2
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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,
Incorporated 56-2128483
(a South Carolina Corporation)
1426 Main Street, Columbia, South Carolina 29201
(803) 217-9000
Indicate by check mark whether the registrants: (1) have 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
registrants were required to file such reports), and (2) have 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 last practicable date.
Description of Shares Outstanding
Registrant Common Stock at April 30, 2001
- ---------- ------------ ----------------------------
Public Service Company of
North Carolina, Incorporated Without Par Value 1,0001
1Held beneficially and of record by SCANA Corporation.
Public Service Company of North Carolina, Incorporated meets the
conditions set forth in General Instruction 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).
================================================================================
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2001, as set forth in the pages attached
hereto:
Item 1: Financial Statements
The above item has been amended to revise the Condensed
Consolidated Statements of Cash Flows for the Company to properly
reflect Net Cash Used For Investing Activities for three months ended
March 31, 2001. This revision deleted "Sale of Subsidiary" from Cash
Flows from Investing Activities and added a note in Supplemental Cash
Flow Information related to the sale of PSNC Production Corporation and
SCANA Public Service Company LLC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------
March 31, December 31,
Millions of dollars 2001 2000
- ------------------------------------------------------------------------------------------------------
Assets
Gas Utility Plant $795 $787
Less accumulated depreciation 269 263
Acquisition adjustment, net of accumulated amortization 449 452
- ------------------------------------------------------------------------------------------------------
Gas Utility Plant, Net 975 976
- ------------------------------------------------------------------------------------------------------
Nonutility Property and Investments, Net 29 34
- ------------------------------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments 31 8
Restricted cash and temporary investments - 5
Receivables (net of allowance for uncollectible
accounts of $3 for 2001 and $2 for 2000) 129 148
Inventories (at average cost):
Stored gas 21 32
Materials and supplies 8 7
Other 2 2
- ------------------------------------------------------------------------------------------------------
Total Current Assets 191 202
- ------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Due from affiliate-pension asset 10 10
Regulatory assets 21 21
Other 10 10
- ------------------------------------------------------------------------------------------------------
Total Deferred Charges and Other Assets 41 41
- ------------------------------------------------------------------------------------------------------
Total $1,236 $1,253
======================================================================================================
======================================================================================================
Capitalization and Liabilities
Capitalization:
Common equity $729 $712
Long-term debt, net 295 145
- ------------------------------------------------------------------------------------------------------
Total Capitalization 1,024 857
- ------------------------------------------------------------------------------------------------------
Current Liabilities:
Short-term borrowings - 125
Current portion of long-term debt 4 4
Accounts payable 44 84
Taxes accrued 20 3
Customer prepayments and deposits 4 8
Advances from parent - 44
Dividends declared and interest accrued 10 5
Other 1 1
- ------------------------------------------------------------------------------------------------------
Total Current Liabilities 83 274
- ------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Deferred income taxes, net 83 82
Due to affiliate-postretirement benefits 10 10
Regulatory liabilities 13 5
Other 23 25
- ------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 129 122
- ------------------------------------------------------------------------------------------------------
Total $1,236 $1,253
======================================================================================================
See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(Unaudited)
----------------------------------------------------------------------------------------------
Three Months Ended
March 31,
Millions of dollars 2001 2000
------------------------------------------------------------------------- --------------------
Operating Revenues $228 $169
Cost of Gas 160 103
------------------------------------------------------------------------- --------------------
Gross Margin 68 66
------------------------------------------------------------------------- --------------------
Operating Expenses:
Operation and maintenance 17 17
Depreciation and amortization 10 10
Other taxes 2 2
------------------------------------------------------------------------- --------------------
Total Operating Expenses 29 29
------------------------------------------------------------------------- --------------------
Operating Income 39 37
Other Income, net 1 1
Interest Charges 5 5
------------------------------------------------------------------------- --------------------
Income Before Income Taxes and 35 33
Cumulative Effect of Accounting Change
Income Taxes 15 14
------------------------------------------------------------------------- --------------------
Income Before Cumulative Effect of Accounting Change 20 19
Cumulative Effect of Accounting Change,
net of taxes (Note 2) - 7
------------------------------------------------------------------------- --------------------
------------------------------------------------------------------------- --------------------
Net Income 20 26
Retained Earnings at Beginning of Period 9 73
Acquisition of Company - (73)
Common Stock Cash Dividends Declared (6) (6)
------------------------------------------------------------------------- --------------------
------------------------------------------------------------------------- --------------------
Retained Earnings at End of Period $23 $20
========================================================================= ====================
See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------------------------
Three Months Ended
March 31
Millions of dollars 2001 2000
- ------------------------------------------------------------------------------------- ------------
Cash Flows From Operating Activities:
Net income $20 $26
Adjustments to reconcile net income to net cash provided
from operating activities:
Cumulative effect of accounting change, net of taxes - (7)
Depreciation and amortization 12 12
Equity in earnings of investee (1) (2)
Over (under) collection, fuel adjustment clause 13 17
Changes in certain assets and liabilities:
(Increase) decrease in receivables, net 12 -
(Increase) decrease in inventories 10 15
Increase (decrease) in accounts payable and advances (75) (11)
Increase (decrease) in regulatory liabilities (5) -
Increase (decrease) in deferred income taxes, net 1 1
Increase (decrease) in accrued taxes 18 19
Other, net 2 (9)
- ------------------------------------------------------------------------------------- ------------
Net Cash Provided From Operating Activities 7 61
- ------------------------------------------------------------------------------------- ------------
Cash Flows From Investing Activities:
Construction expenditures (11) (8)
Investments 5 -
Nonutility and other 2 2
- ------------------------------------------------------------------------------------- ------------
Net Cash Used For Investing Activities (4) (6)
- ------------------------------------------------------------------------------------- ------------
Cash Flows From Financing Activities:
Issuance of medium-term notes 149 -
Repayment of short-term borrowings, net (125) (48)
Retirement of long-term debt and common stock - (1)
Cash dividends (4) (5)
- ------------------------------------------------------------------------------------- ------------
Net Cash Provided From (Used For) Financing Activities 20 (54)
- ------------------------------------------------------------------------------------- ------------
Net Increase In Cash and Temporary Cash Investments 23 1
Cash and Temporary Cash Investments, January 1 8 9
- ------------------------------------------------------------------------------------- ------------
Cash and Temporary Cash Investments, March 31 $31 $10
===================================================================================== ============
Supplemental Cash Flow Information:
Cash paid for - Interest (net of capitalized interest of $0.3 for
2001 and $0.2 for 2000) $2 $3
- Income taxes - 1
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 $466
million acquisition adjustment.
Effective January 1, 2001 PSNC Production Corporation and SCANA Public Service
Company LLC were sold to SCANA Energy Marketing, Inc., an affiliate, for $4.4
million, which approximated net book value. Assets transferred included
approximately $4.0 million in cash.
See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
The following notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in Public Service Company of North
Carolina, Incorporated's (the Company) Annual Report on Form 10-K for the year
ended December 31, 2000. These are interim financial statements, and due to the
seasonality of the Company's business, the amounts reported in the Condensed
Consolidated Statements of Income are not necessarily indicative of amounts
expected for the year. In the opinion of management, the information furnished
herein reflects all adjustments, all of a normal recurring nature except as
described in Notes 2, 3, 4 and 5, which are necessary for a fair statement of
the results for the interim periods reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Accounting
The Company accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) 71. This accounting standard requires
cost-based rate-regulated utilities to recognize in their financial
statements revenues and expenses in different time periods than do
enterprises that are not rate-regulated. As a result the Company has
recorded, as of March 31, 2001, approximately $21 million and $13
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax liabilities of approximately
$0.3 million. The regulatory assets are recoverable through rates. In
the future, as a result of deregulation or other changes in the
regulatory environment, the Company 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 the Company's results of operations in the period the
write-off would be recorded, but it is not expected that cash flows or
financial position would be materially affected.
B. New Accounting Standard
Effective January 1, 2001 the Company adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended. The
Company's adoption of SFAS 133, as amended, did not have a material
impact on the Company's results of operations, cash flows or financial
position.
C. Reclassifications
Certain amounts from prior periods have been reclassified to conform
with the presentation adopted for 2001.
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 taxes.
Accruing unbilled revenues more closely matches revenues and expenses.
Unbilled revenues represent the estimated amount customers will be
charged for service rendered but not yet billed as of the end of the
accounting period. Also, effective January 1, 2000 the gas costs
associated with unbilled revenues are no longer deferred.
3. ACQUISITION BY SCANA CORPORATION
On February 10, 2000 the acquisition of the Company by SCANA
Corporation (SCANA) was consummated in a business combination accounted
for as a purchase. As a result the Company became a wholly owned
subsidiary of SCANA. Pursuant to the Agreement and Plan of Merger, the
Company shareholders were paid approximately $212 million in cash and
17.4 million shares of SCANA common stock valued at approximately $488
million.
The Company has recorded a utility plant acquisition adjustment of
approximately $466 million, which reflects the excess of SCANA's
purchase price of approximately $700 million over the fair value of the
Company's net assets at January 1, 2000. The adjustment is being
amortized over 35 years on the straight-line basis. Common equity at
March 31, 2001 reflects this acquisition adjustment.
The Company 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 the Company in connection
with deferred compensation and retirement plans, and approximately $8.1
million was paid to participants in the Company's nonqualified stock
option plans.
4. SALE OF PSNC PRODUCTION CORPORATION AND SCANA PUBLIC SERVICE LLC
PSNC Production Corporation and SCANA Public Service Company LLC were
sold to SCANA Energy Marketing, Inc., a subsidiary of SCANA, for $4.4
million, which approximated net book value, effective January 1, 2001.
5. RATE AND OTHER REGULATORY MATTERS
On April 6, 2000 the North Carolina Utilities Commission (NCUC) issued
an order permanently approving the Company's request to establish its
commodity cost of gas for large commercial and industrial customers on
the basis of market prices for natural gas. The NCUC previously allowed
the Company use of this mechanism on a trial basis. This procedure
allows the Company 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.
A state expansion fund, established by the North Carolina General
Assembly in 1991 and funded by refunds from the Company's interstate
pipeline transporters, provides financing for expansion into areas that
otherwise would not be economically feasible to serve. On December 30,
1999 the Company filed an application with the NCUC to extend natural
gas service to Madison, Jackson and Swain Counties. Pursuant to state
statutes, the NCUC required the Company 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 the Company's
requests for reinstatement of its exclusive franchises for Madison,
Jackson and Swain Counties and disbursement of up to $28.4 million from
the Company's expansion fund for this project. The Company estimates
that the cost of this project will be approximately $31.4 million.
On December 7, 1999 the NCUC issued an order approving the
acquisition of the Company by SCANA. As specified in the NCUC order,
the Company reduced its rates by approximately $1 million in August
2000, will reduce rates another $1 million in August 2001 and has
agreed to a moratorium on general rate cases until August 2005. General
rate relief can be obtained during this period to recover costs
associated with materially adverse governmental actions and force
majeure events.
6. LONG-TERM DEBT
On February 16, 2001 the Company issued $150 million of medium-term
notes having an annual interest rate of 6.625 percent and maturing on
February 15, 2011. The proceeds from these borrowings were used to
reduce short-term debt and for general corporate purposes.
7. CONTINGENCIES
The Company owns, or has owned, all or portions of seven sites in North
Carolina on which manufactured gas plants (MGP) 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. An environmental due
diligence review of the Company conducted in February 1999 estimated
that the cost to remediate the remaining 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. The
Company 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 Company'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 (PRP). An order of the NCUC dated May 11, 1993 authorized
deferral accounting for all costs associated with the investigation and
remediation of MGP sites. As of March 31, 2001
the Company 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. Amounts incurred to date are not
material.
Management intends to request recovery of additional MGP cleanup costs
not recovered from other PRPs in future rate case filings, and believes
that all costs incurred will be recoverable in gas rates.
8. SEGMENT OF BUSINESS INFORMATION
For the three months ended March 31, 2001 Gas Distribution is the
Company's only reportable segment. Gas Distribution uses operating
income to measure profitability. Effective January 1, 2001 PSNC
Production Corporation and SCANA Public Service Company LLC (SCANA
Public Service) were sold to SCANA Energy Marketing, Inc., a subsidiary
of SCANA (see Note 4). In 2000 SCANA Public Service was an Energy
Marketing segment of the Company and used net income to measure
profitability.
Disclosure of Reportable Segments
(Millions of Dollars)
- ------------------------------------------------------- --------- ----------------- ---------------
Three months ended Gas Energy All Adjustments/ Consolidated
March 31, 2001 Distribution Marketing Other Eliminations Total
- ------------------------------------------------------- --------- ----------------- ---------------
External Revenue $228 n/a - - $228
Intersegment Revenue - n/a - - -
Operating Income 39 n/a n/a - 39
Segment Assets 1,232 n/a 29 (25) 1,236
- ------------------------------------------------------- --------- ----------------- ---------------
Three months ended Gas Energy All Adjustments/ Consolidated
March 31, 2000 Distribution Marketing Other Eliminations Total
- ------------------------------------------------------- --------- ----------------- ---------------
External Revenue $166 $31 - $(28) $169
ntersegment Revenue - 2 (32) -
Operating Income 36 n/a $30 1 37
n/a
Net Income n/a 1
1 24 1 26
Segment Assets 1,133 18 (65)
54 1,140
1 Includes cumulative effect of accounting change
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
1426 Main Street
Columbia, South Carolina 29218
May 17, 2001
Document Control - EDGAR
U. S. Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
We are transmitting for filing pursuant to the Securities Act of 1933,
as amended, the following:
Form 10-Q/A Amendment No. 1 to Form 10-Q for the quarter ended March
31, 2001. This amendment revises Public Service Company of North Carolina,
Incorporated's Condensed Consolidated Statements of Cash Flows to properly
reflect Net Cash Used For Investing Activities for the three months ended March
31, 2001.
Please call me at (803) 217-9257 if you have any comments or questions.
Sincerely,
s/Mark L. Sparks
Mark L. Sparks
Team Leader
/vaw
Enclosures