SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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 1-3375
South Carolina Electric & Gas Company
(Exact name of registrant as specified in its charter)
South Carolina 57-0248695
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1426 Main Street, Columbia, South Carolina 29201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 748-3000
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
As of April 30, 1994, there were issued and outstanding
40,296,147 shares of the registrant's common stock $4.50 par
value, all of which were held, beneficially and of record, by
SCANA Corporation.
SOUTH CAROLINA ELECTRIC & GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1994 and December 31, 1993................ 3
Consolidated Statements of Income and Retained
Earnings for the Periods Ended
March 31, 1994 and 1993............................. 5
Consolidated Statements of Cash Flows for the
Periods Ended March 31, 1994 and 1993............... 6
Notes to Consolidated Financial Statements............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................ 12
Item 6. Exhibits and Reports on Form 8-K................. 12
Signatures................................................... 13
Exhibit Index................................................ 14
2
PART I
FINANCIAL INFORMATION
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
As of March 31, 1994 and December 31, 1993
(Unaudited)
March 31, December 31,
1994 1993
ASSETS (Thousands of Dollars)
Utility Plant:
Electric............................................. $3,069,928 $3,067,881
Gas.................................................. 295,519 272,506
Transit.............................................. 3,770 3,769
Common............................................... 73,396 72,804
Total.............................................. 3,442,613 3,416,960
Less accumulated depreciation and amortization....... 1,126,634 1,097,531
Total.............................................. 2,315,979 2,319,429
Construction work in progress........................ 411,250 338,677
Nuclear fuel, net of accumulated amortization........ 33,689 29,087
Utility Plant, Net............................... 2,760,918 2,687,193
Nonutility property and investments, (net of
accumulated depreciation)............................ 12,419 12,709
Current Assets:
Cash and temporary cash investments.................. 16,333 193
Receivables - customer and other..................... 112,178 119,296
Receivables - affiliated companies................... 982 244
Inventories (at average cost):
Fuel............................................... 27,996 31,192
Materials and supplies............................. 42,804 43,372
Prepayments.......................................... 12,816 10,089
Accumulated deferred income taxes.................... - 9,015
Total Current Assets............................. 213,109 213,401
Deferred Debits:
Unamortized debt expense............................. 10,895 11,060
Unamortized deferred return on plant investment...... 13,799 14,860
Nuclear plant decommissioning fund................... 26,423 25,103
Other................................................ 223,707 225,613
Total Deferred Debits............................ 274,824 276,636
Total................................. $3,261,270 $3,189,939
See notes to consolidated financial statements.
3
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
As of March 31, 1994 and December 31, 1993
(Unaudited)
March 31, December 31,
1994 1993
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
Stockholders' Investment:
Common Equity:
Common stock ($4.50 par value)...................... $ 181,333 $ 181,333
Premium on common stock and other paid-in capital... 600,695 583,785
Capital stock expense (debit)....................... (5,470) (5,497)
Retained earnings................................... 307,414 291,713
Total Common Equity............................... 1,083,972 1,051,334
Preferred stock (Not subject to purchase or sinking
funds).............................................. 26,027 26,027
Total Stockholders' Investment.................... 1,109,999 1,077,361
Preferred stock, net (Subject to purchase or
sinking funds)........................................ 51,079 52,840
Long-term debt, net..................................... 1,098,322 1,097,043
Advances from affiliated companies...................... 6,196 -
Total Capitalization............................ 2,265,596 2,227,244
Current Liabilities:
Short-term borrowings................................. 83,405 1,011
Current portion of long-term debt..................... 13,489 13,719
Current portion of preferred stock.................... 2,496 2,504
Accounts payable...................................... 40,308 68,182
Accounts payable - affiliated companies............... 19,064 28,630
Estimated rate refunds and related interest........... 1,782 2,509
Customer deposits..................................... 12,554 12,207
Taxes accrued......................................... 19,727 39,965
Interest accrued...................................... 20,140 17,764
Dividends declared.................................... 29,663 29,982
Accumulated deferred income taxes..................... 4,327 -
Other................................................. 12,378 10,042
Total Current Liabilities....................... 259,333 226,515
Deferred Credits:
Accumulated deferred income taxes..................... 482,614 480,808
Accumulated deferred investment tax credits........... 83,966 84,447
Accumulated reserve for nuclear plant decommissioning. 26,423 25,103
Other................................................. 143,338 145,822
Total Deferred Credits.......................... 736,341 736,180
Total ................................. $3,261,270 $3,189,939
See notes to consolidated financial statements.
4
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended March 31, 1994 and 1993
(Unaudited)
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
OPERATING REVENUES:
Electric.......................................... $234,889 $207,646
Gas............................................... 77,411 70,807
Transit........................................... 1,021 788
Total Operating Revenues..................... 313,321 279,241
OPERATING EXPENSES:
Fuel used in electric generation.................. 40,993 35,821
Purchased power (including affiliated
purchases)...................................... 28,468 25,676
Gas purchased from affiliate for resale........... 43,956 39,817
Other operation................................... 51,377 46,580
Maintenance....................................... 14,725 15,477
Depreciation and amortization..................... 26,690 25,325
Income taxes...................................... 26,427 17,965
Other taxes....................................... 17,165 17,306
Total Operating Expenses..................... 249,801 223,967
OPERATING INCOME.................................... 63,520 55,274
OTHER INCOME:
Allowance for equity funds used
during construction............................. 2,073 2,338
Other income (loss),net of income taxes........... (101) (212)
Total Other Income........................... 1,972 2,126
INCOME BEFORE INTEREST CHARGES...................... 65,492 57,400
INTEREST CHARGES (CREDITS):
Interest expense.................................. 21,775 22,394
Allowance for borrowed funds used
during construction............................. (1,623) (1,814)
Total Interest Charges, Net.................. 20,152 20,580
NET INCOME.......................................... 45,340 36,820
Preferred Stock Cash Dividends (at stated
rates)............................................ (1,539) (1,567)
Earnings Available for Common Stock................. 43,801 35,253
Retained Earnings at Beginning of Period............ 291,713 262,262
Common Stock Cash Dividends Declared................ (28,100) (27,000)
Retained Earnings at End of Period.................. $307,414 $270,515
See notes to consolidated financial statements.
5
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1994 and 1993
(Unaudited)
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 45,340 $ 36,820
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization...................... 26,729 25,363
Amortization of nuclear fuel....................... 3,835 3,536
Deferred income taxes, net......................... 14,909 31,504
Deferred investment tax credits, net............... (481) (811)
Net regulatory asset-adoption of SFAS No. 109...... (929) (22,897)
Nuclear refueling accrual.......................... 1,756 534
Allowance for funds used during construction....... (3,696) (4,152)
Over (under) collections, fuel adjustment clause... 5,053 4,584
Changes in certain current assets and liabilities:
(Increase) decrease in receivables................ 6,380 10,627
(Increase) decrease in inventories................ 3,764 1,243
Increase (decrease) in accounts payable........... (36,546) (14,003)
Increase (decrease) in estimated rate refunds
and related interest............................ (727) (14,146)
Increase (decrease) in taxes accrued.............. (20,238) (32,228)
Increase (decrease) in interest accrued........... 2,376 (9,315)
Other, net......................................... 2,483 (4,949)
Net Cash Provided From Operating Activities............ 50,008 11,710
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction
expenditures....................................... (110,608) (55,156)
Increase in other property and investments........... (136) (31)
Principal noncash items:
Allowance for funds used during construction....... 3,696 4,152
Transfer of assets from SCANA...................... 6,285 -
Net Cash Used For Investing Activities................. (100,763) (51,035)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Equity contribution from parent.................... 10,652 13,837
Repayments:
Other long-term debt............................... (207) -
Preferred stock.................................... (1,770) (1,764)
Dividend payments:
Common stock....................................... (28,400) (26,741)
Preferred stock.................................... (1,558) (1,606)
Short-term borrowings, net........................... 82,394 43,295
Fuel financings, net................................. 482 5,914
Advances - affiliated companies, net................. 5,302 (839)
Net Cash Provided From Financing Activities............ 66,895 32,096
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS........................... 16,140 (7,229)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1....... 193 24,302
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31........ $ 16,333 $ 17,073
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest............................. $ 19,233 $ 12,866
- Income taxes......................... 2,754 12,806
See notes to consolidated financial statements.
6
SOUTH CAROLINA ELECTRIC & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
(Unaudited)
The following notes should be read in conjunction with the
Notes to Consolidated Financial Statements appearing in the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993. These are interim financial statements and,
because of temperature variations between seasons of the year,
the amounts reported in the Consolidated Statements of Income are
not necessarily indicative of amounts expected for the year. In
the opinion of management, the information furnished herein
reflects all adjustments, all of a normal recurring nature, which
are necessary for a fair statement of the results for the interim
periods reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Principles of Consolidation:
The Company, a public utility, is a South Carolina
corporation organized in 1924 and a wholly owned subsidiary
of SCANA Corporation (SCANA), a South Carolina holding
company. The accompanying Consolidated Financial Statements
include the accounts of the Company and South Carolina Fuel
Company, Inc. (Fuel Company), an affiliate. Intercompany
balances and transactions between the Company and Fuel
Company have been eliminated in consolidation.
The assets of the former Peoples Natural Gas Company of South
Carolina, which were owned by SCANA and operated by the
Company, were transferred to the Company on January 1, 1994.
The transaction did not have a significant impact on the
Company's financial position or results of operations.
The Company has entered into agreements with certain
affiliates to purchase gas for resale to its distribution
customers and to purchase electric energy. The Company
purchases all of its natural gas requirements from South
Carolina Pipeline Corporation. The Company purchases all of
the electric generation of Williams Station, which is owned
by South Carolina Generating Company, Inc., under a unit
power sales agreement. Such unit power purchases are
included in "Purchased power."
B. Reclassifications:
Certain amounts from prior periods have been reclassified to
conform with the 1994 presentation.
2. RATE MATTERS:
With respect to rate matters at March 31, 1994, reference is
made to Note 2 of Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the
year ended December 31, 1993. No changes have occurred with
respect to those matters as reported therein except as shown
below.
On March 31, 1994 the Company filed an application with The
South Carolina Public Service Commission (PSC) for the
elimination of the $.40 fare for low income riders of the
Company's transit system. A hearing is scheduled for May 31,
1994.
3. RETAINED EARNINGS:
The Restated Articles of Incorporation of the Company and the
Indenture underlying certain of its bond issues contain
provisions that may limit the payment of cash dividends on
common stock. In addition, with respect to hydroelectric
projects, the Federal Power Act may require the appropriation
of a portion of the earnings therefrom. At March 31, 1994
approximately $10.7 million of retained earnings were
restricted as to payment of dividends on common stock.
4. COMMITMENTS AND CONTINGENCIES:
With respect to commitments at March 31, 1994, reference is
made to Note 10 of Notes to Consolidated Financial Statements
appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1993. No significant changes have
occurred with respect to those matters as reported therein.
7
Contingencies at March 31, 1994 are as follows:
A. Nuclear Insurance
The Price-Anderson Indemnification Act, which deals with the
Company's public liability for a nuclear incident, currently
establishes the liability limit for third-party claims
associated with any nuclear incident at $9.4 billion. Each
reactor licensee is currently liable for up to $79.3 million
per reactor owned for each nuclear incident occurring at any
reactor in the United States, provided that not more than $10
million of the liability per reactor would be assessed per
year. The Company's maximum assessment, based on its two-
thirds ownership of Summer Station, would not exceed
approximately $52.9 million per incident but not more than
$6.7 million per year.
The Company currently maintains policies (for itself and on
behalf of the PSA) with Nuclear Electric Insurance Limited
(NEIL) and American Nuclear Insurers (ANI) providing combined
property and decontamination insurance coverage of $1.4
billion for any losses in excess of $500 million pursuant
to existing primary coverages (with ANI) on Summer Station.
The Company pays annual premiums and, in addition, could be
assessed a retroactive premium not to exceed 7 1/2 times its
annual premium in the event of property damage loss to any
nuclear generating facilities covered by NEIL. Based on the
current annual premium, this retroactive premium would not
exceed approximately $8.1 million.
To the extent that insurable claims for property damage,
decontamination, repair and replacement and other costs and
expenses arising from a nuclear incident at Summer Station
exceed the policy limits of insurance, or to the extent such
insurance becomes unavailable in the future, and to the
extent that the Company's rates would not recover the cost of
any purchased replacement power, the Company will retain the
risk of loss as a self-insurer. The Company has no reason to
anticipate a serious nuclear incident at Summer Station. If
such an incident were to occur, it could have a materially
adverse impact on the Company's financial position.
B. Environmental
The Company has an environmental assessment program to
identify and assess current and former operations sites that
could require environmental cleanup. As site assessments are
initiated, an estimate is made of the amount of expenditures,
if any, necessary to investigate and clean up each site.
These estimates are refined as additional information becomes
available; therefore actual expenditures could significantly
differ from the original estimates. Amounts estimated and
accrued to date for site assessment and cleanup
(approximately $22.9 million) relate primarily to regulated
operations; such amounts have been deferred and are being
amortized and recovered through rates over a ten year period.
8
SOUTH CAROLINA ELECTRIC & GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Capital Resources and Liquidity
From December 31, 1993 to March 31, 1994
Liquidity and Capital Resources
The cash requirements of the Company arise primarily from
its operational needs and construction program. The ability of
the Company to replace existing plant investment, as well as to
expand to meet future demands for electricity and gas, will
depend upon its ability to attract the necessary financial
capital on reasonable terms. The Company recovers the costs of
providing services through rates charged to customers. Rates for
regulated services are based on historical costs. As customer
growth and inflation occur and the Company expands its
construction program it is necessary to seek increases in rates.
As a result the Company's future financial position and results
of operations will be impacted by its ability to obtain adequate
and timely rate relief.
The following table summarizes how the Company generated
funds for its utility property additions and construction
expenditures during the three months ended March 31, 1994 and
1993:
Three Months Ended
March 31,
1994 1993
(Thousands of Dollars)
Net cash provided from operating activities $ 50,008 $11,710
Net cash provided from financing activities 66,895 32,096
Cash and temporary cash investments available
at the beginning of the period 193 24,302
Net cash available for utility property
additions and construction expenditures $117,096 $68,108
Funds used for utility property additions
and construction expenditures, net of
noncash allowance for funds used during
construction $106,912 $51,004
The Company anticipates that the remainder of its 1994 cash
requirements will be met primarily through internally generated
funds, sales of additional securities, additional equity
contributions from SCANA and the incurrence of additional short-
term and long-term indebtedness. The timing and amount of such
financings will depend upon market conditions and other factors.
The ratio of earnings to fixed charges for the twelve months
ended March 31, 1994 was 3.78.
The Company expects that it has or can obtain adequate
sources of financing to meet its cash requirements for the next
twelve months and for the foreseeable future.
9
SOUTH CAROLINA ELECTRIC & GAS COMPANY
Results of Operations
For the Three Months Ended March 31, 1994
As Compared to the Corresponding Period in 1993
Earnings and Dividends
Net income for the three months ended March 31, 1994
increased approximately $8.5 million when compared to the
corresponding period in 1993 primarily due to an increase in the
electric operating margin.
AFC is a utility accounting practice whereby a portion of
the cost of both equity and borrowed funds used to finance
construction (which is shown on the balance sheet as construction
work in progress) is capitalized. Both the equity and the debt
portions of AFC are noncash items of nonoperating income which
have the effect of increasing reported net income. AFC
represented approximately 5% and 8% of income before income taxes
for the three months ended March 31, 1994 and 1993, respectively.
On February 15, 1994 the Company's Board of Directors
authorized the payment of a dividend on common stock of
$28,100,000 for the quarter ended March 31, 1994. The dividend
was paid on April 1, 1994 to SCANA Corporation, the Company's
parent.
On April 28, 1994 the Company's Board of Directors
authorized the payment of a dividend on common stock of
$29,600,000 for the quarter ended June 30, 1994. The dividend is
payable on July 1, 1994 to SCANA Corporation, the Company's
parent.
Sales Margins
The change in the electric sales margins for the three
months ended March 31, 1994 when compared to the corresponding
period in 1993 was as follows:
Three Months
Change % Change
(Millions)
Electric operating revenues $27.3 13.1
Less: Fuel used in electric
generation 5.2 14.4
Purchased power 2.8 10.9
Margin $19.3 13.2
The electric sales margin increased for the three months
ended March 31, 1994 compared to the corresponding period in 1993
primarily due to higher kilowatt hour sales due to increased
customer usage associated with a period of extremely cold weather
during the first quarter of 1994. In addition, the electric
sales margin includes an increase in retail electric rates which
was effective beginning June 1993.
10
The change in the gas sales margins for the three months
ended March 31, 1994 when compared to the corresponding period in
1993 was as follows:
Three Months
Change % Change
(Millions)
Gas operating revenues $6.6 9.3
Less: Gas purchased for resale 4.1 10.4
Margin $2.5 8.0
The increase in the gas sales margin for the three months is
primarily a result of increased sales due to the transfer of the
operations of the former Peoples Natural Gas Company of South
Carolina from SCANA Corporation to the Company in January 1994.
The increase in the gas sales margin for the three months also
includes increased sales partially offset by reduced recoveries
under the weather normalization adjustment, both due to colder
weather during the first quarter of 1994.
Other Operating Expenses
Increases (decreases) in other operating expenses,
including taxes, for the three months ended March 31, 1994
compared to the corresponding period in 1993 are presented in the
following table:
Three Months
Change % Change
(Millions)
Other operation and maintenance $ 4.0 6.5
Depreciation and amortization 1.4 5.4
Income taxes 8.5 47.1
Other taxes (0.2) (0.8)
Total $13.7 11.2
Other operation and maintenance expenses for the three
months ended March 31, 1994 increased primarily due to an
increase in employee-related expenses. The depreciation and
amortization increase for the three months reflects additions to
plant in service. The increase in income tax expense for the
three month comparison corresponds to the increases in income
and reflects the 1993 increase in the corporate tax rate from 34%
to 35% which was recorded in August 1993 and was retroactive to
January 1, 1993.
11
SOUTH CAROLINA ELECTRIC & GAS COMPANY
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
For information regarding legal proceedings see Note 2
"Rate Matters" and Note 4 "Commitments and Contingencies"
of Notes to Consolidated Financial Statements.
Items 2, 3, 4 and 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibits filed with this Quarterly Report on Form 10-Q
are listed in the following Exhibit Index. Certain of
such exhibits which have heretofore been filed with
the Securities and Exchange Commission and which are
designated by reference to their exhibit numbers in
prior filings are hereby incorporated herein by
reference and made a part hereof.
B. Reports on Form 8-K
The Company filed a report on Form 8-K on January 13,
1994 in response to Item 5, "Other Events" regarding
the settlement with Westinghouse Electric Corporation
of a lawsuit relating to the steam generators provided
to the Company's Summer Station.
12
SOUTH CAROLINA ELECTRIC & GAS COMPANY
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.
SOUTH CAROLINA ELECTRIC & GAS COMPANY
(Registrant)
May 11, 1994 By: s/Jimmy E. Addison
Jimmy E. Addison
Vice President and Controller
(Principal Accounting Officer)
13