Exhibit 99.1
PRESS RELEASE DATED OCTOBER 22, 2004
For Immediate Release
Media Contact: Investor Contact:
Cathy Love John Winn
(803) 217-7777 (803) 217-9240
clove@scana.com jwinn@scana.com
SCANA Reports Financial Results for Third Quarter 2004,
Updates Earnings Guidance
Columbia, SC, October 22, 2004...SCANA Corporation (NYSE: SCG) today announced
financial results for the three and nine months ended September 30, 2004, and
narrowed its previous guidance for 2004 earnings.
Reported earnings for the three months ended September 30, 2004 were $54
million, or 48 cents per share, compared to $84 million, or 76 cents per share
for the third quarter of 2003. Earnings reported for the third quarter of 2004
include an after-tax write-down of approximately $15 million, or 13 cents per
share, related to the valuation of the Company's investment in Knology, a
regional telecommunications provider headquartered in West Point, Georgia, and
an after-tax charge of $11 million, or 10 cents per share, related to litigation
associated with the sale of the Company's propane assets in 1999. Reported
earnings for the third quarter of 2003 included an after-tax gain of $2 million,
or 2 cents per share, related to the sale of a portion of the Company's
investment in ITC Holding Company. Excluding those items in both periods,
GAAP-adjusted net earnings from operations for the third quarter of 2004 were
$80 million, or 71 cents per share, compared to $82 million, or 74 cents per
share, for the same period in 2003.
SCANA's reported earnings are prepared in accordance with Generally Accepted
Accounting Principles (GAAP). SCANA's management believes that, in addition to
reported earnings under GAAP, the GAAP-adjusted net earnings per share from
operations provides a meaningful representation of the Company's fundamental
earnings power and can aid in analysis of period-over-period financial
performance. A reconciliation of reported (GAAP) earnings per share to
GAAP-adjusted net earnings per share from operations for the three months and
nine months ended September 30, 2004 and 2003 is provided in the following
table:
3 Months Ended September 30, 9 Months Ended September 30,
2004 2003 2004 2003
---- ---- ---- ----
Reported (GAAP) Earnings per Share $.48 $.76 $1.93 $2.18
Add:
Impairment Charge on Knology Investment .13 -
..13 .04
Charge Related to Pending Litigation .10 .10
Deduct:
Gain on Sale of ITC Holding Company Investment - (.02) - (.35)
GAAP-Adjusted Net Earnings per Share From Operations $.71 $.74 $2.16 $1.87
"The 3 cents per share decline in third quarter GAAP-adjusted net earnings from
operations was due in part to costs we began recording in May when the Company's
new 875 megawatt Jasper Electric Generating Station began commercial operation,"
said Kevin Marsh, senior vice president and chief financial officer. "These
costs were included in the retail electric rate increase request we filed with
the South Carolina Public Service Commission earlier this year. In addition, we
recorded an increase in other operation and maintenance expenses. Depreciation
expense, property taxes and interest expense also increased compared to the
third quarter of last year, reflecting additions to property and higher millage
rates. Those higher expenses more than offset the favorable impact of an
improved electric sales margin reflecting increased off-system sales, customer
growth and slightly more favorable weather."
Although the weather across the Company's electric service area during the third
quarter, as measured by cooling degree days, was 6 percent cooler than normal,
it was 2.5 percent warmer than during the same quarter last year. The slightly
warmer temperatures, combined with a 2.5 percent increase in customers, resulted
in a 3.7 percent increase in retail kilowatt-hour sales of electricity compared
to the same quarter in 2003. Residential sales were up 3.8 percent, commercial
sales increased 3.2 percent, and sales to industrial customers rose 4.1 percent.
Wholesale, or off-system sales, were up nearly 85 percent, principally
reflecting sales under long-term contracts that began in January 2004. Total
kilowatt-hour sales of electricity in the third quarter were up 10 percent
compared to the third quarter of 2003.
Marsh noted that SCANA's businesses did not sustain any significant damage from
the hurricanes and tropical storms that moved through South Carolina during the
third quarter. "The major storms that hit the U.S. this summer were
unprecedented, both in terms of their number and intensity," said Marsh. "We
were very fortunate that our service area did not receive the extensive property
damage and extended power outages that devastated portions of Florida and other
states. We did send our storm teams and contract crews to assist other
southeastern utilities with power restoration efforts following four of these
major storms."
Reported (GAAP) earnings for the nine months ended September 30, 2004 were $215
million, or $1.93 per share. Those results include the after-tax write-down of
$15 million, or 13 cents per share, related to the valuation of the Company's
Knology investment and the after-tax charge of $11 million, or 10 cents per
share, related to pending litigation that were recorded in the third quarter. By
comparison, reported earnings for the nine months ended September 30, 2003, were
$242 million, or $2.18 per share. Those prior period results included a net
after-tax gain of $34 million, or 31 cents per share, related to the
monetization and valuation of the Company's telecommunications assets. Excluding
these items in both periods, GAAP-adjusted net earnings from operations for the
nine months ended September 30, 2004 were $241 million, or $2.16 per share,
compared to $208 million, or $1.87 per share, for the same period in 2003.
"We are pleased with the financial performance we have achieved through the
first nine months of 2004," said Marsh. "On the basis of those results, we
anticipate that our full-year 2004 GAAP-adjusted net earnings from operations
will be in the upper half of our guidance of $2.55 to $2.75 per share," said
Marsh. "Taking into consideration the effect of the write-down of the Company's
Knology investment and the charge related to pending litigation discussed below,
the Company anticipates that reported (GAAP) earnings in 2004 will be 23 cents
per share lower than the GAAP-adjusted net earnings per share from operations."
QUARTERLY RESULTS BY MAJOR LINES OF BUSINESS
South Carolina Electric & Gas Company
Reported earnings in the third quarter of 2004 at South Carolina Electric & Gas
Company (SCE&G) were $85 million, or 76 cents per share, compared to $88
million, or 80 cents per share, in the third quarter of 2003. That decline was
due primarily to increases in operating and maintenance expenses, depreciation
expense, interest expense and property taxes. At September 30, 2004, SCE&G was
serving approximately 581,000 electric customers and 276,000 natural gas
customers, up 2.5 percent and 2.2 percent, respectively, over the past year.
PSNC Energy
PSNC Energy, the Company's North Carolina-based retail natural gas distribution
subsidiary, reported a seasonal loss of $6 million, or 6 cents per share, in the
third quarter of 2004, relatively unchanged compared to a loss of $7 million, or
6 cents per share, in the same quarter in 2003. At September 30, 2004, PSNC
Energy was serving approximately 391,000 customers, an increase of 3.5 percent
over the last twelve months.
South Carolina Pipeline Corporation
South Carolina Pipeline, SCANA's intrastate natural gas transmission subsidiary,
reported earnings of $1 million, or 1 cent per share, in the third quarter of
2004, compared to breakeven results in the same quarter last year. That
improvement was due primarily to higher revenue from increased transportation
volumes.
SCANA Energy - Georgia
SCANA Energy, the Company's non-regulated retail natural gas marketing business
in Georgia, reported a loss of $1 million, or 1 cent per share, in the third
quarter of 2004, compared to breakeven results in the third quarter of 2003.
That decline was due to higher operating and customer service expenses, which
more than offset a higher sales margin resulting primarily from customer growth.
At September 30, 2004 SCANA Energy was serving more than 450,000 customers,
which maintains the company's position as the second largest natural gas
marketer in Georgia with about a 30 percent market share.
Corporate and Other
SCANA's corporate and other businesses reported a combined loss of $25 million,
or 22 cents per share, in the third quarter of 2004, compared to earnings of $2
million, or 2 cents per share, in the third quarter of 2003. Excluding the
impact of the valuation and monetization of the Company's telecommunications
investments in both periods and the charge related to pending litigation in
2004, combined GAAP-adjusted net earnings from operations for these businesses
were $1 million, or 1 cent per share, in the third quarter of 2004 compared to
breakeven results in the third quarter of 2003.
UPDATE ON PENDING RETAIL ELECTRIC RATE CASE
On July 1, 2004, SCE&G filed an application with the South Carolina Public
Service Commission (SCPSC) requesting an increase in retail electric base rates
of approximately $81.2 million annually, or 5.66 percent, based on an adjusted
test year of March 31, 2004. That increase is largely associated with recovering
the construction and operating costs associated with the Jasper Electric
Generating Station, which began commercial operation on May 1, 2004, recovery of
costs related to mandatory environmental upgrades at the company's electric
generating facilities, and increases in other expenses. In its application,
SCE&G also requested Commission approval of an accounting plan that would apply
current and anticipated synthetic fuel tax credits to offset the cost of
constructing the back-up dam at Lake Murray near Columbia, South Carolina. Work
on this $275 million project, which was mandated by the Federal Energy
Regulatory Commission to help ensure the safety of the dam in the event of a
major earthquake, continues on budget and on schedule for completion in 2005.
The SCPSC has scheduled a public hearing on the company's application beginning
November 1, 2004. If approved, the new rates would go into effect in January
2005.
On October 18, 2004 SCE&G announced that it had entered into a stipulation and
settlement agreement with the Staff of the SCPSC in connection with this
application. The settlement agreement is subject to review and approval by the
South Carolina Public Service Commission following the public hearing that
begins on November 1, 2004. The settlement agreement covers all of the major
issues addressed in SCE&G's application and, if approved, would result in an
overall increase in retail electric revenues of approximately $51.1 million, or
3.57 percent based on an adjusted test year ended March 31, 2004, or about 63
percent of the overall revenue increase requested by the company in its
application. The settlement agreement establishes an allowed return on common
equity in a range of 11.4 percent to 10.4 percent, with rates to be set based on
the midpoint of that range of 10.9 percent. Among other things, the settlement
agreement approves SCE&G's proposal to use current and anticipated synthetic
fuel tax credits to offset the capital cost of the Lake Murray Dam remediation
project.
"We are pleased to have reached agreement with a key party to this proceeding
and are seeking a similar agreement with other intervenors," said Marsh. "This
agreement balances the needs of SCE&G's customers and SCANA's shareholders, and
we believe it is consistent with the spirit of prior Commission rulings."
UPDATE ON PENDING LITIGATION
As previously disclosed by SCANA, in 1999 Heritage Propane, LLP, an unsuccessful
bidder for the purchase of SCANA's non-regulated propane gas assets, filed suit
against the Company in South Carolina Circuit Court. In this suit, Heritage
alleged the existence of a contract for the sale of assets to it and various
causes of action associated with that contract, and sought actual and punitive
damages. In this matter Heritage was a bidder for the SCANA's propane properties
but was outbid by Suburban Propane LP during negotiations in September of 1999.
As reported in the Company's 1999 Form 10-K filed with the Securities and
Exchange Commission, Suburban Propane purchased SCANA's propane assets for $94.5
million, which resulted in a one-time, after-tax gain for SCANA of $29.9
million, or 29 cents per share.
SCANA vigorously defends its position in this case based primarily on the
provisions of a confidentiality agreement that Heritage signed in connection
with this proposed transaction. In this confidentiality agreement, Heritage
acknowledged that no contract or agreement providing for a business transaction
would exist until both parties signed a final definitive agreement. No
definitive agreement was ever completed or signed by SCANA or Heritage. The
confidentiality agreement also stated that letters of intent, preliminary
agreements, or oral acceptance of offers or bids would not qualify as a
definitive agreement.
On October 20, 2004, testimony from all parties was concluded in South Carolina
Circuit Court and the case was sent to the jury. On October 21, 2004, the jury
issued its verdict on this matter against the Company for four causes of action
for damages totaling $48 million. The judge granted all parties 10 days to file
post-verdict motions, and the Company believes that a final judgment is likely
from the Court within 30 days. It is our interpretation that the damages awarded
with respect to certain causes of action are overlapping. Therefore, it is our
belief that a reasonably possible estimate of the total damages based on the
amounts awarded by the jury will be in the range of $18 - $36 million. However,
the Company believes that the verdict was inconsistent with the facts presented
and applicable law and intends to appeal any adverse judgment by the Circuit
Court.
Based on the current status of this matter, and in accordance with GAAP, we have
recorded a pre-tax charge to earnings in the third quarter of 2004 of $18
million, $11 million after-tax, or 10 cents per share, which is our reasonable
estimate of the loss that is probable if the final judgment is consistent with
the jury verdict.
EARNINGS OUTLOOK
The Company currently expects that GAAP-adjusted net earnings from operations in
2004 will be in the upper half of its previously announced range of $2.55 -
$2.75 per share. Taking into consideration the effect of the write-down of the
Company's Knology investment and the charge related to pending litigation
recorded in the third quarter, the Company anticipates that reported (GAAP)
earnings in 2004 will be 23 cents per share lower than the GAAP-adjusted net
earnings per share from operations. The 2004 guidance assumes normal weather in
the Company's electric and natural gas service areas during the fourth quarter
of 2004 and excludes any potential gains or losses from investing activities or
sales of certain assets. Other factors that may impact future earnings are
discussed in the Company's Securities and Exchange Commission filings and below
under the Safe Harbor Statement.
PROFILE
SCANA Corporation, a Fortune 500 company headquartered in Columbia, South
Carolina, is an energy-based holding company principally engaged, through
subsidiaries, in electric and natural gas utility operations, telecommunications
and other energy-related businesses. The Company serves approximately 581,000
electric customers in South Carolina and more than one million natural gas
customers in South Carolina, North Carolina and Georgia. Information about SCANA
and its businesses is available on the Company's website at www.scana.com.
CONFERENCE CALL NOTICE
SCANA will host its quarterly conference call for security analysts at 10:00
a.m. Eastern Time today. The call-in numbers for the conference call are
1-800-374-2396 (US/Canada) and 1-706-679-5430 (International). Participants
should call in 5 to 10 minutes prior to the scheduled start time. There is no
password or I.D. number required. A tape recording of the conference call will
be available approximately 2 hours after conclusion of the call through November
5, 2004. The telephone replay numbers are 1-800-642-1687 (US/Canada) and
1-706-645-9291 (International). The conference I.D. number for the telephone
replay is 242632. A transcript of the conference call will be available in the
Investor Information section of the Company's web site.
All interested persons, including investors, media and the general public, may
listen to a live web cast of the conference call at either of the following
internet web sites: www.scana.com or www.videonewswire.com/SCG/102204.
Participants should go to either of these web sites at least 10 minutes prior to
the call start time and follow the instructions. A replay of the conference call
will be available approximately 2 hours after conclusion of the call through
November 5, 2004 on either of these web sites.
SAFE HARBOR STATEMENT
This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Those statements include statements
regarding the intent, belief or current expectations of the Company and its
management. Although SCANA Corporation believes that its expectations are based
on reasonable assumptions, it can give no assurance that its goals will be
achieved. Readers are cautioned that any 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) regulatory actions or changes in the
utility and non-utility regulatory environment, (3) changes in the economy,
especially in areas served by the Company's subsidiaries, (4) the impact of
competition from other energy suppliers, including competition from alternate
fuels in industrial interruptible markets, (5) growth opportunities for the
Company's regulated and diversified subsidiaries, (6) the results of financing
efforts, (7) changes in the Company's accounting policies, (8) weather
conditions, especially in areas served by the Company's subsidiaries, (9)
performance of and marketability of the Company's investments in
telecommunications companies, (10) performance of the Company's pension plan
assets, (11) inflation, (12) changes in environmental regulations, (13)
volatility in commodity natural gas markets and (14) the other risks and
uncertainties described from time to time in the Company's periodic reports
filed with the Securities and Exchange Commission. The Company disclaims any
obligation to update any forward-looking statements.
# # #
FINANCIAL AND OPERATING INFORMATION
Condensed Consolidated Statements of Income
(Millions, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating Revenues:
Electric $492 $429 $1,306 $1,121
Gas-regulated 162 155 776 775
Gas-non-regulated 203 167 750 650
--- ----- --- ---
Total Operating Revenues 857 751 2,832 2,546
--- --- ----- -----
Operating Expenses:
Fuel and purchased power 150 110 398 297
Gas purchased for resale 300 262 1,206 1,127
Other operation and maintenance 142 135 440 420
Depreciation and amortization 68 60 198 180
Other taxes 36 34 112 104
-- -- --- ---
Total Operating Expenses 696 601 2,354 2,128
--- --- ----- -----
Operating Income 161 150 478 418
--- --- --- ---
Other Income (Expense), Net (31) 19 2 101
Interest Charges, Net 50 48 151 149
Income Tax Expense 24 35 108 120
Preferred Dividend Requirement
of SCE&G - Mandatorily Redeemable
Preferred Securities - - - (2)
Preferred Stock Cash Dividends
of SCE&G (2) (2) (6) (6)
----- ----- --- ---
Net Income $54 $84 $215 $242
-- -- --- ---
Common Stock Data:
Wtg. Avg. Common Shares Outstanding 111.8 110.9 111.3 110.9
Basic and Diluted Reported Earnings
per Share $.48 $.76 $1.93 $2.18
Condensed Consolidated Balance Sheets
(Millions) (Unaudited)
September 30, December 31,
2004 2003
---- ----
ASSETS
Utility Plant, Net $6,659 $6,417
Other Property and Investments 296 318
Current Assets 907 893
Deferred Debits 841 830
-------- --------
Total Assets $8,703 $8,458
------ ------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Equity $2,442 $2,306
Preferred Stock 115 115
Long-Term Debt, Net 3,185 3,225
------- -----
Total Capitalization 5,742 5,646
------- -----
Current Liabilities:
Short-Term Borrowings 184 195
Current Portion of Long-Term Debt 258 202
Other Current Liabilities 517 626
--- ---
Total Current Liabilities 959 1,023
-------- -----
Deferred Credits 2,002 1,789
------- -----
Total Capitalization and Liabilities $8,703 $8,458
------ ------
Reported Earnings (Loss) per Share (GAAP Basis):
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ----- ---- ----
SC Electric & Gas $.76 $.80 $1.75 $1.57
PSNC Energy (.06) (.06) .11 .15
SC Pipeline .01 .00 .07 .04
SCANA Energy-Georgia (.01) .00 .21 .15
Corporate and Other Non-regulated, Net (.22) .02 (.21) .27
---- --- ------ ---
Reported (GAAP) Earnings per Share $.48 $.76 $1.93 $2.18
---- ---- ----- -----
GAAP-Adjusted Net Earnings (Loss) per Share From Operations:
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ----- ---- ----
SC Electric & Gas $.76 $.80 $1.75 $1.57
PSNC Energy (.06) (.06) .11 .15
SC Pipeline .01 .00 .07 .04
SCANA Energy-Georgia (.01) .00 .21 .15
Corporate and Other Non-regulated, Net .01 .00 .02 (.04)
--- --- --- -----
GAAP-Adjusted Net Earnings from Operations per Share $.71 $.74 $2.16 $1.87
---- ---- ----- -----
Variances in Reported Earnings (Loss) per Share:
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 Basic and Diluted Reported (GAAP) Earnings Per Share $.76 $2.18
Variances:
Electric Margin .12 .46
Gas Margin .03 .12
O&M Expense (.04) (.11)
Depreciation Expense (.05) (.10)
Property Taxes (.01) (.04)
Interest Expense (net of AFDC) (.01) (.01)
Additional Shares Outstanding (Dilution) (.01) (.01)
Other, Net (.06) (.02)
Variance in GAAP-Adjusted Net Earnings per Share From Operations (.03) .29
Gain on Sale of ITC Holding Company Investment (.02) (.35)
Charge Related to Pending Litigation (.10) (.10)
Impairment Charge on Knology Investment (.13) (.09)
---- ----
Variance in Reported (GAAP) Earnings per Share (.28) (.25)
---- ----
2004 Basic and Diluted Reported (GAAP) Earnings Per Share $.48 $1.93
---- -----
Consolidated Operating Statistics
Three Months Ended September 30, Nine Months Ended September 30,
2004 2003 % Change 2004 2003 % Change
---- ---- -------- ---- ---- --------
Electric Operations:
Sales (Million KWH):
Residential 2,150 2,071 3.8 5,815 5,383 8.0
Commercial 1,968 1,907 3.2 5,285 5,034 5.0
Industrial 1,772 1,702 4.1 5,122 4,938 3.7
Other 145 139 4.3 403 381 5.8
--- --- --- ---
Retail Sales 6,035 5,819 3.7 16,625 15,736 5.6
Wholesale 952 516 84.5 2,569 1,464 75.5
--- --- ----- -----
Total Sales 6,987 6,335 10.3 19,194 17,200 11.6
----- ----- ------ ------
Customers 581 567 2.5
(Period-End, Thousands)
Natural Gas Operations:
Sales (Thousand Dekatherms):
Residential 4,483 4,170 7.5 45,408 43,995 3.2
Commercial 5,982 5,656 5.8 28,739 27,846 3.2
Industrial 33,066 28,909 14.4 95,035 84,046 13.1
------ ------ ------ ------
Sales to Ultimate Consumers 43,531 38,735 12.4 169,182 155,887 8.5
Sales for Resale 2,968 2,108 40.8 7,378 11,461 (35.6)
Transportation Volumes 17,720 8,416 110.6 47,689 25,422 87.6
------ ----- ------ ------
Total Sales 64,219 49,259 30.4 224,249 192,770 16.3
------ ------ ------- -------
Customers 1,121 1,039 7.9
(Period-End, Thousands)
Weather Data - Electric Service Territory:
Three Months Ended September 30, Nine Months Ended September 30,
Actual Percent Change Actual Percent Change
2004 vs 2003 vs Normal 2004 vs 2003 vs Normal
---- ------- --------- ---- ------- ---------
Heating Degree Days 1 (87.5) (80.0) 1,469 5.7 10.3
Cooling Degree Days 1,305 2.5 (5.8) 2,232 12.4 2.3
Security Credit Ratings (as of 10/22/04):
Standard & Poor's Moody's
----------------- -------
Rating Outlook Rating Outlook
SCANA Corporation:
Corporate/Issuer Rating A- Stable A3 Stable
Senior Unsecured BBB+ Stable A3 Stable
South Carolina
Electric & Gas Company:
Corporate/Issuer Rating A- Stable A2 Stable
Senior Secured A- Stable A1 Stable
Commercial Paper A-2 Stable P-1 Stable
PSNC Energy:
Senior Unsecured A- Stable A2 Stable
Commercial Paper A-2 Stable P-1 Stable