-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BxFv4oPMrFYNiBadwqpZ2fu4FmUl3ytHjvoPYAgdRq/VoznhP82hGPIiHMjlf/KF sHM1boPzDJ1ohX8Fu7aSug== 0000086521-02-000014.txt : 20020510 0000086521-02-000014.hdr.sgml : 20020510 ACCESSION NUMBER: 0000086521-02-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC ENTERPRISES INC CENTRAL INDEX KEY: 0000075527 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 940743670 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00040 FILM NUMBER: 02641511 BUSINESS ADDRESS: STREET 1: 555 WEST 5TH ST STREET 2: STE 2900 CITY: LOS ANGELES STATE: CA ZIP: 90013 BUSINESS PHONE: 2138955000 MAIL ADDRESS: STREET 1: 555 WEST 5TH STREET STREET 2: SUITE 2900 CITY: LOS ANGELES STATE: CA ZIP: 90013 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC LIGHTING CORP DATE OF NAME CHANGE: 19880224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CALIFORNIA GAS CO CENTRAL INDEX KEY: 0000092108 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 951240705 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01402 FILM NUMBER: 02641512 BUSINESS ADDRESS: STREET 1: 555 W FIFTH ST STREET 2: ML 14H1 CITY: LOS ANGELES STATE: CA ZIP: 90013-1011 BUSINESS PHONE: 2132441200 MAIL ADDRESS: STREET 1: 555 WEST 5TH STREET CITY: LOS ANGELES STATE: CA ZIP: 90051-1011 10-Q 1 pescg10q302.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [..X..] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 March 31, 2002 For the quarterly period ended....................................... Or [.....] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to _________________ Commission Name of Registrant, State of IRS Employer File Incorporation, Address and Identification Number Telephone Number Number - ---------- ---------------------------------- -------------- 1-40 Pacific Enterprises 94-0743670 (A California Corporation) 101 Ash Street San Diego, California 92101 (619) 696-2020 1-1402 Southern California Gas Company 95-1240705 (A California Corporation) 555 West Fifth Street Los Angeles, California 90013 (213) 244-1200 No Change - ----------------------------------------------------------------------- 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 Sections 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. Common Stock outstanding: Pacific Enterprises Wholly owned by Sempra Energy Southern California Gas Company Wholly owned by Pacific Enterprises ITEM 1. FINANCIAL STATEMENTS. PACIFIC ENTERPRISES AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME Dollars in millions
Three Months Ended March 31, ----------------- 2002 2001 ------- ------- Operating Revenues $ 722 $ 1,548 ------- ------- Operating Expenses Cost of natural gas distributed 347 1,151 Other operating expenses 171 188 Depreciation 68 65 Income taxes 47 42 Other taxes and franchise payments 24 34 ------- ------- Total operating expenses 657 1,480 ------- ------- Operating Income 65 68 ------- ------- Other Income and (Deductions) Interest income 2 17 Regulatory interest - net 1 (5) Allowance for equity funds used during construction 2 1 Taxes on non-operating income 3 (2) Other - net 3 (4) ------- ------- Total 11 7 ------- ------- Interest Charges Long-term debt 9 17 Other 9 9 Allowance for borrowed funds used during construction (1) (1) ------- ------- Total 17 25 ------- ------- Net Income 59 50 Preferred Dividend Requirements 1 1 ------- ------- Earnings Applicable to Common Shares $ 58 $ 49 ======= ======= See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in millions
Balance at March 31, December 31, 2002 2001 --------- ------------ ASSETS Property, plant and equipment $6,655 $6,590 Accumulated depreciation (3,853) (3,793) ------ ------ Property, plant and equipment - net 2,802 2,797 ------ ------ Current assets: Cash and cash equivalents 66 13 Accounts receivable - trade 320 415 Accounts receivable - other 43 14 Due from unconsolidated affiliates 181 -- Income taxes receivable -- 20 Deferred income taxes 44 33 Regulatory assets arising from fixed-price contracts and other derivatives 94 103 Fixed-price contracts and other derivatives 12 59 Inventories 13 42 Other 3 4 ------ ------ Total current assets 776 703 ------ ------ Other assets: Due from unconsolidated affiliates 423 409 Regulatory assets arising from fixed-price contracts and other derivatives 342 157 Sundry 131 125 ------ ------ Total other assets 896 691 ------ ------ Total assets $4,474 $4,191 ====== ====== See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in millions
Balance at March 31, December 31, 2002 2001 --------- ------------ CAPITALIZATION AND LIABILITIES Capitalization: Common Stock (600,000,000 shares authorized; 83,917,664 shares outstanding) $1,317 $1,317 Retained earnings 234 177 ------ ------ Total common equity 1,551 1,494 Preferred stock 80 80 ------ ------ Total shareholders' equity 1,631 1,574 Long-term debt 506 579 ------ ------ Total capitalization 2,137 2,153 ------ ------ Current liabilities: Short-term debt -- 50 Current portion of long-term debt 175 100 Accounts payable - trade 195 160 Accounts payable - other 111 81 Due to unconsolidated affiliates 60 168 Regulatory balancing accounts - net 166 85 Income taxes payable 8 -- Dividends and interest payable 37 31 Regulatory liabilities 12 18 Fixed-price contracts and other derivatives 103 103 Other 409 390 ------ ------ Total current liabilities 1,276 1,186 ------ ------ Deferred credits and other liabilities: Customer advances for construction 28 24 Post-retirement benefits other than pensions 86 88 Deferred income taxes 138 110 Deferred investment tax credits 49 50 Regulatory liabilities 99 86 Fixed-price contracts and other derivatives 344 162 Deferred credits and other liabilities 297 312 Preferred stock of subsidiary 20 20 ------ ------ Total deferred credits and other liabilities 1,061 852 ------ ------ Contingencies and commitments (Note 2) Total liabilities and shareholders' equity $4,474 $4,191 ====== ====== See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS Dollars in millions
Three Months Ended March 31, ------------------ 2002 2001 ------ ----- Cash Flows from Operating Activities Net Income $ 59 $ 50 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 68 65 Deferred income taxes and investment tax credits 16 9 Changes in other assets -- 13 Changes in other liabilities (12) (3) Net changes in other working capital components 343 132 ----- ----- Net cash provided by operating activities 474 266 ----- ----- Cash Flows from Investing Activities Capital expenditures (70) (46) Loans repaid by (paid to) affiliates (200) 190 ----- ----- Net cash provided by (used in) investing activities (270) 144 ----- ----- Cash Flows from Financing Activities Common dividends paid (100) (140) Preferred dividends paid (1) (1) Decrease in short-term debt (50) -- ----- ----- Net cash used in financing activities (151) (141) ----- ----- Increase in cash and cash equivalents 53 269 Cash and cash equivalents, January 1 13 205 ----- ----- Cash and cash equivalents, March 31 $ 66 $ 474 ===== ===== Supplemental Disclosure of Cash Flow Information: Interest payments, net of amounts capitalized $ 13 $ 21 ===== ===== Income tax payments, net of refunds $ -- $ 102 ===== ===== See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME Dollars in millions
Three Months Ended March 31, ----------------- 2002 2001 ------- ------- Operating Revenues $ 722 $ 1,548 ------- ------- Operating Expenses Cost of natural gas distributed 347 1,151 Other operating expenses 168 186 Depreciation 68 65 Income taxes 48 44 Other taxes and franchise payments 24 34 ------- ------- Total operating expenses 655 1,480 ------- ------- Operating Income 67 68 ------- ------- Other Income and (Deductions) Interest income 1 9 Regulatory interest - net 1 (5) Allowance for equity funds used during construction 2 1 Taxes on non-operating income 4 (2) Other - net - (1) ------- ------- Total 8 2 ------- ------- Interest Charges Long-term debt 9 17 Other 7 3 Allowance for borrowed funds used during construction (1) (1) ------- ------- Total 15 19 ------- ------- Earnings Applicable to Common Shares $ 60 $ 51 ======= ======= See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in millions
Balance at March 31, December 31, 2002 2001 --------- ------------ ASSETS Utility plant - at original cost $6,531 $6,467 Accumulated depreciation (3,769) (3,710) ------ ------ Utility plant - net 2,762 2,757 ------ ------ Current assets: Cash and cash equivalents 66 13 Accounts receivable - trade 320 415 Accounts receivable - other 43 14 Due from unconsolidated affiliates 181 -- Deferred income taxes 73 62 Regulatory assets arising from fixed-price contracts and other derivatives 94 103 Fixed-price contracts and other derivatives 12 59 Inventories 13 42 Other 3 4 ------ ------ Total current assets 805 712 ------ ------ Other assets: Regulatory assets arising from fixed-price contracts and other derivatives 342 157 Sundry 144 136 ------ ------ Total other assets 486 293 ------ ------ Total assets $4,053 $3,762 ====== ====== See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in millions
Balance at March 31, December 31, 2002 2001 --------- ------------ CAPITALIZATION AND LIABILITIES Capitalization: Common Stock (100,000,000 shares authorized; 91,300,000 shares outstanding) $ 835 $ 835 Retained earnings 430 470 ------ ------ Total common equity 1,265 1,305 Preferred stock 22 22 ------ ------ Total shareholders' equity 1,287 1,327 Long-term debt 506 579 ------ ------ Total capitalization 1,793 1,906 ------ ------ Current liabilities: Short-term debt -- 50 Current portion of long-term debt 175 100 Accounts payable - trade 195 160 Accounts payable - other 111 81 Due to unconsolidated affiliates -- 24 Regulatory balancing accounts - net 166 85 Income taxes payable 63 32 Interest payable 33 29 Regulatory liabilities 12 18 Fixed-price contracts and other derivatives 103 103 Other 408 390 ------ ------ Total current liabilities 1,266 1,072 ------ ------ Deferred credits and other liabilities: Customer advances for construction 28 24 Deferred income taxes 209 183 Deferred investment tax credits 49 50 Regulatory liabilities 185 174 Fixed-price contracts and other derivatives 344 162 Deferred credits and other liabilities 179 191 ------ ------ Total deferred credits and other liabilities 994 784 ------ ------ Contingencies and commitments (Note 2) Total liabilities and shareholders' equity $4,053 $3,762 ====== ====== See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS Dollars in millions
Three Months Ended March 31, ------------------ 2002 2001 ------ ------ Cash Flows from Operating Activities Net income $ 60 $ 51 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 68 65 Deferred income taxes and investment tax credits 13 8 Changes in other assets -- 13 Changes in other liabilities (10) -- Net changes in other working capital components 342 135 ------ ------ Net cash provided by operating activities 473 272 ------ ------ Cash Flows from Investing Activities Capital expenditures (70) (46) Loan repaid by (paid to) affiliate (200) 183 ------ ------ Net cash provided by (used in) investing activities (270) 137 ------ ------ Cash Flows from Financing Activities Dividends paid (100) (140) Decrease in short-term debt (50) -- ------ ------ Net cash used in financing activities (150) (140) Increase in cash and cash equivalents 53 269 Cash and cash equivalents, January 1 13 205 ------ ------ Cash and cash equivalents, March 31 $ 66 $ 474 ====== ====== Supplemental Disclosure of Cash Flow Information: Interest payments, net of amounts capitalized $ 11 $ 15 ====== ====== Income tax payments, net of refunds $ -- $ 90 ====== ====== See notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL This Quarterly Report on Form 10-Q is that of Pacific Enterprises (PE) and of Southern California Gas Company (SoCalGas)(collectively referred to herein as the companies). PE's common stock is wholly owned by Sempra Energy, a California-based Fortune 500 energy services company. SoCalGas' common stock is wholly owned by PE. The financial statements herein are, in one case, the Consolidated Financial Statements of PE and its subsidiary, SoCalGas, and, in the second case, the Consolidated Financial Statements of SoCalGas and its subsidiaries, which comprise less than one percent of SoCalGas' consolidated financial position and results of operations. The accompanying Consolidated Financial Statements have been prepared in accordance with the interim-period-reporting requirements of Form 10-Q. Results of operations for interim periods are not necessarily indicative of results for the entire year. In the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation. These adjustments are only of a normal recurring nature. Certain changes in classification have been made to prior presentations to conform to the current financial statement presentation. The companies' significant accounting policies are described in the notes to Consolidated Financial Statements in the companies' Annual Report on Form 10-K for the year ended December 31, 2001 (Annual Report). The same accounting policies are followed for interim reporting purposes. Information in this Quarterly Report is unaudited and should be read in conjunction with the companies' Annual Report. As described in the notes to Consolidated Financial Statements in the companies' Annual Report, SoCalGas accounts for the economic effects of regulation on utility operations in accordance with Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71). NEW ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board (FASB) issued two statements, SFAS 142 "Goodwill and Other Intangible Assets" and SFAS 143 "Accounting for Asset Retirement Obligations." The former is not presently relevant to the companies. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This applies to legal obligations associated with the retirement of long-lived assets. It requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity increases the carrying amount of the related long-lived asset to reflect the future retirement cost. Over time, the liability is accreted to its present value and paid, and the capitalized cost is depreciated over the useful life of the related asset. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The companies have not yet determined the precise effect of SFAS 143 on their Consolidated Balance Sheets, but have determined that it will not have a material impact on their Statements of Consolidated Income. In August 2001, the FASB issued SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" that replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long-lived assets, including discontinued operations. SFAS 144 requires that those long-lived assets classified as held for sale be measured at the lower of carrying amount or fair value less cost to sell. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. SFAS 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of SFAS 144 are effective for fiscal years beginning after December 15, 2001. The adoption of SFAS 144 has not affected the companies' financial statements. 2. MATERIAL CONTINGENCIES LITIGATION Lawsuits filed in 2000 and currently consolidated in San Diego Superior Court seek class-action certification and allege that Sempra Energy, SoCalGas, SDG&E and El Paso Energy Corp. acted to drive up the price of natural gas for Californians by agreeing to restrict pipeline capacity into California. Management believes the allegations are without merit. Except for the matter referred to above, neither the companies nor their subsidiaries are party to, nor is their property the subject of, any material pending legal proceedings other than routine litigation incidental to their businesses. Management believes that these matters will not have a material adverse effect on the companies' financial condition or results of operations. QUASI-REORGANIZATION In 1993, PE divested its merchandising operations and most of its oil and gas exploration and production business. In connection with the divestitures, PE effected a quasi-reorganization for financial reporting purposes effective December 31, 1992. Management believes the remaining balances of the liabilities established in connection with the quasi- reorganization are adequate. 3. COMPREHENSIVE INCOME The following is a reconciliation of net income to comprehensive income. Pacific Enterprises SoCalGas ------------------- ------------------- Three-month periods Three-month periods ended March 31, ended March 31, ------------------- ------------------- (Dollars in millions) 2002 2001 2002 2001 - --------------------------------------------------------------------- Net income $ 59 $ 50 $ 60 $ 51 Financial instruments (Note 4) (1)* -- (1)* -- ----------------------------------------- Comprehensive income $ 58 $ 50 $ 59 $ 51 - --------------------------------------------------------------------- * This did not affect the reported balance of accumulated other comprehensive income ($0 at the beginning and end of the period) due to rounding. 4. FINANCIAL INSTRUMENTS Note 8 of the notes to Consolidated Financial Statements in the companies' Annual Report discusses the companies' financial instruments, including the adoption of SFAS 133, accounting for derivative instruments and hedging activities, market risk, interest-rate risk management, energy derivatives and contracts, and fair value. Additional activity and information since January 1, 2002 related to financial instruments are described herein. At March 31, 2002, $12 million in current assets, $103 million in current liabilities and $344 million in noncurrent liabilities were recorded in the Consolidated Balance Sheets for fixed-priced contracts and other derivatives. Regulatory assets and liabilities were established to the extent that derivative gains and losses are recoverable or payable through future rates. As such, $94 million in current regulatory assets, $342 million in noncurrent regulatory assets, $2 million in regulatory balancing account liabilities and $1 million in other current liabilities were recorded in the Consolidated Balance Sheets as of March 31, 2002. For the three months ended March 31, 2002, $2 million in other operating losses were recorded in "Other - net" in the Statements of Consolidated Income. Additionally, $2 million was a market value adjustment to long- term debt related to a fixed-to-floating interest rate swap agreement. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements contained in this Form 10-Q and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the companies' Annual Report. INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimates," "believes," "expects," "anticipates," "plans," "intends," "may," "would" and "should" or similar expressions, or discussions of strategy or of plans are intended to identify forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in these forward-looking statements. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others, local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the CPUC, the California Legislature and the FERC; capital market conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory and legal decisions; the pace of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the companies. Readers are cautioned not to rely unduly on any forward-looking statements and are urged to review and consider carefully the risks, uncertainties and other factors which affect the companies' business described in this report and other reports filed by the companies from time to time with the Securities and Exchange Commission. See also "Factors Influencing Future Performance" below. CAPITAL RESOURCES AND LIQUIDITY The companies' California utility operations have historically been a major source of liquidity. See further discussion in the companies' Annual Report. CASH FLOWS FROM OPERATING ACTIVITIES For the three-month period ended March 31, 2002, the increase in cash flows from operations compared to the corresponding period in 2001 is primarily due to greater income tax payments made during the first quarter of 2001 compared to none made during the same period in 2002, and the increase in overcollected regulatory balancing accounts resulting from increased natural gas usage due to cooler winter weather. CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures for property, plant and equipment are estimated to be $300 million for the full year 2002 and are being financed primarily by internally generated funds and security issuances. Construction, investment and financing programs are continuously reviewed and revised in response to changes in competition, customer growth, inflation, customer rates, the cost of capital, and environmental and regulatory requirements. CASH FLOWS FROM FINANCING ACTIVITIES For the three-month period ended March 31, 2002, cash flows used in financing activities increased from the corresponding period in 2001 due primarily to the repayment of short-term debt, partially offset by the decrease in common dividends paid. In April 2002, Fitch, Inc. confirmed its prior credit ratings of the companies' debt; Standard & Poor's reduced its ratings of SoCalGas' secured debt one notch from AA- with a negative outlook to A+ with a stable outlook and made corresponding adjustments in the ratings and outlook of the companies' other debt, including reducing PE's preferred stock from A- to BBB+; and Moody's Investors Service, Inc., confirmed its prior ratings of the debt of SoCalGas. RESULTS OF OPERATIONS The companies' net income increased for the three-month period ended March 31, 2002, compared to the corresponding period in 2001 primarily due to lower operating and interest expenses in 2002. The table below summarizes natural gas volumes and revenues by customer class for the three-month periods ended March 31, 2002 and 2001. Gas Sales, Transportation and Exchange (Volumes in billion cubic feet, dollars in millions)
Gas Sales Transportation & Exchange Total -------------------------------------------------------------- Volumes Revenue Volumes Revenue Volumes Revenue -------------------------------------------------------------- 2002: Residential 95 $ 586 1 $ 2 96 $ 588 Commercial and industrial 29 145 71 31 100 176 Electric generation plants -- -- 43 7 43 7 Wholesale -- -- 45 3 45 3 -------------------------------------------------------------- 124 $ 731 160 $ 43 284 $ 774 Balancing accounts and other (52) -------- Total $ 722 - ------------------------------------------------------------------------------------------ 2001: Residential 104 $1,096 1 $ 2 105 $1,098 Commercial and industrial 28 265 60 56 88 321 Electric generation plants -- -- 100 26 100 26 Wholesale -- -- 52 9 52 9 -------------------------------------------------------------- 132 $1,361 213 $ 93 345 1,454 Balancing accounts and other 94 -------- Total $1,548 - ------------------------------------------------------------------------------------------
The decrease in natural gas revenues was primarily due to lower natural gas prices and decreased transportation for electric generation plants. The decrease in the cost of natural gas distributed was primarily due to lower natural gas prices. Under the current regulatory framework, the cost of natural gas is passed on to customers without markup and changes in core-market natural gas prices do not affect net income since, as explained more fully in the Annual Report, current or future core customer rates normally recover the actual cost of natural gas on a substantially concurrent basis. FACTORS INFLUENCING FUTURE PERFORMANCE Performance of the companies will depend primarily on the ratemaking and regulatory process, electric and natural gas industry restructuring, and the changing energy marketplace. These factors are discussed in the companies' Annual Report. NEW ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board (FASB) issued two statements, SFAS 142 "Goodwill and Other Intangible Assets" and SFAS 143 "Accounting for Asset Retirement Obligations." The former is not presently relevant to the companies. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. In August 2001, the FASB issued SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" that replaces SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 applies to all long- lived assets, including discontinued operations. See further discussion in Note 1 of the notes to Consolidated Financial Statements. ITEM 3. MARKET RISK There have been no significant changes in the risk issues affecting the companies subsequent to those discussed in the Annual Report. As noted in that report, SoCalGas may, at times, be exposed to limited market risk in its natural gas purchase and sale activities as a result of activities under SoCalGas' Gas Cost Incentive Mechanism. The risk is managed within the parameters of the companies' market- risk management and trading framework. As of March 31, 2002, the total Value at Risk of SoCalGas' natural gas positions was not material. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Except as otherwise described in this report, neither the companies nor their subsidiaries are party to, nor is their property the subject of, any material pending legal proceedings other than routine litigation incidental to their businesses. ITEM 5. OTHER INFORMATION A new collective bargaining agreement for field, technical and most clerical employees at SoCalGas represented by the Utility Workers' Union of America or the International Chemical Workers' Council has been negotiated. The new agreement on wages, hours and working conditions is in effect through December 31, 2004. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 12 - Computation of ratios 12.1 Computation of Ratio of Earnings to Fixed Charges of PE. 12.2 Computation of Ratio of Earnings to Fixed Charges of SoCalGas. (b) Reports on Form 8-K There were no reports on Form 8-K filed after December 31, 2001. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly cause this report to be signed on their behalf by the undersigned thereunto duly authorized. PACIFIC ENTERPRISES ------------------- (Registrant) Date: May 9, 2002 By: /s/ F. H. Ault ---------------------------- F. H. Ault Sr. Vice President and Controller SOUTHERN CALIFORNIA GAS COMPANY ------------------------------- (Registrant) By: /s/ D.L. Reed --------------------------- D.L. Reed President and Chief Financial Officer EX-12 3 pecoverageratioq12002.txt EXHIBIT 12.1 PE RATIOS EXHIBIT 12.1 PACIFIC ENTERPRISES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES (Dollars in millions)
Three months ended March 31, 1997 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- --------- Fixed Charges: Interest $ 91 $ 84 $ 82 $ 72 $ 88 $ 18 Interest portion of annual rentals 12 11 3 4 3 - Preferred dividends of subsidiaries (1) 13 2 2 2 2 - -------- -------- -------- -------- -------- --------- Combined Fixed Charges and Preferred Stock Dividends for Purpose of Ratio $116 $ 97 $ 87 $ 78 $ 93 $ 18 ======== ======== ======== ======== ======== ========= Earnings: Pretax income from continuing operations $335 $274 $350 $396 $377 $103 Add Total Fixed Charges (from above) 116 97 87 78 93 18 -------- -------- -------- -------- ------- --------- Total Earnings for Purpose of Ratio $451 $371 $437 $474 $470 $121 ======== ======== ======== ======== ======= ========== Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 3.89 3.82 5.02 6.08 5.05 6.72 ======== ======== ======== ======== ======= ========== (1) In computing this ratio, "Preferred dividends of subsidiaries" represents the before-tax earnings necessary to pay such dividends, computed at the effective tax rates for the applicable periods.
EX-12 4 scgcoverageratios302.txt EXHIBIT 12.2 SCG RATIOS EXHIBIT 12.2 SOUTHERN CALIFORNIA GAS COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
For the three months ended March 31, 1997 1998 1999 2000 2001 2002 -------- -------- -------- -------- -------- -------- Fixed Charges: Interest $ 88 $ 81 $ 62 $ 72 $ 70 $ 16 Interest portion of annual rentals 5 4 3 4 3 - -------- -------- -------- -------- -------- -------- Total Fixed Charges for purpose of ratio $ 93 $ 85 $ 65 $ 76 $ 73 $ 16 ======== ======== ======== ======== ======== ======== Earnings: Pretax income from continuing operations $416 $287 $383 $390 $377 $104 Add Total Fixed Charges (from above) 93 85 65 76 73 16 -------- -------- -------- -------- -------- -------- Total Earnings for Purpose of Ratio $509 $372 $448 $466 $450 $120 ======== ======== ======== ======== ======== ======== Ratio of Earnings To Fixed Charges 5.47 4.38 6.89 6.13 6.16 7.50 ======== ======== ======== ======== ======== ========
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