PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 27, 1996)
$60,000,000
Southwestern Public Service Company
First Mortgage Bonds, 6 1/2% Series Due 2006
(Interest payable on March 1 and September 1)
The First Mortgage Bonds, 6 1/2% Series Due 2006 (the "Offered Bonds") of
Southwestern Public Service Company (the "Company") mature on March 1, 2006 and
are not redeemable prior to maturity.
The Offered Bonds will be issued and registered only in the name of Cede &
Co., as nominee for The Depository Trust Company, New York, New York ("DTC"), as
registered owner of all the Offered Bonds, to which principal and interest
payments on the Offered Bonds will be made. Individual purchases will be made
only in book-entry form (as described herein). Purchasers of such book-entry
interests in the Offered Bonds will not receive physical delivery of bond
certificates and must maintain an account with a broker, dealer or bank that
participates in DTC's book-entry system. See "Certain Terms of the Offered
Bonds--Book-Entry System," herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public* Commissions+ Company*++
Per Bond...................... 99.94% .65% 99.29%
Total......................... $59,964,000 $390,000 $59,574,000
* Plus accrued interest, if any, from the date of issuance.
+ The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
++ Before deducting expenses payable by the Company, estimated at $300,000.
The Offered Bonds are being offered by the Underwriter as set forth
under "Underwriting" herein. It is expected that the Offered Bonds will be
delivered in book-entry form only, on or about March 8, 1996 through the
facilities of The Depository Trust Company, against payment therefor in same-day
funds.
Dillon, Read & Co. Inc.
The date of this Prospectus Supplement is March 5, 1996.
<PAGE>
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
At the Annual Meeting of the Company's shareholders held on January 31,
1996, the shareholders approved the proposed "merger of equals" of the Company
and Public Service Company of Colorado ("PSCo"). Pursuant to the terms of the
Merger Agreement, upon satisfaction or waiver of the terms and conditions
thereof, the Company and PSCo will become wholly-owned subsidiaries of a new
holding company called New Century Energies, Inc. The Company and PSCo will
maintain their separate identities and continue to serve customers in their
respective service areas. The Company's debt (including the Offered Bonds) and
any preferred stock of the Company outstanding at the time of effectiveness of
the merger will remain outstanding debt and preferred stock of the Company and
the terms and conditions thereof will not change. The Company currently has no
outstanding preferred stock. The transaction is subject to various conditions
including the receipt of approvals from various state and federal regulators.
At the Annual Meeting, the Company's shareholders also approved the
amendment of the Company's Restated Articles of Incorporation to eliminate the
Company's Preferred Stock, including the New Preferred Stock (as defined in the
attached Prospectus) referred to in the attached Prospectus dated February 27,
1996 ("Prospectus"), and to provide for a new class of 10,000,000 shares of
Preferred Stock, $1 par value, which may be issued in series with such terms and
conditions as may be set by the Company's Board of Directors. The terms of such
Preferred Stock, $1 par value, are described in the Joint Proxy
Statement/Prospectus dated December 13, 1995 (contained in Registration No.
33-64951). Such Joint Proxy Statement/Prospectus, which also includes
information with respect to the proposed combination of the Company and PSCo,
and the Company's Current Report on Form 8-K filed February 26, 1996 (which
includes as an exhibit the Company's Restated Articles of Incorporation
containing the terms of the Preferred Stock, $1 par value) are incorporated
herein by reference. The attached Prospectus contains references to the
eliminated New Preferred Stock, and any reference to such preferred stock shall
be considered to be deleted therefrom. Accordingly, such Prospectus should be
referred to only for information (including information concerning the First
Mortgage Bonds) which does not pertain to the eliminated New Preferred Stock.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Bonds will be used to repay
commercial paper borrowings, approximately $75,000,000 of which were incurred to
finance the redemption and repurchase in December, 1995 and January, 1996 of all
of the Company's outstanding preferred stock and the balance of which was used
for other general corporate purposes relating to the Company's utility
construction program. The Company's commercial paper balance and its average
interest rate at March 1, 1996 were $159,000,000 and 5.36%, respectively. To the
extent that the net proceeds from the sale of the Offered Bonds are not
immediately so used, they will be temporarily invested in short-term,
interest-bearing investments.
S-2
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<PAGE>
CERTAIN FINANCIAL INFORMATION
Set forth below is a summary of certain information concerning the results
of operations of the Company. The information with respect to the fiscal years
ended August 31, 1995 and 1994 was derived from the Company's financial
statements contained in the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1995 which is incorporated herein by reference. The
information with respect to the twelve months ended November 30, 1995 was
derived from the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1995 which is incorporated herein by reference. Such reports
contain, in addition to such financial statements, the related management's
discussion and analysis of financial condition and results of operations.
<TABLE>
<CAPTION>
Fiscal Year Twelve Months
Ended August 31, Ended November 30,
1994 1995 1995
(unaudited)
($ in thousands)
<S> <C> <C> <C>
Operating revenues ................ $843,448 $834,083 $847, 823
Operating expenses ................ 703,729 679,872 690,462
Operating income .................. 139,719 154,211 157,361
Net earnings ...................... 102,168 119,477 121,477
Ratio of earnings to
fixed charges ..................... 4.76 5.10 5.06
<CAPTION>
Capitalization at
November 30, 1995
(unaudited)
($ in thousands)
<S> <C>
Common stock, $1 par value, authorized -
100,000,000 shares; issued and
outstanding -- 40,917,908 $ 40,918
Premium on capital stock 306,376
Retained earnings 372,903
Common shareholders' equity 720,197
Preferred stock - redemption not required 72,680*
Long-term debt 580,653
Total capitalization $1,373,530
- -------------------------
* All shares of Preferred Stock have been redeemed or repurchased in
December, 1995 and January, 1996.
</TABLE>
S-3
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CERTAIN TERMS OF THE OFFERED BONDS
The Offered Bonds are to be issued and secured by the Indenture of Mortgage
and Deed of Trust, dated August 1, 1946 (the "Original Indenture"), to Chemical
Bank, as Trustee (the "Trustee"), as supplemented and amended and as to be
supplemented and amended by the Supplemental Indenture to be dated March 1, 1996
(the Original Indenture as so supplemented and amended being herein called the
"Mortgage").
The following description of the particular terms of the Offered Bonds
supplements the description of the general terms and provisions of the bonds
issued and to be issued under the Mortgage set forth in the Prospectus under
"Description of New Bonds."
Maturity and Interest Rate
The Offered Bonds will mature on March 1, 2006 and will bear interest at
the rate of 6 1/2% per annum, payable semiannually on March 1 and September 1
in each year, beginning September 1, 1996. The Offered Bonds will bear interest
from the date of delivery and no accrued interest will be paid on the date of
delivery.
Redemption Provisions
The Offered Bonds will not be redeemable prior to maturity. (Supplemental
Indenture for the Offered Bonds Section 1.03).
Modification of the Maintenance Covenant
The Company has reserved the right to amend the Mortgage without any
consent or other action by holders of any series of Bonds created after July 15,
1992, including the Offered Bonds, the Original Indenture, and the Original
Indenture as supplemented, as shall be necessary in order to amend or delete in
its entirety the maintenance covenant set forth in the Mortgage, and such
covenant as amended by the Supplemental Indentures. See "Description of New
Bonds-Maintenance Covenant" and "Description of New Bonds-Modification of the
Mortgage" in the Prospectus accompanying this Prospectus Supplement.
Book-Entry System
DTC will act as securities depository for the Offered Bonds. The Offered
Bonds will be issued as fully-registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One fully-registered Offered Bond (the
"Global Bond") certificate will be issued for the Offered Bonds, in the
aggregate principal amount of the issue, and will be deposited with DTC.
The Company understands that DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust
S-4
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<PAGE>
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Offered Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Offered Bonds on DTC's
records. The ownership interest of each actual purchaser of each Offered Bond
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Offered Bonds are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Offered
Bonds, except in the event that use of the book-entry system for the Offered
Bonds is discontinued.
To facilitate subsequent transfers, all Offered Bonds deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Offered Bonds with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Offered Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Offered Bonds are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to Offered
Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Offered Bonds are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Principal and interest payments on the Offered Bonds will be made to DTC.
DTC has advised the Company and the Trustee that its present practice is, upon
receipt of any payment of principal or interest, to immediately credit the
accounts of the Direct Participants with such payment in amounts proportionate
to their respective holdings in principal amount of beneficial interests in the
Global Bond as shown on the records of DTC. Payments by Direct and Indirect
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee, or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Offered Bonds at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Offered Bond certificates are required to
be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Offered Bond certificates will be printed and delivered.
S-5
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<PAGE>
Beneficial Owners should consult with the Direct Participant or Indirect
Participant from whom they purchased a book-entry interest to obtain information
concerning the system maintained by such Direct Participant or Indirect
Participant to record such interests, to make payments and to forward notices or
other information.
The Company and Trustee have no responsibility or liability for any aspects
of the records or notices relating to, or payments made on account of,
book-entry interest ownership, or for maintaining, supervising or reviewing any
records relating to that ownership.
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement,
the Company has agreed to sell to Dillon, Read & Co. Inc. (the "Underwriter"),
and the Underwriter has agreed to purchase, all of the Offered Bonds.
Under the terms and conditions of the Purchase Agreement, the Underwriter
is committed to take and to pay for all of the Offered Bonds if any are taken.
The Offered Bonds are being initially offered by the Underwriter for sale
at the price set forth on the cover hereof under "Price to Public," or at such
price less a concession of .400% of the principal amount of the Offered Bonds on
sales to certain dealers. The Underwriter may allow, and such dealers may
reallow, a concession not exceeding .250% of the principal amount of the Offered
Bonds, on sales to certain other dealers. After the initial public offering, the
offering prices, concessions and reallowances may be changed by the Underwriter.
The offering of the Offered Bonds is made for delivery when, as and if
accepted by the Underwriter and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriter
reserves the right to reject any order for the purchase of the Offered Bonds.
The Company has agreed in the Purchase Agreement to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments made or required to be made
by the Underwriter with respect to such liabilities.
The Underwriter has rendered certain financial advisory services and other
related services to the Company.
The Offered Bonds are not proposed to be listed on a securities exchange,
and the Underwriter will not be obligated to make a market in the Offered Bonds.
The Company cannot predict the activity of any trading in or the liquidity of
the Offered Bonds.
S-6
<PAGE>
<PAGE>
PROSPECTUS
$200,000,000
Southwestern Public Service Company
Cumulative Preferred Stock*
First Mortgage Bonds
Southwestern Public Service Company (the "Company") intends from time to
time to sell shares of its Cumulative Preferred Stock, $100 par value (the "New
Preferred Stock"),* and/or its First Mortgage Bonds (the "New Bonds," and
collectively with the New Preferred Stock, the "Securities"), in one or more
series, each on terms to be determined at the time or times of sale. The
aggregate principal amount of the New Bonds and the par value of the New
Preferred Stock to be sold will not exceed $200,000,000 and the total par value
of New Preferred Stock to be sold will not exceed $40,000,000. All specific
terms of the offering and sale of the Securities, including (i) the specific
number of shares, designation, issue price, rate and terms of payment of
dividends and redemption provisions and sinking fund terms, if any, liquidation
preferences or other special rights, if any, of the New Preferred Stock, (ii)
the specific designation, aggregate principal amount, maturity, rate and terms
of payment of interest, redemption provisions and sinking fund terms, if any, of
the New Bonds and (iii) other specific terms and any listing on a securities
exchange of the Securities in respect of which this Prospectus is being
delivered will be set forth in a Prospectus Supplement ("Prospectus
Supplement"), together with the terms of offering of such Securities. The
Securities will be offered as set forth under "Plan of Distribution".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AN EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is February 27, 1996
- --------
* The class of New Preferred Stock referred to herein and the Company's
preferred stock, $25 par value, have been eliminated and, accordingly,
any reference to such preferred stock in this Prospectus should be
considered to be deleted.
<PAGE>
<PAGE>
AVAILABLE INFORMATION
Southwestern Public Service Company (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports and other information with the Securities and
Exchange Commission which may be inspected and copied at the offices of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60601;
and Seven World Trade Center, New York, New York 10048, and copies of such
material can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549, at prescribed rates. Certain securities of the Company
are listed on the New York, Chicago and Pacific Stock Exchanges. Reports, proxy
and information statements, and other information concerning the Company can be
inspected at such exchanges.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-3789) pursuant to the 1934 Act are incorporated herein by reference as of
their respective dates of filing and shall be deemed to be a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended August 31,
1995 (the "1995 Form 10-K").
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1995 (the "Quarterly Report").
3. The Company's Current Reports on Form 8-K filed February 2, 1996 and
February 26, 1996.
4. Joint Proxy Statement/Prospectus for the Annual Meeting held January 31,
1996 included in the Registration Statement of New Century Energies, Inc.
(Registration No. 33-64951).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of this offering shall also be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the request of any such person, a copy of any or all documents
referred to above which have been or may be incorporated by reference in this
Prospectus (not including exhibits to such incorporated information that are not
specifically incorporated by reference into such information). Requests for such
copies should be directed to Secretary, Southwestern Public Service Company,
Tyler at Sixth, Amarillo, Texas 79101.
THE COMPANY
The Company, incorporated under the laws of the State of New Mexico in
1921, is principally engaged in the generation, transmission, distribution and
sale of electric energy in portions of Texas, New Mexico, Oklahoma and Kansas.
The electric properties comprise an interconnected system. A major portion of
the Company's electric operating revenues is derived from operations in Texas.
The principal executive offices of the Company are located at Tyler at Sixth,
Amarillo, Texas 79101 (Tel: 806-378-2121).
USE OF PROCEEDS
The proceeds from the sale of the Securities will be used as described in
the Prospectus Supplement by which such Securities are offered.
2
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EARNINGS RATIOS
The Ratio of Earnings to Fixed Charges and the Ratio of Earnings to
Combined Fixed Charges and Preferred Dividend Requirements for each of the
twelve month periods ending as follows:
<TABLE>
<CAPTION>
November 30, August 31,
1995 ----------------------------------------
------------ 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Ratio of
Earnings to
Fixed Charges: 5.06 5.10 4.76 4.82 4.53 4.67
Combined Fixed
Charges and
Preferred
Dividend
Requirements: 4.35 4.37 4.04 4.01 3.63 3.79
</TABLE>
The Ratios for future periods will be included in the Company's Reports on
Form 10-K and 10-Q. Such Reports are incorporated by reference into this
Prospectus at the time they are filed.
DESCRIPTION OF NEW PREFERRED STOCK
The text of this section formerly set forth herein has been deleted as the
classes of Preferred Stock previously described have been eliminated from the
Company's Restated Articles of Incorporation.
DESCRIPTION OF NEW BONDS
General
The New Bonds will be issued in one or more series under the Indenture of
Mortgage and Deed of Trust, dated August 1, 1946, to Chemical Bank, as trustee
(the "Bonds Trustee") as supplemented and amended and as it is to be
supplemented by a supplemental indenture for each series of New Bonds (such
indenture, as so supplemented and amended, the "Mortgage"). This Prospectus
includes brief outlines of certain provisions contained in the Mortgage and the
Articles and does not purport to be complete. Copies of the instruments
constituting the Mortgage and the Articles are Exhibits to the Registration
Statement and reference is made thereto for further information including
definitions of certain terms used herein.
The principal, premium, if any, and interest on the New Bonds are payable
at the principal corporate trust office of Chemical Bank in New York, New York
unless the Prospectus Supplement provides otherwise. Each series of New Bonds
will have a stated principal amount, maturing date(s), interest rate(s) and
other specific terms as may be determined at the time of sale, all of which will
be set forth in the Prospectus Supplement relating to such series. Interest,
payable semiannually, at the rate set forth in such Prospectus Supplement will
be paid to the persons in whose names the New Bonds are registered at the close
of business on the record date set forth therein. Unless otherwise indicated in
a Prospectus Supplement relating thereto, the New Bonds will be issuable only as
fully registered bonds in denominations of $1,000 and integral multiples
thereof, and will be exchangeable for other New Bonds of the same series in
equal aggregate principal amounts without any service or other charge therefor
by the Company, except for any applicable taxes or governmental charges.
3
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<PAGE>
Unless otherwise indicated in a Prospectus Supplement, the covenants
contained in the Mortgage and the New Bonds do not afford holders of the New
Bonds special protection in the event of a highly leveraged transaction
involving the Company that may adversely affect the holders of New Bonds.
Optional Redemption Provisions
The Prospectus Supplement for each series of New Bonds will indicate if
such series is subject to redemption at the option of the Company prior to
maturity. If so, the Prospectus Supplement will include the terms of such
redemption, which will be made upon thirty days' notice and in the manner
provided in the Mortgage. The provisions of this paragraph do not apply to
redemptions pursuant to operation of any sinking fund (Mortgage, Articles 8 and
11).
Sinking and Improvement Fund
For each series of New Bonds for which the Company determines to provide a
sinking and improvement fund, the terms of such fund will be described in the
Prospectus Supplement relating to that series.
Security
Each series of New Bonds together with all other Bonds heretofore or
hereafter issued under the Mortgage will be equally and ratably secured by the
Mortgage, which constitutes, in the opinion of Hinkle, Cox, Eaton, Coffield &
Hensley, counsel for the Company, a valid and direct first lien (subject to
Permitted Encumbrances) on all the present properties (principally generating
plants and transmission and distribution facilities) and franchises of the
Company, other than Excepted Property, subject only to a reversionary interest
in the site of the Company's generating plant near Borger, Texas, conditioned
upon its continued use in the generation, transmission and distribution of
electric energy, and to certain minor defects in the Company's title to the
sites of certain of its transmission and distribution lines, substations and
minor structures. Neither such reversionary interest nor such minor defects, in
the opinion of such counsel, materially interferes with the use or operation of
the Company's properties.
The Mortgage contains provisions for subjecting to the lien thereof
(subject to limitations contained in Article 15 in case of a merger or transfer
or lease of the Company's assets) after-acquired property other than Excepted
Property. After-acquired property may, subject to certain limitations, be
subject to prior liens (Mortgage Section 9.15), but, if so subject, may not be
included in Gross Bondable Additions or Net Bondable Additions under the
Mortgage until the prior liens thereon have been paid or prepaid (Mortgage
Section 4.01).
Maintenance Covenant
The Mortgage provides that the Company shall, on or before October 1 in
each year, deposit with the Trustee cash equal to the excess of (i) 15% of
operating revenues for the year ended the preceding May 31 (less the cost of
utility services purchased for resale and a further sum equal to the cost of
fuel used to generate electricity in excess of 2.90 mills per net kilowatt hour)
with certain adjustments, over (ii) the amounts charged on its books for
maintenance and repairs during such year. Instead of depositing cash, the
Company may (a) deliver Bonds or certify that Bonds have been or are to be
retired (with certain exceptions) or (b) certify Gross Bondable Additions. Cash
so deposited may be withdrawn in the same manner as cash deposited on release of
property, may be applied to the purchase of Bonds, or may be applied to the
redemption of Bonds (Mortgage Section 9.06; Supplemental Indenture Section 2.02;
Mortgage, Article 8). Cash, Bonds and Gross Bondable Additions used to satisfy
the requirements of the Maintenance Covenant may be deducted from Retirements in
computing Net Bondable Additions (Mortgage Section 4.01).
Issuance of Additional Bonds
The maximum principal amount of Bonds which may be outstanding under the
Mortgage at any one time is $3,000,000,000. The Mortgage provides that Bonds may
be issued from time to time against (1) 60% of Net Bondable Additions (Mortgage,
Article 4), (2) Bonds retired or then to be retired (with certain exceptions)
(Mortgage, Article 6) or (3) cash deposited with the Trustee for such purpose,
which cash may be withdrawn from time to time against 60% of Net Bondable
Additions (Mortgage, Article 5). With certain exceptions in the case of (2)
above, no
4
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<PAGE>
additional Bonds may be issued unless Net Earnings for 12 consecutive
calendar months within the 15 immediately preceding calendar months, before
interest and income and profits taxes, are at least twice the annual interest
requirements on all Bonds outstanding and then to be issued and on all prior
lien indebtedness. Based on the Company's financial results for the twelve
months ended August 31, 1995, the Company could have issued approximately
$316,300,000 principal amount of additional Bonds under this restriction. The
available amount of Net Bondable Additions and Retired Bonds at August 31, 1995
was approximately $335,000,000 and $115,300,000, respectively.
Dividend Covenant
The Mortgage provides that the Company will not declare any dividends
(other than dividends payable in its stock) upon any shares of its stock, or
make any payment on account of the purchase, redemption or other retirement of,
or any distribution in respect of, any shares of its stock except to the extent
that the sum of (1) $1,278,243.59, (2) Net Income of the Company, as defined,
since June 1, 1946, and (3) net proceeds received by the Company from the issue
since such date of any shares of its stock (but only up to an amount equal to
the aggregate amount of all payments since such date on account of the
acquisition of any shares of its stock), shall be greater than the aggregate
amount of dividends declared on all classes of the Company's stock and of all
payments made on account of the acquisition of, or distribution in respect of,
any shares of its stock since such date (Mortgage Section 9.20). At August 31,
1995, approximately $949,000 of the Company's retained earnings of
$378,458,000 was not available for any such purpose under this limitation.
Modification of the Mortgage
The Mortgage, the rights and obligations of the Company and the rights of
the Bondholders may be modified with the consent of the holders of 66-2/3% of
the Bonds, and, if less than all series of Bonds are affected, the consent of
the holders of 66-2/3% of the Bonds of each series affected (Mortgage Section
19.06). No modification of the terms of payment of principal, interest or
premium and no modification reducing the percentage required for modification is
effective against any Bondholder without his consent.
The Company has reserved the right to amend the Mortgage without any
consent or other action by holders of any series of Bonds created after July 15,
1992, including the New Bonds, as shall be necessary in order to amend or delete
in its entirety the maintenance covenant set forth in the Mortgage, and such
covenant as amended by the Supplemental Indentures. (See "Description of New
Bonds -- Maintenance Covenant.")
Defaults
An event of default is defined as: default in payment of principal of any
Bond; default for 30 days in payment of interest upon any Bond or of sinking or
improvement fund installments in respect of any Bond; default under other
covenants for 60 days after notice to the Company by the Trustee or holders of
10% of the Bonds; failure to discharge final money judgments within 60 days;
certain events in bankruptcy, insolvency, or reorganization; and certain
assumptions of custody or control of the Company or its assets by governmental
agencies. The Trustee may withhold notice of default (except in payment of
principal, interest or sinking or improvement fund installments) if in its
judgment it is in the interests of the Bondholders (Mortgage Section 13.01).
Holders of a majority of the Bonds may require the Trustee to, and holders
of 25% of the Bonds may, declare the principal and interest due and payable on
default, but holders of a majority of the Bonds may annul such declaration if
such default is cured (Mortgage Section 13.01). No Bondholder may enforce the
Mortgage unless such holder shall have given the Trustee written notice of a
default and unless the holders of a majority of the Bonds have requested the
Trustee in writing to act and have offered the Trustee reasonable indemnity or
security, if required, and the Trustee shall have failed to act for a period of
30 days (Mortgage Section 13.14). The foregoing does not affect the right of
each Bondholder to enforce payment of principal and interest on the holder's
Bond. Holders of a majority of the Bonds may direct the Trustee to take
action in the event of default (Mortgage Sections 13.04, 13.19). The Trustee
is not required to risk its funds or incur personal liability if there is
reasonable ground for believing that repayment is not reasonably assured
(Mortgage Section 16.02).
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Other than in connection with applications made under the Mortgage from
time to time, periodic evidence is not required to be furnished as to absence of
default or as to compliance with the terms of the Mortgage.
The Trustee
Chemical Bank is the Trustee under the Mortgage.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly to one or more purchasers; or
(iii) through agents. The applicable Prospectus Supplement will set forth the
terms of the offering of any Securities, including the names of any underwriters
or agents, the purchase price of such Securities and the proceeds to the Company
from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers and any securities exchanges
on which such Securities may be listed.
If underwriters are used in the sale of the Securities, such Securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the applicable Prospectus
Supplement, the obligations of the underwriters to purchase such Securities will
be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Securities if any of such Securities are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time. Only
underwriters named in a Prospectus Supplement are deemed to be underwriters in
connection with the Securities offered thereby.
Securities also may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Securities will be named and any commissions payable by the Company to
such agent will be set forth in the applicable Prospectus Supplement. Unless
otherwise indicated in the applicable Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
If so indicated in a Prospectus Supplement with respect to the New Bonds,
the Company will authorize agents, underwriters or dealers to solicit offers by
certain institutions to purchase such New Bonds from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in the Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate amount of the New Bonds sold pursuant to
the Contracts shall be not less nor more than, the respective amounts stated in
the Prospectus Supplement. Institutions with whom the Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. The Contracts will not be subject to any conditions
except (i) the purchase by an institution of the New Bonds covered by its
Contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the New Bonds are being sold to underwriters, the Company shall have sold to
such underwriters the total amount of the New Bonds less the amount thereof
covered by the Contracts. The underwriters will not have any responsibility in
respect of the validity or performance of the Contracts.
If dealers are utilized in the sale of any Securities, the Company will
sell such Securities to the dealers, as principal. Any dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. The name of any dealer and the terms of the transaction
will be set forth in the Prospectus Supplement with respect to such Securities
being offered thereby.
It has not been determined whether any of the Securities will be listed on
a securities exchange. Underwriters will not be obligated to make a market in
any of the Securities. The Company cannot predict the activity of trading in, or
liquidity of, any of the Securities.
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Any underwriters, dealers or agents participating in the distribution of
Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Securities may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Securities Act"). Agents and underwriters may be entitled under
agreements entered into with the Company to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments that the agents, or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engaged in transactions with, or perform services for, the Company or its
affiliates in the ordinary course of business.
LEGAL OPINIONS
Certain legal matters in connection with the Securities are being passed
upon for the Company by Hinkle, Cox, Eaton, Coffield & Hensley, Amarillo, Texas
and Cahill Gordon & Reindel, a partnership including a professional corporation,
New York, New York. Cahill Gordon & Reindel is not passing upon the
incorporation of the Company and is relying upon the opinions of Hinkle, Cox,
Eaton, Coffield & Hensley as to matters of New Mexico and Texas law; Rainey,
Ross, Rice & Binns, Oklahoma City, Oklahoma as to matters of Oklahoma law; and
Foulston & Siefkin, Topeka, Kansas as to matters of Kansas law. Gary W. Wolf, a
partner in the law firm of Cahill Gordon & Reindel, is a director of the
Company.
EXPERTS
The consolidated financial statements of the Company for the year ended
August 31, 1993 included in the Company's 1995 Form 10-K, which is incorporated
herein by reference, are incorporated herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, included in the 1995
Form 10-K, and upon the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets and statements of capitalization of the
Company as of August 31, 1995 and 1994 and the related consolidated statements
of earnings, common shareholders' equity and cash flows for the years then ended
included in the 1995 Form 10-K, which statements are incorporated herein by
reference, have been audited by Deloitte & Touche LLP ("Deloitte & Touche"),
independent public accountants, as indicated in its report with respect thereto,
and are included herein in reliance upon the authority of that firm as experts
in accounting and auditing in giving said report.
With respect to any unaudited interim financial information included in the
Company's quarterly reports on Form 10-Q that are or will be incorporated herein
by reference, Deloitte & Touche applies limited procedures in accordance with
professional standards for reviews of such information. As stated in any of its
reports that are included in the Company's quarterly reports that are or will be
incorporated herein by reference, Deloitte & Touche did not audit and did not
express an opinion on such interim financial information. Accordingly, the
degree of reliance on any of Deloitte & Touche's reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche is not subject to the liability provisions of Section
11 of the Securities Act for any of its reports on such unaudited interim
financial information because those reports are not "reports" or a "part" of the
Registration Statement filed under the Securities Act with respect to the
Securities prepared or certified by an accountant within the meaning of Sections
7 and 11 of the Securities Act.
To the extent that a firm of certified public accountants audits and
reports on the financial statements of the Company issued at future dates, and
consents to the use of their report thereon, such financial statements also will
be incorporated by reference herein in reliance upon their report and said
authority.
The statements and legal conclusions as to all matters of law in the
Company's 1995 Form 10-K, the Quarterly Report and this Prospectus (except as to
matters of Kansas and Oklahoma law in such documents) have been reviewed by
Hinkle, Cox, Eaton, Coffield & Hensley. Statements and legal conclusions as to
matters of Oklahoma law in such documents have been reviewed by Rainey, Ross,
Rice & Binns. Statements and legal conclusions as to matters of Kansas law in
such documents have been reviewed by Foulston & Siefkin. All such
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statements and legal conclusions are set forth in such documents and
incorporated by reference herein or set forth herein in reliance upon said
firms, respectively, as experts.
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No person is authorized to give any
information or to make any representations
other than those contained or incorporated by
reference in this Prospectus Supplement and
the Prospectus and, if given or made, such
information or representations must not be
relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do
not constitute an offer to sell or the
solicitation of an offer to buy any
securities other than the Offered Bonds to
which this Prospectus Supplement relates.
This Prospectus Supplement and the Prospectus
do not constitute an offer to sell or a $60,000,000
solicitation of an offer to buy such
securities in any circumstances in which such Southwestern Public
offer or solicitation is unlawful. Neither Service Company
the delivery of this Prospectus Supplement or
the Prospectus nor any sale made hereunder
shall, under any circumstances, create any First Mortgage Bonds,
implication that there has been no change in 6 1/2% Series Due 2006
the affairs of the Company since the date
hereof or that the information contained or
incorporated by reference herein is correct
as of any time subsequent to the date of this
Prospectus Supplement.
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TABLE OF CONTENTS Prospectus Supplement
----------------------
Page
Recent Developments S-2
Use of Proceeds S-2
Certain Financial Information S-3
Certain Terms of the Offered Bonds S-4
Underwriting S-6
Prospectus
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Company 2
Use of Proceeds 2
Earnings Ratios 3 DILLON, READ & CO. INC.
Description of New Preferred Stock 3
Description of New Bonds 3
Plan of Distribution 6
Legal Opinions 7
Experts 7
