UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 27, 1998
----------------------------
Pacific Enterprises
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California
----------------------------------------------------
(State or other jurisdiction of incorporation
1-40 94-0743670
- ---------------------- ------------------------------------
Commission File Number (I.R.S. Employer Identification No.)
555 West Fifth Street, Los Angeles, California 90013-1011
----------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(213) 895-5000
-----------------------------------------------------------
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
See the attached news release dated January 27, 1998, which sets forth
certain fourth quarter and year-end 1997 earnings results for Pacific
Enterprises and Southern California Gas Company.
The Justice Department has issued a request for additional information
and documents in connection with its review under the Hart-Scott-Rodino
Antitrust Improvements Act of the pending business combination of Pacific
Enterprises and Enova Corporation. Pacific Enterprises expects that any
Justice Department concerns will be favorably resolved and will not affect
the timing of the business combination which is expected to be completed this
summer.
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pacific Enterprises
- ------------------------------
(Registrant)
/s/ Ralph Todaro
- ------------------------------
Vice President and Controller
(Chief Accounting Officer and
duly authorized signatory)
Date: Feb 9, 1998
-------------------------
Contact: Clem Teng (Investors) (213) 244-3966
Larry Pickett (News Media) (213) 244-2585
FOR IMMEDIATE RELEASE
January 27, 1998
PACIFIC ENTERPRISES ANNOUNCES
EARNINGS FOR 1997, 4TH QUARTER
LOS ANGELES - Pacific Enterprises (NYSE-PET), the parent of Southern
California Gas Co., today reported net income of $184 million or $2.22 per share
of common stock for 1997, compared to 1996 earnings of $203 million or $2.37
per common share.
Excluding merger-related and nonrecurring items in both periods, earnings
increased by 7 percent to $2.41 per share in 1997 from $2.26 per share in 1996.
For the fourth quarter of 1997, the company reported net income of $40
million or 47 cents per share, compared to net income of $48 million or 56 cents
per share for the same period of 1996. These results include merger-related
expenses of 4 cents and 5 cents per share, respectively, for each period.
-MORE-
4TH QUARTER EARNINGS --2
Willis B. (Bill) Wood Jr., Pacific Enterprises chairman and chief executive
officer, said that 1997 was an excellent year for PE and its shareholders,
driven by the performance of it's major subsidiary, Southern California Gas Co.
(SoCalGas) which exceeded the rate of return on rate base authorized by the
California Public Utilities Commission (CPUC) and by other company efforts to
position itself for the new energy marketplace.
Consolidated results included 1997 net income of $231 million for SoCalGas,
compared with $193 million in 1996. Results in 1996 were impacted by an
after-tax, non-cash charge of $27 million related to a previous accounting
estimate for a comprehensive settlement between SoCalGas and the CPUC. This
charge impacted SoCalGas' net income, but had no effect on PE's consolidated
income.
For the fourth quarter of 1997, SoCalGas reported earnings of $49 million,
compared with $57 million for the fourth quarter of 1996.
Wood noted that SoCalGas' 1997 results were achieved within the
implementation parameters of the Performance Based Regulation (PBR) order by the
CPUC which went into effect Aug. 1. The impact of this order was partially
offset by the greater volumes of gas transported during 1997 due to higher
demand for gas used to generate electricity; by lower operating expenses and; by
a 60-basis-point increase in the authorized common equity component in the
utility's capital structure.
-MORE-
4TH QUARTER EARNINGS --3
" We continue to believe that the PBR overall encourages a more competitive
environment which provides SoCalGas with the opportunity to achieve its
authorized return," noted Wood.
Gas volumes delivered by SoCalGas in 1997 totaled 930 billion cubic feet
(BCF), compared with 884 BCF in 1996. Gas transported for utility electric
generation customers totaled 158 BCF for 1997 compared to 139 BCF in 1996.
According to Wood, other achievements in 1997 that enhance shareholder
value include:
- - A 1997 total return to the shareholders of 30 percent which includes stock
price appreciation and assumed reinvested dividends.
- - A progression of regulatory approvals on the company's proposed merger with
Enova Corporation (NYSE-ENA), parent of San Diego Gas & Electric. The
Federal Energy Regulatory Commission (FERC) conditionally approved the
merger on June 25, 1997; the Nuclear Regulatory Commission approved the
merger on August 19, 1997; and the California Attorney General's office
approved the merger on November 21, 1997. Final regulatory approvals must
be gained from the CPUC, FERC, the U.S. Department of Justice and the
Securities and Exchange Commission.
-MORE-
4TH QUARTER EARNINGS -4
It is expected that all regulatory approvals will be granted and the new
company, to be called Sempra Energy, will be operational in the summer of 1998.
- - Maintenance of PE's strong financial position demonstrated by its excellent
debt-to-total-capital ratio of 51 percent, along with $153 million in
short-term investments and cash at year-end with no outstanding bank debt.
- - The repurchase of 1.5 million shares of common stock during 1997, bringing
total shares under the repurchase program to 2.4 million shares.
- - Completion of the acquisitions with Enova of AIG Trading Corporation and
CES/Way International, dramatically expanding the company's portfolio of
competitive energy services and capabilities.
- - Expansion of domestic operations with new natural gas distribution projects
in North Carolina and Maine under regional joint ventures and partnerships
by Energy Pacific, the joint venture company of Pacific Enterprises and
Enova.
Wood noted that these business ventures demonstrate significant moves by
the company to position itself as a major player in the new national and
international energy marketplace. Such moves, however, did affect Pacific
Enterprise's earnings for the year with costs for the launch of new unregulated
products and services and the higher level of international activity.
-MORE-
4TH QUARTER EARNINGS --5
Pacific Enterprises' Energy Management Services (EMS), which is responsible
for interstate and offshore gas pipeline operations and unregulated energy
products and services, had losses of approximately $5 million for 1997 compared
to net income of $6 million for the same period last year.
The loss was partially due to a reduction of revenues related to the
mid-year sale of Pacific Energy, completed on June 30, 1997, which included EMS'
alternate energy electric generating assets. The sale was required prior to
completion of the merger with Enova because of Pacific Enterprises ownership of
these "Qualifying Facility" assets, which cannot be more than 50 percent owned
by an electric utility holding company.
Pacific Enterprises International had losses of $8 million for the 12
months of 1997 compared with losses of $5 million for 1996.
Looking forward to 1998, it is expected that activities in the unregulated
businesses, both domestic and international, will continue to incur start-up
losses. Also, as a result of the impact of PBR on SoCalGas operations, Wood
explained that it will be more difficult for the utility to achieve the level of
returns above those authorized by the CPUC, that it has recently experienced.
-MORE-
4TH QUARTER EARNINGS --6
Southern California Gas Co., PE's major subsidiary, is the nation's largest
natural gas distributor with 4.8 million meters serving 17 million customers.
In addition to its regulated operations, Pacific Enterprises also markets a
wide range of unregulated energy products and services, including natural gas,
and owns interests in international utility operations, interstate and offshore
natural gas pipelines and centralized heating and cooling for large building
complexes.
###
PACIFIC ENTERPRISES AND SUBSIDIARY COMPANIES
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
1997 1996 1997 1996
- ------------------------------------------------------ ------ ------ ------ -------
(DOLLARS ARE IN MILLIONS, EXCEPT SHARE AND PER-SHARE
AMOUNTS)
REVENUE
Operating Revenue $743 $776 $2,738 $2,563
Other Income 9 9 39 25
------ ------ ------ ------
Total 752 785 2,777 2,588
------ ------ ------ ------
EXPENSES
Cost of Gas Distributed 272 295 1,059 866
Operating Expenses 293 302 918 910
Depreciation and Amortization 64 63 256 255
Other 28 27 106 106
------ ------ ------ ------
Total 657 687 2,339 2,137
------ ------ ------ ------
INCOME FROM OPERATIONS BEFORE INTEREST AND TAXES 95 98 438 451
INTEREST 25 21 103 97
------ ------ ------ ------
INCOME FROM OPERATIONS BEFORE INCOME TAXES 70 77 335 354
INCOME TAXES 30 29 151 151
------ ------ ------ ------
NET INCOME 40 48 184 203
DIVIDENDS ON PREFERRED STOCK 1 1 4 5
PREFERRED STOCK ORIGINAL ISSUE DISCOUNT - - - 2
------ ------ ------ ------
NET INCOME APPLICABLE TO COMMON STOCK $39 $47 $180 $196
------ ------ ------ ------
------ ------ ------ ------
NET INCOME PER SHARE OF COMMON STOCK:
BASIC $0.47 $0.56 $2.22 $2.37
------ ------ ------ ------
------ ------ ------ ------
DILUTED $0.47 $0.56 $2.21 $2.36
------ ------ ------ ------
------ ------ ------ ------
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING (IN THOUSANDS) 81,158 82,652 81,124 82,626
------ ------ ------ ------
------ ------ ------ ------
- --------------------------------------------------------------------------------------------------------------
KEY CONSOLIDATED BALANCE SHEET STATISTICS December 31,
---------------------
1997 1996
- ------------------------------------------------------ ------ ------
(DOLLARS ARE IN MILLIONS, EXCEPT PER-SHARE AMOUNTS)
SHORT-TERM DEBT $354 $262
CURRENT PORTION LONG-TERM DEBT 148 149
LONG-TERM DEBT 1,118 1,225
PREFERRED STOCK 175 175
COMMON EQUITY 1,389 1,360
------ ------
TOTAL CAPITALIZATION $3,184 $3,171
------ ------
------ ------
DEBT TO TOTAL CAPITALIZATION 51% 52%
BOOK VALUE PER SHARE $17.13 $16.58
PARENT CASH AND CASH EQUIVALENTS $151 $234
SOUTHERN CALIFORNIA GAS COMPANY
SUPPLEMENTAL OPERATING DATA
Three Months Ended Twelve Months Ended
December 31 December 31,
---------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------- ---------------------------------------------------
GAS VOLUMES (BCF)
Residential 73 74 237 233
Commercial/Industrial 20 21 80 82
------ ------ ------ ------
Gas Volumes Sold 93 95 317 315
------ ------ ------ ------
Residential 1 1 3 3
Commercial/Industrial 81 77 308 292
Utility Electric Generation 30 30 158 139
Wholesale 35 36 138 130
Exchange 2 1 6 5
------ ------ ------ ------
Gas Volumes Transported or Exchanged 149 145 613 569
------ ------ ------ ------
Total Throughput 242 240 930 884
------ ------ ------ ------
------ ------ ------ ------
Core 96 97 323 314
Noncore 146 143 607 570
------ ------ ------ ------
Total Throughput 242 240 930 884
------ ------ ------ ------
------ ------ ------ ------
REVENUES (IN MILLIONS)
Residential $569 $489 $1,736 $1,613
Commercial/Industrial 195 184 756 708
Utility Electric Generation 15 9 76 70
Wholesale 19 22 67 70
Exchange - - 1 1
------ ------ ------ ------
Gas Revenues in Rates 798 704 2,636 2,462
Regulatory Balancing Accounts and Other (58) 25 5 (40)
------ ------ ------ ------
Total Utility Operating Revenues $740 $729 $2,641 $2,422
------ ------ ------ ------
------ ------ ------ ------
AVERAGE RATES ($/MCF)
Residential $7.69 $6.52 $7.23 $6.83
Commercial/Industrial 1.93 1.88 1.95 1.89
Utility Electric Generation 0.50 0.30 0.48 0.50
Wholesale 0.54 0.61 0.49 0.54
Exchange 0.10 0.16 0.17 0.10
System Average Gas Sold 3.30 2.93 2.83 2.79
Core 7.36 6.30 6.94 6.59
Noncore 0.63 0.68 0.65 0.69
GAS PURCHASED (BCF)
Total Market Gas 57 71 229 226
Affiliates 24 24 95 96
Other Long-Term Supplies 2 2 5 12
------ ------ ------ ------
Total Gas Purchased 83 97 329 334
------ ------ ------ ------
------ ------ ------ ------
System Average Cost of Gas Purchased
(Excluding Fixed Costs and Adjusted for
Comprehensive Settlement), $/MCF $2.92 $2.66 $2.58 $1.88
OTHER OPERATING STATISTICS
Degree Days 431 472 1,126 1,195
New Meters Added 12,435 11,607 43,720 44,406
Total Number of Active Meters (in thousands) - - 4,830 4,790
Capital Expenditures (in millions) $49 $73 $159 $197
Weighted Average Rate Base (in millions) - - $2,734 $2,777
Utility Book Value Per Share of PE Common Stock - - $16.89 $16.95
Authorized Return on Rate Base - - 9.49% 9.42%
Authorized Return on Common Equity - - 11.60% 11.60%
Achieved Return on Common Equity* - - 16.74% 14.35%
*(ADJUSTED FOR NON-RECURRING SETTLEMENTS)
