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 1-8809
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.
104,681,412 Common Shares, without par value, as of April 30, 1996
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SCANA CORPORATION
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........................................ 15
Item 6. Exhibits and Reports on Form 8-K......................... 15
Signatures........................................................ 16
Exhibit Index..................................................... 17
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PART I
FINANCIAL INFORMATION
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996 and December 31, 1995
(Unaudited)
<S> <C> <C> <C>
March 31, December 31,
1996 1995
(Thousands of Dollars)
ASSETS
Utility Plant:
Electric................................................... $3,963,009 $3,539,068
Gas........................................................ 486,451 484,752
Transit.................................................... 3,824 3,768
Common..................................................... 86,232 91,616
Total.................................................... 4,539,516 4,119,204
Less accumulated depreciation and amortization............. 1,435,136 1,367,541
Total.................................................... 3,104,380 2,751,663
Construction work in progress.............................. 256,795 644,661
Nuclear fuel, net of accumulated amortization.............. 44,179 46,492
Acquisition adjustment-gas, net of accumulated
amortization............................................. 25,923 26,172
Utility Plant, Net.................................... 3,431,277 3,468,988
Nonutility Property and Investments, net of accumulated
depreciation and depletion................................. 308,706 314,207
Current Assets:
Cash and temporary cash investments........................ 19,255 16,082
Receivables................................................ 236,243 211,173
Inventories (at average cost):
Fuel..................................................... 47,648 61,499
Materials and supplies................................... 50,391 47,674
Prepayments................................................ 16,335 15,870
Accumulated deferred income taxes.......................... 19,473 20,186
Total Current Assets.................................. 389,345 372,484
Deferred Debits:
Emission allowances........................................ 30,373 28,514
Unamortized debt expense................................... 13,158 13,432
Unamortized deferred return on plant investment............ 5,307 6,369
Nuclear plant decommissioning fund......................... 37,601 36,070
Other...................................................... 324,196 294,362
Total Deferred Debits................................. 410,635 378,747
Total....................................... $4,539,963 $4,534,426
See notes to consolidated financial statements.
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SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996 and December 31, 1995
<S> <C> <S> <C> <C> <C>
(Unaudited)
March 31, December 31,
1996 1995
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Stockholders' Investment:
Common Equity:
Common stock (without par value)......................... $1,075,886 $1,056,689
Retained earnings........................................ 528,470 497,991
Total Common Equity..................................... 1,604,356 1,554,680
Preferred Stock of Subsidiary (not subject to purchase
or sinking funds)........................................ 26,027 26,027
Total Stockholders' Investment.......................... 1,630,383 1,580,707
Preferred Stock of Subsidiary, net (subject to purchase
or sinking funds).......................................... 44,485 46,243
Long-term debt, net.......................................... 1,536,824 1,588,879
Total Capitalization.................................. 3,211,692 3,215,829
Current Liabilities:
Short-term borrowings...................................... 95,983 112,524
Current portion of long-term debt.......................... 98,911 40,983
Current portion of preferred stock......................... 2,435 2,439
Accounts payable........................................... 110,213 138,778
Customer deposits.......................................... 14,018 13,643
Taxes accrued.............................................. 40,947 66,914
Interest accrued........................................... 33,513 25,884
Dividends declared......................................... 40,089 39,056
Other...................................................... 17,656 14,625
Total Current Liabilities............................. 453,765 454,846
Deferred Credits:
Accumulated deferred income taxes.......................... 560,020 542,022
Accumulated deferred investment tax credits................ 86,808 87,719
Accumulated reserve for nuclear plant decommissioning...... 37,601 36,070
Other...................................................... 190,077 197,940
Total Deferred Credits................................ 874,506 863,751
Total....................................... $4,539,963 $4,534,426
See notes to consolidated financial statements.
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SCANA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended March 31, 1996 and 1995
(Unaudited)
<S> <C> <C> <C>
Three Months Ended
March 31,
1996 1995
(Thousands of Dollars,
Except Per Share Amounts)
OPERATING REVENUES:
Electric........................................... $262,146 $230,574
Gas................................................ 131,906 113,159
Transit............................................ 910 1,026
Total Operating Revenues....................... 394,962 344,759
OPERATING EXPENSES:
Fuel used in electric generation................... 57,002 51,852
Purchased power.................................... 1,740 629
Gas purchased for resale........................... 86,535 65,405
Other operation.................................... 56,219 56,130
Maintenance........................................ 14,970 14,790
Depreciation and amortization...................... 35,790 30,778
Income taxes....................................... 34,264 28,859
Other taxes........................................ 23,056 21,270
Total Operating Expenses....................... 309,576 269,713
OPERATING INCOME..................................... 85,386 75,046
OTHER INCOME:
Allowance for equity funds used
during construction.............................. 1,705 2,468
Other income, net of income taxes.................. 13,739 5,828
Total Other Income............................. 15,444 8,296
INCOME BEFORE INTEREST CHARGES AND
PREFERRED STOCK DIVIDENDS.......................... 100,830 83,342
INTEREST CHARGES (CREDITS):
Interest expense................................... 32,596 33,351
Allowance for borrowed funds used
during construction.............................. (1,949) (2,708)
Total Interest Charges, Net.................... 30,647 30,643
INCOME BEFORE PREFERRED STOCK CASH
DIVIDENDS OF SUBSIDIARY............................ 70,183 52,699
PREFERRED STOCK CASH DIVIDENDS OF
SUBSIDIARY (At stated rates)....................... (1,370) (1,434)
NET INCOME........................................... 68,813 51,265
RETAINED EARNINGS AT BEGINNING OF PERIOD............. 497,991 472,371
COMMON STOCK CASH DIVIDENDS DECLARED................. (38,334) (34,848)
RETAINED EARNINGS AT END OF PERIOD................... $528,470 $488,788
NET INCOME........................................... $ 68,813 $ 51,265
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (THOUSANDS)
(Note 1B)........................................ 104,158 96,633
EARNINGS PER WEIGHTED AVERAGE SHARE
OF COMMON STOCK.................................... $ .66 $ .53
CASH DIVIDENDS DECLARED PER SHARE OF
COMMON STOCK...................................... $ .3675 $ .36
See notes to consolidated financial statements.
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SCANA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
<S> <C> <C> <C>
March 31,
1996 1995
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 68,813 $ 51,265
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation, depletion and amortization............ 48,224 43,943
Amortization of nuclear fuel........................ 5,208 4,974
Deferred income taxes, net.......................... 18,489 8,690
Deferred investment tax credits, net................ (911) (907)
Net regulatory asset - adoption of SFAS No. 109..... 327 1,118
Dividends declared on preferred stock of subsidiary. 1,370 1,434
Equity in (earnings) losses of investees............ (1,169) (25)
Nuclear refueling accrual........................... 1,536 1,740
Allowance for funds used during construction........ (3,654) (5,176)
Unamortized loss on reacquired debt................. 383 261
Over (under) collections, fuel adjustment clauses... 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................. (25,070) (646)
(Increase) decrease in inventories................. 11,134 4,382
(Increase) decrease in prepayments................. (465) (2,558)
Increase (decrease) in accounts payable............ (28,565) (21,641)
Increase (decrease) in taxes accrued............... (25,967) (21,253)
Increase (decrease) in interest accrued ........... 7,629 3,020
Other, net.......................................... 16,050 (3,751)
Net Cash Provided From Operating Activities............. 96,398 79,903
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction
expenditures, net of AFC............................ (47,869) (81,050)
Increase in other property and investments............ (13,781) (12,968)
Net Cash Used For Investing Activities.................. (61,650) (94,018)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Issuance of notes and loans......................... 60,000 60,000
Issuance of other long-term debt.................... 935 -
Issuance of common stock............................ 19,248 16,415
Repayments:
Redemption of notes................................. (61,886) (58,490)
Other long-term debt................................ (391) -
Preferred stock..................................... (1,762) (1,846)
Dividend payments:
Common stock........................................ (37,305) (33,883)
Preferred stock of subsidiary....................... (1,396) (1,470)
Short-term borrowings, net............................ (16,541) 32,494
Fuel financings, net.................................. 7,523 4,795
Net Cash Provided From (Used For) Financing Activities.. (31,575) 18,015
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS............................ 3,173 3,900
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1........ 16,082 12,938
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31......... $ 19,255 $ 16,838
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest (includes capitalized
interest of $1,949 and $2,708)....... $ 24,112 $ 30,088
- Income taxes.......................... 5,733 1,623
See notes to consolidated financial statements.
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SCANA CORPORATION
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 SCANA
Corporation'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 accounts of SCANA Corporation and its wholly owned
subsidiaries (Company) 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 profits 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
March 31, 1996, approximately $155 million and $8 million of
regulatory assets and liabilities, respectively, excluding net
accumulated deferred income tax assets of approximately $26
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
operations in the period the write-off is recorded.
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 the prior period reported.
D. Reclassifications
Certain amounts from prior periods have been reclassified to
conform with the 1996 presentation.
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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, SCE&G filed an
application with the PSC for an increase in retail electric
rates. On January 9, 1996 the PSC issued an order granting
SCE&G 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 of SCE&G's electric regulatory assets
(excluding accumulated deferred income taxes) and the
transition obligation for postretirement benefits other than
pensions, changing the amortization periods to allow recovery
by the end of the year 2000. SCE&G's request to shift
approximately $257 million of depreciation reserves from
transmission and distribution assets to nuclear production
assets was also approved.
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 March 31, 1996
approximately $14.8 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 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.
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 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 retroactive premium not to exceed
7 1/2 times its annual premium in the event of property damage
loss to any nuclear generating facilities 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 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.
8
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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, 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.
SCE&G, the Company's principal subsidiary, owns four
decommissioned manufactured gas plant sites which contain
residues of by-product chemicals. SCE&G maintains an active
review of the sites to monitor the nature and extent of the
residual contamination.
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 eighteen 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 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. 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 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.
C. SCANA Communications, Inc. Guarantee
A percentage of the projected annual revenues for the years
1996-2003 of certain fiber optic routes of a joint venture
between SCANA Communications, Inc. (SCI), formerly MPX Systems,
Inc., and a subsidiary of ITC Holding Company, Inc., a Georgia-
based telecommunications holding company, has been guaranteed
by SCI. The aggregate maximum amount of such guarantee over
the remaining portion of the eight-year period is approximately
$46.2 million at March 31, 1996, prior to reduction for revenue
contracts obtained by the joint venture.
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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 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. To enhance its flexibility and
responsiveness to change, the Company's electric and gas utility,
SCE&G, operates Strategic Business Units. Maintaining a
competitive cost structure is of paramount importance in the
utility's strategic plan. SCE&G 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 SCE&G's electric regulatory assets and the shift of
depreciation reserves from transmission and distribution assets to
nuclear production assets. SCE&G 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 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 $155
million and $8 million of regulatory assets and liabilities,
respectively, excluding amounts related to net accumulated deferred
income tax assets of approximately $26 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
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 financial
position and results of operations are affected by the regulated
subsidiaries' 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, SCE&G filed an application with the PSC for
an increase in retail electric rates. On January 9, 1996 the PSC
issued an order granting SCE&G 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 of SCE&G'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. SCE&G's request to shift approximately
$257 million of depreciation reserves from transmission and
distribution assets to nuclear production assets was also approved.
10
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The following table summarizes how the Company generated funds
for its property acquisitions and 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 $ 96,398 $ 79,903
Net cash provided from (used for)
financing activities (31,575) 18,015
Cash and temporary cash investments available
at the beginning of the period 16,082 12,938
Net cash available for property acquisitions
and utility property additions and
construction expenditures $ 80,905 $110,856
Funds used for utility property additions
and construction expenditures, net of
noncash allowance for funds used during
construction $ 47,869 $ 81,050
Funds used for nonutility property
additions $ 13,781 $ 12,968
On January 13, 1995 the Company closed a $60 million unsecured
bank loan due January 12, 1996, and used the proceeds to pay off
loans in a like total amount. In January 1996 the Company
refinanced the loan with unsecured bank loans totaling $60 million
due January 10, 1997 at initial interest rates between 5.684% and
5.730%, subject to reset quarterly at LIBOR plus a spread of nine
to fifteen basis points.
SCI, a wholly owned subsidiary of SCANA, through a joint
venture with a subsidiary of ITC Holding Company, Inc., a Georgia-
based telecommunications holding company, is constructing a fiber
optic network through Texas, Louisiana, Mississippi, Alabama and
Georgia. The network, which will consist of more than 900 miles of
fiber optic lines, has been substantially completed and will cost
approximately $73.5 million. SCI has signed a seven-year contract
with the State of South Carolina for the build-out of the 800 MHz
radio system which will allow emergency agencies to establish
statewide communications during a disaster. Powertel PCS Partners,
L.P. (Powertel), a limited partnership in which SCI was a limited
partner, successfully bid for three PCS licenses in the Southeast
offered by the Federal Communications Commission (FCC) 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. SCI held the
largest partnership interest, approximately 40%, of Powertel.
Powertel signed and consummated a business combination agreement
with InterCel, Inc. (InterCel), a publicly traded cellular
telephone company providing services in Georgia, Alabama and Maine.
SCI's interest in the combined entity is approximately 17%, and
will be accounted for under the cost method. All new ventures
currently capitalize on fiber infrastructure in place and provide
for expansion of the network.
11
<PAGE>
On March 6, 1996 InterCel entered into a definitive agreement
with GTE Mobilnet Incorporated (GTE) to purchase GTE's PCS license
for the Atlanta MTA for approximately $195 million. Closing of the
InterCel purchase is subject to regulatory approval. InterCel
plans to finance the purchase principally through a $150 million
private placement of convertible preferred stock. The Company has
agreed to purchase $75 million of a series of InterCel non-voting
preferred stock that is convertible after four years. The purchase
of InterCel preferred stock is being financed through internally
generated funds, the sales of additional equity securities and the
incurrence of additional short-term and long-term indebtedness.
SCANA Petroleum Resources, Inc. (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 are continuing an extensive 3-D seismic
acquisition program on the property. 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.
On April 22, 1996, SPR closed a $46.7 million sale of
substantially all of its oil and gas properties in the state of
Oklahoma to ONEOK Resources Company, a subsidiary of ONEOK, Inc.
Under the full cost method of accounting, the sale resulted in an
adjustment of the Company's oil and gas reserves and associated
costs and did not result in any gain or loss. There was no
material affect on SPR's cost per barrel equivalent of reserves.
Following the sale, over 95 percent of its remaining reserves are
located on properties in East Texas, Louisiana, Mississippi and
other onshore and offshore Gulf Coast areas. SPR 's long-term
operating strategy will be focused on these areas.
The Company anticipates that the remainder of its 1996 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 March 31, 1996 was 3.23.
The Company expects that it has or can obtain adequate sources
of financing to meet its cash requirements for the next twelve
months and for the foreseeable future.
12
<PAGE>
SCANA CORPORATION
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 $17.5 million, when compared to the corresponding
periods in 1995. The primary factors accounting for the improved
earnings performance were a higher electric margin and a non-
recurring after-tax gain of $5.7 million reported by SCI as a
result of the business combination of Powertel PCS Partners and
Intercel, Inc. in February 1996. Improved earnings at SPR also
contributed to the increase in net income. SPR recorded a net
income of $5.2 million for the three months ended March 31,
1996 and a net loss of $0.8 million for the three months ended
March 31, 1995.
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 6% 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
declared a quarterly dividend on common stock of 36 3/4 cents per
share, for the quarter ended March 31, 1996. The dividend was paid
on April 1, 1996 to common stockholders of record on March 8, 1996.
On April 25, 1996, the Company's Board of Directors declared
a quarterly dividend on common stock of 36 3/4 cents per share for
the quarter ended June 30, 1996. The dividend is payable on July
1, 1996 to common stockholders of record on June 10, 1996.
Sales Margins
The change in the electric sales margin for the three months
ended March 31, 1996, when compared to the corresponding periods in
1995, was as follows:
Three Months
Change % Change
(Millions)
Electric operating revenues $31.6 13.7
Less: Fuel used in electric
generation 5.2 9.9
Purchased power 1.1 176.6
Margin $25.3 14.2
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 SCE&G
in January, 1996.
13
PAGE 14
The change in the gas sales margin for the three months ended
March 31, 1996 compared to the corresponding period in 1995, was as
follows:
Three Months
Change % Change
(Millions)
Gas operating revenues $18.7 16.6
Less: Gas purchased for resale 21.1 32.3
Margin $(2.4) (5.0)
The decrease in the gas sales margin is primarily a result of higher gas
costs and curtailments imposed on interruptible industrial customers
as a result of abnormally cold weather.
Other Operating Expenses
Changes in other operating expenses, including taxes, for the
three months ended March 31, 1996 compared to the corresponding
periods in 1995 are presented in the following table:
Three Months
Change % Change
(Millions)
Other operation and maintenance $ 0.3 0.4
Depreciation and amortization 5.0 16.3
Income taxes 5.4 18.7
Other taxes 1.8 8.4
Total $12.5 8.2
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 reflect additions to plant in service. The increase
in income tax expense corresponds to the increase 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.
Other Income
Other income, net of income taxes, for the three months ended
March 31, 1996 increased $7.9 million, compared to the
corresponding period of 1995. The increase is due primarily to the
gain reported by MPX and the improved earnings performance of SPR
in the first quarter of 1996 as discussed under "Earnings and
Dividends" on page 13.
14
<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
None
15
<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)
May 14, 1996 By: s/K. B. Marsh
K. B. Marsh, Vice President - Finance,
Chief Financial Officer and Controller
16
<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.
17
<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.
18
<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-F 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-F 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
19
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
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<TOTAL-NET-UTILITY-PLANT> 3,431,277
<OTHER-PROPERTY-AND-INVEST> 308,706
<TOTAL-CURRENT-ASSETS> 389,345
<TOTAL-DEFERRED-CHARGES> 410,635
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<COMMON> 1,075,886
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 528,470
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,604,356
44,485
26,027
<LONG-TERM-DEBT-NET> 1,536,824
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<TOTAL-OPERATING-EXPENSES> 309,576
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<EARNINGS-AVAILABLE-FOR-COMM> 68,813
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