-----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, N+mmQ0mw44QED0KI9POcqE8H8+DLmpxr/Qg80RJkBAVPbHLKCeqmcoFA3oCxUYyJ F4JkAccBH5m5wP5yCcz6fA== 0000091882-97-000005.txt : 19970514 0000091882-97-000005.hdr.sgml : 19970514 ACCESSION NUMBER: 0000091882-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570248695 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03375 FILM NUMBER: 97602474 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST 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 March 31, 1997 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 1-3375 South Carolina Electric & Gas Company (Exact name of registrant as specified in its charter) South Carolina 57-0248695 (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. As of March 31, 1997, there were issued and outstanding 40,296,147 shares of the registrant's common stock, $4.50 par value, all of which were held, beneficially and of record, by SCANA Corporation. 1 SOUTH CAROLINA ELECTRIC & GAS COMPANY INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996........................................ 3 Consolidated Statements of Income and Retained Earnings for the Periods Ended March 31, 1997 and 1996................ 5 Consolidated Statements of Cash Flows for the Periods Ended March 31, 1997 and 1996................................ 6 Notes to Consolidated Financial Statements..................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings......................................... 15 Item 6. Exhibits and Reports on Form 8-K.......................... 15 Signatures............................................................ 16 Exhibit Index......................................................... 17 2 PART I FINANCIAL INFORMATION SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS As of March 31, 1997 and December 31, 1996 (Unaudited) March 31, December 31, 1997 1996 (Thousands of Dollars) ASSETS Utility Plant: Electric............................................. $3,894,703 $3,870,561 Gas.................................................. 339,979 338,095 Transit.............................................. 3,881 3,923 Common............................................... 82,058 81,858 Total.............................................. 4,320,621 4,294,437 Less accumulated depreciation and amortization....... 1,362,459 1,331,824 Total.............................................. 2,958,162 2,962,613 Construction work in progress........................ 225,161 193,278 Nuclear fuel, net of accumulated amortization........ 38,659 41,006 Utility Plant, Net............................... 3,221,982 3,196,897 Nonutility Property and Investments, net of accumulated depreciation............................. 15,757 11,529 Current Assets: Cash and temporary cash investments.................. 28,363 5,399 Receivables - customer and other..................... 156,743 170,476 Receivables - affiliated companies................... 1,500 1,021 Inventories (at average cost): Fuel............................................... 33,480 33,121 Materials and supplies............................. 46,521 45,375 Prepayments.......................................... 9,597 8,758 Deferred income taxes................................ 20,025 20,025 Total Current Assets............................. 296,229 284,175 Deferred Debits: Emission allowances.................................. 30,485 30,457 Environmental........................................ 41,418 41,375 Nuclear plant decommissioning fund................... 43,842 42,194 Pension asset, net................................... 62,116 57,931 Other................................................ 250,280 294,244 Total Deferred Debits............................ 428,141 466,201 Total................................. $3,962,109 $3,958,802 See notes to consolidated financial statements. 3 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS As of March 31, 1997 and December 31, 1996 (Unaudited) March 31, December 31, 1997 1996 (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Stockholders' Investment: Common Equity: Common stock ($4.50 par value)...................... $ 181,333 $ 181,333 Premium on common stock and other paid-in capital... 834,106 821,984 Capital stock expense (debit)....................... (5,313) (5,340) Retained earnings................................... 430,079 415,485 Total Common Equity............................... 1,440,205 1,413,462 Preferred Stock (not subject to purchase or sinking funds).............................................. 26,027 26,027 Total Stockholders' Investment.................... 1,466,232 1,439,489 Preferred Stock, net (subject to purchase or sinking funds)........................................ 41,253 43,014 Long-term debt, net..................................... 1,279,565 1,276,758 Total Capitalization............................ 2,787,050 2,759,261 Current Liabilities: Short-term borrowings................................. 98,600 90,000 Current portion of long-term debt..................... 42,755 42,755 Current portion of preferred stock.................... 2,432 2,432 Accounts payable...................................... 51,868 66,741 Accounts payable - affiliated companies............... 18,007 31,395 Customer deposits..................................... 15,506 14,944 Taxes accrued......................................... 40,320 66,900 Interest accrued...................................... 24,693 21,304 Dividends declared.................................... 35,774 35,972 Other................................................. 6,139 5,004 Total Current Liabilities....................... 336,094 377,447 Deferred Credits: Deferred income taxes................................. 538,323 521,745 Deferred investment tax credits....................... 74,262 75,073 Reserve for nuclear plant decommissioning............. 43,842 42,194 Other................................................. 182,538 183,082 Total Deferred Credits.......................... 838,965 822,094 Total ................................. $3,962,109 $3,958,802 See notes to consolidated financial statements. 4 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Periods Ended March 31, 1997 and 1996 (Unaudited) Three Months Ended March 31, 1997 1996 (Thousands of Dollars) OPERATING REVENUES: Electric................................................ $252,623 $262,183 Gas..................................................... 84,427 91,171 Transit................................................. 411 910 Total Operating Revenues........................... 337,461 354,264 OPERATING EXPENSES: Fuel used in electric generation........................ 38,114 41,676 Purchased power (including affiliated purchases)................................. 24,628 24,707 Gas purchased from affiliate for resale............................................ 47,755 55,962 Other operation......................................... 52,039 52,203 Maintenance............................................. 14,646 14,246 Depreciation and amortization........................... 34,907 32,667 Income taxes............................................ 28,223 32,463 Other taxes............................................. 23,604 20,861 Total Operating Expenses........................... 263,916 274,785 OPERATING INCOME.......................................... 73,545 79,479 OTHER INCOME: Allowance for equity funds used during construction................................... 1,316 1,253 Other income (loss), net of income taxes.......................................... 334 276 Total Other Income................................. 1,650 1,529 INCOME BEFORE INTEREST CHARGES............................ 75,195 81,008 INTEREST CHARGES (CREDITS): Interest expense........................................ 26,352 26,734 Allowance for borrowed funds used during construction.............................. (1,494) (1,810) Total Interest Charges, net........................ 24,858 24,924 NET INCOME................................................ 50,337 56,084 Preferred Stock Cash Dividends (at stated rates)....................................... (1,343) (1,370) Earnings Available for Common Stock....................... 48,994 54,714 Retained Earnings at Beginning of Period............................................... 415,485 366,236 Common Stock Cash Dividends Declared................................................ (34,400) (32,800) Retained Earnings at End of Period........................ $430,079 $388,150 See notes to consolidated financial statements. 5 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Periods Ended March 31, 1997 and 1996 (Unaudited) Three Months Ended March 31, 1997 1996 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................... $ 50,337 $ 56,084 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization...................... 34,937 32,697 Amortization of nuclear fuel....................... 5,767 5,208 Deferred income taxes, net......................... 16,580 14,064 Pension asset...................................... (4,185) (3,104) Allowance for funds used during construction....... (2,810) (3,063) Over (under) collections, fuel adjustment clause... 17,100 9,155 Early retirements.................................. 4,306 (4,260) Changes in certain current assets and liabilities: (Increase) decrease in receivables............... 13,254 (9,916) (Increase) decrease in inventories............... (1,505) (1,772) Increase (decrease) in accounts payable.......... (28,261) (26,300) Increase (decrease) in taxes accrued............. (26,580) (24,443) Increase (decrease) in interest accrued.......... 3,389 3,160 Other, net......................................... (1,439) 5,079 Net Cash Provided From Operating Activities............ 80,890 52,589 CASH FLOWS FROM INVESTING ACTIVITIES: Utility property additions and construction expenditures, net of AFC........................... (39,534) (40,895) Nonutility property and investments.................. (4,187) (16) Net Cash Used For Investing Activities................. (43,721) (40,911) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds: Equity contributions from parent................... 12,148 11,697 Repayments: Repayment of bank loans............................ - (1,886) Other long-term debt............................... - (387) Preferred stock.................................... (1,761) (1,762) Dividend payments: Common stock....................................... (34,600) (31,700) Preferred stock.................................... (1,341) (1,396) Short-term borrowings, net........................... 8,600 (1,500) Fuel and emission allowance financings, net.......... 2,749 8,458 Net Cash Used For Financing Activities................. (14,205) (18,476) NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS........................... 22,964 (6,798) CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1....... 5,399 6,798 CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31........ $ 28,363 $ - SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for - Interest (includes capitalized interest of $1,494 and $1,810)...... $ 22,466 $ 22,802 - Income taxes......................... (3,524) 1,916 See notes to consolidated financial statements. 6
SOUTH CAROLINA ELECTRIC & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (Unaudited) The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 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. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71). The accounting standard requires 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 March 31, 1997, approximately $239 million and $60 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $104 million and $52 million, respectively. The electric regulatory assets of approximately $89 million (excluding deferred income tax assets) are being recovered through rates, and the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $61 million of these assets. 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, but it is not expected that cash flows or financial position would be materially affected. B. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 1997 presentation. 2. RETAINED EARNINGS: The Restated Articles of Incorporation of the Company 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 March 31, 1997 approximately $18.4 million of retained earnings were restricted as to payment of cash dividends on common stock. 3. CONTINGENCIES: With respect to commitments at March 31, 1997, reference is made to Note 10 of Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Contingencies at March 31, 1997 are as follows: 7 A. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with the Company's 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. The Company'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. The Company currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority with American Nuclear Insurers (ANI) and Nuclear Electric Insurance Limited (NEIL) providing combined property and decontamination insurance coverage of $1.9 billion for any losses at Summer Station. The Company pays annual premiums and, in addition, could be assessed a retroactive premium assessment not to exceed five 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 retroactive premium assessment would not exceed $5.7 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 the Company's rates would not recover the cost of any purchased replacement power, the Company will retain the risk of loss as a self-insurer. The Company 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 results of operations, cash flows and financial position. 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 differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations; such amounts are deferred (approximately $41.4 million) and are being amortized and recovered through rates over a five-year period for electric operations and an eight-year period for gas operations. The deferral includes the costs estimated to be associated with the matters discussed below. In September 1992 the Environmental Protection Agency (EPA) notified the Company, 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 the Company'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, 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 8 EPA to participate in an innovative approach to site investigation and cleanup called "Superfund Accelerated Cleanup Model," allowing the pre-cleanup site investigation process to be compressed significantly. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993 and the EPA conditionally approved a Remedial Investigation Report in March 1997. The Company is continuing to investigate cost effective cleanup methodologies. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by the Company to the City. The Company expects to recover the amount of the settlement, which does not encompass site assessment and cleanup costs, in the same manner as other amounts accrued for site assessments and cleanup as discussed above. As part of the environmental settlement, the Company has agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The Company owns three other decommissioned manufactured gas plant sites which contain residues of by-product chemicals. The Company is actively investigating review the sites to monitor the nature and extent of the residual contamination. The Company is pursuing recovery of environmental liabilities from appropriate pollution insurance carriers. Site assessment and cleanup costs recovered through rates are net of insurance recoveries. 4. Subsequent Event On April 24, 1997 the Company sold 1,000,000 shares of 6.52% cumulative preferred stock, $100 par value. Net proceeds from the sale will be used to reduce short term indebtedness incurred for the Company's construction program, to refinance senior securities or for general corporate purposes. 9 SOUTH CAROLINA ELECTRIC & GAS COMPANY 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 regulation. Deregulation of electric wholesale and retail markets is creating 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. Legislative initiatives at the Federal and state levels are being considered and, if enacted, could mandate market deregulation. The pace of deregulation, future prices of electricity, and the regulatory actions which may be taken by the PSC and the FERC in response to the changing environment cannot be predicted. However, recent FERC actions will likely accelerate competition among electric utilities by providing for wholesale transmission access. In April 1996 the FERC issued Order 888, which addresses open access to transmission lines and stranded cost recovery. Order 888 requires utilities under FERC jurisdiction that own, control or operate transmission lines to file nondiscriminatory open access tariffs that offer to others the same transmission service they provide themselves. The FERC has also permitted utilities to seek recovery of wholesale stranded costs from departing customers by direct assignment. Approximately five percent of the Company's electric revenues is under FERC jurisdiction. The Company is aggressively pursuing actions to position itself strategically for the transformed environment. To enhance its flexibility and responsiveness to change, the Company operates Strategic Business Units. Maintaining a competitive cost structure is of paramount importance in the utility's strategic plan. The Company has undertaken a variety of initiatives, including reductions in operation and maintenance costs and in staffing levels. In January 1996 the PSC approved (as discussed under "Liquidity and Capital Resources") the accelerated recovery of the Company's electric regulatory assets and the shift, for ratemaking purposes, of depreciation reserves from transmission and distribution assets to nuclear production assets. The FERC has rejected the depreciation transfer for rates subject to its jurisdiction. In May 1996 the FERC approved the Company's application establishing open access transmission tariffs and requesting authorization to sell bulk power to wholesale customers at market-based rates. Significant investments are being made in customer and management information systems. Marketing of services to commercial and industrial customers has been increased significantly. The Company believes that these actions as well as numerous others that have been and will be taken demonstrate its ability and commitment to succeed in the new operating environment to come. 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 eligible to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Although the potential effects of deregulation cannot be determined at present, discontinuation of the accounting treatment could have a material adverse effect on the Company's results of operations in the period the write-off is recorded. It is expected that cash flows and the financial position of the Company would not be materially affected by the discontinuation of the accounting treatment. The Company reported approximately $239 million and $60 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $104 million and $52 million, respectively, on its balance sheet at March 31, 1997. 10 Material Changes in Capital Resources and Liquidity Since December 31, 1996 Liquidity and Capital Resources The cash requirements of the Company arise primarily from its operational needs and its construction program. The ability of the Company to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend upon its ability to attract the necessary financial capital on reasonable terms. The Company recovers 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 Company continues its ongoing construction program, 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 its ability to obtain adequate and timely rate and other regulatory relief. On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates of 7.34%, which will produce additional revenues of approximately $67.5 million annually. The increase has been implemented in two phases. The first phase, an increase in revenues of approximately $59.5 million annually based on a test year, or 6.47%, commenced in January 1996. The second phase, an increase in revenues of approximately $8.0 million annually, based on a test year or .87%, was implemented in January 1997. The PSC authorized a return on common equity of 12.0%. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million and collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The PSC's ruling does not apply to wholesale electric revenue under the FERC's jurisdiction, which constitute approximately five percent of the Company's electric revenues. The FERC has rejected the transfer of depreciation reserves for rates subject to its jurisdiction. The following table summarizes how the Company generated funds for its utility property additions and construction expenditures during the three months ended March 31, 1997 and 1996: Three Months Ended March 31, 1997 1996 (Thousands of Dollars) Net cash provided from operating activities $ 80,890 $ 52,589 Net cash used for financing activities (14,205) (18,476) Cash and temporary cash investments available at the beginning of the period 5,399 6,798 Net cash available for utility property additions and construction expenditures $ 72,084 $ 40,911 Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $ 39,534 $ 40,895 11 On April 24, 1997 the Company sold 1,000,000 shares of 6.52% cumulative preferred stock, $100 par value. Net proceeds from the sale will be used to reduce short term indebtedness incurred for the Company's construction program, to refinance senior securities or for general corporate purposes. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with the Company. In consideration for the electric franchise agreement, the Company will pay the City $25 million over seven years (1996-2002) and has donated to the City the existing transit assets in Charleston. In settlement of environmental claims the City may have had against the Company involving the Calhoun Park area, where the Company and its predecessor companies operated a manufactured gas plant until the 1960's, the Company will pay the City $26 million over a four- year period. As part of the environmental settlement, the Company has agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. SCANA and Westvaco Corporation have formed a limited liability company, Cogen South LLC, to build and operate a $170 million cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility will provide industrial process steam for the Westvaco paper mill and shaft horsepower to enable the Company to generate up to 99 megawatts of electricity. Construction financing is being provided to Cogen South LLC by banks. In addition to the cogeneration LLC, Westvaco has entered into a 20-year contract with the Company for all its electricity requirements at the North Charleston mill at the Company's standard industrial rate. Construction of the plant began in September 1996 and it is expected to be operational in the fall of 1998. The Company anticipates that the remainder of its 1997 cash requirements will be met through internally generated funds, additional equity contributions from SCANA and the incurrence of additional short-term and long-term indebtedness. The timing and amount of such financings will depend upon market conditions and other factors. The ratio of earnings to fixed charges for the twelve months ended March 31, 1997 was 3.71. 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. 12 SOUTH CAROLINA ELECTRIC & GAS COMPANY Results of Operations For the Three Months ended March 31, 1997 As Compared to the Corresponding Periods in 1996 Earnings and Dividends Net income for the three months ended March 31, 1997 decreased approximately $5.7 million when compared to the corresponding period in 1996. A lower electric margin, resulting from milder weather in the current period, was the primary factor accounting for the drop in earnings. The negative impact of weather on the electric margin was partially offset by higher retail electric rates and economic and customer growth. 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 4% and 3% of income before income taxes for the three months ended March 31, 1997 and 1996, respectively. On February 18, 1997 the Company's Board of Directors authorized the payment of a dividend on common stock of approximately $34.4 million for the quarter ended March 31, 1997. The dividend was paid on April 1, 1997 to SCANA Corporation, the Company's parent. On April 24, 1997 the Company's Board of Directors authorized the payment of a dividend on common stock of approximately $36.2 million for the quarter ended June 30, 1997. The dividend is payable on July 1, 1997 to SCANA Corporation, the Company's parent. Sales Margins The change in the electric sales margin for the three months ended March 31, 1997, when compared to the corresponding period in 1996, was as follows: Three Months Change % Change (Millions) Electric operating revenues $(9.6) (3.6) Less: Fuel used in electric generation (3.6) (8.5) Purchased power (0.1) (0.3) Margin $(5.9) (3.0) The electric sales margin decreased for the three months ended March 31, 1997, when compared to the corresponding period in 1996 as a result of the effect of milder weather which more than offset the favorable impact of the rate increases placed into effect in January 1996 and January 1997 and economic growth factors. 13 The change in the gas sales margin for the three months ended March 31, 1997, when compared to the corresponding period in 1996, was as follows: Three Months Change % Change (Millions) Gas operating revenues $(6.7) (7.4) Less: Gas purchased for resale (8.2) (14.7) Margin $ 1.5 4.2 The gas sales margin increased slightly for the three months ended March 31, 1997, when compared to the corresponding period in 1996 primarily as a result of increased sales to interruptible customers attributable to fewer curtailments. Other Operating Expenses Changes in other operating expenses, including taxes, for the three months ended March 31, 1997, when compared to the corresponding period in 1996 are presented in the following table: Three Months Change % Change (Millions) Other operation and maintenance $ 0.2 0.4 Depreciation and amortization 2.2 6.9 Income taxes (4.2) (13.1) Other taxes 2.8 13.1 Total $ 1.0 0.6 Other operation and maintenance expenses for the three months ended March 31, 1997 increased only slightly from 1996 levels. Increased costs at electric generating plants were largely offset by a decrease in transit operating costs resulting from the Company's transfer of the ownership of the Charleston transit system to the City of Charleston in October 1996. The increase in depreciation and amortization expenses for the three months' comparisons reflects the addition of the Cope Plant and other additions to plant in service. The decrease in income tax expense results from the decrease in operating income. The increase in other taxes results primarily from the accrual of additional property taxes, beginning in January 1997, related to the Cope Plant and other property additions. Recovery of the Cope Plant property taxes is provided for in a retail electric rate increase that became effective in January 1997. 14 SOUTH CAROLINA ELECTRIC & GAS COMPANY Part II OTHER INFORMATION Item 1. Legal Proceedings For information regarding legal proceedings see Note 2 "Rate Matters," appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and Note 3 "Contingencies" of Notes to Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q. 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 None 15 SOUTH CAROLINA ELECTRIC & GAS COMPANY 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. SOUTH CAROLINA ELECTRIC & GAS COMPANY (Registrant) May 13, 1997 By: s/Jimmy E. Addison Jimmy E. Addison Vice President and Controller (Principal Accounting Officer) 16 SOUTH CAROLINA ELECTRIC & GAS COMPANY Sequentially EXHIBIT INDEX Numbered Number Pages 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession Not Applicable 3. Articles of Incorporation and By-Laws A. Restated Articles of Incorporation of the Company as adopted on December 15, 1993 (Exhibit 3-A to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3375)...................... # B. Articles of Amendment, dated June 7, 1994, filed June 9, 1994 (Exhibit 3-B to Form 10-Q for the quarter ended June 30, 1994, File No. 1-3375) C. Articles of Amendment, dated November 9, 1994 (Exhibit 3-C to Form 10-K for the year ended December 31, 1994, File No. 1-3375)........................ # D. Articles of Amendment, dated December 9, 1994 (Exhibit 3-D to Form 10-K for the year ended December 31, 1994, File No. 1-3375)........................ # E. Articles of Correction, dated January 17, 1995 (Exhibit 3-E to Form 10-K for the year ended December 31, 1994, File No. 1-3375)........................ # F. Articles of Amendment, dated January 13, 1995 (Exhibit 3-F to Form 10-K for the year ended December 31, 1994, File No. 1-3375)........................ # G. Articles of Amendment, dated March 31, 1995 (Exhibit 3-G to Form 10-Q for the quarter ended March 31, 1995, File No. 1-3375)..................... # H. Articles of Correction - Amendment to Statement filed March 31, 1995, dated December 13, 1995 (Exhibit 3-H to Form 10-K for the year ended December 31, 1995, File No. 1-3375)........................ # I. Articles of Amendment dated December 13, 1995 (Exhibit 3-I to Form 10-K for the year ended December 31, 1995, File No. 1-3375)........................ # J. Copy of By-Laws of the Company as revised and amended on June 18, 1996 (Exhibit 3-J to Form 10-Q for the quarter ended March 31, 1996).................. # K. Articles of Amendment dated February 18, 1997 (Exhibit 3-L to Registration Statement No. 333- 24919)...................................................... # L. Articles of Amendment dated February 21, 1997 (Filed herewith)............................................ 20 4. Instruments Defining the Rights of Security Holders, Including Indentures A. 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).................................. # B. Fourth Supplemental Indenture dated as of April 1, 1950, to Indenture referred to in Exhibit 4A, pursuant to which the Company assumed said Indenture (Exhibit 2-C to Registration No. 2-26459)........ # C. Fifth through Fifty-second Supplemental Indentures to Indenture referred to in Exhibit 4A 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................................................ # December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 # Incorporated herein by reference as indicated. 17 SOUTH CAROLINA ELECTRIC & GAS COMPANY Sequentially EXHIBIT INDEX Numbered Number Pages 4. (Continued) 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 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 D. 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)...................................... # E. First Supplemental Indenture to Indenture referred to in Exhibit 4-D dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421).......... # F. Second Supplemental Indenture to Indenture referred to in Exhibit 4-D 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 # Incorporated herein by reference as indicated. 18 SOUTH CAROLINA ELECTRIC & GAS COMPANY Exhibit Index (Continued) Number 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 19 EX-1 2 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY. 2. On , the corporation adopted the following Amendment(s) of its Articles of Incorporation: NOT APPLICABLE 3. The manner, if not set forth in the amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (a) The number of redeemable shares of the corporation reacquired by redemption or purchase is 57,517, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 4.50% 1,519 Cumulative Preferred Stock ($50 par value) 4.60% 747 Cumulative Preferred Stock ($50 par value) 4.60% (Series A) 2,000 Cumulative Preferred Stock ($50 par value) 4.60% (Series B) 3,400 Cumulative Preferred Stock ($50 par value) 5.125% 1,000 Cumulative Preferred Stock ($100 par value) 7.70% 2,965 Cumulative Preferred Stock ($100 par value) 8.12% 4,233 Cumulative Preferred Stock ($50 par value) 9.40% 6,468 Cumulative Preferred Stock ($50 par value) 8.72% 31,985 Cumulative Preferred Stock ($50 par value) 6.00% 3,200 (b) The aggregate number of issued shares of the corporation after giving effect to such cancellation is 41,325,126, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 87 " " " " 4.50% 16,000 " " " " 4.60% (Series A) 24,052 " " " " 5.125% 71,000 " " " " 4.60% (Series B) 71,400 " " " " 6% 80,000 " " " " 9.40% 176,751 " " " ($100 par value) 8.12% 118,812 " " " " 7.70% 84,000 " " " " 8.40% 197,668 " " " ($50 par value) 8.72% 64,000 Common Stock ($4.50 par value)------ 40,296,147 41,325,126 (c) The amount of the stated capital of the corporation after giving effect to such cancellation is $252,805,611.50. 20 (d) The number of shares which the corporation has authority to issue after giving effect to such cancellation is 55,477,748, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 87 " " " " 4.50% 16,000 " " " " 4.60% (Series A) 24,052 " " " " 5.125% 71,000 " " " " 4.60% (Series B) 71,400 " " " " 6% 80,000 " " " " 9.40% 176,751 " " " ($100 par value) 8.12% 118,812 " " " " 7.70% 84,000 " " " " 8.40% 197,668 " " " ($50 par value) 8.72% 64,000 Serial Preferred Stock ($50 par value) (1 vote) ---- 463,249 Serial Preferred Stock ($100 par value) (1 vote) ---- 1,349,520 Serial Preferred Stock ($25 par value) (1/4 vote) ---- 2,000,000 Serial Preferred Stock ($50 par value) (1/2 vote) ---- 636,000 Common Stock ($4.50 par value) ---- 50,000,000 55,477,748 __ 4. (a) |__| Amendment(s) adopted by shareholder action. At the date of adoption of the amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was: Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Voted Group Shares to be Cast the meeting For Against __ (b) |XX| The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code, as amended, and shareholder action was not required. 5. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of the acceptance for filing by the Secretary of State (See Section 33-1-230(b)): SOUTH CAROLINA ELECTRIC & GAS COMPANY Date: February 21, 1997 By:__________________________________________ Secretary 21
EX-27 3
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATIONE EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1997 PER-BOOK 3,221,982 15,757 296,229 428,141 0 3,962,109 181,333 828,793 430,079 1,440,205 41,253 26,027 1,279,565 98,600 0 0 42,755 2,432 0 0 1,031,272 3,962,109 337,461 28,223 235,693 263,916 73,545 1,650 75,195 24,858 50,337 (1,343) 48,994 34,400 0 80,890 0 0
-----END PRIVACY-ENHANCED MESSAGE-----