-----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, O89+HmpRhEc4fZNj4HmBxLnpZ9iEaYoxqP6ltHqP0/wr2vTrTSdspiVJjEMOoook 5CBN6ok/d+ELc4DVygox5A== 0000754737-95-000025.txt : 19951119 0000754737-95-000025.hdr.sgml : 19951119 ACCESSION NUMBER: 0000754737-95-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANA CORP CENTRAL INDEX KEY: 0000754737 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570784499 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08809 FILM NUMBER: 95589252 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST STREET 2: P O BOX 764 CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8037483000 MAIL ADDRESS: STREET 1: MAIL CODE 051 CITY: COLUMBIA STATE: SC ZIP: 29218 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8809 SCANA Corporation (Exact name of registrant as specified in its charter) South Carolina 57-0784499 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1426 Main Street, Columbia, South Carolina 29201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 803) 748-3000 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 . APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes . No . APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 103,358,769 Common Shares, without par value, as of October 31, 1995 1 SCANA CORPORATION INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994.................................... 3 Consolidated Statements of Income and Retained Earnings for the Periods Ended September 30, 1995 and 1994........ 5 Consolidated Statements of Cash Flows for the Periods Ended September 30, 1995 and 1994........................ 6 Notes to Consolidated Financial Statements............... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................ 17 Item 6. Exhibits and Reports on Form 8-K......................... 17 Signatures........................................................ 18 Exhibit Index..................................................... 19 2 PART I FINANCIAL INFORMATION SCANA CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 1995 and December 31, 1994 (Unaudited) September 30, December 31, 1995 1994 (Thousands of Dollars) As adjusted (Note 1) ASSETS Utility Plant: Electric................................................... $3,439,781 $3,424,951 Gas........................................................ 469,822 467,576 Transit.................................................... 3,519 3,785 Common..................................................... 77,881 77,327 Total.................................................... 3,991,003 3,973,639 Less accumulated depreciation and amortization............. 1,337,331 1,333,360 Total.................................................... 2,653,672 2,640,279 Construction work in progress.............................. 681,508 582,628 Nuclear fuel, net of accumulated amortization.............. 34,088 43,591 Acquisition adjustment-gas, net of accumulated amortization............................................. 26,422 27,169 Utility Plant, Net.................................... 3,395,690 3,293,667 Nonutility Property and Investments, net of accumulated depreciation and depletion................................. 308,001 317,309 Current Assets: Cash and temporary cash investments........................ 104,118 12,938 Receivables................................................ 192,904 183,180 Inventories (at average cost): Fuel..................................................... 55,867 60,273 Materials and supplies................................... 48,628 47,463 Prepayments................................................ 15,644 19,853 Accumulated deferred income taxes.......................... 18,297 18,629 Total Current Assets.................................. 435,458 342,336 Deferred Debits: Emission allowances........................................ 28,074 19,409 Unamortized debt expense................................... 13,147 13,488 Unamortized deferred return on plant investment............ 7,430 10,614 Nuclear plant decommissioning fund......................... 34,648 30,383 Other...................................................... 300,578 289,306 Total Deferred Debits................................. 383,877 363,200 Total....................................... $4,523,026 $4,316,512 See notes to consolidated financial statements. 3 SCANA CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 1995 and December 31, 1994 (Unaudited) September 30, December 31, 1995 1994 (Thousands of Dollars) As adjusted (Note 1) CAPITALIZATION AND LIABILITIES Stockholders' Investment: Common Equity: Common stock (without par value)......................... $1,040,168 $ 886,770 Retained earnings........................................ 501,836 472,371 Total Common Equity..................................... 1,542,004 1,359,141 Preferred stock (not subject to purchase or sinking funds). 26,027 26,027 Total Stockholders' Investment.......................... 1,568,031 1,385,168 Preferred stock, net (subject to purchase or sinking funds).. 46,629 49,528 Long-term debt, net.......................................... 1,535,370 1,548,824 Total Capitalization.................................. 3,150,030 2,983,520 Current Liabilities: Short-term borrowings...................................... 133,889 171,827 Current portion of long-term debt.......................... 116,365 38,055 Current portion of preferred stock......................... 2,472 2,418 Accounts payable........................................... 72,364 119,963 Customer deposits.......................................... 13,560 13,768 Taxes accrued.............................................. 78,380 46,670 Interest accrued........................................... 33,844 25,226 Dividends declared......................................... 37,160 35,530 Other...................................................... 16,035 17,220 Total Current Liabilities............................. 504,069 470,677 Deferred Credits: Accumulated deferred income taxes.......................... 551,463 561,703 Accumulated deferred investment tax credits................ 88,626 91,349 Accumulated reserve for nuclear plant decommissioning...... 34,648 30,383 Other...................................................... 194,190 178,880 Total Deferred Credits................................ 868,927 862,315 Total....................................... $4,523,026 $4,316,512 See notes to consolidated financial statements. 4 SCANA CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Periods Ended September 30, 1995 and 1994 (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 (Thousands of Dollars, Except Per Share Amounts) As adjusted As adjusted (Note 1) (Note 1) OPERATING REVENUES: Electric............................... $307,620 $294,361 $ 777,198 $ 754,407 Gas.................................... 64,960 65,956 249,235 247,295 Transit................................ 896 1,012 2,939 2,981 Total Operating Revenues........... 373,476 361,329 1,029,372 1,004,683 OPERATING EXPENSES: Fuel used in electric generation....... 67,120 66,407 173,244 177,703 Purchased power........................ 4,869 6,232 12,207 16,030 Gas purchased for resale............... 40,679 45,022 151,042 159,930 Other operation........................ 56,063 56,041 169,792 168,754 Maintenance............................ 14,451 16,853 44,987 50,074 Depreciation and amortization.......... 31,185 29,762 92,704 89,306 Income taxes........................... 42,561 33,767 91,163 77,819 Other taxes............................ 21,110 20,537 62,737 58,913 Total Operating Expenses........... 278,038 274,621 797,876 798,529 OPERATING INCOME......................... 95,438 86,708 231,496 206,154 OTHER INCOME: Allowance for equity funds used during construction.................. 2,735 1,495 7,659 5,564 Other income, net of income taxes...... 1,671 (41,806) (7,859) (28,243) Total Other Income................. 4,406 (40,311) (200) (22,679) INCOME BEFORE INTEREST CHARGES AND PREFERRED STOCK DIVIDENDS.............. 99,844 46,397 231,296 183,475 INTEREST CHARGES (CREDITS): Interest expense....................... 33,979 29,711 101,150 85,521 Allowance for borrowed funds used during construction.................. (3,580) (1,497) (9,014) (4,925) Total Interest Charges, Net........ 30,399 28,214 92,136 80,596 INCOME BEFORE PREFERRED STOCK CASH DIVIDENDS OF SUBSIDIARY................ 69,445 18,183 139,160 102,879 PREFERRED STOCK CASH DIVIDENDS OF SUBSIDIARY (At stated rates)........... (1,416) (1,482) (4,280) (4,483) NET INCOME............................... 68,029 16,701 134,880 98,396 RETAINED EARNINGS AT BEGINNING OF PERIOD, AS PREVIOUSLY REPORTED...... 469,247 519,233 523,668 506,380 ADJUSTMENTS FOR THE CUMULATIVE EFFECT ON PRIOR PERIODS OF APPLYING RETRO- ACTIVELY THE FULL COST METHOD OF ACCOUNTING FOR OIL AND GAS (NOTE 1C)... - (13,145) (51,297) (15,550) BALANCE AT BEGINNING OF PERIOD, AS ADJUSTED............................ 469,247 506,088 472,371 490,830 COMMON STOCK CASH DIVIDENDS DECLARED..... (35,440) (33,591) (105,415) (100,028) RETAINED EARNINGS AT END OF PERIOD....... $501,836 $489,198 $ 501,836 $ 489,198 NET INCOME............................... $ 68,029 $ 16,701 $ 134,880 $ 98,396 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (THOUSANDS) (Note 1B)............................ 98,562 95,121 97,544 94,398 EARNINGS PER WEIGHTED AVERAGE SHARE OF COMMON STOCK........................ $ 0.69 $ 0.18 $ 1.38 $ 1.04 CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK.......................... $ 0.360 $ .3525 $ 1.080 $ 1.0575 See notes to consolidated financial statements. 5 SCANA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Periods Ended September 30, 1995 and 1994 (Unaudited) Nine Months Ended September 30, 1995 1994 (Thousands of Dollars) As adjusted CASH FLOWS FROM OPERATING ACTIVITIES: (Note 1) Net income............................................ $134,880 $ 98,396 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, depletion and amortization............ 154,376 209,217 Amortization of nuclear fuel........................ 5,264 12,863 Deferred income taxes, net.......................... (10,461) (7,945) Deferred investment tax credits, net................ (2,723) (2,729) Net regulatory asset - adoption of SFAS No. 109..... (2,851) (975) Dividends declared on preferred stock of subsidiary. 4,280 4,483 Equity (earnings) losses of investees............... (349) (274) Nuclear refueling accrual........................... 5,218 3,148 Allowance for funds used during construction (AFC).. (16,673) (10,489) Amortization of loss on reacquired debt............. (3,636) (320) Over (under) collections, fuel adjustment clause.... 20,750 (6,806) Early retirements................................... (21,291) - Emission allowances................................. (8,665) - Changes in certain current assets and liabilities: (Increase) decrease in receivables................. (9,724) (8,407) (Increase) decrease in inventories................. 3,241 8,045 (Increase) decrease in prepayments................. 4,209 7,352 Increase (decrease) in accounts payable............ (47,598) (18,388) Increase (decrease) in estimated rate refunds and related interest............................. - (2,509) Increase (decrease) in taxes accrued............... 31,710 6,160 Increase (decrease) in interest accrued ........... 8,618 5,822 Other, net.......................................... 20,388 5,181 Net Cash Provided From Operating Activities............. 268,963 301,825 CASH FLOWS FROM INVESTING ACTIVITIES: Utility property additions and construction expenditures, net of AFC............................ (181,301) (304,572) Acquisition of oil and gas producing properties....... - (47,189) Increase in other property and investments............ (67,532) (91,657) Sale of assets of subsidiary.......................... - 48,678 Net Cash Used For Investing Activities.................. (248,833) (394,740) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds: Issuance of First Mortgage Bonds.................... 99,583 99,207 Issuance of other long-term debt.................... 28,170 - Issuance of notes and loans......................... 61,019 60,000 Issuance of common stock............................ 155,498 48,925 Repayments: First and Refunding Mortgage Bonds.................. (48,779) - Pollution Control Bonds............................. (100) (100) Redemption of notes................................. (63,917) (67,250) Other long-term debt................................ (11,200) (13,346) Preferred stock..................................... (2,846) (2,964) Dividend payments: Common stock........................................ (103,858) (98,371) Preferred stock of subsidiary....................... (4,336) (4,568) Short-term borrowings, net............................ (37,937) 60,340 Fuel financings, net.................................. (247) 11,510 Net Cash Provided From Financing Activities............. 71,050 93,383 NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS............................ 91,180 468 CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1........ 12,938 30,565 CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30..... $ 104,118 $ 31,033 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for - Interest (includes capitalized interest of $9,014 and $4,925)....... $ 90,893 $ 78,260 - Income taxes.......................... 49,411 52,038 See notes to consolidated financial statements.
6 SCANA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (Unaudited) The following notes should be read in conjunction with the Notes to Consolidated Financial Statements for the year ended December 31, 1994 appearing in the Company's Current Report on Form 8-K dated September 6, 1995. These are interim financial statements and, because of temperature variations between seasons of the year, the amounts reported in the Consolidated Statements of Income are not necessarily indicative of amounts expected for the year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature, which are necessary for a fair statement of the results for the interim periods reported. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. Principles of Consolidation: The accounts of the Company and its wholly owned subsidiaries are consolidated in the accompanying Consolidated Financial Statements. Certain investments are reported using the equity method of accounting. Significant intercompany balances and transactions have been eliminated in consolidation in compliance with Statement of Financial Accounting Standards No. 71 "Accounting for the Effects of Certain Types of Regulation" which provides that profit on intercompany sales to regulated affiliates are not eliminated if the sale price is reasonable and the future recovery of the sales price through the rate making process is probable. B. Basis of Accounting: The Company prepares its financial statements in accordance with the provisions of Statement of Financial Accounting Standard No. 71 (SFAS 71), "Accounting for the Effects of Certain Types of Regulations." The accounting standard allows cost-based rate-regulated utilities, such as the Company, to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, the Company has recorded, as of September 30, 1995, approximately $110 million and $3 million of regulatory assets and liabilities, respectively, excluding net accumulated deferred income tax assets of approximately $40 million. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and would be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off is recorded. The Company's cash flows would not be affected. C. Stock Split On April 27, 1995, the Company's Board of Directors approved a two-for-one split of the Company's Common Stock effective at the close of business May 11, 1995. The weighted average number of common shares outstanding, earnings per weighted average share of common stock and cash dividends declared per share of common stock have been restated to reflect the stock split for all periods reported. D. Change in Method of Accounting for Oil and Gas Operations During the second quarter of 1995 the Company's oil and gas subsidiary, SCANA Petroleum Resources, Inc. (SPR), changed from the successful efforts method to the full cost method of accounting for its oil and gas operations. The Company believes the full cost method provides a better matching of revenues and expenses given the change in SPR's primary focus from a purchaser of producing oil and gas properties to a developer of reserves on its own or others' properties. The financial statements of prior periods have been restated to apply the new method retroactively. The effects of the accounting change on the income statements for the third quarter of 1994, for the nine months ended September 30, 1995 and 1994 and for the years ended December 31, 1994, 1993 and 1992, respectively, are as follows: 7 Increase (Decrease) (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, Effect on-- 1994 1995 1994 Other income, net of income taxes $(32,989) $ (349) $(30,584) Net income $(32,989) $ (349) $(30,584) Earnings Per Weighted Average Share of Common Stock* $ (.35) $ - $ (.32) Increase (Decrease) (In thousands, except per share amounts) Year Ended December Effect on-- 1994 1993 1992 Other income, net of income taxes $(35,747) $(2,741) $ 77 Net income $(35,747) $(2,741) $ 77 Earnings Per Weighted Average Share of Common Stock* $ (.38) $ (.03) $ - * The effect on prior periods has been adjusted for a two- for-one stock split effective May 11, 1995. The balance of retained earnings as of December 31, 1994 has been reduced for the effect (net of income taxes) of applying retroactively the new method of accounting. E. Recently Issued Accounting Standard The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The provisions of the Statement, which must be implemented by the Company for the fiscal year beginning January 1, 1996, require the recognition of a loss in the income statement and related disclosures whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. The Company does not believe that adoption of the provisions of the Statement will have a material adverse impact on its results of operations or financial position. F. Reclassifications: Certain amounts from prior periods have been reclassified to conform with the 1995 presentation. 8 2. RATE MATTERS: With respect to rate matters at September 30, 1995, reference is made to Note 2 of Notes to Consolidated Financial Statements for the year ended December 31, 1994 appearing in the Company's Current Report on Form 8-K dated September 6, 1995. On July 10, 1995, South Carolina Electric & Gas Company (SCE&G) filed an application with the Public Service Commission of South Carolina (PSC) for an increase in retail electric rates. The proposed increase of 8.35% would produce additional revenues of approximately $76.7 million annually, if approved. SCE&G has requested that the increase be implemented in two phases. The first phase, an increase in revenues of approximately $61.8 annually, or 6.73%, would commence at the time SCE&G's 385 MW generating station currently under construction near Cope, S. C. begins commercial operation, which is expected in January 1996. The second phase is planned in January 1997 and would produce additional revenues of approximately $14.9 million annually, or 1.62% more than current rates. No assurance can be given as to the adequacy or timing of the rate relief that will be granted by the PSC. Hearings are scheduled to begin during November 1995. 3. RETAINED EARNINGS: The Restated Articles of Incorporation of the Company do not limit the dividends that may be payable on its common stock. However, the Restated Articles of Incorporation of SCE&G and the Indenture underlying certain of its bond issues contain provisions that may limit the payment of cash dividends on common stock. In addition, with respect to hydroelectric projects, the Federal Power Act may require the appropriation of a portion of the earnings therefrom. At September 30, 1995 approximately $15.1 million of SCE&G's retained earnings were restricted as to payment of cash dividends on common stock. 4. COMMITMENTS AND CONTINGENCIES: With respect to commitments at September 30, 1995, reference is made to Note 10 of Notes to Consolidated Financial Statements for the year ended December 31, 1994 appearing in the Company's Current Report on Form 8-K dated September 6, 1995. No significant changes have occurred with respect to those matters as reported therein. A. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $8.9 billion. Each reactor licensee is currently liable for up to $79.3 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. SCE&G's maximum assessment, based on its two- thirds ownership of Summer Station, would be approximately $52.9 million per incident but not more than $6.7 million per year. SCE&G currently maintains policies (for itself and on behalf of the PSA) with American Nuclear Insurers (ANI) and Nuclear Electric Insurance Limited (NEIL) providing combined primary and excess property and decontamination insurance coverage of $1.9 billion for any losses at Summer Station. SCE&G pays annual premiums and, in addition, could be assessed a retrospective premium assessment not to exceed 7.5 times its annual premium in the event of property damage loss to any nuclear generating facility covered under the NEIL program. Based on the current annual premium, this retrospective premium assessment would not exceed $8.2 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risk of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's financial position and results of operations. 9 B. Environmental The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, an estimate is made of the amount of expenditures, if any, necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore actual expenditures could significantly differ from the original estimates. Amounts estimated and accrued to date for site assessment and cleanup relate primarily to regulated operations; such amounts have been deferred (approximately $19.2 million) and are being amortized and recovered through rates over a ten- year period for electric operations and an eight-year period for gas operations. In September 1992 the Environmental Protection Agency (EPA) notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park Area Site in Charleston, South Carolina. This site originally encompassed approximately 18 acres and included properties which were the locations for industrial operations, including a wood preserving (creosote) plant and one of SCE&G's decommissioned manufactured gas plants. The original scope of this investigation has been expanded to approximately 30 acres including adjacent properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priority List, but may be added before cleanup is initiated. The potentially responsible parties (PRP) have agreed with the EPA to participate in an innovative approach to site investigation and cleanup called "Superfund Accelerated Cleanup Model," allowing the pre-cleanup site investigations process to be compressed significantly. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study (RI/FS) and a corresponding Scope of Work. Actual field work began November 1, 1993 after final approval and authorization was granted by EPA. SCE&G is also working with the City of Charleston to investigate potential contamination from the manufactured gas plant which may have migrated to the city's aquarium site. In 1994 the City of Charleston notified SCE&G that it considers SCE&G to be responsible for a projected $43.5 million increase in costs of the aquarium project allegedly attributable to delays resulting from contamination of the Calhoun Park area site. SCE&G believes it has meritorious defenses against this claim and does not expect its resolution to have a material impact on its financial position or results of operations. C. Loan Guarantee MPX Systems, Inc. (MPX), a wholly owned subsidiary of the Company, through a joint venture with Gulf States Transmission Systems, Inc., a subsidiary of ITC Holding Company, is constructing a fiber optic network through Louisiana, Mississippi, Alabama and Georgia. The Company has guaranteed approximately $5.1 million of the financing obtained by the joint venture, Gulf States Fibernet. 10 SCANA CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Competition The electric utility industry has begun a major transition that could lead to expanded market competition and less regulatory protection. Future deregulation of electric wholesale and retail markets will create opportunities to compete for new and existing customers and markets. As a result, profit margins and asset values of some utilities could be adversely affected. The pace of deregulation, the future market price of electricity, and the regulatory actions which may be taken by the Public Service Commission of South Carolina (PSC) in response to the changing environment cannot be predicted. However, the Company is aggressively pursuing actions to position itself strategically for the transformed environment. Regulated public utilities are allowed to record as assets some costs that would be expensed by other enterprises. If deregulation or other changes in the regulatory environment occur, the Company may no longer be qualified to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off is recorded. The Company reported approximately $110 million and $3 million of regulatory assets and liabilities, respectively, excluding amounts related to net accumulated deferred income tax assets of approximately $40 million, on its balance sheet at September 30, 1995. The Company's cash flows would not be affected. Material Changes in Capital Resources and Liquidity From December 31, 1994 to September 30, 1995 Liquidity and Capital Resources The cash requirements of the Company arise primarily from South Carolina Electric & Gas Company's (SCE&G's) operational needs, the Company's construction program and the need to fund the activities or investments of the Company's nonregulated subsidiaries. The ability of the Company's regulated subsidiaries to replace existing plant investment, as well as to expand to meet future demands for electricity and gas, will depend upon their ability to attract the necessary financial capital on reasonable terms. The Company's regulated subsidiaries recover the costs of providing services through rates charged to customers. Rates for regulated services are generally based on historical costs. As customer growth and inflation occur and the regulated subsidiaries expand their construction programs, it is necessary to seek increases in rates. As a result, the Company's future financial position and results of operations will be affected by the regulated subsidiaries' ability to obtain adequate and timely rate relief. On July 10, 1995, SCE&G filed an application with the PSC for an increase in retail electric rates. The proposed increase of 8.35% would produce additional revenues of approximately $76.7 million annually, if approved. SCE&G has requested that the increase be implemented in two phases. The first phase, an increase in revenues of approximately $61.8 annually, or 6.73%, would commence at the time SCE&G's 385 MW generating station currently under construction near Cope, S. C. begins commercial operation, which is expected in January 1996. The second phase is planned in January 1997 and would produce additional revenues of approximately $14.9 million annually, or 1.62% more than current rates. No assurance can be given as to the adequacy or timing of the rate relief that will be granted by the PSC. Hearings are scheduled to begin during November 1995. 11 The following table summarizes how the Company generated funds for its property acquisitions and utility property additions and construction expenditures during the six months ended September 30, 1995 and 1994: Nine Months Ended September 30, 1995 1994 (Thousands of Dollars) Net cash provided from operating activities $268,963 $301,825 Net cash provided from financing activities 71,050 93,383 Cash and temporary cash investments available at the beginning of the period 12,938 30,565 Sale of assets of subsidiary - 48,678 Net cash available for property acquisitions and utility property additions and construction expenditures $352,951 $474,451 Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $181,301 $304,572 Funds used for nonutility property additions $ 67,532 $ 91,657 Funds used for oil and gas property acquisitions $ - $ 47,189 On January 14, 1994 the Company closed unsecured bank loans totaling $60 million due January 13, 1995, and used the proceeds to pay off a loan in a like amount. In January 1995 the Company refinanced the loans with a $60 million unsecured bank loan due January 12, 1996 at an interest rate of 6.44% subject to reset quarterly at LIBOR plus ten basis points. On April 12, 1995 SCE&G issued $100 million of First Mortgage Bonds, 7 5/8% series due April 1, 2025 to repay short-term borrowings. On September 25, 1995, the Company sold 4,500,000 shares of its common stock. Net proceeds were used for the reduction of short-term indebtedness incurred by the Company and its subsidiaries for investment in utility plant and nonregulated subsidiaries, and for general corporate purposes. Powertel PCS Partners, L.P. (Powertel), a limited partnership that includes MPX, successfully bid for three personal communications service licenses in the Southeast offered by the Federal Communications Commission for the development of a new generation of wireless communications. Powertel had winning bids totaling $124.5 million in the FCC's auction for radio airspace in three Major Trading Areas (MTA) that cover parts of six states. The areas are the Jacksonville MTA, a 50-county area of northern Florida and southern Georgia; the Memphis MTA, a 93-county area that includes southwest Tennessee, northern and middle Mississippi and parts of eastern Arkansas; and the Birmingham MTA, a 53-county area of Alabama. MPX holds the largest partnership interest, approximately 40% of Powertel. Powertel has signed an agreement to enter into a business combination with InterCel, Inc., a publicly traded cellular telephone company providing services in Georgia, Alabama and Maine. Powertel's interest in the combined entity, after giving effect to expected public offerings of common stock of the combined entity, is anticipated to approximate 18%. 12 SCANA Petroleum Resources (SPR) and Fina Oil and Chemical Company (Fina) have entered into a joint exploration and development agreement providing for the exclusive oil and gas development rights on approximately 183,000 acres of onshore lands owned by Fina in Terrebonne and LaFourche Parishes in southern Louisiana. SPR and Fina have begun an extensive 3-D seismic acquisition program on the property which will continue over the next several years. Fina is the operator of the multi-million dollar seismic program which is financed and owned on a 50-50 basis between the companies. SPR's participation in the seismic and drilling activity is financed largely with internal cash flows from the existing SPR operations. SPR's change to the full cost method of accounting during the second quarter of 1995 provides a better matching of revenues and expenses given the primary focus of SPR on developing reserves on its own or others' properties. In connection with the change, additional reserve adjustments were recorded in the current and restated prior periods. All reserve adjustments were non-cash and had no impact on the liquidity of SPR. The Company anticipates that the remainder of its 1995 cash requirements will be met through internally generated funds, the sales of additional equity securities and medium-term notes and the incurrence of additional short-term and long-term indebtedness. The timing and amount of such financing will depend upon market conditions and other factors. The ratio of earnings to fixed charges for the twelve months ended September 30, 1995 was 2.86. The Company expects that it has or can obtain adequate sources of financing to meet its cash requirements for the next twelve months and for the foreseeable future. Statements of Financial Accounting Standards Not Yet Adopted The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The provisions of the Statement, which must be implemented by the Company for the fiscal year beginning January 1, 1996, require the recognition of a loss in the income statement and related disclosures whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. The Company does not believe that adoption of the provisions of the Statement will have a material adverse impact on its results of operations or financial position. 13 SCANA CORPORATION Results of Operations For the Three and Nine Months Ended September 30, 1995 As Compared to the Corresponding Periods in 1994 Earnings and Dividends During the second quarter of 1995 the Company's oil and gas subsidiary, SCANA Petroleum Resources, Inc. (SPR), changed from the successful efforts method to the full cost method of accounting for its oil and gas operations. The Company believes the full cost method provides a better matching of revenues and expenses given the change in SPR's operations from a purchaser of producing oil and gas properties to a developer of reserves on its own or others' properties. The financial statements of prior periods have been restated to apply the new method retroactively. Net income for the three and nine months ended September 30, 1995 increased approximately $51.3 million and $36.5 million, respectively, when compared to the corresponding periods in 1994. SPR's results of operations improved significantly in 1995. SPR recorded net losses of $46.5 million and $41.9 million, respectively, for the three and nine months ended September 30, 1994; losses of $0.3 million and $20.0 million were recorded for the three and nine months ended September 30, 1995, respectively. Higher electric and gas sales margins also contributed to the favorable 1995 earnings performance. Allowance for funds used during construction (AFC) is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. Both the equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC represented approximately 8% and 7% of income before income taxes for the nine months ended September 30, 1995 and 1994, respectively. On February 14, 1995 the Company's Board of Directors declared a quarterly dividend on common stock of 36 cents per share, as adjusted for the two-for-one stock split effective May 11, 1995, for the quarter ended March 31, 1995. The dividend was paid on April 1, 1995 to common stockholders of record on March 10, 1995. On April 27, 1995, the Company's Board of Directors declared a quarterly dividend on common stock of 36 cents per share for the quarter ended June 30, 1995. The dividend was paid on July 1, 1995 to common stockholders of record on June 9, 1995. On August 23, 1995 the Company's Board of Directors declared a quarterly dividend on common stock of 36 cents per share for the quarter ended September 30, 1995. The dividend was paid on October 1, 1995 to common stockholders of record on September 8, 1995. On October 17, 1995 the Company's Board of Directors declared a quarterly dividend on common stock of 36 cents per share for the quarter ending December 31, 1995. The dividend is payable January 1, 1996 to common stockholders of record on December 8, 1995. Sales Margins The changes in the electric sales margin for the three and nine months ended September 30, 1995, when compared to the corresponding periods in 1994, were as follows: Three Months Nine Months Change % Change Change % Change (Millions) (Millions) Electric operating revenues $ 13.2 4.5 $22.8 3.0 Less: Fuel used in electric generation 0.7 1.1 (4.5) (2.5) Purchased power (1.4) (21.9) (3.8) (23.8) Margin $ 13.9 6.3 $31.1 5.5 14 The electric sales margin increased for the three months ended September 30, 1995 compared to the corresponding period in 1994 primarily as a result of increased sales attributable to warmer weather. For the nine months ended September 30, 1995, the increase in the electric sales margin over the comparable 1994 period is a result of the combined impact of warmer weather in the third quarter of 1995, improved economic conditions, and the base rate increase received by SCE&G in mid-1994. These factors more than offset the adverse impact of milder weather experienced during the first quarter of 1995. The changes in the gas sales margins for the three and nine months ended September 30, 1995 compared to the corresponding periods in 1994, were as follows: Three Months Nine Months Change % Change Change % Change (Millions) (Millions) Gas operating revenues $(1.0) (1.5) $ 1.9 0.8 Less: Gas purchased for resale (4.3) (9.6) (8.9) (5.6) Margin $ 3.3 16.0 $10.8 12.4 The increases in the gas sales margin are primarily a result of lower gas costs, which allowed the Company to compete more successfully with alternate fuel suppliers in industrial markets. Additionally, a shifting of transportation customers to the industrial class contributed to the improved margin on a year-to- date basis. Other Operating Expenses Changes in other operating expenses, including taxes, for the three and nine months ended September 30, 1995 compared to the corresponding periods in 1994 are presented in the following table: Three Months Nine Months Change % Change Change % Change (Millions) (Millions) Other operation and maintenance $(2.4) (3.3) $(4.0) (1.9) Depreciation and amortization 1.4 4.8 3.4 3.8 Income taxes 8.8 26.0 13.3 17.1 Other taxes 0.6 2.8 3.8 6.5 Total $ 8.4 5.4 $16.5 3.7 Other operation and maintenance expenses for the three and nine months ended September 30, 1995 were slightly below 1994 levels primarily as a result of lower costs at electric generating plants. Increases in depreciation and amortization expenses for the three and nine months reflect additions to plant in service. The increases in income tax expense correspond to the increases in operating income. The increases in other taxes reflect higher property taxes resulting from higher millages and assessments, partially offset by lower payroll taxes resulting from early retirements of employees. 15 Other Income Other income, net of income taxes, for the three and nine months ended September 30, 1995 increased $43.5 million and $20.4 million, respectively, compared to the corresponding periods of 1994. The increases are due primarily to the improved earnings performance of SPR in 1995 as discussed under Earnings and Dividends on page 14. Interest Charges Interest expense, excluding the debt component of AFC, for the three and nine months ended September 30, 1995 increased $4.3 million and $15.6 million, respectively, compared to the corresponding period of 1994. The increases are due primarily to the issuance of additional debt (including commercial paper) during the latter part of 1994 and early 1995. 16 SCANA CORPORATION Part II OTHER INFORMATION Item 1. Legal Proceedings For information regarding legal proceedings see Note 2 "Rate Matters" and Note 4 "Commitments and Contingencies" of Notes to Consolidated Financial Statements. Items 2, 3, 4 and 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K A. Exhibits Exhibits filed with this Quarterly Report on Form 10-Q are listed in the following Exhibit Index. Certain of such exhibits which have heretofore been filed with the Securities and Exchange Commission and which are designated by reference to their exhibit numbers in prior filings are hereby incorporated herein by reference and made a part hereof. B. Reports on Form 8-K The Company filed a report on Form 8-K on September 6, 1995 in response to Item 5, "Other Events" regarding restatements of information previously included in SCANA's Annual Report on Form 10-K for the year ended December 31, 1994. The restatements reflect the effects of a two-for-one stock split of the Company's common stock, no par value, effective at the close of business May 11, 1995 and the Company's change from the successful efforts method to the full cost method of accounting for its oil and gas operations. 17 SCANA CORPORATION SIGNATURES 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. SCANA CORPORATION (Registrant) November 10, 1995 By: s/W. B. Timmerman W. B. Timmerman, Executive Vice President, Chief Financial Officer and Controller (Principal Financial Officer) 18 SCANA CORPORATION EXHIBIT INDEX Sequentially Numbered Pages Number 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession Not Applicable 3. Articles of Incorporation and By-Laws A. Restated Articles of Incorporation of SCANA Corporation as adopted on April 26, 1989 (Exhibit 3-A to Registration Statement No. 33-49145)........................................... # B. Articles of Amendment dated April 27, 1995 (Exhibit 4-B to Registration Statement No. 33-62421)............................................... # C. Copy of By-Laws of SCANA Corporation as revised and amended on February 15, 1994 (Exhibit 4.2 to Post-Effective Amendment No. 1 to Registration Statement No. 33-56923)................................. # 4. Instruments Defining the Rights of Security Holders, Including Indentures A. Articles of Exchange of South Carolina Electric & Gas Company and SCANA Corporation (Exhibit 4-A to Post-Effective Amendment No. 1 to Registration Statement No. 2-90438).................. # B. Indenture dated as of November 1, 1989 to The Bank of New York, Trustee (Exhibit 4-A to Registration No. 33-32107)........................... # C. Indenture dated as of January 1, 1945, from the South Carolina Power Company (the "Power Company") to Central Hanover Bank and Trust Company, as Trustee, as supplemented by three Supplemental Indentures dated respectively as of May 1, 1946, May 1, 1947 and July 1, 1949 (Exhibit 2-B to Registration No. 2-26459)............... # D. Fourth Supplemental Indenture dates as of April 1, 1950, to Indenture referred to in Exhibit 4C, pursuant to which the Company assumed said Indenture (Exhibit 2-C to Registration No. 2-26459)............................... # E. Fifth through Fifty-second Supplemental Indenture referred to in Exhibit 4C dated as of the dates indicated below and filed as exhibits to the Registration Statements and 1934 Act reports whose file numbers are set forth below......................................... # # Incorporated herein by reference as indicated. 19 SCANA CORPORATION EXHIBIT INDEX Number December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 June 1, 1955 Exhibit 2-G to Registration No. 2-26459 November 1, 1957 Exhibit 2-H to Registration No. 2-26459 September 1, 1958 Exhibit 2-I to Registration No. 2-26459 September 1, 1960 Exhibit 2-J to Registration No. 2-26459 June 1, 1961 Exhibit 2-K to Registration No. 2-26459 December 1, 1965 Exhibit 2-L to Registration No. 2-26459 June 1, 1966 Exhibit 2-M to Registration No. 2-26459 June 1, 1967 Exhibit 2-N to Registration No. 2-29693 September 1, 1968 Exhibit 4-O to Registration No. 2-31569 June 1, 1969 Exhibit 4-C to Registration No. 33-38580 December 1, 1969 Exhibit 4-Q to Registration No. 2-35388 June 1, 1970 Exhibit 4-R to Registration No. 2-37363 March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324 January 1, 1972 Exhibit 4-C to Registration No. 33-38580 July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291 May 1, 1975 Exhibit 4-C to Registration No. 33-38580 July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908 February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304 December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936 March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662 May 1, 1977 Exhibit 4-C to Registration No. 33-38580 February 1, 1978 Exhibit 4-C to Registration No. 33-38580 June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653 April 1, 1979 Exhibit 4-C to Registration No. 33-38580 June 1, 1979 Exhibit 4-C to Registration No. 33-38580 April 1, 1980 Exhibit 4-C to Registration No. 33-38580 June 1, 1980 Exhibit 4-C to Registration No. 33-38580 December 1, 1980 Exhibit 4-C to Registration No. 33-38580 April 1, 1981 Exhibit 4-D to Registration No. 33-49421 June 1, 1981 Exhibit 4-D to Registration No. 2-73321 March 1, 1982 Exhibit 4-D to Registration No. 33-49421 April 15, 1982 Exhibit 4-D to Registration No. 33-49421 May 1, 1982 Exhibit 4-D to Registration No. 33-49421 December 1, 1984 Exhibit 4-D to Registration No. 33-49421 December 1, 1985 Exhibit 4-D to Registration No. 33-49421 June 1, 1986 Exhibit 4-D to Registration No. 33-49421 February 1, 1987 Exhibit 4-D to Registration No. 33-49421 September 1, 1987 Exhibit 4-D to Registration No. 33-49421 January 1, 1989 Exhibit 4-D to Registration No. 33-49421 January 1, 1991 Exhibit 4-D to Registration No. 33-49421 February 1, 1991 Exhibit 4-D to Registration No. 33-49421 July 15, 1991 Exhibit 4-D to Registration No. 33-49421 # Incorporated herein by reference as indicated. 20 SCANA CORPORATION EXHIBIT INDEX Sequentially Numbered Pages Number August 15, 1991 Exhibit 4-D to Registration No. 33-49421 April 1, 1993 Exhibit 4-E to Registration No. 33-49421 July 1, 1993 Exhibit 4-D to Registration No. 33-57955 F. Indenture dated as of April 1, 1993 from South Carolina Electric & Gas Company to NationsBank of Georgia, National Association (Filed as Exhibit 4-F to Registration Statement No. 33-49421)........................................... # G. First Supplemental Indenture to Indenture referred to in Exhibit 4-G dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421)........................................... # H. Second Supplemental Indenture to Indenture referred to in Exhibit 4-E dated as of June 15, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-57955)........................................... # 10. Material Contracts Not Applicable 11. Statement Re Computation of Per Share Earnings Not Applicable 15. Letter Re Unaudited Interim Financial Information Not Applicable 18. Letter Re Change in Accounting Principles Not Applicable 19. Report Furnished to Security Holders Not Applicable 22. Published Report Regarding Matters Submitted to Vote of Security Holders Not Applicable 23. Consents of Experts and Counsel Not Applicable 24. Power of Attorney Not Applicable 27. Financial Data Schedule (Filed herewith) 99. Additional Exhibits Not Applicable 21 EX-27 2
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1994 SEP-30-1995 PER-BOOK 3,395,690 308,001 435,458 383,877 0 4,523,026 1,040,168 0 501,836 1,542,004 46,629 26,027 1,535,370 133,889 0 0 116,365 2,472 0 0 1,120,270 4,523,026 373,476 42,561 235,477 278,038 95,438 4,406 99,844 30,399 69,445 (1,416) 68,029 35,440 0 268,963 0.69 0
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