UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MarkOne)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 1996 .............................................. ..19,165,630
1
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
AND SUBSIDIARIES
The condensed financial statements included herein have been prepared by
the registant 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.
2
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------ ------------------ -------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
Operating revenues $ 58,807 $ 41,650 $275,782 $221,175 $302,500 $252,032
Cost of gas 32,382 17,414 151,341 106,389 162,017 122,341
-------- -------- -------- -------- -------- --------
Gross margin 26,425 24,236 124,441 114,786 140,483 129,691
-------- -------- -------- -------- -------- --------
Operating expenses and taxes:
Operating and maintenance 13,465 12,903 41,065 38,188 54,146 50,369
Provision for depreciation 4,851 4,581 14,545 13,513 19,188 17,447
General taxes 3,468 2,819 13,402 11,493 15,732 13,882
Income taxes 736 338 17,974 16,310 15,184 14,262
-------- -------- -------- -------- -------- --------
22,520 20,641 86,986 79,504 104,250 95,960
-------- -------- -------- -------- -------- --------
Operating income 3,905 3,595 37,455 35,282 36,233 33,731
Other income 1,089 107 2,597 93 2,723 1,117
Interest deductions 3,553 3,097 10,904 9,604 14,158 12,641
-------- -------- -------- -------- -------- --------
Net income $ 1,441 $ 605 $ 29,148 $ 25,771 $ 24,798 $ 22,207
======== ======== ======== ======== ======== ========
Average common shares
outstanding 19,066 18,587 18,932 18,452 18,869 18,389
Earnings per share $.08 $.03 $1.54 $1.40 $1.31 $1.21
Cash dividends declared
per share $.22 $.2125 $.645 $.6225 $.8575 $.8275
3
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Jun 30 Sep 30 Jun 30
1996 1995 1995
-------- -------- --------
Gas utility plant $614,243 $573,945 $554,959
Less - Accumulated depreciation 179,414 166,506 163,774
-------- -------- --------
434,829 407,439 391,185
-------- -------- --------
Non-utility property, net 705 801 949
-------- -------- --------
Current assets:
Cash and temporary investments 3,376 993 2,581
Restricted cash and temporary investments 5,776 4,215 4,128
Receivables, less allowance for
doubtful accounts 23,825 13,605 12,760
Materials and supplies 6,498 5,577 5,842
Stored gas inventory 9,483 12,141 8,980
Deferred gas costs, net 12,782 3,692 -
Prepayments and other 2,048 2,089 2,882
-------- -------- --------
63,788 42,312 37,173
-------- -------- --------
Deferred charges and other assets 8,072 6,443 6,199
-------- -------- --------
Total $507,394 $456,995 $435,506
======== ======== ========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common equity -
Common stock, $1 par $ 19,076 $ 18,689 $ 18,603
Capital in excess of par value 112,116 106,655 105,346
Retained earnings 64,953 48,028 56,365
-------- -------- --------
196,145 173,372 180,314
Long-term debt 143,900 100,700 109,140
-------- -------- --------
340,045 274,072 289,454
-------- -------- --------
Current liabilities:
Maturities of long-term debt 9,300 10,480 9,540
Accounts payable 23,641 20,411 13,219
Accrued taxes 9,155 1,824 7,896
Customer prepayments and deposits 2,920 5,742 4,855
Cash dividends and interest 7,056 6,423 5,526
Restricted supplier refunds 5,776 4,215 4,128
Deferred gas costs, net - - 1,298
Other 3,821 3,416 3,125
-------- -------- --------
61,669 52,511 49,587
Interim bank loans 24,000 51,000 18,500
-------- -------- --------
85,669 103,511 68,087
-------- -------- --------
Deferred credits and other liabilities:
Income taxes, net 56,024 52,606 51,628
Investment tax credits 4,119 4,646 4,553
Accrued pension cost 11,679 12,931 12,957
Other 9,858 9,229 8,827
-------- -------- --------
81,680 79,412 77,965
-------- -------- --------
Total $507,394 $456,995 $435,506
======== ======== ========
4
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In thousands)
Twelve Months Ended
June 30
-------------------
1996 1995
------- --------
Balance beginning of period $56,365 $49,514
Add - Net income 24,798 22,207
Deduct - Common stock dividends
and other 16,210 15,356
------- -------
Balance end of period $64,953 $56,365
======= =======
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended Twelve Months Ended
June 30 June 30
----------------- -------------------
1996 1995 1996 1995
------- ------- ------- --------
Cash Flows From Operating Activities:
Net income $29,148 $25,771 $24,798 $22,207
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation, depletion and other 17,744 16,055 23,301 20,821
Deferred income taxes, net 3,418 3,159 4,396 2,743
------- ------- ------- -------
50,310 44,985 52,495 45,771
Change in operating assets and liabilities:
Receivables, net (11,748) 2,638 (12,746) 1,894
Inventories 1,737 5,586 (1,158) 2,129
Accounts payable 3,229 (2,437) 10,422 (2,423)
Accrued pension cost (1,251) (2,575) (1,278) (2,073)
Other (2,914) 2,665 (10,296) (682)
------- ------- ------- -------
39,363 50,862 37,439 44,616
------- ------- ------- -------
Cash Flows From Investing Activities:
Construction expenditures (43,689) (39,709) (65,099) (58,065)
Non-utility and other (1,374) (1,520) (2,011) (1,298)
------- ------- ------- -------
(45,063) (41,229) (67,110) (59,363)
------- ------- ------- -------
Cash Flows From Financing Activities:
Sale of senior debentures, net of expenses 49,314 - 49,314 -
Issuance of common stock through
dividend reinvestment, stock purchase
and stock option plans 5,746 5,412 7,096 7,000
Increase (decrease) in interim bank
loans, net (27,000) (4,500) 5,500 18,500
Retirement of long-term debt
and common stock (7,980) (296) (15,496) (7,871)
Cash dividends (11,997) (10,202) (15,948) (14,984)
------- ------- ------- -------
8,083 (9,586) 30,466 2,645
------- ------- ------- -------
Net increase (decrease) in cash and
temporary investments 2,383 47 795 (12,102)
Cash and temporary investments
at beginning of period 993 2,534 2,581 14,683
------- ------- ------- -------
Cash and temporary investments
at end of period $ 3,376 $ 2,581 $ 3,376 $ 2,581
======= ======= ======= =======
Cash paid during the period for:
Interest (net of amount capitalized) $10,180 $ 9,844 $12,474 $12,164
Income taxes 7,845 10,669 10,663 13,915
5
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 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.
3. 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.
6
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 June 30
-----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- -------- --
Gross margin $ 26,425 $ 24,236 $ 2,189 9
Less - Franchise taxes 1,870 1,321 549 42
-------- -------- --------
Net margin $ 24,555 $ 22,915 $ 1,640 7
======== ======== ========
Total volume throughput (DT):
Residential 3,610 2,522 1,088 43
Commercial/small industrial 2,549 1,982 567 29
Large commercial/industrial 7,548 7,193 355 5
-------- -------- --------
13,707 11,697 2,010 17
======== ======== ========
Raleigh/Durham area degree days:
Actual 320 216 104 48
Normal 255 255 - -
Percent of normal 125% 85%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (1,942) $ 1,005 $ (2,947)
Customers at end of period: (1)
Residential 247,666 245,510 2,156 1
Commercial/small industrial 40,106 29,371 10,735 37
Large commercial/industrial 400 388 12 3
-------- -------- --------
288,172 275,269 12,903 5
======== ======== ========
(1) Reflected in customers at June 30, 1996 is the reclassification of
approximately 8,000 customers from residential to commercial/small industrial.
Net margin for the three months ended June 30, 1996 increased
$1,640,000 as compared to the same period last year. This increase in net margin
is attributable to the items shown below (in thousands):
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ------- ------
Volume variances, net $1,123 $ 578 $ 418 $ - $2,119
Other - - - (479) (479)
------ ----- ----- ------ ------
Total $1,123 $ 578 $ 418 $ (479) $1,640
====== ===== ===== ====== ======
This increase in net margin is due primarily to an increase in the
number of customers served.
7
(Amounts in thousands except
degree day data) Nine Months Ended June 30
----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- -------- --
Gross margin $124,441 $114,786 $ 9,655 8
Less - Franchise taxes 8,854 7,104 1,750 25
-------- -------- --------
Net margin $115,587 $107,682 $ 7,905 7
======== ======== ========
Total volume throughput (DT):
Residential 21,379 16,529 4,850 29
Commercial/small industrial 12,863 10,471 2,392 23
Large commercial/industrial 22,237 22,608 (371) (2)
-------- -------- --------
56,479 49,608 6,871 14
======== ======== ========
Raleigh/Durham area degree days:
Actual 3,816 2,936 880 30
Normal 3,341 3,323 18 1
Percent of normal 114% 88%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (8,735) $ 5,800 $(14,535)
The increase in normal degree days for the nine and twelve months ended
June 30, 1996 is due to an additional day for the leap year.
Net margin for the nine months ended June 30, 1996 increased $7,905,000
as compared to the same period last year. This increase in net margin is
attributable to the items shown below (in thousands):
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ----- -------
Cardinal rate increase
(effective 1/95) $ 917 $ 452 $ 267 $ - $ 1,636
Volume variances, net 3,943 1,465 50 - 5,458
Refund made in 10/94 - - - 732 732
Other - - - 79 79
------- ------- ------- ----- -------
Total $ 4,860 $ 1,917 $ 317 $ 811 $ 7,905
======= ======= ======= ====== =======
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.
8
MANAGEMENT'S DISCUSSION (Continued)
(Amounts in thousands except
degree day data) Twelve Months Ended June 30
----------------------------------------
Increase
1996 1995 (Decrease) %
-------- -------- -------- --
Gross margin $140,483 $129,691 $ 10,792 8
Less - Franchise taxes 9,692 8,072 1,620 20
-------- -------- --------
Net margin $130,791 $121,619 $ 9,172 8
======== ======== ========
Total volume throughput (DT):
Residential 22,417 17,531 4,886 28
Commercial/small industrial 14,247 11,839 2,408 20
Large commercial/industrial 28,826 29,225 (399) (1)
-------- -------- --------
65,490 58,595 6,895 12
======== ======== ========
Raleigh/Durham area degree days:
Actual 3,834 2,943 891 30
Normal 3,359 3,341 18 1
Percent of normal 114% 88%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (8,735) $ 5,800 $(14,535)
Net margin for the twelve months ended June 30, 1996 increased
$9,172,000 as compared to the same period last year. This increase in net margin
is attributable to the items shown below (in thousands):
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ----- -------
General rate increase
(effective 10/94) $ 1,191 $ 291 $ (456) $ - $ 1,026
Cardinal rate increase 993 540 454 - 1,987
(effective 1/95)
Volume variances, net 4,386 1,530 25 - 5,941
Refund made in 10/94 - - - 732 732
Other - - - (514) (514)
------- ------ ------ ------ -------
Total $ 6,570 $2,361 $ 23 $ 218 $ 9,172
======= ====== ====== ====== =======
This increase in net margin is due primarily to an increase in the
number of customers served, the general rate increase effective October 7, 1994,
and the Cardinal Pipeline rate increase effective January 26, 1995.
9
Operating and maintenance expenses for the three, nine and twelve
months ended June 30, 1996 increased 4%, 8% and 7%, respectively, as compared to
the same periods last year. Prior period expenses for the nine and twelve months
reflect reductions of $1,138,000 for the accounting adjustments discussed below.
Absent these adjustments, operating and maintenance expenses for the nine and
twelve months ended June 30, 1996, respectively, increased only 4% and 5% from
the comparable periods the prior year. Adjustments in the prior periods which
lowered operating and maintenance expenses include $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 enables PSNC to recover such prudently incurred expenses through gas
rates. The prior period credits are partially offset by one-time charges of
$441,000 recorded in March 1995. These charges included New York Stock Exchange
listing fees and employee severance expenses related to department
reorganizations. Operating and maintenance expenses increased in all periods due
to an increase in the provision for uncollectible accounts, which is based on
revenues, increased salary expenses and related employee benefits. 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, nine and twelve months
ended June 30, 1996 due to utility plant additions. General taxes for the three,
nine and twelve months ended June 30, 1996 increased 23%, 17%, and 13%,
respectively, as compared to the same periods last year. These increases are
mainly due to increased franchise taxes based on operating revenues that
increased 41%, 25%, and 20% as compared to the same periods last year.
Other income for the three, nine and twelve months ended June 30, 1996
increased $982,000, $2,504,000 and $1,606,000, respectively, as compared to the
same periods last year. These increases are primarily due to interest income
associated with deferred gas costs and gains realized by PSNC's gas marketing
subsidiary from an increase in both natural gas brokering activities and the
number of customers served. Also contributing was a $265,000 gain from the sale
of land during June 1996 and improvements in merchandising operations. The
three- and nine-month periods reflect an increase in income from secondary
market transactions entered into by the utility. Secondary market transactions
are any transactions that utilize capacity rights on interstate pipelines.
Effective November 1, 1995, the shareholder portion of the margins on secondary
market transactions increased from 10% to 25% by an order of the North Carolina
Utilities Commission (NCUC). The increase for the twelve-month period was
partially offset by a decline in income from secondary market transactions due
to the reclassification of pipeline capacity sales income to other income from
operating revenues during fiscal 1994.
Interest deductions for the three, nine and twelve months ended June
30, 1996 increased 15%, 14% and 12%, respectively, as compared to the same
periods last year. The primary reasons for the increase in the three-, nine- and
twelve-month periods are interest expense increases due to the January 1996
issuance of $50,000,000 of 6.99%
10
MANAGEMENT'S DISCUSSION (Continued)
Senior Debentures due 2026. Interest expense on short-term debt increased for
the nine- and twelve-month periods ended June 30, 1996 due to the higher average
short-term bank loans outstanding and increased weighted interest rates.
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, employee stock purchase and
nonqualified 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 nine and twelve months ended June 30, 1996 were $43,689,000 and
$65,099,000, respectively, as compared to $39,709,000 and $58,065,000 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 seven commercial banks which vary monthly
depending upon seasonal requirements and a five-year revolving line with one
bank. For the twelve-month period beginning April 1, 1996, total 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 totaling
$80,000,000. 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.
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 this retired the balance of first mortgage bonds, PSNC has closed
the original indenture and all supplemental indentures.
11
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,
1996 were used to pay down a significant portion of the then outstanding
short-term bank debt.
At June 30, 1996, restricted cash and temporary investments were
$5,776,000. 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 June 30, 1996 of $11,065,000, as
compared to June 30, 1995, reflects increased gas sales due to colder weather
and increased tariff rates which resulted from increases in PSNC's wholesale
cost of gas.
Accounts payable increased $10,422,000 as compared to June 30, 1995
mainly due to approximately 400,000 dekatherms of additional gas purchases and
to increased payables related to computer equipment purchases.
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 June 30, 1996 represent
undercollections from customers of $12,782,000. These undercollections primarily
reflect the unanticipated surge in the price of natural gas during January 1996
when PSNC experienced record throughput. PSNC's deferred gas costs balances are
approved by the NCUC in annual gas cost prudence reviews and are collected from
or refunded to customers over a subsequent twelve-month period. Amounts that
have not been collected from or refunded to customers bear interest at an annual
rate of 10% as required by the NCUC. PSNC's strategy is to manage the balance of
deferred gas costs to a minimal level over a twelve-month period. Deferred gas
costs at June 30, 1995 reflect overcollections of demand costs from customers of
$1,298,000.
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 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.
During July 1996, the FERC completed its environmental assessment of Pine Needle
and concluded that the project would have no significant environmental impact.
On May 30, 1996, the NCUC filed an application for rehearing of the preliminary
determination. In its request, the NCUC contested the approved rate of return on
equity and the proposed capital structure. The FERC has not acted on the merits
12
MANAGEMENT'S DISCUSSION (Continued)
of this application for rehearing. Through June 30, 1996, PSNC Blue Ridge
Corporation, a subsidiary of PSNC, has invested $1,713,000 in the project.
Rate Matters
PSNC filed a general rate case with the NCUC on March 1, 1996 asking
for a 4.9%, or approximately $15,400,000, increase in annual revenues. On July
23, 1996, a negotiated settlement of the case was filed with the NCUC. This
settlement, if approved by the NCUC, will increase PSNC's rates by approximately
$2,700,000 annually and authorizes a return on net investment of 10.37%. The
settlement also allows PSNC to retain approximately $3,500,000 annually of fixed
gas costs that previously would have been refunded to customers. Therefore, the
total effect of the general rate case settlement will be an annual increase in
gross margin of approximately $6,200,000. PSNC expects a general rate order
approving the settlement from the NCUC on or about October 1, 1996.
Effective July 15, 1996, the NCUC added seven counties in western North
Carolina to PSNC's franchised service territory. PSNC's franchised service
territory now consists of all or parts of 33 counties in North Carolina.
13
EXHIBIT 11
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended Twelve Months Ended
June 30 June 30 June 30
------------------ ------------------ --------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
Net income $ 1,441 $ 605 $ 29,148 $ 25,771 $ 24,798 $ 22,207
-------- -------- -------- -------- -------- --------
Average common shares outstanding 19,066 18,587 18,932 18,452 18,869 18,389
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 73 50 82 50 76 50
-------- -------- -------- -------- -------- --------
Average common shares outstanding
as adjusted 19,139 18,637 19,014 18,502 18,945 18,439
-------- -------- -------- -------- -------- --------
Earnings per share, as adjusted $ .08 $ .03 $1.53 $1.39 $1.31 $1.20
===== ===== ===== ===== ===== =====
<FN>
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%.
</FN>
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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10-A-24 Firm Transportation Service Agreement under Rate
Schedule FT, dated January 24, 1996, between PSNC and
Transcontinental Gas Pipe Line Corporation.
10-A-25 General Storage Service Agreement under Rate Schedule
GSS, dated October 17, 1995, between PSNC and CNG
Transmission Corporation.
10-A-26 Firm Transportation Service Agreement under Rate
Schedule FT-NN-GSS, dated October 17, 1995, between
PSNC and CNG Transmission Corporation.
10-A-27 Firm Transportation Service Agreement under Rate
Schedule FT, dated January 24, 1996, between PSNC and
CNG Transmission Corporation.
10-A-28 Firm Transportation Service Agreement under Rate
Schedule FT-NN, dated October 17, 1995, between PSNC
and CNG Transmission Corporation.
10-A-29 Firm Transportation Service Agreement under Rate
Schedule FT, dated January 19, 1996, between PSNC and
Texas Gas Transmission Corporation.
15
10-A-30 Firm Transportation Service Agreement under Rate
Schedule FT-1, dated October 30, 1995, between PSNC
and Texas Eastern Transmission Corporation.
10-A-31 Interruptible Transportation Service Agreement under
Rate Schedule IT, dated January 23, 1996, between
PSNC and Transcontinental Gas Pipe Line Corporation.
11 Statement re: computation of per share earnings.
27 Financial Data Schedule.
b. Forms 8-K
There were no reports on Form 8-K filed during the three months ended
June 30, 1996.
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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 August 12, 1996 -------------------------------
s\ Charles E. Zeigler, Jr.
Chairman, President and
Chief Executive Officer
Date August 12, 1996 -------------------------------
s\ Robert D. Voigt
Senior Vice President - Corporate
Development and Chief Financial Officer
17