<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8809
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.
106,697,782 Common Shares, without par value, as of March 31, 1997
<PAGE>
SCANA CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996.................................... 3
Consolidated Statements of Income and Retained Earnings
for the Periods Ended March 31, 1997 and 1996............ 5
Consolidated Statements of Cash Flows for the Periods
Ended March 31, 1997 and 1996............................ 6
Notes to Consolidated Financial Statements............... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................ 16
Item 6. Exhibits and Reports on Form 8-K......................... 16
Signatures........................................................ 17
Exhibit Index..................................................... 18
2
<PAGE>
<TABLE>
PART I
FINANCIAL INFORMATION
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1997 and December 31, 1996
(Unaudited)
<S> <C> <C> <C>
March 31, December 31,
1997 1996
(Thousands of Dollars)
ASSETS
Utility Plant:
Electric................................................... $4,159,642 $4,135,567
Gas........................................................ 542,324 540,196
Transit.................................................... 3,881 3,923
Common..................................................... 82,058 81,858
Total.................................................... 4,787,905 4,761,544
Less accumulated depreciation and amortization............. 1,551,474 1,517,847
Total.................................................... 3,236,431 3,243,697
Construction work in progress.............................. 252,401 219,150
Nuclear fuel, net of accumulated amortization.............. 38,659 41,006
Acquisition adjustment-gas, net of accumulated
amortization............................................. 24,926 25,175
Utility Plant, Net.................................... 3,552,417 3,529,028
Nonutility Property and Investments, net of accumulated
depreciation and depletion................................. 314,546 345,248
Current Assets:
Cash and temporary cash investments........................ 61,230 17,349
Receivables................................................ 219,692 239,286
Inventories (at average cost):
Fuel..................................................... 52,818 67,428
Materials and supplies................................... 50,434 49,449
Prepayments................................................ 14,806 13,276
Deferred income taxes...................................... 20,043 20,776
Total Current Assets.................................. 419,023 407,564
Deferred Debits:
Emission allowances........................................ 30,485 30,457
Environmental.............................................. 41,418 41,375
Nuclear plant decommissioning fund......................... 43,842 42,194
Pension asset, net......................................... 62,116 57,931
Other...................................................... 263,947 305,549
Total Deferred Debits................................. 441,808 477,506
Total....................................... $4,727,794 $4,759,346
See notes to consolidated financial statements.
3
<PAGE>
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1997 and December 31, 1996
(Unaudited)
<S> <C> <S> <C> <C> <C>
March 31, December 31,
1997 1996
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Stockholders' Investment:
Common Equity:
Common stock (without par value)......................... $1,139,067 $1,125,282
Retained earnings........................................ 575,253 558,166
Net Unrealized Holding Loss on Securities................ (13,462) -
Total Common Equity..................................... 1,700,858 1,683,448
Preferred Stock of Subsidiary (not subject to purchase
or sinking funds)........................................ 26,027 26,027
Total Stockholders' Investment.......................... 1,726,885 1,709,475
Preferred Stock of Subsidiary, net (subject to purchase
or sinking funds).......................................... 41,253 43,014
Long-term debt, net.......................................... 1,549,471 1,581,608
Total Capitalization.................................. 3,317,609 3,334,097
Current Liabilities:
Short-term borrowings...................................... 135,586 144,599
Current portion of long-term debt.......................... 107,730 51,220
Current portion of preferred stock......................... 2,432 2,432
Accounts payable........................................... 111,790 157,475
Customer deposits.......................................... 16,653 16,122
Taxes accrued.............................................. 35,566 70,610
Interest accrued........................................... 31,731 25,609
Dividends declared......................................... 42,059 40,773
Other...................................................... 8,729 7,200
Total Current Liabilities............................. 492,276 516,040
Deferred Credits:
Deferred income taxes...................................... 587,223 577,509
Deferred investment tax credits............................ 83,189 84,100
Reserve for nuclear plant decommissioning.................. 43,842 42,194
Other...................................................... 203,655 205,406
Total Deferred Credits................................ 917,909 909,209
Total....................................... $4,727,794 $4,759,346
See notes to consolidated financial statements.
4
<PAGE>
SCANA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended March 31, 1997 and 1996
(Unaudited)
<S> <C> <C> <C>
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars, Except Per Share Amounts)
OPERATING REVENUES:
Electric.............................................. $252,597 $262,146
Gas................................................... 132,110 131,906
Transit............................................... 411 910
Total Operating Revenues.......................... 385,118 394,962
OPERATING EXPENSES:
Fuel used in electric generation...................... 54,329 57,002
Purchased power....................................... 662 1,740
Gas purchased for resale.............................. 82,807 86,535
Other operation....................................... 55,679 56,219
Maintenance........................................... 15,490 14,970
Depreciation and amortization......................... 38,267 35,790
Income taxes.......................................... 30,933 34,264
Other taxes........................................... 25,847 23,056
Total Operating Expenses.......................... 304,014 309,576
OPERATING INCOME........................................ 81,104 85,386
OTHER INCOME:
Allowance for equity funds used
during construction................................. 1,919 1,705
Other income, net of income taxes..................... 6,632 13,739
Total Other Income................................ 8,551 15,444
INCOME BEFORE INTEREST CHARGES AND
PREFERRED STOCK DIVIDENDS............................. 89,655 100,830
INTEREST CHARGES (CREDITS):
Interest expense...................................... 32,609 32,596
Allowance for borrowed funds used
during construction................................. (1,662) (1,949)
Total Interest Charges, Net....................... 30,947 30,647
INCOME BEFORE PREFERRED STOCK CASH
DIVIDENDS OF SUBSIDIARY............................... 58,708 70,183
PREFERRED STOCK CASH DIVIDENDS OF
SUBSIDIARY (At stated rates).......................... (1,343) (1,370)
NET INCOME.............................................. 57,365 68,813
RETAINED EARNINGS AT BEGINNING OF PERIOD................ 558,166 497,991
COMMON STOCK CASH DIVIDENDS DECLARED.................... (40,278) (38,334)
RETAINED EARNINGS AT END OF PERIOD...................... $575,253 $528,470
NET INCOME.............................................. $ 57,365 $ 68,813
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (THOUSANDS) ....................... 106,623 104,158
EARNINGS PER WEIGHTED AVERAGE SHARE
OF COMMON STOCK....................................... $ .54 $ .66
CASH DIVIDENDS DECLARED PER SHARE OF
COMMON STOCK........................................... $ .3775 $ .3675
See notes to consolidated financial statements.
5
<PAGE>
SCANA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1997 and 1996
(Unaudited)
<S> <C> <C> <C>
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 57,365 $ 68,813
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation, depletion and amortization............ 45,015 48,224
Amortization of nuclear fuel........................ 5,767 5,208
Deferred income taxes, net.......................... 18,787 18,489
Pension asset....................................... (4,185) (3,104)
Allowance for funds used during construction........ (3,581) (3,654)
Over (under) collections, fuel adjustment clauses... 17,100 9,155
Early retirements................................... 4,306 (4,260)
Changes in certain current assets and liabilities:
(Increase) decrease in receivables................. 29,558 (25,070)
(Increase) decrease in inventories................. 13,625 11,134
(Increase) decrease in prepayments................. (1,530) (465)
Increase (decrease) in accounts payable............ (45,685) (28,565)
Increase (decrease) in taxes accrued............... (35,044) (25,967)
Increase (decrease) in interest accrued ........... 6,122 7,629
Other, net.......................................... (6,227) 18,831
Net Cash Provided From Operating Activities............. 101,393 96,398
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction
expenditures, net of AFC............................ (40,518) (47,869)
Increase in other property and investments............ (12,466) (13,781)
Sale of Subsidiary Assets............................. 7,794 -
Net Cash Used For Investing Activities.................. (45,190) (61,650)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Issuance of notes and loans......................... 24,844 60,000
Issuance of other long-term debt.................... - 935
Issuance of common stock............................ 14,653 19,248
Repayments:
Redemption of notes................................. - (61,886)
Other long-term debt................................ (3,434) (391)
Preferred stock..................................... (1,761) (1,762)
Dividend payments:
Common stock........................................ (39,019) (37,305)
Preferred stock of subsidiary....................... (1,341) (1,396)
Short-term borrowings, net............................ (9,013) (16,541)
Fuel and emission allowance financings, net........... 2,749 7,523
Net Cash Used For Financing Activities.................. (12,322) (31,575)
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS............................ 43,881 3,173
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1........ 17,349 16,082
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31......... $ 61,230 $ 19,255
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest (includes capitalized
interest of $1,662 and $1,949)....... $ 25,918 $ 24,112
- Income taxes.......................... 2,156 2,238
NONCASH INVESTING ACTIVITIES:
Subsidiary sale of interest in joint venture
and certain other assets valued at approximately
24.4 million in exchange for preferred stock and
notes of investee:
See notes to consolidated financial statements.
</TABLE>
6
<PAGE>
SCANA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
The following notes should be read in conjunction with the
Notes to Consolidated Financial Statements appearing in SCANA
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996. These are interim financial statements and,
because of temperature variations between seasons of the year, the
amounts reported in the Consolidated Statements of Income are not
necessarily indicative of amounts expected for the year. In the
opinion of management, the information furnished herein reflects
all adjustments, all of a normal recurring nature, which are
necessary for a fair statement of the results for the interim
periods reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Accounting
The Company accounts for its regulated utility operations,
assets and liabilities in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS 71). The
accounting standard requires cost-based rate-regulated
utilities, such as the Company, to recognize in their financial
statements revenues and expenses in different time periods than
do enterprises that are not rate-regulated. As a result the
Company has recorded, as of March 31, 1997, approximately $242
million and $68 million of regulatory assets and liabilities,
respectively, including amounts recorded for deferred income
tax assets and liabilities of approximately $107 million and
$60 million, respectively. The electric regulatory assets of
approximately $89 million (excluding deferred income tax
assets) are being recovered through rates, and the Public
Service Commission of South Carolina (PSC) has approved
accelerated recovery of approximately $61 million of these
assets. In the future, as a result of deregulation or other
changes in the regulatory environment, the Company may no
longer meet the criteria for continued application of SFAS 71
and would be required to write off its regulatory assets and
liabilities. Such an event could have a material adverse
effect on the Company's results of operations in the period the
write-off is recorded, but it is not expected that cash flows
or financial position would be materially affected.
B. Reclassifications
Certain amounts from prior periods have been reclassified to
conform with the 1997 presentation.
2. RETAINED EARNINGS:
The Restated Articles of Incorporation of the Company 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, 1997
approximately $18.4 million of SCE&G's retained earnings were
restricted as to payment of cash dividends on common stock.
7
<PAGE>
3. INVESTMENTS IN EQUITY SECURITIES:
SCANA Communications, Inc. (SCI), owns 4.5 million common
shares and 100,000 non-voting convertible preferred shares of
InterCel, Inc. (InterCel), an established provider of cellular
telephone services and a developer of a personal communications
services (PCS) system in major markets in the Southeast. Such
investments, with book values of approximately $66.7 million
and $75.1 million, respectively, are accounted for on the cost
method. Common shares were recorded at $14.85 per share and
are restricted securities (within the meaning of the Securities
Act of 1933) until February 1998. Preferred shares are
convertible in April 2000 at a conversion price of $16.50 per
common share or approximately 4.5 million common shares.
InterCel common stock, which trades on NASDAQ, traded between
a high of $17 per share and a low of $9 3/4 per share during
the first quarter and closed at $10 per share on March 31,
1997, resulting in a pretax unrealized holding loss of $21.8
million, or $13.5 million after-tax. Such amount is shown in
the balance sheet as a separate line item under "Common
Equity." The market value of the convertible preferred shares
of InterCel is not readily determinable. However, on an as if
converted basis, the market value of the underlying common
shares was approximately $45.5 million at March 31, 1997,
resulting in an unrecorded pretax holding loss of $29.6
million.
SCI also holds investments in ITC Holding Company, Inc. (ITC),
the parent company of InterCel, of approximately 775,000 shares
of common stock and 588,000 shares of convertible preferred
stock, with book values of approximately $16.1 million and $18
million, respectively. Fair market values for these
investments are not readily determinable.
In March 1997 SCI sold its interest in GulfStates Fibernet, a
Georgia general partnership (constituting the remaining joint
venture interests of SCI), and certain fiber optic assets of
SCI located within the State of Georgia to ITC, a Georgia-
based telecommunications holding company, in exchange for non-
voting convertible preferred stock and a subordinated note of
ITC.
4. CONTINGENCIES:
With respect to commitments at March 31, 1997, reference is
made to Note 10 of Notes to Consolidated Financial Statements
appearing in The Company's Annual Report on Form 10-K for the
year ended December 31, 1996. Contingencies at March 31, 1997
are as follows:
A. Nuclear Insurance
The Price-Anderson Indemnification Act, which deals with the
Company's public liability for a nuclear incident, currently
establishes the liability limit for third-party claims
associated with any nuclear incident at $8.9 billion. Each
reactor licensee is currently liable for up to $79.3 million
per reactor owned for each nuclear incident occurring at any
reactor in the United States, provided that not more than $10
million of the liability per reactor would be assessed per
year. 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 South Carolina Public Service Authority with American
Nuclear Insurers (ANI) and Nuclear Electric Insurance Limited
(NEIL) providing combined property and decontamination
insurance coverage of $1.9 billion for any losses at Summer
Station. SCE&G pays annual premiums and, in addition, could
be assessed a retroactive premium assessment not to exceed five
times its annual premium in the event of property damage loss
to any nuclear generating facility covered under the NEIL
program. Based on the current annual premium, this retroactive
premium assessment would not exceed $5.7 million.
8
<PAGE>
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 results of operations, cash flows and financial
position.
B. Environmental
The Company has an environmental assessment program to identify
and assess current and former operations sites that could
require environmental cleanup. As site assessments are
initiated an estimate is made of the amount of expenditures,
if any, necessary to investigate and clean up each site. These
estimates are refined as additional information becomes
available; therefore, actual expenditures could differ
significantly from the original estimates. Amounts estimated
and accrued to date for site assessments and cleanup and
environmental claims settlements relate primarily to regulated
operations; such amounts are deferred (approximately $41.4
million) and are being amortized and recovered through rates
over a five-year period for electric operations and an eight-
year period for gas operations. The deferral includes the
costs estimated to be associated with the matters discussed
below.
In September 1992 the Environmental Protection Agency
(EPA) notified 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, 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 and the EPA conditionally approved a
Remedial Investigation Report in March 1997. SCE&G
is continuing to investigate cost-effective cleanup
methodologies.
In October 1996 the City of Charleston and SCE&G
settled all environmental claims the City may have
had against SCE&G involving the Calhoun Park area for
a payment of $26 million over four years (1996-1999)
by SCE&G to the City. SCE&G expects to recover the
amount of the settlement, which does not encompass
site assessment and cleanup costs, in the same manner
as other amounts accrued for site assessments and
cleanup as discussed above. As part of the
environmental settlement, SCE&G has agreed to
construct an 1,100 space parking garage on the
Calhoun Park site and to transfer the facility to the
City in exchange for a 20-year municipal bond backed
by revenues from the parking garage and a mortgage on
the parking garage. The total amount of the bond is
not to exceed $16.9 million, the maximum expected
project cost.
SCE&G owns three other decommissioned manufactured
gas plant sites which contain residues of by-product
chemicals. SCE&G is actively investigating the sites
to monitor the nature and extent of the residual
contamination.
SCE&G is pursuing recovery of environmental liabilities from
appropriate pollution insurance carriers. Site assessment and
cleanup costs recovered through rates are net of insurance
recoveries.
9
<PAGE>
C. SCANA Communications, Inc. Matters
SCI, as a result of an internal audit, informed the Federal
Communications Commission (FCC) that it violated certain
licensing requirements in establishing and operating an 800 Mhz
radio system in South Carolina for public safety and utility
use. As a result, SCI has returned to the FCC several licenses
obtained in violation of FCC rules and the FCC is conducting
an investigation of the system. The Company does not believe
that the resolution of this issue will have a material impact
on its results of operations, cash flows or financial position.
5. Subsequent Event
On April 24, 1997 SCE&G sold 1,000,000 shares of 6.52%
cumulative preferred stock, $100 par value. Net proceeds from
the sale will be used to reduce short term indebtedness
incurred for SCE&G's construction program, to refinance senior
securities or for general corporate purposes.
10
<PAGE>
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 regulation.
Deregulation of electric wholesale and retail markets is creating
opportunities to compete for new and existing customers and
markets. As a result, profit margins and asset values of some
utilities could be adversely affected. Legislative initiatives at
the Federal and state levels are being considered and, if enacted,
could mandate market deregulation. The pace of deregulation,
future prices of electricity, and the regulatory actions which may
be taken by the PSC and the FERC in response to the changing
environment cannot be predicted. However, recent FERC actions will
likely accelerate competition among electric utilities by providing
for wholesale transmission access. In April 1996 the FERC issued
Order 888, which addresses open access to transmission lines and
stranded cost recovery. Order 888 requires utilities under FERC
jurisdiction that own, control or operate transmission lines to
file nondiscriminatory open access tariffs that offer to others the
same transmission service they provide themselves. The FERC has
also permitted utilities to seek recovery of wholesale stranded
costs from departing customers by direct assignment. Approximately
five percent of the Company's electric revenues is under FERC
jurisdiction.
The Company is aggressively pursuing actions to position
itself strategically for the transformed environment. To enhance
its flexibility and responsiveness to change, the Company'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, for
ratemaking purposes, of depreciation reserves from transmission and
distribution assets to nuclear production assets. The FERC has
rejected the depreciation transfer for rates subject to its
jurisdiction. In May 1996 the FERC approved SCE&G's application
establishing open access transmission tariffs and requesting
authorization to sell bulk power to wholesale customers at market-
based rates. Significant investments are being made in customer
and management information systems. Marketing of services to
commercial and industrial customers has been increased
significantly. The Company believes that these actions as well as
numerous others that have been and will be taken demonstrate its
ability and commitment to succeed in the new operating environment
to come.
Regulated public utilities are allowed to record as assets some
costs that would be expensed by other enterprises. If deregulation
or other changes in the regulatory environment occur, the Company
may no longer be eligible to apply this accounting treatment and
may be required to eliminate such regulatory assets from its
balance sheet. Although the potential effects of deregulation
cannot be determined at present, discontinuation of the accounting
treatment could have a material adverse effect on the Company's
results of operations in the period the write-off is recorded. It
is expected that cash flows and the financial position of the
Company would not be materially affected by the discontinuation of
the accounting treatment. The Company reported approximately $242
million and $68 million of regulatory assets and liabilities,
respectively, including amounts recorded for deferred income tax
assets and liabilities of approximately $107 million and $60
million, respectively, on its balance sheet at March 31, 1997.
Material Changes in Capital Resources and Liquidity
Since December 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 continue their ongoing 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 and other regulatory relief.
11
<PAGE>
On January 9, 1996 the PSC issued an order granting SCE&G an
increase in retail electric rates of 7.34% which will produce
additional revenues of approximately $67.5 million annually. The
increase has been implemented in two phases. The first phase, an
increase in revenues of approximately $59.5 million annually based
on a test year, or 6.47%, commenced in January 1996. The second
phase was implemented in January 1997 and will produce additional
revenues of approximately $8.0 million annually, based on a test
year, 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 to be
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 deferred income tax
assets) and the remaining transition obligation for postretirement
benefits other than pensions, changing the amortization periods to
allow recovery by the end of the year 2000. SCE&G's request to
shift, for ratemaking purposes, approximately $257 million of
depreciation reserves from transmission and distribution assets to
nuclear production assets was also approved. The PSC's ruling does
not apply to wholesale electric revenues under the FERC's
jurisdiction, which constitutes approximately 5% of the Company's
electric revenues. The FERC has rejected the transfer of
depreciation reserves for rates subject to its jurisdiction.
The following table summarizes how the Company generated funds
for its property acquisitions and utility property additions and
construction expenditures during the three months ended March 31,
1997 and 1996:
Three Months Ended
March 31,
1997 1996
(Thousands of Dollars)
Net cash provided from operating activities $101,393 $ 96,398
Net cash used for financing activities (12,322) (31,575)
Cash and temporary cash investments available
at the beginning of the period 17,349 16,082
Net cash available for property acquisitions
and utility property additions and
construction expenditures $106,420 $ 80,905
Funds used for utility property additions
and construction expenditures, net of
noncash allowance for funds used during
construction $ 40,518 $ 47,869
Funds used for nonutility property
additions $ 4,672 $ 13,781
On January 12, 1996 SCANA closed on unsecured bank loans
totalling $60 million due January 10, 1997, and used the proceeds
to pay off a loan in a like total amount. On January 10, 1997
SCANA refinanced the loans with unsecured bank loans totaling $60
million due January 9, 1998 at initial interest rates between
5.995% and 6.031%, at a fixed 12-month LIBOR plus a spread of 10 to
12 1/2 basis points.
On February 12, 1997 SCANA closed on the sale of $25 million
of Medium-Term Notes having an annual interest rate of 6.9% and
maturing February 15, 2007. These funds were used to reduce short-
term borrowings at SCANA.
On April 24, 1997 SCE&G sold 1,000,000 shares of 6.52%
cumulative preferred stock $100 par value. Net proceeds from the
sale will be used to reduce short term indebtedness incurred for
SCE&G's construction program, to refinance senior securities or for
general corporate purposes.
On August 7, 1996 the City of Charleston executed 30-year
electric and gas franchise agreements with SCE&G. In consideration
for the electric franchise agreement, SCE&G will pay the City $25
million over seven years (1996-2002) and has donated to the City
the existing transit assets in Charleston. In settlement of
environmental claims the City may have had against SCE&G involving
the Calhoun Park area, where SCE&G and its predecessor companies
operated a manufactured gas plant until the 1960's, SCE&G will pay
the City $26 million over a four-year period. As part of the
environmental settlement, SCE&G has agreed to construct an 1,100
space parking garage on the Calhoun Park site and to transfer the
facility to the City in exchange for a 20-year municipal bond
backed by revenues from the parking garage and a mortgage on the
parking garage. The total amount of the bond is not to exceed
$16.9 million, the maximum expected project cost.
12
<PAGE>
The Company and Westvaco Corporation have formed a limited
liability company, Cogen South LLC, to build and operate a $170
million cogeneration facility at Westvaco's Kraft Division Paper
Mill in North Charleston, South Carolina. The Company and Westvaco
each own a 50% interest in the LLC. The facility will provide
industrial process steam for the Westvaco paper mill and shaft
horsepower to enable SCE&G to generate up to 99 megawatts of
electricity. Construction financing is being provided to Cogen
South LLC by banks. A $15 million capital contribution to the LLC
by each partner is expected prior to operation of the facility. In
addition to the cogeneration LLC, Westvaco has entered into a 20-
year contract with SCE&G for all its electricity requirements at
the North Charleston mill at SCE&G's standard industrial rate.
Construction of the plant began in September 1996 and it is
expected to be operational in the fall of 1998.
SCI holds an approximate 17% interest in the common stock of
InterCel, a publicly traded telecommunications company which owns
PCS licenses for the Birmingham, Alabama; Jacksonville, Florida;
and Memphis, Tennessee/Jackson, Mississippi MTAs. In June 1996
InterCel purchased a PCS license for the Atlanta MTA, financing the
purchase principally through a private placement of non-voting
convertible preferred stock, of which SCI purchased $75 million.
The non-voting preferred stock is convertible to InterCel common
stock in April 2000. InterCel was the winning bidder for
additional PCS licenses to provide service to thirteen BTAs in
Kentucky, Tennessee and Indiana.
In March 1997 SCI sold its interest in GulfStates Fibernet, a
Georgia general partnership (constituting the remaining joint
venture interests of SCI), and certain fiber optic assets of SCI
located within the State of Georgia to ITC, a Georgia-based
telecommunications holding company, in exchange for non-voting
convertible preferred stock and a subordinated note of ITC.
SCI, as a result of an internal audit, informed the FCC that
it violated certain licensing requirements in establishing and
operating an 800 Mhz radio system in South Carolina for public
safety and utility use. As a result, SCI has returned to the FCC
several licenses obtained in violation of FCC rules and the FCC is
conducting an investigation of the system. The Company does not
believe that the resolution of this issue will have a material
impact on its results of operations, cash flows or financial
position.
SCANA Petroleum Resources, Inc. (SPR) and Fina Oil and
Chemical Company (Fina) are parties to a joint exploration and
development agreement providing for the exclusive oil and gas
development rights on approximately 400,000 acres 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.
In August 1996, SPR and Cobra Oil Gas Corporation (COBRA)
entered into an agreement providing for the joint exploration and
development of fifteen field areas in Atlanta, Arkansas, Louisiana,
New Mexico and Texas. SPR's average interest in the program is
approximately 30%. Under the agreement, SPR has acquired interests
in 83,000 acres of processed 3-D seismic data covering 900 square
miles.
The Company anticipates that the remainder of its 1997 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 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. The ratio of earnings to fixed charges for the twelve
months ended March 31, 1997 was 3.45.
13
<PAGE>
SCANA CORPORATION
Results of Operations
For the Three Months ended March 31, 1997
As Compared to the Corresponding Periods in 1996
Earnings and Dividends
Net income for the three months ended March 31, 1997
decreased approximately $11.5 million, when compared to the
corresponding period in 1996. The electric margin decreased by
approximately $5.8 million primarily as a result of milder weather
in the current period. The negative impact of weather on the
electric margin was partially offset by higher retail electric
rates and economic and customer growth. A non-recurring after-tax
gain of $5.2 million reported by SCI as a result of the business
combination of Powertel PCS Partners and Intercel, Inc. in February
1996 is included in net income for the three months ended March 31,
1996.
Allowance for funds used during construction (AFC) is a
utility accounting practice whereby a portion of the cost of both
equity and borrowed funds used to finance construction (which is
shown on the balance sheet as construction work in progress) is
capitalized. Both the equity and the debt portions of AFC are
noncash items of nonoperating income which have the effect of
increasing reported net income. AFC represented approximately 4%
and 3% of income before income taxes for the three months ended
March 31, 1997 and 1996, respectively.
On February 18, 1997 the Company's Board of Directors
declared a quarterly dividend on common stock of 37 3/4 cents per
share, for the quarter ended March 31, 1997. The dividend was paid
on April 1, 1997 to common stockholders of record on March 10,
1997.
On April 24, 1997 the Company's Board of Directors declared a
quarterly dividend on common stock of 37 3/4 cents per share for
the quarter ended June 30, 1997. The dividend is payable on July
1, 1997 to common stockholders of record on June 10, 1997.
Sales Margins
The change in the electric sales margin for the three months
ended March 31, 1997, when compared to the corresponding period in
1996, was as follows:
Three Months
Change % Change
(Millions)
Electric operating revenues $(9.6) (3.6)
Less: Fuel used in electric
generation (2.7) (4.7)
Purchased power (1.1) (62.0)
Margin $(5.8) (2.9)
The electric sales margin decreased for the three months ended
March 31, 1997, when compared to the corresponding period in 1996
as a result of the effect of milder weather which more than offset
the favorable impact of the rate increases placed into effect in
January 1996 and January 1997 and economic growth factors.
14
<PAGE>
The change in the gas sale margins for the three months ended
March 31, 1997, when compared to the corresponding period in 1996,
was as follows:
Three Months
Change % Change
(Millions)
Gas operating revenues $ 0.2 0.2
Less: Gas purchased for resale (3.7) (4.3)
Margin $ 3.9 8.7
The gas sales margin increased for the three months ended
March 31, 1997, when compared to the corresponding period in 1996
primarily as a result of increased sales to interruptible customers
attributable to fewer curtailments.
Other Operating Expenses
Changes in other operating expenses, including taxes, for the
three months ended March 31, 1997, when compared to the
corresponding period in 1996 are presented in the following table:
Three Months
Change % Change
(Millions)
Other operation and maintenance $ - -
Depreciation and amortization 2.4 6.9
Income taxes (3.3) (9.7)
Other taxes 2.8 12.1
Total $ 1.9 1.2
Other operation and maintenance expenses for the three months
ended March 31, 1997 remained at 1996 levels. Increased costs at
electric generating plants were largely offset by a decrease in
transit operating costs resulting from the Company's transfer of
the ownership of the Charleston transit system to the City of
Charleston in October 1996. The increase in depreciation and
amortization expenses for the three months' comparisons reflects
the addition of the Cope Plant and other additions to plant in
service. The decrease in income tax expense for the three months
results from the decrease in operating income. The increase in
other taxes results primarily from the accrual of additional
property taxes, beginning in January 1997, related to the Cope
Plant and other property additions. Recovery of the Cope Plant
property taxes is provided for in a retail electric rate increase
that became effective in January 1997.
Other Income
Other income, net of income taxes, for the three months ended
March 31, 1997 decreased $7.1 million when compared to the
corresponding period of 1996. The principal factors accounting for
the drop in other income is the nonrecurring gain reported by SCI
(discussed under "Earnings and Dividends"), which is included in
other income reported for the three months ended March 31, 1996.
15
<PAGE>
SCANA CORPORATION
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings see Note 2
"Rate Matters," appearing in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, and
Note 4 "Contingencies" of Notes to Consolidated Financial
Statements appearing in this Quarterly Report on Form 10-Q.
Items 2, 3, 4 and 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibits filed with this Quarterly Report on Form 10-Q are
listed in the following Exhibit Index. Certain of such
exhibits which have heretofore been filed with the
Securities and Exchange Commission and which are
designated by reference to their exhibit numbers in prior
filings are hereby incorporated herein by reference and
made a part hereof.
B. Reports on Form 8-K
None
16
<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 13, 1997 By: s/K. B. Marsh
K. B. Marsh, Vice President - Finance,
Chief Financial Officer and Controller
17
<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 June 18, 1996 (Exhibit 4-B to
Registration Statement No. 333-18149).................... #
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 dated 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
Indentures 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.
18
<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.
19
<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
20
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1997 AND THE CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,552,417
<OTHER-PROPERTY-AND-INVEST> 314,546
<TOTAL-CURRENT-ASSETS> 419,023
<TOTAL-DEFERRED-CHARGES> 441,808
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,727,794
<COMMON> 1,139,067
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 575,253
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,700,858
41,253
26,027
<LONG-TERM-DEBT-NET> 1,549,471
<SHORT-TERM-NOTES> 135,586
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 107,730
2,432
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,164,437
<TOT-CAPITALIZATION-AND-LIAB> 4,727,794
<GROSS-OPERATING-REVENUE> 385,118
<INCOME-TAX-EXPENSE> 30,933
<OTHER-OPERATING-EXPENSES> 273,081
<TOTAL-OPERATING-EXPENSES> 304,014
<OPERATING-INCOME-LOSS> 81,104
<OTHER-INCOME-NET> 8,551
<INCOME-BEFORE-INTEREST-EXPEN> 89,655
<TOTAL-INTEREST-EXPENSE> 30,947
<NET-INCOME> 58,708
(1,343)
<EARNINGS-AVAILABLE-FOR-COMM> 57,365
<COMMON-STOCK-DIVIDENDS> 40,278
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 101,393
<EPS-PRIMARY> .54
<EPS-DILUTED> 0
</TABLE>
