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 June 30,
1996, statements of income for the three and twelve month periods ended June 30,
1996, and notes to the financial statements as Exhibit 1 attached hereto.
2. Credit hereby certifies that on June 30, 1996, it had $764,000,000 face
amount of commercial paper outstanding at a weighted average cost of 5.44%. This
amount consisted of $380,200,000 issued and sold to Lehman Commercial Paper,
Inc., as dealer, and $383,800,000 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 June 30, 1996.
3. Credit hereby files as Exhibit 3 attached hereto the earnings coverage
for Credit's indebtedness for the period from April 1, 1996 through June 30,
1996 and Credit's capital structure at June 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 April 1, 1996 through June
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 $337,791,000 outstanding during the
twelve months ended June 30, 1996. During the quarter ended June 30, 1996 the
daily maximum borrowing relating to the purchase of accounts receivable from HLP
was $432,078,000.
6. Credit hereby certifies it was in accordance with the 50% restriction
on non-affiliated receivables during the quarter ended June 30, 1996, as shown
in Exhibit 4 attached hereto.
7. Credit hereby certifies that any HLP receivables acquired during
the quarter were retained by Credit.
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 2
<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 13th day of August 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 3
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Transmission
Number Exhibit Method
- ------- ------- ------------
1 Balance sheet as of June 30, 1996, statements of Electronic
income for the three and twelve month periods
ended June 30, 1996, and notes to the financial
statements.
2 Commercial paper outstanding at June 30, 1996. Electronic
3 Earnings coverage for the period from April 1, Electronic
1996 through June 30, 1996 and capital structure
at June 30, 1996.
4 Twelve month average as of the end of each month Electronic
of outstanding accounts receivable of affiliated
and non-affiliated companies and bad debt write-
offs related to non-affiliated companies during
the period April 1, 1996 through June 30, 1996.
5 Discount calculation for affiliated companies for Electronic
the three months ended June 30, 1996.
6 Analysis of the allowed returns on common equity Electronic
for affiliated companies at June 30, 1996.
7 Factoring expense savings for affiliated companies Electronic
for the three months ended June 30, 1996.
Page 4
<PAGE>
EXHIBIT 1
---------
CSW CREDIT, INC.
BALANCE SHEET
JUNE 30, 1996
(THOUSANDS)
UNAUDITED
ASSETS
-------
Accounts receivable, net of allowance for
doubtful accounts of $4,225 $840,124
Cash and temporary cash investments 51
Deferred income taxes 3,691
Other assets 3,222
--------
$847,088
========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Short-term debt $764,000
Deferred credit 16,989
Other liabilities 4,837
Unearned revenues 2,850
Stockholder's equity
Common stock, no par; authorized
1,000 shares; issued and
outstanding 253 shares 1
Paid-in capital 58,411
--------
$847,088
========
The accompanying notes to financial statements are an integral
part of these statements.
Page 5
<PAGE>
CSW CREDIT, INC.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30
(THOUSANDS)
UNAUDITED
Three Months Ended Twelve Months Ended
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
REVENUES $16,170 $15,540 $66,955 $61,825
------ ------- ------- -------
OPERATING EXPENSES
Interest 9,102 9,394 39,939 38,165
Provision for
bad debts 3,320 3,041 13,010 10,239
Credit line fees 239 349 1,121 1,564
General and
administrative 229 290 634 1,470
------ ------- ------- -------
12,890 13,074 54,704 51,438
------ ------- ------- -------
OPERATING INCOME 3,280 2,466 12,251 10,387
------ ------- ------- -------
OTHER INCOME AND DEDUCTIONS
Interest income 22 12 229 188
Tax benefit of parent
company loss 24 - 60 -
------ ------- ------- -------
46 12 289 188
INCOME BEFORE FEDERAL
INCOME TAXES 3,326 2,478 12,540 10,575
------ ------- ------- -------
FEDERAL INCOME TAXES
Current 1,156 507 5,674 (1,990)
Deferred - 360 (937) 5,062
------ ------- ------- -------
1,156 867 4,737 3,072
------ ------- ------- -------
NET INCOME $ 2,170 $ 1,611 $ 7,803 $ 7,503
====== ======= ======= =======
The accompanying notes to financial statements are an integral
part of these statements.
Page 6
<PAGE>
CSW CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 38% for the twelve months ended June 30, 1996, and 29% for the
twelve months ended June 30, 1995. The difference in the effective rates is
primarily due to consolidated allocations and true-ups of prior year income tax
accruals.
Deferred income taxes for the three months and twelve months ended June
30, 1996 vary from the three months and twelve months ended June 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 7
<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 rates for the twelve months ended
June 30, 1996, was 5.68%. At June 30, 1996, the Company had a revolving credit
agreement aggregating $830 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.
(6) SALE OF TRANSOK, INC.
On June 6, 1996 CSW sold Transok, Inc. (Transok) to Tejas. As a result,
the statements of income for the three and twelve month periods ended June 30,
1996 do not reflect a full three and twelve months of earnings associated with
the purchase of Transok's accounts receivable.
Page 8
<PAGE>
EXHIBIT 2
---------
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
LEHMAN COMMERCIAL PAPER, INC.
JUNE 30, 1996
(THOUSANDS)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
-------- -------- --------- -------- ------------
08/16/96 06/14/96 $ 10,000 5.4200% 5.4719%
07/23/96 06/17/96 15,400 5.4300 5.4596
07/30/96 06/12/96 12,700 5.4000 5.4392
08/02/96 06/13/96 41,600 5.4200 5.4611
07/02/96 06/18/96 2,200 5.4200 5.4314
08/07/96 06/21/96 26,000 5.4300 5.4688
07/02/96 06/28/96 1,700 5.5000 5.5034
08/23/96 06/19/96 24,600 5.4500 5.5042
08/06/96 06/20/96 36,100 5.4500 5.4891
07/26/96 06/05/96 15,000 5.3700 5.4112
07/15/96 05/16/96 10,200 5.3500 5.3981
07/19/96 05/17/96 22,300 5.3500 5.4006
07/08/96 05/08/96 15,100 5.3500 5.3989
07/12/96 05/14/96 15,900 5.3300 5.3770
07/17/96 05/20/96 30,900 5.3400 5.3863
07/23/96 05/23/96 8,500 5.3400 5.3888
07/11/96 05/30/96 20,400 5.3200 5.3532
07/18/96 05/21/96 39,400 5.3300 5.3762
07/22/96 05/22/96 32,200 5.3400 5.3888
--------
$380,200
========
Page 9
<PAGE>
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
GOLDMAN SACHS & CO.
JUNE 30, 1996
(THOUSANDS)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
-------- -------- --------- -------- ------------
08/02/96 06/13/96 $ 500 5.4300% 5.4713%
08/08/96 06/13/96 5,000 5.4500 5.4966
08/08/96 06/13/96 14,500 5.4500 5.4966
07/29/96 06/10/96 4,000 5.4300 5.4704
07/29/96 06/10/96 13,500 5.4300 5.4704
08/07/96 06/12/96 8,000 5.4500 5.4966
08/09/96 06/14/96 22,800 5.4300 5.4763
08/20/96 06/25/96 14,300 5.4700 5.5169
08/15/96 06/26/96 5,000 5.4600 5.5017
07/02/96 06/28/96 1,800 5.5000 5.5034
09/06/96 06/17/96 11,000 5.4700 5.5382
08/12/96 06/24/96 20,000 5.4600 5.5009
08/12/96 06/24/96 20,600 5.4600 5.5009
07/02/96 05/16/96 5,000 5.3600 5.3978
07/10/96 05/16/96 5,000 5.3600 5.4043
07/16/96 05/23/96 8,000 5.3300 5.3730
07/09/96 05/14/96 40,000 5.3500 5.3949
07/10/96 05/15/96 36,500 5.3600 5.4051
07/15/96 05/16/96 20,000 5.3600 5.4083
07/11/96 05/24/96 1,000 5.3300 5.3681
07/26/96 06/05/96 15,100 5.3900 5.4315
08/06/96 06/07/96 4,800 5.4500 5.5000
08/05/96 06/07/96 30,500 5.4500 5.4991
07/11/96 05/24/96 7,000 5.3300 5.3681
07/24/96 05/24/96 26,000 5.3500 5.3989
07/25/96 06/04/96 43,900 5.3900 5.4315
--------
$383,800
========
TOTAL COMMERCIAL PAPER OUTSTANDING:
Lehman Commercial Paper, Inc. $380,200
Goldman Sachs & Co. 383,800
--------
$764,000
========
Page 10
<PAGE>
EXHIBIT 3
---------
CSW CREDIT, INC.
EARNINGS COVERAGE
(THOUSANDS, EXCEPT RATIOS)
1996
----------------------------------------
APRIL MAY JUNE
--------- ---------- ----------
Net Income $ 392 $ 391 $ 1,387
Income Taxes 205 204 747
Tax benefit of parent
company loss (12) (12) -
Interest Expense 2,759 3,070 3,273
-------- --------- --------
$ 3,344 $ 3,653 $ 5,407
======== ======== ========
Interest Expense $ 2,759 $ 3,070 $ 3,273
-------- -------- --------
Ratio of Earnings
to Fixed Charges 1.21 1.19 1.65
-------- ------- --------
CAPITAL STRUCTURE
JUNE 30, 1996
(THOUSANDS)
Short-term Debt $ 764,000 93%
Common Equity 58,412 7%
--------- -----
Total $ 822,412 100%
========= =====
Page 11
<PAGE>
EXHIBIT 4
---------
CSW CREDIT, INC.
AVERAGE MONTH END ACCOUNTS RECEIVABLE
(THOUSANDS)
1996
---------------------------------------------
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
April 30 May 31 June 30
-------------- ------------- --------------
Non-Affiliated-HLP $ 333,573 $ 335,057 $ 337,791
Non-Affiliated-Other 27,087 27,093 27,484
-------- ------- -------
Total Non-Affiliated 360,660 362,150 365,275
Less: Affiliated 380,784 384,604 382,322
-------- -------- --------
Excess Restriction $ (20,124) $ (22,454) $ (17,047)
BAD DEBT WRITE-OFFS
(THOUSANDS)
1996
----------------------------------------
APRIL MAY JUNE
--------- ---------- ----------
Non-Affiliated $ 376 $ 535 $ 312
Page 12
<PAGE>
EXHIBIT 5
---------
CENTRAL POWER AND LIGHT COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED JUNE 30, 1996
Retail Wholesale
-------- ---------
Weighted Cost of Capital (Annualized) 0.060821 0.061264
Average Days Outstanding 29.53 4.70
-------- --------
Weighted Cost of Capital (Average 0.004919 0.000789
Days Outstanding)
Collection Experience Factor 0.001790 0.000000
Agency Fee Rate 0.020000 0.020000
-------- --------
Total Discount Factor 0.026709 0.020789
======== ========
ASSUMPTIONS
- -----------
INTEREST RATE 0.05400
RETAIL ROCE 0.11750
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
Page 13
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
DISCOUNT CALCULATION
THREE MONTHS ENDED JUNE 30, 1996
Retail Wholesale
-------- ---------
Weighted Cost of Capital (Annualized) 0.060216 0.061264
Average Days Outstanding 41.37 53.87
-------- --------
Weighted Cost of Capital (Average 0.006825 0.009047
Days Outstanding)
Collection Experience Factor 0.002349 0.000000
Agency Fee Rate 0.020000 0.020000
-------- --------
Total Discount Factor 0.029174 0.029047
======== ========
ASSUMPTIONS
- -----------
INTEREST RATE 0.05400
RETAIL ROCE 0.11000
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
Page 14
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED JUNE 30, 1996
Arkansas Louisiana Texas Wholesale
-------- --------- ------- ---------
Weighted Cost of Capital (Annualized) 0.063119 0.063039 0.064006 0.061264
Average Days Outstanding 38.30 42.89 33.67 91.05
-------- -------- -------- --------
Weighted Cost of Capital (Average 0.006624 0.007409 0.005903 0.015290
Days Outstanding)
Collection Experience Factor 0.002746 0.002688 0.002081 0.000000
Agency Fee Rate 0.020000 0.020000 0.020000 0.020000
-------- -------- -------- --------
Total Discount Factor 0.029369 0.030097 0.027984 0.035290
======== ======== ======== ========
ASSUMPTIONS
- -----------
INTEREST RATE 0.05400
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 15
<PAGE>
WEST TEXAS UTILITIES COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED JUNE 30, 1996
Retail Wholesale
-------- ---------
Weighted Cost of Capital (Annualized) 0.060518 0.061264
Average Days Outstanding 35.67 17.79
-------- --------
Weighted Cost of Capital (Average 0.005918 0.002986
Days Outstanding)
Collection Experience Factor 0.002906 0.000000
Agency Fee Rate 0.020000 0.020000
-------- --------
Total Discount Factor 0.028824 0.022986
======== ========
ASSUMPTIONS
- -----------
INTEREST RATE 0.05400
RETAIL ROCE 0.11375
WHOLESALE ROCE 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
Page 16
<PAGE>
TRANSOK, INC. (1)
DISCOUNT CALCULATION
THREE MONTHS ENDED JUNE 30, 1996
Weighted Cost of Capital (Annualized) 0.061212
Daily Rate 0.000168
Collection Experience Factor 0.000000
Agency Fee Rate 0.020000
--------
Total Discount Factor (2)
========
ASSUMPTIONS
- -----------
INTEREST RATE 0.05400
RETURN ALLOWED 0.12300
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
(1) On June 6, 1996 CSW sold Transok to Tejas Gas Corporation.
(2) Total discount factor varies for each customer and is calculated using
average days outstanding for that customer.
Page 17
<PAGE>
EXHIBIT 6
---------
CSW CREDIT, INC.
ALLOWED RETURNS ON COMMON EQUITY
JUNE 30, 1996
ALLOWED
RETURN (1)
----------
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%
TRANSOK (2) 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.
(2) On June 6, 1996 CSW sold Transok to Tejas Gas Corporation.
Page 18
<PAGE>
EXHIBIT 7
---------
CSW CREDIT, INC.
AFFILIATED COMPANIES
FACTORING EXPENSE SAVINGS
THREE MONTHS ENDED JUNE 30, 1996
(THOUSANDS)
20% Equity 5% Equity Savings
---------- --------- -------
CPL $ 2,381 $ 1,785 $ 596
PSO 1,447 1,104 343
SWEPCO 1,981 1,379 602
WTU 641 484 157
TRANSOK (1) 1,384 1,024 360
-------- -------- -------
TOTAL $ 7,834 $ 5,776 $ 2,058
======== ======== =======
(1) The factoring expense savings for the three months ended June 30, 1996 do
not reflect a full three months of earnings associated with the purchase of
Transok's accounts receivable.
Page 19
