SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended September 30, 1998
-------------------------------------------
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 (I.R.S. Employer
of 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) 217-9000
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
103,572,623 Common Shares, without par value, as of September 30,
1998
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SCANA CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997..................................... 3
Consolidated Statements of Income and Retained Earnings
for the Periods Ended September 30, 1998 and 1997......... 5
Consolidated Statements of Cash Flows for the Periods
Ended September 30, 1998 and 1997......................... 6
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk. 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 19
Item 6. Exhibits and Reports on Form 8-K.......................... 19
Signatures......................................................... 20
Exhibit Index...................................................... 21
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 and December 31, 1997
(Unaudited)
September 30, December 31,
1998 1997
(Millions of Dollars)
ASSETS
<S> <C> <C>
Utility Plant:
Electric................................................... $4,307 $4,292
Gas........................................................ 584 580
Other...................................................... 86 84
------ ------
Total.................................................... 4,977 4,956
Less accumulated depreciation and amortization............. 1,701 1,619
------ ------
Total.................................................... 3,276 3,337
Construction work in progress.............................. 360 234
Nuclear fuel, net of accumulated amortization.............. 43 53
Acquisition adjustment-gas, net of accumulated
amortization............................................. 24 24
------ ------
Utility Plant, Net.................................... 3,703 3,648
------ ------
Nonutility Property and Investments, net of
accumulated depreciation................................... 474 364
------ ------
Current Assets:
Cash and temporary cash investments........................ 52 60
Receivables................................................ 283 248
Inventories (at average cost):
Fuel..................................................... 48 51
Materials and supplies................................... 51 52
Prepayments................................................ 22 16
Deferred income taxes...................................... 22 25
------ ------
Total Current Assets.................................. 478 452
------ ------
Deferred Debits:
Emission allowances........................................ 31 31
Environmental.............................................. 28 32
Nuclear plant decommissioning fund......................... 54 49
Pension asset, net......................................... 100 82
Other...................................................... 278 274
------ ------
Total Deferred Debits................................. 491 468
------ ------
Total....................................... $5,146 $4,932
====== ======
See notes to consolidated financial statements.
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<CAPTION>
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 and December 31, 1997
(Unaudited)
September 30, December 31,
1998 1997
(Millions of Dollars)
CAPITALIZATION AND LIABILITIES
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Stockholders' Investment:
Common Equity:
Common stock (without par value)......................... $1,043 $1,153
Retained earnings........................................ 687 617
Net Unrealized Holding Gain on Securities................ 37 18
------ ------
Total Common Equity.................................... 1,767 1,788
Preferred stock (not subject to purchase or sinking funds). 106 106
------ ------
Total Stockholders' Investment............................ 1,873 1,894
Preferred stock, net (subject to purchase or sinking funds).. 11 12
SCE&G Obligated Mandatorily Redeemable Preferred Securities of SCE&G's
Subsidiary Trust, SCE&G Trust I, holding solely $50 million, principal
amount of the 7.55%
Junior Subordinated Debentures of SCE&G, due 2027........ 50 50
Long-term debt, net.......................................... 1,583 1,566
------ ------
Total Capitalization.................................. 3,517 3,522
------ ------
Current Liabilities:
Short-term borrowings...................................... 181 59
Current portion of long-term debt.......................... 77 73
Accounts payable........................................... 144 131
Customer deposits.......................................... 18 18
Taxes accrued.............................................. 87 59
Interest accrued........................................... 34 26
Dividends declared......................................... 42 43
Other...................................................... 10 14
------ ------
Total Current Liabilities............................. 593 423
------ ------
Deferred Credits:
Deferred income taxes...................................... 638 612
Deferred investment tax credits............................ 95 98
Reserve for nuclear plant decommissioning.................. 54 49
Postretirement benefits.................................... 83 61
Other...................................................... 166 167
------ ------
Total Deferred Credits................................ 1,036 987
------ ------
Total....................................... $5,146 $4,932
====== ======
See notes to consolidated financial statements.
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SCANA CORPORATION
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine months Ended
September 30, September 30,
1998 1997 1998 1997
(Millions of Dollars, Except Per Share Amounts)
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Electric........................................ $393 $340 $ 962 $ 841
Gas............................................. 81 78 305 294
Transit......................................... - 1 1 1
---- ---- ------ ------
Total Operating Revenues.................... 474 419 1,268 1,136
---- ---- ------ ------
OPERATING EXPENSES:
Fuel used in electric generation................ 84 76 212 185
Purchased power................................. 9 3 22 7
Gas purchased for resale........................ 54 54 199 192
Other operation................................. 66 62 186 174
Maintenance..................................... 21 16 62 52
Depreciation and amortization................... 39 38 107 115
Income taxes.................................... 55 44 117 94
Other taxes..................................... 26 25 78 74
---- ---- ------ ------
Total Operating Expenses.................... 354 318 983 893
---- ---- ------ ------
OPERATING INCOME.................................. 120 101 285 243
---- ---- ------ ------
OTHER INCOME:
Allowance for equity funds used
during construction........................... 2 2 6 5
Other income, net of income taxes............... (1) 5 1 12
---- ---- ------ ------
Total Other Income.......................... 1 7 7 17
---- ---- ------ ------
INCOME BEFORE INTEREST CHARGES AND
PREFERRED STOCK DIVIDENDS....................... 121 108 292 260
---- ---- ------ ------
INTEREST CHARGES (CREDITS):
Interest expense on long term debt.............. 31 29 89 87
Other interest expense.......................... 3 3 8 9
Allowance for borrowed funds used
during construction........................... (2) (2) (5) (5)
---- ---- ------ ------
Total Interest Charges, Net................. 32 30 92 91
----- ---- ------ ------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS
ON MANDATORILY REDEEMABLE PREFERRED
SECURITIES 89 78 200 169
PREFERRED DIVIDEND REQUIREMENT OF SCE&G
- OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES 1 - 3 -
---- ---- ------ ------
INCOME BEFORE PREFERRED STOCK CASH
DIVIDENDS OF SUBSIDIARY........................ 88 78 197 169
PREFERRED STOCK CASH DIVIDENDS OF
SUBSIDIARY (At stated rates)................... (2) (3) (5) (7)
---- ---- ------ ------
NET INCOME....................................... 86 75 192 162
RETAINED EARNINGS AT BEGINNING OF PERIOD......... 641 564 617 558
COMMON STOCK CASH DIVIDENDS DECLARED............. (40) (41) (122) (122)
---- ---- ------ ------
RETAINED EARNINGS AT END OF PERIOD............... $687 $598 $ 687 $ 598
==== ==== ====== ======
NET INCOME....................................... $ 86 $ 75 $ 192 $ 162
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (MILLIONS).................. 104.2 107.3 105.9 107.0
EARNINGS PER WEIGHTED AVERAGE SHARE
OF COMMON STOCK................................ $.82 $.69 $1.81 $1.51
CASH DIVIDENDS DECLARED PER SHARE OF
COMMON STOCK................................... $.3850 $.3775 $1.1550 $1.1325
See notes to consolidated financial statements.
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SCANA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended September 30, 1998 and 1997
(Unaudited)
Nine months Ended
September 30,
1998 1997
---- ----
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income.......................................... $192 $162
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation, depletion and amortization.......... 113 134
Amortization of nuclear fuel...................... 15 16
Deferred income taxes, net........................ 17 21
Pension asset..................................... (18) (12)
Postretirement benefits........................... 22 9
Allowance for funds used during construction...... (12) (9)
Over (under) collections, fuel adjustment clauses. (1) 10
Changes in certain current assets and liabilities:
(Increase) decrease in receivables............... (35) 3
(Increase) decrease in inventories............... 4 14
(Increase) decrease in prepayments............... (6) (3)
Increase (decrease) in accounts payable.......... 13 (29)
Increase (decrease) in taxes accrued............. 28 19
Other, net........................................ 5 19
---- ----
Net Cash Provided From Operating Activities........... 337 354
---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction
expenditures, net of AFC.......................... (161) (168)
Increase in other property and investments.......... (87) (52)
Sale of subsidiary assets........................... - 8
---- ----
Net Cash Used For Investing Activities................ (248) (212)
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Issuance of notes and loans....................... 135 25
Issuance of common stock.......................... - 30
Issuance of preferred stock....................... - 99
Issuance of other long-term notes................. - 1
Repayments:
First and Refunding Mortgage Bonds................ (20) (15)
Notes and loans................................... (80) (10)
Other long-term debt.............................. (5) (4)
Preferred stock................................... (1) (3)
Repurchase of common stock........................ (110) -
Dividend payments:
Common stock...................................... (122) (120)
Preferred stock of subsidiary..................... (6) (5)
Short-term borrowings, net.......................... 122 (85)
Fuel and emission allowance financings, net......... (10) (1)
---- ----
Net Cash Used For Financing Activities................ (97) (88)
---- ----
NET INCREASE (DECREASE) IN CASH AND TEMPORARY
CASH INVESTMENTS.................................... (8) 54
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1...... 60 17
---- ----
CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30... $ 52 $ 71
==== ====
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest (includes capitalized
interest of $5 and $5)............. $ 87 $ 85
- Income taxes........................ 59 55
Noncash investing activities
- Unrealized gain (loss) on securities
available for sale (net of tax).... 19 11
- City of Charleston Franchise Fee.... - 25
Exchange of interest in joint venture and certain other assets with a book
value of approximately $24.4 million in exchange for preferred stock and
notes of buyer in 1997.
See notes to consolidated financial statements.
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SCANA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
The following notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in SCANA Corporation's (the Company)
Annual Report on Form 10-K for the year ended December 31, 1997. These are
interim financial statements, and 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 except as described in Note 2,
which are necessary for a fair statement of the results for the interim periods
reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Accounting
The Company accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of Statement of Financial
Accounting Standards No. 71 (SFAS 71). The accounting standard requires
cost-based rate-regulated utilities to recognize in their financial
statements revenues and expenses in different time periods than do
enterprises that are not rate-regulated. As a result the Company has
recorded, as of September 30, 1998, approximately $230 million and $68
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax assets and liabilities of
approximately $124 million and $58 million, respectively. The electric
and gas regulatory assets (excluding deferred income tax assets) of
approximately $69 million and $35 million, respectively, are being
recovered through rates, and the Public Service Commission of South
Carolina (PSC) has approved accelerated recovery of approximately $24
million of the electric regulatory 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
could 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. Comprehensive Income
Comprehensive income includes net income and all other changes in
equity except those resulting from investments by and distributions to
stockholders. Comprehensive income of the Company totaled $70.5 million
and $210.3 million for the three and nine months ended September 30,
1998, respectively, and $88.8 million and $173.0 million for the same
periods in 1997. For each period, comprehensive income included net
income and unrealized gains/losses on securities available for sale.
C. Reclassifications
Certain amounts from prior periods have been reclassified to conform
with the 1998 presentation.
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2. RATE MATTERS
On January 9, 1996 the PSC issued an order granting South Carolina
Electric & Gas Company (SCE&G) an increase in retail electric rates of
7.34%, which was designed to produce additional revenues, based on a
test year, of approximately $67.5 million annually. The increase was
implemented in two phases. The first phase, an increase in revenues of
approximately $59.5 million annually or 6.47%, commenced in January
1996. The second phase, an increase in revenues of approximately $8.0
million annually, or .87%, was implemented in January 1997. The PSC
authorized a return on common equity of 12.0%. The PSC also approved
establishment of a Storm Damage Reserve Account capped at $50 million 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 Consumer Advocate and two other intervenors appealed
certain issues in the order to the South Carolina Circuit Court, which
affirmed the PSC's decisions, and, subsequently, to the South Carolina
Supreme Court. In March 1998, SCE&G, the PSC, the Consumer Advocate and
one of the other intervenors reached an agreement that provided for the
reversal of the shift in depreciation reserves and the dismissal of the
appeal of all other issues. The PSC also authorized SCE&G to adjust
depreciation rates that had been approved in the 1996 rate order for its
electric transmission, distribution and nuclear production properties to
eliminate the effect of the depreciation reserve shift and to
retroactively apply such depreciation rates to February 1996. As a
result, a one-time reduction in depreciation expense of $5.5 million
after taxes was recorded in March 1998. The agreement does not affect
retail electric rates. In September 1998, the Supreme Court affirmed the
Circuit Court's rulings on the issues contested by the remaining
intervenor. The Federal Energy Regulatory Commission (FERC) had
previously rejected the transfer of depreciation reserves for rates
subject to its jurisdiction.
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 its
First and Refunding Mortgage Bonds contain provisions that, under
certain circumstances, could limit the payment of cash dividends on its
common stock. In addition, with respect to hydroelectric projects, the
Federal Power Act requires the appropriation of a portion of certain
earnings therefrom. At September 30, 1998 approximately $24.3 million of
retained earnings were restricted by this requirement as to payment of
cash dividends on SCE&G's common stock.
4. INVESTMENTS IN EQUITY SECURITIES:
At September 30, 1998, SCANA Communications, Inc. (SCI) held the following
investments in ITC Holding Company (ITC) and its affiliates:
o Powertel, Inc. (Powertel) is a publicly traded company that owns and
operates personal communications services (PCS) systems in several
major Southeastern markets. SCI owns approximately 4.5 million common
shares of Powertel, representing approximately 17% of the total common
shares, at a cost of approximately $66.7 million. Common shares were
initially recorded at $14.85 per share, and closed at $13 9/16 on
September 30, 1998, resulting in a pre-tax unrealized holding loss of
$5.8 million. The after-tax amount of such loss is included in the
balance sheet as a component of "Common Equity." In addition, SCI owns
several series of non-voting convertible preferred shares of Powertel.
These investments, and their approximate cost, are as follows: 100,000
shares series B ($75.1 million); 50,000 shares series D ($22.5
million); and, 50,000 series E 6.5% ($75 million). Preferred series B
shares are convertible in March 2002 at a conversion price of $16.50
per common share or approximately 4.5 million common
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shares. Preferred series D shares are convertible in March 2002 at a
conversion price of $12.75 per common share or approximately 1.7
million common shares. Preferred series E shares are are convertible
in June 2003 at a conversion price of $22.01 per common share or
approximately 3.4 million common shares. The market value of the
convertible preferred shares of Powertel is not readily determinable.
However, on an as converted basis, the market value of the underlying
common shares for the preferred shares was approximately $131.8
million at September 30, 1998, resulting in an unrecorded pre-tax
holding loss of $40.8 million. o ITC Delta^Com, Inc. (ITCD) is a fiber
optic telecommunications provider. At September 30, 1998 SCI owned
3,555,838 common shares of ITCD (after giving effect to the
two-for-one stock split announced July 29, 1998) at a cost of
approximately $9.0 million. ITCD common stock closed at $20.75 per
share on September 30, 1998, resulting in a pre-tax unrealized holding
gain of $64.8 million. The after-tax amount of such gain is included
in the balance sheet as a component of "Common Equity." In addition,
SCI owns 1,480,771 shares of series A preferred stock of ITCD at a
cost of approximately $11.2 million. Series A preferred shares are
convertible in March 2002 into 2,961,542 shares of ITCD common stock
(after giving effect to the two-for-one stock split). The market value
of series A preferred stock of ITCD is not readily determinable.
However, on an as converted basis the market value of the underlying
common stock for the series A preferred stock was approximately $61.4
million at September 30, 1998, resulting in an unrecorded pre-tax
holding gain of $50.2 million.
o Knology Holdings, Inc. (Knology) is a broad-band service provider of
cable, television, telephone and internet services. SCI owns 71,050
units of Knology. Each unit consists of one 11.875% Senior Discount
Note due 2007 and one warrant entitling the holder to purchase .003734
shares of preferred stock of Knology. The cost of this investment was
approximately $40 million. SCI also owns an additional 753 warrants
which entitles it to purchase 753 shares of preferred stock at $1,500
per share. Effective July 31, 1998, SCI sold all of its 3,639 shares
of preferred stock in Knology to ITC. SCI's original investment in
these shares was approximately $5.3 million. In exchange, SCI received
133,664 shares of ITC series B convertible preferred stock, valued at
$1,600 per share, and approximately $0.4 million cash. o ITC has an
ownership interest in several Southeastern communications companies.
SCI owns 3,098,464 common shares (after giving effect to the
four-for-one stock split on August 25, 1998), 645,153 series A
convertible preferred shares, and 133,664 series B convertible
preferred shares of ITC. These investments cost approximately $7.1
million, $8.9 million, and $5.0 million, respectively. Series A and
series B preferred shares are convertible in March 2002 into ITC
common shares on a four to one basis. The market value of these
investments is not readily determinable.
5. CONTINGENCIES:
With respect to commitments at September 30, 1998, 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,
1997. Contingencies at September 30, 1998 are as follows:
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
$9.9 billion. Each reactor licensee is currently liable for up to $88.1
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 V. C. Summer Nuclear
Station (Summer Station), would be approximately $58.7 million per
incident, but not more than $6.7 million per year.
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SCE&G currently maintains policies (for itself and on behalf of the
PSA) with Nuclear Electric Insurance Limited (NEIL) and American
Nuclear Insurers (ANI) providing combined property and decontamination
insurance coverage of $2.0 billion for any losses at Summer Station.
SCE&G pays annual premiums and, in addition, could be assessed a
retroactive premium 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 $6.1 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 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, estimates
are made of the expenditures, if any, deemed 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 assessment and cleanup relate primarily
to regulated operations; such amounts are deferred (approximately $28
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 estimated costs associated
with the matters discussed below.
o 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
encompasses approximately 30 acres and includes properties which were
locations for industrial operations, including a wood preserving
(creosote) plant, one of SCE&G's decommissioned manufactured gas
plants, properties owned by the National Park Service and the City of
Charleston, and private properties. The site has not been placed on
the National Priorities List, but may be added in the future. The
Potentially Responsible Parties (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 approved a Remedial
Investigation Report in February 1997 and a Feasibility Study Report
in June 1998. A Record of Decision, which sets forth EPA's view of the
extent of each PRP's responsibility for site contamination and the
level to which the site must be remediated, has not been issued.
However, in July 1998, EPA approved SCE&G's Removal Action Work Plan
for soil excavation. Accordingly, SCE&G began soil excavation for
Phase One of the Removal Action in August 1998, and completed field
work in October 1998. The total cost for Phase One is expected to be
approximately $1.5 million. Phase Two will include excavation and
installation of several permanent barriers to mitigate coal tar
seepage. Phase Two is expected to begin in November 1998, and is
expected to cost approximately $2.2 million. 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 is recovering the amount of
the settlement, which does not encompass site assessment and cleanup
costs, through rates 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.
Construction is expected to begin before the end of 1998. The total
amount of the bond is not to exceed $16.9 million, the maximum
expected project cost.
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o SCE&G owns three other decommissioned manufactured gas plant sites
which contain residues of by-product chemicals. For the site located
in Sumter, South Carolina, effective September 15, 1998, SCE&G entered
into a Remedial Action Plan Contract with the South Carolina
Department of Health and Environmental Control (DHEC) pursuant to
which it agreed to undertake a full site investigation and remediation
under the oversight of DHEC. Site investigation and characterization
are proceeding according to schedule. Upon selection and successful
implementation of a site remedy, DHEC will give SCE&G a Certificate of
Completion, and a covenant not to sue. SCE&G is continuing to
investigate the other two sites, and is monitoring the nature and
extent of residual contamination.
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 results of operations, cash flows or financial
position.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SCANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in SCANA Corporation's (the Company) Annual Report on Form 10-K for
the year ended December 31, 1997.
Statements included in this discussion and analysis (or elsewhere in this
quarterly report) which are not statements of historical fact are intended to
be, and are hereby identified as, "forward-looking statements" for purposes of
the safe harbor provided by Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties, and that actual results could differ materially from those
indicated by such forward-looking statements. Important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements include, but are not limited to, the following: (1) that the
information is of a preliminary nature and may be subject to further and/or
continuing review and adjustment, (2) changes in the utility regulatory
environment, (3) changes in the economy in areas served by the Company's
subsidiaries, (4) the impact of competition from other energy suppliers, (5) the
management of the Company's operations, (6) growth opportunities for the
Company's regulated and diversified subsidiaries, (7) the results of financing
efforts, (8) changes in the Company's accounting policies, (9) weather
conditions in areas served by the Company's utility subsidiaries, (10)
performance of the telecommunications companies in which the Company has made
significant investments, (11) inflation, (12) changes in environmental
regulations and (13) the other risks and uncertainties described from time to
time in the Company's periodic reports filed with the Securities and Exchange
Commission.
The Company disclaims any obligation to update any forward-looking statements.
Material Changes in Capital Resources and Liquidity
Since December 31, 1997
Liquidity and Capital Resources
On January 9, 1996 the PSC issued an order which, among other things,
authorized SCE&G to earn 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, 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 approved. The Consumer Advocate and two other intervenors
appealed certain issues in the order to the South Carolina Circuit Court, which
affirmed the PSC's decisions, and, subsequently, to the South Carolina Supreme
Court. In March 1998, SCE&G, the PSC, the Consumer Advocate and one of the other
intervenors reached an agreement that provided for the reversal of the shift in
depreciation reserves and the dismissal of the appeal of all other issues. The
PSC also authorized SCE&G to adjust depreciation rates that had been approved in
the 1996 rate order for its electric transmission, distribution and nuclear
production properties to eliminate the effect of the depreciation reserve shift
and to retroactively apply such depreciation rates to February 1996. As a
result, a one-time reduction in depreciation expense of $5.5 million after taxes
was recorded in March 1998. The agreement does not affect retail electric rates.
See "Results of Operations - Earnings and Dividends." In September 1998, the
Supreme Court affirmed the Circuit Court's ruling on the issues contested by the
remaining intervenor. The FERC had previously rejected the transfer of
depreciation reserves for rates subject to its jurisdiction.
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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 nine months ended September 30, 1998 and 1997:
Nine Months Ended
September 30,
1998 1997
- --------------------------------------- --------------------------------------
(Millions of Dollars)
Net cash provided from operating activities $337 $354
Net cash used for financing
activities (97) (88)
Cash provided from sale of subsidiary assets - 8
Cash and temporary cash investments available
at the beginning of the period 60 17
- --------------------------------------- --------------------------------------
Net cash available for property acquisitions
and utility property additions and
construction expenditures $300 $291
======================================= ======================================
Funds used for utility property additions
and construction expenditures, net of
noncash allowance for funds used during
construction $161 $168
======================================= ======================================
Funds used for nonutility property
additions and investments $ 87 $ 52
======================================= ======================================
On January 10, 1997, SCANA closed on unsecured bank loans totaling $60
million due January 9, 1998, and used the proceeds to pay off a loan in a like
total amount. On January 13, 1998 SCANA refinanced the loans with $60 million of
medium-term notes due January 13, 2003 at an interest rate of 6.05%.
On July 8, 1998, SCANA issued $75 million of medium-term notes having an
annual interest rate of 6.25% and maturing on July 8, 2003. These funds were
used to finance an additional investment of $75 million in Powertel.
On October 23, 1998, SCANA issued $115 million of medium-term notes having
an annual interest rate of 5.81% and maturing on October 23, 2008. These funds
were used to reduce short-term debt.
On October 29, 1998, SCANA's shelf registration statement filed with the
Securities and Exchange Commission became effective, providing for the issuance
of up to an additional $200 million in medium-term notes.
On November 2, 1998, SCE&G redeemed, prior to maturity, all $30 million
principal amount outstanding of its 7.25% Series First and Refunding Mortgage
Bonds due January 1, 2002.
The Company anticipates that the remainder of its 1998 cash requirements
will be met through internally generated funds, and the incurrence of additional
short-term and long-term indebtedness. The timing and amount of such financings
will depend upon market conditions and other factors. The Company expects that
it has or can obtain adequate sources of financing to meet its projected cash
requirements for the next twelve months and for the foreseeable future. The
ratio of earnings to fixed charges for the twelve months ended September 30,
1998 was 4.03.
The Environmental Protection Agency has proposed new regulations relating
to nitrogen oxide emissions which, if enacted in their present form, could have
a material adverse effect on the results of operations, cash flows and financial
position of the Company.
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The Company and Westvaco each own a 50% interest in Cogen South LLC (Cogen).
Cogen was formed to build and operate a cogeneration facility at Westvaco's
Kraft Division Paper Mill in North Charleston, South Carolina. Construction of
the facility began in September 1996 and it is expected to be operational by
November 30, 1998. Construction financing for the facility, originally estimated
at $170 million, is provided to Cogen by banks. The contractor in charge of
construction is Black & Veatch Construction, Inc. (B&V). On September 10, 1998,
B&V filed suit in South Carolina Circuit Court seeking approximately $35 million
from Cogen. B&V alleges that it incurred construction cost overruns relating to
the facility, and that the construction contract provides for its recovery of
these costs. In addition to Cogen, B&V has also named Westvaco, SCE&G and the
Company in the suit. The Company and the other defendants believe the suit is
without merit and are mounting an appropriate defense. 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.
On June 23, 1998 SCI purchased for $75 million 50,000 shares of non-voting
6.5% series E convertible preferred stock of Powertel. In addition, SCI owns
approximately 4.5 million common shares, representing approximately 17% of the
total Powertel common shares, and 100,000 non-voting series B and 50,000
non-voting series D convertible preferred shares of Powertel. The costs of such
investments are approximately $66.7 million, $75.1 million and $22.5 million,
respectively.
At September 30, 1998, SCI owned 3,555,838 shares (after giving effect to
the two-for-one stock split announced July 29, 1998), representing approximately
6.9%, of ITCD common stock, and 1,480,771 shares of series A preferred stock of
ITCD convertible in March 2002 into 2,691,542 shares of ITCD common stock (after
giving effect to the two-for-one stock split). The costs of such investments
were approximately $9.0 million and $11.2 million, respectively. SCI owns 71,050
units of Knology. Each unit consists of one 11.875% Senior Discount Note due
2007 and one warrant entitling the holder to purchase .003734 shares of
preferred stock of Knology. The cost of this investment was approximately $40
million. SCI also owns an additional 753 warrants which entitles it to purchase
753 shares of preferred stock at $1,500 per share. Effective July 31, 1998 SCI
sold all of its preferred stock in Knology to ITC. SCI received 133,664 shares
of ITC Series B convertible preferred stock, valued at $1,600 per share, and
approximately $0.4 million cash.
SCI owns 3,098,464 common shares (after giving effect to the four-for-one
stock split on August 25, 1998), representing approximately 9.3% of ITC common
stock and 645,153 series A convertible preferred shares of ITC. The costs of
these investments are approximately $7.1 million and $8.9 million, respectively.
In addition, as a result of the sale of its investment in Knology preferred
stock, SCI received 133,664 series B convertible preferred shares of ITC
effective July 31, 1998.
On October 6, 1998, SCANA Energy Marketing (SEM) was one of 19 marketers
authorized to market natural gas to the 1.4 million residential and commercial
customers currently served by a Georgia utility. Sales to customers began on
November 1, 1998. As of November 1, 1998, SEM had incurred approximately $3
million in start-up costs, which have been expensed as incurred. The level of
future expenditures and startup costs is dependent on several factors that
cannot be reasonably predicted. These factors include how rapidly SEM can gain
market share, the intensity of competition as it develops, and the margin SEM is
able to achieve on gas sales.
Year 2000 Issue
The Year 2000 is an issue because many computers, embedded systems and
software were originally programmed using two digits rather than four digits to
identify the applicable year. This may prevent them from accurately processing
information with dates beyond 1999. Because the Year 2000 issue could have a
material impact on the operations of the Company if not addressed, our goal is
to be Year 2000 ready. This means that before the year 2000, critical systems,
equipment, applications and business relationships will have been evaluated and
should be suitable to continue into and beyond the year 2000 and that applicable
contingency plans are in place.
In 1993, the Company began the first of several projects to replace many of
its business application systems to provide increased functionality and to
improve access to business information. Accordingly, the Company has implemented
new general ledger, purchasing, materials inventory and accounts payable
systems, and is currently implementing a new customer information system. The
new customer information system is being phased into
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PAGE 15
production by geographical area, and should be fully implemented by first
quarter of 1999. These new systems, which comprise a significant portion of the
Company's application software, are designed to be Year 2000 compliant, and
therefore mitigate our overall Year 2000 exposure.
In 1997, the Company established a Corporate Year 2000 Project Office
(Project Office) to direct Year 2000 efforts throughout the Company and its
subsidiaries. A Steering Committee was formed to direct the efforts of the
Project Office. The Steering Committee reports to the senior officers of the
Company and to the board of directors. It is chaired by the chief financial
officer of the Company and is comprised of officers representing all operational
areas. The Project Office is staffed by nine full time project managers and
extensive support personnel. The Project Office is responsible for addressing
Year 2000 issues and coordinating the required assessment and remediation
efforts.
The Company's Year 2000 efforts encompass three projects, all reporting to
the Steering Committee. The Information Technology Project covers all mainframe
and client server application software, infrastructure hardware, system
software, desktop computers and network equipment. The Embedded Systems Project
covers all microprocessors, instrument and control devices, monitoring equipment
on power lines and in substations, security and control devices, telephone
systems and certain types of meters. The Procedures and External Interfaces
Project covers Year 2000 procedures, documentation and communications with key
suppliers, vendors, customers, financial institutions and governmental agencies.
The Company's Year 2000 project approach involves the following: (1)
inventorying all Year 2000 internal and external items and entities and updating
the Year 2000 Inventory Database; (2) performing risk analysis and corporate
prioritization of all inventory entries; (3) performing detailed assessments of
all inventory entries to determine Year 2000 readiness and establishing a
remediation action plan where necessary; (4) remediating all inventory entries
assessed as non-compliant, including repairing, replacing or developing
acceptable work-arounds; (5) testing through date simulation and comprehensive
test data (6) implementation of all converted systems and equipment into
production operations; and (7) contingency planning.
In the second quarter of 1998, the Company completed the inventory and the
risk analysis and corporate prioritization for each of the projects. Remaining
work on each of the projects is ongoing. Each of the Year 2000 projects is
currently on schedule to complete all phases by July 1999.
The Information Technology Project Team has completed the assessment process
for all application software. Most of the code remediation efforts are complete
and the code is being tested in an isolated Year 2000 testing environment. The
assessment of all infrastructure items, desktop computers and network equipment
is scheduled to be complete by the end of 1998. The Information Technology
Project was approximately 40% complete through September 1998.
The Embedded Systems Project Team, which includes approximately 20 engineers
with prior experience with microprocessors, was formed, and detailed assessment,
remediation and testing procedures were developed. This team is currently
working closely with each of the Company's business units to complete the
assessments of critical systems and equipment based on the corporate
prioritization process. An Embedded Systems Audit Review Committee has been
established to review all assessments for critical systems. As assessments are
completed, any required remediation efforts are evaluated and implemented. The
Embedded Systems Project was approximately 30% complete through September 1998.
The Procedures and External Interfaces Project Team has developed written
documentation and procedures for Year 2000 compliance definition, document
control, inventory, prioritization, assessment, remediation, change control,
business continuity planning, and vendor and supplier communications. This team
is coordinating communications with all significant vendors and suppliers in an
attempt to determine the extent to which the Company may be vulnerable to their
failure to remediate their own Year 2000 issues. The Company has completed an
initial survey of vendors and is currently evaluating the responses to those
surveys. The Company is also in the process of surveying critical third party
service providers to ascertain their Year 2000 readiness. The Company has
developed communications materials explaining its year 2000 efforts and has
initiated communications with
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PAGE 16
significant customers and external groups, including the South Carolina and
Georgia Public Service Commissions. The Procedures and External Interfaces
Project was approximately 25% complete through September 1998.
The Company has projected the total cost of its Year 2000 efforts to be
approximately $20 million. The table below outlines the anticipated timing and
breakdown of these expenditures:
- ----------------------------- ----------------------------- --------------------
Internal Costs Out of Pocket Costs Total Costs
- --------------------------------------------------------------------------------
Remaining 1998 1.0 2.0 3.0
1999 3.0 8.0 11.0
---- ---- ----
Total $ 6.0 $14.0 $20.0
- --------------------------------------------------------------------------------
The cost of the project is based on Management's best estimates, which are
based on assumptions regarding future events. These future events include
continued availability of key resources, third parties' Year 2000 readiness and
other factors. The cost of the project is not expected to have a material impact
on the results of operations or on the financial position or cash flows of the
Company. The costs of implementing the new business application systems referred
to earlier are not included in these cost estimates.
A failure to correct a material Year 2000 problem by the Company or by a
critical third party supplier could result in an interruption in, or a failure
of the Company's ability to provide energy services. At this time, the Company
believes its most reasonably likely worst case scenario is that Year 2000
failures could lead to temporary reduced generating capacity on the Company's
electrical grid, temporary intermittent interruptions in communications and
temporary intermittent interruptions in gas supply from interstate suppliers or
producers. A Year 2000 problem of this nature could result in temporary
interruptions in electric or gas service to our customers. We have no historical
experience with interruptions caused by this scenario. However, these temporary
interruptions in service, if any, might be similar to weather related outages
that the Company encounters from time to time in its business today. Although
the Company does not believe that this scenario will occur, the Company is
enhancing existing contingency plans to ensure preparedness and to mitigate the
long term effect of such a scenario. Since the expected impact of this scenario
on the Company's operations, cash flow and financial position cannot be
determined, we cannot guarantee that it would not be material.
The Company has established seven business continuity planning task groups
to develop Year 2000 business continuity plans. These task groups will develop
plans to cover the Company's Customer Service Operations, Electric Generation,
Transmission and Distribution Operations, Gas Delivery Operations,
Telecommunications, Information Technology, Procurement and Emergency
Preparedness. Detailed contingency plans that are already in place to cover
weather related outages, computer failures and generation outages will be the
basis for our Year 2000 business continuity plans. The existing plans will be
enhanced, and where necessary, new plans developed to include mitigation
strategies and emergency response action plans to address potential Year 2000
scenarios and critical system failures. The final plans will also include
mitigation strategies to address our reliance on critical third party suppliers.
The North American Electric Reliability Council (NERC) is coordinating Year
2000 efforts of the electric utility industry in the United States and
contingency planning within the regional electric reliability councils.
Coordination in the Company's region is through the Southeastern Electric
Reliability Council (SERC). The Company's contingency planning efforts will
comply with the SERC and NERC contingency planning guidelines which require
draft contingency plans to be complete by December 31, 1998 and final
contingency plans to be complete by June 30, 1999.
In addition to NERC and SERC, the Company is working with the Electric Power
Research Institute (EPRI) to address the issue of overall grid reliability and
protection. To ensure that all Year 2000 issues at its Summer Station nuclear
plant are addressed, the Company is closely cooperating with other utility
companies that own nuclear power plants. The utilities are sharing technical
nuclear plant operating and monitoring systems information to ensure the prompt
and effective resolution of the year 2000 issue.
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SCANA CORPORATION
Results of Operations
For the Three and Nine Months ended September 30, 1998
As Compared to the Corresponding Periods in 1997
Earnings and Dividends
Net income for the three and nine months ended September 30, 1998 increased
approximately $11 million and $30 million, respectively, when compared to the
corresponding periods in 1997. Higher electric margins were partially offset by
increased operating and maintenance expenses and lower earnings from
non-regulated businesses. Net income for the nine months ended September 30,
1998 includes a one-time, after-tax reduction to depreciation expense of
approximately $5.5 million related to a change in depreciation rates retroactive
to February 1996. This change in rates results from the reversal of a $257
million shift of depreciation reserves from electric transmission and
distribution assets to nuclear production assets, previously approved in a PSC
rate order in January 1996. See "Liquidity and Capital Resources."
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% of income before income
taxes for the nine months ended September 30, 1998 and 1997, respectively.
The Company's Board of Directors declared the following quarterly dividends
on common stock:
- --------------------------------------------------------------------------------
Declaration Dividend Record Payment
Date Per Share Date Date
- --------------------------------------------------------------------------------
February 17, 1998 38 1/2 cents March 10, 1998 April 1, 1998
April 23, 1998 38 1/2 cents June 10, 1998 July 1, 1998
August 19, 1998 38 1/2 cents September 10, 1998 October 1, 1998
October 20, 1998 38 1/2 cents December 10, 1998 January 1, 1999
- --------------------------------------------------------------------------------
Sales Margins
Changes in the electric sales margin for the three and nine months ended
September 30, 1998, when compared to the corresponding periods in 1997, were as
follows:
Three Months Nine Months
Change % Change Change % Change
(Millions) (Millions)
Electric operating revenues $52.9 15.5 $121.5 14.5
Less: Fuel used in electric
generation 8.8 11.6 27.1 14.7
Purchased power 5.8 199.7 14.6 196.2
----- ------
Margin $38.3 14.6 $ 79.8 12.3
=============================================================================
The electric sales margin increased for the three and nine months ended
September 30, 1998 when compared to the corresponding periods of 1997 primarily
as a result of more favorable weather and customer growth.
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PAGE 18
Changes in the gas sales margin for the three and nine months ended
September 30, 1998, when compared to the corresponding periods in 1997, were as
follows:
Three Months Nine Months
Change % Change Change % Change
(Millions) (Millions)
Gas operating revenues $2.9 3.7 $11.1 3.8
Less: Gas purchased for resale (0.2) (0.3) 6.3 3.3
---- -----
Margin $3.1 13.1 $ 4.8 4.7
======================================= ======================================
The gas sales margin for the three and nine months ended September 30, 1998
increased from 1997 levels primarily as a result of decreased competitiveness of
alternative fuels. Gas sales margin for the nine months ended September 30, 1998
also increased over 1997 levels due to more favorable weather and increased
sales to industrial interruptible customers attributable to fewer curtailments
in the first quarter.
Other Operating Expenses
Changes in other operating expenses, including taxes, for the three and
nine months ended September 30, 1998, when compared to the corresponding periods
in 1997, are presented in the following table:
Three Months Nine Months
Change % Change Change % Change
(Millions) (Millions)
Other operation and maintenance $ 8.2 10.5 $21.3 9.4
Depreciation and amortization 0.8 2.1 (7.3) (6.3)
Income taxes 11.1 25.4 23.8 25.4
Other taxes 1.8 7.0 4.3 5.8
Total ----- -----
$21.9 11.8 $42.1 8.3
============================================================================
Other operation and maintenance expenses for the three and nine months
ended September 30, 1998 increased from 1997 levels primarily as a result of
increased maintenance costs for electric generation and distribution facilities,
various other electric operating costs, and Year 2000 remediation costs. The
decrease in depreciation and amortization expenses for the nine months ended
September 30, 1998 reflects the non-recurring adjustment to depreciation expense
discussed under "Earnings and Dividends." The changes in income tax expense
primarily reflect changes in operating income. The increase in other taxes for
the periods primarily results from increases in property taxes.
Other Income
Other income, net of income taxes, for the three and nine months ended
September 30, 1998 decreased approximately $6.1 million and $10.7 million,
respectively, when compared to the corresponding periods of 1997. These
decreases are primarily attributable to losses from energy marketing activities
as a result of decreased gas margins, volatility in power markets related to
unusually hot weather and startup costs in new markets. Additionally, SCANA
Petroleum Resources, Inc., which had contributed approximately $2.3 million and
$5.0 million for the three and nine months ended September 30, 1997, sold
substantially all of its assets in the fourth quarter of 1997.
Interest Expense
Interest expense, excluding the debt component of AFC, for the three and
nine months ended September 30, 1998 increased approximately $1.9 million and
$2.8 million, respectively, when compared to the corresponding periods in 1997.
The increases are primarily due to the issuance of additional debt (including
commercial paper) during mid-1998.
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PAGE 19
Item 3. Quantitative and Qualitative Disclosure About Market Risk
With regard to the market risk information disclosed in the Company's
Annual Report on Form 10-K at December 31, 1997 there have been no
material changes in market risk exposure related to interest rate risk.
With regard to equity price risk, investments in telecommunications
companies' equity securities are carried at $364.3 million at September
30, 1998, in accordance with Statement of Financial Accounting Standards
No. 115. A ten percent decline in market value would result in a $36.4
million reduction in fair value and a corresponding adjustment, net of
tax effect, to the related equity account for unrealized gains.
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, 1997, and Note 5 "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
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SCANA CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCANA CORPORATION
(Registrant)
November 13, 1998 By: s/K. B. Marsh
K. B. Marsh,
Senior Vice President,
Chief Financial Officer and
Controller
(Principal financial officer)
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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 December 17, 1997 (Exhibit 3-C
to Form 10-K for the year ended December 31, 1997).. #
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.
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SCANA CORPORATION
EXHIBIT INDEX
Sequentially
Numbered
Number Pages
------
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
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
# Incorporated herein by reference as indicated.
22
<PAGE>
PAGE 3
SCANA CORPORATION
EXHIBIT INDEX
Sequentially
Numbered
Number Pages
------
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)........................................... #
I. Trust Agreement for SCE&G Trust I (Filed as
Exhibit 4-I to Form 10-K for the year ended
December 31, 1997)...................................... #
J. Certificate of Trust for SCE&G Trust I (Filed as
Exhibit 4-J to Form 10-K for the year ended
December 31, 1997)...................................... #
K. Junior Subordinated Indenture for SCE&G Trust I
(Filed as Exhibit 4-K to Form 10-K for the year
ended December 31, 1997)................................ #
L. Guarantee Agreement for SCE&G Trust I
(Filed as Exhibit 4-L to Form 10-K for the year
ended December 31, 1997)................................ #
M. Amended & Restated Trust Agreement for SCE&G
Trust I (Filed as Exhibit 4-M to Form 10-K for the year
ended December 31, 1997)................................ #
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
# Incorporated herein by reference as indicated.
23
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,703
<OTHER-PROPERTY-AND-INVEST> 474
<TOTAL-CURRENT-ASSETS> 478
<TOTAL-DEFERRED-CHARGES> 491
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,146
<COMMON> 1,043
<CAPITAL-SURPLUS-PAID-IN> (9)
<RETAINED-EARNINGS> 687
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,767
61
106
<LONG-TERM-DEBT-NET> 1,583
<SHORT-TERM-NOTES> 181
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 77
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,371
<TOT-CAPITALIZATION-AND-LIAB> 5,146
<GROSS-OPERATING-REVENUE> 1,268
<INCOME-TAX-EXPENSE> 117
<OTHER-OPERATING-EXPENSES> 866
<TOTAL-OPERATING-EXPENSES> 983
<OPERATING-INCOME-LOSS> 285
<OTHER-INCOME-NET> 7
<INCOME-BEFORE-INTEREST-EXPEN> 292
<TOTAL-INTEREST-EXPENSE> 92
<NET-INCOME> 197
5
<EARNINGS-AVAILABLE-FOR-COMM> 192
<COMMON-STOCK-DIVIDENDS> 122
<TOTAL-INTEREST-ON-BONDS> 7
<CASH-FLOW-OPERATIONS> 337
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 0
</TABLE>
