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 March 31,
1997, statements of income for the three and twelve month periods ended March
31, 1997, and notes to the financial statements as Exhibit 1 attached hereto.
2. Credit hereby certifies that on March 31, 1997, it had $493,300,000
face amount of commercial paper outstanding at a weighted average cost of 5.43%.
This amount consisted of $273,950,000 issued and sold to Lehman Commercial
Paper, Inc., as dealer, and $219,350,000 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 March 31,
1997.
3. Credit hereby files as Exhibit 3 attached hereto the earnings coverage
for Credit's indebtedness for the period from January 1, 1997 through March 31,
1997 and Credit's capital structure at March 31, 1997. 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, Central Power and Light Company
(CPL), Public Service Company of Oklahoma (PSO), Southwestern Electric Power
Company (SWEPCO), and West Texas Utilities Company (WTU), Credit hereby
certifies that the allowed returns on common equity for the period from January
1, 1997 through March 31, 1997 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.
5. With respect to Houston Lighting & Power Company (HLP), Credit had
month ending average net receivables of $345,112,000 outstanding during the
twelve months ended March 31, 1997. During the quarter ended March 31, 1997 the
daily maximum borrowing relating to the purchase of accounts receivable from HLP
was $313,792,000.
6. Credit hereby certifies it was in compliance with the 50% restriction
on non-affiliated receivables during the months of January and February 1997 as
shown in Exhibit 4 attached hereto. In addition, for the month of March 1997
Credit was in compliance with the terms of the temporary relief as defined in
the order issued on March 11, 1997 as shown in Exhibit 4 attached hereto.
7. Credit hereby certifies that during the period January 1, 1997 through
March 31, 1997, 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:
January $13,400,000 and February $18,200,000. There was no sale of HLP
receivables in March. The figures set forth in Exhibit 4 attached hereto shows
the detail of the receivables.
8. Credit hereby files as Exhibit 8 attached hereto the calculation, by
month, of the amount CPL has received attributable to the factoring of HLP
receivables by Credit.
9. Credit hereby files as Exhibit 9 attached hereto a copy of any state
regulatory commission decision or analysis addressing the effect of the
factoring of CSW system accounts receivable rates which was issued during the
period January 1, 1997 through March 31, 1997.
10. Credit hereby files as Exhibit 10 attached hereto a copy of the
audited annual financial statements for the year ended December 31, 1996.
11. Credit hereby files as Exhibit 11 attached hereto a copy of the
accounting system procedures and chart of accounts of Credit as maintained by
Central and South West Services, Inc.
12. 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, December 16, 1994, and March 11, 1997, 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.
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 15th day of May 1997.
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
EXHIBIT INDEX
-------------
Exhibit Transmission
Number Exhibit Method
- ------- ------- ------------
1 Balance sheet as of March 31, 1997, statements Electronic
of income for the three and twelve month periods
ended March 31, 1997, and notes to the financial
statements.
2 Commercial paper outstanding at March 31, 1997. Electronic
3 Earnings coverage for the period from January 1, 1997 Electronic
through March 31, 1997 and capital structure at
March 31, 1997.
4 Twelve month average as of the end of each month of Electronic
outstanding accounts receivable of affiliated and
non-affiliated companies and bad debt write-offs
related to non-affiliated companies during the
period January 1, 1997 through March 31, 1997.
5 Discount calculation for affiliated companies for the Electronic
three months ended March 31, 1997.
6 Analysis of the allowed returns on common equity for Electronic
affiliated companies at March 31, 1997.
7 Factoring expense savings for the affiliated companies Electronic
for the three months ended March 31, 1997.
8 Calculation, by month, of amount received by CPL Electronic
attributable to factoring of HLP recievables.
9 Copy of any state regulatory commission decision or Electronic
analysis addressing the effect of the factoring of
CSW system accounts receivable rates issued during
the period January 1, 1997 through March 31, 1997.
10 Copy of audited annual financial statements for the Electronic
year ended December 31, 1996.
11 Copy of the accounting system procedures and chart of Electronic
accounts of Credit as maintained by Central and South
West Services, Inc.
EXHIBIT 1
Page 1 of 5
CSW CREDIT, INC.
BALANCE SHEET
AS OF MARCH 31, 1997
(THOUSANDS, UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $6,803
Accounts receivable, net of allowance for doubtful
accounts of $ 776 536,696
--------
Total current assets 543,499
OTHER ASSETS:
Deferred income taxes 1,796
Other 1,773
--------
Total other assets 3,569
Total assets $547,068
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term debt $493,300
Deferred credits 11,876
Unearned revenue 716
Other liabilities 1,747
--------
Total current liabilities 507,639
STOCKHOLDER'S EQUITY:
Common stock, no par; authorized 1,000 shares;
issued and outstanding 231 shares 1
Paid-in capital 39,428
--------
Total stockholder's equity 39,429
--------
Total liabilities and stockholder's equity $547,068
========
The accompanying notes to the financial statements are
an integral part of these statements.
EXHIBIT 1
Page 2 of 5
CSW CREDIT, INC.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED MARCH 31
(THOUSANDS, UNAUDITED)
Three Months Ended Twelve Months Ended
1997 1996 1997 1996
-------- ------- ------- --------
REVENUES $14,794 $15,027 $66,087 $66,325
-------- ------- ------- --------
OPERATING EXPENSES:
Interest 7,790 9,158 37,645 40,231
Provision for bad debts 4,402 2,752 15,762 12,731
Credit line fees 171 246 849 1,231
General and administrative (175) 219 453 695
-------- ------- ------- --------
12,188 12,375 54,708 54,888
-------- ------- ------- --------
OPERATING INCOME 2,606 2,652 11,379 11,437
-------- ------- ------- --------
OTHER INCOME AND DEDUCTIONS:
Interest income 16 121 75 219
Tax benefit of parent
company loss 65 36 150 36
-------- ------- ------- --------
81 157 225 255
-------- ------- ------- --------
INCOME BEFORE FEDERAL INCOME TAXES 2,687 2,809 11,604 11,692
-------- ------- ------- --------
FEDERAL INCOME TAXES:
Current 59 971 2,153 5,026
Deferred 859 0 1,895 (577)
-------- ------- ------- --------
918 971 4,048 4,449
-------- ------- ------- --------
NET INCOME $1,769 $1,838 $7,556 $7,243
======== ======= ======= ========
The accompanying notes to the financial statements are an
integral part of these statements.
EXHIBIT 1
Page 3 of 5
CSW CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
CSW Credit, Inc. (Company) is a wholly owned subsidiary of Central and South
West Corporation (CSW or the Parent Company), whose primary business is to
purchase, without recourse, the accounts receivable of certain CSW subsidiary
companies and non-affiliated companies. Revenue from affiliated companies for
the period ended March 31, 1997 was $7.2 million. 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 34.2% for the period ended March 31, 1997.
Deferred income taxes resulted primarily from the differences between book and
tax deductions for bad debt expense. The Internal Revenue Code provides for tax
deductions for bad debts when they are charged off. As a result of a favorable
earnings history, the Company did not record any valuation allowance against
deferred tax assets at March 31, 1997.
STATEMENT OF CASH FLOWS
Cash equivalents are considered to be highly liquid debt instruments purchased
with a maturity of three months or less. Accordingly, the Company's temporary
cash investments are considered cash equivalents.
EXHIBIT 1
Page 4 of 5
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.
RECLASSIFICATION
Certain financial statement items have been reclassified to conform to the 1997
presentation.
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 period ending March 31,
1997 was 5.43%. At March 31, 1997, the Company had a revolving credit agreement
aggregating $830 million to back up its commercial paper program. The revolving
credit agreement expires June 27, 1997 and has a fee of .075% on the commitment.
At March 31, 1997, the Company was in compliance with the revolving credit
agreement covenants.
4. HOUSTON LIGHTING & POWER COMPANY:
The Company entered into an agreement with Houston Lighting & Power Company
(HLP) to purchase substantially all of its utility receivables. During the three
months ended March 31, 1997 the Company had average HLP receivables of
approximately $284.5 million.
Prior to March 11, 1997, the Company was subject to a SEC restriction (50%
Restriction) which required the average amount of non-affiliated accounts
receivable outstanding to be less than the average amount of affiliated accounts
receivable outstanding for the previous twelve calendar months. The Company
received SEC authority to sell off excess HLP receivables to third parties in
order to maintain the Company's compliance with the 50% Restriction.
EXHIBIT 1
Page 5 of 5
On March 11, 1997, the SEC issued an order granting the Company temporary relief
from the 50% Restriction. The SEC has allowed the Company to factor HLP
receivables up to a maximum of $450 million while increasing the factored
receivables amount to $100 million for other non-affiliated utility companies.
This relief has been granted through December 31, 2000. At March 31, 1997 the
Company was in compliance with the provisions set forth by the SEC under the
terms of the temporary relief.
5. FINANCIAL INSTRUMENTS:
CASH, CASH EQUIVALENTS, 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
Page 1 of 2
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
LEHMAN COMMERCIAL PAPER, INC.
MARCH 31, 1997
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- -------- -------- -------- ----------- ------------
4/22/97 03/14/97 $20,000 5.4000 5.4318
4/24/97 03/17/97 10,000 5.4000 5.4310
4/21/97 03/13/97 5,000 5.3800 5.4115
4/17/97 03/10/97 10,400 5.3800 5.4107
4/21/97 03/12/97 8,800 5.3700 5.4022
4/23/97 03/21/97 13,000 5.6000 5.6289
4/17/97 03/24/97 8,600 5.6000 5.6210
4/14/97 03/20/97 15,000 5.5000 5.5211
4/16/97 03/18/97 7,300 5.4300 5.4539
4/22/97 03/19/97 11,800 5.4300 5.4580
4/16/97 03/07/97 8,600 5.3700 5.4022
4/08/97 02/21/97 21,700 5.3200 5.3564
4/09/97 02/24/97 8,400 5.3100 5.3447
4/07/97 02/20/97 11,900 5.3200 5.3564
4/02/97 02/14/97 26,800 5.3300 5.3673
4/03/97 02/19/97 27,600 5.3300 5.3642
4/11/97 03/04/97 18,550 5.3700 5.4006
4/18/97 03/06/97 9,900 5.3700 5.4047
4/07/97 02/28/97 5,800 5.3700 5.4006
4/09/97 02/26/97 13,500 5.3200 5.3532
4/10/97 02/27/97 11,300 5.3300 5.3634
-------
$273,950
=======
EXHIBIT 2
Page 2 of 2
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
GOLDMAN SACHS & CO.
MARCH 31, 1997
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- -------- -------- -------- ----------- ------------
4/21/97 03/17/97 $10,000 5.4100 5.4386
4/11/97 03/18/97 7,300 5.4100 5.4296
4/24/97 03/14/97 10,800 5.4000 5.4334
4/22/97 03/13/97 1,494 5.3900 5.4225
4/25/97 03/13/97 13,006 5.3900 5.4249
4/14/97 03/20/97 14,400 5.4400 5.4606
5/02/97 03/26/97 18,400 5.6200 5.6527
5/02/97 03/27/97 2,000 5.6200 5.6518
4/07/97 03/24/97 8,600 5.5700 5.5821
4/25/97 03/21/97 9,000 5.5600 5.5902
4/07/97 03/21/97 4,100 6.0700 6.0874
4/14/97 02/25/97 3,100 5.3200 5.3580
4/23/97 03/04/97 18,550 5.3800 5.4205
4/14/97 02/24/97 8,300 5.3100 5.3487
4/04/97 02/13/97 19,200 5.3500 5.3901
4/18/97 02/21/97 21,700 5.3100 5.3542
4/11/97 03/06/97 7,000 5.3500 5.3788
4/17/97 03/11/97 11,400 5.3700 5.3998
4/21/97 03/12/97 8,900 5.3900 5.4225
4/16/97 03/10/97 10,400 5.3700 5.3998
4/11/97 03/06/97 3,000 5.3500 5.3788
4/16/97 03/07/97 8,700 5.3700 5.4022
--------
$219,350
========
TOTAL COMMERCIAL PAPER OUTSTANDING:
Lehman Commercial Paper, Inc. $273,950
Goldman Sachs & Co. 219,350
-------
$493,300
=======
EXHIBIT 3
CSW CREDIT, INC.
EARNINGS COVERAGE
(thousands, except ratios)
1997
JANUARY FEBRUARY MARCH
Net Income $493 $1,021 $255
Income Taxes 254 538 126
Tax benefit of parent
company loss (21) (22) (22)
Interest Expense 2,864 2,502 2,595
------- ------- -------
$3,590 $4,039 $2,954
======= ======= =======
Interest Expense $2,864 $2,502 $2,595
Ratio of Earnings
to Fixed Charges 1.25 1.61 1.14
CAPITAL STRUCTURE
MARCH 31, 1997
(thousands)
Short-term Debt $493,300 93%
Common Equity 39,429 7%
---------------- ----------------
Total $532,729 100%
================ ================
EXHIBIT 4
Page 1 of 2
CSW CREDIT, INC.
AVERAGE MONTH END ACCOUNTS RECEIVABLE
USING 50% RESTRICTION
(thousands)
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
January 31, 1997 February 28, 1997 March 31, 1997
Non-Affiliated-HLP $349,587 $347,210 NA
Less: HLP receivables
sold to BONY 13,400 18,200 NA
--------- --------- ----------
HLP net receivables $336,187 $329,010 NA
Non-Affiliated-Other 29,365 29,576 NA
--------- --------- ----------
Total Non-Affiliated 365,552 358,587 NA
Less: Affiliated 365,587 358,640 NA
--------- --------- ----------
Excess Restriction ($35) ($53) NA
========= ========= ==========
BAD DEBT WRITE-OFFS
(thousands)
1997
-------------------------------------------
JANUARY FEBRUARY MARCH
--------------------------------------------
Non-Affiliated $1,041 $800 NA
EXHIBIT 4
Page 2 of 2
CSW CREDIT, INC.
AVERAGE MONTH END ACCOUNTS RECEIVABLE
USING TEMPORARY RELIEF PROVISIONS
(thousands)
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
January 31, 1997 February 28, 1997 March 31, 1997
---------------------------------------------------
AFFILIATES
- --------------------
CPL NA NA $ 129,012
PSO NA NA 86,953
SWEPCO NA NA 95,901
WTU NA NA 36,921
-------------------------------------------------
Total Affiliates: NA NA $ 348,787
-------------------------------------------------
NON-AFFILIATES
- --------------------
TX-NM POWER NA NA $ 32,989
HL& P NA NA 353,260
-------------------------------------------------
Total Non-Affiliates: NA NA $386,249
-------------------------------------------------
BAD DEBT WRITE-OFFS
(thousands)
January 31, 1997 February 28, 1997 March 31, 1997
---------------------------------------------------
NON-AFFILIATES
- --------------------
TX-NM POWER NA NA 204
HL& P NA NA 536
---------------------------------------------------
Total Non-Affiliates: NA NA $740
---------------------------------------------------
EXHIBIT 5
Page 1 of 4
CENTRAL POWER AND LIGHT COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED MARCH 31, 1997
Retail Wholesale
------------ ------------
Weighted Cost of Capital (Annualized) 0.061097 0.061611
Average Days Outstanding 38.18 24.23
------------ ------------
Weighted Cost of Capital (Average
Days Outstanding) 0.006388 0.004100
Collection Experience Factor 0.003460
Agency Fee Rate 0.020000 0.020000
------------ ------------
Total Discount Factor 0.029848 0.024100
============ ============
ASSUMPTIONS
INTEREST RATE 0.05430
RETAIL ROCE 0.11750
WHOLESALE ROCE 0.12390
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
EXHIBIT 5
Page 2 of 4
PUBLIC SERVICE COMPANY OF OKLAHOMA
DISCOUNT CALCULATION
THREE MONTHS ENDED MARCH 31, 1997
Retail Wholesale
------------ ------------
Weighted Cost of Capital (Annualized) 0.060492 0.061611
Average Days Outstanding 46.09 36.11
------------ ------------
Weighted Cost of Capital (Average
Days Outstanding) 0.007648 0.006096
Collection Experience Factor 0.002713
Agency Fee Rate 0.020000 0.020000
------------ ------------
Total Discount Factor 0.030361 0.026096
============ ============
ASSUMPTIONS
INTEREST RATE 0.05430
RETAIL ROCE 0.11000
WHOLESALE ROCE 0.12390
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
EXHIBIT 5
Page 3 of 4
SOUTHWESTERN ELECTRIC POWER COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED MARCH 31, 1997
Arkansas Louisiana Texas Wholesale
---------- ----------- --------- ---------
Weighted Cost of Capital (Annualized) 0.063395 0.063315 0.064282 0.061611
Average Days Outstanding 42.49 47.30 38.59 86.53
---------- ----------- --------- ---------
Weighted Cost of Capital (Average
Days Outstanding) 0.007385 0.008201 0.006799 0.014611
Collection Experience Factor 0.003645 0.003019 0.002515
Agency Fee Rate 0.020000 0.020000 0.020000 0.020000
---------- ----------- --------- ---------
Total Discount Factor 0.031030 0.031220 0.029314 0.034611
========== =========== ========= =========
ASSUMPTIONS
INTEREST RATE 0.05430
ARKANSAS ROCE 0.14600
LOUISIANA ROCE 0.14500
TEXAS ROCE 0.15700
WHOLESALE ROCE 0.12390
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
EXHIBIT 5
Page 4 of 4
WEST TEXAS UTILITIES COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED MARCH 31, 1997
Retail Wholesale
------------ ------------
Weighted Cost of Capital (Annualized) 0.060217 0.061034
Average Days Outstanding 42.24 21.74
------------ ------------
Weighted Cost of Capital (Average
Days Outstanding) 0.006958 0.003622
Collection Experience Factor 0.005090
Agency Fee Rate 0.020000 0.020000
------------ ------------
Total Discount Factor 0.032048 0.023622
============ ============
ASSUMPTIONS
INTEREST RATE 0.05430
RETAIL ROCE 0.11375
WHOLESALE ROCE 0.12390
TAX RATE 0.38000
DEBT RATIO 0.95000
EQUITY RATIO 0.05000
EXHIBIT 6
CSW CREDIT, INC.
ALLOWED RETURNS ON COMMON EQUITY
MARCH 31, 1997
ALLOWED
RETURN
CPL
- RETAIL 11.750%
- WHOLESALE 12.390%
PSO
- RETAIL 11.000%
- WHOLESALE 12.390%
SWEPCO
- ARKANSAS 14.600%
- LOUISIANA 14.500%
- TEXAS 15.700%
- WHOLESALE 12.390%
WTU
- RETAIL 11.375%
- WHOLESALE 12.390%
EXHIBIT 7
CSW CREDIT, INC.
AFFILIATED COMPANIES
FACTORING EXPENSE SAVINGS
THREE MONTHS ENDED MARCH 31, 1997
(thousands)
20% 5%
EQUITY EQUITY SAVINGS
----------- ------------ -----------
CPL $2,308 $1,730 $578
PSO 1,444 1,105 339
SWEPCO 2,049 1,431 618
WTU 676 509 167
----------- ------------ -----------
TOTAL $6,477 $4,775 $1,702
=========== ============ ===========
EXHIBIT 8
Page 1 of 3
CSW CREDIT, INC.
FACTORING OF HL&P RECEIVABLES
CALCULATION OF CPL RECEIPTS
HL&P
Receivables Finder Fee Finder Fee
Date Balance Rate Amount
- ----------------- -------------------- ------------------ ----------------
1 Jan 1997 286,855,513.99 0.000038 $10,900.51
2 Jan 1997 284,881,262.95 0.000038 10,825.49
3 Jan 1997 282,586,275.20 0.000038 10,738.28
4 Jan 1997 282,586,275.20 0.000038 10,738.28
5 Jan 1997 282,586,275.20 0.000038 10,738.28
6 Jan 1997 278,052,256.71 0.000038 10,565.99
7 Jan 1997 278,463,890.10 0.000038 10,581.63
8 Jan 1997 284,306,337.29 0.000038 10,803.64
9 Jan 1997 293,621,397.57 0.000038 11,157.61
10 Jan 1997 311,472,123.15 0.000038 11,835.94
11 Jan 1997 311,472,123.15 0.000038 11,835.94
12 Jan 1997 311,472,123.15 0.000038 11,835.94
13 Jan 1997 309,600,720.94 0.000038 11,764.83
14 Jan 1997 313,791,535.92 0.000038 11,924.08
15 Jan 1997 310,362,555.76 0.000038 11,793.78
16 Jan 1997 301,489,949.51 0.000038 11,456.62
17 Jan 1997 300,784,852.01 0.000038 11,429.82
18 Jan 1997 300,784,852.01 0.000038 11,429.82
19 Jan 1997 300,784,852.01 0.000038 11,429.82
20 Jan 1997 300,784,852.01 0.000038 11,429.82
21 Jan 1997 309,291,225.54 0.000038 11,753.07
22 Jan 1997 311,619,382.55 0.000038 11,841.54
23 Jan 1997 309,501,342.96 0.000038 11,761.05
24 Jan 1997 306,515,187.35 0.000038 11,647.58
25 Jan 1997 306,515,187.35 0.000038 11,647.58
26 Jan 1997 306,515,187.35 0.000038 11,647.58
27 Jan 1997 301,387,807.63 0.000038 11,452.74
28 Jan 1997 292,587,861.92 0.000038 11,118.34
29 Jan 1997 290,458,173.07 0.000038 11,037.41
30 Jan 1997 279,450,717.27 0.000038 10,619.13
31 Jan 1997 278,749,320.29 0.000038 10,592.47
----------------
Jan 1997 $350,334.59
================
EXHIBIT 8
Page 2 of 3
CSW CREDIT, INC.
FACTORING OF HL&P RECEIVABLES
CALCULATION OF CPL RECEIPTS
HL&P
Receivables Finder Fee Finder Fee
Date Balance Rate Amount
- ----------------- -------------------- ------------------ ---------------
1 Feb 1997 278,749,320.29 0.000038 $10,592.47
2 Feb 1997 278,749,320.29 0.000038 10,592.47
3 Feb 1997 284,341,557.45 0.000038 10,804.98
4 Feb 1997 277,125,205.14 0.000038 10,530.76
5 Feb 1997 277,764,057.93 0.000038 10,555.03
6 Feb 1997 279,347,652.96 0.000038 10,615.21
7 Feb 1997 278,974,782.04 0.000038 10,601.04
8 Feb 1997 278,974,782.04 0.000038 10,601.04
9 Feb 1997 278,974,782.04 0.000038 10,601.04
10 Feb 1997 295,542,187.77 0.000038 11,230.60
11 Feb 1997 299,462,186.72 0.000038 11,379.56
12 Feb 1997 299,410,960.69 0.000038 11,377.62
13 Feb 1997 301,483,826.30 0.000038 11,456.39
14 Feb 1997 301,464,921.92 0.000038 11,455.67
15 Feb 1997 301,464,921.92 0.000038 11,455.67
16 Feb 1997 301,464,921.92 0.000038 11,455.67
17 Feb 1997 301,464,921.92 0.000038 11,455.67
18 Feb 1997 287,685,303.73 0.000038 10,932.04
19 Feb 1997 285,141,113.97 0.000038 10,835.36
20 Feb 1997 282,683,976.31 0.000038 10,741.99
21 Feb 1997 278,983,122.19 0.000038 10,601.36
22 Feb 1997 278,983,122.19 0.000038 10,601.36
23 Feb 1997 278,983,122.19 0.000038 10,601.36
24 Feb 1997 273,456,834.55 0.000038 10,391.36
25 Feb 1997 270,263,359.28 0.000038 10,270.01
26 Feb 1997 269,118,112.95 0.000038 10,226.49
27 Feb 1997 261,791,562.84 0.000038 9,948.08
28 Feb 1997 260,990,224.58 0.000038 9,917.63
----------------
Feb 1997 $301,827.93
================
EXHIBIT 8
Page 3 of 3
CSW CREDIT, INC.
FACTORING OF HL&P RECEIVABLES
CALCULATION OF CPL RECEIPTS
HL&P
Receivables Finder Fee Finder Fee
Date Balance Rate Amount
- ----------------- -------------------- ------------------ ---------------
1 Mar 1997 260,990,224.58 0.000038 $9,917.63
2 Mar 1997 260,990,224.58 0.000038 9,917.63
3 Mar 1997 265,997,099.20 0.000038 10,107.89
4 Mar 1997 275,160,211.87 0.000038 10,456.09
5 Mar 1997 264,589,305.72 0.000038 10,054.39
6 Mar 1997 268,120,373.26 0.000038 10,188.57
7 Mar 1997 275,381,138.14 0.000038 10,464.48
8 Mar 1997 275,381,138.14 0.000038 10,464.48
9 Mar 1997 275,381,138.14 0.000038 10,464.48
10 Mar 1997 277,878,232.22 0.000038 10,559.37
11 Mar 1997 278,870,444.39 0.000038 10,597.08
12 Mar 1997 284,585,962.64 0.000038 10,814.27
13 Mar 1997 285,585,043.53 0.000038 10,852.23
14 Mar 1997 286,675,929.85 0.000038 10,893.69
15 Mar 1997 286,675,929.85 0.000038 10,893.69
16 Mar 1997 286,675,929.85 0.000038 10,893.69
17 Mar 1997 288,553,837.80 0.000038 10,965.05
18 Mar 1997 278,450,562.65 0.000038 10,581.12
19 Mar 1997 277,436,658.88 0.000038 10,542.59
20 Mar 1997 282,910,018.63 0.000038 10,750.58
21 Mar 1997 279,987,297.69 0.000038 10,639.52
22 Mar 1997 279,987,297.69 0.000038 10,639.52
23 Mar 1997 279,987,297.69 0.000038 10,639.52
24 Mar 1997 276,700,590.00 0.000038 10,514.62
25 Mar 1997 255,789,910.17 0.000038 9,720.02
26 Mar 1997 257,344,528.26 0.000038 9,779.09
27 Mar 1997 256,905,088.44 0.000038 9,762.39
28 Mar 1997 256,905,088.44 0.000038 9,762.39
29 Mar 1997 256,905,088.44 0.000038 9,762.39
30 Mar 1997 256,905,088.44 0.000038 9,762.39
31 Mar 1997 248,661,528.35 0.000038 9,449.14
----------------
Mar 1997 $320,809.99
================
EXHIBIT 9
STATE REGULATORY COMMISSION DECISIONS OR ANALYSIS
During the period from January 1, 1997 through March 31, 1997 there were not any
state regulatory commission decisions or analysis issued addressing the effect
of the factoring of CSW system accounts receivable rates.
EXHIBIT 10
Page 1 of 9
CSW CREDIT, INC.
1996 FINANCIAL STATEMENTS
EXHIBIT 10
Page 2 of 9
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CSW Credit, Inc.:
We have audited the accompanying balance sheets of CSW Credit, Inc. (a Delaware
corporation and wholly owned subsidiary of Central and South West Corporation)
as of December 31, 1996 and 1995, and the related statements of income,
stockholder's equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of CSW Credit, Inc. as of December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas
February 28, 1997
EXHIBIT 10
Page 3 of 9
CSW CREDIT, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
-----------------------------
(thousands)
REVENUES $66,320 $65,948
------- -------
OPERATING EXPENSES:
Interest 38,977 40,288
Provision for bad debts 14,112 12,129
Credit line fees 924 945
General and administrative 882 775
------- -------
54,895 54,137
------- -------
OPERATING INCOME 11,425 11,811
------- -------
OTHER INCOME AND DEDUCTIONS:
Interest income 179 188
Tax benefit of parent company loss 122 --
------- -------
301 188
------- -------
INCOME BEFORE FEDERAL INCOME TAXES 11,726 11,999
------- -------
FEDERAL INCOME TAXES:
Current 3,064 220
Deferred 1,036 4,250
------- -------
4,100 4,470
------- -------
NET INCOME $7,626 $7,529
======= =======
The accompanying notes to the financial
statements are an integral part of these
statements.
EXHIBIT 10
Page 4 of 9
CSW CREDIT, INC.
BALANCE SHEETS - DECEMBER 31,1996 AND 1995
1996 1995
-------- --------
(thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $8,816 $41,777
Accounts receivable, net of allowance for doubtful
accounts of $3,230 in 1996 and $6,632 in 1995 615,214 658,155
-------- --------
Total current assets 624,030 699,932
OTHER ASSETS:
Deferred income taxes 2,655 3,691
Other 3,625 4,017
-------- --------
Total other assets 6,280 7,708
Total assets $630,310 $707,640
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Short-term debt $579,300 $646,300
Deferred credits 13,266 13,415
Unearned revenue 3,380 2,492
Other liabilities 2,588 1,830
-------- --------
Total current liabilities 598,534 664,037
STOCKHOLDER'S EQUITY:
Common stock, no par; authorized 1,000 shares;
issued and outstanding 237 and 234 shares 1 1
Paid-in capital 31,775 43,602
-------- --------
Total stockholder's equity 31,776 43,603
-------- --------
Total liabilities and stockholder's equity $630,310 $707,640
======== ========
The accompanying notes to the financial
statements are an integral part of these
statements.
EXHIBIT 10
Page 5 of 9
CSW CREDIT, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31
(THOUSANDS)
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
BALANCE DECEMBER 31, 1994 $1 $43,066 -- $43,067
Capital contributions - 536 -- 536
Net income - -- 7,529 7,529
Common stock dividends - -- (7,529) (7,529)
-- -------- ------- --------
BALANCE DECEMBER 31, 1995 1 43,602 -- 43,603
Capital contributions - (11,827) -- (11,827)
Net income - -- 7,626 7,626
Common stock dividends - -- (7,626) (7,626)
-- -------- ------- --------
BALANCE DECEMBER 31, 1996 $1 $31,775 $0 $31,776
== ======== ======= ========
The accompanying notes to the financial
statements are an intergral part of these
statements.
EXHIBIT 10
Page 6 of 9
CSW CREDIT, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
-------- --------
(thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $7,626 $7,529
Adjustments to reconcile net income to net cash
provided by operating activities-
Changes in assets and liabilities-
Decrease (increase) in accounts receivable 42,941 (25,716)
Decrease in deferred income taxes 1,036 4,250
Decrease (increase) in other assets 392 (846)
(Decrease) increase in deferred credits (149) 470
Increase (decrease) in unearned revenue 888 (630)
Increase (decrease) in other liabilities 758 (9,613)
-------- --------
Net cash provided by (used in)
operating activities 53,492 (24,556)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (67,000) (7,179)
Capital contributions (11,827) 536
Payment of dividends (7,626) (7,529)
-------- --------
Net cash used in financing activities (86,453) (14,172)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (32,961) (38,728)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 41,777 80,505
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $8,816 $41,777
======== ========
SUPPLEMENTARY INFORMATION:
Interest paid $39,881 $40,246
======== ========
Income taxes paid (refunded) $4,237 ($2,069)
======== ========
The accompanying notes to the financial
statements are an integral part of these
statements.
EXHIBIT 10
Page 7 of 9
CSW CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
CSW Credit, Inc. (Company) is a wholly owned subsidiary of Central and South
West Corporation (CSW or the Parent Company), whose primary business is to
purchase, without recourse, the accounts receivable of certain CSW subsidiary
companies and non-affiliated companies. Revenues from affiliated companies in
1996 and 1995 were $32.2 million and $32.8 million, respectively. 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 effective
rates of 35% and 37% in 1996 and 1995, respectively. The difference in the
effective rates is due primarily to consolidated allocations and true-ups of
prior year income tax accruals.
Deferred income taxes resulted primarily from the differences between book and
tax deductions for bad debt expense. The Internal Revenue Code provides for tax
deductions for bad debts when they are charged off. As a result of a favorable
earnings history, the Company did not record any valuation allowance against
deferred tax assets at December 31, 1996 and 1995.
STATEMENTS OF CASH FLOWS
Cash equivalents are considered to be highly liquid debt instruments purchased
with a maturity of three months or less. Accordingly, the Company's temporary
cash investments are considered cash equivalents.
EXHIBIT 10
Page 8 of 9
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.
RECLASSIFICATION
Certain financial statement items for the prior year have been reclassified to
conform to the 1996 presentation.
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 1996 and 1995 were 5.5% and
6.0%, respectively. At December 31, 1996, the Company had a revolving credit
agreement aggregating $830 million to back up its commercial paper program. The
revolving credit agreement expires June 27, 1997 and has a fee of .075% on the
commitment. At December 31, 1996, the Company was in compliance with the
revolving credit agreement covenants.
4. HOUSTON LIGHTING & POWER COMPANY:
The Company entered into an agreement with Houston Lighting & Power Company
(HLP) to purchase substantially all of its utility receivables. During the
twelve months ended December 31, 1996 and 1995, the Company had month ending
average HLP receivables of $340,796,000 and $327,062,000, respectively.
The Company is currently subject to a SEC restriction (50% Restriction) such
that the average amount of non-affiliated receivables is less that 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. At December 31,
1996 the Company was in compliance with the 50% Restriction.
EXHIBIT 10
Page 9 of 9
5. FINANCIAL INSTRUMENTS:
CASH, CASH EQUIVALENTS, 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 11
Page 1 of 3
CSW CREDIT, INC.
CHART OF ACCOUNTS
STANDARD ACCOUNTS - QUICK REFERENCE
BALANCE SHEET ACCOUNTS (1310-2820)
DESCRIPTION ACCOUNT NUMBER
ASSETS
Cash 1310.XXXX
Cash 1310.0100
Temporary Cash Investments 1360.XXXX
Temporary Investments 1360.0100
Notes Receivable 1410.XXXX
Interest Receivable 1410.5000
Due From Broker 1410.7100
Other Accounts Receivable 1430.XXXX
Accounts Receivable 1430.4700
Federal Income Tax Receivable 1430.4800
Factored Unbilled Accounts Receivable 1430.4900
Accumulated Provision for Uncollectible Accounts - Credit 1440.XXXX
Allowance for Bad Debt 1440.0100
Accounts Receivable from Associated Companies 1460.XXXX
A/R - Associated Companies 1460.1000
Prepayments 1650.XXXX
Prepayments 1650.0100
Prepayments Credit Line Fees 1650.0200
Prepayments Interest 1650.0300
Prepayments Taxes 1650.6200
LIABILITIES
Common Stock Issued 2010.XXXX
Common Stock 2010.0000
Miscellaneous Paid-in Capital 2110.XXXX
Paid-in Capital 2110.0000
Appropriated Retained Earnings 2150.XXXX
Retained Earnings 2150.0100
Notes Payable 2310.XXXX
Commercial Paper 2310.0100
Notes Payable to Associated Companies 2330.XXXX
Notes Payable 2330.0100
Accounts Payable to Associated Companies 2340.XXXX
Accounts Payable - CSW 2340.1000
Accounts Payable - Associated 2340.4900
Accounts Payable - CSWS 2340.9900
Taxes Accrued 2360.XXXX
Accrued Taxes Payable 2360.0100
Accrued Franchise Tax Payable 2360.0300
Dividends Declared 2380.XXXX
Accrued Dividend Payable - CSW 2380.0100
Other Deferred Credits 2530.XXXX
Deferred Credits 2530.0100
Unearned Revenue 2530.0200
Accumulated Deferred Income Taxes - Other Property 2820.XXXX
Deferred Federal Income Taxes 2820.0200
EXHIBIT 11
Page 2 of 3
CSW CREDIT, INC.
CHART OF ACCOUNTS
STANDARD ACCOUNTS - QUICK REFERENCE
INCOME STATEMENT ACCOUNTS (4081-9302)
DESCRIPTION ACCOUNT NUMBER
REVENUES
Miscellaneous Nonoperating Income 4210.XXXX
Interest Income 4210.0100
Miscellaneous Nonoperating Income - A/R Factored 4210.5200
Miscellaneous Income 4210.9000
Miscellaneous Service Revenues 4510.XXXX
Discounts Revenue 4510.0100
Unearned Revenue 4510.0200
Unearned Revenue - Reversal 4510.0300
Bad Debt Revenue 4510.0400
Agency Fee Revenue 4510.0500
Carrying Cost Revenue 4510.0600
Credit Line Fee Revenue 4510.0700
EXPENSES
Taxes Other than Income Taxes - Utility Operating Income 4081.XXXX
Franchise Tax Expense 4081.0000
Income Taxes - Utility Operating Income 4091.XXXX
Income Tax Expense 4091.0000
Deferred Income Tax Expense 4100.XXXX
Income Tax Expense 4100.0000
Other Deductions 4265.XXXX
Allocated Corp Federal Income Taxes 4265.7000
Other Interest Expense 4310.XXXX
Interest Expense 4310.0100
Interest Expense - Bank of New York 4310.0200
Uncollectible Accounts 9040.XXXX
Bad Debt Expense 9040.0100
Outside Services Employed 9230.XXXX
Outside Services - Legal 9230.7420
Miscellaneous General Expenses 9302.XXXX
Credit Line Expense 9302.1000
Rating Fee Expense 9302.1900
Miscellaneous Expense 9302.2000
Miscellaneous General Expense 9302.9000
Business Normalization Expense 9302.9100
CSWS Allocations 9302.9900
EXHIBIT 11
Page 3 of 3
CSW CREDIT, INC.
ACCOUNTING SYSTEM PROCEDURES
The accounting system procedures of Central and South West Services, Inc.
applicable to CSW Credit, Inc. are currently being reviewed and formalized
and will be submitted with the Certificate for the second calendar quarter of
1997.
