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 Quarter Ended June 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)
400 Cox Road, P. O. Box 1398
Gastonia, North Carolina 28053-1398
(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
July 31, 2000 ....................................................1,0001
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
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3
Consolidated Statements of Income and Retained Earnings
for the Periods Ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Periods
Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Narrative Analysis of Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and December 31, 1999
(Unaudited)
-------------------------------------------------------------------------------
June 30 December 31
2000 1999
-------------------------------------------------------------------------------
(Millions of Dollars)
Assets
Gas utility plant $ 779 $768
Less - Accumulated depreciation 257 245
Acquisition adjustment, net of
accumulated amortization (Note 3) 461 -
-------------------------------------------------------------------------------
Gas utility plant, net 983 523
-------------------------------------------------------------------------------
Nonutility property and investments,
net of accumulated depreciation 34 31
-------------------------------------------------------------------------------
Current assets:
Cash and temporary investments 10 9
Restricted cash and temporary investments - 3
Receivables (including unbilled revenues),
less allowance for doubtful accounts 41 59
Inventories (at average cost):
Stored gas inventory 27 29
Materials and supplies 6 7
Deferred gas costs, net (Note 2) 6 27
Other 2 1
---------------------------------------------------- ---------------------
Total current assets 92 135
---------------------------------------------------- ---------------------
Deferred charges and other assets:
Pension asset 9 -
Other 14 9
----------------------------------------------------- ---------------------
Total deferred charges and other assets 23 9
----------------------------------------------------- ---------------------
Total $1,132 $698
===================================================== =====================
Capitalization and Liabilities
Capitalization:
Common equity (Note 3) $ 714 $232
Long-term debt 151 151
----------------------------------------------------- ---------------------
Total capitalization 865 383
----------------------------------------------------- ---------------------
Current liabilities:
Short-term borrowings 100 138
Current portion of long-term debt 7 7
Accounts payable 39 50
Accrued taxes 7 5
Customer prepayments and deposits 4 7
Dividends declared and interest accrued 7 8
Other 1 2
----------------------------------------------------- ---------------------
Total current liabilities 165 217
---------------------------------------------------- ---------------------
Deferred credits and other liabilities:
Deferred income taxes, net 76 75
Deferred investment tax credits 3 3
Accrued pension cost - 3
Other 23 17
----------------------------------------------------- ---------------------
Total deferred credits and other liabilities 102 98
---------------------------------------------------- ---------------------
Total $1,132 $698
===================================================== =====================
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended June 30, 2000 and 1999
(Unaudited)
-----------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------- ---------- ---------------
(Millions of Dollars)
Operating revenues $80 $54 $250 $188
Cost of gas 52 22 156 85
----------------------------------------------------------------------------
Gross margin 28 32 94 103
-----------------------------------------------------------------------------
Operating expenses and taxes:
Operation and maintenance 19 16 35 34
Provision for depreciation 10 6 21 12
Other taxes 1 3 3 10
-----------------------------------------------------------------------------
Total operating expenses 30 25 59 56
-----------------------------------------------------------------------------
Operating income (2) 7 35 47
Other income 1 1 2 2
Interest charges 5 4 10 9
-----------------------------------------------------------------------------
Income before income taxes (6) 4 27 40
Income taxes (1) 2 13 16
-----------------------------------------------------------------------------
Income before cumulative effect
of accounting change (5) 2 14 24
Cumulative effect of accounting change,
net of taxes (Note 2) - - 7 -
-----------------------------------------------------------------------------
Net income/(loss) (5) 2 21 24
Retained earnings at beginning of period 20 86 73 69
Common stock cash dividends declared
and other (5) (6) (84) (11)
-----------------------------------------------------------------------------
=============================================================================
Retained earnings at end of period $10 $82 $ 10 $ 82
=============================================================================
See Notes to Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended June 30, 2000 and 1999
(Unaudited)
------------------------------------------------------------------------------
Six Months Ended
June 30
2000 1999
-----------------------------------------------------------------------------
(Millions of Dollars)
Cash Flows From Operating Activities: $21 $24
Net income
Adjustments to reconcile net income to net
cash provided from operating
activities:
Cumulative effect of accounting change (7) -
Depreciation, amortization and other 23 14
Deferred income taxes, net 1 1
Change in operating assets and liabilities:
Decrease in receivables, net 24 17
Decrease in inventories 3 5
Increase in pension asset (9) -
Decrease in accounts payable (11) (11)
Decrease in accrued pension cost (3) -
Decrease in deferred gas cost 21 12
Other, net 6 10
----------------------------------------------------------------------------
Net Cash Provided from Operating Activities 69 72
-----------------------------------------------------------------------------
Cash Flows From Investing Activities:
Construction expenditures (15) (21)
Non-utility and other (3) (10)
----------------------------------------------------------------------------
Net Cash Used for Investing Activities (18) (31)
----------------------------------------------------------------------------
Cash Flows From Financing Activities:
Issuance of common stock - 4
Decrease in short-term borrowings, net (38) (25)
Retirement of long-term debt and common stock (1) (11)
Cash dividends (11) (10)
-----------------------------------------------------------------------------
Net Cash Used for Financing Activities (50) (42)
-----------------------------------------------------------------------------
Net increase (decrease) in cash and temporary investments 1 (1)
Cash and temporary investments at January 1 9 4
-----------------------------------------------------------------------------
-------------------------------------------------------- --------------------
Cash and temporary investments at June 30 $10 $ 3
=========================================================== =================
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of capitalized interest of $0.4
for 2000 and $0.3 for 1999) $11 $ 9
Income taxes 16 3
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 Consolidated Financial Statements.
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 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). 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, PSNC has
recorded, as of June 30, 2000, approximately $18.1 million and $0.3
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax liabilities of approximately
$0.2 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 Bulletin
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, which will be implemented by PSNC
by the fourth quarter of 2000, provides the SEC staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. PSNC does not expect the adoption of this Bulletin
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. Previously these revenues were
recognized as operating revenues as customers were billed. 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 ($2.4) million and $24.4 million for the three and six months
ended June 30, 1999, respectively, compared to $1.7 million and $23.8
million, respectively, as previously 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 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 June 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 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 issuedan order approving the
acquisition of PSNC by SCANA. As specified in the NCUC order, PSNC
will reduce its rates by approximately $2 million ($1 million in
August 2000 and 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 filed a
motion with the North Carolina Court of Appeals to withdraw 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 an
NCUC order issued April 6, 2000.
6. CONTINGENCIES
With respect to commitments at June 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 June 30, 2000 are as follows:
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. At June 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 shared
cost recovery from other PRPs.
<PAGE>
The NCUC concluded that it is proper and in the public interest to allow
recovery of prudently incurred clean-up costs from current customers as
reasonable operating expenses even though the MGP sites are not used
and useful in providing gas service to current customers. However, the
NCUC will not allow recovery of carrying costs on deferred amounts.
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
deemed by the NCUC to be prudently 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).
Disclosure of Reportable Segments
(Millions of Dollars)
--------------------------------------------------------------------------------
Three months ended Gas Energy All Adjustments/ Consolidated
June 30, 2000 Distribution Marketing Other Eliminations Total
--------------------------------------------------------------------------------
External Revenue $ 55 $25 - - $ 80
Intersegment Revenue - - - - -
Operating Income/(Loss) (2) n/a n/a - (2)
Net Income/(Loss) n/a - $ 1 $ (6) (5)
Segment Assets 1,117 20 59 (64) 1,132
--------------------------------------------------------------------------------
Three months ended Gas Energy All Adjustments/ Consolidated
June 30, 1999 Distribution Marketing Other Eliminations Total
--------------------------------------------------------------------------------
External Revenue $54 n/a $ 1 $ (1) $ 54
Intersegment Revenue - n/a 20 (20) -
Operating Income 7 n/a n/a - 7
Net Income n/a n/a 1 1 2
Segment Assets 628 n/a 46 (32) 642
--------------------------------------------------------------------------------
Six months ended Gas Energy All Adjustments/ Consolidated
June 30, 2000 Distribution Marketing Other Eliminations1 Total
--------------------------------------------------------------------------------
External Revenue $221 $55 - $ (26) $ 250
Intersegment Revenue - 1 $30 (31) -
Operating Income 33 n/a n/a 2 35
Net Income n/a 1 3 17 21
Segment Assets 1,117 20 59 (64) 1,132
<PAGE>
--------------------------------------------------------------------------------
Six months ended Gas Energy All Adjustments/ Consolidated
June 30, 1999 Distribution Marketing Other Eliminations Total
--------------------------------------------------------------------------------
External Revenue $188 n/a $ 4 $ (4) $188
Intersegment Revenue - n/a 20 (20) -
Operating Income 47 n/a n/a - 47
Net Income n/a n/a 1 23 24
Segment Assets 628 n/a 46 (32) 642
1 Includes cumulative effect of accounting change
<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 six months
ended June 30, 2000 were $15 million compared to $20.9 million for the same
period last year.
Earnings and Dividends
Net income for the six months ended June 30, 2000 and 1999 was as
follows:
-------------------------------------------------------------------------
Six Months Ended June 30,
(Millions of Dollars) 2000 1999
---------------------------------------------------- --------------------
Net income derived from:
Operations $14.2 $23.8
Change in accounting 6.6 -
==================================================== ====================
Total net income $20.8 $23.8
==================================================== ====================
Net income from operations decreased approximately $9.6 million. This
was primarily due to increased depreciation and amortization expense due to the
amortization of the utility plant acquisition adjustment (see Note 3 to the
Consolidated Financial Statements) and additional plant. The decrease in net
income was partially offset by the change in accounting for unbilled revenues
(see Note 2 to the Consolidated Financial Statements).
Due to the seasonal nature of PSNC's business, 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
Gas Distribution
The decrease in gross margin for the six months ended June 30, 2000,
when compared to the corresponding period in 1999, is as follows:
-------------------------------------------------------------------------
(Dollars in Millions) Six Months Ended June 30,
-------------------------------------------------------------------------
2000 1999 Change % Change
---- ---- ------ --------
Gas operating revenue $195.3 $188.4 $ 6.9 3.7%
Less: Cost of gas 103.5 85.6 17.9 20.9%
============================================================
Gross margin $ 91.8 $102.8 $(11.0) (10.7%)
========================================================================
The decrease in gross margin for the six months ended June 30, 2000
includes a change in accounting for unbilled revenue (see Note 2 to the
Consolidated Financial Statements) and the elimination of franchise taxes in
August 1999 (see Other Operating Expenses of Management's Narrative Analysis of
Results of Operations), which was partially offset by five percent customer
growth .
Energy Marketing
The energy marketing sales margin (including affiliated transactions)
for the six months ended June 30, 2000 is as follows:
---------------------------------------------------------------------
(Millions of Dollars) Six Months Ended June 30,
---------------------------------------------------------------------
Net income derived from:
Gas revenue $56.2
Less: Cost of gas 54.1
---------------------------------------------------------------------
Margin $ 2.1
=====================================================================
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 to the Consolidated Financial Statements).
Other Operating Expenses
Operating and maintenance expenses for the six months ended June 30,
2000 increased approximately $0.7 million compared to the same period in 1999,
which is not significant.
Depreciation and amortization expense increased approximately $8.4
million for the six months ended June 30, 2000 as compared to the same period in
1999 due primarily to the amortization of the utility plant acquisition
adjustment (see Note 3 to the Consolidated Financial Statements).
<PAGE>
The decrease in other taxes for the six months ended June 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 were included in
PSNC's billing rates and were 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As more fully disclosed in Part I, Item 1, in Note 6 to the 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
period ending 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:
The Company filed on April 3, 2000 a Current Report on
Form 8-K dated March 27, 2000 changing its certifying accountant.
The Company filed on April 14, 2000 a Current Report on
Form 8-K/A dated March 27, 2000 amending its April 3, 2000 filing
to include an exhibit regarding change in certifying accountant.
<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)
August 11, 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 June 30, 2000. Those exhibits previously filed
and incorporated herein by reference are identified below with an asterisk and
with a 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-A to PSNC's Form 10-Q for the
quarter ended March 31, 2000)
3.02* Articles of Amendment of New Sub II, Inc. as adopted on February
10, 2000 (Filed as Exhibit 3-B to PSNC's Form 10-Q for the
quarter ended March 31, 2000)
3.03* Articles of Correction of PSNC dated February 11, 2000 (Filed as
Exhibit 3-C to PSNC's Form 10-Q for the quarter ended March 31,
2000)
4.01* Debenture Purchase Agreement, dated as of September 15, 1988,
for $25 million of 10% Senior Debentures due October 1, 2003
(Filed as Exhibit 4-B to PSNC's Form 10-K for the year ended
September 30, 1988, File No. 0-1218)
4.02* Debenture Purchase Agreement, dated as of December 5, 1989, for
$43 million of 10% Senior Debentures due December 1, 2004
(Filed as Exhibit 4-C to PSNC's Form 10-K for the year ended
September 30, 1989, File No. 0-1218)
4.03* Debenture Purchase Agreement, dated as of June 25, 1992, for
$32 million of 8.75% Senior Debentures due June 30, 2012 (Filed
as Exhibit 4-D to PSNC's Form 10-Q for the quarter ended June
30, 1992, File No. 0-1218)
4.04* Indenture dated as of January 1, 1996, as supplemented by a
First Supplemental Indenture dated as of January 1, 1996,
between PSNC and First Union National Bank of North Carolina,
as trustee (Filed as Exhibit 4-E-1 to PSNC's Form 10-Q for the
quarter ended December 31, 1995, File No. 1-11429)
4.05* Specimen of the certificate representing the $50 million
aggregate principal amount of 6.99% Senior Debentures Due 2026
issued by PSNC on January 16, 1996 (Filed as Exhibit 4-E-2 to
PSNC's Form 10-Q for the quarter ended December 31, 1995, File
No. 1-11429)
4.06* Second Supplemental Indenture dated as of December 15, 1996 to
Indenture dated as of January 1, 1996, between PSNC and First
Union National Bank of North Carolina, as trustee (Filed as
Exhibit 4-E-3 to PSNC's Form 10-Q for the quarter ended December
31, 1996, File No. 1-11429)
4.07* Specimen of the certificate representing the $50 million
aggregate principal amount of 7.45% Senior Debentures Due 2026
issued by PSNC on December 15, 1996 (Filed as Exhibit 4-E-4 to
PSNC's Form 10-Q for the quarter ended December 31, 1996, File
No. 1-11429)
<PAGE>
Exhibit
Number
10.01* Operating Agreement of Pine Needle LNG Company, LLC dated
August 8, 1995 (Filed as Exhibit 10-D-5 to PSNC's on Form
10-Q for the quarter December 31, 1996, File No. 1-11429)
10.02* Amendment to Operating Agreement of Pine Needle LNG
Company, LLC dated October 1, 1995 (Filed as Exhibit 10-D-
5.1 to PSNC's Form 10-Q for the quarter ended December
31, 1996, File No. 1-11429)
10.03* Amended Operating Agreement of Cardinal Extension Company,
LLC, dated December 19, 1996 (Filed as Exhibit 10-D-7 on
PSNC's Form 10-Q for the quarter ended December 31, 1997,
File No.
1-11429)
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-D-8 on PSNC's Form 10-Q for the quarter ended
December 31, 1997, File No.
1-11429)
10.05* Form of Severance Agreement between PSNC and its Executive
Officers. (Filed as Exhibit 10-F to PSNC's Form 10-Q for
the quarter ended June 1997, File No. 1-11429)
10.06 Service Agreement between PSNC and SCANA Services, Inc.,
effective April 1, 2000 (Filed herewith on page 17)
27.01 Financial Data Schedule (Filed herewith)
