-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DTVBPonAkRDNAqU6vdBEztj938yXL5E/+yBcRjWURcZBBTMKIRu8gJSUS0SxOPRQ RF/asLMhNdHGqYtz2YxcQw== 0000018540-96-000002.txt : 19960123 0000018540-96-000002.hdr.sgml : 19960123 ACCESSION NUMBER: 0000018540-96-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960110 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960122 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL & SOUTH WEST CORP CENTRAL INDEX KEY: 0000018540 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 510007707 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01443 FILM NUMBER: 96505760 BUSINESS ADDRESS: STREET 1: 1616 WOODALL RODGERS FRWY CITY: DALLAS STATE: TX ZIP: 75202 BUSINESS PHONE: 2147541000 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 10, 1996 Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-1443 Central and South West Corporation 51-0007707 (A Delaware Corporation) 1616 Woodall Rodgers Freeway Dallas, TX 75202-1234 (214) 777-1000 2 Item 2. Acquisition or disposition of assets. Acquisition of SEEBOARD plc. On November 6, 1995, Central and South West Corporation (CSW), indirectly through CSW (UK) plc (CSW (UK)), announced its intention to commence an offer (the Offer) in the United Kingdom to acquire all of the outstanding share capital of SEEBOARD plc (SEEBOARD), a regional electric company based in the United Kingdom, for an aggregate purchase price of approximately $2.52 billion, subject to reduction as described below. Prior to the Offer, the outstanding share capital of SEEBOARD was widely held and publicly traded on the International Stock Exchange of the United Kingdom and the Republic of Ireland (the London Stock Exchange). The aggregate purchase price contained in the Offer was determined by CSW based upon the then prevailing market price of SEEBOARD shares on the London Stock Exchange, plus a premium over such price in an amount sufficient, as determined by CSW, to provide fair compensation to the holders of SEEBOARD shares and to enable CSW to acquire a significant position in SEEBOARD early in the Offer. On January 10, 1996, CSW (UK) announced that all conditions necessary to consummate the Offer had been satisfied or waived, and that the Offer had been declared wholly unconditional. Under applicable law, CSW (UK) is required to pay on or before January 31, 1996 for all shares that have been validly tendered by January 10, 1996. As of January 9, 1996, CSW (UK) owned approximately 73,393,000 shares of SEEBOARD capital stock, constituting approximately 29.9% of the outstanding share capital of SEEBOARD, and had received pursuant to the Offer acceptances in respect of approximately 116,822,000 shares of SEEBOARD capital stock, constituting approximately 47.6% of the outstanding share capital of SEEBOARD. Pursuant to the terms of the Offer, the aggregate purchase price to be paid in the Offer was reduced by approximately $400 million to approximately $2.12 billion to reflect the distribution by SEEBOARD to its shareholders, including CSW (UK), of SEEBOARD's ownership interest in National Grid Holding plc (the National Grid) on December 11, 1995 (the Grid Distribution). CSW (UK) received 34,492,964 shares of National Grid common stock, representing 2.0% of the outstanding share capital of the National Grid, in the Grid Distribution. CSW (UK) intends to dispose of its ownership interest in the National Grid and apply the proceeds from such sale (approximately $98 million based upon the market price of the National Grid shares on January 9, 1996) to repay indebtedness incurred pursuant to the CSW Investments credit facility (as hereinafter defined). CSW has contributed, or committed to contribute, to CSW (UK) up to $850 million of the approximately $2.12 billion required to complete the acquisition of SEEBOARD shares in connection with the Offer. CSW expects to obtain such funds through the proceeds of borrowings under a $850 million senior credit agreement entered into on November 6, 1995 for that purpose with a consortium of banks led by Citibank, N.A., Credit Suisse, and Union Bank of Switzerland (the CSW Credit Agreement). Borrowings under the CSW Credit Agreement are unsecured and mature on November 6, 2000, subject to prepayment by CSW at any time. As of January 9, 1996, CSW had borrowed approximately $731 million under the CSW Credit Agreement to fund, indirectly through CSW (UK), open market purchases of capital stock of SEEBOARD. CSW (UK) intends to obtain the remaining amounts necessary to consummate the Offer, approximately $1.27 billion, from capital contributions or loans to be made to CSW (UK) by its sole shareholder, CSW Investments (CSW Investments), which has arranged a senior secured credit facility for that purpose with a consortium of banks led by Citibank International plc, Credit Suisse, and Union Bank of Switzerland (the CSW Investments Credit Facility). Neither CSW nor CSW International, Inc., a wholly owned subsidiary of CSW and the indirect parent of CSW Investments and CSW (UK), has guaranteed or is otherwise liable for amounts borrowed under the CSW Investments Credit Facility. SEEBOARD's principal business is the distribution and supply of electricity in southeast England. SEEBOARD has its headquarters in Crawley, West Sussex. It has a distribution territory that covers approximately 3,000 square miles which extends from the outlying areas of London to the English Channel. SEEBOARD serves approximately 2 million customers, approximately 80% of which are residential and commercial and approximately 20% of which are industrial. For the year ended March 31, 1995, SEEBOARD had electricity sales of 17.7 billion kilowatt-hours and a profit before tax of approximately $224 million on revenues of approximately $1.9 billion. SEEBOARD is also involved in certain activities other than electricity distribution, including electrical contracting and retailing, gas supply and electricity generation. The earnings of SEEBOARD 3 presented above have been converted into U.S. dollar amounts for illustrative purposes only at an exchange rate of 1.00 pound= $1.5788, which was the prevailing rate of exchange at the close of business on November 3, 1995, the business day prior to the announcement of the Offer. In November 1995, CSW accounted for its investment in SEEBOARD using the equity method in its consolidated financial statements. In December 1995, CSW began full consolidation accounting for SEEBOARD in its consolidated financial statements. Item 7. Financial Statements and Exhibits (a) Financial statements for businesses acquired. Audited financial statements of SEEBOARD plc for the fiscal years ended March 31, 1995 and March 31, 1994 and auditor's report thereon and unaudited financial statements for the six months ended September 30, 1995 and September 30, 1994. (b) Pro forma financial information. Unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 1995 and the year ended December 31, 1994 and unaudited pro forma condensed consolidated balance sheets as of September 30, 1995. (c) Exhibits. Exhibit 23.1 - Consent of KPMG, Chartered Accountants, Registered Auditors. 4 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 hereunto duly authorized. CENTRAL AND SOUTH WEST CORPORATION Date: January 19, 1996 By: /s/ Wendy G. Hargus Wendy G. Hargus Controller 5 AUDITED FINANCIAL STATEMENTS OF SEEBOARD plc FOR THE YEARS ENDED MARCH 31, 1995 AND 1994 AND AUDITOR'S REPORT THEREON (The symbol for British pounds sterling has been denoted by the symbol # in the following financial statements and accompanying tables.) SEEBOARD plc - ACCOUNTS for the year ended 31 March 1995 STATEMENT OF DIRECTORS' RESPONSIBILITIES Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and Group and of the profit or loss for that period. In preparing those financial statements, the directors are required to: * select suitable accounting policies and then apply them consistently; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; * prepare financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy, the financial position of the Company, and for ensuring that the financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. - ------------------------------------------------------------------------------ To the shareholders of SEEBOARD plc We have audited the accompanying consolidated balance sheets of SEEBOARD plc and subsidiaries as at 31 March 1995 and 31 March 1994, and the related consolidated profit and loss accounts and statements of cash flows for each of the years in the two year period ended 31 March 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SEEBOARD plc and subsidiaries at 31 March 1995 and 31 March 1994 and the results of their operations and cash flows for each of the years in the two year period ended 31 March 1995 in conformity with generally accepted accounting principles in the United Kingdom. Generally accepted accounting principles in the United Kingdom vary in certain significant respects from generally accepted accounting principles in the United States. Application of generally acccepted accounting principles in the United States would have affected results of operations and shareholders' equity as of and for the years ended 31 March 1995 and 31 March 1994 to the extent summarised in Note 26 to the consolidated financial statements. KPMG London, England Chartered Accountants 6 June 1995 Registered Auditors 6 SEEBOARD plc - GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 March 1995 1995 1994 Note #m #m Turnover 1 1,195.6 1,218.1 Cost of sales (846.3) (879.7) Gross profit 349.3 338.4 Net operating costs and administrative expenses 2 (210.7) (218.4) Operating profit 138.6 120.0 Income from fixed asset investments 3 14.7 13.6 Profit on ordinary activities before interest 153.3 133.6 Net interest 4 1.5 (1.9) Government debt premium 5 (12.8) - Profit on ordinary activities before taxation 142.0 131.7 Taxation on profit on ordinary activities 7 (38.0) (35.0) Profit on ordinary activities after taxation 104.0 96.7 Minority interests (0.1) (0.2) Profit for the financial year 103.9 96.5 Dividends 8 (35.1) (29.8) Retained profit 68.8 66.7 Earnings per ordinary share Normal 9 41.5p 37.8p Adjusted to exclude Government debt premium write off 9 946.6p 37.8p A statement of movements on the profit and loss account is given in note 19. Recognised gains or losses There are no recognised gains or losses (1994 #nil) other than the profit for the financial year. 7 SEEBOARD plc - BALANCE SHEETS as at 31 March 1995 Group Company 1995 1994 1995 1994 Note #m #m #m #m Fixed assets Tangible assets 10 525.3 494.2 525.2 494.2 Investments 11 57.3 57.4 60.8 60.8 582.6 551.6 586.0 555.0 Current assets Stocks 12 10.5 10.7 10.5 10.7 Debtors 13 220.4 194.7 214.7 188.2 Investments 15 13.2 9.7 8.5 6.5 Cash at bank and in hand 36.0 175.3 24.4 164.5 280.1 390.4 258.1 369.9 Creditors (amounts falling due within one year) 16 251.1 268.3 237.8 256.1 Net current assets 29.0 122.1 20.3 113.8 Total assets less current liabilities 611.6 673.7 606.3 668.8 Creditors (amounts falling due after more than one year) 16 14.3 83.4 14.0 82.5 Provisions for liabilities and charges 17 36.2 45.1 36.2 45.1 Minority interests 0.4 0.3 - - Net assets 560.7 544.9 556.1 541.2 Capital and reserves Called up share capital 18 122.5 128.2 122.5 128.2 Share premium account 19 5.5 1.2 5.5 1.2 Capital redemption reserve 19 6.8 - 6.8 - Profit and loss account 19 425.9 415.5 421.3 411.8 Shareholders' funds 560.7 544.9 556.1 541.2 8 SEEBOARD plc - GROUP CASH FLOW STATEMENT for the year ended 31 March 1995 1995 1994 Note #m #m Net cash inflow from operating activities 23 106.4 285.8 Returns on investments and servicing of finance Interest received 5.8 6.7 Interest paid (4.6) (8.4) Government debt premium (12.8) - Dividends received 11.5 9.7 Dividends paid (31.2) (26.3) Net cash outflow from returns on investments and servicing of finance (31.3) (18.3) Taxation Corporation tax paid (including ACT) (43.0) (33.7) Cash flow from operations after tax 32.1 233.8 Investing activities Purchase of tangible fixed assets (68.3) (79.6) (Purchase)/sale of current asset investments (1.4) 2.7 Purchase of fixed asset investments - (0.2) Receipts from sales of tangible fixed assets 3.3 0.8 Net cash outflow from investing activities (66.4) (76.3) Net cash (outflow)/inflow before financing (34.3) 157.5 Financing Issue of ordinary share capital 3.1 2.0 Purchase of own shares (60.5) - Repayment of Government debt (54.0) (26.0) Net cash outflow from financing (111.4) (24.0) (Decrease)/increase in cash and cash equivalents 23 (145.7) 133.5 9 SEEBOARD plc - ACCOUNTING POLICIES New accounting standards Except for the effect of two new Financial Reporting Standards issued by the Accounting Standards Board the accounting policies of the Group remain unchanged. The two standards, which have a direct impact upon these accounts, are FRS4 - Capital Instruments and FRS5 - Reporting the substance of transactions. During the year, SEEBOARD repurchased Government debt for #66.8m, representing a premium of #12.8m over the book amount of the debt. In compliance with FRS4, this premium on repayment has been shown separately as a charge to the profit and loss account. The Employee Share Ownership Trust (ESOT) received a further loan of #2m during the year, making a total of #8.5m, with which it has purchased SEEBOARD shares. In compliance with FRS5 the ESOT has been consolidated into the Group and the amounts loaned are shown as own shares purchased. Comparative figures in the balance sheet have been restated accordingly. Basis of preparation The accounts have been prepared under the historical cost convention in accordance with the Companies Act 1985 and applicable accounting standards. No profit and loss account is presented for the Company as provided by Section 230 of the Companies Act 1985. Consolidation The accounts consolidate the financial statements of SEEBOARD plc ('the Company'), its subsidiary undertakings and its share of the results of associated undertakings ('the Group'). The results of the subsidiaries are included in the consolidated profit and loss account from the date of acquisition. Goodwill arising on consolidation, being the excess of the purchase price of subsidiaries and associates over the fair value of the net assets acquired, is written off against reserves. An associated undertaking is one in which the Group has a long term interest and over which it exercises significant but not dominant influence. The Group's share of the profits less losses of associates is included in the profit and loss account within income from fixed asset investments and the Group's share of net assets is included in investments in the balance sheet. Where an accounting policy of an associate represents a significant departure from that of the Group, appropriate adjustments to the results of the associate are made on consolidation. Turnover Turnover represents the value of electricity consumption during the year, which includes an estimate of the sales value of units supplied to customers between the date of the last meter reading and the year end, and the invoice value of other goods and services provided, exclusive of value added tax. Cost of sales, net operating costs and administrative expenses Cost of sales includes the purchase cost of electricity, use of system charges and all other costs incurred to the point of sale. Other costs are analysed between net operating costs and administrative expenses. Net operating costs, referred to by the Companies Act 1985 as distribution costs, include all other costs with the exception of finance and administrative expenses. 10 SEEBOARD plc - ACCOUNTING POLICIES Regulated income Where there is an over recovery of Supply or Distribution Business revenues against the regulated maximum allowable amount, revenues equivalent to the over recovered amount are deferred. The deferred amount is deducted from turnover and included in creditors within accruals and deferred income. Where there is an under recovery, any potential future recovery is not anticipated. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The charge for depreciation is calculated on a straight line basis to write off assets over their estimated useful lives. Freehold land is not depreciated. The lives of each major class of asset are: Network plant and buildings 40 years, at 3% for 20 years then 2% per annum Non-network buildings Up to 60 years Fixtures, equipment and vehicles Up to 10 years In the case of major projects, such as the construction of generation plant, cost includes interest capitalised during the construction period. Customers' contributions are credited to the profit and loss account at the same rate as the network is depreciated. Property clawback Under a trust deed, HM Government is entitled to a proportion of certain property gains accruing or treated as accruing as a result of property disposals. A provision for clawback of gains in respect of property disposals is made only to the extent that it is probable that a liability will crystallise. Such a liability will crystallise when an actual or deemed disposal occurs. Stocks Stocks are valued at the lower of cost and net realisable value. Leases Rental costs under operating leases are charged to the profit and loss account in equal annual amounts over the period of the lease. Pension costs Contributions to the Electricity Supply Pension Scheme are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the Company. The capital cost of ex-gratia and supplementary pensions is charged to the profit and loss account in the accounting period in which they are granted. Deferred taxation Deferred taxation arises in respect of items where there is a timing difference between their treatment for accounting purposes and their treatment for taxation purposes. A provision or asset for deferred taxation, using the liability method, is established to the extent that it is probable that a liability or asset will crystallise in the foreseeable future. 11 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 1 Turnover, profit and net assets by business Turnover, profit before taxation and net assets of continuing operations attributable to the following classes of business were: Profit before Turnover taxation Net assets 1995 1994 1995 1994 1995 1994 #m #m #m #m #m #m Distribution 306.1 292.0 116.8 101.1 399.9 383.6 Supply 1,049.7 1,090.9 16.5 14.5 22.2 (50.3) Other activities 117.8 115.6 5.3 4.4 80.1 69.1 Unallocated - - - - (28.0) (35.7) Inter-activity sales (278.0) (280.4) - - - - 1,195.6 1,218.1 138.6 120.0 474.2 366.7 NGH dividends and investment - - 14.7 13.6 56.9 56.9 Net interest and net cash - - 1.5 (1.9) 29.6 121.3 Government debt premium - - (12.8) - - - 1,195.6 1,218.1 142.0 131.7 560.7 544.9 2 Net operating costs and administrative expenses 1995 1994 #m #m Net operating costs - depreciation 32.4 30.7 - other 151.4 158.5 183.8 189.2 Administrative expenses 26.9 29.2 210.7 218.4 Certain costs previously shown under administrative expenses have been reclassified and the comparative figures have been restated accordingly. Net operating costs and administrative expenses include: 1995 1994 #m #m Operating lease rentals 4.9 5.2 Auditors' remuneration 0.1 0.1 Remuneration of auditors for non audit work 1.1 0.6 3 Income from fixed asset investments 1995 1994 #m #m Dividends from The National Grid Holding plc (NGH) 14.8 13.6 Share of loss of associated undertakings (0.1) - 14.7 13.6 12 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 4 Net interest 1995 1994 #m #m Interest payable: On bank loans, overdrafts and other loans wholly repayable within five years (4.6) (1.7) On long term loans repayable in whole or in part after five years - (6.7) Interest receivable 6.1 6.5 1.5 (1.9) 5 Government debt premium Early repayment of Government debt On 23 August 1994, Government debt with a book amount of #54m was repaid at a premium of #12.8m. The debt carried a fixed rate of interest of 12.365% per annum and was repayable in 2008. 6 Directors and employees (a) Directors' share options
Granted Date from Date of Held at during Held at Exercise which Expiry Scheme grant 1.4.1994 the year 31.3.1995 price exercisable date T J Ellis Executive option 9.12.1991 27,000 - 27,000 156.0p 9.12.1994 9.12.2001 Executive option 18.1.1993 107,000 - 107,000 235.5p 18.1.1996 18.1.2003 S Gutteridge Executive option 18.1.1993 126,000 - 126,000 235.5p 18.1.1996 18.1.2003 M J Pavia - - - - - - - A R Smith Sharesave 18.12.1990 4,542 - 4,542 87.5p 1.3.1996 1.9.1996 Executive option 18.1.1993 30,000 - 30,000 235.5p 18.1.1996 18.1.2003 Executive option 21.7.1994 - 25,000 25,000 337.0p 21.7.1997 21.7.2004 J Weight Sharesave 18.12.1990 3,514 - 3,514 87.5p 1.3.1996 1.9.1996 Sharesave 30.9.1992 2,232 - 2,232 154.5p 1.12.1997 1.6.1998 Executive option 18.1.1993 50,000 - 50,000 235.5p 18.1.1996 18.1.2003
No options were either exercised or lapsed during the year. The market price of the shares at 31 March 1995 was 343p and the range during the year was 304p to 488p. Share options to be granted to executive directors in 1995/6 will be subject to strict performance criteria. The exercise of these options will require that the Company's share price performance over the three year period from the date of the grant is maintained in the top third of the RECs and that electricity prices to domestic customers are consistently in the lowest third. 13 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 6 Directors and employees continued (b) Emoluments of directors of the Company were as follows: 1995 1994 #000 #000 Salaries 837 720 Benefits 46 75 Fees 118 112 1,001 907 Pension contributions 139 77 1,140 984 1995 1994 Salary Benefits Total Total #000 #000 #000 #000 Chairman Sir Keith Stuart 70 - 70 70 (Paid to Associated British Ports Holdings PLC) Executive directors T J Ellis (highest paid director) 206 8 214 184 S Gutteridge 118 10 128 117 M J Pavia (appointed 1.10.1994) 75 4 79 - A R Smith (appointed 1.1.1995) 24 2 26 - J Weight (appointed 1.7.1993) 102 14 116 80 Salary and benefits do not include pension contributions. The Company's pension contributions on behalf of T J Ellis, highest paid director, amounted to #30,000 (1994 #26,000). No bonuses are paid to any directors. Furthermore, non- executive directors receive neither share options nor pension entitlements. All executive directors have service contracts terminable by two years' notice. The emoluments of the directors (excluding pension contributions) fell into the following bands: 1995 1994 Number Number #1 - #5,000 1 - #10,001 - #15,000 - 1 #15,001 - #20,000 3 3 #20,001 - #25,000 1 1 #25,001 - #30,000 2 1 #65,001 - #70,000 1 1 #70,001 - #75,000 - 1 #75,001 - #80,000 1 - #80,001 - #85,000 - 1 #110,001 - #115,000 1 - #115,001 - #120,000 1 1 #120,001 - #125,000 - 1 #125,001 - #130,000 1 - #130,001 - #135,000 - 1 #135,001 - #140,000 1 - #180,001 - #185,000 - 1 #210,001 - #215,000 1 - Pension contributions paid in respect of the early retirement of former directors amounted to #271,350. A pension of #29,300 (1994 #28,790) was paid in the year to a former Chairman. Following a judgment of the High Court on 9 December 1994 a payment of #201,370 was made to T A Boley, a former director, as compensation for the early termination of his service contract in April 1993. 14 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 6 Directors and employees continued (c) Employment costs The aggregate remuneration of all employees, including the directors of the Group, comprised: 1995 1994 #m #m Wages and salaries 85.5 95.1 Social security costs 7.1 8.2 Other pension costs 12.7 4.6 105.3 107.9 Less: charged as capital expenditure (17.8) (20.5) Charged to profit and loss account 87.5 87.4 Other pension costs in 1994 included the release of pension provision of #9.0m in respect of the equalisation of pension rights no longer required. 1995 1994 (d) Average number of employees in the Group during the year were: 4,680 5,339 7 Taxation on profit on ordinary activities 1995 1994 #m #m UK corporation tax at 33% (1994 33%) 40.1 30.9 Tax on The National Grid Holding plc dividends 3.0 2.7 Deferred tax (1.2) 1.4 41.9 35.0 Adjustment to taxation in respect of prior years' profits (3.9) - 38.0 35.0 8 Dividends Shares ranking Dividends for dividend payable 1995 1995 1994 000's #m #m Interim dividend paid of 4.0p (1994 3.3p) per ordinary share 241,387 9.7 8.3 Proposed final dividend of 10.5p (1994 8.45p) per ordinary share 241,585 25.4 21.5 35.1 29.8 An employee share ownership trust, which holds 3,448,662 shares in the Company, has waived its right to all but a nominal dividend. 9 Earnings per ordinary share Earnings per ordinary share of 41.5p (1994 37.8p) are calculated by dividing the profit for the financial year of #103.9m (1994 #96.5m) by the average issued share capital of 250,525,000 (1994 255,206,000) ordinary shares. Earnings per ordinary share, excluding the non-recurring effect of the premium of #12.8m paid in respect of the repurchase of Government debt, amounted to 46.6p based on an adjusted profit of #116.7m. 15 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 10 Tangible fixed assets (a) Group and Company Non- network Vehicles land & Fixtures & & mobile Network buildings equipment plant Total Cost #m #m #m #m #m At 1 April 1994 623.9 77.7 67.9 22.3 791.8 Additions 50.3 6.2 8.2 0.5 65.2 Disposals (4.3) (2.2) (1.0) (2.9) (10.4) At 31 March 1995 669.9 81.7 75.1 19.9 846.6 Depreciation At 1 April 1994 227.6 16.1 41.8 12.1 297.6 Disposals (4.3) (1.2) (1.0) (2.2) (8.7) Charge for the year 16.5 3.2 9.4 3.3 32.4 At 31 March 1995 239.8 18.1 50.2 13.2 321.3 Net book amount At 31 March 1995 430.1 63.6 24.9 6.7 525.3 At 31 March 1994 396.3 61.6 26.1 10.2 494.2 All assets are owned by the Company with the exception of fixtures and equipment owned by Southern Gas Ltd at a cost of #0.1m (net book amount #0.1m). (b) The net book amount of non-network land and buildings comprised: 1995 1994 #m #m Freehold 61.4 58.3 Short leasehold 2.2 3.3 63.6 61.6 Non-network land, included at #6.7m (1994 #7.6m), is not depreciated. (c) Included in fixed assets at 31 March 1995 are assets in course of construction amounting to #33.8m (1994 #26.6m). 16 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 11 Fixed asset investments Group Company 1995 1994 1995 1994 #m #m #m #m The National Grid Holding plc 56.9 56.9 56.9 56.9 Investments in subsidiary companies - - 3.4 3.4 Investments in associated companies 0.2 0.3 0.3 0.3 Other fixed asset investments 0.2 0.2 0.2 0.2 57.3 57.4 60.8 60.8 The holding in The National Grid Holding plc was acquired from The Secretary of State for Energy on 23 May 1990. The investment was revalued to #56.9m to represent the Company's share, being 7.3%, of' the pro forma historical cost value of the net assets as at 31 March 1990 of The National Grid Company plc which is wholly owned by The National Grid Holding plc. A proposal for the demerger to shareholders of the Company's investment in The National Grid Holding plc is well advanced. The Company's principal investment in an associate comprises a 37.5% interest in Medway Power Ltd (Medway), a company formed to construct, own and operate a 660 MW gas fired power station on the Isle of Grain, Kent. The power station, which is presently undergoing commissioning trials, is expected to commence generating electricity commercially in the autumn. The Company has entered into an agreement to purchase 50% of Medway's output of electricity for 15 years commencing in 1995. A schedule of the Company's principal subsidiary and associated undertakings is given in note 24. 12 Stocks Group and Company 1995 1994 #m #m Raw materials and consumables 2.3 3.6 Work in progress 1.6 1.7 Finished goods and goods for resale 6.6 5.4 10.5 10.7 13 Debtors Group Company 1995 1994 1995 1994 #m #m #m #m Amounts falling due within one year: Trade debtors 174.6 145.1 166.8 137.4 Amounts owed by group undertakings - - 2.0 1.3 Credit sale installments not yet due 14.5 10.0 14.5 10.0 Other debtors 7.6 16.9 7.4 16.9 Prepayments and accrued income 0.7 3.6 0.5 3.5 Dividends receivable 8.0 7.6 8.5 7.6 Deferred tax 6.3 5.1 6.3 5.1 211.7 188.3 206.0 181.8 Amounts falling due after more than one year: Credit sale installments not yet due 2.4 1.0 2.4 1.0 Advance corporation tax recoverable 6.3 5.4 6.3 5.4 220.4 194.7 214.7 188.2 17 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 14 Deferred tax Total unprovided deferred tax liabilities computed at a rate of 33% (1994 33%) were as follows: Group and Company 1995 1994 #m #m Capital allowances in excess of depreciation 136.0 127.5 Other timing differences (11.1) (14.0) 124.9 113.5 A transfer to/(from) deferred tax of #1.2m (1994 (#1.4m)) increased the deferred tax asset in respect of short term timing differences from #5.1m at 31 March 1994 to #6.3m at 31 March 1995. 15 Current asset investments Group Company 1995 1994 1995 1994 #m #m #m #m Own shares purchased 8.5 6.5 8.5 6.5 Other investments 4.7 3.2 - - 13.2 9.7 8.5 6.5 Of the other investments #4.1m (1994 #3.0m) were listed on the London Stock Exchange. At 31 March 1995 3,448,662 (1994 2,990,000) ordinary shares were held by an independently managed trust in connection with Company share schemes (see note 18). 16 Creditors Group Company 1995 1994 1995 1994 #m #m #m #m Amounts falling due within one year: Advance payments 26.0 43.2 25.5 41.7 Bank loans and overdrafts 6.4 - 6.4 - Payments received on account 6.0 7.3 6.0 7.3 Trade creditors 106.1 85.8 101.7 82.0 Corporation tax 31.7 37.5 31.4 37.2 Other taxation and social security 0.5 0.6 0.5 0.2 Proposed dividend 25.4 21.5 25.4 21.5 Other creditors 26.7 16.9 18.6 10.7 Accruals and deferred income 22.3 55.5 22.3 55.5 251.1 268.3 237.8 256.1 Amounts falling due after more than one year: Government debt - 54.0 - 54.0 Advance payments 11.4 28.5 11.1 27.6 Other creditors 2.9 0.9 2.9 0.9 14.3 83.4 14.0 82.5 18 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 16 Creditors continued Bank loans and overdrafts outstanding at 31 March 1995 were repayable as follows: Group and Company 1995 1994 #m #m Repayable within one year 6.4 - Repayable after five years - 54.0 6.4 54.0 On 23 August 1994 marketable bonds of #54m were repurchased from HM Treasury at a premium of #12.8m. 17 Provisions for liabilities and charges Restructuring Pensions Other Total #m #m #m #m Group and Company Balance at 1 April 1994 26.6 2.1 16.4 45.1 Applied during the year (27.6) - (3.2) (30.8) Provided in the year 20.4 0.5 1.0 21.9 Balance at 31 March 1995 19.4 2.6 14.2 36.2 Included within other provisions are amounts set aside in respect of uninsured potential losses arising from storm damage of #6.5m (1994 #5.5m). 18 Called up share capital (a) Share capital Authorised: Number #m Ordinary shares of 50p each 400,000,000 200.0 Special rights redeemable preference share of #1 1 - Allotted and fully paid: At 1 April 1994 256,386,637 128.2 Issue of ordinary 50p shares arising from exercise of options 1,246,310 0.6 Issue of ordinary 50p shares to employees under a matching offer 1,001,050 0.5 Ordinary 50p shares cancelled (13,600,000) (6.8) At 31 March 1995 245,033,997 122.5 The special rights redeemable preference share of #1, registered in the name of The Secretary of State for Trade and Industry, was redeemed at par on 31 March 1995. (b) Cancellation of ordinary shares During the course of the year 13,600,000 ordinary shares were purchased at an average price of 430p. The shares have been cancelled and in accordance with Section 170 of the Companies Act 1985 an amount of #6.8m equivalent to the nominal value of the cancelled share capital has been transferred to the capital redemption reserve, as set out in note 19. 19 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 18 Called up share capital continued (c) Employee share schemes On 8 September 1994 1,001,050 ordinary shares were allotted to employees under a one for one matching offer. At 31 March 1995 the following options over the Company's ordinary shares were outstanding: Number Price Period of of Date options per exercise shares granted share Six months from Savings related share option scheme 5,176,000 18 December 1990 87.5p 1 March 1996 2,573,378 30 September 1992 154.5p 1 December 1997 7,749,378 Executive share option scheme From To 80,000 17 January 1991 127.5p 1994 2001 27,000 9 December 1991 156.0p 1994 2001 2,771,000 18 January 1993 235.5p 1996 2003 350,000 21 July 1994 337.0p 1997 2004 3,228,000 (d) At 31 March 1995 3,448,662 ordinary shares of the Company were held in an independently managed employee share ownership trust, formed to purchase shares in the Company on the open market, for use in satisfying the share option schemes. (e) At 31 March 1995 Seeboard Share Scheme Trustees Ltd held 3,278,919 ordinary shares on behalf of employees in respect of the profit sharing scheme arrangements. 19 Reconciliation of movements in shareholders' funds
Group Company Share Capital profit Share- profit and Share premium redemption and loss holders' loss capital account reserve account funds account #m #m #m #m #m #m Balance at 1 April 1994 128.2 1.2 - 415.5 544.9 411.8 Retained profit for the year - - - 68.8 68.8 67.9 Issue of ordinary shares 1.1 4.3 - - 5.4 - Cancellation of ordinary shares - - - (58.4) (58.4) (58.4) Transfer to capital redemption reserve (6.8) - 6.8 - - - Balance at 31 March 1995 122.5 5.5 6.8 425.9 560.7 421.3
The cumulative amount of goodwill written off to reserves at 31 March 1995 was #3.9m (1994 #3.9m). 20 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 20 Pension costs The Company's employees are entitled to join the Electricity Supply Pension Scheme which provides pension and other related benefits, based on final pensionable pay, to employees throughout the Electricity Supply Industry. The assets of the Scheme are held in a separate trustee administered fund. A full actuarial valuation of the Scheme is carried out on a triennial basis. These accounts incorporate the results of the latest valuation of the Scheme carried out as at 31 March 1992. Pension costs charged to the profit and loss account for the year were #12.7m (1994 #4.6m as reduced by the release of a provision of #9.0m for the equalisation of pension rights no longer required). The latest full actuarial valuation of the Company's section of the Scheme was carried out by Bacon and Woodrow, consulting actuaries, as at 31 March 1992 and the results of this valuation have been used as the basis for assessing pension costs. The 'attained age' method was used for the valuation and the principal actuarial assumptions adopted were that the investment return would exceed salary increases by 2% per annum (exclusive of merit awards) and exceed future pension increases by 4% per annum. The actuarial value of the assets of the Company's section of the Scheme as at 31 March 1992 represented 104% of the actuarial value of the accrued benefits. After allowing for benefit improvements granted as a result of the valuation and the provision made from surplus to cover contingencies and anticipated short term early retirement costs, this reduces to 100%. The accrued benefits include all benefits for pensioners and other former members as well as benefits based on service completed to date for active members, allowing for future salary rises. The total market value of the assets of the Scheme as at 31 March 1992 was #9,492m of which #414m represented the section of the Scheme which relates to the members and beneficiaries of the Company. Contributions payable by the Company to the Scheme during the year (excluding provisions) were #12.2m (1994 #13.6m). 21 Lease obligations The following annual obligations under operating leases for equipment and vehicles expire: Group and Company 1995 1994 #m #m Within one year 0.4 0.2 In the second to fifth year inclusive 0.5 1.0 0.9 1.2 The following annual obligations under operating leases for non-network land and buildings expire: Group and Company 1995 1994 #m #m Within one year 0.1 - In the second to fifth year inclusive 0.7 0.5 In more than five years 2.6 2.7 3.4 3.2 21 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 22 Capital and other commitments Capital investment authorised by the Board of Directors but not provided for as at 31 March 1995 amounted to #51.3m (1994 #51.9m) in respect of which the Board of Directors has entered into contractual commitments of #9.5m (1994 #9.3m). On 10 April 1992 the Company entered into an agreement to subscribe for 37.5% of the equity and subordinated loan stock of Medway Power Ltd, (Medway), a company formed to construct, own and operate a 660 MW power station on the Isle of Grain, Kent. The maximum amount of the commitment by the Company to Medway, which is dependent upon actual construction costs, is #22.9m. At the same date a power purchase agreement was entered into by the Company to purchase 50% of' Medway's output for 15 years commencing in 1995. At 31 March 1995, Medway had tangible assets of #293.0m and a project bank loan secured on those assets amounting to #284.9m. The lending banks have no right of recourse to the shareholders of Medway, including the Company, in respect of the repayment of the bank loan. 23 Notes to the cash flow statement Reconciliation of operating profit to net cash inflow from operating activities 1995 1994 #m #m Operating profit 138.6 120.0 Non cash items Depreciation 32.4 30.7 Profit on sale of fixed assets (1.6) (0.4) Decrease in provisions (6.6) (4.2) 24.2 26.1 Movement in working capital Decrease in stocks 0.2 0.7 (Increase)/decrease in debtors (23.4) 13.0 (Decrease)/increase in creditors (Decrease)/increase in advance payments (34.3) 71.7 (Decrease)/increase in Supply regulatory over recovery (33.8) 33.8 Improved power purchase credit terms - 23.0 Increase/(decrease) in other creditors 34.9 (2.5) (56.4) 139.7 Net cash inflow from operating activities 106.4 285.8 22 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 23 Notes to the cash flow statement continued Analysis of cash and cash equivalents Balance Movement in year 1995 1994 1995 1994 #m #m #m #m Short term deposits 35.4 157.0 (121.6) 123.0 Cash at bank and in hand 0.6 18.3 (17.7) 10.5 Bank overdraft (6.4) - (6.4) - 29.6 175.3 (145.7) 133.5 Analysis of changes in financing during the year Share capital Government and premium debt 1995 1994 1995 1994 #m #m #m #m Balance at 1 April 1994 129.4 63.7 54.0 80.0 One for one scrip issue - 63.7 - - One for one matching offer 2.3 - - - Transfer to capital redemption reserve (6.8) - - - 124.9 127.4 54.0 80.0 Movement of funds Cash outflow from financing - - (54.0) (26.0) Issue of share capital 3.1 2.0 - - Balance at 31 March 1995 128.0 129.4 - 54.0 24 Subsidiary and associated undertakings The undertakings at 31 March 1995 which are incorporated and operate in England and Wales (unless otherwise stated) are as follows: Percentage of ordinary shares held Activities Principal subsidiary undertakings Seeboard Insurance Company Ltd (Isle of Man) 100% Insurance Longfield Insurance Company Ltd (Isle of Man) 100% Insurance SEEBOARD (Generation) Ltd 100% Holding company Southern Gas Ltd 75% Gas supply Associated undertakings SEEBOARD International Ltd 51% Overseas consultancy Medway Power Ltd 37.5% Generation 23 SEEBOARD plc - NOTES TO THE ACCOUNT'S 31 March 1995 25 Supplementary current cost information Group current cost profit and loss account for the year ended 31 March 1995 1995 1994 #m #m Historical cost profit on ordinary activities before taxation 142.0 131.7 Current cost adjustments: Depreciation (35.0) (34.7) Cost of sales (0.1) (0.2) Monetary working capital 0.3 (1.6) Current cost profit on ordinary activities before taxation 107.2 95.2 Taxation on profit on ordinary activities (38.0) (35.0) Current cost profit on ordinary activities after taxation 69.2 60.2 Minority interests (0.1) (0.2) Current cost profit for the financial year 69.1 60.0 Dividends (35.1) (29.8) Current cost retained profit 34.0 30.2 Group current cost balance sheet as at 31 March 1995 1995 1994 #m #m Fixed assets Tangible assets 961.5 939.4 Investments 229.5 229.6 1,191.0 1,169.0 Net current assets 29.0 122.1 Creditors (amounts falling due after more than one year) 14.3 83.4 Provisions for liabilities and charges 36.2 45.1 Minority interests 0.4 0.3 Net assets 1,169.1 1,162.3 Capital and reserves Called up share capital 122.5 128.2 Share premium account 5.5 1.2 Capital redemption reserve 6.8 - Current cost reserve 956.8 931.0 Profit and loss account 77.5 101.9 Shareholders' funds 1,169.1 1,162.3 24 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 25 Supplementary current cost information continued Current cost accounting allows for price changes specific to the business, principally through the use of indices, when reporting assets employed and profits thereon. Fixed assets and stocks are stated in the balance sheet at net current replacement cost which in turn requires adjustments to the depreciation charge and to cost of sales in the profit and loss account. A monetary working capital adjustment is made to allow for the effects of inflation on the working capital required to support the day to day operations of the Group and a gearing adjustment reduces the effect of the above adjustments in the profit and loss account to take account of financing the business partly by net borrowings. No gearing adjustment has been made in the current year as the Group has no net borrowings. The fixed asset investment has been included at directors' valuation. Current cost turnover, profit and net assets by activity Current cost turnover, profit before taxation and net assets of continuing operations attributable to the following classes of business were: Profit before Turnover taxation Net assets 1995 1994 1995 1994 1995 1994 #m #m #m #m #m #m Distribution 306.1 292.0 84.0 67.4 790.9 785.0 Supply 1,049.7 1,090.9 16.0 12.7 22.4 (50.3) Other activities 117.8 115.6 3.8 3.4 125.1 112.9 Unallocated - - - - (28.0) (35.7) Inter-activity sales (278.0) (280.4) - - - - 1,195.6 1,218.1 103.8 83.5 910.4 811.9 NGH dividends and investment - - 14.7 13.6 229.1 229.1 Net interest and net cash - - 1.5 (1.9) 29.6 121.3 Government debt premium - - (12.8) - - - 1,195.6 1,218.1 107.2 95.2 1,169.1 1,162.3 Reconciliation of movements in current cost reserves Current Profit Capital Current cost and loss and other cost net reserve account reserves assets #m #m #m #m Balance at 1 April 1994 931.0 101.9 129.4 1,162.3 Current cost retained profit for the year - 34.0 - 34.0 Revaluation of net fixed assets 26.0 - - 26.0 Cost of sales adjustment 0.1 - - 0.1 Monetary working capital adjustment (0.3) - - (0.3) Issue of ordinary shares - - 5.4 5.4 Cancellation of ordinary shares - (58.4) - (58.4) Balance at 31 March 1995 956.8 77.5 134.8 1,169.1 25 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 26 Reconciliation to U. S. GAAP SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SEEBOARD's consolidated financial statements have been prepared in accordance with UK GAAP which differs in certain significant respects from US GAAP. The significant differences as they relate to SEEBOARD summarised in the following paragraphs. The approximate effect of the adjustments to profit after taxation and extraordinary items and equity shareholders' funds which would be required under US GAAP are set forth in the tables below. Income from fixed asset investments Dividends from the National Grid Holding plc have been recorded, in accordance with UK GAAP, in the profit for the year to which they pertain. Under US GAAP dividends are recorded in the financial statements of the year in which they are declared. Pension costs Under UK GAAP, pension costs represent the expected cost of providing benefits to be charged to the profit and loss account so as to spread the cost over the expected remaining service lives of employees. Under US GAAP the annual pension cost comprises the estimated cost of benefits accruing in the period adjusted for a portion of the deficit or surplus arising at the time Statement Number 87 of the United States Financial Accounting Standards Board ("SFAS 87") "Employer's Accounting for Pensions" was adopted. The charge is further adjusted to reflect a portion of the cost of benefit improvements and any surpluses/deficits falling outside a 10% fluctuation "corridor". Deferred taxation UK GAAP requires provision for deferred taxation only when it is expected that a liability will become payable in the foreseeable future. US GAAP requires full provision for deferred taxes to be made using enacted future tax rates. Premium on redemption of bonds Under UK GAAP, a premium or discount on the repurchase of bonds before their maturity date is an expense in determining profit before taxation. Under US GAAP, the premium or discount would be described as a loss or gain from extinguishment of debt and, if material, would be classified on the face of the consolidated profit and loss account as an extraordinary item. Dividends Under UK GAAP, dividends are recorded by the group as a deduction from the profit for the year to which they pertain. Under US GAAP dividends are recorded in the financial statements in the period in which they are declared. Employee Share Ownership Trust (ESOT) Under UK GAAP, the cost of shares in the Company purchased by an ESOT is included within the current asset investments as "own shares purchased". Under US GAAP this amount is included as a deduction to shareholders equity. 26 SEEBOARD plc - NOTES TO THE ACCOUNTS 31 March 1995 Approximate effect on profit after taxation and extraordinary items of significant differences between UK GAAP and US GAAP: March March 1995 1994 #m #m Profit after taxation under UK GAAP 103.9 96.5 US GAAP adjustments: Income from fixed asset investments (0.6) (1.3) Pension costs 9.3 1.2 Premium on redemption of Government bonds 12.8 - Taxation effects on the foregoing adjustments (3.0) (0.2) Deferred taxation (11.4) (11.9) Profit before extraordinary loss under US GAAP 111.0 84.3 Extraordinary loss: Premium on redemption of bonds (12.8) - Profit after taxation and extraordinary loss under US GAAP 98.2 84.3 pence pence Earnings per share under US GAAP: Profit before extraordinary loss 44.3 33.0 Extraordinary loss (5.1) - Profit after taxation and extraordinary loss 39.2 33.0 Approximate cumulative effect on equity shareholders' funds of significant differences between UK GAAP and US GAAP: 31 March 31 March 1995 1994 #m #m Equity shareholders' funds under UK GAAP 560.7 544.9 US GAAP adjustments: Income from fixed asset investments (9.9) (9.3) Pension costs 27.3 18.0 Dividends 25.4 21.5 Employee share ownership trust (8.5) (6.5) Tax effects on the above adjustments (7.2) (4.2) Deferred taxation (124.9) (113.5) Equity shareholders' funds under US GAAP 462.9 450.9 STATEMENT OF CASH FLOWS: BASIS OF PREPARATION SEEBOARD's statement of cash flows is prepared in accordance with UK Financial Reporting Standard 1 (FRS 1), the objectives and principles of which are similar to those set out in Statement of Financial Accounting Standards 95, "Statement of Cash Flows" (SFAS 95) under US GAAP. The principal differences between FRS 1 and SFAS 95 relate to classification. Cash flows from taxation and returns on investments and servicing of finance under FRS 1 would be included in operating activities under SFAS 95. Under FRS 1 net cash and cash equivalents include short term borrowings repayable within 3 months from the date of their advance. Under SFAS 95 short-term borrowings repayable within 3 months from the date of their advance and overdraft balances would not be included within cash and cash equivalents and movements on those borrowings and overdraft balances would be included in financing activities. In addition, under SFAS 95 changes in minority interests would be presented as a cash flow from operating activities. 27 UNAUDITED FINANCIAL STATEMENTS OF SEEBOARD plc FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (B) Unaudited interim results for the six months ended 30 September, 1995 (The symbol for British pounds sterling has been denoted by the symbol # in the following financial statements and accompanying tables.) SEEBOARD plc GROUP PROFIT AND LOSS ACCOUNT Unaudited Audited Six Months Ended Year Ended 30 September, 31 March, Note 1995 1994 1995 #m #m #m Turnover 1 512.2 509.3 1,195.6 Operating profit 38.5 40.1 138.6 Income from fixed asset investments - 4.8 14.7 Profit on ordinary activities before interest and taxation 38.5 44.9 153.3 Net interest 0.9 1.4 1.5 Government debt premium 3 - (12.8) (12.8) Profit on ordinary activities before taxation 1 39.4 33.5 142.0 Taxation on profit on ordinary activities 2 (10.4) (10.2) (38.0) Profit on ordinary activities after taxation 29.0 23.3 104.0 Minority interests 0.1 - (0.1) Profit for the period 3 29.1 23.3 103.9 Dividends 4 - (9.7) (35.1) Retained profit 29.1 13.6 68.8 Earnings per ordinary share Normal 3 11.9p 9.1p 41.5p Adjusted 3 14.1p 46.6p Dividend per share 4 NIL 4.0p 14.5p There are no recognised gains or losses other than the profit for the period. 28 SEEBOARD plc GROUP BALANCE SHEET Unaudited Audited Six Months Ended Year Ended 30 September, 31 March, Note 1995 1994 1995 #m #m #m Fixed assets Tangible assets 537.1 509.1 525.3 Investments 57.3 57.4 57.3 594.4 566.5 582.6 Current assets Stocks 10.2 12.3 10.5 Debtors 171.7 165.9 220.4 Investments 42.8 42.3 13.2 Cash and short term deposits 60.1 101.3 36.0 284.8 321.8 280.1 Creditors (amounts falling due within one year) 241.2 317.5 251.1 Net current assets 43.6 4.3 29.0 Total assets less current liabilities 638.0 570.8 611.6 Creditors (amounts falling due after more than one year) 11.0 20.7 14.3 Provisions for liabilities and charges 5 36.5 44.5 36.2 Minority interests 0.3 0.3 0.4 Net assets 590.2 505.3 560.7 Capital and reserves Called up share capital 122.7 122.4 122.5 Share premium 5.7 5.3 5.5 Capital redemption reserve 6.8 6.8 6.8 Profit and loss account 455.0 370.8 425.9 590.2 505.3 560.7 29 SEEBOARD plc GROUP CASH FLOW STATEMENT Unaudited Audited Six Months Ended Year Ended 30 September, 31 March, 1995 1994 1995 #m #m #m Cash inflow from operating activities Operating profit 38.5 40.1 138.6 Depreciation 16.2 17.0 32.4 Profit on sale of fixed assets (0.2) (1.1) (1.6) Working capital movements 50.4 48.6 (63.0) 104.9 104.6 106.4 Interest 0.5 0.8 1.2 Government debt premium - (12.8) (12.8) Dividends received - - 11.5 Dividends paid (25.4) (21.5) (31.2) Corporation tax paid (1.4) (1.6) (43.0) Net cash inflow from operations after taxation 78.6 69.5 32.1 Investing activities Purchase of tangible fixed assets (27.2) (34.6) (68.3) Net purchase of treasury investments (29.6) (30.5) (1.4) Receipts from sales of tangible fixed assets 0.6 2.1 3.3 Net cash inflow/(outflow) before financing 22.4 6.5 (34.3) Financing Issue of ordinary share capital 0.4 3.1 3.1 Purchase of own shares - (34.5) (60.5) Repayment of debenture loan - (54.0) (54.0) Increase/(decrease) in cash and cash equivalents 22.8 (78.9) (145.7) 30 SEEBOARD plc GROUP NOTES Basis of preparation of interim financial statements The interim financial statements for the six months ended 30 September, 1995 for SEEBOARD plc and its subsidiaries, which are unaudited, have been prepared on the basis of the accounting policies set out in the Group's 1995 statutory accounts. The figures for the financial year ended 31 March, 1995 are not the Group's full statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified. 1. Segmental analysis Unaudited Unaudited Audited Six Months Ended Six Months Ended Year Ended 30 September, 1995 30 September, 1994 31 March, 1995 Profit Profit Profit before before before Turnover taxation Turnover taxation Turnover taxation #m #m #m #m #m #m Distribution 128.6 42.0 142.3 43.6 306.1 116.8 Supply 437.1 (4.0) 444.1 (4.2) 1,049.7 16.5 Other activities 57.0 0.5 49.2 0.7 117.8 5.3 Inter-activity sales (110.5) - (126.3) - (278.0) - 512.2 38.5 509.3 40.1 1,195.6 138.6 Income from fixed asset investments - 4.8 14.7 Net interest 0.9 1.4 1.5 Government debt premium - (12.8) (12.8) 512.2 39.4 509.3 33.5 1,195.6 142.0 2. Taxation The charge for taxation for the six months ended 30 September, 1995 has been computed by applying the estimated effective tax rate for the full financial year. 3. Earnings per ordinary share Earnings per ordinary share of 11.9p are calculated by dividing the profit for the period of #29.1m by the average issued share capital of 245.23m ordinary shares. Adjusted earnings per ordinary share shown in respect of the six months ended 30 September, 1994 and the year ended 31 March, 1995 exclude the Government debt premium of #12.8m. 4. Interim dividend Assuming that the recommended cash offer, of 635p per SEEBOARD Share, made by CS First Boston on behalf of CSW (UK) plc becomes wholly unconditional, the Directors do not intend to pay an interim dividend in respect of the six months ended 30 September, 1995. 31 SEEBOARD plc GROUP NOTES (Continued) 5. Provisions for liabilities and charges Restructuring Pension Other Total #m #m #m #m Balance at 1 April, 1995 19.4 2.6 14.2 36.2 Applied during the year (6.4) - (0.3) (6.7) Provided in the year 6.6 0.2 0.2 7.0 Balance at 30 September, 1995 19.6 2.8 14.1 36.5 6. Net cash Unaudited Audited 30 September, 31 March, 1995 1994 1995 #m #m #m Cash and short term deposits 60.1 101.3 36.0 Bank overdraft (7.7) (4.9) (6.4) Cash and cash equivalents 52.4 96.4 29.6 Treasury investments 34.3 33.7 4.7 86.7 130.1 34.3 Proceeds of #99.2m from a Eurobond issue were received on 3 October, 1995. 7. Reconciliation of movements in shareholders' funds Group Share Capital Profit Share Premium Redemption and Loss Shareholders Capital Accounts Reserve Account Funds #m #m #m #m #m Balance at 1 April, 1995 122.5 5.5 6.8 425.9 560.7 Retained profit for the period - - - 29.1 29.1 Issue of ordinary shares 0.2 0.2 - - 0.4 Balance at 30 September, 1995 122.7 5.7 6.8 455.0 590.2 8. The National Grid Holding plc At an extraordinary meeting to be held on 8 December, 1995, approval will be sought for the demerger of SEEBOARD's shareholding in the National Grid. If approval is given, SEEBOARD's investment in The National Grid Holding plc will be distributed as a dividend in specie. 9. Summary of Significant Differences Between UK and US Generally Accepted Accounting Principles SEEBOARD's interim financial statements are unaudited and have been prepared in accordance with UK GAAP which differs in certain significant respects from US GAAP. The significant differences, as they relate to SEEBOARD, are explained in Note 26 to the SEEBOARD accounts for the years ended 31 March 1995 and 1994 included elsewhere herein. The approximate effect of the adjustments to profit after taxation and extraordinary items and equity shareholders'funds which would be required under US GAAP are set forth in the tables below. 31 SEEBOARD plc GROUP NOTES (Continued) Approximate effect on profit after taxation and extraordinary items of significant differences between UK GAAP and US GAAP: Half year Half year to 30 to 30 September September 1995 1994 Profit after taxation under UK GAAP 29.1 23.3 US GAAP adjustments: Income from fixed asset investments - (4.8) Pension costs 5.0 4.7 Premium on redemption of bonds - 12.8 Taxation effects on the foregoing adjustments (1.6) (0.8) Deferred taxation (2.5) (5.9) Profit before extraordinary loss under US GAAP 30.0 29.3 Extraordinary loss: Premium on redemption of bonds - (12.8) Profit after taxation and extraordinary loss under 30.0 16.5 US GAAP pence pence Earnings per share under US GAAP: Profit before extraordinary loss 12.2 11.4 Extraordinary loss - (5.0) Profit after taxation and extraordinary loss 12.2 6.4 Approximate cumulative effect on equity shareholders' funds of significant differences between UK GAAP and US GAAP: Half year to Half year to 30 September 30 September 1995 1994 #m #m Equity shareholders' funds under UK GAAP 590.2 505.2 US GAAP adjustments Income from fixed asset investments (9.9) (14.1) Pension costs 32.3 22.7 Dividends payable - 9.7 Employee share ownership trust (8.5) (8.6) Tax effects on the foregoing adjustments (8.8) (5.0) Deferred taxation (127.4) (119.4) Equity shareholders' funds under US GAAP 467.9 390.5 STATEMENT OF CASH FLOWS: BASIS OF PREPARATION SEEBOARD's statement of cash flows is prepared in accordance with UK Financial Reporting Standard 1 (FRS 1), the objectives and principles of which are similar with those set out in Statement of Financial Accounting Standards 95, "Statement of Cash Flows" (SFAS 95) under US GAAP. The principal differences between FRS 1 and SFAS 95 relate to classification. Cash flows from taxation and returns on investments and servicing of finance under FRS 1 would be included as operating activities under SFAS 95. Under FRS 1 net cash and cash equivalents include short-term borrowings repayable within 3 months from the date of their advance. Under SFAS 95 short-term borrowings repayable within 3 months from the date of their advance and overdraft balances would not be included within cash and cash equivalents and movements on those borrowings and overdraft balances would be included in financing activities. In addition, under SFAS 95 changes in minority interests would be presented as a cash flow from operating activities. 33 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND BALANCE SHEETS The unaudited pro forma condensed consolidated statements of income and balance sheets required by Item 7(b) are filed as part of this Form 8-K. The pro forma results give effect to the acquisition of SEEBOARD accounted for under the purchase method of accounting for the nine months ended September 30, 1995 and the twelve months ended December 31, 1994 as if the transaction had been consummated at the beginning of the periods presented for the pro forma condensed consolidated statements of income and at the end of the period presented for the pro forma condensed consolidated balance sheets. The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 1994 include the results of operations of SEEBOARD for the year ended March 31, 1995. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 1995 include the results of operations of SEEBOARD for that period. Consequently, revenues of approximately $555 million and net income of approximately $55 million of SEEBOARD have been included in both periods presented. The unaudited pro forma condensed consolidated statements of income and balance sheets are based upon preliminary fair value allocations related to the purchase of SEEBOARD. The allocations are subject to revision after more detailed analyses, appraisals and evaluations are completed. The condensed historical balance sheets and statements of income for each company and for the pro forma consolidated company have been prepared in accordance with United States Generally Accepted Accounting Principles. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the SEEBOARD acquisition had taken place at the beginning of the period specified, nor is it necessarily indicative of future operating results. Pro forma financial statements were converted at a translation rate of $1.54/pound for the income statement dated December 31, 1994 and $1.58/pound for income statement and balance sheets dated September 30, 1995. The unaudited pro forma condensed consolidated statements of income and balance sheets should be read in conjunction with the consolidated financial statements of CSW and the related notes thereto included in CSW's Combined Annual Report on Form 10-K for the year ended December 31, 1994 and CSW's Combined Quarterly Report on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, as well as the financial statements of SEEBOARD, prepared in accordance with generally accepted accounting principles in the United Kingdom, for the fiscal year ended March 31, 1995 and the six months ended September 30, 1995 and notes thereto included in Item 7(a) to this Current Report on Form 8-K. 34 CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma Pro Forma CSW SEEBOARD Adjustments Consolidated (Millions, except per share amounts) REVENUES $ 2,666 $ 1,365 $ - $ 4,031 OPERATING EXPENSES AND TAXES Operating expenses 1,655 1,185 - 2,840 Depreciation and amortization 280 38 30 (a) 348 Taxes, other than federal income 140 - - 140 Federal income taxes 64 52 (37)(b) 79 2,139 1,275 (7) 3,407 OPERATING INCOME 527 90 7 624 OTHER INCOME AND DEDUCTIONS 76 8 (8)(c) 76 INCOME BEFORE INTEREST CHARGES 603 98 (1) 700 INTEREST CHARGES 249 (1) 103 (d) 351 NET INCOME 354 99 (104) 349 Preferred stock dividends 14 - - 14 NET INCOME FOR COMMON STOCK $ 340 $ 99 $ (104) $ 335 EARNINGS PER SHARE OF COMMON STOCK $1.78 $1.75 AVERAGE COMMON SHARES OUTSTANDING 191.4 191.4
Notes to Pro Forma Condensed Consolidated Statements of Income (a) Reflects the increase in depreciation expense for the step-up in basis of plant acquired and the increase in amortization expense of goodwill recorded in connection with the acquisition of SEEBOARD. (b) Reflects the estimated income tax effects of the acquisition. (c) Reflects the elimination of revenues from the National Grid Group plc, the share of which were distributed by SEEBOARD to its shareholders' effective December 11, 1995. In addition, the adjustment assumes the consumption of the CSW Grid sale. (d) Reflects interest expense on indebtedness or to be incurred pursuant to the CSW Credit Agreement and the CSW Investments Credit Facility to finance the acquisition, reduced by interest expense on indebtedness to be repaid from (i) cash on hand of SEEBOARD at the closing date of the acquisition, (ii) amounts to be received upon the factoring by SEEBOARD of 80% of its accounts receivable (the receivables factoring) and (iii) the proceeds from the sale of CSW (UK)'s interest in the National Grid (the CSW Grid Sale). 35 CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Pro Forma Pro Forma CSW SEEBOARD Adjustments Consolidated Twelve Months Twelve Months Twelve Months Ended Ended Ended December 31, March 31, December 31, 1994 1995 1994 (Millions, except per share amounts) REVENUES $ 3,623 $ 1,842 $ - $ 5,465 OPERATING EXPENSES AND TAXES Operating expenses 2,298 1,564 - 3,862 Depreciation and amortization 356 50 38 (a) 444 Taxes, other than federal income 196 - - 196 Federal income taxes 179 82 (50) (b) 211 3,029 1,696 (12) 4,713 OPERATING INCOME 594 146 12 752 OTHER INCOME AND DEDUCTIONS 111 22 (22) (c) 111 INCOME BEFORE INTEREST CHARGES 705 168 (10) 863 INTEREST CHARGES 293 (2) 135 (d) 426 NET INCOME 412 170 (145) 437 Preferred stock dividends 18 - - 18 NET INCOME FOR COMMON STOCK $ 394 $ 170 $ (145) $ 419 EARNINGS PER SHARE OF COMMON STOCK $2.08 $ 2.21 AVERAGE COMMON SHARES OUTSTANDING 189.3 189.3 See the accompanying notes on the previous page.
36 CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 Pro Forma Pro Forma CSW SEEBOARD Adjustments Consolidated (Millions) ASSETS Net plant $ 8,057 $ 848 $ 87 (a) $ 8,992 Current Assets Cash 61 95 (95) (b) 61 Accounts receivable 1,006 261 (209) (c) 1,058 Other 416 58 26 (a) 500 Investment in National Grid - 91 (91) (d) - Goodwill - - 1,447 (a) 1,447 Deferred Charges and Other 1,756 61 6 (a) 1,823 $ 11,296 $ 1,414 $ 1,171 $ 13,881 CAPITALIZATION & LIABILITIES Capitalization Common stock $ 673 $ - $ - $ 673 Paid-in capital 597 201 (201) (a) 597 Retained earnings 1,914 539 (539) (a) 1,914 Total Common Stock Equity 3,184 740 (740) 3,184 Preferred stock 326 - - 326 Long-term debt 3,001 - 1,880 (b) 4,881 Total Capitalization 6,511 740 1,140 8,391 Current Liabilities 2,247 381 - 2,628 Deferred Income Taxes 2,111 218 31 (a) 2,360 Other Liabilities 427 75 - 502 $ 11,296 $ 1,414 $ 1,171 $ 13,881 Notes to Pro Forma Condensed Consolidated Balance Sheets. (a) Reflects the following preliminary purchase accounting adjustments resulting from the acquisition of SEEBOARD, determined as if the acquisition occurred on September 30, 1995: (millions) Step-up in basis of plant $ 87 Fair value adjustment of other assets 26 Increase in goodwill on acquisition 1,447 Recognition of additional pension asset 6 Elimination of the paid-in capital of SEEBOARD 201 Elimination of the retained earnings of SEEBOARD 539 Increase in deferred taxes on preliminary purchase accounting adjustments 31 (b) Reflects indebtedness incurred or to be incurred pursuant to the CSW Credit Agreement and the CSW Investments Credit Facility to finance the acquisition, reduced by indebtedness to be repaid from (i) cash on hand of SEEBOARD at the closing date of the acquisition, (ii) the proceeds of the receivables factoring and (iii) the proceeds from the CSW Grid Sale. (c) Assumes the consummation of the receivables factoring. (d) Assumes the consummation of the CSW Grid Sale and distribution of the grid shares. EX-23.1 2 37 EXHIBIT 23.1 The Directors SEEBOARD plc We consent to the incorporation by reference in the registration statement on Form S-8 (File nos. 2-70746, 33-12992, 33-46301, 33-63027 and 33-64233) and on Form S-3 (File No. 33-50193) of Central and South West Corporation of our report dated 6 June 1995, with respect to the consolidated balance sheets of SEEBOARD plc and subsidiaries as of 31 March 1995 and 31 March 1994 and the related profit and loss accounts incash flows for each of the years in the two-year period ended 31 March 1995, which report appears in Form 8-K of Central and South West Corporation dated 19 January 1996. KPMG Chartered Accountants London Registered Auditors 19 January 1996 -----END PRIVACY-ENHANCED MESSAGE-----