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
September 30, 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
September 30,
------------------
2002 2001
------- -------
Operating Revenues $ 597 $ 561
------- -------
Operating Expenses
Cost of natural gas distributed 192 163
Other operating expenses 207 188
Depreciation 69 68
Income taxes 46 50
Franchise payments and other taxes 20 20
------- -------
Total operating expenses 534 489
------- -------
Operating Income 63 72
------- -------
Other Income and (Deductions)
Interest income 2 8
Regulatory interest - net -- (2)
Allowance for equity funds used
during construction 2 2
Taxes on non-operating income -- (1)
Other - net 2 (1)
------- -------
Total 6 6
------- -------
Interest Charges
Long-term debt 8 17
Other 7 5
Allowance for borrowed funds used
during construction (1) (1)
------- -------
Total 14 21
------- -------
Net Income 55 57
Preferred Dividend Requirements 1 1
------- -------
Earnings Applicable to Common Shares $ 54 $ 56
======= =======
See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
Nine Months Ended
September 30,
-----------------
2002 2001
------- -------
Operating Revenues $ 1,999 $ 3,036
------- -------
Operating Expenses
Cost of natural gas distributed 808 1,847
Other operating expenses 598 580
Depreciation 205 200
Income taxes 135 130
Franchise payments and other payments 67 79
------- -------
Total operating expenses 1,813 2,836
------- -------
Operating Income 186 200
------- -------
Other Income and (Deductions)
Interest income 8 37
Regulatory interest - net (1) (8)
Allowance for equity funds used
during construction 6 4
Taxes on non-operating income 3 (5)
Preferred dividends of subsidiaries (1) (1)
Other - net 7 (1)
------- -------
Total 22 26
------- -------
Interest Charges
Long-term debt 27 50
Other 19 22
Allowance for borrowed funds used
during construction (2) (2)
------- -------
Total 44 70
------- -------
Net Income 164 156
Preferred Dividend Requirements 3 3
------- -------
Earnings Applicable to Common Shares $ 161 $ 153
======= =======
See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
Balance at
---------------------------
September 30, December 31,
2002 2001
------------ ------------
ASSETS
Property, plant and equipment $6,779 $6,590
Accumulated depreciation (3,970) (3,793)
------ ------
Property, plant and equipment - net 2,809 2,797
------ ------
Current assets:
Cash and cash equivalents 12 13
Accounts receivable - trade 193 415
Accounts receivable - other 5 14
Due from unconsolidated affiliates 127 --
Income taxes receivable 31 20
Deferred income taxes 83 33
Regulatory assets arising from fixed-price
contracts and other derivatives 67 103
Fixed-price contracts and other derivatives 2 59
Inventories 67 42
Other 12 4
------ ------
Total current assets 599 703
------ ------
Other assets:
Due from unconsolidated affiliates 320 409
Regulatory assets arising from fixed-price
contracts and other derivatives 284 157
Sundry 149 125
------ ------
Total other assets 753 691
------ ------
Total assets $4,161 $4,191
====== ======
See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions Balance at
---------------------------
September 30, December 31,
2002 2001
------------ ------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stock (600,000,000 shares authorized;
83,917,664 shares outstanding) $1,319 $1,317
Retained earnings 238 177
------ ------
Total common equity 1,557 1,494
Preferred stock 80 80
------ ------
Total shareholders' equity 1,637 1,574
Long-term debt 508 579
------ ------
Total capitalization 2,145 2,153
------ ------
Current liabilities:
Short-term debt -- 50
Accounts payable - trade 117 160
Accounts payable - other 29 81
Due to unconsolidated affiliates 83 168
Regulatory balancing accounts - net 68 85
Interest payable 37 30
Regulatory liabilities 8 18
Fixed-price contracts and other derivatives 70 103
Current portion of long-term debt 75 100
Customer deposits 129 42
Other 360 349
------ ------
Total current liabilities 976 1,186
------ ------
Deferred credits and other liabilities:
Customer advances for construction 29 24
Post-retirement benefits other than pensions 82 88
Deferred income taxes 156 110
Deferred investment tax credits 47 50
Regulatory liabilities 114 86
Fixed-price contracts and other derivatives 284 162
Deferred credits and other liabilities 308 312
Preferred stock of subsidiary 20 20
------ ------
Total deferred credits and other liabilities 1,040 852
------ ------
Contingencies and commitments (Note 2)
Total liabilities and shareholders' equity $4,161 $4,191
====== ======
See notes to Consolidated Financial Statements.
PACIFIC ENTERPRISES AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in millions
Nine Months Ended
September 30,
------------------
2002 2001
------ ------
Cash Flows from Operating Activities
Net Income $ 164 $ 156
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 205 200
Deferred income taxes and investment tax credits (7) 18
Changes in other assets (1) --
Changes in other liabilities (5) 62
Net changes in other working capital components 253 (179)
----- -----
Net cash provided by operating activities 609 257
----- -----
Cash Flows from Investing Activities
Capital expenditures (213) (190)
Loan (to) from affiliate - net (144) 88
----- -----
Net cash used in investing activities (357) (102)
----- -----
Cash Flows from Financing Activities
Common dividends paid (100) (190)
Preferred dividends paid (3) (3)
Decrease in short-term debt (50) --
Payment of long-term debt (100) --
Other -- (3)
----- -----
Net cash used in financing activities (253) (196)
----- -----
Change in cash and cash equivalents (1) (41)
Cash and cash equivalents, January 1 13 205
----- -----
Cash and cash equivalents, September 30 $ 12 $ 164
===== =====
Supplemental Disclosure of Cash Flow Information:
Interest payments, net of amounts capitalized $ 34 $ 66
===== =====
Income tax payments, net of refunds $ 151 $ 192
===== =====
See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
Three Months Ended
September 30,
------------------
2002 2001
------- -------
Operating Revenues $ 597 $ 561
------- -------
Operating Expenses
Cost of natural gas distributed 192 163
Other operating expenses 205 188
Depreciation 69 68
Income taxes 47 49
Franchise payments and other taxes 20 20
------- -------
Total operating expenses 533 488
------- -------
Operating Income 64 73
------- -------
Other Income and (Deductions)
Interest income 1 4
Regulatory interest - net -- (2)
Allowance for equity funds used
during construction 2 2
Taxes on non-operating income -- (1)
------- -------
Total 3 3
------- -------
Interest Charges
Long-term debt 8 17
Other 4 3
Allowance for borrowed funds used
during construction (1) (1)
------- -------
Total 11 19
------- -------
Earnings Applicable to Common Shares $ 56 $ 57
======= =======
See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Dollars in millions
Nine Months Ended
September 30,
-----------------
2002 2001
------- -------
Operating Revenues $ 1,999 $ 3,036
------- -------
Operating Expenses
Cost of natural gas distributed 808 1,847
Other operating expenses 591 572
Depreciation 205 200
Income taxes 139 131
Franchise payments and other taxes 67 79
------- -------
Total operating expenses 1,810 2,829
------- -------
Operating Income 189 207
------- -------
Other Income and (Deductions)
Interest income 3 20
Regulatory interest - net (1) (8)
Allowance for equity funds used
during construction 6 4
Taxes on non-operating income 5 (5)
Other - net -- (1)
------- -------
Total 13 10
------- -------
Interest Charges
Long-term debt 27 50
Other 9 12
Allowance for borrowed funds used
during construction (2) (2)
------- -------
Total 34 60
------- -------
Net Income 168 157
Preferred Dividend Requirements 1 1
------- -------
Earnings Applicable to Common Shares $ 167 $ 156
======= =======
See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions
Balance at
--------------------------
September 30, December 31,
2002 2001
------------- ------------
ASSETS
Utility plant - at original cost $6,655 $6,467
Accumulated depreciation (3,884) (3,710)
------ ------
Utility plant - net 2,771 2,757
------ ------
Current assets:
Cash and cash equivalents 12 13
Accounts receivable - trade 193 415
Accounts receivable - other 5 14
Due from unconsolidated affiliates 130 --
Deferred income taxes 113 62
Regulatory assets arising from fixed-price
contracts and other derivatives 67 103
Fixed-price contracts and other derivatives 2 59
Inventories 67 42
Other 11 4
------ ------
Total current assets 600 712
------ ------
Other assets:
Regulatory assets arising from fixed-price
contracts and other derivatives 284 157
Sundry 160 136
------ ------
Total other assets 444 293
------ ------
Total assets $3,815 $3,762
====== ======
See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dollars in millions Balance at
---------------------------
September 30, December 31,
2002 2001
------------- ------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stock (100,000,000 shares authorized;
91,300,000 shares outstanding) $ 837 $ 835
Retained earnings 537 470
------ ------
Total common equity 1,374 1,305
Preferred stock 22 22
------ ------
Total shareholders' equity 1,396 1,327
Long-term debt 508 579
------ ------
Total capitalization 1,904 1,906
------ ------
Current liabilities:
Short-term debt -- 50
Accounts payable - trade 117 160
Accounts payable - other 29 81
Due to unconsolidated affiliates 20 24
Regulatory balancing accounts - net 68 85
Income taxes payable 27 32
Interest payable 34 29
Regulatory liabilities 8 18
Fixed-price contracts and other derivatives 70 103
Current portion of long-term debt 75 100
Customer deposits 129 42
Other 360 348
------ ------
Total current liabilities 937 1,072
------ ------
Deferred credits and other liabilities:
Customer advances for construction 29 24
Deferred income taxes 225 183
Deferred investment tax credits 47 50
Regulatory liabilities 196 174
Fixed-price contracts and other derivatives 284 162
Deferred credits and other liabilities 193 191
------ ------
Total deferred credits and other liabilities 974 784
------ ------
Contingencies and commitments (Note 2)
Total liabilities and shareholders' equity $3,815 $3,762
====== ======
See notes to Consolidated Financial Statements.
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in millions
Nine Months Ended
September 30,
------------------
2002 2001
------ ------
Cash Flows from Operating Activities
Net income $ 168 $ 157
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 205 200
Deferred income taxes and investment tax credits (12) 18
Changes in other liabilities (3) 40
Net changes in other working capital components 249 (179)
------ ------
Net cash provided by operating activities 607 236
------ ------
Cash Flows from Investing Activities
Capital expenditures (213) (190)
Loan (to) from affiliate - net (144) 104
------ ------
Net cash used in investing activities (357) (86)
------ ------
Cash Flows from Financing Activities
Dividends paid (101) (191)
Payment of long-term debt (100) --
Decrease in short-term debt (50) --
------ ------
Net cash used in financing activities (251) (191)
------ ------
Change in cash and cash equivalents (1) (41)
Cash and cash equivalents, January 1 13 205
------ ------
Cash and cash equivalents, September 30 $ 12 $ 164
====== ======
Supplemental Disclosure of Cash Flow Information:
Interest payments, net of amounts capitalized $ 27 $ 55
====== ======
Income tax payments, net of refunds $ 151 $ 199
====== ======
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 as the companies). PE's common stock is wholly owned by Sempra
Energy, a California-based Fortune 500 holding company, and PE owns all
of the common stock of SoCalGas. 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.
Sempra Energy also indirectly owns all of the common stock of San Diego
Gas & Electric (SDG&E). SoCalGas and SDG&E are collectively referred to
herein as "the California utilities."
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.
Information in this Quarterly Report is unaudited and should be read in
conjunction with the companies' Annual Report on Form 10-K for the year
ended December 31, 2001 (Annual Report) and Quarterly Reports on Form
10-Q for the three months ended March 31, 2002 and the three months
ended June 30, 2002.
The companies' significant accounting policies are described in Note 2
of the notes to Consolidated Financial Statements in the companies'
Annual Report. The same accounting policies are followed for interim
reporting purposes.
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 71).
BOND OFFERING
In October 2002, SoCalGas publicly offered and sold $250 million of
4.80-percent First Mortgage Bonds, maturing on October 1, 2012. The
bonds are not subject to a sinking fund and are not redeemable prior to
maturity except through a make-whole mechanism. Proceeds from the bond
sale have become part of the company's general treasury funds to
replenish amounts previously expended to refund and retire indebtedness
and will be used for working capital and other general corporate
purposes. These bonds were assigned ratings of A+ by the Standard &
Poor's rating agency, A1 by Moody's Investors Service, Inc., and AA by
Fitch, Inc.
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. It applies to legal obligations
associated with the retirement of long-lived assets and 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. The
capitalized cost is depreciated over the useful life of the related
asset. SFAS 143 is effective for the company beginning in 2003. The
companies have not yet determined the 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 governs the determination of whether the carrying
value of certain assets, primarily property, plant and equipment, should
be reduced. SFAS 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13 and Technical Corrections", was
issued in April 2002 and will be effective for the companies on January
1, 2003. In June, 2002, the FASB issued SFAS 146 "Accounting for Costs
Associated with Exit or Disposal Activities" which nullifies EITF Issue
94-3 "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity," and is effective for exit or
disposal activities that are initiated after December 31, 2002. Adoption
of these statements will not have a material impact on the companies'
financial statements.
In June 2002, a consensus was reached in Emerging Issues Task Force
(EITF) Issue 02-3 "Issues Related to Accounting for Contracts Involved
in Energy Trading and Risk Management Activities," which codifies and
reconciles existing guidance on the recognition and reporting of gains
and losses on energy trading contracts and addresses other aspects of
the accounting for contracts involved in energy trading and risk
management activities.
Most of the consensus reached by the EITF is not applicable to PE and
SoCalGas, because of the way the companies conduct business and the
requirements of SFAS 71.
2. MATERIAL CONTINGENCIES
GAS INDUSTRY RESTRUCTURING
As discussed in Note 12 of the notes to Consolidated Financial
Statements in the Annual Report, in December 2001 the CPUC issued a
decision related to gas industry restructuring, with implementation
anticipated during 2002. However, implementation has been delayed and
the CPUC has ordered additional hearings.
CPUC INVESTIGATION OF ENERGY-UTILITY HOLDING COMPANIES
In January 2002, the CPUC issued a decision that broadly determined that
a holding company would be required to provide cash to a utility
subsidiary to cover its operating expenses and working capital to the
extent they are not adequately funded through retail rates. Also in
January 2002, the CPUC ruled that it had jurisdiction to create the
holding company system and, therefore, retains jurisdiction to enforce
conditions to which the holding companies had agreed. The company filed
a request for rehearing on the issues, which the CPUC denied on July 17,
2002. The company is seeking judicial review of the orders in the
California Court of Appeals. The company filed its appeal on August 19,
2002.
LITIGATION
Lawsuits filed in 2000 and currently consolidated in San Diego Superior
Court seek class-action certification and damages, alleging that Sempra
Energy, SoCalGas and SDG&E, along with El Paso Energy Corp. and several
of its affiliates, sought to maintain their positions in the natural gas
market by agreeing, among other things, to restrict the supply of
natural gas into Southern California. On October 16, 2002, the assigned
San Diego Superior Court judge ruled that the case can proceed with
discovery and that the California courts, rather than the Federal Energy
Regulatory Commission (FERC), have jurisdiction in the case. This was a
preliminary ruling and not a ruling on the merits or facts of the case.
The northern California cases which only name El Paso as a defendant are
scheduled for trial in September 2003 and the remainder of the cases are
set for trial in January 2004. According to published reports, the
Nevada Attorney General filed a similar lawsuit in Nevada in November
2002.
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.
In response to an inquiry by the FERC, SoCalGas has denied engaging in
"wash" or "round trip" trading transactions. It is also cooperating with
the FERC and other governmental agencies and officials in their various
investigations of the California energy markets.
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 Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
----------------------------- ----------------------------
(Dollars in millions) 2002 2001 2002 2001 2002 2001 2002 2001
- --------------------------------------------------------------------------------------
Net income $ 55 $ 57 $ 164 $156 $ 56 $ 57 $ 168 $157
Market-value adjustments of
financial instruments
(Note 4) -- 1 (1)* 1 -- 1 (1)* 1
Minimum pension liability
adjustments -- -- -- 1 -- -- -- 1
----------------------------------------------------------
Comprehensive income $ 55 $ 58 $ 163 $158 $ 56 $ 58 $ 167 $159
- --------------------------------------------------------------------------------------
* This did not affect the reported balance of accumulated other
comprehensive income related to this topic ($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 and SFAS 138, 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 September 30, 2002, $2 million in current assets, $70 million in
current liabilities and $284 million in deferred credits and other
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, $67
million in current regulatory assets and $284 million in noncurrent
regulatory assets were recorded in the Consolidated Balance Sheets as of
September 30, 2002.
For the nine months ended September 30, $2 million of losses in 2002 and
$3 million of income in 2001 were recorded in operating revenues in the
Statements of Consolidated Income. Additionally, a market value
adjustment of $4 million was made at December 31, 2001 to long-term debt
relating to a fixed-to-floating interest rate swap agreement. This
market value adjustment was subsequently reversed at September 30, 2002
upon cancellation of the 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' utility operations are a major source of liquidity. See
further discussion in the companies' Annual Report.
CASH FLOWS FROM OPERATING ACTIVITIES
For the nine-month period ended September 30, 2002, the increase in cash
flows from operations compared to the corresponding period in 2001 was
primarily due to changes in natural gas prices and the resulting effects
on regulatory balancing accounts, accounts payable and accounts
receivable. In addition, the increase in cash flows from operations was
due to greater income tax payments made during the first nine months of
2001 compared to the same period in 2002 and increases in customer
deposits in 2002.
CASH FLOWS FROM INVESTING ACTIVITIES
For the nine-month period ended September 30, 2002, the increase in cash
flows used in investing activities compared to the corresponding period
in 2001 was primarily due to advances to Sempra Energy, which are
payable on demand, and increased capital expenditures.
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.
The expansion of SoCalGas' pipeline capacity to meet increased demand by
electric generators and commercial and industrial customers, which
increased its capital expenditures in early 2002 and in 2001 and 2000,
have been completed.
CASH FLOWS FROM FINANCING ACTIVITIES
For the nine-month period ended September 30, 2002, cash flows used in
financing activities increased from the corresponding period in 2001 due
primarily to the repayment of long-term and short-term debt in 2002,
partially offset by the decrease in common dividends paid.
In October 2002, SoCalGas publicly offered and sold $250 million of
4.80-percent First Mortgage Bonds, maturing on October 1, 2012. The
bonds are not subject to a sinking fund and are not redeemable prior to
maturity except through a make-whole mechanism. Proceeds from the bond
sale have become part of the company's general treasury funds to
replenish amounts previously expended to refund and retire indebtedness
and will be used for working capital and other general corporate
purposes. These bonds were assigned ratings of A+ by the Standard &
Poor's rating agency, A1 by Moody's Investors Service, Inc., and AA by
Fitch, Inc.
On September 30, 2002, SoCalGas cancelled a fixed-to-variable interest-
rate swap on $175 million of first mortgage bonds. The $6 million gain
on the transaction is recorded in "Deferred Credits and Other
Liabilities" on the Consolidated Balance Sheet and will be amortized
over the life of the bonds, which mature in 2025.
In August 2002, SoCalGas paid off $100 million of 6.875-percent first
mortgage bonds at maturity.
In August 2002 and again in October 2002, SoCalGas paid $100 million in
dividends on common stock to PE, which paid corresponding dividends to
Sempra Energy.
In May 2002, SDG&E and SoCalGas replaced their individual revolving
lines of credit with a combined revolving credit agreement under which
each utility may individually borrow up to $300 million, subject to a
combined borrowing limit for both utilities of $500 million. Each
utility's revolving credit line expires on May 16, 2003, at which time
it may convert its then outstanding borrowings to a one-year term loan
subject to having obtained any requisite regulatory approvals relating
to long-term debt. Borrowings under the agreement, which are available
for general corporate purposes including back-up support for commercial
paper and variable-rate long-term debt, would bear interest at rates
varying with market rates and the individual borrowing utility's credit
rating. The agreement requires each utility individually to maintain a
debt-to-total capitalization ratio (as defined in the agreement) of not
to exceed 60 percent. The rights, obligations and covenants of each
utility under the agreement are individual rather than joint with those
of the other utility, and a default by one utility would not constitute
a default by the other. These lines of credit were unused at September
30, 2002.
In April 2002, Fitch, Inc. confirmed its prior credit ratings of the
companies' debt; Standard & Poor's reduced its ratings of the companies'
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 remained flat for the three-month period ended
September 30, 2002, and increased for the nine-month period ended
September 30, 2002, compared to the corresponding periods in 2001. The
increase was primarily due to lower interest expense in 2002.
The table below summarizes natural gas volumes and revenues by customer
class for the nine-month periods ended September 30, 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 182 $1,271 2 $ 5 184 $1,276
Commercial and industrial 73 377 215 116 288 493
Electric generation plants -- -- 168 32 168 32
Wholesale -- -- 121 17 121 17
--------------------------------------------------------------
255 $1,648 506 $170 761 $1,818
Balancing accounts and other 181
--------
Total $1,999
- ------------------------------------------------------------------------------------------
2001:
Residential 186 $1,864 2 $ 4 188 $1,868
Commercial and industrial 68 543 187 125 255 668
Electric generation plants -- -- 299 73 299 73
Wholesale -- -- 131 27 131 27
--------------------------------------------------------------
254 $2,407 619 $229 873 2,636
Balancing accounts and other 400
--------
Total $3,036
- ------------------------------------------------------------------------------------------
The decrease in natural gas revenues for the nine-month period ended
September 30, 2002, compared to the corresponding period in 2001, was
primarily due to lower natural gas commodity prices and decreased
transportation for electric generation plants.
The decrease in the cost of natural gas distributed was primarily due to
lower natural gas commodity prices. The increases in natural gas
revenues and the cost of natural gas distributed for the three-month
period ended September 30, 2002, compared to the corresponding period in
2001, was mainly due to higher natural gas commodity prices in the third
quarter 2002. Under the current regulatory framework, the cost of
natural gas is passed on to customers without markup and changes in
natural gas commodity prices do not affect net income since, as
explained more fully in the Annual Report, current or future customer
rates normally recover the actual commodity cost of natural gas on a
substantially concurrent basis, subject to the mechanisms under
performance-based ratemaking as explained in the Annual Report.
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.
Merger Savings
In October 2001, the CPUC denied the California utilities' request to
continue equal sharing between ratepayers and shareholders of estimated
savings stemming from the 1998 merger between the California utilities'
former parent companies. Instead, the CPUC ordered that all of the
estimated 2003 merger savings go to ratepayers. The annual shareholder
portion of the pretax savings for 2002 is $28 million.
Gas and Electric Rates
SoCalGas has a Cost of Capital Trigger Mechanism under which the
company's rate of return and customer rates authorized by the CPUC are
subject to automatic cost of capital adjustments for certain changes in
interest rates. On October 8, 2002, such a trigger occurred. Therefore,
there will be an automatic downward adjustment in rates by a formula
that updates the cost of each component of SoCalGas' capital structure.
SoCalGas will file an advice letter at the CPUC and expects the filing
will reduce its annual margin effective January 1, 2003, by an amount
expected to be approximately $10 million as a result of the triggering
of this mechanism. This would reduce SoCalGas' annual after-tax income
by approximately $6 million.
The CPUC has adopted a settlement proposed by SoCalGas in a recent case
involving review of its Gas Cost Incentive Mechanism (GCIM). The CPUC
decision finds that this mechanism, which allows SoCalGas to receive a
share of the savings it achieves in buying natural gas for core
customers, should continue indefinitely. Savings are determined by
comparing the actual cost of gas purchases to a benchmark of monthly
prices. SoCalGas has requested that the CPUC approve rewards of $30.8
million and $17 million for the last two completed program years. No
rewards are included in SoCalGas' earnings until approved by the CPUC.
CPUC approval of these rewards is expected in 2003, pending the
Commission's investigation into the run-up in California border natural
gas prices during the winter of 2000-2001.
In September 2002, the CPUC issued a decision denying SoCalGas' and
SDG&E's request to combine their natural gas procurement activities at
this time, pending completion of the CPUC's ongoing investigation of
market power issues.
The California utilities will file applications with the CPUC in
December 2002 to set new base rates. A CPUC decision is expected in late
2003, with new rates to become effective January 1, 2004.
The California utilities have earned rewards for successful
implementation of Demand-Side Management programs that have been
scheduled by the CPUC for payout over several years. In a recent ruling,
a CPUC Administrative Law Judge has indicated an intent to reanalyze the
uncollected portion of past rewards earned by utilities (which have not
been included in SoCalGas' income), and potentially recompute the amount
of the rewards. The California utilities will oppose the recomputation.
NEW ACCOUNTING STANDARDS
New statements by the Financial Accounting Standards Board that have
recently become effective or are yet to be effective are numbers 142
through 146. They are described in Note 1 of the notes to Consolidated
Financial Statements. Number 142 is not presently relevant to the
companies. Number 143 requires accounting and disclosure changes
concerning legal obligations related to future asset retirements. Number
144 replaces number 121 in dealing with asset impairment issues. Number
145 makes technical corrections to previous statements and number 146
deals with exit and disposal activities, replacing Issue 94-3 of the
Emerging Issues Task Force.
In June 2002, a consensus was reached in Emerging Issues Task Force
(EITF) Issue 02-3 "Issues Related to Accounting for Contracts Involved
in Energy Trading and Risk Management Activities," which codifies and
reconciles existing guidance on the recognition and reporting of gains
and losses on energy trading contracts and addresses other aspects of
the accounting for contracts involved in energy trading and risk
management activities.
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 September 30, 2002, the total Value at Risk of SoCalGas' natural
gas positions was not material.
ITEM 4. CONTROLS AND PROCEDURES
The companies have designed and maintain disclosure controls and
procedures to ensure that information required to be disclosed in the
companies' reports under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission and is accumulated and communicated to the companies'
management, including their Chief Executive Officers and Chief Financial
Officers, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating these controls and procedures,
management recognizes that any system of controls and procedures, no
matter how well designed and operated, can provide only reasonable
assurance of achieving the desired objectives and necessarily applies
judgment in evaluating the cost-benefit relationship of other possible
controls and procedures.
Under the supervision and with the participation of management,
including the Chief Executive Officers and the Chief Financial Officers,
the companies within 90 days prior to the date of this report have
evaluated the effectiveness of the design and operation of the
companies' disclosure controls and procedures. Based on that evaluation,
the companies' Chief Executive Officers and Chief Financial Officers
have concluded that the controls and procedures are effective.
There have been no significant changes in the companies' internal
controls or in other factors that could significantly affect the
internal controls subsequent to the date the companies completed their
evaluations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as described in Note 2 of the notes to Consolidated Financial
Statements, 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 - Material Contracts
10.1 Amended and Restated Sempra Energy Deferred compensation and
Excess Savings Plan (incorporated by reference from the September
30, 2002 Sempra Energy 10-Q (Commission File No. 1-14201), Exhibit
10.3).
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
The following report on Form 8-K was filed after June 30, 2002:
Current Report on Form 8-K filed August 14, 2002, filing as an exhibit
Statements Under Oath of Principal Executive Officer and Principal
Financial Officer Regarding Facts and Circumstances Relating to Exchange
Act Filings pursuant to 18 U.S.C. Sec. 1350, as created by Section 906
of the Sarbanes-Oxley Act of 2002.
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: November 8, 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
CERTIFICATIONS
I, Stephen L. Baum, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pacific
Enterprises;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
November 8, 2002
/s/ Stephen L. Baum
Stephen L. Baum
Chief Executive Officer
I, Neal E. Schmale, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pacific
Enterprises;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
November 8, 2002
/s/ Neal E. Schmale
Neal E. Schmale
Chief Financial Officer
I, Edwin A. Guiles, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Southern
California Gas Company;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
November 8, 2002
/s/ Edwin A. Guiles
Edwin A. Guiles
Chief Executive Officer
I, Debra L. Reed, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Southern
California Gas Company;
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Quarterly Report (the "Evaluation Date"); and
c) presented in this Quarterly Report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Quarterly Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
November 8, 2002
/s/ Debra L. Reed
Debra L. Reed
Chief Financial Officer
EXHIBIT 12.1
PACIFIC ENTERPRISES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Nine
months
ended
September 30,
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -----------
Fixed Charges:
Interest $ 91 $ 84 $ 82 $ 72 $ 88 $ 46
Interest portion of
annual rentals 12 11 3 4 3 1
Preferred dividends
of subsidiaries (1) 13 2 2 2 2 2
-------- -------- -------- -------- -------- ---------
Total Fixed Charges
for Purpose of Ratio $116 $ 97 $ 87 $ 78 $ 93 $ 49
======== ======== ======== ======== ======== =========
Earnings:
Pretax income from
continuing operations $335 $274 $350 $396 $377 $296
Total Fixed Charges
(from above) 116 97 87 78 93 49
-------- -------- -------- -------- ------- ---------
Total Earnings for
Purpose of Ratio $451 $371 $437 $474 $470 $345
======== ======== ======== ======== ======= ==========
Ratio of Earnings
to Fixed Charges 3.89 3.82 5.02 6.08 5.05 7.04
======== ======== ======== ======== ======= ==========
(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.
EXHIBIT 12.2
SOUTHERN CALIFORNIA GAS COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
For the nine
months ended
September 30,
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- --------
Fixed Charges:
Interest $ 88 $ 81 $ 62 $ 72 $ 70 $ 36
Interest portion of
annual rentals 5 4 3 4 3 1
-------- -------- -------- -------- -------- --------
Total Fixed Charges for
Purpose of Ratio $ 93 $ 85 $ 65 $ 76 $ 73 $ 37
======== ======== ======== ======== ======== ========
Earnings:
Pretax income from
continuing operations $416 $287 $383 $390 $377 $302
Total Fixed Charges
(from above) 93 85 65 76 73 37
-------- -------- -------- -------- -------- --------
Total Earnings for
Purpose of Ratio $509 $372 $448 $466 $450 $339
======== ======== ======== ======== ======== ========
Ratio of Earnings
To Fixed Charges 5.47 4.38 6.89 6.13 6.16 9.16
======== ======== ======== ======== ======== ========
