-----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, QelAGnVSZW2KAvZ+celOu0YquLepBXhex5EqyTQs4Z7LWFPt7b+l95GYmkv8mC84 b1J9f0JEN2NNy8Yj3jU0+w== 0000091882-96-000002.txt : 19960515 0000091882-96-000002.hdr.sgml : 19960515 ACCESSION NUMBER: 0000091882-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96563742 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, 1996 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 April 30, 1996, 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, 1996 and December 31, 1995........................................ 3 Consolidated Statements of Income and Retained Earnings for the Periods Ended March 31, 1996 and 1995................ 5 Consolidated Statements of Cash Flows for the Periods Ended March 31, 1996 and 1995................................ 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......................................... 14 Item 6. Exhibits and Reports on Form 8-K.......................... 14 Signatures............................................................ 15 Exhibit Index......................................................... 16 2 PART I FINANCIAL INFORMATION SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS As of March 31, 1996 and December 31, 1995 (Unaudited) March 31, December 31, 1996 1995 (Thousands of Dollars) ASSETS Utility Plant: Electric............................................. $3,700,856 $3,277,530 Gas.................................................. 320,749 320,847 Transit.............................................. 3,824 3,768 Common............................................... 86,232 91,616 Total.............................................. 4,111,661 3,693,761 Less accumulated depreciation and amortization....... 1,260,959 1,196,279 Total.............................................. 2,850,702 2,497,482 Construction work in progress........................ 220,690 613,683 Nuclear fuel, net of accumulated amortization........ 44,179 46,492 Utility Plant, Net............................... 3,115,571 3,157,657 Nonutility Property and Investments, net of accumulated depreciation............................. 11,668 11,603 Current Assets: Cash and temporary cash investments.................. - 6,798 Receivables - customer and other..................... 168,058 154,816 Receivables - affiliated companies................... 3,806 7,132 Inventories (at average cost): Fuel............................................... 34,645 35,812 Materials and supplies............................. 46,522 43,583 Prepayments.......................................... 9,991 10,158 Accumulated deferred income taxes.................... 19,420 19,420 Total Current Assets............................. 282,442 277,719 Deferred Debits: Emission allowances.................................. 30,373 28,514 Unamortized debt expense............................. 11,250 11,445 Unamortized deferred return on plant investment...... 5,307 6,369 Nuclear plant decommissioning fund................... 37,601 36,070 Other................................................ 311,465 273,056 Total Deferred Debits............................ 395,996 355,454 Total................................. $3,805,677 $3,802,433 See notes to consolidated financial statements. 3 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS As of March 31, 1996 and December 31, 1995 (Unaudited) March 31, December 31, 1996 1995 (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... 784,564 772,894 Capital stock expense (debit)....................... (5,364) (5,391) Retained earnings................................... 388,150 366,236 Total Common Equity............................... 1,348,683 1,315,072 Preferred Stock (not subject to purchase or sinking funds).............................................. 26,027 26,027 Total Stockholders' Investment.................... 1,374,710 1,341,099 Preferred Stock, net (subject to purchase or sinking funds)........................................ 44,485 46,243 Long-term debt, net..................................... 1,287,328 1,279,379 Total Capitalization............................ 2,706,523 2,666,721 Current Liabilities: Short-term borrowings................................. 79,000 80,500 Current portion of long-term debt..................... 33,961 36,033 Current portion of preferred stock.................... 2,435 2,439 Accounts payable...................................... 46,030 71,731 Accounts payable - affiliated companies............... 25,613 26,212 Customer deposits..................................... 12,875 12,518 Taxes accrued......................................... 39,565 64,008 Interest accrued...................................... 24,786 21,626 Dividends declared.................................... 34,200 33,126 Other................................................. 15,607 12,507 Total Current Liabilities....................... 314,072 360,700 Deferred Credits: Accumulated deferred income taxes..................... 502,596 488,310 Accumulated deferred investment tax credits........... 77,505 78,316 Accumulated reserve for nuclear plant decommissioning. 37,601 36,070 Other................................................. 167,380 172,316 Total Deferred Credits.......................... 785,082 775,012 Total ................................. $3,805,677 $3,802,433 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, 1996 and 1995 (Unaudited) Three Months Ended March 31, 1996 1995 (Thousands of Dollars) OPERATING REVENUES: Electric.................................................. $262,183 $230,609 Gas....................................................... 91,171 77,124 Transit................................................... 910 1,026 Total Operating Revenues............................. 354,264 308,759 OPERATING EXPENSES: Fuel used in electric generation.......................... 41,676 36,094 Purchased power (including affiliated purchases)................................... 24,707 24,481 Gas purchased from affiliate for resale.............................................. 55,962 42,284 Other operation........................................... 52,203 52,246 Maintenance............................................... 14,246 13,851 Depreciation and amortization............................. 32,667 27,709 Income taxes.............................................. 32,463 25,875 Other taxes............................................... 20,861 19,030 Total Operating Expenses............................. 274,785 241,570 OPERATING INCOME............................................ 79,479 67,189 OTHER INCOME: Allowance for equity funds used during construction..................................... 1,253 2,406 Other income (loss), net of income taxes............................................ 276 (137) Total Other Income................................... 1,529 2,269 INCOME BEFORE INTEREST CHARGES.............................. 81,008 69,458 INTEREST CHARGES (CREDITS): Interest expense.......................................... 26,734 26,829 Allowance for borrowed funds used during construction................................ (1,810) (2,620) Total Interest Charges, net.......................... 24,924 24,209 NET INCOME.................................................. 56,084 45,249 Preferred Stock Cash Dividends (at stated rates)......................................... (1,370) (1,434) Earnings Available for Common Stock......................... 54,714 43,815 Retained Earnings at Beginning of Period................................................. 366,236 324,101 Common Stock Cash Dividends Declared.................................................. (32,800) (28,563) Retained Earnings at End of Period.......................... $388,150 $339,353 See notes to consolidated financial statements. 5 SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Periods Ended March 31, 1996 and 1995 (Unaudited) Three Months Ended March 31, 1996 1995 (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................... $ 56,084 $ 45,249 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization...................... 32,697 27,743 Amortization of nuclear fuel....................... 5,208 4,974 Deferred income taxes, net......................... 14,064 7,020 Deferred investment tax credits, net............... (811) (807) Net regulatory asset arising from adoption of SFAS No. 109.................................. 381 1,186 Nuclear refueling accrual.......................... 1,536 1,740 Allowance for funds used during construction....... (3,063) (5,026) Unamortized loss on reacquired debt................ 320 257 Over (under) collections, fuel adjustment clause... 9,155 24,965 Early retirements.................................. (4,260) (6,445) Emission allowances................................ (1,859) (2,965) Changes in certain current assets and liabilities: (Increase) decrease in receivables................ (9,916) 5,707 (Increase) decrease in inventories................ (1,772) (4,900) Increase (decrease) in accounts payable........... (26,300) (12,525) Increase (decrease) in taxes accrued.............. (24,443) (18,936) Increase (decrease) in interest accrued........... 3,160 274 Other, net......................................... 2,408 (14,349) Net Cash Provided From Financing Activities............ 52,589 53,162 CASH FLOWS FROM INVESTING ACTIVITIES: Utility property additions and construction expenditures, net of AFC........................... (40,895) (77,537) Nonutility property and investments.................. (16) (7) Net Cash Used For Investing Activities................. (40,911) (77,544) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds: Equity contributions from parent................... 11,697 12,587 Other long-term debt............................... - 37,577 Repayments: Bank loans......................................... (1,886) - Other long-term debt............................... (387) (287) Preferred stock.................................... (1,762) (1,846) Dividend payments: Common stock....................................... (31,700) (27,000) Preferred stock.................................... (1,396) (1,470) Short-term borrowings, net........................... (1,500) (320) Fuel and emission allowance financings, net.......... 8,458 4,795 Net Cash Provided From (Used For) Financing Activities. (18,476) 24,036 NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS........................... (6,798) (346) CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1....... 6,798 346 CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31........ $ - $ - SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for - Interest (includes capitalized interest of $1,810 and $2,620....... $ 22,802 $ 26,372 - Income taxes......................... 2,006 2,055 See notes to consolidated financial statements.
6 SOUTH CAROLINA ELECTRIC & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1996 (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, 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 Company, a public utility, is a South Carolina corporation organized in 1924 and a wholly owned subsidiary of SCANA Corporation (SCANA), a South Carolina holding company. The accompanying Consolidated Financial Statements include the accounts of the Company and South Carolina Fuel Company, Inc. (Fuel Company), an affiliate. Intercompany balances and transactions between the Company and Fuel Company have been eliminated in consolidation. The Company has entered into agreements with certain affiliates to purchase gas for resale to its distribution customers and to purchase electric energy. The Company purchases all of its natural gas requirements from South Carolina Pipeline Corporation. The Company purchases all of the electric generation of Williams Station, which is owned by South Carolina Generating Company, Inc., under a unit power sales agreement. Such unit power purchases are included in "Purchased power." B. Basis of Accounting The Company prepares its financial statements in accordance with the provisions of Statement of Financial Accounting Standards 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 March 31, 1996, approximately $155 million and $8 million of regulatory assets and liabilities, respectively, excluding net accumulated deferred income tax assets of approximately $32 million. The electric regulatory assets of approximately $130.2 million are being recovered through rates and, as discussed in Note 2, the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $70 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 operation in the period the write-off is recorded. C. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 1996 presentation. 2. RATE MATTERS: With respect to rate matters at March 31, 1996, reference is made to Note 2 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. On July 10, 1995, the Company filed an application with the PSC for an increase in retail electric rates. On January 9, 1996 the PSC issued an order granting the Company an increase of 7.34% which will produce additional revenues of approximately $67.5 million annually. The increase is being 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 on January 15, 1996. The second phase will be implemented in January 1997 and will produce additional revenues of approximately $8.0 million annually, or .87% more than current rates. 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 (excluding accumulated deferred income taxes) of the Company's electric regulatory assets and the 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 approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. 7 3. 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, 1996 approximately $14.8 million of retained earnings were restricted as to payment of dividends on common stock. 4. COMMITMENTS AND CONTINGENCIES: With respect to commitments at March 31, 1996, 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, 1995. No significant changes have occurred with respect to those matters as reported therein, except with regard to the Calhoun Park Area site discussed in Note 4B below. Contingencies at March 31, 1996 are as follows: 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 PSA) 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 7 1/2 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 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 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 financial position and results of operations. 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, estimates are made of the cost, if any, to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations; such amounts are deferred (approximately $17 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. The deferral includes the costs estimated to be associated with the matters discussed in the following paragraphs, except that the deferral does not yet reflect an increase of approximately $26 million, pending approval of the Calhoun Park area proposed settlement discussed below. The Company owns four decommissioned manufactured gas plant sites which contain residues of by-product chemicals. The Company maintains an active review of the sites to monitor the nature and extent of the residual contamination. 8 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 eighteen 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 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 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. The Company 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 the Company that it considers the Company to be responsible for a projected $43.5 million increase in costs of the aquarium project attributable to delays resulting from contamination of the Calhoun Park Area Site. In May 1996 the City of Charleston and the Company agreed, subject to approval by City Council and the Company's Board of Directors, to settle all environmental claims the City may have against the Company involving the Calhoun Park area for a payment of $26 million over four years by the Company to the City. The Company does not expect the proposed settlement, if approved, to have a material impact on the Company's financial position or results of operations. 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 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, future prices of electricity, and the regulatory actions which may be taken by the PSC and the Federal Energy Regulatory Commission in response to the changing environment cannot be predicted. However, 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 of depreciation reserves from transmission and distribution assets to nuclear production assets. 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. 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 $155 million and $8 million of regulatory assets and liabilities, respectively, excluding amounts related to net accumulated deferred income tax assets of approximately $32 million, on its balance sheet at March 31, 1996. Material Changes in Capital Resources and Liquidity From December 31, 1995 to March 31, 1996 Liquidity and Capital Resources The cash requirements of the Company arise primarily from its operational needs and construction program. The ability of the Company to replace existing plant investment, as well as to expand to meet future demands 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 based on historical costs. As customer growth and inflation occur and the Company expands its construction program it is necessary to seek increases in rates. As a result the Company's financial position and results of operations are impacted by its ability to obtain adequate and timely rate relief and in the future will be dependent on the Company's ability to compete in a deregulated environment (see "Competition"). On July 10, 1995 the Company filed an application with the PSC for an increase in retail electric rates. On January 9, 1996 the PSC issued an order granting the Company an increase of 7.34% which will produce additional revenues of approximately $67.5 million annually. The increase is being implemented in two phases. The first phase, an increase in revenues of approximately $59.5 annually based on a test year, or 6.47%, commenced on January 15, 1996. The second phase will be implemented in January 1997 and will produce additional revenues of approximately $8.0 million annually, or .87% more than current rates. 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 accumulated deferred income taxes) 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 approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. 10 The following table summarizes how the Company generated funds for its utility property additions and construction expenditures during the three months ended March 31, 1996 and 1995: Three Months Ended March 31, 1996 1995 (Thousands of Dollars) Net cash provided from operating activities $ 52,589 $53,162 Net cash provided from (used for) financing activities (18,476) 24,036 Cash and temporary cash investments available at the beginning of the period 6,798 346 Net cash available for utility property additions and construction expenditures $ 40,911 $77,544 Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction and transfer of assets from parent $ 40,895 $77,537 The Company anticipates that the remainder of its 1996 cash requirements will be met primarily 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, 1996 was 3.58. 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. 11 SOUTH CAROLINA ELECTRIC & GAS COMPANY Results of Operations For the Three Months ended March 31, 1996 As Compared to the Corresponding Periods in 1995 Earnings and Dividends Net income for the three months ended March 31, 1996 increased approximately $10.8 million compared to the corresponding periods in 1995. Increases in the electric margin more than offset increases in fixed operating costs. 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 3% and 7% of income before income taxes for the three months ended March 31, 1996 and 1995, respectively. On February 20, 1996 the Company's Board of Directors authorized the payment of a dividend on common stock of approximately $32.8 million for the quarter ended March 31, 1996. The dividend was paid on April 1, 1996 to SCANA Corporation, the Company's parent. On April 25, 1996, the Company's Board of Directors authorized the payment of a dividend on common stock of $34.2 million for the quarter ended June 30, 1996. The dividend is payable on July 1, 1996 to SCANA Corporation, the Company's parent. Sales Margins The change in the electric sales margin for the three months ended March 31, 1996, when compared to the corresponding period in 1995, was as follows: Three months Change % Change (Millions) Electric operating revenues $31.6 13.7 Less: Fuel used in electric generation 5.6 15.5 Purchased power 0.2 0.9 Margin $25.8 15.2 The electric sales margin increased for the three months ended March 31, 1996 compared to the corresponding period in 1995 primarily as a result of the combined impact of colder weather in the first quarter of 1996 and the rate increase received by the Company in January of 1996. The change in the gas sales margin for the three months ended March 31, 1996, when compared to the corresponding period in 1995, was as follows: Three months Change % Change (Millions) Gas operating revenues $14.1 18.2 Less: Gas purchased for resale 13.7 32.3 Margin $ 0.4 1.0 Despite significantly colder weather in the first quarter of 1996, the gas sales margin remained substantially unchanged primarily as a result of the weather normalization adjustment. 12 Other Operating Expenses Changes in other operating expenses, including taxes, for the three months ended March 31, 1996 compared to the corresponding period in 1995 are presented in the following table: Three months Change % Change (Millions) Other operation and maintenance $ 0.3 0.5 Depreciation and amortization 5.0 17.9 Income taxes 6.6 25.4 Other taxes 1.8 9.6 Total $13.7 9.9 Other operation and maintenance expenses for the three months ended March 31, 1996 increased slightly from 1995 levels. Higher employee benefit costs were substantially offset by lower costs of administrative and general salaries and by cost reductions in other areas. Increases in depreciation and amortization expenses for the three months' comparisons reflect additions to plant in service. The increase in income tax expense for the two periods corresponds to the increases in operating income. The increase in other taxes reflects higher property taxes resulting from higher millages and assessments partially offset by lower payroll taxes resulting from early retirements of employees. 13 SOUTH CAROLINA ELECTRIC & GAS COMPANY 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 None 14 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 14, 1996 By: s/Jimmy E. Addison Jimmy E. Addison Vice President and Controller (Principal Accounting Officer) 15 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, 1195, 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 thru December 15, 1993 (Exhibit 3-AZ to Form 10-K for the year ended December 31, 1993, File No. 1-3375).......................................... # 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 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 # Incorporated herein by reference as indicated. 16 PAGE 2 SOUTH CAROLINA ELECTRIC & GAS COMPANY Sequentially EXHIBIT INDEX Numbered Number Pages 4. (Continued) 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 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 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. 17 PAGE 3 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 18 EX-27 2
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1995 MAR-31-1996 PER-BOOK 3,115,571 11,668 282,442 395,996 0 3,805,677 181,333 779,200 388,150 1,348,683 44,485 26,027 1,287,328 79,000 0 0 33,961 2,435 0 0 983,758 3,805,677 354,264 32,463 242,322 274,785 79,479 1,529 81,008 24,924 56,084 (1,370) 54,714 32,800 0 52,589 0 0
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