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GENERAL INFORMATION AND OTHER FINANCIAL DATA (Tables)
 3 Months Ended
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Cash and Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Balance Sheets to the sum of such amounts reported on the Condensed Consolidated Statements of Cash Flows. We provide information about the nature of restricted cash in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
 
March 31,
December 31,
 
2020
2019
Sempra Energy Consolidated:
 
 
Cash and cash equivalents
$
2,247

$
108

Restricted cash, current
23

31

Restricted cash, noncurrent
3

3

Cash, cash equivalents and restricted cash in discontinued operations
181

75

Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows
$
2,454

$
217
Accounts Receivable, Allowance for Credit Loss Table
We provide below allowances and changes in allowances for credit losses for trade and other accounts receivable, excluding allowances related to amounts due from unconsolidated affiliates and off-balance sheet arrangements, which we discuss separately below the table.
TRADE AND OTHER ACCOUNTS RECEIVABLE – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
 
 
 
Sempra Energy Consolidated(1)
SDG&E(2)
SoCalGas(3)
Allowances for credit losses at December 31, 2019
$
29

$
14

$
15

Incremental allowance upon adoption of ASU 2016-13
1

—

—

Provisions for expected credit losses
6

3

3

Write-offs
(4
)
(3
)
(1
)
Recoveries
1

1

—

Allowances for credit losses at March 31, 2020
$
33

$
15

$
17

(1) 
Balance at March 31, 2020 includes $9 million and $24 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(2) 
Balance at March 31, 2020 includes $4 million and $11 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
(3) 
Balance at March 31, 2020 includes $4 million and $13 million in Accounts Receivable – Trade, Net and Accounts Receivable – Other, Net, respectively.
Financing Receivable, Allowance for Credit Loss We provide below the changes in allowances for credit losses for loans and other amounts due from unconsolidated affiliates.
AMOUNTS DUE FROM UNCONSOLIDATED AFFILIATES – ALLOWANCES FOR CREDIT LOSSES
 
(Dollars in millions)
 
Sempra Energy Consolidated(1)
Allowances for credit losses at December 31, 2019
$
—

Allowance established upon adoption of ASU 2016-13
6

Provisions for expected credit losses
1

Allowances for credit losses at March 31, 2020
$
7

(1) 
Balance at March 31, 2020 includes negligible amounts and $7 million in Due from Unconsolidated Affiliates – Current and Due from Unconsolidated Affiliates – Noncurrent, respectively.
Inventory Table
The components of inventories are as follows:
INVENTORY BALANCES
(Dollars in millions)
 
Natural gas
 
LNG
 
Materials and supplies
 
Total
 
March
 
December
 
March
 
December
 
March
 
December
 
March
 
December
 
31, 2020
 
31, 2019
 
31, 2020
 
31, 2019
 
31, 2020
 
31, 2019
 
31, 2020
 
31, 2019
Sempra Energy Consolidated
$
55

 
$
110

 
$
5

 
$
9

 
$
157

 
$
158

 
$
217

 
$
277

SDG&E
1

 
1

 
—

 
—

 
92

 
93

 
93

 
94

SoCalGas
32

 
90

 
—

 
—

 
47

 
46

 
79

 
136
Capitalized Financing Costs Table
The table below summarizes capitalized interest and AFUDC.
CAPITALIZED FINANCING COSTS
(Dollars in millions)
 
Three months ended March 31,
 
2020
 
2019
Sempra Energy Consolidated
$
48

 
$
47

SDG&E
27

 
17

SoCalGas
11

 
11
Net Periodic Benefit Cost Table
The following three tables provide the components of net periodic benefit cost.
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
 
Pension benefits
 
Other postretirement benefits
 
Three months ended March 31,
 
2020
 
2019
 
2020
 
2019
Service cost
$
33

 
$
27

 
$
5

 
$
4

Interest cost
32

 
35

 
8

 
9

Expected return on assets
(42
)
 
(36
)
 
(13
)
 
(18
)
Amortization of:
 
 
 
 
 
 
 
Prior service cost (credit)
3

 
3

 
(1
)
 
—

Actuarial loss (gain)
9

 
14

 
(3
)
 
(2
)
Settlement charges
5

 
—

 
—

 
—

Net periodic benefit cost (credit)
40

 
43

 
(4
)
 
(7
)
Regulatory adjustments
(28
)
 
(36
)
 
4

 
7

Total expense recognized
$
12

 
$
7

 
$
—

 
$
—

NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
 
Pension benefits
 
Other postretirement benefits
 
Three months ended March 31,
 
2020
 
2019
 
2020
 
2019
Service cost
$
8

 
$
8

 
$
1

 
$
1

Interest cost
7

 
9

 
2

 
2

Expected return on assets
(13
)
 
(11
)
 
(3
)
 
(3
)
Amortization of:

 
 
 

 
 
Prior service cost
1

 
1

 
—

 
1

Actuarial loss (gain)
1

 
4

 
(1
)
 
(1
)
Net periodic benefit cost (credit)
4

 
11

 
(1
)
 
—

Regulatory adjustments
(3
)
 
(11
)
 
1

 
—

Total expense recognized
$
1

 
$
—

 
$
—

 
$
—

NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
 
Pension benefits
 
Other postretirement benefits
 
Three months ended March 31,
 
2020
 
2019
 
2020
 
2019
Service cost
$
22

 
$
16

 
$
3

 
$
3

Interest cost
22

 
23

 
6

 
7

Expected return on assets
(27
)
 
(24
)
 
(10
)
 
(14
)
Amortization of:
 
 
 
 

 
 
Prior service cost (credit)
2

 
2

 
—

 
(1
)
Actuarial loss (gain)
6

 
9

 
(2
)
 
(2
)
Net periodic benefit cost (credit)
25

 
26

 
(3
)
 
(7
)
Regulatory adjustments
(25
)
 
(25
)
 
3

 
7

Total expense recognized
$
—

 
$
1

 
$
—

 
$
—
Contributions to Benefit Plans Table
The following table shows our year-to-date contributions to pension and other postretirement benefit plans and the amounts we expect to contribute in 2020.
BENEFIT PLAN CONTRIBUTIONS
(Dollars in millions)
 
 
Sempra Energy
Consolidated
 
SDG&E
 
SoCalGas
Contributions through March 31, 2020:
 
 
 
 
 
 
Pension plans
 
$
20

 
$
—

 
$
1

Other postretirement benefit plans
 
1

 
—

 
—

Total expected contributions in 2020:
 
 
 
 
 
 
Pension plans
 
$
268

 
$
53

 
$
154

Other postretirement benefit plans
 
7

 
—

 
1
Earnings Per Share Computations Table
Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS
 
 
 
(Dollars in millions, except per share amounts; shares in thousands)
 
 
 
 
Three months ended March 31,
 
2020
 
2019
Numerator for continuing operations:
 
 
 
Income from continuing operations, net of income tax
$
867

 
$
560

Earnings attributable to noncontrolling interests
(143
)
 
(32
)
Mandatory convertible preferred stock dividends
(36
)
 
(36
)
Earnings from continuing operations attributable to common shares for basic EPS
688

 
492

Add back dividends for dilutive mandatory convertible preferred stock(1)
36

 
—

Earnings from continuing operations attributable to common shares for diluted EPS
$
724

 
$
492

 
 
 
 
Numerator for discontinued operations:
 
 
 
Income (loss) from discontinued operations, net of income tax
$
80

 
$
(42
)
Earnings attributable to noncontrolling interests
(8
)
 
(9
)
Earnings (losses) from discontinued operations attributable to common shares
$
72

 
$
(51
)
 
 
 
 
Numerator for earnings:
 
 
 
Earnings attributable to common shares for basic EPS
$
760

 
$
441

Add back dividends for dilutive mandatory convertible preferred stock(1)
36

 
—

Earnings attributable to common shares for diluted EPS
$
796

 
$
441

 
 
 
 
Denominator:
 
 
 
Weighted-average common shares outstanding for basic EPS(2)
292,790

 
274,674

Dilutive effect of stock options and RSUs(3)
1,304

 
969

Dilutive effect of common shares sold forward
—

 
1,585

Dilutive effect of mandatory convertible preferred stock
19,831

 
—

Weighted-average common shares outstanding for diluted EPS
313,925

 
277,228

 
 
 
 
Basic EPS:
 
 
 
Earnings from continuing operations
$
2.35

 
$
1.79

Earnings (losses) from discontinued operations
$
0.25

 
$
(0.19
)
Earnings
$
2.60

 
$
1.60

 
 
 
 
Diluted EPS:
 
 
 
Earnings from continuing operations
$
2.30

 
$
1.78

Earnings (losses) from discontinued operations
$
0.23

 
$
(0.19
)
Earnings
$
2.53

 
$
1.59

(1)
In the three months ended March 31, 2020, due to the dilutive effect of mandatory convertible preferred stock, the numerator used to calculate diluted EPS includes an add-back of mandatory convertible preferred stock dividends declared in that quarter.
(2)
Includes 542 and 613 average fully vested RSUs held in our Deferred Compensation Plan for the three months ended March 31, 2020 and 2019, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.
(3) 
Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.
Schedule of Accumulated Other Comprehensive Income (Loss) Table
The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
 
Foreign
currency
translation
adjustments
 
Financial
instruments
 
Pension
and other
postretirement
benefits
 
Total
accumulated other
comprehensive
income (loss)
 
Three months ended March 31, 2020 and 2019
Sempra Energy Consolidated(2):
 
 
 
 
 
 
 
Balance as of December 31, 2019
$
(607
)
 
$
(215
)
 
$
(117
)
 
$
(939
)
OCI before reclassifications
(138
)
 
(154
)
 
16

 
(276
)
Amounts reclassified from AOCI
—

 
19

 
6

 
25

Net OCI
(138
)
 
(135
)
 
22

 
(251
)
Balance as of March 31, 2020
$
(745
)
 
$
(350
)
 
$
(95
)
 
$
(1,190
)
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
$
(564
)
 
$
(82
)
 
$
(118
)
 
$
(764
)
Cumulative-effect adjustment from change in accounting principle
—

 
(25
)
 
(17
)
 
(42
)
OCI before reclassifications
32

 
(45
)
 
1

 
(12
)
Amounts reclassified from AOCI
—

 
(1
)
 
2

 
1

Net OCI
32

 
(46
)
 
3

 
(11
)
Balance as of March 31, 2019
$
(532
)
 
$
(153
)
 
$
(132
)
 
$
(817
)
SDG&E:
 
 
 
 
 
 
 
Balance as of December 31, 2019 and March 31, 2020
 
 
 
 
$
(16
)
 
$
(16
)
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
 
 
 
$
(10
)
 
$
(10
)
Cumulative-effect adjustment from change in accounting principle
 
 
 
 
(2
)
 
(2
)
Balance as of March 31, 2019
 
 
 
 
$
(12
)
 
$
(12
)
SoCalGas:
 
 
 
 
 
 
 
Balance as of December 31, 2019 and March 31, 2020
 
 
$
(13
)
 
$
(10
)
 
$
(23
)
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
 
$
(12
)
 
$
(8
)
 
$
(20
)
Cumulative-effect adjustment from change in accounting principle
 
 
(2
)
 
(2
)
 
(4
)
Balance as of March 31, 2019
 
 
$
(14
)
 
$
(10
)
 
$
(24
)

(1) 
All amounts are net of income tax, if subject to tax, and exclude NCI.
(2) 
Includes discontinued operations.
Reclassifications out of AOCI Table

RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other
comprehensive income (loss) components
Amounts reclassified
from accumulated other
comprehensive income (loss)
 
Affected line item on Condensed
Consolidated Statements of Operations
 
Three months ended March 31,
 
 
 
2020
 
2019
 
 
Sempra Energy Consolidated:
 
 
 
 
 
Financial instruments:
 
 
 
 
 
Interest rate and foreign exchange instruments(1)
$
2

 
$
1

 
Interest Expense
 
41

 
(3
)
 
Other (Expense) Income, Net
Interest rate and foreign exchange instruments
—

 
1

 
Equity Earnings
Foreign exchange instruments
(2
)
 
1

 
Revenues: Energy-Related Businesses
 
(2
)
 
—

 
Other (Expense) Income, Net
Total before income tax
39

 
—

 
 
 
(12
)
 
—

 
Income Tax Benefit (Expense)
Net of income tax
27

 
—

 
 
 
(8
)
 
(1
)
 
Earnings Attributable to Noncontrolling Interests
 
$
19

 
$
(1
)
 
 
Pension and other postretirement benefits(2):
 
 
 
 
 
Amortization of actuarial loss
$
2

 
$
2

 
Other (Expense) Income, Net
Amortization of prior service cost
1

 
1

 
Other (Expense) Income, Net
Settlement charges
5

 
—

 
Other (Expense) Income, Net
Total before income tax
8

 
3

 
 
 
(2
)
 
(1
)
 
Income Tax Benefit (Expense)
Net of income tax
$
6

 
$
2

 
 
 
 
 
 
 
 
Total reclassifications for the period, net of tax
$
25

 
$
1

 
 
SDG&E:
 
 
 
 
 
Financial instruments:
 
 
 
 
 
Interest rate instruments(1)
$
—

 
$
1

 
Interest Expense
 
—

 
(1
)
 
Earnings Attributable to Noncontrolling Interest
Total reclassifications for the period, net of tax
$
—

 
$
—

 
 

(1) 
Amounts in 2019 include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE.
(2) 
Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

For the three months ended March 31, 2020 and 2019, reclassifications out of AOCI to net income were negligible for SoCalGas.
Ownership Interests Held By Others Table
The following table provides information about noncontrolling ownership interests held by others (not including preferred shareholders) recorded in Other Noncontrolling Interests in Total Equity on Sempra Energy’s Condensed Consolidated Balance Sheets.
OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
 
 
 
Percent ownership held by noncontrolling interests
 
 Equity (deficit) held by
noncontrolling interests
 
March 31,
2020
 
December 31,
2019
 
March 31,
2020
 
December 31,
2019
Sempra Mexico:
 
 
 
 
 
 
 
IEnova
33.4
%
33.4
%
$
1,726

 
$
1,608

IEnova subsidiaries(1)
10.0 – 17.5
 
10.0 – 46.3
 
6

 
15

Sempra LNG:
 
 
 
 
 
 
 
Liberty Gas Storage LLC
—
 
24.6
 
—

 
(13
)
ECA LNG JV
16.7
 
16.7
 
14

 
12

Parent and other:
 
 
 
 
 
 
 
PXiSE Energy Solutions, LLC
20.0
 
20.0
 
1

 
1

Discontinued Operations:
 
 
 
 
 
 
 
Chilquinta Energía subsidiaries(1)
19.7 – 43.4
 
19.7 – 43.4
 
21

 
23

Luz del Sur
16.4
 
16.4
 
205

 
205

Tecsur
9.8
 
9.8
 
5

 
5

Total Sempra Energy
 
 
 
 
$
1,978

 
$
1,856

(1) 
IEnova and Chilquinta Energía have subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.
Transactions with Affiliates Table
We summarize amounts due from and to unconsolidated affiliates at Sempra Energy Consolidated, SDG&E and SoCalGas in the following table.
AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
 
March 31,
2020
 
December 31,
2019
Sempra Energy Consolidated:
 
 
 
Total due from various unconsolidated affiliates – current, net of negligible allowance for credit losses at March 31, 2020(1)(2)
$
64

 
$
32

 
 
 
 
Sempra Texas Utilities – TTHC, net of allowance for credit losses of $1 at March 31, 2020(2)(3)
$
6

 
$
—

Sempra Mexico – IMG JV – Note due March 15, 2022, net of allowance for credit losses of $6 at March 31, 2020(2)(4)
586

 
742

Total due from unconsolidated affiliates – noncurrent
$
592

 
$
742

 
 
 
 
Total due to various unconsolidated affiliates – current
$
(8
)
 
$
(5
)
 
 
 
 
Sempra Mexico(2):
 
 
 
TAG Pipelines Norte, S. de. R.L. de C.V.:
 
 
 
Note due December 20, 2021(5)
$
(40
)
 
$
(39
)
5.5% Note due January 9, 2024(6)
(65
)
 
—

TAG JV – 5.74% Note due December 17, 2029(6)
(158
)
 
(156
)
Total due to unconsolidated affiliates – noncurrent
$
(263
)
 
$
(195
)
SDG&E:
 
 
 
Sempra Energy
$
(45
)
 
$
(37
)
SoCalGas
(6
)
 
(10
)
Various affiliates
(8
)
 
(6
)
Total due to unconsolidated affiliates – current
$
(59
)
 
$
(53
)
 
 
 
 
Income taxes due from Sempra Energy(7)
$
64

 
$
130

SoCalGas:
 
 
 
SDG&E
$
6

 
$
10

Various affiliates
1

 
1

Total due from unconsolidated affiliates – current
$
7

 
$
11

 
 
 
 
Sempra Energy
$
(49
)
 
$
(45
)
Various affiliates
—

 
(2
)
Total due to unconsolidated affiliates – current
$
(49
)
 
$
(47
)
 
 
 
 
Income taxes due from Sempra Energy(7)
$
104

 
$
152

(1) 
Amount at March 31, 2020 includes $23 million of outstanding principal and a negligible amount of accrued interest receivable from a U.S. dollar-denominated loan from IEnova to ESJ at a variable interest rate based on 1-month LIBOR plus 196 bps (3.54% at March 31, 2020) with a maturity date of June 30, 2020. Pursuant to the agreement, if ESJ is unable to meet certain conditions for an expansion project by May 13, 2020, IEnova and ESJ have the option to convert the loan to a 10-year note.
(2) 
Amounts include principal balances plus accumulated interest outstanding.
(3) 
U.S. dollar-denominated loans at fixed interest rates of 6.25% and 6.45% with maturity dates of November 5, 2028 and November 5, 2030, respectively.
(4) 
Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $604 million U.S. dollar-equivalent, at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (8.79% at March 31, 2020), to finance construction of the natural gas marine pipeline. At March 31, 2020, $2 million of accrued interest receivable is included in Due From Unconsolidated Affiliates – Current.
(5) 
U.S. dollar-denominated loan at a variable interest rate based on 6-month LIBOR plus 290 bps (4.08% at March 31, 2020).
(6) 
U.S. dollar-denominated loan at a fixed interest rate.
(7) 
SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return.

The following table summarizes revenues and cost of sales from unconsolidated affiliates.
REVENUES AND COST OF SALES FROM UNCONSOLIDATED AFFILIATES
 
 
 
(Dollars in millions)
 
 
 
 
Three months ended March 31,
 
2020
 
2019
Revenues:
 
 
 
Sempra Energy Consolidated
$
12

 
$
14

SDG&E
1

 
1

SoCalGas
18

 
17

Cost of Sales:
 
 
 
Sempra Energy Consolidated
$
11

 
$
14

SDG&E
17

 
20

SoCalGas
—

 
4
Other Income and Expense Table
Other (Expense) Income, Net on the Condensed Consolidated Statements of Operations consists of the following:
OTHER (EXPENSE) INCOME, NET
 
 
 
(Dollars in millions)
 
 
 
 
Three months ended March 31,
 
2020
 
2019
Sempra Energy Consolidated:
 
 
 
Allowance for equity funds used during construction
$
31

 
$
21

Investment (losses) gains(1)
(37
)
 
26

(Losses) gains on interest rate and foreign exchange instruments, net
(153
)
 
13

Foreign currency transaction (losses) gains, net(2)
(123
)
 
7

Non-service component of net periodic benefit credit
26

 
24

Penalties related to billing practices OII
—

 
(8
)
Interest on regulatory balancing accounts, net
2

 
(1
)
Total
$
(254
)
 
$
82

SDG&E:
 
 
 
Allowance for equity funds used during construction
$
21

 
$
12

Non-service component of net periodic benefit credit
8

 
9

Interest on regulatory balancing accounts, net
2

 
—

Sundry, net
—

 
1

Total
$
31

 
$
22

SoCalGas:
 
 
 
Allowance for equity funds used during construction
$
8

 
$
8

Non-service component of net periodic benefit credit
25

 
18

Penalties related to billing practices OII
—

 
(8
)
Interest on regulatory balancing accounts, net
—

 
(1
)
Sundry, net
(3
)
 
(1
)
Total
$
30

 
$
16

(1) 
Represents investment (losses) gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.
(2) 
Includes losses of $149 million and gains of $10 million in the three months ended March 31, 2020 and 2019, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG JV, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.
Income Tax Expense and Effective Income Tax Rates Table
We provide our calculations of ETRs in the following table.
INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
 
Three months ended March 31,
 
2020
 
2019
Sempra Energy Consolidated:
 
 
 
Income tax (benefit) expense from continuing operations
$
(207
)
 
$
42

 
 
 
 
Income from continuing operations before income taxes and equity earnings
$
397

 
$
501

Equity (losses) earnings, before income tax(1)
(43
)
 
5

Pretax income
$
354

 
$
506

 
 
 
 
Effective income tax rate
(58
)%
 
8
%
SDG&E:
 
 
 
Income tax expense
$
58

 
$
5

Income before income taxes
$
320

 
$
182

Effective income tax rate
18
 %
 
3
%
SoCalGas:
 
 
 
Income tax expense
$
52

 
$
19

Income before income taxes
$
355

 
$
283

Effective income tax rate
15
 %
 
7
%

(1) 
We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.