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