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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
...............................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
Commission file number 1-3146
........................................................
Southwestern Electric Power Company
.................................................................
(Exact name of registrant as specified in its charter)
Delaware 72-0323455
................................. ..............................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
428 Travis Street, Shreveport, Louisiana 71156-0001
................................................................
(Address of principal executive offices)
(Zip Code)
(318) 222-2141
................................................................
(Registrant's telephone number, including area code)
................................................................
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
...... ......
Number of shares of Common Stock outstanding at April 30, 1994: 7,536,640
...............
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SOUTHWESTERN ELECTRIC POWER COMPANY
INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements. (Unaudited)
Statements of Income for the Three Months
Ended March 31, 1994 and 1993 3
Balance Sheets as of March 31, 1994 and
December 31, 1993 4 - 5
Statements of Cash Flows for the Three Months
Ended March 31, 1994 and 1993 6
Notes to Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9 - 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 11
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on Form 8-K. 11
Signature. 12
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
MARCH, 31
1994 1993
(Thousands)
ELECTRIC OPERATING REVENUES $190,066 $175,601
OPERATING EXPENSES AND TAXES
Fuel 85,981 77,069
Purchased power 4,559 2,525
Other operating 29,211 28,617
Maintenance 8,976 10,484
Depreciation and amortization 19,762 18,482
Taxes, other than Federal income 12,900 11,698
Federal income taxes 3,857 2,773
165,246 151,648
OPERATING INCOME 24,820 23,953
OTHER INCOME AND DEDUCTIONS
Other 1,717 530
INCOME BEFORE INTEREST CHARGES 26,537 24,483
INTEREST CHARGES
Interest on long-term debt 10,813 10,685
Interest on short-term debt and other 1,187 934
12,000 11,619
Income before Cumulative Effect of Changes in
Accounting Principles 14,537 12,864
Cumulative Effect of Changes in Accounting
Principles - 3,405
NET INCOME 14,537 16,269
Preferred Stock Dividends 840 840
NET INCOME FOR COMMON STOCK $ 13,697 $ 15,429
The accompanying notes to financial statements
are an integral part of these statements.
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SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
MARCH 31, DECEMBER 31,
1994 1993
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $1,397,827 $1,392,058
Transmission 354,668 350,625
Distribution 691,290 678,788
General 196,959 188,193
Construction work in progress 123,970 126,258
2,764,714 2,735,922
Less - Accumulated depreciation 967,637 947,792
1,797,077 1,788,130
CURRENT ASSETS
Cash and temporary cash
investments 7,581 6,723
Accounts receivable 29,337 24,363
Materials and supplies, at average cost 25,350 25,218
Fuel inventory, at average cost 36,757 49,487
Deferred income taxes 4,521 3,912
Prepayments and other 12,261 14,965
115,807 124,668
DEFERRED CHARGES AND OTHER ASSETS 59,785 55,487
$1,972,669 $1,968,285
The accompanying notes to financial statements
are an integral part of these statements.
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SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
MARCH 31, DECEMBER 31,
1994 1993
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $18 par value; authorized
7,600,000 shares; issued and outstanding
7,536,640 shares $ 135,660 $ 135,660
Paid-in capital 245,000 245,000
Retained earnings 272,768 265,071
Total Common Stock Equity 653,428 645,731
Preferred stock
Not subject to mandatory
redemption 16,032 16,032
Subject to mandatory redemption 36,028 36,028
Long-term debt 600,012 602,065
Total Capitalization 1,305,500 1,299,856
CURRENT LIABILITIES
Long-term debt due within twelve months 4,661 5,028
Advances from affiliates 24,093 27,864
Accounts payable 34,005 41,598
Fuel refund due customers 3,528 2,358
Customer deposits 14,464 14,244
Accrued taxes 31,710 27,340
Accrued interest 12,346 17,354
Accrued restructuring charges 25,203 25,203
Other 19,351 30,499
169,361 191,488
DEFERRED CREDITS
Income taxes 335,642 332,522
Investment tax credits 84,250 85,301
Income tax related
regulatory liabilities - net 51,806 52,828
Other 26,110 6,290
497,808 476,941
$1,972,669 $1,968,285
The accompanying notes to financial statements
are an integral part of these statements.
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SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1994 1993
(Thousands)
OPERATING ACTIVITIES
Net income $ 14,537 $ 16,269
Non-cash items included in net income
Depreciation and amortization 22,116 20,447
Deferred income taxes and investment
tax credits 440 2,496
Cumulative Effect of Changes in
Accounting Principles - (3,405)
Allowance for equity funds used during
construction (667) (300)
Changes in assets and liabilities
Accounts receivable (4,974) 3,449
Fuel inventory 12,730 13,623
Accounts payable (7,593) 591
Accrued taxes 4,370 715
Accrued interest (5,008) (3,992)
Unrecovered fuel/Fuel refund due customers 1,170 (1,570)
Other 7,704 427
44,825 48,750
INVESTING ACTIVITIES
Construction expenditures (28,597) (23,724)
Allowance for borrowed funds used during
construction (393) (269)
Other (1,286) (787)
(30,276) (24,780)
FINANCING ACTIVITIES
Long-term debt sold - 54,069
Change in short-term debt (3,771) (5,324)
Retirement of long-term debt (1,365) (7,916)
Reacquisition of long-term debt (1,714) (107,563)
Special deposits for reacquisition
of long-term debt - 53,500
Payment of dividends (6,841) (10,865)
(13,691) (24,099)
NET CHANGE IN CASH AND CASH EQUIVALENTS 858 (129)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 6,723 1,058
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,581 $ 929
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 16,434 $ 15,097
Income taxes paid $ 373 $ 202
The accompanying notes to financial statements
are an integral part of these statements.
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SOUTHWESTERN ELECTRIC POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(Unaudited)
(1) PRINCIPLES OF PREPARATION
The condensed financial statements included herein have been prepared
by Southwestern Electric Power Company (Company) pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
The unaudited financial information furnished herewith reflects all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods. Information for quarterly periods is affected by seasonal
variations in sales, rate changes, timing of fuel expense recovery and other
factors.
Certain financial statement items for prior years have been
reclassified or restated to conform to the 1994 presentation. Pursuant to
changes in accounting principles made in December 1993, but effective January 1,
1993, the Company restated 1993 first quarter information to reflect the change
in its method of accounting for unbilled revenues, and for the adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes and SFAS No. 112, Employers' Accounting for Postemployment
Benefits. The effects of restating net income for the quarter ended March 31,
1993 are as follows:
Electric
Operating Operating Net
1993 Revenues Income Income
(thousands)
March 31 - Reported $176,486 $24,528 $13,439
Adjustment (885) (575) 2,830
March 31 - restated $175,601 $23,953 $16,269
(2) REGULATORY MATTERS
On March 17, 1994, the Company filed a petition, designated as Docket
No. 12855, with the Public Utility Commission of Texas to reconcile fuel costs
for the period November 1989 through December 1993. Total Texas jurisdictional
fuel expenses subject to reconciliation for this 50-month period were
approximately $559 million. The Company's net under-recovery for the
reconciliation period was approximately $.9 million. Discovery has begun and a
hearing on the case has been scheduled to begin July 26, 1994.
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SOUTHWESTERN ELECTRIC POWER COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1994
(Unaudited)
(3) DIVIDENDS
At March 31, 1994, all of the Company's retained earnings of $273
million were available for the payment of cash dividends to its parent company,
Central and South West Corporation (CSW).
(4) COMMITMENTS AND CONTINGENT LIABILITIES
In connection with the lignite mining contract for its Henry W. Pirkey
Power Plant, the Company has agreed, under certain conditions, to assume the
obligations of the mining contractor. As of March 31, 1994, the maximum the
Company would have to assume is $75 million. The maximum amount may vary as the
mining contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of March 31, 1994 is $66 million.
(5) FINANCING
In January 1994, the Company redeemed $.5 million of Series U, 9-1/8%
First Mortgage Bonds due November 1, 2019. The redemption was made under the
terms of the Company's bond indenture. Also during January, an additional $1.1
million of Series U bonds was acquired at a premium. The premium and related
redemption costs associated with this transaction will be recorded as a loss on
reacquired debt and will be amortized over the remaining life of this issue.
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SOUTHWESTERN ELECTRIC POWER COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 1993 Annual Report
on Form 10-K. Reference is also made to the unaudited Financial Statements and
related Notes to Financial Statements included herein. The information included
therein should be read in conjunction with, and is essential in understanding,
the following discussion and analysis.
REGULATORY MATTERS
Reference is made to Note 2 of the Notes to Financial Statements for a
discussion of the Company's regulatory matters.
CONSTRUCTION PROGRAM AND FINANCING
The Company's construction expenditures totaled $29 million during the
first three months of 1994. This represents approximately 23% of the projected
$125 million construction program for 1994. The Company utilizes short-term
debt to meet fluctuations in working capital requirements due to the seasonal
nature of electric sales. Funds to meet the Company's construction expenditures
during the first three months of 1994 came from internal sources and it is
expected that the remainder of 1994's planned expenditures will also be
internally financed.
If additional funds are needed, the financial condition of the Company
should allow the required funds to be obtained from the capital markets at
reasonable rates. At March 31, 1994, the Company's capitalization ratios were
50% common stock equity, 4% preferred stock, and 46% long-term debt.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1994 COMPARED TO THE QUARTER ENDED MARCH 31, 1993
Net Income for Common Stock. Net income for common stock decreased 11% to
$13.7 million for the first quarter of 1994 as compared to the same period of
1993. The decrease reflects the restatment of first quarter 1993 net income due
to a change in the method of accounting for unbilled revenues, partially off-
set by the adoption of SFAS No. 112, Employers' Accounting for Postemployment
Benefits, resulting in a $3.4 million increase in 1993 net income due to the
cumulative effect of changes in accounting principles.
Electric Operating Revenues. Operating revenues for the first quarter were
$190 million, an 8.2% increase from revenues of $176 million in 1993. Favorable
weather in the Company's service territory led to a 4.7% increase in retail
energy sales. Also contributing to the increase in operating revenues were
higher fuel-related revenues.
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SOUTHWESTERN ELECTRIC POWER COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
Fuel and Purchased Power. An increase in generation of 4.7% more than
offset a slight decrease in fuel price per mmbtu, resulting in an $8.9 million
rise in fuel expense. Purchased power expense increased by $2.0 million as
compared to the first quarter of 1993 due to a contract negotiated with Cajun
Electric Power Cooperative, Inc. in conjunction with the Company's acquisition
of the Bossier Rural Electric Membership Corporation.
Expenses and Taxes. Maintenance expense in the first quarter of 1994 was
$1.5 million lower than the same period in 1993 due to significantly higher than
average expenditures on the Company's production and transmission facilities in
1993. Depreciation expense increased 6.9% or $1.3 million due to capital asset
additions. Additional ad valorem taxes caused the 10% or $1.2 million increase
in taxes other than federal income. Federal income taxes increased $1.1 million
or 39% as a result of higher pre-tax income and an increase in the federal
income tax rate from 34% to 35% implemented by the Company in the third quarter
of 1993.
Cumulative Effect of Changes in Accounting Principles. In 1993, the
Company implemented SFAS No. 112, Employers' Accounting for Postemployment
Benefits, SFAS No. 109, Accounting for Income Taxes and changed the method of
accounting for unbilled revenues. These changes had a cumulative effect of
increasing net income approximately $3.4 million after tax.
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SOUTHWESTERN ELECTRIC POWER COMPANY
PART II - OTHER INFORMATION
For background and earlier developments relating to Part II
information, reference is made to the Company's 1993 Annual Report on Form 10-K.
Item 1. Legal Proceedings
See Note 2 of the Notes to Financial Statements for information
relating to regulatory proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
a) The annual meeting of shareholders of the Company was held on April 13,
1994.
b) The following directors were elected:
Richard H. Bremer Michael H. Madison
E. R. Brooks Harry D. Mattison
James E. Davison Marvin McGregor
Al P. Eason, Jr. William C. Peatross
Dr. Frederick E. Joyce Jack L. Phillips
c) No other matters (other than procedural matters) were voted upon
at the annual meeting.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Computation of Ratio of Earnings to Fixed Charges (Exhibit 1).
b) Reports on Form 8-K
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHWESTERN ELECTRIC POWER COMPANY
Date May 13, 1994 /s/ ROX E. COLVIN
Rox E. Colvin
Controller and Chief Accounting Officer
EXHIBIT 1
SOUTHWESTERN ELECTRIC POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED MARCH 31, 1994
(Thousands except Ratio)
(Unaudited)
Operating Income $118,924
Adjustments
Federal and state income taxes 43,053
Provision for deferred Federal
and state income taxes (2,804)
Deferred investment tax credits (5,093)
Other income and deductions 4,478
Allowance for borrowed and equity
funds used during construction 3,071
Interest portion of financing leases 2,415
Earnings $164,044
Fixed Charges:
Interest on long-term debt $ 41,086
Amortization of debt issuance cost 3,405
Other interest 1,839
Interest portion of financing leases 2,415
Fixed Charges $ 48,745
Ratio of Earnings to Fixed Charges 3.37
