UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-11429 Public Service Company of North Carolina, 56-2128483
Incorporated
(A South Carolina Corporation)
1426 Main Street
Columbia, South Carolina 29201
(704) 864-6731
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, no par value, outstanding at
October 31, 2000 .........................................1,000 1
1Held beneficially and of record by SCANA Corporation.
The registrant meets the conditions set forth in General Instructions H(1) (a)
and (b) of Form 10-Q and therefore is filing this form with the reduced
disclosure format allowed under General Instruction H(2).
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999.................................... 3
Condensed Consolidated Statements of Income (Loss) and Retained
Earnings (Accumulated Deficit) for the Periods Ended
September 30, 2000 and 1999.............................. 4
Condensed Consolidated Statements of Cash Flows for the Periods
Ended September 30, 2000 and 1999....................... 5
Notes to Condensed Consolidated Financial Statements...... 6
Item 2. Management's Narrative Analysis of Results of Operations... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 12
Item 6. Exhibits and Reports on Form 8-K........................... 12
Signatures........................................................... 13
Exhibit Index........................................................ 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
--------------------------------------------------------------------------------
September 30, December 31,
2000 1999
--------------------------------------------------------------------------------
(Millions of Dollars)
Assets
Gas utility plant $ 788 $768
Less - Accumulated depreciation 264 245
Acquisition adjustment, net of accumulated
amortization (Note 3) 457 -
--------------------------------------------------------------------------------
Gas utility plant, net 981 523
--------------------------------------------------------------------------------
Nonutility Property and Investments,
net of accumulated depreciation 33 31
--------------------------------------------------------------------------------
Current assets:
Cash and temporary investments 12 9
Restricted cash and temporary investments - 3
Receivables (including unbilled revenues) 41 59
Inventories (at average cost):
Stored gas inventory 42 29
Materials and supplies 7 7
Deferred gas costs, net (Note 2) 14 27
Other 2 1
--------------------------------------------------------------------------------
Total current assets 118 135
--------------------------------------------------------------------------------
Deferred charges and other assets:
Pension asset - due from affiliate 9 -
Other 14 9
--------------------------------------------------------------------------------
Total deferred charges and other assets 23 9
--------------------------------------------------------------------------------
Total $1,155 $698
================================================================================
Capitalization and Liabilities
Capitalization:
Common equity (Note 3) $ 702 $232
Long-term debt 151 151
--------------------------------------------------------------------------------
Total capitalization 853 383
--------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings 125 138
Current portion of long-term debt 7 7
Accounts payable 36 50
Accrued taxes 7 5
Customer prepayments and deposits 7 7
Advances from parent 8 -
Dividends declared and interest accrued 8 8
Other - 2
--------------------------------------------------------------------------------
Total current liabilities 198 217
--------------------------------------------------------------------------------
Deferred credits and other liabilities:
Deferred income taxes, net 77 75
Deferred investment tax credits 3 3
Accrued pension cost - 3
Postretirement benefits - due to affiliate 9 -
Other 15 17
--------------------------------------------------------------------------------
Total deferred credits and other liabilities 104 98
--------------------------------------------------------------------------------
Total $1,155 $698
================================================================================
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
------------------------------------------------------------------------- ---------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------- -------------------------
(Millions of Dollars)
<S> <C> <C> <C> <C>
Operating revenues $76 $37 $326 $226
Cost of gas 54 14 210 100
--------------------------------------------------------------------- -------------------------
Gross margin 22 23 116 126
--------------------------------------------------------------------- -------------------------
Operating expenses and taxes:
Operation and maintenance 17 17 52 51
Depreciation and amortization 10 7 32 20
Other taxes 2 2 5 11
--------------------------------------------------------------------- -------------------------
Total operating expenses 29 26 89 82
--------------------------------------------------------------------- -------------------------
Operating income (loss) (7) (3) 27 44
Other income, net 1 2 4 3
Interest charges 5 5 15 13
--------------------------------------------------------------------- -------------------------
Income (Loss) before Income Taxes and (11) (6) 16 34
Cumulative Effect of Accounting Change
Income taxes (benefit) (3) (3) 10 13
--------------------------------------------------------------------- -------------------------
Income (Loss) before cumulative effect
of accounting change (8) (3) 6 21
Cumulative effect of accounting change,
net of taxes (Note 2) - - 7 -
--------------------------------------------------------- -------------- ----------------------
--------------------------------------------------------- -------------- ----------------------
Net income (loss) (8) (3) 13 21
Retained earnings at beginning of period 10 81 73 68
Common stock cash dividends declared and other (5) (5) (89) (16)
--------------------------------------------------------- -------------- ----------------------
========================================================= ============== ======================
Retained earnings (accumulated deficit)
at end of period $ (3) $73 $ (3) $ 73
========================================================= ============== ======================
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------------------------------------------------------------------------
Nine Months Ended
September 30
2000 1999
------------------------------------------------------------------------- ---
(Millions of Dollars)
Cash Flows From Operating Activities: $13 $21
Net income
Adjustments to reconcile net income to net
cash provided from operating
activities:
Cumulative effect of accounting change (7) -
Depreciation and amortization 35 22
Over (under) collections, fuel adjustment clause 4 3
Deferred income taxes, net 2 6
Change in operating assets and liabilities:
(Increase) Decrease in receivables, net 32 21
(Increase) Decrease in inventories (11) (5)
(Increase) Decrease in pension receivable (9) -
Increase (Decrease) in accounts payable
and advances (6) (7)
Increase (Decrease) in accrued pension cost (3) (1)
(Increase) Decrease in deferred gas cost 4 (3)
Increase (Decrease) in postretirement payable 9
Other, net (3) (3)
-----------------------------------------------------------------------------
Net Cash Provided from Operating Activities 60 54
-----------------------------------------------------------------------------
Cash Flows From Investing Activities:
Construction expenditures (25) (33)
Nonutility and other (2) (6)
-----------------------------------------------------------------------------
Net Cash Used for Investing Activities (27) (39)
-----------------------------------------------------------------------------
Cash Flows From Financing Activities:
Issuance of common stock - 4
Decrease in short-term borrowings, net (13) 10
Retirement of long-term debt and common stock (1) (11)
Cash dividends (16) (15)
-----------------------------------------------------------------------------
Net Cash Used for Financing Activities (30) (12)
-----------------------------------------------------------------------------
Net increase in cash and temporary investments 3 3
Cash and temporary investments at January 1 9 4
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Cash and temporary investments at September 30 $12 $ 7
================================================================= ==========
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of capitalized interest
of $0.7 for 2000 and $0.5 for 1999) $15 $ 11
Income taxes 12 7
In connection with the acquisition of Public Service Company of North
Carolina, Inc. by SCANA Corporation, $21 million in common stock was
cancelled. The application of push-down accounting for the acquisition
resulted in a $467 million acquisition adjustment.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
The following notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in Public Service Company of North
Carolina, Inc.'s (PSNC) Annual Report on Form 10-K for the fiscal year ended
September 30, 1999. These are interim financial statements, and due to the
seasonality of PSNC's business, the amounts reported in the Condensed
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 necessary for a fair statement of the results of
operations for the interim periods reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting
PSNC accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of Statement of Financial
Accounting Standards No. 71 (SFAS 71). This 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, PSNC has
recorded, as of September 30, 2000, approximately $26 million and $0.2
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax liabilities of approximately
$0.1 million. The regulatory assets are recoverable through rates. In
the future, as a result of deregulation or other changes in the
regulatory environment, PSNC 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 PSNC's results of operations in the period that a
write-off would be required, but it is not expected that cash flows or
financial position would be materially affected.
B. Change in Fiscal Year
On March 27, 2000 PSNC filed a transition report on Form 10-Q/A with
the Securities and Exchange Commission (SEC) to change its fiscal year
end to December 31 from September 30 effective January 1, 2000.
C. Recently Issued Accounting Standard and Bulletin
In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities." In June 2000 the
FASB issued SFAS No. 138, which amends certain provisions of SFAS 133
to expand the normal purchase and sale exemption for supply contracts
and to redefine interest rate risk to reduce sources of
ineffectiveness, among other things. PSNC has appointed a team to
implement SFAS 133, as amended. This team has been educating both
financial and non-financial personnel, inventorying contracts and
addressing various other SFAS 133 related issues. PSNC will adopt SFAS
133, as amended, on January 1, 2001. PSNC is determining the impact of
adoption of SFAS 133 on its consolidated results of operations and
financial position. Adoption of this statement should have no impact on
consolidated cash flows.
In December 1999 the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements." In June 2000 the SEC
amended the Bulletin to delay the implementation date until no later
than the fourth fiscal quarter of fiscal years beginning after December
15, 1999. The Bulletin provides the SEC staff's views in applying
generally accepted accounting principles to selected revenue
recognition issues. This Bulletin, which PSNC will adopt for the fourth
quarter of 2000, is not expected to have a material impact on PSNC's
results of operations, cash flows or financial position.
D. Reclassifications
Certain amounts from prior periods have been reclassified to conform
with the 2000 presentation.
<PAGE>
2. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective January 1, 2000 PSNC changed its method of accounting for
operating revenues from cycle billing to full accrual. The cumulative
effect of this change was approximately $6.6 million, net of tax.
Accruing unbilled revenues more closely matches revenues and expenses.
Unbilled revenues represent the estimated amount customers will be
charged for service received, but that has not yet been billed, as of
the end of the accounting period. In addition, at December 31, 1999,
the gas costs associated with unbilled revenues were deferred.
Beginning January 1, 2000 these costs are no longer deferred.
If this method had been applied retroactively, net income (loss) would
have been $(2.9) million and $21.4 million for the three and nine
months ended September 30, 1999, respectively, compared to $(3.0)
million and $20.7 million, respectively, as reported.
3. ACQUISITION BY SCANA CORPORATION
On February 10, 2000 the acquisition of PSNC by SCANA Corporation
(SCANA) was consummated in a business combination accounted for as a
purchase. As a result, PSNC became a wholly owned subsidiary of SCANA.
Pursuant to the Agreement and Plan of Merger, PSNC shareholders were
paid approximately $212 million in cash and 17 million shares of SCANA
common stock.
PSNC has recorded a utility plant acquisition adjustment of
approximately $467 million, which reflects the excess of SCANA's
purchase price of approximately $700 million over the fair value of
PSNC's net assets at January 1, 2000. The adjustment is being amortized
over 35 years on the straight-line basis. Common equity at September
30, 2000 includes the acquisition adjustment.
PSNC agreed to pay approximately $5 million to ten key executives under
severance agreements related to the acquisition. Severance benefits of
approximately $2.7 million have been paid to seven key executives whose
positions were eliminated. In addition, approximately $3.1 million was
paid to former directors of PSNC in connection with deferred
compensation and retirement plans, and approximately $8.1 million was
paid to participants in PSNC's nonqualified stock option plans.
4. ACQUISITION OF SONAT PUBLIC SERVICE COMPANY
Effective December 31, 1999 PSNC Production Corporation (PSNC
Production), a wholly owned subsidiary of PSNC, purchased the remaining
50% membership interest in Sonat Public Service Company, L.L.C.
(Sonat). As a result, Sonat became a wholly owned subsidiary of PSNC
Production. PSNC Production paid $5.3 million to acquire this interest.
Sonat was subsequently renamed SCANA Public Service Company, L.L.C.
(SCANA Public Service).
5. RATE AND OTHER REGULATORY MATTERS
On December 30, 1999 PSNC filed an application with the North Carolina
Utilities Commission (NCUC) to extend natural gas service to Madison,
Jackson and Swain Counties. Pursuant to state statutes, the NCUC
required PSNC to forfeit its exclusive franchises to serve six counties
in western North Carolina effective January 31, 2000 because these
counties were not receiving any natural gas service. Madison, Jackson
and Swain Counties were included in the forfeiture order. On June 29,
2000 the NCUC approved PSNC's requests for reinstatement of its
exclusive franchises for Madison, Jackson and Swain Counties and
disbursement of up to $28.4 million from PSNC's expansion fund for this
project. PSNC estimates that the cost of this project will be
approximately $31.4 million.
<PAGE>
On December 7, 1999 the NCUC issued an order approving the acquisition
of PSNC by SCANA. As specified in the NCUC order, PSNC reduced its
rates by approximately $1 million in August 2000, will reduce rates
another $1 million in August 2001 and has agreed to a five-year
moratorium on general rate cases. General rate relief can be obtained
during this period to recover costs associated with materially adverse
governmental actions and force majeure events. On December 30, 1999
the Carolina Utility Customer Association, Inc. (CUCA) filed an appeal
of this order. On June 15, 2000 CUCA withdrew its appeal.
On February 22, 1999 the NCUC approved PSNC's application to use
expansion funds to extend natural gas service into Alexander County,
and authorized disbursements from the fund of approximately $4.3
million based upon budgeted construction costs of approximately $6.2
million. Most of Alexander County lies within PSNC's certificated
service territory and did not previously have natural gas service. The
project was completed and customers began receiving natural gas service
in March 2000.
On October 30, 1998 the NCUC issued an order in PSNC's general rate
case filed in April 1998. The order, effective November 1, 1998,
granted PSNC additional annual revenue of $12.4 million and allowed a
9.82 percent overall rate of return on PSNC's net utility investment.
It also approved the continuation of the Weather Normalization
Adjustment and Rider D mechanisms and full margin transportation rates.
On February 4, 2000 in response to an appeal by CUCA, the Supreme Court
of North Carolina affirmed the NCUC order.
<PAGE>
On November 6, 1997 the NCUC issued an order permitting PSNC,
on a trial basis, to establish its commodity cost of gas for large
commercial and industrial customers on the basis of market prices for
natural gas. This procedure allows PSNC to manage its deferred gas
costs better by ensuring that the amount paid for natural gas to serve
these customers approximates the amount collected from them. PSNC's
request for permanent approval of this mechanism was approved by
the NCUC in an order issued April 6, 2000.
6. CONTINGENCIES
With respect to commitments at September 30, 2000, reference is made to
Note 12 to Consolidated Financial Statements appearing in PSNC's Annual
Report on Form 10-K for the fiscal year ended September 30, 1999.
Contingencies at September 30, 2000 include the following:
PSNC owns, or has owned, all or portions of seven sites in North
Carolina on which manufactured gas plants (MGPs) were formerly
operated. Intrusive investigation (including drilling, sampling and
analysis) has begun at only one site and the remaining sites have been
evaluated using historical records and observations of current site
conditions. These evaluations have revealed that MGP residuals are
present or suspected at several of the sites. The North Carolina
Department of Environment and Natural Resources has recommended that no
further action be taken with respect to one site. In March and April
1994, an environmental consulting firm retained by PSNC estimated that
the aggregate cost of investigating and monitoring the extent of
environmental degradation and of implementing remedial procedures with
respect to the remaining sites may range from $3.7 million to $50.1
million over a 30-year period. Subsequently, an environmental due
diligence review of PSNC conducted in February 1999 estimated that the
cost to remediate the sites would range between $11.3 million and $21.9
million. During the second quarter of 2000, the review was finalized
and the estimated liability was recorded. PSNC is unable to determine
the rate at which costs may be incurred over this time period. The
estimated cost range has not been discounted to present value. The
range includes the cost of investigating and monitoring the sites at
the low end of the range and investigating, monitoring and extensively
remediating the sites at the high end of the range. PSNC's associated
actual costs for these sites will depend on a number of factors, such
as actual site conditions, third-party claims and recoveries from other
potentially responsible parties (PRPs). An order of the NCUC dated May
11, 1993 authorized deferral accounting for all costs associated with
the investigation and remediation of MGP sites. Recovery of carrying
costs on deferred amounts is not allowed. At September 30, 2000 PSNC
has recorded a liability and associated regulatory asset of $10.2
million, which reflects the minimum amount of the range, net of
estimated shared cost recovery from other PRPs.
<PAGE>
Amounts incurred to date are not material. Management intends to request
recovery of additional MGP clean-up costs not recovered from other PRPs
in future rate case filings, and believes that all costs incurred will
be recoverable in gas rates.
7. SEGMENT OF BUSINESS INFORMATION
PSNC's reportable segments are listed in the following table. Gas
Distribution uses operating income to measure profitability, while
Energy Marketing, which is comprised solely of SCANA Public Service
(formerly Sonat), uses net income to measure profitability. Affiliate
revenue is derived from transactions between reportable segments. Prior
to December 31, 1999 Sonat was an equity investment and not a segment
of business (see Note 4).
<TABLE>
<CAPTION>
Disclosure of Reportable Segments
(Millions of Dollars)
----------------------- ------------------- -------------- --------- ---------------- --------------------
Three months ended Gas Energy All Adjustments/ Consolidated
September 30, 2000 Distribution Marketing Other Eliminations Total
----------------------- ------------------- -------------- --------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
External Revenue $ 45 $31 - - $ 76
Intersegment Revenue - - - - -
Operating Income (Loss) (8) n/a n/a $ 1 (7)
Net Income (Loss) n/a - $ 1 (9) (8)
Segment Assets 1,137 17 55 (54) 1,155
----------------------- ------------------- -------------- --------- ---------------- --------------------
Three months ended Gas Energy All Adjustments/ Consolidated
September 30, 1999 Distribution Marketing Other Eliminations Total
----------------------- ------------------- -------------- --------- ---------------- --------------------
External Revenue $ 37 n/a $ $ (1) $ 37
1
Intersegment Revenue - n/a (18) - 18
Operating Income (Loss) (3) n/a - (3) n/a
Net Income (Loss) n/a n/a (3) 2 (5)
Segment Assets 637 n/a 46 (34) 649
----------------------- ------------------- -------------- --------- ---------------- --------------------
Nine months ended Gas Energy All Adjustments/ Consolidated
September 30, 2000 Distribution Marketing Other Eliminations1 Total
----------------------- ------------------- -------------- --------- ---------------- --------------------
External Revenue $267 $85 $(26) $326 -
Intersegment Revenue - 1 (31) - $30
Operating Income 25 n/a 2 27 n/a
Net Income n/a 1 4 8 13
Segment Assets 1,137 17 55 (54) 1,155
----------------------- ------------------- -------------- --------- ---------------- --------------------
Nine months ended Gas Energy All Adjustments/ Consolidated
September 30, 1999 Distribution Marketing Other Eliminations Total
----------------------- ------------------- -------------- --------- ---------------- --------------------
External Revenue $226 n/a $5 $ (5) $226
Intersegment Revenue - n/a (39) - 39
Operating Income 44 n/a - 44 n/a
Net Income n/a n/a 18 21 3
Segment Assets 637 n/a 46 (34) 649
1 Includes cumulative effect of accounting change
</TABLE>
<PAGE>
Item 2. Management's Narrative Analysis of Results of Operations.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing in Public Service Company of North Carolina, Inc.'s (PSNC)
Annual Report on Form 10-K for the fiscal year ended September 30, 1999.
Statements included in this narrative 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 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
PSNC's service territory, (4) the impact of competition from other energy
suppliers, (5) the management of PSNC's operations, (6) variations in prices of
natural gas, (7) growth opportunities, (8) the results of financing efforts, (9)
changes in PSNC's accounting policies, (10) weather conditions in areas served
by PSNC, (11) inflation, (12) exposure to environmental issues and liabilities,
(13) changes in environmental regulation, and (14) the other risks and
uncertainties described from time to time in PSNC's periodic reports filed with
the Securities and Exchange Commission. PSNC disclaims any obligation to update
any forward-looking statements.
Capital Expansion Program
PSNC's 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 calendar 2000
construction budget is approximately $38 million, compared to actual
construction expenditures for calendar 1999 of $44.5 million. The construction
program is reviewed regularly by management and is dependent upon PSNC's
continuing ability to generate adequate funds internally and to sell new issues
of debt on acceptable terms. Construction expenditures during the nine months
ended September 30, 2000 were $24.6 million compared to $32.5 million for the
same period last year.
Earnings and Dividends
Net income for the nine months ended September 30, 2000 and 1999 was as
follows:
------------------------------------------ ---------------------------------
Nine Months Ended September 30,
(Millions of Dollars) 2000 1999
------------------------------------------ ---------------------------------
Net income derived from:
Operations $ 6.3 $20.7
Change in accounting 6.6 -
========================================== =================================
Total net income $12.9 $20.7
========================================== =================================
<PAGE>
Net income from operations decreased approximately $14.4 million. This
was primarily due to increased depreciation and amortization expense arising
from the amortization of the utility plant acquisition adjustment (see Note 3 of
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) and additional plant Net
income from a change in accounting resulted from the recording of unbilled
revenues (See Note 2 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS).
The nature of PSNC's business is seasonal. The quarters ending June 30
and September 30 are generally PSNC's least profitable quarters due to decreased
demand for natural gas related to lower space heating requirements.
PSNC's Board of Directors authorized payment of dividends on common
stock held by SCANA as follows:
Declaration Date Dividend Amount Quarter Ended Payment Date
February 22, 2000 $6 million March 31, 2000 April 1, 2000
April 27, 2000 $5 million June 30, 2000 July 1, 2000
August 16, 2000 $4.5 million September 30, 2000 October 1, 2000
October 17, 2000 $3.5 million December 31, 2000 January 1, 2001
Gas Distribution
Changes in gas distribution sales margins (excluding unbilled revenue
and eliminating the impact of franchise taxes in 1999 as described at Other
Operating Expenses) for the nine months ended September 30, 2000, when compared
to the corresponding period in 1999, were as follows:
--------------------------------------------------------------------------------
(Millions of Dollars) Nine Months Ended
September 30,
--------------------------------------------------------------------------------
2000 1999 Change % Change
---- ---- ------ --------
Gas operating revenue $263.9 $219.3 $ 44.6 20.3%
Less: Cost of gas 141.0 100.0 41.0 41.0%
===============================================================================
Gross margin $ 122.9 $119.3 $ 3.6 3.0%
================================================================================
The increase in margin for the nine months ended September 30, 2000
primarily results from customer growth. Customers as of September 30, 2000 and
1999 were approximately 352,000 and 339,000, respectively.
Energy Marketing
The energy marketing sales margin (including affiliated transactions)
for the nine months ended September 30, 2000 was as follows:
------------------------------------------------------
(Millions of Dollars) Nine Months Ended
September 30,
--------------------------------------------------------
Net income derived from:
Gas revenue $86.0
Less: Cost of gas 83.2
--------------------------------------------------------
Margin $ 2.8
========================================================
Energy Marketing consists of SCANA Public Service Company, L.L.C.,
which became a wholly owned subsidiary of PSNC effective December 31, 1999 (see
Note 4 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS) and participates
in nonregulated activities such as natural gas brokering and supply services.
<PAGE>
Other Operating Expenses
Depreciation and amortization expense increased approximately $12.1
million for the nine months ended September 30, 2000 as compared to the same
period in 1999 due primarily to the amortization of the utility plant
acquisition adjustment (see Note 3 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS).
The decrease in other taxes for the nine months ended September 30,
2000 as compared to the same period in 1999 resulted primarily from the
elimination of franchise taxes by the State of North Carolina effective August
1, 1999. The franchise tax was replaced by an excise tax. Franchise taxes
totaled $6.3 million in 1999, and were included in PSNC's billing rates and
recorded as both operating revenues and general tax expense. The new excise tax
is added to customer bills based on the volume of natural gas consumed. PSNC
does not include the excise tax in either operating revenues or general tax
expense, as this tax is a pass-through from the customer to the State of North
Carolina.
Income Taxes
Income taxes as a percentage of Income Before Income Taxes increased
for the nine months ended September 30, 2000 compared to the corresponding
period for 1999, primarily due to the non- deductibility of amortization expense
related to the acquisition adjustment.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As more fully disclosed in Part I, Item 1, in Note 6 of NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS, in this Form 10-Q, under "Contingencies" and
in Part II in Note 7 to the financial statements in the Annual Report on Form
10-K for the year ended September 30, 1999, PSNC owns, or has owned, all or
portions of seven sites in North Carolina on which manufactured gas plants were
formerly operated and is cooperating with the North Carolina Department of
Environment and Natural Resources to investigate these sites.
Item 6. Exhibits and Reports on Form 8-K
(a) Part I Exhibits:
Exhibits filed with this Quarterly Report on Form 10-Q
are listed in the following Exhibit Index.
(b) Reports on Form 8-K:
None
<PAGE>
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)
November 13, 2000 s/M. R. Cannon
-----------------------------------
M. R. Cannon, Controller
(Principal accounting officer)
<PAGE>
EXHIBIT INDEX
The following documents are filed as a part of this interim report on
Form 10-Q for the period ended September 30, 2000. Those exhibits previously
filed and incorporated herein by reference are identified below with reference
to the previous filing.
Exhibit
Number
2.01 Agreement and Plan of Merger, dated as of February 16, 1999 as
amended and restated as of May 10, 1999, by and among PSNC, SCANA
Corporation, New Sub I, Inc. and New Sub II, Inc. (Filed as
Exhibit 2.1 to SCANA Corporation's Registration Statement on Form
S-4 on May 11, 1999 (File No. 333-78227) and incorporated by
reference herein)
3.01 Articles of Incorporation of New Sub II, Inc., dated February 12,
1999 (Filed as Exhibit 3.01 to Registration Statement No.
333-45206)
3.02 Articles of Amendment of New Sub II, Inc. as adopted on February
10, 2000 (Filed as Exhibit 3.02 to Registration Statement No.
333-45206)
3.03 Articles of Correction of PSNC dated February 11, 2000 (Filed as
Exhibit 3.03 to Registration Statement No. 333-45206)
4.01 Debenture Purchase Agreement, dated as of September 15, 1988,
with respect to $25 million of 10% Senior Debentures due October
1, 2003 (Filed as Exhibit 4.01 to Registration Statement No.
333-45206)
4.02 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and Southland Life Insurance
Company (Filed as Exhibit 4.02 to Registration Statement No.
333-45206)
4.03 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and Jefferson-Pilot Life Insurance
Company (Filed as Exhibit 4.03 to Registration Statement No.
333-45206)
4.04 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and The Franklin Life Insurance
Company (Filed as Exhibit 4.04 to Registration Statement No.
333-45206)
4.05 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and Columbus Life Insurance Company
(Filed herewith)
4.06 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and Salkeld & Company
(Filed herewith)
4.07 Amendment to Debenture Purchase Agreement dated as of September
15, 1988, between the Company and UMB Bank (Filed herewith)
4.08 Debenture Purchase Agreement, dated as of December 5, 1989, as
amended, with respect to $43 million of 10% Senior Debentures due
December 1, 2004 (Filed as Exhibit 4.05 to Registration Statement
No.
333-45206)
Exhibit
Number
4.09 Amendment to Debenture Purchase Agreement dated as of December
5, 1989, between the Company and The Prudential Life Insurance
Company of America (Filed as Exhibit 4.06 to Registration
Statement No.
333-45206)
4.10 Debenture Purchase Agreement, dated as of June 25, 1992, with
respect to $32 million of 8.75% Senior Debentures due June 30,
2012 (Filed as Exhibit 4.07 to Registration Statement No.
333-45206)
4.11 Indenture dated as of January 1, 1996 (Filed as Exhibit 4.08 to
Registration Statement No. 333-45206)
4.12 First Supplemental Indenture dated as of January 1, 1996,
between Public Service Company of North Carolina, Incorporated
and First Union National Bank of North Carolina, as Trustee
(Filed as Exhibit 4.09 to Registration Statement No. 333-45206)
4.13 Second Supplemental Indenture dated as of December 15, 1996
Filed as Exhibit 4.10 to Registration Statement No. 333-45206)
4.14 Third Supplemental Indenture dated as of February 10, 2000
(Filed as Exhibit 4.11 to Registration Statement No. 333-45206)
4.15 Form of Fourth Supplemental Indenture relating to Notes to be
offered pursuant to the prospectus constituting a part of
Registration Statement 333-45206 (Filed as Exhibit 4.12 to
Registration Statement No. 333-45206)
10.01 Operating Agreement of Pine Needle LNG Company, LLC dated August
8, 1995 (Filed as Exhibit 10.01 to Registration Statement No.
333-45206)
10.02 Amendment to Operating Agreement of Pine Needle LNG Company, LLC
dated October 1, 1995 (Filed as Exhibit 10.02 to Registration
Statement No. 333-45206)
10.03 Amended Operating Agreement of Cardinal Extension Company, LLC
dated December 19, 1996 (Filed as Exhibit 10.03 to Registration
Statement No. 333-45206)
10.04 Amended Construction, Operation and Maintenance Agreement by and
between Cardinal Operating Company and Cardinal Extension
Company, LLC dated December 19, 1996 (Filed as Exhibit 10.04 to
Registration Statement No. 333-45206)
10.05 Form of Severance Agreement between PSNC and its Executive
Officers (Filed as Exhibit 10.05 to Registration Statement No.
333-45206)
10.06 Service Agreement between PSNC and SCANA Services, Inc.,
effective April 1, 2000 (Filed as Exhibit 10.06 to Registration
Statement No. 333-45206)
27.01 Financial Data Schedule (Filed herewith)
