDIT, INC.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30
(thousands)
UNAUDITED
Three Months Ended Twelve Months Ended
1996 1995 1996 1995
------- ------- -------- --------
REVENUES $19,742 $19,816 $66,880 $64,461
------- ------- -------- --------
OPERATING EXPENSES
Interest 11,446 11,802 39,583 39,496
Provision for
bad debts 4,458 3,858 13,609 11,222
Credit line fees 250 349 1,023 1,493
General and
administrative 224 285 573 1,327
------- ------- -------- --------
16,378 16,294 54,788 53,538
------- ------- -------- --------
OPERATING INCOME 3,364 3,522 12,092 10,923
------- ------- -------- --------
OTHER INCOME AND DEDUCTIONS
Interest income 13 12 230 192
Tax benefit of parent
company loss 36 -- 96 --
------- ------- -------- --------
49 12 326 192
------- ------- -------- --------
INCOME BEFORE FEDERAL
INCOME TAXES 3,413 3,534 12,418 11,115
------- ------- -------- --------
FEDERAL INCOME TAXES
Current 1,182 1,330 5,526 (1,944)
Deferred -- 547 (1,485) 6,376
------- ------- -------- --------
1,182 1,877 4,041 4,432
------- ------- -------- --------
NET INCOME $2,231 $1,657 $8,377 $6,683
======= ======= ======== ========
Theaccompanying notes to financial statements are an
integral part of these statements.
<PAGE>
CSW CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
UNAUDITED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CSW Credit, Inc. (Company) is a wholly owned subsidiary of Central and
South West Corporation (CSW), whose primary business is to purchase, without
recourse, the accounts receivable of certain CSW subsidiary companies and
non-affiliated companies. Significant accounting policies are summarized below:
REVENUE RECOGNITION
Revenues are generally recorded for the difference between the face amount
of the receivables purchased and the purchase price.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains an allowance for doubtful accounts at a level which
reflects the amount of receivables not reasonably expected to be collected. The
allowance is determined principally on the basis of collection experience.
Receivables are written off when they are determined to be uncollectable.
FEDERAL INCOME TAXES
The Company, together with affiliated companies, files a consolidated
Federal income tax return and participates in a tax sharing agreement with the
other members of the CSW system. Federal income tax expense resulted in an
effective rate of 33% for the twelve months ended September 30, 1996, and 40%
for the twelve months ended September 30, 1995. The difference in the effective
rates is due primarily to consolidated allocations and true-ups of prior year
income tax accruals.
Deferred income taxes for the three months and twelve months ended
September 30, 1996 vary from the three months and twelve months ended September
30, 1995 primarily due to recognition differences of book and income tax
deductions.
RELATED PARTY TRANSACTIONS
Central and South West Services, Inc., a wholly owned subsidiary of CSW,
provides administrative services to the Company and is reimbursed for the cost
of such services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
(2) REGULATION
The Company is subject to regulation by the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935, as
amended. The SEC has approved the Company's method of calculating the discount
associated with the purchase of CSW subsidiary companies' accounts receivable.
(3) SHORT-TERM FINANCING
The Company issues commercial paper that is secured by the assignment of
its receivables. The weighted average interest rate for the twelve months ended
September 30, 1996, was 5.56%. At September 30, 1996, the Company had a
revolving credit agreement aggregating $880 million to back up its commercial
paper program.
(4) HOUSTON LIGHTING & POWER COMPANY
The Company entered into an agreement with Houston Lighting & Power
Company (HLP) to purchase substantially all of HLP's utility receivables.
The Company is currently subject to a SEC restriction (50% Restriction)
such that the average amount of non-affiliated receivables is less than the
average of the preceding twelve calendar month-end balances of affiliated
account receivables outstanding. The Company received SEC authority to sell a
sufficient amount of HLP receivables acquired by the Company from HLP to third
parties such that the Company remains in compliance with the 50% Restriction.
The Company has been and is in compliance with the 50% Restriction.
(5) FINANCIAL INSTRUMENTS
CASH, TEMPORARY CASH INVESTMENTS, AND SHORT-TERM DEBT
The fair value equals the carrying amount as stated on the balance sheets
because of the short maturity of those instruments.
EXHIBIT 2
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
LEHMAN COMMERCIAL PAPER, INC.
SEPTEMBER 30, 1996
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- ----------- --------- ----------- -------- ---------------
11/08/96 09/12/96 $39,400 5.4600 5.5076
11/05/96 09/13/96 37,300 5.4200 5.4636
10/03/96 09/05/96 13,100 5.4200 5.4429
11/04/96 09/11/96 11,500 5.4700 5.5153
10/30/96 09/16/96 7,600 5.4000 5.4359
10/21/96 09/24/96 35,900 5.5200 5.5429
11/13/96 09/25/96 8,000 5.3800 5.4197
10/24/96 09/17/96 15,900 5.4000 5.4301
10/23/96 09/20/96 32,000 5.4500 5.4774
10/24/96 08/29/96 4,000 5.3700 5.4152
10/15/96 08/16/96 32,000 5.3600 5.4083
10/16/96 08/19/96 16,500 5.3500 5.3965
10/11/96 07/18/96 39,200 5.5100 5.5826
10/07/96 08/13/96 37,800 5.3500 5.3941
10/04/96 08/21/96 8,800 5.3300 5.3649
10/21/96 08/26/96 13,500 5.3500 5.3949
10/03/96 08/28/96 5,000 5.3600 5.3889
10/17/96 08/22/96 21,300 5.3300 5.3746
10/18/96 08/23/96 28,600 5.3400 5.3847
-----------
$407,400
===========
<PAGE>
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
GOLDMAN SACHS & CO.
SEPTEMBER 30, 1996
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- ----------- ---------- ----------- ---------- -------------
11/06/96 09/17/96 $10,500 5.4000 5.4408
10/24/96 09/17/96 11,500 5.3800 5.4099
10/22/96 09/20/96 6,900 5.4300 5.4563
11/04/96 09/09/96 10,400 5.4500 5.4966
11/05/96 09/13/96 11,200 5.4100 5.4534
10/30/96 09/16/96 15,300 5.4000 5.4359
11/14/96 09/25/96 37,700 5.3700 5.4104
11/07/96 09/26/96 12,700 5.3800 5.4140
11/12/96 09/27/96 15,500 5.3800 5.4172
10/22/96 09/23/96 5,000 5.4800 5.5043
10/08/96 09/23/96 9,000 5.4800 5.4925
10/08/96 09/23/96 2,500 5.4800 5.4925
10/15/96 08/16/96 25,600 5.3600 5.4083
10/09/96 08/21/96 40,400 5.3300 5.3690
10/25/96 08/26/96 13,800 5.3500 5.3981
10/02/96 08/09/96 22,800 5.3600 5.4034
10/10/96 08/12/96 40,600 5.3600 5.4075
10/08/96 08/14/96 5,300 5.3600 5.4043
10/29/96 08/29/96 22,100 5.3900 5.4397
10/08/96 09/04/96 10,800 5.4100 5.4378
10/04/96 09/06/96 18,900 5.4200 5.4429
10/17/96 08/22/96 21,000 5.3400 5.3847
10/28/96 08/28/96 20,000 5.4000 5.4499
10/22/96 08/28/96 12,300 5.4000 5.4449
-----------
$401,800
===========
TOTAL COMMERCIAL PAPER OUTSTANDING:
Lehman commercial Paper, Inc. $407,400
Goldman Sachs & Co. 401,800
----------
$809,200
==========
EXHIBIT 3
CSW CREDIT, INC.
EARNINGS COVERAGE
(thousands, except ratios)
1996
JULY AUGUST SEPTEMBER
Net Income $718 $804 $709
Income Taxes 387 413 382
Tax benefit of parent
company loss - (36) -
Interest Expense 3,697 3,952 3,797
---------- --------- --------
$4,802 $5,133 $4,888
========== ========= ========
Interest Expense $3,697 $3,952 $3,797
Ratio of Earnings
to Fixed Charges 1.30 1.30 1.29
CAPITAL STRUCTURE
SEPTEMBER 30, 1996
(thousands)
Short-term Debt $809,200 93%
Common Equity 61,078 7%
------------ ---------
Total $870,278 100%
============ =========
EXHIBIT 4
CSW CREDIT, INC.
AVERAGE MONTH END ACCOUNTS RECEIVABLE
(thousands)
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
July 31, 1996 August 31, 1996 September 30, 1996
Non-Affiliated-HLP $338,672 $342,254 $348,689
Less: HLP receivables
sold to BONY - - 1,200
--------------- ----------------- ----------------
HLP net receivables $338,672 $342,254 $347,489
Non-Affiliated-Other 27,527 27,859 27,884
--------------- ----------------- ----------------
Total Non-Affiliated 366,199 370,113 375,373
Less: Affiliated 382,608 380,797 375,392
--------------- ----------------- ----------------
Excess Restriction ($16,409) ($10,684) ($19)
=============== ================= ================
BAD DEBT WRITE-OFFS
(thousands)
1996
---------------------------------------------------------
JULY AUGUST SEPTEMBER
--------------- ----------------- --------------------
Non-Affiliated $358 $625 $698
CENTRAL POWER AND LIGHT COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED SEPTEMBER 30, 1996
Retail Wholesale
---------- -----------
Weighted Cost of Capital (Annualized) 0.061217 0.061660
Average Days Outstanding 32.03 3.93
---------- -----------
Weighted Cost of Capital (Average
Days Outstanding) 0.005371 0.000665
Collection Experience Factor 0.001886
Agency Fee Rate 0.020000 0.020000
---------- -----------
Total Discount Factor 0.027257 0.020665
========== ===========
ASSUMPTIONS
INTEREST RATE 0.05450
RETAIL ROCE 0.11750
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
DISCOUNT CALCULATION
THREE MONTHS ENDED SEPTEMBER 30, 1996
Retail Wholesale
---------- -----------
Weighted Cost of Capital (Annualized) 0.060612 0.061660
Average Days Outstanding 34.51 87.02
---------- -----------
Weighted Cost of Capital (Average
Days Outstanding) 0.005734 0.014723
Collection Experience Factor 0.002344
Agency Fee Rate 0.020000 0.020000
---------- -----------
Total Discount Factor 0.028078 0.034723
========== ===========
ASSUMPTIONS
INTEREST RATE 0.05450
RETAIL ROCE 0.11000
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED SEPTEMBER 30, 1996
Arkansas Louisiana Texas Wholesale
---------- ---------- --------- ----------
Weighted Cost of Capital
(Annualized) 0.063515 0.063435 0.064402 0.061660
Average Days Outstanding 36.71 39.71 32.78 51.90
---------- ---------- --------- ----------
Weighted Cost of Capital
(Average Days Outstanding) 0.006391 0.006901 0.005784 0.008771
Collection Experience Factor 0.003074 0.002852 0.002163
Agency Fee Rate 0.020000 0.020000 0.020000 0.020000
---------- ---------- --------- ----------
Total Discount Factor 0.029464 0.029754 0.027947 0.028771
========== ========== ========= ==========
ASSUMPTIONS
INTEREST RATE 0.05450
ARKANSAS ROCE 0.14600
LOUISIANA ROCE 0.14500
TEXAS ROCE 0.15700
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
<PAGE>
WEST TEXAS UTILITIES COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED SEPTEMBER 30, 1996
Retail Wholesale
---------- -----------
Weighted Cost of Capital (Annualized) 0.060914 0.061660
Average Days Outstanding 35.41 20.03
---------- -----------
Weighted Cost of Capital (Average
Days Outstanding) 0.005909 0.003384
Collection Experience Factor 0.003727
Agency Fee Rate 0.020000 0.020000
---------- -----------
Total Discount Factor 0.029636 0.023384
========== ===========
ASSUMPTIONS
INTEREST RATE 0.05450
RETAIL ROCE 0.11375
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
EXHIBIT 6
CSW CREDIT, INC.
ALLOWED RETURNS ON COMMON EQUITY
SEPTEMBER 30, 1996
ALLOWED
RETURN
CPL
- RETAIL 11.750%
- WHOLESALE 12.300%
PSO
- RETAIL 11.000%
- WHOLESALE 12.300%
SWEPCO
- ARKANSAS 14.600%
- LOUISIANA 14.500%
- TEXAS 15.700%
- WHOLESALE 12.300%
WTU
- RETAIL 11.375%
- WHOLESALE 12.300%
(1) Monthly adjustments are made to compensate for fluctuations in interest
rates and average days outstanding to ensure that actual returns on common
equity do not exceed those allowed on common equity.
EXHIBIT 7
CSW CREDIT, INC.
AFFILIATED COMPANIES
FACTORING EXPENSE SAVINGS
THREE MONTHS ENDED SEPTEMBER 30, 1996
(thousands)
20% 5%
EQUITY EQUITY SAVINGS
--------- --------- --------
CPL $3,087 $2,318 $769
PSO 2,201 1,687 514
SWEPCO 2,544 1,775 769
WTU 953 721 232
--------- --------- --------
TOTAL $8,785 $6,501 $2,284
========= ========= ========
