1
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,June 30, 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,July 31, 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 and Six Months
Ended March 31,June 30, 1994 and 1993 3
Balance Sheets as of March 31,June 30, 1994 and
December 31, 1993 4 - 5
Statements of Cash Flows for the ThreeSix Months
Ended March 31,June 30, 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 - 1011
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 1112
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults uponUpon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders. 11Inapplicable
Item 5. Other Information. Inapplicable
Item 6. Exhibits and Reports on Form 8-K. 1112
Signature. 1213
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED MARCH, 31SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993 1994 1993
(Restated) (Restated)
(Thousands)
ELECTRIC OPERATING REVENUES $190,066 $175,601$211,989 $193,225 $402,055 $368,826
OPERATING EXPENSES AND TAXES
Fuel 85,981 77,06987,692 80,947 173,673 158,016
Purchased power 4,559 2,5254,050 2,565 8,609 5,090
Other operating 29,211 28,61729,595 29,227 58,806 57,844
Maintenance 8,976 10,48410,955 11,303 19,931 21,787
Depreciation and amortization 19,762 18,48219,878 18,516 39,640 36,998
Taxes, other than Federal income 12,900 11,69812,751 11,187 25,651 22,885
Federal income taxes 3,857 2,773
165,246 151,64810,369 7,526 14,226 10,299
175,290 161,271 340,536 312,919
OPERATING INCOME 24,820 23,95336,699 31,954 61,519 55,907
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used during
construction 736 327 1,403 627
Other 1,717 530438 70 1,488 300
1,174 397 2,891 927
INCOME BEFORE INTEREST CHARGES 26,537 24,48337,873 32,351 64,410 56,834
INTEREST CHARGES
Interest on long-term debt 10,813 10,68510,900 9,732 21,713 20,417
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
Principles1,553 1,553 3,133 2,756
Allowance for borrowed funds used during
construction (431) (297) (824) (566)
12,022 10,988 24,022 22,607
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 25,851 21,363 40,388 34,227
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES - - - 3,405
NET INCOME 14,537 16,26925,851 21,363 40,388 37,632
Preferred Stock Dividends 840 840stock dividends 841 841 1,681 1,681
NET INCOME FOR COMMON STOCK $ 13,69725,010 $ 15,42920,522 $ 38,707 $ 35,951
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,JUNE 30, DECEMBER 31,
1994 1993
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $1,397,827 $1,392,058
Transmission 354,668353,730 350,625
Distribution 691,290697,620 678,788
General 196,959196,915 188,193
Construction work in progress 123,970155,257 126,258
2,764,7142,801,349 2,735,922
Less - Accumulated depreciation 967,637986,371 947,792
1,797,0771,814,978 1,788,130
CURRENT ASSETS
Cash and temporary cash investments 7,5814,293 6,723
Accounts receivable 29,33734,161 24,363
Materials and supplies, at average cost 25,35027,400 25,218
Fuel inventory, at average cost 36,75733,691 49,487
DeferredAccumulated deferred income taxes 4,5214,479 3,912
Prepayments and other 12,26114,195 14,965
115,807118,219 124,668
DEFERRED CHARGES AND OTHER ASSETS 59,78562,931 55,487
$1,972,669$1,996,128 $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,JUNE 30, 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 272,768286,779 265,071
Total Common Stock Equity 653,428667,439 645,731
Preferred stock
Not subject to mandatory redemption 16,032 16,032
Subject to mandatory redemption 36,028 36,028
Long-term debt 600,012600,610 602,065
Total Capitalization 1,305,5001,320,109 1,299,856
CURRENT LIABILITIES
Long-term debtdebt/preferred stock due within
twelve months 4,661 5,028
Advances from affiliates 24,093- 27,864
Accounts payable 34,00547,080 41,598
Fuel refund due customers 3,5284,055 2,358
Customer deposits 14,46414,517 14,244
Accrued taxes 31,71044,544 27,340
Accrued interest 12,34616,898 17,354
Accrued restructuring charges 25,20321,540 25,203
Other 19,35123,317 30,499
169,361176,612 191,488
DEFERRED CREDITS
Income taxes 335,642338,512 332,522
Investment tax credits 84,25083,201 85,301
Income tax related regulatory liabilities - net 51,80650,730 52,828
Other 26,11026,964 6,290
497,808499,407 476,941
$1,972,669$1,996,128 $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)
THREESIX
MONTHS ENDED
MARCH 31,JUNE
30,
1994
1993
(Restated)
(Thousands)
OPERATING ACTIVITIES
Net income $ 14,537 $ 16,269$40,388 $37,632
Non-cash items included in net income
Depreciation and amortization 22,116 20,44744,316 41,104
Deferred income taxes and investment
tax credits 440 2,4961,226 2,727
Cumulative Effecteffect of Changeschanges in
Accounting Principlesaccounting principles - (3,405)
Allowance for equity funds used during
construction (667) (300)(1,403) (627)
Changes in assets and liabilities
Accounts receivable (4,974) 3,449(9,798) 5,530
Fuel inventory 12,730 13,62315,796 6,069
Accounts payable (7,593) 5915,482 4,936
Accrued taxes 4,370 715
Accrued interest (5,008) (3,992)17,204 12,078
Unrecovered fuel/Fuel refund due customers 1,170 (1,570)1,697 (492)
Restructuring charges (3,663) -
Other 7,704 427
44,825 48,7505,702 3,357
116,947 108,909
INVESTING ACTIVITIES
Construction expenditures (28,597) (23,724)(66,728) (51,997)
Allowance for borrowed funds used during
construction (393) (269)(824) (566)
Other (1,286) (787)
(30,276) (24,780)(2,007) (1,620)
(69,559) (54,183)
FINANCING ACTIVITIES
Long-termProceeds from the issuance of long-term debt sold - 54,069
Change in short-term debt (3,771) (5,324)(27,864) 6,404
Retirement of long-term debt (1,365) (7,916)(1,559) (38,194)
Reacquisition of long-term debt (1,714)(1,713) (107,563)
Special deposits for reacquisition
of long-term debt - 53,500
Payment of dividends (6,841) (10,865)
(13,691) (24,099)(18,682) (21,705)
(49,818) (53,489)
NET CHANGE IN CASH AND CASH EQUIVALENTS 858 (129)(2,430) 1,237
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 6,723 1,058
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,5814,293 $ 9292,295
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 16,434 $ 15,097$23,374 $21,494
Income taxes paid $ 3731,932 $ 2021,360
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,JUNE 30, 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, 1993.1993 and the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.
The unaudited financial information furnished herewith
reflects all adjustments (consisting only of normal recurring
adjustments)adjustments, except for the 1993 cumulative effect of changes in
accounting principles discussed below) 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 reclassifiedrestated or restatedreclassified to conform to the 1994
presentation. Pursuant to changes in accounting principles made
in December 1993, but effective January 1, 1993, the Company has
restated 1993 firstsecond quarter information to reflect thea change in
itsthe method of accounting for unbilled revenues and restated 1993
year to date information to reflect a change in the method of
accounting for unbilled revenues and 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 incomethe
restatement for the quarter and six months ended March 31,June 30, 1993
are as follows:
Electric
Operating Operating Net
1993 Revenues Income Income
(thousands)
March 31 -(Thousands)
Quarter Ended
Reported $176,486 $24,528 $13,439$190,202 $29,989 $19,398
Adjustment (885) (575) 2,830
March 31 - restated $175,601 $23,953 $16,2693,023 1,965 1,965
Restated $193,225 $31,954 $21,363
Six Months Ended
Reported $366,688 $54,517 $32,837
Adjustment 2,138 1,390 4,795
Restated $368,826 $55,907 $37,632
(2) REGULATORY MATTERS
On March 17, 1994, the Company filed a petition,
designated as Docket No. 12855, with the Public Utility
Commission of Texas (Texas Commission) to reconcile fuel costs
for the period November 1989 through December 1993. Total Texas
jurisdictional fuel expensesexpense subject to reconciliation for this
50-month period wereis approximately $559 million. The Company's net under-recoveryunder-
recovery for the reconciliation period wasis approximately $.9$0.9
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,JUNE 30, 1994
(Unaudited)
This under-recovered balance includes $0.5 million of
reconciled, but unrecovered fuel and interest carried forward
from Docket No. 8900, the Company's last fuel reconciliation,
$4.1 million of currently over-recovered fuel, $1.2 million of
interest due the Company on prior under-recovered fuel balances,
and a $3.3 million recovery of litigation and settlement
negotiation costs associated with the Company's renegotiation of
a coal supply agreement.
Intervenor status has been granted to Texas Industrial
Energy Consumers (TIEC) and to the Texas Office of Public Utility
Counsel (OPUC). TIEC's consultant filed testimony on August 3,
1994 seeking reclassification of $22.2 million of Texas
jurisdictional expenses, premised on the argument that these
costs are more appropriately recovered as components of base
rates, rather than as fuel expense. OPUC did not file testimony.
Testimony was filed by the Texas Commission Staff
(Staff) on August 10, 1994. The Staff identified four issues in
testimony and recommended a Texas jurisdictional disallowance of
approximately $1.2 million.
Discovery is continuing and a hearing on the case is
scheduled to begin August 22, 1994. The Company believes that the
positions taken by TIEC and the Staff are without merit. While
management cannot predict the outcome of these proceedings,
management believes that the resolution of these proceedings will
not have a material adverse effect on the Company's financial
position or results of operations.
(3) DIVIDENDS
At March 31,June 30, 1994, all of the Company's retained earnings of
$273approximately $287 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,June 30, 1994, the maximum the Company would
have to assume is $75approximately $76.8 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,June 30, 1994 is $66approximately $65.7 million.
(5) FINANCING
In January 1994,The Company has received notification from the
Mississippi Department of Environmental Quality (MDEQ) that it
may be responsible, along with at least two or three other large
companies, for a suspected manufactured gas plant site in Biloxi.
The Company redeemed $.5 million of Series U, 9-1/8%
First Mortgage Bonds due November 1, 2019.has insufficient information at this time to
determine the extent, if any, to which contamination is present
or has impacted soil, groundwater or other conditions at the
site. The redemption was made underCompany intends to cooperate with the terms ofMDEQ and other
identified parties in investigating 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.Biloxi site.
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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.10-K and the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994.
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 PROGRAMFINANCING AND FINANCINGCAPITAL RESOURCES
At June 30, 1994, the Company's capitalization ratios were
50% common stock equity, 4% preferred stock, and 46% long-term
debt. The Company's construction expenditures totaled $29 million during the
first three months of 1994. This represents approximately 23% of the projected
$125 millionCompany anticipates that all funds required for its
construction program for 1994.the remainder of 1994 will be provided
from internal sources. The Company utilizes short-term debt to
meet fluctuations in working capital requirements due to the
seasonal nature of electricenergy sales. Funds to meetThe Company may need additional
long-term financing during the Company'speriod, depending on the timing of
construction expenditures, duringbut the first three monthsnature, amount and timing 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, theany financings have not been determined. The financial condition
of the Company should allow the required funds to be obtained
from the capital markets at reasonable rates.
At March 31,RESTRUCTURING
As previously reported, the Company and CSW have undertaken
a restructuring and early retirement program designed to
consolidate and restructure their operations in order to meet the
challenges of the changing electric utility industry and to
compete effectively in the years ahead. The underlying goal of
restructuring is to enable the CSW Electric Operating Companies
to focus on and be accountable for serving the customer. The
Company's portion of the costs for the restructuring is expected
to be approximately $25.2 million and was expensed in 1993. The
Company does not expect any material additional restructuring
costs in 1994. Approximately $17.8 million of the restructuring
costs will be paid from general corporate funds. The remaining
$7.4 million represents the present value of enhanced benefit
amounts to be paid from the benefit plan trusts to participants
over future years in accordance with the early retirement
program. This amount will funded from general corporate funds to
the benefit plan trusts over future years. The restructuring
is expected to be substantially completed in 1994. Certain
aspects of the restructuring may be subject to SEC approval.
The Company expects to realize a number of benefits from the
restructuring. Beginning in 1994 and continuing into the future,
increased efficiencies and synergies are expected to be realized
with the elimination of previously duplicated functions. This
leads to enhanced communication and efficiency, which should
translate into a reduction in the rate of growth of operating and
maintenance costs. All restructuring costs are expected to be
recovered within 18-24 months after implementation of the
restructuring changes.
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A number of assumptions and judgments are built into these
expected benefits. These assumptions may become inaccurate as a
result of other costs and circumstances which are beyond the
Company's control. If projections of future operating and
maintenance costs are too low, the restructuring should mitigate
any future increases in cost of service but may not result in any
net operating and maintenance reduction overall. It is also
assumed that staffing will be adequate at the new levels. The
reductions in staff will increase the need for automation, with
resulting increases in capital and maintenance costs. The
Company is continuing to re-engineer its business practices.
COAL TRANSPORTATION CONTRACT
During April 1994, the Company resolved a contractual
dispute with Kansas City Southern Railway Company (KCS). As part
of the settlement, the Company has entered into a new long-term
contract with KCS for transportation of low-sulfur coal from
Kansas City to the Company's capitalization ratios were
50% common stock equity, 4% preferred stock,Flint Creek and 46% long-term debt.Welsh power plants.
The settlement should provide the Company with additional
operations flexibility and the Company's customers with savings
in fuel costs.
WHOLESALE POWER CONTRACT
The City of Minden, Louisiana has agreed, commencing in 1995
after expiration of a contract with another supplier, to purchase
power at wholesale from the Company for a period of 5 years with
an option for an additional 5 years. The contract is expected to
provide the Company with an additional 31 megawatt of electric
load. The City of Minden has a population of approximately
15,000.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31,JUNE 30, 1994 COMPARED TO THE QUARTER ENDED MARCH 31,JUNE 30, 1993
Net Income for Common Stock. Net income for common stock
decreased 11%increased 22% to $13.7$25.0 million for the firstsecond quarter of 1994 as
compared to the same period of 1993. The decrease reflects the restatment of first quarter 1993 net incomeincrease was due
primarily 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.increased kilowatt-hour sales.
Electric Operating Revenues. Operating revenues for the
firstsecond quarter were $190$212.0 million, an 8.2%a 10% increase from revenues
of $176$193.2 million in 1993. Favorable
weather in the Company's service territory ledThe $18.8 million increase was due
primarily to a 4.7%16% increase in retail
energy sales. Also contributingtotal kilowatt-hour sales
resulting from increased weather related demand, the July 1993
acquisition of the Bossier Rural Electric Membership Corporation
(BREMCO) and increased sales for resale to the increase in operating revenues were
higher fuel-related revenues.
10
SOUTHWESTERN ELECTRIC POWER COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)other utilities due to
lower unit fuel costs as described below.
Fuel. Fuel and Purchased Power. Anexpense increased approximately $6.7 million or
8% due primarily to a 20% increase in generation of 4.7% more thanpartially offset
by a slight decrease in the cost of fuel. The increase in generation
was primarily a result of increased kilowatt-hour sales as
previously discussed. The average unit fuel pricecost per mmbtu, resultingmillion BTU
decreased 9% from $1.90 in an $8.9 million
rise1993 to $1.74 in 1994. This decrease
was due primarily to the settlement of litigation with fuel
expense.suppliers.
Purchased Power. Purchased power expense increased by
$2.0approximately $1.5 million in the second quarter of 1994 as
compared to the first quarter ofcorresponding period in 1993 due to purchases
under a contract negotiated with Cajun Electric Power
Cooperative, Inc. in conjunction with the Company's acquisition
of the Bossier Rural Electric Membership Corporation.BREMCO.
11
Expenses and Taxes. MaintenanceDepreciation expense increased 7% or
approximately $1.4 million due to increases in depreciable
property. The $1.6 million increase in Taxes, Other than Federal
Income was due primarily to increased ad valorem taxes. Federal
income taxes increased approximately $2.8 million or 38% as a
result of higher pre-tax income.
Interest Charges. Interest expense on long-term debt
increased $1.2 million, or 12% due to an increase in long-term
debt outstanding.
SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO THE SIX MONTHS ENDED
JUNE 30, 1993
Net Income for Common Stock. Net income for common stock
increased 8% for the six months ended June 30, 1994 as compared
to the same period of 1993. The increase was due primarily to
increased kilowatt-hour sales. This increase was partially
offset by the restatement of 1993 financial information to
reflect the change in the Company's method of recording unbilled
revenues and the adoption of SFAS No. 112, Employers' Accounting
for Postemployment Benefits.
Electric Operating Revenues. Operating revenues rose 9% to
approximately $402.0 million for the six months ended June 30,
1994. The increase was primarily the result of a 16% increase in
total kilowatt-hour sales resulting from increased weather
related demand, the acquisition of BREMCO and increased sales for
resale to other utilities due to lower unit fuel costs as
described below.
Fuel. Fuel expense increased approximately $15.7 million or
10% due primarily to an 18% increase in generation partially
offset by a decrease in the cost of fuel. The increase in
generation was primarily a result of increased kwh sales as
previously discussed. The average unit fuel cost per million BTU
decreased 5% from $1.92 in 1993 to $1.81 in 1994. This decrease
was due primarily to the settlement of litigation with fuel
suppliers.
Purchased Power. Purchased power expense increased
approximately $3.5 million as compared to the first quartersix months of
1993 due to purchases under a contract negotiated with Cajun
Electric Power Cooperative, Inc. in conjunction with the
Company's acquisition of BREMCO.
Expenses and Taxes. Depreciation expense rose 7%, or
approximately $2.6 million due primarily to increased depreciable
plant. Taxes, Other than Federal Income increased approximately
$2.8 million in 1994 was
$1.5 million lower thancompared to the same period in 1993 due
primarily to significantlyan increase in ad valorem taxes. Federal income
taxes increased approximately $3.9 million or 38% due to higher
than
average expenditurespre-tax income.
Interest Charges. Interest expense on the Company's production and transmission facilities in
1993. Depreciation expenselong-term debt
increased 6.9%6% or $1.3 million due primarily 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.long-
term debt outstanding.
Cumulative Effect of Changes in Accounting Principles.
InAccounting changes in 1993 includes the Company implementedadoption of SFAS No. 112,
Employers' Accounting for Postemployment Benefits, SFAS No. 109, Accounting for Income Taxes andBenefits. The Company
also changed theits method of accounting for unbilled revenues.
These accounting changes had a cumulative effect of increasing
six months ended June 30, 1993 net income approximatelyby $3.4 million after tax.million.
1112
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.10-K and the Company's quarterly report on Form 10-
Q for the quarter ended March 31, 1994.
Item 1. Legal ProceedingsProceedings.
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.
1213
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,August 12, 1994 /s/ ROX E. COLVIN
Rox E. ColvinR. RUSSELL DAVIS
R. Russell Davis
Controller and Chief Accounting Officer