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 December
31, 1996, statements of income for the three and twelve month periods ended
December 31, 1996, and notes to the financial statements as Exhibit 1 attached
hereto.
2. Credit hereby certifies that on December 31, 1996, it had $579,300,000
face amount of commercial paper outstanding at a weighted average cost of 5.47%.
This amount consisted of $295,800,000 issued and sold to Lehman Commercial
Paper, Inc., as dealer, and $283,500,000 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 December 31,
1996.
3. Credit hereby files as Exhibit 3 attached hereto the earnings coverage
for Credit's indebtedness for the period from October 1, 1996 through December
31, 1996 and Credit's capital structure at December 31, 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 October 1, 1996 through
December 31, 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.
5. With respect to Houston Lighting & Power Company (HLP), Credit had
month ending average net receivables of $340,796,000 outstanding during the
twelve months ended December 31, 1996. During the quarter ended December 31,
1996 the daily maximum borrowing relating to the purchase of accounts receivable
from HLP was $437,639,000.
6. Credit hereby certifies it was in accordance with the 50% restriction
on non-affiliated receivables during the quarter ended December 31, 1996, as
shown in Exhibit 4 attached hereto.
7. Credit hereby certifies that during the period October 1, 1996 through
December 31, 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:
October $5,400,000, November $9,300,000 and December $11,500,000. 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.
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 February 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 December 31, 1996, statements Electronic
of income for the three and twelve month periods
ended December 31, 1996, and notes to the financial
statements.
2 Commercial paper outstanding at December 31, 1996. Electronic
3 Earnings coverage for the period from October 1, Electronic
1996 through December 31, 1996 and capital
structure at December 31, 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 October 1, 1996 through December 31, 1996.
5 Discount calculation for affiliated companies for Electronic
the three months ended December 31, 1996.
6 Analysis of the allowed returns on common equity Electronic
for affiliated companies at December 31, 1996.
7 Factoring expense savings for the affiliated Electronic
companies for the three months ended December 31,
1996.
EXHIBIT 1
CSW CREDIT, INC.
BALANCE SHEET
DECEMBER 31, 1996
(thousands)
UNAUDITED
ASSETS
Accounts receivable, net of allowance for
doubtful accounts of $3,230 $615,214
Cash and temporary cash investments 8,816
Deferred income taxes 2,655
Other assets 3,625
-----------
$630,310
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-term debt $579,300
Deferred credit 13,266
Other liabilities 2,588
Unearned revenues 3,380
Stockholder's equity
Common stock, no par; authorized
1,000 shares; issued and
outstanding 237 shares 1
Paid-in capital 31,775
-----------
$630,310
===========
The accompanying notes to financial statements
are an integral part of these statements.
CSW CREDIT, INC.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31
(thousands)
UNAUDITED
Three Months Ended Twelve Months Ended
1996 1995 1996 1995
--------- --------- ---------- ---------
REVENUES $15,382 $15,941 $66,320 $65,948
--------- --------- ---------- ---------
OPERATING EXPENSES
Interest 9,272 9,877 38,977 40,288
Provision for
bad debts 3,582 3,080 14,112 12,129
Credit line fees 188 287 924 945
General and
administrative 211 (99) 882 775
--------- --------- ---------- ---------
13,253 13,145 54,895 54,137
--------- --------- ---------- ---------
OPERATING INCOME 2,129 2,796 11,425 11,811
--------- --------- ---------- ---------
OTHER INCOME AND DEDUCTIONS
Interest income 24 76 179 188
Tax benefit of parent
company loss 26 - 122 -
--------- --------- ---------- ---------
50 76 301 188
--------- --------- ---------- ---------
INCOME BEFORE FEDERAL
INCOME TAXES 2,179 2,872 11,726 11,999
--------- --------- ---------- ---------
FEDERAL INCOME TAXES
Current (243) 2,219 3,064 220
Deferred 1,036 (1,485) 1,036 4,250
--------- --------- ---------- ---------
793 734 4,100 4,470
--------- --------- ---------- ---------
NET INCOME $1,386 $2,138 $7,626 $7,529
========= ========= ========== =========
The accompanying notes to financial statements
are an integral part of these statements.
CSW CREDIT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 35% for the twelve months ended December 31, 1996, and 37% for
the twelve months ended December 31, 1995. The difference in the effective rates
is due primarily to consolidated allocations and true-ups of prior year income
tax accruals. The current statutory rate for federal income taxes is 35%.
Deferred income taxes for the three months and twelve months ended
December 31, 1996 vary from the three months and twelve months ended December
31, 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 the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
OTHER
Certain reclassifications have been made to the Statements of Income 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 rate for the twelve months ended
December 31, 1996, was 5.46%. At December 31, 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 the instruments.
EXHIBIT 2
Page 1 of 2
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
LEHMAN COMMERCIAL PAPER, INC.
DECEMBER 31, 1996
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- ----------- --------- ----------- --------- --------------
2/18/97 12/06/96 $32,800 5.4300 5.4913
2/19/97 12/05/96 31,800 5.4000 5.4623
2/10/97 12/04/96 15,100 5.4000 5.4556
3/14/97 12/20/96 30,000 5.5000 5.5715
2/20/97 12/10/96 15,500 5.4200 5.4794
2/21/97 12/09/96 47,900 5.4200 5.4811
2/07/97 11/25/96 5,000 5.3800 5.4402
1/24/97 11/18/96 5,800 5.3700 5.4242
1/13/97 11/08/96 44,700 5.3700 5.4234
1/17/97 11/07/96 10,000 5.3700 5.4275
2/05/97 11/25/96 21,400 5.4000 5.4590
1/22/97 11/21/96 6,000 5.3800 5.4303
2/14/97 11/20/96 29,800 5.3500 5.4193
-----------
$295,800
===========
EXHIBIT 2
Page 2 of 2
CSW CREDIT, INC.
COMMERCIAL PAPER OUTSTANDING
GOLDMAN SACHS & CO.
DECEMBER 31, 1996
(thousands)
MATURITY ISSUE PAR DISCOUNT WEIGHTED
DATE DATE AMOUNT RATE AVERAGE COST
- ----------- ---------- ----------- ---------- ------------
2/06/96 12/06/96 $13,600 5.4200 5.4711
2/11/97 12/12/96 20,300 5.4200 5.4702
2/04/97 12/03/96 10,500 5.4200 5.4719
2/03/97 12/05/96 31,900 5.4200 5.4694
2/25/97 12/18/96 15,200 5.4800 5.5382
2/24/97 12/23/96 9,200 5.5500 5.6044
2/24/97 12/13/96 13,500 5.4300 5.4905
2/13/97 12/16/96 25,300 5.4600 5.5093
1/16/97 11/14/96 29,200 5.3900 5.4413
1/23/97 11/15/96 19,300 5.4000 5.4565
1/14/97 11/07/96 21,100 5.3600 5.4148
1/15/97 11/12/96 10,900 5.3700 5.4218
1/30/97 11/22/96 15,600 5.3800 5.4361
1/29/97 11/26/96 22,000 5.4100 5.4625
1/15/97 11/18/96 5,800 5.3900 5.4372
1/27/97 11/19/96 20,100 5.4000 5.4565
-----------
$283,500
===========
TOTAL COMMERCIAL PAPER OUTSTANDING:
Lehman Commercial Paper, Inc. $295,800
Goldman Sachs & Co. 283,500
----------
$579,300
==========
EXHIBIT 3
CSW CREDIT, INC.
EARNINGS COVERAGE
(thousands, except ratios)
1996
OCTOBER NOVEMBER DECEMBER
Net Income $669 $717 $0
Income Taxes 360 386 47
Tax benefit of parent
company loss - - (26)
Interest Expense 3,489 3,052 2,919
------------ ------------ ------------
$4,518 $4,155 $2,940
============ ============ ============
Interest Expense $3,489 $3,052 $2,919
Ratio of Earnings
to Fixed Charges 1.29 1.36 1.01
CAPITAL STRUCTURE
DECEMBER 31, 1996
(thousands)
Short-term Debt $579,300 95%
Common Equity 31,776 5%
------------ ------------
Total $611,076 100%
============ ============
EXHIBIT 4
CSW CREDIT, INC.
AVERAGE MONTH END ACCOUNTS RECEIVABLE
(thousands)
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
October 31, 1996 November 30, 1996 December 31, 1996
Non-Affiliated-HLP $350,519 $352,960 $352,296
Less: HLP receivables
sold to BONY 5,400 9,300 11,500
----------------- ----------------- -----------------
HLP net receivables 345,119 343,660 340,796
Non-Affiliated-Other 28,215 28,730 29,055
----------------- ----------------- -----------------
Total Non-Affiliated 373,334 372,390 369,851
Less: Affiliated 373,345 372,438 369,951
----------------- ----------------- -----------------
Excess Restriction ($11) ($48) ($100)
================= ================= =================
BAD DEBT WRITE-OFFS
(thousands)
1996
----------------------------------------------------
OCTOBER NOVEMBER DECEMBER
------- -------- --------
Non-Affiliated $777 $1,019 $1,508
EXHIBIT 5
Page 1 of 4
CENTRAL POWER AND LIGHT COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED DECEMBER 31, 1996
Retail Wholesale
--------- -----------
Weighted Cost of Capital (Annualized) 0.060872 0.061315
Average Days Outstanding 41.83 6.09
--------- -----------
Weighted Cost of Capital (Average
Days Outstanding) 0.006976 0.001024
Collection Experience Factor 0.002676
Agency Fee Rate 0.020000 0.020000
--------- -----------
Total Discount Factor 0.029652 0.021024
========= ===========
ASSUMPTIONS
INTEREST RATE 0.05410
RETAIL ROCE 0.11750
WHOLESALE ROCE 0.12300
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 DECEMBER 31, 1996
Retail Wholesale
--------- ----------
Weighted Cost of Capital (Annualized) 0.060267 0.061315
Average Days Outstanding 48.30 66.55
--------- ----------
Weighted Cost of Capital (Average
Days Outstanding) 0.007973 0.011183
Collection Experience Factor 0.002337
Agency Fee Rate 0.020000 0.020000
--------- ----------
Total Discount Factor 0.030310 0.031183
========= ==========
ASSUMPTIONS
INTEREST RATE 0.05410
RETAIL ROCE 0.11000
WHOLESALE ROCE 0.12300
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 DECEMBER 31, 1996
Arkansas Louisiana Texas Wholesale
-------- --------- --------- ---------
Weighted Cost of Capital (Annualized) 0.063170 0.063090 0.064057 0.061315
Average Days Outstanding 46.04 53.42 40.30 82.43
-------- --------- --------- ---------
Weighted Cost of Capital (Average
Days Outstanding) 0.007977 0.009237 0.007078 0.013847
Collection Experience Factor 0.003406 0.002919 0.002329
Agency Fee Rate 0.020000 0.020000 0.020000 0.020000
-------- --------- --------- ---------
Total Discount Factor 0.031383 0.032156 0.029407 0.033847
======== ========= ========= =========
ASSUMPTIONS
INTEREST RATE 0.05410
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
EXHIBIT 5
Page 4 of 4
WEST TEXAS UTILITIES COMPANY
DISCOUNT CALCULATION
THREE MONTHS ENDED DECEMBER 31, 1996
Retail Wholesale
--------- ------------
Weighted Cost of Capital (Annualized) 0.060569 0.061315
Average Days Outstanding 48.39 22.76
--------- ------------
Weighted Cost of Capital (Average
Days Outstanding) 0.008028 0.003826
Collection Experience Factor 0.004466
Agency Fee Rate 0.020000 0.020000
--------- ------------
Total Discount Factor 0.032494 0.023826
========= ============
ASSUMPTIONS
INTEREST RATE 0.05410
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
DECEMBER 31, 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%
EXHIBIT 7
CSW CREDIT, INC.
AFFILIATED COMPANIES
FACTORING EXPENSE SAVINGS
THREE MONTHS ENDED DECEMBER 31, 1996
(thousands)
20% 5%
EQUITY EQUITY SAVINGS
--------- --------- --------
CPL $2,719 $2,038 $681
PSO 1,792 1,369 423
SWEPCO 2,155 1,500 655
WTU 698 527 171
--------- --------- --------
TOTAL $7,364 $5,434 $1,930
========= ========= ========
