< PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............ to ............
Commission file number 1-11429
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0233140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 COX ROAD, P. O. BOX 1398
GASTONIA, NORTH CAROLINA 28053-1398
(Address of principal executive offices) (Zip Code)
(704) 864-6731
(Registrant's telephone number, including area code)
NONE
(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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Common Stock, $1 par value, outstanding
at April 30, 1996 . . . . . . . . . . . . . . . . 19,054,009
<PAGE> 2
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
The condensed financial statements included herein have been
prepared by the registrant without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Although certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the registrant believes that the disclosures herein are
adequate to make the information presented not misleading. It is
recommended that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included
in the registrant's latest annual report on Form 10-K.
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31 March 31 March 31
------------------ ------------------ ------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues $142,053 $112,690 $216,975 $179,525 $285,343 $258,554
Cost of gas 80,553 55,238 118,959 88,974 147,050 130,538
-------- -------- -------- -------- -------- --------
Gross margin 61,500 57,452 98,016 90,551 138,293 128,016
-------- -------- -------- -------- -------- --------
Operating expenses and taxes:
Operating and maintenance 14,389 14,211 27,601 25,285 53,584 49,980
Provision for depreciation 4,897 4,499 9,694 8,932 18,918 16,508
General taxes 6,229 5,149 9,933 8,674 15,082 14,003
Income taxes 12,808 11,744 17,238 15,973 14,786 14,045
-------- -------- -------- -------- -------- -------
38,323 35,603 64,466 58,864 102,370 94,536
-------- -------- -------- -------- -------- --------
Operating income 23,177 21,849 33,550 31,687 35,923 33,480
Other income (deductions) 1,074 (26) 1,508 (14) 1,742 2,596
Interest deductions 3,674 3,320 7,351 6,507 13,702 12,806
-------- -------- -------- -------- -------- --------
Net income $ 20,577 $ 18,503 $ 27,707 $ 25,166 $ 23,963 $23,270
======== ======== ======== ======== ======== ========
Average common shares
outstanding 18,959 18,478 18,865 18,385 18,749 18,118
Earnings per share $1.09 $1.00 $1.47 $1.37 $1.28 $1.28*
Cash dividends declared
per share $.2125 $.205 $.425 $.41 $.85 $ .82
* Includes $.09 related to sale of propane assets effective June 1994.
</TABLE>
<PAGE> 4
<TABLE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<CAPTION>
Mar 31 Sep 30 Mar 31
1996 1995 1995
-------- -------- --------
<S> <C> <C> <C>
Gas utility plant $595,263 $573,945 $543,828
Less - Accumulated depreciation 175,582 166,506 160,254
-------- -------- --------
419,681 407,439 383,574
-------- -------- --------
Non-utility property, net 716 801 943
-------- -------- --------
Current assets:
Cash and temporary investments 4,089 993 4,612
Restricted cash and temporary investments 5,467 4,215 4,055
Receivables, less allowance for
doubtful accounts 49,813 13,605 28,417
Materials and supplies 5,937 5,577 5,566
Stored gas inventory 4,383 12,141 6,859
Deferred gas costs, net 17,996 3,692 -
Prepayments and other 2,118 2,089 2,802
-------- -------- --------
89,803 42,312 52,311
-------- -------- --------
Deferred charges and other assets 8,405 6,443 6,194
-------- -------- --------
Total $518,605 $456,995 $443,022
======== ======== ========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common equity -
Common stock, $1 par $ 18,979 $ 18,689 $ 18,494
Capital in excess of par value 110,769 106,655 103,942
Retained earnings 67,709 48,028 59,740
-------- -------- --------
197,457 173,372 182,176
Long-term debt 143,900 100,700 109,140
-------- -------- --------
341,357 274,072 291,316
-------- -------- --------
Current liabilities:
Maturities of long-term debt 9,300 10,480 9,540
Accounts payable 43,926 20,411 18,175
Accrued taxes 13,064 1,824 12,654
Customer prepayments and deposits 3,172 5,742 3,510
Cash dividends and interest 7,695 6,423 6,095
Restricted supplier refunds 5,467 4,215 4,055
Deferred gas costs, net - - 2,415
Other 3,164 3,416 2,487
-------- -------- --------
85,788 52,511 58,931
Interim bank loans 10,000 51,000 16,500
-------- -------- --------
95,788 103,511 75,431
-------- -------- --------
Deferred credits and other liabilities:
Income taxes, net 55,007 52,606 50,185
Investment tax credits 4,129 4,646 4,558
Accrued pension cost 12,703 12,931 12,983
Other 9,621 9,229 8,549
-------- -------- --------
81,460 79,412 76,275
-------- -------- --------
Total $518,605 $456,995 $443,022
======== ======== ========
</TABLE>
<PAGE> 5
<TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In thousands)
Twelve Months Ended
March 31
-------------------
1996 1995
------- -------
Balance beginning of period $59,740 $51,554
Add - Net income 23,963 23,270
Deduct - Common stock dividends
and other 15,994 15,084
------- -------
Balance end of period $67,709 $59,740
======= =======
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Six Months Ended Twelve Months Ended
March 31 March 31
------------------ -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $27,707 $25,166 $23,963 $23,270
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation, depletion and other 11,819 10,592 22,840 19,950
Deferred income taxes, net 2,401 1,715 4,822 462
Gain on sale of propane assets - - - (3,128)
------- ------- ------- -------
41,927 37,473 51,625 40,554
Change in operating assets and
liabilities:
Receivables, net (37,414) (12,786) (22,989) 5,444
Inventories 7,398 7,982 2,106 315
Accounts payable 23,514 2,519 25,750 (5,443)
Accrued pension cost (228) (2,549) (280) (1,544)
Other (5,051) 7,088 (16,897) 6,310
------- ------- ------- -------
30,146 39,727 39,315 45,636
------- ------- ------- -------
Cash Flows From Investing Activities:
Construction expenditures (23,133) (27,185) (57,066) (54,947)
Non-utility and other (561) (1,148) (1,530) (1,924)
Proceeds from sale of propane assets - - - 12,800
------- ------- ------- -------
(23,694) (28,333) (58,596) (44,071)
------- ------- ------- -------
Cash Flows From Financing Activities:
Sale of senior debentures, net of expenses 49,314 - 49,314 -
Issuance of common stock through public
offering, net of expenses - - - 23,406
Issuance of common stock through
dividend reinvestment, stock purchase
and stock option plans 4,274 3,862 7,175 6,723
Increase (decrease) in interim bank
loans, net (41,000) (6,500) (6,500) (8,500)
Retirement of long-term debt
and common stock (7,980) (267) (15,525) (10,939)
Cash dividends (7,964) (6,411) (15,706) (14,371)
------- ------- ------- -------
(3,356) (9,316) 18,758 (3,681)
------- ------- ------- -------
Net increase (decrease) in cash and
temporary investments 3,096 2,078 (523) (2,116)
Cash and temporary investments
at beginning of period 993 2,534 4,612 6,728
------- ------- ------- -------
Cash and temporary investments
at end of period $ 4,089 $ 4,612 $ 4,089 $ 4,612
======= ======= ======= =======
Cash paid during the period for:
Interest (net of amount capitalized) $ 5,960 $ 6,175 $11,923 $12,278
Income taxes 5,080 7,652 10,914 13,082
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements and notes
should be read in conjunction with the financial statements and notes
included in PSNC's 1995 Annual Report. In the opinion of management, all
adjustments necessary for a fair statement of the results of operations for
the interim periods have been recorded. Certain amounts previously reported
have been reclassified to conform with the current period's presentation.
PSNC's business is seasonal in nature; therefore, the financial results
for any interim period are not necessarily indicative of those which may be
expected for the annual period.
2. In October 1994, the Financial Accounting Standards Board (FASB) issued
SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments." PSNC currently uses derivatives primarily
to reduce the level of price volatility of PSNC's gas supply. PSNC plans to
adopt this standard on October 1, 1996. Due to its limited use of
derivatives, PSNC does not expect the adoption of this statement to
materially affect PSNC's financial position or the results of operations.
3. In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of."
This statement imposes stricter criteria for regulatory assets by requiring
that such assets be probable of future recovery at each balance sheet date.
PSNC plans to adopt this standard on October 1, 1996. Based on the current
regulatory structure in which PSNC operates, PSNC does not expect the
adoption of this statement to materially affect PSNC's financial position or
the results of operations.
4. In October 1995, the FASB issued SFAS No. 123, "Accounting for Awards of
Stock-Based Compensation to Employees." This statement establishes financial
accounting and reporting standards for stock-based employee compensation
plans. PSNC will adopt this standard on October 1, 1996. The effect on
PSNC's financial position or the results of operations of adopting this
standard has not yet been determined.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Changes in Results of Operations
- --------------------------------
(Amounts in thousands except
degree day and customer data) Three Months Ended March 31
-----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- --------- ---
Gross margin $ 61,500 $ 57,452 $ 4,048 7
Less - Franchise taxes 4,566 3,624 942 26
-------- -------- ---------
Net margin $ 56,934 $ 53,828 $ 3,106 6
======== ======== =========
Total volume throughput (DT):
Residential 12,068 9,840 2,228 23
Commercial/small industrial 6,593 5,587 1,006 18
Large commercial/industrial 6,893 7,840 (947) (12)
-------- -------- ---------
25,554 23,267 2,287 10
======== ======== =========
Raleigh/Durham area degree days:
Actual 2,069 1,720 349 20
Normal 1,822 1,804 18 1
Percent of normal 114% 95%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (4,762) $ 1,274 $ (6,036)
Customers at end of period:
Residential 259,122 251,722 7,400 3
Commercial/small industrial 36,654 29,903 6,751 23
Large commercial/industrial 392 383 9 2
-------- -------- ---------
296,168 282,008 14,160 5
======== ======== =========
The increase in normal degree days for the three, six and twelve months
ended March 31, 1996 is due to the additional day for leap year. Reflected
in customers at March 31, 1996 is the reclassification of approximately 5,400
residential customers to commercial/small industrial.
Net margin for the three months ended March 31, 1996 increased
$3,106,000 as compared to the same period last year. This increase in net
margin is attributable to the items shown below (in thousands):
<TABLE>
<CAPTION>
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C>
Cardinal rate increase
(effective 1/95) $ 494 $ 213 $ 42 $ $ 749
Volume variances, net 2,191 623 (284) - 2,530
Other - - - (173) (173)
------ ----- ------ ------ ------
Total $2,685 $ 836 $ (242) $ (173) $3,106
====== ===== ====== ====== ======
</TABLE>
<PAGE> 8
MANAGEMENT'S DISCUSSION (Continued)
This increase in net margin is due primarily to an increase in the
number of customers served and the Cardinal Pipeline rate increase effective
January 26, 1995.
(Amounts in thousands except
degree day data) Six Months Ended March 31
-----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- --------- ---
Gross margin $ 98,016 $ 90,551 $ 7,465 8
Less - Franchise taxes 6,984 5,784 1,200 21
-------- -------- ---------
Net margin $ 91,032 $ 84,767 $ 6,265 7
======== ======== =========
Total volume throughput (DT):
Residential 17,769 14,007 3,762 27
Commercial/small industrial 10,314 8,489 1,825 21
Large commercial/industrial 14,689 15,415 (726) (5)
-------- -------- ---------
42,772 37,911 4,861 13
======== ======== =========
Raleigh/Durham area degree days:
Actual 3,496 2,720 776 29
Normal 3,086 3,068 18 1
Percent of normal 113% 89%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (6,792) $ 4,795 $ (11,587)
Net margin for the six months ended March 31, 1996 increased $6,265,000
as compared to the same period last year. This increase in net margin is
attributable to the items shown below (in thousands):
<TABLE>
<CAPTION>
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ------ -------
<C> <S> <S> <S> <S> <S>
Cardinal rate increase
(effective 1/95) $ 917 $ 452 $ 267 $ - $ 1,636
Volume variances, net 2,820 887 60 3,767
Refund ordered in rate case - - - 732 732
Other - - - 130 130
------- ------ ------- ------ -------
Total $ 3,737 $1,339 $ 327 $ 862 $ 6,265
======= ====== ======= ====== =======
</TABLE>
This increase in net margin is due primarily to an increase in the
number of customers served and the Cardinal Pipeline rate increase effective
January 26, 1995.
<PAGE> 9
MANAGEMENT'S DISCUSSION (Continued)
(Amounts in thousands except
degree day data) Twelve Months Ended March 31
-----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- --------- ---
Gross margin $138,293 $128,016 $ 10,277 8
Less - Franchise taxes 9,143 8,279 864 10
-------- -------- ---------
Net margin $129,150 $119,737 $ 9,413 8
======== ======== =========
Total volume throughput (DT):
Residential 21,329 17,555 3,774 21
Commercial/small industrial 13,680 11,839 1,841 16
Large commercial/industrial 28,471 29,035 (564) (2)
-------- -------- ---------
63,480 58,429 5,051 9
======== ======== =========
Raleigh/Durham area degree days:
Actual 3,730 2,945 785 27
Normal 3,359 3,341 18 1
Percent of normal 111% 88%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (5,788) $ 5,717 $ (11,505)
Net margin for the twelve months ended March 31, 1996 increased
$9,413,000 as compared to the same period last year. This increase in net
margin is attributable to the items shown below (in thousands):
<TABLE>
<CAPTION>
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ------ -------
<C> <S> <S> <S> <S> <S>
General rate increase
(effective 10/94) $ 2,609 $ 443 $ (1,076) $ - $ 1,976
Cardinal rate increase 1,156 665 594 - 2,415
(effective 1/95)
Volume variances, net 3,509 999 399 - 4,907
Refund ordered in rate case - - - 732 732
Other - - - (617) (617)
------- ------ -------- ------ -------
Total $ 7,274 $2,107 $ (83) $ 115 $ 9,413
======= ====== ======== ====== =======
</TABLE>
This increase in net margin is due primarily to an increase in the
number of customers served, the general rate increase effective October,
1994, and the Cardinal Pipeline rate increase effective January 26, 1995.
<PAGE> 10
MANAGEMENT'S DISCUSSION (Continued)
Operating and maintenance expenses for the three, six and twelve months
ended March 31, 1996 increased 1%, 9% and 7%, respectively, as compared to
the same periods last year. For the three, six and twelve months ended
March 31, 1995, non-recurring expenses for employee severance expenses and
New York Stock Exchange listing fees were $441,000. For the six and twelve
months ended March 31, 1995, accounting adjustments were made which lowered
expenses by $1,579,000. Included in this amount is $829,000 related to
health and life insurance refunds received due to favorable experience
realized, along with the transfer of a large number of employees to a less
costly health maintenance organization (HMO) provider. Also contributing
was a $750,000 reversal of expenses related to the investigation of former
manufactured gas plant (MGP) sites. A favorable ruling in PSNC's November
1994 general rate case order enabled PSNC to recover such prudently incurred
expenses through gas rates. On a straight comparison without these non-
recurring items, operating and maintenance expenses for the three, six and
twelve months ended March 31, 1996 increased 4%, 4% and 5%, respectively,
from the comparable periods the prior year. Operating and maintenance
expenses increased in all periods due to increases in the provision for
uncollectible accounts, which is based on revenues, increased salary
expenses and related employee benefits. The six- and twelve-month periods
also reflect increases related to payroll reallocation. These increases
were partially offset by decreased power usage at the liquefied natural gas
facility and decreased outside consulting expenses related to information
systems and employee benefits.
Depreciation expense increased for the three, six and twelve months
ended March 31, 1996 due to utility plant additions. General taxes for the
three, six and twelve months ended March 31, 1996 increased 21%, 15%, and
8%, respectively, as compared to the same periods last year. These
increases are mainly due to increased franchise taxes based on operating
revenues that increased 26%, 21%, and 10% as compared to the same periods
last year.
Other income for the three and six months ended March 31, 1996
increased $1,100,000 and $1,522,000, respectively, as compared to the same
periods last year. These increases are due mainly to interest income
associated with deferred gas costs and gains realized by PSNC's gas
marketing subsidiary due to an increase in customers served. Also
contributing to the increase is income from secondary market transactions
entered into by the utility. Secondary market transactions are any
transactions that utilize capacity rights on interstate pipelines. For the
twelve months ended March 31, 1996 other income decreased $854,000 due
mainly to the sale of propane assets in June 1994, the reclassification of
certain sales commissions to merchandise and jobbing from operation and
maintenance expenses in connection with the October 1994 general rate case
order, and the reclassification of pipeline capacity sales income from
operating revenues to other income. This decrease for the twelve-month
period was partially offset by the previously mentioned increased interest
income associated with deferred gas costs and income from secondary market
transactions.
Interest deductions for the three, six and twelve months ended
March 31, 1996 increased 11%, 13% and 7%, respectively, as compared to the
same periods last year. The primary reasons for the increase in the three-
and six-month periods are interest expense increases due to the January 1996
issuance of $50,000,000 of 6.99% Senior Debentures due 2026 and increased
short-term debt balances used for financing a portion of fiscal 1996 and
1995 construction expenditures. For the twelve-month period ended March 31,
1996, interest expense on long-term debt decreased due to a declining
<PAGE> 11
MANAGEMENT'S DISCUSSION (Continued)
twelve-month average balance in long-term debt outstanding. This decrease
was offset by the increased interest expense on short-term debt for
the twelve months ended March 31, 1996. The average balance in short-term
debt for the twelve months ended March 31, 1996 was significantly higher
than the same period last year.
The change in earnings per share for all three periods reflects
increases of 3% in the average number of common shares outstanding as
compared to the same periods last year. These increases are primarily due
to shares issued through PSNC's dividend reinvestment and stock option
plans.
Changes in Financial Condition
- ------------------------------
The capital expansion program, through the construction of lines,
services, systems, and facilities, and the purchase of equipment, is
designed to help PSNC meet the growing demand for its product. PSNC's
fiscal 1996 construction budget is approximately $61,000,000, compared to
actual construction expenditures for fiscal 1995 of $61,119,000. The
construction program is regularly reviewed by management and is dependent
upon PSNC's continuing ability to generate adequate funds internally and to
sell new issues of debt and equity securities on acceptable terms.
Construction expenditures during the six and twelve months ended March 31,
1996 were $23,133,000 and $57,066,000, respectively, as compared to
$27,185,000 and $54,947,000 for the same periods a year ago.
PSNC generally finances its operations with internally generated funds,
supplemented with bank lines of credit to satisfy seasonal requirements.
PSNC also borrows under its bank lines of credit to finance portions of its
construction expenditures pending refinancing through the issuance of equity
or long-term debt at a later date depending upon prevailing market
conditions. PSNC has committed lines of credit with eight commercial banks
which vary monthly depending upon seasonal requirements. For the twelve-
month period beginning April 1, 1996, lines of credit with these banks range
from a minimum of $24,000,000 to a winter-period maximum of $79,000,000.
PSNC also has uncommitted annual lines of credit with four of these banks
totaling $71,000,000. Lines of credit are evaluated periodically by
management and renegotiated to accommodate anticipated short-term financing
needs. Management believes these lines are currently adequate to finance a
portion of construction expenditures, stored gas inventories and other
corporate needs.
PSNC sold 1,725,000 new shares of $1 par common stock through an
underwritten public offering during May 1994. The net proceeds of
$23,406,000 were used to repay all outstanding short-term indebtedness, to
redeem the outstanding $3,098,000 of First Mortgage Bonds, 9 7/8% Series H,
due 1995, and to help finance a portion of fiscal 1994's construction
expenditures. During September 1995, PSNC made an additional principal
payment on its 10% Senior Debentures due 2003 of $2,500,000, the maximum
additional annual payment permitted pursuant to the terms of the debenture
agreement.
Effective December 1, 1995, PSNC redeemed the remaining $3,680,000
balance of its 8% Series I First Mortgage Bonds, due 1998, at a redemption
price of 100.35%. PSNC financed this redemption through the use of short-
term bank debt. Since the retirement of the first mortgage bonds, PSNC has
closed the original indenture and all supplemental indentures.
<PAGE> 12
MANAGEMENT'S DISCUSSION (Continued)
On December 20, 1995, PSNC filed with the Securities and Exchange
Commission a registration statement covering up to an aggregate amount of
$125,000,000 of unsecured debt securities. On January 10, 1996, PSNC sold
$50,000,000 of 6.99% Senior Debentures due 2026 in a public offering under
the registration statement. The net proceeds of $49,562,500 received on
January 16 were used to pay down a significant portion of the then
outstanding short-term bank debt.
At March 31, 1996, restricted cash and temporary investments were
$5,467,000. These funds primarily represent refunds received from PSNC's
pipeline supplier that have not yet been deposited into the expansion fund
in the Office of the State Treasurer. This fund was created by an order of
the NCUC, dated June 3, 1993, for the purpose of financing the construction
of natural gas lines into unserved areas of PSNC's service territory that
otherwise would not be economically feasible to serve.
The increase in receivables at March 31, 1996 of $21,396,000, as
compared to March 31, 1995, reflects higher customer billings due to weather
that was 65% colder than in March 1995, and to increased tariff rates.
The increase in accounts payable at March 31, 1996 of $25,751,000 as
compared to March 31, 1995 is largely due to additional gas purchases. An
additional 3,500,000 DT were purchased in March 1996 due to colder weather.
Net deferred gas costs fluctuate in response to the operation of PSNC's
Rider D rate mechanism. This mechanism allows PSNC to recover margin losses
on negotiated sales to large commercial and industrial customers with
alternate fuel capability. It also allows PSNC to recover from customers
all prudently incurred gas costs. On a monthly basis, any difference in
amounts paid and collected for these costs is recorded for subsequent refund
to or collection from PSNC's customers. Deferred gas costs at March 31,
1996 represent undercollections from customers of $17,996,000. These
undercollections primarily reflect the unanticipated surge in the price of
natural gas during January 1996 when PSNC experienced record throughput.
Conversely, deferred gas costs at March 31, 1995 reflect overcollections of
demand costs from customers of $2,415,000.
On April 30, 1996, the Federal Energy Regulatory Commission (FERC) made
a preliminary determination to grant a certificate authorizing the
construction and operation of the Pine Needle LNG project, a liquefied natural
gas (LNG) storage facility in Guilford County, North Carolina. The preliminary
determination does not address any environmental issues; final approval is
dependent on a favorable environmental ruling by FERC in a subsequent order.
The FERC has approved a 12.75% return on equity for the project, and stated
that the debt component of the rate structure will be determined after
permanent financing is obtained. Through March 31, 1996, PSNC Blue Ridge
Corporation, a subsidiary of PSNC, has invested $1,082,000 in the project.
Rate Matters
- ------------
PSNC filed a general rate case with the NCUC on March 1, 1996 asking
for a 4.9% or $15,400,000 increase in annual revenues. A general rate order
from the NCUC is expected on or about October 1, 1996.
<PAGE> 13
<TABLE>
EXHIBIT 11
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31 March 31 March 31
------------------ ------------------ -------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income $ 20,577 $ 18,503 $ 27,707 $ 25,166 $ 23,963 $ 23,270
-------- -------- -------- -------- -------- --------
Average common shares outstanding 18,959 18,478 18,865 18,385 18,749 18,118
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 95 59 92 52 77 52
-------- -------- -------- -------- ------- --------
Average common shares outstanding
as adjusted 19,054 18,537 18,957 18,437 18,826 18,170
-------- -------- -------- -------- -------- --------
Earnings per share, as adjusted $1.08 $1.00 $1.46 $1.36 $1.27 $1.28
===== ===== ===== ===== ===== =====
This calculation is submitted in accordance with Regulation S-K item 601(b)(11)
although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because
it results in dilution of less than 3%.
</TABLE>
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
As more fully disclosed in Part I under "Environmental Matters" and in
Part II in Note 8 to the financial statements in the Annual Report on Form
10-K for the period ending September 30, 1995, PSNC owns or has owned
portions of sites at which manufactured gas plants were formerly operated
and is cooperating with the North Carolina Department of Environment, Health
and Natural Resources to investigate these sites.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At the Annual Meeting of Shareholders held on January 26, 1996, the
following members were elected or reelected to serve on the Board of
Directors for a term expiring at the annual meeting in the month and
year indicated or until their successors are elected and qualified.
Director Term Ending Votes in Favor Votes Withheld
----------------------- ------------- -------------- --------------
Ben R. Rudisill, II January 1998 15,567,578 122,330
Bert Collins January 1999 15,591,832 98,076
John W. Copeland January 1999 15,589,534 100,374
D. Wayne Peterson January 1999 15,589,078 100,830
Charles E. Zeigler, Jr. January 1999 15,599,521 90,387
The following seven directors are the other directors whose term of
office continued after the meeting:
William C. Burkhardt, William A. V. Cecil, H. Max Craig, Jr., Van E.
Eure, B. Frank Matthews, II, William L. O'Brien, Jr., G. Smedes York.
The shareholders also ratified the selection of Arthur Andersen LLP as
PSNC's independent public accountants for the fiscal year ending
September 30, 1996.
For - 15,554,570 Against - 47,602 Abstain - 87,736
Item 5. Other Information
- --------------------------
None.
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Part I Exhibits:
11 - Statement re: computation of per share earnings.
27 - Financial Data Schedule.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months
ended March 31, 1996.
<PAGE> 16
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.
PUBLIC SERVICE COMPANY
OF NORTH CAROLINA, INCORPORATED
---------------------------------------
(Registrant)
Date 5-10-96 Robert D. Voigt
------- ---------------------------------------
Senior Vice President - Corporate
Development and Chief Financial Officer
(On behalf of the registrant and as chief
financial and accounting officer)
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<S> <C>
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0
0
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</TABLE>
