Sempra Energy 8/7/2003 8-K

 

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):

August 7, 2003
- -------------------

SEMPRA ENERGY
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

CALIFORNIA
- ---------------------------------

1-14201
- ---------------------------------

33-0732627
- ---------------------------------

(State of incorporation
or organization)

(Commission
File Number)

(I.R.S. Employer
Identification No.

101 ASH STREET, SAN DIEGO, CALIFORNIA
- ------------------------------------------------------------------

92101
- ----------------------

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code

(619) 696-2034
- -------------------

---------------------------------------------------------------------
(Former name or former address, if changed since last report.)






FORM 8-K

Item 12. Results of Operations and Financial Condition

On August 7, 2003, Sempra Energy announced consolidated net income of $116 million, or $0.55 per diluted share of common stock, for the second quarter of 2003.

 

Item 7. Financial Statements and Exhibits.

(c) Exhibits

99.1 August 7, 2003 Sempra Energy News Release (including tables)

 






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.

SEMPRA ENERGY
(Registrant)

Date: August 7, 2003

By: /s/ F. H. Ault
- -----------------------------------------

 

F. H. Ault
Sr. Vice President and Controller

 

SEMPRA ENERGY 8/7/2003 Earnings Release

Exhibit 99.1

News Release

 

 

Media Contacts:

Doug Kline/Ralph Richardson
Sempra Energy
(877) 866-2066
www.sempra.com

 
 
 

Financial Contacts:

Dennis Arriola/Karen Sedgwick
Sempra Energy
(877) 736-7727

 
 

 

SEMPRA ENERGY ANNOUNCES
SECOND-QUARTER 2003 EARNINGS

SAN DIEGO, Aug. 7, 2003 -- Sempra Energy today reported unaudited second-quarter 2003 earnings of $116 million, or $0.55 per diluted share, compared with $147 million, or $0.71 per diluted share, for the same period of 2002.

Second-quarter 2002 earnings included a $25 million, or $0.12 per diluted share, after-tax benefit at San Diego Gas & Electric (SDG&E) from the favorable resolution of tax issues from prior years and an extraordinary gain of $2 million, or $0.01 per diluted share, related to Sempra Energy Trading's acquisition of the metals business.

Year-to-date, Sempra Energy reported earnings of $204 million, or $0.98 per diluted share, in 2003, compared with $293 million, or $1.42 per diluted share, during the first six months of 2002.

Year-to-date 2003 results reflect the $45 million, or $0.21 per diluted share, negative effects of implementing new accounting principle EITF 02-3. The components of this non-cash reduction in earnings consist of $29 million, or $0.14 per diluted share, reflected as a cumulative-effect adjustment at Dec. 31, 2002, and an additional $16 million, or $0.07 per diluted share, for the year-to-date effect of the change. EITF 02-3 eliminated mark-to-market accounting for certain commodity-trading assets, changing the timing for revenue recognition.

Revenues for Sempra Energy rose 20 percent to $1.8 billion in the second quarter 2003 from $1.5 billion in the second quarter 2002. Increased revenues during the second quarter this year resulted from higher commodity prices, primarily at Sempra Energy Utilities, and from SDG&E's resuming the purchase of a portion of its power requirements in 2003.

Earnings Outlook

The company expects reported 2003 earnings-per-share to be in the range of $2.70 to $2.90.

"Our businesses remain on track to meet our operating expectations for the year," said Stephen L. Baum, chairman, president and chief executive officer of Sempra Energy. "Our new guidance is on a reported per-share basis. It reflects an anticipated favorable resolution of tax issues that are expected to more than offset the cumulative effect of mandated accounting changes."

Baum said the new earnings guidance reflects the effect of several non-cash items, including the previously identified cumulative effect of $0.14 per diluted share related to EITF 02-3. In addition, in the third quarter 2003, the company will adopt FASB Interpretation No. 46 (FIN 46), requiring the consolidation of its variable interest entities. The adoption of FIN 46 is expected to result in a non-cash cumulative downward adjustment to earnings of approximately $0.14 per diluted share. The anticipated favorable resolution of tax issues relates primarily to utility balancing accounts.

Sempra Energy Utilities

Sempra Energy Utilities contributed net income of $78 million in the second quarter 2003, compared with net income of $102 million in the second quarter last year. Second-quarter 2002 earnings included the $25 million tax benefit at SDG&E.

Net income at both SDG&E and Southern California Gas Co. (SoCalGas) were negatively impacted by the end of merger savings allocated to shareholders. From 1998, when Sempra Energy was formed, through 2002, both utilities benefited from sharing in savings from the merger.

SDG&E reported net income in the second quarter 2003 of $41 million, down from $51 million for the same period in 2002. Absent the $25 million tax benefit, SDG&E's net income improved primarily due to increased revenues from electric distribution and transmission operations.

Net income for SoCalGas decreased in the second quarter 2003 to $37 million from $51 million in the same period in 2002, due to the loss of sharing merger savings and higher operating expenses.

Sempra Energy Trading

Sempra Energy Trading reported net income of $35 million for the second quarter 2003, up 67 percent from $21 million in the year-earlier period, as trading volumes and margins improved, with significant gains in natural gas and oil trading.

Excluding the EITF 02-3 quarterly impact of $7 million, Sempra Energy Trading's second-quarter 2003 earnings would have been $42 million.

"The fundamentals of our trading operation remain solid," said Baum. "During the second quarter, the volume of our customer transactions grew, demonstrating the strength of this business in both volatile and stable commodity markets. We focus on a short-dated portfolio of customer contracts that convert into cash relatively quickly -- the majority in less than one year. "

Sempra Energy Resources

Sempra Energy Resources, the wholesale power-generation subsidiary of Sempra Energy, reported net income of $5 million in the second quarter 2003, compared with $34 million in the second quarter 2002. Lower 2003 second-quarter earnings were primarily related to the requirements of its contract with the California Department of Water Resources (CDWR).

"Under our contract with the CDWR, a substantial portion of the power deliveries are scheduled for the second half of the year, so we are on track at Sempra Energy Resources to reach our 2003 target of $55 million to $65 million," Baum said.

Sempra Energy Resources has brought online three new, state-of-the-art power plants operating in Arizona, California and Mexico, representing a combined total of about 1,500 megawatts, producing power to help meet the energy needs of the Pacific Southwest. An additional generating unit of 625 megawatts at the Arizona power plant is scheduled to be operational by December 2003.

Sempra Energy Resources received two favorable regulatory and court rulings, one by the Federal Energy Regulatory Commission June 25, 2003, and another by the California Superior Court May 20, 2003, upholding the company's 10-year contract with the CDWR.

In another positive ruling for the company, a U.S. District Court decision July 9, 2003, allowed for the continued import of power into the United States from Sempra Energy Resources' Termoelectrica de Mexicali 600-megawatt natural gas-fueled power plant in Mexico. The plant is designed to be one of the cleanest in North America.

Baum said the company expects to prevail in any appeals of these matters.

Sempra Energy International

For the second quarter of 2003, Sempra Energy International's net income rose to $18 million from $9 million during the same quarter in 2002, primarily due to the successful resolution of a dispute related to the company's South American operations.

The company continues development of two liquefied natural gas (LNG) receiving terminals in Baja California, Mexico, and Louisiana. The Baja California facility, Energia Costa Azul, has received its environmental permit from Mexican regulators and two other key permits -- one for operations and, the other, for local land use -- are expected to be granted in the third quarter 2003. The Louisiana terminal, Cameron LNG, also is in the permitting phase and is expected to receive final regulatory approvals by the end of the year. Energia Costa Azul and Cameron LNG are scheduled to be operational by 2006 and 2007, respectively.

Sempra Energy Solutions

Sempra Energy Solutions, which offers energy outsourcing and commodity services to commercial and industrial customers, recorded net income of $8 million in the second quarter 2003, compared with net income of $5 million in the same period in 2002.

Internet Broadcast

Sempra Energy will broadcast a live discussion of its earnings results over the Internet today at 1 p.m. EDT with Baum; Neal E. Schmale, executive vice president and chief financial officer, Sempra Energy; Donald E. Felsinger, group president, Sempra Energy Global Enterprises; Edwin A. Guiles, group president, Sempra Energy Utilities; Frank H. Ault, senior vice president and controller, Sempra Energy; and Dennis V. Arriola, vice president of communications and investor relations, Sempra Energy. Access is available by logging onto the Web site at www.sempra.com. For those unable to log onto the live Webcast, the teleconference will be available on replay a few hours after its conclusion by dialing (888) 203-1112 and entering passcode number 745256.

Sempra Energy (NYSE: SRE), based in San Diego, is a Fortune 500 energy services holding company with 2002 revenues of $6 billion. The Sempra Energy companies' 12,000 employees serve more than 9 million customers in the United States, Europe, Canada, Mexico, South America and Asia.

###

 

 

Sempra Energy Trading, Sempra Energy Resources, Sempra Energy International and Sempra Energy Solutions are not the same as the utilities, San Diego Gas & Electric and Southern California Gas Co.

This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995. When the company uses words like "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "would," "should" or similar expressions, or when the company discusses its strategy or plans, the company is making 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 the 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: national, international, regional and local economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources and the Federal Energy Regulatory Commission; capital market conditions, inflation rates and interest rates; energy and trading markets, including the timing and extent of changes in commodity prices; weather conditions; 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 company's control. These risks and uncertainties are further discussed in the company's reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov.

SEMPRA ENERGY

Table A

STATEMENTS OF CONSOLIDATED INCOME (Unaudited)

Three months ended

Six months ended

June 30,

June 30,

(Dollars in millions, except per share amounts)

2003

 

2002

2003

 

2002

Operating Revenues

California utilities:

Natural gas

$ 929

$ 754

$ 2,091

$ 1,634

Electric

397

323

792

604

Other

514

411

880

725

Total

1,840

1,488

3,763

2,963

Operating Expenses

California utilities:

Cost of natural gas distributed

480

305

1,157

729

Electric fuel and net purchased power

137

79

300

140

Other cost of sales

296

206

515

338

Other operating expenses

518

475

963

890

Depreciation and amortization

149

152

297

300

Franchise fees and other taxes

57

43

113

87

Total

1,637

1,260

3,345

2,484

Operating Income

203

228

418

479

Other income - net

9

8

4

27

Interest income

10

10

22

21

Interest expense

(71)

(78)

(145)

(147)

Preferred dividends / distributions by subsidiaries

(8)

(8)

(15)

(15)

Income before income taxes

143

160

284

365

Income taxes

27

15

51

74

Income before extraordinary item and cumulative effect of

change in accounting principle

116

145

233

291

Extraordinary item, net of tax

-

2

-

2

Income before cumulative effect of change in accounting principle

116

147

233

293

Cumulative effect of change in accounting principle, net of tax

-

-

(29)

-

Net Income

$ 116

$ 147

$ 204

$ 293

Weighted-average number of shares outstanding:

Basic*

207,626

205,354

207,013

205,105

Diluted*

210,164

207,084

208,882

206,729

Income before extraordinary item and cumulative effect of

change in accounting principle per share of common stock

Basic

$ 0.56

$ 0.71

$ 1.13

$ 1.42

Diluted

$ 0.55

$ 0.70

$ 1.12

$ 1.41

Income before cumulative effect of change in accounting

principle per share of common stock

Basic

$ 0.56

$ 0.72

$ 1.13

$ 1.43

Diluted

$ 0.55

$ 0.71

$ 1.12

$ 1.42

Net income per share of common stock

Basic

$ 0.56

$ 0.72

$ 0.99

$ 1.43

Diluted

$ 0.55

$ 0.71

$ 0.98

$ 1.42

Dividends declared per share of common stock

$ 0.25

$ 0.25

$ 0.50

$ 0.50

*In thousands of shares

 

SEMPRA ENERGY

Table B

CONSOLIDATED BALANCE SHEETS (Unaudited)

Balance at

June 30,

December 31,

(Dollars in millions)

2003

 

2002

Assets

Current assets:

Cash and cash equivalents

$ 325

$ 455

Accounts receivable

822

889

Due from unconsolidated affiliates

144

80

Deferred income taxes

77

20

Trading assets

4,853

5,064

Regulatory assets arising from fixed-price contracts and other derivatives

146

151

Other regulatory assets

90

75

Inventories

129

134

Other

137

142

Total current assets

6,723

7,010

Investments and other assets:

Fixed-price contracts and other derivatives

36

42

Due from unconsolidated affiliates

54

57

Regulatory assets arising from fixed-price contracts and other derivatives

740

812

Other regulatory assets

490

532

Nuclear-decommissioning trusts

534

494

Investments

1,446

1,313

Sundry

723

665

Total investments and other assets

4,023

3,915

Property, plant and equipment - net

7,477

6,832

Total assets

$ 18,223

$ 17,757

Liabilities and Shareholders' Equity

Current liabilities:

Short-term debt

$ 311

$ 570

Accounts payable

749

744

Income taxes payable

4

22

Trading liabilities

4,141

4,094

Dividends and interest payable

136

133

Regulatory balancing accounts - net

666

578

Regulatory liabilities

11

18

Fixed-price contracts and other derivatives

151

153

Current portion of long-term debt

204

281

Other

622

654

Total current liabilities

6,995

7,247

Long-term debt

4,214

4,083

Deferred credits and other liabilities:

Due to unconsolidated affiliate

162

162

Customer advances for construction

96

91

Post-retirement benefits other than pension

138

136

Deferred income taxes

791

800

Deferred investment tax credits

87

90

Fixed-price contracts and other derivatives

827

813

Regulatory liabilities

117

121

Regulatory liabilities arising from asset retirement obligations

241

-

Asset retirement obligations

309

-

Deferred credits and other liabilities

812

985

Total deferred credits and other liabilities

3,580

3,198

Preferred stock of subsidiaries

203

204

Mandatory redeemable trust preferred securities

200

200

Shareholders' equity

3,031

2,825

Total liabilities and shareholders' equity

$ 18,223

$ 17,757

 

SEMPRA ENERGY

Table C

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)

Six months ended

June 30,

(Dollars in millions)

2003

 

2002

Cash Flows from Operating Activities:

Net income

$ 204

$ 293

Adjustments to reconcile net income to net cash provided by operating

activities:

Extraordinary item, net of tax

-

(2)

Cumulative effect of change in accounting principle

29

-

Depreciation and amortization

297

300

Deferred income taxes and investment tax credits

(25

)

(54)

Other - net

39

17

Changes in other assets

(48

)

32

Changes in other liabilities

12

23

Net changes in other working capital components

248

145

Net cash provided by operating activities

756

754

Cash Flows from Investing Activities:

Expenditures for property, plant and equipment

(441

)

(559)

Investments and acquisitions of affiliates, net of cash acquired

(134

)

(199)

Dividends received from unconsolidated affiliates

-

9

Loan to unconsolidated affiliate

(64

)

-

Other - net

-

(10)

Net cash used in investing activities

(639

)

(759)

Cash Flows from Financing Activities:

Common stock dividends

(104

)

(102)

Issuances of common stock

50

11

Repurchases of common stock

(6

)

(4)

Issuances of long-term debt

400

800

Payments of long-term debt

(339

)

(303)

Decrease in short-term debt

(240

)

(462)

Other - net

(8

)

(18)

Net cash used in financing activities

(247

)

(78)

Decrease in cash and cash equivalents

(130

)

(83)

Cash and cash equivalents, January 1

455

605

Cash and cash equivalents, June 30

$ 325

$ 522

Supplemental Disclosure of Cash Flow Information:

Interest payments, net of amounts capitalized

$ 136

$ 141

Income tax payments, net of refunds

$ 94

$ 24

Supplemental Schedule of Non-cash Investing and Financing

Activities:

Acquisition of subsidiaries:

Assets acquired

$ -

$ 1,210

Cash paid

-

(199)

Liabilities assumed

$ -

$ 1,011

 

SEMPRA ENERGY

Table D

BUSINESS UNIT EARNINGS AND CAPITAL EXPENDITURES & INVESTMENTS (Unaudited)

Three months ended

Six months ended

June 30,

June 30,

(Dollars in millions)

2003

 

2002

2003

 

2002

Net Income:

California Utilities:

San Diego Gas & Electric

$ 41

$ 51

$ 86

$ 104

Southern California Gas

37

51

95

111

Total California Utilities

78

102

181

215

Global Enterprises:

Trading

35

21

(1)

17

(2)

63

(1)

Resources

5

34

15

31

International

18

9

25

17

Solutions

8

5

7

(2)

6

Total Global Enterprises

66

69

64

117

Financial

8

7

19

14

Parent & Other

(36

)

(31

)

(60

)

(53

)

Consolidated Net Income

$ 116

$ 147

$ 204

$ 293

(1)

Includes $2 extraordinary gain

(2)

Consolidated net income includes ($29) cumulative effect of change in accounting principle. The effects to Trading and Solutions were ($28) and ($1), respectively.

Three months ended

Six months ended

June 30,

June 30,

(Dollars in millions)

2003

 

2002

2003

 

2002

Capital Expenditures and Investments:

California Utilities:

Southern California Gas

$ 77

$ 73

$ 135

$ 143

San Diego Gas & Electric

94

105

183

182

Total California Utilities

171

178

318

325

Global Enterprises:

Resources

87

204

171

260

Trading

5

52

12

102

International

29

22

55

47

Total Global Enterprises

121

278

238

409

Parent & Other

10

13

19

24

Consolidated Capital Expenditures and Investments

$ 302

$ 469

$ 575

$ 758

 

SEMPRA ENERGY

Table E

OTHER OPERATING STATISTICS (Unaudited)

Three months ended

Six months ended

June 30,

June 30,

CALIFORNIA UTILITIES

2003

 

2002

2003

 

2002

Revenues (Dollars in millions)

SDG&E (excludes intercompany sales)

$ 514

$ 413

$ 1,073

$ 845

SoCalGas (excludes intercompany sales)

$ 812

$ 664

$ 1,810

$ 1,393

Gas Sales (BCF)

89

86

214

228

Transportation and Exchange (BCF)

113

133

247

271

Total Deliveries (BCF)

202

219

461

499

Total Gas Customers (Thousands)

6,166

6,089

Electric Sales (Millions of kWhs)

3,454

3,341

7,063

6,865

Direct Access (Millions of kWhs)

759

890

1,565

1,693

Total Deliveries (Millions of kWhs)

4,213

4,231

8,628

8,558

Total Electric Customers (Thousands)

1,289

1,268

RESOURCES

 

Power Sold (Millions of kWhs)

1,962

928

3,365

1,434

SOLUTIONS

 

Revenues (Dollars in millions)

$ 55

$ 43

$ 97

$ 81

INTERNATIONAL

(Represents 100% of these subsidiaries, although only the Mexican subsidiaries are 100% owned by Sempra Energy).

Natural Gas Sales (BCF)

Argentina

67

65

109

103

Mexico

10

12

19

21

Chile

-

-

1

1

Natural Gas Customers (Thousands)

Argentina

1,387

1,336

Mexico

87

79

Chile

36

35

Electric Sales (Millions of kWhs)

Peru

994

985

2,012

1,961

Chile

444

428

925

896

Electric Customers (Thousands)

Peru

724

712

Chile

488

480

 

SEMPRA ENERGY

Table E (Continued)

TRADING

 

 

 

 

 

Three months ended

Six months ended

June 30,

June 30,

Trading Margin (Dollars in millions)

2003

2002

2003

2002

Geographical:

North America

$ 89

$ 63

$ 151

$ 153

Europe/Asia

51

37

73

84

Total

$ 140

$ 100

$ 224

$ 237

Product Line:

Gas

$ 62

$ 50

$ 92

$ 117

Power

14

27

12

50

Oil - Crude & Products

18

1

50

40

Metals

19

25

26

29

Other

27

(3)

44

1

Total

$ 140

$ 100

$ 224

$ 237

Physical Statistics

 

 

 

 

 

Natural Gas (BCF/Day)

13.2

9.0

13.4

9.3

Electric (Billions of kWhs)

65.3

29.2

65.7

52.0

Oil & Liquid Products (Millions Bbls/Day)

1.9

1.8

1.7

2.1

Fair

Market Value

June 30,

Scheduled Maturity (in months)

Liquidity of Net Unrealized Revenue (Dollars in millions)

2003

0 - 12

13 - 24

25 - 36

> 36

Sources of Over-the-Counter (OTC) Fair Value:

Prices actively quoted

$ 354

$ 407

$ (72)

$ 12

$ 7

Prices provided by other external sources

(2)

(5)

(2)

-

5

Prices based on models and other valuation methods

26

7

5

1

13

Total OTC Fair Value (1)

378

409

(69)

13

25

Maturity of OTC Fair Value

Percentage

100.0%

108.2%

(18.2%)

3.4%

6.6%

Cumulative Percentages

 

108.2%

90.0%

93.4%

100.0%

 

 

 

 

 

 

Exchange Contracts (2)

$ 76

$ 19

$ 38

$ 13

$ 6

Total Net Unrealized Revenue

$ 454

(1) The present value of net unrealized revenue to be received (paid) from outstanding OTC contracts

(2) Cash (paid) received associated with open Exchange Contracts

June 30,

March 31,

December 31,

September 30,

June 30,

Credit Quality of Unrealized Trading Assets (net of margin)

2003

2003

2002

2002

2002

Commodity Exchanges

6%

7%

3%

6%

11%

Investment Grade

71%

62%

67%

69%

69%

Below Investment Grade

23%

31%

30%

25%

20%

Three months ended

Six months ended

June 30,

June 30,

Risk Adjusted Performance Indicators

2003

2002

2003

2002

VaR at 95% (Dollars in millions) (1)

$ 5.6

$ 5.4

$ 7.7

$ 5.9

VaR at 99% (Dollars in millions) (2)

$ 7.9

$ 7.6

$ 10.9

$ 8.4

Risk Adjusted Return on Capital (RAROC) (3)

38%

24%

22%

29%

(1) Average Daily Value-at-Risk for the period using a 95% confidence level

(2) Average Daily Value-at-Risk for the period using a 99% confidence level

(3) Average Daily Trading Margin/Average Daily VaR at 95% confidence level